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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 21, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE MONY GROUP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 6719 13-3976138
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1740 BROADWAY
NEW YORK, NEW YORK 10019
(212) 708-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RICHARD E. MULROY, JR., ESQ.
THE MONY GROUP INC.
1740 BROADWAY
NEW YORK, NEW YORK 10019
(212) 708-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
------------------------
PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO:
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<S> <C>
WILLIAM W. ROSENBLATT, ESQ. WILLIAM D. TORCHIANA, ESQ.
JONATHAN L. FREEDMAN, ESQ. SULLIVAN & CROMWELL
DEWEY BALLANTINE LLP 125 BROAD STREET
1301 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10004
NEW YORK, NEW YORK 10019 (212) 558-4000
(212) 259-8000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED(1) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C>
Common Stock, par value $0.01 per share(3)........ $100,000,000 $29,500
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(1) A portion of the shares of Common Stock to be registered represents shares
that are to be offered outside of the United States but that may be resold
from time to time in the United States. Such shares are not being registered
for the purpose of offers or sales outside of the United States.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933.
(3) Includes the related preferred stock purchase rights as described under
"Description of Capital Stock".
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 21, 1998
SHARES
THE MONY GROUP INC.
[MONY LOGO]
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
------------------------
Of the shares of Common Stock offered by The MONY Group Inc.
(the "Holding Company"), shares are being offered hereby in the
United States and shares are being offered in a concurrent
international offering outside the United States. The initial public offering
price and the aggregate underwriting discount per share are identical for both
Offerings. See "Underwriting".
The shares of Common Stock offered in the Offerings are in addition to the
shares of Common Stock distributable to policyholders in connection with a plan
of reorganization under which The Mutual Life Insurance Company of New York will
convert from a mutual life insurance company organized under the laws of the
State of New York, into a New York stock life insurance company in accordance
with the requirements of Section 7312 of the New York Insurance Law and become a
wholly-owned subsidiary of the Holding Company. See "The Demutualization".
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price per
share will be between $ and $ . For factors to be considered
in determining the initial public offering price, see "Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 24 FOR A DISCUSSION OF CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
Application will be made to list the Common Stock on the New York Stock
Exchange under the symbol "MNY".
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR THE NEW YORK
SUPERINTENDENT OF INSURANCE NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIES COMMISSION OR THE NEW YORK SUPERINTENDENT OF INSURANCE PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share................................ $ $ $
Total(3)................................. $ $ $
</TABLE>
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(1) The Holding Company and MONY have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting".
(2) Before deducting estimated expenses of $ _______ payable by the Holding
Company.
(3) The Holding Company has granted the U.S. Underwriters an option for 30 days
to purchase up to an additional __________ shares at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, the Holding Company has granted the
International Underwriters a similar option with respect to an additional
__________ shares as part of the concurrent International Offering. If such
options are exercised in full, the initial public offering price,
underwriting discount and proceeds to the Holding Company will be
$ _______ , $ _______ and $ _______ , respectively. See "Underwriting".
------------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York on
or about ________ , 1998, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO. DONALDSON, LUFKIN & JENRETTE
MORGAN STANLEY DEAN WITTER SALOMON SMITH BARNEY
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The date of this Prospectus is ________ , 1998.
<PAGE> 3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Discussions containing such forward-looking statements may be
found in the material set forth under "Prospectus Summary", "Risk Factors",
"Certain Provisions of the Investment", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business". Actual events or
results could differ materially from those discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed under "Risk Factors" as well as those discussed in the sections
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and in the other sections of this
Prospectus.
2
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AVAILABLE INFORMATION
The MONY Group Inc., a Delaware corporation, has filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement on Form S-1
(together with all amendments, exhibits, schedules and supplements thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder, with
respect to shares of Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement (the "Prospectus"), does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. The statements or descriptions herein concerning any agreement or
other document referred to herein are summaries only. Where such agreement or
other document is an exhibit to the Registration Statement, reference is made to
such exhibit for a full statement of the provisions thereof. For further
information with respect to the Holding Company and the shares of Common Stock
offered hereby, reference is made to the Registration Statement. Any interested
party may inspect the Registration Statement, without charge, at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material may be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549.
The Commission maintains a Web site on the Internet at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
Upon completion of the offerings the Holding Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, will file reports, proxy
statements and other information with the Commission. The Holding Company
intends to furnish holders of Common Stock with annual reports that include
audited annual consolidated financial statements and an opinion thereon
expressed by independent certified public accountants.
Application will be made to list the Common Stock on the New York Stock
Exchange. Periodic reports, proxy statements and other information concerning
the Holding Company will be available for inspection at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.
------------------------
UNDER THE NEW YORK INSURANCE LAW, FOR A PERIOD OF FIVE YEARS FOLLOWING THE
PLAN EFFECTIVE DATE (AS HEREINAFTER DEFINED), NO PERSON MAY ACQUIRE BENEFICIAL
OWNERSHIP OF 5% OR MORE OF THE OUTSTANDING SHARES OF THE COMMON STOCK WITHOUT
THE PRIOR APPROVAL OF THE NEW YORK SUPERINTENDENT OF INSURANCE. INVESTORS IN
CERTAIN DEBT SECURITIES OF THE COMPANY HAVE RECEIVED A WAIVER OF THIS RULE FROM
THE NEW YORK SUPERINTENDENT OF INSURANCE IN CONNECTION WITH THE POTENTIAL
EXERCISE OF CERTAIN WARRANTS TO PURCHASE SHARES OF COMMON STOCK PRIOR TO THE END
OF SUCH FIVE-YEAR PERIOD. IN ADDITION, STATE INSURANCE HOLDING COMPANY STATUTES
APPLICABLE TO THE HOLDING COMPANY GENERALLY PROVIDE THAT NO PERSON MAY ACQUIRE
CONTROL OF THE HOLDING COMPANY, AND THUS INDIRECT CONTROL OF ITS INSURANCE
SUBSIDIARIES, WITHOUT THE PRIOR APPROVAL OF THE APPROPRIATE INSURANCE
REGULATORS. GENERALLY, ANY PERSON WHO ACQUIRES BENEFICIAL OWNERSHIP OF 10% OR
MORE OF THE OUTSTANDING SHARES OF THE COMMON STOCK WOULD BE PRESUMED TO HAVE
ACQUIRED SUCH CONTROL, UNLESS THE APPROPRIATE INSURANCE REGULATORS UPON
APPLICATION DETERMINE OTHERWISE. IN ADDITION, PERSONS WHO DO NOT ACQUIRE
BENEFICIAL OWNERSHIP OF MORE THAN 10% OF THE OUTSTANDING SHARES OF COMMON STOCK
MAY BE DEEMED TO HAVE ACQUIRED SUCH CONTROL IF APPROPRIATE REGULATORS DETERMINE
THAT SUCH PERSONS, DIRECTLY OR INDIRECTLY, EXERCISE A CONTROLLING INFLUENCE OVER
THE MANAGEMENT OR POLICIES OF THE INSURER. SEE "BUSINESS -- REGULATION".
------------------------
3
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CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
4
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Certain insurance and other terms are defined in the Glossary,
which starts at page G-1. Except as otherwise indicated, the information in this
Prospectus assumes that the U.S. Underwriters' (the "U.S. Underwriters") and the
International Underwriters' (the "International Underwriters", together with the
U.S. Underwriters, the "Underwriters") over-allotment options are not exercised.
See "Underwriting". All financial data and ratios presented herein have been
prepared using generally accepted accounting principles ("GAAP") unless
otherwise indicated.
For purposes of this Prospectus, the term "Company" refers, at all times
prior to the effective date (the "Plan Effective Date") of the Demutualization
(as hereinafter defined), to The Mutual Life Insurance Company of New York, a
mutual life insurance company organized under the laws of the State of New York
("MONY"), and its subsidiaries, including MONY Life Insurance Company of
America, an Arizona stock life insurance company ("MLOA"), and the Holding
Company, and at all times on and after the Plan Effective Date, to the Holding
Company and its subsidiaries, including MONY Life Insurance Company, the
successor to MONY as of the Plan Effective Date. References herein to "MONY" on
and after the Plan Effective Date refer to MONY Life Insurance Company and the
other operating subsidiaries of the Holding Company. The Plan Effective Date
will occur prior to, or simultaneously with, the completion of the offerings.
The term "Common Stock" refers to the Common Stock, par value $0.01 per share,
of the Holding Company. References to the "Investors" refer to, collectively, GS
Mezzanine Partners, L.P., GS Mezzanine Partners Offshore, L.P., Stone Street
Fund 1997, L.P., and Bridge Street Fund 1997, L.P. References to the
"Investment" refer to the Investors' investment in the Company as described more
fully herein.
THE COMPANY
The Company, which is one of the oldest and largest mutual life insurance
companies in the United States, provides a wide range of life insurance, annuity
and investment products primarily to higher income individuals, particularly
family builders, pre-retirees and small business owners. The Company distributes
its products through a career agency sales force in the United States which
consisted of 2,218 agents at June 30, 1998. The Company sells its products in
all 50 of the United States, the District of Columbia, the U.S. Virgin Islands,
Guam and the Commonwealth of Puerto Rico and currently insures or provides other
financial services to more than 1.0 million people. Chartered in 1842, MONY was
the first mutual life insurance company in the United States to sell an
insurance policy and the first to pay a dividend to policyholders.
For management and reporting purposes, the Company's business is organized
in two principal operating segments, the "Protection Products" segment and the
"Accumulation Products" segment. Substantially all of the Company's other
business activities are combined in the "Other Products" segment. In its
Protection Products segment, the Company offers a wide range of life insurance
products, including whole life, term life, universal life, variable universal
life, last survivor life and group universal life. In its Accumulation Products
segment, the Company offers fixed annuities, single premium deferred annuities,
immediate annuities, flexible payment variable annuities and proprietary retail
mutual funds. The Company's Other Products segment primarily consists of a
securities broker-dealer operation, an insurance brokerage operation and certain
insurance lines of business no longer written by the Company (the "Run-Off
Businesses"). In addition to selling the Company's proprietary investment
products, the securities broker-dealer operation provides customers of the
Company's protection and accumulation products access to other non-proprietary
investment products (including stocks, bonds, limited partnership interests,
tax-exempt unit investment trusts and other investment securities). The
insurance brokerage operation provides the Company's career agency sales force
with access to life, annuity, small group health and
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specialty insurance products written by other carriers to meet the insurance and
investment needs of its customers.
In 1998, the Company had 513 agents in the "Million Dollar Round Table"
("MDRT"), an industry designation based on sales which result in annual
first-year commissions of $53,000 or more, up from 460 in 1996. The Company
believes that its rate of growth in MDRT members from 1995 to 1997 was among the
highest in the life insurance industry and that the percentage of its career
agents who are MDRT members is among the highest in the industry.
The Company had total consolidated assets and equity at June 30, 1998 of
approximately $24.6 billion and $1.4 billion, respectively. Of the Company's
total consolidated assets at such date, approximately $12.8 billion represented
assets held in the Company's general account, approximately $5.7 billion
represented assets transferred pursuant to the Group Pension Transaction (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 11 to the Consolidated Financial Statements) and
approximately $6.1 billion were held in the Company's separate accounts, for
which the Company does not generally bear investment risk.
Consolidated revenues reported by the Company for the six month period
ended June 30, 1998 and the year ended December 31, 1997 were $1,044.5 million
and $1,976.4 million, respectively. Revenues reported for such periods by the
Company's Protection Products, Accumulation Products and Other Products segments
(which amounts are presented before unallocated amounts and non-recurring
items -- see Note 6 to the Consolidated Financial Statements and Note 5 to the
Unaudited Condensed Consolidated Financial Statements) were $813.8 million,
$145.8 million and $80.4 million, respectively, for the six month period ended
June 30, 1998 and $1,598.7 million, $239.4 million and $131.1 million,
respectively, for the year ended December 31, 1997.
Consolidated income before income taxes and extraordinary item reported by
the Company for the six month period ended June 30, 1998 and the year ended
December 31, 1997 was $199.9 million, and $187.7 million, respectively.
Consolidated pre-tax earnings reported by the Company's aforementioned operating
segments for such periods (which amounts are presented before unallocated
amounts and non-recurring items -- see Note 6 to the Consolidated Financial
Statements and Note 5 to the Unaudited Condensed Consolidated Financial
Statements) were $136.7 million, $50.0 million and $13.4 million, respectively,
for the six month period ended June 30, 1998 and $129.0 million, $44.1 million
and $18.3 million, respectively, for the year ended December 31, 1997.
MONY's current financial strength ratings are "A+" from Standard & Poor's
Rating Group ("S&P"), "A3" from Moody's Investors Service, Inc. ("Moody's"),
"A-" from A.M. Best Company, Inc. ("A.M. Best") and "A+" from Duff & Phelps,
Inc. ("Duff & Phelps"). Moody's, on January 6, 1998, and Duff & Phelps, on
August 4, 1998, each announced that it had changed its respective outlook on
MONY's rating from stable to positive. The foregoing ratings reflect each rating
agency's current opinion of MONY's claims-paying ability, financial strength,
operating performance and ability to meet its obligations to policyholders and
are not evaluations directed toward the protection of investors in the Common
Stock. Such factors are of concern to policyholders, agents and intermediaries.
Such ratings should not be relied upon when making a decision to purchase shares
of Common Stock offered hereby. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Historical Overview" and
"Business -- Ratings".
STRATEGY
The Company's current business strategy to achieve earnings growth, improve
its return on equity and increase shareholder value is focused on: (i)
continuing to improve the quality of and increase the earnings on its invested
assets, (ii) emphasizing the core operating fundamentals of its protection
business, (iii) continuing the growth of its accumulation business and (iv)
expanding the size of and improving upon the productivity of its career agency
sales force. The Company believes
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that by focusing its expansion efforts on the career agency system, it will be
more successful at marketing value-added protection and accumulation products to
its core customer base which is typically comprised of small business owners and
higher income individuals, particularly family builders and pre-retirees.
Management further believes that by providing a range of protection and
accumulation products, the Company can respond to changes in the insurance
marketplace that may arise from changes in interest rates or volatility in the
general level of the stock market. In addition, the Company intends to seek
opportunities through selective mergers, acquisitions and strategic alliances.
CONTINUING TO IMPROVE THE QUALITY OF AND INCREASE THE EARNINGS ON INVESTED
ASSETS
Since December 31, 1992, the Company has decreased its exposure to equity
real estate, commercial mortgage loans and below investment grade securities
from 49.9% of total invested assets (which includes for all purposes of this
Prospectus cash and cash equivalents) to 19.1% at June 30, 1998. The effect of
such actions has been to significantly improve the credit quality of the
Company's total invested assets and increase the earnings thereon.
EMPHASIZING THE CORE OPERATING FUNDAMENTALS OF PROTECTION BUSINESS
The Company believes that the operating performance of its protection
business is significantly impacted by five basic elements: (i) mortality, (ii)
persistency, (iii) operating expenses, (iv) investment yield and (v) sales. The
Company believes that improvement with respect to each of these five basic
elements is important for increasing shareholder value.
CONTINUING THE GROWTH OF ACCUMULATION BUSINESS
Over the past several years, the Company has sought to take advantage of
demographic trends in the U.S. economy by continuing the growth of its asset
accumulation business. Since December 31, 1993, the Company has increased its
annuity assets under management from approximately $927.0 million to
approximately $4,309.5 million at June 30, 1998 and, through The Enterprise
Group of Funds, Inc. ("Enterprise Group of Funds"), its retail mutual fund
assets under management have increased from $485.9 million to $2,457.0 million
during this time period.
EXPANDING THE SIZE OF AND IMPROVING THE PRODUCTIVITY OF CAREER AGENCY SALES
FORCE
The Company is committed to the career agency distribution system.
Management believes that distribution through the Company's career agency sales
force is a competitive advantage over other large life insurance companies which
do not have such a career agency sales force and for whom it would be difficult
and expensive to create one. The career agency sales force allows the Company to
establish closer relationships with customers than is typical of insurers using
third party brokers, thereby enhancing the Company's ability to evaluate and
respond to customer needs and underwriting risks.
In early 1998, in order to increase the productivity and size of its career
agency sales force, the Company adopted a plan to "tier" its agents and agencies
and to provide focused marketing, recruiting and training support tailored to
meet the particular needs of each "tier". By restructuring its agencies into
tiers, the Company is able to segment its career agency sales force into groups
according to experience and productivity levels and to assign agency managers to
tiers-based on their skill sets and the particular needs and goals of such
tiers. In January of 1998, the Company revised its compensation structure to
provide a salary plus incentive compensation system for all of its agency
managers and sales managers designed to more closely align the interests of the
managers with those of the Company. The Company believes that these actions will
improve the recruitment, retention and productivity of the Company's career
agency sales force.
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SEEKING OPPORTUNITIES THROUGH SELECTIVE MERGERS, ACQUISITIONS AND STRATEGIC
ALLIANCES
Management believes that making selective acquisitions and engaging in
selective joint ventures in the Company's core businesses could more fully
utilize the Company's career agency sales force and administrative capacity to
obtain improved economies of scale and a lower overall cost structure.
BACKGROUND
In response to higher interest rates in the 1980s, the Company invested
significant funds in higher yielding but higher risk assets in order to be
competitive with regard to crediting rates on its insurance products. However,
declines in the market values of these assets led to the deterioration of the
Company's financial strength and, along with the concurrent and highly
publicized failures of several financial institutions, resulted in ratings
downgrades. The Company's current management team was assembled in 1989 and MONY
adopted a new strategy designed to strengthen its financial position. Under this
strategy, the Company focused on: (i) its core businesses of individual
protection products, annuities, mutual funds and investment securities and (ii)
its key markets of small business owners and higher income individuals,
particularly family builders and pre-retirees. Significant specific actions
taken by the Company's current management team since 1989 have included:
- Repositioning the Company's product mix and upgrading the Company's sales
force
- Focusing on building its accumulation business, including variable
annuities
- Improving the quality of its career agency sales force and
increasing the number of MDRT qualifiers
- Reinsuring its group life and health insurance business during
1989-1990 and ceasing to write any new group life and health
insurance business
- Transferring a significant portion of its guaranteed investment
contract ("GIC") business to a third party reinsurer in 1991 and
ceasing the production of any new GIC business
- Transferring a substantial portion of its group pension business and
operations in 1993 (see "Business -- The Group Pension Transaction")
and ceasing the production of any new group pension business
- Transferring all of its disability income insurance business to a
third party reinsurer under an indemnity reinsurance contract in
1997 and ceasing to write new disability insurance business (the "DI
Transaction")
- Disposing of the Company's non-core businesses
- Disposing of North American Mortgage Company, its mortgage banking
subsidiary, in 1989
- Disposing of Financial Services Corporation, its wholesale
securities brokerage subsidiary, in 1989
- Disposing of Unified Management Corporation, its mutual fund,
transfer agent and clearing broker dealer subsidiary, in 1989
- Disposing of Evaluation Associates, Incorporated, its investment
management performance tracking and consulting subsidiary, in 1991
- Disposing of MONY Reinsurance Corporation, its property and casualty
reinsurance subsidiary, in 1991
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<PAGE> 10
- Repositioning the Company's investment portfolio
- Reducing the Company's exposure to commercial mortgage loans by: (i)
discontinuing new commercial mortgage loan investments through 1995,
followed by a more selective program involving the investment of new
funds in this asset class, (ii) aggressively foreclosing on
commercial mortgage loans and selling such loans and (iii)
encouraging prepayments, paydowns, and repayments in the commercial
mortgage loan portfolio. As a result, the Company's exposure to
commercial mortgage loans was reduced from a carrying value at
December 31, 1992 of approximately $3,576.5 million, or 27.2% of
total invested assets, to $892.1 million at June 30, 1998, or 8.3%
of total invested assets
- Upgrading the management of the Company's equity real estate
portfolio to improve the portfolio's cash flow and marketability
- Implementing and executing a plan for the orderly disposal of a
substantial portion of the Company's equity real estate assets,
which resulted in aggregate sales proceeds of $1,620.4 million from
January 1, 1995 through June 30, 1998. As a result, the Company's
exposure to real estate was reduced from a carrying value at
December 31, 1992 of approximately $1,828.5 million, or 13.9% of
total invested assets, to $791.6 million at June 30, 1998, or 7.4%
of total invested assets
- Reducing the Company's exposure to below investment grade securities
by selectively disposing of such securities and investing
substantially all new funds in investment grade fixed maturity
securities. As a result, the Company's exposure to below investment
grade securities was reduced from a carrying value at December 31,
1992 of approximately $1,023.4 million, or 7.8% of total invested
assets, to $369.3 million at June 30, 1998, or 3.4% of total
invested assets
- Taking significant cost reduction actions
- Reducing the rate of growth of operating expenses by, among other
things, (i) reducing the number of employees through early
retirement programs and attrition, (ii) disposing of certain
businesses and (iii) reducing certain costs incurred in connection
with operating the career agency sales force
- Raising additional statutory capital
- Issuing $125.0 million aggregate principal amount of 11.25% Surplus
Notes (the "11.25% Surplus Notes") in 1994
- Consummating the Investment on December 30, 1997
As a result of these actions during this time period, consolidated equity
increased from approximately $962.5 million at December 31, 1992 to $1,448.9
million at June 30, 1998.
THE DEMUTUALIZATION
The Holding Company is a Delaware corporation organized for the purpose of
becoming the parent holding company of MONY. Pursuant to a Plan of
Reorganization, which was adopted by the Board of Trustees of MONY (the "MONY
Board") on August 14, 1998 (the "Board Adoption Date") pursuant to Section 7312
of the New York Insurance Law ("Section 7312") and amended by certain clarifying
and technical amendments adopted by the MONY Board on September 9, 1998 (such
Plan, as amended, the "Plan"), MONY will convert from a mutual life insurance
company to a stock life insurance company (such conversion, together with other
matters addressed by the Plan, the "Demutualization") and become a wholly owned
subsidiary of the Holding Company.
9
<PAGE> 11
The following chart sets forth the organization of the Holding Company,
MONY and its subsidiaries prior to the Plan Effective Date:
Mony Organizational Chart
The following chart sets forth the organization of the Holding Company,
MONY and their subsidiaries as of and following the Plan Effective Date:
Mony Organizational Chart
10
<PAGE> 12
The Plan was approved by MONY's policyholders on , 1998 (of all
MONY's policyholders entitled to vote on the Plan % ( ) voted and
% ( ) of these votes were cast in favor of the Plan) and on
, 1998 the New York Superintendent of Insurance (the "New York
Superintendent") approved the Plan after a public hearing. The principal purpose
of the Demutualization is to enable MONY to obtain equity capital through the
Holding Company from sources currently unavailable to it as a mutual life
insurance company, thereby strengthening MONY's ability to maintain its strong
marketplace franchise while maximizing financial flexibility and future growth
and providing additional value to its policyholders.
In connection with the effectiveness of the Plan, the following will occur:
(i) MONY will convert from a mutual life insurance company to a stock life
insurance company, which will be named MONY Life Insurance Company, and will
become a wholly owned subsidiary of the Holding Company, (ii) all policyholders'
membership interests will be extinguished and in exchange therefor policyholders
who own a policy that was in force on the Board Adoption Date and which remains
in force on the Plan Effective Date (an "Eligible Policyholder") will receive
shares of Common Stock or, in certain circumstances, cash or Policy Credits and
Eligible Policyholders owning a life or accident and health insurance policy or
annuity contract issued by MONY under which there is a right to participate in
the divisible surplus of MONY to the extent that dividends are apportioned
thereon (a "Participating Policyholder") will receive additional shares of
Common Stock or, in certain circumstances, cash or Policy Credits, (iii) a
closed block (the "Closed Block") of certain individual MONY participating
policies in classes for which MONY had a current payable dividend scale will be
created, and assets will be allocated to the Closed Block to support the future
payment of benefits and dividends on, and certain expenses and taxes relating
to, the policies included therein and (iv) shares of Common Stock will be
offered to the public in the Offerings. See "The Demutualization" and "Pro Forma
Consolidated Financial Information" for a general discussion of the
Demutualization and a more detailed discussion of the amount and composition of
the assets and liabilities included in, and the accounting for, the Closed
Block, and the effect of the Closed Block on results of operations of MONY after
the Plan Effective Date.
MONY has received an opinion of a nationally recognized independent tax
counsel stating that the Demutualization will not result in any recognized gain
to the Holding Company or MONY.
THE INVESTMENT
On December 30, 1997 (the "First Closing Date"), the Investors, each of
whom is an affiliate of Goldman, Sachs & Co. ("Goldman Sachs"), one of the
representatives (the "Representatives") of the U.S. Underwriters, bought 9.50%
Surplus Notes due December 30, 2012 (the "MONY Notes") in an aggregate principal
amount of $115.0 million from MONY for a purchase price of $115.0 million and
warrants to purchase from the Holding Company in the aggregate 7.0% of the fully
diluted Common Stock (after giving effect to the Offerings) at the
Demutualization Date (as hereinafter defined) (collectively, the "Warrants") for
a purchase price of $10.0 million. The price payable for each share of the
Common Stock issuable upon exercise of Warrants initially is (a) in the event
the Offerings occur prior to, on or within five trading days after the
Demutualization Date, the initial public offering price of the Common Stock in
the Offerings, unless the average of the daily closing prices of the Common
Stock for the 40 trading days following the first 20 trading days after the
Demutualization Date is greater than 115% of the initial public offering price,
in which case such initial exercise price shall be equal to the sum of the
initial public offering price plus an amount equal to one half of the excess of
such 40 day average over 115% of the initial public offering price or (b) in the
event the Offerings do not occur prior to, on or within five trading days after
the Demutualization Date, the lesser of (i) the average of the daily closing
prices of the Common Stock for the first 20 trading days following
Demutualization and (ii) 70% of the book value per share of the Common Stock as
of the Demutualization, determined in accordance with GAAP. The Warrants contain
standard anti-dilution provisions providing for adjustment to the exercise price
in the event of, among other things, a dividend or other distribution of capital
stock, evidences of indebtedness
11
<PAGE> 13
or other property, issuances of rights, options or warrants, certain cash
dividends and certain tender offers.
At any time from and after the date the Plan becomes effective pursuant to
Section 7312 or, if later, the first date following such effectiveness on which
shares of Common Stock are first distributed to Company policyholders (the
"Demutualization Date"), the Investors may elect to exchange the MONY Notes then
held by them for the Holding Company Subordinated Notes. If such exchange
occurs, the Holding Company will hold one or more surplus notes in an aggregate
principal amount equal to the principal amount of the Holding Company
Subordinated Notes (the "Intercompany Surplus Notes").
In addition to the MONY Notes and the Warrants, the Investors have agreed,
on the Company's request made within 90 days after the Demutualization Date and
subject to certain conditions precedent, to purchase an aggregate of one million
shares of Convertible Preferred Stock of the Holding Company, liquidation value
$100 per share, for a total purchase price of $100.0 million (the "Convertible
Preferred Stock"). The Convertible Preferred Stock is convertible into shares of
Common Stock at an initial conversion price equal to the initial exercise price
of the Warrants, with such conversion price subject to the same anti-dilution
adjustments as the exercise price of the Warrants. The conversion price of the
Convertible Preferred Stock is further subject to a one-time adjustment on the
third anniversary of original issuance to an amount equal to 70% of the GAAP
book value per share of Common Stock if the conversion price at that time is
greater than 70% of such book value per share. If the offering of Common Stock
being made hereby is consummated, management will not require the purchase of
the Convertible Preferred Stock.
RISK FACTORS
Potential investors should carefully consider the factors described in
"Risk Factors" as well as the other information contained in this Prospectus
before purchasing the shares of Common Stock offered hereby. Such "Risk Factors"
include:
<TABLE>
<C> <S>
(i) the risk that the Holding Company's ability to meet its cash
requirements and pay dividends on the Common Stock depends
upon the receipt of dividends and other payments from MONY
and that the ability to pay such dividends may be limited by
applicable law,
(ii) the decline and expiration of certain payments and income to
MONY related to the Group Pension Transaction (as defined
below),
(iii) the risk of losses on real estate and commercial mortgage
loans,
(iv) other risks relating to the Company's investment portfolio,
(v) the risk that interest rate changes could make certain of
the Company's products less profitable to the Company or
less attractive to customers,
(vi) the risk of challenge to the New York Superintendent's
Order,
(vii) risks with respect to certain sales practice litigation,
(viii) the risk of increased surrenders of certain annuities as the
surrender charges with respect to such annuities expire,
(ix) risks with respect to the Closed Block,
(x) risks associated with certain economic and market factors,
(xi) the risk of variations in claims experience,
(xii) risks related to certain insurance regulatory matters,
(xiii) risks of competition,
(xiv) risks with respect to claims-paying ability ratings and
financial strength ratings,
</TABLE>
12
<PAGE> 14
<TABLE>
<C> <S>
(xv) risks with respect to Year 2000 computer programming issues,
(xvi) risks of potential adoption of new Federal income tax
legislation and the effect of such adoption on certain of
the Company's life and annuity products,
(xvii) the risk that anti-takeover statutes and provisions in
certain of the Company's agreements and corporate governance
documents may delay, defer or prevent an acquisition of the
Company that a stockholder might consider to be in the
Company's best interest,
(xviii) the risk of dilution to stockholders of the Company if the
Investors exercise the Warrants or purchase the Convertible
Preferred Stock,
(xix) risks with respect to shares eligible for future sale and
(xx) the lack of a prior public market for the Common Stock.
</TABLE>
------------------------
The Company's executive offices are located at 1740 Broadway, New York, New
York 10019 and its telephone number is (212) 708-2000.
13
<PAGE> 15
THE OFFERINGS
The offering of shares of Common Stock initially being offered in
the United States (the "U.S. Offering") and the offering of shares of
Common Stock initially being offered in a concurrent international offering
outside the United States (the "International Offering") are collectively
referred to as the "Offerings". The closing of each Offering is conditioned upon
the closing of the other Offering.
Common Stock offered(1):
U.S. Offering............... shares
International Offering...... shares
Total....................... shares
Common Stock to be distributed
to Eligible
Policyholders(2)............ shares
Common Stock to be outstanding
after the
Offerings(1)(2)(3).......... shares
Use of proceeds............... The $ million estimated net proceeds of
the Offerings will be: (i) first, contributed
to MONY in the amount of $100 million to be
used for general operations of MONY or, in the
absence of sufficient net proceeds in excess of
$100 million, to provide for the amounts
required for any of the purposes stated in
clauses (ii), (iii) or (iv) hereof; (ii) then,
contributed to MONY in an amount sufficient to
enable MONY to fund all of the Policy Credits
required to be credited to Eligible
Policyholders pursuant to the Plan; (iii) then,
retained by the Holding Company in an amount
sufficient to enable the Holding Company to pay
all of the cash to Eligible Policyholders who
are to receive cash as described in the Plan
(other than pursuant to an expression of a
preference to receive cash); (iv) then,
contributed to MONY in an amount sufficient to
enable MONY to satisfy the undertaking of MONY
to pay the expenses of the Demutualization as
required by the New York Insurance Law; (v)
then, retained by the Holding Company in an
amount not to exceed $10 million to provide
working capital for the Holding Company; (vi)
then, retained by the Holding Company in an
amount not to exceed $30 million to pay
dividends on the stock of the Holding Company;
(vii) then, retained by the Holding Company in
an amount not to exceed 25% of the proceeds of
the Offerings (net of underwriting commissions
and expenses related thereto) to pay cash to
Eligible Policyholders who are to receive cash
pursuant to an expression of a preference to
receive cash; and (viii) then, to the extent
that such net proceeds exceed the aggregate of
the amounts identified in clauses (i), (ii),
(iii), (iv), (v), (vi) and (vii), and, to the
extent that the amount retained by the Holding
Company pursuant to each of clauses (iii), (vi)
and (vii) is not used for the purpose stated in
each such clause, promptly contributed to MONY
to be used for general operations of MONY.
14
<PAGE> 16
New York Stock Exchange
listing....................... Application will be made to list the Common
Stock on the New York Stock Exchange ("NYSE")
under the symbol "MNY".
- ---------------
(1) Exclusive of up to shares and up to shares that may be
purchased pursuant to the over-allotment options granted to the U.S.
Underwriters and the International Underwriters, respectively. See
"Underwriting".
(2) Estimated as of June 30, 1998. See "Pro Forma Consolidated Financial
Information".
(3) Does not include shares of Common Stock issuable upon exercise of the
Warrants and conversion of the Convertible Preferred Stock, if issued. See
"The Demutualization", "Pro Forma Consolidated Financial Information",
"Beneficial Ownership of Common Stock" and "Description of Capital Stock".
15
<PAGE> 17
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary historical consolidated financial
information for the Company. The summary consolidated financial information for
each of the years in the three-year period ended December 31, 1997 and at
December 31, 1997 and 1996 has been derived from consolidated financial
statements audited by PricewaterhouseCoopers LLP, independent accountants,
included elsewhere herein. The consolidated financial information at December
31, 1995, 1994 and 1993 and for the years ended December 31, 1994 and 1993 has
been derived from unaudited consolidated financial information not included
elsewhere herein, which in the opinion of management presents fairly such
consolidated financial information in conformity with GAAP. The summary
consolidated financial information for the six-month periods ended June 30, 1998
and 1997, and at June 30, 1998, has been derived from unaudited interim
condensed consolidated financial statements included herein. The summary
consolidated financial information at June 30, 1997 has been derived from
unaudited interim condensed consolidated financial statements not included
elsewhere herein. In the opinion of the Company's management, all unaudited
interim condensed consolidated financial information presented in the table
below reflects all adjustments (consisting of normal, recurring accruals)
necessary for a fair statement of the Company's consolidated financial position
and results of operations for such periods. The results of operations for the
six months ended June 30, 1998 are not necessarily indicative of the results to
be expected for the full year. This summary financial information should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations", the Company's consolidated financial statements and
the notes thereto and the other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX
MONTHS ENDED JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
----------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- --------- --------- --------- --------- ---------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
REVENUES:
Premiums................... $ 353.8 $ 411.9 $ 838.6 $ 859.8 $ 875.9 $ 890.6 $ 919.6
Universal life and
investment-type product
policy fees.............. 74.3 54.4 127.3 100.9 80.8 69.8 75.1
Net investment income...... 357.7 359.6 733.0 751.6 728.8 666.9 953.7
Net realized gains (losses)
on investments(2)........ 157.6 42.6 72.1 75.9 16.2 (8.8) 18.2
Group Pension Profits(3)... 22.7 28.2 60.0 59.5 61.7 90.4 0.0
Other income............... 78.4 58.8 145.4 117.3 96.2 107.6 72.4
---------- ---------- --------- --------- --------- --------- ---------
Total revenues....... 1,044.5 955.5 1,976.4 1,965.0 1,859.6 1,816.5 2,039.0
BENEFITS AND EXPENSES:
Benefits to
policyholders............ 379.7 423.9 840.1 872.2 883.6 866.5 895.4
Interest credited to
policyholders' account
balances................. 61.2 70.8 139.4 156.1 175.3 180.0 388.0
Amortization of deferred
policy acquisition
costs.................... 70.8 68.4 181.2 158.2 132.6 138.9 110.9
Dividends to
policyholders............ 108.4 117.8 224.3 231.4 222.5 211.1 221.1
Other operating costs and
expenses................. 224.5 196.1 403.7 446.6(4) 383.8 355.0 378.0
---------- ---------- --------- --------- --------- --------- ---------
Total benefits and
expenses........... 844.6 877.0 1,788.7 1,864.5 1,797.8 1,751.5 1,993.4
Income before income taxes
and extraordinary item..... 199.9 78.5 187.7 100.5 61.8 65.0 45.6
Income tax expense(5)........ 71.8 32.0 57.3 44.0 21.4 42.9 13.2
---------- ---------- --------- --------- --------- --------- ---------
Income before extraordinary
item....................... 128.1 46.5 130.4 56.5 40.4 22.1 32.4
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX
MONTHS ENDED JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
----------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- --------- --------- --------- --------- ---------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Extraordinary item --
demutualization expenses,
net........................ 9.7 2.4 13.3 0.0 0.0 0.0 0.0
---------- ---------- --------- --------- --------- --------- ---------
Net income................... 118.4 44.1 117.1 56.5 40.4 22.1 32.4
Other comprehensive income
(loss), net(6)............. 9.9 (17.3) 33.0 (59.9) 191.5 (216.4) 141.6
---------- ---------- --------- --------- --------- --------- ---------
Comprehensive income
(loss), net........ $ 128.3 $ 26.8 $ 150.1 $ (3.4) $ 231.9 $ (194.3) $ 174.0
========== ========== ========= ========= ========= ========= =========
BALANCE SHEET DATA:(1)
GENERAL:
General account assets..... $ 12,753.6 $ 12,286.2 $12,493.3 $12,344.2 $12,531.9 $12,310.9 $12,397.1
Separate account assets.... 6,127.5 4,873.0 5,403.1 4,171.7 3,153.5 2,355.8 2,001.4
Assets transferred in Group
Pension Transaction...... 5,720.5 5,538.5 5,714.9 5,627.6 5,992.8 5,660.1 6,457.3
Total assets............... 24,601.6 22,697.7 23,611.3 22,143.5 21,678.2 20,326.8 20,855.8
Short-term debt............ -- 41.5 0.0 153.0 157.8 0.7 2.3
Long-term debt............. 418.9 273.4 423.6 269.7 420.6 504.0 458.5
Policyholders'
liabilities.............. 10,042.2 10,068.7 10,060.7 10,070.6 10,199.7 10,250.7 10,271.9
Separate account
liabilities.............. 6,115.5 4,862.1 5,392.4 4,162.1 3,144.2 2,348.4 1,994.9
Liabilities transferred in
Group Pension
Transaction(7)........... 5,682.3 5,518.6 5,638.7 5,544.1 5,855.7 5,608.0 6,386.7
Total liabilities........ 23,152.7 21,500.4 22,290.7 20,973.0 20,504.3 19,384.8 19,719.4
Equity..................... 1,448.9 1,197.3 1,320.6 1,170.5 1,173.9 942.0 1,136.4
REAL ESTATE AND MORTGAGE
LOANS:(8)
Real estate, to be disposed
of....................... $ 339.1 $ 578.6 $ 621.2 $ 434.8 $ 717.4 $ 611.3 $ 0.0
Real estate held for
investment............... 452.5 649.7 495.9 1,070.4 1,179.8 1,527.5 2,024.5
---------- ---------- --------- --------- --------- --------- ---------
Subtotal................. 791.6 1,228.3 1,117.1 1,505.2 1,897.2 2,138.8 2,024.5
Mortgage loans on real
estate................... 1,478.8 1,550.1 1,430.1 1,582.3 1,771.1 1,916.8 2,298.6
---------- ---------- --------- --------- --------- --------- ---------
Total real estate and
mortgage loans on real
estate................. $ 2,270.4 $ 2,778.4 $ 2,547.2 $ 3,087.5 $ 3,668.3 $ 4,055.6 $ 4,323.1
========== ========== ========= ========= ========= ========= =========
STATUTORY DATA:(9)
Capital and surplus(10).... $ 849.8 $ 719.6 $ 835.4 $ 703.5 $ 689.0 $ 680.1 $ 600.2
Asset valuation reserve
("AVR").................. 332.9 318.5 348.6 317.7 285.3 244.0 238.2
---------- ---------- --------- --------- --------- --------- ---------
Capital and surplus plus
AVR.................... $ 1,182.7 $ 1,038.1 $ 1,184.0 $ 1,021.2 $ 974.3 $ 924.1 $ 838.4
========== ========== ========= ========= ========= ========= =========
Net income................. 13.3 $ 43.3 $ 88.5 $ 62.7 $ 58.0 $ 87.5 $ 118.7
OTHER DATA:
Employee count............. 2,324 2,281 2,312 2,078 2,329 2,498 2,811
Agent count(15)............ 2,352 1,835 2,216 2,092 2,094 2,146 2,174
========== ========== ========= ========= ========= ========= =========
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX AS OF AND FOR THE YEAR ENDED
MONTHS ENDED JUNE 30, DECEMBER 31,
---------------------- -----------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SEGMENT DATA:(1)(11)
Protection Products:
Premiums................................... $ 343.8 $ 403.4 $ 817.0 $ 837.4 $ 845.1
Universal life policy fees................. 41.8 30.3 74.9 63.4 53.9
Net investment income and net realized
gains on investments..................... 397.0 304.7 611.9 605.3 501.5
Group Pension Profits(3)................... 22.7 28.2 60.0 59.5 61.7
Other income............................... 8.5 9.2 34.9 28.2 23.3
--------- --------- --------- --------- ---------
Total revenues........................... $ 813.8 $ 775.8 $ 1,598.7 $ 1,593.8 $ 1,485.5
========= ========= ========= ========= =========
Income before income taxes................. $ 136.7 $ 48.3 $ 129.0 $ 101.2 $ 28.7
========= ========= ========= ========= =========
Policyholders' liabilities(12)............. $10,102.9 $10,317.7 $10,105.7 $ 9,996.2 $ 9,936.3
Separate account liabilities(13)........... 3,967.8 3,455.9 3,720.1 3,393.0 3,500.1
Assets(14)................................. 16,218.3 15,291.9 15,776.5 15,158.5 15,213.2
Accumulation Products:
Premiums................................... $ 1.8 $ 2.8 $ 5.0 $ 4.2 $ 9.8
Investment-type product fees............... 31.6 23.2 50.9 36.6 24.8
Net investment income and net realized
gains on investments..................... 77.8 65.3 131.4 144.0 153.3
Other income............................... 34.6 23.4 52.1 32.2 26.0
--------- --------- --------- --------- ---------
Total revenues........................... $ 145.8 $ 114.7 $ 239.4 $ 217.0 $ 213.9
========= ========= ========= ========= =========
Income before income taxes................. $ 50.0 $ 24.4 $ 44.1 $ 35.9 $ 34.2
========= ========= ========= ========= =========
Policyholders' liabilities................. $ 1,332.2 $ 1,493.0 $ 1,416.1 $ 1,601.7 $ 1,797.2
Separate account liabilities............... 4,598.1 3,469.8 4,002.6 2,851.4 1,928.1
Assets..................................... 6,285.8 5,266.4 5,757.9 4,747.2 3,981.7
Other Products:
Premiums................................... $ 8.2 $ 5.8 $ 16.6 $ 18.2 $ 21.0
Investment-type product fees............... 0.9 0.9 1.5 0.9 2.1
Net investment income and net realized
gains on investments..................... 38.9 30.9 59.9 74.6 85.4
Other income............................... 32.4 23.5 53.1 52.2 42.0
--------- --------- --------- --------- ---------
Total revenues........................... $ 80.4 $ 61.1 $ 131.1 $ 145.9 $ 150.5
========= ========= ========= ========= =========
Income before income taxes................. $ 13.4 $ 5.8 $ 18.3 $ 8.1 $ 8.9
========= ========= ========= ========= =========
Policyholders' liabilities................. $ 480.0 $ 321.9 $ 513.4 $ 542.4 $ 694.8
Separate account liabilities............... 565.1 630.3 547.7 625.6 613.3
Assets..................................... 1,209.8 1,327.1 1,234.2 1,417.1 1,713.3
</TABLE>
- ---------------
(1) Prior to 1996, the Company, as a mutual life insurance company, prepared
its financial statements in conformity with accounting practices prescribed
or permitted by the New York State Insurance Department (the "New York
Insurance Department") which accounting practices were considered to be
GAAP for mutual life insurance companies. As of January 1, 1996, the
Company adopted Financial Accounting Standards Board (FASB) Interpretation
No. 40, Applicability of Generally Accepted Accounting Principles to Mutual
Life Insurance and Other Enterprises and Statement of Financial Accounting
Standards ("SFAS") No. 120, Accounting and Reporting by Mutual Life
Insurance Enterprises and by Insurance Enterprises for Certain Long
Duration Participating Policies. Interpretation No. 40 and SFAS No. 120
require mutual life insurance companies to adopt all applicable
authoritative GAAP pronouncements in their general purpose financial
statements. See Note 5 to the Consolidated Financial State-
18
<PAGE> 20
ments. Accordingly, the financial information presented in the Summary
Financial Information for periods prior to 1996 has been derived from
financial information of the Company which have been retroactively restated
to reflect the adoption of all applicable authoritative GAAP
pronouncements. All such applicable pronouncements were adopted as of the
effective date originally specified in each such pronouncement. However, if
the effective date of a pronouncement was subsequent to the earliest
financial information presented herein, the Company applied the accounting
alternative available during such prior periods which was most consistent
with the subsequent pronouncement. The following sets forth the significant
accounting pronouncements with effective dates subsequent to the earliest
financial information presented herein, the effective dates of their
adoption by the Company and, if applicable, a description of the accounting
followed by the Company for periods presented herein prior to the effective
date of such pronouncements.
- SFAS No. 114, Accounting by Creditors for Impairment of a Loan, was adopted
on a retroactive basis for the year ended December 31, 1993 and subsequent
years. For periods prior to the adoption of SFAS No. 114, the Company
established a policy to record impairment losses for troubled loans based
on discounted cash flows. The policy was substantially consistent with SFAS
No. 114 except that impairment losses were reflected as permanent
reductions in the cost basis of such loans. There was no material effect on
the Company's financial statements as a result of the adoption of SFAS No.
114.
- SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities, was adopted on a retroactive basis as of December 31, 1993 and
subsequent years.
- SFAS No. 120, Accounting and Reporting by Mutual Life Insurance Enterprises
for Certain Long-Duration Participating Contracts was adopted on a
retroactive basis for the year ended December 31, 1992 and subsequent
years.
- SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, was adopted for the year ended
December 31, 1994 and subsequent years. For periods prior to the adoption
of SFAS No. 121, the Company had no material real estate that it intended
to dispose of, and writedowns on impaired real estate were established if
the undiscounted cash flows were less than the carrying value. In such
cases, the asset was written down to the discounted cash flow amount.
Accordingly, there was no material effect on the Company's financial
statements as a result of the adoption of SFAS No. 121.
(2) Includes writedowns for impairment and net changes in valuation allowances
on real estate, mortgage loans and investment securities aggregating $5.5
million and $45.2 million for the six month periods ended June 30, 1998 and
1997, and $76.0 million, $20.1 million, $54.3 million, $49.3 million and
$8.0 million for the years ended December 31, 1997, 1996, 1995, 1994 and
1993, respectively.
(3) The Group Pension Transaction occurred on December 31, 1993. See
"Business -- The Group Pension Transaction".
(4) Other operating costs and expenses for the year ended December 31, 1996
include: (i) approximately $27.6 million relating to settlements of, and
reserves for, various legal disputes including lawsuits against the Company
alleging market conduct improprieties (see Note 19 to the Consolidated
Financial Statements), (ii) $5.1 million of legal expenses relating to the
aforementioned legal disputes and lawsuits and (iii) approximately $14.0
million relating to special termination benefits paid to certain employees
under an early retirement program offered by the Company in April of 1996
(see Note 8 to the Consolidated Financial Statements).
(5) As a mutual life insurance company, the Company is subject to the add-on
(surplus) tax imposed on mutual life insurance companies under Section 809
of the Internal Revenue Code of 1986 (the "Code"). Section 809 requires
(and the surplus tax results from) the disallow-
19
<PAGE> 21
ance of a portion of a mutual life insurance company's policyholder
dividends as a deduction from taxable income. The income tax expense
(benefit) amounts include $1.9 million, $4.4 million, $(5.8) million, $12.8
million, $0.0 million, $23.0 million and $0.3 million of surplus tax for
the six months ended June 30, 1998 and 1997 and the years ended December
31, 1997, 1996, 1995, 1994 and 1993, respectively. See "Pro Forma
Consolidated Financial Information" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
(6) During 1997, the Company adopted SFAS No. 130, Reporting Comprehensive
Income. SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components in general purpose financial
statements. All periods presented herein reflect the adoption of SFAS No.
130. For all periods presented, other comprehensive income consists only of
the change in unrealized gains and losses on the Company's fixed maturity
and equity securities and is presented net of the effect of such unrealized
gains (losses) attributable to deferred acquisition costs and deferred
Federal income taxes. See Note 12 to the Consolidated Financial Statements.
(7) Includes liabilities transferred in connection with the Group Pension
Transaction pursuant to indemnity reinsurance of $167.2 million, $191.6
million, $173.9 million, $204.4 million, $276.9 million, $1,090.9 million
and $6,360.1 million as of June 30, 1998 and 1997 and December 31, 1997,
1996, 1995, 1994 and 1993, respectively (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 11 to
the Consolidated Financial Statements).
(8) Amounts presented do not include real estate and mortgage loan assets
transferred to AEGON (as defined below) in the Group Pension Transaction
(see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 11 to the Consolidated Financial
Statements).
(9) Statutory data have been derived from the Annual and Quarterly Statements
of MONY and MLOA, as filed with insurance regulatory authorities.
(10) In accordance with accounting practices prescribed or permitted by the New
York Insurance Department statutory capital and surplus includes $187.3
million, $72.3 million, $187.3 million, $72.3 million, $72.3 million and
$72.3 million relating to the Company's outstanding surplus notes at June
30, 1998 and 1997 and December 31, 1997, 1996, 1995 and 1994, respectively.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and Note 17 to
the Consolidated Financial Statements.
(11) During 1997, the Company adopted SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. SFAS No. 131 establishes
standards for the way that public business enterprises report information
about operating segments in their annual and interim financial statements.
The segment data presented herein reflect the adoption of SFAS No. 131 on a
retroactive basis beginning with the year ended December 31, 1995. Excluded
from the Company's operating segments are revenues, expenses, assets and
liabilities relating to contracts issued by the Company with respect to its
employee benefit plans, as well as any nonrecurring or unusual items. Such
amounts constitute reconciling items in accordance with SFAS No. 131.
Accordingly, see Note 6 to the Consolidated Financial Statements for a
reconciliation of amounts reported for the Company's operating segments to
such amounts reported in the Company's consolidated financial statements.
(12) Includes policyholder liabilities transferred in the Group Pension
Transaction of $1,890.9 million, $2,086.3 million, $1,991.0 million,
$2,158.1 million, and $2,315.1 million as of June 30, 1998 and 1997, and
December 31, 1997, 1996, and 1995, respectively (see "Management's
20
<PAGE> 22
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 11 to the Consolidated Financial Statements).
(13) Includes separate account liabilities transferred in the Group Pension
Transaction of $3,761.2 million, $3,397.2 million, $3,614.0 million,
$3,358.3 million, and $3,495.4 million as of June 30, 1998 and 1997, and
December 31, 1997, 1996 and 1995, respectively (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 11 to the Consolidated Financial Statements).
(14) Includes assets transferred in the Group Pension Transaction of $5,720.5
million, $5,538.5 million, $5,714.9 million, $5,627.6 million, and $5,992.8
million as of June 30, 1998 and 1997, and December 31, 1997, 1996 and 1995,
respectively (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 11 to the Consolidated
Financial Statements).
(15) Includes international agents of 134, 75, 96, 75, 53, 30 and 27 as of June
30, 1998 and 1997 and December 31, 1997, 1996, 1995, 1994 and 1993.
21
<PAGE> 23
SUMMARY PRO FORMA DATA
The summary pro forma data presented below are derived from the pro forma
consolidated financial information and notes thereto included herein. The pro
forma data give effect to the Demutualization and the Offerings (collectively,
the "Transaction") and the establishment of the Closed Block as if the
Transaction and the establishment of the Closed Block had occurred as of June
30, 1998 for purposes of the pro forma consolidated balance sheet data and
January 1, 1997 for purposes of the pro forma consolidated income statement
data. Such pro forma consolidated financial information has been prepared based
on the Plan and certain assumptions described under "Pro Forma Consolidated
Financial Information". The pro forma data presented below assume, among other
things, that (i) the Closed Block liabilities exceed the Closed Block assets by
$1,152.8 million, (ii) million shares of Common Stock are issued in the
Offerings at an initial public offering price of $ per share, (iii) a total
of million shares of Common Stock are allocated to policyholders under the
Plan, (iv) million shares of Common Stock are allocated but not issued to
policyholders who, under the Plan, receive payments in the form of cash or
Policy Credits rather than in shares of Common Stock, (v) the Warrants are not
exercised, (vi) a Federal income tax rate of 35% is used to show the income tax
effects of the pro forma adjustments, (vii) the Underwriters' over-allotment
options are not exercised and (viii) the Convertible Preferred Stock is not
issued. The pro forma data does not purport to represent what the Company's
consolidated financial position or consolidated results of operations would
actually have been if the Transaction and the establishment of the Closed Block
had in fact occurred on such dates or to project the Company's results of
operations or financial position for any future period. The pro forma data set
forth below should be read in conjunction with the information set forth under,
or referred to in, "Pro Forma Consolidated Financial Information".
<TABLE>
<CAPTION>
($ IN MILLIONS,
EXCEPT PER SHARE
AMOUNTS)
----------------
<S> <C>
As of and for the six months ended June 30, 1998:
Pro forma income before extraordinary item(1A)............ $
Pro forma basic and diluted income before extraordinary
item per share......................................... $
Pro forma equity(2)....................................... $
Pro forma book value per share............................ $
For the year ended December 31, 1997:
Pro forma income before extraordinary item(1)............. $
Pro forma basic and diluted income before extraordinary
item per share......................................... $
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE OWNERSHIP
--------------- --------------------
(IN MILLIONS)
<S> <C> <C>
Share Data:
Shares allocated to Eligible Policyholders.............
Less: estimated shares allocated to Eligible
Policyholders who receive cash or Policy Credits.....
----
Shares distributed to Eligible Policyholders........... %
Shares issued in the Offerings.........................
---- -----
Total outstanding shares of Common Stock..... 100.0%
==== =====
</TABLE>
- ---------------
(1) Includes the following:
(A) Elimination of the mutual company add-on (surplus) tax for the six
months ended June 30, 1998 and the year ended December 31, 1997,
which is applicable only to mutual life insurance companies. The
add-on (surplus) tax will not be applicable after MONY converts, in
the Demutualization, to a stock life insurance company.
22
<PAGE> 24
(B) Adjustment to reflect interest expense on the MONY Notes as if the
MONY Notes were issued, outstanding and accruing interest since
January 1, 1997.
(C) Income tax effects of the pro forma adjustment to reflect interest
expense on the MONY Notes as if the MONY Notes were issued,
outstanding and accruing interest since January 1, 1997.
(2) Assumes estimated net proceeds from the Offerings of $ million and the
payment of $
million to certain policyholders who would receive cash in lieu of Common
Stock pursuant to the Plan, $ million to fund Policy Credits provided to
certain Eligible Policyholders and estimated additional nonrecurring after
tax expenses of $ million related to the Demutualization.
23
<PAGE> 25
RISK FACTORS
Prospective purchasers of the Common Stock should consider carefully the
factors set forth below as well as the other information contained in this
Prospectus.
HOLDING COMPANY STRUCTURE; RESTRICTIONS ON DIVIDENDS
Following the Plan Effective Date, the Holding Company will be a holding
company which will conduct no operating activities and whose sole assets will be
a portion of the net proceeds of the Offerings, the purchase price received for
the Warrants and all of the outstanding capital stock of MONY. As a holding
company, its ability to meet its cash requirements (including interest on the
Holding Company Subordinated Notes, if issued) and pay dividends on the Common
Stock depends upon the receipt of dividends and other payments from MONY. The
payment of dividends by MONY to the Holding Company is regulated under state
insurance law. Under the New York Insurance Law, MONY will be permitted to pay
shareholder dividends to the Holding Company only if it files notice of its
intention to declare such a dividend and the amount thereof with the New York
Superintendent and the New York Superintendent does not disapprove the
distribution. Under the New York Insurance Law, the New York Superintendent has
broad discretion in determining whether the financial condition of a stock life
insurance company would support the payment of dividends to its shareholders.
The New York Insurance Department has established informal guidelines for the
New York Superintendent's determinations that focus on, among other things,
overall financial condition and profitability under statutory accounting
practices. Management believes these guidelines may limit the ability of MONY to
pay dividends to the Holding Company. There can be no assurance that MONY will
have statutory earnings to support the payment of dividends to the Holding
Company in an amount sufficient to fund its cash requirements and interest and
pay cash dividends. In addition, the Arizona insurance laws contain similar
restrictions on the ability of MLOA to pay dividends to MONY. There can be no
assurance that the Arizona insurance laws will in the future permit the payment
of dividends by MLOA to MONY in an amount sufficient to support the ability of
MONY to pay dividends to the Holding Company. Also, no dividend can be paid on
the Common Stock unless all dividends on any preferred stock to be issued in the
future have been duly paid or provided for. MONY's inability to pay dividends to
the Holding Company in the future in an amount sufficient for the Holding
Company to pay dividends to its stockholders would have a material adverse
effect on the Holding Company and the market value of the Common Stock. See
"Dividends", "Use of Proceeds", "Business -- Regulation -- Shareholder Dividend
Restrictions", "Certain Provisions of the Investment" and "Description of
Capital Stock".
In addition, the amount of earnings on MONY's participating policies that
may inure to the benefit of the Holding Company and its stockholders is subject
to limitations under the Plan and the New York Insurance Law. The aggregate
after-tax amount the participating policies included in the Closed Block may
contribute to MONY's statutory operating results over the period the Closed
Block remains in effect is limited to the excess of Closed Block liabilities
over Closed Block assets (excluding participating policies outside the Closed
Block) at the Plan Effective Date determined on the basis of statutory
accounting practices. With respect to participating policies issued after the
Plan Effective Date, MONY will be subject to statutory restrictions that limit
the amount of statutory profits on these policies (measured before dividends to
policyholders) that can inure to the benefit of the Holding Company and its
stockholders.
If the Holding Company Subordinated Notes are issued, the Holding Company
may also receive payments of principal and interest from MONY on the
Intercompany Surplus Notes. The Intercompany Surplus Notes will be in an
aggregate principal amount equal to the aggregate principal amount of the
Holding Company Subordinated Notes and bear interest at 9.50% per annum, which
is payable semiannually. Principal is payable at maturity. Payments of principal
and interest on the Intercompany Surplus Notes can only be made with the prior
approval of the New York Superintendent "whenever, in his judgment, the
financial condition of such insurer warrants". Such payments
24
<PAGE> 26
further may be made only out of surplus funds which are available for such
payments under the New York Insurance Law. There can be no assurance that MONY
will obtain the requisite approval for payments with respect to the Intercompany
Surplus Notes, or that surplus funds will be available for such payments. If
such payments are not made, the Holding Company may not be able to meet its cash
requirements, including principal and interest payments on the Holding Company
Subordinated Notes, if issued, and dividends on any preferred stock to be issued
in the future and the Common Stock. If the Holding Company fails to pay
principal or interest on the Holding Company Subordinated Notes, it will be in
default thereunder, allowing the holders of the Holding Company Subordinated
Notes to exercise all remedies available to them. Any such default would have a
material adverse effect on the Company's financial position and results of
operations.
From time to time, the National Association of Insurance Commissioners (the
"NAIC") and various state insurance regulators have considered, and may in the
future consider, proposals to further restrict dividend payments that may be
made by an insurance company without regulatory approval. No assurance can be
given that there will not be any further regulatory action restricting the
ability of the Company's insurance subsidiaries to pay dividends. Inability to
pay dividends to the Holding Company in an amount sufficient to enable the
Holding Company to meet its cash requirements (including dividend payments on
the Common Stock) could be materially adverse to holders of Common Stock.
DECLINE AND EXPIRATION OF PAYMENTS AND INCOME RELATED TO THE GROUP PENSION
TRANSACTION
On December 31, 1993 (the "Group Pension Transaction Date"), the Company
entered into an agreement (the "AEGON Agreement") with AEGON USA, Inc. ("AEGON")
under which the Company transferred a substantial portion of its group pension
business to AEGON's wholly-owned subsidiary, AUSA Life Insurance Company, Inc.
("AUSA"). The transaction (hereafter referred to as the "Group Pension
Transaction") was legally structured as a sale. However, for accounting
purposes, the Company continues to record the assets and liabilities comprising
the transferred business, as well as the related profits therefrom, in its
financial statements because, pursuant to the terms of the AEGON Agreement, the
Company retained substantially all the risks and rewards of the transferred
business. See "Business -- The Group Pension Transaction", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 11 to the Consolidated Financial Statements.
In connection with the Group Pension Transaction at December 31, 1993, the
Company made a $200.0 million capital investment in AEGON by purchasing $150.0
million face amount of "Series A Notes" and $50.0 million face amount of "Series
B Notes" (hereinafter referred to as the "AEGON Notes"). The Series A Notes pay
interest at 6.44% per annum and the Series B Notes pay interest at 6.24% per
annum. Both the Series A and Series B Notes mature on December 31, 2002.
Pursuant to the AEGON Agreement, MONY receives from AUSA (i) payments on an
annual basis through December 31, 2002 (the "Group Pension Payments") equal to
all of the earnings, as defined in the AEGON Agreement, from the existing
deposits on contracts in force and transferred to AEGON on the Group Pension
Transaction Date (the "Existing Deposits"), (ii) a final payment (the "Final
Value Payment") at December 31, 2002 based on the remaining fair value of the
Existing Deposits and (iii) a contingent payment (the "New Business Growth
Payment") at December 31, 2002 based on new business growth subsequent to the
Group Pension Transaction Date. However, the level of new business growth
necessary for MONY to receive the New Business Growth Payment made it unlikely
that MONY would ever receive any such payment.
With respect to the Group Pension Payments, the annual results from the
Existing Deposits are measured on a basis in accordance with the AEGON Agreement
(such basis hereafter referred to as the "Earnings Formula"), which is
substantially the same as GAAP, except that: (i) asset impairments on fixed
maturity securities are only recognized when such securities are designated
25
<PAGE> 27
with an NAIC rating of "6" and (ii) no impairment losses are recognized on
mortgage loans until such loans are disposed or at the time, and in the
calculation of, the Final Value Payment.
Earnings which emerge from the Existing Deposits pursuant to the
application of the Earnings Formula are recorded in the Company's financial
statements only after adjustments (primarily to recognize asset impairments in
accordance with SFAS Nos. 114 and 115) to reflect such earnings on a basis in
accordance with GAAP (such earnings hereafter referred to as the "Group Pension
Profits"). Losses which arise from the application of the Earnings Formula for
any annual period will be reflected in the Company's results of operations
(after adjustments to reflect such losses in accordance with GAAP) only up to
the amount for which the Company is at risk (as described below), which at any
time is equal to the then outstanding principal amount of the Series A Notes.
Operating losses reported in any annual period pursuant to the Earnings
Formula are carried forward to reduce any earnings in subsequent years reported
pursuant to the Earnings Formula. Any resultant deficit remaining at December
31, 2002 will be deducted from the Final Value Payment and New Business Growth
Payment, if any, due to the Company. If a deficit still remains, it will be
applied as an offset against the principal payment due to the Company upon
maturity of the Series A Notes.
The Group Pension Profits have represented a significant portion of the
Company's net income. For the six month periods ended June 30, 1998 and 1997 and
the years ended December 31, 1997, 1996 and 1995, AUSA reported earnings to the
Company pursuant to the application of the Earnings Formula of $23.5 million,
$24.3 million, $55.7 million, $66.7 million and $70.2 million, respectively, and
the Company recorded Group Pension Profits of $22.7 million, $28.2 million,
$60.0 million, $59.5 million and $61.7 million, respectively. The Group Pension
Profits represented 11.4%, 35.7%, 32.0%, 59.2% and 99.8% of income before income
taxes and extraordinary item for such periods, respectively. In addition,
management expects that Group Pension Profits will decline in each succeeding
annual period consistent with the continuing run-off of the underlying business
until they terminate as of December 31, 2002. Accordingly, the Company's
financial position and results of operations could be adversely affected unless
management takes actions which will increase its revenue and net income in each
succeeding year and, particularly, subsequent to December 31, 2002, to replace
the Group Pension Profits.
Any future losses reported on commercial mortgage loans, real estate and
fixed maturity securities which were transferred to AUSA in connection with the
Group Pension Transaction will adversely affect Group Pension Profits reported
in the future and may have a material adverse effect on the financial condition
and results of operations reported by the Company in the future. Such assets are
subject to substantial risks, including those described in "-- Risk of Further
Losses on Real Estate; Risk with Respect to Commercial Mortgage Loans" and
"-- Other Investment Portfolio Risks; Fluctuation of Results; Writedowns".
See "Business -- The Group Pension Transaction", "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Note 11 to
the Consolidated Financial Statements.
RISK OF FURTHER LOSSES ON REAL ESTATE; RISK WITH RESPECT TO COMMERCIAL MORTGAGE
LOANS
REAL ESTATE
At June 30, 1998 and December 31, 1997, 7.4% ($791.6 million) and 10.6%
($1,117.1 million), respectively, of the Company's total invested assets
consisted of real estate. (Amounts in this section do not include invested
assets transferred in the Group Pension Transaction. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations" and
Note 11 to the Consolidated Financial Statements).
The carrying value of real estate classified as held for investment is
generally adjusted for impairment whenever events or changes in circumstances
indicate that the carrying amount of the
26
<PAGE> 28
asset may not be recoverable. Such impairment writedowns are recorded as
realized investment losses and, accordingly, are reflected in the Company's
results of operations. For the six months ended June 30, 1998 and the years
ended December 31, 1997, 1996 and 1995, such impairment writedowns aggregated
$0.0 million, $0.0 million, $3.8 million and $0.0 million, respectively. At June
30, 1998 and December 31, 1997, 1996 and 1995, the carrying value of real estate
held for investment was $452.5 million, $495.9 million, $1,070.4 million and
$1,179.8 million, or 4.2%, 4.7%, 10.2% and 11.0% of invested assets at such
dates, respectively. The aforementioned carrying values are net of cumulative
impairments (including impairment writedowns recorded upon foreclosures of
mortgage loans on real estate) of $55.8 million, $61.7 million, $206.1 million
and $246.4 million, respectively, relating to management's best estimate of
impairment losses at such dates. However, there can be no assurance that
additional provisions for impairment writedowns with respect to real estate held
for investment will not need to be made. Any such writedowns may have a material
adverse effect on the Company's financial position and results of operations.
In accordance with its ongoing strategy to strengthen the Company's
financial position, management expects to continue to selectively sell real
estate. Once management identifies a real estate property to be sold and
commences a plan for marketing the property, the property is classified as to be
disposed of and a valuation allowance is established and periodically revised,
if necessary, to adjust the carrying value of the property to reflect the lower
of its current carrying value or the fair value, less associated selling costs.
Increases in such valuation allowances are recorded as realized investment
losses and, accordingly, are reflected in the Company's results of operations.
Real estate classified as to be disposed of may also be net of impairment
adjustments recorded prior to the time such real estate was designated for sale
or at the time of foreclosure if acquired in satisfaction of debt. At June 30,
1998 and December 31, 1997, 1996 and 1995, the carrying value of real estate to
be disposed of was $339.1 million, $621.2 million, $434.8 million and $717.4
million, or 3.2%, 5.9%, 4.2% and 6.7% of invested assets at such dates,
respectively. The aforementioned carrying values are net of valuation allowances
of $45.2 million, $82.7 million, $46.0 million and $49.1 million, respectively.
In addition, the carrying value of real estate to be disposed of at such date is
net of $113.9 million, $182.3 million, $120.1 million and $136.7 million of
impairment adjustments. For the six months ended June 30, 1998 and the years
ended December 31, 1997, 1996 and 1995, such increases in valuation allowances
aggregated $1.4 million, $63.8 million, $16.8 million and $39.5 million,
respectively. Because carrying values are adjusted to reflect such valuation
allowances, management expects the net proceeds from sales of real estate will
not be materially different from the carrying value of such real estate on a
GAAP basis. However, there can be no assurance that increases in valuation
allowances will not be required in the future or that future sales of real
estate will not be made at amounts below recorded GAAP carrying value which may
have a material effect on the Company's financial position and results of
operations.
In addition, as a result of differences between accounting practices
prescribed or permitted by the New York Insurance Department ("SAP") and GAAP,
the carrying value of real estate on a SAP basis exceeds the carrying value of
such investments on a GAAP basis. (See Note 20 to the Consolidated Financial
Statements). Accordingly, management expects to incur losses on a SAP basis as a
result of anticipated real estate sales, which losses could materially affect
the Company's statutory-basis surplus and net income. The GAAP carrying value of
real estate to be disposed of was $339.1 million at June 30, 1998 (or 3.2% of
invested assets), which amount is net of impairment adjustments and valuation
allowances aggregating approximately $113.9 million and $45.2 million,
respectively. There can be no assurance as to whether, when or for what amounts
any real estate that is classified to be disposed of will actually be disposed
of. For the six month period ended June 30, 1998 and the years ended December
31, 1997, 1996 and 1995 the GAAP carrying value of real estate sold was
approximately $317.0 million, $346.3 million, $414.1 million and $273.2 million,
respectively. The SAP carrying value of such real estate sold was $428.5
million, $395.0 million, $449.1 million and $299.3 million.
27
<PAGE> 29
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Real Estate Sales", "Investments -- Equity Real
Estate -- Real Estate Sales", "Investments -- Investment Impairments and
Valuation Allowances" and Note 20 to the Consolidated Financial Statements.
COMMERCIAL MORTGAGE LOANS
At June 30, 1998 and December 31, 1997, 8.3% ($892.1 million) and 8.7%
($914.9 million), respectively, of the Company's total invested assets consisted
of commercial mortgage loans. (Amounts in this section do not include invested
assets transferred in the Group Pension Transaction. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations" and
Note 11 to the Consolidated Financial Statements). Commercial mortgage loans are
stated at their unpaid principal balances, net of valuation allowances for
impairment. The Company provides valuation allowances for commercial mortgage
loans when it is probable that the Company will be unable to collect all amounts
due according to the contractual terms of the loan agreement. Increases in such
valuation allowances are recorded as realized investment losses and,
accordingly, are reflected in the Company's results of operations. For the six
months ended June 30, 1998 and the years ended December 31, 1997, 1996 and 1995,
such increases (decreases) in valuation allowances aggregated $(0.2) million,
$0.4 million, $(4.2) million and $3.1 million, respectively. The carrying value
of commercial mortgage loans at June 30, 1998 was $892.1 million, which amount
is net of $72.3 million representing management's best estimate of cumulative
impairment losses at such date. However, there can be no assurance that
additional provisions for impairment writedowns with respect to the Company's
commercial mortgage loans will not need to be made. Any such writedowns may have
a material adverse effect on the Company's financial position and results of
operations.
The Company reviews its mortgage loan portfolio and analyzes the need for a
valuation allowance for any loan which is delinquent for 60 days or more, in
process of foreclosure, restructured, on "watchlist", or which currently has a
valuation allowance. Loans which are delinquent and loans in process of
foreclosure are categorized by the Company as "problem" loans. Loans with
valuation allowances, but which are not currently delinquent, and loans which
are on watchlist are categorized by the Company as "potential problem" loans.
Loans for which the original terms of the mortgages have been modified or for
which interest or principal payments have been deferred are categorized by the
Company as "restructured" loans. At June 30, 1998, the carrying value of
problem, potential problem and restructured loans was $11.9 million, $81.1
million and $218.6 million, respectively, net of valuation allowances of $2.3
million, $15.1 million and $40.2 million, respectively.
OTHER INVESTMENT PORTFOLIO RISKS; FLUCTUATION OF RESULTS; WRITEDOWNS
The Company's investment portfolio consists primarily of fixed maturity
securities, equity securities, limited partnership interests, money market
investments, commercial mortgage loans, agricultural mortgage loans and real
estate. The fair value of these and the Company's other invested assets
fluctuates depending on general economic and market conditions. In addition, the
Company is also subject to credit risk relating to the uncertainty associated
with the continued ability of debtors to make timely payments pursuant to the
contractual terms underlying such investments.
With respect to the Company's investments in fixed maturity securities and
commercial and agricultural mortgage loans, the market value of such investments
generally increase or decrease in an inverse relationship with fluctuations in
interest rates, and the Company's net investment income increases or decreases
in direct relationship with interest rate changes.
At June 30, 1998 and December 31, 1997, 58.5% ($6,282.4 million) and 56.9%
($5,950.1 million), respectively, of the Company's total invested assets
consisted of fixed maturity securities. (Amounts in this section do not include
invested assets transferred in the Group Pension Transac-
28
<PAGE> 30
tion. See "Management's Discussion and Analysis of Financial Conditions and
Results Operations" and Note 11 to the Consolidated Financial Statements). Fixed
maturity securities whose value is deemed other than temporarily impaired are
written down to fair value. Such writedowns are recorded as realized investment
losses and, accordingly, are reflected in the Company's results of operations
and the cost basis of the respective assets are permanently adjusted to reflect
such impairment. For the six months ended June 30, 1998 and the years ended
December 31, 1997, 1996 and 1995, such writedowns aggregated $2.7 million, $6.1
million, $3.0 million and $2.3 million, respectively. At June 30, 1998, the
carrying value of fixed maturity securities was net of $10.0 million of
cumulative adjustments to the cost basis from writedowns representing
management's best estimate of impairment losses at such date. In addition, the
carrying value of fixed maturity securities at June 30, 1998 included
approximately $2,938.4 million of private fixed maturities, which have a less
liquid market than public fixed maturity securities. There can be no assurance
that additional writedowns for impairment with respect to the Company's fixed
maturity securities will not need to be made. Any such writedowns may have a
material adverse effect on the Company's financial position and results of
operations.
Mortgage backed securities ("MBSs"), including collateralized mortgage
obligations ("CMOs") and pass-through securities, represented approximately
10.7% ($673.1 million) of the Company's fixed maturity securities as of June 30,
1998. Such securities are subject to prepayment risks that vary with, among
other things, interest rates. During periods of declining interest rates, MBSs
generally prepay faster as the underlying mortgages are prepaid and refinanced
by the borrowers in order to take advantage of the lower rates. MBSs that have
an amortized cost that is greater than par (i.e., purchased at a premium) may
incur a reduction in yield or a loss as a result of such prepayments. In
addition, during such periods, the Company will generally be unable to reinvest
the proceeds of any such prepayment at comparable yields. Conversely, during
periods of rising interest rates, prepayments are generally slow. MBSs that have
an amortized value that is less than par (i.e., purchased at a discount) may
incur a decrease in yield or a loss as a result of slower prepayments.
At June 30, 1998 and December 31, 1997, the Company had investments in
approximately 43 and 36 different limited partnerships which represented 1.6%
($166.9 million) and 1.4% ($146.4 million), respectively, of the Company's total
invested assets. Investment results for this portfolio are dependent upon, among
other things, general market conditions for initial and secondary offerings of
common stock. For the six months ended June 30, 1998 and the years ended
December 31, 1997, 1996 and 1995, investment income from investments in limited
partnership interests was approximately $18.9 million, $49.0 million, $50.5
million and $42.3 million, respectively, representing 5.3%, 6.7%, 6.7% and 5.8%,
respectively, of the net investment income for such periods. For the same time
periods, the Company achieved total returns on its investments in limited
partnership interests of 35.0%, 37.5%, 51.1% and 33.9%, respectively. There can
be no assurance that the recent level of investment returns achieved on limited
partnership investments can be sustained in the future, and the failure to do so
could have a material adverse effect on the Company's financial position and
results of operations.
The risk of fluctuations in market value of substantially all of the
Company's separate account assets is borne by the separate account contract
holders. Certain of the Company's policy charges for administering such separate
account assets, however, are set as a percentage of market value of such assets.
Accordingly, fluctuations in the market value of separate account assets may
result in fluctuations in the Company's revenue from policy charges.
The Company may, from time to time, for business, regulatory or other
reasons, elect or be required to sell certain of its general account invested
assets at a time when their fair values are less than their carrying values,
resulting in realized losses on investments, which would reduce net income. See
"Investments".
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INTEREST RATE RISK
The Company's life insurance and fixed annuity business is subject to
several inherent risks arising from movements in interest rates. Interest rate
changes can cause compression of the Company's net spread between interest
earned on investments and interest credited in dividend calculations or on
customer deposits, thereby adversely affecting the Company's results of
operations. Rapid changes in interest rates may result in, among other things,
increased asset calls, mortgage prepayments or policy withdrawals and
reinvestment at significantly lower yields, which could adversely affect
earnings. Interest rate changes can also produce an unanticipated increase in
transfers to separate account (variable) options or withdrawals of the Company's
fixed annuity products which may force the Company to sell investment assets at
a loss in order to fund such transfers or withdrawals.
The Company will experience spread compression when it is unable or chooses
not to maintain its target margin between investment earnings and its crediting
rates. When interest rates rise, the Company may not be able to replace the
assets in its investment portfolio with higher yielding assets that will be
necessary to fund the higher crediting rates necessary to keep its life
insurance and fixed annuities products competitive. As a result, the Company may
experience either a decrease in sales and an increase in transfers to separate
account (variable) options or withdrawals if it chooses to maintain its spread
by not raising its crediting rates, or spread compression if it does increase
its crediting rates. Conversely, when interest rates fall, the Company would
have to reinvest the cash received from its investments (i.e., interest and
payments of principal upon maturity or redemption) in the lower yielding
instruments then available. If the Company were unable (e.g., due to guaranteed
minimum or fixed crediting rates or limitations on the frequency of crediting
rate resets) or chose not to reduce the life insurance dividends or reduce the
crediting rates on its fixed annuities products or acquire relatively higher
risk investments yielding higher rates of return, spread compression would
occur.
At June 30, 1998, the Company has approximately $6.4 billion in cash values
on life insurance policies in which life insurance policyholders have rights to
policy loans. For such contracts, the Company has much the same interest rate
risks as with surrenders. In addition, policies with below market fixed policy
loan interest rates can create further compression of spreads until the dividend
interest rate can be adjusted to take into account the change in policy loan
utilization.
An increase in interest rates could make investments in fixed maturity
securities, including the Company's fixed rate products, more attractive to
potential policyholders, and hence make certain of the Company's variable
products, including but not limited to its variable annuities, less attractive.
If, as a result of interest rate increases, the Company were unable or
chose not to raise its crediting rates to keep them competitive, the Company may
experience withdrawals. If the Company lacked sufficient liquidity, the Company
might have to sell investment securities to fund associated payments. Because
the value of such securities would likely have decreased in response to the
increase in interest rates, the Company would realize a loss on the sales.
Although certain of the Company's products contain market value adjustment
features which transfer an approximation of such loss to the customer if the
selected time horizon for the fixed return investment is terminated prior to
maturity, there can be no assurance that the Company would be fully insulated
from realizing any losses on sales of its securities. In addition, regardless of
whether the Company realizes an investment loss, the withdrawals would produce a
decrease in invested assets, with an adverse effect on future earnings
therefrom. Finally, premature withdrawals may also cause the Company to
accelerate amortization of deferred policy acquisition costs which would
otherwise be amortized over a longer period, thereby adversely affecting the
Company's results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
Because all of the Company's fixed maturities and equity securities are
classified as available for sale, changes in the market or fair value of the
Company's fixed maturities and equity securities are reflected in the Company's
financial statements. Similar treatment is not available for liabilities. If
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interest rates rise, this will cause GAAP equity and total comprehensive income
to be adversely affected. In addition, should such assets be sold for less than
their carrying value, comprehensive income may be materially adversely affected.
The Company attempts to mitigate the negative impact of interest rate
changes through asset/liability management, including purchasing non-callable
bonds where practical and investing in private placement bonds, mortgage loans
and mortgage-backed securities which provide prepayment protection. There can be
no assurance that management will be able to manage successfully the negative
impact of interest rate changes.
RISK OF CHALLENGE TO THE NEW YORK SUPERINTENDENT'S ORDER
After a public hearing, the New York Superintendent will determine whether
the Plan meets the standards of applicable New York law, including, among other
things, whether the Plan is fair and equitable to the policyholders of MONY. The
order approving the Plan by the New York Superintendent is not expected to
address the fairness of the Plan to purchasers of Common Stock in the Offerings.
Section 7312 provides that any action challenging the validity of or
arising out of acts taken or proposed to be taken under the demutualization
statute in connection with the Demutualization must be commenced within one year
after a copy of the Plan, with the New York Superintendent's approval endorsed
thereon, is filed in the office of the New York Superintendent or six months
from the Plan Effective Date, whichever is later, or if the Plan is withdrawn,
within six months of such withdrawal. (Although Section 326 of the New York
Insurance Law provides that orders of the New York Superintendent are subject to
judicial review in a proceeding under Article 78 of the New York Civil Practice
Law and Rules, the law is not clear as to whether a lawsuit challenging an order
of the New York Superintendent under Section 7312 would have to be commenced
within 4 months after the order became final and binding, as is generally the
case for an Article 78 proceeding, or within the time period specified in
Section 7312.) The Company cannot predict whether any action challenging the
Plan or the approval thereof will be commenced or what aspects of the Plan, if
any, such an action might challenge. The existence of such a challenge could
adversely affect the market price of the Common Stock.
In the event that the order of the New York Superintendent is challenged, a
successful challenge could result in monetary damages, a modification of the
Plan or the New York Superintendent's approval of the Plan being set aside. In
order to challenge successfully the New York Superintendent's approval of the
Plan, the petitioner would have to sustain the burden of showing that such
approval was arbitrary and capricious or an abuse of discretion, made in
violation of lawful procedures, affected by error of law or not supported by
substantial evidence. In addition, Section 7312 provides that the insurer may
require the challenging party to give security for the insurer's reasonable
expenses, including attorney's fees, which may be incurred or for which the
insurer may become liable, to which security the insurer shall have recourse in
such amount as the court shall determine upon the termination of the action.
A successful challenge would likely result in substantial uncertainty
relating to the terms and effectiveness of the Plan, and a substantial period of
time might be required to reach a final determination. Such an outcome would be
materially adverse to purchasers of Common Stock in the Offerings and would have
a material adverse effect on the Company's financial position and results of
operations and the market price of the Common Stock.
RISKS WITH RESPECT TO SALES PRACTICE LITIGATION
In late 1995 and during 1996 a number of purported class actions were
commenced in various state and federal courts against the Company alleging that
the Company engaged in deceptive sales practices in connection with the sale of
whole and universal life insurance policies during the period 1980 through 1995.
Although the claims asserted in each case are not identical, they seek
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substantially the same relief under essentially the same theories of recovery
(i.e., breach of contract, fraud, negligent misrepresentation, negligent
supervision and training, breach of fiduciary duty, unjust enrichment and
violation of state insurance and/or deceptive business practice laws).
Plaintiffs in these cases (including the Goshen case discussed below) seek
primarily equitable relief (e.g., reformation, specific performance, mandatory
injunctive relief prohibiting the Company from canceling policies for failure to
make required premium payments, imposition of a constructive trust and creation
of a claims resolution facility to adjudicate any individual issues remaining
after resolution of all class-wide issues) as opposed to compensatory damages,
although they also seek compensatory damages in unspecified amounts. The Company
has answered the complaints in each action (except for one being voluntarily
held in abeyance), has denied any wrongdoing, and has asserted numerous
affirmative defenses. With respect to one of these cases, Goshen v. The Mutual
Life Insurance Company of New York and MONY Life Insurance Company of America
(the "Goshen case"), on October 21, 1997 the New York State Supreme Court
granted the Company's motion for summary judgment and dismissed all claims filed
in the Goshen case against the Company. The order of the New York State Supreme
Court has been appealed by plaintiffs. There can be no assurance that the
present or any future litigation relating to pricing and sales practices will
not have a material adverse effect on the Company. See "Business -- Legal
Proceedings".
EXPIRATION OF SURRENDER PENALTIES WITH RESPECT TO CERTAIN ANNUITIES
The Company typically imposes surrender charges on annuities sold by it to
enable the Company to recover unamortized policy acquisition costs in the event
that the annuity is surrendered before policy acquisition costs are fully
amortized and to discourage contract surrenders, which could require the Company
to dispose of assets prematurely at a loss. As surrender penalties expire it is
likely that surrenders of single premium deferred annuities ("SPDAs") and
flexible payment variable annuities ("FPVAs") will increase. This could have a
material adverse effect on the Company's financial position and results of
operations.
RISKS RELATED TO THE CLOSED BLOCK; ASSETS OF CLOSED BLOCK AVAILABLE SOLELY TO
POLICYHOLDERS
The Plan requires that MONY establish and operate a Closed Block for the
benefit of the Closed Block Business, which is designed to give reasonable
assurance with respect to policies included therein that, after the Plan
Effective Date, assets will be available to maintain current payable dividend
scales if the experience underlying such dividend scales continues. For so long
as there are policyholders whose policies are in the Closed Block, the Closed
Block will continue to be in effect until the date on which none of the policies
in the Closed Block remains in force. The duration of the Closed Block is
currently expected to be in excess of 90 years. The amount of assets allocated
to the Closed Block is expected to produce cash flows which, together with
anticipated revenues from the Closed Block Business, are reasonably expected to
be sufficient to support the Closed Block Business, including, but not limited
to, provisions for payment of claims and surrender benefits, certain expenses
and taxes and to provide for the continuation of current payable dividend
scales, if the experience underlying such dividend scales continues, and for
appropriate adjustments in such scales if the experience changes.
The assets, including the revenue therefrom, allocated to the Closed Block
will inure solely to the benefit of owners of policies included in the Closed
Block until such time as the Closed Block is no longer in effect, and will not
be available to be distributed as dividends to the Holding Company. To the
extent that over time cash flows from the assets allocated to the Closed Block
and other experience relating to the Closed Block Business are, in the
aggregate, more favorable than assumed in setting up the Closed Block, total
dividends paid to Closed Block policyholders in future years will be greater
than the total dividends that would have been paid to such policyholders if the
current payable dividend scales had been continued and will not be available to
stockholders of the Holding Company. Conversely, to the extent that over time
such cash flows and other experience are, in the aggregate, less favorable than
assumed in setting up the Closed Block, total dividends
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paid to Closed Block policyholders in future years will be less than the total
dividends that would have been paid to such policyholders if the current payable
dividend scales had been continued. If the investment, mortality, persistency or
other experience of the Closed Block were substantially worse than that of the
Company's principal competitors, management might, for competitive reasons, use
MONY's general funds to maintain competitive dividend levels. In the event that
the assets allocated to the Closed Block, the cash flows therefrom, and the
revenues from the policies included therein prove to be insufficient to pay the
benefits guaranteed under the terms of the policies within the Closed Block,
MONY will be required to make such payments from its general funds. State and
local taxes paid on premiums, state guaranty fund assessments and Federal income
taxes in respect of the Closed Block Business will be charged to the Closed
Block in accordance with the procedures set forth in the Plan. However, expenses
(including investment management expenses) of operating and administering the
Closed Block, other than certain real estate operating expenses, real estate
taxes and asset acquisition and disposition costs, will not be charged to the
Closed Block, and the cost of increases in such expense will be borne by MONY.
As a result of such exclusion, operating costs and expenses outside of the
Closed Block are disproportionate to the business outside of the Closed Block.
See "The Demutualization -- Establishment and Operation of the Closed Block".
RISKS ASSOCIATED WITH CERTAIN ECONOMIC AND MARKET FACTORS
The Company's results of operations are affected by certain economic and
market factors, including the level of volatility in the markets in which the
Company invests and the overall investment returns provided thereby. In
particular, significant growth in the retirement-oriented investment market and
uncommonly strong stock and bond market appreciation have been material factors
in the growth of the Company's assets and its ability to generate sales in
recent years. There can be no assurance, however, that these economic and market
trends will continue. Adverse economic conditions and other factors, including a
protracted and/or precipitous decline in the stock market and other economic
factors that affect the popularity of the Company's products and services, may
negatively impact the Company's business, financial position and results of
operations.
RISK OF VARIATIONS IN CLAIMS EXPERIENCE
An insurance company's earnings significantly depend upon the claims paid
under its insurance contracts and will vary from period to period depending upon
the amount of claims incurred in the relevant periods. Therefore, there is
limited predictability of claims experience within any given month or year. As a
result, it is anticipated that the Company's financial results (and,
accordingly, the trading price of the Common Stock) may vary from period to
period and that such variations may be material in any given period. The Company
uses certain assumptions in pricing its products. There can be no assurance that
actual experience will match the assumptions made for pricing purposes and, to
the extent that they differ, the Company's operating results could be materially
adversely affected.
RISKS RELATED TO REGULATORY MATTERS
Insurance companies are subject to supervision and regulation by the state
insurance authority in each state in which they transact business. Such
supervision and regulation relate to numerous aspects of an insurance company's
business and financial condition, including limitations on the authorization of
lines of business, underwriting limitations, the setting of premium rates, the
establishment of standards of solvency, the licensing of insurers and agents,
concentration of investments, levels of reserves, the payment of dividends,
transactions with affiliates, changes of control and the approval of policy
forms. Such regulation is concerned primarily with the protection of
policyholders. State regulatory oversight and various proposals at the federal
level (including the
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proposed adoption of a federal regulatory framework for insurance companies) may
in the future adversely affect the Company's ability to sustain adequate returns
in certain lines of business. In recent years, the state insurance regulatory
framework has come under increased federal scrutiny, and certain state
legislatures have considered or enacted laws that alter and, in many cases,
increase state authority to regulate insurance companies and insurance holding
company systems. Further, the NAIC and state insurance regulators are
re-examining existing laws and regulations, and as a condition to accreditation
have required the adoption of certain model laws which specifically focus on
insurance company investments, issues relating to the solvency of insurance
companies, risk-based capital guidelines, interpretations of existing laws, the
development of new laws, and the definition of extraordinary dividends. See
"Business -- Regulation". It is impossible to predict the future impact of
potential state and federal regulations on the Company's operations, and there
can be no assurance that future insurance-related laws and regulations, or the
interpretation thereof, will not have a material adverse effect on the
operations of the Company's business or on the Company's financial position or
results of operations.
The capacity for an insurance company's growth in premiums is in part a
function of its statutory surplus. Maintaining appropriate levels of statutory
surplus, as measured by state insurance regulators, is considered important by
state insurance regulatory authorities and the private agencies that rate
insurers' claims-paying abilities and financial strength. Failure to maintain
certain levels of statutory surplus could result in increased regulatory
scrutiny, action by state regulatory authorities or a downgrade by the private
agencies referred to below. As of June 30, 1998, MONY and MLOA were in
compliance with state requirements with respect to statutory surplus. However,
there can be no assurance that the Company's insurance company subsidiaries will
maintain such levels of surplus. In particular, the Company expects to realize
losses on a SAP basis in connection with future sales of the Company's real
estate which could materially affect the Company's statutory surplus. See
"Investments -- Equity Real Estate -- Real Estate Sales".
The NAIC has adopted a system for assessing the adequacy of statutory
capital for life and health insurers. This system, known as Risk Based Capital
("RBC"), is in addition to the states' fixed dollar minimum capital and other
requirements. This system is based on risk-based formulas that apply prescribed
factors to the various risk elements in an insurer's business to report a
minimum capital requirement proportional to the amount of risk assumed by the
insurer. As of June 30, 1998, based on computations made by the Company in
accordance with the prescribed formulas, MONY and MLOA exceeded the minimum RBC
requirements. However, there can be no assurance that capital requirements
applicable to the Company's businesses will not increase or that the Company
will be able to meet minimum RBC requirements in the future. See "Business --
Regulation -- Risk-Based Capital Requirements".
Insurance regulators have given greater emphasis in recent years to the
investigation of allegations of improper life insurance pricing and sales
practices by life and annuity insurers, including churning and misleading sales
presentations by insurance agents. State insurance regulatory authorities also
regularly make inquiries, hold investigations and administer market conduct
examinations with respect to insurers' compliance with applicable insurance laws
and regulations. There can be no assurance that any non-compliance with such
applicable laws and regulations would not have a material adverse effect on the
Company. The Company is currently engaged in certain class action and individual
litigation relating to its sales practices in connection with the sale of whole
life and universal life insurance policies. See "Business -- Legal Proceedings".
In addition, the NAIC has adopted a model law and regulation which would
standardize the form and content of any illustrations provided to prospective
purchasers of individual life insurance products. The model law has been enacted
in a number of states, and is currently under consideration in a number of other
states. Management expects that similar legislation will eventually be enacted
in additional states in which the Company sells individual life insurance
products. There can be no assurance as to whether this reform will have a
material adverse impact on sales of such products by the industry as a whole or
by the Company.
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State guaranty association laws exist in all states, the District of
Columbia and Puerto Rico. Insurers doing business in any of these jurisdictions
can be assessed for policyholder losses incurred by insolvent insurance
companies. These arrangements provide certain levels of protection to
policyholders from losses under insurance policies issued by impaired or
insolvent insurance companies. Although MONY and MLOA have established reserves
that they consider adequate for assessments in respect to insurance companies
that are currently subject to insolvency proceedings, the amount and timing of
any future assessments on MONY and MLOA under these laws cannot be reasonably
estimated and are beyond the control of MONY and MLOA. While most of these laws
provide that an assessment may be excused or deferred if it would threaten an
insurer's solvency and further provide for annual limits on such assessments,
there can be no assurance that the reserves established by MONY and MLOA for
assessments are adequate and, consequently, the Company's financial performance
could be adversely affected by such guaranty association assessments.
In March 1998, the NAIC voted to adopt its Codification of Statutory
Accounting Principles project (referred to hereafter as "codification").
Codification is a modified form of statutory accounting principles that will
result in changes to the current NAIC Accounting Practices and Procedures Manual
applicable to insurance enterprises. Although adoption of codification by all
states is not a certainty, the NAIC has recommended that all states enact
codification as soon as practicable with an effective date of January 1, 2001.
It is currently anticipated that codification will become an NAIC state
accreditation requirement starting in 2002. In addition, the American Institute
of Certified Public Accountants and the NAIC have agreed to continue to allow
the use of certain permitted accounting practices when codification becomes
effective in 2001. Any accounting differences from codification principles,
however, must be disclosed and quantified in the footnotes to the audited
financial statements. Therefore, codification will likely result in changes to
what are currently considered prescribed statutory insurance accounting
practices.
Certain of the Company's businesses are subject to other governmental
regulation, including regulation pursuant to federal and state securities laws.
Changes to these laws and regulations could have a material adverse effect on
the operations of the Company's business or on the Company's financial position
or results of operations.
See "Business -- Regulation".
RISKS OF COMPETITION
The Company believes that competition in the Company's lines of business is
based on service, product features, price, commission structure, perceived
financial strength, claims-paying ratings and name recognition. The Company
competes with a large number of other insurers as well as non-insurance
financial services companies, such as banks, broker-dealers and mutual funds,
many of which have greater financial resources, offer alternative products or
more competitive pricing and, with respect to other insurers, have higher
ratings than the Company. Competition exists for individual consumers and agents
and other distributors of insurance products. National banks, with their
pre-existing customer bases for financial services products, may pose increasing
competition in the future to insurers who sell annuities, including the Company,
as a result of the United States Supreme Court's 1994 decision in NationsBank of
North Carolina v. Variable Annuity Life Insurance Company, which permits
national banks to sell annuity products of life insurance companies in certain
circumstances.
The Company must attract and retain productive agents to sell its insurance
and annuity products. Strong competition exists among insurance companies for
agents with demonstrated ability. Management believes that key bases of
competition among insurance companies for agents with demonstrated ability
include a company's financial position and the services provided to, and
relationships developed with, these agents in addition to compensation and
product structure. Changes arising from the Demutualization, as well as the
realignment of the career agency sales
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force and the transition to new products, may affect the Company's ability to
retain productive distributors of its individual insurance and annuity products.
Sales of individual insurance and annuity products and the Company's financial
position and results of operations could be materially adversely affected if
such changes occur.
In addition, the Company recently adopted a plan to restructure its career
agency sales force. See "Business -- Marketing and Distribution". There can be
no assurance that such restructuring will be successful or that the career
agency sales force will be receptive to the new structure. If the restructuring
is not successful, or if the career agency sales force is not receptive to the
new structure, the Company's financial position and results of operations could
be materially adversely affected.
In addition, several proposals to repeal or modify the Glass-Steagall Act
of 1933, as amended, and the Bank Holding Company Act of 1956, as amended, have
been made by members of Congress and the Clinton Administration. Currently, the
Bank Holding Company Act restricts banks from being affiliated with insurance
companies. None of these proposals have yet been enacted, and it is not possible
to predict whether any of these proposals will be enacted or, if enacted, their
potential effect on the Company.
See "Business -- Competition".
RISKS WITH RESPECT TO RATINGS
Ratings with respect to claims-paying ability and financial strength have
become an increasingly important factor in establishing the competitive position
of insurance companies. Ratings are important to maintaining public confidence
in MONY and its ability to market its products. Rating organizations continually
review the financial performance and condition of insurers, including MONY. Any
lowering of MONY's ratings could have a material adverse effect on MONY's
ability to market its products and retain its current policyholders. These
consequences could, depending upon the extent thereof, have a material adverse
effect on MONY's liquidity and, under certain circumstances, net income. MONY is
currently rated "A-" by A.M. Best and MONY's insurance claims-paying ability is
rated "A3" by Moody's, "A+" by Duff & Phelps and "A+" by S&P. Moody's, on
January 6, 1998, and Duff & Phelps, on August 4, 1998, each announced that it
had changed its respective outlook on MONY's rating from stable to positive.
The foregoing ratings reflect each rating agency's current opinion of
MONY's claims-paying ability, financial strength, operating performance and
ability to meet its obligations to policyholders and are not evaluations
directed toward the protection of investors in the Common Stock. Such factors
are of concern to policyholders, agents and intermediaries. Such ratings should
not be relied upon when making a decision to purchase shares of Common Stock
offered hereby.
YEAR 2000
The Year 2000 issue is the result of the widespread use of computer
programs being written using two digits (rather than four) to define the
applicable year. Such programming was a common industry practice designed to
avoid the significant costs associated with additional mainframe capacity
necessary to accommodate a four digit year field. As a result, any of the
Company's computer systems that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a major system failure or miscalculations. The Company has conducted a
comprehensive review of its computer systems to identify the systems that could
be affected by the "Year 2000" issue and has developed and implemented a plan to
resolve the issue. The Company currently believes that, with modifications to
existing software and converting to new software, the Year 2000 problem will not
pose significant operational problems for the Company's computer systems.
However, if such modifications and conversions are not completed on a timely
basis, the Year 2000 problem may have a material impact on the operations of the
Company. Further, even if the Company timely completes such modifications and
conversions,
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there can be no assurance that the failure by vendors or other third parties to
solve the Year 2000 problem will not have a material impact on the operations of
the Company. The Company estimates the total cost to resolve its Year 2000
problem to be approximately $18 million, of which $8.9 million has been incurred
through June 30, 1998; however, there can be no assurance that the actual cost
incurred will not be materially higher than such estimate. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000".
RISKS OF POTENTIAL ADOPTION OF NEW FEDERAL INCOME TAX LEGISLATION
Current Federal income tax laws generally permit the tax-deferred
accumulation of earnings on the premiums paid by the holders of annuities and
life insurance products. Taxes, if any, are payable on the accumulated
tax-deferred earnings when earnings are actually paid. Congress has, from time
to time, considered possible legislation that would eliminate the deferral of
taxation on the accretion of value within certain annuities and life insurance
products. The 1994 United States Supreme Court ruling in NationsBank of North
Carolina v. Variable Annuity Life Insurance Company that annuities are not
insurance for purposes of the National Bank Act may cause Congress to consider
legislation that would eliminate such tax deferral at least for certain
annuities. Other possible legislation, including a simplified "flat tax" income
structure with an exemption from taxation for investment income, could also
adversely affect purchases of life insurance if such legislation were to be
enacted. There can be no assurance as to whether such legislation will be
enacted or, if enacted, whether such legislation would contain provisions with
possible adverse effects on the Company's annuity and life insurance products.
Recently, the Federal income tax rate on capital gains was reduced. Certain
of the Company's accumulation products that feature tax-deferral of earnings
might consequently be deemed to be relatively less attractive than before in
comparison with alternative accumulation products that feature long-term capital
gains treatment, particularly if the tax rates on ordinary income that are
ultimately applied to such tax-deferred earnings are substantially in excess of
the reduced rate on long-term capital gains.
RISKS WITH RESPECT TO ANTI-TAKEOVER EFFECTS OF STATUTES, AMENDED AND RESTATED
CERTIFICATE AND THE BY-LAWS; PREFERRED SHARE PURCHASE RIGHTS
Under the New York Insurance Law, for a period of five years following the
Plan Effective Date, no person may acquire beneficial ownership of 5% or more of
the outstanding shares of Common Stock without the prior approval of the New
York Superintendent. The Investors have received a conditional waiver of this
rule from the New York Superintendent in connection with the potential exercise
of the Warrants prior to the end of such five-year period. After the Plan
Effective Date, the Holding Company will be the parent holding company of MONY,
a New York insurance company subsidiary and MLOA, an Arizona insurance company
subsidiary. As a result, New York Insurance Law and Arizona Insurance Law will
prohibit any person from acquiring control of the Holding Company, and thus
indirect control of its wholly-owned subsidiaries, without the prior approval of
the New York Superintendent and the Director of Insurance of Arizona (the
"Arizona Director of Insurance"). Control will be presumed to exist where any
person, directly or indirectly, owns, controls, holds the power to vote, or
holds proxies representing 10% or more of the outstanding voting stock of the
Holding Company, unless the New York Superintendent or the Arizona Director of
Insurance, upon application, determines otherwise. Persons who do not acquire
beneficial ownership of more than 10% of the outstanding shares of Common Stock
may be deemed to have acquired such control, if the appropriate regulators
determine that such persons, directly or indirectly, exercise a controlling
influence over the management or policies of the insurer. Any person seeking to
acquire a controlling interest of the Holding Company would therefore face
regulatory obstacles which may delay, defer or prevent an acquisition that
stockholders might consider to be in their best interests.
37
<PAGE> 39
The Holding Company, through certain provisions of its Amended and Restated
Certificate of Incorporation (the "Amended and Restated Certificate") and its
By-laws, as amended (the "By-laws"), has also created obstacles which may delay,
defer or prevent a takeover attempt. Such provisions may adversely affect
prevailing market prices for the Common Stock. These provisions, among other
things, (i) divide the Board of Directors of the Holding Company (the "Holding
Company Board") into three classes, which will serve for staggered three-year
terms, (ii) provide that a director of the Holding Company may be removed only
for cause and only by the affirmative vote of the holders of a majority of the
outstanding securities eligible to vote on such matters, (iii) provide that only
the Holding Company Board, its Chairman, or the President of the Holding Company
may call special meetings of the stockholders and (iv) eliminate the ability of
the stockholders to take any action without a meeting. The By-laws also
establish certain advance notice procedures for nomination of candidates for
election as directors and for stockholder proposals to be considered at
stockholders' meetings. Furthermore, the standstill provisions set forth in the
Investment Agreement may also have anti-takeover effects.
In addition, on the Board Adoption Date, the Holding Company Board
authorized the Holding Company to enter into a Rights Agreement (the "Rights
Agreement") pursuant to which a preferred stock purchase right (collectively,
the "Rights") will be attached to each share of Common Stock and will become
exercisable under certain specified circumstances involving the acquisition of
or tender offer for 15% or more of the issued and outstanding shares of Common
Stock. The issuance of the Rights will have certain anti-takeover effects by
causing substantial dilution to a person or group that attempts to acquire the
Holding Company on terms not approved by the Holding Company Board. See "Certain
Provisions of the Amended and Restated Certificate of Incorporation and the
By-laws of the Holding Company", "Description of Capital Stock -- Preferred
Stock" and "-- Preferred Share Purchase Rights" and "Certain Provisions of the
Investment -- Standstill Agreement".
RISK OF POTENTIAL DILUTION
The Investors hold Warrants which may be exercised, in whole or in part, at
any time on or after the Demutualization Date and on or before the tenth
anniversary of the Demutualization Date for up to an aggregate number of shares
of Common Stock that represents 7% of the Common Stock on a fully-diluted basis
on the Demutualization Date, subject to adjustment. Any exercise of the Warrants
would have a dilutive effect on other stockholders' ownership interests,
including, among other things, voting power. Earnings per share would also be
diluted. See "Certain Provisions of the Investment" and "Description of Capital
Stock".
RISKS WITH RESPECT TO SHARES ELIGIBLE FOR FUTURE SALE
Substantially all of the shares of Common Stock distributed in the
Demutualization will be eligible for immediate resale in the public market
without restriction as set forth later in this Prospectus under the heading
"Shares Eligible for Future Sale". Moreover, in accordance with the Plan and
subject to the approval of the New York Superintendent, the Holding Company will
for a limited period commencing on the nine-month anniversary of the Plan
Effective Date and continuing for three months thereafter (unless extended by
the Holding Company) provide for the public sale, at market prices and without
brokerage commissions or similar fees, of all shares of Common Stock of any
Eligible Policyholder who receives a number of shares of Common Stock under the
Plan that is equal to or less than a number of shares to be determined by the
MONY Board at least 60 days prior to the nine-month anniversary of the Plan
Effective Date (which number shall not be less than 25 nor more than 99). As of
the Board Adoption Date, MONY had approximately 840,000 policyholders, most of
whom, if their policies remain in force on the Plan Effective Date and if not
paid cash or provided Policy Credits, will receive a number of shares of Common
Stock in the Demutualization which will make them eligible to sell such shares
through the commission-free sales program (as described in "The
Demutualization -- Commission-Free Programs"). No predic-
38
<PAGE> 40
tion can be made as to the effect, if any, such future sales of shares, or the
availability of shares for such future sales, will have on the market price of
the Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock, or the perception such sales could occur, could adversely affect
prevailing market prices for all the Common Stock. The Investors have also been
granted registration rights with respect to (i) the Warrants and (ii) all shares
of Common Stock issuable upon the exercise of any Warrant (collectively, the
"Registrable Securities"). Any sales pursuant to such registration rights may
adversely affect the prevailing market prices for all the Common Stock. See "The
Demutualization -- Allocation and Payment to Policyholders", "Certain Provisions
of the Investment -- Standstill Agreement" and "-- Registration Rights
Agreement" and "Shares Eligible for Future Sale".
NO PRIOR MARKET FOR COMMON STOCK
Prior to the distribution of Common Stock in the Demutualization and the
Offerings, there has been no public market for the Common Stock. The initial
public offering price of the Common Stock in the Offerings will be determined
through negotiations between the Holding Company and the representatives of the
Underwriters, and may not be indicative of the market price for the Common Stock
after the Offerings. Although application will be made to have the Common Stock
approved for listing on the NYSE, there can be no assurance that an active
trading market for the Common Stock will develop or be sustained. There can be
no assurance that purchasers of shares of Common Stock in the Offerings will be
able to resell the shares of Common Stock at or above the initial offering
price. See "Underwriting".
39
<PAGE> 41
THE DEMUTUALIZATION
The following summary discussion of the Plan does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the Plan. A copy of the Plan is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
PURPOSE
The principal purpose of the Demutualization is to enable MONY to obtain
equity capital through the Holding Company from sources unavailable to it as a
mutual life insurance company. Management believes that the additional equity
capital will enhance MONY's financial strength and will strengthen MONY's
ability to maintain its marketplace franchise while maximizing financial
flexibility and future growth and providing additional value to its
policyholders.
SUMMARY OF PLAN
The MONY Board adopted the Plan on August 14, 1998 and adopted certain
clarifying and technical amendments thereto on September 9, 1998. The Plan will
become effective on the Plan Effective Date. In connection with the
effectiveness of the Plan, among other things: MONY will by operation of Section
7312 of the New York Insurance Law become a stock life insurance company; MONY
will become a wholly-owned subsidiary of the Holding Company; the Holding
Company will contribute cash to MONY to fund the distribution of Policy Credits;
all policyholders' membership interests will be extinguished and Eligible
Policyholders will be entitled to receive, in exchange therefor, shares of
Common Stock or, in certain circumstances, cash or Policy Credits and
Participating Policyholders will receive additional shares of Common Stock or,
in certain circumstances, cash or Policy Credits; the Closed Block will be
established and operated by MONY; and shares of Common Stock will be offered to
the public in the Offerings.
APPROVAL OF THE PLAN; PLAN EFFECTIVE DATE
Pursuant to Section 7312, the Plan was approved (i) on , 1998
by persons who owned policies on the Board Adoption Date (of all MONY
policyholders entitled to vote on the Plan, % voted and % of these
votes were cast in favor of the Plan) and (ii) on , 1998 by the New
York Superintendent after a public hearing. After the satisfaction of conditions
including receipt of any required governmental consents and approvals and
certain other conditions specified in the Plan, the Plan will become effective
on the Plan Effective Date, which will be the earlier of the date on which the
closing of the Offerings occurs and a date chosen by the MONY Board.
Notwithstanding that the Plan will become effective on the Plan Effective Date,
actions challenging the validity of, or actions taken in connection with, the
Plan may be brought for a substantial period of time after the Plan Effective
Date. See "Risk Factors -- Risk of Challenge to the New York Superintendent's
Order".
ALLOCATION AND PAYMENT OF CONSIDERATION TO ELIGIBLE POLICYHOLDERS
First, shares of Common Stock will be allocated among Eligible
Policyholders. It is currently anticipated that each Eligible Policyholder will
be allocated a fixed number of shares of Common Stock equal to shares, with
the aggregate number of shares of Common Stock comprising the fixed component
currently anticipated to be approximately 6 million shares. In addition,
Participating Policyholders will be allocated a variable number of additional
shares of Common Stock based upon formulas which take into account, among other
things, each such participating policy's estimated contribution to MONY's
surplus. Estimated contributions will be based generally on the mortality,
morbidity, expense, tax, persistency and investment experience of the relevant
product class. The aggregate number of shares comprising the variable component
is currently anticipated to be approximately million shares of Common Stock.
40
<PAGE> 42
Second, shares of Common Stock or other consideration described below will
be paid to Eligible Policyholders. Each Eligible Policyholder will receive, in
book entry form (unless otherwise requested), a number of shares of Common Stock
equal to the fixed component plus, provided that such Eligible Policyholder is
also a Participating Policyholder, a number of shares of Common Stock equal to
the variable component allocated to such Eligible Policyholder, except that,
under certain circumstances, Policy Credits will be credited or cash will be
paid in lieu of Common Stock. The amount paid as cash or value credited as
Policy Credits to an Eligible Policyholder will equal the number of shares
allocated to such Eligible Policyholder multiplied by the initial public
offering price for the shares in the Offerings or, if the Offerings do not occur
within 120 days of the Plan Effective Date, 70% of the book value per share of
the Common Stock on the Plan Effective Date. Policy Credits, in the form of
dividends, increases in fund values, accumulation values or accumulation account
values or extensions of coverages, will be credited to Eligible Policyholders
having certain tax-qualified policies. If the MONY Board so determines, cash
will be paid to Eligible Policyholders who are not required under the Plan to
receive Policy Credits, who are allocated in the aggregate 75 or fewer shares of
Common Stock (the "Cash Election Number") and who have affirmatively indicated a
preference to receive cash instead of Common Stock, except that the total amount
of cash to be distributed to Eligible Policyholders pursuant to any such
determination by the MONY Board to distribute cash will not exceed 25% of the
proceeds of the Offerings (net of underwriting commissions and expenses related
thereto) or such lower aggregate amount established by the MONY Board prior to
the Demutualization Date (the "Aggregate Cash Amount"). In the event that the
aggregate number of shares of Common Stock allocated to Eligible Policyholders
who elect to receive cash in lieu of stock corresponds to an amount of cash, as
provided in the Plan, that exceeds the Aggregate Cash Amount, then the MONY
Board, subject to the approval of the New York Superintendent, will reduce the
Cash Election Number (such number being the "Reset Cash Election Number") to
accommodate the Aggregate Cash Amount. In the event the MONY Board so reduces
the Cash Election Number, no pro rata distributions of cash will be made, with
the result that Eligible Policyholders who elect to receive cash and are
allocated a number of shares equal to or less than the Reset Cash Election
Number will receive cash, and Eligible Policyholders who elect to receive cash
but are allocated a number of shares greater than the Reset Cash Election Number
will receive stock. Cash will also be paid to Eligible Policyholders with
mailing addresses located outside both the United States and Canada. The right
of Eligible Policyholders to receive consideration pursuant to the Plan arises
on the Plan Effective Date, and distributions thereof will be made as soon as
reasonably practicable thereafter. See "Use of Proceeds" and "Pro Forma
Consolidated Financial Information".
COMMISSION-FREE PROGRAMS
Under the Plan, the Holding Company will establish, subject to the approval
of the New York Superintendent, a commission-free sales program for Eligible
Policyholders who receive a number of shares of Common Stock under the Plan that
is equal to or less than a number of shares to be determined by the MONY Board
at least 60 days prior to the nine-month anniversary of the Plan Effective Date
(which number shall not be less than 25 nor more than 99) to sell all of their
shares. The program will involve agency transactions effected on a periodic
basis on the NYSE, and will not involve purchases or sales by MONY or its
affiliates for their own accounts. The commission-free sales program will
commence on the nine-month anniversary of the Plan Effective Date and shall
continue for three months, unless extended by the Holding Company. Under the
Plan, the Holding Company also shall establish, subject to the approval of the
New York Superintendent, a commission-free purchase program for Eligible
Policyholders who receive 99 or fewer shares of Common Stock under the Plan,
enabling such Eligible Policyholders to purchase, commission-free, such number
of shares as is necessary to bring their total respective number of shares of
Common Stock to 100. As of the Board Adoption Date, MONY had approximately
840,000 policyholders, most of whom, if their policies remain in force on the
Plan Effective Date and if not paid cash or provided Policy Credits, will
receive a number of shares of Common Stock in the Demutualization which will
41
<PAGE> 43
make them eligible to sell such shares, or purchase additional shares through
the commission-free programs. See "Shares Eligible for Future Sale".
ESTABLISHMENT AND OPERATION OF THE CLOSED BLOCK
The Closed Block is a mechanism described in Section 7312 of the New York
Insurance Law, the statute governing the Demutualization. Under the Plan, MONY
will establish and operate the Closed Block as a closed block of participating
business for the benefit, for dividend purposes only, of the policies included
therein. The Closed Block Business will contain those classes of individual
participating MONY policies in respect of which MONY had a current payable
dividend scale (with certain exceptions specified in the Plan) and which are (a)
in force on the Plan Effective Date, or (b) issued and delivered after the Plan
Effective Date pursuant, in each case, to an application, complete on its face,
that is received prior to the Plan Effective Date at MONY's administrative
offices, provided that all underwriting in connection with any policy referred
to in this clause (b) is completed within 60 days of the Plan Effective Date and
such policy is issued as applied for without material change (upon receipt of
premium payment in accordance with MONY's customary business practice) and
delivered in accordance with the terms of the application. The Closed Block
Business will also contain policies within the classes of participating MONY
policies referred to above that are in force on the Plan Effective Date as
extended term insurance pursuant to non-forfeiture provisions in such policies.
A policy may be within a class for which there was a currently payable dividend
scale, even though no dividend was paid in that year on that policy. The Closed
Block will continue in effect until no more policies included therein are in
force. The duration of the Closed Block is expected to be in excess of 90 years.
Subsequent to the Plan Effective Date certain of the contracts offered by the
Company will be substantially the same, in all material respects, as certain of
the contracts included in the Closed Block, except that such contracts will be
outside of the Closed Block.
MONY will allocate to the Closed Block an amount of assets expected to
produce cash flows which, together with anticipated revenues from the Closed
Block Business, are reasonably expected to be sufficient to support the Closed
Block Business, including, but not limited to, provisions for payment of claims
and surrender benefits, certain expenses and taxes, and for continuation of
current payable dividend scales, assuming the experience underlying such
dividend scales continues, and for appropriate adjustments in such scales if the
experience changes. The assets, including the revenue therefrom, allocated to
the Closed Block, will inure solely to the benefit of the owners of policies
included in the Closed Block and will not revert to the benefit of the
shareholders of MONY. However, the financial results of the Closed Block will
affect the results of continuing operations of MONY in the manner described in
Note 1 of Notes to Pro Forma Condensed Consolidated Financial Information.
To the extent that over time cash flows from the assets allocated to the
Closed Block and other experience relating to the Closed Block Business are, in
the aggregate, more favorable than assumed in setting up the Closed Block, total
dividends paid to Closed Block policyholders in future years will be greater
than the total dividends that would have been paid to such policyholders if the
current payable dividend scales had been continued. Conversely, to the extent
that over time such cash flows and other experience are, in the aggregate, less
favorable than assumed in setting up the Closed Block, total dividends paid to
Closed Block policyholders in future years will be less than the total dividends
that would have been paid to such policyholders if the current payable dividend
scales had been continued. If the investment, mortality, persistency or other
experience of the Closed Block were substantially worse than that of the
Company's principal competitors, management might, for competitive reasons, use
MONY's general funds to maintain competitive dividend levels. In the event that
the assets allocated to the Closed Block, the cash flows therefrom and the
revenues from the policies included therein prove to be insufficient to pay the
benefits guaranteed under the terms of the policies within the Closed Block,
MONY will be required to make such payments from its general funds. Since the
Closed Block will be funded to provide for payment of
42
<PAGE> 44
guaranteed benefits on such policies and, in addition, for continuation of
dividends paid under current payable dividend scales, it will not be necessary
to use general funds to pay guaranteed benefits unless the Closed Block Business
experiences very substantial ongoing adverse experience in investment,
mortality, persistency or other experience factors.
Insurance cash flows (including, but not limited to, premiums, policy
benefits and annuity considerations) and investment cash flows from operations
of the Closed Block will be credited or charged to the Closed Block as provided
in the Plan. State and local taxes paid on premiums, state guaranty fund
assessments and Federal income taxes in respect of the Closed Block Business
will be charged to the Closed Block in accordance with the procedures set forth
in the Plan. However, expenses (including investment management expenses) of
operating and administering the Closed Block, other than certain real estate
operating expenses, real estate taxes and asset acquisition and disposition
costs, will not be charged to the Closed Block. At the same time, assets which
otherwise would have been allocated to the Closed Block had such operating
expenses been chargeable to the Closed Block, will remain outside of the Closed
Block and operating results outside the Closed Block will include the investment
results of such assets. Since such expenses will not be charged to the Closed
Block, the cost of increases in such expenses will be borne by, and the benefit
of decreases in such expenses will inure to, MONY and ultimately the Holding
Company.
The Plan prohibits the reallocation or transfer of assets between the
Closed Block and any other portion of MONY's general account, any of its
separate accounts or to any affiliate of MONY without the New York
Superintendent's approval. Other transactions between the Closed Block and any
other portion of MONY's general account, any of its separate accounts or any
affiliate of MONY are subject to regulation by the New York Superintendent as
affiliate transactions. The assets to be allocated to the Closed Block will be
available to satisfy the claims of MONY's creditors in the same priority in
liquidation as the other assets in MONY's general account.
CLOSED BLOCK ASSETS AND LIABILITIES
The Plan provides for the allocation of specifically identified general
account assets to the Closed Block on the Plan Effective Date, as well as policy
loans, accrued interest and due and deferred premiums in respect of the policies
included in the Closed Block. This allocation excluded from the Closed Block
equity real estate, securities with an NAIC designation below 3 (for a
description of NAIC securities designations, see "Investments -- Fixed
Maturities"), certain mortgage loans and certain other specified investments.
The Plan further provides a procedure for allocating to the Closed Block a
portion of new assets acquired in connection with MONY's individual life
business during the period from December 31, 1997 through the Plan Effective
Date. See Note 5 to the Pro Forma Consolidated Financial Information for a
summary of the type and amount of assets that would have been allocated to the
Closed Block on a pro forma basis if the Transaction and the establishment of
the Closed Block had occurred June 30, 1998.
New investments for the Closed Block acquired on and after January 1, 1998
will consist of cash and short-term securities having an NAIC designation of 1
or a comparable rating by a nationally recognized rating agency, fixed maturity
securities having an NAIC designation of 1, 2 or, 3 and commercial and
agricultural mortgage loans having an average debt service coverage ratio of at
least 1.20. No new investments will be made in equity real estate, mortgage
loans or obligations rated below the NAIC categories described above, except to
safeguard the value in existing investments allocated to the Closed Block or to
honor existing commitments. The Closed Block reinvestment policies may not be
changed without the New York Superintendent's prior approval.
Had the Closed Block been established as of June 30, 1998, the liabilities
associated with the Closed Block would have aggregated approximately $7,234.4
million, including $6,618.9 million of reserves for future policy benefits,
$295.9 million of policyholders' account balances and $159.6 million of other
policyholder liabilities. The carrying value of the assets to be allocated to
the Closed Block at the Plan Effective Date will be less than the carrying
amount of the Closed Block liabilities at
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<PAGE> 45
such date because, in addition to such assets, the net cash flows from the
Closed Block Business subsequent to the Plan Effective Date will be used to fund
the Closed Block liabilities. Accordingly, in determining the amount of assets
to be allocated to the Closed Block on the Plan Effective Date, management has
made certain estimates and assumptions regarding the expected cash flows from
the Closed Block Business subsequent to the Plan Effective Date. The excess of
the Closed Block liabilities over the Closed Block assets at the Plan Effective
Date represents the total estimated future post-tax contribution expected to
emerge from the operation of the Closed Block, which will be recognized in the
Company's income over the period the policies and the contracts in the Closed
Block remain in force. See "Pro Forma Consolidated Financial Information -- Note
1" for a discussion of how future contributions from the Closed Block affect
future results of operations.
OTHER INDIVIDUAL PARTICIPATING POLICIES
Under the Plan, MONY is subject to special requirements relating to
distribution of dividends with respect to certain classes of individual
participating policies that are in force on the Plan Effective Date and are not
included in the Closed Block. These classes of participating policies consist of
module ordinary life insurance policies including Legal Professional Life, fixed
account riders to the participating individual variable annuity contracts,
medical insurance policies and disability income policies. With respect to such
policies, MONY will distribute dividends as set forth in the Plan.
FEDERAL TAX CONSEQUENCES
The following discussion is based on relevant portions of the Code, the
Treasury regulations promulgated thereunder, published revenue rulings and
judicial decisions in effect as of the date of this Prospectus. There can be no
assurance that future changes in applicable law or administrative and judicial
interpretations thereof, which changes may have retroactive effect, will not
adversely affect the tax consequences discussed herein or that there will not be
differences of opinion as to the interpretation of applicable law. The following
discussion is for general information only, addresses only Federal income tax
consequences and does not attempt to address all the possible tax consequences
which may apply to any given taxpayer.
MONY has received an opinion of Chadbourne & Parke LLP, independent tax
counsel, regarding the Federal income tax consequences of the Demutualization.
The opinion provides as follows:
Eligible Policyholders will not recognize any gain for Federal income tax
purposes as a result of (i) the surrender of their policyholders' membership
interests pursuant to the Plan or (ii) the receipt of Common Stock pursuant to
the Plan, except that an Eligible Policyholder will generally recognize gain to
the extent of any cash received in the Plan. Moreover, Eligible Policyholders
will not recognize gain on the receipt of Policy Credits. The payment of
consideration in the form of Policy Credits in accordance with the Plan will not
(i) cause disqualification of the tax attributes or status accorded to those (1)
individual life insurance policies or individual annuity contracts that have
been issued pursuant to plans qualified under Section 401(a) or 403(a) of the
Code, or (2) individual retirement annuities within the meaning of Section 408
of the Code or tax deferred annuities qualified under Section 403(b) of the Code
(including those issued to employees of organizations described in Section
501(c)(3) of the Code), to which such Policy Credits have been credited, or (ii)
result in penalties for the holders of those plans, policies and contracts
referred to in the preceding clause (i). The Demutualization of the Company
pursuant to the Plan, including without limitation the receipt of MONY common
stock by the Holding Company and the extinguishment of the policyholders'
membership interests, will not result in the recognition of any gain for Federal
income tax purposes by either the Company or the Holding Company; insurance
policies issued or purchased before the Plan Effective Date will not be deemed
re-issued, issued in exchange for existing policies or purchased as a result of
the Demutualization.
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<PAGE> 46
The affiliated group of which MONY was the common parent immediately before
the Demutualization will remain in existence, the Holding Company will become
the new common parent of such group and MONY will continue to be an eligible
corporation for purposes of its inclusion in the group.
The opinion of Chadbourne & Parke LLP is based on the accuracy of certain
representations and undertakings by MONY. Management believes, based on the
opinion MONY has obtained from such tax counsel, that MONY will not realize any
significant income for Federal income tax purposes as a result of the
Demutualization, and MONY's Federal income tax attributes, including its basis
and holding period in its assets, any net operating loss or capital loss
carryforwards and tax accounting methods, will not be significantly affected by
the Demutualization. In this regard, based on the number of shares of the
Holding Company contemplated to be issued in the Demutualization and in the
Offerings and issuable upon exercise of the Warrants, tax counsel has concluded
that it is unlikely that MONY will undergo an "ownership change" which might
limit MONY's ability to use net operating loss and tax credit carryforwards.
USE OF PROCEEDS
The net proceeds to the Holding Company from the Offerings are estimated to
be $ million (or $ million if the Underwriters' over-allotment
options are exercised in full) after deducting the underwriting discount and
estimated expenses of the Offerings. The $ million estimated net
proceeds of the Offerings will be: (i) first, contributed to MONY in the amount
of $100 million to be used for general operations of MONY or, in the absence of
sufficient net proceeds in excess of $100 million, to provide for the amounts
required for any of the purposes stated in clauses (ii), (iii) or (iv) hereof;
(ii) then, contributed to MONY in an amount sufficient to enable MONY to fund
all of the Policy Credits required to be credited to Eligible Policyholders
pursuant to the Plan; (iii) then, retained by the Holding Company in an amount
sufficient to enable the Holding Company to pay all of the cash to Eligible
Policyholders who are to receive cash as described in the Plan (other than
pursuant to an expression of a preference to receive cash); (iv) then,
contributed to MONY in an amount sufficient to enable MONY to satisfy the
undertaking of MONY to pay the expenses of the Demutualization as required by
the New York Insurance Law; (v) then, retained by the Holding Company in an
amount not to exceed $10 million to provide working capital for the Holding
Company; (vi) then, retained by the Holding Company in an amount not to exceed
$30 million to pay dividends on the stock of the Holding Company; (vii) then,
retained by the Holding Company in an amount not to exceed 25% of the proceeds
of the Offerings (net of underwriting commissions and expenses related thereto)
to pay cash to Eligible Policyholders who are to receive cash pursuant to an
expression of a preference to receive cash; and (viii) then, to the extent that
such net proceeds exceed the aggregate of the amounts identified in clauses (i),
(ii), (iii), (iv), (v), (vi) and (vii), and, to the extent that the amount
retained by the Holding Company pursuant to each of clauses (iii), (vi) and
(vii) is not used for the purpose stated in each such clause, promptly
contributed to MONY to be used for general operations of MONY.
DIVIDENDS
The Holding Company Board has adopted a resolution expressing its intention
to declare a quarterly cash dividend of $0.06 per share on the Common Stock
commencing in the first quarter of 1999. The declaration of dividends will be
reviewed periodically by the Holding Company Board in light of the Company's
earnings, financial condition and capital requirements, and such dividend may be
adjusted or eliminated at the discretion of the Holding Company Board on the
basis of these or other considerations.
As a holding company, the Holding Company's ability to meet its cash
requirements and pay dividends on the Common Stock will depend in large part
upon the receipt of dividends and other payments from MONY. The payment of
dividends by MONY to the Holding Company is regulated under state insurance law.
See "Risk Factors -- Holding Company Structure; Restrictions on Dividends" and
"Business -- Regulation -- Shareholder Dividend Restrictions".
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<PAGE> 47
CAPITALIZATION
The following table sets forth at June 30, 1998: (i) the unaudited
historical consolidated capitalization of the Company, (ii) such capitalization
on a pro forma basis to reflect the transactions consummated in connection with
the Demutualization, as if the Demutualization had occurred as of June 30, 1998,
and (iii) the pro forma capitalization of the Company described in clause (ii)
as adjusted to reflect the sale of million shares of Common Stock in the
Offerings at an estimated per share price of $ , as if such sale had
occurred as of June 30, 1998, and the application of the net proceeds therefrom
as described in "Use of Proceeds" (after deducting the underwriting discount and
estimated offering expenses payable by the Company). Since management does not
currently expect to require the purchase of the Convertible Preferred Stock, the
following table does not reflect the issuance of the Convertible Preferred
Stock. See "Certain Provisions of the Investment -- General" and "Description of
Capital Stock -- Convertible Preferred Stock". This table should be read in
conjunction with the audited Consolidated Financial Statements and the Unaudited
Interim Condensed Consolidated Financial Statements and Pro Forma Financial
Statements of the Company included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
FOR THE AS ADJUSTED FOR
HISTORICAL DEMUTUALIZATION THE OFFERINGS
---------- --------------- ---------------
<S> <C> <C> <C>
DEBT:(1)
Short-term debt.................................. $ -- $ $
Long-term debt................................... 418.9
-------- -------- --------
Total debt............................. 418.9
EQUITY:
Common stock, $0.01 par value; 400 million shares
authorized; 1,000 shares issued and outstanding
historical; million shares issued and
outstanding pro forma as adjusted..............
Preferred Stock, $0.01 par value; 100 million
shares authorized; no shares issued and
outstanding....................................
Capital in excess of par(2)...................... --
Retained earnings(3)............................. 1,320.9
Accumulated and other comprehensive income....... 128.0
-------- -------- --------
Total equity..................................... 1,448.9
-------- -------- --------
TOTAL CAPITALIZATION............................. $1,867.8 $ $
======== ======== ========
</TABLE>
- ---------------
(1) Historical amounts are comprised of $110.5 million, $115.0 million, $186.6
million and $6.8 million relating to the Company's 11.25% Surplus Notes, the
MONY Notes, mortgages on certain real estate properties owned by the Company
and a debt obligation associated with a sale-leaseback arrangement entered
into by the Company. See Note 17 to the Consolidated Financial Statements
for a detailed description of each of the aforementioned obligations.
(2) The pro forma amounts include $10.0 million received by the Holding Company
relating to the purchase by the Investors of the Warrants from the Holding
Company which are exercisable for Common Stock upon certain terms and
conditions and at the exercise price specified under the terms of the
Investment Agreement. See "Certain Provisions of the Investment -- General"
and "Description of Capital Stock -- Convertible Preferred Stock".
(3) Pro forma retained earnings amounts reflected above are net of $12.0 million
which represents management's best estimate of the remaining after-tax
amount of direct Demutualization expenses (excluding costs incurred in
connection with the Offerings) expected to be incurred subsequent to June
30, 1998 through the Plan Effective Date, which would have been incurred as
of June 30, 1998 if the Demutualization had occurred on such date.
46
<PAGE> 48
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial information
for the Company. The selected consolidated financial information for each of the
years in the three-year period ended December 31, 1997 and at December 31, 1997
and 1996 has been derived from consolidated financial statements audited by
PricewaterhouseCoopers LLP, independent accountants, included elsewhere herein
and should be read in conjunction with and is qualified by reference to such
statements and related notes. The consolidated financial information at December
31, 1995, 1994 and 1993 and for the years ended December 31, 1994 and 1993 has
been derived from unaudited consolidated financial information not included
elsewhere herein, which in the opinion of management presents fairly such
consolidated financial information in conformity with GAAP. The selected
consolidated financial information for the six-month periods ended June 30, 1998
and 1997 and at June 30, 1998, has been derived from unaudited interim condensed
consolidated financial statements included herein. The selected consolidated
financial information at June 30, 1997 has been derived from unaudited interim
condensed consolidated financial statements not included elsewhere herein. In
the opinion of the Company's management, all unaudited interim condensed
consolidated financial information presented in the table below reflects all
adjustments (consisting of normal, recurring accruals) necessary for a fair
statement of the Company's consolidated financial position and results of
operations for such periods. The results of operations for the six months ended
June 30, 1998 are not necessarily indicative of the results to be expected for
the full year. This summary financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations", the Company's consolidated financial statements and the notes
thereto and the other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS
ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
Revenues:
Premiums............................ $ 353.8 $ 411.9 $ 838.6 $ 859.8 $ 875.9 $ 890.6 $ 919.6
Universal life and investment-type
product policy fees............... 74.3 54.4 127.3 100.9 80.8 69.8 75.1
Net investment income............... 357.7 359.6 733.0 751.6 728.8 666.9 953.7
Net realized gains (losses) on
investments(2).................... 157.6 42.6 72.1 75.9 16.2 (8.8) 18.2
Group Pension Profits(3)............ 22.7 28.2 60.0 59.5 61.7 90.4 0.0
Other income........................ 78.4 58.8 145.4 117.3 96.2 107.6 72.4
--------- --------- --------- --------- --------- --------- ---------
Total revenues.................... 1,044.5 955.5 1,976.4 1,965.0 1,859.6 1,816.5 2,039.0
Benefits and expenses:
Benefits to policyholders........... 379.7 423.9 840.1 872.2 883.6 866.5 895.4
Interest credited to policyholders'
account balances.................. 61.2 70.8 139.4 156.1 175.3 180.0 388.0
Amortization of deferred policy
acquisition costs................. 70.8 68.4 181.2 158.2 132.6 138.9 110.9
Dividends to policyholders.......... 108.4 117.8 224.3 231.4 222.5 211.1 221.1
Other operating costs and
expenses.......................... 224.5 196.1 403.7 446.6(4) 383.8 355.0 378.0
--------- --------- --------- --------- --------- --------- ---------
Total benefits and expenses....... 844.6 877.0 1,788.7 1,864.5 1,797.8 1,751.5 1,993.4
</TABLE>
47
<PAGE> 49
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS
ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes and
extraordinary item.................. 199.9 78.5 187.7 100.5 61.8 65.0 45.6
Income tax expense(5)................. 71.8 32.0 57.3 44.0 21.4 42.9 13.2
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary item...... 128.1 46.5 130.4 56.5 40.4 22.1 32.4
Extraordinary item -- demutualization
expenses, net....................... 9.7 2.4 13.3 0.0 0.0 0.0 0.0
--------- --------- --------- --------- --------- --------- ---------
Net income............................ 118.4 44.1 117.1 56.5 40.4 22.1 32.4
========= ========= ========= ========= ========= ========= =========
Other comprehensive income (loss),
net(6).............................. 9.9 (17.3) 33.0 (59.9 191.5 (216.4) 141.6
--------- --------- --------- --------- --------- --------- ---------
Comprehensive income (loss),
net............................. $ 128.3 $ 26.8 $ 150.1 $ (3.4)$ 231.9 $ (194.3) $ 174.0
========= ========= ========= ========= ========= ========= =========
BALANCE SHEET DATA:(1)
General:
General account assets.............. $12,753.6 $12,286.2 $12,493.3 $12,344.2 $12,531.9 $12,310.9 $12,397.1
Separate account assets............. 6,127.5 4,873.0 5,403.1 4,171.7 3,153.5 2,355.8 2,001.4
Assets transferred in Group Pension
Transaction....................... 5,720.5 5,538.5 5,714.9 5,627.6 5,992.8 5,660.1 6,457.3
Total assets...................... 24,601.6 22,697.7 23,611.3 22,143.5 21,678.2 20,326.8 20,855.8
Short-term debt..................... -- 41.5 0.0 153.0 157.8 0.7 2.3
Long-term debt...................... 418.9 273.4 423.6 269.7 420.6 504.0 458.5
Policyholders' liabilities.......... 10,042.2 10,068.7 10,060.7 10,070.6 10,199.7 10,250.7 10,271.9
Separate account liabilities........ 6,115.5 4,862.1 5,392.4 4,162.1 3,144.2 2,348.4 1,994.9
Liabilities transferred in Group
Pension Transaction(7)............ 5,682.3 5,518.6 5,638.7 5,544.1 5,855.7 5,608.0 6,386.7
Total liabilities................. 23,152.7 21,500.4 22,290.7 20,973.0 20,504.3 19,384.8 19,719.4
Equity.............................. 1,448.9 1,197.3 1,320.6 1,170.5 1,173.9 942.0 1,136.4
Real Estate and Mortgage Loans:(8)
Real estate, to be disposed of...... $ 339.1 $ 578.6 $ 621.2 $ 434.8 $ 717.4 $ 611.3 $ 0.0
Real estate held for investment..... 452.5 649.7 495.9 1,070.4 1,179.8 1,527.5 2,024.5
--------- --------- --------- --------- --------- --------- ---------
Subtotal.......................... 791.6 1,228.3 1,117.1 1,505.2 1,897.2 2,138.8 2,024.5
Mortgage loans on real estate....... 1,478.8 1,550.1 1,430.1 1,582.3 1,771.1 1,916.8 2,298.6
--------- --------- --------- --------- --------- --------- ---------
Total real estate and mortgage
loans on real estate............ $ 2,270.4 $ 2,778.4 $ 2,547.2 $ 3,087.5 $ 3,668.3 $ 4,055.6 $ 4,323.1
========= ========= ========= ========= ========= ========= =========
STATUTORY DATA:(9)
Capital and surplus (10)............ $ 849.8 $ 719.6 $ 835.4 $ 703.5 $ 689.0 $ 680.1 $ 600.2
Asset valuation reserve ("AVR")..... 332.9 318.5 348.6 317.7 285.3 244.0 238.2
--------- --------- --------- --------- --------- --------- ---------
Capital and surplus plus AVR...... $ 1,182.7 $ 1,038.1 $ 1,184.0 $ 1,021.2 $ 974.3 $ 924.1 $ 838.4
========= ========= ========= ========= ========= ========= =========
Net income.......................... $ 13.3 $ 43.3 $ 88.5 $ 62.7 $ 58.0 $ 87.5 $ 118.7
OTHER DATA:
Employee count...................... 2,324 2,281 2,312 2,078 2,329 2,498 2,811
Agent count(15)..................... 2,352 1,835 2,216 2,092 2,094 2,146 2,174
</TABLE>
48
<PAGE> 50
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX
MONTHS ENDED AS OF AND FOR THE YEAR ENDED
JUNE 30, DECEMBER 31,
---------------------- -----------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SEGMENT DATA:(1)(11)
Protection Products:
Premiums.......................................... $ 343.8 $ 403.4 $ 817.0 $ 837.4 $ 845.1
Universal life policy fees........................ 41.8 30.3 74.9 63.4 53.9
Net investment income and net realized gains on
investments..................................... 397.0 304.7 611.9 605.3 501.5
Group Pension Profits(3).......................... 22.7 28.2 60.0 59.5 61.7
Other income...................................... 8.5 9.2 34.9 28.2 23.3
--------- --------- --------- --------- ---------
Total revenues.................................. $ 813.8 $ 775.8 $ 1,598.7 $ 1,593.8 $ 1,485.5
========= ========= ========= ========= =========
Income before income tax expense.................. $ 136.7 $ 48.3 $ 129.0 $ 101.2 $ 28.7
========= ========= ========= ========= =========
Policyholders' liabilities(12).................... $10,102.9 $10,317.7 $10,105.7 $ 9,996.2 $ 9,936.3
Separate account liabilities(13).................. 3,967.8 3,455.9 3,720.1 3,393.0 3,500.1
Assets(14)........................................ 16,218.3 15,291.9 15,776.5 15,158.5 15,213.2
Accumulation Products:
Premiums.......................................... $ 1.8 $ 2.8 $ 5.0 $ 4.2 $ 9.8
Investment-type product fees...................... 31.6 23.2 50.9 36.6 24.8
Net investment income and net realized gains on
investments..................................... 77.8 65.3 131.4 144.0 153.3
Other income...................................... 34.6 23.4 52.1 32.2 26.0
--------- --------- --------- --------- ---------
Total revenues.................................. $ 145.8 $ 114.7 $ 239.4 $ 217.0 $ 213.9
========= ========= ========= ========= =========
Income before income taxes........................ $ 50.0 $ 24.4 $ 44.1 $ 35.9 $ 34.2
========= ========= ========= ========= =========
Policyholders' liabilities........................ $ 1,332.2 $ 1,493.0 $ 1,416.1 $ 1,601.7 $ 1,797.2
Separate account liabilities...................... 4,598.1 3,469.8 4,002.6 2,851.4 1,928.1
Assets............................................ 6,285.8 5,266.4 5,757.9 4,747.2 3,981.7
Other Products:
Premiums.......................................... $ 8.2 $ 5.8 $ 16.6 $ 18.2 $ 21.0
Investment-type product fees...................... 0.9 0.9 1.5 0.9 2.1
Net investment income and net realized gains on
investments..................................... 38.9 30.9 59.9 74.6 85.4
Other income...................................... 32.4 23.5 53.1 52.2 42.0
--------- --------- --------- --------- ---------
Total revenues.................................. $ 80.4 $ 61.1 $ 131.1 $ 145.9 $ 150.5
========= ========= ========= ========= =========
Income before income taxes........................ $ 13.4 $ 5.8 $ 18.3 $ 8.1 $ 8.9
========= ========= ========= ========= =========
Policyholders' liabilities........................ $ 480.0 $ 321.9 $ 513.4 $ 542.4 $ 694.8
Separate account liabilities...................... 565.1 630.3 547.7 625.6 613.3
Assets............................................ 1,209.8 1,327.1 1,234.2 1,417.1 1,713.3
</TABLE>
- ---------------
(1) Prior to 1996, the Company, as a mutual life insurance company, prepared
its financial statements in conformity with accounting practices prescribed
or permitted by the New York Insurance Department which accounting
practices were considered to be GAAP for mutual life insurance companies.
As of January 1, 1996, the Company adopted Financial Accounting Standards
Board (FASB) Interpretation No. 40, Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises and
Statement of Financial Accounting Standards ("SFAS") No. 120, Accounting
and Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long Duration Participating Policies.
Interpretation No. 40 and SFAS No. 120 require mutual life insurance
companies to adopt all applicable authoritative GAAP pronouncements in
their general purpose financial statements.
49
<PAGE> 51
See Note 5 to the Consolidated Financial Statements. Accordingly, the
financial information presented in the Selected Consolidated Financial
Information for periods prior to 1996 has been derived from financial
information of the Company which have been retroactively restated to
reflect the adoption of all applicable authoritative GAAP pronouncements.
All such applicable pronouncements were adopted as of the effective date
originally specified in each such pronouncement However, if the effective
date of a pronouncement was subsequent to the earliest financial
information presented herein, the Company applied the accounting
alternative available during such prior periods which was most consistent
with the subsequent pronouncement. The following sets forth the significant
accounting pronouncements with effective dates subsequent to the earliest
financial information presented herein, the effective dates of their
adoption by the Company and, if applicable, a description of the accounting
followed by the Company for periods presented herein prior to the effective
date of such pronouncements.
- SFAS No. 114, Accounting by Creditors for Impairment of a Loan, was
adopted on a retroactive basis for the year ended December 31, 1993 and
subsequent years. For periods prior to the adoption of SFAS No. 114, the
Company established a policy to record impairment losses for troubled
loans based on discounted cash flows. The Policy was substantially
consistent with SFAS No. 114 except that impairment losses were reflected
as permanent reductions in the cost basis of such loans. There was no
material effect on the Company's financial statements as a result of the
adoption of SFAS No. 114.
- SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities, was adopted on a retroactive basis as of December 31, 1993 and
subsequent years.
- SFAS No. 120, Accounting and Reporting by Mutual Life Insurance
Enterprises for Certain Long-Duration Participating Contracts was adopted
on a retroactive basis for the year ended December 31, 1992 and subsequent
years.
- SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, was adopted for the year ended
December 31, 1994 and subsequent years. For periods prior to the adoption
of SFAS No. 121, the Company had no material real estate that it intended
to dispose of, and writedowns on impaired real estate were established if
the undiscounted cash flows were less than the carrying value. In such
cases, the asset was written down to the discounted cash flow amount.
Accordingly, there was no material effect on the Company's financial
statements as a result of the adoption of SFAS No. 121.
(2) Includes writedowns for impairment and net changes in valuation allowances
on real estate, mortgage loans and investment securities aggregating $5.5
million and $45.2 million for the six month periods ended June 30, 1998 and
1997, and $76.0 million, $20.1 million, $54.3 million, $49.3 million and
$8.0 million for the years ended December 31, 1997, 1996, 1995, 1994 and
1993, respectively.
(3) The Group Pension Transaction occurred on December 31, 1993. See
"Business -- The Group Pension Transaction".
(4) Other operating costs and expenses for the year ended December 31, 1996
include: (i) approximately $27.6 million relating to settlements of, and
reserves for, various legal disputes including lawsuits against the Company
alleging market conduct improprieties (see Note 19 to the consolidated
financial statements), (ii) $5.1 million of legal expenses relating to the
aforementioned legal disputes and lawsuits and (iii) approximately $14.0
million relating to special termination benefits paid to certain employees
under an early retirement program offered by the Company in April of 1996
(see Note 8 to the Consolidated Financial Statements).
(5) As a mutual life insurance company, the Company is subject to the add-on
(surplus) tax imposed on mutual life insurance companies under Section 809
of the Code. Section 809 requires (and the surplus tax results from) the
disallowance of a portion of a mutual life insurance company's policyholder
dividends as a deduction from taxable income. The income
50
<PAGE> 52
tax expense (benefit) amounts include $1.9 million, $4.4 million, $(5.8)
million, $12.8 million, $0.0 million, $23.0 million and $0.3 million of
surplus tax for the six months ended June 30, 1998 and 1997 and the years
ended December 31, 1997, 1996, 1995, 1994 and 1993, respectively. See "Pro
Forma Consolidated Financial Information" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
(6) During 1997, the Company adopted SFAS No. 130, Reporting Comprehensive
Income. SFAS No. 130 established standards for reporting and display of
comprehensive income and its components in general purpose financial
statements. All periods presented herein reflect the adoption of SFAS No.
130. For all periods presented, other comprehensive income consists only of
the change in unrealized gains and losses on the Company's fixed maturity
and equity securities and is presented net of the effect of such unrealized
gains (losses) attributable to deferred acquisition costs and deferred
federal income taxes. See Note 12 to the Consolidated Financial Statements.
(7) Includes liabilities transferred in connection with the Group Pension
Transaction pursuant to indemnity reinsurance of $167.2 million, $191.6
million, $173.9 million, $204.4 million, $276.9 million, $1,090.9 million
and $6,360.1 million as of June 30, 1998 and 1997 and December 31, 1997,
1996, 1995, 1994 and 1993, respectively (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 11 to
the Consolidated Financial Statements).
(8) Amounts presented do not include real estate and mortgage loan assets
transferred to AEGON in the Group Pension Transaction (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 11 to the consolidated Financial Statements).
(9) Statutory data have been derived from the Annual and Quarterly Statements
of MONY and MLOA, as filed with insurance regulatory authorities.
(10) In accordance with accounting practices prescribed or permitted by the New
York Insurance Department statutory capital and surplus includes $187.3
million, $72.3 million, $187.3 million, $72.3 million, $72.3 million and
$72.3 million relating to the Company's outstanding surplus notes at June
30, 1998 and 1997 and December 31, 1997, 1996, 1995 and 1994, respectively.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and Note 17 to
the Consolidated Financial Statements.
(11) During 1997, the Company adopted SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. SFAS No. 131 establishes
standards for the way that public business enterprises report information
about operating segments in their annual and interim financial statements.
The segment data presented herein reflect the adoption of SFAS No. 131 on a
retroactive basis beginning with the year ended December 31, 1995. Excluded
from the Company's operating segments are revenues, expenses, assets and
liabilities relating to contracts issued by the Company with respect to its
employee benefit plans, as well as any nonrecurring or unusual items. Such
amounts constitute reconciling items in accordance with SFAS No. 131.
Accordingly, see Note 6 to the Consolidated Financial Statements for a
reconciliation of amounts reported for the Company's operating segments to
such amounts reported in the Company's consolidated financial statements.
(12) Includes policyholder liabilities transferred in the Group Pension
Transaction of $1,890.9 million, $2,086.3 million, $1,991.0 million,
$2,158.1 million, and $2,315.1 million as of June 30, 1998 and 1997, and
December 31, 1997, 1996, and 1995, respectively (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 11 to the Consolidated Financial Statements).
(13) Includes separate account liabilities transferred in the Group Pension
Transaction of $3,761.2 million, $3,397.2 million, $3,614.0 million,
$3,358.3 million, and $3,495.4 million as of June 30,
51
<PAGE> 53
1998 and 1997, and December 31, 1997, 1996, and 1995, respectively (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 11 to the Consolidated Financial Statements).
(14) Includes assets transferred in the Group Pension Transaction of $5,720.5
million, $5,538.5 million, $5,714.9 million, $5,627.5 million and $5,992.8
million as of June 30, 1998 and 1997, and December 31, 1997, 1996, and
1995, respectively (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 11 to the Consolidated
Financial Statements).
(15) Includes international agents of 134, 75, 96, 75, 53, 30 and 27 as of June
30, 1998 and 1997 and December 31, 1997, 1996, 1995, 1994 and 1993.
52
<PAGE> 54
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The pro forma condensed consolidated financial information (the "Pro Forma
Information") presented below gives effect to (i) the Transaction and (ii) the
establishment of the Closed Block as if the Transaction and the establishment of
the Closed Block had occurred as of June 30, 1998 for purposes of the pro forma
condensed consolidated balance sheet and as of January 1, 1997 for purposes of
the pro forma condensed consolidated statements of income and comprehensive
income. The Pro Forma Information has been prepared based on the Plan and
certain assumptions set forth below. See "The Demutualization".
The basic assumptions used in the Pro Forma Information are as follows: (i)
the pro forma Closed Block liabilities exceed the pro forma Closed Block assets
at June 30, 1998 by $1,152.8 million, (ii) million shares of Common Stock
are issued in the Offerings at an initial public offering price of $ per
share, (iii) a total of million shares of Common Stock are allocated to
policyholders under the Plan, (iv) million shares of Common Stock are
allocated but not issued to policyholders who, under the Plan, receive payments
in the form of cash or Policy Credits rather than in shares of Common Stock, (v)
the Warrants are not exercised, (vi) a Federal income tax rate of 35% is used to
show the income tax effects of the pro forma adjustments, (vii) the
Underwriters' overallotment options are not exercised and (viii) the Convertible
Preferred Stock is not issued.
The Pro Forma Information reflects estimated gross and net proceeds of the
Offerings of $
million and $ million, respectively. Of these estimated net proceeds, (i)
$ million is estimated to be used to pay cash to Eligible Policyholders
pursuant to the terms of the Plan, including the amount used to pay cash
pursuant to an expression of a preference to receive cash in lieu of Common
Stock, which amount will not exceed 25% of the net proceeds of the Offerings,
(ii) the Holding Company will contribute to MONY cash in the amount of $
million to fund the Policy Credits to be credited to Eligible Policyholders,
(iii) $ million will be contributed by the Holding Company to MONY as a
capital contribution (which includes $35.0 million for reimbursement of the
after tax cost of nonrecurring expenses directly attributable to the
Demutualization) and (iv) the remainder of $ million will be retained by the
Holding Company to pay expenses of, and provide working capital for, the Holding
Company, as well as to pay dividends on the stock of the Holding Company and for
other general corporate purposes. See "Use of Proceeds".
The Demutualization will be accounted for using the historical carrying
values of the assets and liabilities of the Company.
The Pro Forma Information is based on available information and on
assumptions management believes are reasonable and that reflect the effects of
the Transaction and the establishment of the Closed Block. The Pro Forma
Information is provided for informational purposes only and should not be
construed to be indicative of the Company's consolidated financial position or
its consolidated results of operations had the Transaction and the establishment
of the Closed Block been consummated on the dates assumed, and does not in any
way represent a projection or forecast of the Company's consolidated financial
position or consolidated results of operations for any future date or period.
The Pro Forma Information should be read in conjunction with the historical
consolidated financial statements of the Company included elsewhere in this
Prospectus and with the information set forth under "The Demutualization",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Description of Capital Stock".
53
<PAGE> 55
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
-------------------------------------------------------
ESTABLISHMENT
OF THE CLOSED TRANSACTION
HISTORICAL BLOCK(1) ADJUSTMENTS(2) PRO FORMA
---------- ------------- -------------- ---------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS:
Investments:
Securities available-for-sale at fair value
Fixed maturities.............................. $ 6,282.4 $(3,397.7) $ $
Equity securities............................. 378.1 --
Mortgage loans on real estate................... 1,478.8 (525.1)
Policy loans.................................... 1,252.6 (1,197.3)
Real estate to be disposed of................... 339.1 --
Real estate held for investment................. 452.5 --
Other invested assets........................... 57.0 (0.5)
--------- --------- --------- ---------
Total investments......................... 10,240.5 (5,120.6)
Cash and cash equivalents......................... 492.4 (120.8) $ A
B
C
Accrued investment income......................... 192.3 (120.7)
Amounts due from reinsurers....................... 579.8 (127.2)
Premiums receivable............................... 19.2 (15.9)
Deferred policy acquisition costs................. 990.0 (576.1)
Other assets...................................... 239.4 (0.3)
Assets transferred in Group Pension
Transaction..................................... 5,720.5 --
Separate account assets........................... 6,127.5 --
Closed Block assets............................... 6,081.6
--------- --------- --------- ---------
Total assets.............................. $24,601.6 $ -- $ $
========= ========= ========= =========
LIABILITIES:
Future policy benefits............................ $ 7,543.0 $(6,618.9) $ A $
Policyholders' account balances................... 2,249.1 (295.9)
Other policyholder liabilities.................... 250.1 (159.6)
Amounts due to reinsurers......................... 96.4 (96.0)
Accounts payable and other liabilities............ 634.7 (54.4)
Short-term debt................................... 0.0 --
Long-term debt.................................... 418.9 --
Current federal income taxes payable.............. 145.9 (9.6)
Deferred federal income taxes..................... 16.8 --
Liabilities transferred in Group Pension
Transaction..................................... 5,682.3 --
Separate account liabilities...................... 6,115.5 --
Closed Block liabilities.......................... 7,234.4
--------- --------- --------- ---------
Total liabilities......................... 23,152.7 --
EQUITY:
Common Stock, $0.01 par value; 400 million shares
authorized; 1,000 shares issued and outstanding
historical; million shares issued and
outstanding pro forma........................... -- -- C
D
Preferred Stock, $0.01 par value; 100 million
shares authorized; no shares issued and
outstanding..................................... --
Capital in excess of par.......................... -- -- C
D
Retained earnings................................. 1,320.9 -- A
B
D
Accumulated other comprehensive income............ 128.0
--------- --------- --------- ---------
Total equity.............................. 1,448.9 --
--------- --------- --------- ---------
Total liabilities and equity.............. $24,601.6 $ -- $ $
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of this Pro Forma
Condensed Consolidated Balance Sheet.
54
<PAGE> 56
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998
---------------------------------------------------------
ESTABLISHMENT
OF THE TRANSACTION
HISTORICAL CLOSED BLOCK(1) ADJUSTMENTS(3) PRO FORMA
---------- --------------- -------------- ---------
($ IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES:
Premiums................................ $ 353.8 $(299.6) $ $
Universal life and investment-type
product policy fees................... 74.3 --
Net investment income................... 357.7 (184.0)
Net realized gains on investments....... 157.6 (7.5)
Group Pension Profits................... 22.7 --
Other income............................ 78.4 (0.8)
Contribution from the Closed Block...... 26.6
-------- ------- ------ ------
Total revenues................ 1,044.5 (465.3)
BENEFITS AND EXPENSES:
Benefits to policyholders............... 379.7 (309.7)
Interest credited to policyholders'
account balances...................... 61.2 (3.7)
Amortization of deferred policy
acquisition costs..................... 70.8 (40.8)
Dividends to policyholders.............. 108.4 (106.9)
Other operating costs and expenses...... 224.5 (4.2)
-------- ------- ------ ------
Total benefits and expenses... 844.6 (465.3)
-------- ------- ------ ------
Income before income taxes and
extraordinary item.................... 199.9 --
Income tax expense...................... 71.8 -- C
-------- ------- ------ ------
Income before extraordinary item........ 128.1 --
Other comprehensive income, net......... 9.9 --
-------- ------- ------ ------
Comprehensive income before
extraordinary item.......... $ 138.0 $ -- $ $
======== ======= ====== ======
Shares used in the calculation of basic
and diluted income before
extraordinary item per share (Note
3(D)).................................
======
Basic and diluted income before
extraordinary item per share..........
$
======
</TABLE>
The accompanying notes are an integral part of this Pro Forma
Condensed Consolidated Statement of Income and Comprehensive Income.
55
<PAGE> 57
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------
ESTABLISHMENT OF
THE CLOSED TRANSACTION
HISTORICAL BLOCK(1) ADJUSTMENTS(3) PRO FORMA
---------- ---------------- -------------- ---------
($ IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES:
Premiums............................. $ 838.6 $(670.2) $ $
Universal life and investment-type
product policy fees................ 127.3 --
Net investment income................ 733.0 (375.0)
Net realized gains on investments.... 72.1 (7.2)
Group Pension Profits................ 60.0 --
Other income......................... 145.4 --
Contribution from the Closed Block... -- 71.4
-------- ------- ------ ------
Total revenues............. 1,976.4 (981.0)
BENEFITS AND EXPENSES:
Benefits to policyholders............ 840.1 (672.8)
Interest credited to policyholders'
account balances................... 139.4 --
Amortization of deferred policy
acquisition costs.................. 181.2 (81.5)
Dividends to policyholders........... 224.3 (221.3)
Other operating costs and expenses... 403.7 (5.4)
-------- ------- ------ ------
Total benefits and
expenses................. 1,788.7 (981.0)
-------- ------- ------ ------
Income before income taxes and
extraordinary item................. 187.7 --
Income tax expense................... 57.3 --
-------- ------- ------ ------
Income before extraordinary item..... 130.4 --
Other comprehensive income, net...... 33.0 --
-------- ------- ------ ------
Comprehensive income before
extraordinary item....... $ 163.4 $ -- $ $
======== ======= ====== ======
Shares used in the calculation of
basic and diluted income before
extraordinary item per share (Note
3(D)):.............................
======
Basic and diluted income before
extraordinary item per share....... $
======
</TABLE>
The accompanying notes are an integral part of this Pro Forma
Condensed Consolidated Statement of Income and Comprehensive Income.
56
<PAGE> 58
- ---------------
(1) The Plan provides for the establishment of the Closed Block. See "The
Demutualization -- Establishment and Operation of the Closed Block".
- The establishment of the Company's Closed Block, including the policy
liabilities and the assets included therein, is subject to the review and
approval of the New York Insurance Department. For purposes of making such
determination the Company formed a pro forma Closed Block at January 1,
1998, as required by the New York Insurance Law. In this regard, the Company
established bookkeeping records to specifically segregate the assets and
liabilities in the pro forma Closed Block, as if the Closed Block had been
formed on January 1, 1998. The pro forma Closed Block (including the amount
and type of both the assets and liabilities to be included therein) was
reviewed by the New York Insurance Department. The Company will account for
the activity on the assets and liabilities in the pro forma Closed Block
subsequent to January 1, 1998 through to the Plan Effective Date, as well as
assets and liabilities on any new business written after January 1, 1998
which, pursuant to the Plan, is required to be included in the Closed Block.
At the Plan Effective Date the Closed Block will actually be formed and will
include the assets and liabilities included in the pro forma Closed Block
established on January 1, 1998 adjusted for the aforementioned activity,
including the assets and liabilities on new business written after January
1, 1998 (hereafter collectively referred to as the "Activity"). The Closed
Block amounts in the Pro Forma Condensed Consolidated Balance Sheet at June
30, 1998 (which gives effect to the Transaction and the establishment of the
Closed Block as if the Transaction and the establishment of the Closed Block
had occurred as of June 30, 1998) represent the actual assets and
liabilities in the pro forma Closed Block as of January 1, 1998, adjusted to
reflect the Activity referred to above from such date through June 30, 1998.
The Closed Block amounts in the Pro Forma Condensed Consolidated Statement
of Income and Comprehensive Income for the Six Months Ended June 30, 1998
(which gives effect to the Transaction and the establishment of the Closed
Block as if the Transaction and the establishment of the Closed Block had
occurred as of January 1, 1997) represent the Activity during such six month
period, adjusted to exclude (i) revenues and benefits relating to new
business written during such six month period, and (ii) revenues and
benefits during such six month period from new business written during the
year ended December 31, 1997. Such adjustments were necessary because after
the Plan Effective Date, which for purposes of pro forma income statement
data was assumed to have occurred January 1, 1997, new business will be
written on policies and contracts which will be outside of the Closed Block.
See "The Demutualization -- Establishment and Operation of the Closed
Block."
The Closed Block amounts in the Pro Forma Condensed Consolidated Statement
of Income and Comprehensive Income for the year ended December 31, 1997
(which gives effect to the Transaction and the establishment of the Closed
Block as if the Transaction and the establishment of the Closed Block had
occurred as of January 1, 1997) were determined as follows: (i) premiums and
substantially all benefits and expenses relating to the policies to be
included in the Closed Block were derived from the actual records of the
Company for the year then ended (such amounts were adjusted to exclude
revenues and benefits relating to new business written during the year ended
December 31, 1997 because after the Plan Effective Date, which for purposes
of pro forma income statement data was assumed to have occurred January 1,
1997, new business will be written on policies and contracts which will be
outside of the Closed Block) and (ii) investment income and realized gains
for the year then ended were allocated to the Closed Block. The pro forma
amount of investment income and realized gains allocated to the Closed Block
for the year ended December 31, 1997 was determined as follows: (a)
liabilities relating to the various policy types included in the Closed
Block as of January 1, 1997 were derived from the actual records of the
Company, (b) the amount of Closed Block invested assets was imputed to be
equal to an amount such that the percentage of Closed Block invested assets
to Closed Block liabilities at January 1, 1997 was equal to such percentage
at January 1, 1998, (c) the composition of Closed Block invested assets at
57
<PAGE> 59
January 1, 1997 was assumed to be consistent with that as of January 1,
1998, (d) the average amounts of invested assets by type held during the
year ended December 31, 1997 were calculated, (e) the actual yields
(investment income and realized gains) during the year ended December 31,
1997 for each such asset type was applied to the aforementioned average
amounts to determine the aggregate investment income and realized gains
allocated to the Closed Block for the year then ended.
- - Assets and liabilities allocated to the Closed Block on the pro forma
condensed consolidated balance sheet are reflected at their June 30, 1998
carrying values. The Closed Block will not be formed until the Plan Effective
Date and, accordingly, the actual assets and liabilities ultimately allocated
to the Closed Block and the carrying values thereof will not be known until
such date. However, the allocation of assets and liabilities to the Closed
Block as of the Plan Effective Date is not expected to differ materially from
the allocation reflected in the pro forma condensed consolidated balance
sheet. See "The Demutualization -- Closed Block Assets and Liabilities". The
methodology for determining the amount of assets required to fund the Closed
Block and the liabilities to be included in the Closed Block is prescribed by
the New York Insurance Department. The methodology used considers historical
information about the policies to be included in the Closed Block together
with management's assumptions that underlie the current dividend scales of
such policies (e.g. mortality rates, asset yield rates and policy lapse
rates).
- - The Contribution from the Closed Block, as further described below, reflected
in the pro forma condensed consolidated statements of income and comprehensive
income is not necessarily indicative of the Closed Block's contribution had
the Closed Block been established as of January 1, 1997 or of the expected
contribution for any future period and is based on the assumption that the
actual contribution from the Closed Block equals the expected contribution
from the Closed Block for the six month period ended June 30, 1998 and the
year ended December 31, 1997.
- - The Closed Block is designed to give reasonable assurance to owners of
policies included in the Closed Block that assets will be available to support
such policies, including maintaining dividend scales in effect at the time of
the Demutualization, if the experience underlying such dividend scales
continues and for appropriate adjustments in such scales if the experience
changes. The assets, including the revenues therefrom, allocated to the Closed
Block will inure solely to the benefit of the owners of policies included in
the Closed Block.
- - The Company will allocate to the Closed Block an amount of assets at the Plan
Effective Date that are expected to produce cash flows which, together with
anticipated cash flows from the Closed Block Business subsequent to the Plan
Effective Date, are reasonably expected to be sufficient to fund the Closed
Block liabilities. In determining the amount of assets to be allocated to the
Closed Block on the Plan Effective Date, management has made certain estimates
and assumptions regarding the expected cash flows from the Closed Block assets
and the Closed Block Business subsequent to the Plan Effective Date, including
estimates and assumptions regarding investment cash flows, mortality,
persistency and expenses which are to be funded in the Closed Block. The
assets and liabilities allocated to the Closed Block will be recorded in the
Company's financial statements at their historical carrying values. The
carrying value of the assets allocated to the Closed Block will be less than
the carrying value of the Closed Block liabilities at the Plan Effective Date.
The excess of the Closed Block liabilities over the Closed Block assets at the
Plan Effective Date represents the total estimated future post-tax
contribution expected to emerge from the operation of the Closed Block, which
will be recognized in the Company's income over the period the policies and
the contracts in the Closed Block remain in force.
- - The estimated net cash flows assumed in determining the Closed Block funding
consist of premiums from policies included in the Closed Block, investment
income from Closed Block assets, proceeds from maturities and dispositions of
Closed Block assets, less benefits paid
58
<PAGE> 60
on Closed Block policies, certain expenses (including taxes) funded in the
Closed Block and dividends on Closed Block policies based on current payable
dividend scales. To the extent that the actual cash flows, subsequent to the
Plan Effective Date, from the assets allocated to the Closed Block and the
Closed Block Business are, in the aggregate, more favorable than assumed in
establishing the Closed Block, total dividends paid to the Closed Block
policyholders in future years will be greater than the total dividends that
would have been paid to such policyholders if the current payable dividend
scales had been continued. Conversely, to the extent that the actual cash
flows, subsequent to the Plan Effective Date, from the assets allocated to the
Closed Block and the Closed Block Business are, in the aggregate, less
favorable than assumed in establishing the Closed Block, total dividends paid
to the Closed Block policyholders in future years will be less than the total
dividends that would have been paid to such policyholders if the current
payable dividend scales had been continued. Accordingly, the recognition of
the aforementioned estimated future post-tax contribution expected to emerge
from the operation of the Closed Block is not affected by the aggregate actual
experience of the Closed Block assets and the Closed Block Business subsequent
to the Plan Effective Date, except in the unlikely event that the Closed Block
assets and the actual experience of the Closed Block Business subsequent to
the Plan Effective Date are not sufficient to pay the guaranteed benefits on
the Closed Block policies, in which case the Company will be required to fund
any such deficiency from its general account assets outside of the Closed
Block. Since the Closed Block will be funded to provide for payment of
guaranteed benefits on such policies and, in addition, for continuation of
dividends paid under current payable dividend scales, it will not be necessary
to use general funds to pay guaranteed benefits unless the Closed Block
Business experiences very substantial ongoing adverse experience in
investment, mortality, persistency or other experience factors.
- As a result of the establishment of the Closed Block, certain line items in
the Company's financial statements subsequent to the establishment of the
Closed Block will reflect material reductions in reported amounts, as
compared to years prior to the establishment of the Closed Block, while
having no effect on net income. The actual results of the Closed Block
assets and the Closed Block Business will be reflected as a single line item
in the Company's statements of income entitled, "Contribution from the
Closed Block", whereas, prior to the establishment of the Closed Block, the
results from the underlying business were reported in various line items in
the Company's income statements, including premiums investment income, net
realized gains and losses on investments, benefits, amortization of deferred
acquisition costs, etc. The Contribution from the Closed Block is expected
to be equal to the periodic amortization of the gain resulting from the
difference between the carrying value of the assets allocated to the Closed
Block and the Closed Block liabilities at the Plan Effective Date. In
addition, all assets and liabilities allocated to the Closed Block will be
reported in the Company's statement of financial position separately under
the captions "Closed Block assets" and "Closed Block liabilities",
respectively.
- The pre-tax contribution from the Closed Block includes only those revenues,
benefit payments, dividends, premium taxes, state guaranty fund assessments
and investment expenses considered in funding the Closed Block. However,
many expenses associated with operating the Closed Block and administering
the policies included therein will be excluded from and, accordingly, not
funded in the Closed Block. These expenses will be reported in the Company's
statement of operations, outside of the contribution from the Closed Block,
consistent with how they are funded. Such expenses will be reported in the
separate line items to which they apply based on the nature of such
expenses. Management expects that such expenses will be included and
reported as Other Operating Costs and Expenses in the Company's statement of
operations, unless any individual expense item is considered to be
significant, in which case such item or items will be reported separately in
the Company's statement of operations. Federal income taxes applicable to
the Closed Block, which will be funded in the Closed Block,
59
<PAGE> 61
will be reflected as a component of federal income tax expense in the
Company's statement of operations.
(2) The following adjustments reflect the pro forma effects of the Transaction
on the pro forma condensed consolidated balance sheet:
(A) Represents the payment of cash in lieu of the distribution of Common
Stock to certain Eligible Policyholders allocated approximately
million shares of Common Stock and the provision of Policy Credits
by MONY in lieu of the distribution of Common Stock to certain
Eligible Policyholders allocated approximately million shares
of Common Stock.
(B) Represents $ million for the estimated after tax cost of
additional nonrecurring expenses related to the Demutualization
assumed to be incurred as of the date of the pro forma condensed
consolidated balance sheet. Such expenses will be reported as
extraordinary expenses.
(C) Represents the proceeds of $ million from the sale of million
shares of Common Stock in the Offerings, less estimated Common Stock
issue costs of $ million. Issue costs include estimated amounts
for underwriting discounts and expenses.
(D) Represents the reclassification of retained earnings to reflect
MONY's conversion to a stock life insurance company and the
distribution of million shares of Common Stock to Eligible
Policyholders.
(3) The following represents the pro forma effects of the Transaction on the pro
forma condensed consolidated statements of income and comprehensive income:
(A) Represents an adjustment to reflect interest expense on the MONY
Notes and amortization of related debt issuance costs as if the MONY
Notes were issued, outstanding and accruing interest since January
1, 1997.
(B) Represents the income tax effects of the pro forma adjustment to
reflect interest expense on the MONY Notes and amortization of
related debt issuance costs as if the MONY Notes were issued,
outstanding and accruing interest since January 1, 1997.
(C) Represents the elimination of the add-on (surplus) tax applicable to
mutual life insurance companies. The adjustment reflects the
elimination of the current estimate of the add-on (surplus) tax
provision, net of the credit to revise the estimate of the provision
of the prior year. The Company will no longer be subject to the
add-on (surplus) tax after conversion to a stock life insurance
company.
(D) The number of shares (in millions) used in the calculation of basic
and diluted net income per common share follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
Shares allocated to Eligible Policyholders........
Less: estimated shares allocated to Eligible
Policyholders who receive cash or Policy
Credits.........................................
----
Shares distributed to Eligible Policyholders......
----
Shares issued in the Offerings....................
----
Total outstanding shares of Common Stock
before exercise of Warrants...........
====
</TABLE>
(E) The pro forma condensed consolidated statements of income and
comprehensive income do not reflect certain nonrecurring expenses
of $35.0 million net of tax directly attributable to the
Demutualization. Such expenses will be reported as extraordinary
expenses. Approximately $9.7 million and $13.3 million of such
expenses were
60
<PAGE> 62
incurred and recognized as extraordinary expenses in the Company's
consolidated statements of income and comprehensive income for the
six month period ended June 30, 1998 and the year ended December 31,
1997, respectively.
(4) Presented below is certain summarized financial information with respect to
the pro forma assets and liabilities allocated to the Closed Block as of
June 30, 1998, as well as the related pro forma revenues, expenses and
contribution from the Closed Block for the six months ended June 30, 1998
and the year ended December 31, 1997 ($ in millions):
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------
<S> <C>
ASSETS:
Fixed maturities available for sale at estimated fair
value..................................................... $3,397.7
Mortgage loans on real estate............................... 525.1
Policy loans................................................ 1,197.3
Other invested assets....................................... 0.5
--------
Total investments................................. 5,120.6
Cash and cash equivalents................................... 120.8
Accrued investment income................................... 120.7
Amounts due from reinsurers................................. 127.2
Premiums receivable......................................... 15.9
Deferred policy acquisition costs........................... 576.1
Other assets................................................ 0.3
--------
Total Closed Block assets......................... $6,081.6
========
LIABILITIES:
Future policy benefits...................................... $6,618.9
Policyholders' account balances............................. 295.9
Other policyholder liabilities.............................. 159.6
Amounts due to reinsurers................................... 96.0
Accounts payable and other liabilities...................... 54.4
Current federal income taxes payable........................ 9.6
--------
Total Closed Block liabilities.................... $7,234.4
========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1998 1997
------------- -------------
<S> <C> <C>
REVENUES:
Premiums........................................ 299.6 670.2
Net investment income........................... 184.0 375.0
Net realized gains on investments............... 7.5 7.2
Other income.................................... 0.8
------ -------
Total revenues........................ 491.9 1,052.4
BENEFITS AND EXPENSES:
Benefits to policyholders....................... 309.7 672.8
Interest credit to policyholders' account
balances...................................... 3.7
Amortization of deferred policy acquisition
costs......................................... 40.8 81.5
Dividends to policyholders...................... 106.9 221.3
Other operating costs and expenses.............. 4.2 5.4
------ -------
Total benefits and expenses........... 465.3 981.0
------ -------
Contribution from Closed Block.................. $ 26.6 $ 71.4
====== =======
</TABLE>
61
<PAGE> 63
The amortized cost, gross unrealized gains and losses, and estimated fair
value of fixed maturity securities allocated to the Closed Block at June 30,
1998 are as follows ($ in millions):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
TYPE COST GAINS LOSSES VALUE
- ---- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
US Treasuries/Other Agencies.................. $ 48.1 $ 0.9 $0.0 $ 49.0
CMOs:
- -Government Agency............................ 219.3 3.4 0.0 222.7
- -Non Agency Backed............................ 54.3 1.6 0.0 55.9
Other Mortgage/Asset Backed:
- -Government Agency............................ 24.4 0.1 0.1 24.4
- -Non Agency Backed............................ 155.0 5.6 0.0 160.6
Utilities..................................... 449.4 23.9 1.0 472.3
Corporate Bonds............................... 2,321.5 98.1 6.8 2,412.8
-------- ------ ---- --------
Totals.............................. $3,272.0 $133.6 $7.9 $3,397.7
======== ====== ==== ========
</TABLE>
The amortized cost and estimated fair value, by contractual maturity dates,
(excluding scheduled sinking funds) of fixed maturity securities allocated to
the Closed Block as of June 30, 1998 are as follows ($ in millions):
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED COST FAIR VALUE
-------------- ----------
<S> <C> <C>
Due in one year or less..................................... $ 35.8 $ 36.1
Due after one year through five years....................... 782.7 795.5
Due after five years through ten years...................... 1,438.3 1,507.5
Due after ten years......................................... 562.2 595.0
-------- --------
Subtotal.......................................... 2,819.0 2,934.1
Mortgage Backed Securities.................................. 453.0 463.6
-------- --------
Total............................................. $3,272.0 $3,397.7
======== ========
</TABLE>
The following table sets forth the carrying value of mortgage loans
allocated to the Closed Block as of June 30, 1998 by contractual maturity ($ in
millions):
<TABLE>
<CAPTION>
CARRYING % OF
VALUE TOTAL
-------- -----
<S> <C> <C>
1 year or less.............................................. $ 59.4 11.3%
Over 1 year but less than or equal to 2 years............... 44.4 8.5
Over 2 years but less than or equal to 3 years.............. 51.0 9.7
Over 3 years but less than or equal to 4 years.............. 55.0 10.5
Over 4 years but less than or equal to 5 years.............. 41.9 8.0
Over 5 years but less than or equal to 6 years.............. 27.8 5.3
Over 6 years but less than or equal to 7 years.............. 22.8 4.3
Over 7 years but less than or equal to 8 years.............. 30.1 5.7
Over 8 years but less than or equal to 9 years.............. 30.0 5.7
Over 9 years but less than or equal to 10 years............. 17.5 3.3
Over 10 years............................................... 145.2 27.7
------ -----
Total............................................. $525.1 100.0%
====== =====
</TABLE>
62
<PAGE> 64
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion addresses the consolidated financial condition and
results of operations of the Company for the periods indicated. This discussion
should be read in conjunction with the "Selected Consolidated Financial Data",
the "Pro Forma Consolidated Financial Data", the Consolidated Financial
Statements and related footnotes, the Unaudited Interim Condensed Consolidated
Financial Statements and other financial information included elsewhere in this
prospectus.
HISTORICAL OVERVIEW
During the 1980s, the Company, under its previous management team, adopted
a strategy designed to diversify the Company's operations and asset mix in
response to growing support for the deregulation of the financial services
industry and competition from savings products offered by banks, savings and
loan associations, mutual funds, life insurance companies and other financial
institutions. As a result of this strategy, the Company (i) acquired businesses
offering fund management and mortgage banking services, (ii) began to offer
interest-sensitive life insurance and annuity products and (iii) increased its
investment in commercial mortgage loans, real estate and below investment grade
fixed maturity securities to maximize investment income and support its
interest-sensitive products and other lines of business.
In response to higher interest rates in the 1980s many life insurance
companies, including the Company, invested funds in higher yielding but higher
risk assets to fund the crediting rates on their insurance products at levels
which were necessary for them to compete effectively with rates on investment
products offered by other financial institutions. At the time, investments in
commercial mortgages, real estate and below investment grade fixed maturity
securities consistently generated returns which outperformed other investments
available to insurance companies. As a result, many companies in the life
insurance industry, including the Company, increased their exposure to such
assets during the 1980s. At its peak in 1990, the Company's exposure to such
assets was approximately 50.0% of general account assets as determined in
accordance with SAP. However, by the late 1980s, prompted by the repeal of tax
laws favorable to real estate development with the passage of the Tax Reform Act
of 1986, the savings and loan crisis, and overcapacity in the real estate
markets across the country, commercial mortgage loan and real estate investments
began to experience financial pressure and become increasingly illiquid. As a
result, the market values of such assets began to decline. In addition, in the
early 1990s several highly publicized failures of financial institutions
highlighted their exposures to below investment grade fixed maturity securities
resulting in regulatory actions requiring the divestiture of such securities
which led to a significant decrease in the market value of such securities. Due
to the Company's high exposure to such assets as determined in accordance with
SAP, its financial condition began to deteriorate and the Company's financial
strength ratings were downgraded in the 1989-1990 period.
During 1989, the Company's current management team was assembled and the
Company adopted a new strategy designed to strengthen its financial position.
Under this strategy, the Company focused on: (i) its core businesses of
individual protection products, annuities, mutual funds and investment
securities and (ii) its key markets of small business owners and higher income
individuals, particularly family builders and pre-retirees. Significant specific
actions taken by the Company's current management team since 1989 have included:
- Repositioning the Company's product mix and upgrading the Company's sales
force
- Focusing on building its accumulation business, including variable
annuities
- Improving the quality of its career agency sales force and
increasing the number of MDRT qualifiers
- Reinsuring its group life and health insurance business during
1989-1990 and ceasing to write any new group life and health
insurance business
63
<PAGE> 65
- Transferring a significant portion of its GIC business to a third
party reinsurer in 1991 and ceasing the production of any new GIC
business
- Transferring a substantial portion of its group pension business and
operations in 1993 (see "Business -- The Group Pension Transaction")
and ceasing the production of any new group pension business
- Transferring all of its disability income insurance business to a
third party reinsurer under an indemnity reinsurance contract in
1997 and ceasing to write new disability insurance business
- Disposing of the Company's non-core businesses
- Disposing of North American Mortgage Company, its mortgage banking
subsidiary, in 1989
- Disposing of Financial Services Corporation, its wholesale
securities brokerage subsidiary, in 1989
- Disposing of Unified Management Corporation, its mutual fund,
transfer agent and clearing broker dealer subsidiary, in 1989
- Disposing of Evaluation Associates, Incorporated, its investment
management performance tracking and consulting subsidiary, in 1991
- Disposing of MONY Reinsurance Corporation, its property and casualty
reinsurance subsidiary, in 1991
- Repositioning the Company's investment portfolio
- Reducing the Company's exposure to commercial mortgage loans by (i)
discontinuing new commercial mortgage loan investments through 1995,
followed by a more selective program involving the investment of new
funds in this asset class, (ii) aggressively foreclosing on
commercial mortgage loans and selling such loans and (iii)
encouraging prepayments, paydowns and repayments in the commercial
mortgage loan portfolio. As a result, the Company's exposure to
commercial mortgage loans was reduced from a carrying value at
December 31, 1992 of approximately $3,576.5 million, or 27.2% of
total investments, to $892.1 million at June 30, 1998, or 8.3% of
total invested assets.
- Upgrading the management of the Company's equity real estate
portfolio to improve the portfolio's cash flow and marketability
- Implementing and executing a plan for the orderly disposal of a
substantial portion of the Company's equity real estate assets,
which resulted in aggregate sales proceeds of $1,620.4 million from
January 1, 1995 through June 30, 1998. As a result, the Company's
exposure to real estate was reduced from a carrying value at
December 31, 1992 of approximately $1,828.5 million, or 13.9% of
total invested assets, to $791.6 million at June 30, 1998, or 7.4%
of total invested assets
- Reducing the Company's exposure to below investment grade securities
by selectively disposing of such securities and investing
substantially all new funds in investment grade fixed maturity
securities. As a result, the Company's exposure to below investment
grade securities was reduced from a carrying value at December 31,
1992 of approximately $1,023.4 million, or 7.8% of total invested
assets, to $369.3 million at June 30, 1998, or 3.4% of total
invested assets
- Taking significant cost reduction actions
- Reducing the rate of growth of operating expenses by, among other
things, (i) reducing the number of employees through early
retirement programs and attrition, (ii) disposing
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<PAGE> 66
of certain businesses and (iii) reducing certain costs incurred in
connection with operating the career agency sales force
- Raising additional statutory capital
- Issuing $125.0 million aggregate principal amount of the 11.25%
Surplus Notes in 1994
- Consummating the Investment on December 30, 1997
As a result of these actions, consolidated equity increased from
approximately $962.5 million at December 31, 1992 to $1,448.9 million at June
30, 1998.
RECENT ACTIONS
On August 14, 1998, the MONY Board adopted the Plan and on September 9,
1998, the MONY Board amended the Plan to incorporate certain clarifying and
technical changes. In accordance with the Plan, among other things the following
will occur: (i) MONY will convert from a mutual life insurance company to a
stock life insurance company and become a wholly owned subsidiary of the Holding
Company, (ii) all policyholders' membership interests will be extinguished and
in exchange therefor Eligible Policyholders will receive shares of Common Stock
or, in certain circumstances, cash or Policy Credits and Participating
Policyholders will receive additional shares of Common Stock or, in certain
circumstances, cash or Policy Credits, (iii) the Closed Block will be created,
and assets will be allocated to the Closed Block to support the future payment
of benefits and dividends on, and certain expenses and taxes relating to, the
policies included therein and (iv) shares of Common Stock will be offered to the
public in the Offerings. Payments to Eligible Policyholders and Participating
Policyholders described in clause (ii) above will generally be made in the form
of Common Stock unless the Eligible Policyholder resides outside of the United
States or Canada, or is allocated a number of shares of Common Stock equal to or
less than a number to be designated by the MONY Board and such Eligible
Policyholder has affirmatively indicated a preference under the Plan to receive
cash, in which case the distribution may be in the form of cash, or is the owner
of certain tax qualified policies, in which case the distribution will be in the
form of Policy Credits. For a more detailed description of the Plan generally,
see "The Demutualization", and for a more detailed description of the
distribution to Eligible Policyholders specifically, see "The Demutualization --
Allocation and Payment to Eligible Policyholders".
In connection with the transactions contemplated under the Plan, on
December 30, 1997, the Investors entered into the Investment Agreement, pursuant
to which the Investors purchased the MONY Notes and Warrants. The MONY Notes
bear interest at the stated rate of 9.50% and mature on December 30, 2012. In
addition, under the terms of the Investment Agreement, the Investors have
agreed, on the Company's request made within 90 days after the Demutualization
Date and subject to certain conditions precedent, to purchase an aggregate of
one million shares of Convertible Preferred Stock for a total purchase price of
$100.0 million. If the Offerings are consummated, management will not require
the purchase of the Convertible Preferred Stock. See "Notes to Consolidated
Financial Statements" and "Certain Provisions of the Investment".
In 1996, due to improving market conditions, the need to maintain a
diversified investment portfolio and advantageous yields, the Company started to
originate new commercial mortgage loans. New commercial mortgage loan
originations aggregated $93.8 million, $79.9 million and $54.3 million for the
six month period ended June 30, 1998 and the years ended December 31, 1997 and
1996, respectively.
Effective December 31, 1997, the Company ceased writing new disability
insurance business because of changes in the economics of the disability
insurance market (particularly, expansive views of insurance companies'
obligations under these types of policies by the judicial system, pressure on
pricing from competitors with greater economies of scale and the consolidation
trend among the disability insurance carriers). In conjunction therewith, the
Company transferred all of its existing in force disability income insurance
business to a third party reinsurer, Centre Life
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<PAGE> 67
Reinsurance, Ltd. ("Centre Re"), under an indemnity reinsurance contract (the
"DI Transaction"). MONY will remain contingently liable for all benefits payable
even if Centre Re fails to meet its obligations to MONY. See "Reinsurance". As a
result of this transaction, the Company recorded a pre-tax loss for the year
ended December 31, 1997 of approximately $9.1 million which represented the
excess of the amount paid for the indemnity reinsurance and deferred acquisition
costs relating to such business (which were reflected on the Company's books at
the date of the transaction) over the carrying value of the liabilities
transferred. In addition, the indemnity reinsurance purchased pursuant to the DI
Transaction replaced a previously existing reinsurance contract which had been
accounted for as a financing rather than reinsurance. The assets held on deposit
under the replaced contract, which had a fair value in excess of the carrying
value of the deposit on MONY's books at the date of the transaction, were used
to partially fund the cost of the aforementioned indemnity agreement. As a
result thereof, the Company recorded a gain of $19.4 million which is separate
from the DI Transaction and reported in "Other Income". Also, concurrent with
the DI Transaction, the Company entered into a distribution agreement with
Provident Life and Accident Insurance Company so that it could continue to
distribute, through the Company's career agency sales force, disability
insurance products to its customers. The impact on the Company's historical
consolidated operating results for the years ended December 31, 1997, 1996 and
1995 from the Company's disability income insurance business was not material.
OUTLOOK
Management believes that the actions it has taken, as discussed above, in
conjunction with the net proceeds from the Offerings will help support the
Company's ratings with respect to its claims-paying ability and financial
strength. Ratings have become an increasingly important factor in establishing
the competitive position of insurance companies and maintaining public
confidence in insurance companies and their ability to market their products.
Although there can be no assurance, management believes that the Company's
ratings should be positively affected if it achieves improvements in operating
results, reduces its exposure to higher risk assets and realizes further cost
reductions. In this regard, management believes that future GAAP earnings will
be positively affected by the Company's continuing program for the sale of real
estate, which the Company expects will result in increased investment income as
a result of being able to invest the proceeds from real estate sales in higher
yielding investments and lower depreciation charges. In addition, with a
stronger capital base and enhanced ratings, management expects the Company to be
able to increase sales by: (i) pursuing new product development, (ii)
implementing state-of-the-art agency support and customer services programs,
(iii) strengthening its marketplace visibility and brand name and (iv) expanding
its current distribution sources. However, there can be no assurance that sales
will increase.
FACTORS AFFECTING PROFITABILITY
The Company derives its revenues principally from: (i) premiums on
participating individual life insurance, (ii) insurance, administrative and
surrender charges on universal life and annuity products, (iii) asset management
fees from separate account and mutual fund products, (iv) net investment income
on general account assets, (v) the Group Pension Profits and (vi) commissions
from securities and insurance brokerage operations. See "-- The Group Pension
Transaction -- Decline and Expiration of Payments and Income Related to the
Group Pension Transaction". The Company's expenses consist of insurance benefits
provided to policyholders, interest credited on policyholders' account balances,
dividends to policyholders, the cost of selling and servicing the various
products sold by the Company, including commissions to sales representatives
(net of any deferrals), and general business expenses.
The Company's profitability depends in large part upon (i) the amount of
its assets, (ii) the adequacy of its product pricing (which is primarily a
function of competitive conditions, management's ability to assess and manage
trends in mortality and morbidity experience as compared to
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<PAGE> 68
the level of benefit payments, and its ability to maintain expenses within
pricing assumptions), (iii) the maintenance of the Company's target spreads
between credited rates on policyholder account balances and the rate of earnings
on its investments, (iv) the persistency of its policies (which affects the
ability of the Company to recover the costs incurred to sell a policy) and (v)
its ability to manage the market and credit risks associated with its invested
assets. External factors, such as legislation and regulation of the insurance
marketplace and products, may also affect the Company's profitability.
THE GROUP PENSION TRANSACTION
DECLINE AND EXPIRATION OF PAYMENTS AND INCOME RELATED TO THE GROUP PENSION
TRANSACTION
On the Group Pension Transaction Date, the Company entered into the AEGON
Agreement under which the Company effected the Group Pension Transaction.
Pursuant to the Group Pension Transaction, the Company transferred a substantial
portion of its group pension business, including its full service group pension
contracts, consisting primarily of tax-deferred annuity, 401(k) and managed
funds lines of business, to AUSA. The Company also transferred to AUSA the
corporate infrastructure supporting the group pension business, including data
processing systems, facilities and regional offices. AUSA was newly formed by
AEGON solely for the purpose of facilitating this transaction. In connection
with the transaction, the Company and AEGON entered into certain service
agreements. These agreements, among other things, provide that the Company will
continue to manage the transferred assets, and that AUSA will continue to
provide certain administrative services to the Company's remaining group pension
contracts not included in the transfer.
The transferred group pension business consisted of approximately $6.4
billion in group pension assets and liabilities, which was comprised of
approximately $2.8 billion of general account assets and liabilities, and $3.6
billion of separate account assets and liabilities. The transfer was initially
structured in the form of indemnity reinsurance, however, the AEGON Agreement
contemplated that the transfer would be restructured in the form of assumption
reinsurance as soon as practicable following the consent of contractholders to
assumption of their contracts. Substantially all of the contractholders
consented to the assumption of their contracts by AUSA.
In addition, pursuant to the AEGON Agreement, MONY agreed to make a $200
million capital investment in AEGON by purchasing $150 million face amount of
Series A Notes and $50 million face amount of the Series B Notes. The Series A
Notes pay interest at 6.44 percent per annum and the Series B Notes pay interest
at 6.24 percent per annum. Both the Series A Notes and the Series B Notes mature
on December 31, 2002. MONY's investment in the Series A Notes were intended to
provide AEGON with the funding necessary to capitalize AUSA.
The Company entered into the Group Pension Transaction due to downgrades of
its financial strength ratings resulting from the deterioration of its financial
position during the period from 1989 through the early 1990s. The Company's
group pension business was considered to be particularly sensitive to heightened
withdrawal and surrender activity due to requirements of many pension fund
advisors that insurance carriers have a minimum financial strength rating
consistent with a "AA" claims-paying ability rating from Standard & Poor's. In
light of the downgrades and certain highly publicized failures of life insurance
companies in the 1990s resulting from abnormally high withdrawal and surrender
activity, management became concerned with respect to the Company's ability to
sustain inordinate amounts of such activity and entered into the Group Pension
Transaction to preserve the value of such business. The transaction allowed the
Company to: (i) place the transferred Group Pension Business in a higher rated
entity which significantly diminished the risk of adverse persistency with
respect to such business, and (ii) retain all the profits resulting from the
$6.4 billion of transferred Existing Deposits. As consideration for the
transaction, MONY remunerated AEGON by transferring to AUSA (i) the intangible
value associated with MONY's group pension franchise, including established
customer relationships, (ii) rights to substantially all the profits associated
with any new deposits made after the Group Pension Transaction Date on the
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<PAGE> 69
contracts which were in force and transferred by MONY to AUSA on the Group
Pension Transaction Date, and (iii) rights to substantially all the profits on
any new business generated subsequent to the Group Pension Transaction Date.
In accordance with GAAP, the transaction did not constitute a sale because
the Company retained substantially all the risks and rewards associated with the
Existing Deposits. The Company continues to reflect the transferred assets and
liabilities on its balance sheet under separate captions entitled "Assets
transferred in Group Pension Transaction" and "Liabilities transferred in Group
Pension Transaction". In addition, the Company reports in its GAAP earnings the
profits from the Existing Deposits as discussed below. See Note 11 to the
Consolidated Financial Statements.
Pursuant to the Agreement, MONY receives from AUSA, (i) the Group Pension
Payments on an annual basis through December 31, 2002 equal to all of the
earnings from the Existing Deposits, (ii) the Final Value Payment at December
31, 2002 based on the remaining fair value of the Existing Deposits, and (iii)
the New Business Growth Payment at December 31, 2002 based on new business
growth subsequent to the Group Pension Transaction Date. However, the level of
new business growth necessary for MONY to receive the New Business Growth
Payment made it unlikely that MONY would ever receive any such payment.
With respect to the Group Pension Payments, the annual results from the
Existing Deposits are measured in accordance with the Earnings Formula which
represents a basis of accounting that is substantially the same as GAAP, except
that: (i) asset impairments on fixed maturity securities are only recognized
when such securities are designated with an NAIC rating of "6" and (ii) no
impairment losses are recognized on mortgage loans until such loans are disposed
or at the time, and in the calculation of, the Final Value Payment.
Earnings which emerge from the Existing Deposits pursuant to the
application of the Earnings Formula are recorded in the Company's financial
statements only after adjustments (primarily to recognize asset impairments in
accordance with SFAS Nos. 114 and 115) to reflect such earnings on a basis in
accordance with GAAP. Losses which arise from the application of the Earnings
Formula for any annual period will be reflected in the Company's results of
operations (after adjustments to reflect such losses in accordance with GAAP)
only up to the amount for which the Company is at risk (as described below),
which at any time is equal to the then outstanding principal amount of the
Series A Notes.
Operating losses reported in any annual period pursuant to the Earnings
Formula are carried forward to reduce any earnings in subsequent years reported
pursuant to the Earnings Formula. Any resultant deficit remaining at December
31, 2002 will be deducted from the Final Value Payment and New Business Growth
Payment, if any, due to the Company. If a deficit still remains, it will be
applied (as provided for in the AEGON Agreement) as an offset against the
principal payment due to the Company upon maturity of the Series A Notes.
The Group Pension Profits have represented a significant portion of the
Company's net income. For the six month periods ended June 30, 1998 and 1997 and
the years ended December 31, 1997, 1996 and 1995, AUSA reported earnings to the
Company pursuant to the application of the Earnings Formula of $23.5 million,
$24.3 million, $55.7 million, $66.7 million, and $70.2 million, respectively,
and the Company recorded Group Pension Profits of $22.7 million, $28.2 million,
$60.0 million, $59.5 million and $61.7 million, respectively. The Group Pension
Profits represented 11.4%, 35.7%, 32.0%, 59.2% and 99.8% of income before income
taxes and extraordinary item for such periods, respectively. In addition,
management expects that Group Pension Profits will decline in each succeeding
annual period consistent with the continuing run-off of the underlying business
until they terminate as of December 31, 2002.
In addition to the Group Pension Profits, the Company earned $6.4 million,
$11.3 million, $17.7 million, $23.0 million and $17.4 million of interest income
on the AEGON Notes during the aforementioned periods, which is reflected in net
investment income. Pursuant to the terms of the
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<PAGE> 70
Group Pension Transaction, from 1994 through 1996, the Company reinvested an
aggregate of $169.0 million of the aforementioned profits and interest in
additional Series A Notes with a face amount equal to the amount reinvested. The
additional Series A Notes bore interest at 1.0% above the two-year U.S. Treasury
rate in effect at the time of their issuance. All of the additional Series A
Notes were redeemed at face value by AEGON during 1997. At December 31, 1997,
the remaining Series A Notes held by the Company consisted of the original
$150.0 million face amount Series A Notes it acquired on December 31, 1993.
For the definitions of certain terms used in the foregoing discussion of
the Group Pension Transaction, see "Risk Factors -- Decline and Expiration of
Payments and Income Related to the Group Pension Transaction" and "Glossary".
The following sets forth certain summarized financial information relating
to the Group Pension Transaction as of and for the periods indicated, including
information regarding: (i) the general account assets transferred to support the
Existing Deposits in the Group Pension Transaction, (ii) the transferred
separate account assets and liabilities and (iii) the components of revenue and
expense comprising the Group Pension Profits:
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JUNE 30, ---------------------
1998 1997 1996
--------- --------- ---------
($ IN MILLIONS)
<S> <C> <C> <C>
ASSETS
General Account
Fixed Maturities:
Available for sale at estimated fair value
(amortized cost $1,493.7, $1,585.4 and $1,568.1,
respectively)....................................... $ 1,548.1 $ 1,645.0 $ 1,629.2
Mortgage loans on real estate......................... 288.7 347.9 527.9
Real estate held for investment....................... 53.2 50.4 55.3
Cash and cash equivalents............................. 41.9 24.5 23.3
Accrued investment income............................. 27.4 33.1 33.6
--------- --------- ---------
Total general account assets..................... 1,959.3 2,100.9 2,269.3
Separate account assets.................................. 3,761.2 3,614.0 3,358.3
--------- --------- ---------
Total assets..................................... $ 5,720.5 $ 5,714.9 $ 5,627.6
========= ========= =========
LIABILITIES:
General Account(1)
Policyholders' account balances....................... $ 1,890.9 $ 1,991.0 $ 2,158.1
Other liabilities..................................... 30.2 33.7 27.7
--------- --------- ---------
Total general account liabilities................ 1,921.1 2,024.7 2,185.8
Separate account liabilities(2).......................... 3,761.2 3,614.0 3,358.3
--------- --------- ---------
Total liabilities................................ $ 5,682.3 $ 5,638.7 $ 5,544.1
========= ========= =========
</TABLE>
- ---------------
(1) Includes general account liabilities transferred in connection with the
Group Pension Transaction pursuant to indemnity reinsurance of $133.2
million, $142.8 million and $175.2 million as of June 30, 1998 and December
31, 1997 and 1996, respectively.
(2) Includes separate account liabilities transferred in connection with the
Group Pension Transaction pursuant to indemnity reinsurance of $34.0
million, $31.1 million and $29.2 million as of June 30, 1998 and December
31, 1997 and 1996, respectively.
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<PAGE> 71
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
-------------- ---------------------------------
1998 1997 1997 1996 1995
----- ----- ------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
REVENUES:
Product policy fees......................... $11.1 $11.0 $23.7 $ 24.7 $ 25.0
Net investment income....................... 80.6 85.9 169.3 192.4 215.9
Net realized gains (losses) on
investments............................... (2.4) 2.2 7.1 (7.4) (8.2)
----- ----- ----- ------ ------
Total revenues............................ 89.3 99.1 200.1 209.7 232.7
Benefits and Expenses:
Interest credited to policyholders' account
balances.................................. 55.7 59.8 117.3 125.9 141.2
Other operating costs and expenses.......... 10.9 11.1 22.8 24.3 29.8
----- ----- ----- ------ ------
Total benefits and expenses............... 66.6 70.9 140.1 150.2 171.0
Group Pension Profits....................... $22.7 $28.2 $60.0 $ 59.5 $ 61.7
===== ===== ===== ====== ======
</TABLE>
TOTAL FIXED MATURITIES BY CREDIT QUALITY
<TABLE>
<CAPTION>
AS OF AS OF
AS OF DECEMBER 31, DECEMBER 31,
JUNE 30, 1998 1997 1996
---------------- ----------------- ----------------
NAIC RATING AGENCY CARRYING % OF CARRYING % OF CARRYING % OF
RATING EQUIVALENT DESIGNATION VALUE TOTAL VALUE TOTAL VALUE TOTAL
- ------ --------------------------------------- -------- ----- -------- ------ -------- -----
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
1 Aaa/Aa/A............................... $ 963.1 62.2% $ 998.9 60.7% $ 948.7 58.3%
2 Baa.................................... 504.3 32.6 510.9 31.1 497.2 30.5
3 Ba..................................... 55.5 3.6 74.0 4.5 98.3 6.0
4 B...................................... 25.2 1.6 18.4 1.1 42.7 2.6
5 Caa and lower.......................... 0.0 0.0 42.8 2.6 42.3 2.6
6 In or near default..................... 0.0 0.0 0.0 0.0 0.0 0.0
-------- ----- -------- ------ -------- -----
Subtotal........................................ $1,548.1 100.0% $1,645.0 100.0% $1,629.2 100.0%
Redeemable Preferred Stock...................... 0.0 0.0 0 0.0 -- 0.0
-------- ----- -------- ------ -------- -----
Total Fixed Maturities.......................... $1,548.1 100.0% $1,645.0 100.0% $1,629.2 100.0%
======== ===== ======== ====== ======== =====
</TABLE>
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<PAGE> 72
ANALYSIS OF MORTGAGE LOAN CREDIT QUALITY(1)
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JUNE 30, ------------------
1998 1997 1996
-------- ------- -------
($ IN MILLIONS)
<S> <C> <C> <C>
Total Commercial Mortgages.................................. $288.7 $347.9 $527.9
====== ====== ======
Problem commercial mortgages(2)............................. $ 1.3 $ 8.1 $ 19.3
Potential problem commercial mortgages...................... 0.0 0.0 9.4
Restructured commercial mortgages........................... 65.6 88.5 107.2
------ ------ ------
Total problem, potential problem and restructured commercial
mortgages................................................. $ 66.9 $ 96.6 $135.9
====== ====== ======
Total problem, potential problem and restructured commercial
mortgages as a percent of total commercial mortgages...... 23.2% 27.8% 25.7%
====== ====== ======
Valuation allowances:
Problem loans............................................. $ 0.0 $ 0.0 $ 1.9
Potential problem loans................................... 0.0 0.0 0.7
Restructured loans........................................ 7.5 5.8 7.2
------ ------ ------
Total valuation allowances.................................. $ 7.5 $ 5.8 $ 9.8
====== ====== ======
Total valuation allowances as a percent of problem,
Potential problem and restructured commercial mortgages at
carrying value before valuation allowances................ 10.1% 5.7% 6.7%
====== ====== ======
</TABLE>
- ---------------
(1) See "Investments" for definitions of problem, potential problem, and
restructured mortgages.
(2) Problem commercial mortgages included delinquent mortgage loans of $1.3
million, $0.0 million, and $0.0 million at June 30, 1998 and December 31,
1997 and 1996, respectively, and mortgage loans in foreclosure of $0.0
million, $8.2 million, and $19.3 million at the such dates, respectively.
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RESULTS OF OPERATIONS
The following table presents summary consolidated financial information for
the Company for the six months ended June 30, 1998 and 1997 and the years ended
December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS ENDED AS OF AND FOR THE YEAR ENDED
JUNE 30, DECEMBER 31,
----------------- ------------------------------
1998 1997 1997 1996 1995
-------- ------ -------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenues:
Premiums.................................. $ 353.8 $411.9 $ 838.6 $ 859.8 $ 875.9
Universal life and investment-type product
policy fees............................ 74.3 54.4 127.3 100.9 80.8
Net investment income..................... 357.7 359.6 733.0 751.6 728.8
Net realized gains on investments......... 157.6 42.6 72.1 75.9 16.2
Group Pension Profits..................... 22.7 28.2 60.0 59.5 61.7
Other income.............................. 78.4 58.8 145.4 117.3 96.2
-------- ------ -------- -------- --------
Total revenues.................... 1,044.5 955.5 1,976.4 1,965.0 1,859.6
Benefits and expenses:
Benefits to policyholders................. 379.7 423.9 840.1 872.2 883.6
Interest credited to policyholders'
account balances....................... 61.2 70.8 139.4 156.1 175.3
Amortization of deferred policy
acquisition costs...................... 70.8 68.4 181.2 158.2 132.6
Dividends to policyholders................ 108.4 117.8 224.3 231.4 222.5
Other operating costs and expenses........ 224.5 196.1 403.7 446.6 383.8
-------- ------ -------- -------- --------
Total benefits and expenses....... 844.6 877.0 1,788.7 1,864.5 1,797.8
Income before income taxes and extraordinary
item...................................... 199.9 78.5 187.7 100.5 61.8
Income tax expense.......................... 71.8 32.0 57.3 44.0 21.4
-------- ------ -------- -------- --------
Income before extraordinary item............ 128.1 46.5 130.4 56.5 40.4
Extraordinary item -- demutualization
expenses, net............................. 9.7 2.4 13.3 0.0 0.0
-------- ------ -------- -------- --------
Net income.................................. 118.4 44.1 117.1 56.5 40.4
Other comprehensive income (loss), net...... 9.9 (17.3) 33.0 (59.9) 191.5
======== ====== ======== ======== ========
Comprehensive income, net................... $ 128.3 $ 26.8 $ 150.1 $ (3.4) $ 231.9
======== ====== ======== ======== ========
</TABLE>
SIX MONTH PERIOD ENDED JUNE 30, 1998 COMPARED TO SIX MONTH PERIOD ENDED JUNE
30, 1997
The Company reported consolidated pre-tax earnings (before extraordinary
items) of $199.9 million ($128.1 million after tax) for the six month period
ended June 30, 1998, an increase of $121.4 million or 154.6% ($81.6 million or
175.5% after tax), as compared to consolidated pre-tax earnings (before
extraordinary items) of $78.5 million ($46.5 million after tax) reported in the
comparable period ended June 30, 1997.
Consolidated revenues were $1,044.5 million for the six month period ended
June 30, 1998, an increase of $89.0 million or 9.3% from $955.5 million reported
in the comparable period ended June 30, 1997. The increase in revenues primarily
resulted from increases in universal life and investment-type product policy
fees, net realized capital gains, and other income of $19.9 million,
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<PAGE> 74
$115.0 million and $19.6 million, respectively, offset by decreases in premiums,
net investment income, and Group Pension Profits of $58.1 million, $1.9 million,
and $5.5 million, respectively.
Total benefits and expenses were $844.6 million for the six month period
ended June 30, 1998, a decrease of $32.4 million or 3.7% from $877.0 million
reported for the comparable period ended June 30, 1997. The decrease resulted
from lower benefits to policyholders, interest credited to policyholders'
account balances, and dividends to policyholders of $44.2 million, $9.6 million,
and $9.4 million, respectively, offset by an increase in amortization of
deferred policy acquisition costs and other operating costs and expenses of $2.4
million and $28.4 million, respectively.
Premium revenue was $353.8 million for the six month period ended June 30,
1998, a decrease of $58.1 million, or 14.1%, from $411.9 million reported in the
comparable period ended June 30, 1997. Approximately $36.6 million of the
decrease resulted from lower premiums due to the transfer of the Company's
disability income insurance business in 1997 pursuant to the DI Transaction. In
addition, the decrease resulted from lower new and renewal premiums of $7.6
million and $9.7 million, respectively, as well as lower single premiums of $5.6
million due to lower dividends.
Universal life and investment-type product policy fees were $74.3 million
for the six month period ended June 30, 1998, an increase of $19.9 million, or
36.5%, from $54.4 million reported in the comparable period ended June 30, 1997.
This increase was primarily the result of higher fees relating to the Company's
FPVA and variable universal life ("VUL") business of $8.4 million and $9.1
million, respectively. For the six month period ended June 30, 1998, the Company
reported total fees from its FPVA and VUL business of $31.2 million and $16.6
million, respectively, as compared to $22.8 million and $7.5 million reported
for the comparable period ended June 30, 1997. The variance in the FPVA fees is
primarily a result of an increase in the account value. The average FPVA account
value for the six month period ended June 30, 1998 was $4.3 billion, as compared
to $3.1 billion for the comparable period ended June 30, 1997. The increase in
VUL fees is primarily due to higher cost of insurance charges of approximately
$4.5 million consistent with the in force growth of such business.
Net investment income was $357.7 million for the first six months of 1998,
a decrease of $1.9 million, or 0.5%, from $359.6 million reported for the first
six months of 1997. Lower interest rates in 1998 resulted in lower investment
income of approximately $9.9 million, while an increase in the Company's average
total invested assets during the first half of 1998 of approximately $67.4
million, as compared to the first half of 1997, resulted in an offsetting
increase to investment income of approximately $7.8 million. From June 1997 to
June 1998, the Company's average investment in fixed maturity securities (before
unrealized gains or losses) increased by approximately $546.6 million, while its
average investment in mortgage loans and real estate decreased by approximately
$111.7 million and $412.4 million, respectively. At June 30, 1998, fixed
maturity securities, mortgage loans and real estate represented approximately
58.5%, 13.8% and 7.4% of total invested assets, as compared to 52.5%, 15.0% and
11.9% at June 30, 1997. The yield on the Company's invested assets before and
after realized gains/(losses) on investments was 6.9% and 9.9%, respectively,
for the first half of 1998, as compared to 7.0% and 7.8%, respectively, for the
first half of 1997. See "Investments".
Net realized gains on investments were $157.6 million for the first half of
1998, an increase of $115.0 million, or 270.0%, from $42.6 million for the first
half of 1997. The increase is due to higher gains on sales of real estate and
partnership equities, lower provisions for real estate losses, and higher gains
on prepayments and sales of fixed maturity securities offset by lower gains on
sales of equity securities and lower releases for provisions for mortgage
losses. Provisions for valuation allowances on real estate to be disposed of
aggregated $1.4 million for the first half of 1998, as compared to $45.2 million
for the first half of 1997, primarily as a result of additional properties put
up for sale in the first half of 1997 that had carrying values in excess of
their fair values less costs to sell; realized gains on sales of real estate and
partnership equities totaled $122.6 million in the first half of 1998, as
compared to $48.1 million in the first half of 1997; realized gains on sales of
common
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stock were $18.5 million in the first half of 1998, as compared to $25.9 million
in the first half of 1997; realized gains on the sales/prepayments of fixed
maturities were $14.9 million in the first half of 1998, as compared to $6.5
million in the first half of 1997; gains on releases of mortgage valuation
reserves totaled $0.8 million in the first half of 1998, as compared to $13.1
million in the first half of 1997.
Group Pension Profits were $22.7 million for the six month period ended
June 30, 1998, a decrease of $5.5 million, or 19.5%, from $28.2 million reported
in the comparable period ended June 30, 1997. Group Pension Profits during the
six month period ended June 30, 1998 consisted of $23.5 million of Group Pension
Payments offset by an increase of $0.8 million in valuation allowances relating
to adjustments required to reflect the earnings from such payments in accordance
with GAAP. Such adjustments primarily relate to changes in the valuation
allowances established to recognize impairment of assets supporting the business
transferred in the Group Pension Transaction. In the comparable prior year
period Group Pension Profits consisted of $24.3 million of Group Pension
Payments and $3.9 million relating to a decrease in the aforementioned valuation
allowances. Group Pension Payments during the six month period ended June 30,
1998 decreased from that reported in the comparable prior year period primarily
because of the continuing run-off of the Existing Deposits and lower
reinvestment rates. The decrease in the valuation allowance reported during the
six month period ended June 30, 1997 resulted primarily from the paydown of
certain mortgage loans.
Other income (which consists primarily of fees earned by the Company's
mutual fund management, broker-dealer, and insurance brokerage operations, as
well as revenues from interest on deposits held under financial reinsurance
arrangements, certain other asset management fees, and other miscellaneous
revenues) was $78.4 million for the six month period ended June 30, 1998, an
increase of $19.6 million, or 33.3%, as compared to $58.8 million reported in
the comparable prior year period. The increase was primarily the result of
higher commissions earned by the Company's broker-dealer operations of $9.1
million and higher fees earned by the Company's mutual fund management
operations of $11.6 million. During the six month period ended June 30, 1998,
the Company's broker-dealer operations reported commission earnings of $24.2
million, as compared to $15.1 million reported in the comparable prior year
period. Also, during the six month period ended June 30, 1998, the Company's
mutual fund management operations reported $29.5 million in fees from advisory,
underwriting and distribution services, as compared to $17.9 million reported in
the comparable prior year period.
Benefits to policyholders were $379.7 million for the six month period
ended June 30, 1998, a decrease of $44.2 million, or 10.4%, as compared to
$423.9 million reported in the comparable prior year period. The decrease
primarily resulted from the transfer of the Company's disability income
insurance business pursuant to the DI Transaction during the fourth quarter of
1997. During the six months ended June 30, 1997, the Company reported benefits
of approximately $36.7 million relating to its disability income insurance
business.
Interest credited to policyholder account balances was $61.2 million for
the six month period ended June 30, 1998, a decrease of $9.6 million, or 13.6%,
as compared to $70.8 million reported in the comparable prior year period. The
decrease primarily resulted from lower interest crediting across substantially
all product lines.
Amortization of deferred policy acquisition costs ("DAC") results from the
capitalization of commissions and other costs of acquiring new contracts and the
amortization of these costs over the estimated life of the contracts based on
the present value of estimated gross profits or margins from such business.
Amortization of deferred policy acquisition costs was $70.8 million for the six
month period ended June 30, 1998, an increase of $2.4 million, or 3.5%, as
compared to $68.4 million reported in the comparable prior year period. The
increase is primarily the result of: (i) higher amortization of approximately
$4.1 million relating to the Company's FPVA product line, (ii) a decrease in
amortization of approximately $3.0 million relating to the VUL product line
which
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experienced $4.6 million of higher death claims as compared to the comparable
prior year period, and (iii) higher amortization of approximately $2.4 million
in the traditional whole life business due to gains from real estate sales. The
increase in amortization relating to FPVAs resulted from higher management fees
due to an increase in separate account value. The increase in account value
during the first six months of 1998 of $581.9 million resulted from new sales
and other deposits of $346.5 million and market appreciation of $466.9 million,
offset by approximately $231.5 million in withdrawals and surrenders.
Other operating costs and expenses were $224.5 million for the six month
period ended June 30, 1998, an increase of $28.4 million, or 14.5%, as compared
to $196.1 million reported in the comparable prior year period. The increase
primarily consists of: (i) higher sub-advisory fees, commission expense and
other cost of sales for Enterprise Capital Management, Inc. ("ECM"), the
subsidiary through which the Company conducts its proprietary retail mutual fund
operations, of $5.6 million and higher commission expense of $9.1 million from
MONY Securities Corp., (ii) approximately $5.3 million of higher interest
expense as a result of the issuance of the MONY Notes on December 31, 1997,
(iii) costs incurred in connection with the Year 2000 issue of approximately
$4.4 million.
Dividends to policyholders of $108.4 million for the six month period ended
June 30, 1998 decreased $9.4 million, or 8.0% from $117.8 million reported in
the comparable prior year period. The decrease primarily resulted from a
reduction in the fourth quarter of 1997 in the interest component of the
dividend scales on all policies by amounts ranging from 15 to 50 basis points,
which was partially offset by an increase in life insurance reserves.
The Company's provision for federal income taxes for the six month period
ended June 30, 1998, including the tax effect of demutualization expenses, of
approximately $70.8 million included surplus tax of $1.9 million, compared to a
surplus tax expense of $4.4 million reported in the comparable prior year
period. The Company's effective tax rate before the surplus tax and
extraordinary item was 35.0% for the six month periods ended June 30, 1998 and
1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
The Company reported consolidated pre-tax earnings (before extraordinary
items) of $187.7 million ($130.4 million after tax) for the year ended December
31, 1997, an increase of $87.2 million or 86.8% ($73.9 million or 130.8% after
tax), as compared to consolidated pre-tax earnings (before extraordinary items)
of $100.5 million ($56.5 million after tax) for the year ended December 31,
1996.
Consolidated revenues were $1,976.4 million for 1997, an increase of $11.4
million, or 0.6% from $1,965.0 million reported for 1996. The increase in
revenues primarily resulted from increases in universal life and investment-type
product policy fees and other income of $26.4 million and $28.1 million,
respectively, offset by decreases in premiums, net investment income and net
realized gains on investments of $21.2 million, $18.6 million, and $3.8 million,
respectively.
Total benefits and expenses were $1,788.7 million for 1997, a decrease of
$75.8 million or 4.1% from $1,864.5 million reported for 1996. The decrease
resulted from lower benefits to policyholders, interest credited to
policyholders' account balances, dividends to policyholders and other operating
costs and expenses of $32.1 million, $16.7 million, $7.1 million and $42.9
million, respectively, offset by an increase in amortization of deferred policy
acquisition costs of $23.0 million.
Premium revenue was $838.6 million for 1997, a decrease of $21.2 million,
or 2.5%, from $859.8 million reported for 1996. The decrease was primarily the
result of lower new and renewal premiums of $4.3 million and $23.5 million,
respectively, offset by higher sales of single premium individual life insurance
of approximately $6.6 million. Management believes that the decrease was
consistent with trends in the industry, particularly the continuing shift by
consumers from traditional protection products to asset accumulation and
retirement income products. Management also
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believes that the decrease was reflective of the then current interest rate
environment wherein declining long-term rates have caused traditional protection
products to be comparatively less competitive with variable products.
Universal life and investment-type product policy fees were $127.3 million
for 1997, an increase of $26.4 million, or 26.2%, from $100.9 million reported
for 1996. This increase was primarily the result of higher fees relating to the
Company's FPVA and VUL business of $14.8 million and $8.9 million, respectively,
as a result of an increase in the aggregate account values of such products. For
the year ended December 31, 1997, the Company reported total fees from its FPVA
and VUL business of $50.0 million and $17.8 million, respectively, as compared
to $35.2 million and $8.9 million reported for the year ended December 31, 1996.
FPVA account value increased $1,167.5 million during 1997 to $4,314.1 million as
compared to $3,146.6 million in 1996. The increase in account value in 1997
resulted from new sales and other deposits of $712.7 million and market
appreciation of $738.9 million, offset by approximately $284.1 million in
withdrawals and surrenders. VUL account value increased $65.1 million during
1997 to $106.4 million as compared to $41.3 million in 1996. The increase in
account value in 1997 resulted from new sales and other deposits of $68.3
million and market appreciation of $14.2 million, offset by approximately $17.4
million in withdrawals and surrenders.
Net investment income was $733.0 million for 1997, a decrease of $18.6
million, or 2.5%, from $751.6 million reported for 1996. Lower interest rates in
1997 resulted in lower investment income of approximately $10.4 million, while a
decrease in the Company's average total invested assets during 1997 of
approximately $107.9 million, as compared to 1996, resulted in a further
decrease in investment income of approximately $7.8 million. The effect of
investing new money of approximately $2.0 billion (including the proceeds from
prepayments, sales and maturities of its invested assets, as well as net cash
flow from operating activities), in conjunction with a change in the mix of
invested assets, reduced the total yield on invested assets by approximately 10
basis points in 1997. Average total invested assets in 1997 decreased, as
compared to 1996, primarily as a result of the retirement of the Company's
Eurobond debt issuances at their scheduled maturity dates (see Note 17 to the
Consolidated Financial Statements). During 1997, the Company's average
investment in fixed maturity securities (before unrealized gains or losses)
increased by approximately $459.3 million, while its average investment in
mortgage loans and real estate decreased by approximately $170.5 million and
$390.1 million, respectively. At December 31, 1997, fixed maturity securities,
mortgage loans and real estate represented approximately 56.9%, 13.6% and 10.7%
of total invested assets, as compared to 52.2%, 15.1 % and 14.4% at December 31,
1996. The yield on the Company's invested assets before and after realized gains
(losses) on investments was 7.1% and 7.8%, respectively, for 1997, as compared
to 7.2% and 7.9%, respectively, for 1996. See "Investments".
Net realized gains on investments were $72.1 million for 1997, a decrease
of $3.8 million, or 5.0%, from $75.9 million reported for 1996. The decrease was
due to higher provisions for losses and lower gains on sales of certain
partnership interests offset by higher gains on sales of real estate and common
stock. Provisions for valuation allowances on real estate to be disposed of
aggregated $63.8 million for 1997, as compared to $16.8 million in 1996,
primarily as a result of additional properties put up for sale in 1997 that had
carrying values in excess of their fair values less costs to sell; realized
gains on sales of real estate were $87.6 million in 1997, as compared to $42.8
million in 1996; realized gains on sales of common stock were $39.7 million in
1997, as compared to $31.4 million in 1996; and gains on sales of certain
partnership interests totaled $1.3 million in 1997, as compared to $10.5 million
in 1996.
Group Pension Profits were $60.0 million for 1997, an increase of $0.5
million, or approximately 0.8%, as compared to $59.5 million reported in 1996.
Group Pension Profits in 1997 consisted of $55.7 million of Group Pension
Payments and $4.3 million relating to adjustments required to reflect the
earnings from such payments in accordance with GAAP. Such adjustments primarily
relate to changes in the valuation allowances established to recognize
impairment of assets supporting the
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business transferred in the Group Pension Transaction. In 1996, Group Pension
Profits consisted of $66.7 million of Group Pension Payments offset by $(7.2)
million relating to an increase in the aforementioned valuation allowances.
Group Pension Payments in 1997 decreased from that recorded in 1996 primarily
because of the continuing run-off of the Existing Deposits. The decrease in
valuation allowances in 1997 resulted primarily from the decrease in mortgage
loan assets supporting the transferred business due to prepayments of such
loans.
Other income was $145.4 million for 1997, an increase of $28.1 million, or
24.0%, as compared to $117.3 million reported in 1996. The increase was
primarily the result of higher commissions earned by the Company's broker-dealer
operations of $3.5 million, higher fees earned by the Company's mutual fund
management operations of $17.2 million and a gain of $19.4 million relating to
certain assets which had appreciated in value and were transferred to partially
fund the cost of the indemnity reinsurance purchased in connection with the DI
Transaction in 1997. These assets had previously been held on deposit by a third
party reinsurance company under a financial reinsurance arrangement which was
replaced with the aforementioned indemnity reinsurance. Offsetting such
increases was miscellaneous non-recurring income of approximately $8.1 million
recorded in Other Income in 1996 and lower earnings of approximately $2.7
million relating to an aviation reinsurance pool in which the Company
participates. During 1997, the Company's broker-dealer operations reported
commission earnings of $32.2 million, as compared to $28.7 million reported in
1996. Also, during 1997, the Company's mutual fund management operations
reported $42.3 million in fees from advisory, underwriting and distribution
services, as compared to $25.1 million reported in 1996, as assets under
management increased to approximately $5.4 billion from $3.5 billion at December
31, 1997 and 1996, respectively.
Benefits to policyholders were $840.1 million for 1997, a decrease of $32.1
million, or 3.7%, from $872.2 million reported for 1996. The decrease primarily
resulted from favorable mortality in almost all product lines and the DI
Transaction. Favorable mortality contributed approximately $15.6 million of the
decrease, while the DI Transaction caused a decrease in benefits of
approximately $21.6 million. The decrease in benefits caused by the DI
Transaction resulted from the difference between the amount of reserves ceded
(which approximated $367.5 million) and the cost of such reinsurance (which
approximated $345.9 million). However, after the writeoff of associated deferred
policy acquisition costs of approximately $30.7 million, the DI Transaction
resulted in a pre-tax loss of approximately $9.1 million.
Interest credited to policyholders' account balances was $139.4 million for
1997, a decrease of $16.7 million, or 10.7%, from $156.1 million reported for
1996. The decrease was comprised of lower interest crediting of $9.5 million and
$11.9 million on the Company's SPDAs and retained group pension business, offset
by $4.9 million of higher interest crediting on universal life business. The
year to year change in interest credited primarily resulted from the change in
average account balances for the aforementioned products. The average account
balances for such products were $636.5 million, $220.4 million and $496.6
million for 1997, respectively, and $788.0 million, $292.7 million and $470.3
million for 1996, respectively.
Amortization of DAC was $181.2 million for 1997, an increase of $23.0
million, or 14.5%, from $158.2 million reported for 1996. The increase was
primarily the result of: (i) charging off approximately $30.7 million of
deferred policy acquisition costs relating to the DI Transaction, (ii) higher
amortization of approximately $11.6 million relating to the Company's FPVA
product line and (iii) a decrease in amortization of approximately $21.5 million
relating to the Company's traditional life business which resulted from revised
projections of the present value of the ultimate profits expected from such
business to reflect actual results to date. The increase in amortization
relating to FPVAs resulted from higher profits due to an increase in account
value of approximately $1,167.5 million during 1997 to $4,314.1 million, as
compared to $3,146.6 million in 1996. The increase in account value in 1997
resulted from new sales and other deposits of $712.7 million and market
appreciation of $738.9 million, offset by approximately $284.1 million in
withdrawals and surrenders.
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Other operating costs and expenses were $403.7 million for 1997, a decrease
of $42.9 million, or 9.6%, from $446.6 million reported for 1996. The decrease
consists primarily of: (i) lower interest expense in 1997, as compared to 1996,
of approximately $16.2 million as a result of the maturity of the Company's
Eurobond debt (see Note 17 to the Consolidated Financial Statements), (ii) lower
costs incurred of approximately $27.6 million in 1997, as compared to 1996, in
connection with settlements of, and reserves for, various legal disputes,
including lawsuits against the Company alleging market conduct improprieties
(see Note 19 to the Consolidated Financial Statements), (iii) nonrecurring
charges in 1996 of approximately $14.0 million relating to special termination
benefits granted to certain employees under an early retirement program offered
by the Company in April 1996 (see Note 8 to the Consolidated Financial
Statements), (iv) costs incurred of approximately $2.7 million for severance
benefits granted to certain employees in connection with the DI Transaction and
(v) higher commissions and sub-advisor fees of approximately $7.0 million and
higher operating expenses of approximately $8.5 million incurred by the
Company's broker-dealer and mutual fund management operations.
Dividends to policyholders of $224.3 million in 1997 decreased $7.1
million, or 3.1%, from $231.4 million reported in 1996. The decrease primarily
resulted from a reduction in the interest component of the dividend scales on
all policies during 1997 by amounts ranging from 15 to 50 basis points, which
was partially offset by an increase in life insurance reserves.
The Company's provision for federal income taxes in 1997, including the tax
effect of demutualization expenses, of $53.8 million included a benefit relating
to the surplus tax of $5.8 million, compared to surplus tax expense incurred of
$12.8 million in 1996. The Company's effective tax rate before the surplus tax
and extraordinary item was 33.6% in 1997, as compared to approximately 31% in
1996.
The Company is subject to the surplus tax (add-on tax) imposed on mutual
life insurance companies under Section 809 of the Code. Section 809 requires
(and the surplus tax results from) the disallowance of a portion of a mutual
life insurance company's policyholder dividends as a deduction from taxable
income. As a stock company, the Company will no longer be subject to the surplus
tax.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The Company reported consolidated pre-tax earnings of $100.5 million ($56.5
million after tax) for the year ended December 31, 1996, an increase of $38.7
million or 62.6% ($16.1 million or 39.9% after tax), as compared to consolidated
pre-tax earnings of $61.8 million ($40.4 million after tax) for the year ended
December 31, 1995.
Consolidated revenues were $1,965.0 million for 1996, an increase of $105.4
million, or 5.7%, from $1,859.6 million reported for 1995. The increase in
revenues primarily resulted from increases in net realized investment gains,
universal life and investment-type product policy fees, net investment income
and other income of $59.7 million, $20.1 million, $22.8 million and $21.1
million, respectively, offset by decreases in premiums of $16.1 million and
Group Pension Profits of $2.2 million.
Total benefits and expenses were $1,864.5 million for 1996, an increase of
$66.7 million, or 3.7%, from $1,797.8 million reported for 1995. The increase
was primarily attributable to increases in amortization of policy acquisition
costs, other operating costs and expenses and dividends to policyholders of
$25.6 million, $62.8 million and $8.9 million, respectively, offset by decreases
in benefits to policyholders and interest credited to policyholders' account
balances of $11.4 million and $19.2 million, respectively.
Premium revenue was $859.8 million for 1996, a decrease of $16.1 million,
or 1.8%, from $875.9 million reported for 1995. The decrease was primarily the
result of lower premiums on traditional life insurance of $7.2 million in
addition to lower premiums of $5.6 million relating to the
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sales of individual immediate annuities. Management believes that the decrease
was consistent with trends in the industry, particularly the continuing shift by
consumers from traditional protection products to asset accumulation and
retirement income products. Management also believes that the decrease was
reflective of the then current interest rate environment wherein declining
long-term rates have caused traditional protection products to be comparatively
less competitive with variable products.
Universal life and investment-type product policy fees were $100.9 million
for 1996, an increase of $20.1 million, or 24.9%, from $80.8 million reported
for 1995. This increase was primarily the result of higher fees relating to the
Company's FPVA and VUL business of $12.4 million and $6.9 million, respectively,
as a result of an increase in the aggregate account values of such products.
FPVA account value increased $929.4 million during 1996 to $3,146.6 million as
compared to $2,217.2 million in 1995. The increase in account value in 1996
resulted from new sales and other deposits of $668.4 million and market
appreciation of $448.6 million, offset by approximately $187.6 million in
withdrawals and surrenders. VUL account value increased $30.5 million during
1996 to $41.3 million as compared to $10.8 million in 1995. The increase in
account value in 1996 resulted from new sales and other deposits of $35.7
million and market appreciation of $4.7 million, offset by approximately $9.9
million in withdrawals and surrenders.
Net investment income was $751.6 million for 1996, an increase of $22.8
million, or 3.1%, from $728.8 million reported for 1995. From 1995 to 1996, the
Company's investment results benefited from the strong performance of the
Company's equity partnership investments, while being constrained by slightly
declining interest rates. Invested assets produced a yield (including realized
capital gains) of 7.9% in 1996, compared with 7.1% in 1995.
Net realized gains on investments were $75.9 million for 1996, an increase
of $59.7 million, or 368.5%, from $16.2 million reported for 1995. The increase
was primarily due to higher realized gains on sales of equity securities and
real estate and lower provisions for losses on real estate classified as to be
disposed of. Realized gains on sales of equity securities in 1996 totaled $30.0
million as compared to $9.2 million in 1995, realized gains on sales of real
estate in 1996 totaled $42.8 million as compared to $28.3 million in 1995 and
provisions for valuation allowances on real estate to be disposed of aggregated
$16.8 million in 1996 as compared to $39.5 million in 1995. In addition, the
Company recorded realized gains on sales and prepayments of fixed maturity
securities in 1996 of $6.2 million, a decrease of approximately $12.8 million
from that reported in 1995, which decrease was largely offset by a reduction in
mortgage loan valuation allowances in 1996 of approximately $4.0 million, as
compared to an increase in the amount of such allowances of approximately $4.0
million recorded in 1995.
Group Pension Profits were $59.5 million for 1996, a decrease of $2.2
million, or approximately 3.6%, as compared to $61.7 million reported in 1995.
Group Pension Profits in 1996 consisted of $66.7 million of Group Pension
Payments and ($7.2) million relating to adjustments required to reflect the
earnings from such payments in accordance with GAAP. Such adjustments primarily
relate to changes in the valuation allowances established to recognize
impairment of assets supporting the business transferred in the Group Pension
Transaction. In 1995, Group Pension Profits consisted of $70.2 million in Group
Pension Payments offset by $(8.5) million relating to an increase in the
aforementioned valuation allowances. Group Pension Payments in 1996 decreased
from that recorded in 1995 primarily because of the continuing run-off of the
Existing Deposits. The increase in valuation allowances in 1996 was due to one
loan in the portfolio.
Other income was $117.3 million for 1996, an increase of $21.1 million, or
21.9%, from $96.2 million reported for 1995. The increase in other income was
principally the result of higher commissions earned in the Company's
broker-dealer operations and higher advisory fees in its mutual fund management
operations.
Benefits to policyholders were $872.2 million for 1996, a decrease of $11.4
million, or 1.3%, from $883.6 million reported for 1995. The decrease primarily
consisted of approximately $3.5 mil-
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lion relating to favorable mortality in almost all product lines and lower
surrenders on traditional life insurance products and a decrease of
approximately $6.1 million in sales of immediate annuities.
Interest credited to policyholders' account balances was $156.1 million for
1996, a decrease of $19.2 million, or 10.9%, from $175.3 million reported for
1995. The decrease in interest credited was primarily the result of a decrease
in policyholders' account balances which the Company believes reflected consumer
preferences for separate account participation products.
Amortization of DAC was $158.2 million for 1996, an increase of $25.6
million, or 19.3%, from $132.6 million reported for 1995. The increase was
primarily the result of higher profitability across all major product lines.
Amortization of deferred expenses attributable to traditional participating
whole life policies increased by $9.5 million due to improved profitability
resulting from higher realized gains in 1996, while higher profitability on the
Company's universal life products resulting from better mortality experience, as
compared to the prior year, caused amortization to increase by $11.6 million. In
addition, the Company's continuing growth in the flexible payment variable
annuities fund base resulted in an increase in advisory fees which contributed
approximately $12.7 million to the increase in policy acquisition cost
amortization. These increases were partially offset by a $2.4 million decrease
in amortization relating to term business, as a result of lower business
production as compared to the prior year.
Other operating costs and expenses were $446.6 million for 1996, an
increase of $62.8 million, or 16.4%, from $383.8 million reported for 1995,
largely as a result of: (i) costs incurred of approximately $27.6 million
relating to settlements of, and reserves for, various legal disputes, including
lawsuits against the Company alleging market conduct improprieties (see Note 19
to the Consolidated Financial Statements), (ii) $5.1 million of legal expenses
relating to the aforementioned legal disputes and lawsuits and (iii)
approximately $14.0 million of expense associated with special termination
benefits paid to certain employees under an early retirement program offered by
the Company in April of 1996 (see Note 8 to the Consolidated Financial
Statements). Other factors contributing to the increase in other operating costs
and expenses during 1996 included higher commissions in the Company's
broker-dealer operations and higher advisory fees in its mutual fund management
operations.
Dividends to policyholders of $231.4 million in 1996 were slightly higher
than the $222.5 million level of 1995. During 1996, the Company maintained the
dividend scale from the preceding year and the increase resulted from an
increase in life insurance reserves during 1996.
The Company's provision for federal income taxes of $44.0 million for 1996
included surplus tax of $12.8 million, as compared to the 1995 provision for
federal income taxes of $21.4 million which included $0.0 relating to surplus
tax. The Company did not incur any surplus tax in 1995 as the differential
earnings rate was zero.
The Company is subject to the add-on (surplus) tax imposed on mutual life
insurance companies under Section 809 of the Code. Section 809 requires (and the
surplus tax results from) the disallowance of a portion of a mutual life
insurance company's policyholder dividends as a deduction from taxable income.
As a stock company, the Company will no longer be subject to the surplus tax.
RESULTS OF OPERATIONS BY SEGMENT
For management and reporting purposes, the Company's business is organized
in two principal operating segments, the "Protection Products" segment and the
"Accumulation Products" segment. Substantially all of the Company's other
business activities are combined and reported in the "Other Products" segment.
In its Protection Products segment, the Company offers a wide range of
individual life insurance products, including whole life, term life, universal
life, variable universal life, last survivor life and group universal life. Also
included in the Protection Products segment are the: (i) assets and liabilities
transferred pursuant to the Group Pension Transaction, as well as the
80
<PAGE> 82
Group Pension Profits, and (ii) the Company's disability income insurance
business which was transferred in the DI Transaction. For accounting purposes,
the Protection Products segment will include, following the Demutualization, the
contribution from the Closed Block. In its Accumulation Products segment, the
Company offers fixed annuities, single premium deferred annuities, immediate
annuities, flexible payment variable annuities and proprietary retail mutual
funds. The Company's Other Products segment primarily consists of a securities
broker-dealer operation, an insurance brokerage operation and the Run-Off
Businesses. In addition to selling the Company's proprietary investment
products, the securities broker-dealer operation provides customers of the
Company's protection and accumulation products access to other non-proprietary
investment products (including stocks, bonds, limited partnership interests,
tax-exempt unit investment trusts and other investment securities). The
insurance brokerage operation provides the Company's career agency sales force
with access to life, annuity, small group health and specialty insurance
products written by other carriers to meet the insurance and investment needs of
its customers. The Run-Off Businesses primarily consist of group life and health
insurance as well as the group pension business that was not included in the
Group Pension Transaction. For a reconciliation of the amounts reported in the
segments with the amounts reported in the consolidated financial statements, see
Note 6 to the Consolidated Financial Statements.
81
<PAGE> 83
The following table presents certain summary financial data for the Company
by operating segment as of the dates and for the periods indicated.
<TABLE>
<CAPTION>
AS OF OR FOR THE SIX
MONTHS ENDED JUNE 30, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
---------------------- -----------------------------------------
1998 1997 1997 1996 1995
--------- --------- ----------- ----------- -----------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES(1):
Protection Products(2)..... $ 813.8 $ 775.8 $ 1,598.7 $ 1,593.8 $ 1,485.5
Accumulation Products...... 145.8 114.6 239.4 217.0 213.9
Other Products............. 80.4 61.1 131.1 145.9 150.5
--------- --------- --------- --------- ---------
$ 1,040.0 $ 951.5 $ 1,969.2 $ 1,956.7 $ 1,849.9
========= ========= ========= ========= =========
TOTAL BENEFITS AND
EXPENSES(1):
Protection Products........ $ 677.1 $ 727.4 $ 1,469.7 1,492.6 1,456.8
Accumulation Products...... 95.8 90.3 195.3 181.1 179.7
Other Products............. 67.0 55.3 112.8 137.8 141.6
--------- --------- --------- --------- ---------
$ 839.9 $ 873.0 $ 1,777.8 $ 1,811.5 $ 1,778.1
========= ========= ========= ========= =========
INCOME BEFORE INCOME
TAXES(1):
Protection Products(2)..... $ 136.7 $ 48.3 $ 129.0 $ 101.2 $ 28.7
Accumulation Products...... 50.0 24.3 44.1 35.9 34.2
Other Products............. 13.4 5.8 18.3 8.1 8.9
--------- --------- --------- --------- ---------
$ 200.1 $ 78.4 $ 191.4 $ 145.2 $ 71.8
========= ========= ========= ========= =========
ASSETS(1):
Protection Products(3)..... $16,218.3 $15,291.9 $15,776.5 $15,158.5 $15,213.2
Accumulation Products...... 6,285.8 5,266.4 5,757.9 4,747.2 3,981.7
Other Products............. 1,209.8 1,327.1 1,234.2 1,417.1 1,713.3
--------- --------- --------- --------- ---------
$23,713.9 $21,885.4 $22,768.6 $21,322.8 $20,908.2
========= ========= ========= ========= =========
POLICYHOLDER
LIABILITIES(1)(4):
Protection Products(5)..... $10,102.9 $10,317.7 $10,105.7 $ 9,996.2 $ 9,936.3
Accumulation Products...... 1,332.2 1,493.0 1,416.1 1,601.7 1,797.2
Other Products............. 480.0 321.9 513.4 542.4 694.8
--------- --------- --------- --------- ---------
$11,915.1 $12,132.6 $12,035.2 $12,140.3 $12,428.3
========= ========= ========= ========= =========
SEPARATE ACCOUNT
LIABILITIES(1)(6):
Protection Products(7)..... $ 3,967.8 $ 3,455.9 $ 3,720.1 $ 3,393.0 $ 3,500.1
Accumulation Products...... 4,598.1 3,469.8 4,002.6 2,851.4 1,928.1
Other Products............. 565.1 630.3 547.7 625.6 613.3
--------- --------- --------- --------- ---------
$ 9,131.0 $ 7,556.0 $ 8,270.4 $ 6,870.0 $ 6,041.5
========= ========= ========= ========= =========
</TABLE>
- ---------------
(1) Excluded from the Company's operating segments are revenues, benefits and
expenses, assets and liabilities relating to contracts issued by the Company
with respect to its employee benefit plans, as well as any nonrecurring or
unusual items. Such amounts constitute reconciling items in accordance with
SFAS No. 131. Accordingly, see Note 6 to the Consolidated Financial
Statements and Notes to the Unaudited Interim Condensed Consolidated
Financial Statements for a reconciliation of amounts reported for the
Company's operating segments to such amounts reported in the Company's
consolidated financial statements.
82
<PAGE> 84
(2) Includes Group Pension Profits of $22.7 million, $28.2 million, $60.0
million, $59.5 million and $61.7 million for the six month periods ended
June 30, 1998 and 1997 and the years ended December 31, 1997, 1996 and 1995,
respectively. "See Risk Factors -- Decline and Expiration of Payments and
Income Related to the Group Pension Transaction" and "-- The Group Pension
Transaction, -- Decline and Expiration of Payments and Income Related to the
Group Pension Transaction".
(3) Includes assets transferred in the Group Pension Transaction of $5,720.5
million, $5,538.5 million, $5,714.9 million, $5,627.9 million, and $5,992.8
million as of June 30, 1998 and 1997, and December 31, 1997, 1996, and 1995,
respectively (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 11 to the Consolidated
Financial Statements).
(4) Includes interest credited to policyholders' account balances.
(5) Includes policyholder liabilities transferred in the Group Pension
Transaction of $1,890.9 million, $2,086.3 million, $1,991.0 million,
$2,158.1 million, and $2,315.1 million as of June 30, 1998 and 1997, and
December 31, 1997, 1996, and 1995, respectively (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 11 to the Consolidated Financial Statements).
(6) Each segment includes separate account assets in an amount not less than the
corresponding liability reported.
(7) Includes separate account liabilities transferred in the Group Pension
Transaction of $3,761.2 million, $3,397.2 million, $3,614.0 million,
$3,358.3 million, and $3,495.4 million as of June 30, 1998 and 1997, and
December 31, 1997 1996, and 1995, respectively (see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Note 11
to the Consolidated Financial Statements).
Assets have been allocated to the segments in amounts sufficient to support
the associated liabilities of each segment and maintain a separately calculated
RBC level for each segment equal to that of the Company's RBC level. Allocations
of net investment income and net realized gains on investments were based on the
amount of assets allocated to each segment. Other costs and operating expenses
were allocated to each of the segments based on; (i) a review of the nature of
such costs, (ii) cost allocations utilizing time studies and (iii) cost
estimates included in the Company's product pricing. Substantially all non-cash
transactions and impaired real estate (including real estate acquired in
satisfaction of debt) have been allocated to the Protection Products segment.
83
<PAGE> 85
Set forth below is a discussion of the operating results of the Company by
segment for the periods indicated.
PROTECTION PRODUCTS SEGMENT
The following table presents certain summary financial data relating to the
Company's Protection Products segment for the periods indicated.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, ENDED DECEMBER 31,
------------------ ------------------------------------
1998 1997 1997 1996 1995
------- ------- -------- ------------ --------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
REVENUES:
Premiums............................ $343.8 $403.4 $ 817.0 $ 837.4 $ 845.1
Universal life policy fees.......... 41.8 30.3 74.9 63.4 53.9
Net investment income and net
realized gains on investments..... 397.0 304.7 611.9 605.3 501.5
Group Pension Profits............... 22.7 28.2 60.0 59.5 61.7
Other income........................ 8.5 9.2 34.9 28.2 23.3
------ ------ -------- -------- --------
813.8 775.8 1,598.7 1,593.8 1,485.5
BENEFITS AND EXPENSES:
Benefits to policyholders........... 349.8 398.0 776.8 815.0 818.5
Interest credited to policyholders'
account balances.................. 27.0 28.3 57.5 48.2 49.4
Amortization of deferred policy
acquisition costs................. 55.4 55.8 146.8 135.0 118.7
Other operating costs and
expenses.......................... 138.1 129.4 267.6 267.1 252.0
Dividends to policyholders.......... 106.8 115.9 221.0 227.3 218.2
------ ------ -------- -------- --------
677.1 727.4 1,469.7 1,492.6 1,456.8
Income before income taxes.......... $136.7 $ 48.3 $ 129.0 $ 101.2 $ 28.7
====== ====== ======== ======== ========
</TABLE>
SIX MONTH PERIOD ENDED JUNE 30, 1998 COMPARED TO SIX MONTH PERIOD ENDED JUNE
30, 1997 -- PROTECTION PRODUCTS SEGMENT
Premium revenue was $343.8 million for the six month period ended June 30,
1998, a decrease of $59.6 million, or 14.8%, from $403.4 million reported in the
comparable period ended June 30, 1997. Approximately $36.6 million of the
decrease resulted from lower premiums due to the transfer of the Company's
disability income insurance business in 1997 pursuant to the DI Transaction. In
addition, the decrease resulted from lower new and renewal premiums of $7.6
million and $9.7 million, respectively, as well as lower single premiums of $5.6
million due to lower dividends.
Universal life and investment-type product policy fees were $41.8 million
for the six-month period ended June 30, 1998, an increase of $11.5 million, or
38.0%, from $30.3 million reported in the comparable period ended June 30, 1997.
This increase was primarily the result of higher fees relating to the Company's
VUL business of $9.1 million. For the six month period ended June 30, 1998, the
Company reported total fees from its VUL business of $16.6 million, as compared
to $7.5 million reported for the comparable period ended June 30, 1997. The
increase in VUL fees is primarily due to higher cost of insurance charges of
approximately $4.5 million and higher and administrative charges of $4.2 million
consistent with the in force growth of such business.
Net investment income and net realized gains on investments were $397.0
million for the six-month period ended June 30, 1998, an increase of $92.3
million, or 30.3%, from $304.7 million reported in the comparable period ended
June 30, 1997. The increase was primarily due to higher gains from sales of real
estate, which was partially offset by a decrease in yield on investment of new
money.
84
<PAGE> 86
Group Pension Profits were $22.7 million for the six month period ended
June 30, 1998, a decrease of $5.5 million, or 19.5%, from $28.2 million reported
in the comparable period ended June 30, 1997. Group Pension Profits during the
six month period ended June 30, 1998 consisted of $23.5 million of Group Pension
Payments offset by an increase of $0.8 million in valuation allowances relating
to adjustments required to reflect the earnings from such payments in accordance
with GAAP. Such adjustments primarily relate to changes in the valuation
allowances established to recognize impairment of assets supporting the business
transferred in the Group Pension Transaction. In the comparable prior year
period Group Pension Profits consisted of $24.3 million of Group Pension
Payments and $3.9 million relating to a decrease in the aforementioned valuation
allowances. Group Pension Payments during the six month period ended June 30,
1998 decreased from that reported in the comparable prior year period primarily
because of the continuing run-off of the Existing Deposits and lower
reinvestment rates. The decrease in the valuation allowance reported during the
six month period ended June 30, 1997 resulted primarily from the paydown of
certain mortgage loans.
Other income was $8.5 million for the six month period ended June 30, 1998,
a decrease of $0.7 million, or 7.6%, as compared to $9.2 million reported in the
comparable prior year period. The decrease was primarily the result of lower
expense allowances under the Company's reinsurance programs.
Benefits to policyholders were $349.8 million for the six month period
ended June 30, 1998, a decrease of $48.2 million, or 12.1%, as compared to
$398.0 million reported in the comparable prior year period. The decrease
primarily resulted from the transfer of the Company's disability income
insurance business pursuant to the DI Transaction during the fourth quarter of
1997. During the six months ended June 30, 1997, the Company reported benefits
of approximately $36.7 million relating to its disability income insurance
business. Also contributing to the decrease was a $12.0 million decrease in
reserves relating to the Company's traditional whole life business which is
consistent with the decrease in the amount of such in force business.
Interest credited to policyholder account balances was $27.0 million for
the six month period ended June 30, 1998, a decrease of $1.3 million, or 4.6%,
as compared to $28.3 million reported in the comparable prior year period. The
decrease primarily resulted from lower interest crediting across substantially
all product lines.
Amortization of DAC costs was $55.4 million for the six month period ended
June 30, 1998, a decrease of $0.4 million, or 0.7%, as compared to $55.8 million
reported in the comparable prior year period. The decrease is primarily the
result of: (i) a decrease in amortization of approximately $3.0 million relating
to the VUL product line which experienced $4.6 million of higher death claims as
compared to the comparable prior year period 1998 compared to 1997, and (ii)
higher amortization of approximately $2.4 million in the traditional whole life
business due to gains from real estate sales.
Other operating costs and expenses were $138.1 million for the six month
period ended June 30, 1998, an increase of $8.7 million, or 6.7%, as compared to
$129.4 million reported in the comparable prior year period. The increase
primarily consists of higher costs incurred in connection with the certain
strategic initiatives, including resolving the Year 2000 issue.
Dividends to policyholders of $106.8 million for the six month period ended
June 30, 1998 decreased $9.1 million, or 7.9% from $115.9 million reported in
the comparable prior year period. The decrease primarily resulted from a
reduction in the fourth quarter of 1997 in the interest component of the
dividend scales on all policies by amounts ranging from 15 to 50 basis points,
which was partially offset by an increase in life insurance reserves.
85
<PAGE> 87
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31,
1996 -- PROTECTION PRODUCTS SEGMENT
Premium revenue was $817.0 million for 1997, a decrease of $20.4 million,
or 2.4%, from $837.4 million reported for 1996. The decrease was primarily the
result of lower new and renewal premiums, offset by higher sales of single
premium individual life insurance.
Universal life policy fees were $74.9 million for 1997, an increase of
$11.5 million, or 18.1%, from $63.4 million reported for 1996. This increase was
primarily the result of an increase in fees relating to the Company's VUL
business of $8.9 million. For the year ended December 31, 1997, the Company
reported total fees from VUL business of $17.8 million, as compared to $8.9
million reported for the year ended December 31, 1996. VUL account value
increased $65.1 million during 1997 to $106.4 million, as compared to $41.3
million in 1996. The increase in account value in 1997 resulted from new sales
and other deposits of $68.3 million and market appreciation of $14.2 million,
offset by approximately $17.4 million in withdrawals and surrenders.
Net investment income and net realized gains on investments were $611.9
million for the year ending December 31, 1997, a $6.6 million increase from
$605.3 million for 1996. The increase was primarily due to higher average
invested assets of approximately $300.0 million offset by slightly lower yields
(including net realized gains on investments) for 1997 of 7.8%, as compared to
7.9% for 1996.
Group Pension Profits were $60.0 million for 1997, an increase of $0.5
million, or approximately 0.8%, as compared to $59.5 million reported in 1996.
Group Pension Profits in 1997 consisted of $55.7 million of Group Pension
Payments and $4.3 million relating to adjustments required to reflect the
earnings from such payments in accordance with GAAP. Such adjustments primarily
related to changes in the valuation allowances established to recognize
impairment of assets supporting the business transferred in the Group Pension
Transaction. In 1996, Group Pension Profits consisted of $66.7 million of Group
Pension Payments, offset by $(7.2) million relating to an increase in the
aforementioned valuation allowances. Group Pension Payments in 1997 decreased
from that recorded in 1996 primarily because of the continuing run-off of the
Existing Deposits. The decrease in valuation allowances in 1997 resulted
primarily from the decrease in mortgage loan assets supporting the transferred
business due to prepayments of such loans.
Other income was $34.9 million for 1997, an increase of $6.7 million, or
23.8%, as compared to $28.2 million reported in 1996. The increase was primarily
the result of a gain of $19.4 million on assets held on deposit under a
financial reinsurance contract which was replaced with an indemnity reinsurance
contract during 1997, offset by a decrease of $8.1 million relating to
miscellaneous non-recurring income recorded in Other Income in 1996 and $4.6
million of other miscellaneous items.
Benefits to policyholders were $776.8 million for 1997, a decrease of $38.2
million, or 4.7%, from $815.0 million reported for 1996. The decrease primarily
resulted from favorable mortality in almost all product lines and the DI
Transaction. Favorable mortality contributed approximately $15.6 million of the
decrease, while the DI transaction caused a decrease in benefits of
approximately $21.6 million. The decrease in benefits caused by the DI
Transaction resulted from the difference between the amount of reserves ceded
(which approximated $367.5 million) and the cost of such reinsurance (which
approximated $345.9 million). However, after the writeoff of associated deferred
policy acquisition costs of approximately $30.7 million, the DI Transaction
resulted in a loss of approximately $9.1 million.
Interest credited to policyholders' account balances was $57.5 million for
1997, an increase of $9.3 million, or 19.3%, from $48.2 million reported for
1996. The increase was primarily comprised of $4.9 million of higher interest
crediting on universal life business. The average interest crediting rates in
1997 on the Company's universal life business was approximately 6.3% in 1997, as
compared to 6.0% in 1996. The average account balances for such products were
$496.6 million for 1997 and $470.3 million for 1996, respectively.
86
<PAGE> 88
Amortization of DAC was $146.8 million for 1997, an increase of $11.8
million, or 8.7%, from $135.0 million reported for 1996. The increase was
primarily the result of charging off approximately $30.7 million of deferred
policy acquisition costs relating to the DI Transaction, offset by a decrease in
amortization of approximately $21.5 million relating to traditional life
business which resulted from revised projections of the ultimate profits
expected from such business based on actual results to date.
Other operating costs and expenses were $267.6 million for 1997, an
increase of $0.5 million, or 0.2%, from $267.1 million reported for 1996.
Dividends to policyholders of $221.0 million in 1997 decreased $6.3
million, or 2.8%, from $227.3 million reported in 1996. The decrease primarily
resulted from a reduction in the interest component of the dividend scales in
1997 on all policies by amounts ranging from 15 to 50 basis points, which was
partially offset by an increase in life insurance reserves.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 --
PROTECTION PRODUCTS SEGMENT
Premium revenue was $837.4 million for 1996, a decrease of $7.7 million, or
0.9%, from $845.1 million reported for 1995. The decrease was primarily the
result of lower individual life insurance premiums of approximately $7.2
million. Management believes that the decrease was consistent with trends in the
industry, particularly the continuing shift by consumers from traditional life
insurance policies to variable life insurance products and also was reflective
of the then current interest rate environment, wherein declining long-term rates
caused traditional protection products to be comparatively less competitive than
variable products.
Universal life policy fees were $63.4 million for 1996, an increase of $9.5
million, or 17.6%, from $53.9 million reported for 1995. The increase was
primarily the result of increased fees of $6.8 million and $2.3 million relating
to the Company's variable universal life and universal life insurance products,
respectively, which grew as a result of new sales and increases in the value of
assets underlying such products. Fees earned on separate account products, which
are a percentage of separate account asset values, benefited from the strong
stock market returns experienced during this period.
Net investment income and net realized gains on investments were $605.3
million for 1996, an increase of $103.8 million, or 20.7%, from $501.5 million
reported for 1995. The increase primarily resulted from higher gains realized on
sales of real estate and equity securities during 1996 as compared to 1995 and
additional investment income reflecting an increase in the segment's general
account invested assets of approximately $218.3 million.
Group Pension Profits were $59.5 million for 1996, a decrease of $2.2
million, or approximately 3.6%, as compared to $61.7 million reported in 1995.
Group Pension Profits in 1996 consisted of $66.7 million of Group Pension
Payments and $(7.2) million relating to adjustments required to reflect the
earnings from such payments in accordance with GAAP. Such adjustments primarily
relate to changes in the valuation allowances established to recognize
impairment of assets supporting the business transferred in the Group Pension
Transaction. In 1995, Group Pension Profits consisted of $70.2 million in Group
Pension Payments offset by $(8.5) million relating to an increase in the
aforementioned valuation allowances. Group Pension Payments in 1996 decreased
from that recorded in 1995 primarily because of the continuing run-off of the
Existing Deposits. The increase in valuation allowances in 1996 was due to one
loan in the portfolio.
Other income was $28.2 million for 1996, an increase of $4.9 million, or
21.0%, from $23.3 million reported for 1995. The increase was primarily the
result of an increase from the prior year of approximately $5.2 million relating
to interest income received in connection with a federal income tax refund.
87
<PAGE> 89
Benefits to policyholders were $815.0 million for 1996, a decrease of $3.5
million, or 0.4%, from $818.5 million reported for 1995, primarily as a result
of favorable mortality in almost all product lines and lower surrenders on
traditional products.
Interest credited to policyholders' account balances was $48.2 million for
1996, a decrease of $1.2 million, or 2.4%, from $49.4 million reported for 1995.
The decrease in interest credited was primarily the result of a decrease in
policyholders' account balances relating to group universal life business.
Amortization of DAC was $135.0 million for 1996, an increase of $16.3
million, or 13.7%, from $118.7 million reported for 1995. The increase was
primarily attributable to higher gross margins on traditional and universal life
products resulting from favorable mortality and higher investment yields.
Other operating costs and expenses were $267.1 million for 1996, an
increase of $15.1 million, or 6.0%, from $252.0 million reported for 1995. The
increase was primarily related to expenses incurred for the operation,
management and enhancement of the Company's information systems.
Dividends to policyholders were $227.3 million for 1996, an increase of
$9.1 million, or 4.2%, from $218.2 million reported for 1995. During 1996, the
Company maintained the dividend scale from the preceding year and the increase
resulted from an increase in life insurance reserves during 1996.
ACCUMULATION PRODUCTS SEGMENT
The following table presents certain summary financial data relating to the
Company's Accumulation Products segment for the periods indicated.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, ENDED DECEMBER 31,
------------------ --------------------------
1998 1997 1997 1996 1995
------- ------- ------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
REVENUES:
Premiums................................... $ 1.8 $ 2.8 $ 5.0 $ 4.2 $ 9.8
Investment-type product fees............... 31.6 23.2 50.9 36.6 24.8
Net investment income and net realized
gains on investments..................... 77.8 65.3 131.4 144.0 153.3
Other income............................... 34.6 23.4 52.1 32.2 26.0
------ ------ ------ ------ ------
145.8 114.7 239.4 217.0 213.9
BENEFITS AND EXPENSES:
Benefits to policyholders.................. 8.9 11.3 21.2 17.9 24.0
Interest credited to policyholders' account
balances................................. 27.9 35.3 71.4 84.9 92.3
Amortization of deferred policy acquisition
costs.................................... 15.4 12.6 34.4 23.2 13.9
Other operating costs and expenses......... 42.7 30.0 66.3 52.8 47.2
Dividends to policyholders................. 0.9 1.1 2.0 2.3 2.3
------ ------ ------ ------ ------
95.8 90.3 195.3 181.1 179.7
Income before income taxes................. $ 50.0 $ 24.4 $ 44.1 $ 35.9 $ 34.2
====== ====== ====== ====== ======
</TABLE>
88
<PAGE> 90
SIX MONTH PERIOD ENDED JUNE 30, 1998 COMPARED TO SIX MONTH PERIOD ENDED
JUNE 30, 1997 -- ACCUMULATION PRODUCTS SEGMENT
Premium revenue was $1.8 million for the six month period ended June 30,
1998, a decrease of $1.0 million, or 33.3%, from $2.8 million reported in the
comparable period ended June 30, 1997. The decrease was entirely attributable to
lower sales of immediate annuities.
Investment-type product policy fees were $31.6 million for the six month
period ended June 30, 1998, an increase of $8.4 million, or 36.2%, from $23.2
million reported in the comparable period ended June 30, 1997. This increase
resulted from higher fees from the Company's FPVA business. For the six month
period ended June 30, 1998, the Company reported total fees from its FPVA of
$31.2 million, as compared to $22.8 million reported for the comparable period
ended June 30, 1997. The variance in the FPVA fees is primarily a result of an
increase in the account value. The average FPVA account value for the six month
period ended June 30, 1998 was $4.3 billion, as compared to $3.1 billion for the
comparable period ended June 30, 1997.
Net investment income and net realized gains on investments were $77.8
million for the six-month period ended June 30, 1998, an increase of $12.5
million, or 19.1%, from $65.3 million reported in the comparable period ended
June 30, 1997. The increase was due to higher gains from the sales of real
estate offset by lower average invested assets.
Other income was $34.6 million for the six month period ended June 30,
1998, an increase of $11.2 million, or 47.9%, as compared to $23.4 million
reported in the comparable prior year period. The increase was primarily the
result of higher fees earned by the Company's mutual fund management operations
of $11.6 million. During the six month period ended June 30, 1998, the Company's
mutual fund management operations reported $29.5 million in fees from advisory,
underwriting and distribution services, as compared to $17.9 million reported in
the comparable prior year period.
Benefits to policyholders were $8.9 million for the six month period ended
June 30, 1998, a decrease of $2.4 million, or 21.2%, as compared to $11.3
million reported in the comparable prior year period. The decrease is primarily
due to lower reserves on immediate annuities resulting from lower sales and a
decrease in the issuance of supplementary contracts with life contingencies
during the period.
Interest credited to policyholder account balances was $27.9 million for
the six month period ended June 30, 1998, a decrease of $7.4 million, or 20.9%,
as compared to $35.3 million reported in the comparable prior year period. The
decrease primarily resulted from lower interest crediting on all accumulation
products consistent with the decrease in such corresponding liabilities.
Amortization of DAC was $15.4 million for the six month period ended June
30, 1998, an increase of $2.8 million, or 22.2%, as compared to $12.6 million
reported in the comparable prior year period. The increase is primarily the
result of higher amortization of approximately $4.1 million relating to the
Company's FPVA product line. The increase in amortization relating to FPVAs
resulted from higher management fees due to an increase in separate account
value. The increase in account value during the first six months of 1998 of
$581.9 million resulted from new sales and other deposits of $346.5 million and
market appreciation of $466.9 million, offset by approximately $231.5 million in
withdrawals and surrenders.
Other operating costs and expenses were $42.7 million for the six month
period ended June 30, 1998, an increase of $12.7 million, or 42.3%, as compared
to $30.0 million reported in the comparable prior year period. The increase
primarily consists of higher sub-advisory fees, commission expense and other
cost of sales of ECM of approximately $5.6 million.
Dividends to policyholders of $0.9 million for the six month period ended
June 30, 1998 decreased $0.2 million, or 18.2%, from $1.1 million reported in
the comparable prior year period. The
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<PAGE> 91
decrease primarily resulted from a reduction in the fourth quarter of 1997 in
the interest component of the dividend scales on all policies by amounts ranging
from 15 to 50 basis points.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 --
ACCUMULATION PRODUCTS SEGMENT
Premium revenue was $5.0 million for 1997, an increase of $0.8 million, or
19.0% from $4.2 million reported for 1996. The increase primarily resulted from
$0.8 million in higher sales of immediate annuities to $5.0 million for 1997, as
compared to $4.2 million for 1996.
Investment-type product fees were $50.9 million for 1997, an increase of
$14.3 million, or 39.1%, from $36.6 million reported for 1996. This increase was
primarily the result of an increase in fees relating to the Company's FPVA
business of $14.8 million. For the year ended December 31, 1997, the Company
reported total fees in its FPVA business of $50.0 million, as compared to $35.2
million reported for the year ended December 31, 1996. FPVA account value
increased $1,167.5 million during 1997 to $4,314.1 million, as compared to
$3,146.6 million in 1996. The increase in account value in 1997 resulted from
new sales and other deposits of $712.7 million and market appreciation of $738.9
million, offset by approximately $284.1 million in withdrawals and surrenders.
Net investment income and net realized gains on investments aggregated
$131.4 million for 1997, a decrease of $12.6 million, or 8.75%, from $144.0
million reported for 1996. The decrease is primarily related to lower average
invested assets during 1997 of approximately $180.0 million, as compared to
1996. Average total invested assets in 1997 decreased, as compared to 1996,
primarily as a result of a decline in SPDA's in force. During 1997, SPDA account
value decreased $156.8 million to $558.1 million, as compared to $714.9 million
in 1996. The decrease in account value in 1997 resulted from new sales and other
deposits of $4.0 million and interest on the account value of $34.1 million,
offset by approximately $194.9 million in withdrawals and surrenders.
Other income was $52.1 million for 1997, an increase of $19.9 million, or
61.8%, as compared to $32.2 million reported in 1996. The increase was primarily
the result of higher fees earned by the Company's mutual fund management
operations of $16.1 million. During 1997, the Company's mutual fund management
operations reported $40.2 million in fees from advisory, underwriting and
distribution services as compared to $24.1 million reported in 1996 as assets
under management increased to approximately $5.4 billion from $3.5 billion at
December 31, 1997 and 1996, respectively.
Benefits to policyholders were $21.2 million for 1997, an increase of $3.3
million, or 18.4%, from $17.9 million reported for 1996. The increase primarily
resulted from higher transfers to supplementary contracts with life
contingencies from immediate annuities of approximately $2.9 million.
Interest credited to policyholders' account balances was $71.4 million for
1997, a decrease of $13.5 million, or 15.9%, from $84.9 million reported for
1996. The decrease was primarily due to lower interest crediting of
approximately $9.5 million relating to the Company's SPDA business which
resulted from a decrease in SPDA account value of approximately $156.8 million
during 1997 to $558.1 million, as compared to $714.9 million at the end of 1996.
The decrease in account value was due to higher withdrawals in 1997, as compared
to 1996, which management believes reflected consumer preferences for separate
account products. Average interest crediting rates on the Company SPDA's were
approximately 5.5% in both 1997 and 1996, respectively.
Amortization of DAC was $34.4 million for 1997, an increase of $11.2
million, or 48.3%, from $23.2 million reported for 1996. This increase primarily
consisted of higher amortization of $11.6 million, as compared to the prior
year, relating to the Company's FPVA product line which resulted from higher
profits due to an increase account value of approximately $1,167.5 million
during 1997 to $4,314.1 million, as compared to $3,146.6 million in 1996. The
increase in account value in 1997 resulted from new sales and other deposits of
$712.7 million and market appreciation of $738.9 million, offset by
approximately $284.1 million in withdrawals and surrenders.
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<PAGE> 92
Other operating costs and expenses were $66.3 million for 1997, an increase
of $13.5 million, or 25.6%, from $52.8 million reported for 1996. The increase
consisted primarily of higher sub-advisor fees and commissions of approximately
$5.1 million and higher operating expenses of approximately $5.9 million
incurred by the Company's mutual fund management operations.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 --
ACCUMULATION PRODUCTS SEGMENT
Premium revenue was $4.2 million for 1996, a decrease of $5.6 million, or
57.1%, from $9.8 million reported for 1995, as a result of lower sales of
immediate annuities.
Investment-type product policy fees were $36.6 million for 1996, an
increase of $11.8 million, or 47.6%, from $24.8 million reported for 1995. The
increase was primarily a result of increased fees relating to the Company's
FPVAs. The increase in fees from FPVAs resulted from an increase of $929.4
million in the account value of such products in 1996 to $3,146.6 million as
compared to $2,217.2 million in 1995. The increase in account value resulted
from new sales and other deposits in 1996 of $ 668.4 million and market
appreciation of $448.5 million, offset by approximately $187.5 million in
withdrawals and surrenders.
Net investment income and net realized gains on investments were $144.0
million for 1996, a decrease of $9.3 million, or 6.1%, from $153.3 million
reported for 1995. The decrease was primarily a result of a decline in SPDA
business in force. Average general account assets decreased by approximately
$133.0 million from 1995 to 1996, reflecting consumer preferences for separate
account products.
Other income was $32.2 million for 1996, an increase of $6.2 million, or
23.9%, from $26.0 million reported for 1995. The increase was primarily a result
of higher asset management fees of approximately $10.4 million earned by the
Company's mutual fund management operation partially offset by a decrease in
transfers from individual annuities to supplementary contracts with life
contingencies of $1.8 million to $5.4 million as compared to $7.2 million in
1995. During 1996, assets under management by the Company's mutual fund
management operation increased $1,170.0 million to $3,482.0 million as compared
to $2,312.0 million for 1995.
Benefits to policyholders were $17.9 million for 1996, a decrease of $6.1
million, or 25.4%, from $24.0 million reported for 1995, as a result of the
decrease in sales of immediate annuities. Premiums from sales of immediate
annuities are recognized in income in the period due with a corresponding
increase in reserves.
Interest credited to policyholders' account balances was $84.9 million for
1996, a decrease of $7.4 million, or 8.0%, from $92.3 million reported for 1995,
as a result of the decrease in account value associated with the Company's SPDAs
reflecting consumer preferences for separate account products.
Amortization of DAC was $23.2 million for 1996, an increase of $9.3
million, or 66.9%, from $13.9 million reported for 1995, primarily due to a
$12.7 million increase in the amortization of deferred policy acquisition costs
associated with the Company's FPVAs and a $3.0 million decrease in amortization
of deferred policy acquisition costs associated with the Company's SPDAs. The
increase in amortization relating to the Company's FPVAs resulted from an
increase in fees earned and the maintenance of assumptions regarding the
ultimate profitability from such business. Similarly, the decrease in
amortization of deferred policy acquisition costs relating to the Company's
SPDAs resulted from a decrease in earnings from such business.
Other operating costs and expenses were $52.8 million for 1996, an increase
of $5.6 million, or 11.9%, from $47.2 million reported for 1995, primarily as a
result of higher sub-advisory fees paid to third party mutual fund providers.
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<PAGE> 93
OTHER PRODUCTS SEGMENT
The following table presents certain summary financial data relating to the
Company's Other Products segment for the periods indicated.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE YEAR
ENDED JUNE 30, ENDED DECEMBER 31,
-------------- --------------------------
1998 1997 1997 1996 1995
----- ----- ------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
REVENUES:
Premiums..................................... $ 8.2 $ 5.8 $ 16.6 $ 18.2 $ 21.0
Investment-type product policy fees.......... 0.9 0.9 1.5 0.9 2.1
Net investment income and net realized gains
on investments............................. 38.9 30.9 59.9 74.6 85.4
Other income................................. 32.4 23.5 53.1 52.2 42.0
----- ----- ------ ------ ------
80.4 61.1 131.1 145.9 150.5
BENEFITS AND EXPENSES:
Benefits to policyholders.................... 16.3 10.6 35.0 31.7 32.9
Interest credited to policyholders' account
balances................................... 6.3 7.1 10.4 22.4 32.0
Other operating costs and expenses........... 43.7 36.8 66.2 81.9 74.7
Dividends to policyholders................... 0.7 0.8 1.2 1.8 2.0
----- ----- ------ ------ ------
67.0 55.3 112.8 137.8 141.6
Income before income taxes................... $13.4 $ 5.8 $ 18.3 $ 8.1 $ 8.9
===== ===== ====== ====== ======
</TABLE>
SIX MONTH PERIOD ENDED JUNE 30, 1998 COMPARED TO SIX MONTH PERIOD ENDED
JUNE 30, 1997 --
OTHER PRODUCTS SEGMENT
Premium revenue was $8.2 million for the six month period ended June 30,
1998, an increase of $2.4 million, or 41.4%, from $5.8 million reported in the
comparable period ended June 30, 1997. The increase primarily relates to higher
annuitization of pension contracts during the period.
Universal life and investment-type product policy fees were $0.9 million
for the six month periods ended June 30, 1998 and 1997. There was no significant
variance from period to period in such fees.
Net investment income and net realized gains on investments were $38.9
million for the six-month period ended June 30, 1998, an increase of $8.0
million, or 25.9%, from $30.9 million reported in the comparable period ended
June 30, 1997. The increase was due to higher gains from the sale of real estate
offset by lower average invested assets.
Other income was $32.4 million for the six month period ended June 30,
1998, an increase of $8.9 million, or 37.9%, as compared to $23.5 million
reported in the comparable prior year period. The increase was primarily the
result of higher commissions earned by the Company's broker-dealer operations of
$9.1 million. During the six month period ended June 30, 1998, the Company's
broker-dealer operations reported commission earnings of $24.2 million, as
compared to $15.1 million reported in the comparable prior year period.
Benefits to policyholders were $16.3 million for the six month period ended
June 30, 1998, an increase of $5.7 million, or 53.8%, as compared to $10.6
million reported in the comparable prior year period. The increase primarily
resulted from higher death claims, disability and health benefits related to the
Company's group insurance business.
Interest credited to policyholder account balances was $6.3 million for the
six month period ended June 30, 1998, a decrease of $0.8 million, or 11.3%, as
compared to $7.1 million reported in
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<PAGE> 94
the comparable prior year period. The decrease primarily resulted from lower
interest crediting across all product lines.
Other operating costs and expenses were $43.7 million for the six month
period ended June 30, 1998, an increase of $6.9 million, or 18.8%, as compared
to $36.8 million reported in the comparable prior year period. The increase
primarily consists of higher commission expenses of $9.1 million from MONY
Securities Corp.
Dividends to policyholders of $0.7 million in 1997 decreased $0.1 million,
or 12.5% from $0.8 million reported in the comparable prior year period. The
decrease primarily resulted from a reduction in the fourth quarter of 1997 in
the interest component of the dividend scales on all policies by amounts ranging
from 15 to 50 basis points.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 --
OTHER PRODUCTS SEGMENT
Premium revenue was $16.6 million for 1997, a decrease of $1.5 million, or
8.3%, from $18.1 million reported for 1996. The decrease was primarily due to
lower assumed premiums resulting from the termination of the Company's
participation in a reinsurance pool covering group health business.
Investment-type product policy fees were $1.5 million for 1997, an increase
of $0.5 million, or 50.0%, from $1.0 million reported for 1996. The increase
primarily resulted from higher surrender charges on group annuities relating to
the retained group pension business.
Net investment income and net realized gains on investments were $59.9
million for 1997, a decrease of $14.7 million, or 19.7%, from $74.6 million
reported for 1996. The decrease primarily consisted of $6.9 million relating to
a decline in the segment's assets due to the runoff of the Company's group
pension business, as well as approximately $14.2 million relating to the
retirement of the Company's Eurobond debt issuances at their scheduled maturity
dates (see Note 17 to the Consolidated Financial Statements), offset by higher
realized gains of approximately $6.3 million recorded by the Company's non-life
subsidiaries. The Company issued the Eurobonds and invested the proceeds
therefrom through its wholly owned subsidiary, MONY Funding, Inc., which is
reported in the Other Products Segment.
Other income was $53.1 million for 1997, an increase of $0.9 million, or
1.7%, as compared to $52.2 million reported in 1996. The increase primarily
related to higher commission revenue reported by the Company's broker-dealer
operations of approximately $3.5 million, offset by lower revenues of
approximately $2.7 million relating to an aviation reinsurance pool in which the
Company participates. During 1997, the Company's broker-dealer operations
reported commission revenue of $32.2 million, as compared to $28.7 million in
1996.
Benefits to policyholders were $35.0 million for 1997, an increase of $3.3
million, or 10.4%, from $31.7 million reported for 1996. The increase primarily
resulted from $6.0 million of reserve strengthening on the Company's retained
group pension business, offset by lower claims of approximately $2.3 million
reported by the aforementioned aviation reinsurance pool.
Interest credited to policyholders' account balances was $10.4 million for
1997, a decrease of $12.0 million, or 53.6%, from $22.4 million reported for
1996. The decrease was primarily related to lower average account balances on
the Company's retained group pension business. The average account balance on
such business was $220.4 million and $292.7 million for 1997 and 1996,
respectively.
Other operating costs and expenses were $66.2 million for 1997, a decrease
of $15.7 million, or 19.2%, from $81.9 million reported for 1996. The decrease
primarily relates to lower interest expense of approximately $16.2 million as a
result of the maturity of the Company's Eurobond debt
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<PAGE> 95
(see Note 17 to the Consolidated Financial Statements), offset by higher
commission expense of approximately $2.1 million incurred by the Company's
broker-dealer operations.
Dividends to policyholders of $1.2 million in 1997, decreased $0.6 million,
or 33.3%, from $1.8 million reported in 1996. The decrease reflects lower
interest rates and a decrease in the number of policies that pay dividends.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 --
OTHER PRODUCTS SEGMENT
Premium revenue was $18.2 million for 1996, a decrease of $2.8 million, or
14.2%, from $21.0 million reported for 1995, primarily as a result of a decline
in the election of annuity pay-out options related to the retained group pension
business.
Investment-type product policy fees were $0.9 million for 1996, a decrease
of $1.2 million, or 52.4%, from $2.1 million reported for 1995, due to the
continued run-off of the Company's retained group pension business.
Net investment income and net realized gains on investments were $74.6
million for 1996, a decrease of $10.8 million, or 12.6%, from $85.4 million
reported for 1995, primarily as a result of the declining asset base associated
with the Company's retained group pension business.
Other income was $52.2 million for 1996, an increase of $10.2 million, or
24.3%, from $42.0 million reported for 1995. The increase resulted principally
from a $9.5 million increase in commissions earned by the Company's
broker-dealer operation, which were $28.7 million in 1996, compared to $19.2
million in 1995.
Benefits to policyholders were $31.7 million for 1996, a decrease of $1.2
million or 3.7% from $32.9 million reported for 1995.
Interest credited to policyholders' account balances was $22.4 million for
1996, a decrease of $9.6 million, or 30.0%, from $32.0 million reported for
1995. The decrease primarily related to the continuing run-off of the Company's
retained group pension business.
Other operating costs and expenses were $81.9 million for 1996, an increase
of $7.2 million, or 9.6%, from $74.7 million reported for 1995, primarily as a
result of an approximately $8.5 million increase in commission expense from the
Company's broker-dealer operation resulting from increased production.
EXTRAORDINARY CHARGE FOR DEMUTUALIZATION; HOLDING COMPANY EXPENSES
The $13.3 million and $9.7 million reflected as after-tax demutualization
expenses on the Company's consolidated statements of income for the year ended
December 31, 1997 and the six months ended June 30, 1998, respectively, were
direct nonrecurring costs specifically related to the Demutualization. Costs
incurred include primarily the fees of financial, legal, actuarial and
accounting advisors to the Company and to the New York Insurance Department, as
well as printing and postage for communication with policyholders. Management
expects significant amounts of Demutualization expenses will continue to be
incurred through the Plan Effective Date. See "Pro Forma Consolidated Financial
Information".
After the Plan Effective Date, the Holding Company will be subject to
certain additional expenses as a public company, including the cost of providing
stockholder services, which expenses are not reflected in Pro Forma Consolidated
Financial Information.
CLOSED BLOCK
The Plan provides for the establishment of the Closed Block. The Company
will allocate to the Closed Block an amount of assets expected to produce cash
flows which, together with anticipated
94
<PAGE> 96
revenues from the Closed Block Business, are reasonably expected to be
sufficient to support the Closed Block Business, including provision for the
payment of claims, certain expenses and taxes and continuation of current
payable dividend scales, assuming the experience underlying such dividend scales
continues and for appropriate adjustments in such scales if the experience
changes. For a discussion of the potential effects of the Closed Block on the
Company's consolidated financial position and results of continuing operations,
and an illustration of the presentation of the Closed Block after the Plan
Effective Date in the Company's consolidated financial statements, see "The
Demutualization -- Closed Block Assets and Liabilities" and "Pro Forma
Consolidated Financial Information".
The assets, including the revenue therefrom, allocated to the Closed Block
will inure solely to the benefit of the Closed Block Business. In the event that
the assets allocated to the Closed Block, the cash flows therefrom and the
revenues from the policies included therein, prove to be insufficient to pay
benefits guaranteed under the terms of the policies within the Closed Block, the
Company will be required to make such payment from general account assets
outside the Closed Block. To the extent that over time cash flows from the
assets allocated to the Closed Block and other experience related to the Closed
Block business are, in the aggregate, more favorable than assumed in
establishing the Closed Block, total dividends paid to the Closed Block
policyholders in future years will be greater than the total dividends that
would have been paid to such policyholders if the current payable dividend
scales had been continued. Conversely, to the extent that over time such cash
flows and other experience are, in the aggregate, less favorable than assumed in
establishing the Closed Block, total dividends paid to the Closed Block
policyholders in future years will be less than the total dividends that would
have been paid to such policyholders if the current payable dividend scales had
been continued.
Although the assets allocated to the Closed Block will inure solely to the
benefit of the Closed Block Business, the excess of Closed Block liabilities
over Closed Block assets at the Plan Effective Date measured on a GAAP basis
will represent the expected future post-tax contribution from the Closed Block
which may inure to the benefit of shareholders of the Holding Company and be
recognized in income over the period the policies and the contracts in the
Closed Block remain in-force. The contribution to operating income of the
Company from the Closed Block is reported as a single line item in the statement
of operations. Accordingly, premiums, investment income, realized gains (losses)
on investments, policyholder benefits and dividends attributable to the Closed
Block, less certain expenses including amortization of deferred policy
acquisition costs, are reported as a net number under the caption "Contribution
from the Closed Block". This results in material reductions in the
aforementioned line items reported in the statement of operations while having
no effect on net income. Also, all assets allocated to the Closed Block are
grouped together and reported in the Company's balance sheet separately under
the caption "Closed Block assets". Similarly, all liabilities attributable to
the Closed Block are combined and reported separately under the caption "Closed
Block Liabilities". See "The Demutualization -- Closed Block Assets and
Liabilities" and "Pro Forma Consolidated Financial Information".
LIQUIDITY AND CAPITAL RESOURCES
HOLDING COMPANY
The Holding Company's cash flow will consist of dividends from
subsidiaries, if declared and paid, principal and interest payments with respect
to the Intercompany Surplus Notes, if issued in connection with the issuance of
the Holding Company Subordinated Notes, and investment income on assets held by
the Holding Company, offset by expenses incurred for debt service on the Holding
Company Subordinated Notes, if issued, salaries and other expenses. Assuming
that the entire $115 million aggregate principal amount of Holding Company
Subordinated Notes that could be issued is actually issued, annual interest
payments on the Holding Company Subordinated Notes will be $10.9 million per
year. As a holding company, the Holding Company's ability to meet its cash
requirements and pay dividends on the Common Stock depends upon the receipt of
dividends and
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<PAGE> 97
other payments from MONY. The payment of dividends by MONY to the Holding
Company is regulated under state insurance law. Under the New York Insurance
Law, MONY will be permitted to pay shareholder dividends to the Holding Company
only if it files notice of its intention to declare such a dividend and the
amount thereof with the New York Superintendent and the New York Superintendent
does not disapprove the distribution. Under the New York Insurance Law, the New
York Superintendent has broad discretion in determining whether the financial
condition of a stock life insurance company would support the payment of
dividends to its shareholders. The New York Insurance Department has established
informal guidelines for the New York Superintendent's determinations that focus
on, among other things, overall financial condition and profitability under
statutory accounting practices. Management believes these guidelines may limit
the ability of MONY to pay dividends to the Holding Company. There can be no
assurance that MONY will have statutory earnings to support the payment of
dividends to the Holding Company in an amount sufficient to fund its cash
requirements and pay cash dividends. In addition, the Arizona insurance laws
contain similar restrictions on the ability of MLOA to pay dividends to MONY.
There can be no assurance that the Arizona insurance laws will in the future
permit the payment of dividends by MLOA to MONY in an amount sufficient to
support the ability of MONY to pay dividends to the Holding Company. See
"Business -- Regulation -- Shareholder Dividend Restrictions".
If the Holding Company Subordinated Notes are issued, the Holding Company
may also receive payments of principal and interest from MONY on the
Intercompany Surplus Notes. The Intercompany Surplus Notes will be in an
aggregate principal amount equal to the aggregate principal amount of the
Holding Company Subordinated Notes and bear interest at 9.50% per annum, which
is payable semiannually. Principal is payable at maturity. Payments of principal
and interest on the Intercompany Surplus Notes can only be made with the prior
approval of the New York Superintendent "whenever, in his judgment, the
financial condition of such insurer warrants". Such payments further may be made
only out of surplus funds which are available for such payments under the New
York Insurance Law. There can be no assurance that MONY will obtain the
requisite approval for payments with respect to the Intercompany Surplus Notes,
or that surplus funds will be available for such payments.
MONY
MONY's cash inflows are provided mainly from life insurance premiums,
annuity considerations and deposit funds, investment income and maturities and
sales of invested assets. Cash outflows primarily relate to the liabilities
associated with its various life insurance and annuity products, dividends to
policyholders, operating expenses, income taxes and principal and interest on
its outstanding debt obligations. The life insurance and annuity liabilities
relate to the Company's obligation to make benefit payments under its insurance
and annuity contracts, as well as the need to make payments in connection with
policy surrenders, withdrawals and loans. The Company develops an annual cash
flow projection which shows expected asset and liability cash flows on a monthly
basis. At the end of each quarter actual cash flows are compared to projections,
projections for the balance of the year are adjusted in light of the actual
results, if appropriate, and investment strategies are also changed, if
appropriate. The quarterly cash flow reports contain relevant information on all
of the following: new product sales and deposits versus projections, existing
liability cash flow versus projections and asset portfolio cash flow versus
projections. An interest rate projection is a part of the initial annual cash
flow projections for both assets and liabilities. Actual changes in interest
rates during the year and, to a lesser extent, changes in rate expectations will
impact the changes in projected asset and liability cash flows during the course
of the year. When the Company is formulating its cash flow projections it
considers, among other things, its expectations about sales of the Company's
products, its expectations concerning customer behavior in light of current and
expected economic conditions, its expectations concerning competitors and the
general outlook for the economy and interest rates.
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<PAGE> 98
The events most likely to cause an adjustment in the Company's investment
policies are: (i) a significant change in its product mix, (ii) a significant
change in the outlook for either the economy in general or for interest rates in
particular and (iii) a significant reevaluation of the prospective risks and
returns of various asset classes.
The following table sets forth the withdrawal characteristics and the
surrender and withdrawal experience of the Company's total annuity reserves and
deposit liabilities at June 30, 1998 and December 31, 1997 and 1996.
WITHDRAWAL CHARACTERISTICS OF
ANNUITY RESERVES AND DEPOSIT LIABILITIES
<TABLE>
<CAPTION>
AMOUNT AT AMOUNT AT
AMOUNT AT PERCENT DECEMBER 31, PERCENT DECEMBER 31, PERCENT
JUNE 30, 1998 OF TOTAL 1997 OF TOTAL 1996 OF TOTAL
------------- -------- ------------ -------- ------------ --------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Not subject to discretionary
withdrawal provisions............ $ 932.9 11.8% $ 944.2 12.6% $1,180.7 17.9%
Subject to discretionary
withdrawal -- with market value
adjustment or at carrying value
less surrender charge............ 5,738.3 72.4 5,236.4 70.1 4,062.9 61.5
-------- ----- -------- ----- -------- -----
Subtotal........................... 6,671.2 84.2 6,180.6 82.7 5,243.6 79.4
Subject to discretionary
withdrawal -- without adjustment
at carrying value................ 1,257.6 15.8 1,295.3 17.3 1,366.9 20.6
-------- ----- -------- ----- -------- -----
Total annuity reserves and deposit
liabilities (gross).............. 7,928.8 100.0% 7,475.9 100.0% 6,610.5 100.0%
-------- ===== -------- ===== -------- =====
Less reinsurance................... 133.6 145.7 178.2
-------- -------- --------
Total annuity reserves and deposit
liabilities (net)................ $7,795.2 $7,330.2 $6,432.3
======== ======== ========
</TABLE>
The following table sets forth by product line the actual amounts paid in
connection with surrenders and withdrawals for the periods indicated.
SURRENDERS AND WITHDRAWALS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------ --------------------------------
1998 1997 1996 1995
------------ -------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
PRODUCT LINE:
Traditional life................................ $162.0 $326.2 $321.1 $339.7
Variable and universal life..................... 16.3 29.5 27.3 22.8
Annuities....................................... 271.7 461.2 393.7 381.1
------ ------ ------ ------
Total................................. $450.0 $816.9 $742.1 $743.6
====== ====== ====== ======
</TABLE>
The Company's principal sources of liquidity to meet cash outflows are its
portfolio of liquid assets and its net operating cash flow. During 1997, the
Company reported net cash flow from operations of $69.1 million, as compared to
$334.8 million in 1996 and $318.7 million in 1995. The decrease in net cash flow
from operations of $265.7 million in 1997, as compared to that reported for
1996, resulted primarily from a $149.5 million payment made in 1997 representing
a portion of the assets transferred in the DI Transaction and higher federal
income tax payments in 1997 of approximately $101.0 million, as compared to
1996. The Company's liquid assets include substantial
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<PAGE> 99
U.S. Treasury holdings, short-term money market investments and marketable
long-term fixed maturity securities. Management believes that the Company's
sources of liquidity are adequate to meet its anticipated needs. As of December
31, 1997, the Company had readily marketable fixed maturity securities with a
carrying value of $5,957.1 million, which were comprised of $3,209.4 million
public and $2,747.7 million private fixed maturity securities. At that date,
approximately 94.9% of the Company's fixed maturity securities were designated
in NAIC rating categories 1 and 2 (considered investment grade, with a rating of
"Baa" or higher by Moody's or "BBB" or higher by S&P). In addition, at December
31, 1997 the Company had cash and cash equivalents of $313.4 million.
In addition, the Company has several bank line of credit facilities with
domestic banks aggregating $100.0 million, each with a scheduled renewal date in
September 1998. The purpose of these facilities is to provide additional
liquidity for any unanticipated short-term cash needs the Company might
experience. The Company has not borrowed against these lines of credit since
1982.
At June 30, 1998, MONY had commitments to issue $33.1 million of fixed rate
agricultural loans with periodic interest rate reset dates. The initial interest
rates on such loans range from 7.20% to 7.85%. MONY also had commitments
outstanding to purchase $18.8 million of private fixed maturity securities as of
June 30, 1998 with interest rates ranging from 6.86% to 7.80%. In addition, at
that date MONY had no outstanding commitments to issue any fixed rate commercial
mortgage loans.
Of the $914.9 million of currently outstanding commercial mortgage loans in
the Company's investment portfolio at December 31, 1997, $220.1 million, $79.6
million and $86.5 million are scheduled to mature in 1998, 1999 and 2000,
respectively. See "Investments -- Mortgage Loans -- Commercial Mortgage Loans".
In 1994, the Company completed the sale of $125.0 million face amount of
its 11.25% Surplus Notes due August 15, 2024, which generated net proceeds of
$70.0 million after a discount of approximately 42.2% from the principal amount
payable at maturity and issuance expenses of approximately $2.3 million.
Following the discount accretion period, interest will begin to accrue on August
15, 1999; thereafter, interest is scheduled to be paid on February 15 and August
15 of each year, commencing February 15, 2000, at a rate of 11.25% per annum.
To the extent that the MONY Notes are not exchanged for Holding Company
Subordinated Notes, they will remain as surplus notes of MONY having an interest
rate of 9.50%, payable semiannually in arrears on June 30 and December 31 in
each year.
The Company has mortgage loans on certain of its real estate properties.
The interest rates on these loans range from 7.9% to 12.5%. Maturities range
from June 2000 to March 2020. For the years ended December 31, 1997, 1996 and
1995, interest expense on such mortgage loans aggregated $12.3 million, $12.9
million, and $13.9 million, respectively.
During 1989, the Company entered into a transaction which is accounted for
as a financing arrangement involving certain real estate properties held for
investment. Pursuant to the terms of the agreement, the Company effectively
pledged the real estate properties as collateral for a loan of approximately
$35.0 million bearing simple interest at a rate of 8% per annum. Interest is
cumulative. Periodic interest payments are not required. All principal and
interest are effectively due at the maturity of the obligation (March 30, 2000)
which is subject to extension at the option of the creditor. However, interest
may be paid periodically subject to available cash flow from the real estate
properties. At December 31, 1997 and 1996, the outstanding balance of the
obligation including accrued interest was $41.3 million and $40.1 million,
respectively. Interest expense on the obligation of $3.0 million, $2.9 million,
and $2.8 million is reflected in Other Operating Costs and Expenses on the
Company's statements of income for the years ended December 31, 1997, 1996 and
1995, respectively.
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<PAGE> 100
In 1988, the Company financed one of its real estate properties under a
sales/leaseback arrangement. The facility was sold for $66.0 million, $56.0
million of which was in the form of an interest bearing note receivable and
$10.0 million in cash. The note is due January 1, 2009. The transaction is
accounted for as a financing. Accordingly, the facility remains on the Company's
books and continues to be depreciated. An obligation representing the total
proceeds on the sale was recorded by the Company at the effective date of the
transaction, and is reduced based on payments under the lease. The lease has a
term of 20 years beginning December 21, 1988 and requires minimum annual rental
payments of $7.0 million in 1998, $7.1 million in 1999, $7.3 million in 2000,
$7.4 million in 2001, $7.6 million in 2002, and $48.7 million thereafter. The
Company has the option to renew the lease at the end of the lease term.
At December 31, 1997, aggregate maturities of long-term debt based on
required principal payments for 1998 and the succeeding four years are $2.2
million, $13.8 million, $89.1 million, $81.5 million, $0.7 million,
respectively, and $256.7 million thereafter.
Aggregate contractual debt service payments on the Company's debt at June
30, 1998, for the remainder of 1998 and the succeeding four years are $12.3
million, $35.9 million, $123.5 million, $112.2 million and $25.7 million,
respectively.
The NAIC established RBC requirements to help state regulators monitor and
safeguard life insurers' financial strength by identifying those companies that
may be inadequately capitalized. The RBC guidelines provide a method to measure
the adjusted capital (statutory-basis capital and surplus plus the Asset
Valuation Reserve ("AVR") and other adjustments) that a life insurance company
should have for regulatory purposes, taking into consideration the risk
characteristics of such company's investments and products. A life insurance
company's RBC ratio will vary over time depending upon many factors, including
its earnings, the nature, mix and credit quality of its investment portfolio and
the nature and volume of the products that it sells. See "Business --
Regulation -- Risk-Based Capital Requirements".
While the RBC guidelines are intended to be a regulatory tool only, and are
not intended as a means to rank insurers generally, comparisons of RBC ratios of
life insurers have become generally available. The adjusted RBC capital ratios
of all the Company's insurance subsidiaries at June 30, 1998 and December 31,
1997 were in excess of the minimum required RBC.
REAL ESTATE SALES
In accordance with its ongoing strategy to strengthen the Company's
financial position, management expects to continue to selectively sell equity
real estate. Once management identifies a real estate property to be sold and
commences a plan for marketing the property, the property is classified as to be
disposed of and a valuation allowance is established and periodically revised,
if necessary, to adjust the carrying value of the property to reflect the lower
of its current carrying value or its fair value, less associated selling costs.
(See Note 5 to the Consolidated Financial Statements). Increases in such
valuation allowances are recorded as realized investment losses and,
accordingly, are reflected in the Company's results of operations. Real estate
classified as to be disposed of may also be net of impairment adjustments
recorded prior to the time such real estate was designated for sale or at the
time of foreclosure, if acquired in satisfaction of debt. At June 30, 1998 and
December 31, 1997, 1996 and 1995, the carrying value of real estate to be
disposed of was $339.1 million, $621.2 million, $434.8 million and $717.4
million, or 3.2%, 5.9%, 4.2% and 6.7% of invested assets at such dates,
respectively. The aforementioned carrying values are net of valuation allowances
of $45.2 million, $82.7 million, $46.0 million and $49.1 million, respectively.
In addition, the carrying value of real estate to be disposed of at such dates
is net of $113.9 million, $182.3 million, $120.1 million and $136.7 million of
impairment adjustments. For the six months ended June 30, 1998 and the years
ended December 31, 1997, 1996 and 1995, such increases in valuation allowances
aggregated $1.4 million, $63.8 million, $16.8 million and $39.5 million,
respectively. Because the carrying value of real estate to be disposed of is
adjusted to reflect the
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<PAGE> 101
aforementioned valuation allowances, management expects that the net proceeds
from sales of real estate will not be materially different from the carrying
value of such real estate on a GAAP basis. However, there can be no assurance
that increases in valuation allowances will not be required in the future or
that future sales of real estate will not be made at amounts below recorded GAAP
carrying value which may have a material effect on the Company's financial
position and results of operations.
In addition, as a result of differences between accounting practices
prescribed or permitted by the New York Insurance Department ("SAP") and GAAP,
the carrying value of real estate on a SAP basis exceeds the carrying value of
such investments on a GAAP basis. Accordingly, management expects to incur
losses on a SAP basis as a result of anticipated real estate sales, which losses
could materially affect the Company's statutory-basis surplus and net income.
Although there can be no assurance, the Company believes that any such impact on
statutory surplus will be partially offset by the release of the statutory
investment reserves established by the Company and expected future statutory net
income. The Company will monitor the results of its real estate sales strategy
and its ongoing effect on statutory surplus. The GAAP carrying value of real
estate to be disposed of was $339.1 million at June 30, 1998 (or 3.2% of
invested assets), which amount is net of impairment adjustments and valuation
allowances aggregating approximately $113.9 million and $45.2 million,
respectively. There can be no assurance as to whether, when or for what amounts
any real estate that is classified to be disposed of will actually be disposed
of. For the six month period ended June 30, 1998 and the years ended December
31, 1997, 1996 and 1995 the GAAP carrying value of real estate sold was
approximately $317.0 million, $346.3 million, $414.1 million and $273.2 million,
respectively. For the six month period ended June 30, 1998 and the years ended
December 31, 1997, 1996 and 1995, the SAP carrying value of real estate sold was
approximately $428.5 million, $395.0 million, $449.1 million and $299.3 million.
See "Risk Factors -- Risk of Further Losses on Real Estate; Risk with Respect to
Commercial Mortgage Loans", "Investments -- Equity Real Estate -- Real Estate
Sales", "Investments -- Investment Impairments and Valuation Allowances" and
Note 20 to the Consolidated Financial Statements.
The following table sets forth certain data concerning the Company's real
estate sales during the periods indicated.
REAL ESTATE SALES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS FOR THE YEAR
ENDED JUNE 30, ENDED DECEMBER 31,
-------------- --------------------------
1998 1997 1996 1995
-------------- ------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
Sales proceeds................................. $428.1 $433.9 $456.9 $301.5
====== ====== ====== ======
Carrying value before impairment adjustments
and valuation allowance...................... $431.2 $462.3 $519.2 $373.7
Impairment adjustments......................... (74.3) (88.9) (85.2) (87.4)
Valuation allowances........................... (39.9) (27.1) (19.9) (13.1)
------ ------ ------ ------
Carrying value after impairment adjustments and
valuation allowances......................... $317.0 $346.3 $414.1 $273.2
====== ====== ====== ======
Gain (loss).................................... $111.1 $ 87.6 $ 42.8 $ 28.3
====== ====== ====== ======
</TABLE>
YEAR 2000
The Year 2000 issue is the result of the widespread use of computer
programs being written using two digits (rather than four) to define the
applicable year. Such programming was a common industry practice designed to
avoid the significant costs associated with additional mainframe
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capacity necessary to accommodate a four digit year field. As a result, any of
the Company's computer systems that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a major system failure or miscalculations. The Company has conducted a
comprehensive review of its computer systems to identify the systems that could
be affected by the "Year 2000" problem and has developed and implemented a plan
to resolve the issue. The Company currently believes that, with modifications to
existing software and converting to new software, the Year 2000 problem will not
pose significant operational problems for the Company's computer systems.
However, if such modifications and conversions are not completed on a timely
basis, the Year 2000 problem may have a material impact on the operations of the
Company. Further, even if the Company completes such modifications and
conversions on a timely basis, there can be no assurance that the failure by
vendors or other third parties to solve the Year 2000 problem will not have a
material impact on the operations of the Company. The Company estimates the
total cost to resolve its Year 2000 problem to be approximately $18.0 million,
of which $8.9 million has been incurred through June 30, 1998; however, there
can be no assurance that the actual cost incurred will not be materially higher
than such estimate.
EFFECTS OF INFLATION
The Company does not believe that inflation has had a material effect on
its consolidated results of operations except insofar as inflation affects
interest rates. See "Risk Factors -- Interest Rate Risk".
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<PAGE> 103
BUSINESS
GENERAL
The Company, which is one of the oldest and largest mutual life insurance
companies in the United States, provides a wide range of life insurance, annuity
and investment products primarily to higher income individuals, particularly
family builders, pre-retirees and small business owners. The Company distributes
its products through a career agency sales force in the United States which
consisted of 2,218 agents at June 30, 1998. The Company sells its products in
all 50 of the United States, the District of Columbia, the U.S. Virgin Islands,
Guam and the Commonwealth of Puerto Rico and currently insures or provides other
financial services to more than 1.0 million people. Chartered in 1842, MONY was
the first mutual life insurance company in the United States to sell an
insurance policy and the first to pay a dividend to policyholders.
For management and reporting purposes, the Company's business is organized
in two principal operating segments, the "Protection Products" segment and the
"Accumulation Products" segment. Substantially all of the Company's other
business activities are combined in the "Other Products" segment. In its
Protection Products segment, the Company offers a wide range of life insurance
products, including whole life, term life, universal life, variable universal
life, last survivor life and group universal life. In its Accumulation Products
segment, the Company offers fixed annuities, single premium deferred annuities,
immediate annuities, flexible payment variable annuities and proprietary retail
mutual funds. The Company's Other Products segment primarily consists of a
securities broker-dealer operation, an insurance brokerage operation and the
Run-Off Businesses. In addition to selling the Company's proprietary investment
products, the securities broker-dealer operation provides customers of the
Company's protection and accumulation products access to other non-proprietary
investment products (including stocks, bonds, limited partnership interests,
tax-exempt unit investment trusts and other investment securities). The
insurance brokerage operation provides the Company's career agency sales force
with access to life, annuity, small group health and specialty insurance
products written by other carriers to meet the insurance and investment needs of
its customers.
The Company had total consolidated assets and equity at June 30, 1998 of
approximately $24.6 billion and $1.4 billion, respectively. Of the Company's
total consolidated assets at such date, approximately $12.8 billion represented
assets held in the Company's general account, approximately $5.7 billion
represented assets transferred pursuant to the Group Pension Transaction (see
"Management Discussion and Analysis of Financial Condition and Results of
Operations" and Note 11 to the Consolidated Financial Statements) and
approximately $6.1 billion were held in the Company's separate accounts, for
which the Company does not generally bear investment risk.
Consolidated revenues reported by the Company for the six month period
ended June 30, 1998 and the year ended December 31, 1997 were $1,044.5 million
and $1,976.4 million, respectively. Revenues reported for such periods by the
Company's Protection Products, Accumulation Products and Other Products segments
(which amounts are presented before unallocated amounts and non-recurring
items -- see Note 6 to the Consolidated Financial Statements and Note 5 to the
Unaudited Condensed Consolidated Financial Statements) were $813.8 million,
$145.8 million and $80.4 million, respectively, for the six month period ended
June 30, 1998 and $1,598.7 million, $239.4 million and $131.1 million,
respectively, for the year ended December 31, 1997.
Consolidated income before income taxes and extraordinary item reported by
the Company for the six month period ended June 30, 1998 and the year ended
December 31, 1997 was $199.9 million and $187.7 million, respectively.
Consolidated pre-tax earnings reported by the Company's aforementioned operating
segments for such periods (which amounts are presented before unallocated
amounts and pre-tax non-recurring items -- see Note 6 to the Consolidated
Financial Statements and Note 5 to the Unaudited Condensed Consolidated
Financial Statements) were $136.7 million, $50.5 million and $13.4 million,
respectively, for the six-month period ended June 30,
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1998 and $129.0 million, $44.1 million and $18.3 million, respectively, for the
year ended December 31, 1997.
The following chart sets forth the Company's life insurance and annuities
in force for the periods indicated.
LIFE INSURANCE AND ANNUITIES IN-FORCE
<TABLE>
<CAPTION>
AS OF
JUNE 30, AS OF DECEMBER 31,
--------- ---------------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
PROTECTION PRODUCTS:
Traditional life:(1)
Number of policies
(in thousands)....... 982.2 1,006.3 1,060.8 1,116.5 1,163.6 1,205.1
GAAP life reserves...... $ 6,709.4 $ 6,651.4 $ 6,491.7 $ 6,313.3 $ 6,144.2 $ 5,953.6
Face amounts............ $59,966.0 $60,640.1 $62,319.8 $63,635.1 $64,122.3 $63,155.4
Universal life:
Number of policies
(in thousands)....... 60.2 60.8 61.3 63.0 59.2 55.1
GAAP account values..... $ 528.7 $ 507.6 $ 492.0 $ 459.5 $ 413.7 $ 379.0
Face amounts............ $ 8,435.3 $ 8,858.0 $ 8,603.8 $ 8,603.9 $ 7,818.2 $ 7,255.6
Variable universal life:
Number of policies
(in thousands)....... 25.0 21.0 12.1 4.1 -- --
GAAP account values..... $ 196.1 $ 106.4 $ 41.3 $ 10.7 $ -- $ --
Face amounts............ $ 6,000.8 $ 4,515.7 $ 2,508.1 $ 857.8 $ -- $ --
Group universal life:
Number of policies
(in thousands)....... 56.0 57.5 50.6 49.2 40.6 25.8
GAAP account values..... $ 61.4 $ 60.4 $ 54.8 $ 51.6 $ 45.7 $ 37.0
Face amounts............ $ 2,046.1 $ 2,143.3 $ 1,890.6 $ 1,821.4 $ 1,552.4 $ 1,043.2
ACCUMULATION PRODUCTS:
Variable annuities:
Number of contracts
(in thousands)....... 112.5 107.2 92.5 75.3 59.6 43.8
Account values.......... $ 4,896.0 $ 4,314.1 $ 3,146.6 $ 2,217.2 $ 1,370.6 $ 1,013.2
Fixed annuities:
Number of contracts
(in thousands)....... 16.0 17.9 22.3 26.8 31.8 35.4
Account values.......... $ 1,025.6 $ 1,103.8 $ 1,311.8 $ 1,508.1 $ 1,689.9 $ 1,795.0
ENTERPRISE GROUP OF FUNDS
Number of retail mutual
fund shareholders
(in thousands).......... 190.2 133.2 79.6 60.1 51.9 45.9
</TABLE>
- ---------------
(1) Consists of whole life and term life contracts.
STRATEGY
The Company's business strategy to achieve earnings growth, improve its
return on equity and increase shareholder value is focused on: (i) continuing to
improve the quality of and increase the
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<PAGE> 105
earnings on its invested assets, (ii) emphasizing the core operating
fundamentals of its protection business, (iii) continuing the growth of its
accumulation business and (iv) expanding the size of and improving upon the
productivity of its career agency sales force. The Company believes that by
focusing its expansion efforts on the career agency system, it will be more
successful at marketing value-added protection and accumulation products to its
core customer base which is typically comprised of small business owners and
higher income individuals, particularly family builders and pre-retirees.
Management further believes that by providing a range of protection and
accumulation products, the Company can respond to changes in the insurance
marketplace that may arise from changes in interest rates or volatility in the
general level of the stock market. In addition, the Company intends to seek
opportunities through selective mergers, acquisitions and strategic alliances.
CONTINUING TO IMPROVE THE QUALITY OF AND INCREASE THE EARNINGS ON INVESTED
ASSETS
Since December 31, 1992, the Company has decreased its exposure to equity
real estate from $1,828.5 million (13.9% of total invested assets) to $791.6
million (7.4% of total invested assets) at June 30, 1998. Similarly, the Company
has decreased its exposure to commercial mortgage loans from $3,576.5 million
(27.2% of total invested assets) at December 31, 1992 to $892.1 million (8.3% of
total invested assets) at June 30, 1998. In 1995, the Company accelerated its
real estate disposition program to take advantage of favorable conditions in the
real estate market, and between January 1, 1995 and June 30, 1998 the Company
sold $1,350.6 million of real estate assets. Additionally, the Company has
targeted approximately $102.8 million of additional real estate assets for sale
through the balance of 1998. See "Investments -- Equity Real Estate -- Real
Estate Sales". At June 30, 1998, the carrying value of the Company's real estate
to be disposed of was $339.1 million. See "Risk Factors -- Risk of Further
Losses on Real Estate; Risk with Respect to Commercial Mortgage Loans". In
addition, the Company has decreased its exposure to below investment grade
securities by selectively disposing of such securities and investing
substantially all new funds in investment grade fixed maturity securities.
The effect of such actions has been to significantly improve the credit
quality of the Company's total assets and increase the earnings thereon.
Although there can be no assurance, management believes that the Company's
ratings should be positively affected if it achieves improvements in operating
results, reduces its exposure to higher risk assets and realizes further cost
reductions. In this regard, management believes that future GAAP earnings will
be positively affected by the Company's continuing program for the sale of real
estate, which the Company expects will result in increased investment income as
a result of being able to invest the proceeds from real estate sales in higher
yielding investments and incurring lower depreciation charges. The Company also
expects to make selective investments in the commercial mortgage market. See
"Investments -- Mortgage Loans and -- Equity Real Estate".
EMPHASIZING THE CORE OPERATING FUNDAMENTALS OF PROTECTION BUSINESS
The Company believes that the operating performance of its protection
business is significantly impacted by five basic elements: (i) mortality, (ii)
persistency, (iii) operating expenses, (iv) investment yield and (v) sales. The
Company believes that improvement with respect to each of these five basic
elements is important for increasing shareholder value.
The Company believes its conservative risk selection practices and its
disciplined field underwriting have resulted in the Company realizing favorable
mortality experience for the last several years. The Company fully underwrites
each application and has limited group underwriting or guaranteed issue
business. See "-- Marketing and Distribution" and "-- Pricing and Underwriting".
The Company has achieved improving persistency levels on its life insurance
products in recent years despite ratings pressures and competitive industry
conditions during the early 1990s. See "-- Protection Products". This has
resulted in high levels of renewal premiums and, as a result, a
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<PAGE> 106
larger revenue base over which to amortize acquisition costs. A significant
portion of the Company's sales are to existing customers. The Company believes
that the close customer relationships formed by its career agents help
contribute to its improved persistency.
Furthermore, the Company has actively managed its cost structure, reducing
the rate of growth of operating expenses by, among other things: (i) reducing
the number of employees through early retirement programs and otherwise, (ii)
disposing of certain businesses and (iii) reducing costs incurred in connection
with operating the career agency sales force. The Company expects to continue in
its efforts to reduce general expenses following the Demutualization. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Management believes that the Company's investment yield has benefited by
its efforts to improve the quality of and increase the earnings on invested
assets as described above.
Finally, management believes that sales are largely driven by the
performance of its managerial agency and career agency sales force. In order to
increase the productivity of its career agents the Company has recently adopted
a plan to restructure its career agency sales force. See "-- Marketing and
Distribution".
CONTINUING THE GROWTH OF ACCUMULATION BUSINESS
Over the past several years, the Company has sought to take advantage of
demographic trends in the U.S. economy by continuing the growth of its asset
accumulation business. Since December 31, 1993 the Company has increased its
annuity assets under management from approximately $927.0 million to
approximately $4,309.5 million at June 30, 1998, and through The Enterprise
Group of Funds, its retail mutual fund assets under management have increased
from $485.9 million to $2,457.0 million during this time period. Many of the
Company's proprietary funds have performed well versus standard industry
measures. See "-- Accumulation Products".
EXPANDING THE SIZE OF AND IMPROVING UPON THE PRODUCTIVITY OF CAREER AGENCY
SALES FORCE
The Company is committed to the career agency distribution system.
Management believes that distribution through the Company's career agency sales
force is a competitive advantage over other large life insurance companies which
do not have such a career agency sales force and for whom it would be difficult
and expensive to create one. The career agency sales force allows the Company to
establish closer relationships with customers than is typical of insurers using
third party brokers, thereby enhancing the Company's ability to evaluate and
respond to customer needs and underwriting risks. Management also believes that
the career agency sales force is essential to the Company's emphasis on its core
protection and accumulation products. Management further believes that
maintaining a balance between protection and accumulation products is important
to the career agency sales force as it allows the career agency sales force to
respond to changes in the insurance marketplace that may arise from changes in
interest rates or volatility in the general level of the stock market.
In early 1998, in order to increase the productivity and size of its career
agency sales force, the Company adopted a plan to "tier" its agents and agencies
and to provide focused marketing, recruiting and training support tailored to
meet the particular needs of each "tier". By restructuring its agencies into
tiers, the Company is able to segment its career agency sales force into groups
according to experience and productivity levels and to assign agency managers to
tiers based on their skill sets and the particular needs and goals of such
tiers. In January of 1998, the Company revised its compensation structure to
provide a salary plus incentive compensation system for all of its agency
managers and sales managers designed to more closely align the interests of the
managers with those of the Company. The Company believes that these actions will
improve the recruitment, retention and productivity of the Company's career
agency sales force. See "-- Marketing and Distribution".
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<PAGE> 107
SEEKING OPPORTUNITIES THROUGH SELECTIVE MERGERS, ACQUISITIONS AND STRATEGIC
ALLIANCES
Management believes that making selective acquisitions and engaging in
selective joint ventures in the Company's core businesses could more fully
utilize the Company's career agency sales force and administrative capacity to
obtain improved economies of scale and a lower overall cost structure. The
Company believes that the Demutualization and the Offerings will enhance the
Company's ability to pursue selective acquisitions. The Company is not currently
engaged in discussions concerning any material transaction; however, the Company
is in discussions to acquire a life insurance company, which acquisition would
not be material.
PROTECTION PRODUCTS
The Company offers a diverse portfolio of protection products consisting of
traditional life insurance, universal life insurance and variable universal life
insurance.
The Company's traditional protection products consist of whole life
insurance products and term insurance products. The whole life insurance
products vary in their level and duration of premiums and guaranteed cash
values, providing flexibility to the Company's marketplace of individuals and
small businesses with varying needs. The Company's term insurance products
include annual renewable term insurance, term insurance providing coverage for a
limited number of years and term insurance featuring a level premium for a
variable number of years.
The Company also offers several universal life insurance products.
Universal life insurance permits customers to vary the amount and frequency of
periodic cash premiums they pay, depending upon the needs of the customer and
the availability of value within the policy necessary to maintain the policy.
The Company's universal life insurance products vary as to the initial premium
required and the resulting degree of flexibility in future policy years.
The Company also offers variable universal life insurance. This is a
universal life insurance type of product that features the ability of the
policyholder to allocate premiums among sub-accounts of the Company's separate
accounts, allowing a choice among a wide variety of investment objectives. These
sub-accounts have the same investment objectives and investment advisors as the
sub-accounts that support the Company's variable annuities. See
" -- Accumulation Products".
Several of the Company's protection products are designed to particularly
meet the needs of clients for estate planning vehicles. Survivorship life
products insure several lives and provide for the payment of death benefits upon
the death of the last surviving insured. A variety of policy riders are
available for the Company's protection products. These riders are designed to
provide additional benefits or flexibility at the option of the policyholder.
They include riders that waive premium payments upon disability, pay higher
benefits in the event of accidental death, allow the purchase of additional
coverage without evidence of insurability and permit the addition of term
insurance to whole life insurance products.
The Company also offers protection products designed for marketing to
employees in their work sites. This program is designed to offer employers the
opportunity to provide employees a means of purchasing life insurance through
payroll deduction.
106
<PAGE> 108
The following table presents Protection Products segment sales of life
insurance and life insurance account values or reserves for the periods
indicated.
PROTECTION PRODUCTS SEGMENT -- SALES AND ACCOUNT VALUE OR RESERVES
<TABLE>
<CAPTION>
AS OF AND FOR
THE SIX MONTHS
ENDED JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-------------- ----------------------------------------------------
1998 1997 1996 1995 1994 1993
-------------- -------- -------- -------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
SALES:
Traditional life(1)........... $ 8.1 $ 24.7 $ 33.0 $ 41.5 $ 57.8 $ 64.2
Universal life................ 3.4 8.7 9.3 21.4 19.8 10.7
Variable universal life....... 27.7 39.2 29.0 13.5 -- --
Group universal life.......... 1.0 4.4 3.8 5.5 3.8 2.6
Disability income
insurance(2)............... -- 4.9 5.6 7.2 7.3 8.0
-------- -------- -------- -------- -------- --------
Total................. $ 40.2 $ 81.9 $ 80.7 $ 89.1 $ 88.7 $ 85.5
======== ======== ======== ======== ======== ========
ACCOUNT VALUE OR RESERVES:
Traditional life(1)........... $6,709.4 $6,651.4 $6,491.7 $6,313.3 $6,144.2 $5,953.6
Universal life................ 528.7 507.6 492.0 459.5 413.7 379.0
Variable universal life....... 196.1 106.4 41.3 10.7 -- --
Group universal life.......... 61.4 60.4 54.8 51.6 45.7 37.0
Disability income
insurance(2)............... 386.0 376.2 345.2 316.3 265.7 235.0
-------- -------- -------- -------- -------- --------
Total................. $7,881.6 $7,702.0 $7,425.0 $7,151.4 $6,869.3 $6,604.6
======== ======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Consists of whole life and term life policies.
(2) No longer offered; at December 31, 1997 all existing in force disability
income insurance has been reinsured.
The following table sets forth the Company's protection products segment's
direct premiums on a statutory basis for the periods indicated.
107
<PAGE> 109
PROTECTION PRODUCTS SEGMENT -- DIRECT PREMIUMS BY PRODUCT
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------ ----------------------------------------------
1998 1997 1996 1995 1994 1993
------------ -------- ------ -------- ------ ------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
LIFE INSURANCE:
TRADITIONAL LIFE:(1)
First year & single.............. $ 72.0 $ 169.3 $169.2 $ 166.6 $177.7 $195.2
Renewal.......................... 264.5 594.4 616.3 630.1 643.7 645.6
------ -------- ------ -------- ------ ------
Total.................... $336.5 $ 763.7 $785.5 $ 796.7 $821.4 $840.8
====== ======== ====== ======== ====== ======
UNIVERSAL LIFE:
First year & single.............. $ 5.0 $ 13.4 $ 17.5 $ 43.8 $ 30.7 $ 20.3
Renewal.......................... 34.2 67.5 65.0 55.6 53.8 51.1
------ -------- ------ -------- ------ ------
Total.................... $ 39.2 $ 80.9 $ 82.5 $ 99.4 $ 84.5 $ 71.4
====== ======== ====== ======== ====== ======
VARIABLE UNIVERSAL LIFE:
First year & single.............. $ 75.6 $ 47.9 $ 32.4 $ 12.3 $ -- $ --
Renewal.......................... 18.6 18.3 3.3 -- -- --
------ -------- ------ -------- ------ ------
Total.................... $ 94.2 $ 66.2 $ 35.7 $ 12.3 $ -- $ --
====== ======== ====== ======== ====== ======
GROUP UNIVERSAL LIFE:
First year & single.............. $ 2.6 $ 5.1 $ 5.1 $ 6.9 $ 4.8 $ 3.3
Renewal.......................... 6.3 11.1 10.2 8.4 5.9 5.8
------ -------- ------ -------- ------ ------
Total.................... $ 8.9 $ 16.2 $ 15.3 $ 15.3 $ 10.7 $ 9.1
====== ======== ====== ======== ====== ======
DISABILITY INCOME INSURANCE:(2)
First year & single.............. $ 3.0 $ 4.9 $ 5.6 $ 7.5 $ 6.9 $ 8.1
Renewal.......................... 36.4 73.2 72.6 69.8 67.0 64.7
------ -------- ------ -------- ------ ------
Total.................... $ 39.4 $ 78.1 $ 78.2 $ 77.3 $ 73.9 $ 72.8
====== ======== ====== ======== ====== ======
TOTAL LIFE AND DISABILITY
INCOME INSURANCE....... $518.2 $1,005.1 $997.2 $1,001.0 $990.5 $994.1
====== ======== ====== ======== ====== ======
</TABLE>
- ---------------
(1) Consists of whole life and term life premiums.
(2) No longer offered; at December 31, 1997 all existing in force disability
income insurance has been reinsured.
Effective December 31, 1997, the Company ceased writing new disability
insurance business. In conjunction therewith, the Company transferred all of its
existing in force disability income insurance business to a third party
reinsurer under an indemnity reinsurance contract. The transfer was accomplished
through a novation of its existing disability income reinsurance coverage and a
concurrent amendment to such existing reinsurance contract. In connection with
the transaction, the Company entered into an agreement with an unrelated
insurance company to distribute its disability insurance products through the
Company's career agency sales force.
The Company has achieved improving persistency levels on its life insurance
products in recent years despite ratings pressures and competitive industry
conditions during the early 1990s. The Company believes that its career agents
help contribute to its persistency. The following table
108
<PAGE> 110
illustrates lapse rates on individual life insurance products for MONY and for
stock and mutual life insurance companies for the five year period 1993-1997.
INDIVIDUAL LIFE INSURANCE LAPSE RATES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Mutual Life Companies*................................. 6.8% 7.2% 7.2% 7.3% 7.9%
Stock Life Companies*.................................. 8.3 8.4 9.3 8.7 10.8
Total Life Industry*......................... 7.8 8.0 8.6 8.3 9.8
MONY................................................... 7.0% 8.0% 8.8% 9.1% 9.3%
</TABLE>
- ---------------
* Source A.M. Best Individual Life Lapse Rates (median values). Lapse rates
based on face amounts.
ACCUMULATION PRODUCTS
The Company's accumulation products focus on the savings and retirement
needs of the growing number of individuals who are preparing for retirement or
have already retired. The Company offers a wide variety of accumulation
products, such as fixed annuities, single premium deferred annuities, immediate
annuities, flexible payment variable annuities and proprietary retail mutual
funds. The Company's annuity and mutual fund products offer numerous investment
alternatives to meet the customer's individual investment objectives. As of June
30, 1998, the Company had $5.9 billion of assets under management with respect
to its annuity products and, additionally, $2.5 billion of assets under
management with respect to its proprietary retail mutual funds.
By offering both fixed and variable annuities in its Accumulation Segment,
the Company believes it has the ability to grow profitably in a variety of
market environments. The Company believes that periods of rising interest rates,
which tend to cause lower sales growth in its variable annuities business, make
its fixed annuity products more attractive to consumers. Conversely, in periods
of declining interest rates, which tend to cause lower sales growth in its fixed
annuities business, the Company believes its variable annuities are more
attractive to customers. The Company further believes that the sale of its
proprietary retail mutual funds complements the sale of its variable annuities.
The Company conducts its proprietary retail mutual funds operations through its
subsidiary, ECM. ECM is the registered investment advisor of The Enterprise
Group of Funds, a group of mutual funds that provides investors with a broad
range of investment alternatives through 13 separate investment portfolios. In
addition, Enterprise Accumulation Trust, for which ECM is also the registered
investment advisor, is the principal funding vehicle for the Company's variable
annuities and variable universal life insurance products. Enterprise
Accumulation Trust provides investors with a broad range of investment
alternatives through five separate investment portfolios. The Company earns
investment management fees on the assets managed in connection with both its
variable annuities and its proprietary retail mutual funds. In addition to
investment management fees, the Company also earns insurance fees in connection
with its annuities.
Sales of annuities and proprietary retail mutual funds were approximately
$728.6 million and $751.6 million, respectively in 1997. Of such sales of
annuities, $712.7 million relates to variable annuities and $15.9 million
relates to fixed annuities.
109
<PAGE> 111
The following table sets forth the total account value and sales of the
principal products offered by the Company in its Accumulation Products segment.
ACCUMULATION PRODUCTS SEGMENT --
ASSETS UNDER MANAGEMENT AND SALES
<TABLE>
<CAPTION>
AS OF AND FOR
THE SIX MONTHS
ENDED JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-------------- ----------------------------------------------------
1998 1997 1996 1995 1994 1993
-------------- -------- -------- -------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS UNDER MANAGEMENT
Individual variable
annuities(1)............... $4,896.0 $4,314.1 $3,146.6 $2,217.2 $1,370.6 $1,013.2
Individual fixed
annuities(1)............... 1,025.6 1,103.8 1,311.8 1,508.1 1,689.9 1,795.0
Proprietary mutual funds..... 2,457.0 1,716.7 952.1 679.6 493.9 485.9
-------- -------- -------- -------- -------- --------
$8,378.6 $7,134.6 $5,410.5 $4,404.9 $3,554.4 $3,294.1
======== ======== ======== ======== ======== ========
SALES BY PRODUCT
Individual variable
annuities.................. $ 346.5 $ 712.7 $ 668.4 $ 495.3 $ 405.8 $ 463.4
Individual fixed annuities... 5.0 15.9 14.8 25.4 27.3 29.8
Proprietary retail mutual
funds...................... 655.8 751.6 347.0 207.2 150.3 181.5
</TABLE>
- ---------------
(1) Represents account values for annuities.
The Company's fixed annuity products include a single premium deferred
annuity contract. This is a tax-deferred annuity contract with a one-time
premium payment with a resulting cash accumulation over time and the option to
receive a lump sum distribution or various payout options over the life of the
annuitant. The Company also offers a single payment immediate annuity contract
which provides for a single premium payment that is immediately annuitized to
provide the annuitant with a guaranteed level income for life or for a minimum
number of years.
Variable annuity contractholders and variable universal life insurance
policyholders have a range of investment accounts in which to place the assets
held under their contracts, including accounts with interest rates guaranteed by
the Company. More than 85% of the aggregate amount held under these contracts
and policies is presently in investment accounts not guaranteed by the Company.
Since early 1992, the Company has emphasized the sale of its separate
account variable annuities over its general account annuities. The Company
believes that it benefits from a shift towards separate account variable annuity
products, as this reduces the Company's investment risks (by shifting such risks
to the separate account contractholder) and capital requirements because the
assets are held in the Company's separate accounts, while enabling the Company
to earn fee income from the management of assets held in the separate accounts.
The selection of separate accounts also permits contractholders to choose more
aggressive or conservative investment strategies without affecting the
composition and quality of assets in the Company's general account. The growth
of the Company's individual variable annuity account value has been considerable
for the past several years, which the Company attributes to favorable
demographic trends, strong sales, market appreciation and low levels of
surrenders. In addition, the Company believes there will be a continuation in
the trend among U.S. employers away from defined benefit plans (under which the
employer makes the investment decisions) toward employee-directed, defined
contribution retirement and savings plans (which allow employees to choose from
a variety
110
<PAGE> 112
of investment options), which will benefit its accumulation business. The
following table illustrates the growth in individual variable annuity account
value from the beginning to the end of each period presented and the principal
factors which caused the increase in account value for such period.
ACCUMULATION PRODUCTS SEGMENT --
INDIVIDUAL VARIABLE ANNUITY ACCOUNT VALUE
<TABLE>
<CAPTION>
AS OF AND FOR
THE SIX MONTHS
ENDED JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-------------- ----------------------------------------------------
1998 1997 1996 1995 1994 1993
-------------- -------- -------- -------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
ACCOUNT VALUE
Beginning total account
value...................... $4,314.1 $3,146.6 $2,217.2 $1,370.6 $1,013.2 $ 523.5
Sales and other deposits..... 346.5 712.7 668.4 495.3 405.8 463.4
Market appreciation.......... 466.9 738.9 448.5 471.2 22.7 67.7
Surrenders and withdrawals... (231.5) (284.1) (187.5) (119.9) (71.1) (41.4)
-------- -------- -------- -------- -------- --------
Ending total
account value.... 4,896.0 $4,314.1 $3,146.6 $2,217.2 $1,370.6 $1,013.2
======== ======== ======== ======== ======== ========
</TABLE>
The following table illustrates the performance of the principal
sub-accounts available in respect of the Company's variable annuities and the
current rankings assigned to such sub-accounts by Morningstar, Inc.
("Morningstar"). The historical performance of these funds is not an indication
of future performance.
PERFORMANCE OF VARIABLE ANNUITY SUB-ACCOUNTS
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
-------------------------------------------------------
ONE-YEAR FIVE-YEAR OVERALL
ANNUALIZED ANNUALIZED MORNINGSTAR
SUB-ACCOUNT TYPE OF SUB-ACCOUNT NET ASSETS RETURN(1) RETURN(1) RANKING
- ----------- ------------------- --------------- ---------- ---------- -----------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ENTERPRISE ACCUMULATION TRUST
Equity........................ Growth $ 621.6 23.14% 21.30% 4 Stars
Small Company Value........... Small Value 458.1 34.19% 17.42% 3 Stars
Managed....................... Flexible 3,048.6 22.44% 21.85% 4 Stars
International Growth(2)....... Foreign Stock 91.4 12.38% N/A 3 Stars
High-Yield Bond(2)............ High-Yield Bond 89.8 5.76% N/A 4 Stars
--------
Total Enterprise
Accumulation
Trust............... $4,309.5
========
</TABLE>
111
<PAGE> 113
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
-------------------------------------------------------
ONE-YEAR FIVE-YEAR OVERALL
ANNUALIZED ANNUALIZED MORNINGSTAR
SUB-ACCOUNT TYPE OF SUB-ACCOUNT NET ASSETS RETURN(1) RETURN(1) RANKING
- ----------- ------------------- --------------- ---------- ---------- -----------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
MONY SERIES FUND, INC.
Money Market.................. Money Market $ 160 5.2% 4.3% N/A
Intermediate Term Bond........ Bond 50 8.6% 6.0% 3 Stars
Long Term Bond................ Bond 86 17.0% 8.7% 2 Stars
Equity Income................. Income 19 22.9% 19.2% N/A
Equity Growth................. Growth 2 24.8% 20.6% N/A
Diversified................... Balanced 2 23.2% 16.8% N/A
Government Securities......... Government Bond 30 7.2% 4.9% 3 Stars
--------
Total MONY Series Fund, Inc... 349
OTHER SUB-ACCOUNTS.............. 68
--------
Total................. $ 417
========
</TABLE>
- ---------------
(1) Prior to insurance and expense charges to contractholders.
(2) Commenced operations on November 18, 1994.
N/A not available
Morningstar is an independent provider of financial information concerning
mutual fund performance. According to Morningstar, a fund's 10 year return
accounts for 50% of its overall rating score, its five year return accounts for
30% and its three year return accounts for 20%. If only five years of history
are available, the five year period is weighted 60% and the three year period is
weighted 40%. If only three years of data are available, the three years are
used alone. Funds scoring in the top 10% of their investment category receive 5
stars; funds scoring in the next 22.5% receive 4 stars; the next 35% receive 3
stars; those in the next 22.5% receive 2 stars and the bottom 10% receive 1
star.
Approximately 85% of the Company's career agents were licensed through MONY
Securities Corp. at June 30, 1998 to sell variable annuities (with 74% having
National Association of Securities Dealers, Inc. ("NASD") Series 6 licenses and
26% having NASD Series 7 licenses).
The Company offers a variety of proprietary retail mutual funds to retail
customers. ECM's wholly-owned subsidiary, Enterprise Fund Distributors, Inc.,
acts as the broker-dealer in distributing shares in the Enterprise Group of
Funds through MONY Securities Corp. and third-party broker-dealer firms. ECM
recently made available Enterprise Accumulation Trust as a funding vehicle for
variable product offerings of third-party insurance companies, initially
concentrating on small and mid-size insurance companies.
As of June 30, 1998, ECM had $6.8 billion in assets under management, of
which $2.5 billion related to the proprietary retail mutual funds and $4.3
billion related to the Enterprise Accumulation Trust. The Company earns
management fees on both of these categories of assets.
ECM offers an opportunity for individual retail investors to have access to
the advice and expertise of leading institutional money managers, which is
generally not available to those individual retail investors. In an opinion
survey of financial advisors conducted by DALBAR, a Boston-based mutual fund
market research and publishing firm, in 1997, the Enterprise Group of Funds was
one of three companies ranked number one on the basis of "General Opinion" out
of the 19 "small" mutual fund complexes ranked. For purposes of the survey,
"small" mutual fund complexes are companies with asset size of approximately
$8.0 billion or less or which offer fewer than 10 funds with distinct investment
objectives.
112
<PAGE> 114
The following table, in addition to indicating the performance of the 13
portfolios of the Enterprise Group of Funds, also indicates the institutional
money manager for each portfolio. These money managers are compensated through
sub-advisory fees. The historical performance of the portfolios is not an
indicator of future performance.
ENTERPRISE GROUP OF FUNDS PERFORMANCE
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
----------------------------
ONE-YEAR
TYPE OF ANNUALIZED
FUND CLASS* FUND FUND MANAGER NET ASSETS RETURN
- -------------------------- ------ -------- ----------------------------------- --------------- ----------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Growth A Equity Montag & Caldwell, Inc. $ 659 31.03%
B Equity 306 30.33%
C Equity 79 30.22%
Y Equity 62 31.54%
Growth and Income A Equity Retirement System Investors Inc. 11 NA
B Equity 13 NA
C Equity 3 NA
Y Equity 18 22.17%
Equity A Equity OpCap Advisors 5 21.63%
B Equity 5 21.21%
C Equity 1 21.08%
Equity Income A Equity 1740 Advisers, Inc. 111 16.80%
B Equity 29 16.14%
C Equity 4 16.18%
Y Equity 0 NA
Capital Appreciation A Equity Provident Investment Counsel, Inc. 124 30.22%
B Equity 11 29.49%
C Equity 0 29.47%
Y Equity 0 NA
Small Company Growth A Equity Pilgrim Baxter & Associates, Ltd. 8 NA
B Equity 6 NA
C Equity 2 NA
Y Equity 11 2.00%
Small Company Value A Equity Gabelli Asset Management Company 77 28.92%
B Equity 51 28.27%
C Equity 9 28.18%
Y Equity 0 29.47%
International Growth A Equity Brinson Partners, Inc. 43 4.92%
B Equity 14 4.31%
C Equity 2 4.28%
Y Equity 13 5.38%
Government Securities A Income TCW Funds Management, Inc. 68 8.90%
B Income 17 8.41%
C Income 1 8.31%
Y Income 8 NA
High-Yield Bond A Income Caywood-Scholl Capital Management 73 11.78%
B Income 30 11.20%
C Income 4 11.15%
Y Income 1 NA
Tax-Exempt Income A Income MBIA Capital Management, Inc. 24 7.36%
B Income 3 6.84%
C Income 0 6.67%
Managed A Flexible OpCap Advisors 189 19.56%
B Flexible 154 18.92%
C Flexible 10 18.92%
Y Flexible 98 20.18%
Money Market A Money
Market Enterprise Capital Management, Inc. 87 4.93%
B Money
Market 7 4.64%
C Money
Market 3 4.64%
Y Money
Market 3 NA
Total................................................ $2,457.0
========
<CAPTION>
AS OF JUNE 30, 1998
------------------------
FIVE-YEAR OVERALL
ANNUALIZED MORNINGSTAR
FUND RETURN RATING
- -------------------------- ---------- -----------
<S> <C> <C>
Growth 27.26% 4 Stars
NA 5 Stars
NA NA
NA NA
Growth and Income NA NA
NA NA
NA NA
22.04% 4 Stars
Equity NA NA
NA NA
NA NA
Equity Income 17.87% 3 Stars
NA 3 Stars
NA NA
NA NA
Capital Appreciation 16.60% 3 Stars
NA 2 Stars
NA NA
NA NA
Small Company Growth NA NA
NA NA
NA NA
21.11% 2 Stars
Small Company Value NA 3 Stars
NA 4 Stars
NA NA
NA 4 Stars
International Growth 12.70% 3 Stars
NA 4 Stars
NA NA
NA NA
Government Securities 6.26% 3 Stars
NA 3 Stars
NA NA
NA NA
High-Yield Bond 10.41% 4 Stars
NA 4 Stars
NA NA
NA NA
Tax-Exempt Income 5.06% 2 Stars
NA 2 Stars
NA NA
Managed NA 3 Stars
NA 3 Stars
NA NA
NA NA
Money Market
4.24% NA
NA NA
NA NA
NA NA
</TABLE>
- ---------------
* These designations represent different classes within each fund based upon fee
and expense computations.
113
<PAGE> 115
OTHER PRODUCTS
BROKER-DEALER OPERATIONS
In its broker-dealer operations, in addition to selling the Company's
proprietary investment products, the Company facilitates transactions for its
accumulation customers by providing access to other non-proprietary investment
products (including stocks, bonds, limited partnership interests, tax-exempt
unit investment trusts and other investment securities).
MONY Securities Corp. ("MSC") is a registered securities broker-dealer and
investment advisor and a member of the NASD. MSC is a wholly-owned subsidiary of
MONY. MSC performs brokerage and other investment services relating to a wide
range of securities, including mutual funds, stocks, bonds, limited partnership
interests (primarily in real estate, oil and gas and equipment leasing) and
tax-exempt unit investment trusts. For the years ended December 31, 1997, 1996
and 1995, 40%, 30% and 24%, respectively, based on brokerage commissions, of the
investment products sold by MSC are shares in mutual funds in the Enterprise
Group of Funds. MSC's products and services are distributed through registered
representatives who belong to MONY's career agency sales force. MSC transacts
business in all 50 of the United States, the District of Columbia and Puerto
Rico. In 1995, DALBAR conducted a consumer survey, which ranked the level of
customer satisfaction with various financial services firms that such customers
do business with on a regular basis. In the category of managing day-to-day
investments, MSC was ranked in the top 10 of all banks, brokerage and fund
companies.
The following table shows, for the periods indicated, sales of the
Company's proprietary mutual funds and other investment products.
INVESTMENT PRODUCT SALES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- ------- -------
($ IN MILLIONS)
<S> <C> <C> <C>
Enterprise Group of Funds................................... $ 751.6 $347.0 $207.2
Other investment products................................... 296.0 360.0 240.0
-------- ------ ------
Total............................................. $1,047.6 $707.0 $447.2
======== ====== ======
</TABLE>
INSURANCE BROKERAGE OPERATIONS
In its insurance brokerage operation, the Company provides its career
agency sales force with access to life, annuity, small group health and
specialty insurance products written by other carriers to meet the insurance and
investment needs of its customers. MONY's insurance brokerage subsidiary is
licensed as an insurance broker in Delaware and most other states.
RUN-OFF BUSINESSES
The Run-Off Businesses include certain lines of business no longer written
by the Company. The Run-Off Businesses primarily consist of group life and
health insurance as well as the group pension business that was not included in
the Group Pension Transaction.
MARKETING AND DISTRIBUTION
The Company's marketing strategy focuses on small business owners and
higher income individuals, particularly family builders and pre-retirees. The
Company believes this strategy capitalizes on the Company's key strengths,
namely its wide range of individual protection and accumulation products and its
career agency sales force. Based on commissions, the Company derived nearly 74%
of its sales from such key markets for the year ended December 31, 1997.
114
<PAGE> 116
The Company believes that its managerial agency system and career agency
sales force is a competitive advantage in the marketplace. Distribution through
career agents allows the Company to establish closer relationships with
customers than is typical of insurers using third party brokers, thereby
enhancing the ability of the Company to evaluate customer needs and underwriting
risks.
The Company's career agency sales force consisted of approximately 2,218
field agents at June 30, 1998. The career agency sales force generates most
(approximately 90% in 1997 by premium) of the Company's new individual insurance
and annuity sales and is also the primary distribution system for the Company's
sale of mutual funds and other investment products to individuals. The sales
force is organized as a managerial agency system under which 49 agency managers
as of June 30, 1998 supervise the marketing and sales activities of agents in
defined marketing territories in the United States and Europe. The agency
managers are all employees of the Company, while the career agents are all
independent contractors and not employees of the Company. The contract with each
career agent requires the agent to submit to MONY or MLOA applications for
policies of insurance issued by MONY or MLOA. MONY and MLOA's compensation
arrangements with career agents contain incentives for the career agents to
solicit applications for products issued by MONY and MLOA and for products
issued by insurance companies, not affiliated with the Company, made available
by the Company's insurance brokerage operations, MONY Brokerage, Inc. Those
incentives include counting first year commissions (weighted in the case of
products made available by MONY Brokerage, Inc.) for the purposes of expense
reimbursement programs, sales awards and certain other benefits. In addition,
MONY Brokerage, Inc. makes available products issued by other insurance
companies that neither MONY nor MLOA issues.
In 1998, the Company had 513 agents in the MDRT, an industry designation
based on sales which result in annual first-year commissions of $53,000 or more,
up from 460 in 1996. The Company believes that its rate of growth in MDRT
members from 1995 to 1997 was among the highest in the life insurance industry
and that the percentage of its career agents who are MDRT members is among the
highest in the industry.
The Company believes that the two most significant challenges of operating
a career agency system are ensuring that the interests of the agency management
organization are aligned with the interests of the Company and providing a
cost-effective and appropriate level of marketing, training and recruiting
support to each of the Company's career agents and agency managers. To address
these challenges, over the last several years the Company has made several
changes in its compensation structure for its agency management organization,
which changes culminated in January of 1998 when the Company revised its
compensation structure to provide a salary plus incentive compensation system
for all of its agency managers and sales managers designed to more closely align
the interests of the managers with those of the Company.
To further address the challenges of operating a career agency sales force,
the Company has initiated several programs directed at targeted efforts in
recruiting, marketing and training of its career agents. As a result of its new
recruiting program, the Company hired 928 new agents in 1997, the highest annual
number of new agents for the Company since 1990. The Company has recently begun
targeted marketing programs to assist the agency sales force in specialized
areas such as selling to professional athletes and seminar selling, which the
Company believes will result in increased premium production. In the area of
training, the Company redesigned its training programs directed at new agents in
order to provide them with increased knowledge and skills.
In early 1998, in order to increase the productivity and size of its career
agency sales force, the Company adopted a plan to "tier" its agents and agencies
and to provide focused marketing, recruiting and training support tailored to
meet the particular needs of each "tier". By restructuring its agencies into
tiers, the Company is able to segment its career agency sales force into groups
according to experience and productivity levels and to assign agency managers to
tiers based on their skill sets and the particular needs and goals of such
tiers. For example, separate tiers are being established for new agents with
little or no experience in the industry, experienced agents
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who are producing at superior levels and one or more groups of agents with
experience or production levels falling between those two levels. The Company
began the tiering process on a selective basis in June 1998 and intends to
expand the process throughout the remainder of 1998.
The Company believes that this tiering system is unique in the life
insurance industry and will give the Company a competitive advantage in the
marketplace. For example, by having certain managers responsible solely for
recruiting and providing necessary support systems for new recruits, the Company
believes that it will be able to increase the number and quality of new agents
recruited each year. The Company believes that the tiering system will also
allow the Company to attract and retain already established and successful
agents by providing an environment in which such agents can compete favorably
with other producer groups, such as third-party brokers or general agents.
Additionally, the Company believes that the tiering system will enable the
Company to attract and retain other agents by providing marketing and training
support that is responsive to such agents' career development needs.
In addition to sales by the career agents, the Company's mutual funds are
also sold through third-party broker-dealers. The Company markets to these
third-party broker-dealers through 16 wholesalers. The Company expects to
increase the number of these specialized sales agents in the future.
PRICING AND UNDERWRITING
Insurance underwriting involves a determination of the type and amount of
risk which an insurer is willing to accept. The Company underwrites each
application. The Company's underwriters evaluate policy applications on the
basis of information provided by the applicant and others. The Company follows
detailed and uniform underwriting practices and procedures designed to properly
asses and quantify risks before issuing coverage to qualified applicants. The
Company's insurance underwriting standards attempt to produce mortality results
consistent with the assumptions used in product pricing while also allowing
competitive risk selection. Factors considered by the Company in setting
premiums and charges for products include assumptions which are considered
prudent by management as to future investment returns, expenses, persistency,
mortality and taxes, where appropriate. The long-term profitability of the
Company's products is affected by the degree to which future experience deviates
from these assumptions.
In underwriting business, the Company uses its automated underwriting
system, which it believes to be technologically superior to the systems of many
of its competitors. The Company's Field Application Submit Transaction (FAST)
system allows agents to submit policy applications electronically. The Company's
Consolidated Life Underwriting Expert System (CLUES) automatically requests and
processes data necessary to underwrite life insurance applications, including
blood test results and motor vehicle records. The Company's Total Online
Production System (TOPS), which contains the Company's policyholder database,
handles policy billing and administrative services. The Company's agencies each
have computers connected to this integrated system, enabling agents in the field
to automatically submit applications and access policyholder data.
The Company believes that its underwriting staff is highly experienced and
qualified. Of the Company's 30 Home Office Underwriting professionals, eight
have over 20 years of industry experience and seven others have at least 10
years of industry experience.
REINSURANCE
MONY utilizes a variety of indemnity reinsurance agreements with insurers
to control its loss exposure. Generally, these agreements are structured either
on an automatic basis, where risks meeting prescribed criteria are automatically
covered, or on a facultative basis, where the reinsurer must agree to accept the
specific reinsurance risk before it becomes liable. The amount of each risk
retained by MONY depends on its evaluation of the specific risk, subject, in
certain circumstances,
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to maximum limits based on characteristics of coverages. Under the terms of the
reinsurance agreements, the reinsurer will be liable to reimburse MONY for the
ceded amount in the event the claim is paid. However, MONY remains contingently
liable for all benefits payable even if the reinsurer fails to meet its
obligations to MONY.
Life insurance business is ceded on a yearly renewable term basis under
various reinsurance contracts. The Company's general practice is to retain no
more than $4.0 million of risk on any one person for individual products and
$6.0 million for last survivor products. The total amount of reinsured life
insurance in force on this basis was $7.4 billion, $7.5 billion and $8.0 billion
at December 31, 1997, 1996 and 1995, respectively.
The Company also has in place certain "surplus relief" reinsurance
contracts. Surplus relief reinsurance contracts are indemnity reinsurance
agreements whereby the Company transfers a certain percentage of its risk with
respect to specified business lines to another reinsurer to increase statutory
surplus through the receipt of an initial reinsurance allowance provided by the
reinsurers. Although these agreements do not qualify to be accounted for as
reinsurance under GAAP, the Company's agreements qualify for reinsurance
accounting under SAP and have specifically been approved by the New York State
Insurance Department. Future statutory earnings will be reduced as amounts are
credited to reinsurers based on the experience of the reinsured business. At
June 30, 1998, the Company's combined statutory surplus included $69.7 million
relating to surplus relief reinsurance, or 8.2% of the Company's statutory
surplus at that date. The ability of the Company to maintain surplus relief
reinsurance at current levels may be important to its ability to maintain its
statutory surplus position. The ability of MONY to pay dividends to the Holding
Company may be affected by a reduction in its statutory earnings caused by any
reduction in the outstanding level of surplus relief reinsurance. See
"-- Regulation -- Shareholder Dividend Restrictions".
As of December 31, 1997 the Company's outstanding individual disability
income insurance business is reinsured on an indemnity basis. See "-- Protection
Products".
The following table presents the Company's principal reinsurers and the
percentage of total reinsurance recoverable reported in the Company's
consolidated financial statements at December 31, 1997 under the captions
"Amounts Due From Reinsurers" (which amounted to $574.5 million) and "Assets
transferred in the Group Pension Transaction" (which amounted to $173.9 million)
that was due from each reinsurer.
<TABLE>
<S> <C>
REINSURERS:
Centre Life Reinsurance, Ltd................................ 47.8%
AUSA Life Insurance Company, Inc............................ 18.6
Life Reassurance Corporation of America..................... 11.8
Reinsurance Group of America................................ 2.5
All Other................................................... 19.3
-----
100.0%
=====
</TABLE>
THE GROUP PENSION TRANSACTION
On December 31, 1993, the Company entered into the AEGON Agreement with
AEGON under which the Company transferred a substantial portion of its group
pension business, including its full service group pension contracts, consisting
primarily of tax-deferred annuity, 401(k) and managed funds lines of business,
to AUSA, a wholly owned subsidiary of AEGON. The Company also transferred to
AUSA the corporate infrastructure supporting the group pension business,
including data processing systems, facilities and regional offices. In
connection with the Group Pension Transaction, the Company and AEGON have
entered into certain service agreements. These agreements, among other things,
provide that the Company will continue to manage the transferred
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assets and that AUSA will continue to provide certain administrative services to
the Company's remaining group pension contracts not included in the transfer.
The transferred group pension business consisted of approximately $6.4
billion in group pension assets and liabilities, which was comprised of $2.8
billion of general account assets and liabilities, and $3.6 billion of separate
account assets and liabilities. The transfer was initially structured in the
form of indemnity reinsurance, however, the AEGON Agreement contemplated that
the transfer would be restructured in the form of assumption reinsurance as soon
as practicable following the consent of contractholders to assumption of their
contracts. Substantially all of the contractholders consented to the assumption
of their contracts by AUSA.
Under the terms of the AEGON Agreement, MONY agreed to not compete with
AEGON for new group pension business similar to that transferred in the Group
Pension Transaction, during the three-year period following the Group Pension
Transaction Date. However, MONY retained certain group pension business not
transferred in the transaction, which consists of (i) annuities purchased by
pension plan participants from MONY after retirement ("purchased annuities"),
(ii) deposit administration contracts and (iii) MONY's remaining GIC business.
Total general account reserves at December 31, 1997 for such non-transferred
business were $190.9 million, $151.6 million and $56.3 million, respectively.
AEGON's group pension business, including the business transferred by MONY
is serviced by AUSA and Diversified Investment Advisors Inc., a registered
investment advisor and subsidiary of AEGON formed in connection with the Group
Pension Transaction ("Diversified"). MONY officers formerly responsible for the
management of MONY's group pension operations became officers of Diversified at
the time of the Group Pension Transaction and continue to manage the transferred
group pension operations. Substantially all of the Company's 450 employees in
its group pension operations became employees of Diversified at such time and
continue to administer and service the transferred business, as well as MONY's
retained group pension business, under an administrative services agreement. In
addition, in connection with the Group Pension Transaction, the Company's career
agency sales force was authorized to continue to market and distribute group
pension business through the transferred operations on behalf of AEGON and its
affiliates.
The Group Pension Transaction was legally structured as a sale. However,
for accounting purposes, the Company continues to record the assets and
liabilities comprising the transferred business, as well as the related profits
therefrom, in its financial statements because, pursuant to the terms of the
AEGON Agreement, the Company retained substantially all the risks and rewards of
the transferred business.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- The Group Pension Transaction -- Decline and Expiration
of Payments and Income Related to the Group Pension Transaction" for a
discussion of the consideration received in connection with the Group Pension
Transaction.
COMPETITION
The Company believes that competition in the Company's lines of business is
based on service, product features, price, commission structure, perceived
financial strength, claims-paying ratings and name recognition. The Company
competes with a large number of other insurers as well as non-insurance
financial services companies, such as banks, broker-dealers and mutual funds,
many of which have greater financial resources, offer alternative products or
more competitive pricing and, with respect to other insurers, have higher
ratings than the Company. Competition exists for individual consumers, employer
groups and agents and other distributors of insurance products. National banks,
with their pre-existing customer bases for financial services products, may pose
increasing competition in the future to insurers who sell annuities, including
the Company, as a result of the United States Supreme Court's 1994 decision in
NationsBank of North Carolina v.
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Variable Annuity Life Insurance Company, which permits national banks to sell
annuity products of life insurance companies in certain circumstances.
The Company must attract and retain productive agents to sell its insurance
and annuity products. Strong competition exists among insurance companies for
agents with demonstrated ability. Management believes that key bases of
competition among insurance companies for agents with demonstrated ability
include the services provided to, and relationships developed with, these agents
in addition to compensation and product structure. Changes arising from the
Demutualization, as well as the realignment of the career agency sales force and
the transition to new products, may affect the Company's ability to retain
productive distributors of its individual insurance and annuity products. Sales
of individual insurance and annuity products and the Company's financial
position and results of operations could be materially adversely affected if
such changes occur.
In addition, several proposals to repeal or modify the Glass-Steagall Act
of 1933, as amended, and the Bank Holding Company Act of 1956, as amended, have
been made by members of Congress and the Clinton Administration. Currently, the
Bank Holding Company Act restricts banks from being affiliated with insurance
companies. None of these proposals has yet been enacted, and it is not possible
to predict whether any of these proposals will be enacted or, if enacted, their
potential effect on the Company.
The investment management and securities brokerage businesses, having
relatively few barriers to entry, continually attract new entrants. The Company
competes with other providers of investment products and services primarily on
the basis of the range of investment products offered, the investment
performance of such products and the quality of service provided to clients.
In addition, the Company recently adopted a plan to restructure its career
agency sales force. See "-- Marketing and Distribution". There can be no
assurance that such restructuring will be successful or that the career agency
sales force will be receptive to the new structure. If the restructuring is not
successful, or if the career agency sales force is not receptive to the new
structure, the Company's financial position and results of operations could be
materially adversely affected.
INTERNATIONAL BUSINESS
MONY, through its subsidiaries, MONY Life Insurance Company of the
Americas, Ltd. and MONY Bank & Trust Company of the Americas, Ltd. has
established a pilot program to explore marketing its products internationally.
Initially, MONY is focusing primarily on Latin America, and secondarily on
Europe. To service these markets, MONY is offering a portfolio of offshore
financial products including life insurance, annuities, mutual funds and trust
services.
RATINGS
Ratings with respect to claims-paying ability and financial strength have
become an increasingly important factor in establishing the competitive position
of insurance companies. Ratings are important to maintaining public confidence
in MONY and its ability to market its products. Rating organizations continually
review the financial performance and condition of insurers, including MONY. Any
lowering of MONY's ratings could have a material adverse effect on MONY's
ability to market its products and retain its current policyholders. These
consequences could, depending upon the extent thereof, have a material adverse
effect on MONY's liquidity and, under certain circumstances, net income. MONY
currently is rated "A-" by A.M. Best and MONY's insurance claims-paying ability
is rated "A3" by Moody's, "A+" by Duff&Phelps and "A+" by S&P. Moody's, on
January 6, 1998, and Duff & Phelps, on August 4, 1998, each announced that it
had changed its respective outlook on MONY's rating from stable to positive.
A.M. Best's ratings for insurance companies currently range from "A++" to "F",
and some companies are not rated. A.M. Best publications indicate that "A-"
ratings are assigned to those companies that in A.M. Best's opinion have
achieved excellent overall performance when compared to the standards
established by A.M.
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Best. "A" and "A-" companies are considered to have a strong ability to meet
their obligations to policyholders over a long period of time. The
Demutualization and the Offerings are part of management's strategy to enhance
the Company's capital base and its access to capital in order to improve
ratings.
Moody's rating for insurance companies currently range from "Aaa" to "C",
S&P ratings for insurance companies range from "AAA" to "CCC-", and Duff &
Phelps' ratings for insurance companies range from "AAA" to "CCC-". In
evaluating a company's financial and operating performance, Moody's, S&P and
Duff & Phelps review its profitability, leverage and liquidity as well as its
book of business, the adequacy and soundness of its reinsurance, the quality and
estimated market value of its assets, the adequacy of its policy reserves and
the experience and competence of its management.
The foregoing ratings reflect each rating agency's current opinion of
MONY's claims-paying ability, financial strength, operating performance and
ability to meet its obligations to policyholders and are not evaluations
directed toward the protection of investors in the Common Stock. Such factors
are of concern to policyholders, agents and intermediaries. Such ratings should
not be relied upon when making a decision to purchase shares of the Common Stock
offered hereby.
Management believes the investment by the Investors, together with the
portion of the net proceeds of the Offerings contributed to MONY, will help
support MONY's ratings. In addition, management believes MONY's ratings should
be positively affected if it achieves improvements in operating results, reduces
its exposure to higher risk assets and realizes further cost reductions. However
there can be no assurance as to whether or when such positive effect on ratings
will take place.
REGULATION
GENERAL REGULATION AT THE STATE LEVEL
MONY is licensed to transact its insurance business in, and is subject to
regulation and supervision by, all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, Guam and the U.S. Virgin Islands. MLOA is licensed
and regulated in all states other than New York.
The laws of the various states establish state insurance departments with
broad administrative powers to approve policy forms and, for certain lines of
insurance, rates, grant and revoke licenses to transact business, regulate trade
practices, license agents, require statutory financial statements and prescribe
the type and amount of investments permitted. In addition, the New York
Insurance Department restricts certain agency expenses. The aforementioned
regulation by the state insurance departments is for the benefit of
Policyholders, not stockholders.
The Holding Company is not regulated as an insurance company but will, as
the direct or indirect owner of the capital stock of MONY and MLOA, be subject
to the insurance holding company acts of the states in which MONY and MLOA are
domiciled (or deemed to be commercially domiciled). Most states have enacted
legislation that requires each insurance holding company and each insurance
company in an insurance holding company system to register with the insurance
regulatory authority of the insurance company's state of domicile and, annually,
to furnish financial and other information concerning the operations of
companies within the holding company system that may materially affect the
operations, management or financial condition of the insurers within such
system. The Holding Company is subject to the insurance holding company laws in
New York and Arizona. Under such laws, all transactions within an insurance
holding company system affecting insurers must be fair and equitable and each
insurer's policyholder surplus following any such transaction must be both
reasonable in relation to its outstanding liabilities and adequate for its
needs. The New York and Arizona insurance holding company laws also require
prior notice or regulatory approval of the change of control of an insurer or
its holding company and of material intercorporate transfers of assets or other
material transactions within the holding company
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structure. Generally, under such laws, a state insurance authority must approve
in advance the direct or indirect acquisition of 10% or more of the voting
securities of an insurance company domiciled in its state. Under the New York
Insurance Law, for a period of five years following the Plan Effective Date, no
person may acquire beneficial ownership of 5% or more of the outstanding shares
of Common Stock without the prior approval of the New York Superintendent. The
Investors have received a conditional waiver of this rule from the New York
Superintendent in connection with the potential exercise of the Warrants prior
to the end of such five-year period. See "Restrictions on Acquisitions of
Securities of the Holding Company".
In recent years, a number of life and annuity insurers have been the
subject of regulatory proceedings and litigation relating to alleged improper
life insurance pricing and sales practices. Some of these insurers have incurred
or paid substantial amounts in connection with the resolution of such matters.
See "-- Legal Proceedings". In addition, state insurance regulatory authorities
regularly make inquiries, hold investigations and administer market conduct
examinations with respect to insurers' compliance with applicable insurance laws
and regulations.
MONY and MLOA continuously monitor sales, marketing and advertising
practices and related activities of their agents and personnel and provide
continuing education and training in an effort to ensure compliance with
applicable insurance laws and regulations. There can be no assurance that any
non-compliance with such applicable laws and regulations would not have a
material adverse effect on the Company.
Insurance companies are required to file detailed annual and quarterly
financial statements with state insurance regulators in each of the states in
which they do business, and their business and accounts are subject to
examination by such agencies at any time. In addition, insurance regulators
periodically examine an insurer's financial condition, adherence to statutory
accounting practices and compliance with insurance department rules and
regulations. Applicable state insurance laws, rather than federal bankruptcy
laws, apply to the liquidation or the restructuring of insurance companies.
Insurance company subsidiaries of the Holding Company would be subject to such
state insurance laws; however, the Holding Company would generally be subject to
federal bankruptcy laws.
The NAIC has established a program of accrediting state insurance
departments. NAIC accreditation permits accredited states to conduct periodic
examinations of insurance companies domiciled in such states. NAIC-accredited
states will not accept reports of examination of insurance companies from
unaccredited states except under limited circumstances. As a direct result,
insurers domiciled in unaccredited states may be subject to financial
examination by accredited states in which they are licensed, in addition to any
examinations conducted by their domiciliary states. The accreditation of the New
York Insurance Department, MONY's principal insurance regulator, has been
suspended as a result of the New York legislature's failure to adopt certain
model NAIC laws. MONY believes that the suspension of the NAIC accreditation of
the New York Insurance Department, even if continued, will not have a
significant impact upon its ability to conduct its insurance businesses.
MONY's variable life insurance products and variable annuity products are
considered securities within the meaning of the federal securities laws and are,
therefore, subject to regulation thereunder, as well as under state insurance
laws. In addition, MONY and its subsidiaries are generally subject to federal
and state laws and regulations which affect the conduct of their business.
STATUTORY EXAMINATION
As part of their routine regulatory oversight process, state insurance
departments conduct periodic detailed examinations of the books, records and
accounts of insurance companies domiciled in their states. Such examinations are
generally conducted in cooperation with the departments of two or three other
states under guidelines promulgated by NAIC.
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The New York Insurance Department recently completed an examination of MONY
for each of the five years in the period ended December 31, 1996, and the
Arizona State Insurance Department recently completed an examination of MLOA,
for each of the three years in the period ended December 31, 1996. The New York
report noted certain technical violations of New York Insurance law regarding
advertising and the crediting of interest, but the examination did not reveal
any material financial reporting items. With regard to the Arizona examination
of MLOA, the report noted that certain reinsurance agreements were either not in
writing or not submitted to the Arizona Department for approval, that MLOA does
not settle its federal income tax liability to MONY in a timely fashion and does
not maintain current appraisals on its limited real estate portfolio, but it did
not reveal any material financial condition or operating items.
SHAREHOLDER DIVIDEND RESTRICTIONS
The payment of dividends by MONY to the Holding Company is regulated under
state insurance law. Under the New York Insurance Law, MONY will be permitted to
pay shareholder dividends to the Holding Company only if it files notice of its
intention to declare such a dividend and the amount thereof with the New York
Superintendent and the New York Superintendent does not disapprove the
distribution. The applicable statute gives the New York Superintendent broad
discretion to disapprove dividend requests based upon a determination of whether
MONY's financial condition would support the payment of dividends. The New York
Insurance Department has established informal guidelines for the New York
Superintendent's determinations, which focus upon, among other things, overall
financial condition and profitability under statutory accounting practices.
Management believes these guidelines may limit the ability of MONY to pay
dividends to the Holding Company. There can be no assurance that MONY will have
statutory earnings to support the payment of dividends to the Holding Company in
an amount sufficient to fund its cash requirements, interest and pay cash
dividends (including interest on the Holding Company Subordinated Notes, if
issued). In addition, the Arizona insurance laws contain restrictions on the
abilities of MLOA to pay dividends to MONY. MONY's inability to pay dividends to
the Holding Company in the future in an amount sufficient for the Holding
Company to pay dividends to its stockholders would have a material adverse
effect on the Holding Company and the market value of the Common Stock. See
"Risk Factors -- Holding Company Structure; Restrictions on Dividends" and
"Dividends".
If the Holding Company Subordinated Notes are issued, the Holding Company
may also receive payments of principal and interest from MONY on the
Intercompany Surplus Notes. Such payments can only be made with the prior
approval of the New York Superintendent "whenever, in his judgment, the
financial condition of such insurer warrants". Such payments further may be made
only out of surplus funds which are available for such payments under the New
York Insurance Law. There can be no assurance that MONY will obtain the
requisite approval for payments with respect to the Intercompany Surplus Notes,
or that surplus funds will be available for such payments. If such payments are
not made, the Holding Company may not be able to meet its cash requirements,
including principal and interest payments on the Holding Company Subordinated
Notes and dividends on the Convertible Preferred Stock, if issued, or any other
preferred stock to be issued in the future and the Common Stock.
NAIC IRIS RATIOS
The NAIC has developed a set of financial relationships or "tests" known as
the Insurance Regulatory Information System ("IRIS") that were designed for
early identification of companies which may require special attention or action
by insurance regulatory authorities. Insurance companies submit data annually to
the NAIC, which in turn analyzes the data by utilizing, in the case of life
insurance companies, 12 ratios, each with defined "usual ranges". Generally, an
insurance company will become subject to regulatory scrutiny if it falls outside
the usual ranges of four or more of the ratios, and regulators may then act, if
the company has insufficient capital, to constrain such
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company's underwriting capacity. Neither MONY nor MLOA is currently subject to
regulatory scrutiny based on its IRIS ratios.
POLICY AND CONTRACT RESERVE SUFFICIENCY ANALYSIS
Under the New York Insurance Law and the laws of several other states, the
Company is required to conduct an annual analysis of reserve sufficiency
including all life and health insurance reserves and interest-sensitive single
premium life and annuity reserves. A qualified actuary must submit an opinion
which states that the reserves when considered in light of the assets held with
respect to such reserves make good and sufficient provision for the associated
contractual obligations and related expenses of the insurance company. If such
an opinion cannot be provided, the insurance company must set up additional
reserves by transferring funds from surplus. MONY and MLOA have provided a
current opinion, without qualification, to applicable state regulators with
respect to such reserves.
STATUTORY INVESTMENT VALUATION RESERVES
SAP require a life insurance company to maintain both an AVR and interest
maintenance reserve ("IMR") to absorb both realized and unrealized gains and
losses on a portion of its investments. AVR establishes statutory reserves for
fixed maturity securities, equity securities, mortgage loans, equity real
estate, and other invested assets. AVR is designed to capture all realized and
unrealized gains and losses on such assets, other than those resulting from
changes in interest rates. The level of AVR is based on both the type of
investment and its rating. In addition, the reserves required for similar
investments, for example, fixed maturity securities, differ according to the
ratings of the investments, which are based upon ratings established
periodically by the NAIC Securities Valuation Office. IMR applies to all types
of fixed maturity investments, including bonds, preferred stocks, mortgage
backed securities and mortgage loans. IMR is designed to capture the net gains
which are realized upon the sale of such investments and which result from
changes in the overall level of interest rates. Such captured net realized gains
are then amortized into income over the remaining period to the stated maturity
of the investment sold. Any increase in AVR and IMR causes a reduction in MONY's
statutory capital and surplus which, in turn, reduces funds available for
stockholder dividends.
RISK-BASED CAPITAL REQUIREMENTS
In order to enhance the regulation of insurer solvency, the NAIC has
adopted a model law to implement RBC requirements for life insurance companies.
The requirements are designed to monitor capital adequacy and to raise the level
of protection that statutory surplus provides for policyholders. The model law
measures four major areas of risk facing life insurers: (i) the risk of loss
from asset defaults and asset value fluctuation; (ii) the risk of loss from
adverse mortality and morbidity experience; (iii) the risk of loss from
mismatching of asset and liability cash flow due to changing interest rates and
(iv) business risks. Insurers having less statutory surplus than required by the
RBC model formula will be subject to varying degrees of regulatory action
depending on the level of capital inadequacy.
The RBC formula provides a mechanism for the calculation of an insurance
company's Authorized Control Level RBC and its total adjusted capital. The model
law sets forth the points at which a superintendent of insurance is authorized
and expected to take regulatory action. The first level is known as the Company
Action Level RBC, which is set at twice the Authorized Control Level RBC. The
second level is the Regulatory Action Level RBC, set at 1.5 times the Authorized
Control Level RBC. The third is the Authorized Control Level RBC, and the fourth
is the Mandatory Control Level RBC, set at 70% of the Authorized Control Level
RBC.
If an insurance company's adjusted capital is higher than the Regulatory
Action Level but below the Company Action Level, the insurance company must
submit to its superintendent of insurance a
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comprehensive financial plan. If an insurance company's adjusted capital is
higher than the Authorized Control level but lower than the Regulatory Action
Level, the superintendent of insurance shall perform such examination or
analysis as he or she deems necessary of the insurer's business and operations
and issue any appropriate corrective orders to address the insurance company's
financial problems. If an insurer's adjusted capital is higher than the
Mandatory Control Level but lower than the Authorized Control Level, the
superintendent may place the insurer under regulatory control. If the insurance
company's adjusted capital falls below the Mandatory Control Level, the
superintendent will be required to place the insurer under regulatory control.
The adjusted RBC capital ratios of all the Company's insurance subsidiaries at
June 30, 1998 and December 31, 1997 were in excess of the Company Action Levels.
REGULATION OF INVESTMENTS
MONY and MLOA are subject to state laws and regulations that require
diversification of their investment portfolios and limit the amount of
investments in certain investment categories such as below investment grade
fixed income securities, equity real estate and equity investments. Failure to
comply with these laws and regulations would cause investments exceeding
regulatory limitations to be treated as non-admitted assets for purposes of
measuring surplus, and, in some instances, would require divestiture of such
non-qualifying investments. As of June 30, 1998, MONY's and MLOA's investments
complied with all such regulations.
ASSESSMENTS AGAINST INSURERS
Insurance guaranty association laws exist in all states, the District of
Columbia and Puerto Rico. Insurers doing business in any of these jurisdictions
can be assessed for policyholder losses incurred by insolvent insurance
companies. These arrangements provide certain levels of protection to
policyholders from losses under insurance policies (and certificates issued
under group insurance policies issued by life insurance companies) issued by
insurance companies that become impaired or insolvent. Typically, assessments
are levied (up to prescribed limits) on member insurers on a basis which is
related to the member insurer's proportionate share of the business written by
all member insurers in the appropriate state.
While the amount and timing of any future assessment on MONY and MLOA under
these laws cannot be reasonably estimated and are beyond the control of MONY and
MLOA, MONY and MLOA have established reserves which they consider adequate for
assessments in respect to insurance companies that are currently subject to
insolvency proceedings. Recent regulatory actions against certain large life
insurers encountering financial difficulty have prompted the various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed loss. Most of these laws do provide, however, that an assessment may
be excused or deferred if it would threaten an insurer's solvency and further
provide for annual limits on such assessments. A large part of the assessments
paid by MONY and MLOA pursuant to these laws may be used as credits for a
portion of MONY's and MLOA's premium taxes. The Company believes the total
assessments will not be material to its operating results or financial position.
For the years ended December 31, 1997, 1996 and 1995, the Company paid
approximately $3.3 million, $3.7 million and $8.1 million, respectively, in
assessments pursuant to state insurance guaranty association laws.
GENERAL REGULATION AT FEDERAL LEVEL
Although the federal government generally does not directly regulate the
insurance business, federal initiatives often have an impact on the business in
a variety of ways. Current and proposed federal measures that may significantly
affect the insurance business include limitations on antitrust immunity, minimum
solvency requirements and the removal of barriers restricting banks from
engaging in the insurance and mutual fund business.
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<PAGE> 126
SECURITIES LAWS
The Company, certain of its subsidiaries and certain policies and contracts
offered by such subsidiaries are subject to various levels of regulation under
the federal securities laws administered by the Commission and under certain
state securities laws. Certain separate accounts and a variety of mutual funds
and other pooled investment vehicles are registered under the Investment Company
Act of 1940, as amended (the "Investment Company Act"). Certain annuity
contracts and insurance policies issued by subsidiaries are registered under the
Securities Act, and certain other subsidiaries of the Company are registered as
broker-dealers under the Exchange Act.
MONY and certain of its subsidiaries are investment advisors registered
under the Investment Advisers Act of 1940, as amended (the "Investment Advisers
Act"). Certain investment companies managed by such subsidiaries are registered
with the Commission under the Investment Company Act and the shares of certain
of these entities are qualified for sale in certain states in the United States
and the District of Columbia. Certain subsidiaries of the Company are also
subject to the Commission's net capital rules.
All aspects of MONY's subsidiaries' investment advisory activities are
subject to various federal and state laws and regulations in jurisdictions in
which they conduct business. These laws and regulations are primarily intended
to benefit investment advisory clients and investment company shareholders and
generally grant supervisory agencies broad administrative powers, including the
power to limit or restrict the carrying on of business for failure to comply
with such laws and regulations. In such event, the possible sanctions which may
be imposed include the suspension of individual employees, limitations on the
activities in which the investment advisor may engage, suspension or revocation
of the investment advisor's registration as an advisor, censure and fines.
MONY and its subsidiaries may also be subject to similar laws and
regulations in the states and foreign countries in which they provide investment
advisory services, offer the products described above or conduct other
securities related activities.
ERISA CONSIDERATIONS
On December 13, 1993, the United States Supreme Court issued its opinion in
John Hancock Mutual Life Insurance Company v. Harris Trust and Savings Bank
holding that certain assets in excess of amounts necessary to satisfy guaranteed
obligations held by John Hancock in its general account under a participating
group annuity contract are "plan assets" and therefore subject to certain
fiduciary obligations under the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), which specifies that fiduciaries must perform their duties
solely in the interest of ERISA plan participants and beneficiaries. The Court
limited the imposition of ERISA fiduciary obligations in these instances to
assets in an insurer's general account that were not reserved to pay benefits of
guaranteed benefit policies (i.e., benefits whose value would not fluctuate in
accordance with the insurer's investment experience). On December 22, 1997 the
Secretary of Labor issued proposed regulations, providing guidance for the
purpose of determining, in cases where an insurer issues one or more policies
backed by the insurer's general account to or for the benefit of an employee
benefit plan, the extent to which assets of the insurer constitute plan assets
for purposes of ERISA and the Code. Final regulations will be issued after a
notice and comment period. The regulations will apply only with respect to a
policy issued by an insurer on or before December 31, 1998. In the case of such
a policy, the regulations will generally take effect at the end of the 18-month
period following the date such regulations become final. Generally, no person
will be liable under ERISA or the Code for conduct occurring prior to the end of
such 18-month period, where the basis of a claim is that insurance company
general account assets constitute plan assets. Insurers issuing new policies
after December 31, 1998, that are not guaranteed benefit policies will be
subject to fiduciary obligations under ERISA.
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<PAGE> 127
The regulations should indicate the requirements that must be met in order
to satisfy ERISA's fiduciary standards. A review of the Company's procedures
with respect to its general account contracts will be required to ensure
compliance with the regulations.
POTENTIAL TAX LEGISLATION
Congress has, from time to time, considered possible legislation that would
eliminate the deferral of taxation on the accretion of value within certain
annuities and life insurance products. The 1994 United States Supreme Court
ruling in NationsBank of North Carolina v. Variable Annuity Life Insurance
Company that annuities are not insurance for purposes of the National Bank Act
may cause Congress to consider legislation that would eliminate such tax
deferral at least for certain annuities. Other possible legislation, including a
simplified "flat tax" income tax structure with an exemption from taxation for
investment income, could also adversely affect purchases of annuities and life
insurance if such legislation were to be enacted. There can be no assurance as
to whether legislation will be enacted which would contain provisions with
possible adverse effects on the Company's annuity and life insurance products.
ENVIRONMENTAL CONSIDERATIONS
As owners and operators of real property, MONY and certain of its
subsidiaries are subject to extensive federal, state and local environmental
laws and regulations. Inherent in such ownership and operation is also the risk
that there may be potential environmental liabilities and costs in connection
with any required remediation of such properties. In addition, MONY and certain
of its subsidiaries hold equity stakes in companies that could potentially be
subject to environmental liabilities. MONY assesses the business and properties
and its level of involvement in the operation and management of such companies.
MONY routinely conducts environmental assessments for real estate being acquired
for investment and before taking title through foreclosure to real property
collateralizing mortgages held by MONY. While there can be no assurance that
unexpected environmental liabilities will not arise, based on these
environmental assessments and compliance with MONY's internal procedures,
management believes that any costs associated with compliance with environmental
laws and regulations or any remediation of such properties would not have a
material adverse effect on the Company's financial position or results of
operations.
LEGAL PROCEEDINGS
In late 1995 and during 1996 a number of purported class actions were
commenced in various state and federal courts against the Company alleging that
the Company engaged in deceptive sales practices in connection with the sale of
whole and universal life insurance policies from the early 1980s through the mid
1990s. Although the claims asserted in each case are not identical, they seek
substantially the same relief under essentially the same theories of recovery
(i.e., breach of contract, fraud, negligent misrepresentation, negligent
supervision and training, breach of fiduciary duty, unjust enrichment and
violation of state insurance and/or deceptive business practice laws).
Plaintiffs in these cases (including the Goshen case discussed below) seek
primarily equitable relief (e.g., reformation, specific performance, mandatory
injunctive relief prohibiting the Company from canceling policies for failure to
make required premium payments, imposition of a constructive trust and creation
of a claims resolution facility to adjudicate any individual issues remaining
after resolution of all class-wide issues) as opposed to compensatory damages,
although they also seek compensatory damages in unspecified amounts. The Company
has answered the complaints in each action (except for one being voluntarily
held in abeyance), has denied any wrongdoing and has asserted numerous
affirmative defenses.
On June 7, 1996, the New York State Supreme Court certified the Goshen
case, being the first of the aforementioned class actions filed, as a nationwide
class consisting of all persons or entities who have, or at the time of the
policy's termination had, an ownership interest in a whole or universal life
insurance policy issued by the Company and sold on an alleged "vanishing
premium"
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<PAGE> 128
basis during the period January 1, 1982 to December 31, 1995. On March 27, 1997,
the Company filed a motion to dismiss or, alternatively, for summary judgment on
all counts of the complaint. All of the other putative class actions have been
consolidated and transferred by the Judicial Panel on Multidistrict Litigation
to the United States District Court for the District of Massachusetts, or are
being voluntarily held in abeyance pending the outcome of the Goshen case. The
Massachusetts District Court in the Multidistrict Litigation has entered an
order essentially holding all of the federal cases in abeyance pending the
outcome of the Goshen case.
On October 21, 1997, the New York State Supreme Court granted the Company's
motion for summary judgment and dismissed all claims filed in the Goshen case
against the Company on the merits. The order by the New York State Supreme Court
has been appealed by plaintiffs and all actions before the United States
District Court for the District of Massachusetts are still pending. There can be
no assurance, however, that the present or any future litigation relating to
sales practices will not have a material adverse effect on the Company.
In addition to the foregoing, from time to time the Company is a party to
litigation and arbitration proceedings in the ordinary course of its business,
none of which is expected to have a material adverse effect on the Company.
PROPERTIES
The Company leases its headquarters building which is located at 1740
Broadway, New York, New York and consists of approximately 225,000 square feet.
The Company also leases facilities in Syracuse, New York, for use in its
insurance operations, which consist of approximately 600,000 square feet in the
aggregate. The Company also leases all 98 of its agency and subsidiary offices,
which consist of approximately 609,000 square feet in the aggregate. The Company
believes that such properties are suitable and adequate for its current and
anticipated business operations.
EMPLOYEES
As of June 30, 1998, the Company had approximately 2,324 employees. No
employees are covered by a collective bargaining agreement. The Company is
represented by approximately 2,352 full time career agents, at June 30, 1998,
who are all independent contractors and are not employees of the Company. The
Company believes that its employee and agent relations are satisfactory.
127
<PAGE> 129
INVESTMENTS
The following discussion excludes invested assets transferred in the Group
Pension Transaction. This discussion should be read in conjunction with the
summary financial information presented elsewhere herein, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 11 to the Consolidated Financial Statements.
GENERAL
The Company's investment operations are managed by its investment area,
which reports directly to the Chief Investment Officer of the Company. The
investment area, in consultation with the product actuaries, is responsible for
determining, within specified risk tolerances and investment guidelines, the
general asset allocation, duration and other characteristics of the Company's
investment portfolio.
The primary investment objective of the Company is to maximize after-tax
returns consistent with acceptable risk parameters (including the management of
the interest rate sensitivity of invested assets to that of policyholder
obligations). The Company is exposed to two primary sources of investment risk:
credit risk, relating to the uncertainty associated with the continued ability
of a given obligor to make timely payments of principal and interest, and
interest rate risk, relating to the market price and/or cash flow variability
associated with changes in market yield curves. The Company manages credit risk
through industry and issuer diversification and asset allocation. The Company
manages interest rate risk as part of its asset/liability management strategies,
product design, such as the use of market value adjustment features and
surrender charges and proactive monitoring and management of certain
non-guaranteed elements of the Company's products (such as the resetting of
credited interest rates for policies that permit such adjustments). A key aspect
in managing interest rate exposure are the analyses performed by the Company to
assess the adequacy of its projected asset cash flows relative to its projected
liability cash flows. These analyses, many of which are required pursuant to
Regulation 126 of the New York Insurance Department, involve evaluating the
potential gain or loss for over 95% of the Company's in force business under
various increasing and decreasing interest rate environments, including inverted
yield curves. For purposes of these analyses the Company has developed models of
its in force business which reflect product characteristics such as cost of
insurance rates, surrender charges, market value adjustments, dividends, cash
values, etc. The models include assumptions, based on current and anticipated
experience, regarding lapse and mortality rates and interest crediting
strategies. In addition, these models include asset cash flow projections
reflecting coupon payments, sinking fund payments, principal payments, defaults,
bond calls, and mortgage prepayments.
Generally, these cash flow analyses are based on projections of cash flows
using ten different interest rate scenarios over ten or more years. First a
baseline interest rate is selected based on current rates. Then from the
selected baseline rate the ten scenarios are: (i) level, (ii) an immediate
increase of 3% and then level, (iii) an immediate decrease of 3% and then level,
(iv) a uniform increase over ten years of one half a percent per year and then
level, (v) a uniform decrease over ten years of one half a percent per year and
then level, (vi) a uniform increase of one percent per year over five years
followed by a uniform decrease of one percent per year over the next five years
and then level, (vii) a uniform decrease of one percent per year over five years
followed by a uniform increase of one percent per year over the next five years
and then level and (viii) a decrease of 2% and then level. In addition, two of
the scenarios are run with an inverted yield curve.
Since most of its in force liabilities result from participating whole life
insurance and separate account products, the Company does not focus on more
precise liability duration measures because management believes that the
scenario testing employed is sufficient to adequately assess interest rate risk.
The Company uses hedging instruments on only a limited basis because management
believes that there is limited general account risk exposure from recurring cash
flows and limitations
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<PAGE> 130
contained in product designs. The Company's strategy for the management of
investment risk also includes the continuing selective sale of real estate. See
"-- Real Estate Sales".
The Company had total consolidated assets at June 30, 1998 of approximately
$24.6 billion. Of the Company's total consolidated assets at such date,
approximately $12.8 billion represented assets held in the Company's general
account, approximately $5.7 billion represented assets transferred pursuant to
the Group Pension Transaction (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 11 to the Consolidated
Financial Statements) and approximately $6.1 billion were held in the Company's
separate accounts, for which the Company does not generally bear investment
risk.
Separate account assets are managed in accordance with the prescribed
investment strategy that applies to the specific separate account. Separate
accounts are established in conformity with insurance laws and are generally not
chargeable with liabilities that arise from any other business of the Company.
Separate account assets are subject to general account claims only to the extent
that the value of such assets exceeds the separate account liabilities.
Investments held in separate accounts and liabilities of the separate accounts
are reported separately as assets and liabilities. Substantially all separate
account assets are reported at estimated fair value. Investment income and gains
or losses on the investments of separate accounts accrue directly to
contractholders and, accordingly, are not reflected in the Company's
consolidated statements of income and cash flows. Fees charged to the separate
accounts by the Company (including mortality charges, policy administration fees
and surrender charges) are reflected in the Company's revenues.
General account assets are managed to support all of the Company's life
insurance and annuity lines of business. With respect to the general account,
the Company seeks to protect policyholders' benefits through asset/liability
matching, emphasizing safety of principal, maintaining sufficient liquidity and
avoiding undue asset concentrations through diversification. At the same time,
the Company seeks to produce an investment return that supports competitive
product pricing and which contributes to achieving the required risk adjusted
return on surplus. The Company's general account consists of a diversified
portfolio of investments. Although all the assets of the general account support
all the Company's liabilities, the Company has developed separate investment
portfolios for specific classes of product liabilities within the general
account. The investment area works closely with the business lines to develop
investment guidelines, including duration targets, asset allocation,
asset/liability mismatch tolerances and return objectives, for each product line
in order to achieve each such product line's individual risk and return
objectives.
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<PAGE> 131
The following table summarizes the invested assets held in the general
account of the Company at the dates indicated.
INVESTED ASSETS
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
------------------ ----------------------------------------
1998 1997 1996
------------------ ------------------ ------------------
CARRYING % OF CARRYING % OF CARRYING % OF
VALUE TOTAL VALUE TOTAL VALUE TOTAL
--------- ----- --------- ----- --------- -----
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Fixed maturities............ $ 6,282.4 58.5% $ 5,950.1 56.9% $ 5,460.8 52.2%
Equity securities........... 378.1 3.5 337.8 3.2 305.2 2.9
Mortgage loans on real
estate.................... 1,478.8 13.8 1,430.1 13.7 1,582.3 15.1
Policy loans................ 1,252.6 11.7 1,247.2 11.9 1,231.3 11.8
Real estate to be disposed
of........................ 339.1 3.2 621.2 5.9 434.8 4.2
Real estate held for
investment................ 452.5 4.2 495.9 4.7 1,070.4 10.2
Other invested assets....... 57.0 0.5 68.6 0.7 65.8 0.6
Cash and cash equivalents... 492.4 4.6 313.4 3.0 315.4 3.0
--------- ----- --------- ----- --------- -----
Total invested
assets.......... $10,732.9 100.0% $10,464.3 100.0% $10,466.0 100.0%
========= ===== ========= ===== ========= =====
</TABLE>
The yield on general account invested assets (including net realized gains
and losses on investments) was 9.9%, 7.8% and 7.9% for the six month period
ended June 30, 1998 and the years ended December 31, 1997 and 1996,
respectively.
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<PAGE> 132
The following table illustrates the yields on average assets for each of
the components of the Company's investment portfolio for the six month period
ended June 30, 1998 and the years ended December 31, 1997 and 1996.
INVESTMENT RESULTS BY ASSET CATEGORY
<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS AS OF AND FOR THE AS OF AND FOR THE
ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
-------------------- -------------------- --------------------
YIELD(1) AMOUNT YIELD(1) AMOUNT YIELD(1) AMOUNT
-------- -------- -------- -------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
FIXED MATURITIES:
Investment income.......... 7.4% $ 219.9 7.6% $ 422.5 7.7% $ 392.4
Net realized gains
(losses)................. 0.4% 12.3 0.1 7.3 0.1 6.2
Total............ 7.8% $ 232.2 7.7% $ 429.8 7.8% $ 398.6
---- -------- ---- -------- ---- --------
Ending assets.............. 6,070.5 5,764.4 5,373.8
EQUITY SECURITIES:(2)
Investment income.......... 11.6% $ 20.8 16.6% $ 53.5 19.0% $ 54.5
Net realized gains
(losses)................. 10.0% 17.9 11.1 35.8 10.5 30.0
Total............ 21.6% $ 38.7 27.7% $ 89.3 29.5% $ 84.5
---- -------- ---- -------- ---- --------
Ending assets.............. 378.1 337.8 305.2
MORTGAGE LOANS:
Investment income.......... 8.7% $ 63.1 9.1% $ 137.1 9.5% $ 159.2
Net realized gains
(losses)................. 0.6 4.6 0.7 10.4 0.5 8.4
Total............ 9.3% $ 67.7 9.8% $ 147.5 10.0% $ 167.6
---- -------- ---- -------- ---- --------
Ending assets.............. 1,478.8 1,430.1 1,582.3
</TABLE>
131
<PAGE> 133
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE AS OF AND FOR THE
SIX MONTHS ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER DECEMBER 31, 1996
-------------------- -------------------- --------------------
YIELD(1) AMOUNT YIELD(1) AMOUNT YIELD(1) AMOUNT
-------- ------ -------- ------ -------- ------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
REAL ESTATE:(3)
Investment income.................... 5.4% $ 25.7 4.3% $ 56.2 4.9% $ 84.1
Net realized gains (losses).......... 21.0 100.1 1.5 20.1 1.2 20.8
Total................................ 26.4% $ 125.8 5.8% $ 76.3 6.1% $ 104.9
---- --------- ---- --------- ---- ---------
Ending assets........................ 791.6 1,117.1 1,505.2
POLICY LOANS:
Investment income.................... 6.3% $ 39.6 6.6% $ 82.2 6.5% $ 80.2
Net realized gains (losses).......... 0.0 0.0 0.0 0.0 0.0 0.0
Total................................ 6.3% $ 39.6 6.6% $ 82.2 6.5% $ 80.2
---- --------- ---- --------- ---- ---------
Ending assets........................ 1,252.6 1,247.2 1,231.3
CASH & CASH EQUIVALENTS:
Investment income.................... 3.4% $ 6.9 5.8% $ 18.2 6.0% $ 22.4
Net realized gains (losses).......... 0.0 0.0 0.0 0.0 0.0 0.0
Total................................ 3.4% $ 6.9 5.8% $ 18.2 6.0% $ 22.4
---- --------- ---- --------- ---- ---------
Ending assets........................ 492.4 313.4 315.4
OTHER INVESTED ASSETS:
Investment income(4)................. 0.0% $ 0.0 1.3% $ 0.9 5.1% $ 3.4
Net realized gains (losses).......... 72.3 22.7 (2.2) (1.5) 15.6 10.5
Total................................ 72.3% $ 22.7 (0.9)% $ (0.6) 20.7% $ 13.9
---- --------- ---- --------- ---- ---------
Ending assets........................ 57.0 68.6 65.8
TOTAL BEFORE INVESTMENT EXPENSES:
Investment income(5)................. 7.3% $ 376.0 7.5% $ 770.6 7.6% $ 796.2
Net realized gains (losses).......... 3.0 157.6 0.7 72.1 0.7 75.9
Total................................ 10.3% $ 533.6 8.2% $ 842.7 8.3% $ 872.1
---- --------- ---- --------- ---- ---------
Ending assets........................ 10,521.0 10,278.6 10,379.0
Investment expenses net of offeree
income(6).......................... (0.4)% $ (18.3) (0.4)% $ (37.6) 0.4% $ (44.6)
TOTAL AFTER INVESTMENT EXPENSES:
Investment income(6)................. 6.9% $ 357.7 7.1% $ 733.0 7.2% $ 751.6
Net realized gains (losses).......... 3.0 157.6 0.7 72.1 0.7 75.9
Total................................ 9.9% $ 515.3 7.8% $ 805.1 7.9% $ 827.5
---- --------- ---- --------- ---- ---------
Ending assets........................ 10.521.0 10,278.6 10,379.0
Net unrealized gains (losses) on
fixed maturities................... 211.9 185.7 87.0
--------- --------- ---------
Total invested assets................ $10,732.9 $10,464.3 $10,466.0
</TABLE>
- ---------------
(1) Yields are based on annual average asset carrying values, excluding
unrealized gains (losses) in the fixed maturity asset category.
(2) Including net unrealized gains and losses in the determination of the total
yield on equity securities for the six month period ended June 30, 1998 and
the years ended December 31, 1997 and 1996 would have resulted in a total
yield of 24.2%, 28.0% and 34.4%, respectively, which would have resulted in
a total return on invested assets of 10.0%, 7.8% and 8.0% for the
aforementioned periods, respectively.
(3) Equity real estate income is shown net of operating expenses, depreciation
and minority interest.
(4) Excludes amounts referred to in (6) below.
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<PAGE> 134
(5) Total investment income includes non-cash income from amortization,
payment-in-kind distributions and undistributed equity earnings of $18.2
million, $49.6 million and $83.0 million for the six months ended June 30,
1998 and the years ended December 31, 1997 and 1996, respectively. In
addition, real estate investment income is shown net of depreciation of
$14.1 million, $45.1 million and $48.3 million for the aforementioned
periods, respectively.
(6) Includes mortgage servicing fee and other miscellaneous fee income of
approximately $1.8 million, $3.3 million and $3.5 million for the six months
ended June 30, 1998 and the year ended December 31, 1997 and 1996,
respectively.
FIXED MATURITIES
Fixed maturities consist of publicly traded debt securities, privately
placed debt securities and small amounts of redeemable preferred stock, and
represented 58.5%, 56.9% and 52.2% of total invested assets at June 30, 1998,
December 31, 1997, December 31, 1996, respectively.
The Securities Valuation Office of the NAIC evaluates the bond investments
of insurers for regulatory reporting purposes and assigns securities to one of
six investment categories called "NAIC Designations". The NAIC Designations
closely mirror the Nationally Recognized Securities Rating Organizations' credit
ratings for marketable bonds. NAIC Designations 1 and 2 include bonds considered
investment grade ("Baa" or higher by Moody's, or "BBB" or higher by S&P) by such
rating organizations. NAIC Designations 3 through 6 are referred to as below
investment grade ("Ba" or lower by Moody's, or "BB" or lower by S&P).
The following tables present the Company's private, public and total fixed
maturities by NAIC designation and the equivalent ratings of the Nationally
Recognized Securities Rating Organizations as of June 30, 1998 and December 31,
1997 and 1996, as well as the percentage, based on fair value, that each
designation comprises.
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<PAGE> 135
PUBLIC FIXED MATURITIES BY CREDIT QUALITY
($ IN MILLIONS)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------ ------------------------------ ------------------------------
NAIC RATING AGENCY AMORTIZED % OF ESTIMATED AMORTIZED % OF ESTIMATED AMORTIZED % OF ESTIMATED
RATING EQUIVALENT DESIGNATION COST TOTAL FAIR VALUE COST TOTAL FAIR VALUE COST TOTAL FAIR VALUE
------ ---------------------- --------- ----- ---------- --------- ----- ---------- --------- ----- ----------
($ IN MILLIONS)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Aaa/Aa/A.............. $2,314.3 71.4% $2,388.4 $2,251.2 72.1% $2,313.9 $1,806.6 73.5% $1,823.8
2 Baa................... 785.9 24.5 818.0 781.1 25.3 812.1 596.8 24.3 602.9
3 Ba.................... 131.3 3.9 131.5 69.8 2.2 71.6 53.6 2.2 54.3
4 B..................... 4.0 0.1 3.8 10.8 0.3 9.6 0 0.0 0
5 Caa and lower......... 0.0 0.0 0.0 0.0 0.0 0.0 0 0.0 0
6 In or near default.... 0.0 0.0 0.0 0.0 0.0 0.0 0 0.0 0
-------- ----- -------- -------- ----- -------- -------- ----- --------
Subtotal.............. 3,235.5 99.9 3,341.7 3,112.9 99.9 3,207.2 2,457.0 100.0 2,481.0
Redeemable Preferred
Stock................. 2.5 0.1 2.3 2.5 0.1 2.2 1.2 0.0 0.7
-------- ----- -------- -------- ----- -------- -------- ----- --------
Total Public Fixed
Maturities............ $3,238.0 100.0% $3,344.0 $3,115.4 100.0% $3,209.4 $2,458.2 100.0% $2,481.7
======== ===== ======== ======== ===== ======== ======== ===== ========
</TABLE>
PRIVATE FIXED MATURITIES BY CREDIT QUALITY
($ IN MILLIONS)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------ ------------------------------ ------------------------------
NAIC RATING AGENCY AMORTIZED % OF ESTIMATED AMORTIZED % OF ESTIMATED AMORTIZED % OF ESTIMATED
RATING EQUIVALENT DESIGNATION COST TOTAL FAIR VALUE COST TOTAL FAIR VALUE COST TOTAL FAIR VALUE
------ ---------------------- --------- ----- ---------- --------- ----- ---------- --------- ----- ----------
($ IN MILLIONS)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Aaa/Aa/A............. $ 981.5 35.1% $1,033.2 $1,059.4 40.5% $1,110.0 $1,074.7 37.2% $1,107.6
2 Baa.................. 1,606.1 56.4 1,656.8 1,369.2 51.4 1,408.3 1,547.3 52.9 1,576.0
3 Ba................... 197.9 6.9 202.0 170.4 6.3 173.0 236.1 7.9 235.9
4 B.................... 17.5 0.6 16.9 27.5 1.0 26.8 36.9 1.4 39.8
5 Caa and lower........ 0.0 0.0 0.0 6.4 0.2 6.7 3.1 0.1 2.8
6 In or near default... 8.1 0.3 8.1 10.7 0.4 10.7 16.4 0.5 16.0
-------- ----- -------- -------- ----- -------- -------- ----- --------
Subtotal............. 2,811.1 99.3 2,917.0 2,643.6 99.8 2,735.5 2,914.5 100.0 2,978.1
Redeemable Preferred
Stock................ 21.4 0.7 21.4 5.4 0.2 5.2 1.0 0.0 1.0
-------- ----- -------- -------- ----- -------- -------- ----- --------
Total Private Fixed
Maturities........... $2,832.5 100.0% $2,938.4 $2,649.0 100.0% $2,740.7 $2,915.5 100.0% $2,979.1
======== ===== ======== ======== ===== ======== ======== ===== ========
</TABLE>
TOTAL FIXED MATURITIES BY CREDIT QUALITY
($ IN MILLIONS)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------ ------------------------------ ------------------------------
NAIC RATING AGENCY AMORTIZED % OF ESTIMATED AMORTIZED % OF ESTIMATED AMORTIZED % OF ESTIMATED
RATING EQUIVALENT DESIGNATION COST TOTAL FAIR VALUE COST TOTAL FAIR VALUE COST TOTAL FAIR VALUE
------ ---------------------- --------- ----- ---------- --------- ----- ---------- --------- ----- ----------
($ IN MILLIONS)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Aaa/Aa/A.............. $3,295.8 54.5% $3,421.6 $3,310.6 57.6% $3,423.9 $2,881.3 53.7% $2,931.4
2 Baa................... 2,392.0 39.4 2,474.8 2,150.3 37.3 2,220.4 2,144.1 39.9 2,178.9
3 Ba.................... 329.2 5.3 333.5 240.2 4.1 244.6 289.7 5.3 290.2
4 B..................... 21.5 0.3 20.7 38.3 0.6 36.4 36.9 0.7 39.8
5 Caa and lower......... 0.0 0.0 0.0 6.4 0.1 6.7 3.1 0.1 2.8
6 In or near default.... 8.1 0.1 8.1 10.7 0.2 10.7 16.4 0.3 16.0
-------- ----- -------- -------- ----- -------- -------- ----- --------
Subtotal.............. 6,046.6 99.6 6,258.7 5,756.5 99.9 5,942.7 5,371.5 100.0 5,459.1
Redeemable Preferred
Stock................. 23.9 0.4 23.7 7.9 0.1 7.4 2.2 0.0 1.7
-------- ----- -------- -------- ----- -------- -------- ----- --------
Total Fixed
Maturities............ $6,070.5 100.0% $6,282.4 $5,764.4 100.0% $5,950.1 $5,373.7 100.0% $5,460.8
======== ===== ======== ======== ===== ======== ======== ===== ========
</TABLE>
134
<PAGE> 136
The Company utilizes its investments in privately placed fixed maturities
to enhance the overall value of the portfolio, increase diversification and
obtain higher yields than are possible with comparable quality public market
securities. These privately placed securities are also used to enhance cash flow
as a result of sinking fund payments. Generally, private placements provide the
Company with broader access to management information, strengthened negotiated
protective covenants, call protection features and, where applicable, a higher
level of collateral. They are, however, generally not freely tradable because of
restrictions imposed by federal and state securities laws and illiquid trading
markets.
At June 30, 1998, the percentage, based on estimated fair value, of total
public and private placement fixed maturities that were investment grade (NAIC
Designation 1 or 2) was 94.1% compared to 94.4% for December 31, 1997. The fixed
maturities portfolio was comprised, based on estimated fair value, of 53.2% in
public fixed maturities and 46.8% in private fixed maturities at June 30, 1998
and 53.9% in public fixed maturities and 46.1% in private fixed maturities at
December 31, 1997.
The Company reviews all fixed maturity securities at least once each
quarter and identifies investments that management concludes require additional
monitoring. Among the criteria are: (i) violation of financial covenants, (ii)
public securities trading at a substantial discount as a result of specific
credit concerns and (iii) other subjective factors relating to the issuer.
The Company defines problem securities in the fixed maturity category as
securities (i) as to which principal and/or interest payments are in default or
are to be restructured pursuant to commenced negotiations or (ii) issued by a
company that went into bankruptcy subsequent to the acquisition of such
securities. The fair value of problem fixed maturities was $28.1 million, $30.2
million and $30.9 million at June 30, 1998 and December 31, 1997 and 1996,
respectively. For the six month period ended June 30, 1998 and the years ended
December 31, 1997, 1996 and 1995 $0.8 million, $1.1 million, $5.1 million and
$6.5 million of interest income was not accrued on problem fixed maturities.
The Company defines potential problem securities in the fixed maturity
category as securities that are deemed to be experiencing significant operating
problems or difficult industry conditions. Typically these credits are
experiencing or anticipating liquidity constraints, having difficulty meeting
projections/budgets and would most likely be considered a below investment grade
risk. The fair value of potential problem fixed maturities were $64.6 million,
$86.2 million and $51.2 million at June 30, 1998, December 31, 1997 and 1996,
respectively.
The Company defines restructured securities in the fixed maturity category
as securities where a concession has been granted to the borrower related to the
borrower's financial difficulties that the Company would not have otherwise
considered. The Company restructures certain securities in instances where a
determination was made that greater economic value will be realized under the
new terms than through liquidation or other disposition. The terms of the
restructure generally involve some or all of the following characteristics: a
reduction in the interest rate, an extension of the maturity date and a partial
forgiveness of principal and/or interest. The fair value of restructured fixed
maturities were $0.0 million, $0.0 million and $6.5 million at June 30, 1998,
December 31, 1997 and 1996, respectively.
The following table sets forth the total carrying values of the Company's
fixed maturity portfolio, as well as its problem, potential problem and
restructured fixed maturities.
135
<PAGE> 137
PROBLEM, POTENTIAL PROBLEM AND
RESTRUCTURED FIXED MATURITIES AT FAIR VALUE
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- --------------------
1998 1997 1996
-------------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C>
Total fixed maturities (public and private)............ $6,282.4 $5,950.1 $5,460.8
======== ======== ========
Problem fixed maturities............................... $ 28.1 30.2 $ 30.9
Potential problem fixed maturities..................... 64.6 86.2 51.2
Restructured fixed maturities.......................... 0.0 0.0 6.5
-------- -------- --------
Total problem, potential problem & restructured fixed
maturities........................................... $ 92.7 $ 116.4 $ 88.6
======== ======== ========
Total problem, potential problem & restructured fixed
maturities as a percent of total fixed maturities.... $ 1.5% $ 2.0% 1.6%
======== ======== ========
</TABLE>
The Company believes that its long-term fixed maturities portfolio is well
diversified among industry types. The following tables set forth the fair value
of the Company's fixed maturities by industry category, as well as the
percentage of the total portfolio that each industry category comprises as of
June 30, 1998 and December 31, 1997 and 1996. The tables also show by industry
category the relative amounts of publicly traded and privately placed
securities.
FIXED MATURITIES PORTFOLIO BY INDUSTRY AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
PUBLICLY TRADED PRIVATELY PLACED TOTAL
------------------ ------------------ ------------------
FAIR FAIR FAIR
INDUSTRY CLASS VALUE % TOTAL VALUE % TOTAL VALUE % TOTAL
- -------------- -------- ------- -------- ------- -------- -------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Other Manufacturing............... $ 304.6 9.1% $ 551.7 18.8% $ 856.3 13.5%
Public Utilities.................. 507.8 15.2 288.1 9.8 795.9 12.7
Consumer Goods & Services......... 286.1 8.5 452.7 15.4 738.8 11.8
Non-Government -- Asset/ Mortgage
Backed.......................... 347.0 10.5 291.4 9.9 638.4 10.2
Financial Services................ 229.8 6.9 374.9 12.8 604.7 9.6
Transportation/Aerospace.......... 274.6 8.2 231.7 7.9 506.3 8.1
Energy............................ 234.9 7.0 246.7 8.4 481.6 7.7
Mortgage Backed-Government &
Agency(1)....................... 448.1 13.4 4.2 0.1 452.3 7.2
Nat Res/Manuf (non-energy)........ 112.7 3.4 243.5 8.3 356.2 5.7
Bank Holding Companies............ 225.2 6.7 31.7 1.1 256.9 4.1
Banks............................. 158.1 4.7 36.9 1.3 195.0 3.1
Government & Agency............... 130.4 3.9 3.1 0.1 133.5 2.1
Media/Adver/Printing.............. 35.1 1.0 84.7 2.9 119.8 1.9
Other............................. 47.3 1.4 42.5 1.4 89.8 1.4
Cable Television.................. -- 0.0 33.2 1.1 33.2 0.5
Redeemable Preferred Stock........ 2.3 0.1 21.4 0.7 23.7 0.4
-------- ----- -------- ----- -------- -----
Total................... $3,344.0 100.0% $2,938.4 100.0% $6,282.4 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
136
<PAGE> 138
FIXED MATURITIES PORTFOLIO BY INDUSTRY AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
PUBLICLY TRADED PRIVATELY PLACED TOTAL
------------------- ------------------- -------------------
FAIR FAIR FAIR
INDUSTRY CLASS VALUE % TOTAL VALUE % TOTAL VALUE % TOTAL
- -------------- ----- ------- ----- ------- ----- -------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Other Manufacturing.......... $ 315.3 9.9% $ 489.6 17.9% $ 804.9 13.5%
Public Utilities............. 464.2 14.5 283.3 10.3 747.5 12.6
Consumer Goods & Services.... 254.4 7.9 357.0 13.0 611.4 10.3
Non-Government -- Asset/
Mortgage Backed............ 326.5 10.2 281.9 10.3 608.4 10.2
Financial Services........... 249.7 7.8 334.6 12.2 584.3 9.8
Transportation/Aerospace..... 258.3 8.0 275.7 10.1 534.0 9.0
Energy....................... 238.6 7.4 267.2 9.7 505.8 8.5
Mortgage Backed-Government &
Agency(1).................. 469.9 14.6 4.4 0.2 474.3 8.0
Nat Res/Manuf (non-energy)... 77.1 2.4 214.6 7.8 291.7 4.9
Bank Holding Companies....... 208.4 6.5 31.7 1.2 240.1 4.0
Banks........................ 149.6 4.7 38.4 1.4 188.0 3.2
Government & Agency.......... 129.5 4.0 4.1 0.1 133.6 2.2
Media/Adver/Printing......... 33.3 1.0 81.1 3.0 114.4 1.9
Other........................ 32.4 1.0 43.6 1.6 76.0 1.3
Cable Television............. -- 0.0 28.3 1.0 28.3 0.5
Preferred Stock.............. 2.2 0.1 5.2 0.2 7.4 0.1
-------- ----- -------- ----- -------- -----
Total.............. $3,209.4 100.0% $2,740.7 100.0% $5,950.1 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
137
<PAGE> 139
FIXED MATURITIES PORTFOLIO BY INDUSTRY AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
PUBLICLY TRADED PRIVATELY PLACED TOTAL
------------------- ------------------- -------------------
FAIR FAIR FAIR
INDUSTRY CLASS VALUE % TOTAL VALUE % TOTAL VALUE % TOTAL
- -------------- ----- ------- ----- ------- ----- -------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Financial Services........... $ 210.1 8.5% $ 531.6 17.9% $ 741.7 13.7%
Public Utilities............. 352.9 14.2 297.5 10.0 650.4 11.9
Other Manufacturing.......... 178.9 7.2 471.0 15.8 649.9 11.9
Consumer Goods & Services.... 183.9 7.4 363.8 12.2 547.7 10.0
Non-Government -- Asset/
Mortgage Backed............ 279.9 11.3 224.8 7.6 504.7 9.2
Energy....................... 164.3 6.6 283.4 9.5 447.7 8.2
Mortgage Backed-Government &
Agency(1).................. 437.6 17.6 8.9 0.3 446.5 8.2
Transportation/Aerospace..... 84.4 3.4 278.2 9.3 362.6 6.6
Nat Res/Manuf (non-energy)... 49.5 2.0 256.5 8.6 306.0 5.6
Government & Agency.......... 207.6 8.4 5.2 0.2 212.8 3.9
Banks........................ 130.9 5.3 69.5 2.3 200.4 3.7
Bank Holding Companies....... 144.0 5.8 6.5 0.2 150.5 2.8
Media/Adver/Printing......... 22.2 0.9 105.7 3.6 127.9 2.3
Other........................ 34.8 1.4 36.2 1.2 71.0 1.3
Cable Television............. -- 0.0 39.3 1.3 39.3 0.7
Redeemable Preferred Stock... 0.7 0.0 1.0 0.0 1.7 0.0
-------- ----- -------- ----- -------- -----
Total.............. $2,481.7 100.0% $2,979.1 100.0% $5,460.8 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
- ---------------
(1) Mortgage-Backed-Government & Agency industry are bonds collateralized by
mortgages backed by the Federal National Mortgage Association, Government
National Mortgage Association, Federal Home Loan Mortgage Corp., or Canadian
Housing Authority.
At June 30, 1998, the Company's largest unaffiliated single concentration
of fixed maturities consists of $194.8 million of face amount of AEGON Notes
purchased in connection with the Group Pension Transaction. These AEGON Notes
represent approximately 1.8% of total invested assets at June 30, 1998 (see
"Business -- Group Pension Transaction"). No other individual non-government
issuer represents more than 0.6% of invested assets.
The Company held approximately $1,090.7 million, $1,082.7 million and
$951.1 million of mortgage-backed and asset-backed securities as of June 30,
1998 and December 31, 1997 and 1996, respectively. Of such amounts, $452.3
million, $474.3 million and $446.5 million or 41.5%, 43.8% and 46.9%,
respectively, represented agency-issued pass-through and collateralized mortgage
obligations ("CMOs") secured by Federal National Mortgage Association, Federal
Home Loan Mortgage Corporation, Government National Mortgage Association and
Canadian Housing Authority collateral. The balance of such amounts were
comprised of other types of mortgage-backed and asset-backed securities. The
Company believes that its active monitoring of its portfolio of mortgage-backed
securities and the limited extent of its holdings of more volatile types of
mortgage-backed securities mitigate the Company's exposure to losses from
prepayment risk associated with interest rate fluctuations for this portfolio.
At June 30, 1998 and December 31, 1997 and 1996 92.0%, 93.2% and 97.5% of the
Company's mortgage-backed and asset-backed securities were assigned an NAIC
Designation 1. In addition, the Company believes that it holds a relatively low
percentage of CMOs compared to other life insurance companies.
138
<PAGE> 140
The following table presents the types of mortgage-backed securities
("MBSs"), as well as other asset-backed securities, held by the Company as of
the dates indicated.
MORTGAGE AND ASSET-BACKED SECURITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- ------------------
1998 1997 1996
-------------- -------- ------
($ IN MILLIONS)
<S> <C> <C> <C>
CMOs..................................................... $ 537.9 $ 522.0 $481.0
Pass-through securities.................................. 54.6 106.4 96.6
Commercial MBSs.......................................... 80.6 122.1 100.0
Asset-backed securities.................................. 417.6 332.2 273.5
-------- -------- ------
Total MBS's and asset backed securities........ $1,090.7 $1,082.7 $951.1
======== ======== ======
</TABLE>
CMOs are purchased to diversify the portfolio risk characteristics from
primarily corporate credit risk to a mix of credit and cash flow risk. The
majority of the CMOs in the Company's investment portfolio have relatively low
cash flow variability. In addition, approximately 76% of the CMOs in the
portfolio have minimal credit risk because the underlying collateral is backed
by the Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation, or the Government National Mortgage Association. These CMOs offer
greater liquidity and higher yields than corporate debt securities of similar
credit quality and expected average lives.
The principal risks inherent in holding CMOs (as well as pass-through
securities) are prepayment and extension risks arising from changes in market
interest rates. In declining interest rate environments, the mortgages
underlying the CMOs are prepaid more rapidly than anticipated, causing early
repayment of the CMOs. In rising interest rate environments, the underlying
mortgages are prepaid at a slower rate than anticipated, causing CMO principal
repayments to be extended. Although early CMO repayments may result in
acceleration of income from recognition of any unamortized discount, the
proceeds typically are reinvested at lower current yields, resulting in a net
reduction of future investment income.
The Company manages this prepayment and extension risk by investing in CMO
tranches that provide for greater stability of cash flows. The mix of CMO
tranches was as follows as of the dates indicated.
COLLATERALIZED MORTGAGE OBLIGATIONS BY TRANCHE
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- ------------------
1998 1997 1996
-------------- ------- -------
($ IN MILLIONS)
<S> <C> <C> <C>
Planned Amortization Class................................ $361.8 $268.1 $252.9
Sequential................................................ 159.2 234.8 207.6
Target Amortization Class................................. 16.9 19.1 20.5
------ ------ ------
Total CMO's..................................... $537.9 $522.0 $481.0
====== ====== ======
</TABLE>
The Planned Amortization Class ("PAC") tranche is structured to provide
more certain cash flows to the investor and therefore is subject to less
prepayment and extension risk than other CMO tranches. In general, the Company's
PACs are structured to provide average life stability for increases and
decreases in interest rates of 100 to 200 basis points. PACs derive their
stability from two factors: (i) early repayments are applied first to other
tranches to preserve the PACs' originally scheduled cash flows as much as
possible and (ii) cash flows applicable to other tranches are applied first to
the PAC if the PACs' actual cash flows are received later than originally
anticipated.
139
<PAGE> 141
The prepayment and extension risk associated with a Sequential tranche can
vary as interest rates fluctuate, since this tranche is not supported by other
tranches. The Target Amortization Class tranche has protection similar to PACs
in decreasing interest rate environments, but has minimal protection in
increasing rate environments.
The majority of the securities contained in the Company's CMO portfolio are
traded in the open market. As such, the Company obtains market prices from
outside vendors. Any security price not received from such vendors is obtained
from the originating broker or internally calculated.
Asset backed securities ("ABS") are purchased both to diversify the overall
credit risks of the fixed maturity portfolio and to provide attractive returns.
The ABS portfolio is diversified both by type of asset and by issuer. The
largest asset class exposure in the ABS portfolio is to credit card receivables.
These are comprised of pools of both general purpose credit card receivables
such as Visa and Mastercard and private label credit card receivable pools.
Excluding the exposures to home equity loans (which represented 3.9%, 6.9% and
8.5%, of the ABS portfolio as of June 30, 1998 and December 31, 1997 and 1996,
respectively), the ABS portfolio is in general insensitive to changes in
interest rates. As of June 30, 1998 and December 31, 1997 and 1996,
respectively, the ABS portfolio did not contain any pools of assets outside of
the United States.
The following table presents the types of ABS held by the Company as of the
dates indicated.
ASSET-BACKED SECURITIES BY TYPE
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- ------------------
1998 1997 1996
-------------- ------- -------
($ IN MILLIONS)
<S> <C> <C> <C>
Credit cards.............................................. $149.4 $150.1 $124.0
Automobile receivables.................................... 47.9 48.6 43.3
Collateralized bond obligations/Collateralized loan
obligations............................................. 47.2 26.3 0.0
Franchisee receivables.................................... 31.8 19.5 20.8
Home equity............................................... 16.1 22.8 23.2
Lease receivables......................................... 28.6 13.4 15.8
Miscellaneous............................................. 96.6 51.5 46.4
------ ------ ------
Total ABS....................................... $417.6 $332.2 $273.5
====== ====== ======
</TABLE>
140
<PAGE> 142
The amortized cost and estimated fair value of fixed maturity securities,
by contractual maturity dates, (excluding scheduled sinking funds) as of June
30, 1998 and December 31, 1997 and 1996 are as follows:
FIXED MATURITY SECURITIES BY CONTRACTUAL MATURITY DATES
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998 AS OF DECEMBER 31, 1997 AS OF DECEMBER 31, 1996
----------------------- ----------------------- -----------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE COST FAIR VALUE
--------- ---------- --------- ---------- --------- ----------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Due in one year or
less................. $ 124.4 $ 125.1 $ 58.6 $ 58.5 $ 178.5 $ 180.2
Due after one year
through five years... 1,411.7 1,438.6 1,250.3 1,273.0 990.0 1,014.7
Due after five years
through ten years.... 2,344.3 2,441.6 2,412.3 2,499.7 2,471.5 2,500.0
Due after ten years.... 1,130.1 1,186.4 989.4 1,036.2 789.9 814.7
-------- -------- -------- -------- -------- --------
Subtotal............. 5,010.5 5,191.7 4,710.6 4,867.4 4,429.9 4,509.6
Mortgage-backed and
other asset-backed
securities........... 1,060.0 1,090.7 1,053.8 1,082.7 943.9 951.2
-------- -------- -------- -------- -------- --------
Total........ $6,070.5 $6,282.4 $5,764.4 $5,950.1 $5,373.8 $5,460.8
======== ======== ======== ======== ======== ========
</TABLE>
MORTGAGE LOANS
Mortgage loans comprise 13.8%, 13.7% and 15.1% of total invested assets at
June 30, 1998 and December 31, 1997 and 1996, respectively. Mortgage loans
consist of commercial, agricultural and residential loans. As of June 30, 1998
and December 31, 1997 and 1996, commercial mortgage loans comprised $892.1
million, $914.9 million and $1,057.9 million or 60.3%, 64.0% and 66.9% of total
mortgage loan investments, respectively. Agricultural loans comprised $584.5
million, $512.7 million and $521.1 million or 39.5%, 35.8% and 32.9% of total
mortgage loans, and residential mortgages comprised $2.2 million, $2.5 million
and $3.3 million or 0.2%, 0.2% and 0.2% of total mortgage loan investments at
the dates indicated.
In 1992, the Company discontinued making new commercial mortgage loans,
except to honor outstanding commitments or safeguard the values of existing
investments. In 1996, due to improving market conditions, the need to maintain a
diversified investment portfolio and advantageous yields, the Company started to
originate new commercial mortgage loans. New commercial mortgage loan
originations aggregated $93.8 million, $79.9 million and $54.3 million for the
six months ended June 30, 1998 and the years ended December 31, 1997 and 1996,
respectively.
141
<PAGE> 143
COMMERCIAL MORTGAGE LOANS
Following is a summary of the Company's commercial mortgage loans by
geographic area and property type as of June 30, 1998 and December 31, 1997 and
1996.
COMMERCIAL MORTGAGE LOAN DISTRIBUTION BY GEOGRAPHIC AREA AND BY TYPE
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
- -----------------------------------------------------------------------------------------------------------------------
GEOGRAPHIC AREA PROPERTY TYPE
- --------------------------------------------------------- --------------------------------------------------------
NUMBER CARRYING % OF NUMBER CARRYING % OF
REGION OF LOANS VALUE TOTAL TYPE OF LOANS VALUE TOTAL
------ -------- --------------- ----- ---- -------- --------------- -----
($ IN MILLIONS) ($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Southeast............ 33 $323.5 36.2% Office.............. 64 $582.3 65.3%
Northeast............ 41 309.9 34.7 Retail.............. 23 119.0 13.4
West................. 15 122.2 13.7 Industrial.......... 14 59.1 6.6
Mountain............. 9 71.2 8.0 Mixed Use........... 10 43.0 4.8
Midwest.............. 11 44.3 5.0 Apartments.......... 5 34.0 3.8
Southwest............ 12 21.0 2.4 Hotel............... 2 29.5 3.3
Other............... 3 25.2 2.8
--- ------ ----- --- ------ -----
Total....... 121 $892.1 100.0% Total............... 121 $892.1 100.0%
=== ====== ===== === ====== =====
</TABLE>
COMMERCIAL MORTGAGE LOAN DISTRIBUTION BY GEOGRAPHIC AREA AND BY TYPE
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------
GEOGRAPHIC AREA PROPERTY TYPE
- --------------------------------------------------------- --------------------------------------------------------
NUMBER CARRYING % OF NUMBER CARRYING % OF
REGION OF LOANS VALUE TOTAL TYPE OF LOANS VALUE TOTAL
------ -------- --------------- ----- ---- -------- --------------- -----
($ IN MILLIONS) ($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Northeast............ 53 $367.8 40.2% Office.............. 70 $597.7 65.3%
Southeast............ 33 323.0 35.3 Retail.............. 29 144.1 15.7
West................. 14 110.5 12.1 Industrial.......... 13 53.6 5.9
Mountain............. 9 54.9 6.0 Apartments.......... 9 51.1 5.6
Midwest.............. 11 41.4 4.5 Other............... 3 26.0 2.9
Southwest............ 12 17.3 1.9 Mixed Use........... 7 25.5 2.8
Hotel............... 1 16.9 1.8
--- ------ ----- --- ------ -----
Total....... 132 $914.9 100.0% Total............... 132 $914.9 100.0%
=== ====== ===== === ====== =====
</TABLE>
COMMERCIAL MORTGAGE LOAN DISTRIBUTION BY GEOGRAPHIC AREA AND BY TYPE
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------------------------
GEOGRAPHIC AREA PROPERTY TYPE
- --------------------------------------------------------- ---------------------------------------------------------
NUMBER CARRYING % OF NUMBER CARRYING % OF
REGION OF LOANS VALUE TOTAL TYPE OF LOANS VALUE TOTAL
------ -------- --------------- ----- ---- -------- --------------- -----
($ IN MILLIONS) ($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Southeast............ 45 $ 380.5 36.0% Office............... 78 $ 652.7 61.7%
Northeast............ 56 377.6 35.7 Retail............... 41 212.6 20.1
West................. 21 183.4 17.3 Industrial........... 19 67.7 6.4
Mountain............. 12 52.1 4.9 Apartments........... 10 46.4 4.4
Midwest.............. 11 43.2 4.1 Other................ 4 29.3 2.7
Southwest............ 14 21.1 2.0 Hotel................ 3 28.5 2.7
Mixed Use............ 4 20.7 2.0
--- -------- ----- --- -------- -----
Total....... 159 $1,057.9 100.0% Total................ 159 $1,057.9 100.0%
=== ======== ===== === ======== =====
</TABLE>
142
<PAGE> 144
Below is a summary of the changes in the commercial mortgage portfolio for
the six month period ended June 30, 1998 and the years ended December 31, 1997
and 1996.
COMMERCIAL MORTGAGE LOANS ASSET FLOWS
<TABLE>
<CAPTION>
AS OF AND FOR AS OF AND FOR
THE SIX MONTHS THE YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
----------------- --------------------
1998 1997 1996
----------------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
Beginning balance.................................... $914.9 $1,057.9 $1,227.1
Plus: New loan originations......................... 93.8 79.9 54.3
Other additions............................... 9.7 14.4 8.9
Less: Scheduled principal payments.................. 64.7 111.7 115.7
Prepayments................................... 57.4 108.3 87.6
Mortgages foreclosed.......................... 0.0 13.7 28.8
Other......................................... 4.2 3.6 0.3
------ -------- --------
Ending balance....................................... $892.1 $ 914.9 $1,057.9
====== ======== ========
</TABLE>
The total number of commercial mortgage loans outstanding at June 30, 1998
and December 31, 1997 and 1996 was 121, 132 and 159 with an average loan size of
$7.4 million, $6.9 million and $6.7 million, respectively. The largest amount
loaned on any single property at such dates aggregated $46.2 million, $46.2
million and $45.9 million and represented less than 0.5%, 0.5% and 0.5% of
general account invested assets, respectively. At such dates, amounts loaned on
6, 5 and 7 properties were $20 million or greater, representing in the aggregate
25.3%, 22.4% and 25.5% of the total carrying value of the commercial mortgage
portfolio at such dates. Total mortgage loans to the five largest borrowers
accounted in the aggregate for approximately 34.8%, 32.4% and 30.5% of the total
carrying value of the commercial mortgage portfolio at June 30, 1998 and
December 31, 1997 and 1996, and less than 2.9%, 2.9% and 3.2% of total invested
assets at such dates. All such loans were performing.
The Company's commercial mortgage loan portfolio is managed by a group of
experienced real estate professionals. These professionals monitor the
performance of the loan collateral, physically inspect properties, collect
financial information from borrowers and keep in close contact with borrowers
and the local broker communities to assess the market conditions and evaluate
the impact of such conditions on property cash flows. The Company's real estate
professionals identify problem and potential problem mortgage assets and develop
workout strategies to deal with borrowers' financial weakness, whether by
foreclosing on properties to prevent a deterioration in collateral value, or by
restructuring mortgages with temporary cash flow difficulties.
Of the $106.2 million, $195.5 million and $276.3 million in maturing loans
during the six months ended June 30, 1998 and the years ended December 31, 1997
and 1996, 11.8%, 13.9% and 12.9% were refinanced, 44.7%, 48.1% and 40.4% were
paid off, 0.0%, 6.9% and 7.4% were foreclosed, and 0.0%, 5.1% and 7.3% were
restructured. Of the $892.1 million of outstanding commercial mortgage loans in
the Company's investment portfolio at June 30, 1998, $153.8 million, $60.5
million and $84.6 million are scheduled to mature in 1998, 1999 and 2000,
respectively.
143
<PAGE> 145
The following table presents the disposition of maturities during the six
month period ended June 30, 1998 and years ended December 31, 1997 and 1996.
DISPOSITIONS OF SCHEDULED MATURITIES OF COMMERCIAL MORTGAGE LOANS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------ ----------------
1998 1997 1996
------------------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C>
Repayment.............................................. $ 47.4 $ 94.0 $111.5
Extension(1)........................................... 23.9 43.6 56.5
Refinance at market.................................... 12.5 27.1 35.8
Foreclosure............................................ 0.0 13.4 20.5
Restructure below market............................... 0.0 10.0 20.1
In process of negotiation.............................. 22.2 4.7 4.9
Borrower extension(2).................................. 0.0 1.6 27.0
Principal write-off.................................... 0.2 1.1 0.0
------ ------ ------
Total........................................ $106.2 $195.5 $276.3
====== ====== ======
</TABLE>
- ---------------
(1) Consists of loans which have had their maturity date extended for a period
of less than one year.
(2) Consists of loans which have had their maturity date extended pursuant to
the borrower's option as provided by the loan documents.
The following table presents the Company's commercial mortgage loan
maturity profile for the periods indicated.
COMMERCIAL MORTGAGE LOAN PORTFOLIO MATURITY PROFILE
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
---------------- -----------------------------------
1998 1997 1996
---------------- ---------------- ----------------
($ IN MILLIONS)
CARRYING % OF CARRYING % OF CARRYING % OF
VALUE TOTAL VALUE TOTAL VALUE TOTAL
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
1 year or less.................................. $176.5 19.8% $220.1 24.0% $ 195.5 18.4%
Over 1 year but less than or equal to 2 years... 75.4 8.5 79.6 8.7 187.6 17.7
Over 2 years but less than or equal to 3
years......................................... 81.2 9.1 86.5 9.5 78.8 7.5
Over 3 years but less than or equal to 4
years......................................... 80.5 9.0 62.0 6.8 108.9 10.3
Over 4 years but less than or equal to 5
years......................................... 74.7 8.4 98.4 10.8 62.2 5.9
Over 5 years but less than or equal to 6
years......................................... 44.2 5.0 62.3 6.8 65.7 6.2
Over 6 years but less than or equal to 7
years......................................... 46.8 5.2 47.9 5.2 97.6 9.3
Over 7 years but less than or equal to 8
years......................................... 47.7 5.3 25.9 2.8 48.2 4.5
Over 8 years but less than or equal to 9
years......................................... 30.1 3.4 44.6 4.9 33.5 3.2
Over 9 years but less than or equal to 10
years......................................... 31.6 3.5 33.6 3.7 39.1 3.7
Over 10 years................................... 203.4 22.8 154.0 16.8 140.8 13.3
------ ----- ------ ----- -------- -----
Total.................................. $892.1 100.0% $914.9 100.0% $1,057.9 100.0%
====== ===== ====== ===== ======== =====
</TABLE>
PROBLEM, POTENTIAL PROBLEM AND RESTRUCTURED COMMERCIAL
MORTGAGES. Commercial mortgage loans are stated at their unpaid principal
balances, net of valuation allowances and writedowns for impairment. The Company
provides valuation allowances for commercial mortgage loans considered to be
impaired. Mortgage loans are considered impaired when, based on current
information and events, it is probable that the Company will be unable to
collect all amounts due according to the
144
<PAGE> 146
contractual terms of the loan agreement. When the Company determines that a loan
is impaired, a valuation allowance for loss is established for the excess of the
carrying value of the mortgage loan over its estimated fair value. Estimated
fair value is based on either the present value of expected future cash flows
discounted at the loan's original effective interest rate, the loan's observable
market price or the fair value of the collateral. The provision for loss is
reported as a realized loss on investment.
The Company reviews its mortgage loan portfolio and analyzes the need for a
valuation allowance for any loan which is delinquent for 60 days or more, in
process of foreclosure, restructured, on "watchlist", or which currently has a
valuation allowance. Loans which are delinquent and loans in process of
foreclosure are categorized by the Company as "problem" loans. Loans with
valuation allowances, but which are not currently delinquent, and loans which
are on watchlist are categorized by the Company as "potential problem" loans.
Loans for which the original terms of the mortgages have been modified or for
which interest or principal payments have been deferred are categorized by the
Company as "restructured" loans.
The carrying value of commercial mortgage loans at June 30, 1998 was $892.1
million, which amount is net of valuation allowances aggregating $72.3 million
which represents management's best estimate of cumulative impairments at such
date. However, there can be no assurance that increases in valuation allowances
will not be necessary. Any such increases may have a material adverse effect on
the Company's financial position and results of operations.
At June 30, 1998, the carrying value of problem, potential problem and
restructured loans was $11.9 million, $81.1 million and $218.6 million,
respectively, net of valuation allowances of $2.3 million, $15.1 million and
$40.2 million, respectively.
Gross interest income on restructured commercial mortgage loan balances
that would have been recorded in accordance with the loans' original terms was
approximately $12.1 million, $25.0 million and $24.3 million at June 30, 1998,
December 31, 1997 and 1996, respectively. As a result of the restructurings, the
gross interest income recognized in net income at June 30, 1998, December 31,
1997 and 1996, respectively, was $8.4, $18.6 million and $18.1 million.
The following table presents the carrying amounts of problem, potential
problem and restructured commercial mortgages relative to the carrying value of
all commercial mortgages as of the dates indicated. The table also presents the
valuation allowances and writedowns recorded by the Company relative to
commercial mortgages defined as problem, potential problem and restructured as
of each of the aforementioned dates.
145
<PAGE> 147
PROBLEM, POTENTIAL PROBLEM AND RESTRUCTURED COMMERCIAL
MORTGAGES AT CARRYING VALUE
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31,
JUNE 30, ------------------
1998 1997 1996
-------- ------ --------
($ IN MILLIONS)
<S> <C> <C> <C>
Total commercial mortgages.................................. $892.1 $914.9 $1,057.9
====== ====== ========
Problem commercial mortgages(1)............................. $ 11.9 $ 11.3 $ 16.3
Potential problem commercial mortgages...................... 81.1 74.7 95.6
Restructured commercial mortgages........................... 218.6 225.6 228.7
------ ------ --------
Total problem, potential problem & restructured commercial
mortgages................................................. $311.6 $311.6 $ 340.6
====== ====== ========
Total problem, potential problem and restructured commercial
mortgages as a percent of total commercial mortgages...... 34.9% 34.1% 32.2%
====== ====== ========
Valuation allowances/writedowns(2):
Problem loans............................................. $ 2.3 $ 2.1 $ 3.0
Potential problem loans................................... 15.1 15.8 33.0
Restructured loans........................................ 40.2 40.9 32.6
------ ------ --------
Total valuation allowances/writedowns(2).................... $ 57.6 $ 58.8 $ 68.6
====== ====== ========
Total valuation allowances as a percent of problem,
potential problem and restructured commercial mortgages at
carrying value before valuation allowances and
writedowns................................................ 15.6% 15.9% 16.8%
====== ====== ========
</TABLE>
- ---------------
(1) Problem commercial mortgages included delinquent mortgage loans of $7.0
million, $0.0 million and $4.5 million at June 30, 1998 and December 31,
1997 and 1996, respectively, and mortgage loans in foreclosure of $4.9
million, $11.3 million and $11.8 million at such dates, respectively.
(2) Includes impairment writedowns recorded prior to the adoption of FASB No.
114, Accounting by Creditors for Impairment of a Loan, of $27.3 million,
$27.4 million, and $29.9 million at June 30, 1998 and December 31, 1997 and
1996, respectively (see Note 1 to Selected Consolidated Financial
Information).
In addition to valuation allowances and impairments writedowns recorded on
specific commercial mortgage loans classified as problem, potential problem, and
restructured mortgage loans, the Company records a non-specific estimate of
expected losses on all other such mortgage loans based on its historical loss
experience for such investments. As of June 30, 1998 and December 31, 1997 and
1996, such reserves were $14.7 million, $17.2 million, and $21.9 million,
respectively.
146
<PAGE> 148
The following tables present the distribution of problem, potential problem
and restructured commercial mortgages by property type and by state as of June
30, 1998 and December 31, 1997 and 1996.
PROBLEM COMMERCIAL MORTGAGES BY PROPERTY TYPE AND BY STATE
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------
AS OF JUNE 30, 1998 1997 1996
--------------------------- --------------------------- ---------------------------
NUMBER CARRYING % OF NUMBER CARRYING % OF NUMBER CARRYING % OF
OF LOANS VALUE TOTAL OF LOANS VALUE TOTAL OF LOANS VALUE TOTAL
-------- -------- ----- -------- -------- ----- -------- -------- -----
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROPERTY TYPE:
Retail................. 1 $ 7.0 58.8% 0 $ 0.0 0.0% 1 $ 3.5 21.1%
Office................. 1 4.9 41.2 1 4.9 43.4 2 6.0 36.9
Apartments............. 0 0.0 0.0 1 6.4 56.6 1 1.0 6.3
Mixed use.............. 0 0.0 0.0 0 0.0 0.0 1 5.8 35.7
---- ----- ----- ---- ----- ----- ---- ----- -----
Total.................. 2 $11.9 100.0% 2 $11.3 100.0% 5 $16.3 100.0%
==== ===== ===== ==== ===== ===== ==== ===== =====
STATE:
New York............... 1 $ 7.0 58.8% 0 $ 0.0 0.0% 1 $ 5.8 35.7%
Ohio................... 1 4.9 41.2 1 4.9 43.4 0 0.0 0.0
Massachusetts.......... 0 0.0 0.0 1 6.4 56.6 0 0.0 0.0
California............. 0 0.0 0.0 0 0.0 0.0 1 5.8 35.7
Vermont................ 0 0.0 0.0 0 0.0 0.0 1 3.5 21.1
Louisiana.............. 0 0.0 0.0 0 0.0 0.0 1 1.0 6.3
Montana................ 0 0.0 0.0 0 0.0 0.0 1 0.2 1.2
---- ----- ----- ---- ----- ----- ---- ----- -----
Total.................. 2 $11.9 100.0% 2 $11.3 100.0% 5 $16.3 100.0%
==== ===== ===== ==== ===== ===== ==== ===== =====
</TABLE>
POTENTIAL PROBLEM COMMERCIAL MORTGAGES
BY PROPERTY TYPE AND BY STATE
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------
AS OF JUNE 30, 1998 1997 1996
--------------------------- --------------------------- ---------------------------
NUMBER CARRYING % OF NUMBER CARRYING % OF NUMBER CARRYING % OF
OF LOANS VALUE TOTAL OF LOANS VALUE TOTAL OF LOANS VALUE TOTAL
-------- -------- ----- -------- -------- ----- -------- -------- -----
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROPERTY TYPE:
Office................. 4 $63.3 78.1% 6 $65.8 88.1% 8 $81.1 84.8%
Retail................. 3 17.8 21.9 2 8.9 11.9 2 14.5 15.2
---- ----- ----- ---- ----- ----- ---- ----- -----
Total.................. 7 $81.1 100.0% 8 $74.7 100.0% 10 $95.6 100.0%
==== ===== ===== ==== ===== ===== ==== ===== =====
STATE:
New York............... 4 $35.4 43.7% 4 $31.2 41.9% 4 $31.8 33.3%
District of Columbia... 1 33.5 41.3 1 33.5 44.8 2 42.8 44.7
New Jersey............. 1 8.2 10.1 1 8.2 10.9 1 8.1 8.5
Wisconsin.............. 1 4.0 4.9 0 0.0 0.0 0 0.0 0.0
Florida................ 0 0.0 0.0 1 1.1 1.5 1 1.2 1.3
Vermont................ 0 0.0 0.0 1 0.7 0.9 0 0.0 0.0
Massachusetts.......... 0 0.0 0.0 0 0.0 0.0 1 6.4 6.7
California............. 0 0.0 0.0 0 0.0 0.0 1 5.3 5.5
---- ----- ----- ---- ----- ----- ---- ----- -----
Total.................. 7 $81.1 100.0% 8 $74.7 100.0% 10 $95.6 100.0%
==== ===== ===== ==== ===== ===== ==== ===== =====
</TABLE>
147
<PAGE> 149
RESTRUCTURED COMMERCIAL MORTGAGES
BY PROPERTY TYPE AND BY STATE
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------
AS OF JUNE 30, 1998 1997 1996
--------------------------- --------------------------- ---------------------------
NUMBER CARRYING % OF NUMBER CARRYING % OF NUMBER CARRYING % OF
OF LOANS VALUE TOTAL OF LOANS VALUE TOTAL OF LOANS VALUE TOTAL
-------- -------- ----- -------- -------- ----- -------- -------- -----
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROPERTY TYPE:
Office................. 19 $169.8 77.7% 19 $174.2 77.2% 19 $173.7 76.0%
Retail................. 5 28.1 12.9 6 29.2 13.0 7 30.6 13.4
Apartments............. 1 11.2 5.1 1 11.2 4.9 2 13.3 5.8
Industrial............. 1 9.5 4.3 1 9.5 4.2 1 9.5 4.1
Mixed use.............. 0 0.0 0.0 1 1.5 0.7 1 1.6 0.7
---- ------ ----- ---- ------ ----- ---- ------ -----
Total.................. 26 $218.6 100.0% 28 $225.6 100.0% 30 $228.7 100.0%
==== ====== ===== ==== ====== ===== ==== ====== =====
STATE:
New York............... 11 $100.3 45.9% 12 $101.7 45.1% 12 $101.9 44.6%
Maryland............... 2 37.5 17.2 2 37.5 16.6 3 42.1 18.4
District of Columbia... 3 21.6 9.9 3 21.8 9.7 2 15.5 6.8
Alabama................ 1 11.2 5.2 1 11.2 4.9 1 11.1 4.8
California............. 1 9.5 4.3 1 9.5 4.2 1 9.5 4.1
Texas.................. 3 9.2 4.2 3 9.2 4.1 3 9.6 4.2
Arizona................ 1 7.7 3.5 1 7.7 3.4 1 7.7 3.4
Colorado............... 1 7.2 3.3 1 7.4 3.3 1 7.6 3.3
Florida................ 1 7.1 3.2 1 7.1 3.2 1 7.1 3.1
South Carolina......... 1 6.4 2.9 1 6.4 2.8 1 6.4 2.8
Louisiana.............. 1 0.9 0.4 1 0.9 0.4 2 2.9 1.3
Connecticut............ 0 0.0 0.0 1 5.2 2.3 0 0.0 0.0
Ohio................... 0 0.0 0.0 0 0.0 0.0 1 6.1 2.7
Georgia................ 0 0.0 0.0 0 0.0 0.0 1 1.2 0.5
---- ------ ----- ---- ------ ----- ---- ------ -----
Total.................. 26 $218.6 100.0% 28 $225.6 100.0% 30 $228.7 100.0%
==== ====== ===== ==== ====== ===== ==== ====== =====
</TABLE>
AGRICULTURAL MORTGAGE LOANS
The carrying value of the Company's agricultural mortgage loans was $584.5
million $512.7 million and $521.1 million at June 30, 1998 and December 31, 1997
and 1996, representing 39.5%, 35.8% and 32.9% of total mortgage assets and 5.5%,
4.9% and 5.1% of general account invested assets at such dates, respectively.
The agricultural mortgage portfolio is diversified both geographically and by
type of product. The security for these loans includes row crops, permanent
plantings, dairies, ranches and timber tracts. Due to strong agricultural
markets and advantageous yields, the Company expects to continue to invest in
agricultural mortgage investments. Less than 0.8%, 0.5% and 0.8% of total
agricultural loans outstanding at June 30, 1998 and December 31, 1997 and 1996
were delinquent or in process of foreclosure. Following is a summary of
agricultural mortgage loans by state which were held by the Company at the dates
indicated.
148
<PAGE> 150
AGRICULTURAL MORTGAGE LOANS BY STATE
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------
AS OF JUNE 30, 1998 1997 1996
--------------------------- --------------------------- ---------------------------
NUMBER CARRYING % OF NUMBER CARRYING % OF NUMBER CARRYING % OF
OF LOANS VALUE TOTAL OF LOANS VALUE TOTAL OF LOANS VALUE TOTAL
-------- -------- ----- -------- -------- ----- -------- -------- -----
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATE:
California............. 130 $109.5 18.7% 122 $ 96.1 18.7% 119 $ 91.6 17.6%
Washington............. 194 81.6 14.0 185 67.9 13.2 200 76.0 14.6
Idaho.................. 126 60.3 10.3 118 55.6 10.9 100 69.4 13.3
Texas.................. 107 59.4 10.2 104 52.2 10.2 113 52.4 10.1
Oregon................. 114 55.6 9.5 104 38.6 7.5 86 37.7 7.2
Georgia................ 57 38.2 6.5 54 35.1 6.8 56 30.9 5.9
Missouri............... 124 38.2 6.5 120 31.4 6.1 127 30.5 5.8
Arizona................ 47 31.6 5.4 47 29.6 5.8 50 33.9 6.5
Montana................ 52 25.8 4.4 54 26.1 5.1 55 26.5 5.1
Colorado............... 40 14.1 2.4 43 15.8 3.1 42 17.0 3.3
Florida................ 24 12.6 2.2 30 15.3 3.0 34 17.0 3.3
New Mexico............. 17 11.6 2.0 17 12.0 2.3 18 11.0 2.1
Arkansas............... 19 8.6 1.5 -- -- -- -- -- --
Mississippi............ 9 7.3 1.3 6 5.4 1.1 2 0.2 0.0
Illinois............... 16 4.8 0.8 15 4.1 0.8 20 5.0 1.0
All others (no other
state more than
0.8%)................ 87 25.3 4.3 105 27.5 5.4 109 22.0 4.2
----- ------ ----- ----- ------ ----- ----- ------ -----
Total......... 1,163 $584.5 100.0% 1,124 $512.7 100.0% 1,131 $521.1 100.0%
===== ====== ===== ===== ====== ===== ===== ====== =====
</TABLE>
PROBLEM, POTENTIAL PROBLEM AND RESTRUCTURED AGRICULTURAL MORTGAGES. The
Company defines problem, potential problem and restructured agricultural
mortgages in the same manner as it does for commercial mortgages. The following
table presents the carrying amounts of problem, potential problem and
restructured agricultural mortgages relative to the carrying value of all
agricultural mortgages as of the dates indicated. The table also presents the
valuation allowances established by the Company relative to agricultural
mortgages defined as problem, potential problem and restructured as of each of
the aforementioned dates indicated.
149
<PAGE> 151
PROBLEM, POTENTIAL PROBLEM AND RESTRUCTURED AGRICULTURAL
MORTGAGES AT CARRYING VALUE
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- ------------------
1998 1997 1996
-------------- ------- -------
($ IN MILLIONS)
<S> <C> <C> <C>
Total agricultural mortgages.............................. $584.5 $512.7 $521.1
====== ====== ======
Problem agricultural mortgages(1)......................... $ 4.2 $ 2.1 $ 4.0
Potential problem agricultural mortgages.................. 2.2 2.6 2.2
Restructured agricultural mortgages....................... 11.3 17.2 19.6
------ ------ ------
Total problem, potential problem & restructured
agricultural mortgages.................................. $ 17.7 $ 21.9 $ 25.8
====== ====== ======
Total problem, potential problem and restructured
agricultural mortgages as a percent of total
agricultural mortgages.................................. 3.0% 4.3% 5.0%
====== ====== ======
Valuation allowances/writedowns:
Problem loans........................................... $ 0.0 $ 0.9 $ 0.5
Potential problem loans................................. 0.1 0.1 0.1
Restructured loans...................................... 0.4 0.4 0.6
------ ------ ------
Total valuation allowances/writedowns..................... $ 0.5 $ 1.4 $ 1.2
====== ====== ======
Total valuation allowances as a percent of problem,
potential problem and restructured agricultural
mortgages at carrying value before valuation allowances
and writedowns.......................................... 2.7% 6.0% 4.4%
====== ====== ======
</TABLE>
- ---------------
(1) Problem agricultural mortgages included delinquent mortgage loans of $4.2
million, $1.2 million, and $0.6 million at June 30, 1998 and December 31,
1997 and 1996, respectively, and mortgage loans in the process of
foreclosure of $0.0 million, $0.9 million, and $3.4 million at such dates,
respectively.
In addition to valuation allowances and impairments writedowns recorded on
specific agricultural mortgage loans classified as problem, potential problem,
and restructured mortgage loans, the Company records a non-specific estimate of
expected losses on all other agricultural mortgage loans based on its historical
loss experience for such investments. As of June 30, 1998 and December 31, 1997
and 1996, such reserves were $5.7 million, $5.0 million, and $5.0 million,
respectively.
As illustrated in the table above, at June 30, 1998 and December 31, 1997
and 1996 problem agricultural mortgage loans totaled $4.2 million, $2.1 million
and $4.0 million or 0.7%, 0.4% and 0.8 % of the total carrying value of
agricultural mortgages at such dates. Potential problems (not currently in a
delinquent status, but with collateral impairment) totaled $2.2 million, $2.6
million and $2.2 million or 0.4%, 0.5% and 0.4% of the total carrying value of
agricultural mortgages at such dates, and restructured mortgages totaled $11.3
million, $17.2 million and $19.6 million or 1.9%, 3.4% and 3.8% of the total
carrying value of agricultural mortgages at such dates. Total problem, potential
problem and restructured mortgages were $17.7 million, $21.9 million and $25.8
million at June 30, 1998, December 31, 1997 and 1996, respectively, or 3.0%,
4.3% and 5.0% of the total carrying value of agricultural mortgages at such
dates. Total specific asset valuation allowances of $0.5 million as of June 30,
1998 for agricultural mortgages were 2.7% of the carrying value before valuation
allowances and writedowns of these total problem agricultural mortgages of $18.2
million.
MONY has, from time to time, pooled certain of its agricultural mortgage
loans and sold beneficial interests in each of the individual agricultural
mortgage loans in such pools (referred to as "participation interests") to third
parties. Under such arrangements, MONY retains a specified equity interest in
the loans in such pools and sells the remaining participation interest. MONY is
150
<PAGE> 152
responsible for servicing the individual agricultural mortgage loans in each
pool, for which it receives a servicing fee from the third party participants.
As of June 30, 1998, the aggregate amount of agricultural mortgage loans in such
pools being serviced by MONY was approximately $199.7 million.
EQUITY REAL ESTATE
The Company holds real estate as part of its general account investment
portfolio. The Company has adopted a policy of not investing new funds in equity
real estate except to safeguard values in existing investments or to honor
outstanding commitments. As of June 30, 1998 and December 31, 1997 and 1996, the
carrying value of the Company's real estate investments was $791.6 million,
$1,117.1 million and $1,505.2 million, respectively, or 7.4%, 10.6% and 14.4%,
respectively, of general account invested assets. The Company owns real estate,
interests in real estate joint ventures (both majority owned and minority
owned), and real estate acquired upon foreclosure of commercial and agricultural
mortgage loans. The following table presents the carrying value of the Company's
equity real estate investments by such classifications.
EQUITY REAL ESTATE
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- --------------------
TYPE 1998 1997 1996
---- -------------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C>
Real estate............................................ $290.2 $ 449.9 $ 621.9
Joint ventures......................................... 309.6 341.1 357.6
------ -------- --------
Subtotal..................................... 599.8 791.0 979.5
Foreclosed............................................. 191.8 326.1 525.7
------ -------- --------
Total........................................ $791.6 $1,117.1 $1,505.2
====== ======== ========
</TABLE>
Equity real estate is categorized as either "Real estate held for
investment" or "Real Estate to be disposed of". Real estate to be disposed of
consists of properties for which the Company has commenced marketing efforts.
The carrying value of real estate held for investment totaled $452.5 million,
$495.9 million and $1,070.4 million as of June 30, 1998 and December 31, 1997
and 1996, respectively. The carrying value of real estate to be disposed of
aggregated $339.1 million, $621.2 million and $434.8 million as of June 30, 1998
and December 31, 1997 and 1996, respectively.
The following tables present information concerning the geographic and
property type breakdown of the equity real estate portfolio as of June 30, 1998.
151
<PAGE> 153
EQUITY REAL ESTATE BY
REGION AND PROPERTY TYPE
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
- -------------------------------------------------------------------------------------------------------------------
TOTAL PORTFOLIO BY REGION
- ------------------------------------------------------- TOTAL PORTFOLIO BY TYPE
- ------------------------------------------------------- ------------------------------------------------------
CARRYING NUMBER CARRYING
NUMBER VALUE PERCENTAGE OF LOANS VALUE PERCENTAGE
------ -------- ---------- -------- -------- ----------
($ IN MILLIONS) ($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Mountain............. 19 $334.1 42.2% Hotel............. 7 $303.2 38.3%
Southeast............ 24 156.5 19.8 Office............ 42 287.7 36.4
Midwest.............. 26 119.0 15.0 Retail............ 20 141.1 17.8
Northeast............ 9 82.0 10.4 Industrial........ 5 36.2 4.6
West................. 13.. 59.3 7.5 Other............. 10 21.4 2.7
Southwest............ 8 40.7 5.1 Agriculture....... 13 1.7 0.2
Apartments........ 2 0.3 0.0
-- ------ ----- -- ------ -----
Total....... 99 $791.6 100.0% Total............. 99 $791.6 100.0%
== ====== ===== == ====== =====
</TABLE>
EQUITY REAL ESTATE BY
REGION AND PROPERTY TYPE
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------
TOTAL PORTFOLIO BY REGION TOTAL PORTFOLIO BY TYPE
- ------------------------------------------------------- -----------------------------------------------------
CARRYING CARRYING
NUMBER VALUE PERCENTAGE NUMBER VALUE PERCENTAGE
------ -------- ---------- ------ -------- ----------
($ IN MILLIONS) ($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Mountain............. 24 $ 389.4 34.9% Office........... 66 $ 494.8 44.3%
Southeast............ 34 234.7 21.0 Hotel............ 9 328.0 29.4
Midwest.............. 32 164.1 14.7 Retail........... 26 188.0 16.8
Northeast............ 15 123.2 11.0 Industrial....... 8 57.8 5.2
Southwest............ 27 118.8 10.6 Apartments....... 15 30.5 2.7
West................. 18.. 86.9 7.8 Other............ 10 15.7 1.4
Agriculture...... 16 2.3 0.2
--- -------- ----- --- -------- -----
Total....... 150 $1,117.1 100.0% Total............ 150 $1,117.1 100.0%
=== ======== ===== === ======== =====
</TABLE>
EQUITY REAL ESTATE BY
REGION AND PROPERTY TYPE
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------------
TOTAL PORTFOLIO BY REGION TOTAL PORTFOLIO BY TYPE
- ------------------------------------------------------- -----------------------------------------------------
CARRYING CARRYING
NUMBER VALUE PERCENTAGE NUMBER VALUE PERCENTAGE
------ -------- ---------- ------ -------- ----------
($ IN MILLIONS) ($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Mountain............. 29 $ 425.8 28.3% Office........... 96 $ 734.0 48.8%
Southeast............ 40 293.4 19.5 Hotel............ 12 351.8 23.4
West................. 37 249.4 16.6 Retail........... 29 223.4 14.8
Midwest.............. 53 241.0 16.0 Industrial....... 15 100.5 6.6
Southwest............ 37 164.3 10.9 Apartments....... 15 50.6 3.4
Northeast............ 20 131.3 8.7 Other............ 22 40.5 2.7
Agriculture...... 27 4.4 0.3
--- -------- ----- --- -------- -----
Total....... 216 $1,505.2 100.0% Total............ 216 $1,505.2 100.0%
=== ======== ===== === ======== =====
</TABLE>
Equity real estate is evenly distributed across geographic regions of the
country with a slightly larger concentration in the mountain and southeast
region of the United States at June 30, 1998. By property type, there is a
concentration in hotels which represented approximately 38.3% of the equity real
estate portfolio at June 30, 1998. The Company's largest equity real estate
holding at
152
<PAGE> 154
June 30, 1998 consisted of three related hotel properties located in Arizona
with an aggregate carrying value of approximately $274.0 million and
representing less than approximately 2.6% of general account invested assets.
The ten largest real estate properties as of June 30, 1998 comprise 50.0% of
total real estate assets and less than 3.7% of total invested assets.
The Company closely monitors property net operating income on a cash basis,
along with occupancy levels of the Company's commercial real estate properties
owned for more than one year, which comprise a significant portion (91.3% at
June 30, 1998) of the Company's equity real estate portfolio. During 1997, the
net operating income for these properties increased for the sixth consecutive
year.
REAL ESTATE SALES
In accordance with its ongoing strategy to strengthen the Company's
financial position, management expects to continue to selectively sell equity
real estate. Once management identifies a real estate property to be sold and
commences a plan for marketing the property, the property is classified as to be
disposed of and a valuation allowance is established and periodically revised,
if necessary, to adjust the carrying value of the property to reflect the lower
of its current carrying value or the fair value, less associated selling costs.
(See Note 5 to the Consolidated Financial Statements). Increases in such
valuation allowances are recorded as realized investment losses and,
accordingly, are reflected in the Company's results of operations. Real estate
classified as to be disposed of may also be net of impairment adjustments
recorded prior to the time such real estate was designated for sale or at the
time of foreclosure if acquired in satisfaction of debt. At June 30, 1998 and
December 31, 1997, 1996 and 1995, the carrying value of real estate to be
disposed of was $339.1 million, $621.2 million, $434.8 million and $717.4
million, or 3.2%, 5.9%, 4.2% and 6.7% of invested assets at such dates,
respectively. The aforementioned carrying values are net of valuation allowances
of $45.2 million, $82.7 million, $46.0 million and $49.1 million, respectively.
In addition, the carrying value of real estate to be disposed of at such dates
is net of $113.9 million, $182.3 million, $120.1 million and $136.7 million of
impairment adjustments. For the six months ended June 30, 1998 and the years
ended December 31, 1997, 1996 and 1995, such increases in valuation allowances
aggregated $1.4 million, $63.8 million, $16.8 million and $39.5 million,
respectively. Because the carrying value of real estate to be disposed of is
adjusted to reflect the aforementioned valuation allowances, management expects
that the net proceeds from sales of real estate will not be materially different
from the carrying value of such real estate on a GAAP basis. However, there can
be no assurance that increases in valuation allowances will not be required in
the future or that future sales of real estate will not be made at amounts below
recorded GAAP carrying value which may have a material effect on the Company's
financial position and results of operations.
In addition, as a result of differences between SAP and GAAP, the carrying
value of real estate on a SAP basis exceeds the carrying value of such
investments on a GAAP basis. Accordingly, management expects to incur losses on
a SAP basis as a result of anticipated real estate sales, which losses could
materially affect the Company's statutory-basis surplus and net income. Although
there can be no assurance, the Company believes that any such impact on
statutory surplus will be partially offset by the release of the statutory
investment reserves established by the Company and expected future statutory net
income. The Company will monitor the results of its real estate sales strategy
and its ongoing effect on statutory surplus. The GAAP carrying value of real
estate to be disposed of was $339.1 million at June 30, 1998 (or 3.2% of general
account invested assets), which amount is net of impairment adjustments and
valuation allowances aggregating approximately $113.9 million and $45.2 million,
respectively. There can be no assurance as to whether, when or for what amounts
any real estate that is classified to be disposed of will actually be disposed
of. For the six month period ended June 30, 1998 and the years ended December
31, 1997, 1996 and 1995 the GAAP carrying value of real estate sold was
approximately $317.0 million, $346.3 million, $414.1 million and $273.2 million,
respectively. For the six month period ended
153
<PAGE> 155
June 30, 1998 and the years ended December 31, 1997, 1996 and 1995, the SAP
carrying value of real estate sold was approximately $428.5 million, $395.0
million, $449.1 million and $299.3 million, respectively. See "Risk
Factors -- Risk of Further Losses on Real Estate; Risk with Respect to
Commercial Mortgage Loans", "-- Investment Impairments and Valuation Allowances"
and Note 20 to the Consolidated Financial Statements.
The following table analyzes the Company's real estate sales (both
commercial and agricultural) on a GAAP basis during the periods indicated.
REAL ESTATE SALES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------ --------------------------------
1998 1997 1996 1995
------------ -------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
Sales Proceeds.................................. $428.1 $433.9 $456.9 $301.5
Carrying value before impairment adjustments and
valuation allowance........................... 431.2 462.3 519.2 373.7
Impairment adjustments.......................... (74.3) (88.9) (85.2) (87.4)
Valuation allowances............................ (39.9) (27.1) (19.9) (13.1)
------ ------ ------ ------
Carrying value at date of sale.................. $317.0 $346.3 $414.1 $273.2
====== ====== ====== ======
Gain (Loss)..................................... $111.1 $ 87.6 $ 42.8 $ 28.3
====== ====== ====== ======
</TABLE>
The Company sold 49 commercial real estate properties and 1 agricultural
real estate property during the first six months of 1998, 60 commercial real
estate properties and 2 agricultural real estate properties in 1997, 40
commercial real estate properties and 5 agricultural real estate properties in
1996 and 43 commercial real estate properties and 4 agricultural real estate
properties in 1995.
Most of the proceeds from real estate sales have been invested in
investment grade public bonds. This has served to make the overall asset
portfolio somewhat more sensitive to changes in interest rates. It has also
served to reduce exposure to an illiquid asset class, real estate, and increase
exposure to a more liquid asset class, investment grade public bonds.
REMIC TRANSACTION
On September 28, 1995, the Company created a real estate mortgage
investment conduit ("REMIC") in compliance with Sections 860A through 860G of
the Code. The REMIC issued to third party investors two classes of notes, each
in the aggregate principal amount of approximately $43.4 million, for a total of
$86.8 million. The collateral for the notes consisted of a segregated pool of 85
conventional, primarily fixed rate commercial and multi-family mortgage loans
that the Company transferred to the REMIC for the purposes of this transaction.
The aggregate principal balance of the mortgages transferred to the REMIC was
approximately $434 million. The Class A-1 notes bore interest at a rate equal to
the monthly London Interbank Offered Rate ("LIBOR") plus 25 basis points and
matured one year after their original issue date; the Class A-2 notes bore
interest at a rate equal to monthly LIBOR plus 31.5 basis points, and matured
two years after their original issue date. Both notes were subject to a maximum
annual interest rate of 14%. In 1996, the Class A-1 notes in the amount of $43.4
million were repaid and the Class A-2 notes were repaid in September 1997.
EQUITY SECURITIES
The Company's equity securities primarily consist of investments in common
stock and limited partnership interests. The Company's investments in common
stocks are classified as available for sale and are reported at estimated fair
value. Unrealized gains and losses on common stocks are reported as a separate
component of other comprehensive income, net of deferred income taxes
154
<PAGE> 156
and an adjustment for the effect on DAC that would have occurred if such gains
and losses had been realized. The Company's investments in limited partnership
interests, all of which represent an ownership interest between 3% and 50%, are
accounted for in accordance with the equity method of accounting. See Note 5 to
the Consolidated Financial Statements.
Substantially all the common stocks owned by the Company are publicly
traded on national security exchanges. The Company's investments in equity
securities represented 3.5%, 3.2% and 2.9% of invested assets at June 30, 1998
and December 31, 1997 and 1996, respectively. The Company achieved a total
return on its investments in equity securities of 24.2%, 28.0%, 34.4% and 30.5%
for the six month period ended June 30, 1998 and the years December 31, 1997,
1996 and 1995, respectively. The Company defines total return as the percentage
obtained by dividing the summation of realized and unrealized gains and losses
and dividends by the average market value of the portfolio during the period.
Proceeds on the sale of common stocks totaled $93.9 million, $234.1 million,
$164.7 million and $58.6 million which resulted in net realized gains of $18.5
million, $39.7 million, $31.4 million and $11.9 million for the six month period
ended June 30, 1998 and the years ended December 31, 1997, 1996 and 1995,
respectively.
The following table presents the carrying values of the Company's
investments in commons stocks and limited partnership interests at the dates
indicated. Included in common stocks at June 30, 1998 and December 31, 1997 and
1996 are $0.8 million, $0.8 million and $6.3 million, respectively, of
non-marketable private equity securities.
INVESTMENTS IN EQUITY SECURITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- --------------------------
1998 1997 1996 1995
-------------- ------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
Common stocks................................... $211.2 $191.4 $170.9 151.3
Limited partnership interests................... 166.9 146.4 134.3 115.7
------ ------ ------ ------
Total................................. $378.1 $337.8 $305.2 $267.0
====== ====== ====== ======
</TABLE>
The following table presents the Company's total return on its investment
in equity securities for the six month period ended June 30, 1998 and the years
ended December 31, 1997, 1996 and 1995.
RETURN ON INVESTMENTS IN EQUITY SECURITIES
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, DECEMBER 31,
------------ --------------------
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Common stocks.......................................... 15.9% 20.5% 21.5% 27.0%
==== ==== ==== ====
Limited partnership interests.......................... 35.0% 37.5% 51.1% 33.9%
==== ==== ==== ====
Total........................................ 24.2% 28.0% 34.4% 30.5%
==== ==== ==== ====
</TABLE>
At June 30, 1998 and December 31, 1997 the Company had investments in
approximately 43 and 36 different limited partnerships which represented 1.6%
($166.9 million) and 1.4% ($146.4 million), respectively, of the Company's
general account invested assets. Investment results for the portfolio are
dependent upon, among other things, general market conditions for initial and
secondary offerings of common stock. For the six months ended June 30, 1998 and
the years ended December 31, 1997, 1996 and 1995 investment income from
investments in limited partnership interests was approximately $18.9 million,
$49.0 million, $50.5 million and $42.3 million, respectively, representing 5.3%,
6.7%, 6.7% and 5.8%, respectively, of the net investment income for such
periods. For the same time periods, the Company achieved total returns on its
investments in limited
155
<PAGE> 157
partnership interests of 35.0%, 37.5%, 51.1% and 33.9%, respectively. There can
be no assurance that the recent level of investment returns achieved on limited
partnership investments can be sustained in the future, and the failure to do so
could have a material adverse effect on the Company's financial position and
results of operations.
INVESTMENT IMPAIRMENTS AND VALUATION ALLOWANCES
The cumulative asset specific impairment adjustments and provisions for
valuation allowances that were recorded as of the end of each period are shown
in the table below and are reflected in the corresponding asset values discussed
above.
CUMULATIVE IMPAIRMENT ADJUSTMENTS ON INVESTMENTS
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- ------------------
1998 1997 1996
-------------- ------- -------
($ IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities.......................................... $ 10.0 $ 7.3 $ 23.1
Equity securities......................................... 14.9 17.8 13.8
Mortgages................................................. 27.3 27.4 29.9
Real estate(1)............................................ 169.7 244.0 326.2
Other..................................................... 0.0 0.0 0.0
------ ------ ------
Total........................................... $221.9 $296.5 $393.0
====== ====== ======
</TABLE>
- ---------------
(1) Includes $62.9 million, $110.0 million and $191.6 million at June 30, 1998,
and December 31, 1997 and 1996, respectively, relating to impairments taken
upon foreclosure of mortgage loans.
CUMULATIVE PROVISIONS FOR VALUATION ALLOWANCES ON INVESTMENTS
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- ------------------
1998 1997 1996
-------------- ------- -------
($ IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities.......................................... $ 0.0 $ 0.0 $ 0.0
Equity securities......................................... 0.0 0.0 0.0
Mortgages................................................. 51.2 54.9 67.0
Real estate............................................... 45.2 82.7 46.0
Other..................................................... 0.0 3.5 2.9
------ ------ ------
Total........................................... $ 96.4 $141.1 $115.9
====== ====== ======
</TABLE>
TOTAL CUMULATIVE IMPAIRMENT ADJUSTMENTS AND PROVISIONS
FOR VALUATION ALLOWANCES ON INVESTMENTS
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- ------------------
1998 1997 1996
-------------- ------- -------
($ IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities.......................................... $ 10.0 $ 7.3 $ 23.1
Equity securities......................................... 14.9 17.8 13.8
Mortgages................................................. 78.5 82.3 96.9
Real estate............................................... 214.9 326.7 372.2
Other..................................................... 0.0 3.5 2.9
------ ------ ------
Total........................................... $318.3 $437.6 $508.9
====== ====== ======
</TABLE>
156
<PAGE> 158
All of the Company's fixed maturity and equity securities are classified as
available for sale and, accordingly, are marked to market, with unrealized gains
and losses excluded from earnings and reported as a separate component of
equity. Securities whose value is deemed other than temporarily impaired are
written down to fair value. The writedowns are recorded as realized losses and
included in earnings. The cost basis of such securities is adjusted to fair
value. The new cost basis is not changed for subsequent recoveries in value. For
the six month period ended June 30, 1998 and the years ended December 31, 1997,
1996 and 1995 such writedowns aggregated $3.3 million, $10.2 million, $4.5
million and $6.7 million, respectively.
At June 30, 1998 and December 31, 1997, 8.3% ($892.1 million) and 8.7%
($914.9 million), respectively, of the Company's general account invested assets
consisted of commercial mortgage loans. Commercial mortgage loans are stated at
their unpaid principal balances, net of valuation allowances for impairment. The
Company provides valuation allowances for commercial mortgage loans when it is
probable that the Company will be unable to collect all amounts due according to
the contractual terms of the loan agreement. Increases in such valuation
allowances are recorded as realized investment losses and, accordingly, are
reflected in the Company's results of operations. For the six months ended June
30, 1998 and the years ended December 31, 1997, 1996 and 1995, such increases
(decreases) in valuation allowances aggregated $(0.2) million, $0.4 million,
($4.2) million and $3.1 million, respectively. The carrying value of commercial
mortgage loans at June 30, 1998 was $892.1 million, which amount is net of $72.3
million representing management's best estimate of cumulative impairment losses
at such date. However, there can be no assurance that additional provisions for
impairment adjustments with respect to the real estate held for investment will
not need to be made. Any such adjustments may have a material adverse effect on
the Company's financial position and results of operations.
The carrying value of real estate held for investment is generally adjusted
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. Such impairment adjustments
are recorded as realized investment losses and, accordingly, are reflected in
the Company's results of operations. For the six months ended June 30, 1998 and
the years ended December 31, 1997, 1996 and 1995, such impairment adjustments
aggregated $0.0 million, $0.0 million, $3.8 million and $0.0 million,
respectively. At June 30, 1998 and December 31, 1997 and 1996, the carrying
value of real estate held for investment was $452.5 million, $495.9 million and
$1,070.4 million, or 4.2%, 4.7% and 10.2% of invested assets at such dates,
respectively. The aforementioned carrying values are net of cumulative
impairments of $55.8 million, $61.7 million and $206.1 million, respectively,
and net of accumulated depreciation of $226.2 million, $239.3 million and $427.5
million, respectively. However, there can be no assurance that additional
provisions for impairment adjustments with respect to real estate held for
investment will not need to be made. Any such adjustments may have a material
adverse effect on the Company's financial position and results of operations.
The carrying value of real estate to be disposed of at June 30, 1998,
December 31, 1997 and 1996 was $339.1 million, $621.2 million and $434.8
million, net of impairment adjustments of $113.9 million, $182.3 million and
$120.1 million, valuation allowances of $45.2 million, $82.7 million and $46.0
million, and accumulated depreciation of $122.1 million, $255.1 million and
$90.3 million, respectively. Once management identifies a real estate property
to be sold and commences a plan for marketing the property, the property is
classified as to be disposed of and a valuation allowance is established and
periodically revised, if necessary, to adjust the carrying value of the property
to reflect the lower of its current carrying value or the fair value, less
associated selling costs (See Note 5 to the Consolidated Financial Statements).
Increases in such valuation allowances are recorded as realized investment
losses and, accordingly, are reflected in the Company's results of operations.
For the six months ended June 30, 1998 and the years ended December 31, 1997,
1996 and 1995, such increases in valuation allowances aggregated $1.4 million,
$63.8 million, $16.8 million and $39.5 million, respectively. See "-- Equity
Real Estate -- Real Estate Sales".
157
<PAGE> 159
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names of the directors and executive officers of the Holding Company
and MONY upon completion of the Offerings and their respective ages and
positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael I. Roth...................... 52 Chairman of the Board, Chief Executive Officer and
Director
Samuel J. Foti....................... 46 President, Chief Operating Officer and Director
Richard Daddario..................... 51 Executive Vice President and Chief Financial
Officer
Kenneth M. Levine.................... 51 Executive Vice President, Chief Investment Officer
and Director
Thomas J. Conklin.................... 51 Senior Vice President and Secretary
Richard E. Connors................... 46 Senior Vice President of MONY
Phillip A. Eisenberg................. 55 Senior Vice President and Chief Actuary of MONY
Stephen J. Hall...................... 51 Senior Vice President of MONY
Richard E. Mulroy, Jr. .............. 53 Senior Vice President and General Counsel
Victor Ugolyn........................ 50 Senior Vice President of MONY
Francis J. Waldron................... 54 Senior Vice President of MONY
Claude M. Ballard, Jr.(1)............ 68 Director
Tom H. Barrett....................... 68 Director
David L. Call........................ 66 Director
G. Robert Durham..................... 69 Director
James B. Farley...................... 67 Director
Robert Holland, Jr. ................. 58 Director
James L. Johnson..................... 71 Director
Robert R. Kiley...................... 62 Director
John R. Meyer........................ 70 Director
Jane C. Pfeiffer..................... 65 Director
Thomas C. Theobald................... 61 Director
</TABLE>
- ---------------
(1) Mr. Ballard is serving as the representative of the Investors pursuant to
the Investment Agreement. See "Certain Provisions of the Investment -- Board
Representation".
The Holding Company Board currently consists of 14 directors, divided into
three classes. The initial term of the first class will expire at the annual
meeting of stockholders to be held in 1999, the initial term of the second class
will expire at the annual meeting of stockholders in 2000 and the initial term
of the third class will expire at the annual meeting of stockholders in 2001.
Messrs. Ballard, Durham, Johnson, Levine and Meyer are members of the first
class, Messrs. Barrett, Call, Farley, Foti and Mrs. Pfeiffer are members of the
second class and Messrs. Holland, Kiley, Roth and Theobald are members of the
third class. At each annual meeting of stockholders, directors will be elected
for a three-year term to succeed the directors whose terms are then to expire.
See "Certain Provisions of the Amended and Restated Certificate of Incorporation
and the By-laws of the Holding Company".
The Holding Company Board has an Audit Committee composed of Messrs.
Barrett, Durham, Farley, Kiley, Meyer and Theobald, none of whom is an officer
or employee of the Holding Company. The Audit Committee recommends to the
Holding Company Board the selection of independent certified public accountants
to audit annually the books and records of the Holding Company, reviews the
activities and the reports of the independent certified public accountants and
reports the
158
<PAGE> 160
results of such review to the Holding Company's Board. The Audit Committee also
considers the adequacy of the Holding Company's internal controls and internal
auditing methods and procedures.
The Holding Company has a Human Resources Committee composed of Messrs.
Durham, Farley, Holland, Johnson and Meyer, none of whom is an officer or
employee of the Holding Company, which, as authorized by the Holding Company
Board, makes determinations with respect to non-cash compensation to officers,
directors and employees of the Holding Company, including with respect to awards
pursuant to the Holding Company's benefit plans.
The Holding Company has a Public Affairs Committee composed of Messrs.
Call, Holland, Kiley, Theobald and Mrs. Pfeiffer, none of whom is an officer or
employee of the Holding Company, which, as authorized by the Holding Company
Board, reviews policies, programs and practices that are consistent with the
Holding Company's social obligations to its employees, society and especially
the communities of its major locations.
Pursuant to the Investment Agreement, the Investors have been granted Board
representation rights. The Holding Company and MONY have agreed to use their
best efforts to cause one of the persons proposed by the Investors and selected
by MONY or the Holding Company, as the case may be, to be elected to its Board.
Claude M. Ballard, Jr., is currently the Board member designated by the
Investors pursuant to these representation rights.
The Investors have agreed to not propose any person who (i) at the time of
such proposal is either a member of the board of directors or board of trustees
or a senior officer of an entity engaged in the Life Insurance Business (as
defined in the Investment Agreement), or (ii) is not qualified to serve as a
trustee or director pursuant to the By-laws of MONY or the Holding Company, as
the case may be. The Investors' Board representation rights granted by the
Investment Agreement will terminate at such time when the Investors and their
subsidiaries and affiliates in the aggregate no longer own an aggregate amount
of Warrants and Convertible Preferred Stock representing the right to acquire
Common Stock and/or Common Stock equal to at least 5% of the voting power of the
Common Stock on an as exercised and as converted basis.
Officers of the Holding Company are elected annually and serve until their
retirement, resignation, death or removal.
DIRECTORS AND EXECUTIVE OFFICERS. Set forth below is a description of the
business positions during at least the past five years for the directors of the
Holding Company, the executive officers of the Holding Company and MONY and the
trustees of MONY. Except for Messrs. Roth, Foti and Levine who have been
directors of the Holding Company since it was incorporated, each of the
directors has been a director of the Holding Company since August 5, 1998.
Michael I. Roth is Chairman of the Board and Chief Executive Officer of the
Holding Company. He is Chairman of the Board (since July 1993) and Chief
Executive Officer (since January 1993) of MONY and has been a Trustee since May
1991. Mr. Roth is also a director of the following subsidiaries of MONY: MONY
Life Insurance Company of America (since July 1991), ARES Holdings, Inc. (since
May 1995), 1740 Advisers, Inc. (since December 1992) and MONY CS, Inc. (since
December 1989). He has also served as MONY's President and Chief Executive
Officer (from January 1993 to July 1993), President and Chief Operating Officer
(from January 1991 to January 1993) and Executive Vice President and Chief
Financial Officer (from March 1989 to January 1991). Mr. Roth has been with MONY
for 9 years. Mr. Roth also served on the board of directors of the American
Council of Life Insurance and serves on the boards of directors of the Life
Insurance Council of New York, Insurance Marketplace Standards Association,
Enterprise Foundation (a charitable foundation not affiliated with the
Enterprise Group of Funds which develops housing), Metropolitan Development
Association of Syracuse and Central New York, Enterprise Group of Funds, Inc.,
Enterprise Accumulation Trust, Pitney Bowes, Inc. and Promus Hotel Corporation.
159
<PAGE> 161
Samuel J. Foti is President and Chief Operating Officer of the Holding
Company. He is President and Chief Operating Officer (since February 1994) of
MONY and has been a Trustee since January 1993. Mr. Foti is also a director of
the following subsidiaries of MONY: MONY Life Insurance Company of America
(since October 1989), MONY Brokerage, Inc. (since January 1990), MONY
International Holdings, Inc. (since October 1994), MONY Life Insurance Company
of the Americas, Ltd., (since December 1994) and MONY Bank & Trust Company of
the Americas, Ltd. (since December 1994). He has also served as MONY's Executive
Vice President (from January 1991 to February 1994) and Senior Vice President
(from April 1989 to January 1991). Mr. Foti has been with MONY for 10 years. Mr.
Foti also serves on the board of directors of the Life Insurance Marketing and
Research Association, where he served as Chairman from October 1996 through
October 1997, Enterprise Group of Funds, Inc., Enterprise Accumulation Trust and
The American College.
Richard Daddario is Executive Vice President and Chief Financial Officer of
the Holding Company. He is Executive Vice President and Chief Financial Officer
(since April 1994) of MONY. Mr. Daddario is also a director of the following
subsidiaries of MONY: MONY Life Insurance Company of America (since October
1989), ARES Holdings, Inc. (since May 1995) and MONY Brokerage, Inc. (since June
1997) and MONY Life Insurance Company of the Americas, Ltd. (since December
1997). He has also served as MONY's Chief Financial Officer (from January 1991
to present) and Senior Vice President (from July 1989 to April 1994). Mr.
Daddario has been with MONY for 9 years.
Kenneth M. Levine is Executive Vice President and Chief Investment Officer
of the Holding Company. He is Executive Vice President (since February 1990) and
Chief Investment Officer (since January 1991) of MONY and has been a Trustee
since May 1994. Mr. Levine is also a director of the following subsidiaries of
MONY: MONY Life Insurance Company of America (since July 1991), ARES Holdings,
Inc. (since May 1995), ARES, Inc. (since July 1997), 1740 Advisers, Inc. (since
December 1989), MONY Funding, Inc. (since October 1991), MONY Realty Partners,
Inc. (since October 1991) and 1740 Ventures, Inc. (since October 1991). He has
also served as MONY's Senior Vice President -- Pensions (from January 1988 to
February 1990). Prior to that time, Mr. Levine held various management positions
within MONY. Mr. Levine has been with MONY for 25 years.
Thomas J. Conklin is Senior Vice President and Secretary of the Holding
Company. He is Senior Vice President and Secretary of MONY (since March 1989).
Mr. Conklin was Vice President and Corporate Secretary of MONY (from January
1988 to February 1989) and prior to that time held several positions with MONY.
Mr. Conklin has been with MONY for 13 years.
Richard E. Connors is Senior Vice President of MONY (since February 1994).
Mr. Connors is also a director of the following subsidiaries of MONY: MONY Life
Insurance Company of America (since June 1994) and MONY Brokerage, Inc. (since
May 1994). He has also served as MONY's Regional Vice President -- Western
Region (from June 1991 to February 1994), Vice President -- Small Business
Marketing (from January 1990 to June 1991) and Vice President -- Manpower
Development (from March 1988 to January 1990). Mr. Connors has been with MONY
for 10 years.
Phillip A. Eisenberg is Senior Vice President and Chief Actuary of MONY
(since April 1993). Mr. Eisenberg is also a director of the following subsidiary
of MONY: MONY Life Insurance Company of America (since June 1997). He has also
served as MONY's Vice President -- Individual Financial Affairs (from January
1989 to March 1993). Prior to that time, Mr. Eisenberg held various positions
within MONY. Mr. Eisenberg has been with MONY for 34 years.
Stephen J. Hall is Senior Vice President of MONY (since February 1994). Mr.
Hall is also a director of the following subsidiaries of MONY: MONY Life
Insurance Company of America (since July 1991) and MONY Brokerage, Inc. (since
October 1991). He has also served as MONY's Vice President & Chief Marketing
Officer (from November 1990 to February 1994) and prior to that time was manager
of MONY's Boise, Idaho insurance agency. Mr. Hall has been with MONY for 24
years.
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<PAGE> 162
Richard E. Mulroy, Jr. is Senior Vice President and General Counsel of the
Holding Company. He is Senior Vice President and General Counsel of MONY (since
April 1992). He has also served as Vice President and Deputy General Counsel
(from 1987 to April 1992). Prior to that time, Mr. Mulroy served as legal
counsel in the Law Department of MONY. Mr. Mulroy has been with MONY for 26
years.
Victor Ugolyn is Senior Vice President of MONY (since May 1991). He is also
Chairman and Chief Executive Officer of Enterprise Capital Management, Inc.
(since May 1991); Enterprise Group of Funds, Inc. (since May 1991); Enterprise
Accumulation Trust (since September 1994); and Enterprise Fund Distributors,
Inc.; Chairman of MONY Securities Corp. (since May 1991); and Chairman and
President of Enterprise International Group of Funds (since October 1994). Mr.
Ugolyn is also a Director of the following subsidiaries or affiliates of MONY:
Enterprise Capital Management, Inc. (since May 1991); Enterprise Group of Funds,
Inc. (since May 1991), Enterprise Accumulation Trust (since September 1994),
Enterprise Fund Distributors, Inc. (since May 1991), MONY Securities Corp.
(since May 1991), MONY Life Insurance Company of the Americas, Ltd. (since
October 1994) and Enterprise International Group of Funds (since October 1994).
Mr. Ugolyn has been with MONY for 8 years.
Francis J. Waldron is Senior Vice President -- International Operations and
Development of MONY (since February 1994). He has also served as a Regional Vice
President (from January 1991-February 1994). Prior to that time, Mr. Waldron
held several positions with MONY. Mr. Waldron is also a director and President
of the following subsidiaries of MONY: MONY International Holdings, Inc. (since
October 1994), MONY Life Insurance Company of the Americas, Ltd. (since December
1994), MONY Bank & Trust Company of the Americas, Ltd. (since December 1994) and
a director of MONY International Life Insurance Co. Seguros de Vida S.A. (since
September 1995). Mr. Waldron has been with MONY for 30 years.
Claude M. Ballard, Jr. has been a director of the Holding Company since
August 5, 1998. Mr. Ballard has been a Trustee of MONY since July 1990. Mr.
Ballard has been a Limited Partner and Consultant at The Goldman Sachs Group,
L.P. since 1988, General Partner from 1981 to 1988 and Chairman of Merit Equity
Partners, Inc., a property acquisition and management company, since July 1989.
He serves on the board of directors of Bedford Property Investors, Inc. (a real
estate investment trust), CBL & Associates Properties, Inc. (a real estate
investment trust), Taubman Centers, Inc. (a real estate investment trust) and
Horizon Hotels, Ltd. The Investors and Goldman Sachs, one of the representatives
of the Underwriters, are affiliates of The Goldman Sachs Group, L.P. Mr. Ballard
currently is the Board member designated by the Investors pursuant to the
Investment Agreement. See "Certain Provisions of the Investment -- Board
Representation".
Tom H. Barrett has been a director of the Holding Company since August 5,
1998. Mr. Barrett has been a Trustee of MONY since July 1990. Mr. Barrett is a
Partner in American Industrial Partners, a private investment partnership since
1992. Mr. Barrett retired from The Goodyear Tire & Rubber Company in December
1993, after serving as Chairman of the Board, President and Chief Executive
Officer of The Goodyear Tire & Rubber Company from April 1989 to July 1991 and
President and Chief Executive Officer from December 1988 to April 1989. He
serves on the board of directors of Air Products and Chemicals, Inc., A.O. Smith
Corporation and Rubbermaid, Incorporated.
David L. Call has been a director of the Holding Company since August 5,
1998. Mr. Call has been a Trustee of MONY since January 1993. Mr. Call is Ronald
P. Lynch Dean Emeritus, Cornell University, College of Agriculture and Life
Sciences since 1995. Prior to that time, Mr. Call was Dean of the College of
Agriculture and Life Sciences. He serves on the board of directors of Seneca
Foods Corporation.
G. Robert Durham has been a director of the Holding Company since August 5,
1998. Mr. Durham has been a Trustee of MONY since June 1988. Mr. Durham retired
from Walter Industries, Inc., a home building and financing, natural resources
and industrial manufacturing
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<PAGE> 163
company, in May 1996, after serving as Chairman of the Board and Chief Executive
Officer from June 1991 to May 1996. Prior to that time, Mr. Durham held various
executive management positions with Phelps Dodge Corporation, a mining company,
serving as President, Chairman of the Board and Chief Executive Officer until
his retirement in June 1989. He serves on the board of directors of The FINOVA
Group, Inc., Amphenol Corporation and Homestake Mining Company.
James B. Farley has been a director of the Holding Company since August 5,
1998. Mr. Farley has been a Trustee of MONY since October 1988. Mr. Farley
retired from MONY in January 1994, after serving as Chairman of the Board from
January 1993 to July 1993. Prior to that time, Mr. Farley held the position of
Chairman of the Board and Chief Executive Officer from January 1991 to January
1993, Chairman of the Board, Chief Executive Officer and President from April
1989 to January 1991, and President and Chief Operating Officer from October
1988 to April 1989 with MONY. He was Senior Chairman from 1985 to 1988 of Booz,
Allen & Hamilton, a consulting firm. Mr. Farley serves on the board of directors
of Ashland, Inc. and Harrah's Entertainment, Inc.
Robert Holland, Jr. has been a director of the Holding Company since August
5, 1998. Mr. Holland has been a Trustee of MONY since May 1990. Mr. Holland is
the owner and Chief Executive Officer of WorkPlace Integrators, an office
furniture manufacturing company, since December 1996. Prior to that time, Mr.
Holland was the President and Chief Executive Officer of Ben & Jerry's Homemade,
Inc., an ice cream company, from February 1995 to October 1996, Chairman of the
Board of Gilreath Manufacturing Company, a plastic injection molding
manufacturing company, from 1990 to 1991 and Vice President of Business
Development from 1988 to 1990. Mr. Holland serves on the board of directors of
AC Nielsen Corporation, Frontier Corporation, Henry Ford Health System, Olin
Corporation and Tricon Global Restaurants, Inc. and on the Advisory Board of
Boardroom Consultants.
James L. Johnson has been a director of the Holding Company since August 5,
1998. Mr. Johnson has been a Trustee of MONY since October 1986. Mr. Johnson is
Chairman Emeritus of GTE Corporation, a telecommunications company, having
served as Chairman and Chief Executive Officer from April 1988 to May 1992.
Prior to that time, Mr. Johnson held various executive management positions with
GTE Corporation. Mr. Johnson serves on the board of directors of CellStar
Corporation, The FINOVA Group, Inc., GTE Corporation, Harte-Hanks
Communications, Inc., Valero Energy Corp. and Walter Industries, Inc.
Robert R. Kiley has been a director of the Holding Company since August 5,
1998. Mr. Kiley has been a Trustee of MONY since November 1995. Mr. Kiley is the
President and Chief Executive Officer of the New York City Partnership and
Chamber of Commerce, Inc. since May 1995. Mr. Kiley is a Principal of Kohlberg &
Co. since April 1994. Prior to that time, Mr. Kiley was President and Chief
Executive Officer of Fischback Corp., an electrical and mechanical contracting
company, from January 1991 to October 1994 and Chairman and Chief Executive
Officer of the Metropolitan Transportation Authority of New York from November
1983 to December 1990. Mr. Kiley serves on the board of directors of the New
York City Partnership and Chamber of Commerce, Inc.
John R. Meyer has been a director of the Holding Company since August 5,
1998. Mr. Meyer has been a Trustee of MONY since December 1972. Mr. Meyer is
Professor Emeritus, Harvard University since January 1997. Prior to that time,
Mr. Meyer was a Professor at Harvard University from July 1973 to January 1997.
Mr. Meyer serves on the board of directors of AC Nielsen Corporation, Union
Pacific Corporation and Union Pacific Railroad Company.
Jane C. Pfeiffer has been a director of the Holding Company since August 5,
1998. Mrs. Pfeiffer has been a Trustee of MONY since November 1988. Mrs.
Pfeiffer is an independent management consultant. Mrs. Pfeiffer serves on the
board of directors of Ashland, Inc., International Paper Company and J.C. Penney
Company, Inc. She is a trustee of the University of Notre Dame and a member of
The Council on Foreign Relations.
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Thomas C. Theobald has been a director of the Holding Company since August
5, 1998. Mr. Theobald has been a Trustee of MONY since May 1990. Mr. Theobald is
managing director, William Blair Capital Partners, L.L.C., an investment firm,
since September 1994. Prior to that time, Mr. Theobald was Chairman of the Board
of Continental Bank from August 1987 to August 1994. Mr. Theobald serves on the
board of directors of Anixter International, Inc., U.S. Timberlands Company,
L.P., Xerox Corp., LaSalle Partners, LaSalle US Realty Income and Growth Fund
and Stein Roe & Farnham Mutual Funds.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Holding Company or an affiliate
of the Holding Company receives an annual retainer fee of $27,500 and each such
director also receives a meeting fee of $1,200 for each meeting of the Holding
Company Board. Additionally, each such director receives an annual retainer fee
of $3,500 per committee on which such director serves as a member and each such
member receives a meeting fee of $1,000 for each meeting of a committee. The
Chairperson of a committee receives an additional annual retainer fee of $1,500.
RESTRICTED STOCK
As part of the Plan, the Holding Company Board may grant restricted stock
to nonemployee directors of the Holding Company each year; provided, however,
that the Holding Company Board may not grant restricted stock prior to the first
anniversary of the Plan Effective Date, and the Holding Company Board must have
the approval of the New York Superintendent before issuing Restricted Stock
prior to the fifth anniversary of the Plan Effective Date. The Holding Company
Board shall have discretion in determining the number of shares subject to each
grant of restricted stock, provided that the fair market value (valued on the
date of grant) of all shares granted to each nonemployee director during any
calendar year does not exceed the lesser of (i) one-half of the directors' fees
earned by such nonemployee director for the immediately preceding calendar year
and (ii) $15,000, rounded upward to the nearest whole share. Grants of
restricted stock shall be in lieu of cash payment of directors' fees equal in
amount to the fair market value of the restricted stock granted. Each grant of
restricted stock shall vest, based on the continued service of the grantee on
the Holding Company Board, in three approximately equal installments on each of
the first three anniversaries of the date of grant thereof. In the event of the
termination of service on the Holding Company Board of a grantee by reason of
disability or death, any restricted stock previously granted to such grantee
will continue to vest as if the grantee's service had not terminated. In the
event of the termination of service on the Holding Company Board of a grantee
for any reason other than disability or death, any unvested restricted stock
will be forfeited.
DIRECTOR RETIREMENT POLICY
The Holding Company Board will continue for its members the retirement
policy adopted by MONY for its Board of Trustees. Pursuant to that policy,
directors serve until the attainment of age 70. The only exception to this
policy is for directors who were elected as Trustees of MONY prior to May 1,
1989, Messrs. Johnson and Meyer, who are scheduled to retire on the first day of
the month following the attainment of age 73. In addition, in order to maintain
the continued guidance, leadership and expertise of the members of the Holding
Company Board during the initial period after the Demutualization, directors
scheduled to retire in 1999 or 2000 will be able to serve an additional two
years.
EXECUTIVE COMPENSATION
Since the formation of the Holding Company, none of its officers or other
personnel has received any compensation from the Holding Company. All
compensation has been paid by MONY. It is expected that after the
Demutualization the executive officers of the Holding Company will continue to
be paid only by MONY, with an allocation of their compensation to be made for
services
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rendered to the Holding Company. The Holding Company will pay the amount of such
allocation to MONY pursuant to a cost allocation agreement.
The information set forth below describes the components of the total
compensation of the Chief Executive Officer and the four other most highly
compensated executive officers of MONY for services rendered during the fiscal
year ended December 31, 1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
- ------------------------------------------------------------------ ------------
(B) (E) (F) (G)
(A) (C) (D) OTHER ANNUAL LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION(1) PAYOUTS(2) COMPENSATION(3)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($)
------------------ ---- ------- ------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael I. Roth, ..... 1997 775,000 760,000 177,188 1,089,167 104,497
Chairman of the Board
and Chief Executive
Officer
Samuel J. Foti, ...... 1997 585,000 475,000 122,073 695,833 71,926
President and Chief
Operating Officer
Kenneth M. Levine, ... 1997 400,000 330,000 85,746 640,000 47,731
Executive Vice
President and Chief
Investment Officer
Richard Daddario, .... 1997 325,000 225,000 42,173 421,666 41,158
Executive Vice
President and Chief
Financial Officer
Stephen J. Hall, ..... 1997 330,000 250,000 32,718 161,333 38,985
Senior Vice President
of MONY
</TABLE>
- ---------------
(1) Includes payments to Messrs. Roth, Foti, Levine, Daddario and Hall,
respectively, of (i) interest with respect to awards made for the 1992-1994
and 1993-1995 performance cycles under MONY's Equity Share Plan in the
amounts of $79,039, $52,334, $51,255, $31,616 and $9,295, and (ii)
automobile allowances (including tax costs related to such allowances) in
the amounts of $61,605, $55,649, $33,701, $9,894 and $22,923.
(2) Includes payments of awards under MONY's Equity Share Plan to Messrs. Roth,
Foti, Levine, Daddario and Hall, respectively, of (i) $297,500, $175,000,
$140,000, $105,000 and $45,500 with respect to the 1994-1996 performance
cycle, (ii) $416,667, $270,833, $250,000, $166,666 and $83,333 with respect
to the 1993-1995 performance cycle, and (iii) $375,000, $250,000, $250,000,
$150,000 and $32,500 with respect to the 1992-1994 performance cycle.
(3) Includes payments to Messrs. Roth, Foti, Levine, Daddario and Hall,
respectively, of (i) the part of premium paid by the Company for split
dollar life insurance in the amounts of $29,497, $22,676, $12,731, $15,408
and $11,485, (ii) contributions to the Company's tax-qualified plans in the
amounts of $5,392, $5,392, $8,000, $6,050 and $8,000, and (iii)
contributions to the Company's non-qualified plan in the amounts of $69,608,
$43,858, $27,000, $19,700 and $19,500.
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LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE BASED PLANS
(A) (B) (C) ----------------------------------
NUMBER OF PERFORMANCE OR OTHER (D) (E) (F)
SHARES, UNITS OR PERIOD UNTIL MATURA- THRESHOLD TARGET MAXIMUM
NAME OTHER RIGHTS(#) TION OR PAYOUT ($) ($) ($)
---- ----------------- -------------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Michael I. Roth............ 7,500 1997-1999 225,000 750,000 1,875,000
Samuel J. Foti............. 5,000 1997-1999 150,000 500,000 1,250,000
Kenneth M. Levine.......... 2,500 1997-1999 75,000 250,000 625,000
Richard Daddario........... 2,500 1997-1999 75,000 250,000 625,000
Stephen J. Hall............ 1,500 1997-1999 45,000 150,000 375,000
</TABLE>
RETIREMENT PLAN INFORMATION
The following table shows the estimated annual retirement benefits payable
at normal retirement age (generally age 65) to a person retiring with the
indicated final average pay and years of credited service on a straight life
annuity basis, under the Retirement Income Security Plan for Employees of The
Mutual Life Insurance Company of New York (the "Retirement Plan"), as
supplemented by the Excess Benefit Plan for MONY Employees (the "Excess Plan"),
each as described below:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS OF RETIREMENT
WITH INDICATED YEARS OF CREDITED SERVICE(1)
--------------------------------------------------------------------
YEARS OF CREDITED SERVICE
--------------------------------------------------------------------
FINAL AVERAGE PAY 10 15 20 25 30 35
----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$350,000............. $ 48,720 $ 73,080 $ 97,440 $121,800 $146,160 $170,520
$700,000............. $101,220 $151,830 $202,440 $253,050 $303,660 $354,270
$1,050,000........... $153,720 $230,580 $307,440 $253,050 $461,160 $538,020
$1,400,000........... $206,220 $309,330 $412,440 $515,550 $618,660 $721,770
$1,750,000........... $258,720 $388,080 $517,440 $646,800 $776,160 $905,520
</TABLE>
- ---------------
(1) Estimated retirement benefit described above does not include the value of
the executive's "employer contribution account".
The annual retirement benefit under the Retirement Plan and the Excess Plan
is generally equal to the product of (a) (i) a percentage of an executive's
"final average pay" in excess of his or her "covered compensation" (i.e., the
average of the social security taxable wage base for the 35 years up to the date
the executive attains social security retirement age), plus (ii) a percentage
(depending upon the executive's social security retirement age) of the
executive's "final average pay" not in excess of his or her "covered
compensation", and (b) the executive's years of credited service up to 35.
"Final average pay" is defined as the highest average annual "compensation" of
an executive for any 36 consecutive months in the 120 months of service prior to
the executive's retirement. "Compensation" used to determine the retirement
benefit under the Retirement Plan and the Excess Plan consists of the salary
paid to an executive, including incentive compensation and salary deferrals to
section 125 and section 401(k) plans, but excluding expense and tuition
reimbursement, deferred compensation under MONY's Deferred Compensation Plan for
Key Employees, amounts payable under the Equity Share Plan, fringe benefits,
group life insurance premiums, moving expenses, prizes, hiring and referral
bonuses, and disability payments. Such "compensation" is generally the same as
the compensation reflected in columns (c) and (d) of the Summary Compensation
Table. The Excess Plan is designed to provide benefits which eligible employees
would have received under the Retirement Plan but for limits applicable under
the Retirement Plan. The estimated "final average pay" of Messrs. Roth, Foti,
Levine, Daddario and Hall under the Retirement Plan and the Excess Plan as of
December 31, 1997 (assuming retirement as
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of such date) is $1,433,333, $915,000, $703,333, $510,000 and $605,000,
respectively, and the estimated years of credited service under the Retirement
Plan and the Excess Plan as of such date for each of such Named Executive
Officers is 9, 9, 25, 8 and 22 years, respectively.
MONY EQUITY SHARE PLAN
Under MONY's Equity Share Plan, MONY makes awards of equity share units to
the Named Executive Officers and other designated officers of MONY relative to
MONY's peer companies. The awards are subject to a three-year performance cycle.
In connection with the award of the equity share units, MONY establishes a
schedule which assigns a value to an equity share unit depending on the relative
earnings of MONY during the performance cycle. As soon as practicable after the
end of each performance cycle, the value of an equity share unit is determined
based on such cumulative earnings. The aggregate value of the equity share units
awarded to each executive with respect to a performance cycle is paid in three
annual installments. The first of such payments is made immediately after the
determination of the value of the equity share units. The second and third
installments are paid, with interest, in the two succeeding years. In the event
of a change of control of MONY (as defined below under "Employment and Change in
Control Agreements"), each executive will receive a lump sum payment equal to
the value of all outstanding equity share units (with the value of any equity
share units for any uncompleted performance cycle determined as if MONY had
achieved targeted performance for such cycle).
HOLDING COMPANY STOCK INCENTIVE PLAN
On August 14, 1998, the Holding Company adopted and MONY, as sole
stockholder of the Holding Company, approved, the Holding Company 1998 Stock
Incentive Plan (the "Stock Plan"). The Human Resources Committee of the Holding
Company Board (the "Committee") will be responsible for administering the Stock
Plan. Under the Stock Plan, the Committee may from time to time grant stock
options to officers, key employees and agents of the Holding Company and its
subsidiaries. Under the Stock Plan, the Committee must consist of two or more
members, each of whom may be, to the extent deemed necessary by the Holding
Company Board, a "nonemployee director" within the meaning of Rule 16b-3, as
promulgated pursuant to the Exchange Act.
The maximum number of shares of the Common Stock that may be issued under
the Stock Plan is 5% of the total outstanding shares on the date of the
Offerings. The shares to be issued under the Stock Plan may be unissued shares
or treasury shares. Upon the occurrence of certain events that affect the
Holding Company's capitalization, appropriate adjustments will be made in the
number and kind of shares that may be issued under the Stock Plan in the future
and in the number and kind of shares and price per share under all outstanding
grants made before the event. If any grant is for any reason cancelled,
terminated or otherwise settled without the issuance of some or all of the
shares of Common Stock subject to the grant, such shares will be available for
future grants. The Committee may not grant any stock options prior to the first
anniversary of the date of the Offerings. Any grant of a stock option after the
first anniversary and prior to the fifth anniversary of the Offerings shall be
subject to the advance approval of the New York State Superintendent of
Insurance.
The Holding Company Board may terminate, suspend or amend (subject, in some
cases, to the approval by the Holding Company's stockholders and, until the
fifth anniversary of the Offerings, approval by the New York Superintendent) the
Stock Plan at any time, but such termination, suspension or amendment may not
adversely affect any stock options then outstanding under the Stock Plan without
the consent of the recipients thereof. Unless terminated by action of the
Holding Company Board, the Stock Plan will continue in effect until the tenth
anniversary of the date of the Holding Company Board's adoption thereof, but
stock options granted prior to such date shall continue in effect until they
expire in accordance with their terms.
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The Committee may grant nonqualified stock options and stock options
qualifying as incentive stock options under the Code. The exercise price per
share of Common Stock subject to either a nonqualified stock option or an
incentive stock option will be not less than the fair market value (as defined
in the Stock Plan) of such share on the date of grant of such option. To
exercise an option, the grantee may pay the exercise price in cash or, if
permitted by the Committee, by delivering on the date of exercise other shares
of Common Stock having an aggregate fair market value equal to the exercise
price of the option.
Each option will generally become exercisable on a cumulative basis in
three approximately equal installments on each of the first three anniversaries
of the date of grant thereof. The term of each option will be fixed by the
Committee but may not be more than ten years from its date of grant.
In the event of the termination of service of a grantee by reason of
disability or death, any option previously granted to such grantee will continue
to vest as if the grantee's service had not terminated. Any vested options may
thereafter be exercised in full for a period of three years (or such shorter
period as the Committee shall determine at the time of grant) or, if earlier,
the expiration of the term of the options. In the event of the termination of
service of a grantee for cause (as defined in the Stock Plan), any outstanding
options granted to such grantee will be forfeited. In general, in the event of
the termination of service of a grantee for any reason other than disability,
death or for cause, any options granted to such grantee exercisable at the date
of termination will remain exercisable for a period of 30 days (or, if earlier,
the expiration of the term of the options).
MONY'S ANNUAL INCENTIVE COMPENSATION PLAN
All senior and corporate officers and selected key employees of MONY are
eligible to participate in MONY's Annual Incentive Compensation Plan (the
"Annual Incentive Plan"). Under the Annual Incentive Plan, performance
objectives are established at the beginning of each calendar year for each
sector and area of MONY as well as for each individual who is eligible to
participate in the Plan. Actual performance results at the end of each calendar
year for each sector and area are used to establish a bonus pool for each sector
and area, the size of which is determined by an area's or a sector's actual
performance and the aggregate salaries of its participants. Each participant's
individual performance with respect to such participant's individual performance
objective is rated by an appropriate supervisor and an award from the bonus pool
is determined from such ratings, with final approval made by senior management.
Awards for certain senior officers are submitted to a committee of the MONY
Board comprised of outside directors for approval in accordance with established
policy. Cash payment is made to participants as soon as practicable after
individual performance ratings have been determined and payment amounts
approved. Individual awards range from 0% to 125% of base salary for full vice
presidents and higher ranking officers and from 0% to 75% of base salary for
functional vice presidents. In addition, a discretionary fund equal to 10% of
all participants' base salaries is established and the Chairman of the MONY
Board, at his discretion, administers this fund to provide participants with
appropriate bonuses that would not otherwise be awarded under the Annual
Incentive Plan.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
MONY has entered into employment agreements (the "Employment Agreements")
with each of Messrs. Roth, Foti, Levine, Daddario and Hall. The current terms of
the Employment Agreements are effective through December 31, 1998, and will be
automatically extended for successive one-year terms unless MONY gives notice to
the executive (within the period specified in the Employment Agreements) that it
will not renew the Employment Agreement for another term.
The Employment Agreements provide that the current base compensation of
each executive will be adjusted in accordance with MONY's regular administrative
practices generally applicable to its senior executives. Under the Employment
Agreements, each executive will participate in MONY's Annual Incentive
Compensation Plan and Equity Share Plan, will be entitled to participate in
other
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incentive compensation plans and any employee benefits plans and programs
generally available to senior executives of MONY, and will be entitled to
perquisites and fringe benefits generally available to officers of their
respective ranks at MONY.
The Employment Agreements prohibit the executives from engaging in or
advising, either directly or indirectly, any business which is substantially
competitive with any business then actively conducted by MONY during the term of
their employment and for a six-month period following termination. The
executives are also prohibited from soliciting, either directly or indirectly,
any person employed by MONY for one year following the termination of their
employment, and are prohibited from divulging confidential information relating
to MONY.
The Employment Agreements provide that MONY will have the right at any time
to terminate any executive's employment, and that any executive will have the
right at any time to terminate his employment with MONY. Under the Employment
Agreements, MONY will provide an executive with the following benefits in the
event of termination by MONY other than for cause (as defined in the Employment
Agreements) or by the executive for good reason (as defined in the Employment
Agreements): (i) a lump-sum payment in an amount equal to (a) two times the
executive's annual base compensation in effect on the date of termination, in
the case of Messrs. Roth, Foti, and Levine, or (b) one time the executive's
annual base compensation in effect on the date of termination, in the case of
Messrs. Daddario and Hall, reduced in all cases by any severance payments made
to the executive under any other employment contract or severance arrangement
with MONY; (ii) any incentive compensation earned with respect to the calendar
year immediately preceding the termination date but not yet paid, and incentive
compensation with respect to the calendar year in which the termination date
occurs, in each case in an amount determined by the Chief Executive Officer (or,
in the case of the Chief Executive Officer, by the Holding Company Board) which
will be not less than 50% of the executive's base compensation; (iii) at the
discretion of the Chief Executive Officer, the value of the perquisites to which
the executive is entitled immediately before the termination date and such other
items as the Chief Executive Officer (or, in the case of the Chief Executive
Officer, the Holding Company Board) will determine; and (iv) title to any
MONY-furnished automobile. In addition, MONY will keep in effect, for the life
of the executive whose employment is terminated other than for cause or for good
reason, the split-dollar life insurance policy maintained for the executive
immediately prior to termination, with MONY and the executive retaining their
respective obligations to pay premiums in accordance with the terms of the
policy.
MONY has also entered into change in control employment agreements
(collectively, the "Change in Control Agreements") with each of Messrs. Roth,
Foti, Levine, Daddario and Hall and other executive officers of MONY, the
provisions of which become effective if and when there is a Change in Control
(as defined below) of MONY. The current terms of the Change in Control
Agreements are effective through December 31, 2000, and will be automatically
renewed for successive one-year terms unless MONY gives notice to the executive
(within the period specified in the Change in Control Agreements) that it will
not extend the expiration date. If a Change in Control occurs, the expiration
date is automatically extended to the third anniversary of the last day of the
month in which the Change in Control occurred.
The Change in Control Agreements provide that the executives will continue
to receive base compensation at a rate not less than the rate in effect
immediately prior to the Change in Control, and that base compensation will be
increased in accordance with the regular administrative practices in effect
immediately prior to the Change in Control. The agreements further provide that
the executives will be entitled to perquisites and fringe benefits equal to
those attached to their positions immediately prior to the Change in Control,
will continue to be full participants in all incentive compensation plans and
all employee benefit plans and programs for senior executives in effect
immediately prior to the Change in Control, and will be entitled to participate
in any other incentive compensation plans and employee benefit plans and
programs generally available to senior executives of MONY.
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The Change in Control Agreements provide that MONY will have the right at
any time to terminate the executive's employment, and that the executive will
have the right at any time to terminate his employment with MONY. Under the
Change in Control Agreements, MONY will provide the executive with the following
benefits in the event of termination by MONY other than for cause (as defined in
the Change in Control Agreements) or by the executive for good reason (as
defined in the Change in Control Agreements): (i) a lump-sum payment in an
amount equal to three times the sum of (A) the executive's annual base
compensation in effect on the date of termination and (B) the executive's
average annual bonus over the preceding three fiscal years, such sum being
reduced by any severance payments made to the executive under any other
employment contract or severance arrangement with MONY; (ii) any incentive
compensation payments awarded for a year prior to the year in which the
termination date occurs but not paid as of the termination date; (iii) a
specified pro rata portion of the bonus under MONY's Annual Incentive
Compensation Plan that would have been earned for the year in which the
termination date occurs; (iv) all amounts payable as of the termination date in
accordance with the terms of MONY's Equity Share Plan (including all awards
under any uncompleted three-year cycle thereunder); (v) in addition to all other
amounts otherwise payable to the executive under the Retirement Income Security
Plan and the Investment Plan Supplement, an amount equal to the aggregate
present value of the retirement benefits that would have been payable to the
executive under MONY's Retirement Income Security Plan, Investment Plan
Supplement and Excess Benefit Plan, had his employment not been terminated; (vi)
an amount equal to the aggregate present value of the additional costs that
would have been incurred by MONY for medical and dental benefits, retiree
medical benefits, and spouse or survivor's income benefits if the executive's
employment had not been terminated; and (vii) continued coverage under various
disability and life insurance programs.
In the event of the death or disability (as defined in the Change in
Control Agreements) of the executive, the Change in Control Agreements provide
that the executive (or his representative) will be entitled to receive (i)
amounts owed to the executive through his effective date of termination, and
(ii) a specified pro rata portion of all awards under MONY's Equity Share Plan
and Annual Incentive Compensation Plan.
The Change in Control Agreements also provide that, to the extent any
payments to the executives would be subject to "golden parachute" excise taxes
under Section 4999 of the Code, the executives will receive "gross-up" payments
in order to make them whole with respect to such taxes and any related interest
and penalties.
For purposes of the Change in Control Agreements, a "Change in Control" is
defined generally to include an acquisition of 20% or more of the voting stock
of the Holding Company, a change in the majority of the members of the Holding
Company Board that is not supported by two-thirds of the incumbent directors,
approval by the shareholders of a merger or reorganization in which the Holding
Company shareholders do not own at least 80% of the resulting entity, a sale of
all or substantially all of the assets of the Holding Company or MONY, a
dissolution of the Holding Company or MONY or adoption by the Holding Company
Board of a resolution to the effect that any person has acquired effecting
control of the Holding Company or MONY. The Demutualization will not constitute
a Change in Control under the Change in Control Agreements.
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BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of Common Stock by: (i) each person who the Holding Company believes
will own beneficially more than 5% of the outstanding shares of Common Stock
following the Offerings, (ii) each director, (iii) each of the executive
officers and (iv) all directors and executive officers as a group. The number of
shares of Common Stock beneficially owned by each director and all directors and
executive officers as a group is based upon the number of shares each director
and executive officer and certain persons and entities affiliated with each
director and executive officer are estimated to receive as Eligible
Policyholders under the Plan. Except as noted below, each stockholder listed
below will have sole investment and voting power with respect to the shares
beneficially held by it.
Certain officers, directors and employees of MONY and of certain of its
affiliates are also Eligible Policyholders and will, consequently, receive
compensation as policyholders pursuant to the Plan. None of the executive
officers and directors of the Holding Company or MONY is expected to receive
more than 1/100 of one percent of the shares of Common Stock to be outstanding
after the Offerings, and, as a group, the executive officers and directors of
the Holding Company and MONY are expected to receive in the aggregate less than
1/200 of one percent of the shares of Common Stock to be outstanding after the
Offering. Under the Plan, the officers, directors and employees (including their
family members and spouses) of MONY are restricted from acquiring any securities
of MONY or the Holding Company until the fifth anniversary of the Plan Effective
Date, except under limited circumstances, which include, with respect to the
officers and employees of MONY, the acquisition of Common Stock through their
participation in the Company's stock incentive plan, and with respect to
non-employee directors of MONY, the acquisition of Common Stock through the
Company's restricted stock plan.
<TABLE>
<CAPTION>
NUMBER OF SHARES
TO BE BENEFICIALLY PERCENT
NAME OWNED OF CLASS(1)
---- ------------------ -----------
<S> <C> <C>
The Goldman Sachs Group, L.P.(2)............................ 7.0
Michael I. Roth............................................. *
Samuel J. Foti.............................................. *
Richard Daddario............................................ *
Kenneth M. Levine........................................... *
Thomas J. Conklin........................................... *
Richard E. Connors.......................................... *
Phillip A. Eisenberg........................................ *
Stephen J. Hall............................................. *
Richard E. Mulroy, Jr. ..................................... *
Victor Ugolyn............................................... *
Francis J. Waldron.......................................... *
Claude M. Ballard, Jr.(3)................................... *
Tom H. Barrett.............................................. *
David L. Call............................................... *
G. Robert Durham............................................ *
James B. Farley............................................. *
Robert Holland, Jr. ........................................ *
James L. Johnson............................................ *
Robert R. Kiley............................................. *
John R. Meyer............................................... *
Jane C. Pfeiffer............................................ *
</TABLE>
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<PAGE> 172
<TABLE>
<CAPTION>
NUMBER OF SHARES
TO BE BENEFICIALLY PERCENT
NAME OWNED OF CLASS(1)
---- ------------------ -----------
<S> <C> <C>
Thomas C. Theobald.......................................... *
All directors and executive officers as a Group (26
persons).................................................. **
</TABLE>
- ---------------
* Indicates beneficial ownership of less than 1/100 of one percent of the
Common Stock outstanding immediately after the Offerings.
** Indicates beneficial ownership of less than 2/100 of one percent of the
Common Stock outstanding immediately after the Offerings.
(1) Based on shares of Common Stock estimated to be outstanding
after the Offerings. See "Consolidated Pro Forma Financial Information".
(2) Represents the aggregate number of shares issuable upon exercise of the
Warrants, which are owned by certain investment funds affiliated with The
Goldman Sachs Group, L.P. Consists of shares beneficially owned by
GS Mezzanine Partners, L.P.; shares beneficially owned by GS
Mezzanine Partners Offshore, L.P.; shares beneficially owned by
Bridge Street Fund 1997, L.P.; and shares beneficially owned by
Stone Street Fund 1997, L.P. The Goldman Sachs Group, L.P. disclaims
beneficial ownership of the shares owned by such investment funds to the
extent attributable to equity interests therein held by persons other than
The Goldman Sachs Group, L.P. and its affiliates. Each of such funds shares
voting and investment power with certain of its respective affiliates. The
address of The Goldman Sachs Group, L.P. is 85 Broad Street, New York, New
York 10004.
(3) Mr. Ballard is a Limited Partner of The Goldman Sachs Group, L.P. Mr.
Ballard disclaims beneficial ownership of the shares owned by The Goldman
Sachs Group, L.P., except to the extent of his pecuniary interest therein.
See note 2 above.
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CERTAIN PROVISIONS OF THE INVESTMENT
The following summary of the Investment Agreement and the Registration
Rights Agreement do not purport to be complete and are qualified in their
entirety by reference to the complete text of such agreements. A copy of the
Investment Agreement and the Registration Rights Agreement are filed as exhibits
to the Registration Statement of which this Prospectus is a part.
GENERAL
In anticipation of the adoption of the Plan by the MONY Board and the
approval of the Demutualization, and in order to enhance the competitive
position and increase the surplus of the Company during the period prior to the
consummation thereof, MONY and the Holding Company entered into the Investment
Agreement on December 30, 1997. Pursuant to the terms and conditions set forth
in the Investment Agreement, the Investors (i) purchased the MONY Notes and the
Warrants and (ii) have agreed to purchase, subject to certain conditions
precedent, after the Demutualization Date, upon MONY's request made within 90
days after the Demutualization Date, the Convertible Preferred Stock. The
Investment Agreement may be terminated by either the Investors or MONY in
certain circumstances specified in the Investment Agreement. If the Investment
Agreement is terminated prior to the issuance of either the Convertible
Preferred Stock or the Holding Company Subordinated Notes, then such securities
will not be issued, but the MONY Notes and Warrants will remain outstanding.
The MONY Notes were sold in an aggregate principal amount of $115,000,000
at an aggregate purchase price of $115,000,000. The MONY Notes bear interest at
9 1/2% per annum, payable semi-annually, and are scheduled to be mature on
December 30, 2012. MONY has no right to redeem the MONY Notes prior to maturity.
The MONY Notes constitute debt obligations of the type generally referred to as
"surplus notes" and were issued in accordance with Section 1307 of the New York
Insurance Law (together with any successor provision and as may be hereafter
amended from time to time "Section 1307"). Pursuant to Section 1307, the MONY
Notes are not part of the legal liabilities of MONY nor are they a basis of any
set-off against MONY. Any payment of interest on or repayment of principal of
the MONY Notes may be made only with the prior approval of the New York
Superintendent and only out of MONY's "free and divisible surplus" and will
reduce MONY's surplus.
The Warrants were sold at an aggregate purchase price of $10,000,000 and
permit the holders thereof to purchase from the Holding Company in the aggregate
7% of the fully diluted Common Stock at the Demutualization Date (giving effect
to the issuance of the shares in the Offerings, the issuance of the shares of
Common Stock issuable upon exercise of the Warrants and the issuance of shares
upon the exercise, conversion or exchange of any other options, warrants and
convertible and exchangeable securities then outstanding) at a specified
exercise price. See "Description of Capital Stock -- Warrants". The Investors
are affiliates of Goldman Sachs, one of the representatives of the Underwriters.
At any time from and after the Demutualization Date, the Investors,
together with such of their subsidiaries or affiliates as may then hold MONY
Notes may elect to exchange MONY Notes for Holding Company Subordinated Notes.
Any such election and exchange shall be made in whole or in part with respect to
the entire aggregate principal amount of MONY Notes held by the Investors and
their subsidiaries and affiliates, provided that no such election and exchange
shall be made for less than (x) $50 million in aggregate principal amount of
such MONY Notes or (y) the balance of such MONY Notes then held by the Investors
and their subsidiaries and affiliates, if less than $50 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".
If the Demutualization Date has occurred on or prior to June 30, 1999, if
the Holding Company requests within 90 days after the Demutualization Date, the
Holding Company may require the Investors to purchase from the Holding Company
an aggregate of 1,000,000 shares of Convertible Preferred Stock for a total
purchase price of $100,000,000, subject to satisfaction of certain
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conditions precedent specified in the Investment Agreement. If the Offerings are
consummated, management will not require the purchase of the Convertible
Preferred Stock.
DETERMINATION OF NON-CONTROL
The New York Superintendent issued a determination pursuant to Section
1501(c) of the New York Insurance Law, dated December 29, 1997, that the
Investors would not control MONY as a result of the transactions contemplated by
the Investment Agreement, subject to certain notice and approval requirements,
and certain commitments by the Investors. The Investors have agreed to the
following notice and approval requirements: (i) the Investors and their
affiliates will notify the New York Superintendent before exercising the
Warrants, converting the Convertible Preferred Stock, or selling any of the
Warrants, Convertible Preferred Stock, or MONY Notes; (ii) the Investors and
their affiliates must notify the New York Superintendent before the sale of any
securities of MONY, the Holding Company or any of their affiliates (the
"Companies") acquired pursuant to the Investment Agreement; (iii) the notice and
non-disapproval requirements of Section 1505(c) and (d) of the New York
Insurance Law (relating to transactions within a holding company system) apply
to transactions between the Investors and the Companies, except transactions in
the ordinary course of the Investors' business other than transactions involving
investment management or investment advisory services performed by the Investors
for or on behalf of the Companies, to which (along with certain other
transactions) the notice requirements of Section 1505(d) of the New York
Insurance Law will apply; and (iv) the Investors will provide to the New York
Superintendent quarterly and annual reports of transactions between the
Investors and the Companies. The Investors have also made commitments to the New
York Superintendent as follows: (i) every transaction between the Investors and
the Companies will comply with the standards of the New York Insurance Law
related to transactions within a holding company system; (ii) the Investors will
be subject to New York Insurance Law requirements regarding examinations by the
New York Superintendent and violations and penalties in the context of holding
company systems; (iii) the Investors will not acquire, directly or indirectly,
any security issued by the Companies except pursuant to the Investment Agreement
or in the ordinary course of their business; (iv) the Investors will not
exercise the rights of security holders to vote (except for certain major
corporate transactions), propose directors in opposition to management, solicit
proxies, call special meetings, or dispose or threaten to dispose of securities
as a condition for corporate action or non-action by the Companies; (v) the
Investors may have one representative (with certain restrictions on activities)
on the boards of MONY, the Holding Company, or a key subsidiary thereof as long
as such boards have at least 13 members; and (vi) the Investors will not
otherwise cause, or attempt to cause, the direction of the management or
policies of, or otherwise exercise control over, the Companies. The
determination of non-control will remain in effect until revoked by the New York
Superintendent in accordance with the New York Insurance Law, at the request of
the Investors or upon the initiative of the New York Superintendent, or the
Investors own less than 2% of the equity securities of the Holding Company.
STANDSTILL AGREEMENT
In the Investment Agreement, the Investors have agreed that, for a period
from the Demutualization Date until the earlier of the fifth anniversary of the
Demutualization Date or June 30, 2004 (such period, the "Standstill Period"),
subject to certain exceptions specified in the Investment Agreement, the
Investors will not, and will cause their subsidiaries and any affiliates that
own Warrants, Convertible Preferred Stock or Common Stock that was acquired upon
exercise of Warrants or conversion of Convertible Preferred Stock not to,
directly or indirectly, acquire, offer to acquire or agree to acquire any
outstanding Common Stock other than pursuant to the Warrants and the conversion
of the Convertible Preferred Stock or from an Investor or a subsidiary or
affiliate of an Investor without the prior written approval of MONY. The
foregoing provisions will terminate when the Investors and their subsidiaries
and affiliates that acquire Warrants, Convertible Preferred Stock or Common
Stock upon exercise of Warrants or conversion of Convertible Preferred Stock own
an aggregate number of shares of Common
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Stock acquired upon exercise of Warrants or conversion of Convertible Preferred
Stock plus the number of shares of Common Stock issuable upon exercise of
Warrants and conversion of Convertible Preferred Stock that is held by the
Investors and their subsidiaries and affiliates that is less than 5% of the
fully diluted Common Stock. The Holding Company has agreed that, so long as the
Investors, their subsidiaries and affiliates are subject to the provisions
described in this paragraph, it will not take any action (including, without
limitation, adoption of a shareholder rights plan) that would have the effect of
imposing more stringent requirements on the Investors, their subsidiaries and
affiliates than those contained in the Investment Agreement.
On the Board Adoption Date, the Holding Company Board authorized the
Holding Company to enter into a rights plan. Such rights plan does not impose
more stringent requirements on the Investors, their subsidiaries or affiliates
than those contained in the Investment Agreement. See "Description of Capital
Stock -- Preferred Share Purchase Rights".
VOTING OF COMMON STOCK
The Investors have agreed that, subject to certain exceptions provided in
the Investment Agreement, during the Standstill Period the Investors will, and
will cause their subsidiaries and affiliates that acquire Common Stock upon
exercise of Warrants or conversion of Convertible Preferred Stock to, vote all
shares of Common Stock acquired upon exercise of Warrants or conversion of
Convertible Preferred Stock owned by them either, at the option of the Holding
Company, in accordance with the recommendation of the Holding Company Board or
in the same proportion as the holders of Common Stock who are not affiliated
with either the Holding Company or the Investors with respect to all matters
properly presented for a vote of the holders of the Common Stock. The foregoing
requirement will not apply if the Investors and their subsidiaries and
affiliates may acquire Common Stock without regard to the restrictions contained
in the Investment Agreement described above or with respect to certain specified
matters, including those that relate to: (i) any merger, consolidation or other
business combination involving, or sale, lease, transfer or other disposition of
substantially all the assets of, the Holding Company, MONY or any Significant
Subsidiary (as defined in the Investment Agreement); (ii) the approval of any
amendment to the Holding Company's certificate of incorporation or By-laws;
(iii) any matter that could result in any decrease in the percentage of the
voting power represented by the aggregate voting power of all Common Stock and
Common Stock issuable upon exercise of Warrants or conversion of Convertible
Preferred Stock then owned by the Investors and their subsidiaries and
affiliates; and (iv) any other matter (other than the election of directors)
that in the good faith judgment of the Investors could adversely affect their
interests as significant stockholders of the Holding Company.
The foregoing provisions shall terminate when the Investors and their
subsidiaries and affiliates that acquire Warrants, Convertible Preferred Stock
or Common Stock upon exercise of Warrants or conversion of Convertible Preferred
Stock own an aggregate number of shares of Common Stock acquired upon exercise
of Warrants or conversion of Convertible Preferred Stock plus the number of
shares of Common Stock issuable upon exercise of Warrants and conversion of
Convertible Preferred Stock that is held by the Investors and their subsidiaries
and affiliates that is less than 5% of the fully diluted Common Stock.
LIMITATION ON SALES OF HOLDING COMPANY COMMON STOCK, WARRANTS AND
CONVERTIBLE PREFERRED STOCK
The Investors have agreed that until the termination of the Standstill
Period, they will not, and will cause their subsidiaries and affiliates that own
Warrants, Convertible Preferred Stock or Common Stock that was acquired upon
exercise of Warrants or conversion of Convertible Preferred Stock not to, sell,
transfer or otherwise dispose of any Warrants, Convertible Preferred Stock or
Common Stock that was acquired upon exercise of Warrants or conversion of
Convertible Preferred Stock in a negotiated transaction (which for these
purposes does not include an open market sale other than as a result of an offer
to sell securities having aggregate voting rights of more than 3% of
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the voting rights on an as converted basis at any one time): (i) to any Person
that is engaged in the Life Insurance Business if, to the knowledge of the
transferor, after giving effect to such transaction such Person would own an
aggregate number of shares of Common Stock plus the number of shares of Common
Stock issuable upon exercise of Warrants and conversion of Convertible Preferred
Stock that is held by such Person that is equal to 3% or more of the fully
diluted Common Stock at the time of such transaction without the prior written
consent of the Holding Company, or (ii) to any Person if, to the knowledge of
the transferor, after giving effect to such transaction such Person would own an
aggregate number of shares of Common Stock plus the number of shares of Common
Stock issuable upon exercise of Warrants and conversion of Convertible Preferred
Stock that is held by such Person that is equal to 5% or more of the fully
diluted Common Stock at the time of such transaction without the prior written
consent of the Company. The foregoing restriction will not apply to: (i) any
transfers between or among the Investors, their subsidiaries and affiliates, or
(ii) any widely distributed public underwritten offering. The foregoing
provisions will terminate when the Investors and their subsidiaries and
affiliates that acquire Warrants, Convertible Preferred Stock or Common Stock
upon exercise of Warrants or conversion of Convertible Preferred Stock own an
aggregate number of shares of Common Stock acquired upon exercise of Warrants or
conversion of Convertible Preferred Stock plus the number of shares of Common
Stock issuable upon exercise of Warrants and conversion of Convertible Preferred
Stock that is held by Investors and their subsidiaries and affiliates that is
less than 5% of the fully diluted Common Stock.
BOARD REPRESENTATION
Pursuant to the Investment Agreement, the Investors have been granted Board
representation rights. MONY (prior to the Demutualization Date) and the Holding
Company (subsequent to the Demutualization Date) have agreed to use their best
efforts to cause one of the persons proposed by the Investors to be elected to
the MONY Board or the Holding Company Board, as applicable. Claude M. Ballard,
Jr., is currently the Board member designated by the Investors pursuant to these
representation rights.
The Investors have agreed to not propose any person who: (i) at the time of
such proposal is either a member of the board of directors or board of trustees
or a senior officer of an entity engaged in the Life Insurance Business (as
defined in the Investment Agreement), or (ii) is not qualified to serve as a
trustee or director pursuant to the By-laws of MONY or the Holding Company, as
the case may be. The Investors' Board representation rights granted by the
Investment Agreement will terminate at such time when the Investors and their
subsidiaries and affiliates in the aggregate no longer own an aggregate amount
of Warrants and Convertible Preferred Stock representing the right to acquire
Common Stock and/or Common Stock equal to at least 5% of the voting power of the
Common Stock on an as exercised or as converted basis.
REGISTRATION RIGHTS
Pursuant to the Investment Agreement the Holding Company has entered into a
registration rights agreement granting to the Investors and their subsidiaries
or affiliates certain rights to registration under the Securities Act with
respect to the Warrants and all shares of Common Stock issuable upon exercise
thereof and upon conversion of the Convertible Preferred Stock (the
"Registration Rights Agreement"). Subject to certain limitations, the
Registration Rights Agreement provides that the Investors and their subsidiaries
and affiliates have the right to make three demand registration requests
("Demand Registrations") of the Holding Company and can make an unlimited number
of requests for piggyback registrations (each, a "Piggyback Registration"). A
Piggyback Registration will not relieve the Holding Company of its obligations
to effect Demand Registrations. The Holding Company has agreed to pay all
expenses with respect to any Demand Registration or Piggyback Registration other
than any underwriting discounts and commissions and any transfer taxes, if any,
attributable to the sale by an Investor or any of their subsidiaries or
affiliates of any securities so registered.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The Amended and Restated Certificate authorizes the Holding Company to
issue 500 million shares of capital stock, of which 400 million shares are
designated as Common Stock, and 100 million shares are designated as Preferred
Stock having a par value of $0.01 per share ("Preferred Stock"), of which one
million shares are designated as Convertible Preferred Stock and 200,000 shares
are designated as Series A Junior Participating Preferred Stock.
COMMON STOCK
Upon issuance of shares of Common Stock in accordance with the Offerings
and the Plan, all such shares will be fully paid and non-assessable. First
Chicago Trust Company of New York is the Transfer Agent and registrar for the
Common Stock.
DIVIDENDS
Subject to the rights of any holders of Preferred Stock, each holder of
Common Stock is entitled to receive dividends out of funds legally available
therefor when, as, and if, declared by the Holding Company Board. Dividends may
be paid in cash, property or shares of the Holding Company's capital stock.
Initially, the sole source of funds which may be available for the payment of
dividends by the Holding Company will be $30 million of the net proceeds from
the Offerings plus the $10.0 million purchase price received for the Warrants.
See "Risk Factors -- Holding Company Structure; Restrictions on Dividends",
"Dividends", "Business -- Regulation -- Insurance -- Shareholder Dividend
Restrictions" and "-- Convertible Preferred Stock".
VOTING RIGHTS
The holders of Common Stock will possess exclusive voting rights in the
Holding Company, except to the extent that the Holding Company Board shall have
designated voting power with respect to any Preferred Stock issued. Each holder
of Common Stock is entitled, on each matter submitted for a vote of holders of
Common Stock, to one vote for each share of such stock registered in such
holder's name on the books of the Holding Company. Except as otherwise required
by law and subject to the rights of any holders of Preferred Stock, the presence
in person or by proxy of the holders of record of a majority of the shares
entitled to vote at a meeting of stockholders constitutes a quorum for the
transaction of business at that meeting. Actions requiring approval of
stockholders will generally require approval by a majority vote at a meeting at
which a quorum is present, except that at each stockholder meeting for the
election of directors, provided a quorum is present, directors will be elected
by a plurality of votes validly cast in the election. Stockholders will not have
any right to cumulate votes in the election of directors.
LIQUIDATION RIGHTS
In the event of liquidation, dissolution or winding-up of the Holding
Company, the holders of the Common Stock will be entitled to share ratably in
the distribution of all assets of the Holding Company remaining after payment of
all of the Holding Company's debts and liabilities and of all sums to which
holders of any Preferred Stock may be entitled.
PREEMPTIVE RIGHTS
Holders of the Common Stock will not generally be entitled to preemptive
rights with respect to any shares of capital stock which may be issued by the
Holding Company.
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PREFERRED STOCK
Currently, there are no shares of Preferred Stock issued or outstanding.
The Preferred Stock may be issued by the Holding Company Board in one or more
series and may have such voting rights, if any, designations, preferences and
relative, participating, optional and other special rights and such
qualifications, limitations and restrictions, as the Holding Company Board (or a
duly authorized committee thereof) may fix by resolution or resolutions.
Moreover, the Holding Company Board may issue such Preferred Stock, from time to
time, in transactions without the approval of the stockholders of the Holding
Company, and the preferences, designations, voting and other rights of any such
shares of Preferred Stock may materially limit or qualify the rights of the
outstanding shares of Common Stock. See "Certain Provisions of the Amended and
Restated Certificate and the By-laws of the Holding Company -- Issuance of
Common and Preferred Stock".
The holders of Preferred Stock issued by the Holding Company may be given
the right to vote for the election of directors generally or to elect a
specified number or percentage of the members of the Holding Company Board. The
number of directors that may be elected by the holders of any class or series of
Preferred Stock having the right to elect directors may be in addition to the
number of directors fixed by or pursuant to the Amended and Restated
Certificate.
One of the effects of undesignated Preferred Stock may be to enable the
Holding Company Board to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of Preferred Stock pursuant to the Holding Company
Board's authority described above may adversely affect the rights of the holders
of Common Stock. For example, Preferred Stock issued by the Company may rank
prior to the Common Stock as to dividend rights, liquidation preference or both,
may have full or limited voting rights and may be convertible into shares of
Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock at a premium or may otherwise adversely
affect the market price of the Common Stock.
CONVERTIBLE PREFERRED STOCK
The following summary of the Convertible Preferred Stock and of the
agreements relating thereto does not purport to be complete and is qualified in
its entirety by reference to the Amended and Restated Certificate of
Incorporation of the Holding Company, a copy of which is filed as an exhibit to
the Registration Statement of which this Prospectus forms a part.
If the Plan Effective Date has occurred on or prior to June 30, 1999, if
the Holding Company requests within 90 days after the Plan Effective Date, the
Holding Company may require the Investors to purchase the Convertible Preferred
Stock, subject to the satisfaction of certain conditions precedent. If the
Offerings are consummated, management will not require the purchase of the
Convertible Preferred Stock.
If issued, the Convertible Preferred Stock will constitute a series of
Preferred Stock and will rank on a parity with other currently outstanding
shares of Preferred Stock and will rank senior to the Common Stock with respect
to the payment of dividends and, to the extent of the liquidation value per
share of Convertible Preferred Stock plus accrued and unpaid dividends, upon
liquidation. The following is a summary of the principal terms of the
Convertible Preferred Stock, if issued.
CONVERSION
The Convertible Preferred Stock will be convertible at the option of the
holder at any time after the date of original issuance of the Convertible
Preferred Stock into Common Stock at an initial conversion price equal to the
initial exercise price of the Warrants, unless previously redeemed. The
conversion price will be subject to the same anti-dilution adjustments as the
exercise price of the
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Warrants, as well as a one-time adjustment. This one-time adjustment provides
that if on the third anniversary of the original issuance of the Convertible
Preferred Stock, the conversion price is greater than 70% of the then book value
per share of the Common Stock determined in accordance with GAAP on such date,
the conversion price will be reset at such time so that the conversion price
will be equal to 70% of such book value per share. After the resetting of the
conversion price, if any, the conversion price will continue to be subject to
the same anti-dilution adjustments.
DIVIDENDS
Cumulative dividends on the Convertible Preferred Stock will be payable
quarterly in cash at a rate equal to the ten-year Treasury Rate in effect on the
date of issuance. If dividends have not been paid or declared in full on the
Convertible Preferred Stock for all prior periods and the current period and set
apart for payment, or if there is an existing default in the Holding Company's
mandatory redemption obligation, no dividends may be declared or paid or set
apart for payment on, nor may any distribution be made to holders of, any class
of stock ranking junior to the Convertible Preferred Stock, including, without
limitation, the Common Stock (other than dividends or distributions made in
shares of stock ranking junior to the Convertible Preferred Stock) and no
dividends on shares of stock ranking on a parity with the Convertible Preferred
Stock may be paid or set apart for payment except ratably according to unpaid
dividends and required redemptions.
If: (i) at any time the equivalent of six quarterly dividends payable on
the Convertible Preferred Stock are accrued and unpaid, or (ii) the Holding
Company fails to make any payment upon mandatory redemption of the Convertible
Preferred Stock (each of (i) and (ii) being a "Triggering Event") the dividend
rate on the Convertible Preferred Stock shall automatically increase by 100
basis points for the period from and including the date of the occurrence of
such Triggering Event. The increased dividend rate will be payable until: (i)
all dividends, accrued and unpaid, have been paid or declared and funds have
been set aside to provide for payment in full, or (ii) the Holding Company has
fulfilled its mandatory redemption obligation, as the case may be.
REDEMPTION
The Convertible Preferred Stock will be subject to mandatory redemption on
the earlier of (i) the tenth anniversary of the date of issuance of the
Convertible Preferred Stock or (ii) December 31, 2013, at a price equal to $100
per share plus accumulated and unpaid dividends to the redemption date (the
"Mandatory Redemption Price"). The Mandatory Redemption Price is payable in
cash, or at the option of the Company, in a number of newly issued, fully paid
and non-assessable shares of the Common Stock the market value of which equals
110% of the Mandatory Redemption Price.
The Holding Company may redeem the Convertible Preferred Stock at its
option, in whole or in part, at any time after the third anniversary of the
issuance of the Convertible Preferred Stock, upon not less than 30 or more than
60 days' notice, at a price equal to $100 per share plus accumulated and unpaid
dividends to the redemption date, if the Closing Price of the Common Stock
exceeds 200% of the then applicable conversion price of the Convertible
Preferred Stock for a period of at least 20 consecutive Trading Days ending
within 10 days of the date on which notice of such redemption is given.
LIQUIDATION RIGHTS
The holders of the Convertible Preferred Stock will be entitled to receive
a liquidation preference out of the assets of the Holding Company, after all its
creditors have been paid and before any distribution is made to the holders of
any junior stock (including Common Stock) of the Holding Company, in an amount
per share equal to $100 per share plus all accrued and unpaid dividends thereon
to the date of distribution.
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VOTING RIGHTS
Except as indicated below or otherwise required by law, the holders of
Convertible Preferred Stock will not be entitled to vote for the election of
directors or on any other matters on which stockholders are generally entitled
to vote. Upon the occurrence of a Triggering Event, the number of directors of
the Holding Company will be increased by two and, subject to obtaining any
necessary regulatory approvals, which the Holding Company has agreed to use its
best efforts to obtain as soon as practicable after the occurrence of a
Triggering Event, the holders of all outstanding shares of Convertible Preferred
Stock, voting separately as a class, will be entitled to elect the additional
two directors. The two additional directors shall serve until all dividends
accrued and unpaid have been paid or declared and funds set aside to provide for
payment in full the Holding Company fulfills its mandatory redemption
obligation, as the case may be.
In addition, without the vote or consent of the holders of at least a
majority of the shares of Convertible Preferred Stock then outstanding, the
Holding Company may not (a) create or issue or increase the authorized number of
shares of any class or series of stock ranking prior to the Convertible
Preferred Stock either as to dividends or upon liquidation, dissolution or
winding up, or any security convertible into or exercisable or exchangeable for
such stock or (b) amend, alter or repeal any of the provisions of the Amended
and Restated Certificate of Incorporation of the Company so as to affect
adversely any right, preference, privilege or voting power of the Convertible
Preferred Stock or the holders thereof; provided, however, that any increase in
the amount of authorized Preferred Stock or the creation and issuance of any
other class of Preferred Stock, or any increase in the amount of authorized
shares of such class or of any other class of Preferred Stock, in each case
ranking on a parity with or junior to the Convertible Preferred Stock with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up, will not be deemed to affect adversely
such rights, preferences or voting powers.
WARRANTS
The Warrants may be exercised, in whole or in part, at any time on or after
the Demutualization Date and on or before the tenth anniversary of the
Demutualization Date for up to an aggregate number of fully paid and
nonassessable shares of Common Stock that collectively represents 7% of the
Common Stock on a fully-diluted basis on the Demutualization Date, subject to
adjustment.
The price payable for each share of the Common Stock issuable upon exercise
of Warrants initially is (a) in the event the Offerings occur prior to, on or
within five trading days after the Demutualization Date, the initial public
offering price of the Common Stock in the Offerings, unless the average of the
daily closing prices of the Common Stock for the 40 trading days following the
first 20 trading days after the Demutualization Date is greater than 115% of the
initial public offering price, in which case the initial exercise price shall be
equal to the sum of the initial public offering price plus an amount equal to
one half of the excess of such 40 day average over 115% of the initial public
offering price or (b) in the event the Offerings do not occur prior to, on or
within five trading days after the Demutualization Date, the lesser of (i) the
average of the daily closing prices of the Common Stock for the first 20 trading
days following Demutualization and (ii) 70% of the book value per share of the
Common Stock as of the Demutualization, determined in accordance with GAAP. The
Warrants contain standard anti-dilution provisions, providing for adjustment to
the exercise price in the event of, among other things, a dividend or other
distribution of capital stock, evidences of indebtedness or other property,
issuances of rights, options or warrants, certain cash dividends and certain
tender offers.
PREFERRED SHARE PURCHASE RIGHTS
On the Board Adoption Date, the Holding Company Board authorized the
Holding Company to enter into the Rights Agreement pursuant to which one Right
will be attached to each share of Common Stock of the Holding Company. The
Rights will be transferable only with Holding Company
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Common Stock, until they become exercisable at an exercise price to be
determined by the Holding Company Board prior to the time the Holding Company
enters into the Rights Agreement.
Generally, the Rights will become exercisable only if a person or group
(other than certain affiliates of the Holding Company) becomes the beneficial
owner of 15% or more of the issued and outstanding shares of Common Stock or
announces a tender offer, the consummation of which would result in ownership by
a person or group of 15% or more of the issued and outstanding shares of Common
Stock. The Rights Agreement provides that for this purpose the Investors and
their subsidiaries and affiliates individually or in the aggregate will not be
deemed to have acquired the requisite percentage of Common Stock as a result of
being the beneficial owner of any Warrants or Convertible Preferred Stock and/or
any securities that were acquired in a manner consistent with the standstill
provisions of the Investment Agreement. Each Right will entitle the holder,
until the tenth anniversary of the Rights Agreement, to buy one one-thousandth
of a share of Holding Company Series A Junior Participating Preferred Stock, at
an exercise price to be determined by the Holding Company Board prior to the
time the Holding Company enters into the Rights Agreement.
If a person or group (other than certain affiliates of the Holding Company)
becomes the beneficial owner of 15% or more of the issued and outstanding shares
of Holding Company Common Stock or if the Holding Company is the surviving
corporation in a merger following such an acquisition, each Right will entitle
its holder (other than such person or members of such group) to purchase, at the
Right's then current exercise price, shares of Common Stock having a market
value of twice the Right's exercise price. If the Holding Company is acquired in
a merger or other business combination transaction or 50% or more of its
consolidated assets or earning power are sold after a person or group (other
than certain affiliates of the Holding Company) acquires 15% or more of the
issued and outstanding shares of Holding Company Common Stock, each right will
entitle its holder to purchase, at the Right's then current exercise price, a
number of the acquiring company's common shares having a then current market
value of twice the Rights' exercise price.
Following the acquisition by a person or group of beneficial ownership of
15% or more of the Holding Company Common Stock and prior to the acquisition by
such person or group of 50% or more of the Holding Company Common Stock, the
Board of Directors of the Holding Company may exchange the Rights (other than
Rights owned by such person or group), in whole or in part, at an exchange ratio
of one share of Common Stock per Right.
Prior to the acquisition by a person or group of beneficial ownership of
15% or more of the Holding Company Common Stock, the Rights will be redeemable
in whole, not in part, for one cent per Right.
The Holding Company's Transfer Agent, First Chicago Trust Company of New
York, will be the Rights Agent under the Rights Agreement.
The issuance of the Rights to purchase shares of Holding Company Series A
Junior Participating Preferred Stock will have certain anti-takeover effects.
The Rights will cause substantial dilution to a person or group that attempts to
acquire the Holding Company on terms not approved by the Holding Company Board.
The Rights should not interfere with any merger or other business combination
approved by the Holding Company Board prior to the time that a person or group
has acquired beneficial ownership of 15% or more of the Holding Company Common
Stock, as the rights will be redeemable by the Holding Company at $0.01 per
Right prior to such time.
SHARES ELIGIBLE FOR FUTURE SALE
A substantial number of shares will be distributed to MONY's policyholders
in the Demutualization. See "The Demutualization -- Allocation and Payment of
Consideration to Eligible Policyholders". The Company has been advised by
counsel that the distribution of such shares will be exempt from registration
under the Securities Act by virtue of the exemption provided by Section 3(a)(10)
of the Securities Act, and those Eligible Policyholders who are not "affiliates"
of the Holding
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Company within the meaning of Rule 144 under the Securities Act will be able to
resell their shares in the public market without registration or compliance with
the time, volume, manner of sale and other limitations set forth in Rule 144.
Substantially all of the shares distributed to MONY's policyholders in the
Demutualization will be distributed to non-affiliates of the Holding Company
and, accordingly, will be freely transferable without limitations.
Pursuant to the Plan, policyholders will initially be issued shares of
Common Stock received in the Demutualization in book-entry form as
uncertificated shares. Under the Plan, the Holding Company shall establish,
subject to the approval of the New York Superintendent, a commission-free sales
program pursuant to which each Eligible Policyholder who receives a number of
shares of Common Stock under the Plan that is equal to or less than a number of
shares to be determined by the MONY Board at least 60 days prior to the
nine-month anniversary of the Plan Effective Date (which number shall not be
less than 25 nor more than 99) will be entitled to sell at market prices all,
but not less than all, of such shares received pursuant to the Plan without
paying brokerage commissions, mailing charges, registration fees or other
administrative or similar expenses. Such program will commence on the first
business day after the nine-month anniversary of the Effective Date and will
continue for three months thereafter unless extended by the Holding Company
Board. Under the Plan, the Holding Company will also establish, subject to the
approval of the New York Superintendent, a commission-free purchase program for
Eligible Policyholders who receive 99 or fewer shares of Common Stock under the
Plan, enabling such Eligible Policyholders to purchase, commission-free, such
number of shares as is necessary to bring their total respective number of
shares of Common Stock to 100.
As of the Board Adoption Date, MONY had approximately 840,000
policyholders, most of whom, if their policies remain in force on the Plan
Effective Date and if not paid cash or provided Policy Credits, will receive a
number of shares of Common Stock in the Demutualization which will make them
eligible to sell such shares through the commission-free sales program (as
described in "The Demutualization -- Commission-Free Programs"). No prediction
can be made as to the effect, if any, such future sale of shares, or the
availability of shares for such future sales, will have on the market price of
the Common Stock prevailing from time to time.
Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect prevailing market prices for the
Common Stock.
In addition, the Investors and their subsidiaries and affiliates have
certain registration rights with respect to the Warrants and the shares of
Common Stock issuable upon exercise thereof and upon conversion of Convertible
Preferred Stock. See "Certain Provisions of the Investment". Any sale of Common
Stock, Warrants or Convertible Preferred Stock by the Investors, including upon
the exercise of their registration rights, could adversely affect the market
price of the Common Stock. The Investors have also agreed with the Underwriters
not to dispose of any shares of Common Stock, Warrants or Convertible Preferred
Stock for a period of days following the Offerings without the
Underwriters' consent. See "Underwriting".
RESTRICTIONS ON ACQUISITIONS OF SECURITIES OF THE HOLDING COMPANY
Section 7312 provides that, for a period of five years after the Plan
Effective Date, no person may, directly or indirectly, offer to acquire or
acquire in any manner, the beneficial ownership (defined as the power to vote or
dispose of, or to direct the voting or disposition of, a security) of 5% or more
of any class of voting security (which term includes the Common Stock) of the
Holding Company without the prior approval of the New York Superintendent. The
Investors have received a conditional waiver of this rule from the New York
Superintendent in connection with the potential exercise of the Warrants prior
to the end of such five-year period. Pursuant to Section 7312, voting securities
acquired in excess of the 5% threshold without such prior approval will be
deemed non-voting. See "Certain Provisions of the Investment -- Determination of
Non-Control".
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State insurance laws require regulatory approval of changes of control
(generally upon acquisitions of 10% or more of voting securities) of insurance
holding companies, such as the Holding Company. State insurance laws, including
the New York Insurance Law, require certain filings concerning changes in
ownership of insurance companies. Although the specific provisions vary,
insurance laws in states such as New York generally prohibit a person from
acquiring a controlling interest in an insurer incorporated in the state or in
any other person controlling such insurer unless the insurance regulatory
authority has approved either the proposed acquisition of control or a
disclaimer of control in accordance with the applicable regulations. The New
York Superintendent issued a determination pursuant to Section 1501(c) of the
New York Insurance Law, dated December 29, 1998, that the Investors would not
control MONY as a result of the transactions contemplated by the Investment
Agreement, subject to certain notice and approval requirements, and certain
commitments by the Investors, as set forth in "Certain Provisions of the
Investment -- Determination of Non-Control".
In addition, Section 203 of the Delaware General Corporation Law prohibits
an "interested stockholder" of a Delaware corporation from engaging in certain
business combinations with the corporation, including mergers or consolidations
or acquisitions of additional shares of the corporation, for a period of three
years following the time that the stockholder becomes an "interested
stockholder". An "interested stockholder" is defined to include persons owning
directly or indirectly 15% or more of the outstanding voting stock of a
corporation. The prohibitions under Section 203 are not applicable in certain
circumstances, including those in which (i) the business combination or the
transaction which results in the stockholder becoming an "interested
stockholder" is approved by the corporation's board of directors prior to the
time the stockholder becomes an "interested stockholder", (ii) the "interested
stockholder" upon consummation of such transaction owns at least 85% of the
voting stock of the corporation outstanding prior to such transaction or (iii)
the corporation has elected not to be governed by such prohibitions. The MONY
Board and the Holding Company Board have approved the Investors' acquisition of
Common Stock as part of their approval of the Investors' investment and,
accordingly, the prohibitions under Section 203 will not apply to any business
combination with the Investors.
CERTAIN PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION AND THE BY-LAWS OF THE HOLDING COMPANY
The following summary of the Amended and Restated Certificate and the
By-laws does not purport to be complete and is qualified in its entirety by
reference to the Amended and Restated Certificate and the By-laws, copies of
which are filed as exhibits to the Registration Statement of which this
Prospectus forms a part.
The following discussion is a summary of certain provisions of the Amended
and Restated Certificate and the By-laws relating to stockholder voting rights,
advance notice requirements and other provisions, some of which may be deemed to
have an "anti-takeover" effect. In addition to these provisions, the regulatory
restrictions on acquisitions of securities of the Holding Company may also deter
attempts to effect, or prevent the consummation of, a change in control of the
Holding Company. See "Restrictions on Acquisitions of Securities of the Holding
Company". Pursuant to the standstill provisions set forth in the Investment
Agreement, the Holding Company has agreed not to take (and to cause its
subsidiaries not to take) any action which has the effect of imposing more
stringent requirements on the Investors, their subsidiaries and affiliates than
those contained in the Investment Agreement. See "Certain Provisions of the
Investment -- Standstill Agreement". In addition, the Investors have agreed to
vote (and to cause their subsidiaries and affiliates to vote) the shares of
Common Stock acquired upon exercise of Warrants and conversion of Convertible
Preferred Stock, at the option of the Holding Company, in accordance with the
recommendation of the Holding Company Board or in the same proportion as the
holders of Common Stock who are not affiliated with either the Holding Company
or the Investors until the termination of the standstill provisions set forth in
the Investment Agreement. See "Certain
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Provisions of the Investment -- Standstill Agreement" and "Certain Provisions of
the Investment -- Voting of Common Stock". These and other provisions affect
stockholder rights and should be given careful attention.
ISSUANCE OF COMMON AND PREFERRED STOCK
The Holding Company believes that its ability to issue the authorized but
unissued shares of Common Stock and shares of Preferred Stock without
stockholder consent will provide the Holding Company with the flexibility
necessary to meet its future needs without experiencing the time delay of having
to seek stockholder approval. Subject to the various contractual restrictions
described herein (see "Certain Provisions of the Investment") and to the
provisions of the Plan, the unissued shares of Common Stock and Preferred Stock
will be issuable from time to time for any corporate purpose, including, without
limitation, stock splits, stock dividends, employee benefit and compensation
plans, acquisitions and public or private sales for cash as a means of raising
capital. It is possible that the Holding Company Board might use its authority
(subject to the restrictions referred to above) to issue Common Stock or
Preferred Stock in a way which could deter or impede the completion of a tender
offer or other attempt to gain control of the Holding Company which the Holding
Company Board does not approve. The Holding Company does not have any
predetermined plans or commitments to use its authority to effect any such
issuance, but reserves the right to take any action in the future which the
Holding Company Board deems to be in the best interests of the stockholders and
the Holding Company under the circumstances.
It is not possible to state the actual effect of any issuance of Preferred
Stock upon the rights of holders of Common Stock because the Holding Company
Board has not determined an issuance price or prices, terms or the rights of the
holders of Preferred Stock (except with respect to the terms of the shares of
Convertible Preferred Stock). However, such effects might include: (i)
restrictions on Common Stock dividends if Preferred Stock dividends have not
been paid; (ii) dilution of the voting power and equity interest of existing
holders of Common Stock to the extent that any Preferred Stock series has voting
rights or would acquire voting rights upon the occurrence of certain events
(such as the failure to pay dividends for a specified period) or that any
Preferred Stock series is convertible into Common Stock; and (iii) current
holders of Common Stock not being entitled to share in the Holding Company's
assets upon liquidation, dissolution or winding-up until satisfaction of any
liquidation preferences granted to any series of Preferred Stock. See
"Description of Capital Securities -- Convertible Preferred Stock".
BOARD OF DIRECTORS
The Amended and Restated Certificate and the By-laws provide that the
Holding Company Board will consist of not less than 5 nor more than 15 directors
(subject to the rights of the holders of any series of Preferred Stock), with
the exact number to be determined from time to time by the affirmative vote of a
majority of the entire Holding Company Board. The Holding Company Board is
classified, with respect to the time for which they severally hold office, into
three classes, as nearly equal in number as possible, one class to hold office
initially for a term expiring at the annual meeting of stockholders to be held
in 1999, another class to hold office initially for a term expiring at the
annual meeting of stockholders to be held in 2000, and another class to hold
office initially for a term expiring at the annual meeting of stockholders to be
held in 2001, with the members of each class to hold office until their
successors are duly elected and qualified. The Company believes that a
classified board of directors will help to assure the continuity and stability
of the Holding Company Board and the business strategies and policies of the
Company as determined by the Holding Company Board.
The classified board provisions could have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain control
of the Company, even though such an attempt might be beneficial to the Company
and its stockholders. In addition, the classified board
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provisions could delay stockholders who do not like the policies of the Holding
Company Board from removing a majority of the Holding Company Board for two
years.
At any meeting of the Holding Company Board, a majority of the entire
Holding Company Board will constitute a quorum for the transaction of business,
and, subject to certain exceptions, at any meeting at which a quorum is present
the affirmative vote of a majority of the directors present will constitute the
act of the Holding Company Board.
Subject to the rights of the holders of any series of Preferred Stock, any
newly created directorship and any other vacancy occurring on the Holding
Company Board may be filled by a majority of the directors then in office
(regardless of whether such majority constitutes a quorum of directors) or by a
sole remaining director. The foregoing provisions could prevent a stockholder
from obtaining majority representation on the Holding Company Board by
permitting the Holding Company Board to enlarge the Holding Company Board and
fill the new directorships with its own nominees. A director so elected by the
Holding Company Board holds office until the next election of the class for
which such director has been chosen and until his successor is elected and
qualified.
Subject to the rights of the holders of any series of Preferred Stock then
outstanding, the Amended and Restated Certificate also provides that directors
may be removed only for cause and only by the affirmative vote of holders of a
majority of the outstanding voting power of the Company. The effect of these
provisions is to preclude a stockholder from removing incumbent directors
without cause and simultaneously gaining control of the Holding Company Board by
filling the vacancies created by such removal with its own nominees.
STOCKHOLDER ACTION
The Amended and Restated Certificate requires that, following the
consummation of the Offerings, any action required or permitted to be taken by
the stockholders may only be effected at a duly called annual or special
meeting.
LIMITATION ON CALL OF SPECIAL MEETINGS OF STOCKHOLDERS
Under the Delaware General Corporation Law, special meetings of
stockholders may be called by the Holding Company Board or by such other persons
as may be authorized by the Amended and Restated Certificate or the By-laws. In
the case of the Holding Company, the Amended and Restated Certificate and the
By-laws provide that special meetings may be called only by the Chairman of the
Board, the President or by the Secretary pursuant to a written request signed by
a majority of the members of the Holding Company Board. Except as otherwise
required by law or the Restated Certificate, no business will be transacted at
any special meeting of stockholders other than the items of business stated in
the notice.
ADVANCE NOTICE REQUIREMENTS
The By-laws establish advance notice procedures with regard to (i) the
nomination, other than by or at the direction of the Holding Company Board, of
candidates for election to the Holding Company Board (the "Nomination
Provision") and (ii) certain business to be brought before an annual meeting of
stockholders of the Holding Company (the "Business Provision").
The Nomination Provision, by requiring advance notice of nominations by
stockholders, affords the Holding Company Board a meaningful opportunity to
consider the qualifications of the proposed nominees and, to the extent deemed
necessary or desirable by the Holding Company Board, to inform stockholders
about such qualifications.
The Business Provision, by requiring advance notice of business proposed to
be brought before an annual meeting, provides a more orderly procedure for
conducting annual meetings of stockholders and provides the Holding Company
Board with a meaningful opportunity prior to the meeting to inform stockholders,
to the extent deemed necessary or desirable by the Holding Company Board,
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of any business proposed to be conducted at such meeting, together with any
recommendation of the Holding Company Board. The Business Provision does not
affect the right of stockholders to make stockholder proposals for inclusion in
proxy statements for the Holding Company's annual meetings of stockholders
pursuant to the rules of the Commission.
Although these By-law provisions do not give the Holding Company Board any
power to approve or disapprove of stockholder nominations for the election of
directors or of any other business desired by stockholders to be conducted at an
annual meeting of stockholders if the proper procedures are followed, these
By-law provisions may have the effect of precluding a nomination or precluding
the conducting of business at a particular annual meeting, and may make it
difficult for a third party to conduct a solicitation of proxies to elect its
own slate of directors or otherwise attempt to obtain control of the Holding
Company, even if such a solicitation or attempt might be beneficial to the
Holding Company and its stockholders.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND THE BY-LAWS
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws unless
such corporation's certificate of incorporation requires a greater percentage.
The Amended and Restated Certificate provides that any amendments to certain
provisions of the Amended and Restated Certificate and of the By-laws requires
the affirmative vote of the holders of at least 80% of the voting power of the
shares entitled to vote at an election of directors. Those provisions in the
Amended and Restated Certificate relate to the following matters: (i) division
of the Board of Directors into classes; (ii) the filling of vacancies on the
Board of Directors; (iii) the basis for the removal of directors; (iv) the size
of the Board of Directors; (v) limitations on action without a meeting; and (vi)
the right of the Board of Directors to amend the By-laws. Those provisions of
the By-laws relate to the following matters: (i) limitations on calling special
meetings; (ii) the size of the Board of Directors; (iii) advance notice of
stockholder proposals; (iv) stockholder nominations of directors; and (v) the
filling of vacancies on the Board of Directors. In addition, the Amended and
Restated Certificate grants the Board of Directors authority to amend the
By-laws.
LIMITATIONS ON DIRECTOR LIABILITY
The Holding Company's Amended and Restated Certificate contains a provision
that is designed to limit the directors' liability to the extent permitted by
the Delaware General Corporation Law and any amendments thereto. Specifically,
directors will not be held liable to the Holding Company or its stockholders for
an act or omission in such capacity as a director, except for liability as a
result of: (i) a breach of the duty of loyalty to the Holding Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) payment of an
improper dividend or improper repurchase of the Holding Company's stock under
Section 174 of the Delaware General Corporation Law, or (iv) actions or
omissions pursuant to which the director received an improper personal benefit.
The principal effect of the limitation on liability provision is that a
stockholder is unable to prosecute an action for monetary damages against a
director of the Holding Company unless the stockholder can demonstrate one of
the specified bases for liability. This provision, however, does not eliminate
or limit director liability arising in connection with causes of action brought
under the federal securities laws. The Holding Company's Amended and Restated
Certificate does not eliminate its directors' duty of care. The inclusion of
this provision in the Holding Company's Amended and Restated Certificate may,
however, discourage or deter stockholders or management from bringing a lawsuit
against directors for a breach of their fiduciary duties, even though such an
action, if successful, might otherwise have benefited the Holding Company and
its stockholders. This provision should not affect the availability of equitable
remedies such as injunction or rescission based upon a director's breach of the
duty of care.
185
<PAGE> 187
The By-laws also provide that the Holding Company will indemnify its
directors and officers to the fullest extent permitted by Delaware law. The
Holding Company is generally required to indemnify its directors and officers
for all judgments, fines, settlements, legal fees and other expenses incurred in
connection with pending or threatened legal proceedings because of the
director's or officer's position with the Holding Company or another entity that
the director or officer serves at the Holding Company's request, subject to
certain conditions, and to advance funds to its directors and officers to enable
them to defend against such proceedings. To receive indemnification, the
director of officer must have been successful in the legal proceeding or acted
in good faith and in what was reasonably believed to be a lawful manner in the
Holding Company's best interest.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby will be passed
upon for the Holding Company by Dewey Ballantine LLP, New York, New York and the
Underwriters by Sullivan & Cromwell, New York, New York.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1997 and
1996 and the consolidated statements of income and comprehensive income, changes
in equity, and cash flows for each of the three years in the period ended
December 31, 1997, and related supplemental schedules included in this
prospectus, have been included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing. Certain partners and other
professional personnel of the independent auditors, PricewaterhouseCoopers LLP,
hold insurance policies issued by MONY. PricewaterhouseCoopers LLP has notified
MONY that, consistent with its existing policy prohibiting its partners and
certain other professional personnel from owning common stock issued by any of
its clients, PricewaterhouseCoopers LLP will require that any of the Common
Stock issued to any partner or certain other professional personnel of
PricewaterhouseCoopers LLP be divested in accordance with such policy without
delay upon receipt.
A consulting actuary associated with PricewaterhouseCoopers LLP has
rendered an opinion, dated August 10, 1998, to the MONY Board that states (in
reliance upon the matters described in such opinion) that the arrangement for
establishment and operation of the Closed Block allocates assets to the Closed
Block which are expected to produce cash flows which, together with anticipated
revenues from the Closed Block Business, are reasonably sufficient to enable the
Closed Block to provide for the guaranteed benefits, certain expenses and taxes
associated with Closed Block policies, and to provide for the continuation of
the 1998 dividend scales if the experience underlying the calculation of these
assets continues. His opinion is included herein in Annex A in reliance upon his
qualification under the American Academy of Actuaries Qualification standards to
render the opinion set forth.
Phillip A. Eisenberg, F.S.A., M.A.A.A., MONY's Senior Vice President and
Chief Actuary, has rendered an opinion, dated August 14, 1998, to the MONY Board
that states (in reliance upon matters described in such opinion) that the
allocation of consideration to policyholders pursuant to the Plan is fair and
equitable to policyholders. His opinion is included herein in Annex A in
reliance upon his qualification under the American Academy of Actuaries
Qualification standards to render the opinion set forth.
The statements under the captions "Business -- Accumulation Products" and
"-- Other Products" concerning the results of opinion surveys by DALBAR have
been reviewed and approved by DALBAR and are included herein in reliance upon
such firm as experts on such matters.
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<PAGE> 188
GLOSSARY
The following Glossary includes definitions of certain general insurance
terms as well as terms relating specifically to the Company.
AEGON......................... AEGON USA, Inc.
AEGON NOTES................... The Series A Notes and Series B Notes, issued
by AEGON at December 31, 1993.
A.M. BEST..................... A.M. Best Company, Inc. A.M. Best financial
condition ratings are opinions of an insurance
company's financial strength, operating
performance and ability to meet its obligations
to policyowners. Such ratings are based upon a
comprehensive review of a company's financial
performance, which is supplemented by certain
data, including responses to A.M. Best's
questionnaires, quarterly NAIC filings, state
insurance department examination reports, loss
reserve reports, annual reports and reports
filed with state insurance departments. A.M.
Best undertakes a quantitative evaluation based
on profitability, leverage and liquidity and a
qualitative evaluation based upon the
composition of a company's book of business or
spread of risk, the amount, appropriateness and
soundness of reinsurance, the quality,
diversification and estimated market value of
its assets, the adequacy of its loss reserves
and policyowners' surplus and the experience
and competence of its management. A.M. Best
Company, Inc. uses the following rating scale:
<TABLE>
<S> <C>
A++ and A+ Superior
A and A- Excellent
B++ and B+ Very Good
B and B- Adequate
C++ and C+ Fair
C and C- Marginal
D Very Vulnerable
E Under State Supervision
F In Liquidation
</TABLE>
ANNUITY....................... A contract that pays a periodic income benefit
for the life of a person (the annuitant), the
lives of two or more persons or a specified
period of time.
ASSET VALUATION RESERVE
(AVR)......................... A reserve which consists of two main
components: a "default component" to provide
for future credit-related losses on
fixed-income investments and an "equity
component" to provide for losses on all types
of equity investments, including real estate.
The AVR is required by statutory accounting
principles and is not included in financial
statements prepared in accordance with GAAP.
AUSA.......................... AUSA Life Insurance Company, Inc., a
wholly-owned subsidiary of AEGON.
BOARD ADOPTION DATE........... August 14, 1998, the date upon which the MONY
Board adopted the Plan.
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<PAGE> 189
CAPITAL AND SURPLUS........... For statutory accounting purposes, consists of
capital stock, paid-in or contributed surplus,
special surplus funds and unassigned surplus.
CARRYING VALUE................ The amount of an item as included in the
financial statements.
CASH VALUE.................... The amount of cash available to a policyholder
on surrender of a life insurance policy.
CEDE, CEDING COMPANY.......... When a company reinsures all or a portion of
its risk with another, it "cedes" business and
is referred to as the "ceding company".
CLOSED BLOCK.................. A mechanism to preserve the reasonable dividend
expectations of individual participating policyholders with traditional
individual life insurance policies where
dividends are currently being paid or are
expected to be paid under the current dividend
scale (i.e., whole life, term, retirement
endowment, endowment and last to die insurance
policies), and individual retirement annuity
contracts and individual flexible premium
retirement annuity contracts, provided that
such policies and contracts otherwise meet the
requirements for Closed Block Business.
CLOSED BLOCK BUSINESS......... Policies within the classes of policies
specified in the Plan (which policy classes
constitute all of the classes of individual
policies with current payable dividend scale,
subject to certain exceptions specified in the
Plan), but only to the extent such policies are
either (a) in force on the Plan Effective Date
or (b) issued and delivered after the Plan
Effective Date pursuant, in each case, to an
application, complete on its face, that is
received prior to the Plan Effective Date at
MONY's administrative offices, provided that
all underwriting in connection with any policy
referred to in this clause (b) is completed
within 60 days of the Plan Effective Date and
such policy is issued as applied for without
material change (upon receipt of premium
payment in accordance with the Company's
customary business practice) and delivered in
accordance with the terms of the application.
"Closed Block Business" also includes any
policy within the classes of policies specified
in the Plan which is in force on the Plan
Effective Date as extended term insurance
pursuant to a non-forfeiture provision in such
policy.
CONVERTIBLE PREFERRED STOCK... The preferred stock of the Holding Company
which the Investors have agreed to purchase on
the Company's request. This preferred stock
will be convertible into shares of Common Stock
and will have a liquidation value of $100 per
share.
CREDITING RATE................ The interest rate credited on a life insurance
policy or annuity contract. This credit
interest rate may be a guaranteed fixed rate, a
variable rate or some combination of both.
DEFERRED POLICY ACQUISITION
COSTS......................... Commissions and other selling expenses which
vary with and are directly related to the
production of business. These
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<PAGE> 190
acquisition costs are deferred and amortized to
achieve a matching of revenues and expenses
when reported in financial statements prepared
in conformity with GAAP.
DEFERRED ANNUITY.............. An annuity that: (i) can be paid either with a
single premium or a series of installments and
(ii) includes a schedule of periodic income
benefit to commence after an accumulation
period.
DEMUTUALIZATION............... The conversion of MONY from a mutual life
insurance company to a stock life insurance
company, together with other matters addressed
by, and pursuant to the terms of, the Plan.
DEMUTUALIZATION DATE.......... The date the plan of reorganization becomes
effective or, if later, the first date
following such effectiveness on which shares of
Common Stock are first issued to Eligible
Policyholders.
DIVIDEND SCALES............... The actuarial formulas used by life insurance
companies to determine amounts payable as
dividends on participating policies based on
experience factors relating, among other
things, to investment results, mortality, lapse
rates, expenses, premium taxes and policy loan
interest.
ELIGIBLE POLICYHOLDER......... Each policyholder who owns a policy that was in
force on the Board Adoption Date and which
remains in force on the Plan Effective Date.
EQUITY REAL ESTATE............ An investment asset category which combines
wholly-owned real estate and interests in real
estate joint ventures.
EXISTING DEPOSITS............. The existing deposits on contracts which were
in force and transferred to AEGON on the Group
Pension Transaction Date.
FINAL VALUE PAYMENT........... The payment MONY will receive at December 31,
2002 based on the remaining fair value of the
Existing Deposits.
FIRST CLOSING DATE............ December 30, 1997.
GENERAL ACCOUNT............... All of an insurer's assets other than those
allocated to a separate account. The insurer
bears the investment risk on the invested
assets of the general account.
GENERAL ACCOUNT INVESTED
ASSETS........................ The assets held in the General Account
associated with the continuing operations of
MONY and its insurance company affiliates and
which include fixed maturities, mortgages,
equity real estate, equity interests, policy
loans and cash and short-term investments.
GOLDMAN SACHS................. Goldman, Sachs & Co.
GROUP PENSION PAYMENTS........ The payments MONY receives on an annual basis
through December 31, 2002 representing the
profits from the business transferred to AEGON
as determined pursuant to the Earnings Formula
under the AEGON Agreement.
GROUP PENSION PROFITS......... The recorded GAAP earnings from the Group
Pension Payments.
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<PAGE> 191
GROUP PENSION TRANSACTION..... The transaction in which the Company
transferred a substantial portion of its group
pension business to AUSA. The transaction was
legally structured as a sale. However, in
accordance with GAAP the transaction did not
constitute a sale because the Company retained
substantially all the risks and rewards
associated with the transferred assets and
liabilities relating to such business.
GROUP PENSION TRANSACTION
DATE.......................... December 31, 1993.
GUARANTEED INVESTMENT
CONTRACTS (GICS).............. Group annuity contracts sold to pension and
profit sharing plans and funding agreements
sold primarily to municipalities that guarantee
a stated interest rate for a specified period
of time.
HOLDING COMPANY SUBORDINATED
NOTES....................... Those notes the Holding Company will issue if
the Investors elect to exchange the MONY Notes.
IMMEDIATE ANNUITY............. An annuity that begins payment immediately
after issuance.
IN FORCE...................... Generally, policies and contracts written and
recorded on the books of an insurance carrier
which are unexpired as of a given date.
INTERCOMPANY SURPLUS NOTES.... One or more surplus notes in an aggregate
principal amount equal to the principal amount
of the Holding Company Subordinated Notes which
bear interest at 9.5% per annum.
INTEREST-SENSITIVE PRODUCT.... A life insurance policy or annuity contract
that provides an explicit guaranteed interest
rate subject to being reset by the insurer
after a specified period of time.
INVESTORS..................... GS Mezzanine Partners, L.P., GS Mezzanine
Partners Offshore, L. P., Stone Street Fund
1997, L. P., and Bridge Street Fund 1997, L. P.
LAPSE......................... Termination of a policy because of surrender,
failure to pay a premium or lack of sufficient
cash value to maintain in force status.
MONY BOARD.................... The Board of Trustees of MONY.
MONY NOTES.................... The 9.50% Surplus Notes due December 30, 2012
in an aggregate principal amount of $115.0
million issued on December 30, 1997, by MONY.
MOODY'S....................... Moody's Investors Service, Inc. Moody's
financial strength ratings are opinions of an
operating insurance company's ability to
discharge senior policyowner claims and
obligations pursuant to its insurance policies.
Moody's financial strength ratings are based on
information provided by the
G-4
<PAGE> 192
company and federal and state regulators.
Moody's Investors Service, Inc. uses the
following rating scale:
<TABLE>
<S> <C>
Aaa Exceptional
Aa1, Aa2 and Aa3 Excellent
A1, A2 and A3 Good
Baa1, Baa2 and Baa3 Adequate
Ba1, Ba2 and Ba3 Questionable
B1, B2 and B3 Poor
Caa Very poor
Ca Extremely poor
C Lowest
</TABLE>
MORBIDITY..................... The relative rate of any health contingency due
to disease or physical impairment.
MORTALITY..................... The ratio of deaths to a specific population.
NAIC.......................... National Association of Insurance
Commissioners.
NAIC DESIGNATION.............. NAIC designation refers to any one of six
specific alpha-numeric categories used by the
Securities Valuation Office of the National
Association of Insurance Commissioners to
denote the credit quality of fixed maturity
securities. The definition of these NAIC
designation categories is as follows:
NAIC 1 is assigned to obligations exhibiting
the highest quality. Credit risk is at its
lowest and the issuer's credit profile is
stable.
NAIC 2 is assigned to obligations of high
quality. Credit risk is low but may increase in
the intermediate future and the issuer's credit
profile is reasonably stable.
NAIC 3 is assigned to obligations of medium
quality. Credit risk is intermediate and the
issuer's credit profile has elements of
instability. These obligations exhibit
speculative elements.
NAIC 4 is assigned to obligations of low
quality. Credit risk is high and the issuer's
credit profile is volatile. These obligations
are highly speculative, but currently the
issuer has the capacity to meet its
obligations.
NAIC 5 is applied to obligations of the lowest
credit quality which are not in or near
default. Credit risk is at its highest and
credit profile is highly volatile, but
currently the issuer has the capacity to meet
its obligations.
NAIC 6 is applied to obligations which are in
or near default.
NEW BUSINESS GROWTH PAYMENT... A contingent payment due to MONY from AEGON, at
December 31, 2002 based on new business growth subsequent to the Group Pension
Transaction Date.
NEW YORK SUPERINTENDENT....... The New York Superintendent of Insurance.
PARTICIPATING POLICY.......... A policy under which there is a right to
participate in the divisible surplus of the
Company to the extent dividends are
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<PAGE> 193
apportioned thereon (including any such policy
that has continued as extended term insurance).
A MONY policy which by its terms is not
non-participating will be deemed to be a
participating policy.
PARTICIPATING POLICYHOLDER.... An Eligible Policyholder who is on the Board
Adoption Date the owner of one or more
participating policies which is then in force
and remains in force on the Plan Effective
Date.
PERSISTENCY................... Percentage of life insurance policies or
annuity contracts remaining in force between
measurement dates.
PLAN.......................... The plan of reorganization (including all
exhibits and schedules thereto), as it may be
amended from time to time, which was adopted by
the Board of Trustees of MONY, pursuant to
which the Company intends to demutualize.
PLAN EFFECTIVE DATE........... The effective date of the Demutualization.
POLICY........................ The written forms, endorsements, riders and
attachments that make up an insurance contract
between an insured and insurer. A policy
includes, among other things, the terms and
conditions of the coverage, the perils insured
or excluded, the limits of insurance provided,
the interests insured, the effective dates of
the coverage.
POLICY ACQUISITION COSTS...... Agents' and brokers' commissions, premium
taxes, underwriting and other direct expenses
associated with acquiring business.
POLICY CREDITS................ Additional values applied to a policy through
dividends, increases in fund values,
accumulation values or accumulation account
values or extensions of coverages.
PREMIUMS...................... Payments and considerations received during the
year on policies and contracts, other than
universal life and investment-type contracts,
issued or reinsured (assumed less ceded) by an
insurance company and accounted for as revenues
under GAAP.
REINSURANCE................... The acceptance by one or more insurers, called
reinsurers, of a portion of the risk
underwritten by another insurer who has
directly written the coverage.
RISK-BASED CAPITAL (RBC)
REQUIREMENTS................ Regulatory and rating agency targeted surplus
based on the relationship of statutory surplus,
with certain adjustments, to the sum of stated
percentages of each element of a specified list
of company risk exposures.
SECTION 7312.................. Section 7312 of the New York Insurance Law.
SEPARATE ACCOUNTS............. Investment accounts maintained by an insurer to
which funds have been allocated for certain
policies under provisions of relevant state
insurance law. The investments in each separate
account are maintained separately from those in
other separate accounts and the general
account. The investment results of the separate
account assets are passed through directly to
the separate account contractholders, so that
an
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<PAGE> 194
insurer derives management and other fees from,
but bears no investment risk on, these assets,
except the risk on certain products that
returns on separate account assets will not
meet the minimum rate guaranteed on these
products.
SERIES A NOTES................ The Series A Notes due December 31, 2002 which
were issued by AEGON and purchased by MONY as
part of the Group Pension Transaction.
SERIES B NOTES................ The Series B Notes due December 31, 2002 which
were issued by AEGON and purchased by MONY as
part of the Group Pension Transaction.
STANDARD & POOR'S............. Standard & Poor's Ratings Group. Standard &
Poor's claims-paying ability ratings are
opinions of an operating insurance company's
financial ability to meet its obligations under
its insurance policies. Standard & Poor's
claims-paying ability ratings are based on
current information provided by the subject
insurance company and other reliable sources.
Standard & Poor's Rating Group uses the
following rating scale:
<TABLE>
<S> <C>
AAA Superior
AA+, AA and AA- Excellent financial
security
A+, A and A- Good financial security
BBB+, BBB and BBB- Adequate
BB+, Bb and BB- Financial security may
be adequate
B+, B and B- Vulnerable
CCC Extremely vulnerable
R Regulatory actions
BBBq, Bbq and Bq Qualified solvency
ratings
</TABLE>
STATUTORY ACCOUNTING PRACTICES
(SAP)....................... Those accounting practices prescribed or
permitted by an insurer's domiciliary state
insurance regulator for purposes of financial
reporting to regulators.
STATUTORY SURPLUS............. The excess of statutory admitted assets over
statutory liabilities.
SURRENDERS AND WITHDRAWALS.... Surrenders of life insurance policies and
annuity contracts for their entire net cash
surrender values and withdrawals of a portion
of such values.
TERM LIFE INSURANCE........... Insurance protection during a certain number of
years but expiring without policy cash value if
the insured survives the stated period.
TRADITIONAL LIFE INSURANCE.... Those life insurance products consisting of
whole life insurance and term life insurance.
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<PAGE> 195
UNDERWRITING.................. Process of examining, accepting or rejecting
insurance risks, and classifying those
accepted, in order to charge an appropriate
premium for each accepted risk.
UNIVERSAL LIFE INSURANCE...... Life insurance under which: (i) premiums are
generally flexible, (ii) the level of death
benefits may be adjusted and (iii) mortality,
expense and other charges may vary. This
insurance is sometimes referred to as unbundled
life insurance because its three basic elements
(investment earnings, cost of protection and
expense charges) are separately identified both
in the policy and in the annual report to the
policyholder.
VARIABLE ANNUITY.............. Annuity the value of which fluctuates in
accordance with the investment experience of a
separate account. At the time of the payment of
benefits to the annuitant, the annuitant can
generally elect from a number of payment
options which provide either fixed or variable
benefit payments.
VARIABLE LIFE INSURANCE....... Life insurance under which the benefits payable
upon death or surrender vary to reflect the
investment experience of a separate account
supporting such policies.
WARRANTS...................... Warrants which give the Investors the right to
purchase from the Holding Company in the
aggregate 7.0% of the fully diluted Common
Stock (after giving effect to the Offerings) at
the Demutualization Date.
WHOLE LIFE INSURANCE.......... Insurance that may be kept in force for a
person's entire life by paying one or more
premiums. The insurance policy pays a benefit
(contractual amount adjusted for items such as
policy loans and dividends, if any) at the
death of the insured. Whole life insurance also
builds up cash values.
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<PAGE> 196
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent accountants' report............................. F-2
Consolidated balance sheets as of December 31, 1997 and
1996...................................................... F-3
Consolidated statements of income and comprehensive income
for the years ended December 31, 1997, 1996 and 1995...... F-4
Consolidated statements of changes in equity for the years
ended December 31, 1997, 1996 and 1995.................... F-5
Consolidated statements of cash flows for the years ended
December 31, 1997, 1996 and 1995.......................... F-6
Notes to consolidated financial statements.................. F-7
Supplemental Schedule to the Consolidated Financial
Statement:
Independent accountants' report............................. F-47
The MONY Group Inc. condensed balance sheet as of December
31, 1997.................................................. F-48
Notes to The MONY Group Inc. condensed balance sheet........ F-49
Unaudited interim condensed consolidated balance sheet as of
June 30, 1998............................................. F-51
Unaudited interim condensed consolidated statements of
income and comprehensive income for the six month periods
ended June 30, 1998 and 1997.............................. F-52
Unaudited interim condensed consolidated statement of
changes in equity for the six month period ended June 30,
1998...................................................... F-53
Unaudited interim condensed consolidated statements of cash
flows for the six month periods ended June 30, 1998 and
1997...................................................... F-54
Notes to unaudited interim condensed consolidated financial
statements................................................ F-55
Supplemental Schedule to the Unaudited Interim Condensed
Consolidated Financial Statements:
The MONY Group Inc. unaudited balance sheet as of June 30,
1998...................................................... F-64
The MONY Group Inc. unaudited statement of income for the
six month period ended June 30, 1998...................... F-65
The MONY Group Inc. unaudited statement of cash flows for
the six month period ended June 30, 1998.................. F-66
Notes to The MONY Group Inc. condensed financial
statements................................................ F-67
</TABLE>
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<PAGE> 197
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
The Mutual Life Insurance Company of New York
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and changes in equity and of cash
flows present fairly, in all material respects, the financial position of The
Mutual Life Insurance Company of New York and its subsidiaries at December 31,
1997 and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 5 to the consolidated financial statements, the
Company adopted in 1996, Statements of Financial Accounting Standards No. 120
(SFAS 120) and Financial Accounting Standards Board Interpretation No. 40 (FIN
40) which required implementation of several accounting pronouncements not
previously adopted. The effects of adopting SFAS 120 and FIN 40 were
retroactively applied to the Company's previously issued financial statements,
consistent with the implementation guidance of those standards.
PricewaterhouseCoopers LLP
New York, New York
July 27, 1998 except for Note 2,
as to which the date is August 14, 1998.
F-2
<PAGE> 198
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities available-for-sale at fair
value.................................................. $ 5,950.1 $ 5,142.1
Fixed maturity securities held-to-maturity at amortized
cost................................................... -- 318.7
Equity securities available-for-sale at fair value........ 337.8 305.2
Mortgage loans on real estate (Note 14)................... 1,430.1 1,582.3
Policy loans.............................................. 1,247.2 1,231.3
Real estate to be disposed of (Note 14)................... 621.2 434.8
Real estate held for investment (Note 14)................. 495.9 1,070.4
Other invested assets..................................... 68.6 65.8
--------- ---------
10,150.9 10,150.6
--------- ---------
Cash and cash equivalents................................... 313.4 315.4
Accrued investment income................................... 182.8 162.7
Amounts due from reinsurers................................. 574.5 392.1
Premiums receivable......................................... 21.6 22.3
Deferred policy acquisition costs........................... 1,007.1 1,095.2
Other assets................................................ 243.0 205.9
Assets transferred in Group Pension Transaction (Note 11)... 5,714.9 5,627.6
Separate account assets..................................... 5,403.1 4,171.7
--------- ---------
Total assets...................................... $23,611.3 $22,143.5
========= =========
LIABILITIES AND EQUITY
Future policy benefits...................................... $ 7,469.4 $ 7,262.5
Policyholders' account balances............................. 2,352.8 2,552.1
Other policyholders' liabilities............................ 238.5 255.9
Amounts due to reinsurers................................... 104.3 110.6
Accounts payable and other liabilities...................... 539.0 487.2
Debt (Note 17):
Short-term............................................. -- 153.0
Long-term.............................................. 423.6 269.7
Current federal income taxes payable........................ 120.5 131.7
Deferred federal income taxes (Note 9)...................... 11.5 44.1
Liabilities transferred in Group Pension Transaction (Note
11)....................................................... 5,638.7 5,544.1
Separate account liabilities................................ 5,392.4 4,162.1
--------- ---------
Total liabilities................................. 22,290.7 20,973.0
Commitments and contingencies (Notes 10, 19, 21)
Retained earnings........................................... 1,202.5 1,085.4
Accumulated other comprehensive income...................... 118.1 85.1
--------- ---------
Total equity...................................... 1,320.6 1,170.5
--------- ---------
Total liabilities and equity...................... $23,611.3 $22,143.5
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 199
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES:
Premiums.................................................. $ 838.6 $ 859.8 $ 875.9
Universal life and investment-type product policy fees.... 127.3 100.9 80.8
Net investment income (Note 12)........................... 733.0 751.6 728.8
Net realized gains on investments (Note 12)............... 72.1 75.9 16.2
Group Pension Profits (Note 11)........................... 60.0 59.5 61.7
Other income.............................................. 145.4 117.3 96.2
-------- -------- --------
1,976.4 1,965.0 1,859.6
-------- -------- --------
BENEFITS AND EXPENSES:
Benefits to policyholders................................. 840.1 872.2 883.6
Interest credited to policyholders' account balances...... 139.4 156.1 175.3
Amortization of deferred policy acquisition costs......... 181.2 158.2 132.6
Dividends to policyholders................................ 224.3 231.4 222.5
Other operating costs and expenses........................ 403.7 446.6 383.8
-------- -------- --------
1,788.7 1,864.5 1,797.8
-------- -------- --------
Income before income taxes and extraordinary item......... 187.7 100.5 61.8
Income tax expense........................................ 57.3 44.0 21.4
-------- -------- --------
Income before extraordinary item.......................... 130.4 56.5 40.4
Extraordinary item -- demutualization expenses, net (Note
5)...................................................... 13.3 0.0 0.0
-------- -------- --------
Net income................................................ 117.1 56.5 40.4
Other comprehensive income, net (Note 12)................. 33.0 (59.9) 191.5
-------- -------- --------
Comprehensive income...................................... $ 150.1 $ (3.4) $ 231.9
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 200
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
RETAINED COMPREHENSIVE
TOTAL EQUITY EARNINGS INCOME
------------ --------- -------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, December 31, 1994........................... $ 942.0 $ 988.5 $(46.5)
Comprehensive income
Net income......................................... 40.4 40.4
Other comprehensive income:
Unrealized gains on investments, net of
unrealized losses, reclassification
adjustments, and taxes (Note 12).............. 191.5 191.5
-------- -------- ------
Comprehensive income................................. 231.9
--------
Balance, December 31, 1995........................... 1,173.9 1,028.9 145.0
Comprehensive income
Net income......................................... 56.5 56.5
Other comprehensive income:
Unrealized losses on investments, net of
unrealized gains, reclassification
adjustments, and taxes (Note 12).............. (59.9) (59.9)
-------- -------- ------
Comprehensive income................................. (3.4)
--------
Balance, December 31, 1996........................... 1,170.5 1,085.4 85.1
Comprehensive income
Net income......................................... 117.1 117.1
Other comprehensive income:
Unrealized gains on investments, net of
unrealized losses, reclassification
adjustments, and taxes (Note 12).............. 33.0 33.0
-------- -------- ------
Comprehensive income................................. 150.1
--------
Balance, December 31, 1997........................... $1,320.6 $1,202.5 $118.1
======== ======== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 201
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES (SEE NOTE 5):
Net income.................................................. $ 117.1 $ 56.5 $ 40.4
Adjustments to reconcile net income to net cash provided by
operating activities:
Interest credited to policyholders' account balances...... 122.3 141.2 144.7
Universal life and investment-type product policy fee
income.................................................. (112.9) (98.4) (87.1)
Capitalization of deferred policy acquisition costs....... (141.0) (145.3) (154.3)
Amortization of deferred policy acquisition costs......... 181.2 158.2 132.6
Provision for depreciation and amortization............... 55.0 53.8 71.7
Provision for deferred federal income taxes............... (50.2) (32.6) (5.5)
Net realized gains on investments......................... (72.1) (75.9) (16.2)
Non-cash distributions from investments................... (31.1) (56.1) (39.2)
Change in other assets and accounts payable and other
liabilities............................................. (177.5) 57.0 124.5
Change in future policy benefits.......................... 206.9 191.7 193.5
Change in other policyholders' liabilities................ (17.4) 21.4 (1.1)
Change in current federal income taxes payable............ (11.2) 63.3 (85.3)
--------- --------- ---------
Net cash provided by operating activities................... 69.1 334.8 318.7
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales, maturities or repayments of:
Fixed maturities.......................................... 952.0 690.1 823.2
Equity securities......................................... 246.7 170.7 71.0
Mortgage loans on real estate............................. 334.4 353.6 229.7
Real estate............................................... 430.8 442.4 303.1
Other invested assets..................................... 5.0 13.3 15.3
ACQUISITIONS OF INVESTMENTS:
Fixed maturities.......................................... (1,336.2) (1,200.8) (1,052.2)
Equity securities......................................... (211.5) (119.7) (92.2)
Mortgage loans on real estate............................. (183.1) (166.8) (141.1)
Real estate............................................... (52.7) (63.6) (79.3)
Other invested assets..................................... (1.7) (1.6) (1.6)
Policy loans, net......................................... (15.9) (12.7) 2.6
Other, net................................................ 10.1 0.1 (13.1)
Property & equipment, net................................. (35.8) (3.9) (3.0)
--------- --------- ---------
Net cash provided by investing activities................... 142.1 101.1 62.4
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt............................................ 115.0 0.0 76.3
Repayments of debt.......................................... (126.0) (174.1) (13.5)
Receipts from annuity and universal life policies credited
to policyholders' account balances........................ 1,226.4 1,204.9 1,066.9
Return of policyholders' account balances on annuity
policies and universal life policies...................... (1,435.2) (1,584.1) (1,350.0)
Other....................................................... 6.6 6.7 0.0
--------- --------- ---------
Net cash used in financing activities....................... (213.2) (546.6) (220.3)
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents........ (2.0) (110.7) 160.8
Cash and cash equivalents, beginning of year................ 315.4 426.1 265.3
--------- --------- ---------
Cash and cash equivalents, end of year...................... $ 313.4 $ 315.4 $ 426.1
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Income taxes................................................ $ 114.6 $ 13.6 $ 111.6
Interest.................................................... $ 20.8 $ 36.8 $ 36.1
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 202
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
The Mutual Life Insurance Company of New York, ("MONY" or the "Company") is
a New York domiciled mutual life insurance company primarily engaged in the
business of providing a wide range of life insurance, annuity, and investment
products to higher income individuals, particularly family builders,
pre-retirees and small business owners (see Note 6). The Company distributes its
products to such individuals primarily through its career agency sales force.
The Company sells its products in all 50 of the United States, the District of
Columbia, the U.S. Virgin Islands, Guam and the Commonwealth of Puerto Rico.
2. DEMUTUALIZATION:
On August 14, 1998 (the "Board Adoption Date"), the Board of Trustees of
MONY adopted, pursuant to the New York Insurance Law, a Plan of Reorganization
(as amended, the "Plan") pursuant to which MONY proposes to convert from a
mutual life insurance company to a stock life insurance company (such proposed
conversion, together with other matters addressed in the Plan, the
"Demutualization"). In connection with the effectiveness of the Plan, the
following will occur: (i) MONY will convert from a mutual life insurance company
to a stock life insurance company, which will be named MONY Life Insurance
Company, and will become a wholly owned subsidiary of The MONY Group Inc. (the
"Holding Company"), (ii) all policyholders' membership interests will be
extinguished and in exchange therefor policyholders who own a Policy (as defined
in the Plan) that was in force on the Board Adoption Date and which remains in
force on the effective date of the Demutualization (the "Plan Effective Date")
("Eligible Policyholders") will receive shares of common stock of the Holding
Company ("Common Stock") or, in certain circumstances, cash or policy credits in
the form of an increase in accumulation account value, dividend deposits or
dividend additions, additional death benefits or an extension of an expiry date
with respect to such policies (hereinafter, "Policy Credits") and Eligible
Policyholders owning a life or accident and health insurance policy or annuity
contract issued by MONY under which there is a right to participate in the
divisible surplus of MONY to the extent that dividends are apportioned thereon
("Participating Policyholders"), will receive additional shares of common stock
or, in certain circumstances, cash or Policy Credits, (iii) a closed block (the
"Closed Block") of certain individual MONY participating policies in classes for
which MONY had a current payable dividend scale (such Policies constitute the
"Closed Block Business") will be created, and assets will be allocated to the
Closed Block to support the future payment of benefits and dividends on, and
certain expenses and taxes relating to, the Policies included therein and (iv)
shares of Common Stock may be registered under the Securities Act of 1933 and
offered to the public in an initial public offering if market conditions are
appropriate.
3. INVESTMENT AGREEMENT:
On December 30, 1997, affiliates of Goldman, Sachs & Co. (the "Investors"),
which is one of the underwriters for the Holding Company's initial public
offering, entered into an investment agreement with MONY (the "Investment
Agreement"), pursuant to which: (i) the Investors purchased, for $115.0 million
(the "Consideration"), Surplus Notes issued by MONY (the "MONY Notes") with an
aggregate principal amount equal to the Consideration (see Note 17), and (ii)
the Investors purchased, for $10.0 million, warrants (the "Warrants") to
purchase from the Holding Company (after giving effect to the initial public
offering) in the aggregate 7.0% of the fully diluted Common Stock as of the date
the Plan becomes effective or, if later, the first date following such
effectiveness on which shares of Common Stock are first issued to Eligible
Policyholders (the "Demutualization Date").
F-7
<PAGE> 203
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The purchase price payable for each share of the Common Stock issuable upon
exercise of Warrants initially is (a) in the event the initial public offering
occurs prior to, on or within five trading days after the Demutualization Date,
the initial public offering price of the Common Stock, unless the average of the
daily closing prices of the Common Stock for the 40 trading days following the
first 20 trading days after the Demutualization Date is greater than 115% of the
initial public offering price, in which case such initial exercise price shall
be equal to the sum of the initial public offering price plus an amount equal to
one half of the excess of such 40 day average over 115% of the initial public
offering price or (b) in the event the initial public offering does not occur
prior to, on or within five trading days after the Demutualization Date, the
lesser of (i) the average of the daily closing prices of the Common Stock for
the first 20 trading days following Demutualization and (ii) 70% of the book
value per share of the Common Stock as of the Demutualization, determined in
accordance with generally accepted accounting principles ("GAAP"). The Warrants
contain standard anti-dilution provisions, providing for adjustment to the
exercise price in the event of, among other things, a dividend or other
distribution of capital stock, evidences of indebtedness or other property,
issuances of rights, options or warrants, certain cash dividends and certain
tender offers.
In addition, under the terms of the Investment Agreement, the Investors
agreed, upon MONY's request, if made at any time up to 90 days after the
Demutualization Date and subject to certain conditions precedent, to purchase an
aggregate of 1.0 million shares of convertible preferred stock of the Holding
Company (the "Convertible Preferred Stock") for a total purchase price of $100.0
million. The Convertible Preferred Stock would be convertible, at the option of
the holder at any time, into Common Stock at a conversion price equal to the
initial exercise price of the Warrants and would be subject to certain
anti-dilution adjustments. The Convertible Preferred Stock would be mandatorily
redeemable on the earlier of (i) the tenth anniversary of the issuance date of
such stock or (ii) December 30, 2013, at a price equal to the liquidation
preference of such stock plus accumulated and unpaid dividends at the redemption
date (the "Redemption Price"). The Redemption Price would be payable in cash or
Common Stock. If the Holding Company elects to issue Common Stock in
satisfaction of the Redemption Price, the number of shares of Common Stock to be
issued would be determined by dividing a number that is equal to 110 percent of
the Redemption Price by the value of the Common Stock, which for this purpose
would be equal to the average of the closing price of the Common Stock for the
20 trading days immediately preceding the redemption date. In addition, under
certain circumstances the Holding Company, at its option, could redeem the
Convertible Preferred Stock after the third anniversary of the issuance of such
stock.
4. THE CLOSED BLOCK:
The Closed Block is a mechanism described in Section 7312 of the New York
Insurance Law. Under the Plan, the Company will establish and operate the Closed
Block as a closed block of participating business for the benefit, for dividend
purposes only, of the Policies included therein. The Company will allocate to
the Closed Block an amount of assets expected to produce cash flows which,
together with anticipated revenues from the Closed Block Business, are
reasonably expected to be sufficient to support the Closed Block Business,
including but not limited to, provision for payment of claims and surrender
benefits, certain expenses and taxes, and for continuation of current payable
dividend scales, assuming the experience underlying such dividend scales
continues, and for appropriate adjustments in such scales if the experience
changes. In determining the amount of assets to be allocated to the Closed
Block, management has made certain estimates and assumptions regarding the
expected cash flows from the Closed Block assets and the Closed Block Business,
including estimates and assumptions regarding investment cash flows, mortality,
persistency, and expenses which are to be funded in the Closed Block. The assets
and liabilities allocated to the Closed Block will be recorded in the Company's
financial statements at their historical carrying values. The carrying value of
the assets allocated to the Closed Block will be less than the
F-8
<PAGE> 204
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
carrying value of the Closed Block liabilities at the Plan Effective Date. The
excess of the Closed Block liabilities over the Closed Block assets at the Plan
Effective Date represents the total estimated future post-tax contribution
expected to emerge from the operation of the Closed Block, which will be
recognized in the Company's income over the period the policies and the
contracts in the Closed Block remain in force.
The estimated net cash flows assumed in determining the Closed Block
funding consist of premiums from Policies included in the Closed Block,
investment income from Closed Block assets, proceeds from maturities and
dispositions of Closed Block assets, less benefits paid on Closed Block
Policies, certain expenses (including taxes) funded in the Closed Block, and
dividends on Closed Block Policies based on current payable dividend scales. To
the extent that the actual cash flows, subsequent to the Plan Effective Date,
from the assets allocated to the Closed Block and the Closed Block Business are,
in the aggregate, more favorable than assumed in establishing the Closed Block,
total dividends paid to the Closed Block policyholders in future years will be
greater than the total dividends that would have been paid to such policyholders
if the current payable dividend scales had been continued. Conversely, to the
extent that the actual cash flows, subsequent to the Plan Effective Date, from
the assets allocated to the Closed Block and the Closed Block Business are, in
the aggregate, less favorable than assumed in establishing the Closed Block,
total dividends paid to the Closed Block policyholders in future years will be
less than the total dividends that would have been paid to such policyholders if
the current payable dividend scales had been continued. Accordingly, the
recognition of the aforementioned gain is not affected by the aggregate actual
experience of the Closed Block assets and the Closed Block Business subsequent
to the Plan Effective Date, except in the unlikely event that the Closed Block
assets and the actual experience of the Closed Block Business subsequent to the
Plan Effective Date are not sufficient to pay the guaranteed benefits on the
Closed Block Policies, in which case the Company will be required to fund any
such deficiency from its general account assets outside of the Closed Block.
Since the Closed Block will be funded to provide for payment of guaranteed
benefits on such Policies and, in addition, for continuation of current payable
dividends, it will not be necessary to use general funds to pay guaranteed
benefits unless the Closed Block Business experiences very substantial ongoing
adverse experience in investment, mortality, persistency or other experience
factors. The Company will regularly (at least quarterly) monitor the experience
from the Closed Block and make changes to the dividend scale, when appropriate,
to ensure that the profits are distributed to the policyholders in a fair and
equitable manner. In addition, periodically the New York Insurance Department
will require the filing of an independent auditor report on the operations of
the Closed Block.
As a result of the establishment of the Closed Block, certain line items in
the Company's financial statements subsequent to the establishment of the Closed
Block will reflect material reductions in reported amounts, as compared to years
prior to the establishment of the Closed Block, while having no effect on net
income. The actual results of the Closed Block assets and the Closed Block
Business will be reflected as a single line item in the Company's statements of
income entitled, "Contribution from the Closed Block", whereas, prior to the
establishment of the Closed Block the results from the underlying business was
reported in various line items in the Company's income statements, including:
premiums, investment income, net realized gains and losses on investments,
benefits, amortization of deferred acquisition costs, etc. The Contribution from
the Closed Block is expected to be equal to the periodic amortization of the
gain resulting from the difference between the carrying value of the assets
allocated to the Closed Block and the Closed Block liabilities at the Plan
Effective Date. In addition, all assets and liabilities allocated to the Closed
Block will be reported in the Company's balance sheet separately under the
captions "Closed Block assets" and "Closed Block liabilities", respectively.
F-9
<PAGE> 205
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The pre-tax Contribution from the Closed Block includes only those
revenues, benefit payments, dividends, premium taxes, state guaranty fund
assessments, and investment expenses considered in funding the Closed Block.
However, many expenses associated with operating the Closed Block and
administering the Policies included therein will be excluded from and,
accordingly, not funded in the Closed Block. These expenses will be reported in
the Company's statement of operations, outside of the Contribution from the
Closed Block, consistent with how they are funded. Such expenses will be
reported in the separate line items to which they apply based on the nature of
such expenses. Management expects that such expenses will be included and
reported as Other Operating Costs and Expenses in the Company's statement of
operations, unless any individual expense item is considered to be significant,
in which case such item or items will be reported separately in the Company's
statement of operations. Federal income taxes applicable to the Closed Block,
which will be funded in the Closed Block, will be reflected as a component of
federal income tax expense in the Company's statement of operations. Since many
expenses related to the Closed Block are funded outside the Closed Block,
operating costs and expenses outside the Closed Block may be disproportionate to
the level of business outside the Closed Block.
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
conformity with GAAP. Prior to 1996, the Company, as a mutual life insurance
company, prepared its financial statements in conformity with accounting
practices prescribed or permitted by the New York State Insurance Department
("SAP") which accounting practices were considered to be GAAP for mutual life
insurance companies. As of January 1, 1996, the Company adopted Financial
Accounting Standards Board (FASB) Interpretation No. 40, Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises (the "Interpretation"), and Statement of Financial Accounting
Standards ("SFAS") No. 120, Accounting and Reporting by Mutual Life Insurance
Enterprises and by Insurance Enterprises for Certain Long Duration Participating
Policies (the "Standard"). The Interpretation and the Standard require mutual
life insurance companies to adopt all applicable authoritative GAAP
pronouncements in their general purpose financial statements. Accordingly, the
initial effect of applying the Interpretation and the Standard has been reported
retroactively through the restatement of previously issued financial statements
presented herein for comparative purposes (see Note 20).
During 1997, the Company adopted SFAS No. 130, Reporting Comprehensive
Income, and SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, which were issued by the FASB in June of 1997. SFAS No. 130
established standards for reporting and display of comprehensive income and its
components in general purpose financial statements. SFAS No. 131 established
standards for the way that public business enterprises report information about
operating segments in their annual and interim financial statements. SFAS No.
131 also established standards for disclosures about an enterprise's products
and services, geographic areas, and major customers. All periods presented
herein reflect the provisions of both SFAS No. 130 and SFAS No. 131.
The preparation of financial statements in conformity 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 significantly
from those estimates. The most significant estimates made in conjunction with
the preparation of the Company's financial statements include those used in
determining, (i) deferred policy acquisition
F-10
<PAGE> 206
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
costs, (ii) the liability for future policy benefits, and (iii) valuation
allowances for mortgage loans and real estate to be disposed of, and impairment
writedowns for real estate held for investment.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company, its wholly owned life insurance and non-insurance subsidiaries, and
those partnerships in which the Company has a majority voting interest. All
significant intercompany accounts and transactions have been eliminated.
Minority interest related to partnerships that are consolidated, which is
included in Accounts Payable and Other Liabilities, amounted to $48.7 million
and $47.1 million at December 31, 1997 and 1996, respectively.
In addition, the Company accounts for its investments in joint ventures,
and limited partnership interests, where it has more than a 3 percent but less
than 50 percent ownership interest, under the equity method of accounting.
VALUATION OF INVESTMENTS AND REALIZED GAINS AND LOSSES
Beginning in 1997, all of the Company's fixed maturity securities are
classified as available for sale and are reported at estimated fair value. Prior
thereto, the Company's investment in the Series A Notes were classified as
held-to-maturity (see Note 11). The Company's equity securities are comprised of
common stocks and limited partnership interests. Investments in equity
securities are classified as available for sale and are reported at estimated
fair value. Unrealized gains and losses on fixed maturity securities and equity
securities are reported as a separate component of other comprehensive income,
net of related deferred income taxes and adjustment for deferred policy
acquisition costs. The adjustment for deferred policy acquisition costs
represents the change in amortization of deferred policy acquisition costs that
would have been required as a charge or credit to operations had such unrealized
amounts been realized. The cost of fixed maturity and equity securities is
adjusted for impairments in value deemed to be other than temporary. These
adjustments are reflected as realized losses on investments. Realized gains and
losses on sales of investments are determined on the basis of specific
identification.
Mortgage loans on real estate are stated at their unpaid principal
balances, net of valuation allowances. Valuation allowances are established for
the excess of the carrying value of a mortgage loan over its estimated fair
value when the loan is considered to be impaired. Mortgage loans are considered
to be impaired when, based on current information and events, it is probable
that the Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement. Estimated fair value is based on either
the present value of expected future cash flows discounted at the loan's
original effective interest rate, or the loan's observable market price (if
considered to be a practical expedient), or the fair value of the collateral if
the loan is collateral dependent and if foreclosure of the loan is considered
probable. The provision for loss is reported as a realized loss on investment.
Loans in foreclosure and loans considered to be impaired, other than
restructured loans, are placed on non-accrual status. Interest received on
non-accrual status mortgage loans is included in investment income in the period
received. Interest income on restructured mortgage loans is accrued at the
restructured loans' interest rate.
Real estate held for investment, as well as related improvements, are
generally stated at cost less depreciation. Depreciation is determined using the
straight-line method over the estimated useful life of the asset (which may
range from 5 to 40 years). Cost is adjusted for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not
be recoverable. In performing the review for recoverability, management
estimates the future
F-11
<PAGE> 207
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
cash flows expected from real estate investments including the proceeds on
disposition. If the sum of the expected undiscounted future cash flows is less
than the carrying amount of the real estate, an impairment loss is recognized.
Impairment losses are based on the estimated fair value of the real estate,
which is generally computed using the present value of expected future cash
flows from the real estate discounted at a rate commensurate with the underlying
risks. Real estate acquired in satisfaction of debt is recorded at estimated
fair value at the date of foreclosure. Real estate that management intends to
sell is classified as "to be disposed of". Real estate to be disposed of is
reported at the lower of its current carrying value or estimated fair value less
estimated sales costs. Changes in reported values relating to real estate to be
disposed of and impairments of real estate held for investment are reported as
realized gains or losses on investments.
Policy loans are carried at their unpaid principal balances.
Cash and cash equivalents include cash on hand, amounts due from banks and
highly liquid debt instruments with an original maturity of three months or
less.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS
Premiums from participating and non-participating traditional life, health
and annuity policies with life contingencies are recognized as premium income
when due. Benefits and expenses are matched with such income so as to result in
the recognition of profits over the life of the contracts. This match is
accomplished by means of the provision for liabilities for future policy
benefits and the deferral and subsequent amortization of policy acquisition
costs.
Premiums from universal life and investment-type contracts are reported as
deposits to policyholders' account balances. Revenue from these types of
products consist of amounts assessed during the period against policyholders'
account balances for policy administration charges, cost of insurance and
surrender charges. Policy benefits charged to expense include benefit claims
incurred in the period in excess of the related policyholders' account balance.
DEFERRED POLICY ACQUISITION COSTS ("DAC")
The costs of acquiring new business, principally commissions, underwriting,
agency, and policy issue expenses, all of which vary with and are primarily
related to the production of new business, are deferred.
For participating traditional life policies, DAC is amortized over the
expected life of the contracts (30 years) as a constant percentage based on the
present value of estimated gross margins expected to be realized over the life
of the contracts using the expected investment yield. At December 31, 1997, the
expected investment yield was 7.25 percent for the years from 1998 to 2002, and
7.40 percent for the years thereafter. Estimated gross margins include
anticipated premiums and investment results less claims and administrative
expenses, changes in the net level premium reserve and expected annual
policyholder dividends.
For universal life products and investment-type products, DAC is amortized
over the expected life of the contracts (ranging from 15 to 30 years) as a
constant percentage based on the present value of estimated gross profits
expected to be realized over the life of the contracts using the contract rate.
The contract rates range from 7.50 percent to 8.50 percent. Estimated gross
profits arise principally from investment results, mortality and expense margins
and surrender charges.
DAC is subject to recoverability testing at the time of policy issuance and
loss recognition testing at the end of each accounting period. The effect on the
amortization of DAC of revisions in estimated experience is reflected in
earnings in the period such estimates are revised. In addition, the effect on
the DAC asset that would result from the realization of unrealized gains
(losses)is
F-12
<PAGE> 208
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recognized through an offset to unrealized gains (losses)in Accumulated Other
Comprehensive Income as of the balance sheet date.
FUTURE POLICY BENEFITS AND POLICYHOLDERS' ACCOUNT BALANCES
Future policy benefit liabilities for participating traditional life
policies are calculated using a net level premium method on the basis of
actuarial assumptions equal to guaranteed mortality and dividend fund interest
rates. The liability for annual dividends represents the accrual of annual
dividends earned. Dividend fund interest assumptions range from 2.0 percent to
5.5 percent.
Policyholders' account balances for universal life and investment-type
contracts represent an accumulation of gross premium payments plus credited
interest less expense and mortality charges and withdrawals. The weighted
average interest crediting rate for universal life products was approximately
6.1 percent, 5.9 percent, and 6.2 percent for the years ended December 31, 1997,
1996, and 1995, respectively. The weighted average interest crediting rate for
investment-type products was approximately 5.6 percent for each of the years
ended December 31, 1997, 1996, and 1995, respectively.
DIVIDENDS TO POLICYHOLDERS
Dividends to policyholders are determined annually by the Board of
Trustees. The aggregate amount of policyholders' dividends is related to actual
interest, mortality, morbidity and expense experience for the year, as well as
management's judgment as to the appropriate level of statutory surplus to be
retained by the Company.
PARTICIPATING BUSINESS
At December 31, 1997 and 1996, participating business represented
approximately 81.0% and 81.6% of the Company's life insurance in force, and
88.4% and 88.6% of the number of life insurance policies in force, respectively.
For each of the years ended December 31, 1997 and 1996, participating business
represented approximately 99.9% of life insurance premiums.
PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements, which are reported in Other
Assets, are stated at cost less accumulated depreciation and amortization.
Depreciation is determined using the straight-line method over the estimated
useful lives of the related assets which generally range from 3 to 40 years.
Amortization of leasehold improvements is determined using the straight-line
method over the lesser of the unexpired lease term or the estimated useful life
of the improvement.
Accumulated depreciation of property and equipment and amortization of
leasehold improvements was $58.5 million and $50.5 million at December 31, 1997
and 1996, respectively. Related depreciation and amortization expense was $8.8
million, $5.9 million and $6.1 million for the years ended December 31, 1997,
1996, and 1995, respectively.
FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return with its life
and non-life affiliates. Deferred income tax assets and liabilities are
recognized based on the difference between financial statement carrying amounts
and income tax bases of assets and liabilities using enacted income tax rates
and laws.
F-13
<PAGE> 209
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REINSURANCE
The Company has reinsured certain of its life insurance and investment
contracts with other insurance companies under various agreements. Amounts due
from reinsurers are estimated based on assumptions consistent with those used in
establishing the liabilities related to the underlying reinsured contracts.
Policy and contract liabilities are reported gross of reserve credits. Gains on
reinsurance are deferred and amortized into income over the remaining life of
the underlying reinsured contracts.
SEPARATE ACCOUNTS
Separate accounts are established in conformity with insurance laws and are
generally not chargeable with liabilities that arise from any other business of
the Company. Separate account assets are subject to general account claims only
to the extent that the value of such assets exceeds the separate account
liabilities. Investments held in separate accounts and liabilities of the
separate accounts are reported separately as assets and liabilities.
Substantially all separate account assets are reported at estimated fair value.
Investment income and gains or losses on the investments of separate accounts
accrue directly to contractholders and, accordingly, are not reflected in the
Company's consolidated statements of income and cash flows. Fees charged to the
separate accounts by the Company (including mortality charges, policy
administration fees and surrender charges) are reflected in the Company's
revenues.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- NON-CASH TRANSACTIONS
For the years ended December 31, 1997, 1996, and 1995, respectively, real
estate of $14.4 million, $29.1 million, and $56.4 million was acquired in
satisfaction of debt. At December 31, 1997 and 1996, the Company owned real
estate acquired in satisfaction of debt of $326.1 million and $525.7 million,
respectively. Other non-cash transactions, which are reflected in the statement
of cash flows as a reconciling item from net income to net cash provided by
operating activities, consisted primarily of stock distributions from the
Company's partnership investments and payment-in-kind for interest due on
certain fixed maturity securities.
EXTRAORDINARY ITEM -- DEMUTUALIZATION EXPENSES
The accompanying consolidated statements of income and comprehensive income
reflect extraordinary charges of $13.3 million (net of taxes) for the year ended
December 31, 1997 relating to costs associated with the Demutualization.
Management estimates that approximately $21.4 million (net of taxes) relating to
costs associated with the Plan will be incurred and expensed subsequent to
December 31, 1997.
NEW ACCOUNTING PRONOUNCEMENTS
In January 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments". SOP 97-3 provides guidance for
determining when an entity should recognize a liability for guaranty fund and
other insurance-related assessments and when it may recognize an asset for a
portion or all of the assessment liability or paid assessment that can be
recovered through premium tax offsets or policy surcharges. SOP 97-3 is
effective for fiscal years beginning after December 15, 1998. Adoption of SOP
97-3 is not expected to have a material effect on the Company's financial
condition or results of operations.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits". SFAS No. 132 revises
disclosures about pension and other postre-
F-14
<PAGE> 210
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
tirement benefit plans. However, it does not change the measurement or
recognition of those plans. SFAS No. 132 is effective for fiscal years beginning
after December 15, 1997. Adoption of SFAS No.132 will not have any effect on the
Company's financial condition or results of operations.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". SOP 98-1 provides guidance for
determining when an entity should capitalize or expense external and internal
costs of computer software developed or obtained for internal use. SOP 98-1 is
effective for fiscal years beginning after December 15, 1998. Adoption of SOP
98-1 is not expected to have a material effect on the Company's financial
condition or results of operations.
In June 1998, The FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires all derivatives to be
recognized in the statement of financial position as either assets or
liabilities and measured at fair value. The corresponding derivative gains and
losses should be reported based on the hedge relationship that exists, if there
is one. Changes in the fair value of derivatives that are not designated as
hedges or that do not meet the hedge accounting criteria in SFAS 133, are
required to be reported in earnings. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. Adoption of SFAS 133 is not expected to have a
material effect on the Company's financial condition or results of operations.
6. SEGMENT INFORMATION:
The Company's business activities consist of the following: protection
product operations, accumulation product operations, mutual fund operations,
securities broker-dealer operations, insurance brokerage operations, and certain
insurance lines of business no longer written by the Company (the "run-off
businesses"). These business activities represent the Company's operating
segments. Except as discussed below, these segments are managed separately
because they either provide different products or services, are subject to
different regulation, require different strategies, or have different technology
requirements.
Management considers the Company's mutual fund operations to be an integral
part of the products offered by the Company's accumulation products segment,
since substantially all the mutual funds sold by the Company are offered
through, and in conjunction with, the products marketed by the accumulation
products segment. Accordingly, for management purposes (including, performance
assessment and making decisions regarding the allocation of resources), the
Company aggregates its mutual fund operations with its accumulation products
segment.
Of the aforementioned segments, only the protection products segment and
the accumulation products segment qualify as reportable segments in accordance
with FASB Statement No. 131. All of the Company's other segments are combined
and reported in an other products segment.
Products comprising the protection products segment primarily include a
wide range of individual life insurance products, including; permanent and last
survivor whole life, term life, universal life, variable universal life, and
group universal life. In addition, included in the protection products segment
are: (i) the assets and liabilities transferred pursuant to the Group Pension
Transaction, as well as the Group Pension Profits (see Note 11), and (ii)
disability income insurance products. Products comprising the accumulation
products segment primarily include fixed annuities, non-participating interest
sensitive products (including; single premium deferred annuities, immediate
annuities, and flexible premium variable annuities), proprietary mutual funds,
investment management services, and certain other financial services products.
The Company's other products segment primarily consists of the securities
broker-dealer operation, the insurance brokerage operation, and the run-off
businesses. The securities broker-dealer operation markets the Company's
proprietary investment products and, in addition, provides customers of the
F-15
<PAGE> 211
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's protection and accumulation products access to other non-proprietary
investment products (including stocks, bonds, limited partnership interests,
tax-exempt unit investment trusts and other investment securities). The
insurance brokerage operation provides the Company's field agency force with
access to life, annuity, small group health and specialty insurance products
written by other carriers to meet the insurance and investment needs of its
customers. The run-off businesses primarily consist of group life and health
business, as well as group pension business that was not included in the Group
Pension Transaction (see Note 11).
Set forth in the table below is certain financial information with respect
to the Company's operating segments as of and for each of the years ended
December 31, 1997, 1996 and 1995, as well as amounts not allocated to the
segments. Except for various allocations discussed below, the accounting
policies of the segments are the same as those described in the summary of
significant accounting policies. The Company evaluates the performance of each
operating segment based on profit or loss from operations before income taxes
and nonrecurring items (e.g. items of an unusual or infrequent nature). The
Company does not allocate nonrecurring items to the segments. In addition, all
segment revenues are from external customers.
Assets have been allocated to the segments in amounts sufficient to support
the associated liabilities of each segment and maintain a separately calculated
regulatory risk based capital ("RBC") level for each segment equal to that of
the Company's RBC level (see Note 20). Allocations of net investment income and
net realized gains on investments were based on the amount of assets allocated
to each segment. Other costs and operating expenses were allocated to each of
the segments based on: (i) a review of the nature of such costs, (ii) time
studies analyzing the amount of employee compensation costs incurred by each
segment, and (iii) cost estimates included in the Company's product pricing.
Substantially all non-cash transactions and impaired real estate (including real
estate acquired in satisfaction of debt) have been allocated to the Protection
Products segment (see Note 5).
Amounts reported as "unallocated amounts" in the table below primarily
relate to: (i) contracts issued by MONY relating to its employee benefit plans,
(ii) expenses incurred in 1996 and 1995 relating to settlements and reserves for
various lawsuits and legal disputes, including lawsuits against the Company
alleging market conduct improprieties (see Note 19) and, (iii) expenses incurred
in 1996 in connection with special termination benefits paid to certain
employees under an early retirement program (see Note 8).
F-16
<PAGE> 212
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------------- ---------
($ IN MILLIONS)
<S> <C> <C> <C>
Premiums:
Protection Products................................ $ 817.0 $ 837.4 $ 845.1
Accumulation Products.............................. 5.0 4.2 9.8
Other Products..................................... 16.6 18.2 21.0
--------- --------- ---------
$ 838.6 $ 859.8 $ 875.9
========= ========= =========
Universal life and investment-type product policy
fees:
Protection Products................................ $ 74.9 $ 63.4 $ 53.9
Accumulation Products.............................. 50.9 36.6 24.8
Other Products..................................... 1.5 0.9 2.1
--------- --------- ---------
$ 127.3 $ 100.9 $ 80.8
========= ========= =========
Net investment income and net realized gains (losses)
on investments:
Protection Products................................ $ 611.9 $ 605.3 $ 501.5
Accumulation Products.............................. 131.4 144.0 153.3
Other Products..................................... 59.9 74.6 85.4
Unallocated amounts................................ 1.9 3.6 4.8
--------- --------- ---------
$ 805.1 $ 827.5 $ 745.0
========= ========= =========
Other income:
Protection Products(1)............................. $ 94.9 $ 87.7 $ 85.0
Accumulation Products.............................. 52.1 32.2 26.0
Other Products..................................... 53.1 52.2 42.0
Unallocated amounts................................ 5.3 4.7 4.9
--------- --------- ---------
$ 205.4 $ 176.8 $ 157.9
========= ========= =========
Amortization of deferred policy acquisition costs:
Protection Products................................ $ 146.8 $ 135.0 $ 118.7
Accumulation Products.............................. 34.4 23.2 13.9
Other Products..................................... 0.0 0.0 0.0
--------- --------- ---------
$ 181.2 $ 158.2 $ 132.6
========= ========= =========
Benefits to policyholders:(2)
Protection Products................................ $ 834.3 $ 863.2 $ 867.9
Accumulation Products.............................. 92.6 102.8 116.3
Other Products..................................... 45.4 54.1 65.0
Unallocated amounts................................ 7.2 8.2 9.7
--------- --------- ---------
$ 979.5 $ 1,028.3 $ 1,058.9
========= ========= =========
Other operating costs and expenses:
Protection Products................................ $ 267.6 $ 267.1 $ 252.0
Accumulation Products.............................. 66.3 52.8 47.2
Other Products..................................... 66.2 81.9 74.7
Unallocated amounts................................ 3.6 44.8 9.9
--------- --------- ---------
$ 403.7 $ 446.6 $ 383.8
========= ========= =========
</TABLE>
F-17
<PAGE> 213
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------------- ---------
($ IN MILLIONS)
<S> <C> <C> <C>
Income before income taxes:
Protection Products................................ $ 129.0 $ 101.2 $ 28.7
Accumulation Products.............................. 44.1 35.9 34.2
Other Products..................................... 18.3 8.1 8.9
Unallocated amounts................................ (3.7) (44.7) (10.0)
--------- --------- ---------
$ 187.7 $ 100.5 $ 61.8
========= ========= =========
Assets:
Protection Products(3)............................. $15,776.5 $15,158.5
Accumulation Products.............................. 5,757.9 4,747.2
Other Products..................................... 1,234.2 1,417.1
Unallocated amounts................................ 842.7 820.7
--------- ---------
$23,611.3 $22,143.5
========= =========
Deferred policy acquisition costs:
Protection Products................................ $ 874.1 $ 961.8
Accumulation Products.............................. 133.0 133.4
Other Products..................................... 0.0 0.0
--------- ---------
$ 1,007.1 $ 1,095.2
========= =========
Policyholders' liabilities:
Protection Products(4)............................. $10,105.7 $ 9,996.2
Accumulation Products.............................. 1,416.1 1,601.7
Other Products..................................... 513.4 542.4
Unallocated amounts................................ 16.5 88.3
--------- ---------
$12,051.7 $12,228.6
========= =========
Separate account liabilities:(5)
Protection Products(6)............................. $ 3,720.1 $ 3,393.0
Accumulation Products.............................. 4,002.6 2,851.4
Other Products..................................... 547.7 625.6
Unallocated amounts................................ 736.0 650.4
--------- ---------
$ 9,006.4 $ 7,520.4
========= =========
</TABLE>
- ---------------
(1) Includes Group Pension Profits of $60.0 million, $59.5 million and $61.7
million for the years ended December 31, 1997, 1996 and 1995, respectively.
See Note 11.
(2) Includes interest credited to policyholders' account balances.
(3) Includes assets transferred in the Group Pension Transaction of $5,714.9
million and $5,627.6 million as of December 31, 1997 and 1996, respectively.
(4) Includes policyholder liabilities transferred in the Group Pension
Transaction of $1,991.0 million and $2,158.1 million as of December 31, 1997
and 1996, respectively.
(5) Each segment includes separate account assets in an amount not less than the
corresponding liability reported.
(6) Includes separate account liabilities transferred in the Group Pension
Transaction of $3,614.0 million and $3,358.3 million as of December 31, 1997
and 1996, respectively.
F-18
<PAGE> 214
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Substantially all of the Company's revenues are derived in the United
States. Revenue derived from outside the United States is not material and
revenue derived from any single customer does not exceed 10 percent of total
consolidated revenues.
Following is a summary of revenues by product for the years ended December
31, 1997, 1996, and 1995 (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
PREMIUMS:
Individual life........................................ $742.4 $762.7 $771.0
Disability income insurance............................ 74.6 74.8 74.1
Group insurance........................................ 16.6 18.1 21.0
Other.................................................. 5.0 4.2 9.8
------ ------ ------
Total........................................ $838.6 $859.8 $875.9
====== ====== ======
UNIVERSAL LIFE AND INVESTMENT-TYPE PRODUCT POLICY FEES:
Universal life......................................... $ 48.3 $ 45.1 $ 43.7
Variable universal life................................ 17.9 8.9 1.9
Group universal life................................... 8.7 9.4 8.3
Individual variable annuities.......................... 50.0 35.2 22.8
Individual fixed annuities............................. 2.4 2.3 4.1
------ ------ ------
Total........................................ $127.3 $100.9 $ 80.8
====== ====== ======
</TABLE>
7. DEFERRED POLICY ACQUISITION COSTS:
Policy acquisition costs deferred and amortized in 1997, 1996 and 1995 are
as follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year........................ $1,095.2 $1,047.1 $1,241.0
Costs deferred during the year.................... 141.0 145.3 154.3
Amortized to expense during the year.............. (181.2) (158.2) (132.6)
Effect on DAC from unrealized gains (losses) (see
Note 5)......................................... (47.9) 61.0 (215.6)
-------- -------- --------
Balance, end of year.............................. $1,007.1 $1,095.2 $1,047.1
======== ======== ========
</TABLE>
8. PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS:
EMPLOYEE AND FIELD UNDERWRITER RETIREMENT PLANS
The Company has a qualified pension plan covering substantially all of its
salaried employees. The provisions of the plan provide both (a) defined benefit
accruals based on (i) years of service, (ii) the employee's final average annual
compensation and (iii) wage bases or benefits under Social Security and (b)
defined contribution accruals based on a Company matching contribution equal to
100% of the employee's elective deferrals under the incentive savings plan for
employees up to 3% of the employee's eligible compensation and an additional 2%
of eligible compensation for each active participant. The Company's funding
policy is to contribute annually the maximum amount that can be deducted for
federal income taxes. No contributions were made in the current year or prior
year because the plan met the full funding requirements under Section 412 of the
Internal Revenue Code.
F-19
<PAGE> 215
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company also sponsors a non-qualified defined benefit pension plan,
which provides benefits in excess of Internal Revenue Service limits to certain
employees. The benefits are based on years of service and the employee's final
average annual compensation. Pension benefits are paid from the Company's
general account.
Components of net periodic pension cost for the qualified and non-qualified
plans are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C>
Service cost........................................... $ 15.5 $ 16.5 $ 15.1
Interest cost on projected benefit obligations......... 34.3 29.7 31.7
Special termination benefits........................... 14.0
Actual return on assets................................ (66.4) (41.2) (73.3)
Net amortization and deferrals......................... 22.1 (1.8) 35.2
------ ------ ------
Net periodic pension cost.............................. $ 5.5 $ 17.2 $ 8.7
====== ====== ======
</TABLE>
In April 1996, the Company offered special benefits to its employees who
elected by May 31, 1996, voluntary termination of employment (special
termination benefits). The special termination benefits represented benefits in
excess of that which would normally be due to employees electing to retire
early. These excess benefits were calculated based on grants of additional years
of service and age used in the benefit calculation. All of the special
termination benefits relating to the Company's qualified plan, which aggregated
$10.6 million, were paid from the Plan's assets. All the benefits paid relating
to the Company's non-qualified plan, which aggregated $3.4 million, were paid
directly from the Company's assets. As a result of the aforementioned early
retirement offer, the Company recorded a charge of $14.0 million in 1996 and
reflected this amount in Other Operating Costs and Expenses.
The funded status of the qualified pension plan is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------ ------
($ IN MILLIONS)
<S> <C> <C>
Actuarial present value of obligations:
Vested.................................................... $304.4 $274.5
Non-vested................................................ 1.9 1.7
------ ------
Accumulated benefit obligation............................ 306.3 276.2
Effect of anticipated future compensation levels.......... 26.9 22.2
------ ------
Projected benefit obligation.............................. 333.2 298.4
Plan assets at fair value................................. 432.5 393.4
------ ------
Plan assets in excess of projected benefit obligation..... 99.3 95.0
Unrecognized prior service cost (benefit)................. 10.7 12.1
Unrecognized net gain from past experience................ 11.0 14.4
Unrecognized net asset at transition...................... (31.6) (39.4)
------ ------
Prepaid pension cost at December 31,...................... $ 89.4 $ 82.1
====== ======
</TABLE>
The assets of the qualified pension plan are primarily invested in MONY
Pooled Accounts which include common stock, real estate, private placement debt
securities and bonds. Benefits of $24.2
F-20
<PAGE> 216
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
million, $30.7 million and $22.7 million were paid by this plan for the years
ended December 31, 1997, 1996, and 1995, respectively. The weighted average
assumed discount rate and the rate of increase in future compensation levels
used in determining the actuarial present value of projected benefit obligations
at December 31, 1997 were 6.75% and 5.0%, respectively (7.5% and 5.0% in 1996,
respectively). The expected weighted average long-term rate of return on assets
for the retirement plan was 10% as of both January 1, 1997 and 1996.
The actuarial present value of obligations and the accrued pension expense
of the non-qualified pension plan are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------ ------
($ IN MILLIONS)
<S> <C> <C>
Actuarial present value of obligations:
Vested.................................................... $ 88.2 $ 76.1
Non-vested................................................ 0.0 0.0
------ ------
Accumulated benefit obligation............................ 88.2 76.1
Effect of anticipated future compensation levels.......... 11.6 11.3
------ ------
Projected benefit obligation.............................. 99.8 87.4
Unrecognized prior service cost........................... 0.0 0.0
Unrecognized net gain from past experience................ (14.5) (8.9)
Unrecognized net obligation at transition................. (4.3) (4.8)
------ ------
Accrued pension cost at December 31....................... 81.0 73.7
Additional minimum liability.............................. 7.2 2.4
Intangible asset.......................................... (4.3) (2.4)
------ ------
Total accrued pension expense..................... $ 83.9 $ 73.7
====== ======
</TABLE>
The weighted average assumed discount rate and the rate of increase in
future compensation levels used in determining the actuarial present value of
projected benefit obligations at December 31, 1997 were approximately 6.75% and
5.0% (7.5% and 5.0% at December 31, 1996), respectively.
The Company also has a qualified money purchase pension plan covering
substantially all career field underwriters. Company contributions of 5% of
earnings plus an additional 2% of such earnings in excess of the social security
wage base are made each year. In addition, after-tax voluntary field underwriter
contributions of up to 10% of earnings are allowed. At December 31, 1997 and
1996, the fair value of plan assets was $211.0 million and $191.1 million,
respectively. For the years ended December 31, 1997, 1996, and 1995, the Company
contributed $3.3 million, $3.7 million and $4.7 million to the plan,
respectively, which amounts are reflected in Other Operating Costs and Expenses.
The Company has incentive savings plans in which substantially all
employees and career field underwriters are eligible to participate. The Company
matches field underwriter contributions up to 2%, of eligible compensation and
may also make an additional profit sharing contribution for non-officer
employees.
POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance benefits for
retired employees and field underwriters. At December 31, 1997 and 1996, the
unamortized postretirement benefit
F-21
<PAGE> 217
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
transition obligation was approximately $45.8 million and $48.9 million,
respectively. The Company amortizes this transition obligation over a period of
twenty years. The amount of transition obligation amortized approximated $3.1
million for each year in the three year period ended December 31, 1997.
Following is an analysis of the unfunded accumulated postretirement benefit
obligation as of December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------ ------
($ IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $ 82.4 $ 71.5
Active participants....................................... 18.7 21.9
------ ------
Accumulated postretirement benefit obligation............. 101.1 93.4
Unrecognized net loss..................................... (14.3) (6.9)
Unrecognized transition obligation........................ (45.8) (48.9)
------ ------
Net postretirement benefit liability...................... $ 41.0 $ 37.6
====== ======
</TABLE>
Net periodic postretirement benefit cost for 1997, 1996 and 1995,
respectively, included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
($ IN MILLIONS)
<S> <C> <C> <C>
Service cost............................................... $ 1.0 $ 1.8 $ 1.4
Interest cost.............................................. 6.7 6.4 6.1
Amortization of unrecognized transition obligation......... 3.1 3.1 3.1
Net amortization and deferral.............................. 0.0 0.4 (0.1)
----- ----- -----
Net periodic postretirement benefit cost................... $10.8 $11.7 $10.5
===== ===== =====
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation was 6.75% and 7.5% in 1997 and 1996, respectively, and the
health care cost trend rate was 11% graded to 6% by 2010.
The health care cost trend rate assumption has an effect on the amounts
reported. To illustrate, an increase in the assumed health care cost trend rates
of one percentage point in each year would increase the estimated postretirement
benefit obligation as of December 31, 1997 by $0.8 million and the estimated
service cost and interest cost components of net periodic postretirement benefit
cost for 1997 by $0.1 million.
F-22
<PAGE> 218
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. FEDERAL INCOME TAXES:
The Company files a consolidated federal income tax return with its life
insurance company and non-life insurance company affiliates.
Federal income taxes have been calculated in accordance with the provisions
of the Internal Revenue Code of 1986, as amended. A summary of the Federal
income tax expense (benefit) is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
($ IN MILLIONS)
<S> <C> <C> <C>
Federal income tax (benefit) expense:
Current................................................ $104.1 $76.6 $26.9
Deferred............................................... (46.8) (32.6) (5.5)
------ ----- -----
Total.................................................... $ 57.3 $44.0 $21.4
====== ===== =====
</TABLE>
Federal income taxes reported in the consolidated statements of income are
different from the amounts determined by multiplying the earnings before federal
income taxes by the statutory federal income tax rate of 35%. The sources of the
difference and the tax effects of each are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
($ IN MILLIONS)
<S> <C> <C> <C>
Tax at statutory rate...................................... $65.7 $35.2 $21.7
Differential earnings amount............................... (5.8) 12.8 0.0
Dividends received deduction............................... (0.5) (0.5) (1.4)
Other...................................................... (2.1) (3.5) 1.1
----- ----- -----
Provision for income taxes................................. $57.3 $44.0 $21.4
===== ===== =====
</TABLE>
The Company's federal income tax returns for years through 1991 have been
examined by the Internal Revenue Service (IRS). No material adjustments were
proposed by the IRS as a result of these examinations. In the opinion of
management, adequate provision has been made for any additional taxes which may
become due with respect to open years.
F-23
<PAGE> 219
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of deferred tax liabilities and assets at December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
($ IN MILLIONS)
<S> <C> <C>
Deferred policy acquisition costs........................... $251.4 $291.0
Fixed maturities and equity securities(1)................... 86.7 72.4
Other (net)................................................. 6.4 4.8
------ ------
Total deferred tax liabilities.............................. 344.5 368.2
------ ------
Policyholder and separate account liabilities............... 120.9 103.4
Deposit funds............................................... 55.1 68.3
Accrued expenses............................................ 55.2 70.9
Deferred compensation and benefits.......................... 8.6 7.9
Policyholder dividends...................................... 39.1 41.6
Real estate and mortgages................................... 54.1 30.4
Minimum tax credit.......................................... 0.0 1.6
------ ------
Total deferred tax assets................................... 333.0 324.1
------ ------
Net deferred tax liability.................................. $ 11.5 $ 44.1
====== ======
</TABLE>
- ---------------
(1) Includes $20.9 million and $43.4 million at December 31, 1997 and 1996 of
deferred taxes relating to net unrealized gains on fixed maturity securities
in the AEGON Portfolio (see Note 11).
The Company is required to establish a valuation allowance for any portion
of the deferred tax asset that management believes will not be realized. In the
opinion of management, it is more likely than not that it will realize the
benefit of the deferred tax assets and, therefore, no such valuation allowance
has been established.
10. LEASES:
The Company has entered into various operating lease agreements for office
space, furniture and equipment. These leases have remaining non-cancelable lease
terms in excess of one year. Total rental expense for these operating leases
amounted to $14.5 million in 1997, $15.1 million in 1996 and $18.5 million in
1995. The future minimum rental obligations under these leases at December 31,
1997 are as follows ($ in millions):
<TABLE>
<S> <C>
1998........................................................ $ 8.5
1999........................................................ 8.5
2000........................................................ 8.3
2001........................................................ 7.5
2002........................................................ 8.0
Later years................................................. 90.5
------
$131.3
======
</TABLE>
11. THE GROUP PENSION TRANSACTION:
On December 31, 1993 (the "Group Pension Transaction Date"), the Company
entered into an agreement (the "Agreement") with AEGON USA, Inc. ("AEGON") under
which the Company
F-24
<PAGE> 220
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
transferred a substantial portion of its group pension business (hereafter
referred to as the "Group Pension Transaction"), including its full service
group pension contracts, consisting primarily of tax-deferred annuity, 401(k)
and managed funds lines of business, to AEGON's wholly-owned subsidiary, AUSA
Life Insurance Company, Inc. ("AUSA"). The Company also transferred to AUSA the
corporate infrastructure supporting the group pension business, including data
processing systems, facilities and regional offices. AUSA was newly formed by
AEGON solely for the purpose of facilitating this transaction. In connection
with the transaction, the Company and AEGON have entered into certain service
agreements. These agreements, among other things, provide that the Company will
continue to manage the transferred assets, and that AUSA will continue to
provide certain administrative services to the Company's remaining group pension
contracts not included in the transfer.
The transferred group pension business consisted of approximately $6.4
billion in group pension assets and liabilities, which was comprised of
approximately $2.8 billion of general account assets and liabilities, and $3.6
billion of separate account assets and liabilities. The transfer was initially
structured in the form of indemnity reinsurance, however, the Agreement
contemplated that the transfer would be restructured in the form of assumption
reinsurance as soon as practicable following the consent of contractholders to
assumption of their contracts. Substantially all of the contractholders
consented to the assumption of their contracts by AUSA.
In addition, pursuant to the Agreement, MONY agreed to make a $200 million
capital investment in AEGON by purchasing $150 million face amount of Series A
Notes and $50 million face amount of Series B Notes (hereinafter referred to as
the "Notes"). The Series A Notes pay interest at 6.44 percent per annum and the
Series B Notes pay interest at 6.24 percent per annum. Both the Series A Notes
and the Series B Notes mature on December 31, 2002. MONY's investment in the
Series A Notes was intended to provide AEGON with the funding necessary to
capitalize AUSA.
The Company entered into the Group Pension Transaction due to downgrades of
its financial strength ratings resulting from the deterioration of its financial
position during the period from 1989 through the early 1990s. The Company's
group pension business was considered to be particularly sensitive to heightened
withdrawal and surrender activity due to requirements of many pension fund
advisors that insurance carriers have a minimum financial strength rating
consistent with a "AA" claims-paying ability rating from Standard & Poor's. In
light of the downgrades and certain highly publicized failures of life insurance
companies in the 1990s resulting from abnormally high withdrawal and surrender
activity, management became concerned with respect to the Company's ability to
sustain inordinate amounts of such activity and entered into the Group Pension
Transaction to preserve the value of such business. The transaction allowed the
Company to: (i) place the transferred Group Pension Business in a higher rated
entity which significantly diminished the risk of adverse persistency with
respect to such business, and (ii) retain all the profits resulting from the
$6.4 billion of deposits on contracts in force and transferred to AEGON on the
Group Pension Transaction Date (the "Existing Deposits"). As consideration for
the transaction, MONY remunerated AEGON by transferring to AUSA (i) the
intangible value associated with MONY's group pension franchise, including
established customer relationships, (ii) rights to substantially all the profits
associated with any new deposits made after the Group Pension Transaction Date
on the contracts which were in force and transferred by MONY to AUSA on the
Group Pension Transaction Date, and (iii) rights to substantially all the
profits on any new business generated subsequent to the Group Pension
Transaction Date.
In accordance with GAAP, the transaction did not constitute a sale because
the Company retained substantially all the risks and rewards associated with the
Existing Deposits. Accordingly, the Company continues to reflect the transferred
assets and liabilities on its balance sheet under separate captions entitled
"Assets transferred in Group Pension Transaction" and "Liabilities
F-25
<PAGE> 221
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
transferred in Group Pension Transaction". In addition, the Company reports in
its GAAP earnings the profits from the Existing Deposits as discussed below.
Pursuant to the Agreement, MONY receives from AUSA, (i) payments on an
annual basis through December 31, 2002 (the "Group Pension Payments") equal to
all of the earnings from the Existing Deposits, (ii) a final payment (the "Final
Value Payment") at December 31, 2002 based on the remaining fair value of the
Existing Deposits, and (iii) a contingent payment (the "New Business Growth
Payment") at December 31, 2002 based on new business growth subsequent to the
Transaction Date. However, the level of new business growth necessary for MONY
to receive the New Business Growth Payment made it unlikely that MONY would ever
receive any such payment.
With respect to the Group Pension Payments, the annual results from the
Existing Deposits are measured on a basis in accordance with the Agreement (such
basis hereafter referred to as the "Earnings Formula") which is substantially
the same as GAAP, except that; (i) asset impairments on fixed maturity
securities are only recognized when such securities are designated with an NAIC
rating of "6", and (ii) no impairment losses are recognized on mortgage loans
until such loans are disposed, or at the time and in the calculation of, the
Final Value Payment.
Earnings which emerge from the Existing Deposits pursuant to the
application of the Earnings Formula are recorded in the Company's financial
statements only after adjustments (primarily to recognize asset impairments in
accordance with SFAS No. 114 and 115) to reflect such earnings on a basis
entirely in accordance with GAAP (such earnings hereafter referred to as the
"Group Pension Profits"). Losses which arise from the application of the
Earnings Formula for any annual period will be reflected in the Company's
results of operations (after adjustments to reflect such losses in accordance
with GAAP) only up to the amount for which the Company is at risk (as described
below), which at any time is equal to the then outstanding principal amount of
the Series A Notes.
Operating losses reported in any annual period pursuant to the Earnings
Formula are carried forward to reduce any earnings in subsequent years reported
pursuant to the Earnings Formula. Any resultant deficit remaining at December
31, 2002 will be deducted from the Final Value Payment and New Business Growth
Payment, if any, due to the Company. If a deficit still remains, it will be
applied (as provided for in the Agreement) as an offset against the principal
payment due to the Company upon maturity of the Series A Notes.
For the years ended December 31, 1997, 1996 and 1995, AUSA reported
earnings to the Company pursuant to the application of the Earnings Formula of
$55.7 million, $66.7 million, and $70.2 million, respectively, and the Company
recorded Group Pension Profits of $60.0 million, $59.5 million and $61.7
million, respectively. In addition, the Company earned $17.7 million, $23.0
million, and $17.4 million of interest income on the Notes during the
aforementioned years. From 1994 through 1996, the Company reinvested an
aggregate of $169 million of the aforementioned profits and interest in
additional Series A notes (the "Additional Notes") with a face amount equal to
the amount reinvested. The Additional Notes paid interest at 1% above the
two-year U.S. Treasury rate in effect at the time of their issuance. All of the
Additional Notes were redeemed at face value by AEGON during 1997. At December
31, 1997, the remaining Series A notes held by the Company consisted of the $150
million face amount Series A notes it acquired on December 31, 1993.
The following sets forth certain summarized financial information relating
to the Group Pension Transaction as of and for the periods indicated, including
information regarding: (i) the general account assets transferred to support the
Existing Deposits in the Group Pension Transaction (such assets hereafter
referred to as the "AEGON Portfolio"), (ii) the transferred separate account
F-26
<PAGE> 222
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
assets and liabilities, and (iii) the components of revenue and expense
comprising the Group Pension Profits:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1997 1996
-------- --------
($ IN MILLIONS)
<S> <C> <C>
ASSETS:
General Account
Fixed Maturities: Available for sale, at estimated fair
value (amortized cost $1,585.4 and $1,568.1,
respectively)........................................ $1,645.0 $1,629.2
Mortgage loans on real estate.......................... 347.9 527.9
Real estate held for investment........................ 50.4 55.3
Cash and cash equivalents.............................. 24.5 23.3
Accrued investment income.............................. 33.1 33.6
-------- --------
Total general account assets........................... 2,100.9 2,269.3
Separate account assets................................... 3,614.0 3,358.3
-------- --------
Total assets...................................... $5,714.9 $5,627.6
======== ========
LIABILITIES:
General Account(1)
Policyholders' account balances........................ $1,991.0 $2,158.1
Other liabilities...................................... 33.7 27.7
-------- --------
Total general account liabilities................. 2,024.7 2,185.8
Separate account liabilities(2)........................... 3,614.0 3,358.3
-------- --------
Total liabilities................................. $5,638.7 $5,544.1
======== ========
</TABLE>
- ---------------
(1) Includes general account liabilities transferred in connection with the
Group Pension Transaction pursuant to indemnity reinsurance of $142.8
million and $175.2 million as of December 31, 1997 and 1996, respectively.
(2) Includes separate account liabilities transferred in connection with the
Group Pension Transaction pursuant to indemnity reinsurance of $31.1 million
and $29.2 million as of December 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C>
REVENUES:
Product policy fees.................................... $ 23.7 $ 24.7 $ 25.0
Net investment income.................................. 169.3 192.4 215.9
Net realized gains (losses) on investments............. 7.1 (7.4) (8.2)
------ ------ ------
Total revenues............................... 200.1 209.7 232.7
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances... 117.3 125.9 141.2
Other operating costs and expenses..................... 22.8 24.3 29.8
------ ------ ------
Total benefits and expenses.................. 140.1 150.2 171.0
Group Pension Profits........................ $ 60.0 $ 59.5 $ 61.7
====== ====== ======
</TABLE>
F-27
<PAGE> 223
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIXED MATURITY SECURITIES
At December 31, 1997 and 1996, there were no fixed maturity securities in
the AEGON Portfolio deemed to have other than temporary impairments in value. In
addition, there were no fixed maturity securities at such dates which have been
non-income producing for the preceding twelve months.
At December 31, 1997 and 1996, the carrying value of problem fixed
maturities (as hereafter defined -- see Note 13) held in the AEGON Portfolio was
$24.4 million and $25.1 million, respectively. In addition, at such dates the
carrying value of potential problem fixed maturities held in the AEGON Portfolio
was $7.4 million and $6.9 million, respectively. Also, none of the fixed
maturity securities held in the AEGON Portfolio at December 31, 1997 and 1996 or
prior thereto had been restructured.
The amortized cost and estimated fair value of fixed maturity securities
held in the AEGON Portfolio, by contractual maturity dates, (excluding scheduled
sinking funds), as of December 31, 1997 are as follows ($ in millions):
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less..................................... $ 71.2 $ 71.7
Due after one year through five years....................... 756.2 782.0
Due after five years through ten years...................... 399.4 417.5
Due after ten years......................................... 43.4 47.5
-------- --------
Subtotal.................................................... 1,270.2 1,318.7
-------- --------
Mortgage and asset backed Securities........................ 315.2 326.3
-------- --------
Total............................................. $1,585.4 1,645.0
======== ========
</TABLE>
Fixed maturity securities that are not due at a single maturity date have
been included in the preceding table in the year of final maturity. Actual
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
The net change in unrealized investment gains (losses) represents the only
component of other comprehensive income generated by the AEGON Portfolio for the
years ended December 31, 1997, 1996, 1995 and prior thereto. Following is a
summary for the AEGON Portfolio of the change in unrealized investment gains
(losses) (see Note 12):
<TABLE>
<CAPTION>
1997 1996 1995
----- ------ ------
<S> <C> <C> <C>
CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Fixed maturities........................................ $(1.5) $(41.6) $107.4
===== ====== ======
</TABLE>
F-28
<PAGE> 224
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MORTGAGE LOANS ON REAL ESTATE
Mortgage loans on real estate in the AEGON Portfolio at December 31, 1997
and 1996 consist of the following ($ in millions):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Commercial mortgage loans................................... $361.5 $550.1
Agricultural and other loans................................ 0.0 0.0
------ ------
Total loans................................................. 361.5 550.1
Less: valuation allowances............................. (13.6) (22.2)
------ ------
Mortgage loans, net of valuation allowance.................. $347.9 $527.9
====== ======
</TABLE>
An analysis of the valuation allowances with respect to the AEGON Portfolio
for 1997, 1996 and 1995 is as follows ($ in millions):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Balance, beginning of year................................. $22.2 $31.8 $27.3
Increase (decrease) in allowance........................... (5.1) (8.7) 5.3
Reduction due to pay downs and pay offs.................... (1.6) 0.0 0.0
Transfers to real estate................................... (1.9) (0.9) (0.8)
----- ----- -----
Balance, end of year....................................... $13.6 $22.2 $31.8
===== ===== =====
</TABLE>
Impaired mortgage loans along with related valuation allowances with
respect to the AEGON Portfolio at December 31, 1997 and 1996 are as follows ($
in millions):
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------
1997 1996 1995
----- ------ ------
<S> <C> <C> <C>
Investment in impaired mortgage loans (before valuation
allowances):
Loans that have valuation allowances.................. $56.0 $ 91.6 $ 63.5
Loans that do not have valuation allowances........... 41.1 45.6 59.9
----- ------ ------
Subtotal...................................... 97.1 137.2 123.4
Valuation allowances.................................... (5.8) (9.8) (13.0)
----- ------ ------
Impaired mortgage loans, net of valuation allowances.... $91.3 $127.4 $110.4
===== ====== ======
</TABLE>
Impaired mortgage loans that do not have valuation allowances are loans
where the net present value of the expected future cash flows related to the
loan or the fair value of the collateral equals or exceeds the recorded
investment in the loan. Such loans primarily consist of restructured loans.
During the years ended December 31, 1997, 1996, and 1995, the average
recorded investment in impaired mortgage loans with respect to the AEGON
Portfolio was approximately $109.3 million, $118.9 million, and $107.6 million,
respectively. For the years ended December 31, 1997, 1996, and 1995
approximately $6.5 million, $13.1 million, and $10.7 million, respectively, of
interest income on impaired loans with respect to the AEGON Portfolio was
earned.
F-29
<PAGE> 225
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1997 and 1996, the carrying values of mortgage loans which
were non-income producing for the twelve months preceding such dates with
respect to the AEGON Portfolio were $21.6 million and $0 million, respectively.
At December 31, 1997 and 1996 the AEGON Portfolio held restructured
mortgage loans of $88.5 million and $107.2 million, respectively. Interest
income of $6.6 million, $10.4 million, and $6.0 million was recognized on
restructured mortgage loans for the years ended December 31, 1997, 1996, and
1995, respectively. Gross interest income on these loans that would have been
recorded in accordance with the original terms of such loans amounted to
approximately $9.2 million, $11.1 million, and $6.8 million for the years ended
December 31, 1997, 1996, and 1995, respectively.
The following table presents the maturity distribution of mortgage loans
held in the AEGON Portfolio as of December 31, 1997 ($ in millions).
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
CARRYING % OF
VALUE TOTAL
-------- -----
<S> <C> <C>
Due in one year or less................................... $ 60.5 17.4%
Due after one year through five years..................... 210.9 60.6
Due after five years through ten years.................... 43.9 12.6
Due after ten years....................................... 32.6 9.4
------ -----
Total........................................... $347.9 100.0%
====== =====
</TABLE>
REAL ESTATE
The following table summarizes the real estate held in the AEGON Portfolio
as of the dates indicated:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1997 1996
------ ------
($ IN MILLIONS)
<S> <C> <C>
Real estate held for investment........................... $50.4 $55.3
Impairment writedowns..................................... 0.0 0.0
----- -----
Carrying value of real estate held for investment......... $50.4 $55.3
===== =====
</TABLE>
- ---------------
(1) Amounts presented as of December 31, 1997 and 1996 are net of $25.6 million
and $21.4 million, respectively, relating to impairments taken upon
foreclosure of mortgage loans. Losses recorded during the years ended
December 31, 1997, 1996 and 1995 related to impairments taken upon
foreclosure were $4.3 million, $16.8 million, and $4.0 million,
respectively.
Real estate is net of accumulated depreciation of $1.8 million, and $1.1
million at December 31, 1997, and 1996, respectively. Depreciation expense of
$1.4 million, $.7 million, and $.4 million, was recorded for the years ended
December 31, 1997, 1996, and 1995, respectively.
There was no real estate included in the AEGON Portfolio which was
non-income producing for the twelve months preceding December 31, 1997, 1996,
and 1995, respectively.
F-30
<PAGE> 226
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. INVESTMENT INCOME, REALIZED AND UNREALIZED INVESTMENT GAINS (LOSSES),
AND COMPREHENSIVE INCOME:
Net investment income for the years ended December 31, 1997, 1996 and 1995
was derived from the following sources ($ in millions):
<TABLE>
<CAPTION>
NET INVESTMENT INCOME 1997 1996 1995
--------------------- ------ ------ ------
<S> <C> <C> <C>
Fixed maturities....................................... $422.5 $392.4 $379.1
Equity securities...................................... 53.5 54.5 40.5
Mortgage loans......................................... 137.1 159.2 169.7
Real estate............................................ 56.2 84.1 81.3
Policy loans........................................... 82.2 80.2 82.0
Other investments (including cash & short-terms)....... 22.4 29.3 24.7
------ ------ ------
Total investment income................................ 773.9 799.7 777.3
Investment expenses.................................... 40.9 48.1 48.5
------ ------ ------
Net investment income.................................. $733.0 $751.6 $728.8
====== ====== ======
</TABLE>
Net realized gains (losses) on investments for the years ended December 31,
1997, 1996 and 1995 are summarized as follows ($ in millions):
<TABLE>
<CAPTION>
NET REALIZED GAINS (LOSSES) ON INVESTMENTS 1997 1996 1995
------------------------------------------ ----- ----- -----
<S> <C> <C> <C>
Fixed maturities........................................... $ 7.3 $ 6.2 $19.0
Equity securities.......................................... 35.8 30.0 9.2
Mortgage loans............................................. 10.4 8.4 (1.8)
Real estate................................................ 20.1 20.8 (13.3)
Other invested assets...................................... (1.5) 10.5 3.1
----- ----- -----
Net realized gains on investments.......................... $72.1 $75.9 $16.2
===== ===== =====
</TABLE>
The net change in unrealized investment gains (losses) represents the only
component of other comprehensive income for the years ended December 31, 1997,
1996, and 1995. In addition, Accumulated Other Comprehensive Income at December
31, 1994 is comprised only of unrealized investment gains (losses). Following is
a summary of the change in unrealized investment gains (losses) net of related
deferred income taxes and adjustment for deferred policy acquisition costs
F-31
<PAGE> 227
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(see Note 5), which are reflected in Accumulated Other Comprehensive Income for
the periods presented:
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS 1997 1996 1995
-------------------------------------------------- ------ ------- -------
($ IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities..................................... $ 98.7 $(126.7) $ 386.1
Equity securities.................................... 0.6 13.8 16.5
Other equity investments............................. 0.8 1.0 0.9
------ ------- -------
Subtotal............................................. 100.1 (111.9) 403.5
AEGON Portfolio (See Note 11)........................ (1.5) (41.6) 107.4
------ ------- -------
Subtotal............................................. 98.6 (153.5) 510.9
Effect on unrealized gains (losses) on Investments
attributable to:
DAC............................................. (47.9) 61.0 (215.6)
Deferred federal income taxes................... (17.7) 32.6 (103.8)
------ ------- -------
Change in unrealized gains (losses) on investments,
net................................................ $ 33.0 $ (59.9) $ 191.5
====== ======= =======
</TABLE>
The following table sets forth the reclassification adjustments required
for the years ended December 31, 1997, 1996, and 1995 to avoid double-counting
in comprehensive income items that are included as part of net income for a
period that also had been part of other comprehensive income in earlier periods
($ in millions):
<TABLE>
<CAPTION>
RECLASSIFICATION ADJUSTMENTS 1997 1996 1995
---------------------------- ------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C>
Unrealized gains (losses) on investments arising during
period.................................................... $ 50.6 $(44.8) $204.1
Reclassification adjustment for gains included in net
income.................................................... $(17.6) $(15.1) $(12.6)
------ ------ ------
Unrealized gains (losses) on investments, net of
reclassification adjustments.............................. $ 33.0 $(59.9) $191.5
====== ====== ======
</TABLE>
Unrealized gains (losses) on investments reported in the above table for
the years ended December 31, 1997, 1996 and 1995 are net of income tax expense
(benefit) of $8.2 million, $(40.8) million, and $97.0 million, respectively, and
$(30.2) million, $75.5 million, and $(204.4) million, respectively, relating to
the effect of such unrealized gains (losses) on DAC.
Reclassification adjustments reported in the above table for the years
ended December 31, 1997, 1996 and 1995 are net of income tax expense (benefit)
of $9.5 million, $8.2 million and $6.8 million, respectively, and $(17.7)
million, $(14.5) million and $(11.2) million, respectively, relating to the
effect of such amounts on DAC.
F-32
<PAGE> 228
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. INVESTMENTS:
FIXED MATURITY SECURITIES AVAILABLE-FOR-SALE:
The amortized cost, gross unrealized gains and loss, and estimated fair
value of fixed maturity securities available for sale as of December 31, 1997
and December 31, 1996 are as follows ($ in millions):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------- --------------- ------------- -------------------
1997 1996 1997 1996 1997 1996 1997 1996
-------- -------- ------ ------ ----- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
US Treasury securities and
obligations of U.S. government
agencies...................... $ 131.4 $ 207.2 $ 2.3 $ 1.5 $ 0.1 $ 0.5 $ 133.6 $ 208.2
Collateralized Mortgage
Obligations:
Government Agency-Backed...... 398.9 379.5 6.6 2.7 0.3 4.6 405.2 377.6
Non-Agency Backed............. 112.4 101.0 4.4 2.7 0.0 0.3 116.8 103.4
Other asset-backed securities:
Government Agency-Backed...... 68.1 68.8 1.3 1.0 0.3 0.9 69.1 68.9
Non-Agency Backed............. 474.4 394.1 17.5 9.0 0.3 1.9 491.6 401.2
Foreign governments............. 0.0 4.5 0.0 0.1 0.0 0.0 0.0 4.6
Utilities....................... 719.1 635.5 30.6 19.8 2.2 4.9 747.5 650.4
Corporate bonds................. 3,852.2 3,262.4 141.4 91.8 14.7 28.1 3,978.9 3,326.1
-------- -------- ------ ------ ----- ----- -------- --------
Total bonds............ 5,756.5 5,053.0 204.1 128.6 17.9 41.2 5,942.7 5,140.4
Redeemable preferred stocks..... 7.9 2.1 0.1 0.0 0.6 0.4 7.4 1.7
-------- -------- ------ ------ ----- ----- -------- --------
Total.................. $5,764.4 $5,055.1 $204.2 $128.6 $18.5 $41.6 $5,950.1 $5,142.1
======== ======== ====== ====== ===== ===== ======== ========
</TABLE>
Fixed maturity securities held to maturity at December 31, 1996 consisted
only of the Series A Notes (see Note 11). The amortized cost, gross unrealized
loss and fair value of such securities at December 31, 1996 was $318.7 million,
$20.9 million, and $297.8 million, respectively. Effective January 1, 1997, the
Series A Notes were reclassified from held-to-maturity to available-for-sale
pursuant to SFAS No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. SFAS No. 125 requires that
investments which can be contractually prepaid or otherwise settled in such a
way that the holder would not recover substantially all of its recorded
investment shall be measured like investments in debt securities classified as
available-for-sale or trading under SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. This provision of SFAS No. 125 is
effective for financial assets held on or acquired after January 1, 1997.
The carrying value of the Company's fixed maturity securities at December
31, 1997 and 1996 is net of adjustments for impairments in value deemed to be
other than temporary of $7.3 million and $23.1 million, respectively.
Included in the table above are $0.0 million and $6.1 million at December
31, 1997 and 1996, respectively of fixed maturity securities at estimated fair
value which have been non-income producing for the twelve months preceding such
dates.
The Company classifies fixed maturity securities which are, (i) in default
as to principal or interest payments, or (ii) are to be restructured pursuant to
commenced negotiations, or (iii) which went into bankruptcy subsequent to
acquisition, as "problem fixed maturity securities". At December 31, 1997 and
1996, the carrying value of problem fixed maturities held by the Company was
$30.2 million and $30.9 million, respectively. In addition, at December 31, 1997
and 1996, the Company held $0.0 million and $6.5 million of fixed maturity
securities which had been restructured.
F-33
<PAGE> 229
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Gross interest income that would have been recorded in accordance with the
original terms of restructured fixed maturity securities amounted to $0.0
million and $0.8 million for the years ended December 31, 1997 and 1996,
respectively. Gross interest income on these fixed maturity securities included
in net investment income aggregated $0.0 million and $1.0 million for the years
ended December 31, 1997 and 1996, respectively.
The amortized cost and estimated fair value of fixed maturity securities,
by contractual maturity dates, (excluding scheduled sinking funds) as of
December 31, 1997 are as follows ($ in millions):
<TABLE>
<CAPTION>
1997
-----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less............................... $ 58.6 $ 58.5
Due after one year through five years................. 1,250.3 1,273.0
Due after five years through ten years................ 2,412.3 2,499.7
Due after ten years................................... 989.4 1,036.2
-------- --------
Subtotal.................................... 4,710.6 4,867.4
Mortgage and asset backed securities.................. 1,053.8 1,082.7
-------- --------
$5,764.4 $5,950.1
======== ========
</TABLE>
Fixed maturity securities that are not due at a single maturity date have
been included in the preceding table in the year of final maturity. Actual
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
Proceeds from sales of fixed maturity securities during 1997, 1996 and 1995
were $225.0 million, $197.3 million and $415.8 million, respectively. Gross
gains of $5.2 million, $4.1 million, and $10.9 million and gross losses of $2.6
million, $4.3 million, and $5.1 million were realized on these sales,
respectively.
EQUITY SECURITIES
The cost, gross unrealized gains and losses, and estimated fair value of
marketable and nonmarketable equity securities at December 31, 1997 and 1996 are
as follows ($ in millions):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------- ------------- ------------ ---------------
1997 1996 1997 1996 1997 1996 1997 1996
------ ------ ----- ----- ----- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marketable equity securities.............. $165.3 $138.8 $30.2 $27.6 $ 4.9 $1.8 $190.6 $164.6
Nonmarketable equity securities........... 101.4 95.9 53.0 49.2 7.2 4.5 147.2 140.6
------ ------ ----- ----- ----- ---- ------ ------
$266.7 $234.7 $83.2 $76.8 $12.1 $6.3 $337.8 $305.2
====== ====== ===== ===== ===== ==== ====== ======
</TABLE>
Proceeds from sales of equity securities during 1997, 1996 and 1995 were
$234.1 million, $164.7 million and $58.6 million, respectively. Gross gains of
$44.4 million, $35.9 million, and $16.9 million and gross losses of $4.7
million, $4.5 million, and $5.0 million were realized on these sales,
respectively.
F-34
<PAGE> 230
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. MORTGAGE LOANS ON REAL ESTATE AND REAL ESTATE:
Mortgage loans on real estate at December 31, 1997 and 1996 consist of the
following ($ in millions):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Commercial mortgage loans............................. $ 963.5 $1,118.6
Agricultural and other loans.......................... 521.5 530.7
-------- --------
Total loans........................................... 1,485.0 1,649.3
Less: valuation allowances.......................... 54.9 67.0
-------- --------
Mortgage loans, net of valuation allowances........... $1,430.1 $1,582.3
======== ========
</TABLE>
An analysis of the valuation allowances for 1997, 1996 and 1995 is as
follows ($ in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- ------
<S> <C> <C> <C>
Balance, beginning of year...................... $ 67.0 $79.6 $ 88.7
Increase (decrease) in allowance................ 1.4 (4.2) 3.9
Reduction due to pay downs and pay offs......... (12.7) (0.6) (0.3)
Transfers to real estate........................ (0.8) (7.8) (12.7)
------ ----- ------
Balance, end of year............................ $ 54.9 $67.0 $ 79.6
====== ===== ======
</TABLE>
Impaired mortgage loans along with related valuation allowances were as
follows ($ in millions):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Investment in impaired mortgage loans (before valuation
allowances):
Loans that have valuation allowances...................... $199.1 $247.0
Loans that do not have valuation allowances............... 167.1 159.5
------ ------
Subtotal.......................................... 366.2 406.5
Valuation allowances........................................ (32.8) (40.1)
------ ------
Impaired mortgage loans, net of valuation allowances........ $333.4 $366.4
====== ======
</TABLE>
Impaired mortgage loans that do not have valuation allowances are loans
where the net present value of the expected future cash flows related to the
loan or the fair value of the collateral equals or exceeds the recorded
investment in the loan. Such loans primarily consist of restructured loans or
loans on which impairment writedowns were taken prior to the adoption of SFAS
No. 114, "Accounting by Creditors for Impairment of a Loan".
During 1997, the average recorded investment in impaired mortgage loans was
approximately $349.9 million ($396.7 million in 1996). During 1997, 1996, and
1995, the Company recognized $28.5 million, $33.3 million, and $36.5 million,
respectively, of interest income on impaired loans.
At December 31, 1997 and 1996, the carrying values of mortgage loans which
were non-income producing for the twelve months preceding such dates were $21.1
million and $15.7 million, respectively.
At December 31, 1997 and 1996, the Company had restructured mortgage loans
of $242.7 million and $248.3 million, respectively. Interest income of $20.3
million, $19.8 million, and $20.6 million was recognized on restructured
mortgage loans in 1997, 1996, and 1995, respectively. Gross
F-35
<PAGE> 231
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest income on these loans that would have been recorded in accordance with
the original terms of such loans amounted to approximately $26.7 million in
1997, $26.3 million in 1996, and $28.0 million in 1995.
The following table summarizes the Company's real estate at December 31,
1997 and 1996:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1997 1996
------ --------
($ IN MILLIONS)
<S> <C> <C>
Real estate to be disposed of(1)............................ $800.2 $ 480.8
Impairment writedowns....................................... (96.3) 0.0
Valuation allowance......................................... (82.7) (46.0)
------ --------
Carrying value of real estate to be disposed of............. $621.2 $ 434.8
====== ========
Real estate held for investment(2).......................... $533.6 $1,205.0
Impairment writedowns....................................... (37.7) (134.6)
------ --------
Carrying value of real estate held for investment........... $495.9 $1,070.4
====== ========
</TABLE>
- ---------------
(1) Amounts presented as of December 31, 1997 and 1996 are net of $75.0 million
and $120.1 million, respectively, relating to impairments taken upon
foreclosure of mortgage loans.
(2) Amounts presented as of December 31, 1997 and 1996 are net of $35.0 million
and $71.5 million, respectively, relating to impairments taken upon
foreclosure of mortgage loans.
An analysis of the valuation allowances relating to real estate classified
as to be disposed of for the years ended December 31, 1997, 1996 and 1995 is as
follows ($ in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Balance, beginning of year............................. $ 46.0 $ 49.1 $ 22.7
Increase due to transfers of properties to real estate
to be disposed of during the year.................... 66.1 11.6 29.9
Increases (decreases) in valuation allowances from the
end of the prior period on properties still held for
disposal............................................. (2.3) 5.2 9.6
Decreases as a result of sales......................... (27.1) (19.9) (13.1)
------ ------ ------
Balance, end of year................................... $ 82.7 $ 46.0 $ 49.1
====== ====== ======
</TABLE>
Real estate is net of accumulated depreciation of $494.4 million and $517.7
million for 1997 and 1996, respectively, and depreciation expense recorded was
$45.1 million, $48.3 million and $64.8 million for the years ended December 31,
1997, 1996 and 1995, respectively.
At December 31, 1997 and 1996, the carrying value of real estate which was
non-income producing for the twelve months preceding such dates was $34.5
million and $38.7 million, respectively. Approximately 80.4% of such real estate
at December 31, 1997 consisted of land and the balance consisted of vacant
buildings.
The carrying value of impaired real estate as of December 31, 1997 and 1996
was $62.3 million and $62.7 million, respectively. The depreciated cost of such
real estate as of December 31, 1997 and 1996 was $196.4 million and $197.3
million before impairment writedowns of $134.0 million and $134.6 million,
respectively. The aforementioned impairments occurred primarily as a result of
low occupancy levels and other market related factors. Losses recorded during
1997, 1996, and 1995 related to impaired real estate aggregated $0.0 million,
$3.8 million, and $0.0 million, respectively,
F-36
<PAGE> 232
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and are included as a component of Net Realized Gains on Investments.
Substantially all impaired real estate is allocated to the Protection Products
segment.
15. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values of the Company's financial instruments
approximate their carrying amounts. The methods and assumptions utilized in
estimating the fair values of the Company's financial instruments are summarized
as follows:
FIXED MATURITIES AND EQUITY SECURITIES
The estimated fair values of fixed maturity securities are based upon
quoted market prices, where available. The fair values of fixed maturity
securities not actively traded and other non-publicly traded securities are
estimated using values obtained from independent pricing services or, in the
case of private placements, by discounting expected future cash flows using a
current market interest rate commensurate with the credit quality and term of
the investments. Equity securities primarily consist of investments in common
stock and limited partnership interests. The fair values of the Company's
investment in common stocks are determined based on quoted market prices, where
available. The fair value of the Company's investments in limited partnership
interests are based on amounts reported by such partnerships to the Company.
MORTGAGE LOANS
The fair values of mortgage loans are estimated by discounting expected
future cash flows, using current interest rates for similar loans to borrowers
with similar credit risk. Loans with similar characteristics are aggregated for
purposes of the calculations. The fair value of mortgages in process of
foreclosure is the estimated fair value of the underlying collateral.
POLICY LOANS
Policy loans are an integral component of insurance contracts and have no
maturity dates. Management has determined that it is not practicable to estimate
the fair value of policy loans.
LONG-TERM DEBT
The fair value of long-term debt is determined based on contractual cash
flows discounted at market rates. The estimated fair values for non-recourse
mortgage debt are determined by discounting contractual cash flows at a rate
which takes into account the level of current market interest rates and
collateral risk.
SEPARATE ACCOUNT ASSETS AND LIABILITIES
The estimated fair value of assets held in Separate Accounts is based on
quoted market prices. The fair value of liabilities related to Separate Accounts
is the amount payable on demand, which includes surrender charges.
INVESTMENT-TYPE CONTRACTS
The fair values of annuities are based on estimates of the value of
payments available upon full surrender. The fair values of the Company's
liabilities under guaranteed investment contracts are estimated by discounting
expected cash outflows using interest rates currently offered for similar
contracts with maturities consistent with those remaining for the contracts
being valued.
F-37
<PAGE> 233
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. REINSURANCE:
Life insurance business is ceded on a yearly renewable term basis under
various reinsurance contracts. The Company's general practice is to retain no
more than $4.0 million of risk on any one person for individual products and
$6.0 million for last survivor products.
The Company has entered into coinsurance agreements with other insurers
related to a portion of its extended term insurance, guaranteed interest
contract and long-term disability claim liabilities and reinsures approximately
50% of its block of paid-up life insurance policies.
The following table summarizes the effect of reinsurance for the years
indicated:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C>
Direct premiums (includes $78.1, $78.2, and $77.3 of
accident and health premiums for 1997, 1996, and
1995, respectively)................................ $871.0 $889.4 $906.4
------ ------ ------
Reinsurance Assumed.................................. 6.2 8.3 6.5
Reinsurance ceded (includes $(3.5), $(3.4), and
$(3.2) of accident and health premiums for 1997,
1996, and 1995, respectively)...................... (38.6) (37.9) (37.0)
------ ------ ------
Net premiums.................................... $838.6 $859.8 $875.9
====== ====== ======
Universal life and investment type product policy fee
income ceded....................................... $ 8.8 $ 8.5 $ 8.0
====== ====== ======
Policyholders' benefits ceded........................ $ 69.0 $ 44.6 $ 39.6
====== ====== ======
Interest credited to policyholders' account balances
ceded.............................................. $ 9.9 $ 14.5 $ 26.0
====== ====== ======
</TABLE>
The Company is contingently liable with respect to ceded insurance should
any reinsurer be unable to meet its obligations under these agreements. To limit
the possibility of such losses, the Company evaluates the financial condition of
its reinsurers and monitors concentration of credit risk.
Effective December 31, 1997, the Company transferred all of its existing in
force disability income insurance business to a third party reinsurer under an
indemnity reinsurance contract and ceased writing new disability income
insurance business. As a result of this transaction, the Company recorded a loss
before tax of approximately $9.1 million for the year ended December 31, 1997.
F-38
<PAGE> 234
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. DEBT:
Short and long-term debt consists of the following ($ in millions):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
SHORT-TERM DEBT:
Real Estate Mortgage Investment Conduit..................... $ 0 $ 33.1
Eurobonds................................................... 0 89.2
Real Estate Mortgage Encumbrances........................... 0 30.7
------ ------
$ 0 $153.0
====== ======
LONG-TERM DEBT:
Surplus Notes............................................... $219.6 $ 93.8
Real Estate Mortgage Encumbrances........................... 155.8 128.8
Other....................................................... 48.2 47.1
------ ------
$423.6 $269.7
====== ======
</TABLE>
REAL ESTATE MORTGAGE INVESTMENT CONDUIT
The Company had outstanding debt in the amount of $33.1 million at December
31, 1996 which represented the remaining outstanding floating rate notes that
were issued by a trust that qualified as a Real Estate Mortgage Investment
Conduit (REMIC) under Section 860 of the Internal Revenue Code. The notes were
collateralized by mortgage loans transferred by the Company in 1995 which had an
aggregate principal amount of $434.3 million. Proceeds from the assets of the
trust were the sole source of payment on the notes. The Company did not
guarantee these notes or the mortgage loans transferred to the trust. The notes
matured in September 1997. The Company accounted for this transaction by
consolidating the trust's mortgages and debt. For the years ended December 31,
1997, 1996, and 1995, the Company recorded interest expense of $0.8 million,
$3.3 million, and $1.3 million, respectively, related to the REMIC. The weighted
average interest rate on the notes for the years ended December 31, 1997, 1996,
and 1995 was 5.9%, 5.8%, and 6.1%, respectively.
SURPLUS NOTES
On December 31, 1997, the Company issued the MONY Notes in connection with
the Investment Agreement (see Note 3). The MONY Notes have a face amount of
$115.0 million, a coupon rate of interest of 9.5% per annum, and mature on
December 30, 2012. Interest on the MONY Notes is payable semi-annually and
principal is payable at maturity. Payment of interest on the MONY Notes may only
be made upon the prior approval of the New York State Superintendent of
Insurance.
On August 15, 1994, the Company issued Surplus Notes due August 15, 2024
with a face amount of $125 million. The notes were issued at a discount of
42.146% from the principal amount payable at maturity, resulting in net proceeds
after issuance expenses of approximately $70.0 million. The amount of such
original issue discount represents a yield of 11.25% per annum for the period
from August 15, 1994 until August 15, 1999. Interest on the notes will not
accrue until August 15, 1999; thereafter, interest on the notes is scheduled to
be paid on February 15 and August 15 of each year, commencing February 15, 2000,
at a rate of 11.25% per annum.
Payment of interest on the notes may only be made upon the prior approval
of the New York State Superintendent of Insurance. The Company amortizes the
discount using the interest method.
F-39
<PAGE> 235
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For the years ended December 31, 1997, 1996, and 1995, the Company recorded
interest expense of $10.8 million, $9.7 million, and $8.7 million, respectively,
related to these notes.
EUROBONDS
At their scheduled maturity date, April 7, 1997, the Company retired the
remaining $89.2 million principal amount of outstanding 8.125% Eurobonds it had
issued in 1987. Of the $125.0 million principal amount of such securities
originally issued, approximately $89.2 million remained outstanding for all of
1995, 1996 and through the date of their maturity.
At their scheduled maturity date, October 29, 1996, the Company retired the
remaining $126.0 million principal amount of outstanding 8.25% Eurobonds it had
issued in 1986. Of the $150.0 million principal amount of such securities
originally issued, approximately $126.0 million remained outstanding for all of
1995 and through the date of their maturity.
For the years ended December 31, 1997, 1996 and 1995 interest expense on
the Eurobonds outstanding aggregated $2.1 million, $18.3 million, and $21.0
million, respectively.
REAL ESTATE MORTGAGE ENCUMBRANCES
The Company has mortgage loans on certain of its real estate properties.
The interest rates on these loans range from 7.9% to 12.5%. Maturities range
from June 2000 to March 2020. For the years ended December 31, 1997, 1996 and
1995, interest expense on such mortgage loans aggregated $12.3 million, $12.9
million, and $13.9 million, respectively.
OTHER
During 1989, the Company entered into a transaction which is accounted for
as a financing arrangement involving certain real estate properties held for
investment. Pursuant to the terms of the agreement, the Company effectively
pledged the real estate properties as collateral for a loan of approximately
$35.0 million bearing simple interest at a rate of 8% per annum. Interest is
cumulative. Periodic interest payments are not required. All principal and
interest are effectively due at the maturity of the obligation (March 30, 2000)
which is subject to extension at the option of the creditor. However, interest
may be paid periodically subject to available cash flow from the real estate
properties. At December 31, 1997 and 1996, the outstanding balance of the
obligation including accrued interest was $41.3 million and $40.1 million,
respectively. Interest expense on the obligation of $3.0 million, $2.9 million,
and $2.8 million is reflected in Other Operating Costs and Expenses on the
statements of income for the years ended December 31, 1997, 1996 and 1995,
respectively.
In 1988, the Company financed one of its real estate properties under a
sales/leaseback arrangement. The facility was sold for $66.0 million, $56.0
million of which was in the form of an interest bearing note receivable and
$10.0 million in cash. The note is due January 1, 2009. The transaction is
accounted for as a financing. Accordingly, the facility remains on the Company's
books and continues to be depreciated. An obligation representing the total
proceeds on the sale was recorded by the Company at the effective date of the
transaction, and is reduced based on payments under the lease. The lease has a
term of 20 years beginning December 21, 1988 and requires minimum annual rental
payments of $7.0 million in 1998, $7.1 million in 1999, $7.3 million in 2000,
$7.4 million in 2001, $7.6 million in 2002, and $48.7 million thereafter. The
Company has the option to renew the lease at the end of the lease term.
F-40
<PAGE> 236
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1997, aggregate maturities of long-term debt based on
required principal payments for 1998 and the succeeding four years are $2.2
million, $13.8 million, $89.1 million, $81.5 million, $0.7 million,
respectively, and $256.7 million thereafter.
18. OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK:
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
Pursuant to a securities lending agreement with a major financial
institution, the Company from time to time lends securities to approved
borrowers. At December 31, 1997, securities loaned by the Company under this
agreement had a carrying value of approximately $35.1 million. There were no
loaned securities as of December 31, 1996. The minimum collateral on securities
loaned is 102 percent of the market value of the loaned securities. Such
securities are marked to market on a daily basis and the collateral is
correspondingly increased or decreased.
CONCENTRATION OF CREDIT RISK:
At December 31, 1997 and 1996, the Company had no single investment or
series of investments with a single issuer, (excluding US Treasury securities
and obligations of U.S. government agencies) exceeding 1.9% and 3.7%,
respectively, of total cash and invested assets.
The Company's fixed maturity securities are diversified by industry type.
The industries that comprise 10% or more of the carrying value of the fixed
maturity securities at December 31, 1997 are Other Manufacturing of $804.9
million (13.5%), Public Utilities of $747.9 million (12.6%), Consumer Goods and
Services of $614.6 million (10.3%), Non-Government Asset/Mortgage Backed of
$608.4 million (10.2%), Government and Agencies of $607.9 million (10.2%).
At December 31, 1996, the industries that comprise 10% or more of the
carrying value Company's fixed maturity securities were Financial Services of
$742.4 million (13.7%), Government and Agencies of $659.4 million (12.1%),
Public Utilities of $651.1 million (11.9%), Other Manufacturing of $649.9
million (11.9%), and Consumer Goods and Services of $547.6 million (10.0%).
The Company holds below investment grade fixed maturity securities with a
carrying value of $304.3 million at December 31, 1997. These investments consist
mostly of privately issued bonds which are monitored by the Company through
extensive internal analysis of the financial condition of the issuers and which
generally include protective debt covenants. At December 31, 1996, the carrying
value of the Company's investments in below investment grade fixed maturity
securities amounted to $350.5 million.
The Company has significant investments in commercial and agricultural
mortgage loans and real estate (including joint ventures and partnerships). The
locations of property collateralizing mortgage loans and real estate investment
carrying values (in millions) at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
GEOGRAPHIC REGION 1997 1996
- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Southeast................................... $ 616.3 24.2% $ 724.5 23.5%
Mountain.................................... 591.5 23.2 641.9 20.8
Northeast................................... 494.2 19.4 512.8 16.6
West........................................ 399.2 15.7 635.5 20.6
Midwest..................................... 253.7 10.0 333.6 10.8
Southwest................................... 192.3 7.5 239.2 7.7
-------- ----- -------- -----
$2,547.2 100.0% $3,087.5 100.0%
======== ===== ======== =====
</TABLE>
F-41
<PAGE> 237
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The states with the largest concentrations of mortgage loans and real
estate investments at December 31, 1997 are: Arizona, $345.0 million (13.5%);
New York, $290.7 million (11.4%); California, $270.6 million (10.6%), Florida,
$185.4 million (7.3%); Texas, $156.7 million (6.2%); Illinois, $131.9 million
(5.2%); Colorado, $119.5 million (4.7%) and, Georgia, $117.3 million (4.6%).
As of December 31, 1997 and 1996, the real estate and mortgage loan
portfolio was also diversified as follows (in millions):
<TABLE>
<CAPTION>
PROPERTY TYPE: 1997 1996
- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Office buildings............................ $1,092.4 42.9% $1,360.8 44.1%
Agricultural................................ 515.0 20.2 521.8 16.9
Hotel....................................... 344.8 13.5 380.3 12.3
Retail...................................... 332.1 13.0 436.8 14.2
Industrial.................................. 111.4 4.4 168.4 5.4
Other....................................... 84.6 3.4 122.1 4.0
Apartment Buildings......................... 66.9 2.6 97.3 3.1
-------- ----- -------- -----
$2,547.2 100.0% $3,087.5 100.0%
======== ===== ======== =====
</TABLE>
19. COMMITMENTS AND CONTINGENCIES:
In late 1995 and during 1996, a number of purported class actions were
commenced in various state and federal courts against the Company alleging that
the Company engaged in deceptive sales practices in connection with the sale of
whole and universal life insurance policies from the early 1980s to the mid
1990s. Although the claims asserted in each case are not identical, they seek
substantially the same relief under essentially the same theories of recovery
(i.e. breach of contract, fraud, negligent misrepresentation, negligent
supervision and training, breach of fiduciary duty, unjust enrichment and
violation of state insurance and/or deceptive business practice laws). The
Company has answered the complaints in each action (except for one being
voluntarily held in abeyance), has denied any wrongdoing, and has asserted
numerous affirmative defenses.
On June 7, 1996, the New York State Supreme Court certified the Goshen
case, being the first of the aforementioned class actions filed, as a nationwide
class consisting of all persons or entities who have, or at the time of the
policy's termination had, an ownership interest in a whole or universal life
insurance policy issued by the Company and sold on an alleged "vanishing
premium" basis during the period January 1, 1982 to December 31, 1995. On March
27, 1997, the Company filed a motion to dismiss or, alternatively, for summary
judgment on all counts of the complaint. All of the other putative class actions
have been consolidated and transferred by the Judicial Panel on Multidistrict
Litigation to the United States District Court for the District of
Massachusetts, or are being voluntarily held in abeyance pending the outcome of
the Goshen case. The Massachusetts District Court in the Multidistrict
Litigation has entered an order essentially holding all of the federal cases in
abeyance pending the action of the Goshen case.
On October 21, 1997, the New York State Supreme Court granted the Company's
motion for summary judgment and dismissed all claims filed in the Goshen case
against the Company on the merits. The order by the New York State Supreme Court
has been appealed to the Appellate Division by plaintiffs and all actions before
the United States District Court for the District of Massachusetts are still
pending.
In addition to the matters discussed above, the Company is involved in
various other legal actions and proceedings in connection with its businesses.
The claimants in certain of these actions and proceedings seek damages of
unspecified amounts. During 1996, the Company paid $12.6
F-42
<PAGE> 238
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
million to settle a number of these claims in the state of Alabama and,
accordingly, recorded such amount in Other Operating Costs and Expenses for the
year then ended.
With respect to all of the other aforementioned pending litigation, the
Company recorded a provision, which is reflected in Other Operating Costs and
Expenses, of $0.0 million, $27.6 million, and $10.0 million during the years
ended December 31, 1997, 1996 and 1995, respectively. At December 31, 1997 and
1996 the total reserve for such litigation, which is reflected in Accounts
Payable and Other Liabilities, amounted to approximately $29.5 million. While
the outcome of such matters cannot be predicted with certainty, in the opinion
of management, any additional liability beyond that recorded in the consolidated
financial statements at December 31, 1997, resulting from the resolution of
these matters will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
Insurance companies are subject to assessments, up to statutory limits, by
state guaranty funds for losses of policyholders of insolvent insurance
companies. In the opinion of management, such assessments will not have a
material adverse effect on the consolidated financial position and the results
of operations of the Company.
The Company maintains lines of credit with domestic banks totaling $100.0
million with scheduled renewal dates during 1998. The Company has not borrowed
against its credit lines since 1982.
At December 31, 1997, the Company had commitments to issue $31.0 million of
fixed rate agricultural loans with periodic interest rate reset dates. The
initial interest rates on such loans range from approximately 7.4% to 8.0%. In
addition, the Company had commitments to issue $36.4 million of fixed rate
commercial mortgage loans with interest rates ranging from 7.2% to 8.2%. The
Company also had commitments outstanding to purchase $41.0 million of private
fixed maturity securities as of December 31, 1997.
20. STATUTORY FINANCIAL INFORMATION AND REGULATORY RISK-BASED CAPITAL:
Financial statements of the Company prepared in accordance with SAP for
filing with the New York State Insurance Department (the "Department") differ
from financial statements of the Company prepared in accordance with GAAP. The
principal differences result from the following: (i) subsidiaries are generally
accounted for under the equity method of accounting under SAP, whereas
subsidiaries in which the Company has a majority voting interest are
consolidated under GAAP; (ii) acquisition costs are charged to operations as
incurred under SAP rather than being amortized over the expected life of the
contracts under GAAP; (iii) certain assets designated as "non-admitted assets"
are charged directly to statutory surplus under SAP but are reflected as assets
under GAAP; (iv) federal income taxes are provided only on taxable income for
which income taxes are currently payable under SAP, whereas under GAAP deferred
income taxes are recognized; (v) an interest maintenance reserve ("IMR") and
asset valuation reserve ("AVR") are computed based on specific statutory
requirements and recorded under SAP, whereas under GAAP, such reserves are not
recognized; (vi) surplus notes are reported in statutory surplus under SAP,
whereas under GAAP, such notes are recorded as a liability; (vii) premiums for
universal life and investment-type products are recognized as revenue when due
under SAP, whereas under GAAP, such amounts are recorded as deposits and not
included in the Company's revenues; (viii) future policy benefit reserves are
based on specific statutory requirements regarding mortality and interest,
without consideration of withdrawals, and are reported net of reinsurance under
SAP, whereas, under GAAP, such reserves are calculated using a net level premium
method based on actuarial assumptions equal to guaranteed mortality and dividend
fund interest rates and are reported gross of reinsurance; (ix) investments in
bonds and redeemable preferred stocks are
F-43
<PAGE> 239
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
generally carried at amortized cost under SAP, whereas under GAAP, such
investments are classified as "available for sale" and reported at estimated
fair value; (x) pension expense for the Company's qualified defined pension plan
is recognized when pension contributions are deductible for federal income tax
purposes, whereas under GAAP, such expense is recognized over the service period
for all eligible employees; (xi) postretirement benefits are recognized for
vested employees and current retirees under SAP, whereas under GAAP, such
expenses are recognized over the service period for all eligible employees,
(xii) methods used for calculating real estate and mortgage loan impairments,
valuation allowances, and real estate depreciation under GAAP are different from
those permitted under SAP, and (xiii) certain contracts with reinsurers are
accounted for as reinsurance under SAP, whereas under GAAP, such contracts are
accounted for as deposits ("financial reinsurance").
Set forth below are reconciliations of the Company's combined capital and
surplus and the net change in capital and surplus, determined in accordance with
SAP, with its equity and net income reported in accordance with GAAP as of and
for each year ended December 31, 1997, 1996, and 1995, respectively. The
reconciliations for 1995 also present the effect of restating previously
reported amounts as of and for the year ended December 31, 1995 for the adoption
of the Interpretation and the Standard (see Note 5).
F-44
<PAGE> 240
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C>
Capital and surplus....................................... $ 835.4 $ 703.5 $ 689.0
AVR....................................................... 348.6 317.7 285.3
-------- -------- --------
Capital and surplus, and AVR.............................. 1,184.0 1,021.2 974.3
Adjustments:
Future policy benefits and policyholders' account
balances............................................. (386.5) (356.8) (346.9)
Deferred policy acquisition costs....................... 1,007.1 1,095.2 1,047.1
Valuation of investments:
Real estate.......................................... (343.9) (372.7) (384.7)
Mortgage loans....................................... (77.1) (91.2) (106.2)
Fixed maturity securities............................ 154.4 39.9 180.1
Other................................................ 12.0 12.7 42.5
Deferred federal income taxes........................... (6.6) (42.6) (110.4)
Reinsurance............................................. (108.7) (141.0) (146.3)
Surplus notes........................................... (219.7) (93.8) (84.1)
Pension and postretirement benefits..................... 71.3 66.2 70.3
Other, net.............................................. 34.3 33.4 38.2
-------- -------- --------
GAAP Equity............................................... $1,320.6 $1,170.5 $1,173.9
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
($ IN MILLIONS)
<S> <C> <C> <C>
Net change in capital and surplus......................... $ 131.9 $ 14.5 $ 8.9
Change in AVR............................................. 30.9 32.4 41.2
-------- -------- --------
Net change in capital and surplus, and AVR................ 162.8 46.9 50.1
Adjustments:
Future policy benefits and policyholders' account
balances............................................. (29.7) (9.9) (2.2)
Reinsurance............................................. 32.3 5.3 1.4
Deferred policy acquisition costs....................... (40.2) (12.9) 21.6
Valuation of investments
Real estate.......................................... 28.8 12.0 (35.2)
Mortgage loans....................................... 14.1 15.0 9.7
Fixed maturity securities............................ 8.6 (13.6) 7.9
Other................................................ 6.3 (2.0) (9.4)
Deferred federal income taxes........................... 53.4 35.3 5.0
Issuance of surplus notes............................... (115.0) -- --
Amortization of discount on surplus notes............... (10.8) (9.7) (8.7)
Pension and postretirement benefits..................... 5.1 (4.1) 0.4
Other, net.............................................. 1.4 (5.8) (0.2)
-------- -------- --------
Net income................................................ $ 117.1 $ 56.5 $ 40.4
======== ======== ========
</TABLE>
The difference between statutory basis "net income" and the "net change in
capital and surplus, and AVR" reflected in the reconciliation above primarily
relates to the AVR, unrealized gains (losses) on equity securities, reinsurance
gains, and certain contingency provisions which for statutory reporting purposes
are charged directly to surplus and are not reflected in statutory basis
F-45
<PAGE> 241
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
net income. The combined statutory net income reported by the Company for the
years ended December 31, 1997, 1996, and 1995 was $88.5 million, $62.7 million,
and $58.0 million, respectively.
In March 1998, the National Association of Insurance Commissioners ("NAIC")
voted to adopt its Codification of Statutory Accounting Principles project
(referred to hereafter as "codification"). Codification is a modified form of
statutory accounting principles that will result in changes to the current NAIC
Accounting Practices and Procedures Manual applicable to insurance enterprises.
Although adoption of codification by all states is not a certainty, the NAIC has
recommended that all states enact codification as soon as practicable with an
effective date of January 1, 2001. It is currently anticipated that codification
will become an NAIC state accreditation requirement starting in 2002. In
addition, the American Institute of Certified Public Accountants and the NAIC
have agreed to continue to allow the use of certain permitted accounting
practices when codification becomes effective in 2001. Any accounting
differences from codification principles, however, must be disclosed and
quantified in the footnotes to the audited financial statements. Therefore,
codification will likely result in changes to what are currently considered
prescribed statutory insurance accounting practices.
Each insurance company's state of domicile imposes minimum risk-based
capital requirements. The formulas for determining the amount of risk-based
capital specify various weighting factors that are applied to financial balances
or various levels of activity based on the perceived degree of risk. Regulatory
compliance is determined by a ratio of the Company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level risk-based
capital, as defined by the NAIC. Companies below specific trigger points or
ratios are classified within certain levels, each of which requires specified
corrective action. Each of the Company's insurance subsidiaries exceed the
minimum risk based capital requirements.
As part of their routine regulatory oversight, the Department recently
completed an examination of MONY for each of the five years in the period ended
December 31, 1996, and the Arizona State Insurance Department (the "Arizona
Department") recently completed an examination of MONY's wholly owned life
insurance subsidiary, MONY Life Insurance Company of America ("MLOA"), for each
of the three years in the period ended December 31, 1996. The reports did not
deal with any matter which will result in a material effect on the Company's
financial condition or results of operations.
21. YEAR 2000
The Year 2000 issue is the result of the widespread use of computer
programs written using two digits (rather than four) to define the applicable
year. Such programming was a common industry practice designed to avoid the
significant costs associated with additional mainframe capacity necessary to
accommodate a four digit year field. As a result, any of the Company's computer
systems that have time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a major systems
failure or miscalculations. The Company has conducted a comprehensive review of
its computer systems to identify the systems that could be affected by the Year
2000 issue and has developed and implemented a plan to resolve the issue. The
Company currently believes that, with modifications to existing software and
converting to new software, the Year 2000 issue will not pose significant
operational problems for the Company's computer systems. However, if such
modifications and conversions are not completed on a timely basis, the Year 2000
issue may have a material impact on the operations of the Company. Furthermore,
even if the Company completes such modifications and conversions on a timely
basis, there can be no assurance that the failure by vendors or other third
parties to solve the Year 2000 problem will not have a material impact on the
operations of the Company. The Company estimates the total cost to resolve its
Year 2000 problem to be approximately $18.0 million, of which approximately $4.0
million has been incurred through December 31, 1997.
F-46
<PAGE> 242
REPORT OF INDEPENDENT ACCOUNTANTS ON
CONSOLIDATED FINANCIAL STATEMENT SUPPLEMENTAL SCHEDULE
To the Board of Trustees of
The Mutual Life Insurance Company of New York
Our audits of the consolidated financial statements referred to in our
report dated July 27, 1998 appearing on page F-2 of this Prospectus also
included an audit of the information included in the consolidated financial
statement supplemental schedule listed in the Index to Consolidated Financial
Statements on page F-1. In our opinion, the consolidated financial statement
supplemental schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PricewaterhouseCoopers LLP
New York, New York
July 27, 1998, except for Note 1
to the supplemental schedule, as to
which the date is August 14, 1998.
F-47
<PAGE> 243
THE MONY GROUP INC.
CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Receivable from Parent...................................... $10,001,000
Cash and cash equivalents................................... --
-----------
Total assets...................................... $10,001,000
===========
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value, authorized 400 million
shares; 1,000 shares issued and outstanding............... 10
Capital in excess of par.................................... 10,000,990
Retained earnings........................................... --
-----------
Total stockholders' equity........................ 10,001,000
-----------
Total stockholders' equity.................................. $10,001,000
===========
</TABLE>
This condensed balance sheet of The MONY Group Inc. should be read in
conjunction with the accompanying notes hereto, and the consolidated financial
statements of The Mutual Life Insurance Company of New York and related notes
thereto presented elsewhere herein.
F-48
<PAGE> 244
THE MONY GROUP INC.
NOTES TO THE CONDENSED BALANCE SHEET
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1. ORGANIZATION:
The MONY Group Inc. (the "Holding Company") was incorporated on June 24,
1997, under the laws of Delaware and is a wholly owned subsidiary of The Mutual
Life Insurance Company of New York ("MONY"), a New York mutual life insurance
company. The Company was organized for the purpose of becoming the parent
holding company of MONY pursuant to a Plan of Reorganization (as amended, the
"Plan") which was adopted by the Board of Trustees of MONY on August 14, 1998.
In accordance with the Plan MONY proposes to convert from a mutual life
insurance company to a stock life insurance company and become a wholly owned
subsidiary of the Holding Company.
The Company did not engage in any activity other than those incident to its
formation from June 24, 1997 to December 30, 1997. At December 30, 1997, the
Company issued warrants to the Investors, as described below, the proceeds from
which provided substantially all of its capitalization.
2. BASIS OF PRESENTATION:
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These financial statements have been prepared consistent
with, and should be read in conjunction with, MONY's Consolidated Financial
Statements and Notes thereto presented elsewhere in this registration statement.
3. INVESTMENT AGREEMENT:
On December 30, 1997, affiliates of Goldman, Sachs & Co. (the "Investors"),
which is one of the underwriters for the Holding Company's initial public
offering, entered into an investment agreement with MONY (the "Investment
Agreement"), pursuant to which: (i) the Investors purchased, for $115.0 million
(the "Consideration"), Surplus Notes issued by MONY (the "MONY Notes") with an
aggregate principal amount equal to the Consideration and (ii) the Investors
purchased, for $10.0 million, warrants (the "Warrants") to purchase from the
Holding Company (after giving effect to the initial public offering) in the
aggregate 7.0% of the fully diluted common stock of the Holding Company ("Common
Stock") as of the date the Plan becomes effective or, if later, the first date
following such effectiveness on which shares of Common Stock are first issued to
Eligible Policyholders (the "Demutualization Date").
The purchase price payable for each share of the Common Stock issuable upon
exercise of Warrants initially is (a) in the event the initial public offering
occurs prior to, on or within five trading days after the Demutualization Date,
the initial public offering price of the Common Stock, unless the average of the
daily closing prices of the Common Stock for the 40 trading days following the
first 20 trading days after the Demutualization Date is greater than 115% of the
initial public offering price, in which case such initial exercise price shall
be equal to the sum of the initial public offering price plus an amount equal to
one half of the excess of such 40 day average over 115% of the initial public
offering price or (b) in the event the initial public offering does not occur
prior to, on or within five trading days after the Demutualization Date, the
lesser of (i) the average of the daily closing prices of the Common Stock for
the first 20 trading days following Demutualization and (ii) 70% of the book
value per share of the Common Stock as of the Demutualization, determined in
accordance with generally accepted accounting principles ("GAAP"). The Warrants
contain standard anti-dilution provisions, providing for adjustment to the
exercise price in the event of, among other
F-49
<PAGE> 245
THE MONY GROUP INC.
NOTES TO THE CONDENSED BALANCE SHEET -- (CONTINUED)
things, a dividend or other distribution of capital stock, evidences of
indebtedness or other property, issuances of rights, options or warrants,
certain cash dividends and certain tender offers.
In addition, under the terms of the Investment Agreement, the Investors
agreed, upon MONY's request, if made at any time up to 90 days after the
Demutualization Date and subject to certain conditions precedent, to purchase an
aggregate of 1.0 million shares of convertible preferred stock of the Holding
Company (the "Convertible Preferred Stock") for a total purchase price of $100.0
million. The Convertible Preferred Stock would be convertible, at the option of
the holder at any time, into Common Stock at a conversion price equal to the
initial exercise price of the Warrants and would be subject to certain
anti-dilution adjustments. The Convertible Preferred Stock would be mandatorily
redeemable on the earlier of (i) the tenth anniversary of the issuance date of
such stock or (ii) December 30, 2013, at a price equal to the liquidation
preference of such stock plus accumulated and unpaid dividends at the redemption
date (the "Redemption Price"). The Redemption Price would be payable in cash or
Common Stock. If the Holding Company elects to issue Common Stock in
satisfaction of the Redemption Price, the number of shares of Common Stock to be
issued would be determined by dividing a number that is equal to 110 percent of
the Redemption Price by the value of the Common Stock, which for this purpose
would be equal to the average of the closing price of the Common Stock for the
20 trading days immediately preceding the redemption date. In addition, under
certain circumstances the Holding Company, at its option, could redeem the
Convertible Preferred Stock after the third anniversary of the issuance of such
stock.
4. DIVIDEND RESTRICTIONS:
Assuming the Plan becomes effective, the Holding Company's cash flows will
consist of dividends from subsidiaries, if declared and paid, principal and
interest payments with respect to Intercompany Surplus Notes, if issued in
connection with the issuance of the Holding Company Subordinated Notes, and
investment income on assets held by the Holding Company, offset by expenses
incurred for debt service on the Holding Company Subordinated Notes, if issued,
dividends on the Convertible Preferred Stock, if issued, salaries and other
expenses. Assuming the entire $115 million aggregate principal amount of Holding
Company Subordinated Notes that could be issued, is actually issued, annual
interest payments on the Holding Company Subordinated Notes will be $10.9
million per year. Annual dividend payments on the Convertible Preferred Stock,
if issued, will be determined based on a rate equal to the ten-year Treasury
Rate in effect on the date of issuance of the Convertible Preferred Stock. As a
holding company, the Holding Company's ability to meet cash requirements and pay
dividends depends upon the receipt of dividends and other payments from MONY.
The payment of dividends by MONY to the Holding Company is regulated under state
insurance law. Under the New York Insurance Law, MONY will be permitted to pay
shareholder dividends to Holding Company only if it files notice of its
intention to declare such a dividend and the amount thereof with the New York
Superintendent and the New York Superintendent does not disapprove the
distribution. Furthermore, payments of principal and interest on the
Intercompany Surplus Notes can only be made with the prior approval of the New
York Superintendent "whenever, in his judgement, the financial condition of the
insurer warrants." In addition, the Arizona insurance laws contain similar
restrictions on the ability of MONY Life Insurance Company of America, MONY's
wholly owned subsidiary.
F-50
<PAGE> 246
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
ASSETS
Investments:
Securities available-for-sale at fair value
Fixed maturities....................................... $ 6,282.4
Equity securities...................................... 378.1
Mortgage loans on real estate............................. 1,478.8
Policy loans.............................................. 1,252.6
Real estate to be disposed of............................. 339.1
Real estate held for investment........................... 452.5
Other invested assets..................................... 57.0
---------
10,240.5
---------
Cash and cash equivalents................................... 492.4
Accrued investment income................................... 192.3
Amounts due from reinsurers................................. 579.8
Premiums receivables........................................ 19.2
Deferred policy acquisition costs........................... 990.0
Other assets................................................ 239.4
Assets transferred in Group Pension Transaction............. 5,720.5
Separate account assets..................................... 6,127.5
---------
Total assets...................................... $24,601.6
=========
LIABILITIES AND EQUITY
Future policy benefits...................................... $ 7,543.0
Policyholder account balances............................... 2,249.1
Other policyholder liabilities.............................. 250.1
Amounts due to reinsurers................................... 96.4
Accounts payable and other liabilities...................... 634.7
Long term debt.............................................. 418.9
Current federal income taxes payable........................ 145.9
Deferred federal income taxes............................... 16.8
Liabilities transferred in Group Pension Transaction........ 5,682.3
Separate accounts liabilities............................... 6,115.5
---------
Total liabilities................................. 23,152.7
Commitments and contingencies
Retained earnings........................................... 1,320.9
Accumulated other comprehensive income...................... 128.0
---------
Total equity...................................... 1,448.9
---------
Total liabilities and equity...................... $24,601.6
=========
</TABLE>
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-51
<PAGE> 247
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------- ------
(IN MILLIONS)
<S> <C> <C>
REVENUES:
Premiums.................................................... $ 353.8 $411.9
Universal life and investment-type product policy fees...... 74.3 54.4
Net investment income....................................... 357.7 359.6
Net realized gains on investment............................ 157.6 42.6
Group Pension Profits....................................... 22.7 28.2
Other income................................................ 78.4 58.8
-------- ------
1,044.5 955.5
-------- ------
BENEFITS AND EXPENSES:
Benefits to policyholders................................... 379.7 423.9
Interest credited to policyholders' account balances........ 61.2 70.8
Amortization of deferred policy acquisition costs........... 70.8 68.4
Dividends to policyholders.................................. 108.4 117.8
Other operating costs and expenses.......................... 224.5 196.1
-------- ------
844.6 877.0
-------- ------
Income before income taxes and extraordinary item........... 199.9 78.5
Income tax expense.......................................... 71.8 32.0
-------- ------
Income before extraordinary item............................ 128.1 46.5
Extraordinary item -- demutualization expenses, net......... (9.7) (2.4)
-------- ------
Net income.................................................. 118.4 44.1
Other comprehensive income, net of tax...................... 9.9 (17.3)
-------- ------
Comprehensive income........................................ $ 128.3 $ 26.8
======== ======
</TABLE>
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-52
<PAGE> 248
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
RETAINED COMPREHENSIVE
TOTAL EARNINGS INCOME
-------- -------- -------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, December 31, 1997............................ $1,320.6 $1,202.5 $118.1
Comprehensive income
Net income.......................................... 118.4 118.4
Other comprehensive income
Unrealized losses on investments, net of
unrealized gains, reclassification adjustments,
and taxes...................................... 9.9 9.9
-------- -------- ------
Comprehensive income.................................. 128.3
-------- -------- ------
Balance, June 30, 1998................................ $1,448.9 $1,320.9 $128.0
======== ======== ======
</TABLE>
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-53
<PAGE> 249
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------- -------
(IN MILLIONS)
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES................... $ 91.6 $ 72.9
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales, maturities or repayment of:
Fixed maturities.......................................... 533.9 644.1
Equity securities......................................... 100.5 174.4
Mortgage loans on real estate............................. 152.0 133.6
Real estate............................................... 424.9 281.0
Other invested assets..................................... 45.5 14.1
Acquisitions of investments:
Fixed maturities.......................................... (826.5) (632.0)
Equity securities......................................... (104.6) (147.2)
Mortgage loans on real estate............................. (171.9) (94.4)
Real estate............................................... (19.1) (22.5)
Other invested assets..................................... (0.4) (0.6)
Policy loans, net......................................... (5.4) (1.6)
Other, net................................................ 57.0 33.8
Property plant & equipment, net........................... (4.0) (9.2)
------- -------
Net cash provided by investing activities................... 181.9 373.5
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt.......................................... (1.8) (113.6)
Receipts from annuity and universal life policies credited
to policyholder account balances.......................... 655.3 605.2
Return of policyholder account balances on annuity policies
and universal life policies............................... (748.0) (712.5)
------- -------
Net cash used in financing activities....................... (94.5) (220.9)
------- -------
Net increase (decrease) in cash and cash equivalents........ 179.0 225.5
Cash and cash equivalents, beginning of year................ 313.4 315.4
------- -------
Cash and cash equivalents, end of year...................... $ 492.4 $ 540.9
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Income taxes................................................ $ 46.4 $ 55.5
Interest.................................................... $ 11.3 $ 14.6
</TABLE>
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-54
<PAGE> 250
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
The Mutual Life Insurance Company of New York, ("MONY" or the "Company") is
a New York domiciled mutual life insurance company primarily engaged in the
business of providing a wide range of life insurance, annuity, and investment
products to higher income individuals, particularly family builders,
pre-retirees and small business owners. The Company distributes its products to
such individuals primarily through its career agency sales force. The Company
sells its products in all 50 of the United States, the District of Columbia, the
U.S. Virgin Islands, Guam and the Commonwealth of Puerto Rico.
2. DEMUTUALIZATION:
On August 14, 1998 (the "Board Adoption Date"), the Board of Trustees of
MONY adopted, pursuant to the New York Insurance Law, a Plan of Reorganization
(as amended, the "Plan") pursuant to which MONY proposes to convert from a
mutual life insurance company to a stock life insurance company (such proposed
conversion, together with other matters addressed in the Plan, the
"Demutualization"). In connection with the effectiveness of the Plan, the
following will occur: (i) MONY will convert from a mutual life insurance company
to a stock life insurance company, which will be named MONY Life Insurance
Company, and will become a wholly owned subsidiary of The MONY Group Inc. (the
"Holding Company"), (ii) all policyholders' membership interests will be
extinguished and in exchange therefor policyholders who own a Policy (as defined
in the Plan) that was in force on the Board Adoption Date and which remains in
force on the effective date of the Demutualization (the "Plan Effective Date")
("Eligible Policyholders") will receive shares of common stock of the Holding
Company ("Common Stock") or, in certain circumstances, cash or policy credits in
the form of an increase in accumulation account value, dividend deposits or
dividend additions, additional death benefits or an extension of an expiry date
with respect to such policies (hereinafter, "Policy Credits") and Eligible
Policyholders owning a life or accident and health insurance policy or annuity
contract issued by MONY under which there is a right to participate in the
divisible surplus of MONY to the extent that dividends are apportioned thereon
("Participating Policyholders"), will receive additional shares of common stock
or, in certain circumstances, cash or Policy Credits, (iii) a closed block (the
"Closed Block") of certain individual MONY participating policies in classes for
which MONY had a current payable dividend scale (such Policies constitute the
"Closed Block Business") will be created, and assets will be allocated to the
Closed Block to support the future payment of benefits and dividends on, and
certain expenses and taxes relating to, the Policies included therein and (iv)
shares of Common Stock may be registered under the Securities Act of 1933 and
offered to the public in an initial public offering if market conditions are
appropriate.
3. INVESTMENT AGREEMENT:
On December 30, 1997, affiliates of Goldman, Sachs & Co. (the "Investors"),
which is one of the underwriters for the Holding Company's initial public
offering, entered into an investment agreement with MONY (the "Investment
Agreement"), pursuant to which: (i) the Investors purchased, for $115.0 million
(the "Consideration"), Surplus Notes issued by MONY (the "MONY Notes") with an
aggregate principal amount equal to the Consideration and (ii) the Investors
purchased, for $10.0 million, warrants (the "Warrants") to purchase from the
Holding Company (after giving effect to the initial public offering) in the
aggregate 7.0% of the fully diluted Common Stock as of the date the Plan becomes
effective or, if later, the first date following such effectiveness on which
shares of Common Stock are first issued to Eligible Policyholders (the
"Demutualization Date").
F-55
<PAGE> 251
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS -- (CONTINUED)
The purchase price payable for each share of the Common Stock issuable upon
exercise of Warrants initially is (a) in the event the initial public offering
occurs prior to, on or within five trading days after the Demutualization Date,
the initial public offering price of the Common Stock, unless the average of the
daily closing prices of the Common Stock for the 40 trading days following the
first 20 trading days after the Demutualization Date is greater than 115% of the
initial public offering price, in which case such initial exercise price shall
be equal to the sum of the initial public offering price plus an amount equal to
one half of the excess of such 40 day average over 115% of the initial public
offering price or (b) in the event the initial public offering does not occur
prior to, on or within five trading days after the Demutualization Date, the
lesser of (i) the average of the daily closing prices of the Common Stock for
the first 20 trading days following Demutualization and (ii) 70% of the book
value per share of the Common Stock as of the Demutualization, determined in
accordance with generally accepted accounting principles ("GAAP"). The Warrants
contain standard anti-dilution provisions, providing for adjustment to the
exercise price in the event of, among other things, a dividend or other
distribution of capital stock, evidences of indebtedness or other property,
issuances of rights, options or warrants, certain cash dividends and certain
tender offers.
In addition, under the terms of the Investment Agreement, the Investors
agreed, upon MONY's request, if made at any time up to 90 days after the
Demutualization Date and subject to certain conditions precedent, to purchase an
aggregate of 1.0 million shares of convertible preferred stock of the Holding
Company (the "Convertible Preferred Stock") for a total purchase price of $100.0
million. The Convertible Preferred Stock would be convertible, at the option of
the holder at any time, into Common Stock at a conversion price equal to the
initial exercise price of the Warrants and would be subject to certain
anti-dilution adjustments. The Convertible Preferred Stock would be mandatorily
redeemable on the earlier of (i) the tenth anniversary of the issuance date of
such stock or (ii) December 30, 2013, at a price equal to the liquidation
preference of such stock plus accumulated and unpaid dividends at the redemption
date (the "Redemption Price"). The Redemption Price would be payable in cash or
Common Stock. If the Holding Company elects to issue Common Stock in
satisfaction of the Redemption Price, the number of shares of Common Stock to be
issued would be determined by dividing a number that is equal to 110 percent of
the Redemption Price by the value of the Common Stock, which for this purpose
would be equal to the average of the closing price of the Common Stock for the
20 trading days immediately preceding the redemption date. In addition, under
certain circumstances the Holding Company, at its option, could redeem the
Convertible Preferred Stock after the third anniversary of the issuance of such
stock.
4. THE CLOSED BLOCK:
The Closed Block is a mechanism described in Section 7312 of the New York
Insurance Law. Under the Plan, the Company will establish and operate the Closed
Block as a closed block of participating business for the benefit, for dividend
purposes only, of the Policies included therein. The Company will allocate to
the Closed Block an amount of assets expected to produce cash flows which,
together with anticipated revenues from the Closed Block Business, are
reasonably expected to be sufficient to support the Closed Block Business,
including but not limited to, provision for payment of claims and surrender
benefits, certain expenses and taxes, and for continuation of current payable
dividend scales, assuming the experience underlying such dividend scales
continues, and for appropriate adjustments in such scales if the experience
changes. In determining the amount of assets to be allocated to the Closed
Block, management has made certain estimates and assumptions regarding the
expected cash flows from the Closed Block assets and the Closed Block Business,
including estimates and assumptions regarding investment cash flows, mortality,
persistency, and expenses which are to be funded in the Closed Block. The assets
and liabilities allocated to the Closed Block will be recorded in the Company's
financial statements at their historical
F-56
<PAGE> 252
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS -- (CONTINUED)
carrying values. The carrying value of the assets allocated to the Closed Block
will be less than the carrying value of the Closed Block liabilities at the Plan
Effective Date. The excess of the Closed Block liabilities over the Closed Block
assets at the Plan Effective Date represents the total estimated future post-tax
contribution expected to emerge from the operation of the Closed Block, which
will be recognized in the Company's income over the period the policies and the
contracts in the Closed Block remain in force.
The estimated net cash flows assumed in determining the Closed Block
funding consist of premiums from Policies included in the Closed Block,
investment income from Closed Block assets, proceeds from maturities and
dispositions of Closed Block assets, less benefits paid on Closed Block
Policies, certain expenses (including taxes) funded in the Closed Block, and
dividends on Closed Block Policies based on current payable dividend scales. To
the extent that the actual cash flows, subsequent to the Plan Effective Date,
from the assets allocated to the Closed Block and the Closed Block Business are,
in the aggregate, more favorable than assumed in establishing the Closed Block,
total dividends paid to the Closed Block policyholders in future years will be
greater than the total dividends that would have been paid to such policyholders
if the current payable dividend scales had been continued. Conversely, to the
extent that the actual cash flows, subsequent to the Plan Effective Date, from
the assets allocated to the Closed Block and the Closed Block Business are, in
the aggregate, less favorable than assumed in establishing the Closed Block,
total dividends paid to the Closed Block policyholders in future years will be
less than the total dividends that would have been paid to such policyholders if
the current payable dividend scales had been continued. Accordingly, the
recognition of the aforementioned gain is not affected by the aggregate actual
experience of the Closed Block assets and the Closed Block Business subsequent
to the Plan Effective Date, except in the unlikely event that the Closed Block
assets and the actual experience of the Closed Block Business subsequent to the
Plan Effective Date are not sufficient to pay the guaranteed benefits on the
Closed Block Policies, in which case the Company will be required to fund any
such deficiency from its general account assets outside of the Closed Block.
Since the Closed Block will be funded to provide for payment of guaranteed
benefits on such Policies and, in addition, for continuation of current payable
dividends, it will not be necessary to use general funds to pay guaranteed
benefits unless the Closed Block Business experiences very substantial ongoing
adverse experience in investment, mortality, persistency or other experience
factors. The Company will regularly (at least quarterly) monitor the experience
from the Closed Block and make changes to the dividend scale, when appropriate,
to ensure that the profits are distributed to the policyholders in a fair and
equitable manner. In addition, periodically the New York Insurance Department
will require the filing of an independent auditor report on the operations of
the Closed Block.
As a result of the establishment of the Closed Block, certain line items in
the Company's financial statements subsequent to the establishment of the Closed
Block will reflect material reductions in reported amounts, as compared to years
prior to the establishment of the Closed Block, while having no effect on net
income. The actual results of the Closed Block assets and the Closed Block
Business will be reflected as a single line item in the Company's statements of
income entitled, "Contribution from the Closed Block", whereas, prior to the
establishment of the Closed Block the results from the underlying business was
reported in various line items in the Company's income statements, including;
premiums, investment income, net realized gains and losses on investments,
benefits, amortization of deferred acquisition costs, etc. The Contribution from
the Closed Block is expected to be equal to the periodic amortization of the
gain resulting from the difference between the carrying value of the assets
allocated to the Closed Block and the Closed Block liabilities at the Plan
Effective Date. In addition, all assets and liabilities allocated to the Closed
Block will be reported in the Company's balance sheet separately under the
captions "Closed Block assets" and "Closed Block liabilities", respectively.
F-57
<PAGE> 253
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS -- (CONTINUED)
The pre-tax Contribution from the Closed Block includes only those
revenues, benefit payments, dividends, premium taxes, state guaranty fund
assessments, and investment expenses considered in funding the Closed Block.
However, many expenses associated with operating the Closed Block and
administering the Policies included therein will be excluded from and,
accordingly, not funded in the Closed Block. These expenses will be reported in
the Company's statement of operations, outside of the Contribution from the
Closed Block, consistent with how they are funded. Such expenses will be
reported in the separate line items to which they apply based on the nature of
such expenses. Management expects that such expenses will be included and
reported as Other Operating Costs and Expenses in the Company's statement of
operations, unless any individual expense item is considered to be significant,
in which case such item or items will be reported separately in the Company's
statement of operations. Federal income taxes applicable to the Closed Block,
which will be funded in the Closed Block, will be reflected as a component of
federal income tax expense in the Company's statement of operations. Since many
expenses related to the Closed Block are funded outside the Closed Block,
operating costs and expenses outside the Closed Block may be disproportionate to
the level of business outside the Closed Block.
F-58
<PAGE> 254
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS -- (CONTINUED)
5. SEGMENT INFORMATION
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX MONTHS
ENDED JUNE 30,
----------------------------
1998 1997
----------- -----------
($ IN MILLIONS)
<S> <C> <C>
Premiums:
Protection Products....................................... $ 343.8 $ 403.4
Accumulation Products..................................... 1.8 2.7
Other Products............................................ 8.2 5.8
--------- ---------
$ 353.8 $ 411.9
========= =========
Universal life and investment-type product policy fees:
Protection Products....................................... $ 41.8 $ 30.3
Accumulation Products..................................... 31.6 23.2
Other Products............................................ 0.9 0.9
--------- ---------
$ 74.3 $ 54.4
========= =========
Net investment income and net realized gains (losses) on
investments:
Protection Products....................................... $ 397.0 $ 304.7
Accumulation Products..................................... 77.8 65.3
Other Products............................................ 38.9 30.9
Unallocated amounts....................................... 1.6 1.3
--------- ---------
$ 515.3 $ 402.2
========= =========
Other income:
Protection Products(1).................................... $ 31.2 $ 37.4
Accumulation Products..................................... 34.6 23.4
Other Products............................................ 32.4 23.5
Unallocated amounts....................................... 2.9 2.7
--------- ---------
$ 101.1 $ 87.0
========= =========
Amortization of deferred policy acquisition costs:
Protection Products....................................... $ 55.4 $ 55.8
Accumulation Products..................................... 15.4 12.6
Other Products............................................ 0.0 0.0
--------- ---------
$ 70.8 $ 68.4
========= =========
Benefits to policyholders:(2)
Protection Products....................................... $ 376.8 $ 426.3
Accumulation Products..................................... 36.8 46.6
Other Products............................................ 22.6 17.7
Unallocated amounts....................................... 4.7 4.1
--------- ---------
$ 440.9 $ 494.7
========= =========
</TABLE>
F-59
<PAGE> 255
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AS OF AND FOR THE SIX MONTHS
ENDED JUNE 30,
----------------------------
1998 1997
----------- -----------
($ IN MILLIONS)
<S> <C> <C>
Other operating costs and expenses:
Protection Products....................................... $ 138.1 $ 129.4
Accumulation Products..................................... 42.7 30.0
Other Products............................................ 43.7 36.7
Unallocated amounts....................................... 0.0 0.0
--------- ---------
$ 224.5 $ 196.1
========= =========
Income before income taxes:
Protection Products....................................... $ 136.7 $ 48.3
Accumulation Products..................................... 50.0 24.4
Other Products............................................ 13.4 5.8
Unallocated amounts....................................... (0.2) 0.0
--------- ---------
$ 199.9 $ 78.5
========= =========
Assets:
Protection Products(3).................................... $16,218.3 $15,291.9
Accumulation Products..................................... 6,285.8 5,266.4
Other Products............................................ 1,209.8 1,327.1
Unallocated amounts....................................... 887.7 812.3
--------- ---------
$24,601.6 $22,697.7
========= =========
Deferred policy acquisition costs:
Protection Products....................................... $ 853.7 $ 986.6
Accumulation Products..................................... 136.3 141.7
Other Products............................................ -- 0.0
--------- ---------
$ 990.0 $ 1,128.3
========= =========
Policyholders' liabilities:
Protection Products(4).................................... $10,102.9 $10,317.7
Accumulation Products..................................... 1,332.2 1,493.0
Other Products............................................ 480.0 321.9
Unallocated amounts....................................... 18.0 22.4
--------- ---------
$11,933.1 $12,155.0
========= =========
Separate account liabilities:(5)
Protection Products(6).................................... $ 3,967.8 $ 3,455.9
Accumulation Products..................................... 4,598.1 3,469.8
Other Products............................................ 565.1 630.3
Unallocated amounts....................................... 745.7 703.3
--------- ---------
$ 9,876.7 $ 8,259.3
========= =========
</TABLE>
- ---------------
(1) Includes Group Pension Profits of $22.7 million and $28.2 million for the
six month periods ended June 30, 1998 and 1997, respectively.
(2) Includes interest credited to policyholders' account balances.
F-60
<PAGE> 256
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS -- (CONTINUED)
(3) Includes assets transferred in the Group Pension Transaction of $5,720.5
million and $5,538.5 million as of June 30, 1998 and 1997, respectively.
(4) Includes policyholder liabilities transferred in the Group Pension
Transaction of $1,890.9 million and $2,086.3 million as of June 30, 1998 and
1997, respectively.
(5) Each segment includes separate account assets in an amount equal to the
corresponding liability reported.
(6) Includes separate account liabilities transferred in the Group Pension
Transaction of $3,761.2 million and $3,397.2 million as of June 30, 1998 and
1997, respectively.
Following is a summary of revenues by product for the six month periods
ended June 30, 1998 and 1997, respectively ($ in millions).
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1998 1997
------ ------
<S> <C> <C>
PREMIUMS:
Individual Life............................................. $343.1 $366.0
Disability income insurance................................. 0.7 37.3
Group insurance............................................. 5.7 5.0
Other....................................................... 4.3 3.6
------ ------
Total............................................. $353.8 $411.9
====== ======
UNIVERSAL LIFE AND INVESTMENT-TYPE PRODUCT POLICY FEES:
Universal life.............................................. $ 20.1 18.8
Variable universal life..................................... 16.6 7.5
Group universal life........................................ 5.1 4.0
Individual variable annuities............................... 31.2 22.8
Individual fixed annuities.................................. 1.3 1.3
------ ------
Total............................................. $ 74.3 $ 54.4
====== ======
</TABLE>
6. THE GROUP PENSION TRANSACTION:
The following tables set forth certain summarized financial information
relating to the Group Pension Transaction as of and for the periods indicated,
including information regarding: (i) the general account assets transferred to
support the Existing Deposits in the Group Pension Transaction (hereafter
referred to as the "AEGON Portfolio"), (ii) the transferred separate account
assets
F-61
<PAGE> 257
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS -- (CONTINUED)
and liabilities, and (iii) the components of revenue and expense comprising the
Group Pension Profits:
<TABLE>
<CAPTION>
AS OF
JUNE 30,
1998
---------------
($ IN MILLIONS)
<S> <C>
ASSETS:
General Account Fixed Maturities:
Available for sale, at estimated fair value (amortized
cost $1.493.7)........................................ $1,548.1
Mortgage loans on real estate.......................... 288.7
Real estate held for investment........................ 53.2
Cash and cash equivalents.............................. 41.9
Other assets........................................... 27.4
--------
Total general account assets...................... 1,959.3
Separate account assets................................... 3,761.2
--------
Total assets...................................... $5,720.5
========
LIABILITIES:
General Account(1)
Policyholders' account balances........................ $1,890.9
Other liabilities...................................... 30.2
--------
Total general account liabilities................. 1,921.1
Separate account liabilities(2)........................... 3,761.2
--------
Total liabilities................................. $5,682.3
========
</TABLE>
- ---------------
(1) Includes general account liabilities transferred in connection with the
Group Pension Transaction pursuant to indemnity reinsurance of $133.2
million as of June 30, 1998.
(2) Includes separate account liabilities transferred in connection with the
Group Pension Transaction pursuant to indemnity reinsurance of $34.0 million
as of June 30, 1998.
<TABLE>
<CAPTION>
FOR THE SIX MONTH
PERIOD
ENDED JUNE 30,
------------------
1998 1997
------- -------
($ IN MILLIONS)
<S> <C> <C>
REVENUES:
Product policy fees......................................... $11.1 $11.0
Net investment income....................................... 80.6 85.9
Net realized gains (losses) on investments.................. (2.4) 2.2
----- -----
Total revenues.................................... 89.3 99.1
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances........ 55.7 59.8
Other operating costs and expenses.......................... 10.9 11.1
----- -----
Total benefits and expenses....................... 66.6 70.9
Group Pension Profits....................................... $22.7 $28.2
===== =====
</TABLE>
F-62
<PAGE> 258
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES:
In late 1995 and during 1996, a number of purported class actions were
commenced in various state and federal courts against the Company alleging that
the Company engaged in deceptive sales practices in connection with the sale of
whole and universal life insurance policies during the period 1980 through 1995.
Although the claims asserted in each case are not identical, they seek
substantially the same relief under essentially the same theories of recovery
(i.e. breach of contract, fraud, negligent misrepresentation, negligent
supervision and training, breach of fiduciary duty, unjust enrichment and
violation of state insurance and/or deceptive business practice laws). The
Company has answered the complaints in each action (except for one being
voluntarily held in abeyance), has denied any wrongdoing, and has asserted
numerous affirmative defenses.
On June 7, 1996, the New York State Supreme Court certified the Goshen
case, being the first of the aforementioned class actions filed, as a nationwide
class consisting of all persons or entities who have, or at the time of the
policy's termination had, an ownership interest in a whole or universal life
insurance policy issued by the Company and sold on an alleged "vanishing
premium" basis during the period January 1, 1982 to December 31, 1995. On March
27, 1997, the Company filed a motion to dismiss or, alternatively, for summary
judgment on all counts of the complaint. All of the other putative class actions
have been consolidated and transferred by the Judicial Panel on Multidistrict
Litigation to the United States District Court for the District of
Massachusetts, or are being voluntarily held in abeyance pending the outcome of
the Goshen case. The Massachusetts District Court in the Multidistrict
Litigation has entered an order essentially holding all of the federal cases in
abeyance pending the action of the Goshen case.
On October 21, 1997, the New York State Supreme Court granted the Company's
motion for summary judgment and dismissed all claims filed in the Goshen case
against the Company. The order by the New York State Supreme Court has been
appealed to the Appellate Division by plaintiffs and all actions before the
United States District Court for the District of Massachusetts are still
pending.
In addition to the matters discussed above, the Company is involved in
various other legal actions and proceedings in connection with its businesses.
The claimants in certain of these actions and proceedings seek damages of
unspecified amounts. In connection with such matters, the Company recorded a
provision of $10.0 million during the six month period ended June 30, 1998.
At June 30, 1998 the total reserve for such litigation, which is reflected
in Accounts Payable and Other Liabilities, amounted to $39.5 million. While the
outcome of such matters cannot be predicted with certainty, in the opinion of
management, any additional liability beyond that recorded at June 30, 1998,
resulting from the resolution of these matters will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.
F-63
<PAGE> 259
THE MONY GROUP INC.
UNAUDITED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... 10,142,100
-----------
Total assets...................................... $10,142,100
-----------
LIABILITIES
Taxes payable............................................... $ 49,385
-----------
Total liabilities................................. 49,385
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value, authorized 400 million
shares; 1,000 shares issued and outstanding............... 10
Capital in excess of par.................................... 10,000,990
Retained earnings........................................... 91,715
-----------
Total stockholders' equity........................ 10,092,715
-----------
Total liabilities and stockholders' equity.................. $10,142,100
===========
</TABLE>
These unaudited condensed financial statements of The MONY Group Inc. should be
read in conjunction with the accompanying notes hereto, and the consolidated
financial statements and the unaudited interim condensed consolidated financial
statements of The Mutual Life Insurance Company of New York and related notes
thereto presented elsewhere herein.
F-64
<PAGE> 260
THE MONY GROUP INC.
UNAUDITED CONDENSED STATEMENT OF INCOME
AND COMPREHENSIVE INCOME
FOR THE PERIOD FROM JANUARY 1, 1998 (COMMENCEMENT OF OPERATIONS)
THROUGH JUNE 30, 1998
<TABLE>
<S> <C>
REVENUES:
Investment Income........................................... $141,100
--------
141,100
EXPENSES:
Income tax expense.......................................... 49,385
--------
49,385
Net income and other comprehensive income................... 91,715
========
</TABLE>
These unaudited condensed financial statements of The MONY Group Inc. should be
read in conjunction with the accompanying notes hereto, and the consolidated
financial statements and the unaudited interim condensed consolidated financial
statements of The Mutual Life Insurance Company of New York and related notes
thereto presented elsewhere herein.
F-65
<PAGE> 261
THE MONY GROUP INC.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1998 (COMMENCEMENT OF OPERATIONS)
THROUGH JUNE 30, 1998
<TABLE>
<S> <C>
Net cash provided by operating activities.............. $ 141,100
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution and issuance of warrants............... 10,001,000
-----------
Net cash provided by financing activities.............. 10,001,000
-----------
Increase in cash and cash equivalents....................... 10,142,100
Cash and cash equivalents, beginning of year................ --
-----------
Cash and cash equivalents, end of year...................... $10,142,100
===========
</TABLE>
These unaudited condensed financial statements of The MONY Group Inc. should be
read in conjunction with the accompanying notes hereto, and the consolidated
financial statements and the unaudited interim condensed consolidated financial
statements of The Mutual Life Insurance Company of New York and related notes
thereto presented elsewhere herein.
F-66
<PAGE> 262
THE MONY GROUP INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1. ORGANIZATION:
The MONY Group Inc. (the "Holding Company") was incorporated on June 24,
1997, under the laws of Delaware and is a wholly owned subsidiary of The Mutual
Life Insurance Company of New York ("MONY"), a New York mutual life insurance
company. The Company was organized for the purpose of becoming the parent
holding company of MONY pursuant to a Plan of Reorganization (as amended, the
"Plan") which was adopted by the Board of Trustees of MONY on August 14, 1998.
In accordance with the Plan MONY proposes to convert from a mutual life
insurance company to a stock life insurance company and become a wholly owned
subsidiary of the Holding Company.
The Company did not engage in any activity other than those incident to its
formation from June 24, 1997 to December 30, 1997. At December 30, 1997, the
Company issued warrants to the Investors, as described below, the proceeds from
which provided substantially all of its capitalization.
2. BASIS OF PRESENTATION:
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These financial statements have been prepared consistent
with, and should be read in conjunction with, MONY's Consolidated Financial
Statements and Notes thereto presented elsewhere in this registration statement.
3. INVESTMENT AGREEMENT:
On December 30, 1997, affiliates of Goldman, Sachs & Co. (the "Investors"),
which is one of the underwriters for the Holding Company's initial public
offering, entered into an investment agreement with MONY (the "Investment
Agreement"), pursuant to which: (i) the Investors purchased, for $115.0 million
(the "Consideration"), Surplus Notes issued by MONY (the "MONY Notes") with an
aggregate principal amount equal to the Consideration and (ii) the Investors
purchased, for $10.0 million, warrants (the "Warrants") to purchase from the
Holding Company (after giving effect to the initial public offering) in the
aggregate 7.0% of the fully diluted common stock of the Holding Company ("Common
Stock") as of the date the Plan becomes effective or, if later, the first date
following such effectiveness on which shares of Common Stock are first issued to
Eligible Policyholders (the "Demutualization Date").
The purchase price payable for each share of the Common Stock issuable upon
exercise of Warrants initially is (a) in the event the initial public offering
occurs prior to, on or within five trading days after the Demutualization Date,
the initial public offering price of the Common Stock, unless the average of the
daily closing prices of the Common Stock for the 40 trading days following the
first 20 trading days after the Demutualization Date is greater than 115% of the
initial public offering price, in which case such initial exercise price shall
be equal to the sum of the initial public offering price plus an amount equal to
one half of the excess of such 40 day average over 115% of the initial public
offering price or (b) in the event the initial public offering does not occur
prior to, on or within five trading days after the Demutualization Date, the
lesser of (i) the average of the daily closing prices of the Common Stock for
the first 20 trading days following Demutualization and (ii) 70% of the book
value per share of the Common Stock as of the Demutualization, determined in
accordance with generally accepted accounting principles ("GAAP"). The Warrants
contain standard anti-dilution provisions, providing for adjustment to the
exercise price in the event of, among other
F-67
<PAGE> 263
THE MONY GROUP INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
things, a dividend or other distribution of capital stock, evidences of
indebtedness or other property, issuances of rights, options or warrants,
certain cash dividends and certain tender offers.
In addition, under the terms of the Investment Agreement, the Investors
agreed, upon MONY's request, if made at any time up to 90 days after the
Demutualization Date and subject to certain conditions precedent, to purchase an
aggregate of 1.0 million shares of convertible preferred stock of the Holding
Company (the "Convertible Preferred Stock") for a total purchase price of $100.0
million. The Convertible Preferred Stock would be convertible, at the option of
the holder at any time, into Common Stock at a conversion price equal to the
initial exercise price of the Warrants and would be subject to certain
anti-dilution adjustments. The Convertible Preferred Stock would be mandatorily
redeemable on the earlier of (i) the tenth anniversary of the issuance date of
such stock or (ii) December 30, 2013, at a price equal to the liquidation
preference of such stock plus accumulated and unpaid dividends at the redemption
date (the "Redemption Price"). The Redemption Price would be payable in cash or
Common Stock. If the Holding Company elects to issue Common Stock in
satisfaction of the Redemption Price, the number of shares of Common Stock to be
issued would be determined by dividing a number that is equal to 110 percent of
the Redemption Price by the value of the Common Stock, which for this purpose
would be equal to the average of the closing price of the Common Stock for the
20 trading days immediately preceding the redemption date. In addition, under
certain circumstances the Holding Company, at its option, could redeem the
Convertible Preferred Stock after the third anniversary of the issuance of such
stock.
4. DIVIDEND RESTRICTIONS:
Assuming the Plan becomes effective, the Holding Company's cash flows will
consist of dividends from subsidiaries, if declared and paid, principal and
interest payments with respect to Intercompany Surplus Notes, if issued in
connection with the issuance of the Holding Company Subordinated Notes, and
investment income on assets held by the Holding Company, offset by expenses
incurred for debt service on the Holding Company Subordinated Notes, if issued,
dividends on the convertible Preferred Stock, if issued, salaries and other
expenses. Assuming the entire $115 million aggregate principal amount of Holding
Company Subordinated Notes that could be issued, is actually issued, annual
interest payments on the Holding Company Subordinated Notes will be $10.9
million per year. Annual dividend payments on the Convertible Preferred Stock,
if issued, will be determined based on a rate equal to the ten-year Treasury
Rate in effect on the date of issuance of the Convertible Preferred Stock. As a
holding company, the Holding Company's ability to meet cash requirements and pay
dividends depends upon the receipt of dividends and other payments from MONY.
The payment of dividends by MONY to the Holding Company is regulated under state
insurance law. Under the New York Insurance Law, MONY will be permitted to pay
shareholder dividends to Holding Company only if it files notice of its
intention to declare such a dividend and the amount thereof with the New York
Superintendent and the New York Superintendent does not disapprove the
distribution. Furthermore, payments of principal and interest on the
Intercompany Surplus Notes can only be made with the prior approval of the New
York Superintendent "whenever, in his judgement, the financial condition of the
insurer warrants." In addition, the Arizona insurance laws contain similar
restrictions on the ability of MONY Life Insurance Company of America, MONY's
wholly owned subsidiary.
F-68
<PAGE> 264
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Holding Company has agreed to sell to each of the U.S. Underwriters named below,
and each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated and
Salomon Smith Barney Inc. are acting as representatives, has severally agreed to
purchase from the Holding Company, the respective number of shares of Common
Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
UNDERWRITER COMMON STOCK
- ----------- -------------------
<S> <C>
Goldman, Sachs & Co. .......................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Morgan Stanley & Co. Incorporated...........................
Salomon Smith Barney Inc. ..................................
--------
Total.............................................
========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters and the International Underwriters (as hereinafter defined) are
committed to take and pay for all the shares offered hereby and in the
International Offering, if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Holding Company has entered into an underwriting agreement (the
"International Underwriting Agreement") with the underwriters of the
International Offering (the "International Underwriters") providing for the
concurrent offer and sale of shares of Common Stock in an
international offering outside the United States. The International Offering is
a firm commitment underwriting. The offering price and aggregate underwriting
discounts and commissions per share for the two offerings are identical. The
closing of the offering made hereby is a condition to the closing of the
International Offering, and vice versa, and each of the offerings is conditioned
upon the consummation of the Demutualization. The representatives of the
International Underwriters are Goldman Sachs International, Donaldson, Lufkin &
Jenrette International, Morgan Stanley & Co. International Limited and Salomon
Smith Barney International Limited.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. Persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the
U-1
<PAGE> 265
purchase is located in the United States. Each of the International Underwriters
has agreed pursuant to the Agreement Between that, as a part of the distribution
of the shares offered as a part of the International Offering, and subject to
certain exceptions, it will (i) not, directly or indirectly, offer, sell or
deliver shares of Common Stock (a) in the United States or to any U.S. persons
or (b) to any person who it believes intends to reoffer, resell or deliver the
shares in the United States or to any U.S. persons and (ii) cause any dealer to
whom it may sell such shares at any concession to agree to observe a similar
restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Holding Company has granted the U.S. Underwriters an option exercisable
for 30 days after the date of this Prospectus to purchase up to an aggregate of
additional shares of Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the shares of Common Stock offered. The Holding
Company has granted the International Underwriters a similar option to purchase
up to an aggregate of additional shares of Common Stock.
The Company, certain executive officers and directors of the Company and
the Investors have agreed that, during the period beginning on the date of the
Underwriting Agreement and continuing to and including the date
days after the date of this Prospectus, they will not offer, sell, contract to
sell, or otherwise dispose of any shares of Common Stock or any securities of
the Holding Company that are substantially similar to the Common Stock,
including but not limited to any securities that are convertible into or
exercisable or exchangeable for, or represent the right to receive, Common Stock
or any such substantially similar securities, without the prior written consent
of the representatives, except for the shares of Common Stock offered in
connection with the concurrent U.S. Offering and International Offering.
The representatives of the Underwriters have informed the Holding Company
that they do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Common Stock offered by them.
Prior to the Offerings, there has been no public market for the shares of
Common Stock. The initial public offering price will be negotiated among the
Holding Company and the representatives of the U.S. Underwriters and the
International Underwriters. Among the factors to be considered in determining
the initial public offering price of the Common Stock, in addition to prevailing
market conditions, will be the Company's historical performance, estimates of
the business potential and earnings prospects of the Company, an assessment of
the Company's management and the consideration of the above factors in relation
to market valuation of companies in related businesses.
In connection with the Offerings, the Underwriters may purchase and sell
the Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offerings. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Common Stock, and syndicate
short positions involve the sale by the Underwriters of a greater number of
shares of Common Stock than they are required to purchase from the Holding
Company in the Offerings. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-dealers
in respect of the Common Stock sold in the offerings for their account may be
reclaimed by the syndicate if such Common Stock is repurchased by the syndicate
in stabilizing or covering transactions. These activities may stabilize,
maintain or otherwise affect the market price of the Common Stock, which
U-2
<PAGE> 266
may be higher than the price that might otherwise prevail in the open market and
these activities, if commenced, may be discontinued at any time. These
transactions may be effected on the NYSE, in the over-the-counter market or
otherwise.
Application will be made to list the Common Stock on the NYSE under the
symbol "MNY". In order to meet one of the requirements for listing the Common
Stock on the NYSE, the Underwriters will be required to undertake to sell lots
of 100 or more shares to a minimum of 2,000 beneficial holders.
Certain of the Underwriters have provided from time to time, and expect to
provide in the future, investment banking services to MONY and its subsidiaries
and/or the Holding Company and their respective affiliates, including without
limitation serving as the initial purchaser of the 11 1/4% Notes, for which such
Underwriters have received and will receive customary fees and commissions. In
addition, certain of the Underwriters distribute a number of the Company's
products for which they receive customary compensation. The Investors are
affiliates of Goldman Sachs, one of the representatives of the Underwriters.
Claude M. Ballard, Jr., a limited partner of The Goldman Sachs Group, L.P., is a
director of the Holding Company and is currently the Board member designated by
the Investors pursuant to the Board representation rights granted to the
Investors in the Investment Agreement. See "Certain Provisions of the
Investment -- Board Representation". The Investors and Goldman Sachs are
affiliates of The Goldman Sachs Group, L.P. Donaldson, Lufkin & Jenrette
Securities Corporation has acted as MONY's financial advisor in connection with
the Demutualization.
The Holding Company and MONY have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
International Offering to persons located in the United States.
At the request of the Holding Company, up to a maximum of
shares of Common Stock are being reserved for sale at the initial
public offering price as set forth on the cover page of this Prospectus to the
employees (other than officers and directors) and agents of the Company. The
shares of Common Stock sold through the reserved share program will be sold
subject to the same terms and conditions as all other shares of Common Stock
sold in the Offerings. The number of shares of Common Stock available for sale
to the general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares not so purchased will be offered by the
U.S. Underwriters on the same basis as the other shares offered hereby.
In connection with the Offerings, is acting as a "qualified
independent underwriter" and the initial public offering price will be no higher
than the price recommended by . In its role as qualified
independent underwriter, has performed due diligence
investigations and reviewed and participated in the preparation of the
Prospectus and the Registration Statement of which this Prospectus forms a part.
U-3
<PAGE> 267
ANNEX
A
ACTUARIAL
OPINIONS
A-1
<PAGE> 268
[PRICEWATERHOUSECOOPERS LETTERHEAD]
August 10, 1998
The Board of Trustees
The Mutual Life Insurance Company of New York
1740 Broadway
New York, NY 10019
Re: Plan of Reorganization of the Mutual Life Insurance Company of New York
(MONY),
dated August 14, 1998
STATEMENT OF ACTUARIAL OPINION
QUALIFICATIONS
I, Jesse M. Schwartz, a Principal with the firm of PricewaterhouseCoopers
LLP (PwC) and a member of the American Academy of Actuaries, am qualified under
the Academy's Qualification Standards to render the opinion set forth herein.
MONY's Plan of Reorganization is carried out under Section 7312 of the New York
Insurance Law. This opinion is not a legal opinion regarding the Plan, and does
not address the overall fairness of the Plan. Rather, it reflects the
application of actuarial concepts and standards of practice to the requirements
set forth in Section 7312.
RELIANCE
I and other PwC staff acting under my direction received from MONY
extensive information concerning MONY's past and present financial experience
and the
characteristics of its policies. We relied on the accuracy and completeness of
the data and assumptions supplied by MONY and did not independently verify that
information. Where possible, the information was reviewed for general
reasonableness and in certain circumstances the data was reconfirmed with MONY.
Information concerning expected future cash flows from assets held by MONY
as of December 31, 1997, and eligible for allocation to the Closed Block was
provided under the direction of MONY's Executive Vice President and Chief
Investment Officer Kenneth M. Levine. I relied on Mr. Levine's representation
that these cash flows represent MONY's current estimate.
Information as to MONY's experience underlying it's 1998 dividend scale for
other than asset cash flows was provided under the general direction of MONY's
Senior Vice President and Chief Actuary Phillip A. Eisenberg, F.S.A., M.A.A.A. I
relied on the accuracy of the data provided by Mr. Eisenberg.
My opinion depends upon the substantial accuracy of the information
described above that was provided by MONY (the "MONY Data").
A-2
<PAGE> 269
Actuarial Opinion Page 2 08/10/98
- --------------------------------------------------------------------------------
PROCESS
PwC developed a financial model based upon MONY Data. Mathematical formulas
were applied to component parts of the model to determine the amount of assets
initially needed to fund the Closed Block. The methodology applied by PwC was
primarily a mechanical process and was based on assumptions and data provided by
management.
The PwC staff, under my direction, performed the calculations on which my
opinion is based.
OPINION
<TABLE>
<C> <S>
In my opinion:
1. The objective of the closed block as being for the exclusive
benefit of the policies included therein for policyholder
dividend purposes only as set forth in Article VIII of the
MONY Plan of Reorganization (the "Plan") is consistent with
Section 7312 of New York insurance law.
2. The operations of the Closed Block as set forth in Article
VIII of the Plan and described in the Closed Block
Memorandum, including the determination of the required
initial funding and the manner in which cash flows are
charged and credited to the Closed Block, are consistent
with the objectives of the closed block.
3. MONY's assets (Closed Block funding) set aside as of January
1, 1998 (including subsequent adjustments), to establish the
Closed Block, as set forth in Article VIII of the Plan
(including the Closed Block Memorandum, Exhibit F thereto),
are adequate because they are expected to produce cash flows
which, together with anticipated revenues from the Closed
Block Business, are reasonably sufficient to enable the
Closed Block to provide for the guaranteed benefits, certain
expenses and taxes associated with Closed Block policies,
and to provide for the continuation of the dividend scale in
effect for 1998 if the experience underlying such dividend
scale continues, and for appropriate adjustments in such
scale if the experience changes.
4. The Plan is consistent with the objective of the closed
block as it provides a vehicle for management to make
appropriate adjustments to future dividend scales, where
necessary, if the underlying experience changes from the
experience underlying such dividend scales.
</TABLE>
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<PAGE> 270
Actuarial Opinion Page 3 08/10/98
- --------------------------------------------------------------------------------
DISCUSSION
- As to (1) above, my opinion as to consistency is based upon the
recognition that credits and charges to the closed block are only
derived from policies included in the closed block and interest
credited to the closed block is only derived from closed block
assets.
- As to (2) above, my opinion is based on my findings that those
matters are consistent with the objective of the Closed Block. I have
specifically taken into account that, other than with respect to
certain taxes and investment expenses, the funding of the Closed
Block does not provide for the future costs of servicing or
commissions payable on the policies included in it, and the Closed
Block Memorandum provides specifically that such expenses and
commissions shall not be charged to the Closed Block.
- As to (3) above, the Closed Block was funded as of January 1, 1998
(including a final adjustment for 1998 new business), based on a
calculation as of that date. The opinion in (3) above rests on that
calculation, which extends over the future life of all policies
assigned to the Closed Block.
- As to (4) above, the criteria set forth in Article VIII for modifying
the dividend scales if the experience changes are such that, if
followed, the Closed Block policyholders will be treated in a manner
consistent with the contribution principle for dividend
determination. The operation of the Closed Block as set forth Article
VIII is consistent with actuarial practice as described in Actuarial
Standard of Practice #15.
Very truly yours,
/s/ JESSE M. SCHWARTZ
Jesse M. Schwartz, F.S.A., M.A.A.A.
Principal
PricewaterhouseCoopers LLP
JMS/cg
A-4
<PAGE> 271
[MUTUAL OF NEW YORK LOGO] Phillip A. Eisenberg, F.S.A., M.A.A.A.
Senior Vice President and
Chief Actuary The Mutual Life
Insurance
Company of New York
1740 Broadway
New York, NY 10019
212 708-2570
212 708-2118 Fax
August 14, 1998
The Board of Trustees
The Mutual Life Insurance Company of New York
1740 Broadway
New York, NY 10019
Re: Plan of Reorganization of The Mutual Life Insurance Company of New York
(MONY),
August 14, 1998
STATEMENT OF ACTUARIAL OPINION
QUALIFICATIONS
I, Phillip A. Eisenberg, MONY's Senior Vice President and Chief Actuary and
a member of the American Academy of Actuaries, am qualified under the Academy's
Qualification Standards to render the opinion set forth herein concerning how
MONY's Plan of Reorganization (the "Plan") is carried out under Section 7312 of
the New York Insurance Law. This opinion is not a legal opinion regarding the
Plan, but rather reflects the application of actuarial concepts and standards of
practice to the requirements set forth in Section 7312.
RELIANCE
In forming the opinion set forth in this memorandum, I relied upon
available MONY documentation of past and present practices and financial
results. For the individual life line of business, this information was very
extensive. Less information was available for the remaining lines of business.
The methodology applied to arrive at my opinion varied with the extent of
available data.
PricewaterhouseCoopers, LLP (PwC) was retained to develop a financial model
using the MONY data provided to it and applied assumptions and mathematical
formulas to the components of the model. I analyzed the results of PwC's work in
forming my opinion. In all cases, PwC activities were performed under my general
direction, and I or other MONY staff approved the methodology applied by PwC.
Information concerning future cash flows from assets held by MONY as of
December 31, 1997, and allocated to business which will receive share
distributions covered by the opinion was provided under the direction of
Executive Vice President and Chief Investment Officer, Kenneth M. Levine. I
relied on Mr. Levine's confirmation that this cash flow represents MONY's
current estimate.
A-5
<PAGE> 272
PROCESS
In all cases, I or other MONY staff reviewed the methodology applied by PwC
in making the calculations necessary for me to reach an opinion.
OPINION
In my opinion, the plan for allocation of policyholder consideration set
forth in Article VII of the Plan is fair and equitable to policyholders as
required by Section 7312 of the New York Insurance Law.
DISCUSSION
The distribution described in Article VII takes into account the estimated
past and future contributions to surplus. The distribution to each eligible
policyholder is based upon its relative contributions to surplus to total
contributions from all eligible policyholders.
Most of the consideration to be distributed to policyholders is allocated
on this basis. Under Section 7312 of the New York Insurance Law, there is no
specific guidance given for the allocation of consideration in a "Method 4"
reorganization, but policyholder contributions are specifically identified as an
acceptable approach to allocation of consideration under other methods of
reorganization within this section of the law. In addition, the contribution
method is recognized in the actuarial literature as an appropriate method. I
therefore find that the use of "actuarial contribution" as the principal basis
underlying the allocation of consideration is fair and equitable. I further find
that the "actuarial contribution" method has been implemented in a reasonable
manner. In particular, the delineation of classes of policyholders in the Plan
is consistent with MONY's past and present business practices.
The distribution also takes into account, to a lesser extent, the fact that
policyholders have intangible membership rights that are independent of their
actuarial contributions. Each Eligible Policyholder is, under the Plan,
allocated a fixed number of shares of common stock without regard to the
contribution of that policyholder or of the class or classes in which policies
held by the policyholder happen to reside. This element of the allocation is
consistent with overall concepts of equity. Under the Plan, the percentage of
the total consideration that is allocated in this manner is small relative to
that allocated in proportion to positive contributions, which is also equitable.
Very truly yours,
[PHILLIP A. EISENBERG SIGNATURE]
Phillip A. Eisenberg, FSA, MAAA
Senior Vice President and Chief
Actuary
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<PAGE> 273
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES OR IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION, THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE HOLDING COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information...................... 3
Prospectus Summary......................... 5
Risk Factors............................... 24
The Demutualization........................ 40
Use of Proceeds............................ 45
Dividends.................................. 45
Capitalization............................. 46
Selected Consolidated Financial
Information.............................. 47
Pro Forma Consolidated Financial
Information.............................. 53
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 63
Business................................... 102
Investments................................ 128
Management................................. 158
Beneficial Ownership of Common Stock....... 170
Certain Provisions of the Investment....... 172
Description of Capital Stock............... 176
Shares Eligible for Future Sale............ 180
Restrictions on Acquisitions of Securities
of the Holding Company................... 181
Certain Provisions of the Amended and
Restated Certificate of Incorporation and
the By-Laws of the Holding Company....... 182
Validity of Common Stock................... 186
Experts.................................... 186
Glossary................................... G-1
Index to Financial Statements.............. F-1
Underwriting............................... U-1
Annex A -- Actuarial Opinions.............. A-1
</TABLE>
------------------------
THROUGH AND INCLUDING , 1998 (25 DAYS FROM THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
SHARES
THE MONY GROUP INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
-----------------------
[MONY LOGO]
-----------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
REPRESENTATIVES OF THE UNDERWRITERS
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 274
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
offering of Common Stock pursuant to this Registration Statement that will be
paid fully by the registrant. All amounts shown are estimates, except the
Securities and Exchange Commission registration fee, the NASD filing fee and the
New York Stock Exchange listing fees.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $29,500
NASD filing fee............................................. 10,500
NYSE listing fee............................................ *
Blue Sky fees and expenses.................................. 15,000
Printing, engraving and postage expenses.................... *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Transfer agent fees and expenses............................ *
Miscellaneous............................................... *
Total............................................. *
</TABLE>
- ---------------
* To be completed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Directors and officers of the Holding Company may be indemnified against
liabilities, fines, penalties and claims imposed upon or asserted against them
as provided in the Delaware General Corporation Law and the Holding Company's
Amended and Restated Certificate. Such indemnification covers all costs and
expenses incurred by a director or officer. The Board of Directors, by a
majority vote of a quorum of disinterested directors or, under certain
circumstances, independent counsel appointed by the Board of Directors, must
determine that the director or officer seeking indemnification was not guilty of
willful misconduct or a knowing violation of the criminal law. In addition, the
Delaware General Corporation Law and the Holding Company's Amended and Restated
Certificate may under certain circumstances eliminate the liability of directors
and officers in a stockholder or derivative proceeding.
If the person involved is not a director or officer of the Holding Company,
the Board of Directors may cause the Holding Company to indemnify to the same
extent allowed for directors and officers of the Holding Company such person who
was or is a party to a proceeding, by reason of the fact that he is or was an
employee or agent of the Holding Company, or is or was serving at the request of
the Holding Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise.
The Holding Company has in force and effect a policy insuring the directors
and officers of the Holding Company against losses which they or any of them
shall become legally obligated to pay for by reason of any actual or alleged
error or misstatement or misleading statement or act or omission or neglect or
breach of duty by the directors and officers in the discharge of their duties,
individually or collectively, or any matter claimed against them solely by
reason of their being directors or officers, such coverage being limited by the
specific terms and provisions of the insurance policy.
Pursuant to the Underwriting Agreements, in the form filed as an exhibit to
the Registration Statement, any Underwriters under the Underwriting Agreements
will agree to indemnify the registrant's directors and officers and persons
controlling the registrant within the meaning of the Securities Act, against
certain liabilities that might arise out of or based upon certain information
furnished to the registrant by any such indemnifying party.
II-1
<PAGE> 275
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On the First Closing Date, MONY and the Holding Company sold to the
Investors the MONY Notes for $115 million and the Warrants. The price payable
for each share of the Common Stock issuable upon exercise of Warrants initially
is (a) in the event the Offerings occur prior to or within five trading days
after the Demutualization Date, the initial public offering price of the Common
Stock in the Offerings, unless the average of the daily closing prices of the
Common Stock for the 40 trading days following the first 20 trading days after
the Demutualization Date is greater than 115% of the initial public offering
price, in which case the initial exercise price shall be equal to the sum of the
initial public offering price plus an amount equal to one half of the excess of
such 40 day average over 115% of the initial public offering price or (b) in the
event the Offerings do not occur prior to or within five trading days after the
Demutualization Date, the lesser of (i) the average of the daily closing prices
of the Common Stock for the first 20 trading days following Demutualization and
(ii) 70% of the book value per share of the Common Stock as of the
Demutualization, determined in accordance with GAAP. The Warrants contain
standard anti-dilution provisions, providing for adjustment to the exercise
price in the event of, among other things, a dividend or other distribution of
capital stock, evidences of indebtedness or other property, issuances of rights,
options or warrants, certain cash dividends and certain tender offers.
Exemption from registration under the Securities Act for such issuances was
claimed under Section 4(2) of the Securities Act. The factors supporting the
availability of the exemption provided by Section 4(2) include: (i) the
sophistication of the Investors (each of whom is an affiliate of Goldman, Sachs
& Co. and an experienced institutional investor), (ii) their access to material
information, (iii) the disclosure actually made to them by the Company and (iv)
the absence of any general solicitation or advertising.
The Holding Company will distribute to certain Eligible Policyholders
shares of Common Stock in the Demutualization. Exemption from registration under
the Securities Act for such distribution will be claimed under Section 3(a)(10)
of the Securities Act based on the New York Superintendent's approval of the
Plan.
ITEM 16. EXHIBITS AND FINANCIAL DATA SCHEDULES.
(a) List of Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTIONS
------- ------------
<S> <C>
1.1 Form of Underwriting Agreement (U.S. Version)+
1.2 Form of Underwriting Agreement (International Version)+
2.1 Plan of Demutualization, as amended*
3.1 Form of Amended and Restated Certificate of Incorporation of
the Holding Company*
3.2 Form of By-laws of the Holding Company, as amended*
4.1 Form of Certificate for the Common Stock, par value $0.01
per share+
4.2 Form of MONY Note*
4.3 Form of Warrant*
5.1 Opinion of Dewey Ballantine LLP+
10.1 Investment Agreement, dated as of December 30, 1997, among
MONY, the Holding Company and GS Mezzanine Partners, GS
Mezzanine Partners Offshore, L.P., Stone Street Fund 1997,
L.P. and Bridge Street Fund 1997, L.P.*
10.2 Registration Rights Agreement dated as of December 30, 1997,
by and among MONY, the Holding Company and the Investors*
</TABLE>
II-2
<PAGE> 276
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTIONS
------- ------------
<S> <C>
10.3 Fiscal Agency Agreement dated as of December 30, 1997, by
and among MONY and Citibank, N.A.*
10.4 Amended and Restated Reinsurance Agreement, effective as of
January 1, 1994, between MONY and Life Reassurance
Corporation of America*
10.5 Portfolio Indemnity Reinsurance Agreement, effective as of
December 30, 1995, between MONY and The Guardian Life
Insurance Company of America, and all amendments thereto*
10.6 Amendment Eight to the Amended and Restated Portfolio
Indemnity Reinsurance Agreement, effective as of December
31, 1995, between MONY and The Guardian Life Insurance
Company of America*
10.7 Amendment Nine to the Amended and Restated Portfolio
Indemnity Reinsurance Agreement, dated as of December 31,
1995, between MONY and The Guardian Life Insurance Company
of America*
10.8 Amended and Restated Reinsurance Agreement (Amendment
Eleven), effective as of December 31, 1995, between MONY and
Lyndon Life Insurance Company*
10.9 Assignment and Novation Agreement, effective January 1,
1996, by and among MONY, Lyndon Life Insurance Company and
RGA Reinsurance Company*
10.10 Amendment Twelve to the Amended and Restated Reinsurance
Agreement, effective as of January 1, 1996, between MONY and
RGA Reinsurance Company*
10.11 Amendment Thirteen to the Amended and Restated Reinsurance
Agreement, effective as of January 1, 1996, between MONY and
RGA Reinsurance Company*
10.12 Agreement of Lease, dated as of December 17, 1990, between
1740 Broadway Associates L.P. and MONY, and all amendments
thereto*
10.13 Amendment to Agreement of Lease, dated as of April 26, 1996,
between 1740 Broadway Associates L.P. and MONY*
10.14 Second Amendment to Agreement of Lease, dated as of August
6, 1996, between 1740 Broadway Associates L.P. and MONY*
10.15 Third Amendment to Agreement of Lease, dated as of December
18, 1996, between 1740 Broadway Associates L.P. and MONY*
10.16 Fourth Amendment to Agreement of Lease, dated as of January
14, 1997, between 1740 Broadway Associates L.P. and MONY*
10.17 Fifth Amendment to Agreement of Lease, dated as of May 30,
1997, between 1740 Broadway Associates L.P. and MONY*
10.18 Letter Agreement, dated as of April 26, 1996, to accompany
Amendment to Agreement of Lease, dated as of April 26, 1996,
between 1740 Broadway Associates L.P. and MONY*
10.19 Letter, dated as of December 18, 1996, amending Letter
Agreement, dated as of April 26, 1996, to accompany First
Amendment to Agreement of Lease, dated as of April 26, 1996,
between 1740 Broadway Associates L.P. and MONY*
10.20 Letter, dated as of January 14, 1997, amending Letter
Agreement, dated as of April 26, 1996, to accompany
Amendment to Agreement of Lease, dated as of April 26, 1996,
between 1740 Broadway Associates L.P. and MONY*
10.21 Agreement of Lease, dated as of December 21, 1988, between
Continental Towers and MONY, and all amendments thereto*
10.22 First Amendment to Agreement of Lease, dated as of January
14, 1994, between Continental Towers and MONY*
</TABLE>
II-3
<PAGE> 277
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTIONS
------- ------------
<S> <C>
10.23 Second Amendment to Agreement of Lease, dated as of October
15, 1997, between Continental Towers and MONY*
10.24 1998 Stock Incentive Plan*
10.25 Asset Transfer and Acquisition Agreement, dated as of
December 31, 1993, by and among MONY, AEGON USA, Inc. and
AUSA Life Insurance Company, Inc.*
10.26 Series A Note Purchase Agreement, dated as of December 31,
1993, by and between AEGON USA, Inc. and MONY*
10.27 Series B Note Purchase Agreement, dated as of December 31,
1993, by and between AEGON USA, Inc. and MONY*
10.28 Fiscal Agency Agreement, dated as of August 15, 1994,
between MONY and The Chase Manhattan Bank, N.A.*
10.29 Excess Benefit Plan for MONY Employees*
10.30 Form of MONY Deferred Compensation Plan Agreement for Key
Employees*
10.31 Form of MONY Deferred Compensation Plan Agreement for MONY
Trustees*
10.32 1988 Equity Share Plan*
10.33 Form of Equity Share Plan Deferred Compensation Agreement*
10.34 Split Dollar Life Insurance Plan*
10.35 Form of Employment Agreement applicable to Messrs. Roth,
Levine and Foti*
10.36 Form of Employment Agreement applicable to Messrs. Conklin,
Connors, Mulroy, Waldron, Hall and Daddario*
10.37 Shareholder Rights Agreement+
10.38 Letter Agreement, dated June 25, 1997, between MONY and The
Chase Manhattan Bank*
10.39 Letter Agreement, dated June 19, 1997, between MONY and
Fleet Bank*
10.40 Letter Agreement, dated June 30, 1997, between MONY and
Citibank, N.A.*
10.41 Letter Agreement, dated June 30, 1997, between MONY and
Mellon Bank*
10.42 Letter Agreement, dated August 6, 1997, between MONY and
State Street Bank and Trust Company*
10.43 The MONY Group Inc. Annual Incentive Compensation Plan*
10.44 Form of Change in Control Employment Agreements*
21.1 Subsidiaries of the registrant+
23.1 Consent of PricewaterhouseCoopers LLP*
23.2 Consent of Chadbourne & Parke LLP+
23.3 Consent of Dewey Ballantine LLP (included in Exhibit 5.1)+
23.4 Consent of DALBAR, Inc.+
23.5 Consent of Jesse M. Schwartz, F.S.A., M.A.A.A.+
23.6 Consent of Phillip A. Eisenberg, F.S.A., M.A.A.A.+
24.1 Powers of Attorney (included on signature page hereto)
27.1 Financial Data Schedule*
</TABLE>
- ---------------
* Filed herewith.
+ To be filed by Amendment.
II-4
<PAGE> 278
(b) Financial Data Schedules.
The following consolidated financial statement schedule of the Company
shall be filed with the Commission by Amendment No. 1 to this Registration
Statement:
Schedule II -- Condensed Financial Information of MONY Life Insurance
Company of America
All other schedules for which provisions are made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable and therefore have
been omitted or the information has been included in the consolidated financial
statements.
ITEM 17. UNDERTAKINGS.
(a) Acceleration of Effectiveness.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant 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 the 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.
(b) Stock Certificates.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
(c) Information omitted from Form of Prospectus pursuant to Rule 430A.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 279
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, The MONY Group
Inc. has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on September 16, 1998.
The MONY Group Inc.
By /s/ MICHAEL I. ROTH
------------------------------------
Name: Michael I. Roth
Title: Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints each of Thomas J. Conklin, Richard Daddario and
Richard E. Mulroy, Jr. as his true and lawful attorney-in-fact and agent, with
full power of substitution, for him and in his name, place and stead, in any and
all capabilities, to sign any or all amendments or post-effective amendments to
this Registration Statement (including without limitation any post-effective
amendment pursuant to Rule 462 under the Securities Act of 1933), and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ MICHAEL I. ROTH Chairman of the Board and September 16, 1998
- ------------------------------------------------ Chief Executive Officer;
Michael Isor Roth Director (Principal
Executive Officer)
/s/ RICHARD DADDARIO Executive Vice President and September 16, 1998
- ------------------------------------------------ Chief Financial Officer
Richard Daddario (Principal Financial
Officer)
/s/ LARRY COHEN Vice President and Controller September 16, 1998
- ------------------------------------------------ (Principal Accounting
Larry Cohen Officer)
/s/ CLAUDE MARK BALLARD, JR. Director September 16, 1998
- ------------------------------------------------
Claude Mark Ballard, Jr.
/s/ TOM H. BARRETT Director September 16, 1998
- ------------------------------------------------
Tom Hans Barrett
</TABLE>
II-6
<PAGE> 280
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ DAVID LINCOLN CALL Director September 16, 1998
- ------------------------------------------------
David Lincoln Call
/s/ GLENN ROBERT DURHAM Director September 16, 1998
- ------------------------------------------------
Glenn Robert Durham
/s/ JAMES BERNARD FARLEY Director September 16, 1998
- ------------------------------------------------
James Bernard Farley
/s/ SAMUEL J. FOTI President and Chief Operating September 16, 1998
- ------------------------------------------------ Officer and Director
Samuel Joseph Foti
/s/ ROBERT HOLLAND, JR. Director September 16, 1998
- ------------------------------------------------
Robert Holland, Jr.
/s/ JAMES LAWRENCE JOHNSON Director September 16, 1998
- ------------------------------------------------
James Lawrence Johnson
/s/ ROBERT RAYMOND KILEY Director September 16, 1998
- ------------------------------------------------
Robert Raymond Kiley
/s/ KENNETH MARC LEVINE Executive Vice President and September 16, 1998
- ------------------------------------------------ Chief Investment Officer
Kenneth Marc Levine and Director
/s/ JOHN ROBERT MEYER Director September 16, 1998
- ------------------------------------------------
John Robert Meyer
/s/ JANE CAHILL PFEIFFER Director September 16, 1998
- ------------------------------------------------
Jane Cahill Pfeiffer
/s/ THOMAS C. THEOBALD Director September 16, 1998
- ------------------------------------------------
Thomas Charles Theobald
</TABLE>
II-7
<PAGE> 281
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<S> <C> <C>
1.1 Form of Underwriting Agreement (U.S. Version)+
1.2 Form of Underwriting Agreement (International Version)+
2.1 Plan of Demutualization, as amended*
3.1 Form of Amended and Restated Certificate of Incorporation of
the Holding Company*
3.2 Form of By-laws of the Holding Company, as amended*
4.1 Form of Certificate for the Common Stock, par value $0.01
per share+
4.2 Form of MONY Note*
4.3 Form of Warrant*
5.1 Opinion of Dewey Ballantine LLP+
10.1 Investment Agreement, dated as of December 30, 1997, among
MONY, the Holding Company and GS Mezzanine Partners, GS
Mezzanine Partners Offshore, L.P., Stone Street Fund 1997,
L.P. and Bridge Street Fund 1997, L.P.*
10.2 Registration Rights Agreement dated as of December 30, 1997,
by and among MONY, the Holding Company and the Investors*
10.3 Fiscal Agency Agreement dated as of December 30, 1997, by
and among MONY and Citibank, N.A.*
10.4 Amended and Restated Reinsurance Agreement, effective as of
January 1, 1994, between MONY and Life Reassurance
Corporation of America*
10.5 Portfolio Indemnity Reinsurance Agreement, effective as of
December 30, 1995, between MONY and The Guardian Life
Insurance Company of America, and all amendments thereto*
10.6 Amendment Eight to the Amended and Restated Portfolio
Indemnity Reinsurance Agreement, effective as of December
31, 1995, between MONY and The Guardian Life Insurance
Company of America*
10.7 Amendment Nine to the Amended and Restated Portfolio
Indemnity Reinsurance Agreement, dated as of December 31,
1995, between MONY and The Guardian Life Insurance Company
of America*
10.8 Amended and Restated Reinsurance Agreement (Amendment
Eleven), effective as of December 31, 1995, between MONY and
Lyndon Life Insurance Company*
10.9 Assignment and Novation Agreement, effective January 1,
1996, by and among MONY, Lyndon Life Insurance Company and
RGA Reinsurance Company*
10.10 Amendment Twelve to the Amended and Restated Reinsurance
Agreement, effective as of January 1, 1996, between MONY and
RGA Reinsurance Company*
10.11 Amendment Thirteen to the Amended and Restated Reinsurance
Agreement, effective as of January 1, 1996, between MONY and
RGA Reinsurance Company*
10.12 Agreement of Lease, dated as of December 17, 1990, between
1740 Broadway Associates L.P. and MONY, and all amendments
thereto*
</TABLE>
E-1
<PAGE> 282
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<S> <C> <C>
10.13 Amendment to Agreement of Lease, dated as of April 26, 1996,
between 1740 Broadway Associates L.P. and MONY*
10.14 Second Amendment to Agreement of Lease, dated as of August
6, 1996, between 1740 Broadway Associates L.P. and MONY*
10.15 Third Amendment to Agreement of Lease, dated as of December
18, 1996, between 1740 Broadway Associates L.P. and MONY*
10.16 Fourth Amendment to Agreement of Lease, dated as of January
14, 1997, between 1740 Broadway Associates L.P. and MONY*
10.17 Fifth Amendment to Agreement of Lease, dated as of May 30,
1997, between 1740 Broadway Associates L.P. and MONY*
10.18 Letter Agreement, dated as of April 26, 1996, to accompany
Amendment to Agreement of Lease, dated as of April 26, 1996,
between 1740 Broadway Associates L.P. and MONY*
10.19 Letter, dated as of December 18, 1996, amending Letter
Agreement, dated as of April 26, 1996, to accompany First
Amendment to Agreement of Lease, dated as of April 26, 1996,
between 1740 Broadway Associates L.P. and MONY*
10.20 Letter, dated as of January 14, 1997, amending Letter
Agreement, dated as of April 26, 1996, to accompany
Amendment to Agreement of Lease, dated as of April 26, 1996,
between 1740 Broadway Associates L.P. and MONY*
10.21 Agreement of Lease, dated as of December 21, 1988, between
Continental Towers and MONY, and all amendments thereto*
10.22 First Amendment to Agreement of Lease, dated as of January
14, 1994, between Continental Towers and MONY*
10.23 Second Amendment to Agreement of Lease, dated as of October
15, 1997, between Continental Towers and MONY*
10.24 1998 Stock Incentive Plan*
10.25 Asset Transfer and Acquisition Agreement, dated as of
December 31, 1993, by and among MONY, AEGON USA, Inc. and
AUSA Life Insurance Company, Inc.*
10.26 Series A Note Purchase Agreement, dated as of December 31,
1993, by and between AEGON USA, Inc. and MONY*
10.27 Series B Note Purchase Agreement, dated as of December 31,
1993, by and between AEGON USA, Inc. and MONY*
10.28 Fiscal Agency Agreement, dated as of August 15, 1994,
between MONY and The Chase Manhattan Bank, N.A.*
10.29 Excess Benefit Plan for MONY Employees*
10.30 Form of MONY Deferred Compensation Plan Agreement for Key
Employees*
10.31 Form of MONY Deferred Compensation Plan Agreement for MONY
Trustees*
10.32 1988 Equity Share Plan*
10.33 Form of Equity Share Plan Deferred Compensation Agreement*
10.34 Split Dollar Life Insurance Plan*
10.35 Form of Employment Agreement applicable to Messrs. Roth,
Levine and Foti*
10.36 Form of Employment Agreement applicable to Messrs. Conklin,
Connors, Mulroy, Waldron, Hall and Daddario*
</TABLE>
E-2
<PAGE> 283
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<S> <C> <C>
10.37 Shareholder Rights Agreement+
10.38 Letter Agreement, dated June 25, 1997, between MONY and The
Chase Manhattan Bank*
10.39 Letter Agreement, dated June 19, 1997, between MONY and
Fleet Bank*
10.40 Letter Agreement, dated June 30, 1997, between MONY and
Citibank, N.A.*
10.41 Letter Agreement, dated June 30, 1997, between MONY and
Mellon Bank*
10.42 Letter Agreement, dated August 6, 1997, between MONY and
State Street Bank and Trust Company*
10.43 The MONY Group Inc. Annual Incentive Compensation Plan*
10.44 Form of Change in Control Employment Agreements*
21.1 Subsidiaries of the registrant+
23.1 Consent of PricewaterhouseCoopers LLP*
23.2 Consent of Chadbourne & Parke LLP+
23.3 Consent of Dewey Ballantine LLP (included in Exhibit 5.1)
23.4 Consent of DALBAR, Inc.+
24.1 Powers of Attorney (included on signature page hereto)
27.2 Financial Data Schedule*
</TABLE>
- ---------------
* Filed herewith.
+ To be filed by amendment.
E-3
<PAGE> 1
Exhibit 2.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
PLAN OF REORGANIZATION
UNDER SECTION 7312
OF THE NEW YORK INSURANCE LAW
AS ADOPTED ON AUGUST 14, 1998,
AND AMENDED ON SEPTEMBER 9, 1998,
BY THE BOARD OF TRUSTEES OF
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS...................................... 1
ARTICLE II PURPOSE OF REORGANIZATION....................... 4
ARTICLE III FORM OF REORGANIZATION......................... 5
3.1 Method of Reorganization............................ 5
3.2 Basis for Choice of Method.......................... 5
3.3 The Investment Agreement............................ 5
ARTICLE IV PROPOSED CHARTER OF THE COMPANY................. 6
ARTICLE V MANNER AND BASIS OF REORGANIZATION............... 6
5.1 Subsidiary of Holding Company; Certificate of
Incorporation and By-Laws.............................. 6
5.2 Effectiveness of Plan............................... 6
5.3 Continuation of Corporate Existence; Company Name... 8
5.4 Notice of Hearing................................... 8
5.5 Notice of Vote...................................... 9
5.6 Policyholder Vote................................... 9
5.7 Filing of Plan...................................... 9
5.8 Tax Considerations.................................. 9
ARTICLE VI POLICY OWNERSHIP AND IN FORCE DATES............. 10
6.1 Determination of Ownership.......................... 10
6.2 In Force Dates...................................... 11
6.3 Certain Group Policies and Contracts................ 12
ARTICLE VII ALLOCATION AND PAYMENT OF POLICYHOLDER
CONSIDERATION............................................. 12
7.1 Allocation of Allocable Shares...................... 12
7.2 Allocation of Aggregate Variable Component.......... 13
7.3 Payment of Consideration............................ 13
7.4 ERISA Plans......................................... 15
ARTICLE VIII METHOD OF OPERATION FOR PARTICIPATING
BUSINESS.................................................. 15
8.1 Establishment of the Closed Block................... 15
8.2 Operation of the Closed Block....................... 16
8.3 Guaranteed Benefits................................. 18
8.4 Other Participating Policies........................ 18
ARTICLE IX PLAN OF OPERATION; NEW PARTICIPATING BUSINESS... 19
9.1 Plan of Operation................................... 19
9.2 New Participating Business.......................... 19
ARTICLE X ADDITIONAL PROVISIONS............................ 19
10.1 Acquisition of Securities by Certain Officers,
Directors and Employees................................ 19
10.2 Restricted Stock for Nonemployee Directors.......... 19
10.3 Corrective Actions.................................. 20
10.4 Compensation of Officers, Directors and Employees... 20
10.5 Adjustment of Share Numbers......................... 20
10.6 Notices............................................. 20
10.7 Amendment or Withdrawal of Plan..................... 20
10.8 Costs and Expenses.................................. 21
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
10.9 Governing Law......................................................... 21
10.10 Corrections.......................................................... 21
Summary of Exhibits and Schedules to the Plan
EXHIBIT A -- Closed Block Business
EXHIBIT B -- Form of Amended and Restated Charter of MONY
EXHIBIT C -- Form of Amended and Restated Certificate of Incorporation of
the Holding Company
EXHIBIT D -- Form of Amended and Restated By-laws of the Holding
Company
EXHIBIT E -- Form of Amended and Restated By-laws of MONY
EXHIBIT F -- Closed Block Assets
EXHIBIT G -- Plan of Operation and Actuarial Projection Pursuant to
Section 7312(e)(1) of the New York Insurance Law
SCHEDULE 1 -- The Investment Agreement
SCHEDULE 2 -- Actuarial Contribution Memorandum
SCHEDULE 3 -- Closed Block Memorandum
SCHEDULE 4 -- The MONY Group Inc. 1998 Stock Incentive Plan
</TABLE>
ii
<PAGE> 4
PLAN OF REORGANIZATION
OF
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
UNDER SECTION 7312 OF
THE NEW YORK INSURANCE LAW
This Plan of Reorganization, which was adopted by the Board of Trustees
(the "Board") of The Mutual Life Insurance Company of New York, a mutual life
insurance company organized under the laws of the State of New York (the
"Company"), at a meeting duly called and held on August 14, 1998 (the "Adoption
Date"), and was adopted at a meeting duly called and held on September 9, 1998
to reflect certain clarifying and technical amendments incorporated herein,
provides for the conversion of the Company from a mutual life insurance company
into a stock life insurance company in accordance with the requirements of
Section 7312 of the New York Insurance Law.
ARTICLE I
DEFINITIONS
As used in this Plan of Reorganization, the following terms have the
following meanings:
"Actuarial Contribution" has the meaning specified in Section 7.2(a).
"Actuarial Contribution Memorandum" has the meaning specified in Section
7.1(b).
"Adjusted Actuarial Contribution" has the meaning specified in Section
7.2(a).
"Adoption Date" has the meaning specified in the first paragraph hereof.
"Aggregate Cash Amount" has the meaning specified in Section 7.3(a).
"Aggregate Variable Component" means that portion of the Allocable Shares
which constitutes the aggregate variable component of the consideration
allocable to all Participating Policyholders.
"Allocable Shares" means the 40 million shares of Holding Company Common
Stock that will be allocated to Eligible Policyholders.
"Board" has the meaning specified in the first paragraph hereof.
"Cash Election Number" has the meaning specified in Section 7.3(a).
"Certificate" as used in relation to group life or accident and health
insurance or group annuities means a certificate evidencing coverage under a
master policy or contract issued to the owner of such coverage.
"Closed Block" has the meaning specified in Section 8.1.
"Closed Block Business" means Policies within the classes of Policies
specified in Exhibit A (which Policy classes constitute all of the classes of
individual Policies for which the Company had a current payable dividend scale
other than those classes listed in Section 8.4(b)(i)), but only to the extent
such Policies are either (a) In Force on the Plan Effective Date or (b) issued
and delivered after the Plan Effective Date pursuant, in each case, to an
application, complete on its face, that is received prior to the Plan Effective
Date at the Company's administrative offices, provided that all underwriting in
connection with any Policy referred to in this clause (b) is completed within 60
days of the Plan Effective Date and such Policy is issued as applied for without
material change (upon receipt of premium payment in accordance with the
Company's customary business practice) and delivered in accordance with the
terms of the application. "Closed Block Business" also includes any Policy
within the classes of Policies specified in Exhibit A which is In Force on the
Plan Effective Date as extended term insurance pursuant to a non-forfeiture
provision in such Policy.
"Closed Block Memorandum" has the meaning specified in Section 8.1.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning specified in the first paragraph hereof.
"Company Common Stock" means the common stock, par value $1.00 per share,
of the Company.
"Convertible Preferred Stock" means the convertible preferred stock of the
Holding Company which may be issued and sold to the Investors at the request of
the Company pursuant to the terms and subject to the conditions of the
Investment Agreement.
"Demutualization Date" means the date the Plan becomes effective pursuant
to Section 5.2(b) or, if later, the first date following such effectiveness on
which shares of Holding Company Common Stock are first issued to Eligible
Policyholders.
"Disability" means permanent and total disability as defined in Section
22(e)(3) of the Code (or any successor provision thereto).
"Directors' Fees" means the annual retainer fee and all meeting fees,
committee fees and other directors' fees earned by a Nonemployee Director for
his services on the Holding Company Board.
"Eligible Investments" has the meaning specified in Section 8.2(b).
"Eligible Policy" means a Policy that is In Force on the Adoption Date and
which remains In Force on the Plan Effective Date.
"Eligible Policyholder" means a Person who is (or, collectively, the
Persons who are) on the Adoption Date the Owner of one or more Policies which
are then In Force and which remain In Force on the Plan Effective Date, except
that a current or former officer of the Company covered under the Company's
corporate owned split dollar life insurance plan shall not be an Eligible
Policyholder with respect to Policies included in such plan.
"Exhibit F Closed Block Assets" has the meaning specified in Section 8.1.
"Fair Market Value" means, on any date, the closing price of the Holding
Company Common Stock as reported on the consolidated tape of the New York Stock
Exchange (or on such other recognized quotation system on which the trading
prices of the Holding Company Common Stock are quoted at the relevant time) on
such date. In the event that there are no Holding Company Common Stock
transactions reported on such tape (or such other system) on such date, Fair
Market Value shall mean the closing price on the immediately preceding date on
which Holding Company Common Stock transactions were so reported.
"Holding Company" means The MONY Group Inc., a Delaware corporation.
"Holding Company Board" means the board of directors of the Holding
Company.
"Holding Company Common Stock" means the common stock, par value $.01 per
share, of the Holding Company.
"Holding Company Subordinated Notes" means notes issued by the Holding
Company in exchange for the MONY Notes on the terms and subject to the
conditions of the Investment Agreement.
"In Force" has the meaning specified in Section 6.2(a).
"Investment Agreement" means the Investment Agreement, dated as of December
30, 1997, among the Company, the Holding Company and the Investors, as amended.
A copy of the Investment Agreement excluding the schedules thereto is attached
as Schedule 1.
"Investors" has the meaning specified in Schedule 1 hereto.
"IPO" means an initial public offering of Holding Company Common Stock as
described in Section 5.2(c).
"IPO Price" means the price per share at which Holding Company Common Stock
is sold to the public in an IPO.
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"IRA" means an individual retirement annuity within the meaning of Section
408 of the Code.
"Method 4" has the meaning specified in Section 3.1.
"MONY Notes" means surplus notes of the Company issued to the Investors in
the aggregate principal amount of $115,000,000 on the terms and subject to the
conditions of the Investment Agreement.
"NAIC" means the National Association of Insurance Commissioners.
"Nonemployee Director" means a member of the Holding Company Board who is
not an employee of the Holding Company or any Subsidiary.
"Owner" means, with respect to any Policy, the Person or Persons specified
or determined pursuant to Section 6.1 or Section 6.3.
"Participating Policy" means a Policy under which there is a right to
participate in the divisible surplus of the Company to the extent that dividends
are apportioned thereon (including any such Policy that has continued as
extended term insurance). A Policy which by its terms is not non-participating
shall be deemed to be a Participating Policy.
"Participating Policyholder" means an Eligible Policyholder who is on the
Adoption Date the Owner of one or more Participating Policies which are then In
Force and which remain In Force on the Plan Effective Date.
"Participation Date" means, with respect to any of the Company's group
annuity contracts referred to in Section 6.3, the date specified in such Policy
as the participation date of such Policy.
"Person" means an individual, corporation, limited liability company, joint
venture, partnership, association, trust, trustee, unincorporated entity,
organization or government or any department or agency thereof. A Person who is
the Owner of Policies in more than one legal capacity (e.g., a trustee under
separate trusts) shall be deemed to be a separate Person in each such capacity.
"Plan" means this Plan of Reorganization (including all Exhibits and
Schedules hereto), as it may be amended from time to time in accordance with
Section 10.7.
"Plan Effective Date" has the meaning specified in Section 5.2(b).
"Policy" means (i) a life insurance policy (including, without limitation,
a pure endowment contract), annuity contract or accident and health insurance
policy authorized pursuant to paragraph (1), (2) or (3) of Section 1113(a) of
the New York Insurance Law that has been issued by the Company and (ii) each
Certificate or participation interest referred to in Section 6.3, each of which
Certificates and participation interests is deemed to be a Policy for purposes
of the Plan pursuant to such Section 6.3.
"Policy Credit" means (a) dividend additions under a Qualifying Policy that
is an individual participating nonvariable annuity contract, (b) an increase in
accumulation value (to which no sales or surrender or similar charges will be
applied) on a Qualifying Policy that is an individual nonparticipating
nonvariable annuity contract, (c) an increase in accumulation account value (to
which no sales or surrender or similar charges will be applied) in the separate
investment account under a Qualifying Policy that is an individual participating
variable annuity contract, (d) an increase in accumulation account value (to
which no sales or surrender or similar charges will be applied) in the general
account investment option (or if there is no general account investment option
set forth in such Qualifying Policy, the money market separate account
investment option set forth in such Qualifying Policy) under a Qualifying Policy
that is an individual nonparticipating variable annuity contract or individual
nonparticipating variable life insurance policy, (e) dividend deposits or
dividend additions, as appropriate (i.e., depending upon whether the dividend
deposit option or the dividend addition option has been selected with respect to
the underlying Qualifying Policy, provided that dividend additions will apply
where an option other than dividend additions or dividend deposits has been
selected), on a Qualifying Policy that is an individual participating life
insurance policy, (f) an increase in fund value (to which no sales or surrender
or similar charges will be applied) on a Qualifying Policy that is an individual
nonparticipating nonvariable life insurance policy, (g) an extension of the
expiry date on a Qualifying Policy which is in force
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as extended term life insurance pursuant to a non-forfeiture provision of a life
insurance policy, or (h) an increase in accumulation account value (to which no
sales or surrender or similar charges will be applied) in the general account
investment option (or if there is no general account investment option under
such Qualifying Policy, the money market separate account investment option set
forth in such Qualifying Policy), under a Qualifying Policy that is a group
annuity contract or certificate issued thereunder.
"Policy Date" means, with respect to any Policy, the date specified in such
Policy as the date such Policy commences.
"Policyholders' Membership Interest" has the meaning specified in Section
7312(a)(3).
"Principal Investor" means GS MEZZANINE PARTNERS, L.P.
"Qualifying Policies" has the meaning specified in Section 7.1(b).
"Reorganization" means the conversion of a company from a mutual life
insurance company to a stock life insurance company pursuant to Section 7312.
"Reset Cash Election Number" has the meaning specified in Section 7.3(a).
"Restricted Stock" means shares of Holding Company Common Stock granted to
a Nonemployee Director subject to such restrictions on transfer and other
incidents of ownership and such forfeiture conditions as set forth in Section
10.2.
"Section 7312" means Section 7312 of the New York Insurance Law, as
amended.
"Securities Act" means the Securities Act of 1933, as amended.
"Short-Term Securities" means securities having a final maturity at the
date of acquisition by the Company of one year or less.
"Statement Date" means December 31, 1997.
"Stock Incentive Plan" means The MONY Group Inc. 1998 Stock Incentive Plan.
"Subsidiary" means any corporation or partnership in which the Holding
Company owns, directly or indirectly, 50% or more of the total combined voting
power of all classes of stock of such corporation or of the capital interest or
profits interest of such partnership.
"Superintendent" means the Superintendent of Insurance of the State of New
York, or such governmental officer, body or authority as may after the Plan
Effective Date succeed such Superintendent as the primary regulator of the
Company's insurance business under applicable law.
"United States" means the States of the United States, the District of
Columbia, the Commonwealth of Puerto Rico and Territories of the United States
within the meaning of Section 2(6) of the Securities Act and APO/FPO (military)
addresses.
"Voting Policyholder" means a policyholder entitled to vote pursuant to
Section 7312(e)(3). An absolute assignee of a Policy under an assignment that
satisfies the requirements specified in Section 6.1(c) is the Voting
Policyholder of that Policy as soon as the assignment is effective on the
records of the Company regardless of any provision in Section 4210 of the New
York Insurance Law to the contrary.
"Warrants" mean the warrants to purchase shares of Holding Company Common
Stock issued to the Investors by the Holding Company for an aggregate purchase
price of $10,000,000, on the terms and subject to the conditions set forth in
the Investment Agreement.
ARTICLE II
PURPOSE OF REORGANIZATION
The principal purpose of the Reorganization of the Company pursuant to the
Plan is to convert the Company from a mutual life insurer to a stock life
insurer thereby permitting it to obtain equity capital from
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sources that are unavailable to it as a mutual insurer. Such equity capital is
expected to enhance the Company's business and competitive position and to
strengthen its capital base. As a mutual life insurer, the Company can increase
its capital only through retained surplus contributed by its businesses or
through the sale of surplus notes or similar instruments issued by it. Neither
source is fully adequate to generate substantial surplus accumulations or to
provide permanent capital to the Company.
Under the Plan, the Company shall become a wholly-owned subsidiary of the
Holding Company. After the Reorganization, as a stock insurance company
subsidiary of the Holding Company, the Company will have access through the
Holding Company to the capital markets, enabling the Company to obtain equity
capital from a variety of sources.
In addition, the reorganization of the Company pursuant to the Plan will
provide Eligible Policyholders with shares of Holding Company Common Stock, cash
or Policy Credits in exchange for their Policyholders' Membership Interests.
Thus, Eligible Policyholders will realize economic value from their
Policyholders' Membership Interests that is otherwise currently unavailable to
them.
ARTICLE III
FORM OF REORGANIZATION
3.1 Method of Reorganization. The Plan, which is adopted pursuant to
Section 7312(d)(4) ("Method 4"), provides that: (a) the Closed Block Business
will be operated as a Closed Block for policyholder dividend purposes only and
none of the Company's other Policies will be included in such Closed Block, but
all Participating Policies not included in the Closed Block Business will
continue in accordance with their terms to be eligible to receive dividends
based on the experience of their respective classes; (b) the Policyholders'
Membership Interests will be exchanged for consideration in the form of shares
of Holding Company Common Stock or, in certain circumstances, cash or Policy
Credits, as more particularly described in Article VII and the Actuarial
Contribution Memorandum; (c) the Holding Company will encourage and assist in
the establishment of a public market for shares of Holding Company Common Stock
pursuant to Section 5.2(h); and (d) certain Eligible Policyholders who receive
shares of Holding Company Common Stock will have an opportunity to sell such
shares at market values without brokerage commissions or similar expenses
pursuant to Section 7.3(e).
3.2 Basis for Choice of Method. The Board has determined that
Reorganization under Method 4 pursuant to which Eligible Policyholders will
receive shares of Holding Company Common Stock or, in certain circumstances,
cash or Policy Credits based on the market value of the Company at the time of
Reorganization, is the most appropriate method of Reorganization under Section
7312(d) for the Company to achieve the purposes described in Article II. In
making such determination, the Board considered, among other things, that (a)
the method described in Section 7312(d)(3) is available only to insurers having
less than $50 million of surplus, (b) the method described in Section 7312(d)(2)
does not provide for Eligible Policyholders to receive consideration as
described above, and (c) the method described in Section 7312(d)(1) does not
clearly provide for raising permanent equity capital in a manner such as that
described in Section 3.3. Further, the Board has determined that the flexibility
of Method 4 allows for the design of a plan of Reorganization that is best
suited to provide the Company's policyholders with a fair and equitable result.
3.3 The Investment Agreement. The Company, the Holding Company and the
Investors have entered into the Investment Agreement, pursuant to which the
Investors have purchased the MONY Notes and the Warrants. The MONY Notes are
scheduled to mature on December 30, 2012. As provided in the Investment
Agreement, at any time from and after the Demutualization Date, the Investors
may elect to exchange, in whole or in part, the MONY Notes for Holding Company
Subordinated Notes. Upon such exchange, the Holding Company, at the request of
the Principal Investor on behalf of the Investors, will register the Holding
Company Subordinated Notes under the Securities Act.
In addition, in the event that the Demutualization Date has occurred on or
prior to June 30, 1999, provided that the Holding Company notifies the Investors
within 90 days after the Demutualization Date, the
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Holding Company may require the Investors to purchase from the Holding Company
an aggregate of 1,000,000 shares of Convertible Preferred Stock of the Holding
Company for a total purchase price of $100,000,000. The Holding Company shall
register the Convertible Preferred Stock under the Securities Act. In addition
to registration under the Securities Act of the Convertible Preferred Stock,
under the Investment Agreement the Investors have rights to registration under
the Securities Act of the Warrants and the shares of Holding Company Common
Stock issuable thereunder and the shares of Holding Company Common Stock
issuable pursuant to the Convertible Preferred Stock.
Under the Investment Agreement, for so long as the Investors and their
subsidiaries and affiliates own (i) an amount of Warrants and Convertible
Preferred Stock representing the right to acquire Holding Company Common Stock
and/or (ii) Holding Company Common Stock, equal, in the aggregate, to at least
5% of the voting power of the Holding Company Common Stock on an as exercised or
as converted basis, the Company (prior to the Demutualization Date) and the
Holding Company (subsequent to the Demutualization Date) shall use its best
efforts to cause a person proposed by the Investors to be elected to the Board
or the Holding Company Board, as applicable.
ARTICLE IV
PROPOSED CHARTER OF THE COMPANY
The form of the Company's amended and restated charter as proposed to be in
effect upon the effectiveness of the Plan is set forth in Exhibit B.
ARTICLE V
MANNER AND BASIS OF REORGANIZATION
5.1 Subsidiary of Holding Company; Certificate of Incorporation and
By-Laws. On the Adoption Date, the Holding Company is a wholly owned subsidiary
of the Company. Prior to the Plan Effective Date, the certificate of
incorporation and by-laws of the Holding Company shall be amended and restated
so that upon the effectiveness of the Plan (a) the certificate of incorporation
shall be in the form of Exhibit C and shall authorize issuance of at least the
number of shares of Holding Company Common Stock that is sufficient to meet the
requirements of the Plan and (b) the by-laws shall be in the form of Exhibit D.
Upon the Plan Effective Date, the Company shall become a wholly owned subsidiary
of the Holding Company as a result of the transactions described herein.
5.2 Effectiveness of Plan. (a) Upon approval by the Superintendent of the
Plan and the method of Reorganization described herein and approval by the
Voting Policyholders of the Plan pursuant to Section 7312, a copy of the Plan,
with the Superintendent's approval endorsed thereon, shall be filed in the
office of the Superintendent, and the Company shall file a copy certified by the
Superintendent in the office of the Clerk of New York County pursuant to Section
7312(1).
(b) The effective date of the Plan (the "Plan Effective Date") shall be the
earlier of (i) the date on which the closing of an IPO occurs or (ii) a stated
date which shall not be more than six months after the date the Plan is approved
by the Superintendent pursuant to Section 7312(j), which shall be chosen by the
Board subsequent to such approval. The Plan shall be deemed to have become
effective at 12:01 a.m., New York time, on the Plan Effective Date.
(c) The Holding Company may make an initial public offering of shares of
Holding Company Common Stock to raise proceeds to the Holding Company of up to
$400 million (net of underwriting commissions and expenses related to the
initial public offering) or such other amount of net proceeds as may be approved
by the Superintendent.
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(d) On the Plan Effective Date:
(i) the Company shall deliver 2 million shares of Company Common
Stock, par value $1.00 per share, to the Holding Company representing all
of the Company's issued and outstanding Company Common Stock;
(ii) the Company shall surrender to the Holding Company, and the
Holding Company shall cancel, all of the Holding Company Common Stock
previously issued by the Holding Company to the Company and held by the
Company immediately prior to the Plan Effective Date;
(iii) the Holding Company shall contribute to the Company cash in
accordance with the provisions of Section 5.2(j); and
(iv) the Holding Company may sell shares of Holding Company Common
Stock in an IPO for cash.
(e) Also on the Plan Effective Date:
(i) the Company's charter and by-laws shall be amended and restated to
read as set forth in Exhibits B and E, respectively;
(ii) the Company shall by operation of Section 7312 become a stock
life insurance company; and
(iii) the Policyholders' Membership Interests shall be extinguished in
accordance with Section 7312 and Eligible Policyholders shall be entitled
to receive in exchange therefor, as described in Article VII and the
Actuarial Contribution Memorandum, shares of Holding Company Common Stock
or, in certain circumstances, cash or Policy Credits.
(f) The Investors shall have the right, under the circumstances set forth
in the Investment Agreement, to purchase shares of Holding Company Common Stock
from the Holding Company upon the exercise of the Warrants on the terms and
subject to the conditions set forth in the Investment Agreement.
(g) The Holding Company shall as soon as reasonably practicable after the
Plan Effective Date issue shares of Holding Company Common Stock or pay some
other consideration, or cause the Company to pay some other consideration, to
Eligible Policyholders in accordance with Article VII and the Actuarial
Contribution Memorandum.
(h) At such time as the Holding Company sells shares of Holding Company
Common Stock in an IPO, the Holding Company shall arrange for the listing of the
Holding Company Common Stock on a national securities exchange or on the NASDAQ
National Market System effective as of the Plan Effective Date, and shall use
its best efforts to maintain such listing for so long as the Holding Company is
a publicly traded company. The Holding Company currently intends to apply to
list the Holding Company Common Stock on the New York Stock Exchange. Such
listing and such efforts by the Holding Company to maintain such listing shall
be in satisfaction of any duty the Company or the Holding Company may have to
encourage and assist in the establishment of a public market for shares of
Holding Company Common Stock. Neither the Company nor the Holding Company shall
have any obligation to provide a procedure for the disposition of shares of
Holding Company Common Stock except as expressly stated in the Plan.
(i) The Company and the Holding Company undertake, to use their best
efforts to ensure that the managing underwriters for the IPO shall conduct the
IPO process in a manner generally consistent with customary practices for
initial public offerings, to the extent reasonably comparable, and that the
Superintendent and his financial advisors shall be afforded reasonable access to
permit them to observe the IPO process. The final pricing decision on the IPO
shall be made by special committees of the Board and the Holding Company Board
within pricing guidelines established by the Holding Company Board.
(j) The proceeds of an IPO (net of underwriting commissions and expenses
related thereto) shall be: (i) first, contributed to the Company in the amount
of $100 million to be used for general operations of the Company or, in the
absence of sufficient net proceeds in excess of $100 million, to provide for the
amounts required for any of the purposes stated in clauses (ii), (iii) or (iv)
hereof; (ii) then, contributed to the
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Company in an amount sufficient to enable the Company to fund all of the Policy
Credits required to be credited to Eligible Policyholders pursuant to Section
7.3; (iii) then, retained by the Holding Company in an amount sufficient to
enable the Holding Company to pay all of the cash to Eligible Policyholders who
are to receive cash as described in, and pursuant to, Article VII other than
pursuant to Section 7.3(a)(v); (iv) then, contributed to the Company in an
amount sufficient to enable the Company to satisfy the undertaking of the
Company to the Superintendent pursuant to Section 7312(p); (v) then, retained by
the Holding Company in an amount not to exceed $10 million to provide working
capital for the Holding Company; (vi) then, retained by the Holding Company in
an amount not to exceed $30 million to pay dividends on the stock (including
Holding Company Common Stock and, if issued, Convertible Preferred Stock) of the
Holding Company; (vii) then, retained by the Holding Company in an amount not to
exceed 25% of the proceeds of the IPO (net of underwriting commissions and
expenses related thereto) to pay cash to Eligible Policyholders who are to
receive cash as described in, and pursuant to, Section 7.3(a)(v); and (viii)
then, to the extent that such net proceeds exceed the aggregate of the amounts
identified in clauses (i), (ii), (iii), (iv), (v), (vi) and (vii), and, if and
to the extent that the amount retained by the Holding Company pursuant to each
of clauses (iii), (vi) and (vii) is not used for the purpose stated in each such
clause, promptly contributed to the Company to be used for general operations of
the Company.
(k) In the absence of an IPO, the Holding Company may exercise its option,
by notice to the Investors within 90 days after the Demutualization Date, to
require the Investors to purchase from the Holding Company an aggregate of
1,000,000 shares of Convertible Preferred Stock for a total purchase price of
$100,000,000. In the event that the Holding Company requires the Investors to
purchase the Convertible Preferred Stock, the proceeds of such sale shall be:
(i) first, contributed to the Company in the amount of $25 million to be used
for general operations of the Company; (ii) then, contributed to the Company in
an amount sufficient to enable the Company to fund all of the Policy Credits
required to be credited to Eligible Policyholders pursuant to Section 7.3; (iii)
then, retained by the Holding Company in an amount sufficient to enable the
Holding Company to pay all of the cash to Eligible Policyholders who are to
receive cash as described in, and pursuant to, Article VII other than pursuant
to Section 7.3(a)(v); (iv) then, contributed to the Company in an amount
sufficient to enable the Company to satisfy the undertaking of the Company to
the Superintendent pursuant to Section 7312(p); (v) then, retained by the
Holding Company in the amount of $8 million to provide working capital for the
Holding Company; and (vi) then, to the extent that such proceeds exceed the
aggregate of the amounts identified in clauses (i), (ii), (iii), (iv) and (v),
and, if and to the extent that the amount retained by the Holding Company
pursuant to clause (iii) is not used for the purpose stated therein, promptly
contributed to the Company to be used for general operations of the Company.
Further, as provided in Section 7.3(a)(v)(y), in the absence of an IPO, no cash
shall be paid to Eligible Policyholders pursuant to Section 7.3(a)(v).
5.3 Continuation of Corporate Existence; Company Name. Upon the
Reorganization of the Company under the terms of the Plan and Section 7312, (a)
the Company's corporate existence as a stock life insurance company shall be a
continuation of its corporate existence as a mutual life insurance company and
(b) the Company's name shall be "MONY Life Insurance Company".
5.4 Notice of Hearing. (a) As soon as practicable following the Adoption
Date, but in any event not less than 30 days before the Superintendent's public
hearing pursuant to Section 7312(i), the Company shall mail notice of the
Superintendent's public hearing by first class mail to all Voting Policyholders.
The notice of hearing shall set forth the date, time, place and purpose of the
Superintendent's public hearing. The notice of hearing shall be preceded or
accompanied by information relevant to the hearing, including a copy of the
Plan, a summary of the Plan approved by the Superintendent and such other
explanatory information as the Superintendent shall approve or require.
(b) The Company shall give notice of the date, time, place and purpose of
the Superintendent's public hearing by publication in three newspapers of
general circulation, one in New York County and two in other cities approved by
the Superintendent. Such newspaper publications shall be made not less than 15
days nor more than 60 days before the hearing, and shall be in a form approved
by the Superintendent.
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5.5 Notice of Vote. (a) As soon as practicable following the Adoption
Date, but in any event not less than 30 days before the vote by Voting
Policyholders pursuant to Section 7312(k), the Company shall mail notice of the
vote by first class mail to all Voting Policyholders. The notice of vote shall
set forth the date, time and place of the vote.
(b) The notice of vote shall be preceded or accompanied by information
relevant to the vote, including a copy of the Plan, a summary of the Plan
approved by the Superintendent and such other explanatory information as the
Superintendent shall approve or require. The notice of vote shall also be
accompanied by a form of ballot.
5.6 Policyholder Vote. (a) A vote on the proposal to approve the Plan
shall be held at the time and place specified in the notice of vote, which shall
be from 10 a.m. to 4 p.m. at the home office of the Company, on a date that is
at least 30 days after the notice of vote is mailed to the Voting Policyholders.
If the Plan is approved by at least two-thirds of the votes validly cast, the
Company shall promptly submit the appropriate documents and certifications to
the Superintendent pursuant to Section 7312(k)(11).
(b) Each Voting Policyholder shall be entitled to one vote pursuant to
Section 7312(k), irrespective of the number or amount of Policies owned by such
Voting Policyholder.
(c) Voting Policyholders shall cast their votes pursuant to rules
established by the Superintendent.
5.7 Filing of Plan. Upon approval of the Plan by the Superintendent and
the Voting Policyholders, the Company shall, as soon as practicable thereafter,
file a copy of the Plan certified by the Superintendent in the office of the
Superintendent and the Clerk of New York County pursuant to Section 7312(l).
5.8 Tax Considerations. The Plan shall not become effective unless, on or
prior to the Plan Effective Date (and in any event, reaffirmed as of the Plan
Effective Date), the Company shall have obtained an opinion of nationally
recognized independent tax counsel, substantially to the effect that:
(a) Eligible Policyholders will not recognize any gain for Federal income
tax purposes as a result of (i) the surrender of their Policyholders' Membership
Interests pursuant to the Plan or (ii) the receipt of Holding Company Common
Stock pursuant to the Plan, except that, in general, an Eligible Policyholder
will recognize gain to the extent of any cash received pursuant to the Plan;
(b) the payment of consideration in the form of Policy Credits in
accordance with Article VII of the Plan will not (i) cause disqualification of
the tax attributes or status accorded to those (1) individual life insurance
policies or individual annuity contracts that have been issued pursuant to plans
qualified under Section 401(a) or 403(a) of the Code, or (2) individual
retirement annuities within the meaning of Section 408 of the Code or tax
deferred annuities qualified under Section 403(b) of the Code (including those
issued to employees of organizations described in Section 501(c)(3) of the
Code), to which such Policy Credits have been credited, or (ii) result in
penalties for the holders of those plans, policies and contracts referred to in
the preceding clause (i);
(c) the Reorganization of the Company pursuant to the Plan, including
without limitation the receipt of Company Common Stock by the Holding Company
and the extinguishment of the Policyholders' Membership Interests, will not
result in the recognition of any gain for Federal income tax purposes by either
the Company or the Holding Company; and
(d) insurance policies issued or purchased before the Plan Effective Date
will not be deemed reissued, issued in exchange for existing policies, or
purchased as a result of the Reorganization of the Company pursuant to the Plan.
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ARTICLE VI
POLICY OWNERSHIP AND IN FORCE DATES
6.1 Determination of Ownership. Unless otherwise stated herein, the Owner
of any Policy as of any date shall be determined on the basis of the Company's
records as of such date in accordance with the following provisions:
(a) The Owner of a Policy that is an individual insurance policy or
annuity contract (including each Certificate deemed to be a Policy pursuant
to Section 6.3) shall be the Person specified in such Policy as the owner
or contract holder unless no owner or contract holder is so specified, in
which case (i) the Owner of a Policy that is an individual policy of life
insurance or of accident and health insurance shall be deemed to be the
Person insured, if such Policy was issued upon the application of such
Person, or the Person who effectuated such Policy, if such Policy was
issued on the application of a Person other than the Person insured, and
(ii) the Owner of a Policy that is an annuity or pure endowment contract
shall be deemed to be the Person to whom such Policy is payable by its
terms.
(b) (i) Except as specified in Section 6.3, the Owner of a Policy that
is a group insurance policy shall be the Person or Persons specified in the
master policy as the policyholder, unless no policyholder is so specified,
in which case the Owner shall be the Person or Persons to whom or in whose
name the master policy shall have been issued and held, as shown on the
Company's records.
(ii) Except as specified in Section 6.3, the Owner of a Policy that is
a group annuity contract shall be the Person or Persons specified in the
contract as the contract holder, unless no contract holder is so specified,
in which case the Owner shall be the Person or Persons to whom or in whose
name the contract shall have been issued and held, as shown on the
Company's records.
(c) Notwithstanding subsections (a) and (b) of this Section 6.1, the
Owner of a Policy that has been assigned to another Person by an assignment
of ownership thereof absolute on its face and filed with the Company in
accordance with the provisions of such Policy and the Company's rules with
respect to the assignment of such Policy in effect at the time of such
assignment shall be the assignee of such Policy as shown on the records of
the Company. Unless an assignment satisfies the requirements specified for
such an assignment in this subsection (c), the determination of the Owner
of a Policy shall be made without giving effect to such assignment.
(d) In no event may there be more than one Owner of a Policy, although
more than one Person may constitute a single Owner. When one Policy has
more than one Person specified in such Policy as the owner or as the holder
of rights (other than the right to dividend values, to designate or change
a beneficiary, to elect or change a settlement or dividend option or to
assign or change a designation of rights under the Policy, and other than
the rights of a collateral assignee, none of which constitutes ownership
rights under a Policy) or who would otherwise be treated as an Owner
pursuant to this Section 6.1, all such Persons shall be deemed,
collectively, to be the single Owner of such Policy. In the event that
different Persons own Policies as trustees for the same trust as shown by
the tax identification number associated with such Persons in the Company's
records, the trust (and not such Persons) shall be deemed one Owner.
(e) Except as otherwise set forth in this Article VI, the identity of
the Owner of a Policy shall be determined without giving effect to any
interest of any other Person in such Policy.
(f) Subject to subsection (h) of this Section 6.1, in any situation
not expressly covered by the foregoing provisions of this Section 6.1, the
determination of the identity of the Owner of a Policy shall be made in
good faith by the Company on the basis of its records, and, except for bona
fide administrative errors, the Company shall not examine or consider any
other facts or circumstances.
(g) The mailing address of an Owner as of any date for purposes of the
Reorganization shall be the Owner's last known address as shown on the
records of the Company on such date or, if such address is not shown on the
records of the Company, then the mailing address of an Owner as of any date
for
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purposes of the Reorganization shall be the premium payor's last known
address as shown on the records of the Company.
(h) Any dispute as to the identity of the Owner of a Policy or the
right to vote or receive consideration shall be resolved in accordance with
procedures acceptable to the Superintendent and, if applicable, Section
7312(k)(4).
(i) The Owner of a supplementary contract or other settlement option
issued in settlement of the proceeds under any of the Company's insurance
policies or annuity contracts shall be the Person entitled to payment at
such date under such contract or option.
(j) In the event that the Owner(s), any successor(s) specified in the
Policy and any other Person(s) who would otherwise be deemed to be the
Owner under Section 6.1(a) have all died, then the Owner shall be deemed to
be the insured under the Policy.
6.2 In Force Dates. (a) Except as otherwise provided in Section 6.3, a
Policy shall be deemed to be in force ("In Force") as of any date if, as shown
on the Company's records on such date, the Policy Date of such Policy occurs on
or prior to such date, and as of such date the required premium has been
received by the Company and such Policy, as shown on the Company's records on
such date, has not matured by death or otherwise or been surrendered or
otherwise terminated; provided that (i) a Policy that is a life insurance policy
shall be deemed to be In Force after lapse for nonpayment of premiums during any
applicable grace period as administered by the Company and for so long as it
continues as reduced paid-up insurance or as extended term insurance on the
records of the Company, (ii) except as otherwise provided in Section 6.2(c), a
Policy that is a supplementary contract or other settlement option issued in
settlement of proceeds under any of the Company's insurance policies or annuity
contracts shall be deemed to be In Force in accordance with its effective date
as shown on the Company's records on any determination date, without regard to
any prior period during which a predecessor Policy was In Force, (iii) a Policy
that has been reinstated after not being In Force shall be deemed to be In Force
commencing on the date of reinstatement of the reinstated Policy, as shown on
the records of the Company, without regard to any prior period during which such
Policy was In Force, unless both the termination of the Policy and its
reinstatement occurred between the Adoption Date and the Plan Effective Date, in
which case the Policy shall be deemed, for purposes of the Plan, to have been
continuously In Force during the period between the Adoption Date and the Plan
Effective Date, (iv) a Policy that is an individual life insurance policy issued
with preliminary term insurance shall be deemed to be In Force on the Policy
Date of the individual life insurance policy, (v) a group Policy shall not be
deemed to be In Force on any date if on that date the Policy has terminated and
the Company's only obligations with respect to such Policy are either to
Certificate holders on disability waiver or on disability under such Policy, are
for unpaid claims incurred under such Policy prior to its termination or are to
pay or to continue paying fixed retirement annuity amounts to individuals
previously covered under the terminated Policy, and (vi) an individual Policy
shall not be deemed to be In Force on any date if on that date the Policy has
terminated and the Company's only obligations with respect to such Policy are to
the policyholder of such Policy on disability under such Policy or are for
unpaid claims incurred under such Policy prior to its termination.
(b) Notwithstanding the fact that a new Policy has been issued as a result
of the exercise of a right under a predecessor Policy, such new Policy shall be
deemed to be In Force in accordance with its Policy Date, without regard to the
Policy Date of the predecessor Policy.
(c) Notwithstanding the provisions of clause (ii) of Section 6.2(a), a
Policy that is a supplementary contract or other settlement option issued in
settlement of proceeds under an annuity contract in the following instances
shall be deemed to be In Force in accordance with the Policy Date of the
predecessor Policy under which said proceeds were payable: (i) maturity
settlement of fixed and flexible premium retirement annuity contracts where the
annuitant accepts the default settlement option of life income with ten years
certain on maturity and (ii) maturity settlement of individual variable annuity
contracts where the annuitant accepts the default variable settlement option of
life income with ten years certain on maturity or elects another variable
settlement option.
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(d) A Policy shall not be deemed to be In Force until it is issued,
notwithstanding that temporary insurance upon the application for such Policy
may have been in force prior to the Policy Date of such Policy.
(e) A Policy shall not be deemed to have matured by death as of any date
unless notice of such death has been received by the Company on or prior to such
date, as shown on the Company's records. The date of the surrender or lapse of a
Policy shall be as shown on the Company's records.
6.3 Certain Group Policies and Contracts. (a) Each Certificate issued
under any of the Company's Pension Department group annuity contracts as part of
a custodial 403(b) or IRA arrangement or as part of a non-ERISA 403(b)
arrangement shall be deemed to be a Policy, the Owner of which shall be
determined in accordance with Section 6.1. Each participation interest allocated
under any of the Company's Pension Department group annuity contracts as part of
a non-ERISA 403(b) arrangement where no Certificate is issued thereunder shall
be deemed to be a Policy and each participant thereunder shall be deemed to be
an Owner. Such Certificate or participation interest shall be deemed to be In
Force as of any date if, as shown on the Company's records on such date, such
Certificate's Policy Date or participation interest's Participation Date occurs
on or prior to such date and such Certificate or participation interest has not
terminated on or before such date. The custodian or employer-sponsor holding
such group annuity contracts shall not be a Voting Policyholder or an Eligible
Policyholder or an Owner. No other certificate issued, or participation interest
allocated, under any of the Company's Pension Department group annuity contracts
shall be deemed to be a Policy.
(b) Each Certificate issued under any of the Company's group life or
accident and health insurance policies issued to a multiple employer welfare
benefit plan and trust, a multiple employer trust or a trust established by the
Company shall be deemed to be a Policy, the Owner of which shall be determined
in accordance with Section 6.1, and shall be deemed to be In Force as of any
date if, as shown on the Company's records on such date, such Certificate's
Policy Date occurs on or prior to such date and such Certificate has not
terminated on or before such date. The trustee of any such trust established by
the Company shall not be a Voting Policyholder or an Eligible Policyholder or an
Owner.
(c) Each Certificate issued under any of the Company's group life or
accident and health insurance policies issued to an association or to the
trustees of a trust established, or participated in, by one or more associations
to insure association members shall be deemed to be a Policy, the Owner of which
shall be determined in accordance with Section 6.1, and shall be deemed to be In
Force as of any date if, as shown on the Company's records on such date, such
Certificate's Policy Date occurs on or prior to such date and such Certificate
has not terminated on or before such date. Any such association or the trustee
of any such trust shall not be a Voting Policyholder or an Eligible Policyholder
or an Owner.
ARTICLE VII
ALLOCATION AND PAYMENT OF POLICYHOLDER CONSIDERATION
7.1 Allocation of Allocable Shares. (a) The consideration to be given to
Eligible Policyholders in exchange for the Policyholders' Membership Interest
shall be shares of Holding Company Common Stock or, in the circumstances
described in Section 7.3, cash or Policy Credits. Solely for purposes of
calculating the amount of such consideration, each Eligible Policyholder will be
allocated shares of Holding Company Common Stock in accordance with this Article
VII and, in the case of Participating Policyholders, also the Actuarial
Contribution Memorandum.
(b) Each Eligible Policyholder shall be allocated a fixed component of
consideration equal to 7 shares of Holding Company Common Stock (subject to
proportional adjustment as provided in Section 10.5). In addition, each
Participating Policyholder shall be allocated a variable component of
consideration equal to the portion, if any, of the Aggregate Variable Component
allocated in respect of the Participating Policy or Participating Policies that
are In Force on both the Adoption Date and the Plan Effective Date
(collectively, the "Qualifying Policies") of which such Participating
Policyholder is the Owner on the Adoption Date. The total number of shares
allocated to an Eligible Policyholder shall be rounded to the nearest whole
share (with one-half being rounded upward). The Aggregate Variable Component
shall be allocated in respect of the
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Qualifying Policies in accordance with the principles set forth in Section 7.2
and the calculation of Actuarial Contribution described in the Actuarial
Contribution Memorandum (the "Actuarial Contribution Memorandum"), a copy of
which is attached as Schedule 2.
7.2 Allocation of Aggregate Variable Component. (a) The Aggregate Variable
Component shall be allocated to Participating Policyholders in respect of their
Qualifying Policies as follows:
(i) Such allocation shall be made by multiplying a policy equity share
for each Participating Policyholder by the number of shares of Holding
Company Common Stock constituting the Aggregate Variable Component. The
policy equity share for each Participating Policyholder shall be equal to
the sum of the Adjusted Actuarial Contributions of all of such
Participating Policyholder's Qualifying Policies divided by the sum of the
Adjusted Actuarial Contributions of all Qualifying Policies.
(ii) From determinations of (A) the contributions of Qualifying
Policies to the Company's assets and (B) the assets required to provide for
future benefits of such Qualifying Policies, the Company shall make
reasonable determinations of the dollar amount of actuarial contribution
(both positive and negative) ("Actuarial Contribution") for each Qualifying
Policy, according to the principles and methodologies set forth in detail
in the Actuarial Contribution Memorandum.
(iii) In order to produce each Qualifying Policy's adjusted Actuarial
Contribution ("Adjusted Actuarial Contribution"), the Company shall set
each negative Actuarial Contribution to zero as provided in the Actuarial
Contribution Memorandum.
(iv) Each such Actuarial Contribution shall be determined on the basis
of the Company's records as of the Statement Date, unless such Qualifying
Policy shall have been issued after the Statement Date, in which case the
Actuarial Contribution for such Qualifying Policy shall be equivalent to
the present value as of the Statement Date of its expected future
contribution to the surplus of the Company, as estimated by the Company in
accordance with the Actuarial Contribution Memorandum.
(b) As more fully described in the Actuarial Contribution Memorandum, past
annual contributions to the assets of the Company for Qualifying Policies In
Force on the Statement Date shall be (a) accumulated with interest to the
Statement Date and (b) reduced by an amount equal to the assets required as of
the Statement Date to provide for the future benefits of such Policies as
estimated by the Company. For all Qualifying Policies, the assets required as of
the Statement Date to provide for future benefits for such Policies shall be
equal to the statutory reserves and other statutory liabilities attributable to
such Policies less the Company's estimate of the present value of the expected
future contributions to surplus from such Policies, in each case as of the
Statement Date.
7.3 Payment of Consideration. (a) Each Eligible Policyholder who has been
allocated only a fixed component of consideration and each Eligible Policyholder
who is also a Participating Policyholder to whom a variable component is
allocated, shall on the Plan Effective Date be entitled to receive shares of
Holding Company Common Stock equal to the number of such shares allocated, in
the aggregate, to such Eligible Policyholder, except that instead of receiving
such shares, cash shall be paid or Policy Credits shall be credited (in an
amount determined pursuant to subsection (b) of this Section 7.3) as follows:
(i) Policy Credits shall be credited with respect to an Eligible
Policy that is an individual life insurance policy or an individual annuity
contract and that has been issued pursuant to a plan qualified under
Section 401(a) or 403(a) of the Code directly to the plan participant;
(ii) Policy Credits shall be credited with respect to an Eligible
Policy that is an individual retirement annuity within the meaning of
Section 408 of the Code or a tax deferred annuity qualified under Section
403(b) of the Code (including those issued to employees of organizations
described in Section 501(c)(3) of the Code);
(iii) In the event an Eligible Policyholder has been allocated a fixed
component of consideration with respect to two or more policies, at least
one of which would be credited Policy Credits pursuant to this Section 7.3,
then said fixed component shall be solely in the form of Policy Credits,
and such Policy
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Credits shall be in the form prescribed in this Section 7.3 for the Policy
that would be credited Policy Credits having the earliest Policy Date;
(iv) except as provided in clauses (i) through (iii) of this Section
7.3(a), cash shall be paid if such Eligible Policyholder's address for
mailing purposes as shown on the records of the Company is located outside
both the United States and Canada; and
(v) except as provided in clauses (i) through (iii) of this Section
7.3(a), cash may be elected in lieu of stock by any Eligible Policyholder
allocated no more than 75 shares of Holding Company Common Stock (the "Cash
Election Number") (subject to proportional adjustment as provided in
Section 10.5) if the Board, in its discretion, determines to make such
payment of cash upon election by an Eligible Policyholder. Such election to
receive cash in lieu of stock must be affirmatively indicated on a form
provided to such Eligible Policyholder that has been properly completed and
received by the Company prior to a date set by the Company and approved by
the Superintendent. Thus, the Company shall pay cash to each Eligible
Policyholder who (A) has so expressed a preference to receive cash in lieu
of stock and (B) has been allocated a number of shares of Holding Company
Common Stock equal to or less than the Cash Election Number, subject to the
following limitations: (x) the total amount of cash to be distributed to
Eligible Policyholders under this clause (v) pursuant to any such
determination by the Board to distribute cash shall not exceed 25% of the
proceeds of an IPO (net of underwriting commissions and expenses related
thereto) or such lower aggregate amount established by the Board prior to
the Demutualization Date (the "Aggregate Cash Amount") and (y) no cash
shall be paid to Eligible Policyholders pursuant to this Section 7.3(a)(v)
in the absence of an IPO. In the event that the aggregate number of shares
of Holding Company Common Stock allocated to Eligible Policyholders who
elect to receive cash in lieu of stock corresponds to an amount of cash, as
provided in Section 7.3(b), that exceeds the Aggregate Cash Amount, then
the Board, subject to the approval of the Superintendent, shall reduce the
Cash Election Number (such number being the "Reset Cash Election Number")
to accommodate the Aggregate Cash Amount. In the event the Board so reduces
the Cash Election Number, no pro rata distributions of cash shall be made,
with the result that Eligible Policyholders who elect to receive cash and
are allocated a number of shares equal to or less than the Reset Cash
Election Number shall receive cash, and Eligible Policyholders who elect to
receive cash but are allocated a number of shares greater than the Reset
Cash Election Number shall receive stock.
(vi) Notwithstanding clauses (i) through (iii) of this Section 7.3(a)
and except as provided in clauses (iv) and (v) hereof, an Eligible
Policyholder shall receive shares of Holding Company Common Stock with
respect to an Eligible Policy that is (A) a supplementary contract or other
settlement option regardless of whether the policy or contract whose
proceeds were settled thereunder would have been credited Policy Credits or
(B) an immediate annuity.
(vii) Except as provided in clauses (i) through (iii) of this Section
7.3(a), and subject to the limit on distribution of cash provided for in
clause (v) hereof, the Company may (A) offer Policy Credits or cash to
Eligible Policyholders to the extent that it is not reasonably feasible or
appropriate to provide consideration in the form that an Eligible
Policyholder would otherwise receive (e.g., because such consideration is
not deliverable) and (B) determine the Eligible Policy to which the Policy
Credits allocated for an Eligible Policyholder's fixed component of
consideration are credited pursuant to clause (iii) of this Section 7.3(a)
based on the feasibility and/or appropriateness of such crediting.
(b) If the consideration is to be paid or credited to an Eligible
Policyholder in cash or Policy Credits, as the case may be, pursuant to the
Plan, the amount of such consideration shall be equal to the number of shares of
Holding Company Common Stock allocable to such Eligible Policyholder as provided
in this Article VII and, in the case of Participating Policyholders, also the
Actuarial Contribution Memorandum, multiplied by the IPO Price or, in the
absence of an IPO within 120 days after the Plan Effective Date, a number equal
to 70% of the book value per share of the Holding Company Common Stock on the
Plan Effective Date. Payment shall be made by check, net of any applicable
withholding tax, or the crediting of a Policy Credit, as the case may be, as
soon as reasonably practicable after the Plan Effective Date.
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(c) As soon as reasonably practicable after the Plan Effective Date, the
Holding Company shall mail to each such Eligible Policyholder an appropriate
notice that a designated number of shares of Holding Company Common Stock have
been registered in the name of such Eligible Policyholder. Upon the request of
the registered holder of any such shares of Holding Company Common Stock so
issued in book-entry form as uncertificated shares, made in accordance with
administrative procedures approved by the Superintendent and established at
least 20 days prior to the Plan Effective Date, the Holding Company shall
promptly mail to such registered holder a stock certificate representing such
shares of Holding Company Common Stock.
(d) In the event that more than one Person constitutes a single Owner of a
Policy, the consideration allocated pursuant to this Article VII and the
Actuarial Contribution Memorandum shall be paid jointly to such Persons.
(e) Subject to the approval of the Superintendent, the Holding Company
shall establish a commission-free sales and purchase program which shall begin
on the first business day after the nine-month anniversary of the Plan Effective
Date and shall continue for three months (and may be extended if the Holding
Company Board determines such extension to be appropriate and in the best
interest of the Holding Company and its stockholders), pursuant to which each
Eligible Policyholder who receives a number of shares of Holding Company Common
Stock under the Plan that is equal to or less than a number of shares to be
determined by the Holding Company Board at least 60 days prior to the nine-month
anniversary of the Plan Effective Date (which number shall not be less than 25
nor more than 99) shall be entitled to sell at market prices all, but not less
than all, the shares of Holding Company Common Stock so received, without paying
brokerage commissions, mailing charges, registration fees or other
administrative or similar expenses. In addition, the program shall provide that
Eligible Policyholders who receive 99 or fewer shares of Holding Company Common
Stock under the Plan shall be entitled to purchase, commission-free, such number
of shares as is necessary to bring their respective total number of shares of
Holding Company Common Stock to 100. The Holding Company shall establish
administrative procedures for the delivery of requests to sell or purchase
shares of Holding Company Common Stock and for the sale or purchase of such
shares of Holding Company Common Stock through such program.
7.4 ERISA Plans. The Company has applied to the Department of Labor for
an exemption from Section 406(a) of the Employee Retirement Income Security Act
of 1974 and Section 4975 of the Code with respect to the receipt of
consideration pursuant to the Plan by employee benefit plans and IRAs subject to
the provisions of such sections. Notwithstanding any other provision of the
Plan, if such exemption is not received prior to the Plan Effective Date, the
Company may delay payment of such consideration to Eligible Policyholders and
may place such consideration in an escrow or similar arrangement subject to
terms and conditions approved by the Superintendent. Any such escrow or
arrangement shall provide for payment to Eligible Policyholders of such
consideration not later than the third anniversary of the Plan Effective Date
and all costs and expenses of such escrow or arrangement shall be borne by the
Company.
ARTICLE VIII
METHOD OF OPERATION FOR PARTICIPATING BUSINESS
8.1 Establishment of the Closed Block. The Closed Block Business shall be
operated by the Company as a closed block of participating business for the
exclusive benefit of the Policies included therein, for policyholder dividend
purposes only (the "Closed Block"). As set forth in the Closed Block Memorandum
attached as Schedule 3 (the "Closed Block Memorandum"), assets of the Company
shall be allocated to the Closed Block in an amount that produces cash flows
which, together with anticipated revenue from the Closed Block Business, are
reasonably expected to be sufficient to support the Closed Block Business
including, but not limited to, provisions for payment of claims and surrender
benefits, certain expenses and taxes, and to provide for continuation of current
payable dividend scales, if the experience underlying such dividend scales
continues, and for appropriate adjustments in such scales if the experience
changes. Exhibit F sets forth certain of the Company's assets and the portions
thereof that are allocated to the Closed Block as of December 31, 1997 (such
portions of such assets, collectively, the "Exhibit F Closed Block Assets").
Policy loans, accrued interest and due and deferred premiums shall be allocated
to the Closed Block as of
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December 31, 1997 as described in the Closed Block Memorandum. The Exhibit F
Closed Block Assets and such policy loans, accrued interest and due and deferred
premiums shall be brought forward to the Plan Effective Date in accordance with
the principles set forth in Section 8.2. The amount of the Company's assets
required to support the Closed Block as of the Statement Date is determined as
set forth in the Closed Block Memorandum.
8.2 Operation of the Closed Block. (a) Insurance and investment cash flows
on and after the Statement Date from operations of the Closed Block Business,
the Exhibit F Closed Block Assets, and, as described in the Closed Block
Memorandum, all other assets acquired by or allocated to the Closed Block, shall
be received by or withdrawn from the Closed Block in accordance with the
principles set forth in this Section 8.2(a).
(i) With respect to insurance cash flows:
(A) Cash premiums (including annuity considerations), cash
repayments of policy loans and policy loan interest paid in cash on
Closed Block Business shall be received by the Closed Block. Death,
surrender and maturity benefits (including any interest allowed for
delayed payment of benefits) paid in cash, policy loans taken in cash,
annuity and other income benefits and dividends paid in cash, all with
respect to Closed Block Business, shall be withdrawn from the Closed
Block.
(B) Cash shall be withdrawn from the Closed Block in the amount of
state and local premium taxes and nonrecoverable guarantee fund
assessments (including franchise taxes to the extent measured solely by
premiums) paid in cash on premiums received in respect of Closed Block
Business. Cash payments with respect to the reinsurance treaties
considered in the development of the Closed Block funding shall be
withdrawn from or received by the Closed Block.
(C) Cash payments shall be received by or withdrawn from the Closed
Block for Federal income taxes in accordance with the tax sharing
procedure described in the Appendix to the Closed Block Memorandum.
(D) No cash shall be withdrawn from the Closed Block with respect
to expenses, other than as provided in Section 8.2(a)(ii), and the
Closed Block shall not be charged for any such expense.
(E) With respect to Closed Block Business issued after the
Statement Date, an amount equal to the estimated present value, as of
each such Policy's Policy Date, of future premiums less the present
value of future guaranteed benefits, dividends, premium taxes or other
federal, state, local or foreign taxes and nonrecoverable guarantee fund
assessments, as set forth in the Closed Block Memorandum, shall be
deducted from the Closed Block.
(ii) With respect to investment cash flows:
(A) Cash payments for equity real estate acquired upon foreclosure
of, reasonable and customary operating expenses of, and equity real
estate taxes (as reported in such Annual Statement) on, any Closed Block
assets that are investments in equity real estate shall be withdrawn
from the Closed Block.
(B) Cash received on dispositions of investments shall be net of
all reasonable and customary brokerage and other transaction expenses,
including taxes, that are deducted in reporting proceeds of such sales
in the Company's Annual Statement to the Superintendent. Cash paid for
expenses in acquiring an investment shall be withdrawn from the Closed
Block to the extent included in the cost of such investment in the
Company's Annual Statement to the Superintendent.
(C) Investment management expenses shall not be withdrawn from or
charged to the Closed Block.
(b) Except as otherwise provided in this subsection (b), new investments
acquired on or after the Statement Date with Closed Block cash flows shall
consist only of fixed income securities (including Short-Term Securities) and
commercial and agricultural mortgages ("Eligible Investments"). Eligible
Investments, at the time of acquisition, (i) if fixed income securities, other
than Short Term Securities, shall either (x) be
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obligations, not in default, which are issued, assumed, guaranteed or insured by
the United States of America or by any agency or instrumentality thereof ("U.S.
Government Obligations") or (y) have a "Category 1," "Category 2" or "Category
3" rating (or the comparable rating in the event either rating classification is
revised or eliminated) of the NAIC Securities Valuation Office, (ii) if
Short-Term Securities, shall either (x) be U.S. Government Obligations or (y) be
NAIC Category 1 securities (or the comparable rating in the event the rating
classification is revised or eliminated) or shall be rated "A-1" or "P-1" or the
comparable rating by a nationally recognized rating agency, or, if rated "A-2"
or "P-2" or the comparable rating by a nationally recognized rating agency,
shall have a final maturity at purchase of not more than 35 days, and (iii) if
mortgages, shall have an average debt service coverage (for all such mortgages
added in a particular year) of at least 1.20. Such acquisitions shall be managed
by the Company with the objective of creating a portfolio of new Closed Block
investments having an average maturity at issue of at least 7 years composed of
no more than 30% commercial mortgages and no more than 20% NAIC 3 bonds. Cash
and Short Term Securities shall be managed with the objective of meeting the
reasonable liquidity needs of the Closed Block. No new investments shall be made
in equity real estate or obligations rated below the NAIC categories previously
described in this paragraph, except to honor existing commitments to
non-affiliated Persons, or as determined by the Company to be required to
safeguard the value of investments previously allocated to the Closed Block.
With the Superintendent's prior approval, the Company may, from time to time,
adopt changes to the foregoing investment policy.
(c) No assets shall be reallocated or transferred between the Closed Block
and any other portion of the Company's general account or any of its separate
accounts or any Person (directly or indirectly) controlling, controlled by or
under common control with the Company or the Holding Company within the meaning
of Section 1501 of the New York Insurance Law (an "affiliate") without the prior
approval of the Superintendent. The Company shall not permit any other
transaction between the Closed Block and any other portion of the Company's
general account or any of its separate accounts or any affiliate of the Company
or the Holding Company which, if entered into between the Company and the
Holding Company or any affiliate of the Company or the Holding Company, would
under Section 1505 of the Insurance Law be subject to the Superintendent's prior
approval, or prior notice and nondisapproval, without such prior approval or
such prior notice and nondisapproval, as the case may be. For purposes of the
preceding sentence, in applying the percentages referred to in Section 1505,
references to "the insurer's admitted assets" shall be deemed to refer to
admitted assets of the Closed Block.
(d) (i) Dividends on Closed Block Business shall be apportioned annually by
the Board in accordance with applicable law and with the objective of minimizing
tontine effects and exhausting assets allocated to the Closed Block with the
final payment under the last Policy contained in the Closed Block.
(ii) The Company shall submit periodic reports to the Superintendent of
the operation of the Closed Block. Such reports shall include the opinion of
an independent actuary who would be a "qualified actuary" pursuant to
Section 4217 of the New York Insurance Law (as it may be amended from time
to time) and shall be submitted by July 1 of the fifth year following the
year in which the Plan Effective Date occurs and by July 1 of each fifth
year thereafter for so long as the Superintendent may require. The
independent actuary shall opine whether the Company, in setting dividend
scales for Closed Block Business, has acted in accordance with the
provisions of this Article VIII.
(e) The Company shall provide as supplemental schedules to its Annual
Statements for the years commencing after the year in which the Plan Effective
Date occurs (i) financial schedules, consisting of the information required by
Annual Statement pages 2, 3, 4 and 5, and (ii) investment schedules, consisting
of the information required by Annual Statement Schedules A, B, BA, D and E (or
comparable information under financial reporting requirements as they may be
established from time to time for the Company as a whole by the Superintendent
after the Adoption Date), in each case for the Closed Block. By July 1 of the
year subsequent to the year being reported, the Company's independent public
accountants shall furnish to the Company, and the Company shall submit to the
Superintendent, an opinion on the financial statements of the Company, which
opinion shall encompass the foregoing financial schedules of the Closed Block.
Additionally, the Company shall submit to the Superintendent by July 1 of each
year a report, prepared at the Company's request by its independent public
accountants, in a form acceptable to the Superintendent, of the results of
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<PAGE> 21
certain procedures, which procedures shall have been approved by the
Superintendent, to test the Company's compliance with subsections (b), (c), (d)
and (e) of this Section 8.2. The reporting obligations provided for in this
subsection (e) shall continue for so long as the Superintendent may require.
(f) No amounts shall be withdrawn from or received by the Closed Block for
any taxes, including premium taxes or other federal, state, local or foreign
taxes, and nonrecoverable guarantee fund assessments, resulting from the
operations of the Company or any of its subsidiaries prior to December 31, 1997.
No asset valuation or interest maintenance reserve or any increase or decrease
therein, or any similar reserve, shall be charged or credited to the Closed
Block.
(g) None of the assets, including the revenue therefrom, allocated to the
Closed Block or acquired by the Closed Block shall revert to the benefit of the
stockholders of the Company.
8.3 Guaranteed Benefits. The Company shall pay all guaranteed benefits for
Closed Block Business in accordance with the terms of the Policies contained in
the Closed Block. The assets allocated to the Closed Block are the Company's
assets and are subject to the same liabilities (in the same priority) as all
assets in the Company's general account.
8.4 Other Participating Policies.
(a) Participating Policies in Force on the Effective Date that are not
included in the Closed Block Business shall continue to be Participating
Policies in accordance with their terms.
(b) The four classes of individual Participating Policies described in
clause (i) below shall be managed in accordance with this subsection (b).
(i) The four classes shall consist of individual Participating
Policies and riders in Force on the Effective Date that are not included in
the Closed Block and that fall within the following four categories: (A)
module ordinary life insurance policies including Legal Professional Life,
(B) fixed account riders to the participating individual variable annuity
contract, (C) medical insurance policies and (D) disability income
policies.
(ii) The Company shall establish, for each such Policy class,
(A) an objective based on (a), (b) or (c) where (a) is the future
statutory gain over the life of such class that is derived from the
methods and actuarial assumptions used in calculating the present value
of future statutory gains for purposes of determining actuarial
contribution for such class, as described in the Actuarial Contribution
Memorandum, for module ordinary life insurance and individual disability
income policies, (b) is the long-term loss ratio assumed in determining
the actuarial contribution for individual medical care insurance and (c)
is the excess interest or dividend rate provided to a similar policy
included in the Closed Block for fixed account riders to the
participating individual variable annuity contract;
(B) a basis for measuring deviations from such objectives, in (A)
above; and
(C) a method by which any long-term deviations from such basis will
be reflected in the financial treatment of Policies within such class.
(iii) The Company shall submit a memorandum to the Superintendent
setting forth for each of the above Policy/rider classes the bases and
methods described in clause (ii) of this Section 8.4(b), which bases and
methods shall be subject to the approval of the Superintendent. The Company
shall not change such bases and methods except with the prior approval of
the Superintendent.
(iv) The Company shall submit to the Superintendent by July 1 of each
year, commencing July 1 of the year following the calendar year in which
the Effective Date occurs, for so long as the Superintendent may require, a
report in a form acceptable to the Superintendent as to its compliance with
this Section 8.4(b).
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ARTICLE IX
PLAN OF OPERATION; NEW PARTICIPATING BUSINESS
9.1 Plan of Operation. The Company's Plan of Operation, including ten-year
actuarial projections, is set forth in Exhibit G. Such Plan of Operation and
projections represent the Company's current estimates and expectations based on
the assumptions used in their preparation and may change in the future (subject
to any required approvals of the Superintendent).
9.2 New Participating Business. The Company intends to continue issuing
for delivery in the State of New York participating individual life insurance
policies after the Effective Date.
ARTICLE X
ADDITIONAL PROVISIONS
10.1 Acquisition of Securities by Certain Officers, Directors and
Employees. (a) From the Adoption Date until the Plan Effective Date and
thereafter until the fifth anniversary of the Plan Effective Date, no officer,
director or employee of the Company, including their family members and their
spouses, shall directly or indirectly offer to acquire or shall acquire in any
manner the beneficial ownership of securities of the Company or the Holding
Company except for acquisitions permitted under Section 7312(w), including, but
not limited to, acquisitions by officers (including officers who are directors)
and employees of the Company pursuant to the Stock Incentive Plan, a copy of
which is attached as Schedule 4, or pursuant to Section 10.2, and provided,
further, that at no time during the period ending on the fifth anniversary of
the Plan Effective Date may the aggregate number of shares issued, and shares
issuable, pursuant to such Stock Incentive Plan and Section 10.2 exceed 5% of
the number of shares of Holding Company Common Stock issued, or issuable upon
conversion or exercise of securities issued, pursuant to Sections 3.3,
5.2(d)(iv) and 5.2(e)(iii).
(b) For purposes of this Section 10.1, the terms "beneficial ownership",
"family member" and "securities" have the meanings given them in Section
7312(w).
10.2 Restricted Stock for Nonemployee Directors. (a) Restricted Stock may
be granted to a Nonemployee Director in each calendar year, except that no
Restricted Stock shall be granted prior to the first anniversary of the Plan
Effective Date, and no Restricted Stock shall be granted prior to the fifth
anniversary of the Plan Effective Date without the approval of the
Superintendent. The Holding Company Board shall have the complete discretion in
determining the number of shares of Restricted Stock, if any, to be granted to a
Nonemployee Director; provided, however, that (i) the Fair Market Value of the
shares of Restricted Stock (valued on the date of grant) granted to a
Nonemployee Director during a calendar year shall not exceed the lesser of (a)
one-half the amount of all Directors' Fees earned by the Nonemployee Director
for the immediately preceding calendar year or (b) $15,000 (rounded upward to
the nearest whole share), and (ii) the grant of Restricted Stock shall be in
lieu of that portion of the Directors' Fees otherwise payable to the Nonemployee
Director in cash during the calendar year of grant that is equal to the Fair
Market Value of the Restricted Stock on the date of grant. Each grant of
Restricted Stock shall be evidenced by a restricted stock agreement that shall
specify the number of shares of Restricted Stock, the vesting requirements and
such other terms and conditions as the Holding Company Board shall determine
which are not inconsistent with the provisions of this Section 10.2.
(b) One-third of the shares of each grant of Restricted Stock shall vest,
based on the continued service of the Nonemployee Director on the Holding
Company Board, on each of the first three anniversaries of the date such
Restricted Stock is granted, or such longer period as may be determined by the
Holding Company Board, except that shares shall continue to vest should the
service of the Nonemployee Director terminate by reason of death or Disability.
(c) Shares of Restricted Stock may not be transferred, assigned or subject
to any encumbrance, pledge or charge until applicable vesting restrictions have
been satisfied. Failure to satisfy any applicable vesting restrictions shall
result in the subject shares of Restricted Stock being forfeited and returned to
the Holding Company, unless otherwise provided by the Holding Company Board. The
Holding Company Board may
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<PAGE> 23
require that certificates representing Restricted Stock granted under this
Section 10.2 bear a legend making appropriate reference to the restrictions
imposed and may require the Nonemployee Director to enter into an escrow
agreement providing that the certificates representing Restricted Stock granted
or sold pursuant to this Section 10.2 will remain in the physical custody of an
escrow holder until all restrictions are removed or expire.
(d) Subject to the foregoing provisions of this Section 10.2, the
Nonemployee Director will have all rights of a shareholder with respect to
shares of Restricted Stock granted to him or her, including the right to vote
the shares after the second anniversary of the Plan Effective Date and receive
all dividends and other distributions paid or made with respect thereto, unless
the Holding Company Board determines otherwise at the time the Restricted Stock
is granted.
(e) If a Nonemployee Director makes an election pursuant to Section 83(b)
of the Code with respect to a grant of Restricted Stock, the Nonemployee
Director shall be required to promptly file a copy of such election with the
Holding Company.
10.3 Corrective Actions. Subject to the terms of the Plan and with the
prior approval of the Superintendent, the Holding Company may distribute
additional shares of Holding Company Common Stock and take any other action it
deems appropriate to remedy errors or miscalculations made in connection with
the Plan.
10.4 Compensation of Officers, Directors and Employees. No officer,
director or employee of the Company shall receive any fee or other
consideration, other than regular salary, director fees or consideration as a
policyholder in connection with the Plan. This Section 10.4 shall not prohibit
the Company from compensating in cash any firm with which one of its directors
is associated for services rendered in connection with the transactions
contemplated by the Plan, or from granting Restricted Stock to Nonemployee
Directors pursuant to Section 10.2.
10.5 Adjustment of Share Numbers. In order to effect a filing range (in
the registration statement under the Securities Act relating to an IPO) for the
IPO Price which the Company and the managing underwriters of such IPO deem
appropriate, the Company may adjust the number of shares of Holding Company
Common Stock established by the Board pursuant to the definition of Allocable
Shares, provided the Company has received the prior approval of the
Superintendent. In the event of such an adjustment, the following numbers of
shares of Holding Company Common Stock in the Plan shall be adjusted
proportionately: (a) the number of shares of Holding Company Common Stock
calculated in accordance with Section 7.1(b); (b) the number of shares of
Holding Company Common Stock set forth in Section 7.3(a)(v) as the maximum
number of shares which entitles an Eligible Policyholder to indicate a
preference to receive cash in lieu of stock; and (c) the number of shares of
Holding Company Common Stock purchasable upon exercise of the Warrants and into
which the Convertible Preferred Stock is convertible. The number of shares of
Holding Company Common Stock resulting from any such adjustment shall be rounded
up to the next higher whole share; provided, that no such adjustment will be
made unless it would result, without any such rounding, in the number of
Allocable Shares to be allocated to each Eligible Policyholder as the fixed
component of the distribution pursuant to Section 7.1(b) being a whole number.
10.6 Notices. If the Company complies substantially and in good faith with
the requirements of Section 7312 or the terms of the Plan with respect to the
giving of any required notice to policyholders, its failure in any case to give
such notice to any Person or Persons entitled thereto shall not impair the
validity of the actions and proceedings taken under Section 7312 or the Plan or
entitle such Person to any injunctive or other equitable relief with respect
thereto.
10.7 Amendment or Withdrawal of Plan. At any time prior to the Plan
Effective Date, the Board may amend or withdraw the Plan (including the Exhibits
and Schedules) in accordance with Section 7312(f). No amendment made after the
public hearing or after the vote of Voting Policyholders may change the Plan in
a manner that the Superintendent determines is materially disadvantageous to any
policyholder (as defined in Section 7312(a)(2)) unless a further hearing or vote
is conducted as provided by Section 7312(f).
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<PAGE> 24
10.8 Costs and Expenses. The Company and the Holding Company have
delivered to the Superintendent written undertakings in compliance with Section
7312(p).
10.9 Governing Law. The terms of the Plan shall be governed by and
construed in accordance with the law of the State of New York.
10.10 Corrections. The Company may, until the earlier of the mailings
required by Section 5.4 and Section 5.5, by an instrument executed by its
Chairman of the Board, President or any Executive Vice President, attested by
its Secretary or Assistant Secretary under its corporate seal and submitted to
the Superintendent, make such modifications of a non-material nature as are
appropriate to correct errors, clarify existing items or make additions to
correct manifest omissions in the Plan (including the Exhibits and Schedules).
In Witness Whereof, The Mutual Life Insurance Company of New York, by
authority of its Board of Trustees, has caused this Plan, as herein amended, to
be signed by its Chairman of the Board and its corporate seal to be affixed
hereto attested by its Secretary on September 9, 1998.
The Mutual Life Insurance Company
of New York
By: /s/ MICHAEL I. ROTH
------------------------------------
Name: Michael I. Roth
Title: Chairman and Chief Executive
Officer
[Seal]
Attest:
By: /s/ THOMAS J. CONKLIN
----------------------------------------------------------------
Name: Thomas J. Conklin
Title: Senior Vice President and Secretary
21
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
THE MONY GROUP INC.
The MONY Group Inc. (hereinafter called the "Corporation"),
a corporation organized and existing under the laws of the State of Delaware,
hereby certifies as follows:
The Corporation was originally incorporated under the name
of MONYCO, Inc., and the original Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on June 24, 1997. Such original
Certificate of Incorporation was amended on December 12, 1997 to change the name
of the Corporation to MONY Financial Services Corporation.
1. Pursuant to Sections 242 and 245 of the Delaware General
Corporation Law, this Amended and Restated Certificate of Incorporation restates
and integrates and further amends the provisions of the Certificate of
Incorporation of the Corporation.
2. The text of the Certificate of Incorporation of the
Corporation is hereby restated, integrated and amended to read in its entirety
as follows:
FIRST: The name of the Corporation is The MONY Group Inc.
SECOND: The address of the registered office and registered
agent in this state is Corporation Trust Center, 1209 Orange Street in the City
of Wilmington, County of New Castle, and the name of the registered agent at
said address is The Corporation Trust Company.
THIRD: The nature of the business of the Corporation and
its purpose is to engage in any lawful act or activity for which corporations
may be organized under the Delaware General Corporation Law (the "DGCL").
FOURTH: The authorized capital stock of the Corporation
shall consist of (i) 100,000,000 shares of Preferred Stock, par value $.01 per
share (the "Preferred Stock"), and (ii) 400,000,000 shares of Common Stock, par
value $.01 per share (the "Common Stock").
The Preferred Stock shall consist of one or more series of
Preferred Stock which shall have the powers, terms, conditions, designations,
preferences and privileges, the relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions, if any, as
provided herein.
<PAGE> 2
A. CONVERTIBLE PREFERRED STOCK
There is hereby designated from the authorized Preferred
Stock a series of Convertible Preferred Stock (the "Convertible Preferred
Stock"), consisting of 1,000,000 shares, with the preferences, powers and other
rights as set forth below.
I. Rank
The Convertible Preferred Stock shall, with respect to
dividend rights and rights on liquidation, dissolution or winding up, rank (i)
on parity with any other class or series of Preferred Stock established by the
Board of Directors of the Corporation (the "Board of Directors"), the terms of
which shall specifically provide that such class or series shall rank on parity
with the Convertible Preferred Stock, and (ii) senior and prior to any other
equity securities of the Corporation with respect to dividend rights and rights
on liquidation, dissolution or winding up.
II. Dividends
(a) The holders of the shares of Convertible Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors,
dividends at a rate equal to the ten-year Treasury Rate (determined in
accordance with standard market practice as reported in the Federal Reserve Bank
of New York "Composite 3:30 P.M. Quotations for U.S. Government Securities") in
effect on the date of issuance, payable quarterly in cash on the last day of
March, June, September and December of each calendar year, only out of funds
that are legally available therefor.
(b) Dividends on the Convertible Preferred Stock shall be cumulative
from and after the date on which the Convertible Preferred Stock is issued, as
hereinafter provided. All dividends payable on the Convertible Preferred Stock
shall be first paid, or declared and set apart for payment, before any dividends
on the Common Stock or any other stock of the Corporation ranking junior in
priority to the Convertible Preferred Stock as to dividends shall be paid or set
apart for payment, so that if for all past dividend periods and for the then
current dividend period, dividends on all outstanding shares of the Convertible
Preferred Stock shall not have been paid or set apart for payment, the
deficiency shall be fully paid or set apart for payment before any dividends
shall be paid or set apart for payment on the Common Stock or any other stock of
the Corporation ranking junior in priority as to dividends to the Convertible
Preferred Stock.
III. Voting and Related Rights
Except as provided in this Section A.III and in Section A.X
of this Paragraph Fourth and as otherwise required by law, the holders of the
Convertible Preferred Stock shall have no right to vote at or participate in any
meeting of stockholders of the Corporation or to receive any notice of any such
meeting.
On any matter in which the holders of Convertible Preferred
Stock shall be entitled to vote, they shall be entitled to one vote for every
share of Convertible Preferred Stock held by them.
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<PAGE> 3
Whenever (a) dividends upon any shares of Convertible
Preferred Stock shall be accrued and unpaid in an amount equal to the equivalent
of six quarterly dividends thereon, or (b) the Corporation fails to make any
payment upon mandatory redemption of the Convertible Preferred Stock (each of
(a) and (b) being a "Triggering Event"), then and in any such case (x) the
number of directors constituting the Board of Directors of the Corporation shall
be increased by two, and, subject to obtaining any necessary regulatory
approvals, which the Corporation will use its best efforts to obtain as soon as
practicable after the occurrence of a Triggering Event, the holders of all
outstanding shares of Convertible Preferred Stock, voting separately as a class,
shall be entitled to elect the two additional members of the Board of Directors
and (y) the dividend rate on the Convertible Preferred Stock shall automatically
increase by 100 basis points for the period from and including the date of the
occurrence of such Triggering Event. The two additional directors shall serve
and the increased dividend rate shall be payable until all dividends accrued and
unpaid have been paid or declared and funds set aside to provide for payment in
full or the Corporation fulfills its mandatory redemption obligation, as the
case may be.
At any time after the vesting in the holders of Convertible
Preferred Stock of the right to elect two additional directors, a special
meeting of the holders of Convertible Preferred Stock for the purpose of
electing the two additional directors shall be held within 60 days after vesting
of such right and upon 30 days' notice by call of the Secretary of the
Corporation. If the Secretary should fail or neglect to call such meeting within
30 days after the vesting of such right, then such meeting may be held by call
of any holder of Convertible Preferred Stock at the time outstanding.
So long as the holders of Convertible Preferred Stock are
entitled hereunder to elect two additional directors, any vacancy in the Board
of Directors caused by the death or resignation of any director elected by the
holders of Convertible Preferred Stock, or selected by the remaining director as
in this sentence provided, shall, until the next meeting of stockholders for the
election of directors, in each case be filled by the remaining director elected
by the holders of Convertible Preferred Stock.
Upon termination of such voting rights of the holders of
Convertible Preferred Stock, the terms of office of all persons who shall have
been elected directors of the Corporation by vote of the holders of Convertible
Preferred Stock, or by vote of a director elected by such holders, shall
forthwith terminate, and the number of directors constituting the Board of
Directors of the Corporation shall be decreased by two, subject always to the
increase of the number of directors pursuant to this Section A.III.
IV. Certain Restrictions.
Whenever quarterly dividends or other dividends or
distributions payable on the Convertible Preferred Stock as provided in Section
A.II of this Paragraph Fourth are in arrears, thereafter and until all accrued
and unpaid dividends and distributions (whether or not declared or due), on
shares of Convertible Preferred Stock outstanding shall have been paid in full,
the Corporation shall not:
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<PAGE> 4
(a) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Convertible Preferred Stock;
(b) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Convertible Preferred Stock, except
dividends paid ratably on the Convertible Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(c) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Convertible Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the Corporation ranking
junior (as to dividends and upon dissolution, liquidation and winding up) to the
Convertible Preferred Stock; or
(d) other than as otherwise provided in Sections A.VII and A.VIII of
this Paragraph Fourth, redeem or purchase or otherwise acquire for consideration
any shares of Convertible Preferred Stock, or any shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Convertible Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under subsection (c) or
(d) of this Section A.IV, purchase or otherwise acquire such shares at such time
and in such manner.
V. Liquidation, Dissolution or Winding Up
(a) In the event of any liquidation, dissolution or winding up of
the affairs of the Corporation, before any distribution of the assets of the
Corporation (whether capital or surplus) shall be made to, or set apart for, the
holders of any of the Common Stock or any other stock of the Corporation having
rights or preferences (either as to dividends or upon liquidation, dissolution
or winding up) junior to the rights and preferences of the Convertible Preferred
Stock, the holders of the Convertible Preferred Stock shall be entitled to the
payment in cash of $100.00 per share, together with an amount equal to any
accrued and unpaid dividends payable thereon (whether or not declared or due) up
to and including the date of final distribution to the holders of the
Convertible Preferred Stock.
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<PAGE> 5
(b) If, upon any such liquidation, dissolution or winding up, the
assets of the Corporation distributable among the holders of the Convertible
Preferred Stock shall be insufficient to pay to them in full the preferential
amounts specified above, then no such assets, or the proceeds thereof, shall be
distributed among the holders of the Convertible Preferred Stock or to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Convertible Preferred Stock
except distributions made ratably on the Convertible Preferred Stock and all
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such a liquidation, dissolution or winding up.
VI. Conversion
The holders of the Convertible Preferred Stock shall have
the following conversion rights (the "Conversion Rights"):
(a) Each share of Convertible Preferred Stock shall be convertible,
at the option of the holder thereof, at any time after the date of original
issuance, at the office of the Corporation or any transfer agent for the Common
Stock, into fully paid and non-assessable shares of Common Stock at the
Conversion Price (as hereafter defined) in effect at the time of conversion
determined as hereinafter provided and upon the terms hereinafter set forth. The
Conversion Price shall equal either, (i) if an underwritten initial public
offering of Common Stock (an "IPO") pursuant to an effective Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
occurs on or within 5 Trading Days (as defined below) after the Demutualization
Date (as defined below), the initial public offering price per share sold in the
IPO as specified on the cover page of the final Prospectus for the IPO (the "IPO
Price") unless the average of the daily Closing Prices (as defined below) of the
Common Stock for the 40 Trading Days following the first 20 Trading Days after
the Demutualization Date (the "40 Trading Day Average") is greater than 115% of
the IPO Price, in which case the Conversion Price shall be equal to the IPO
Price plus an amount equal to one half of the excess of the 40 Trading Day
Average over 115% of the IPO Price or (ii) if the IPO does not occur on or
within 5 Trading Days after the Demutualization Date, the lesser of (x) the
average of the daily Closing Prices of the Common stock for the first 20 Trading
Days following the Demutualization Date and (y) 70% of the book value per share
of the Common Stock as of the Demutualization Date, determined in accordance
with GAAP (as defined below) (the "Conversion Price").
"Business Day" means any day that is not a Saturday, Sunday
or other day on which commercial banks in New York City are required or
authorized by law to be closed.
"Demutualization Date" means the date the Corporation's
Plan of Reorganization, as adopted on _________, 1998 by the Board of Trustees
of The Mutual Life Insurance Company of New York, becomes effective pursuant to
Section 7312 of the New York Insurance Law or, if later, the first date
following such effectiveness on which shares of Common Stock are distributed to
the policyholders of the Corporation's insurance company subsidiary.
5
<PAGE> 6
"Closing Price" means, with respect to the Common Stock,
for any day, the reported last sale price per share on the principal national
securities exchange or inter-dealer quotation system on which the Common Stock
is listed or admitted to trading, or if not listed or admitted to trading on any
national securities exchange or inter-dealer quotation system, the average of
the closing bid and asked prices per share in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by the Corporation for that purpose.
"GAAP" means, at any time, generally accepted accounting
principles in the United States as are consistently applied by the Corporation
at such time.
"Trading Day" means (i) if the Common Stock is listed or
admitted for trading on the New York Stock Exchange or any other national
securities exchange, a day on which such exchange is open for business; (ii) if
the Common Stock is quoted on the Nasdaq National Market or any other system of
automated dissemination of quotations of securities prices, a day on which
trades may be effected through such system; or (iii) if the Common Stock is not
listed or admitted for trading on any national securities exchange or quoted on
the Nasdaq National Market or any other system of automated dissemination of
quotation of securities prices, a day on which the Common Stock is traded
regular way in the over-the-counter market and for which a closing bid and a
closing asked price for the Common Stock are available.
If, on the third anniversary of the original issuance of
the Convertible Preferred Stock, the Conversion Price is greater than 70% of the
then book value per share of the Common Stock determined in accordance with
GAAP, the Conversion Price shall be reset at such time so that the Conversion
Price will be equal to 70% of such book value per share. After the resetting of
the Conversion Price, if any, the Conversion Price will continue to be subject
to the same anti-dilution adjustments described under this Section A.VI.
(b) Each share of Convertible Preferred Stock shall be convertible
into the number of shares of Common Stock which results from dividing (i) the
sum of $100, plus any unpaid accrued or accumulated dividends (whether or not
declared or due), as provided in Section A.II of this Paragraph Fourth, by (ii)
the Conversion Price in effect at the time of conversion.
(c) If at any time or from time to time there shall be a merger or
consolidation of the Corporation with or into another corporation, or the sale
of all or substantially all of the Corporation's properties and assets to any
other person, then as a part of such reorganization, merger, consolidation or
sale, provision shall be made so that the holders of the Convertible Preferred
Stock shall thereafter be entitled to receive upon conversion of the Convertible
Preferred Stock the number of shares of stock or other securities or property of
the Corporation, or of the successor corporation resulting from such merger,
consolidation or sale, to which a holder of the Common Stock deliverable upon
conversion of the Convertible Preferred Stock would have been entitled in such
merger, consolidation or sale. In any such case, appropriate adjustment shall be
made in
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the application of the provisions of this subsection (c) of Section A.VI with
respect to the rights of the holders of the Convertible Preferred Stock after
the merger, consolidation or sale to the end that the provisions of Section A.VI
shall be applicable after an event as nearly equivalent as may be practicable.
If the holders of Common Stock may elect from choices the kind or amount of
shares of stock and other securities and property receivable upon such merger,
consolidation or sale, then the kind and amount of shares of stock and others
securities and property receivable upon such merger, consolidation or sale shall
be deemed to be the choice specified by the holder of the Convertible Preferred
Stock by the later of (i) 20 Business Days after the holder of Convertible
Preferred Stock is provided with a final version of all information required by
law or regulation to be furnished to holders of Common Stock concerning such
choice, or if no such information is required, 20 Business Days after the
Corporation notified the holder of Convertible Preferred Stock of all material
facts concerning such specification and (ii) the last time at which holders of
Common Stock are permitted to make their specification known to the Corporation.
If a holder of Convertible Preferred Stock fails to make any specification, such
holder of Convertible Preferred Stock's choice shall be deemed to be whatever
choice is made by a plurality of holders of Common Stock not affiliated with the
Corporation or the other person to the merger or consolidation.
(d) Before any holder of Convertible Preferred Stock shall be
entitled to convert the same into shares of Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Common Stock, and shall give
written notice to the Corporation at such office that he elects to convert the
same and shall state therein the number of shares of Convertible Preferred Stock
being converted. Thereupon the Corporation shall promptly issue and deliver at
such office to such holder of Convertible Preferred Stock a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Convertible Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.
(e) In the event the Corporation at any time, or from time to time,
after the date of original issue of the Convertible Preferred Stock shall pay or
make a dividend or other distribution on any class of capital stock of the
Corporation payable in Common Stock, the Conversion Price in effect at the
opening of business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination and the denominator shall
be the sum of such number of shares and the total number of shares constituting
such dividend or other distribution, such reduction to become effective
immediately after the opening of business on the day following the date fixed
for such determination. For the purposes of this subsection (e) of this Section
A.VI the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Corporation but shall
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include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock.
(f) In the event the Corporation at any time, or from time to time,
after the date of original issue of the Convertible Preferred Stock shall issue
rights, options or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the current market price per share (determined as provided in subsection (l) of
this Section A.VI) of the Common Stock on the date fixed for the determination
of stockholders entitled to receive such rights, options or warrants, the
Conversion Price in effect at the opening of business on the day following the
date fixed for such determination shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such current market price
and the denominator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus the number
of shares of Common Stock so offered for subscription or purchase, such
reduction to become effective immediately after the opening of business on the
day following the date fixed for such determination. For the purposes of this
Subsection (f) of this Section A.VI, the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the
Corporation but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock.
(g) In the event the Corporation at any time, or from time to time,
after the date of original issue of the Convertible Preferred Stock shall
subdivide the Common Stock into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day following the
day upon which such subdivision becomes effective shall be proportionately
reduced, and, conversely, in case outstanding shares of Common Stock shall each
be combined into a smaller number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day upon
which such combination becomes effective shall be proportionately increased,
such reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(h) In the event the Corporation at any time, or from time to time,
after the date of original issue of the Convertible Preferred Stock shall, by
dividend or otherwise, distribute to all holders of its Common Stock evidences
of its indebtedness, shares of any class of capital stock or other property
(including securities, but excluding (i) any rights, options or warrants
referred to in subsection (f) of this Section A.VI, (ii) any dividend or
distribution paid exclusively in cash, (iii) any dividend or distribution
referred to in subsection (e) of this Section A.VI and (iv) any merger or
consolidation (of the type described below)), the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of business on the
date fixed for the determination of stockholders
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entitled to receive such distribution by a fraction of which the numerator shall
be the current market price per share (determined as provided in subsection (l)
of this Section A.VI) of the Common Stock on the date fixed for such
determination less the then fair market value (as determined by the Board of
Directors) of the portion of the assets, shares or evidences of indebtedness so
distributed applicable to one share of Common Stock and the denominator shall be
such current market price per share of the Common Stock (determined as provided
in subsection (l) of this Section A.VI), such adjustment to become effective
immediately prior to the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such distribution. For
purposes of this subsection (h), merger or consolidation refers to any
consolidation of the Corporation with any other Person, any merger of the
Corporation into another Person or of another Person into the Corporation (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the
Corporation) or any conveyance, sale, transfer or lease of all or substantially
all of the properties and assets of the Corporation.
(i) In the event the Corporation at any time, or from time to time,
after the date of original issue of the Convertible Preferred Stock shall, by
dividend or otherwise, distribute to all holders of its Common Stock cash
(excluding any cash that is distributed upon a merger or consolidation (as
described in subsection (h) of this Section A.VI) or as part of a distribution
referred to in subsection (h) of this Section A.VI) in an aggregate amount that,
combined together with (i) the aggregate amount of any other cash distributions
to all holders of its Common Stock made exclusively in cash within the 12 months
preceding the date of payment of such distribution and in respect of which no
adjustment pursuant to this clause (i) has been made and (ii) the aggregate of
any cash plus the fair market value (as determined by the Board of Directors) of
consideration payable in respect of any tender offer by the Corporation or any
of its subsidiaries for all or any portion of the Common Stock concluded within
the 12 months preceding the date of payment of such distribution and in respect
of which no adjustment pursuant to subsection (j) of this Section A.VI has been
made, exceeds 10% of the product of the current market price per share
(determined as provided in subsection (l) of this Section A.VI) of the Common
Stock on the date for the determination of holders of shares of Common Stock
entitled to receive such distribution times the number of shares of Common Stock
outstanding on such date, then, and in each such case, immediately after the
close of business on such date for determination, the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of business on the
date fixed for determination of the stockholders entitled to receive such
distribution by a fraction (i) the numerator of which shall be equal to the
current market price per share (determined as provided in subsection (l) of this
Section A.VI) of the Common Stock on the date fixed for such determination less
an amount equal to the quotient of (x) the excess of such combined amount over
such 10% and (y) the number of shares of Common Stock outstanding on such date
for determination and (ii) the denominator of which shall be equal to the
current market price per share (determined as provided in subsection (l) of this
Section A.VI) of the Common Stock on such date for determination.
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(j) If at any time, or from time to time, after the date of original
issue of the Convertible Preferred Stock a tender offer made by the Corporation
or any Subsidiary (as defined below) for all or any portion of the Common Stock
shall expire and such tender offer (as amended upon the expiration thereof)
shall require the payment to stockholders (based on the acceptance (up to any
maximum specified in the terms of the tender offer) of Purchased Shares (as
defined below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors) that combined together with (x) the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors), as of the expiration of such tender offer, of consideration payable
in respect of any other tender offer by the Corporation or any Subsidiary (as
defined below) for all or any portion of the Common Stock expiring within the 12
months preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this subsection (j) has been made and (y) the aggregate
amount of any cash distributions to all holders of the Common Stock within 12
months preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to subsection (i) of this Section A.VI has been made,
exceeds 10% of the product of the current market price per share of the Common
Stock (determined as provided in subsection (l) of this Section A.VI) as of the
last time (the "Expiration Time") tenders could have been made pursuant to such
tender offer (as it may be amended) and the number of shares of Common Stock
outstanding (including any tendered shares) as of the Expiration Time, then, and
in each such case, immediately prior to the opening of the business on the
Business Day after the date of the Expiration Time, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of business on the
date of the Expiration Time by a fraction (i) the numerator of which shall be
equal to (A) the product of (I) the current market price per share of the Common
Stock (determined as provided in subsection (l) of this Section A.VI) on the
date of the Expiration Time and (II) the number of shares of Common Stock
outstanding (including any tendered shares) as of the Expiration Time less (B)
the combined amount of consideration specified above, and (ii) the denominator
of which shall be equal to the product of (A) the current market price per share
of the Common Stock (determined as provided in subsection (l) of this Section
A.VI) as of the Expiration Time and (B) the number of shares of Common Stock
outstanding (including any tendered shares) as of the Expiration Time less the
number of all shares purchased in such tender offer (the shares so purchased
being referred to as the "Purchased Shares"). "Subsidiary" means, as to any
person, a second person of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or a general partnership interest are, at the time any determination is
being made, owned, controlled or held by the first person or one or more
Subsidiaries of such person or a combination thereof, provided that the term
"Subsidiary" shall not include (x) any limited partnership in which neither the
Corporation nor any of its Subsidiaries has an interest as a general partner,
(y) any person where (A) the Corporation or its Subsidiaries own securities of
or other ownership interests in such person representing more than 50% of the
equity and 50% or less of the ordinary voting power, (B) such securities or
other ownership interests are held in the investment portfolio of the
Corporation or any of its Subsidiaries and (C) neither the Corporation nor any
of its Subsidiaries controls such person or (z) any person as to which
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control by the Corporation or any of its Subsidiaries has been negated by the
establishment of a voting trust or voting agreement. "Person" means any
individual, corporation, partnership, firm, joint venture, association, joint
stock company, limited liability company, trust, unincorporated organization,
governmental or regulatory authority or other entity.
(k) The reclassification of Common Stock into securities other than
Common Stock (other than any reclassification upon a consolidation or merger as
described in subsection (h) of this Section A.VI) shall be deemed to involve (i)
a distribution of such securities other than Common Stock to all holders of
Common Stock (and the effective date of such reclassification shall be deemed to
be "the date fixed for the determination of stockholders entitled to receive
such distribution" and "the date fixed for such determination" within the
meaning subsection (h) of this Section A.VI), and (ii) a subdivision or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of subsection (g) of this Section A.VI).
(l) For the purpose of any computation under subsections (f), (h),
(i) or (j) of this Section A.VI, the current market price per share of Common
Stock on any date shall be conclusively calculated by the Corporation (absent
manifest error) and be deemed to be the average of the daily Closing Prices for
the ten consecutive Trading Days ending on the earlier of the day in question
and the day before the "ex date" with respect to the issuance or distribution or
the date of the expiration of the tender offer requiring such computation. For
purposes of this paragraph, the term "ex date", when used with respect to any
issuance or distribution, means the first date on which the Common Stock trades
regular way on the applicable securities exchange or in the applicable
securities market without the right to receive such issuance or distribution.
(m) No adjustment to the Conversion Price shall be required unless
such adjustment (plus any adjustments not previously made by reason of this
subsection (m)) would require an increase or decrease of at least one percent in
such price; provided, however, that any adjustments which by reason of this
subsection (m) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
A.VI shall be made to the nearest cent or to the nearest 1/1,000th of a share,
as the case may be.
(n) The Corporation may make such reductions in the Conversion Price,
in addition to those required by subsections (e), (f), (g), (h), (i) and (j) of
this Section A.VI, as it considers to be advisable in order to avoid or diminish
any income tax to any holders of shares of Common Stock resulting from any
dividend or distribution of stock or issuance of rights or warrants to purchase
or subscribe for stock or from any event treated as such for income tax
purposes.
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(o) No fractional shares of Common Stock shall be issued upon
conversion of Convertible Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Corporation shall pay each
holder an amount equal to the product of such fraction multiplied by the Closing
Price for the date of conversion (or, if such day is not a Trading Day, for the
Trading Day immediately preceding such day).
(p) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the shares of the Convertible Preferred Stock such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Convertible Preferred
Stock; and if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Convertible Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(q) The Corporation shall not amend its Amended and Restated
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Convertible
Preferred Stock against dilution or other impairment.
(r) If any event shall occur as to which the provisions of
subsections (c), (e), (f), (g), (h), (i), (j) or (k) of this Section A.VI are
not strictly applicable but the failure to make any adjustment would adversely
affect the conversion rights of the Convertible Preferred Stock in a way that is
contrary to the manifest and essential intent and principles of subsections (c),
(e), (f), (g), (h), (i), (j) or (k) of this Section A.VI, then, in each such
case, the Corporation shall appoint an investment banking firm of recognized
national standing, or any other financial expert that does not (or whose
directors, officers, employees, affiliates or stockholders do not) have a direct
or indirect material financial interest in the Corporation, who has not been,
and, at the time it is called upon to give independent financial advice to the
Corporation, is not (and none of its directors, officers, employees, affiliates
or stockholders are) a promoter, director or officer of the Corporation, which
shall give their opinion upon the adjustment, if any, on a basis consistent with
the manifest and essential intent and principles established in of subsections
(c), (e), (f), (g), (h), (i), (j) or (k) of this Section A.VI, necessary to
preserve, without dilution, the conversion rights of the Convertible Preferred
Stock. Upon receipt of such opinion, the Corporation will promptly provide
notice thereof accompanied by a copy thereof to the holder of Convertible
Preferred Stock and shall make the adjustments described therein.
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(s) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly (i) file at the office of the Corporation or of any
transfer agent for the Common Stock a certificate of a firm of independent
public accountants (who may be the regular accountants employed by the
Corporation) setting forth the Conversion Price after such adjustment and
setting forth a statement of the facts requiring such adjustment and showing in
reasonable detail the manner of computing the same and (ii) give notice of such
adjustment, accompanied by a copy of the certificate referred to in clause (i)
above, to the holders of Convertible Preferred Stock.
VII. Mandatory Redemption
The Corporation shall redeem all outstanding shares of the
Convertible Preferred Stock on the earlier of (i) the tenth anniversary of the
date of issuance of the Convertible Preferred Stock or (ii) December 31, 2013,
at a price equal to $100 per share plus accumulated and unpaid dividends
(whether or not declared or due) to the redemption date (the "Mandatory
Redemption Price"). The Mandatory Redemption Price is payable in cash or, at the
option of the Corporation but subject to the conditions described in the
following sentences, in newly issued fully paid and non-assessable shares of
Common Stock. The number of shares of Common Stock to be delivered in payment of
the Mandatory Redemption Price in lieu of cash shall be determined by dividing a
number that is equal to 110% of the Mandatory Redemption Price by the value of
the Common Stock, which for this purpose shall be equal to the average of the
Closing Price of the Common Stock on the 20 Trading Days immediately preceding
the redemption date. Payment of the Mandatory Redemption Price may not be made
in Common Stock unless the shares of Common Stock to be delivered (i) either
have been registered under the Securities Act prior to delivery or will be
freely transferable without being subject to any transfer restrictions under the
Securities Act upon issuance and delivery, (ii) have been listed or approved for
quotation upon issuance on the principal stock exchange or inter-dealer
quotation system on which the Common Stock is then approved for listing or
quotation and (iii) either have been duly registered, qualified or approved for
issuance and delivery under any applicable state blue sky, securities or
insurance laws prior to issuance and delivery or will be freely transferable
without being subject to any transfer restrictions under any such laws without
such registration, qualification or approval, as applicable.
VIII. Optional Redemption
The Corporation may, at its option, redeem the Convertible
Preferred Stock, as a whole or in part, at any time after the third anniversary
of the issuance of Convertible Preferred Stock, upon not less than 30 or more
than 60 days' notice, upon the payment in cash of $100 per share, plus a sum
equal to any unpaid accrued or accumulated dividends (whether or not declared or
due) to the redemption date, if the Closing Price of the Common Stock exceeds
200% of the then applicable Conversion Price of the Convertible Preferred Stock
for a period of at least 20 consecutive Trading Days ending within 10 days of
the date on which notice of such redemption is given.
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IX. General Provisions Applicable to Convertible Preferred Stock
Redemption
(a) In the case of any redemption of Convertible Preferred Stock, the
Corporation shall give notice thereof to each holder of Convertible Preferred
Stock not less than 30 days prior to the date fixed for such redemption,
specifying (a) the date fixed for redemption, (b) the amount per share payable
on redemption, and (c) if less than all of the shares of Convertible Preferred
Stock shall be redeemed, the total number of shares to be redeemed on such date
and the number of shares held by such holder to be redeemed on such date.
(b) If less than all the shares of Convertible Preferred Stock shall
be redeemed, the shares of Convertible Preferred Stock to be redeemed shall be
allocated in whole shares among all of the holders ratably in proportion, as
nearly as practicable, to the respective numbers of shares held by such holders,
with adjustments, to the extent practicable, to compensate for any prior
redemptions not allocated exactly in such proportion.
(c) Upon the date fixed for any redemption of the Convertible
Preferred Stock, unless the Corporation shall default in paying the amounts
payable on redemption as provided herein, all shares of the Convertible
Preferred Stock redeemed shall be deemed to be no longer outstanding for any
purpose, whether or not the certificates for such shares shall have been
surrendered for cancellation, and all rights with respect to such shares shall
thereupon cease, except only the right of the holders of such shares to receive
the amounts payable upon the redemption thereof. All shares of the Convertible
Preferred Stock redeemed by the Corporation shall be retired and cancelled and
shall not be reissued.
X. Convertible Preferred Stock Restrictions on Corporate Action
Without the consent of the holders of at least a majority
of the shares of Convertible Preferred Stock at the time outstanding, given in
writing or by vote at any regular or special meeting of stockholders, the
Corporation shall not amend, alter or repeal any of the provisions of the
Amended and Restated Certificate of Incorporation, so as to affect adversely the
rights, preferences, privileges or voting powers of the Convertible Preferred
Stock or the holders thereof; provided, however, that any increase in the amount
of authorized Preferred Stock or the creation and issuance of any other class of
Preferred Stock, or any increase in the amount of authorized shares of such
class or of any other class of Preferred Stock, in each case ranking on a parity
with or junior to the Convertible Preferred Stock with respect to the payment of
dividends and the distribution of assets upon liquidation, dissolution or
winding up will not be deemed to affect adversely such rights, preferences or
voting powers.
Without the consent of the holders of record of at least a
majority of the shares of Convertible Preferred Stock at the time outstanding,
given in writing or by vote at any regular or special meeting of stockholders,
the Corporation shall not increase the
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authorized number of shares of Convertible Preferred Stock or create, or
increase the authorized number of shares of, any other class or series of shares
of the Corporation ranking prior to the Convertible Preferred Stock either as to
dividends or upon liquidation, dissolution or winding up or any security
convertible into or exercisable or exchangeable for such stock.
XI. Convertible Preferred Stock Payments and Notices
In case:
(a) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock payable (i) otherwise than exclusively in cash
or (ii) exclusively in cash in an amount that would require any adjustment
pursuant to Section A.VI of this Paragraph Fourth; or
(b) the Corporation shall authorize the granting to the holders of
its Common Stock of rights, options or warrants to subscribe for or purchase any
shares of capital stock of any class or any other rights; or
(c) of any reclassification of the Common Stock, or of any
consolidation, merger or share exchange to which the Corporation is a party and
for which approval of any shareholders of the Corporation is required, or of the
conveyance, sale, transfer or lease of all or substantially all of the assets of
the Corporation; or
(d) of the liquidation, dissolution or winding up of the Corporation;
or
(e) the Corporation or any Subsidiary shall commence a tender offer
for all or a portion of the Corporation's outstanding shares of Common Stock (or
shall amend such tender offer);
then the Corporation shall provide to the holder of the Convertible Preferred
Stock, and shall be caused to be filed at the office of the Corporation or any
transfer agent for the Common Stock, at least 20 days (or 10 days in any case
specified in clause (a) or (b) above) prior to the applicable record, expiration
or effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution, rights,
options or warrants, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such dividend,
distribution, rights, options or warrants are to be determined, (y) the date on
which the right to make tenders under such tender offer expires or (z) the date
on which such reclassification, consolidation, merger, conveyance, transfer,
sale, lease, liquidation, dissolution or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, sale, lease, liquidation,
dissolution or winding up. Neither the failure to give such notice nor any
defect therein shall affect the validity of the proceedings described in
subsections (a) through (e) of this Section XI.
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All notices and all payments with respect to the
Convertible Preferred Stock shall be mailed to the holders thereof at their
respective addresses, as the same shall appear on the books of the Corporation
XII. Preemptive Rights
The holders of the Convertible Preferred Stock shall have
no preemptive rights or other subscription rights.
XIII. Taxes on Issue or Transfer of Common Stock
The Corporation shall pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issuance of shares of
Common Stock upon conversion of the Convertible Preferred Stock; provided,
however, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance of shares of Common
Stock in a name other than that of the holder of Convertible Preferred Stock and
no such issuance shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
XIV. Listing
The Corporation shall use its commercially reasonable
efforts to list shares of Common Stock issued upon conversion of the Convertible
Preferred Stock upon each securities exchange or quotation system, if any, upon
which the outstanding Common Stock is listed or quoted at the time of such
issuance.
B. SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
There is hereby designated from the authorized Preferred
Stock a series of Series A Junior Participating Preferred Stock (the "Series A
Junior Preferred Stock"), consisting of 200,000 shares. Such number of shares
may be increased or decreased by resolution of the Board of Directors; provided,
that no decrease shall reduce the number of shares of Series A Junior Preferred
Stock to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities issued
by the Corporation convertible into Series A Junior Preferred Stock. The Series
A Junior Preferred Stock shall have the preferences, powers and other rights as
set forth below:
I. Rank.
The Series A Junior Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of the Corporation's Preferred Stock.
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II. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior and superior
to the Series A Junior Preferred Stock with respect to dividends, the holders of
shares of Series A Junior Preferred Stock, in preference to the holders of
Common Stock and of any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Junior Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (i) $10.00 or (ii) subject to the
provision for adjustment hereinafter set forth, 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions, other
than a dividend payable in shares of Common Stock or a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock), declared on the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Junior Preferred Stock. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of Series A
Junior Preferred Stock were entitled immediately prior to such event under
clause (ii) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(b) The Corporation shall declare a dividend or
distribution on the Series A Junior Preferred Stock as provided in subsection
(a) of this Section immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been declared
on the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$10.00 per share on the Series A Junior Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or
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unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Junior
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Junior Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Junior Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be not more than 60 days prior to the date fixed for the payment thereof.
III. Voting Rights.
The holders of shares of Series A Junior Preferred Stock
shall have the following voting rights:
Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series A Junior Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Except as otherwise provided herein, in any Certificate of
Designations creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Junior Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
Except as set forth herein, or as otherwise provided by
law, holders of Series A Junior Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action.
IV. Certain Restrictions.
Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Preferred Stock as provided in
Section B.II of this Paragraph
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Fourth are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Junior Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(a) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Preferred Stock;
(b) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Preferred Stock, except
dividends paid ratably on the Series A Junior Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
(c) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire shares of
any such junior stock in exchange for shares of any stock of the Corporation
ranking junior (as to dividends and upon dissolution, liquidation and winding
up) to the Series A Junior Preferred Stock; or
(d) redeem or purchase or otherwise acquire for consideration any
shares of Series A Junior Preferred Stock, or any shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under subsection (c) or
(d) of this Section B.IV, purchase or otherwise acquire such shares at such time
and in such manner.
V. Reacquired Shares.
Any shares of Series A Junior Preferred Stock purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the Amended and
Restated Certificate of Incorporation, or in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
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<PAGE> 20
VI. Liquidation, Dissolution or Winding Up.
Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (1) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Preferred Stock unless, prior thereto, the
holders of shares of Series A Junior Preferred Stock shall have received $1,000
per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Junior Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to
be distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Preferred
Stock, except distributions made ratably on the Series A Junior Preferred Stock
and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Junior Preferred Stock were entitled immediately prior to such event under the
proviso in clause (1) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
VII. Consolidation, Merger, etc.
In case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Series A Junior Preferred Stock
shall at the same time be similarly exchanged or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of shares of
Series A Junior Preferred Stock shall be adjusted by multiplying such amount by
a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the
20
<PAGE> 21
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
VIII. No Redemption.
The shares of Series A Junior Preferred Stock shall not be
redeemable.
IX. Amendment.
The Amended and Restated Certificate of Incorporation of
the Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series A Junior
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Series A Junior
Preferred Stock, voting together as a single class.
C. ADDITIONAL SERIES OF PREFERRED STOCK
Subject to Sections A.X and B.IX of this Paragraph Fourth,
the Board of Directors (or a duly authorized committee thereof) is hereby
expressly authorized to provide for, designate and issue, out of the authorized
but unissued shares of Preferred Stock, one or more series of Preferred Stock in
addition to the Convertible Preferred Stock and the Series A Junior Preferred
Stock. Before any shares of any such series are issued, the Board of Directors
(or a duly authorized committee thereof) shall fix, and is hereby expressly
empowered to fix, as to the shares of any such series:
(a) the designation of such series, the number of shares to
constitute such series and the stated value thereof, if different from the par
value thereof;
(b) whether the shares of such series shall have voting rights or
powers, in addition to any voting rights required by law and, if so, the terms
of such voting rights or powers, which may be full or limited;
(c) the dividends, if any, payable on such series, whether any such
dividends shall be cumulative and, if so, from what dates, the conditions and
dates upon which such dividends shall be payable, the preferences or relation
which such dividends shall bear to the dividends payable on any shares of stock
of any other class or any other series of this class;
(d) whether the shares of such series shall be subject to redemption
by the Corporation and, if so, the times, prices and other conditions of such
redemption;
(e) the amount or amounts payable upon shares of such series upon,
and the rights of the holders of such series in, the liquidation, dissolution or
winding up, or upon any distribution of the assets, of the Corporation;
21
<PAGE> 22
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to which and
manner in which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such series for retirement or other
corporate purposes and the terms and provisions relative to the operation
thereof;
(g) whether the shares of such series shall be convertible into or
exchangeable for shares of stock of any other class or any other series of this
class or any other securities and, if so, the price or prices or the rate or
rates of conversion or exchange and the method, if any, of adjusting the same,
and any other terms and conditions of conversion or exchange;
(h) the limitations and restrictions, if any, to be effective while
any shares of such series are outstanding upon the payment of dividends or the
making of other distributions on, and upon the purchase, redemption or other
acquisition by the Corporation of, the Common Stock or shares of stock of any
other class or any other series of this class;
(i) the conditions or restrictions, if any, to be effective while any
shares of such series are outstanding upon the creation of indebtedness of the
Corporation or upon the issue of any additional stock, including additional
shares of such series or of any other series of this class or of any other
class; and
(j) any other powers, designations, preferences and relative,
participating, optional or other special rights, and any qualifications,
limitations, or restrictions thereof.
The powers, designations, preferences and relative,
participating, optional or other special rights of each series of Preferred
Stock, and the qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding. The Board
of Directors is hereby expressly authorized from time to time to increase (but
not above the total number of authorized shares of Preferred Stock) or decrease
(but not below the number of shares thereof then outstanding) the number of
shares of Preferred Stock designated to any one or more series of Preferred
Stock pursuant to this Section C of this Paragraph Fourth.
D. COMMON STOCK
All shares of Common Stock will be identical and will
entitle the holders thereof to the same rights and privileges.
I. Dividends
When, as and if dividends are declared thereon, whether
payable in cash, property or securities of the Corporation, the holders of
Common Stock will be entitled to share equally in and receive, in accordance
with the number of shares of Common Stock
22
<PAGE> 23
held by each such holder, such dividends. Dividends payable under this Section
D.I shall be paid to the holders of record of the outstanding Common Stock as
their names shall appear on the stock register of the Corporation on the record
date fixed by the Board of Directors in advance of declaration and payment of
each dividend. Any Common Stock issued as a dividend pursuant to this Section
D.I shall, when so issued, be duly authorized, validly issued, fully paid and
non-assessable, and free of all liens and charges.
Notwithstanding anything contained herein to the contrary,
no dividends on Common Stock shall be declared by the Corporation's Board of
Directors or paid or set apart for payment by the Corporation at any time that
such declaration, payment, or setting apart is prohibited by applicable law.
II. Voting Rights
Each holder of the Common Stock shall be entitled to one
vote for each share of Common Stock held on all matters submitted to a vote of
the stockholders.
III. Other Rights
Except for and subject to those rights expressly granted to
the holders of Preferred Stock, including the Convertible Preferred Stock and
the Series A Junior Preferred Stock, or as otherwise provided herein, and except
as may be provided by the laws of the State of Delaware, the holders of Common
Stock shall have exclusively all other rights of stockholders, including,
without limitation, (a) the right to receive dividends, when, as and if declared
by the Board of Directors, out of assets lawfully available therefor, and (b) in
the event of any distribution of assets upon a liquidation, dissolution or
winding up or otherwise, the right to receive ratably and equally with all other
holders of Common Stock all of the assets and funds of the Corporation remaining
after the payment to the holders of the Preferred Stock, including the
Convertible Preferred Stock and the Series A Junior Preferred Stock, of the
specific amounts which they are entitled to receive upon such liquidation,
dissolution or winding up. For the purposes of this Section D.III, neither the
consolidation, combination or merger of the Corporation with or into any other
corporation or corporations in which the stockholders of the Corporation receive
cash or capital stock and/or other securities (including debt securities) of the
acquiring corporation (or of the direct or indirect parent corporation of the
acquiring corporation), nor the sale, lease, or transfer by the Corporation of
all or any part of its assets, nor the reduction of the capital stock of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation.
FIFTH: A. Board of Directors. Subject to the rights of the
holders of the Preferred Stock, including the Convertible Preferred Stock, the
number of directors of the Corporation shall consist of not less than five (5)
nor more than fifteen (15) directors. The exact number of directors shall be
determined from time to time by a resolution or resolutions adopted by the
affirmative vote of a majority of the total number of directors which the
Corporation would have if there were no vacancies. The Board of Directors shall
be classified, with respect to the time for which they severally hold office,
into three classes, as nearly equal in number as possible, one class to hold
office initially for a term
23
<PAGE> 24
expiring at the annual meeting of stockholders to be held in 1999, another class
to hold office initially for a term expiring at the annual meeting of
stockholders to be held in 2000, and another class to hold office initially for
a term expiring at the annual meeting of stockholders to be held in 2001, with
the members of each class to hold office until their successors are duly elected
and qualified, subject, however, to a director's prior death, resignation,
disqualification or removal from office. At each annual meeting of the
stockholders of the Corporation, the successors to the class of directors whose
term expires at that meeting shall be elected to hold office for a term expiring
at the annual meeting of stockholders held in the third year following the year
of their election. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible, and any additional director
of any class elected to fill a vacancy resulting from an increase in such class
shall hold office for a term that shall coincide with the remaining term of that
class, but in no case shall a decrease in the number of directors shorten the
term of any incumbent directors. The directors elected by the holders of the
Convertible Preferred Stock pursuant to Section A.III of Paragraph Fourth hereof
shall be in addition to the directors elected by the holders of Common Stock.
The directors elected by the holders of the Convertible Preferred Stock shall
hold office for a term expiring at the next annual meeting of stockholders,
provided that each such director may be re-elected for additional terms of one
year, subject to their earlier removal pursuant to Section A.III of Paragraph
Fourth hereof.
B. Removal of Directors Solely for Cause. No director may
be removed from office except for cause and only by the affirmative vote of the
holders of a majority of the combined voting power of all outstanding shares of
stock then entitled to vote generally in the election of directors, voting as a
single class. Notwithstanding the foregoing, directors who shall have been
elected by the holders of a series or class of Preferred Stock, voting
separately as a class, shall be removed only pursuant to the provisions
establishing the rights of such series or class to elect such directors.
SIXTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of the
Corporation, and in furtherance and, except as specifically set forth in this
Paragraph, not in limitation of the powers of the Corporation and of its
directors and stockholders conferred by statute:
(1) Subject to the provisions of Article Eleventh hereof,
the Board of Directors shall have power without (except as provided by
applicable law) the assent or vote of the stockholders to make, alter, amend,
change, add to or repeal the By-laws of the Corporation; to authorize and cause
to be executed mortgages and liens upon all or any part of the property of the
Corporation; to determine the use and disposition of any surplus or net profits;
to fix the times for the declaration and payment of dividends; and to set apart
out of any of the funds of the Corporation available for dividends a reserve or
reserves for any proper purpose and to abolish any such reserve.
(2) In addition to the powers and authorities hereinbefore
or by statute expressly conferred upon them, the Board of Directors is hereby
empowered to exercise all such powers and do all such acts and things as may be
exercised or done by the
24
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Corporation; subject, nevertheless, to the provisions of the laws of the state
of Delaware, this Amended and Restated Certificate of Incorporation and the
Corporation's By-laws, as in effect from time to time.
SEVENTH: The books and records of the Corporation may be
kept (subject to any mandatory requirement of law) outside the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or by the By-laws of the Corporation.
EIGHTH: No director shall be liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that the foregoing does not eliminate or limit any liability
that may exist with respect to (1) a breach of the director's duty of loyalty to
the Corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the DGCL or (4) a transaction from which the
director derived an improper personal benefit, it being the intention of the
foregoing provision to eliminate the liability of the Corporation's directors to
the Corporation or its stockholders to the fullest extent permitted by Section
102(b)(7) of the DGCL, as in effect on the date hereof and as such Section may
be amended after the date hereof to the extent such amendment permits such
liability to be further eliminated or limited. No amendment, modification or
repeal of this Paragraph Eighth shall adversely affect any right or protection
of a director that exists at the time of such amendment, modification or repeal.
NINTH: Subject to the provisions of Section A.X and Section
B.IX of Paragraph Fourth, the Corporation reserves the right to amend or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed by the laws of the State
of Delaware, and all rights herein conferred upon stockholders or directors are
granted subject to this reservation.
TENTH: Following the consummation of an initial public
offering of Common Stock or any transaction or event as a result of which any
Common Stock is listed on a national securities exchange or registered under
Section 12 of the Securities Exchange Act of 1934, as amended, any action
required or permitted to be taken by the stockholders of the Corporation must be
affected at a duly called annual or special meeting of stockholders of the
Corporation, and the ability of the stockholders to consent in writing to the
taking of any action is hereby specifically denied.
ELEVENTH: In furtherance and not in limitation of the power
conferred upon the Board of Directors by law, the Board of Directors shall have
the power to make, adopt, alter, amend and repeal from time to time the By-laws
of the Corporation, subject to the right of the stockholders entitled to vote
with respect thereto to alter, amend and repeal By-laws adopted by the Board of
Directors, subject to Paragraph Twelfth.
TWELFTH: The provisions of Paragraphs Fifth, Tenth,
Eleventh and Twelfth hereof and Sections 1.10, 2.02 and 2.11 and the last
sentence of Section 1.02 of the Corporation's By-laws may only be altered,
amended, terminated or repealed, or a
25
<PAGE> 26
provision adopted that is inconsistent with the purpose and intent of the
provisions of such Paragraphs or Article, as the case may be, by the affirmative
vote of the holders of at least 80% of the voting power of the shares entitled
to vote at an election of directors.
3. This Amended and Restated Certificate of Incorporation
was duly adopted in accordance with the provisions of Sections 242 and 245 of
the DGCL. The Board of Directors adopted resolutions setting forth this Amended
and Restated Certificate of Incorporation, declaring its advisability and
directing its consideration by the sole stockholder of the Corporation. Pursuant
to Section 228 of the DGCL, such stockholder of the Corporation duly consented
to this Amended and Restated Certificate of Incorporation.
4. This Amended and Restated Certificate of Incorporation
shall become effective at 12:01 a.m. on , 1998.
26
<PAGE> 27
IN WITNESS WHEREOF, The MONY Group Inc. has caused this
Amended and Restated Certificate of Incorporation to be signed by its President
and Chief Executive Officer and attested to by its Secretary and caused the
corporate seal of the Corporation to be hereunto affixed this _____ day of
____________, 1998.
________________________________
Chief Executive Officer
Attest:
___________________
Secretary
27
<PAGE> 1
Exhibit 3.2
------------------------------------------------------------------------
THE MONY GROUP INC.
AMENDED AND RESTATED BY-LAWS
------------------------------------------------------------------------
<PAGE> 2
THE MONY GROUP INC.
AMENDED AND RESTATED BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
Article I STOCKHOLDERS ...................................................................1
Section 1.01. Annual Meeting ........................................................1
Section 1.02. Special Meetings ......................................................1
Section 1.03. Notice of Meetings; Waiver ............................................1
Section 1.04. Quorum ................................................................2
Section 1.05. Voting ................................................................2
Section 1.06. Voting by Ballot ......................................................2
Section 1.07. Adjournment ...........................................................3
Section 1.08. Proxies ...............................................................3
Section 1.09. Organization; Procedure ...............................................3
Section 1.10. Advance Notice of Stockholder Proposals and Stockholder Nominations
of Directors ..........................................................3
Article II BOARD OF DIRECTORS.............................................................5
Section 2.01. General Powers ........................................................5
Section 2.02. Number and Term of Office .............................................5
Section 2.03. Annual and Regular Meetings ...........................................5
Section 2.04. Special Meetings; Notice ..............................................6
Section 2.05. Quorum; Voting ........................................................6
Section 2.06. Adjournment ...........................................................6
Section 2.07. Action Without a Meeting ..............................................7
Section 2.08. Regulations; Manner of Acting .........................................7
Section 2.09. Action by Telephonic Communications ...................................7
Section 2.10. Resignations ..........................................................7
Section 2.11. Vacancies and Newly Created Directorships .............................7
Section 2.12. Compensation ..........................................................7
Section 2.13. Reliance on Accounts and Reports, etc .................................8
Article III EXECUTIVE COMMITTEE AND OTHER COMMITTEES......................................8
Section 3.01. How Constituted .......................................................8
Section 3.02. Powers ................................................................8
Section 3.03. Proceedings ...........................................................8
Section 3.04. Quorum and Manner of Acting ...........................................9
Section 3.05. Action by Telephonic Communications ...................................9
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Section 3.06. Resignations ..........................................................9
Section 3.07. Removal ...............................................................9
Section 3.08. Vacancies .............................................................9
Article IV OFFICERS.......................................................................9
Section 4.01. Number ................................................................9
Section 4.02. Election .............................................................10
Section 4.03. Removal and Resignation; Vacancies ...................................10
Section 4.04. Authority and Duties of Officers .....................................10
Section 4.05. Chairman of the Board ................................................10
Section 4.06. Vice-Chairman of the Board ...........................................10
Section 4.07. President ............................................................11
Section 4.08. Chief Executive Officer ..............................................11
Section 4.09. The Secretary ........................................................11
Section 4.10. The Treasurer ........................................................12
Section 4.11. Additional Officers ..................................................12
Article V CAPITAL STOCK..................................................................13
Section 5.01. Certificates of Stock; Uncertificated Shares .........................13
Section 5.02. Signatures; Facsimile ................................................13
Section 5.03. Lost, Stolen or Destroyed Certificates ...............................13
Section 5.04. Transfer of Stock ....................................................13
Section 5.05. Record Date ..........................................................14
Section 5.06. Registered Stockholders ..............................................14
Section 5.07. Transfer Agent and Registrar .........................................14
Article VI INDEMNIFICATION...............................................................15
Section 6.01. Nature of Indemnity ..................................................15
Section 6.02. Successful Defense ...................................................15
Section 6.03. Determination That Indemnification Is Proper .........................16
Section 6.04. Advance Payment of Expenses ..........................................16
Section 6.05. Procedure for Indemnification of Directors and Officers ..............16
Section 6.06. Survival; Preservation of Other Rights ...............................17
Section 6.07. Insurance ............................................................17
Section 6.08. Severability .........................................................17
Article VII GENERAL PROVISIONS...........................................................18
Section 7.01. Dividends ............................................................18
Section 7.02. Reserves .............................................................18
Section 7.03. Execution of Instruments .............................................18
Section 7.04. Corporate Indebtedness ...............................................18
Section 7.05. Deposits .............................................................19
Section 7.06. Checks ...............................................................19
Section 7.07. Sale, Transfer, etc., of Securities ..................................19
Section 7.08. Voting as Stockholder ................................................19
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Section 7.09. Fiscal Year ..........................................................19
Section 7.10. Seal .................................................................20
Section 7.11. Books and Records ....................................................20
Article VIII AMENDMENT OF BY-LAWS........................................................20
Section 8.01. Amendment ............................................................20
Article IX CONSTRUCTION..................................................................20
Section 9.01. Construction .........................................................20
</TABLE>
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<PAGE> 5
THE MONY GROUP INC.
AMENDED AND RESTATED BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meeting. An annual meeting of the stockholders,
for the election of directors and for the transaction of such other business as
may properly come before the meeting, shall be held at such place, on such date
and at such time as the Board of Directors shall each year fix, which date shall
be within thirteen months subsequent to the date of the last annual meeting of
stockholders and shall be set forth in the notice and waiver of notice of the
meeting.
To be properly brought before an annual meeting, business
must be (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors or (c)
otherwise properly brought before the meeting by a stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in Section 1.10, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in Section 1.10. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with the
provisions of this Section 1.01, and if he should so determine, the Chairman
shall declare to the meeting that any such business not properly brought before
the meeting shall not be transacted.
Section 1.02. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, may be called at any time by the Chairman of the
Board or the President and shall be called by the Chairman, the President or the
Secretary at the request in writing of a majority of the members of the Board of
Directors. No business other than that included in the notice of the special
meeting shall be acted upon at such meeting. No stockholder may call a special
meeting of the stockholders.
Section 1.03. Notice of Meetings; Waiver. The Secretary or any
Assistant Secretary shall cause written notice of the place, date and hour of
each meeting of the stockholders and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, to be given personally or
by mail, not less than 10 nor more than 60 days prior to the meeting, to each
stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited in
the United States mail, postage prepaid, or delivered to a nationally recognized
overnight delivery service for overnight delivery, in each case directed to the
stockholder at his or her address as it appears on the record of stockholders of
the Corporation, or, if he or she shall have filed with the Secretary a written
request that notices to him or her be mailed to some other address, then
<PAGE> 6
directed to him or her at such other address. Such further notice shall be given
as may be required by law.
No notice of any meeting of stockholders need be given to any
stockholder who submits a signed waiver of notice, whether before or after the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in a written
waiver of notice. The attendance of any stockholder at a meeting of stockholders
in person or by proxy shall constitute a waiver of notice of such meeting,
except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
Section 1.04. Quorum. A stockholders' meeting duly called shall not
be organized for the transaction of business unless a quorum is present. Except
as otherwise expressly provided by law, the Amended and Restated Certificate of
Incorporation, these By-laws, as amended (the "By-laws"), or any certificate
filed under Section 151(g) of the Delaware General Corporation Law (the "DGCL")
(or its successor statute as in effect from time to time) or in instances of a
separate class vote, the presence in person or by proxy of holders of record
entitled to exercise at least a majority of the voting power of the Corporation
shall constitute a quorum for such meeting. The stockholders present at a duly
organized meeting can continue to do business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. If a meeting
cannot be organized because a quorum has not attended, stockholders representing
a majority of the voting power of the stockholders present may adjourn or, in
the absence of a decision by the majority, any officer entitled to preside at
such meeting may adjourn, the meeting from time to time to such time (not more
than 30 days after the previously adjourned meeting) and place as such
stockholders or officer may determine, without notice other than by announcement
at the meeting of the time and place of the adjourned meeting.
Section 1.05. Voting. If, pursuant to Section 5.05 of these By-laws,
a record date has been fixed, every holder of record of shares entitled to vote
at a meeting of stockholders shall be entitled to one vote for each share
outstanding in his or her name on the books of the Corporation at the close of
business on such record date. If no record date has been fixed, then every
holder of record of shares entitled to vote at a meeting of stockholders shall
be entitled to one vote for each share of stock outstanding in his or her name
on the books of the Corporation at the close of business on the day next
preceding the day on which notice of the meeting is given. Except as otherwise
required by law, the Amended and Restated Certificate of Incorporation or these
By-laws, the vote of a majority of the shares represented in person or by proxy
at any meeting at which a quorum is present shall be sufficient for the
transaction of any business at such meeting.
Section 1.06. Voting by Ballot. No vote of the stockholders need be
taken by written ballot, unless otherwise required by law. Any vote which need
not be taken by ballot may be conducted in any manner approved by the meeting.
Section 1.07. Adjournment. Notice of any adjourned meeting of the
stockholders of the Corporation need not be given if the place, date and hour
thereof are
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announced at the meeting at which the adjournment is taken, provided
that if the adjournment is for more than thirty days, or if after the
adjournment a new record date for the adjourned meeting is fixed pursuant to
Section 5.05 of these By-laws, a notice of the adjourned meeting, conforming to
the requirements of Section 1.03 hereof, shall be given to each stockholder of
record entitled to vote at such meeting. At any adjourned meeting at which a
quorum is present, any business may be transacted that might have been
transacted on the original date of the meeting.
Section 1.08. Proxies. Any stockholder entitled to vote at any
meeting of the stockholders may, by a written instrument signed by such
stockholder or his or her attorney-in-fact, authorize another person or persons
to vote at any such meeting for him or her by proxy. No such proxy shall be
voted after the expiration of three years from the date of such proxy, unless
such proxy provides for a longer period. Every proxy shall be revocable at the
pleasure of the stockholder executing it, except in those cases where applicable
law provides that a proxy shall be irrevocable. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in person, by
filing an instrument in writing revoking the proxy or by filing another duly
executed proxy bearing a later date with the Secretary.
Section 1.09. Organization; Procedure. At every meeting of
stockholders the presiding officer shall be the Chairman of the Board or, in the
event of his or her absence or disability, a presiding officer chosen by the
Board of Directors. The Secretary, or in the event of his or her absence or
disability, an Assistant Secretary, if any, or if there be no Assistant
Secretary, in the absence of the Secretary, an appointee of the presiding
officer, shall act as Secretary of the meeting. The order of business and all
other matters of procedure at every meeting of stockholders may be determined by
the presiding officer.
Section 1.10. Advance Notice of Stockholder Proposals and Stockholder
Nominations of Directors. In order to properly submit any business to an annual
meeting of stockholders, or nominate any person for election to the Board of
Directors at any annual meeting of stockholders or any special meeting of
stockholders called for the purpose of electing Directors, a stockholder must
give notice in writing to the Secretary. To be considered timely, a
stockholder's notice must be delivered either in person or by United States
certified mail, postage prepaid, and received at the principal executive offices
of the Corporation (a) in the case of an annual meeting, (i) not less than 60
days nor more than 90 days before the first anniversary date of the
Corporation's proxy statement in connection with the last annual meeting of
stockholders or (ii) if no annual meeting was held in the previous year or the
date of the current annual meeting has been changed by more than 30 days from
the date contemplated at the time of the previous year's proxy statement, not
later than the close of business on the tenth day following the day on which the
notice of the date of the current annual meeting was mailed or other public
disclosure of the date of the annual meeting was made, whichever occurs first,
and (b) in the case of a special meeting of stockholders called for the purpose
of electing Directors, not later than the close of business on the tenth day
following the day on which the notice of the date of the special meeting was
mailed or other public disclosure of the date of the special meeting was made,
whichever occurs first.
The Secretary shall deliver any stockholder proposals and nominations
received in a timely manner for review by the Board of Directors or a committee
designated by the Board of Directors.
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<PAGE> 8
A stockholder's notice to submit business at an annual meeting of
stockholders shall set forth (1) the name and address of such stockholder, (2)
the class and number of shares of stock beneficially owned by such stockholder,
(3) the name in which such shares are registered on the stock transfer books of
the Corporation, (4) a representation that such stockholder intends to appear at
the meeting in person or by proxy to submit the business specified in such
notice, (5) a description of all arrangements or understandings between such
stockholder and any other person or persons (naming such person or persons) in
connection with the business to be submitted and any material interest of such
stockholder in such business and (6) a brief description of the business desired
to be submitted at the annual meeting, including the complete text of any
resolutions to be presented at the annual meeting, and the reasons for
conducting such business at the annual meeting. In addition, the stockholder
making such proposal shall promptly provide any other information reasonably
requested by the Corporation.
In addition to the information required to be given by the foregoing
paragraph, the notice of a stockholder who proposes to nominate a person or
persons for election to the Board of Directors at an annual meeting of
stockholders or a special meeting of stockholders called for the purpose of
electing Directors must also set forth, as to each person whom such stockholder
proposes to nominate for election as a director, (A) the name, age, business
address and, if known, residential address of such person, (B) the principal
occupation or employment of such person, (C) the class and number of shares of
stock of the Corporation which are beneficially owned by such person, (D) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors or is otherwise required by
the rules and regulations of the Securities and Exchange Commission promulgated
under the Securities Exchange Act of 1934, as amended, (E) the written consent
of such person to be named in the proxy statement as a nominee and to serve as a
director if elected and (F) a description of all arrangements or understandings
between such stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or nominations
are to be made by such stockholder.
Any person nominated for election as a director by the Board of
Directors or any committee designated by the Board of Directors shall, upon the
request of the Board of Directors or such committee, furnish to the Secretary
all such information pertaining to such person that is required to be set forth
in a stockholder's notice of nomination.
In addition to the foregoing provisions of this Section 1.10, a
stockholder who seeks to have any proposal included in the Corporation's proxy
statement shall comply with the requirements of Regulation 14A under the
Securities Exchange Act of 1934, as amended, at any time when such requirements
are applicable thereto.
In no event shall the public announcement of the adjournment of a
meeting commence a new time period for the giving of a stockholder's notice as
described above.
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<PAGE> 9
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers. Except as may otherwise be provided by
law, the Amended and Restated Certificate of Incorporation or these By-laws, the
property, affairs and business of the Corporation shall be managed by or under
the direction of the Board of Directors and the Board of Directors may exercise
all the powers of the Corporation.
Section 2.02. Number and Term of Office. Subject to the rights of
any holders of Preferred Stock of the Corporation, the Board of Directors shall
consist of not less than five (5) nor more than fifteen (15) Directors. The
exact number of Directors shall be determined from time to time by a resolution
or resolutions adopted by the affirmative vote of a majority of the total number
of Directors which the Corporation would have if there were no vacancies (the
"entire Board of Directors").
Nominations of persons for election to the Board of Directors may be
made at any annual meeting of stockholders, or at any special meeting of
stockholders called as provided in Section 1.02 for the purpose of electing
Directors, (a) by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (b) by any stockholder of the Company who was a
stockholder of record at the time of giving of notice provided for in Section
1.10, who is entitled to vote at the meeting and who complied with the notice
procedures set forth in Section 1.10. At each meeting of the stockholders for
the election of Directors, provided a quorum is present, the Directors nominated
in accordance with Section 1.10 for election at such meeting shall be elected by
a plurality of the votes validly cast in such election. The Chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the foregoing procedures, and if he
should so determine, the Chairman shall declare to the meeting that the
nomination was defective and such defective nomination shall be disregarded.
Section 2.03. Annual and Regular Meetings. An annual meeting of the
Board of Directors for the purpose of electing officers and for the transaction
of such other business as may come before the meeting shall be held each year at
the same place as, and immediately after, the annual meeting of stockholders, or
at such other place and time as shall theretofore have been determined by the
Board of Directors and notice thereof need not be given. The Board of Directors
from time to time may by resolution provide for the holding of regular meetings
and fix the place (which may be within or without the State of Delaware) and the
date and hour of such meetings. Notice of the annual meeting and regular
meetings need not be given, provided that if the Board of Directors shall fix or
change the time or place of any annual or regular meeting, written notice of
such action shall be given to each Director who shall not have been present at
the meeting at which such action was taken at least two days in advance thereof.
Any such notice shall be deemed given to a Director five days after it has been
sent by mail or immediately when sent by telecopy, e-mail, telegram, telex or
other electronic means of transmission addressed to him or her at his or her
address furnished to the Secretary. Notice of such action need not be given to
any Director who attends such annual or regular meeting without protesting the
lack of notice to him or her, prior to or at the commencement of such
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<PAGE> 10
meeting, or to any Director who submits a signed waiver of notice, whether
before or after such meeting.
Section 2.04. Special Meetings; Notice. Special meetings of the Board
of Directors shall be held whenever called by the Chairman of the Board or, in
the event of his or her absence or disability, by the President or by not less
than one-quarter of the Directors then in office, at such place (within or
without the State of Delaware), date and hour as may be specified in the
respective notices or waivers of notice of such meetings. Written notice of each
special meeting of the Board of Directors shall be given to each Director at
least one day in advance thereof. Such notice shall state in general terms the
purpose or purposes of the meeting. Any such notice for a special meeting shall
be deemed given to a Director five days after it has been sent by mail, or
immediately when sent by telecopy, e-mail, telegram, telex or other electronic
means of transmission addressed to him or her at his or her address furnished to
the Secretary. Notice of any special meeting need not be given to any Director
who attends such meeting without protesting the lack of notice to him or her,
prior to or at the commencement of such meeting, or to any Director who submits
a signed waiver of notice, whether before or after such meeting.
Section 2.05. Quorum; Voting. At all meetings of the Board of
Directors, the presence of not less than a majority of the entire Board of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the Amended and Restated Certificate of Incorporation
or these By-laws, the vote of a majority of the Directors present at any meeting
at which a quorum is present shall be the act of the Board of Directors. The
Directors present at a duly organized meeting can continue to do business until
adjournment, notwithstanding the withdrawal of enough Directors to leave less
than a quorum.
Section 2.06. Adjournment. A majority of the Directors present,
whether or not a quorum is present, may adjourn any meeting of the Board of
Directors to another time or place. No notice need be given of any adjourned
meeting unless the time and place of the adjourned meeting are not announced at
the time of adjournment, in which case notice conforming to the requirements of
Section 2.04 shall be given to each Director.
Section 2.07. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors.
Section 2.08. Regulations; Manner of Acting. To the extent
consistent with applicable law, the Amended and Restated Certificate of
Incorporation and these By-laws, the Board of Directors may adopt such rules and
regulations for the conduct of meetings of the Board of Directors and for the
management of the property, affairs and business of the Corporation as the Board
of Directors may deem appropriate. The Directors shall act only as a Board, and
the individual Directors shall have no power as such.
Section 2.09. Action by Telephonic Communications. Members of the
Board of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communications equipment by means of
which all persons participating in
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<PAGE> 11
the meeting can hear each other, and participation in a meeting pursuant to this
provision shall constitute presence in person at such meeting.
Section 2.10. Resignations. Any Director may resign at any time by
delivering a written notice of resignation, signed by such Director, to the
President or the Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 2.11. Vacancies and Newly Created Directorships. Subject to
the rights of the holders of any series of Preferred Stock of the Corporation,
any vacancy on the Board of Directors that results from an increase in the
number of directors and any other vacancy may be filled by a majority of the
Board of Directors then in office, although less than a quorum, or a sole
remaining director, except that the stockholders shall fill any vacancy
resulting from the removal of a Director by the stockholders. Any director
elected to fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his or her predecessor.
Section 2.12. Compensation. The amount, if any, which each Director
shall be entitled to receive as compensation for his or her services as such
shall be fixed from time to time by resolution of the Board of Directors.
Section 2.13. Reliance on Accounts and Reports, etc. A Director, or
a member of any Committee designated by the Board of Directors, shall, in the
performance of his or her duties, be fully protected in relying in good faith
upon the records of the Corporation and upon information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, by Committees designated by the Board of Directors or by any other
person as to the matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted. The Board of Directors may, by
resolution adopted from time to time by a majority of the entire Board of
Directors, create one or more Committees, including an Executive Committee, and
designate the Directors who are to serve as members of each such Committee. Any
member of a Committee may designate in writing to the Board of Directors, and
upon such designation the Board of Directors shall appoint, one or more other
Directors as an alternative member of such Committee, who may replace such
appointing Committee member at any meeting of such Committee where such
appointing member is absent or disqualified. Each member (and each alternate
member) of any such Committee (whether designated at an annual meeting of the
Board of Directors or to fill a vacancy or otherwise) shall hold office until
his or her successor shall have been designated or until he or she shall cease
to be a Director, or until his or her earlier death, resignation or removal.
Section 3.02. Powers. During the intervals between the meetings of
the Board of Directors, the Executive Committee, subject to the Amended and
Restated Certificate of
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Incorporation and these By-laws, shall have and may exercise all the powers and
authority of the Board of Directors in the day to day management of the
property, affairs and business of the Corporation. Each such other Committee
shall have and may exercise powers of the Board of Directors as may be provided
by resolution or resolutions of the Board of Directors.
The Executive Committee shall have, and any other such Committee may
be granted by the Board of Directors, power to authorize the seal of the
Corporation to be affixed to any or all papers which may require it.
Section 3.03. Proceedings. Each such Committee may fix its own rules
of procedure consistent with these By-laws and may meet at such place (within or
without the State of Delaware), at such time and upon such notice, if any, as it
shall determine from time to time. Each such Committee shall keep minutes of its
proceedings and shall report such proceedings to the Board of Directors at the
meeting of the Board of Directors next following any such proceedings.
Section 3.04. Quorum and Manner of Acting. Except as may be otherwise
provided in the resolution creating such Committee, at all meetings of any
Committee the presence of members (or alternate members) constituting a majority
of the total authorized membership of such Committee shall constitute a quorum
for the transaction of business. The members of the Committee present at a duly
organized meeting can continue to do business until adjournment, notwithstanding
the withdrawal of enough members of the Committee to leave less than a quorum.
The act of the majority of the members present at any meeting at which a quorum
is present shall be the act of such Committee. Any action required or permitted
to be taken at any meeting of any such Committee may be taken without a meeting,
if all members of such Committee shall consent to such action in writing and
such writing or writings are filed with the minutes of the proceedings of the
Committee. The members of any such Committee shall act only as a Committee, and
the individual members of such Committee shall have no power as such.
Section 3.05. Action by Telephonic Communications. Members of any
Committee designated by the Board of Directors may participate in a meeting of
such Committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting. Section 3.06. Resignations . Any
member (and any alternate member) of any Committee may resign at any time by
delivering a written notice of resignation, signed by such member, to the
Chairman of the Board or the President. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Section 3.06. Resignations. Any member (and any alternate member) of
any Committee may resign at any time by delivering a written notice of
resignation, signed by such member, to the Chairman of the Board or the
President. Unless otherwise specified therein, such resignation shall take
effect upon delivery.
Section 3.07. Removal. Any member (and any alternate member) of any
Committee may be removed at any time, only for cause, by resolution adopted by a
majority of the entire Board of Directors.
Section 3.08. Vacancies. If any vacancy shall occur in any
Committee, by reason of disqualification, death, resignation, removal or
otherwise, the remaining members (and
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any alternate members) shall continue to act, and any such vacancy may be filled
by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the Corporation shall be
chosen by the Board of Directors and may include a Chairman of the Board and
Vice Chairman of the Board (who shall be chosen from among the Directors) and
shall include a President, one or more Vice Presidents, a Secretary, a Treasurer
and such other officers as the Board of Directors may determine. The Board of
Directors also may elect Assistant Secretaries and Assistant Treasurers in such
numbers as the Board of Directors may determine. Any number of offices may be
held by the same person, except that the President and the Secretary shall not
be the same person. Except as otherwise provided in these By-laws, no officer
need be a Director.
Section 4.02. Election. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual meeting,
officers may be elected at any regular or special meeting of the Board of
Directors. Each officer shall hold office until his or her successor has been
elected and qualified, or until his or her earlier death, resignation or
removal. All officers shall serve at the pleasure of the Board of Directors.
Section 4.03. Removal and Resignation; Vacancies. Any officer may be
removed for or without cause at any time by the Board of Directors. Any officer
may resign at any time by delivering a written notice of resignation, signed by
such officer, to the Board of Directors or the Chairman. Unless otherwise
specified therein, such resignation shall take effect upon delivery. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise, shall be filled by the Board of Directors.
Section 4.04. Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and perform
such duties as may be specified in these By-laws, except that in any event each
officer shall exercise such powers and perform such duties as may be required by
law.
Section 4.05. Chairman of the Board. The Board of Directors may at a
regular or special meeting elect from among their number a Chairman of the
Board. The Chairman of the Board shall preside at all meetings of the Board of
Directors and also shall exercise such powers and perform such duties as may be
delegated or assigned to or required of him or her by or pursuant to these
By-laws or by or pursuant to authorization of the Board of Directors.
Section 4.06. Vice-Chairman of the Board. The Board of Directors may
at a regular or special meeting elect from among their number one or more
Vice-Chairman of the Board. The Vice-Chairman of the Board shall exercise such
powers and perform such duties as
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may be delegated or assigned to or required of him, her or them by or pursuant
to these By-laws or by or pursuant to authorization of the Board of Directors or
by the Chairman of the Board.
Section 4.07. President. The Board of Directors shall at a regular
or special meeting elect a President. The President shall exercise such powers
and perform such duties as may be delegated or assigned to, or required of him
or her by or pursuant to these By-laws or by or pursuant to authorization of the
Board of Directors or (if the President is not the Chief Executive Officer) the
Chief Executive Officer.
Section 4.08. Chief Executive Officer. The Chairman shall be the
Chief Executive Officer of the Corporation unless the Board of Directors shall
appoint a Chief Executive Officer. Subject to the control of the Board of
Directors, and to the extent not otherwise prescribed by these By-laws, the
Chief Executive Officer shall have plenary power over all departments, officers,
employees and agents of the Corporation, and shall be responsible for the
general management and direction of all the business and affairs of the
Corporation.
Section 4.09. The Secretary. The Secretary shall have the following
powers and duties:
(a) He or she shall keep or cause to be kept a record of all the
proceedings of the meetings of the stockholders and of the Board of
Directors in books provided for that purpose.
(b) He or she shall cause all notices to be duly given in accordance
with the provisions of these By-laws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a
resolution or resolutions of the Board of Directors, he or she shall
furnish a copy of such resolution or resolutions to the members of such
Committee.
(d) He or she shall be the custodian of the records and of the seal
of the Corporation and shall cause such seal (or a facsimile thereof) to
be affixed to all certificates representing shares of the Corporation
prior to the issuance thereof and to all instruments the execution of
which on behalf of the Corporation under its seal shall have been duly
authorized in accordance with these By-laws, and when so affixed he or she
may attest the same.
(e) He or she shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required by
law, the Amended and Restated Certificate of Incorporation or these
By-laws.
(f) He or she shall have charge of the stock books and ledgers of the
Corporation and shall cause the stock and transfer books to be kept in
such manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names
(alphabetically arranged) and the addresses of the holders of record of
such shares, the number of shares held by each holder and the date as of
which each became such holder of record.
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(g) He or she shall sign (unless the Treasurer, an Assistant
Treasurer or Assistant Secretary shall have signed) certificates
representing shares of the Corporation, the issuance of which shall have
been authorized by the Board of Directors.
(h) He or she shall perform, in general, all duties incident to the
office of secretary and such other duties as may be specified in these
By-laws or as may be assigned to him or her from time to time by the Board
of Directors or the Chief Executive Officer.
Section 4.10. The Treasurer. The Treasurer shall have the following
powers and duties:
(a) He or she shall have charge and supervision over and be
responsible for the moneys, securities, receipts and disbursements of the
Corporation and shall keep or cause to be kept full and accurate records
of all receipts of the Corporation.
(b) He or she shall cause the moneys and other valuable effects of
the Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositaries as shall be selected in accordance with Section 7.05 of these
By-laws.
(c) He or she shall cause the moneys of the Corporation to be
disbursed by checks or drafts (signed as provided in Section 7.06 of these
By-laws) upon the authorized depositaries of the Corporation and cause to
be taken and preserved proper vouchers for all moneys disbursed.
(d) He or she may sign (unless an Assistant Treasurer or the
Secretary or an Assistant Secretary shall have signed) certificates
representing stock of the Corporation, the issuance of which shall have
been duly authorized by the Board of Directors.
(e) He or she shall perform, in general, all duties incident to the
office of Treasurer and such other duties as may be specified in these
By-laws or as may be assigned to him or her from time to time by the Board
of Directors or the Chief Executive Officer.
Section 4.11. Additional Officers. The Board of Directors may
appoint such other officers and agents as it may deem appropriate, and such
other officers and agents shall hold their offices for such terms and shall
exercise such powers and perform such duties as may be determined from time to
time by the Board of Directors. The Board of Directors from time to time may
delegate to any officer or agent the power to appoint subordinate officers or
agents and to prescribe their respective rights, terms of office, authorities
and duties. Any such officer or agent may remove any such subordinate officer or
agent appointed by him or her, for or without cause.
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<PAGE> 16
ARTICLE V
CAPITAL STOCK
Section 5.01. Certificates of Stock; Uncertificated Shares. The
Shares of the Corporation shall be represented by certificates, provided that
the Board of Directors may provide by resolution or resolutions that some or all
of any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until each certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock in the Corporation represented by certificates and upon
request every holder of uncertificated shares shall be entitled to have a
certificate signed by, or in the name of the Corporation by the Chairman of the
Board, or the President or a Vice President and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary, representing the number of
shares registered in the certificate form. Such certificate shall be in such
form as the Board of Directors may determine, to the extent consistent with
applicable law, the Amended and Restated Certificate of Incorporation and these
By-laws.
Section 5.02. Signatures; Facsimile. All of such signatures on the
certificate may be a facsimile, engraved or printed, to the extent permitted by
law. In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
Section 5.03. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate setting forth such allegation. The Board
of Directors may require the owner of such lost, stolen or destroyed
certificate, or his or her legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of any such new certificate.
Section 5.04. Transfer of Stock. Upon surrender to the Corporation
or the transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by appropriate evidence of succession, assignment or
authority to transfer, the Corporation shall issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books. Within a reasonable time after the transfer of uncertificated
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the DGCL.
Subject to the provisions of the Amended and Restated Certificate of
Incorporation and these By-laws, the Board of Directors may prescribe such
additional rules and regulations as it may deem appropriate relating to the
issue, transfer and registration of shares of the Corporation.
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<PAGE> 17
Section 5.05. Record Date. In order to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date on which the resolution fixing the
record date is adopted by the Board of Directors, and which shall not be more
than 60 nor less than 10 days before the date of such meeting. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting, provided that the
Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights of the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 5.06. Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such certificate
and the Corporation shall not be bound to recognize any equitable or legal claim
to or interest in such shares on the part of any other person, whether or not
the Corporation shall have notice of such claim or interests. Whenever any
transfer of shares shall be made for collateral security, and not absolutely, it
shall be so expressed in the entry of the transfer if, when the certificates are
presented to the Corporation for transfer or uncertificated shares are requested
to be transferred, both the transferor and transferee request the Corporation to
do so.
Section 5.07. Transfer Agent and Registrar. The Board of Directors
may appoint one or more transfer agents and one or more registrars, and may
require all certificates representing shares to bear the signature of any such
transfer agents or registrars.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Nature of Indemnity. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was or has agreed to become a Director or officer of the Corporation, is
or was serving or has agreed to serve at the request of the Corporation as a
Director or officer of another corporation (including, without limitation, MONY
Life Insurance Company ("MONY") and its subsidiaries and affiliates),
partnership, joint venture, trust or other enterprise, including an employee
benefit plan, or by reason of any action alleged to have been taken or omitted
in such capacity, and may indemnify any person who was or is a party or is
threatened to be made a party to such an action, suit or proceeding by reason of
the fact that he or she is or was
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<PAGE> 18
or has agreed to become an employee or agent of the Corporation, or is or was
serving or has agreed to serve at the request of the Corporation as a director,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (including, without limitation, MONY and its subsidiaries and
affiliates), including an employee benefit plan, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her or on his or her behalf in connection with
such action, suit or proceeding and any appeal therefrom, if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful; except that in the case of an action or suit by or in the right of the
Corporation to procure a judgment in its favor (i) such indemnification shall be
limited to expenses (including attorneys' fees) actually and reasonably incurred
by such person in the defense or settlement of such action or suit and (ii) no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he or she reasonably believed to be in or not opposed to
the best interests of the Corporation and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
Section 6.02. Successful Defense. To the extent that a Director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
6.01 hereof or in defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Section 6.03. Determination That Indemnification Is Proper. Any
indemnification of a Director or officer of the Corporation under Section 6.01
hereof (unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the Director or officer is not
proper in the circumstances because he or she has not met the applicable
standard of conduct set forth in Section 6.01 hereof. Any indemnification of an
employee or agent of the Corporation under Section 6.01 hereof (unless ordered
by a court) may be made by the Corporation upon a determination that
indemnification of the employee or agent is proper in the circumstances because
he or she has met the applicable standard of conduct set forth in Section 6.01
hereof. Any such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to such
action, suit or proceeding, (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion or (iii) by the stockholders.
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<PAGE> 19
Section 6.04. Advance Payment of Expenses. Expenses (including
attorneys' fees) incurred by a Director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the Director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in this
Article VI. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate. The Board of Directors may authorize
the Corporation's counsel to represent such Director, officer, employee or agent
in any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
Section 6.05. Procedure for Indemnification of Directors and Officers.
Any indemnification of a Director or officer of the Corporation under Sections
6.01 and 6.02 or advance of costs, charges and expenses to a Director or officer
under Section 6.04 shall be made promptly, and in any event within 30 days, upon
the written request of the Director or officer. If a determination by the
Corporation that the Director or officer is entitled to indemnification pursuant
to this Article is required, and the Corporation fails to respond within 60 days
to a written request for indemnity, the Corporation shall be deemed to have
approved such request. If the Corporation denies a written request for indemnity
or advancement of expenses, in whole or in part, or if payment in full pursuant
to such request is not made within 30 days, the right to indemnification or
advances as granted by this Article VI shall be enforceable by the Director or
officer in any court of competent jurisdiction. Such person's costs and expenses
incurred in connection with successfully establishing his or her right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for the advance of costs, charges and
expenses under Section 6.04 where the required undertaking, if any, has been
received by the Corporation) that the claimant has not met the standard of
conduct set forth in Section 6.01, but the burden of providing such defense
shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors, its independent legal counsel and its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in Section 6.01, nor the
fact that there has been an actual determination by the Corporation (including
its Board of Directors, its independent legal counsel and its stockholders) that
the claimant has not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the DGCL are in effect, and any repeal or modification thereof
shall not affect any right or obligation then existing with respect to any state
of facts then or previously existing or any action, suit or proceeding
previously or thereafter brought or threatened based in whole or in part upon
any such state of facts. Such a right may not be modified retroactively without
the consent of such Director, officer, employee or agent.
15
<PAGE> 20
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-law, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 6.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
Director or officer of the Corporation, or is or was serving at the request of
the Corporation as a Director or officer of another corporation (including,
without limitation, MONY and its subsidiaries and affiliates), partnership,
joint venture, trust or other enterprise, including an employee benefit plan,
against any liability asserted against him or her and incurred by him or her or
on his or her behalf in any such capacity, or arising out of his or her status
as such, whether or not the Corporation would have the power to indemnify him or
her against such liability under the provisions of this Article.
Section 6.08. Severability. If this Article or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each Director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article VI that shall not have been invalidated and to the
fullest extent permitted by applicable law.
ARTICLE VII
GENERAL PROVISIONS
Section 7.01. Dividends. Subject to any applicable provisions of law
and the Amended and Restated Certificate of Incorporation, dividends upon the
shares of the Corporation may be declared by the Board of Directors at any
regular or special meeting of the Board of Directors and any such dividend may
be paid in cash, property or shares of the Corporation's capital stock.
A member of the Board of Directors shall be fully protected in
relying in good faith upon the records of the Corporation and upon such
information, opinions, reports or statements presented to the Corporation by any
of its officers or employees, Committees of the Board of Directors, or any other
person as to matters the Director reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation, as to the value and amount
of the assets, liabilities and/or net profits of the Corporation, or any other
facts pertinent to the existence and amount of surplus or other funds from which
dividends might properly be declared and paid.
Section 7.02. Reserves. There may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, for
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<PAGE> 21
equalizing dividends or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors shall think
conducive to the interests of the Corporation, and the Board of Directors may
similarly modify or abolish any such reserve.
Section 7.03. Execution of Instruments. The Chairman of the Board,
any Vice-Chairman of the Board, the President, any Vice President, the Secretary
or the Treasurer may in the ordinary course of business enter into any contract
or execute and deliver any instrument in the name and on behalf of the
Corporation. The Board of Directors may authorize any officer or agent to enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. Any such authorization may be general or limited to
specific contracts or instruments.
Section 7.04. Corporate Indebtedness. No loan shall be contracted on
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the Board of Directors or, to the extent
authorized by a resolution adopted by the Board of Directors, the Chief
Executive Officer. Such authorization may be general or confined to specific
instances. Loans so authorized may be effected at any time for the Corporation
from any bank, trust company or other institution or from any firm, corporation
or individual. All bonds, debentures, notes and other obligations or evidences
of indebtedness of the Corporation issued for such loans shall be made, executed
and delivered as the Board of Directors or (to the extent so authorized) the
Chief Executive Officer shall authorize. When authorized by the Board of
Directors, any part of all the properties, including contract rights, assets,
business or good will of the Corporation, whether then owned or thereafter
acquired, may be mortgaged, pledged, hypothecated or conveyed or assigned in
trust as security for the payment of such bonds, debentures, notes and other
obligations or evidences of indebtedness of the Corporation, and of the interest
thereon, by instruments executed and delivered in the name of the Corporation.
Section 7.05. Deposits. Any funds of the Corporation may be
deposited from time to time in such banks, trust companies or other depositaries
as may be determined by the Board of Directors, the Chairman of the Board or the
President or by such officers or agents as may be authorized by the Board of
Directors, the Chairman of the Board or the President to make such
determination.
Section 7.06. Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such agent or
agents of the Corporation, and in such manner, as the Board of Directors, the
Chairman of the Board or the President from time to time may determine.
Section 7.07. Sale, Transfer, etc., of Securities. The Chairman of
the Board, the President, any Vice President, the Secretary, the Treasurer or
any other officers designated by the Board of Directors, may sell, transfer,
endorse, and assign, in each case in the ordinary course of business, any shares
of stock (other than stock of a subsidiary if such transaction has not been
approved by the Board of Directors), bonds or other securities owned by or held
in the name of the Corporation, and may make, execute and deliver in the name of
the Corporation, under its corporate seal, any instruments that may be
appropriate to effect any such sale, transfer, endorsement or assignment.
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<PAGE> 22
Section 7.08. Voting as Stockholder. The Chairman of the Board, the
President, any Vice President, the Secretary, the Treasurer or any other
officers designated by the Board of Directors, shall have full power and
authority on behalf of the Corporation to attend any meeting of stockholders of
any corporation in which the Corporation may hold stock, and to act, vote (or
execute proxies to vote) and exercise in person or by proxy all other rights,
powers and privileges incident to the ownership of such stock. Such officers
acting on behalf of the Corporation shall have full power and authority to
execute any instrument expressing consent to or dissent from any action of any
such corporation without a meeting.
Section 7.09. Fiscal Year. The fiscal year of the Corporation shall
commence on the first day of January of each year and shall terminate in each
case on December 31.
Section 7.10. Seal. The seal of the Corporation shall be circular in
form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
Section 7.11. Books and Records. Except to the extent otherwise
required by law, the books and records of the Corporation shall be kept at such
place or places within or without the State of Delaware as may be determined
from time to time by the Board of Directors.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Section 8.01. Amendment. The Board of Directors shall have the
express power, without a vote of stockholders, to adopt any By-law, and to
amend, alter or repeal the By-laws of the Corporation, except to the extent that
the By-laws or the Amended and Restated Certificate of Incorporation otherwise
provide. Except as the Amended and Restated Certificate of Incorporation may
otherwise provide, stockholders may adopt any By-law, or amend, alter or repeal
the By-laws of the Corporation at any annual or special meeting of the
stockholders held in accordance with the By-laws upon the affirmative vote of
the holders of at least a majority of the votes entitled to be cast by the
holders of all then outstanding voting shares of the Corporation, voting
together as a single class.
ARTICLE IX
CONSTRUCTION
Section 9.01. Construction. In the event of any conflict between the
provisions of these By-laws as in effect from time to time and the provisions of
the Amended and Restated Certificate of Incorporation of the Corporation as in
effect from time to time, the provisions of such Amended and Restated
Certificate of Incorporation shall be controlling.
18
<PAGE> 1
EXHIBIT 4.2
FORM OF DEFINITIVE SECURITY
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM AND IN ACCORDANCE WITH THE FISCAL AGENCY AGREEMENT, COPIES
OF WHICH ARE AVAILABLE FOR INSPECTION AT THE CORPORATE TRUST OFFICE OF THE
FISCAL AGENT. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM SUCH REGISTRATION PROVIDED
BY RULE 144A UNDER THE ACT (TOGETHER WITH ANY SUCCESSOR PROVISION AND AS MAY BE
HEREAFTER AMENDED FROM TIME TO TIME, "RULE 144A").
[INCLUDE UNLESS, PURSUANT TO SECTION 6(g) OF THE FISCAL AGENCY
AGREEMENT, THE ISSUER DETERMINES THAT THE LEGEND MAY BE REMOVED] -- THE HOLDER
OF THIS SECURITY AGREES FOR THE BENEFIT OF THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK ("MONY") THAT (A) THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A, (OR ANY SUCCESSOR
PROVISION THERETO, AND AS MAY HEREAFTER BE AMENDED FROM TIME TO TIME) UNDER THE
ACT IN A TRANSACTION IN ACCORDANCE WITH RULE 144A, (II) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S (TOGETHER
WITH ANY SUCCESSOR PROVISION, AND AS MAY HEREAFTER BE AMENDED FROM TIME TO TIME,
"REGULATION S") UNDER THE ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 (OR ANY SUCCESSOR PROVISION THERETO, AND AS MAY HEREAFTER
BE AMENDED FROM TIME TO TIME) UNDER THE ACT (IF AVAILABLE) OR (IV) TO AN
INSTITUTIONAL INVESTOR WHO IS AN "ACCREDITED INVESTOR," AS DEFINED IN RULE
501(a)(1), (2), (3) or (7) UNDER THE ACT, IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES, AND (B) THAT THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESTRICTIONS REFERRED TO IN (A) ABOVE.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF MONY THAT, IF THE
HOLDER PROPOSES TO SELL OR TRANSFER THIS SECURITY TO ANY EMPLOYEE BENEFIT PLAN
(AS DEFINED IN SECTION 3 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974,
AS AMENDED), THE HOLDER WILL COMPLY WITH THE RESTRICTIONS SET FORTH IN PARAGRAPH
9 HEREOF.
ALL PAYMENTS OF PRINCIPAL AND INTEREST ON THIS SECURITY MAY ONLY BE
MADE OUT OF MONY'S FREE AND DIVISIBLE SURPLUS AND WITH THE PRIOR APPROVAL OF THE
SUPERINTENDENT OF
<PAGE> 2
INSURANCE OF THE STATE OF NEW YORK (THE "SUPERINTENDENT"), IN ACCORDANCE WITH
SECTION 1307 OF THE NEW YORK INSURANCE LAW (TOGETHER WITH ANY SUCCESSOR
PROVISION, AND AS MAY BE HEREAFTER AMENDED FROM TIME TO TIME, "SECTION 1307").
THERE ARE NO GUIDELINES OR INTERPRETATIONS AS TO THE EXTENT OF THE
SUPERINTENDENT'S DISCRETION UNDER SECTION 1307 IN DETERMINING WHETHER THE
FINANCIAL CONDITION OF MONY WARRANTS THE MAKING OF SUCH PAYMENTS.
<PAGE> 3
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
Series A Surplus Note scheduled to mature on
December 30, 2012
No. R-____ $
Issue Date:
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a mutual life insurance
company organized under the laws of the State of New York (herein called the
"Issuer"), for value received, hereby promises to pay, subject to the approval
of the Superintendent pursuant to Section 1307, to ______________________, or
registered assigns, the principal sum of ______________ United States dollars
($_________) on December 30, 2012 (the "Final Scheduled Maturity Date"), and to
pay interest thereon, subject to the approval of the Superintendent pursuant to
Section 1307, from December 30, 1997, or from the most recent Scheduled Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on June 30 and December 31 in each year, commencing June 30, 1998
(each a "Scheduled Interest Payment Date", which term shall also include any
other dates on which the payment of interest herein may be due in accordance
with paragraph 4(a) hereof), at the rate of 9-1/2% per annum, until the
principal hereof is paid or duly provided for. Any reference herein to the term
"Scheduled Maturity Date" or other date for the payment of principal of this
Security shall include the Final Scheduled Maturity Date and the date upon which
any state or federal agency obtains an order or grants approval for the
rehabilitation, liquidation, conservation or dissolution of the Issuer. As
specified on the reverse hereof, all payments of principal of or interest on
this Security may be made only out of the Issuer's free and divisible surplus
and only with the prior approval of the Superintendent. The interest so payable,
and punctually paid or duly provided for, on any Scheduled Interest Payment Date
shall be paid, in accordance with the terms of the Fiscal Agency Agreement
hereinafter referred to, to the person (the "registered holder") in whose name
this Security (or one or more predecessor Securities) is registered at the close
of business on June 15 or December 15 (whether or not a business day), as the
case may be (each a "Regular Record Date"), next preceding such Scheduled
Interest Payment Date. Interest on the Securities shall be calculated on the
basis of a 360-day year of twelve 30-day months. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
registered holder on such Regular Record Date and shall be paid to the person in
whose name this Security (or one or more predecessor Securities) is registered
at the close of
<PAGE> 4
business on a special record date for the payment of such interest to be
fixed by the Issuer, notice whereof shall be given to registered holders of the
Securities not less than 15 days prior to such special record date.
Principal of this Security shall be payable against surrender hereof at
the corporate trust office of the Fiscal Agent hereinafter referred to and at
the offices of such other Paying Agents as the Issuer shall have appointed
pursuant to the Fiscal Agency Agreement. Payments of principal of the Securities
shall be made only against surrender of the Securities. Payments of interest on
this Security may be made, in accordance with the foregoing and subject to
applicable laws and regulations, by check mailed on or before the Scheduled
Interest Payment Date of such payment to the person entitled thereto at such
person's address appearing on the aforementioned register. In the case of a
registered holder of at least $1,000,000 (or any lesser amount at the discretion
of the Issuer) aggregate principal amount of Securities, payments of principal
or interest may be made by wire transfer to an account maintained by the payee
with a bank if such registered holder so elects by giving notice to the Fiscal
Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept
at its discretion) prior to the applicable Scheduled Interest Payment Date or
Scheduled Maturity Date hereof, of such election and of the account to which
payments are to be made. Unless such designation is revoked, any such
designation made by such holder with respect to such securities shall remain in
effect with respect to any future payments with respect to such Securities
payable to such holder. The Issuer agrees that until this Security has been
delivered to the Fiscal Agent for cancellation, or monies sufficient to pay the
full principal of and interest remaining unpaid on this Security have been made
available for payment and either paid or returned to the Issuer as provided
herein, it will at all times maintain offices or agencies in the Borough of
Manhattan, The City of New York and for the payment of the principal of and
interest on the Securities as herein provided.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Security may be executed by the Issuer by manual or facsimile
signatures, and such signatures may be executed on separate counterparts.
Unless the certificate of authentication hereon has been executed by
the Fiscal Agent by manual signature,
<PAGE> 5
this Security shall not be valid or obligatory for any purpose.
<PAGE> 6
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed.
Dated:
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By:________________________
Name:
Title:
By:________________________
Name:
Title:
This is one of the Securities referred to in the within-mentioned
Fiscal Agency Agreement.
CITIBANK, N.A.
as Fiscal Agent
By:________________________
Authorized Officer
<PAGE> 7
FORM OF REVERSE
1. This Security is one of a duly authorized issue of Series A Surplus
Notes scheduled to mature on December 30, 2012 of the Issuer (herein called the
"Securities" or "Notes"), limited in aggregate principal amount to $115,000,000.
The Issuer and CITIBANK, N.A. (as "Fiscal Agent") have entered into a Fiscal
Agency Agreement, dated as of December 30, 1997 (such instrument, as it may be
duly amended from time to time, is herein called the "Fiscal Agency Agreement"),
which provides for the mechanism for issuing the Securities and, inter alia,
sets forth certain duties of the Fiscal Agent in connection therewith. As used
herein, the term "Fiscal Agent" includes any successor fiscal agent under the
Fiscal Agency Agreement. Copies of the Fiscal Agency Agreement are on file and
available for inspection at the corporate trust office of the Fiscal Agent in
the Borough of Manhattan, The City of New York. Holders of Securities are
referred to the Fiscal Agency Agreement for a statement of the terms thereof,
including those relating to transfer, payment, exchanges and certain other
matters. The Fiscal Agent or any Paying Agent shall also act as Transfer Agent
and Securities registrar. Terms used herein which are defined in the Fiscal
Agency Agreement but not otherwise defined herein shall have the meanings
assigned to such terms in the Fiscal Agency Agreement.
The Securities are direct and unsecured obligations of the Issuer and,
subject to the payment restrictions contained in paragraphs 4 and 10 hereof (the
"Payment Restrictions"), are scheduled to mature on December 30, 2012. Section
1307 provides that the Securities are not part of the legal liabilities of the
Issuer and are not a basis of any set-off against the Issuer.
2. The Securities are issuable only in fully registered form without
coupons. Securities are issuable in minimum denominations of $150,000 and
integral multiples of $1,000 above that amount.
3. The Issuer shall maintain, in the Borough of Manhattan, The City of
New York, a Transfer Agent where Securities may be registered or surrendered for
registration of transfer or exchange. The Issuer has initially appointed the
Corporate Trust Office of the Fiscal Agent as its Transfer Agent in the Borough
of Manhattan, The City of New York. The Issuer shall cause each Transfer Agent
to act as a Securities registrar and shall cause to be kept at the office of
each Transfer Agent a register in which, subject to such reasonable regulations
as it may prescribe, the Issuer shall provide for the registration of Securities
and
<PAGE> 8
registration of transfers of Securities. The Issuer reserves the right to vary
or terminate the appointment of any Transfer Agent or to appoint additional or
other Transfer Agents or to approve any change in the office through which any
Transfer Agent acts, provided that there shall at all times be a Transfer Agent
in the Borough of Manhattan, The City of New York. The Issuer shall cause notice
of any resignation, termination or appointment of the Fiscal Agent or any Paying
Agent or Transfer Agent and of any change in the office through which any such
Agent shall act to be provided to holders of Securities.
Subject to the restrictions set forth herein and in the Fiscal Agency Agreement,
the transfer of a Security is registrable on the aforementioned register upon
surrender of such Security at any Transfer Agent duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer duly executed by, the registered holder thereof or his attorney duly
authorized in writing. Upon such surrender of this Security for registration of
transfer, the Issuer shall execute, and the Fiscal Agent shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities, dated the date of authentication thereof, of any authorized
denominations and of a like aggregate principal amount.
Subject to the restrictions set forth herein and in the Fiscal Agency
Agreement, at the option of the registered holder upon request confirmed in
writing, Securities may be exchanged for Securities of any authorized
denominations and aggregate principal amount upon surrender of the Securities to
be exchanged at the office of any Transfer Agent. Whenever any Securities are so
surrendered for exchange, the Issuer shall execute, and the Fiscal Agent shall
authenticate and deliver, the Securities which the registered holder making the
exchange is entitled to receive. Any registration of transfer or exchange shall
be effected upon the Issuer being satisfied with the documents of title and
identity of the person making the request and subject to the restrictions set
forth in the immediately following paragraph and such reasonable regulations as
the Issuer may from time to time agree with the Fiscal Agent.
Securities may not be redeemed by the Issuer, in whole or in part,
prior to the Final Scheduled Maturity Date.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Issuer, evidencing the same
debt, and entitled to the same benefits, as the Securities surrendered upon such
registration of transfer or exchange. No service charge shall be made for any
registration of transfer or exchange, but the Issuer may require payment of a
sum suf-
<PAGE> 9
ficient to cover any tax or other governmental charge payable in connection
therewith.
Prior to due presentment of this Security for registration of transfer,
the Issuer, the Fiscal Agent and any agent of the Issuer or the Fiscal Agent may
treat the person in whose name this Security is registered as the absolute owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Issuer nor the Fiscal Agent nor any such agent shall be affected by notice
to the contrary.
4. (a) Notwithstanding anything to the contrary set forth herein or in
the Fiscal Agency Agreement, any payment of principal of, interest on or any
monies owing with respect to this Security, whether at the Scheduled Interest
Payment Date or Scheduled Maturity Date specified herein or otherwise, may be
made only (i) out of the free and divisible surplus of the Issuer which the
Superintendent determines to be available for such payments under Section 1307
and (ii) with the prior approval of the Superintendent whenever, in his
judgment, the financial condition of the Issuer warrants such payment, in
accordance with Section 1307. If the Superintendent does not approve the making
of any payment of principal of or interest on this Security on the Scheduled
Interest Payment Date or Scheduled Maturity Date thereof, as specified herein,
the Scheduled Interest Payment Date or Scheduled Maturity Date, as the case may
be, shall be extended and such payment shall be made by the Issuer on the next
following Business Day on which the Issuer shall have the approval of the
Superintendent to make such payment. Interest will continue to accrue on any
such unpaid principal through the actual date of payment at the rate of interest
stated on the face hereof. Interest will not accrue on interest with respect to
which the Scheduled Interest Payment Date has been extended, during the period
of such extension. If the Superintendent approves a payment of principal of or
interest on the Securities in an amount that is less than the full amount of
principal of and interest on the Securities then scheduled to be paid in respect
of the Securities, payment of such partial amount shall be made pro rata among
Security holders as their interests may appear.
(b) Any payment of principal of or interest on any Security as to which
the approval of the Superintendent has been obtained and which is not punctually
paid or duly provided for on the Scheduled Interest Payment Date or Scheduled
Maturity Date thereof, as set forth herein (such payment being referred to as an
"Unpaid Amount"), will forthwith cease to be payable to the registered owner of
this Security on the relevant record date designated herein, and such Unpaid
Amount will instead be payable to the registered owner of this Security on a
subsequent special
<PAGE> 10
record date. The Issuer shall fix the special record date and payment date for
the payment of any Unpaid Amount. At least 15 days before the special record
date, the Issuer shall mail to each holder of the Securities and the Fiscal
Agent a notice that states the special record date, payment date and amount of
interest or principal to be paid. On the payment date set forth in such notice,
the Paying Agent shall pay the amount of interest or principal to be so paid to
each holder of the Securities in the manner set forth in Section 4(a) of the
Fiscal Agency Agreement.
5. (a) For so long as the Fiscal Agent is acting as a Paying Agent
hereunder, the Issuer shall provide, subject to the Payment Restrictions, to the
Fiscal Agent in immediately available funds on or prior to 10:00 a.m., New York
time, of each date on which a payment of principal of or any interest on this
Security is payable, as set forth herein, such amounts as are necessary (with
any amounts then held by the Fiscal Agent and available for the purpose) to make
such payment, and the Issuer hereby authorizes and directs the Fiscal Agent from
funds so provided to it to make or cause to be made payment of the principal of
and any interest, as the case may be, on this Security as set forth herein and
in the Fiscal Agency Agreement. Payments of principal of or any interest on the
Securities may be made, in the case of a registered holder of at least
$1,000,000 (or any lesser amount at the discretion of the Issuer) principal
amount of Securities, by wire transfer to an account maintained by the payee
with a bank if such registered holder so elects by giving notice to the Fiscal
Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept
at its discretion) prior to the date on which such payments are scheduled to be
made, of such election and of the account to which payments are to be made.
Unless such designation is revoked, any such designation made by such holder
with respect to such Securities shall remain in effect with respect to any
future payments with respect to such Securities payable to such holder. The
Issuer shall pay any reasonable administrative costs in connection with making
any such payments. The Fiscal Agent shall arrange directly with any other Paying
Agent who may have been appointed by the Issuer pursuant to the provisions of
Section 2 of the Fiscal Agency Agreement for the payment from funds so paid by
the Issuer of the principal of and any interest on this Security. Any monies
held in respect of this Security remaining unclaimed at the end of two years
after such principal and such interest shall have become payable in accordance
with the Payment Restrictions (whether at the Scheduled Maturity Date or
otherwise) and monies sufficient therefor shall have been duly made available
for payment shall, together with any interest made available for payment
thereon, be repaid to the Issuer upon written request and upon such repayment
all liability of the Fiscal Agent with respect thereto shall cease, without,
however,
<PAGE> 11
limiting in any way any obligation the Issuer may have to pay the principal of
and interest on this Security, subject to the Payment Restrictions.
(b) In any case where the Scheduled Interest Payment Date or Scheduled
Maturity Date of any Security shall be at any place of payment a day on which
banking institutions are not carrying out transactions in U.S. dollars or are
authorized or obligated by law or executive order to close, then payment of
principal or interest need not be made on such date at such place but may be
made on the next succeeding day at such place which is not a day on which
banking institutions in the applicable jurisdiction are generally authorized or
obligated by law or executive order to close (a "Business Day"), with the same
force and effect as if made on the Scheduled Interest Payment Date or Scheduled
Maturity Date thereof, and no interest shall accrue for the period after such
date.
6. The Issuer shall pay all stamp and other duties, if any, which may
be imposed by the United States of America or any governmental entity or any
political subdivision thereof or taxing authority of or in the foregoing with
respect to the Fiscal Agency Agreement or the initial issuance of this Security.
Except as otherwise specifically provided in this Security, the Issuer shall not
be required to make any payment with respect to any tax, duty, assessment or
other governmental charge of whatever nature imposed or levied by any government
or any political subdivision or taxing authority thereof or therein.
7. For so long as any of the Securities remain Outstanding or any
amount remains unpaid on any of the Securities,
(a) Except with respect to transactions covered by Paragraph 8 hereof,
the Issuer will do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, material rights (charter and
statutory) and franchise; provided, however, that the Issuer shall not be
required to preserve any such right or franchise if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Issuer and that the Issuer has used its best efforts to not
disadvantage in any material respect the holders of the Securities, or that not
preserving such right or franchise is in the best interest of the policyholders
of the Issuer having considered the interests of the holders of the Securities.
(b) The Issuer will not be or become an open-end investment company,
unit investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act of 1940, as
<PAGE> 12
amended (the "Investment Company Act"), if such action would cause the Issuer to
be in violation of the Investment Company Act at any time prior to payment in
full of the Securities.
(c) The Issuer shall use its best efforts to obtain the approval of the
Superintendent in accordance with Section 1307 for the payment by the Issuer of
interest on and principal of the Securities on the Scheduled Interest Payment
Dates or Scheduled Maturity Dates thereof, and, in the event any such approval
has not been obtained for any such payment at or prior to the Scheduled Interest
Payment Date or Scheduled Maturity Date thereof, as the case may be, to continue
to use its best efforts to obtain such approval promptly thereafter. Not less
than 45 days prior to the Scheduled Interest Payment Date or Scheduled Maturity
Date thereof (excluding any such Scheduled Maturity Date which arises as a
result of the obtaining of an order or the granting of approval for the
rehabilitation, liquidation, conservation or dissolution of the Issuer), the
Issuer will seek the approval of the Superintendent to make each payment of
interest on and principal of the Securities. In addition, the Issuer shall
notify or cause to be notified each holder and the Fiscal Agent no later than 5
Business Days (as defined herein) prior to the Scheduled Interest Payment Date
for interest on or the Scheduled Maturity Date for principal of any Security
(excluding any such Scheduled Maturity Date which arises as a result of the
obtaining of an order or the granting of approval for the rehabilitation,
liquidation, conservation or dissolution of the Issuer) in the event that the
Superintendent has not then approved the making of any such payment on such
Scheduled Interest Payment Date or such Scheduled Maturity Date, and thereafter
shall promptly notify each holder and the Fiscal Agent in the event that the
Issuer shall have failed to make any such payment on any such Scheduled Interest
Payment Date or such Scheduled Maturity Date. Without limiting the Issuer's
obligations set forth in this paragraph, it is understood that, to the extent
authorized by the Issuer's Board of Directors, the Issuer may continue to
declare policyowner dividends and to make dividend payments on its participating
policies even though payments on the Securities may not have been approved by
the Superintendent, regardless of the effect any such declaration or payment may
have on the Superintendent's decision regarding payment of interest on or
principal of the Securities.
8. For so long as any of the Securities remain Outstanding or any
amounts remain unpaid on any of the Securities, the Issuer may convert itself
from a mutual life insurance company into a stock life insurance company (such
conversion, a "demutualization"), merge or consolidate with or into any other
corporation or sell, convey, transfer or otherwise dispose of all or
substantially all of its assets
<PAGE> 13
to any person, firm or corporation, if (i) (A) in the case of a merger or
consolidation, the Issuer is the surviving corporation or (B) in the case of a
merger or consolidation where the Issuer is not the surviving corporation and in
the case of any such sale, conveyance, transfer or other disposition, the
successor corporation is a corporation organized and existing under the laws of
the United States or a State thereof and such corporation expressly assumes by
supplemental fiscal agency agreement all the obligations of the Issuer under the
Securities and the Fiscal Agency Agreement, (ii) at the time of any such
demutualization, merger or consolidation, or such sale, conveyance, transfer or
other disposition, the Issuer shall not have failed to make payment of interest
on or principal of the Securities after having received the Superintendent's
prior approval to make such payment and (iii) the Issuer has delivered to the
Fiscal Agent an Officer's Certificate stating that such demutualization, merger,
consolidation, sale, conveyance, transfer or other disposition complies with
this paragraph and that all conditions precedent herein provided for relating to
such transaction have been complied with. In the event of the assumption by a
successor corporation of the obligations of the Issuer as provided in clause
(i)(B) of the immediately preceding sentence, such successor corporation shall
succeed to and be substituted for the Issuer hereunder and under the Fiscal
Agency Agreement and all such obligations of the Issuer shall terminate.
9. No employee benefit plan within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
prohibited transaction provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), as to which the Issuer is a party in interest or a
disqualified person (each a "Plan"), and no Person acting on behalf of a Plan,
may acquire this Security, unless the acquisition of the Security is exempt
under one or more of Prohibited Transaction exemptions 84-14, 90-1, 91-38 or
96-23 (or any amendment thereof) or another applicable exemption from the
prohibitions under Section 406 of ERISA and Section 4975 of the Code. The
purchase by any Person of this Security shall constitute a representation by
such Person to the Issuer and the Fiscal Agent that such Person either (i) is
not a Plan or (ii) is a Plan, and may acquire this Security under an applicable
exemption from the prohibitions under Section 406 of ERISA and Section 4975 of
the Code. The restrictions on purchases of the Securities set forth in this
Paragraph 9 are in addition to those otherwise set forth in Section 6 of the
Fiscal Agency Agreement and under applicable law.
10. (a) The Issuer agrees, and each Security holder by accepting a
Security agrees, that the indebtedness evidenced by the Securities is
subordinated in right of payment, to the extent and in the manner provided in
this
<PAGE> 14
Section, to the prior payment in full of all Indebtedness, Policy Claims and
Other Creditor Claims (each as hereinafter defined), in accordance with Section
7435 of the New York Insurance Law (together with any successor provision, and
as may be hereafter amended from time to time, "Section 7435").
(b) Upon any distribution to creditors of the Issuer in any
rehabilitation, liquidation, conservation, dissolution or reorganization
proceeding relating to the Issuer or its property, the priority of claims of
Security holders shall be determined in accordance with Section 7435. In a
proceeding commenced under Article 74 of the New York Insurance Law, claims for
principal of or interest on the Securities constitute Class 7 claims under
Section 7435, as currently in effect. If the Superintendent approves a payment
of principal of or interest on the Securities in an amount that is less than the
full amount of principal of and interest on the Securities then scheduled to be
paid in respect of the Securities, payment of such partial amount shall be made
pro rata among Security holders as their interests may appear.
(c) If a distribution is made to Security holders that, because of this
Section, should not have been made to them, the Security holders who receive the
distribution shall hold it in trust for holders of Policy Claims, Indebtedness
and Other Creditor Claims and pay it over to them as their interests may appear.
(d) The Issuer shall promptly notify the Fiscal Agent and the Paying
Agent of any facts known to the Issuer that would cause a payment of principal
of or interest on the Securities to violate this Section.
(e) This Section defines the relative rights of Security holders, on
the one hand, and holders of any other claims, in accordance with Section 7435,
on the other hand. Nothing in this Security or the Fiscal Agency Agreement shall
(i) impair, as between the Issuer and Security holders, the obligation of the
Issuer which is, subject to the Payment Restrictions, absolute and unconditional
to pay principal of and interest on the Securities in accordance with their
terms; (ii) affect the relative rights of Security holders and creditors of the
Issuer, other than holders of Policy Claims, Indebtedness or Other Creditor
Claims; or (iii) prevent the Fiscal Agent or any Security holder from exercising
any available remedies upon a breach by the Issuer of its obligations hereunder,
subject to the rights of holders of Policy Claims, Indebtedness or Other
Creditor Claims to receive distributions otherwise payable to Security holders.
(f) No right of any holder of Policy Claims, Indebtedness or Other
Creditor Claims to enforce the subor-
<PAGE> 15
dination of the indebtedness evidenced by the Securities shall be impaired by
any act or failure to act by the Issuer or by its failure to comply with the
terms of this Fiscal Agency Agreement.
(g) Each holder of Securities, by acceptance thereof, authorizes and
directs the Fiscal Agent on its behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Section and
appoints the Fiscal Agent its attorney-in-fact for any and all such purposes.
As used herein, "Indebtedness" of the Issuer shall mean (i) all
existing or future indebtedness of the Issuer for borrowed money, (ii) all
existing or future indebtedness for borrowed money of other persons, the payment
of which is guaranteed by the Issuer, (iii) all existing or future obligations
of the Issuer under any agreement obligating the Issuer to cause another person
to maintain a minimum level of net worth, or otherwise to ensure the solvency of
such person and (iv) any expense or any claim or amount, to the extent that
payment of principal of and interest on the Securities is required by law to be
subordinated to the prior payment thereof. Any obligation of the Issuer which by
its express terms is subordinated in right of payment to, or ranks equally with,
the Securities, or any indebtedness or other obligation of any separate account
of the Issuer, shall not constitute Indebtedness. However, under current law the
Issuer cannot incur any indebtedness which by its terms is subordinate to the
Securities. In addition, any other surplus notes or similar obligations of the
Issuer (including the Issuer's 11-1/4% Surplus Notes scheduled to mature on
August 15, 2024) shall not constitute Indebtedness and will rank pari passu with
the Securities.
As used herein, "Policy Claims" shall mean all existing or future
claims of policyholders or beneficiaries, as the case may be, under any and all
existing or future policies, endorsements, riders and other contracts of
insurance, annuity contracts (including, without limitation, guaranteed
investment contracts) and funding agreements issued, assumed or renewed by the
Issuer on or prior to the date hereof or hereafter created, all claims arising
under separate account agreements to the extent such claims are not fully
discharged by the assets held by the Issuer in the applicable separate accounts
and all claims of The Life Insurance Company Guaranty Corporation of New York or
any other guaranty corporation or association of New York or any other
jurisdiction, other than claims described in clause (i) of the definition of
"Other Creditor Claims" below and claims for interest.
As used herein, "Other Creditor Claims" shall mean all other claims
which, pursuant to Section 7435, have
<PAGE> 16
priority over claims with respect to the Securities. Under Section 7435 as
currently in effect, such other claims include (i) claims with respect to the
actual and necessary costs and expenses of administration incurred by a
liquidator, conservator, rehabilitator or ancillary rehabilitator under Section
7435; (ii) claims with respect to the actual and necessary costs and expenses of
administration incurred by The Life Insurance Guaranty Corporation or The Life
Insurance Company Guaranty Corporation of New York; (iii) claims of The Life
Insurance Company Guaranty Corporation for certain funds loaned to the
Superintendent under Section 7713(d) of the New York Insurance Law; (iv) debts
up to $1,200 due to employees for services performed within one year of the
commencement of rehabilitation, liquidation, conservation, dissolution or
reorganization proceedings; (v) claims for payment for goods furnished or
services rendered in the ordinary course of business within 90 days of the
declaration of the impairment or insolvency of the Issuer; (vi) claims of the
federal or any state or local government (except in the case of claims for a
penalty or forfeiture which are included only to the extent of pecuniary loss
and reasonable costs occasioned by the act giving rise to the forfeiture or
penalty); and (vii) claims of general creditors and all other claims having
priority under Section 7435.
11. For so long as any of the Securities remain Outstanding or any
amount remains unpaid on any of the Securities, the Issuer shall, in accordance
with Rule 144A, comply with the terms of the agreements set forth in Section 7
of the Fiscal Agency Agreement. The provisions of Sections 7 and 8 of the Fiscal
Agency Agreement are hereby incorporated mutatis mutandis herein.
12. In case this Security shall become mutilated, defaced, destroyed,
lost or stolen, the Issuer will execute and upon the Issuer's request the Fiscal
Agent shall authenticate and deliver a new Security, having a number not
contemporaneously outstanding, of like tenor (including the same date of
issuance) and equal principal amount, registered in the same manner, dated the
date of its authentication and bearing interest from the date to which interest
has been paid on this Security, in exchange and substitution for this Security
(upon surrender and cancellation thereof) or in lieu of and substitution for
this Security. In the case where this Security is destroyed, lost or stolen, the
applicant for a substituted Security shall furnish to the Issuer such security
or indemnity as may be required by the Issuer to save it and the Fiscal Agent
harmless, and, in every case of destruction, loss or theft of this Security, the
applicant shall also furnish to the Issuer satisfactory evidence of the
destruction, loss or theft of this Security and of the ownership thereof;
provided, however, that if the registered holder hereof is, in the judgment of
the Issuer,
<PAGE> 17
an institution of recognized responsibility, such holder's written agreement of
indemnity shall be deemed to be satisfactory for the issuance of a new Security
in lieu of and substitution for this Security. The Fiscal Agent shall
authenticate any such substituted Security and deliver the same only upon
written request or authorization of the Issuer. Upon the issuance of any
substituted Security, the Issuer may require the payment by the registered
holder thereof of a sum sufficient to cover fees and expenses connected
therewith. In case this Security has matured or is about to mature and shall
become mutilated or defaced or be destroyed, lost or stolen, the Issuer may,
subject to the Payment Restrictions, instead of issuing a substitute Security,
pay or authorize the payment of the same (without surrender thereof except if
this Security is mutilated or defaced) upon compliance by the registered holder
with the provisions of this Paragraph 12 as hereinabove set forth.
13. Section 10 of the Fiscal Agency Agreement, which Section is hereby
incorporated mutatis mutandis by reference herein, provides that, with certain
exceptions as therein provided and with the consent of the holders of a majority
of the principal amount of the Outstanding Securities present at a meeting duly
called pursuant thereto or by written consent of such percentage of the
principal amount of all Outstanding Securities, the Issuer and the Fiscal Agent
may, with the prior approval of the Superintendent, modify, amend or supplement
the Fiscal Agency Agreement (with respect to the Securities only and not any
other Securities that may be issued under the Fiscal Agency Agreement) or the
terms of the Securities or may give consents or waivers or take other actions
with respect thereto. Any such modification, amendment, supplement, consent,
waiver or other action shall be conclusive and binding on the holder of this
Security and on all future holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange heretofore or in lieu
hereof, whether or not notation thereof is made upon this Security. The Fiscal
Agency Agreement and the terms of the Securities may, with the prior approval of
the Superintendent, be modified or amended by the Issuer and the Fiscal Agent,
without the consent of any holders of Securities, for the purpose of (a) adding
to the covenants of the Issuer for the benefit of the holders of Securities, or
(b) surrendering any right or power conferred upon the Issuer, or (c) securing
the Securities pursuant to the requirements hereof, thereof or otherwise, or (d)
evidencing the succession of another corporation to the Issuer and the
assumption by such successor of the covenants and obligations of the Issuer
herein and in the Fiscal Agency Agreement as permitted by the Securities and the
Fiscal Agency Agreement, or (e) modifying the restrictions on, and procedures
for, resale and other transfers of the Securities to the extent required or
permitted by any change in
<PAGE> 18
applicable law or regulation (or the interpretation thereof) or in practices
relating to the resale or transfer of restricted securities generally, or (f)
accommodating the issuance, if any, of Securities in book-entry or certificated
form and matters related thereto which do not adversely affect the interest of
any Security holder in any material respect, or (g) curing any ambiguity or
correcting or supplementing any defective provision contained herein or in the
Fiscal Agency Agreement in a manner which does not adversely affect the interest
of any Security holder in any material respect, or (h) effecting any amendment
which the Issuer and the Fiscal Agent may determine is necessary or desirable
and which shall not adversely affect the interest of any Security holder, to all
of which each holder of any Security, by acceptance thereof, consents.
14. Holders of Securities may enforce the Fiscal Agency Agreement or
the Securities only in the manner set forth below.
(a) In the event that any state or federal agency shall obtain an order
or grant approval for the rehabilitation, liquidation, conservation or
dissolution of the Issuer, the Securities will upon the obtaining of such an
order or the granting of such approval immediately mature in full (subject to
the provisions of the next sentence) without any action on the part of the
Fiscal Agent or any holder of the Securities, with payment thereon being subject
to the Payment Restrictions, and any restrictions imposed as a consequence of,
or pursuant to, such proceedings. Notwithstanding any other provision of this
Security or the Fiscal Agency Agreement, in no event shall the Fiscal Agent or
any holder of the Securities be entitled to declare the Securities to
immediately mature or otherwise be immediately payable.
(b) In the event that the Superintendent approves in whole or in part a
payment of any interest on or principal of any Securities and the Issuer fails
to pay the full amount of such approved payment on the date such amount is
scheduled to be paid, such approved amount will be immediately payable on such
date without any action on the part of the Fiscal Agent or any holder of
Securities. In the event that the Issuer fails to perform any of its other
obligations hereunder or under the Fiscal Agency Agreement, each holder of the
Securities may pursue any available remedy to enforce the performance of any
provision of such Securities or the Fiscal Agency Agreement; provided, however,
that such remedy shall in no event include the right to declare the Securities
immediately payable, and shall in no circumstances be inconsistent with the
provisions of Section 1307. A delay or omission by any Security holder in
exercising any right or remedy accruing as a result of the Issuer's failure to
perform its obligations hereunder or under the Fiscal
<PAGE> 19
Agency Agreement and the continuation thereof shall not impair such right
or remedy or constitute a waiver of or acquiescence in such non-performance by
the Issuer. To the extent permitted by law, no remedy is exclusive of any other
remedy and all remedies are cumulative.
(c) Notwithstanding any other provision of this Security or the Fiscal
Agency Agreement, the right of any holder of Securities to receive payment of
the principal of and interest on such holder's Securities on or after the
respective Scheduled Interest Payment Dates or Scheduled Maturity Date expressed
in such Securities, or to bring suit for the enforcement of any such payment on
or after such respective Scheduled Interest Payment Dates or Scheduled Maturity
Date, in each case subject to such payment on such dates having received the
approval of the Superintendent pursuant to the Payment Restrictions, including
the approval of the Superintendent pursuant to Section 1307, is absolute and
unconditional and shall not be impaired or affected without the consent of the
holder.
15. No reference herein to the Fiscal Agency Agreement and no provision
of this Security or of the Fiscal Agency Agreement shall alter or impair the
obligation of the Issuer, subject to the Payment Restrictions, to pay the
principal of and interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed.
<PAGE> 1
EXHIBIT 4.3
THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM.
WARRANT
to Purchase Shares
of
Holding Company Common Stock
of
MONY FINANCIAL SERVICES CORPORATION
This certifies that, for value received, _____________________, or its
registered assigns (the "Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from MONY FINANCIAL SERVICES CORPORATION, a Delaware
corporation (the "Company"), at any time on or after the Demutualization Date
and on or before the tenth anniversary of the Demutualization Date (the
"Expiration Date"), an aggregate number of fully paid and nonassessable shares
of Holding Company Common Stock, that is equal to the number of shares of
Holding Company Common Stock that would collectively represent ___%* of the
Holding Company Common Stock on a fully diluted basis (giving effect to, among
other things, the issuance of such shares and the issuance of shares upon the
exercise, conversion or exchange of options, warrants, and convertible and
exchangeable securities then outstanding (other than the Convertible Preferred
Stock) on the Demutualization Date, subject to adjustment from time to time as
provided herein (such number of shares being hereinafter referred to as the
"Warrant Shares Number"), at the purchase price per share calculated as
specified herein. The price to be paid for each share of Holding Company Common
Stock is subject to adjustment from time to time
- ----------
*/ The total percentage of fully diluted Holding Company Common Stock to
be represented by all the Warrants issued at the First Closing will be
7.00%.
<PAGE> 2
as hereinafter set forth. The purchase price payable for each share of Holding
Company Common Stock in effect at any time and as adjusted from time to time is
referred to herein as the "Exercise Price." This Warrant is one of the Warrants
referred to in Section 1.2 of the Investment Agreement, dated as of December 30,
1997 (the "Investment Agreement"), by and among The Mutual Life Insurance
Company of New York ("Mutual"), the Company and the Investors named therein.
Section 1. Definitions. Except as otherwise specified herein,
capitalized terms used herein but not defined herein have the meanings assigned
to them in the Investment Agreement, as in effect on the date hereof. In
addition, for purposes of this Warrant, the following terms have the following
respective meanings:
"Closing Price" means, with respect to the Holding Company Common
Stock, for any day, the reported last sale price per share on the principal
national securities exchange or inter-dealer quotation system on which the
Holding Company Common Stock is listed or admitted to trading, or if not listed
or admitted to trading on any national securities exchange or inter-dealer
quotation system, the average of the closing bid and asked prices per share in
the over-the-counter market as furnished by any New York Stock Exchange member
firm selected from time to time by the Company for that purpose.
"common stock" includes any stock of any class of capital stock which
has no preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
issuer thereof and which is not subject to redemption by the issuer thereof.
"Holding Company Common Stock" means the common stock of the Company
authorized at the Demutualization Date. Subject to the provisions of Section 9,
shares issuable on exercise hereof shall include only shares of Common Stock or
shares of any class or classes of common stock resulting from any
reclassification or reclassifications thereof; provided, however, that if at any
time there shall be more than one such resulting class, the shares so issuable
on exercise hereof shall include shares of all such classes, and the shares of
each such class then so issuable shall be substantially in the proportion which
the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
"Trading Day" means (i) if the Holding Company Common Stock is listed
or admitted for trading on the New York Stock Exchange or any other national
securities exchange, a day on which such exchange is open for business; (ii) if
the Holding Company Common Stock is quoted on the Nasdaq National Market or any
other system of automated dissemination of quotations of securities prices, a
day on which trades may be effected through such system; or (iii) if the Holding
Company Common Stock is not listed or admitted for trading on any national
securities exchange or quoted on the Nasdaq National Market or any other system
of automated dissemination of quotation of securities prices, a day on which the
Holding Company Common Stock is traded regular way in the over-the-counter
market and for which a closing bid and a closing asked price for the Holding
Company Common Stock are available.
"Warrant Shares Percentage" means, at any particular time, the
percentage of the Holding Company Common Stock on a fully diluted basis (giving
effect to, among other things, the issuance of
2
<PAGE> 3
the shares issuable upon exercise of this Warrant and the issuance of shares
upon the exercise, conversion or exchange of options, warrants, and convertible
securities and exchangeable securities then outstanding (other than the
Convertible Preferred Stock)) that is, was or would be issuable upon exercise of
this Warrant at such time.
Section 2. Initial Exercise Price and Additional Warrants. The initial
Exercise Price shall be either (a) if the IPO occurs prior to, on or within 5
Trading Days after the Demutualization Date, the initial public offering price
per share sold in the IPO as specified on the cover page of the final Prospectus
(the "IPO Price") unless the average of the daily Closing Prices of the Holding
Company Common Stock for the 40 Trading Days following the first 20 Trading Days
after the Demutualization Date (the "40 Trading Day Average") is greater than
115% of the IPO Price, in which case the initial Exercise Price shall be equal
to the IPO Price plus an amount equal to one half of the excess of the 40
Trading Day Average over 115% of the IPO Price or (b) if the IPO does not occur
prior to, on or within 5 Trading Days after the Demutualization Date, the lesser
of (i) the average of the daily Closing Prices of the Holding Company Common
Stock for the first 20 Trading Days following Demutualization and (ii) 70% of
the book value per share of the Holding Company Common Stock as of the
Demutualization, determined in accordance with GAAP.
In the event the IPO occurs within 180 days after the Demutualization
Date, as soon as practicable after the IPO the Company will issue and deliver to
the Holder an additional Warrant having an initial Warrant Shares Number equal
to such number that when combined with the Warrant Shares Number of this Warrant
will represent the same percentage of the Holding Company Common Stock on a
fully diluted basis (giving effect to, among other things, the issuance of
shares in the IPO, the issuance of the shares issuable upon exercise of such
additional Warrant and the issuance of shares upon the exercise, conversion or
exchange of options, warrants and convertible and exchangeable securities then
outstanding (other than the Convertible Preferred Stock)) as the Warrant Shares
Percentage on the Demutualization Date. The initial Exercise Price with respect
to such additional Warrant shall be the IPO Price, and, in the
3
<PAGE> 4
event that the IPO Price is lower than the Exercise Price of this Warrant in
effect at the time of the consummation of the IPO, the Exercise Price of this
Warrant shall at such time become the IPO Price.
Section 3. Exercise of Warrant. Subject to the provisions hereof, this
Warrant may be exercised, in whole or in part, at any time on or after the
Demutualization Date and on or before the Expiration Date, by presentation and
surrender hereof to the Company at the office or agency of the Company
maintained for that purpose pursuant to Section 15 (the "Warrant Office"), with
the Purchase Form annexed hereto duly executed and accompanied by payment to the
Company, for the account of the Company, of the Exercise Price for the number of
shares specified in such form. The Exercise Price may be paid at the option of
the Holder (i) by certified or official bank check or by wire transfer of
immediately available funds to an account designated by the Company for this
purpose or (ii) by the surrender of shares of Holding Company Common Stock
(which surrender shall be evidenced by the reduction of the number of shares of
Holding Company Common Stock purchasable upon exercise of this Warrant), and
without the payment of the Exercise Price in money, in return for the delivery
to the Holder of such number of shares of Holding Company Common Stock equal to
the product of (1) the number of shares of Holding Company Common Stock for
which this Warrant is being exercised (if the Exercise Price were being paid in
cash) and (2) the Cashless Exercise Ratio. For purposes of this Warrant, the
"Cashless Exercise Ratio" shall equal a fraction, the numerator of which is the
excess of the Closing Price of the Holding Company Common Stock on the date of
exercise over the Exercise Price as of the date of exercise and the denominator
of which is the Closing Price of the Holding Company Common Stock on the date of
exercise. An exercise of this Warrant in accordance with clause (ii) of the
second preceding sentence is herein called a "Cashless Exercise". If this
Warrant should be exercised in part only, the Company shall, upon surrender of
this Warrant for cancellation, execute and deliver a new Warrant evidencing the
rights of the Holder thereof to purchase the balance of the shares of Holding
Company
4
<PAGE> 5
Common Stock purchasable hereunder. The Company shall keep at the Warrant Office
a register for the registration and registration of transfer of Warrants.
Upon receipt by the Company of this Warrant at the Warrant Office, in
proper form for exercise, the Holder shall be deemed to be the holder of record
of the shares of Holding Company Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Holding Company Common
Stock shall not then be actually delivered to the Holder. The Company shall pay
all expenses, and any and all United States Federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 3, except that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Holding Company Common
Stock in a name other than that of the Holder who shall have surrendered the
same in exercise of the subscription right evidenced thereby.
The Company covenants that all shares of Holding Company Common Stock
issued upon exercise of this Warrant will, upon payment of the Exercise Price,
be duly authorized and validly issued, fully paid and nonassessable, free of
preemptive rights and, except as provided in the preceding paragraph, free from
all taxes, liens, charges and security interests with respect to the issue
thereof except for those arising out of any action or inaction of the Holder.
The Company shall use its commercially reasonable efforts to list the shares of
Holding Company Common Stock required to be delivered upon exercise of this
Warrant prior to such delivery upon each securities exchange or quotation
system, if any, upon which the outstanding Holding Company Common Stock is
listed or quoted at the time of such delivery.
The Company shall from time to time use its commercially reasonable
efforts to take all action which may be necessary to obtain and keep effective
any and all permits, consents and approvals of governmental agencies and
authorities and securities acts filings under federal and state laws which may
5
<PAGE> 6
be or become requisite in connection with the issuance, sale, transfer and
delivery of the Warrant, the exercise of the Warrant, and the issuance, sale,
transfer and delivery of the shares of Holding Company Common Stock issued upon
exercise of the Warrant.
Section 4. Reservation of Shares; Preservation of Rights of Holder. The
Company hereby agrees that there shall be reserved for issuance upon exercise of
this Warrant, free from preemptive rights, such number of shares of authorized
but unissued shares of Holding Company Common Stock, as shall be required for
issuance upon exercise of this Warrant.
Section 5. Fractional Shares. No fractional shares of Holding Company
Common Stock shall be issued upon exercise of any Warrant. If more than one
Warrant shall be surrendered for exercise at one time by the same Holder, the
number of full shares which shall be issuable upon exercise thereof shall be
computed on the basis of the aggregate number of shares for which such Warrants
are being exercised. Instead of any fractional share of Holding Company Common
Stock which would otherwise be issuable upon exercise of any Warrant or
Warrants, the Company shall calculate and pay a cash adjustment in respect of
such fraction (calculated to the nearest 1/1,000th of a share) in an amount
equal to the same fraction of the Closing Price at the close of business on the
day of exercise (or, if such day is not a Trading Day, on the Trading Day
immediately preceding such day).
Section 6. Exchange, Transfer, Assignment or Loss of Warrant. This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender to the Company hereof at the Warrant Office for other
Warrants of different denominations entitling the Holder(s) thereof to purchase
in the aggregate the same number of shares of Holding Company Common Stock
purchasable hereunder. The Company shall keep at the Warrant Office a register
for registration of Warrants and transfers of Warrants. Subject to the terms and
conditions of the Securities Act, this Warrant is transferable in the same
manner and with the same effect as in the case of a negotiable instrument
payable to a specific person. Upon surrender of this Warrant to the Company at
the Warrant Office with the Assignment Form annexed hereto ("Assignment Form")
duly executed and funds sufficient to pay any transfer tax, and such
certifications or either evidence of compliance with federal and state
securities laws as the Company shall reasonably request (such certifications or
other evidence, "Securities Laws Assurances"), the Company shall, without
charge, execute and deliver a new Warrant registered in the name of the assignee
named in the Assignment Form at the address specified in the Assignment Form,
and this Warrant shall promptly be canceled. The Company may deem and treat the
registered holder of any Warrant as the absolute owner thereof for all
6
<PAGE> 7
purposes, and the Company shall not be affected by any notice to the contrary.
If and when this Warrant is assigned in blank, the Company may (but shall not be
obliged to) treat the bearer hereof as the absolute owner of this Warrant for
all purposes and the Company shall not be affected by any notice to the
contrary. A Warrant, if presented together with a properly executed Assignment
Form and any Securities Laws Assurances, may be exercised by an assignee for the
purchase of shares of Holding Company Common Stock without prior delivery of a
new Warrant issued in the name of the assignee. Notwithstanding the foregoing,
no Securities Laws Assurances shall be required in connection with any transfer
or assignment that is permitted without restriction by, and made in accordance
with, Section 1.6 of the Investment Agreement.
This Warrant may be subdivided or combined with other Warrants
evidencing the same rights as the rights evidenced hereby upon presentation and
surrender hereof at the Warrant Office together with a written notice signed by
the Holder hereof specifying the denominations in which new Warrants are to be
issued. Upon presentation and surrender of any Warrant or Warrants, together
with such written notice, for subdivision or combination, the Company shall
issue a new Warrant or Warrants, in the denominations requested, entitling the
holders thereof to purchase the same aggregate number of shares of Holding
Company Common Stock as the Warrant or Warrants so surrendered. Such new Warrant
or Warrants shall be registered in the name of the Holder submitting such
request and delivered to such Holder, unless such Holder shall have submitted a
properly executed Assignment Form and funds sufficient to pay any transfer tax
and any Securities Laws Assurances, in which case such of the new Warrants as
shall have been assigned by the Holder shall be registered in the name of and
delivered to the Holder's assignee or designee. Any Warrant surrendered for
subdivision or combination shall be canceled promptly upon the issuance of such
new Warrant or Warrants. The term "Warrant" as used herein includes any Warrants
into which this Warrant may be subdivided, combined or exchanged. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new
7
<PAGE> 8
Warrant of like tenor and date. Any such new Warrant executed and delivered
shall constitute an additional contractual obligation on the part of the
Company, whether or not this Warrant so lost, stolen, destroyed or mutilated
shall be at any time enforceable by anyone.
Section 7. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company.
Section 8. Antidilution Provisions. The Exercise Price and the Warrant
Shares Number shall be subject to adjustment from time to time as provided in
this Section 8.
(1) In case at any time after the Demutualization Date the Company
shall pay or make a dividend or other distribution on any class of capital stock
of the Company payable in Holding Company Common Stock, the Exercise Price in
effect at the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Exercise Price by a fraction
of which the numerator shall be the number of shares of Holding Company Common
Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other distribution,
such reduction to become effective immediately after the opening of business on
the day following the date fixed for such determination. For the purposes of
this paragraph (1), the number of shares of Holding Company Common Stock at any
time outstanding shall not include shares held in the treasury of the Company
but shall include shares issuable in respect of scrip certificates issued in
lieu of fractions of shares of Holding Company Common Stock.
(2) In case at any time after the Demutualization Date the Company
shall issue rights, options or warrants to all holders of its Holding Company
Common Stock entitling them to subscribe for or purchase shares of Holding
Company Common Stock at a price per share less than the current market price per
share (determined as provided in paragraph (8) of this Section) of the Holding
Company Common Stock on the date fixed for the determination of stockholders
entitled to receive such rights,
8
<PAGE> 9
options or warrants, the Exercise Price in effect at the opening of business on
the day following the date fixed for such determination shall be reduced by
multiplying such Exercise Price by a fraction of which the numerator shall be
the number of shares of Holding Company Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Holding Company Common Stock which the aggregate of the offering price of the
total number of shares of Holding Company Common Stock so offered for
subscription or purchase would purchase at such current market price and the
denominator shall be the number of shares of Holding Company Common Stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of Holding Company Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (2), the number of shares of
Holding Company Common Stock at any time outstanding shall not include shares
held in the treasury of the Company but shall include shares issuable in respect
of scrip certificates issued in lieu of fractions of shares of Holding Company
Common Stock.
(3) In case at any time after the Demutualization Date outstanding
shares of Holding Company Common Stock shall be subdivided into a greater number
of shares of Holding Company Common Stock, the Exercise Price in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, in case
outstanding shares of Holding Company Common Stock shall each be combined into a
smaller number of shares of Holding Company Common Stock, the Exercise Price in
effect at the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such reduction
or increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision or
combination becomes effective.
9
<PAGE> 10
(4) In case at any time after the Demutualization Date the Company
shall, by dividend or otherwise, distribute to all holders of its Holding
Company Common Stock evidences of its indebtedness, shares of any class of
capital stock, or other property (including securities, but excluding (i) any
rights, options or warrants referred to in paragraph (2) of this Section, (ii)
any dividend or distribution paid exclusively in cash, (iii) any dividend or
distribution referred to in paragraph (1) of this Section and (iv) any merger or
consolidation to which Section 9 applies), the Exercise Price shall be reduced
so that the same shall equal the price determined by multiplying the Exercise
Price in effect immediately prior to the close of business on the date fixed for
the determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the current market price per share
(determined as provided in paragraph (8) of this Section) of the Holding Company
Common Stock on the date fixed for such determination less the then fair market
value (as determined by the Board of Directors) of the portion of the assets,
shares or evidences of indebtedness so distributed applicable to one share of
Holding Company Common Stock and the denominator shall be such current market
price per share of the Holding Company Common Stock (determined as provided in
paragraph (8) of this Section), such adjustment to become effective immediately
prior to the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such distribution.
(5) In case at any time after the Demutualization Date the Company
shall, by dividend or otherwise, distribute to all holders of its Holding
Company Common Stock cash (excluding any cash that is distributed upon a merger
or consolidation to which Section 9 applies or as part of a distribution
referred to in paragraph (4) of this Section) in an aggregate amount that,
combined together with (I) the aggregate amount of any other cash distributions
to all holders of its Holding Company Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution and in
respect of which no adjustment pursuant to this paragraph (5) has been made and
(II) the aggregate of any cash plus the fair market value (as determined by the
Board of Directors) of consideration payable in
10
<PAGE> 11
respect of any tender offer by the Company or any of its subsidiaries for all or
any portion of the Holding Company Common Stock concluded within the 12 months
preceding the date of payment of such distribution and in respect of which no
adjustment pursuant to paragraph (6) of this Section has been made, exceeds 10%
of the product of the current market price per share (determined as provided in
paragraph (8) of this Section) of the Holding Company Common Stock on the date
for the determination of holders of shares of Holding Company Common Stock
entitled to receive such distribution times the number of shares of Holding
Company Common Stock outstanding on such date, then, and in each such case,
immediately after the close of business on such date for determination, the
Exercise Price shall be reduced so that the same shall equal the price
determined by multiplying the Exercise Price in effect immediately prior to the
close of business on the date fixed for determination of the stockholders
entitled to receive such distribution by a fraction (i) the numerator of which
shall be equal to the current market price per share (determined as provided in
paragraph (8) of this Section) of the Holding Company Common Stock on the date
fixed for such determination less an amount equal to the quotient of (x) the
excess of such combined amount over such 10% and (y) the number of shares of
Holding Company Common Stock outstanding on such date for determination and (ii)
the denominator of which shall be equal to the current market price per share
(determined as provided in paragraph (8) of this Section) of the Holding Company
Common Stock on such date for determination.
(6) In case at any time after the Demutualization Date a tender offer
made by the Company or any Subsidiary for all or any portion of the Holding
Company Common Stock shall expire and such tender offer (as amended upon the
expiration thereof) shall require the payment to stockholders (based on the
acceptance (up to any maximum specified in the terms of the tender offer) of
Purchased Shares (as defined below)) of an aggregate consideration having a fair
market value (as determined by the Board of Directors) that combined together
with (I) the aggregate of the cash plus the fair market value (as determined by
the Board of Directors), as of the expiration of such tender offer, of
consideration
11
<PAGE> 12
payable in respect of any other tender offer by the Company or any Subsidiary
for all or any portion of the Holding Company Common Stock expiring within the
12 months preceding the expiration of such tender offer and in respect of which
no adjustment pursuant to this paragraph (6) has been made and (II) the
aggregate amount of any cash distributions to all holders of the Company's
Holding Company Common Stock within 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to paragraph (5) of
this Section has been made, exceeds 10% of the product of the current market
price per share of the Holding Company Common Stock (determined as provided in
paragraph (8) of this Section) as of the last time (the "Expiration Time")
tenders could have been made pursuant to such tender offer (as it may be
amended) times the number of shares of Holding Company Common Stock outstanding
(including any tendered shares) as of the Expiration Time, then, and in each
such case, immediately prior to the opening of business on the Business Day
after the date of the Expiration Time, the Exercise Price shall be reduced so
that the same shall equal the price determined by multiplying the Exercise Price
in effect immediately prior to the close of business on the date of the
Expiration Time by a fraction (i) the numerator of which shall be equal to (A)
the product of (I) the current market price per share of the Holding Company
Common Stock (determined as provided in paragraph (8) of this Section) on the
date of the Expiration Time and (II) the number of shares of Holding Company
Common Stock outstanding (including any tendered shares) as of the Expiration
Time less (B) the combined amount of consideration specified above, and (ii) the
denominator of which shall be equal to the product of (A) the current market
price per share of the Holding Company Common Stock (determined as provided in
paragraph (8) of this Section) as of the Expiration Time and (B) the number of
shares of Holding Company Common Stock outstanding (including any tendered
shares) as of the Expiration Time less the number of all shares purchased in
such tender offer (the shares so purchased being referred to as the "Purchased
Shares").
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<PAGE> 13
(7) The reclassification of Holding Company Common Stock into
securities other than Holding Company Common Stock (other than any
reclassification upon a consolidation or merger to which Section 9 applies)
shall be deemed to involve (a) a distribution of such securities other than
Holding Company Common Stock to all holders of Holding Company Common Stock (and
the effective date of such reclassification shall be deemed to be "the date
fixed for the determination of stockholders entitled to receive such
distribution" and "the date fixed for such determination" within the meaning of
paragraph (4) of this Section), and (b) a subdivision or combination, as the
case may be, of the number of shares of Holding Company Common Stock outstanding
immediately prior to such reclassification into the number of shares of Holding
Company Common Stock outstanding immediately thereafter (and the effective date
of such reclassification shall be deemed to be "the day upon which such
subdivision becomes effective" or "the day upon which such combination becomes
effective", as the case may be, and "the day upon which such subdivision or
combination becomes effective" within the meaning of paragraph (3) of this
Section).
(8) For the purpose of any computation under paragraphs (2), (4), (5)
or (6) of this Section 8, the current market price per share of Holding Company
Common Stock on any date shall be conclusively calculated by the Company (absent
manifest error) and be deemed to be the average of the daily Closing Prices for
the ten consecutive Trading Days ending on the earlier of the day in question
and the day before the "ex" date with respect to the issuance or distribution or
the date of the expiration of the tender offer requiring such computation. For
purposes of this paragraph, the term "'ex' date", when used with respect to any
issuance or distribution, means the first date on which the Holding Company
Common Stock trades regular way on the applicable securities exchange or in the
applicable securities market without the right to receive such issuance or
distribution.
(9) No adjustment in the Exercise Price shall be required unless such
adjustment (plus any adjustments not previously made by reason of this paragraph
(9)) would require an increase or
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<PAGE> 14
decrease of at least one percent in such price; provided, however, that any
adjustments which by reason of this paragraph (9) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section shall be made to the nearest cent or to the
nearest 1/1,000th of a share, as the case may be.
(10) The Company may make such reductions in the Exercise Price, in
addition to those required by paragraphs (1), (2), (3), (4), (5) and (6) of this
Section 8, as it considers to be advisable in order to avoid or diminish any
income tax to any holders of shares of Holding Company Common Stock resulting
from any dividend or distribution of stock or issuance of rights or warrants to
purchase or subscribe for stock or from any event treated as such for income tax
purposes.
(11) Whenever there shall be any change in the Exercise Price
hereunder, then there shall be a corresponding adjustment (to the nearest
1/1,000th of a share) in the Warrant Shares Number, which adjustment shall
become effective at the time such change in the Exercise Price becomes effective
and shall be made by multiplying the Warrant Shares Number in effect immediately
before such change in the Exercise Price by a fraction the numerator of which is
the Exercise Price immediately before such change and the denominator of which
is the Exercise Price immediately after such change.
(12) The Company from time to time may reduce the Exercise Price, and
increase the corresponding Warrant Shares Number, by any amount for any period
of time if the period is at least 20 days and if the reduction and increase, as
applicable, is irrevocable during the period. Whenever the Exercise Price is
reduced and the corresponding Warrant Shares Number increased pursuant to this
paragraph (12), the Company shall provide to the Holder a notice of the increase
and related decrease at least 15 days before the date such reduced Exercise
Price and increased Warrant Shares Number takes effect. The notice shall state
the reduced Exercise Price and increased Warrant Shares Number and the period in
which they will be in effect.
14
<PAGE> 15
Any reduction in the Exercise Price and corresponding increase in the
Warrant Shares Number made pursuant to this paragraph (12) shall not change or
adjust any Exercise Price or Warrant Shares Number otherwise in effect, or as
used for calculations, for purposes of subsections (1) through (6) of this
Section 8.
Section 9. Provision in Case of Consolidation, Merger or Sale of
Assets. In case of any consolidation of the Company with any other Person, any
merger of the Company into another Person or of another Person into the Company
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Holding Company Common Stock
of the Company) or any conveyance, sale, transfer or lease of all or
substantially all of the properties and assets of the Company, the Person formed
by such consolidation or resulting from such merger or which acquires such
properties and assets, as the case may be, shall execute and deliver to the
Holder simultaneously therewith a new Warrant, satisfactory in form and
substance to the Holder, together with such other documents as the Holder may
reasonably request, entitling the Holder thereof to receive upon exercise of
such Warrant on or before the Expiration Date the kind and amount of shares of
stock and other securities and property receivable upon such consolidation,
merger, conveyance, sale, transfer or lease by a holder of the number of shares
of Holding Company Common Stock purchasable upon exercise of this Warrant
immediately prior to such consolidation, merger, conveyance, sale, transfer or
lease, assuming that, if such consolidation, merger, conveyance, transfer, sale
or lease occurs before the first date on which this Warrant may be exercised as
provided herein, this Warrant was exercisable immediately prior to the time of
such occurrence. If the holders of the Holding Company Common Stock may elect
from choices the kind or amount of shares of stock and other securities and
property receivable upon such consolidation, merger, conveyance, sale, transfer
or lease, then for the purpose of this Section 9 the kind and amount of shares
of stock and other securities and property receivable upon such consolidation,
merger, conveyance, sale, transfer or lease shall be deemed to be the choice
specified by
15
<PAGE> 16
the Holder, which specification shall be made by the Holder by the later of (A)
20 Business Days after the Holder is provided with a final version of all
information required by law or regulation to be furnished to holders of Holding
Company Common Stock concerning such choice, or if no such information is
required, 20 Business Days after the Holding Company notified the Holder of all
material facts concerning such specification and (B) the last time at which
holders of Holding Company Common Stock are permitted to make their
specification known to the Holding Company. If the Holder fails to make any
specification, the Holder's choice shall be deemed to be whatever choice is made
by a plurality of holders of Holding Company Common Stock not affiliated with
the Holding Company or the other person to the merger or consolidation. Such new
Warrant shall contain the same basic other terms and conditions as this Warrant
and shall provide for adjustments which, for events subsequent to the effective
date of such written instrument, shall be as nearly equivalent as may be
practicable to the adjustments provided for in Section 8 and this Section 9.
Section 10. No Dilution or Impairment. If any event shall occur as to
which the provisions of Section 8 or 9 hereof are not strictly applicable but
the failure to make any adjustment would adversely affect the purchase rights
represented by this Warrant in a way that is contrary to the manifest and
essential intent and principles of Sections 8 and 9 hereof, then, in each such
case, the Company shall appoint an investment banking firm of recognized
national standing, or any other financial expert that does not (or whose
directors, officers, employees, affiliates or stockholders do not) have a direct
or indirect material financial interest in the Company, who has not been, and,
at the time it is called upon to give independent financial advice to the
Company, is not (and none of its directors, officers, employees, affiliates or
stockholders are) a promoter, director or officer of the Company, which shall
give their opinion upon the adjustment, if any, on a basis consistent with the
manifest and essential intent and principles established in Sections 8 and 9
hereof, necessary to preserve, without dilution, the purchase rights,
represented by this Warrant. Upon receipt of such opinion, the Company will
promptly provide
16
<PAGE> 17
notice thereof accompanied by a copy thereof to the Holder and shall make the
adjustments described therein.
Section 11. Taxes on Issue or Transfer of Holding Company Common Stock.
The Company shall pay any and all documentary stamp or similar issue or transfer
taxes payable in respect of the issuance of shares of Holding Company Common
Stock on the exercise of this Warrant; provided, however, that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance of shares of Holding Company Common Stock in a name
other than that of the Holder and no such issuance shall be made unless and
until the person requesting such issuance has paid to the Company the amount of
any such tax or has established, to the satisfaction of the Company, that such
tax has been paid.
Section 12. Notice of Adjustment of Exercise Price. Whenever the
Exercise Price and Warrant Shares Number are adjusted as herein provided, the
Company shall promptly (i) file at the Warrant Office a certificate of a firm of
independent public accountants (who may be the regular accountants employed by
the Company) setting forth the Exercise Price and Warrant Shares Number after
such adjustment and setting forth a statement of the facts requiring such
adjustment and showing in reasonable detail the manner of computing the same and
(ii) give notice of such adjustment, accompanied by a copy of the certificate
referred to in clause (i) above, to the Holder.
Section 13. Notice Regarding Dividends, Subscription Rights,
Reclassifications, Dissolutions. In case:
(a) the Company shall declare a dividend (or any other distribution) on
its Holding Company Common Stock payable (i) otherwise than exclusively in
cash or (ii) exclusively in cash in an amount that would require any
adjustment pursuant to Section 8; or
17
<PAGE> 18
(b) the Company shall authorize the granting to the holders of its
Holding Company Common Stock of rights, options or warrants to subscribe for
or purchase any shares of capital stock of any class or of any other rights;
or
(c) of any reclassification of the Holding Company Common Stock of the
Company, or of any consolidation, merger or share exchange to which the
Company is a party and for which approval of any shareholders of the Company
is required, or of the conveyance, sale, transfer or lease of all or
substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
(e) the Company or any Subsidiary shall commence a tender offer for all
or a portion of the Company's outstanding shares of Holding Company Common
Stock (or shall amend any such tender offer);
then the Company shall provide to the Holder, and shall cause to be filed at the
Warrant Office, at least 20 days (or 10 days in any case specified in clause (a)
or (b) above) prior to the applicable record, expiration or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, rights, options or
warrants, or, if a record is not to be taken, the date as of which the holders
of Holding Company Common Stock of record to be entitled to such dividend,
distribution, rights, options or warrants are to be determined, (y) the date on
which the right to make tenders under such tender offer expires or (z) the date
on which such reclassification, consolidation, merger, conveyance, transfer,
sale, lease, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Holding
Company Common Stock of record shall be entitled to exchange their shares of
Holding Company Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, conveyance, transfer, sale,
18
<PAGE> 19
lease, dissolution, liquidation or winding up. Neither the failure to give such
notice or the notice referred to in Section 12 nor any defect therein shall
affect the legality or validity of the proceedings described in clauses (a)
through (e) of this Section 13.
Section 14. Provision in Certain Circumstances. The Company and Mutual
hereby agree that if (x) the Plan is not approved by the Superintendent or the
Mutual policyholders pursuant to Section 7312 or is otherwise not consummated
prior to the later of the First Closing or the Second Closing, if any, or if for
any other reason Mutual has not, prior to the tenth anniversary of the later of
the First Closing or the Second Closing, if any, converted to a stock life
insurance company pursuant to Section 7312 or any similar or successor provision
of the NYIL in effect prior to such tenth anniversary, (y) during the period
referred to in the preceding clause (x) during which Mutual has not so converted
it shall merge with, combine or consolidate with or into any other Person, and
(z) (i) subsequent to such merger, combination or consolidation Mutual (if
Mutual is the surviving entity) or the Person which is the surviving entity (if
other than Mutual) shall convert from mutual to stock form pursuant to Section
7312 or any similar or successor provision of the NYIL or any other Applicable
Insurance Law or (ii) such merger, combination or consolidation shall result in
a surviving entity which is a stock corporation, partnership, limited liability
company or other entity organized otherwise than in mutual form, in each case as
may then be permitted by any Applicable Insurance Law or otherwise (any of such
transactions described in this clause (z), an "Alternative Transaction"), then,
immediately upon the consummation of such Alternative Transaction, Mutual shall
make, or cause the successor to Mutual to make, a payment to the Holder equal
to, and consisting of, the amount and kind of consideration that the Holder
would have been entitled to receive in connection with such Alternative
Transaction if the Holder had an interest in Mutual that was equal to the
Warrant Share Percentage immediately prior to such Alternative Transaction after
deducting an amount equal to 60% of the book value of an interest in Mutual
immediately prior to such Alternative Transaction that is equal to the Warrant
Share Percentage immediately prior to such transaction. Upon such payment, this
Warrant will automatically be cancelled. If the policyholders of Mutual may
elect from choices the kind or amount of consideration receivable upon such
Alternative Transaction, then for the purpose of this Section 14, the Holder
shall similarly be entitled to specify such a choice, which specification shall
be made by the Holder by the later of (A) 20 Business Days after the Holder is
provided with a final version of all information required by law or regulation
to be furnished to the Mutual policyholders concerning such choice, or if no
such information is required, 20 Business Days after Mutual notified the Holder
of all material facts concerning such specification and (B) the last time at
19
<PAGE> 20
which the Mutual policyholders are permitted to make their specification known
to Mutual. If the Holder fails to make any specification, the Holder's choice
shall be deemed to be whatever choice is made by a plurality of the Mutual
policyholders.
Section 15. Maintenance of Office or Agency. The Company will maintain
an office or agency in the Borough of Manhattan, The City of New York, where
this Warrant may be presented or surrendered for split-up, combination,
registration of transfer, or exchange and where notices and demands to or upon
the Company in respect of this Warrant may be served. The address of such office
or agency at the date hereof is _________________. The Company shall provide
notice to the Holder of any change in such address promptly after such change.
Section 16. Notices. Notices under this Warrant to the Investor shall
be provided in the manner, and to the addresses of the Investor, set forth in
Section 6.6 of the Investment Agreement. Notices to any Holder other than the
Investor shall be made in writing and mailed, first-class postage prepaid, or
delivered by hand or overnight courier, at its last address as it shall appear
upon the register provided for in Section 3.
Section 17. Successors. All the covenants and provisions of this
Warrant of the Company and Mutual shall bind and inure to the benefit of their
respective successors, including any successor entity to Mutual in an
Alternative Transaction.
Section 18. Governing Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to the principles of conflicts of laws.
20
<PAGE> 21
Section 19. Entire Agreement. This Warrant (with the documents referred
to herein) embodies the entire agreement and understanding between the parties
hereto and supersedes all prior agreements and understandings relating to the
subject matter hereof.
Dated: MONY FINANCIAL SERVICES
CORPORATION
By:
[Title]
ATTEST:
Secretary
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By:
[Title]
ATTEST:
Secretary
21
<PAGE> 22
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing _______ shares of Holding Company Common
Stock, par value $.01 per share, of MONY Financial Services Corporation and
hereby makes payment as follows:
(check one)
/ / $__________ by certified or official bank check or wire transfer.
/ / By surrender of shares of Holding Company Common Stock purchasable upon
exercise of the within Warrant pursuant to a Cashless Exercise.
Signature:
Dated: , _____.
Instructions for Registration of Stock
Name
(please typewrite or print in block letters)
Address
* * * * *
ASSIGNMENT FORM
FOR VALUE RECEIVED,
hereby sells, assigns and transfers unto
Name
(please typewrite or print in block letters)
Address
the right to purchase Holding Company Common Stock represented by this Warrant
to the extent of _____ shares as to which such right is exercisable and does
hereby irrevocably constitute and appoint __________, attorney, to transfer the
same on the books of the Company with full power of substitution in the
premises.
Signature:
Dated: , _____.
22
<PAGE> 1
Exhibit 10.1
INVESTMENT AGREEMENT
Dated as of December 30, 1997
among
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK,
MONY FINANCIAL SERVICES CORPORATION
and
THE INVESTORS NAMED HEREIN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
Purchase and Sale of Notes,
Warrants and Convertible Preferred Stock;
Exchange, Registration and Resale
SECTION 1.1. Purchase and Sale of Notes........................................... 1
SECTION 1.2. Purchase and Sale of the Warrants.................................... 2
SECTION 1.3. Convertible Preferred Stock.......................................... 2
SECTION 1.4. Holding Company Notes................................................ 3
SECTION 1.5. [Intentionally omitted.]............................................. 4
SECTION 1.6. Registration and Resale.............................................. 4
ARTICLE II
Closings; Conditions
SECTION 2.1. First Closing........................................................ 5
SECTION 2.2. Conditions to Obligations of the Investors at First Closing.......... 5
(a) Representations and Warranties............................................... 5
(b) Compliance with Agreements and Conditions.................................... 5
(c) Litigation................................................................... 5
(d) Certain Events............................................................... 6
(e) Certificate.................................................................. 6
(f) Opinions .................................................................... 6
(g) Consents and Approvals....................................................... 6
(h) Ratings...................................................................... 6
(i) Agreements in Full Force and Effect ......................................... 7
(j) Closing Fee ................................................................. 7
SECTION 2.3. Conditions to Obligations of the Company at First Closing............ 7
(a) Representations and Warranties............................................... 7
(b) Litigation................................................................... 7
(c) Certificate.................................................................. 7
(d) Opinions..................................................................... 7
SECTION 2.4. Second Closing....................................................... 7
SECTION 2.5. Conditions to Obligations of the Investors at Second Closing......... 8
(a) Representations and Warranties............................................... 8
(b) Compliance with Agreements and Conditions.................................... 8
(c) Litigation................................................................... 8
(d) Certain Events............................................................... 8
(e) Certificate.................................................................. 8
(f) Opinions .................................................................... 9
(g) Consents and Approvals....................................................... 9
(h) Agreements in Full Force and Effect.......................................... 9
(i) Closing Fee ................................................................. 9
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 2.6. Conditions to Obligations of Holding Company at Second Closing....... 9
(a) Representations and Warranties............................................... 9
(b) Litigation................................................................... 9
(c) Certificate.................................................................. 10
(d) Opinion...................................................................... 10
SECTION 2.7. Subsequent Closings.................................................. 10
ARTICLE III
Representations and Warranties
SECTION 3.1. Representations and Warranties of Company and Holding Company........ 10
(a) Corporate Existence.......................................................... 10
(b) Authorization; Enforcement................................................... 11
(c) Subject Securities........................................................... 11
(d) Consents and Approvals....................................................... 12
(e) No Conflicts................................................................. 12
(f) Capital Structure ........................................................... 13
(g) Company Documents............................................................ 14
(h) Financial Statements and Information......................................... 14
(i) Exchange Act Reports ........................................................ 15
(j) Absence of Certain Changes or Events ........................................ 15
(k) Assets....................................................................... 16
(l) Liabilities and Reserves .................................................... 18
(m) Contracts.................................................................... 19
(n) Litigation................................................................... 19
(o) Compliance with Laws, etc.................................................... 20
(p) Operations Insurance......................................................... 20
(q) Brokers and Finders, etc..................................................... 21
(r) Taxes ....................................................................... 21
(s) Employee Benefit Plans....................................................... 21
(t) Insurance Business .......................................................... 23
(u) Reinsurance.................................................................. 23
(v) Service Marks, Trademarks, etc............................................... 24
(w) Variable Products Securities Law Matters; Investment Companies; Investment
Advisors.................................................................. 24
SECTION 3.2. Representations and Warranties of Investors.......................... 25
(a) Authorization; Enforcement................................................... 25
(b) Status and Investment Intent................................................. 26
(c) Brokers and Finders, etc..................................................... 26
(d) Investor not a Plan.......................................................... 26
(e) No Conflicts................................................................. 26
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE IV
Agreements by the Company
SECTION 4.1. [Intentionally omitted]............................................... 27
SECTION 4.2. [Intentionally omitted]............................................... 27
SECTION 4.3. [Intentionally omitted]............................................... 27
SECTION 4.4. [Intentionally omitted]............................................... 27
SECTION 4.5. Investment Proposals.................................................. 27
SECTION 4.6. [Intentionally omitted]............................................... 27
SECTION 4.7. [Intentionally omitted]............................................... 27
SECTION 4.8. [Intentionally omitted]............................................... 27
SECTION 4.9. Board Representation.................................................. 27
SECTION 4.10. Registration and Resale............................................... 29
SECTION 4.11. [Intentionally omitted]............................................... 29
ARTICLE V
Further Agreements
SECTION 5.1. Public Announcements.................................................. 29
SECTION 5.2. Fees and Expenses..................................................... 30
SECTION 5.3. Regulatory and Other Consents......................................... 30
SECTION 5.4. Best Efforts.......................................................... 31
ARTICLE VI
Miscellaneous
SECTION 6.1. Termination........................................................... 31
SECTION 6.2. Standstill Agreement.................................................. 33
SECTION 6.3. Voting of Holding Company Common Stock................................ 35
SECTION 6.4. Limitation on Sales of Holding Company Common Stock,
Warrants and Convertible Preferred Stock.............................. 37
SECTION 6.5. Survival of Representations and Warranties and Agreements............. 38
SECTION 6.6. Severability.......................................................... 38
SECTION 6.7. Indemnification....................................................... 38
SECTION 6.8. Charter and By-laws................................................... 39
SECTION 6.9. Information........................................................... 39
SECTION 6.10. Plan of Demutualization............................................... 40
SECTION 6.11. Regulatory Filings.................................................... 42
SECTION 6.12. Entire Agreement; No Third-Party Beneficiaries........................ 44
SECTION 6.13. Notices............................................................... 44
SECTION 6.14. Amendments and Waivers................................................ 46
SECTION 6.15. Counterparts.......................................................... 46
SECTION 6.16. Successors and Assigns................................................ 46
SECTION 6.17. Reproduction of Documents............................................. 46
SECTION 6.18. Construction.......................................................... 46
SECTION 6.19. Incorporation......................................................... 47
SECTION 6.20. Waiver of Jury Trial.................................................. 47
SECTION 6.21. Designation of Principal Investor..................................... 47
SECTION 6.22. Interpretation........................................................ 47
SECTION 6.23. GOVERNING LAW......................................................... 47
</TABLE>
iii
<PAGE> 5
Annex Defined Terms
Exhibit 1 Fundamental Terms of the Plan
Exhibit 2-A Form of Fiscal Agency Agreement
Exhibit 2-B Form of Warrant
Exhibit 2-C Terms of Holding Company Notes
Exhibit 2-D Terms of Convertible Preferred Stock
Exhibit 3 Form of Registration Rights Agreement
Exhibit 4 Private Resale Terms
Exhibit 5-A Form of Opinion of Senior Vice President
and General Counsel of the Company
Exhibit 5-B Form of Opinion of Dewey Ballantine
Exhibit 6 Form of Opinion of Sullivan & Cromwell
Exhibit 7-A Form of Opinion of Senior Vice President
and General Counsel of the Company
Exhibit 7-B Form of Opinion of Dewey Ballantine
Exhibit 8 Form of Opinion of Sullivan & Cromwell
Exhibit 9-A Form of Opinion of Senior Vice President
and General Counsel of the Company
Exhibit 9-B Form of Opinion of Dewey Ballantine
Schedule 1.1 Initial Note Investors
Schedule 1.2 Warrant Investors
Schedule 1.3 Convertible Preferred Stock Investors
Schedule 3.1(d) Consents
Schedule 3.1(e) Conflicts
Schedule 3.1(f) Subsidiaries
Schedule 3.1(h) Financial Statements and Information
Schedule 3.1(i) SEC Documents
Schedule 3.1(j) Certain Changes/Events
Schedule 3.1(k) Assets
Schedule 3.1(l) Liabilities and Reserves
Schedule 3.1(n) Litigation
Schedule 3.1(o) Compliance with Laws
Schedule 3.1(q) Brokers and Finders
Schedule 3.1(r) Taxes
Schedule 3.1(t) Insurance Business
Schedule 3.1(u) Reinsurance
Schedule 3.1(v) Intellectual Property
Schedule 3.1(w) Variable Products Matters
iv
<PAGE> 6
INVESTMENT AGREEMENT, dated as of December 30, 1997, among THE
MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a New York mutual life insurance
company (the "Company"), MONY FINANCIAL SERVICES CORPORATION, a Delaware
corporation (the "Holding Company"), and GS MEZZANINE PARTNERS, L.P., a Delaware
limited partnership, GS MEZZANINE PARTNERS OFFSHORE, L.P., a Cayman Islands
exempted limited partnership, STONE STREET FUND 1997, L.P., a Delaware limited
partnership and BRIDGE STREET FUND 1997, L.P., a Delaware limited partnership
(each, an "Investor" and collectively, the "Investors").
WHEREAS the Company is currently considering the possibility of
adopting a plan of reorganization under Section 7312 of the New York Insurance
Law ("Section 7312"), which plan of reorganization would, if adopted, provide
for (a) the conversion of the Company from a mutual life insurance company into
a stock life insurance company which would become a wholly owned subsidiary of
the Holding Company, (b) the issuance of Common Stock of the Holding Company
("Holding Company Common Stock") or other consideration to eligible
policyholders of the Company in exchange for their policyholder membership
interests in the Company and (c) the possible issuance to the Investors or one
or more Subsidiaries or Affiliates of the Investors, at or following the
Demutualization Date, of Holding Company Common Stock pursuant to the Warrants
or the Convertible Preferred Stock; and
WHEREAS in anticipation of the possible consummation of such plan
of reorganization and in order to enhance the competitive position and increase
the surplus of the Company during the period prior to consummation thereof, the
Investors are willing to purchase surplus notes of the Company and provide a
commitment to purchase additional surplus notes in certain circumstances, and
the Company wishes to sell such surplus notes to the Investors and obtain such
commitment, all on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE> 7
ARTICLE I
PURCHASE AND SALE OF NOTES,
WARRANTS AND CONVERTIBLE PREFERRED STOCK;
EXCHANGE, REGISTRATION AND RESALE
SECTION 1.1. Purchase and Sale of Notes. (a) On the terms and
subject to the conditions set forth herein, the Company agrees to issue and sell
to the Investors in the respective amounts set forth in Schedule 1.1 hereto (or
to one or more Subsidiaries or Affiliates of any such Investor that is listed on
Schedule 1.1 and that is designated by such Investor by notice to the Company
not less than five Business Days prior to the First Closing Date that agrees to
be bound by the Agreement (whereupon any such other Person shall become an
Investor under this Agreement)) and the Investors agree to purchase or to cause
such Subsidiaries or Affiliates to purchase from the Company at the First
Closing $115,000,000 aggregate principal amount of the Company's Surplus
Notes(the "Notes") for a total purchase price of $115,000,000 (the "Note
Purchase Price"). The Notes shall be issued pursuant to a Fiscal Agency
Agreement in the form of Exhibit 2-A hereto (the "Fiscal Agency Agreement") and
shall be in substantially the form set forth in Exhibit A to the Fiscal Agency
Agreement.
(b) Notwithstanding the provisions of Section 1.1(a) or Section
1.2, the Investors shall not be required to purchase the Notes or the Warrants
if at any time within the 60 days prior to the First Closing Date the Company or
any investment banker, attorney or other advisor or representative of the
Company or any of its Subsidiaries is or has been in discussions or negotiations
with any Person concerning, or is otherwise contemplating, an Investment
Proposal, other than any discussions or negotiations which may have occurred but
which have been definitively terminated prior to the First Closing Date.
SECTION 1.2. Purchase and Sale of the Warrants. In
consideration of the Investors' agreements and covenants hereunder, and subject
to the terms and conditions stated herein, the Holding Company agrees to issue
and deliver to the Investors in the respective amounts set forth in Schedule 1.2
hereto (or to one or more Subsidiaries or Affiliates of any such Investor that
is listed on Schedule 1.2 and that is designated by such Investor by notice to
the Company not less than five Business Days prior to the First Closing Date) at
the First Closing, for an aggregate purchase price of $10,000,000, one or more
Common Stock Purchase Warrants, substantially in the form set forth in Exhibit
2-B hereto (collectively, the "Warrants"), to
-2-
<PAGE> 8
purchase an aggregate of such number of shares of Holding Company Common Stock
as shall equal the Warrant Shares Number (as defined in the Warrant), at a
purchase price per share equal to the Exercise Price, subject to adjustment
under certain circumstances as provided therein.
SECTION 1.3. Convertible Preferred Stock. In the event that the
Demutualization Date has occurred on or prior to June 30, 1999, the Holding
Company may at any time after the Demutualization Date require the Investors to
purchase in the respective amounts set forth in Schedule 1.3 hereto (or one or
more Subsidiaries or Affiliates of any such Investors that is listed on Schedule
1.3 and that is designated by such Investor by notice to the Company not less
than five Business Days prior to the Second Closing Date that agrees to be bound
by this Agreement (whereupon any such Person shall become an Investor under this
Agreement)) and the Investors agree to purchase or to cause such Subsidiaries or
Affiliates to purchase from the Holding Company at the Second Closing an
aggregate of 1,000,000 shares of convertible preferred stock of the Holding
Company having the terms and conditions set forth in Exhibit 2-D hereto and that
have been registered under the Securities Act (the "Convertible Preferred
Stock") for a total purchase price of $100,000,000 (the "Convertible Preferred
Stock Purchase Price") provided that not later than the 90th day after the
Demutualization Date the Company has first provided such Investors with written
notice of its election to issue the Convertible Preferred Stock and require such
purchase pursuant to this Section 1.3. The Company shall file a registration
statement under the Securities Act with respect to the Convertible Preferred
Stock to be issued and sold to the Investors not later than the 10th Business
Day following its notice to the Investors of its election to issue the
Convertible Preferred Stock and shall use its best efforts to have such
registration statement declared effective as promptly as practicable. On the
effective date of such registration statement the Company shall notify the
Investors of the effectiveness of the registration statement and specify the
date (the "Convertible Preferred Stock Issuance Date") on which it intends to
issue such Convertible Preferred Stock, which date shall be not less than 3
Business Days and not more than 15 Business Days after the giving of such
notice.
SECTION 1.4. Holding Company Notes. At any time from and after
the Demutualization Date, the Investors, together with such of their
Subsidiaries or Affiliates as may then hold Notes may elect to exchange Notes
for Holding Company notes having the terms and conditions set forth in Exhibit
2-C hereto ("Holding Company Notes"). Any such
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election and exchange shall be made in whole or in part with respect to the
entire aggregate principal amount of Notes held by the Investors and their
Subsidiaries and Affiliates, provided that no such election and exchange shall
be made for less than (x) $50 million in aggregate principal amount of such
Notes or (y) the balance of such Notes then held by the Investors and their
Subsidiaries and Affiliates, if less than $50 million. In order to make any such
election, the Principal Investor on behalf of such holders shall provide the
Company and the Holding Company with 15 Business Days' prior written notice (an
"Exchange Notice") of its intent to make such exchange, which Exchange Notice
shall specify whether the Holding Company Notes (i) shall be publicly registered
under the Securities Act upon issuance or (ii) shall not be so registered upon
issuance, but shall be subject to the provisions regarding registration rights
set forth in Exhibit 2-C. If such Exchange Notice specifies that such Holding
Company Notes are to be registered as set forth in clause (i) immediately above,
the Holding Company shall, as soon as practicable following receipt of such
notice, file with the SEC a registration statement relating to such Holding
Company Notes and their resale by the Investors, and shall use its best efforts
to cause such registration statement to become effective within 90 days of the
date of the related Exchange Notice. In the event such registration statement
has not been declared effective within such 90-day period, the Principal
Investor on behalf of such holders may (i) provide the Company and the Holding
Company with a revised Exchange Notice requesting the Holding Company to
withdraw such registration statement and issue non-registered Holding Company
Notes (which shall continue to have the registration rights set forth in Exhibit
2-C or (ii) withdraw such Exchange Notice and continue to hold Notes, provided
that any such withdrawal pursuant to this clause (ii) shall not prohibit the
Principal Investor on behalf of such holders from submitting another Exchange
Notice at any time after 60 days from such withdrawal. In the case of an
exchange for registered Holding Company Notes, such exchange shall occur no
later than five Business Days after the effective date of the registration
statement relating to such Holding Company Notes and, in the case of an exchange
for non-registered Holding Company Notes, such exchange shall occur no later
than 20 Business Days after the provision by the electing party of the Exchange
Notice or five Business Days of a revised Exchange Notice, as the case may be,
requesting such exchange, in any such case unless otherwise agreed to in writing
by the Principal Investor, the Company and the Holding Company.
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Upon any exchange pursuant to this Section 1.4, the Investors or
other party holding the Notes being exchanged shall transfer and assign such
Notes to the Holding Company and the Holding Company shall issue to the
Investors or such other party a like amount of Holding Company Notes.
SECTION 1.5. [Intentionally omitted.]
SECTION 1.6. Registration and Resale. (a) In addition to the
registration of the Holding Company Notes and Convertible Preferred Stock
contemplated by Sections 1.3 and 1.4 hereof, the Investors, together with their
Subsidiaries or Affiliates, shall have rights to registration under the
Securities Act of the Warrants and all shares of Holding Company Common Stock
issuable thereunder and the shares of Holding Company Common Stock issuable
pursuant to the Convertible Preferred Stock, in each case on the terms and
subject to the conditions set forth in the Registration Rights Agreement, which
shall be in substantially the form set forth in Exhibit 3 hereto.
(b) (i) At any time prior to the earlier of (x) the
Demutualization Date and (y) June 30, 1999, the Investors and such of their
Subsidiaries or Affiliates as may then hold Notes shall have the right to
privately resell up to $90 million aggregate principal amount of Notes in one or
more transactions exempt from registration under the Securities Act pursuant to
Rule 144, Rule 144A or any other exemption then available thereunder, provided
that the Company shall not be required to prepare a disclosure document for any
resale of Notes in an amount of less than $50 million in the aggregate. Any such
resale shall be made on the terms and subject to the conditions set forth in
Exhibit 4 hereto, including, from and after the date falling six months after
the First Closing Date, the preparation by the Company of a disclosure document
to be used in connection therewith which shall be acceptable to the Principal
Investor and which shall include narrative and financial disclosure concerning
the Company and its operations substantially consistent in scope with that used
in connection with the sale of the Company's 11-1/4% Surplus Notes due 2024.
(ii) In the event the Demutualization Date has not occurred by
June 30, 1999, the resale rights described in the preceding clause (i) shall
apply to the entire aggregate principal amount of Notes then held by the
Investors or their Subsidiaries or Affiliates.
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(c) Holding Company Notes and Convertible Preferred Stock may be
freely resold at any time by the Investors and their Subsidiaries or Affiliates,
as the case may be, pursuant to registration under the Securities Act or any
applicable exemption from registration thereunder.
(d) Notwithstanding anything herein to the contrary, Subject
Securities may be sold or otherwise transferred between and among the Investors
and their Subsidiaries and Affiliates without restriction hereunder, and any
Subject Securities that have been registered under the Securities Act may be
sold to any Person without restriction hereunder, subject to compliance with
applicable law and to the restrictions contained in Section 6.4.
ARTICLE II
CLOSINGS; CONDITIONS
SECTION 2.1. First Closing. The closing of the purchase and
sale of the Notes and the Warrants shall take place at 10:00 a.m., New York City
time, on December 30, 1997, at the offices of Sullivan & Cromwell, 125 Broad
Street, New York, New York, or at such other time and place as the parties may
mutually determine in writing (the "First Closing"). The actual date on which
the First Closing shall occur is referred to herein as the "First Closing Date".
Subject to the satisfaction of the conditions thereto set forth in Sections 2.2
and 2.3 hereof, the First Closing Date shall occur no later than the date 15
Business Days following the date that the Company provides a notice to the
Investors advising them of the proposed First Closing Date. At the First
Closing, (i) the Company shall issue and deliver to the Investors set forth in
Schedule 1.1 or their Subsidiaries or Affiliates designated pursuant to Section
1.1 the Notes, all duly executed by the Company and dated the First Closing
Date, in such denominations (of $10,000,000 or integral multiples of $1,000,000
in excess thereof) as shall be designated in writing by the Investors not less
than one Business Day prior to the First Closing and registered in the name of
the Investors or the applicable Subsidiary or Affiliate (or the name of its or
their respective nominees), (ii) the Holding Company shall issue and deliver to
the Investors set forth in Schedule 1.2 or their Subsidiaries or Affiliates
designated pursuant to Section 1.2 the Warrants and (iii) the Investors shall
pay the Company, in United States dollars and in immediately available funds by
wire transfer to the Company's account at The Chase Manhattan Bank, N.A. (ABA
No. 021000021, account
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No. 008-000018), an amount equal to the sum of the Note Purchase Price and the
Warrant Purchase Price and shall provide the commitment to purchase the
Convertible Preferred Stock as set forth in Section 1.3 hereof.
SECTION 2.2. Conditions to Obligations of the Investors at First
Closing. The obligations of the Investors to consummate the First Closing are
subject to the satisfaction in full prior to or at the First Closing of each of
the following conditions precedent:
(a) Representations and Warranties. The representations and
warranties made by the Company and the Holding Company in this Agreement
shall have been true and correct when made and shall be true and correct
as of the First Closing, as though such representations and warranties
were made on and as of the First Closing Date.
(b) Compliance with Agreements and Conditions. The Company and
the Holding Company shall have performed and complied in all material
respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by the
Company or the Holding Company at or before the First Closing.
(c) Litigation. On the First Closing Date, there shall not be
(i) in effect any injunction, decree or order enjoining or restraining
any of the Transactions, (ii) pending any action or proceeding seeking
an injunction, decree or order enjoining or restraining any of the
Transactions or, alternatively, seeking substantial damages if any of
the Transactions are consummated or (iii) instituted or, to the best
knowledge of the Company, threatened any action or proceeding by any
Governmental Authority with respect to the issuance or acquisition of
any of the Subject Securities, the execution, delivery or performance of
this Agreement or the consummation of any of the Transactions.
(d) Certain Events. There shall not exist any condition or
state of facts that would, at or immediately after the First Closing,
constitute an event of insolvency, rehabilitation, liquidation,
conservation or dissolution of the Company or MLOA.
(e) Certificate. The Investors shall have received a
certificate executed on behalf of the Company by two senior executive
officers of the Company
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(of the rank of at least Senior Vice President) and dated the First
Closing Date to the effect that to their knowledge (i) the conditions
set forth in clauses (a), (b), (d) and (h) of this Section 2.2 have been
satisfied and (ii) no condition has occurred or exists that would permit
the Investors to decline to purchase the Notes and Warrants pursuant to
Section 1.1(b).
(f) Opinions. The Investors shall have received the opinions,
dated the First Closing Date, of the Senior Vice President and General
Counsel of the Company and of Dewey Ballantine, special counsel to the
Company and the Holding Company, substantially to the effect set forth
in Exhibits 5-A and 5-B, respectively.
(g) Consents and Approvals. (i) All Approvals required in
connection with the validity of the Notes and the Warrants, the
acquisition by the Investors or their Subsidiaries or Affiliates
designated pursuant to Sections 1.1 and 1.2 of Holding Company Common
Stock pursuant to the Warrants and the consummation of the Transactions
contemplated by this Agreement to occur at the First Closing shall have
been duly obtained, made or given and shall be in full force and effect
at the First Closing, without the imposition in such Approvals upon the
Investors or any of their Subsidiaries or Affiliates of any restriction
on the ability of any of them to acquire shares of Holding Company
Common Stock pursuant to exercise of the Warrants or conversion of the
Convertible Preferred Stock or any other material adverse condition.
(ii) The Investors shall have received an indication
satisfactory to them (A) from the NYID, the Arizona Insurance Department
and any other applicable Governmental Authority under Applicable
Insurance Laws to the effect that individually or collectively none of
(x) the acquisition of the Notes, the Warrants or the other Subject
Securities, (y) the acquisition of Holding Company Common Stock pursuant
to the Warrants and the Convertible Preferred Stock or (z) the
appointment of the Investor Director shall result in the Investors, or
any of them, or any of their Subsidiaries or Affiliates, acquiring
"control" of the Company or any Insurance Company within the meaning of
any Applicable Insurance Laws, and (B) from the NYID to the effect that
the Investors or their Subsidiaries or Affiliates may acquire the
Warrants, the Convertible Preferred Stock and Holding Company Common
Stock pursuant to the Warrants or the Convertible Preferred
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Stock notwithstanding the provisions of Section 7312(v).
(h) Ratings. There shall not have occurred any reduction in the
rating of the Company or MLOA by A.M. Best & Co. or in the claims-paying
ability rating of the Company or MLOA by Standard & Poor's Ratings Group
or in the financial strength rating of the Company or MLOA by Moody's
Investors Service, Inc. to "B++" or below, "BBB" or below or "Baa3" or
below, respectively, or any reduction in the Company's surplus notes
debt rating from Standard & Poor's Ratings Group or Moody's Investors
Service, Inc. to "BB+" or below or "Ba1" or below, respectively, and no
such organization shall have informed the Company or otherwise announced
that it will make a reduction in any such ratings if any of the
Transactions are consummated.
(i) Agreements in Full Force and Effect. Each of the
Transaction Agreements shall be in full force and effect.
(j) Closing Fee. At the First Closing, the Company shall pay to
the Investors a closing fee (the "First Closing Fee") in an amount equal
to the sum of $1,250,000 plus 1% of the aggregate principal amount of
Notes to be purchased. The First Closing Fee shall be allocated among
the Investors pro rata according to the aggregate principal amount of
Notes to be purchased by them at the First Closing.
SECTION 2.3. Conditions to Obligations of the Company at First
Closing. The obligations of the Company to consummate the First Closing are
subject to the satisfaction in full prior to or at the First Closing of each of
the following conditions precedent:
(a) Representations and Warranties. The representations and
warranties made by the Investors in this Agreement shall have been true
and correct when made and shall be true and correct as of the First
Closing, as though such representations and warranties were made on and
as of the First Closing Date.
(b) Litigation. On the First Closing Date, there shall not be
(i) in effect any injunction, decree or order enjoining or restraining
any of the Transactions, (ii) pending any action or proceeding seeking
an injunction, decree or order enjoining or restraining any of the
Transactions or, alternatively, seeking substantial damages if any of
the Transactions are
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consummated or (iii) instituted or, to the best knowledge of the
Company, threatened any action or proceeding by any Governmental
Authority with respect to the acquisition of any of the Subject
Securities, the execution, delivery or performance of this Agreement or
the consummation of any of the Transactions.
(c) Certificate. The Company shall have received certificates
executed on behalf of each Investor by two senior executive officers (of
the rank of at least Vice President) of the general partner or managing
general partner of such Investor and dated the First Closing Date to the
effect that the conditions set forth in clause (a) of this Section 2.3
have been satisfied.
(d) Opinions. The Company shall have received (i) the opinion,
dated the First Closing Date, of Sullivan & Cromwell, special counsel to
the Investors, substantially to the effect set forth in Exhibit 6 and
(ii) an opinion from UBS Securities LLC concerning the terms of the
Transactions to be consummated at the First Closing.
SECTION 2.4. Second Closing. The closing of the purchase and
sale of the Convertible Preferred Stock shall take place at 10:00 a.m., New York
City time, on the Convertible Preferred Issuance Date at the offices of Sullivan
& Cromwell, 125 Broad Street, New York, New York, or on such other day or at
such other time and place as the parties may mutually determine in writing (the
"Second Closing"). The actual date on which the Second Closing shall occur is
referred to herein as the "Second Closing Date". At the Second Closing, the
Holding Company shall issue and deliver to the Investors set forth on Schedule
1.3 or their Subsidiaries or Affiliates designated pursuant to Section 1.3 the
Convertible Preferred Stock, all duly executed by the Company and dated the
Second Closing Date, in such denominations as shall be designated in writing by
the Investors not less than one Business Day prior to the Second Closing and
registered in the name of the Investors or the applicable Subsidiary or
Affiliate (or the name of its or their respective nominees) against delivery of
the Convertible Preferred Stock Purchase Price in United States dollars and in
immediately available funds by wire transfer to the account of the Holding
Company designated in writing by the Holding Company to the Principal Investor
not less than one Business Day prior to the Second Closing.
SECTION 2.5. Conditions to Obligations of the Investors at
Second Closing. The obligations of the Investors to consummate the Second
Closing are subject to
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the satisfaction in full prior to or at the Second Closing of each of
the following conditions precedent:
(a) Representations and Warranties. The representations and
warranties made by the Company and the Holding Company in Section
3.1(a),(b),(c),(d),(e),(f) and (j)(b) shall have been true and
correct when made and shall be true and correct as of the Second
Closing, as though such representations and warranties were made on
and as of the Second Closing Date.
(b) Compliance with Agreements and Conditions. The Company and
the Holding Company shall have performed and complied in all
material respects with all agreements, covenants, obligations and
conditions required by this Agreement to be performed or complied
with by the Company or the Holding Company at or before the Second
Closing.
(c) Litigation. On the Second Closing Date, there shall not be
(i) in effect any injunction, decree or order enjoining or
restraining any of the Transactions, (ii) pending any action or
proceeding seeking an injunction, decree or order specifically
enjoining or restraining any of the issuance to the Investors, or
the acquisition by the Investors, of any of the Subject Securities
or, alternatively, seeking substantial damages if any of Subject
Securities are issued to, or acquired by, the Investors or (iii)
instituted or, to the best knowledge of the Company, threatened any
action or proceeding by any Governmental Authority with respect to
the issuance or acquisition of any of the Subject Securities, the
execution, delivery or performance of this Agreement or the
consummation of any of the Transactions.
(d) Certain Events. There shall not exist any condition or state
of facts that would, at or immediately after the Second Closing,
constitute an event of insolvency, rehabilitation, liquidation,
conservation or dissolution of the Company or MLOA.
(e) Certificate. The Investors shall have received a certificate
executed on behalf of the Company by two senior executive officers
of the Company (of the rank of at least Senior Vice President) and
dated the Second Closing Date to the effect that to their knowledge
the conditions set forth in clauses (a), (b), (d) and (h) of this
Section 2.5 and have been satisfied.
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(f) Opinions. The Investors shall have received the opinions,
dated the Second Closing Date, of the Senior Vice President and
General Counsel of the Company and of Dewey Ballantine, special
counsel to the Company and the Holding Company, substantially to the
effect set forth in Exhibits 7-A and 7-B, respectively.
(g) Consents and Approvals. (i) All Approvals required in
connection with the validity of the Convertible Preferred Stock, the
acquisition by the Investors or their Subsidiaries or Affiliates
designated pursuant to Sections 1.2 and 1.3 of Holding Company
Common Stock pursuant to the Warrants and the Convertible Preferred
Stock, and the consummation of the Transactions contemplated by this
Agreement to occur at the Second Closing shall have been duly
obtained, made or given and shall be in full force and effect at the
Second Closing, without the imposition in such Approvals upon the
Investors or any of their Subsidiaries or Affiliates of any
restriction on the ability of any of them to acquire shares of
Holding Company Common Stock pursuant to exercise of the Warrants or
conversion of the Convertible Preferred Stock or any other material
adverse condition.
(ii) The indications to the effect referred to in Section
2.2(g)(ii) hereof shall be in full force and effect and shall not
have been rescinded or modified in any manner.
(h) Agreements in Full Force and Effect. Each of the Transaction
Agreements shall be in full force and effect.
(i) Closing Fee. At the Second Closing, the Company shall pay to
the Investors a closing fee (the "Second Closing Fee") in an amount
equal to $1,000,000. The Second Closing Fee shall be allocated among
the Investors pro rata according to the aggregate number of shares
of Convertible Preferred Stock to be purchased by them at the Second
Closing.
SECTION 2.6. Conditions to Obligations of Holding Company at
Second Closing. The obligations of the Holding Company to consummate the Second
Closing are subject to the satisfaction in full prior to or at the Second
Closing of each of the following conditions precedent:
(a) Representations and Warranties. The representations and
warranties made by the Investors in this Agreement shall have been true
and correct when made
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and shall be true and correct as of the Second Closing, as though such
representations and warranties were made on and as of the Second Closing
Date.
(b) Litigation. On the Second Closing Date, there shall not be
(i) in effect any injunction, decree or order enjoining or restraining
any of the Transactions, (ii) pending any action or proceeding seeking
an injunction, decree or order specifically enjoining or restraining any
of the issuance to the Investors, or the acquisition by the Investors,
of any of the Subject Securities or, alternatively, seeking substantial
damages if any of the Subject Securities are issued to, or acquired by,
the Investors or (iii) instituted or, to the best knowledge of the
Company, threatened any action or proceeding by any Governmental
Authority with respect to the issuance or acquisition of any of the
Subject Securities, the execution, delivery or performance of this
Agreement or the consummation of any of the Transactions.
(c) Certificate. The Company shall have received certificates
executed on behalf of each Investor by two senior executive officers (of
the rank of at least Vice President) of the general partner or managing
general partner of such Investor and dated the Second Closing Date to
the effect that the conditions set forth in clause (a) of this Section
2.6 have been satisfied.
(d) Opinion. The Company shall have received the opinion, dated
the Second Closing Date, of Sullivan & Cromwell, special counsel to the
Investors, substantially to the effect set forth in Exhibit 8.
SECTION 2.7. Subsequent Closings. At the time of any Subsequent
Closing, the Company shall provide to the Investors opinions, dated the date of
such Subsequent Closing, of the Senior Vice President and General Counsel of the
Company and of Dewey Ballantine, substantially to the effect set forth in
Exhibits 9-A and 9-B, respectively.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of Company and
Holding Company. The Company and the Holding Company hereby jointly and
severally make the following representations and warranties to the Investors:
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(a) Corporate Existence. The Company has been duly organized
and is validly existing as a mutual life insurance company in good
standing under the laws of the State of New York, with full corporate
power and authority to own its properties and conduct its business as
currently conducted or proposed to be conducted and to perform its
obligations under the Contracts to which it is a party; each of the
Significant Subsidiaries has been duly incorporated and is validly
existing as a corporation in good standing under the laws or its
respective jurisdiction of incorporation, with full corporate power and
authority to own its properties and conduct its business as currently
conducted or proposed to be conducted and to perform its obligations
under the Contracts to which it is a party; and all of the issued shares
of capital stock of each of the Company's Subsidiaries have been duly
and validly authorized and issued, are fully paid and nonassessable and
(except for directors' qualifying shares) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims. Each of the Company, the Holding Company and each
other Significant Subsidiary of the Company is duly qualified as a
foreign corporation or partnership to transact business and is in good
standing in each jurisdiction in which it owns or leases substantial
properties or in which the conduct of its business requires such
qualification, except where the failure to be so qualified and in good
standing would not, in any case or in the aggregate, have a material
adverse effect upon the business, operations, assets, liabilities,
stockholders' equity (or SAP Surplus in the case of the Insurance
Companies) or financial condition of the Holding Company, the Company
and their Subsidiaries, considered as a whole (a "Material Adverse
Effect").
(b) Authorization; Enforcement. (i) Each of the Company and the
Holding Company has full corporate power and authority to execute and
deliver the Transaction Agreements and such other instruments to be
executed by it pursuant hereto and to perform its obligations under the
Transaction Agreements and such other instruments in accordance with
their respective terms. The Company has full corporate power and
authority to issue and sell the Notes and the Holding Company has full
corporate power and authority to issue and sell the Warrants, to issue
the Holding Company Notes and the Convertible Preferred Stock and to
perform its obligations thereunder in accordance with its terms. Each of
the Company and the Holding Company
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has full corporate power and authority to consummate a Plan, subject to
approval thereof by the Superintendent and the policyholders of the
Company in accordance with Section 7312 and any changes in their
respective certificates of incorporation or by-laws provided for in a
Plan. At the time of any Subsequent Closing, the Holding Company will,
as the case may be, have full corporate power and authority to issue and
deliver the Holding Company Notes and the Convertible Preferred Stock
and the shares of Holding Company Common Stock to be issued and
delivered upon the exercise of Warrants or conversion of Convertible
Preferred Stock at any such Subsequent Closing.
(ii) The Company has formulated and endorsed certain proposed
summary terms of the Plan as set forth in Exhibit 1.
(iii) Each of the Company and the Holding Company has taken all
necessary corporate action to duly and validly authorize its execution
and delivery of the Transaction Agreements and the other instruments to
be executed by it pursuant hereto and the consummation of the
Transactions (except with respect to the adoption of a Plan by the Board
and the approval of the IPO). Each of the Transaction Agreements has
been duly executed and delivered by the Company and the Holding Company
and constitutes a valid and legally binding obligation of the Company
and the Holding Company, enforceable against the Company and the Holding
Company in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles. The provisions of Section 203 of the General
Corporation Law of the State of Delaware will not apply to the Investors
or their Subsidiaries or to this Agreement or the transactions
contemplated by this Agreement.
(c) Subject Securities. Upon issuance to the Investors or their
Subsidiaries or Affiliates as provided herein, the Notes will (A) have
been duly authorized, executed and delivered by the Company, (B) be
validly issued obligations of the Company, enforceable against the
Company in accordance with their respective terms, and (C) be free and
clear of all Liens. Upon issuance to the Investors or their Subsidiaries
or Affiliates as provided herein, the Warrants and Holding Company Notes
will (A) have been duly authorized, executed and delivered by the
Holding
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Company, (B) be validly issued obligations of the Holding Company,
enforceable against the Holding Company in accordance with their
respective terms, and (C) be free and clear of all Liens. Upon issuance
to the Investors or their Subsidiaries or Affiliates as provided herein,
the Convertible Preferred Stock and the Holding Company Common Stock
will have been duly authorized and validly issued and will be fully paid
and nonassessable and, in the case of the Convertible Preferred Stock,
the terms thereof will be valid and binding on the Holding Company.
(d) Consents and Approvals. No Approval is required to be
obtained, made or given, and no Notice is required to be filed, by or
with respect to the Company, the Holding Company or any other Subsidiary
of the Company in connection with the execution and delivery by the
Company or the Holding Company, as the case may be, of the Transaction
Agreements, the issue and sale of the Notes and the Warrants, the issue
and delivery of the Holding Company Notes and the Convertible Preferred
Stock, the issue and delivery in exchange for the Warrants or the
Convertible Preferred Stock of the shares of Holding Company Common
Stock to be issued and so delivered by the Holding Company pursuant
thereto, the adoption and consummation of a Plan, the performance by the
Company, the Holding Company or any other Subsidiary of the Company of
their respective obligations under the Transaction Agreements, or the
consummation of the Transactions, other than (i) under the HSR Act with
respect to the acquisition of Holding Company Common Stock in exchange
for Warrants or Convertible Preferred Stock, (ii) under the insurance
laws of the States of New York and Arizona with respect to the issuance
and sale of the Notes, the effectuation of a Plan and the IPO and the
acquisition of Holding Company Common Stock in exchange for Warrants or
Convertible Preferred Stock, (iii) registration of the shares of Holding
Company Common Stock, the Holding Company Notes and the Convertible
Preferred Stock under the Securities Act and the Exchange Act (if
applicable) and any securities and insurance securities laws of any
State with respect to the issuance of the Holding Company Notes and
Convertible Preferred Stock and the effectuation of a Plan and the IPO,
(iv) filings, at any time, of tax returns, tax reports and tax
information statements and (v) as otherwise specified on Schedule
3.1(d); and other than the Superintendent, no Governmental Authority has
authority to disapprove any payment on the Notes under any Applicable
Insurance Laws.
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(e) No Conflicts. None of the execution and delivery of any of
the Transaction Agreements or the consummation of any of the
Transactions will:
(i) conflict with or result in a breach of any provision of the
Certificate of Incorporation or By-Laws (or other organizational
documents) of the Company, the Holding Company or any other Subsidiary
of the Company (assuming, with respect to the Transactions to be
consummated at or after the First Closing, the amendment of such
organizational documents of the Company and of the Holding Company as
contemplated by Exhibit 1 and by a Plan) or
(ii) except (A) with respect to the termination of the
investment advisory contracts entered into by the Company or any
Subsidiary of the Company as an investment adviser that are subject to
the Investment Advisers Act or the Investment Company Act upon
consummation of a Plan, (B) with respect to (1) any consent or approval
required under any of the real estate joint venture agreements, real
estate leases, mortgage loans and other real estate related agreements
set forth in Schedule 3.1(e) and (2) any Real Property Approvals, in
each case, upon consummation of a Plan and (C) as otherwise specified in
Schedule 3.1(e), result in any conflict with, breach of or default (with
or without notice or lapse of time or both) under, or give rise to any
right of termination, cancellation or acceleration of any obligation or
loss of any benefit under, or result in the imposition of any Liens on
any of their respective properties or assets under, or require any
consent or approval which has not been obtained with respect to:
(1) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement or instrument or permit,
concession, franchise or license to which the Company, the
Holding Company or any other Subsidiary of the Company is a
party or by which the Company, the Holding Company or any other
Subsidiary of the Company or any of their respective properties
or assets may be bound, except where such conflict, breach or
default, termination, cancellation or acceleration, imposition
or failure to obtain any consent or approval referred to in this
clause (1) would not in any case or in the aggregate have a
Material Adverse Effect or
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(2) any order, decree or injunction, or, assuming
that the Consents referred to in Section 3.1(d)(i), (ii), (iii)
or (iv) or specified on Schedule 3.1(d) have been obtained or
made, any law, rule or regulation applicable to the Company, the
Holding Company or any other Subsidiary of the Company or any of
their respective properties or assets, with such exceptions,
individually or in the aggregate, as would not be reasonably
likely to (x) have a Material Adverse Effect, (y) affect the
validity of any of the Subject Securities or (z) prevent the
consummation of any of the Transactions.
(f) Capital Structure. (i) The Company is a mutual life
insurance company organized under the NYIL and is not authorized to
issue any capital stock. The Holding Company is a wholly owned
Subsidiary of the Company. Except for this Agreement and the Warrants,
there are no warrants, options, agreements, convertible or exchangeable
Securities or other commitments pursuant to which the Company or the
Holding Company is or may become obligated to issue or sell any shares
of its capital stock or other equity Securities.
(ii) Schedule 3.1(f) lists the name of each Subsidiary of the
Company that is a subsidiary of the Company for purposes of Regulation
115 of the NYIL, its jurisdiction of incorporation or organization, and,
in the case of each Significant Subsidiary, the authorized, issued and
outstanding amounts of its capital stock or other ownership or
partnership interests and the Company's direct or indirect (through
another specified Subsidiary) percentage interest therein. Except as
disclosed in Schedule 3.1(f), all the issued and outstanding shares of
the capital stock or other ownership or partnership interests of the
Significant Subsidiaries are owned of record and beneficially, directly
or indirectly, by the Company, free and clear of any Liens. All shares
or other ownership or partnership interests of any Significant
Subsidiary are duly and validly issued and outstanding and all such
shares are fully paid and nonassessable. None of the outstanding capital
stock or other ownership or partnership interests of any Significant
Subsidiary has been issued in violation of, or is subject to, any
preemptive or subscription rights. Except as disclosed in Schedule
3.1(f), there are no warrants, options, agreements, convertible or
exchangeable Securities or other commitments pursuant to which any
Significant Subsidiary is or may become obligated
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<PAGE> 24
to issue, sell, purchase, retire or redeem any shares of its capital
stock or other ownership or partnership interests or other Securities.
Except for this Agreement and the Registration Rights Agreement, there
are no standstill, voting or similar agreements or any rights of first
offer or first refusal to which the Company or the Holding Company is a
party that presently or in the future will limit any person's ability to
acquire, vote, sell or hold any Holding Company Common Stock.
(g) Company Documents. The Investors have been furnished prior
to the date of this Agreement true, complete and correct copies of the
Articles or Certificates of Incorporation and By-laws of the Company and
each Significant Subsidiary, each of which is in full force and effect
on the date hereof. The Company has made available for inspection by the
Investors true, complete and correct copies of the minutes of all
meetings since January 1, 1994 of the Board and of each committee of the
Board, and of the respective boards of directors and committees thereof
of each Significant Subsidiary.
(h) Financial Statements and Information. (i) The following
financial statements have been furnished to the Investors by the Company
prior to the date of this Agreement:
(A) The audited consolidated balance sheets of the
Company as of December 31, 1996 and 1995, and the related
consolidated summaries of operations and surplus and
consolidated statements of cash flows of the Company for the
years ended December 31, 1996, 1995 and 1994, including in each
case the opinion thereon of Coopers & Lybrand;
(B) the unaudited balance sheet of the Company as of
September 30, 1997, and the related summaries of operations and
surplus of the Company for the three months then ended;
(C) the audited statements of financial condition of
MLOA as of December 31, 1996 and 1995, and the related
statements of earnings and cash flows for the years then ended,
in each case with the opinion thereon of Coopers & Lybrand; and
(D) the unaudited statement of financial condition of
MLOA as of September 30, 1997, and
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<PAGE> 25
the related unaudited statements of earnings and cash
flows for the three months then ended.
(ii) The financial statements described in paragraph (i)
above are the financial statements of the Company and its
Subsidiaries or of MLOA, and their respective Subsidiaries
(collectively, the "Audited Entities"), as the case may be, as
of the dates of such statements and for the periods then ended
and fairly present the respective financial condition of the
Audited Entities to which they relate as of the dates of such
statements and their respective results of operations and/or
cash flows, as the case may be, for the periods then ended
(subject to normal, recurring audit adjustments). All such
financial statements are in accordance with the respective books
and records of the Audited Entities, which books and records,
when considered together for each Audited Entity, are complete
and current and maintained in accordance with customary
accounting practices. The financial statements of the Company
and of MLOA referred to above have been prepared in conformity
with accounting practices prescribed or permitted by the
Insurance Department of the States of New York and Arizona,
respectively, applied on a consistent basis.
(iii) The Annual Statements and the Quarterly Statements
with respect to each Insurance Company, in each case as filed
with the applicable Governmental Authority of its jurisdiction
of domicile, were prepared in conformity with SAP, present
fairly, to the extent required by and in conformity with SAP,
the statutory financial condition of each such Insurance Company
at their respective dates and the results of operations, changes
in capital and surplus and cash flow of such Insurance Company
for each of the periods then ended, and were correct in all
material respects when filed and there were no material
omissions therefrom when filed. Complete and correct copies of
the Annual Statements and the Quarterly Statements for the
periods referred to in Section 3.1(h)(i) have been furnished by
the Company to the Investors prior to the date of this
Agreement. Except as set forth in Schedule 3.1(h) hereto, no
deficiencies or violations material to the financial condition
or operations of any Insurance Company have been asserted in
writing by any Governmental Authority which have not been cured
or otherwise resolved to the satisfaction of such Governmental
Authority.
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<PAGE> 26
(i) Exchange Act Reports. Each of the Company and each of its
Significant Subsidiaries has filed all material reports, schedules,
forms, statements and other documents required to be filed by it with
the SEC since January l, 1995 (collectively, the "SEC Documents").
Except as set forth in Schedule 3.1(i), each of the SEC Documents has
been duly and timely filed, and when filed was in compliance with the
requirements (including accounting requirements) of any applicable
Federal securities law and the applicable rules and regulations of the
SEC thereunder, and no event has occurred requiring the filing of any
amendment of any of the SEC Documents which amendment has not been duly
and timely filed, except for failures to file or comply, or events,
which would not in the aggregate have a Material Adverse Effect.
(j) Absence of Certain Changes or Events. (a) (i) Except as set
forth in Schedule 3.1(j) or as otherwise disclosed in writing to the
Investors prior to the date of this Agreement, since December 31, 1996,
each of the Company and each of its Significant Subsidiaries has
conducted its business only in the ordinary course consistent with its
past practices in all material respects, and neither the Company nor any
of its Subsidiaries has (i) borrowed, or agreed to borrow, funds in an
amount in excess of $25,000,000, other than, in the case of any
Insurance Company, (A) short-term Indebtedness incurred in the ordinary
course of business consistent with past practice, (B) Section 1307
Indebtedness and (C) other Indebtedness that is nonrecourse to any
assets of the Company or any of its Subsidiaries other than the Separate
Accounts, and, in the case of any Subsidiary of the Company that is not
an Insurance Company, Indebtedness in the ordinary course of business
consistent with past practice not exceeding $50,000,000 in the aggregate
for all such Subsidiaries, (ii) experienced any damage, destruction or
loss that, to the extent not covered by insurance, has had or is likely
to have a Material Adverse Effect, (iii) except in the case of any
wholly owned Subsidiary, declared, set aside or paid any dividend or
other distribution (whether in cash, stock or property) in respect of
its capital stock, insurance policies or partnership units other than
customary dividends or distributions in the ordinary course of business
consistent with past practices,(iv) in the case of any Insurance
Company, made, or agreed to make, any change in its underwriting,
pricing, actuarial or investment practices or policies, and in the case
of any Significant Subsidiary, made, or agreed to make, any change in
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<PAGE> 27
its financial, tax or accounting practices or policies, in either case
including without limitation any basis for establishing reserves and
depreciation or amortization policies or rates and which, in any case,
could have a Material Adverse Effect, or (v) in the case of any
Insurance Company, experienced any increase or decrease in the
percentage of its reinsured business, or any increase in its lapse
ratio, or any decrease in the amount of its in-force business which
could have a Material Adverse Effect.
(b) Except as set forth in Schedule 3.1(j) or as otherwise
disclosed in writing to the Investors prior to the date of this
Agreement, since December 31, 1996, there has not been any event,
condition, change, development involving a prospective change, or other
occurrence that individually or in the aggregate has resulted or is
reasonably likely to result in a Material Adverse Effect.
(c) Since the date of its incorporation, the Holding Company has
engaged in no activities and has incurred no liabilities (contingent or
otherwise) other than those incidental to its organization and the
execution and delivery of this Agreement and the consummation of the
Transactions. The Holding Company has issued no Securities other than
shares of Holding Company Common Stock issued to and purchased by the
Company prior to the date of this Agreement.
(k) Assets.
(i) Material Owned Property. (A) The Investors have been
furnished prior to the date of this Agreement a true and complete list
of all Material Owned Properties and have been provided the opportunity
to review title, mortgage, lease and all other relevant documentation
relating thereto.
(B) Either the Company or one of its Subsidiaries or the Company
and one or more of its Subsidiaries is the holder of good, marketable
and insurable fee simple title or good and valid title to the leasehold
estate to each Material Owned Property free and clear of all Liens,
except for Permitted Real Property Liens and except mortgages on such
Material Owned Property as of December 31, 1996 and refinancings of such
mortgages and other mortgages entered into since December 31, 1996 in
the ordinary course of business consistent with past practice.
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<PAGE> 28
(C) To the knowledge of the Company, the use, occupancy and
condition of each Material Owned Property is in compliance with all
applicable laws, statutes, regulations, ordinances, judgments or orders
(other than with respect to environmental matters), except where the
failure to be so in compliance would not reasonably be expected to have
a material adverse effect on the use, occupancy, operation or market
value of the Material Owned Properties taken as a whole and except as
set forth in Schedule 3.1(k).
(D) All real property ad valorem and other similar taxes payable
by the Company or any of its Subsidiaries have been paid or are
adequately reserved for in the financial statements referred to in
Section 3.1(h)(i), and the amount of such reserves has been determined
in accordance with the standards applicable to such financial statements
as set forth in Sections 3.1(h)(ii) and (iii), except where the failure
to do so would not be reasonably likely to have a Material Adverse
Effect.
(ii) Mortgage Loans.
(A) Except as set forth in Schedule 3.1(k), each Mortgage Loan
was underwritten and originated or purchased or otherwise acquired by
the Company or one of its Subsidiaries in the course of its normal
commercial mortgage lending activities and in a manner deemed reasonable
and prudent by the Company or such Subsidiary and consistent with
industry practice, except as would not, in any case or in the aggregate,
have a material adverse effect on the aggregate market value of all the
Mortgage Loans considered as a whole.
(B) The origination and collection practices used by the Company
and its Subsidiaries with respect to each Mortgage Loan (other than such
Mortgage Loans specified in Schedule 3.1(k)) have complied in all
respects with all Federal, State, local or foreign laws, statutes,
regulations or ordinances except as would not in the aggregate have a
material adverse effect on the aggregate market value of all the
Mortgage Loans, considered as a whole.
(C) Except as disclosed in Schedule 3.1(k), to the knowledge of
the Company, the aggregate amount of those Mortgage Loans that are
classified as in the process of foreclosure for purposes of the 1996
financial statements referred to in Section 3.1(h)(i) has not increased
in the period from April 1, 1997 to
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<PAGE> 29
the date prior to the date of this Agreement by more than $16 million.
As of December 31, 1996, and as of November 30, 1997, payments
were past due more than 90 days only in respect of the respective
aggregate principal amounts of Mortgage Loans set forth in Schedule
3.1(k) hereto. To the knowledge of the Company, the aggregate principal
amount of Mortgage Loans in respect of which payments were past due more
than 90 days did not increase in the period from December 1, 1997 to the
date prior to the date of this Agreement by more than $2 million.
(iii) Environmental Matters. Except as disclosed on Schedule
3.1(k) hereto, (A) the Company has not received within the shorter
period of (1) its period of ownership of any Real Property or (2) the
last three years, any written notice, demand, letter, claim or request
for information regarding the presence of Hazardous Substances or
liability under any Environmental Law with respect to such Real
Property; and (B) the Company has not received any written notice (the
subject of which has not been fully cured) that any of its Real Property
is currently subject to any orders, decrees, injunctions or any other
proceedings or requirements imposed by any governmental authority or
third party pursuant to any Environmental Law.
(l) Liabilities and Reserves. (i) The September 30, 1997,
consolidated balance sheets referred to in Section 3.1(h)(i)(B) and (D)
reflect adequate provision for all obligations and liabilities of the
respective Audited Entities at such date for which provision is required
under the accounting principles specified in Section 3.1(h)(ii) pursuant
to which such balance sheets were prepared, and except to the extent
specifically disclosed, reflected or reserved against in such balance
sheets and the notes thereto, none of the Audited Entities has any
material obligations or liabilities of any nature (whether accrued,
absolute, contingent or otherwise, and whether or not due, or arising
out of transactions entered into, or any state of facts existing, prior
to such date) required under such accounting principles to be set forth
on a consolidated balance sheet of any of the Audited Entities or in the
notes thereto, except (x) liabilities incurred since September 30, 1997,
in the ordinary course of business consistent with past practice and (y)
as disclosed in Schedule 3.1(l).
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<PAGE> 30
(ii) Each reserve and other liability amount in respect of the
insurance business, including without limitation reserve and other
liability amounts in respect of insurance policies, annuity contracts or
guaranteed interest contracts, whether direct or assumed by reinsurance,
established or reflected in the respective Annual Statements for the
year ended December 31, 1996, of the Company and the Insurance Companies
was determined in accordance with generally accepted actuarial standards
consistently applied, was based on actuarial assumptions that were in
accordance with or stronger than those called for in relevant policy and
contract provisions, is fairly stated in accordance with sound actuarial
principles and is in compliance with the requirements of the Applicable
Insurance Laws. Each Insurance Company owns assets that qualify as
admitted assets under Applicable Insurance Laws in an amount at least
equal to the sum of all such reserves and liability amounts and its
minimum statutory capital and surplus as required by the insurance laws,
rules and regulations of its jurisdiction of domicile.
(iii) Except for regular periodic assessments in the ordinary
course of business and except as set forth in Schedule 3.1(l), no claim
or assessment is pending nor, to the knowledge of the Insurance
Companies, threatened against any of them by any State insurance
guaranty association in connection with such association's fund relating
to insolvent insurers.
(m) Contracts. (i) True and complete copies or, if none exist,
written descriptions, of all Contracts, as such Contracts may have been
amended, modified or supplemented, have been provided or made available
to the Investors prior to the date of this Agreement.
(ii) Each of the Contracts is valid and binding in all material
respects in accordance with its terms and is in full force and effect.
None of the Contracts contains terms which would reasonably be expected
to have a Material Adverse Effect. To the knowledge of the Company, no
party to any of the Contracts that are material to the Company or any
Significant Subsidiary is in or claimed to be in breach or default in
any respect under any term or provision of any of such material
Contracts, with such exceptions, individually or in the aggregate, as
would not have a Material Adverse Effect.
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<PAGE> 31
(n) Litigation. (i) Except as set forth in Schedule 3.1(n) and
other than Litigation relating to taxes, there is no Litigation now
pending, or, to the knowledge of the Company, threatened, against or
relating to the Company or any of its Subsidiaries, or any director or
officer of the Company or any of its Significant Subsidiaries in his
capacity as such, or the assets, properties or business of the Company
or any of its Subsidiaries (whether or not covered by insurance) (A)
involving a claim made prior to the date of this Agreement of more than
$5,000,000, (B) which could adversely affect the ability of the Company
or the Holding Company to consummate any of the Transactions, (C) which
could reasonably be expected to have a Material Adverse Effect, (D)
involving any former officers or directors of the Company or any of its
Subsidiaries as a party adverse to the Company or any of its
Subsidiaries, (E) involving criminal proceedings or investigations
against or targeting the Company, any of its Subsidiaries or any of such
directors or officers in their capacity as such, (F) involving
extraordinary regulatory proceedings, (G) adverse to the Company or any
sponsoring Subsidiaries involving any claims, whether individual or
class action, relating to life insurance or annuity-related sales
practices, including "churning", "vanishing premium", "replacement",
"policy illustration" or similar claims or (H) involving any investment
advisory client of the Company or any of its Subsidiaries with assets
under management in excess of $50,000,000 and adverse to the Company or
any of its Subsidiaries.
(ii) Except as set forth in Schedule 3.1(n), neither the Company
nor any of its Subsidiaries nor any of their respective officers or
directors is subject to any permanent, preliminary or temporary
injunction or prohibitive order, judgment or decree of any Governmental
Authority which could adversely affect the ability of the Company or the
Holding Company to consummate the Transactions or which (x) restricts in
any material respect the ability of the Company or of any Significant
Subsidiary to conduct its business or to engage in any other business or
(y) enjoins or prohibits any officer or director of the Company or of
any Significant Subsidiary from taking, or requires any of such officers
or directors to take, in his capacity as such, any action of any kind or
enjoins or prohibits any such officer or director from violating any law
or regulation.
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<PAGE> 32
(o) Compliance with Laws, etc. (i) Each of the Company and MLOA
is duly licensed as an insurance company in its respective jurisdiction
of incorporation and is duly licensed or authorized as an insurer in
each other jurisdiction where it is required to be so licensed or
authorized to conduct its business as currently conducted or proposed to
be conducted, in each case with such exceptions, individually or in the
aggregate, as would not have a Material Adverse Effect; each of the
Company and MLOA is in compliance with the requirements of its
Applicable Insurance Laws, and has filed all Notices required to be
filed thereunder, in each case, with such exceptions, individually or in
the aggregate, as would not have a Material Adverse Effect; and, except
as set forth on Schedule 3.1(o), neither the Company nor MLOA has
received any notification from any insurance regulatory authority to the
effect that any additional Approval from such insurance regulatory
authority is needed to be obtained by the Company or MLOA in any case
where it could be reasonably expected that obtaining such Approvals or
the failure to obtain such Approvals would have a Material Adverse
Effect;
(ii) Each Broker-Dealer Subsidiary and each Investment Adviser
Subsidiary is duly licensed or registered as a broker-dealer or
investment adviser, as the case may be, in each jurisdiction (including
the United States) where it is required to be so licensed or registered
to conduct its business as currently conducted or as proposed to be
conducted, in each case, with such exceptions, individually or in the
aggregate, as would not have a Material Adverse Effect; each
Broker-Dealer Subsidiary and Investment Adviser Subsidiary has all other
necessary Approvals of and from all applicable regulatory authorities to
conduct their respective businesses as currently conducted or as
proposed to be conducted, in each case with such exceptions,
individually or in the aggregate, as would not have a Material Adverse
Effect; except as set forth on Schedule 3.1(o), none of the
Broker-Dealer Subsidiaries or Investment Adviser Subsidiaries has
received any notification from any applicable regulatory authority to
the effect that any additional Approvals from such regulatory authority
are needed to be obtained by such subsidiary in any case where it could
be reasonably expected that (x) any of the Broker-Dealer Subsidiaries or
Investment Adviser Subsidiaries would in fact be required either to
obtain any such additional Approvals or cease or otherwise limit
engaging in certain business and (y) the process of obtaining such
Approvals or limiting such business
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<PAGE> 33
would have a Material Adverse Effect; and each Broker-Dealer Subsidiary
and Investment Adviser Subsidiary is in compliance with the requirements
of the applicable broker-dealer and investment adviser laws and
regulations of each jurisdiction which is applicable to such subsidiary,
and has filed all Notices required to be filed thereunder, in each case
with such exceptions, individually or in the aggregate, as would not
have a Material Adverse Effect.
(p) Operations Insurance. All liability, property and casualty,
workers compensation, directors and officers liability, surety bonds,
key man life insurance and other similar insurance contracts that insure
the business, properties, operations or affairs of the Company or any of
its Significant Subsidiaries or affect or relate to the ownership, use
or operations of the Company's or any of its Significant Subsidiaries'
assets or properties are, to the knowledge of the Company, in full force
and effect and are with financially sound and reputable insurers in
accordance with normal industry practice (including self insurance) and,
in the light of the respective businesses, properties, operations and
affairs of the Company and its Subsidiaries, are in amounts and provide
coverage that is reasonable and customary for persons in similar
businesses or for similar property.
(q) Brokers and Finders, etc. None of the Company or any of its
Subsidiaries nor any of their officers, directors or employees has
employed any broker, agent or finder other than as disclosed in Schedule
3.1(q) or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the Transactions or otherwise in
connection with the sale of the Subject Securities, other than fees to
the advisers set forth in Schedule 3.1(q), which fees are obligations
solely of the Company and will be duly paid by the Company.
(r) Taxes. (i) Each of the Company and each of its Subsidiaries
has (A) timely filed all material tax returns and reports required to be
filed by it and (B) timely paid (or the Company has paid on its behalf)
all taxes shown to be due on such returns or reports. All claims for
assessment or collection of material taxes that have been asserted
against the Company or any of its Subsidiaries are being contested in
good faith in appropriate proceedings or the taxes to which such claims
relate have been paid by the Company (or its Subsidiaries). The most
recent financial statements
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<PAGE> 34
referred to in Section 3.1(h)(i) reflect an adequate accrual (determined
in accordance with the standards applicable to such financial statements
as set forth in Sections 3.1(h)(ii) and (iii)) for all taxes payable or
asserted to be payable by the Company and its Subsidiaries for all
taxable periods and portions thereof through the date of such financial
statements. Except as set forth in Schedule 3.1(r), with respect to the
Company or any of its Subsidiaries, no deficiencies for any taxes in
excess of $1,000,000 have been proposed, asserted or assessed against
the Company or any of its Subsidiaries, and no waivers or requests for
waivers of the time to assess any such taxes are pending. Schedule
3.1(r) sets forth the status of the examination by the Internal Revenue
Service of, or any other proceedings relating to, the tax returns of the
Company and each of its Subsidiaries (including, without limitation,
whether a waiver of any statute of limitations has been requested or
granted in connection with such examination or other proceedings).
(ii) Except as previously disclosed to the Investors in writing,
(A) all Policies issued by any Insurance Company comply with all
relevant definitional provisions of the Code, (B) the Insurance
Companies' Separate Accounts have been maintained in compliance with the
diversification requirements of Section 817 of the Code since its
enactment and (C) each Fund operating in the United States has elected
to be treated as a RIC and has, since the end of the most recent taxable
year of such Fund that has been closed and for which the statute of
limitations for assessments has expired, qualified as a RIC.
(s) Employee Benefit Plans. (i) True and complete copies of
all Benefit Plans, including, but not limited to, any trust instruments
and insurance contracts forming a part of any Benefit Plans and a
description of any obligations for any retiree health and life benefits
thereunder, and all amendments thereto, have been provided or made
available to the Investors prior to the date of this Agreement.
(ii) All Plans, to the extent subject to ERISA, are in
substantial compliance with ERISA. Each Pension Plan which is intended
to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service with
respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), and the
Company is not aware of any circumstances likely to result in revocation
of any
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<PAGE> 35
such favorable determination letter. There is no material pending or, to
the best knowledge of the Company, threatened litigation relating to the
Plans. Neither the Company nor any of its Subsidiaries has engaged in a
transaction with respect to any of the Plans that, assuming the taxable
period of such transaction expired as of the date hereof, could subject
the Company or any Subsidiary to a tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA in an amount which
would be material.
(iii) No liability under Subtitle C or D of Title IV of
ERISA has been or is expected to be incurred by the Company or any of
its Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any ERISA Affiliate. The Company and its
Subsidiaries have not incurred and do not expect to incur any withdrawal
liability with respect to a multiemployer plan under Subtitle E of Title
IV of ERISA (regardless of whether based on contributions of an ERISA
affiliate). No "reportable event", within the meaning of Section 4043 of
ERISA for which the 30-day reporting requirement has not been waived and
which could result in material liabilities to the Company or any
Subsidiary of the Company, has occurred as to any Pension Plan within
the 12-month period ending on the date hereof.
(iv) All contributions required to be made under the
terms of any Benefit Plan have been timely made or have been reflected
on the Annual Statements or the Quarterly Statements. Neither any
Pension Plan nor any single-employer plan of an ERISA Affiliate has an
"accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA
Affiliate has an outstanding funding waiver. Neither the Company nor any
of its Subsidiaries has provided, or is required to provide, security to
any Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
(v) Under each Pension Plan which is a single employer
plan, as of the last day of the most recent plan year ended prior to the
date hereof, the actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial
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<PAGE> 36
assumptions contained in such Pension Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such
Pension Plan, and there has been no material change in the financial
condition of such Pension Plan since the last day of the most recent
plan year. The withdrawal liability of the Company and its Subsidiaries
under each Benefit Plan which is a multiemployer plan to which the
Company, any of its Subsidiaries or an ERISA Affiliate has contributed
during the preceding 12 months, determined as if a "complete
withdrawal", within the meaning of Section 4203 of ERISA, had occurred
as of the date hereof, does not exceed $100,000.
(vi) Except as previously disclosed to the Investors,
neither the Company nor any of its Subsidiaries has any obligations for
retiree health and life benefits under any Benefit Plan. The Company or
its Subsidiaries may amend or terminate any such Benefit Plan at any
time without incurring any liability thereunder.
(t) Insurance Business. (i) Each Insurance Company possesses an
Insurance License in each State or other jurisdiction in which such
Insurance Company is required to possess an Insurance License, except
where the failure to possess Insurance Licenses would not, individually
or in the aggregate, have a Material Adverse Effect. All such Insurance
Licenses are in full force and effect and neither the Company nor any
Subsidiary of the Company has received any notice of any event, inquiry,
investigation or proceeding that would reasonably be expected to result
in the suspension, revocation or limitation of any such Insurance
License, except where the failure to possess Insurance Licenses would
not, individually or in the aggregate, have a Material Adverse Effect,
and to the knowledge of the Insurance Companies, there is no sustainable
basis for any such suspension, revocation or limitation.
(ii) Except as set forth in Schedule 3.1(t), to the knowledge of
the Company, all forms of Policies currently issued (or filed pending
current review by applicable Governmental Authorities) by any Insurance
Company are, to the extent required under Applicable Insurance Laws, on
forms approved by applicable Governmental Authorities of the
jurisdiction where issued or have been filed with and not objected to by
such Governmental Authorities within the period provided for objection,
except where the failure to be on such forms
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would not, individually or in the aggregate, have a Material Adverse
Effect. All Policy applications in respect of Policy forms currently
issued and material to the operation of any Insurance Company as of the
date of this Agreement and required to be filed with or approved by
applicable Governmental Authorities under Applicable Insurance Laws have
been so filed or approved except where the failure to be so filed or be
approved would not, individually or in the aggregate, have a Material
Adverse Effect. Any premium rates with respect to Policies currently
issued required to be filed with or approved by applicable Governmental
Authorities under Applicable Insurance Laws have been so filed or
approved and premiums charged conform thereto, except where the failure
to so file or receive approval or conform will not, individually or in
the aggregate, have a Material Adverse Effect.
(u) Reinsurance. True and complete copies of all Reinsurance
Agreements have been provided or made available to the Investors prior
to the date of this Agreement. Each of the Reinsurance Agreements is
valid and binding in all material respects in accordance with its terms
on the Insurance Company party thereto. The Company has no reason to
believe that any material amount recoverable by any Insurance Company
pursuant to any Reinsurance Agreement is not fully collectible in due
course. No Insurance Company or, to the knowledge of the Company, any
other party thereto, is in default in any material respect as to any
Reinsurance Agreement and, to the knowledge of the Company, there is no
reason to believe that the financial condition of any such other party
is impaired to the extent that a default thereunder may reasonably be
anticipated. Except as disclosed in Schedule 3.1(u), none of the
Reinsurance Agreements contains any provision providing that the other
party thereto may terminate such Reinsurance Agreement by reason of the
transactions contemplated by this Agreement, and any Insurance Company
that has ceded reinsurance, coinsurance or excess insurance pursuant to
any such Reinsurance Agreement is entitled to take full credit in its
statutory financial statements for such reinsurance, coinsurance or
excess insurance ceded pursuant to Applicable Insurance Laws.
(v) Service Marks, Trademarks, etc. Except as set forth in
Schedule 3.1(v) and except for software license payments paid or payable
in the ordinary course of business, each of the Company and each of its
Significant Subsidiaries has the right to use, free and
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clear of any royalty or other payment obligations, claims of
infringement or Liens, all Trademarks that are material to the conduct
of its business.
(w) Variable Products Securities Law Matters; Investment
Companies; Investment Advisors.
(i) The Insurance Companies are in compliance in all material
respects with the Securities Act, the Exchange Act, the Investment
Company Act and the Investment Advisers Act to the extent that such Acts
apply to their insurance operations.
(ii) The Company and its Subsidiaries are in compliance in all
material respects with the Securities Act, the Exchange Act, the
Investment Company Act, the Investment Advisers Act and State securities
laws to the extent that such Acts and State securities laws apply to
their sponsorship of, underwriting of or advisory relationships with
investment companies required to be registered under the Investment
Company Act.
(iii) No prospectus, amendment or supplement thereto, on their
respective dates, and no registration statement, or post-effective
amendment thereto, at the time it became effective, relating to the
Separate Accounts, the trusts in which the Separate Accounts invest or,
to the knowledge of the Company, the investment companies registered
under the Investment Company Act or under any comparable State law to
which the Company or any of its Subsidiaries provides investment
advisory services, included an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which
they were made, not misleading, and none of such prospectuses, as
amended or supplemented and pursuant to which Securities are currently
being offered, includes an untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made,
not misleading.
(iv) Except as set forth in Schedule 3.1(w), since January 1,
1996, none of the Company, any of its Subsidiaries, any employee,
director or officer thereof or any affiliated person of any of the
foregoing has been enjoined, indicted, convicted or made the subject of
disciplinary proceedings, consent decrees or administrative orders on
account of any violation of the Securities Act, the Exchange Act, the
Investment
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Company Act or the Investment Advisers Act or State securities laws in
connection with its insurance operations, nor has any of the foregoing
persons been convicted of any felony or misdemeanor involving the
purchase or sale of any security or arising out of such person's conduct
as an underwriter, broker, dealer, investment adviser, municipal
securities dealer, governmental securities, broker, government
securities dealer, transfer agent, or entity or person required to be
registered under the Commodity Exchange Act, or as an affiliated person,
salesman, or employee of any investment company, bank, insurance
company, or entity or person required to be registered under the
Commodity Exchange Act, or been permanently or temporarily enjoined by
reason of any misconduct by order, judgment, or decree of any court of
competent jurisdiction from acting as an underwriter, broker, dealer,
investment adviser, municipal securities dealer, government securities
broker, government securities dealer, transfer agent, or entity or
person required to be registered under the Commodity Exchange Act, or as
an affiliated person, salesman, or employee of any investment company,
bank, insurance company, or entity or person required to be registered
under the Commodity Exchange Act, or from engaging in or continuing any
conduct or practice in connection with any such activity or in
connection with the purchase or sale of any security.
(v) Schedule 3.1(w) sets forth, as of September 30, 1997, a list
of (a) the name of each registered investment company advised by the
Company or an "affiliated person" of the Company (as defined in the
Investment Company Act) and each registered investment company of which
the Company or an "affiliated person" is the principal underwriter, and
(b) for each such company, a detailed description of the relationships
between such company and its adviser and any subadvisers and the Company
and any other bases for such affiliation. Schedule 3.1(w) sets forth
each such company which is "controlled" by the Company within the
meaning of Section 2(a)(9) of the Investment Company Act and the factual
basis for such control.
SECTION 3.2. Representations and Warranties of Investors. The
Investors, jointly and severally, hereby make the following representations and
warranties to the Company and to the Holding Company:
(a) Authorization; Enforcement . The Investors have full
partnership power and authority to execute
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and deliver the Transaction Agreements to which the Investors are a
party and the other instruments to be executed by them pursuant hereto
and to perform their obligations under the Transaction Agreements to
which the Investors are a party and such other instruments in accordance
with their respective terms. The Investors have taken all necessary
partnership action to duly and validly authorize the execution and
delivery of the Transaction Agreements to which the Investors are a
party and such other instruments to be delivered pursuant hereto and the
consummation of the Transactions. Each of the Transaction Agreements to
which the Investors are a party has been duly executed and delivered by
the Investors and constitutes, or will constitute, a valid and legally
binding obligation of each Investor, enforceable in accordance with its
terms.
(b) Status and Investment Intent. Subject to (i) the right of
resale with respect to the Notes and (ii) the exchange of the Notes for
the Holding Company Notes and the right of resale with respect to such
Holding Company Notes, the Investors purchasing Notes hereunder will be
purchasing such Notes for their own respective accounts, and each
Investor understands that the Notes have not been registered under the
Securities Act and may not be offered or sold unless the Notes are
registered under the Securities Act or a valid exemption from such
registration is available.
(c) Brokers and Finders, etc. None of the Investors nor any of
their Subsidiaries, officers, directors or employees has employed any
broker, agent or finder, or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement or otherwise in connection with the
purchase of the Notes or the Warrants.
(d) Investor not a Plan. Each Investor represents either (a) it
is not (i) an employee benefit plan (as defined in section 3(3) of
ERISA) which is subject to the provisions of Title I of ERISA, (ii) a
plan described in section 4975(e)(1) of the Code, or (iii) an entity
whose underlying assets are deemed to be assets of a plan described in
(i) or (ii) above by reason of such plan's investment in the entity, or
(b) the Investor's purchase and holding of Notes will be exempt under a
prohibited transaction class exemption issued by the U.S. Department of
Labor.
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<PAGE> 41
(e) No Conflicts. None of the execution and delivery by any
Investor of this Agreement or the Registration Rights Agreement or the
consummation of the Transactions will constitute or result in (i) a
breach or violation of such Investor's partnership agreement, (ii) a
breach or violation of, or default under, any material agreement or
instrument to which such Investor is a party or by which it is bound or
to which any of its assets or properties is subject or (iii) a breach or
violation of any order, decree or injunction or, assuming that the
Approvals referred to in Section 3.1(d) are obtained, any law, rule or
regulation applicable to such Investor or any of its properties or
assets, with such exceptions, individually or in the aggregate, as would
not be reasonably likely to prevent the consummation of any of the
Transactions.
ARTICLE IV
AGREEMENTS BY THE COMPANY
The Company and the Investors recognize and agree that nothing
in this Article IV shall constitute a part of or be deemed included in the terms
of the Notes, which terms are set forth in Exhibit 2-A hereto. The Company and
the Investors further recognize and agree that nothing in this Article IV shall
constitute a limitation on or otherwise affect the Superintendent's
discretionary authority pursuant to Section 1307 of the NYIL with respect to the
approval of payments on the Notes.
SECTION 4.1. [Intentionally omitted]
SECTION 4.2. [Intentionally omitted].
SECTION 4.3. [Intentionally omitted].
SECTION 4.4. [Intentionally omitted].
SECTION 4.5. Investment Proposals. (a) The Company promptly
shall advise the Principal Investor orally and in writing of any Investment
Proposal or any inquiry with respect to or which could lead to any Investment
Proposal and the identity of the Person making any such Investment Proposal or
inquiry and will keep the Principal Investor fully informed of the status and
details of any such Investment Proposal or inquiry. In addition, in the
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event that the Company consummates an Investment Proposal prior to the
Demutalization Date, if requested in writing by the Principal Investor within
180 days after the consummation of such Investment Proposal the Company or the
successor to the Company shall purchase all of the outstanding Warrants for a
price of $10,000,000 in the aggregate within 60 days of the date of such
request.
(b) In the event that an Investment Proposal is consummated all
outstanding Notes shall remain outstanding as obligations of the Company or the
successor to the Company, as the case may be, in accordance with their terms.
SECTION 4.6. [Intentionally omitted]
SECTION 4.7. [Intentionally omitted]
SECTION 4.8. [Intentionally omitted]
SECTION 4.9. Board Representation. (a) The Company agrees that,
not later than the first meeting of the Board that occurs after the First
Closing, it will cause one vacancy to be created on its Board (by increasing the
number of the members of such Board or otherwise) and it will cause one person
proposed by the Principal Investor and selected by the Company as provided in
Section 4.9(b) to be elected or appointed to such Board. The Company and the
Holding Company further agree that thereafter the Company, or following the
Demutualization Date, the Holding Company, shall nominate for election to the
Board of the Company or the Holding Company, as applicable, by the policyholders
or stockholders of the Company or the Holding Company, as applicable, at any
meeting of such policyholders or stockholders held for the purpose of electing
Trustees or Directors, the Trustee or Director appointed pursuant to the
previous sentence or another nominee of the Investors that has been selected by
the Company or the Holding Company as provided in Section 4.9(b).
(b) In connection with any appointment or nomination of the
Investors' nominee to the Company's or Holding Company's Board, as applicable,
pursuant to this Section 4.9, the Principal Investor shall propose to the
Company or Holding Company, as applicable, three candidates, one of which may be
selected by the Company or Holding Company, as applicable, subject to the prior
approval of the Superintendent. If none of the three persons proposed by the
Principal Investor is selected by the Company or the Holding Company, as
applicable, the Principal Investor shall propose two additional persons, one of
whom shall be selected for appointment or nomination by the Company or
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<PAGE> 43
Holding Company, as applicable, subject to the prior approval of the
Superintendent. The Principal Investor shall not propose any person who (i) at
the time of such proposal is either a member of the board of directors or board
of trustees or a senior officer of a Person engaged in the Life Insurance
Business or (ii) is not qualified to serve as a Trustee or Director pursuant to
the by-laws of the Company or the Holding Company, as the case may be.
(c) The Company and the Holding Company shall use their
respective best efforts to cause all of the Investors' nominees that have been
selected by the Company or the Holding Company for nomination pursuant to the
provisions of this Agreement to be elected at any meeting of policyholders or
stockholders, as applicable, held for the purpose of electing Trustees or
Directors. Without limiting the foregoing, such persons shall be included in the
list of candidates nominated by the Company's or Holding Company's Board, as
applicable, for such election, and the Company or the Holding Company, as
applicable, shall solicit votes in favor of such persons in the solicitation
materials sent to policyholders or stockholders and shall vote or cause to be
voted all shares or mutual voting interests held by them or which they otherwise
have power to vote or direct the voting of in favor of such persons.
(d) (i) Each nominee of the Investors referred to in this
Section 4.9 shall serve on the Board of Trustees or Board of Directors, as the
case may be, to which such nominee is elected or appointed, until his successor
is duly elected or appointed and qualified, or until his earlier death or
resignation. In the event that any such nominee shall cease to serve as a
Trustee of the Company or as a Director of the Holding Company, as applicable,
for any reason other than as a result of his resignation due to the termination
of the rights provided in this Section 4.9, the Company or the Holding Company,
as applicable, shall cause the vacancy resulting thereby promptly to be filled
by another nominee of the Investors selected by the Company or the Holding
Company as provided in Section 4.9(b).
(e) With respect to any legal requirements concerning the
residency or citizenship of Trustees or Directors, the Company and the Holding
Company will use their best efforts to cause the members of the applicable Board
other than Investors' nominee to be persons with residency and citizenship such
that the selected Investors' nominee will not be ineligible to serve. Such best
efforts will not include causing any necessary resignations in order to
accommodate such nominee. The Principal Investor will include at least one
resident of New York in its list of
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nominees. To the extent that any nominee is required to be a "member" of the
Company, the Company will make reasonable and customary arrangements to cause
such person to become a member (with the Investors, if necessary under law, to
pay any costs of acquiring any necessary insurance policy).
(f) The Investors' Board representation rights granted by this
Section 4.9 shall terminate at such time when the Investors and their
Subsidiaries and Affiliates in the aggregate no longer own an aggregate amount
of Warrants and Convertible Preferred Stock representing the right to acquire
Holding Company Common Stock and/or Holding Company Common Stock equal to at
least 5% of the voting power of the Holding Company Common Stock on an as
exercised or as converted basis.
(g) Each of the Company and the Holding Company agrees that any
Trustee or Director appointed or elected pursuant to this Section 4.9 who is
serving on the Company's or Holding Company's Board, as applicable, shall be
furnished with all information generally provided to the Trustees or Directors,
as applicable (including to the members of any Committee of which such Trustee
or Director is a member), shall have full access to information regarding the
Company or the Holding Company, as applicable, and shall be entitled to the same
perquisites as the Company's and the Holding Company's other outside Trustees or
Directors, as applicable.
(h) The Principal Investor, on behalf of the Investors, shall
have the right to consult with the senior management of the Company or,
following the Demutualization Date, the Holding Company with respect to the
business of the Company and its Subsidiaries or the Holding Company and its
Subsidiaries, as applicable, and to make proposals with respect to such
business. The parties agree that the Company and the Holding Company shall be
under no obligation to take any action with respect to the proposals and other
advice given by the Principal Investor pursuant to the foregoing, provided,
however, that the Company and the Holding Company shall be obligated to take any
such proposals and advice seriously and give due consideration thereto.
SECTION 4.10. Registration and Resale. The Company and the
Holding Company shall comply with the respective provisions regarding
registration and resale rights as are set forth in Exhibit 2-C.
SECTION 4.11. [Intentionally omitted]
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ARTICLE V
FURTHER AGREEMENTS
SECTION 5.1. Public Announcements. The Investors, the Company
and the Holding Company will consult with each other before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, and shall not issue any such press
release or make any such public statement prior to such consultation or, after
such consultation, if any party is not reasonably satisfied with the text of
such release or statement, except as may otherwise be required by applicable
law. For purposes of this Section 5.1, a public statement shall include any
announcement by the Company to its employees and/or agency force; provided,
however, that such an announcement may be made at any time after prior
consultation but notwithstanding the absence of reasonable satisfaction with the
text thereof by the Investors so long as the Investors are not named therein.
SECTION 5.2. Fees and Expenses. (a) Upon the earliest of (x)
the First Closing Date and (y) December 31, 1997, if written approval from the
Superintendent for the issuance of the Notes and Warrants has been obtained at
or prior to such date but the First Closing Date has not occurred, the Company
shall pay the Principal Investor, on behalf of the Investors, a commitment fee
of $1,250,000 in immediately available funds.
(b) The Company shall promptly reimburse the Investors in
same-day funds, upon request therefor by the Principal Investor, for their
reasonable Expenses and for any costs and expenses (including, without
limitation, reasonable legal fees and expenses) incurred to enforce this
provision, unless the First Closing does not occur for any reason other than
that the conditions to the obligations of the Investors set forth in Section 2.2
have not been satisfied, provided, however, that the Company shall not in any
event be required to reimburse the Investors for any such Expenses (other than
any enforcement costs and expenses referred to in this sentence) in an amount in
excess of $600,000. Other than the reimbursement contemplated by the foregoing
sentence or in Section 5.2(a), whether or not the transactions contemplated
hereby are consummated or the Investment Agreement is terminated pursuant to
Section 6.1, all fees and Expenses incurred in connection with the Transaction
Agreements and the transactions contemplated thereby (including without
limitation the Plan and the IPO) shall be paid by the party incurring such fees
or expenses.
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SECTION 5.3. Regulatory and Other Consents. (a) The Investors
shall prepare and file with the appropriate Governmental Authorities all
documentation and information required by law or requested by any such
Governmental Authority to be filed by the Investors to permit the consummation
of the transactions contemplated hereby, including without limitation, (i) any
notifications and filings required to be made by the HSR Act, (ii) applications,
notifications and filings required to be made under any of the Applicable
Insurance Laws and (iii) any necessary applications, reports or other documents
required to be filed by the Investors with the SEC, the NYSE, the NASD and the
securities commissions of States in which any of the Company's Subsidiaries acts
as a broker-dealer or an investment adviser.
(b) The Investors shall not deliver to any Governmental
Authority any application, notification, filing or other document that describes
or refers to the Company, any of its Subsidiaries or the transactions
contemplated hereby without affording the Company a reasonable opportunity to
review and comment on such application, notification, filing or other document
(other than any confidential portions thereof) and without the prior approval by
the Company of such description or reference (which approval shall not be
unreasonably withheld).
(c) The Investors shall promptly deliver to the Company copies
of all documents filed with any Governmental Authorities by the Investors with
respect to the transactions contemplated hereby and copies of all correspondence
to and from such Governmental Authorities in connection therewith, other than,
in each case, confidential portions thereof.
SECTION 5.4. Best Efforts. Subject to the terms and conditions
of this Agreement, including the next sentence, and except as otherwise
specifically provided in Section 6.10, each party will use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective in the most expeditious
manner practicable, the First Closing and the Second Closing and the other
transactions contemplated by the Transaction Agreements including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Authorities and the making of all necessary
registrations and filings (including filings with Governmental Authorities, if
any) and the taking of all reasonable steps as may be necessary to obtain an
approval
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or waiver from, or to avoid an action or proceeding by, any Governmental
Authority, (ii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, brought against such party challenging any
Transaction Agreement or the consummation of the transactions contemplated
thereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Authority vacated or reversed and
(iii) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by the Transaction Agreements. The
parties will use all reasonable efforts to obtain, or cause to be obtained, all
necessary consents, approvals or waivers from third parties to the First
Closing, the Second Closing, any Subsequent Closing and the other transactions
contemplated by the Transaction Agreements.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Termination. This Agreement may be terminated at
any time:
(a) by mutual agreement in writing of the Company and the
Investors;
(b) by either the Company or the Investors upon written notice
to the other parties (i) if the First Closing shall not have occurred by
December 31, 1997, provided, however, that the right to terminate this
Agreement pursuant to this clause (i) shall not be available to any
party whose failure to fulfill any of its obligations under this
Agreement resulted in the First Closing not occurring by such date; or
(ii) if any Governmental Authority shall have issued an injunction,
decree or order or taken any other action permanently enjoining,
restraining or otherwise prohibiting the First Closing, the Second
Closing, the consummation of the Plan or any of the other Transactions
and such injunction, decree or order, or other action, shall have become
final and nonappealable; and
(c) by the Investors if:
(i) the Company or the Board withdraws or abandons a
Plan or ceases to use its commercially reasonable efforts to
effectuate the Plan or there shall have been a material breach
of any covenant or agreement set forth in Section 6.10 or the
Plan
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<PAGE> 48
shall have been amended in a manner that results in the Plan not
containing the terms set forth in Exhibit 1 or containing terms
inconsistent with those set forth in Exhibit 1 or in any of the
Transaction Agreements;
(ii) the Plan is disapproved (or is approved in a manner
that results in the Plan not containing the terms set forth in
Exhibit 1 or containing terms inconsistent with those set forth
in Exhibit 1 or in any of the Transaction Agreements) by the
Superintendent pursuant to Section 7312(j) (regardless of
whether such disapproval is subject to appeal or review), or is
not approved by the Superintendent by June 30, 1999;
(iii) the Plan is disapproved by the policyholders of
the Company, or is not approved by such policyholders within 90
days after the approval of the Plan by the Superintendent; or
(iv) (1) a Governmental Authority shall (A) commence, or
apply for an order directing it to commence, delinquency,
rehabilitation, liquidation, conservation, reorganization,
dissolution or similar proceedings, including, without
limitation, summary proceedings, against the Company or MLOA
under any Applicable Insurance Laws as in effect from time to
time, or (B) appoint, or seek to appoint, a receiver,
rehabilitator, trustee, custodian, sequestrator, liquidator,
conservator or similar official for either of them or for all or
any substantial part of their respective properties or assets;
(2) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (A) relief in respect of the Company or any
Significant Subsidiary, or of a substantial part of the property
or assets of the Company or any Significant Subsidiary, under
Title 11 of the United States Code, as now constituted or
hereafter amended, or any successor to or replacement of such
statute, or any other Federal or State bankruptcy, insolvency,
receivership or similar law, (B) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar
official for the Company or any Significant Subsidiary or for a
substantial part of the property or assets of the Company or any
Significant Subsidiary or (C) the winding-up or liquidation of
the Company or any Significant Subsidiary and such
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proceeding or petition shall continue undismissed for 30 days or
an order or decree approving or ordering any of the foregoing
shall be entered; or (3) (A) the Company or MLOA shall consent
to, or fail to contest in a timely and appropriate manner, the
commencement against it of delinquency, rehabilitation,
liquidation, conservation, reorganization, dissolution or
similar proceedings, including, without limitation, summary
proceedings, under any Applicable Insurance Laws as in effect
from time to time; or (B) the Company or any Significant
Subsidiary shall (i) voluntarily commence any proceeding or file
any petition seeking relief under Title 11 of the United States
Code, as now constituted or hereafter amended, or any successor
to or replacement of such statute, or any other Federal or State
bankruptcy, insolvency, receivership or similar law, (ii)
consent to, or fail to contest in a timely and appropriate
manner, the commencement against it of any proceeding or the
filing of any petition described in clause (1) or (2) above,
(iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar
official for the Company or any Significant Subsidiary or for a
substantial part of the property or assets of the Company or any
Significant Subsidiary, (iv) file an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or
fail generally to pay its debts (including, without limitation,
claims of policyholders under insurance policies, annuity
contracts and funding agreements) as they become due or (vii)
take any action for the purpose of effecting any of the
foregoing; and
(d) By the Investors or, subject to compliance with Section 4.5,
the Company if an Investment Proposal is accepted by the Company's Board
at any time.
In the event of the termination of this Agreement pursuant to
this Section 6.1, this Agreement shall thereafter become void and have no
effect, and no party shall have any liability to any other party hereto or their
shareholders, partners or policyholders in respect thereof, except (x) for the
provisions of Sections 6.10(d) and 5.2 and this Article VI, and (y) nothing
herein will relieve any party from liability for any breach of any of its
represen-
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tations, warranties, covenants or agreements contained in the Transaction
Agreements or the Subject Securities prior to such termination. No party shall
in any event be liable to the other party for loss of anticipated profits from
the transactions contemplated by this Agreement or for any other consequential
damages arising out of the termination of this Agreement.
SECTION 6.2. Standstill Agreement. (a) Subject to Section 6.2(b)
and (c), the Investors covenant and agree that for a period from the
Demutualization Date until the earlier of the fifth anniversary of the
Demutualization Date or June 30, 2004 (such period, the "Standstill Period"),
the Investors will not, and will cause their Subsidiaries and any Affiliates
that own Warrants, Convertible Preferred Stock or Holding Company Common Stock
that was acquired upon exercise of Warrants or conversion of Convertible
Preferred Stock not to, directly or indirectly, acquire, offer to acquire or
agree to acquire any outstanding Holding Company Common Stock other than
pursuant to the Warrants and the Convertible Preferred Stock or from an Investor
or from a Subsidiary or Affiliate of an Investor which acquired such Holding
Company Common Stock upon exercise of Warrants or conversion of Convertible
Preferred Stock without the prior written approval of the Company.
(b) Notwithstanding the foregoing, the Investors and their Subsidiaries and
Affiliates shall have the right to directly or indirectly acquire, offer to
acquire or agree to acquire Holding Company Common Stock:
(i) directly from the Holding Company (pursuant to any stock dividend,
stock split or other distribution, by purchase or otherwise);
(ii) in the case of an Affiliate of an Investor that is a broker-dealer,
investment manager or investment adviser, for third parties or its own
account in the ordinary course of such Affiliate's business;
(iii) in a transaction involving the acquisition of, or merger or
consolidation with, a previously unaffiliated Person, or the acquisition
of substantially all of the assets of a previously unaffiliated Person,
that owns Holding Company Common Stock at the time of such transaction,
other than any such transaction entered into primarily for the purpose
of acquiring Holding Company Common Stock;
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(iv) if the Company or the Holding Company breaches or violates any of
Section 4.9, 4.10 or 6.2(d) of this Agreement or the Registration Rights
Agreement;
(v) if an event specified in Section 6.1(c)(iv) occurs;
(vi) if any Person not affiliated with the Investors makes a formal
proposal or offer (a) for a merger, consolidation or other business
combination directly or indirectly involving the Holding Company, the
Company or any Significant Subsidiary or (b) to acquire directly or
indirectly all or substantially all the assets of the Holding Company,
the Company or any Significant Subsidiary, which proposal or offer is
either supported or not opposed by the Board of the Holding Company; and
(vii) by way of any reorganization, recapitalization, merger,
consolidation, rights offering or similar event.
(c) (i) Notwithstanding the foregoing, this Section 6.2 shall
terminate when the Investors and their Subsidiaries and Affiliates that acquire
Warrants, Convertible Preferred Stock or Holding Company Common Stock upon
exercise of Warrants or conversion of Convertible Preferred Stock own an
aggregate number of shares of Holding Company Common Stock acquired upon
exercise of Warrants or conversion of Convertible Preferred Stock plus the
number of shares of Holding Company Common Stock issuable upon exercise of
Warrants and conversion of Convertible Preferred Stock that is held by the
Investors and their Subsidiaries and Affiliates that is less than 5% of the
fully diluted Holding Company Common Stock.
(ii) In the event an Investor makes a distribution of Warrants,
Convertible Preferred Stock or Holding Company Common Stock to its partners in
the ordinary course, the provisions of Section 6.2(a) shall not apply to any
limited partner of such Investor but shall apply to the general partner or
managing general partner of such Investor and its Subsidiaries and Affiliates
if, and for so long as, the aggregate number of shares of Holding Company Common
Stock acquired upon exercise of Warrants or conversion of Convertible Preferred
Stock plus the number of shares of Holding Company Common Stock issuable upon
exercise of Warrants and conversion of Convertible Preferred Stock that is held
by the Investors and their Subsidiaries and Affiliates is equal to 5% or more of
the fully diluted Holding Company Common Stock.
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(d) The Holding Company agrees that, so long as the Investors,
their Subsidiaries and Affiliates are subject to Section 6.2(a), it will not
take any action (including, without limitation, adoption of a shareholder rights
plan) that would have the effect of imposing more stringent requirements on the
Investors, their Subsidiaries and Affiliates than those contained in this
Section 6.2.
SECTION 6.3. Voting of Holding Company Common Stock. (a) Subject
to Sections 6.3(b), (c) and (d) during the Standstill Period the Investors will
not, and will cause their Subsidiaries and Affiliates that acquire Holding
Company Common Stock upon exercise of Warrants or conversion of Convertible
Preferred Stock not to, (i) solicit proxies or become a participant (other than
by voting) in a "solicitation" (as such term is defined in Regulation 14A under
the Exchange Act) in opposition to the Board (provided that (A) any such person
(1) may vote against any nominee for director of the Holding Company as to whom
proxies are not being solicited by the Board and (2) may vote Holding Company
Common Stock or other Holding Company voting securities so long as it does not
have voting discretion over such securities and (B) none of such persons shall
be deemed a participant for purposes of this Section 6.3(a) solely by reason of
the membership of the Investor Director on the Board), (ii) call or seek to call
any special meeting of the Company's stockholders for any reason whatsoever,
(iii) deposit any such Holding Company Common Stock in a voting trust or subject
any Holding Company Common Stock to any arrangement or agreement with respect to
the voting of such, other than an arrangement or agreement among the Investors
and their Subsidiaries and Affiliates that acquire Warrants, Convertible
Preferred Stock of Holding Company Common Stock or (iv) form or join a group for
the purpose of acquiring, holding, voting or disposing of Holding Company Common
Stock, other than a group consisting only of the Investors and their
Subsidiaries and Affiliates that acquire Warrants, Convertible Preferred Stock
or Holding Company Common Stock.
During the Standstill Period the Investors will, and will cause
their Subsidiaries and Affiliates that acquire Holding Company Common Stock upon
exercise of Warrants or conversion of Convertible Preferred Stock to, vote all
shares of Holding Company Common Stock (i) acquired upon exercise of Warrants or
conversion of Convertible Preferred Stock owned by them or (ii) acquired from
their Subsidiaries or Affiliates either, at the option of the Board upon
reasonable prior notice to the Principal Investor, in accordance with the
recommendation of the Board or in the same proportion as the holders of Holding
Company
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Common Stock who are not affiliated with either the Holding Company or the
Investors with respect to all matters properly presented for a vote of the
holders of the Holding Company Common Stock.
(b) The provisions of Section 6.3(a) shall not apply: (i) if the Investors and
their Subsidiaries and Affiliates may acquire Holding Company Common Stock
without regard to Section 6.2(a) pursuant to Section 6.2(b)(iv), (v) or (vi);
(ii) with respect to matters that relate to: (A)(1) any merger, consolidation or
other business combination involving the Holding Company, the Company or any
Significant Subsidiary, (2) any sale, lease, transfer or other disposition in
one transaction or a series of transactions of all or substantially all the
assets of the Holding Company, the Company or any Significant Subsidiary, (3)
any recapitalization or similar transaction or series of transactions involving
the Holding Company, the Company or any Significant Subsidiary or (4) any
dissolution or complete or partial liquidation of the Holding Company, the
Company or any Significant Subsidiary; (B) the approval of any amendment to the
Holding Company's Certificate of Incorporation or by-laws; (C) any matter that
could result in any decrease in the percentage of the voting power represented
by the aggregate voting power of all Holding Company Common Stock and Holding
Company Common Stock issuable upon exercise of Warrants or conversion of
Convertible Preferred Stock then owned by the Investors and their Subsidiaries
and Affiliates; and (D) any other matter (other than the election of directors)
that in the good faith judgment of the Investors could adversely affect their
interests as significant stockholders of the Holding Company; or (iii) with
respect to the matters specified in the first paragraph of Section 6.3(a), to
the voting and other activities of any Affiliate of an Investor that is a
broker-dealer, investment manager or investment adviser with respect to Holding
Company Common Stock held for the account of third parties or its own account in
the ordinary course of such Affiliate's business. In addition, in the event an
Investor makes a distribution of Warrants, Convertible Preferred Stock or
Holding Company Common Stock to its partners in the ordinary course, the
provisions of Section 6.3(a) shall not apply to any limited partner of such
Investor but shall apply to the general partner or managing general partner of
such Investor and its Subsidiaries and Affiliates if, and for so long as, the
aggregate number of shares of Holding Company Common Stock acquired upon
exercise of Warrants or conversion of Convertible Preferred Stock plus the
number of shares of Holding Company Common Stock issuable upon exercise of
Warrants and conversion of Convertible Preferred Stock that is held by the
Investors and their Subsidiaries
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and Affiliates is equal to 5% or more of the fully diluted Holding Company
Common Stock.
(c) Notwithstanding the foregoing, this Section 6.3 shall terminate when the
Investors and their Subsidiaries and Affiliates that acquire Warrants,
Convertible Preferred Stock or Holding Company Common Stock upon exercise of
Warrants or conversion of Convertible Preferred Stock own an aggregate number of
shares of Holding Company Common Stock acquired upon exercise of Warrants or
conversion of Convertible Preferred Stock plus the number of shares of Holding
Company Common Stock issuable upon exercise of Warrants and conversion of
Convertible Preferred Stock that is held by the Investors and their Subsidiaries
and Affiliates that is less than 5% of the fully diluted Holding Company Common
Stock.
(d) Notwithstanding anything herein to the contrary, the provisions of Section
6.3(a) shall not limit or restrict in any way any action that is or may be taken
in connection with the voting rights carried by the Convertible Preferred Stock.
(e) For purposes of this Section 6.3, all references to Holding Company Common
Stock acquired upon exercise of Warrants or conversion of Convertible Preferred
Stock shall be deemed to include all shares of Holding Common Stock that are
distributed or acquired in respect of such Holding Company Common Stock pursuant
to any stock dividend, stock split, reorganization, recapitalization, merger,
consolidation, rights offering or other similar distribution by the Holding
Company.
SECTION 6.4. Limitation on Sales of Holding Company Common
Stock, Warrants and Convertible Preferred Stock. (a) Subject to Section 6.4(b)
and (c), until the termination of the Standstill Period the Investors will not,
and will cause their Subsidiaries and Affiliates that own Warrants, Convertible
Preferred Stock or Holding Company Common Stock that was acquired upon exercise
of Warrants or conversion of Convertible Preferred Stock not to, sell, transfer
or otherwise dispose of any Warrants, Convertible Preferred Stock or Holding
Company Common Stock that was acquired (including from their Subsidiaries and
Affiliates) upon exercise of Warrants or conversion of Convertible Preferred
Stock in a negotiated transaction (which for these purposes does not include an
open market sale other than as a result of an offer to sell securities having
aggregate voting rights of more than 3% of the voting rights on an as converted
basis at any one time): (i) to any Person that is engaged in the Life Insurance
Business if, to the knowledge
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of the transferor, after giving effect to such transaction such Person would own
an aggregate number of shares of Holding Company Common Stock plus the number of
shares of Holding Company Common Stock issuable upon exercise of Warrants and
conversion of Convertible Preferred Stock that is held by such Person that is
equal to 3% or more of the fully diluted Holding Company Common Stock at the
time of such transaction without the prior written consent of the Holding
Company or (ii) to any Person if, to the knowledge of the transferor, after
giving effect to such transaction such Person would own an aggregate number of
shares of Holding Company Common Stock plus the number of shares of Holding
Company Common Stock issuable upon exercise of Warrants and conversion of
Convertible Preferred Stock that is held by such Person that is equal to 5% or
more of the fully diluted Holding Company Common Stock at the time of such
transaction without the prior written consent of the Company.
(b) Notwithstanding the foregoing, the provisions of Section
6.4(a) shall not apply to (i) any transfers between or among the Investors,
their Subsidiaries and Affiliates or (ii) any widely distributed public
underwritten offering.
(c) Notwithstanding the foregoing, this Section 6.4 shall
terminate when the Investors and their Subsidiaries and Affiliates that acquire
Warrants, Convertible Preferred Stock or Holding Company Common Stock upon
exercise of Warrants or conversion of Convertible Preferred Stock own an
aggregate number of shares of Holding Company Common Stock acquired upon
exercise of Warrants or conversion of Convertible Preferred Stock plus the
number of shares of Holding Company Common Stock issuable upon exercise of
Warrants and conversion of Convertible Preferred Stock that is held by Investors
and their Subsidiaries and Affiliates that is less than 5% of the fully diluted
Holding Company Common Stock. In addition, in the event an Investor makes a
distribution of Warrants, Convertible Preferred Stock or Holding Company Common
Stock to its partners in the ordinary course, the provisions of Section 6.4(a)
shall not apply to any limited partner of such Investor but shall apply to the
general partner or managing general partner of such Investor and its
Subsidiaries and Affiliates if, and for so long as, the aggregate number of
shares of Holding Company Common Stock acquired upon exercise of Warrants or
conversion of Convertible Preferred Stock plus the number of shares of Holding
Company Common Stock issuable upon exercise of Warrants and conversion of
Convertible Preferred Stock that is held by the Investors and their Subsidiaries
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and Affiliates is equal to 5% or more of the fully diluted Holding Company
Common Stock.
(d) For purposes of this Section 6.4, all references to Holding
Company Common Stock acquired upon exercise of Warrants or conversion of
Convertible Preferred Stock shall be deemed to include all shares of Holding
Common Stock that are distributed or acquired in respect of such Holding Company
Common Stock pursuant to any stock dividend, stock split, reorganization,
recapitalization, merger, consolidation, rights offering or other similar
distribution by the Holding Company.
SECTION 6.5. Survival of Representations and Warranties and
Agreements. (a) (a) The representations, warranties and agreements of the
Company and the Holding Company contained in this Agreement shall survive until
the Expiration Date.
(b) The agreements of the Company and the Holding Company
contained in Sections 4.9, 4.10, 6.9, 6.10 and 6.11 of this Agreement shall
survive for so long as the Investors or their respective Subsidiaries or
Affiliates continue to own an aggregate amount of Warrants and Convertible
Preferred Stock representing the right to acquire Holding Company Common Stock
and/or Holding Company Common Stock equal to at least 5% of the voting power of
the Holding Company Common Stock on an as exercised or as converted basis.
SECTION 6.6. Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force and
effect. The parties shall endeavor in good faith negotiations to replace any
invalid, illegal or unenforceable provision with a valid, legal and enforceable
provision, the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provision.
SECTION 6.7. Indemnification. The Company and the Holding
Company jointly and severally agree to indemnify each Investor, and each of
their Subsidiaries and Affiliates and each of their respective partners,
officers, directors, trustees, employees, representatives and agents from and
hold each of them harmless against, and promptly upon demand pay or reimburse
each of them for, any and all actions, suits, proceedings (including any
investigations, litigation or inquiries), claims, costs, losses, liabilities,
damages or expenses of any kind or nature whatsoever which may be incurred by or
asserted against or involve any of them
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(whether or not any of them is designated a party thereto) as a result of,
arising out of or in any way related to (a) any actual or proposed use by the
Company or the Holding Company of the proceeds of any of the Subject Securities;
(b) any breach by the Company or the Holding Company of any representation,
warranty or covenant contained herein; or (c) any other aspect of this
Agreement, the Subject Securities or the Transactions, including, without
limitation, the reasonable fees and disbursements of counsel (including
allocated costs of internal counsel) and all other expenses incurred in
connection with investigating, defending or preparing to defend any such action,
suit, proceeding (including any investigations, litigation or inquiries) or
claim, and including all actions, suits, proceedings (including any
investigations, litigation or inquiries), claims, costs, losses, liabilities,
damages or expenses arising by reason of ordinary negligence of each Investor,
and each of their Subsidiaries and Affiliates and each of their respective
partners, officers, directors, trustees, employees, representatives, agents and
affiliates, provided, however, that the provisions of this Section 6.7 shall not
apply to any action, suit, proceeding, claim, cost, loss, liability, damage or
expense to the extent, but only to the extent, caused by the gross negligence or
willful misconduct of the party seeking indemnification.
The obligations of the Company and the Holding Company under
this Section 6.7 will survive the payment or transfer of any Note or other
Subject Security, the enforcement, amendment or waiver of any provision of this
Agreement, the Transaction Agreements or the Subject Securities, and the
termination of this Agreement.
SECTION 6.8. Charter and By-laws. Except as otherwise
specifically contemplated by this Agreement, the Company and the Holding Company
shall not, except as provided in the Plan, amend its Certificate or Articles of
Incorporation or By-laws and in the case of any Subsidiary of the Company (other
than the Holding Company), amend its Certificate or Articles of Incorporation or
By-laws or partnership agreement, if such amendment would materially adversely
affect the rights of or expected benefits to the Investors or any of its
Subsidiaries under any Transaction Agreement.
SECTION 6.9. Information. (a) The Company shall, and shall cause
each of its Subsidiaries to, afford to the Investors, and to the Investors'
accountants, counsel, financial advisers, actuaries and other representatives,
reasonable access during normal business hours during the period prior to the
Demutualization Date
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(except with respect to the information specified in clauses (a), (c) and (f)
hereunder, which obligations shall continue until the Investors and their
Subsidiaries and Affiliates shall have exercised Warrants representing the right
to acquire at least five percent of the outstanding shares of Holding Company
Common Stock) to all their respective properties, books, contracts, commitments,
records and officers and employees and, during such period, the Company shall,
and shall cause each of its Subsidiaries to, furnish promptly to the Investors
(a) a copy of each Annual Statement, Quarterly Statement and registration
statement filed by it during such period pursuant to the requirements of any
Federal, State or foreign insurance law or regulation, (b) after the end of each
fiscal quarter and fiscal year of the Company and the other Audited Entities,
updated financial statements comparable to those described in Section 3.1(h)(i),
in the case of each quarterly financial statement, certified by the Chief
Financial Officer of the Company or of the relevant other Audited Entity and, in
the case of each annual financial statement, audited by independent public
accountants, (c) in the case of the Company and any Significant Subsidiary,
after the end of each month, its management financial reports (together with all
accompanying documents) prepared with respect to such month, (d) all notices to
any Insurance Company with respect to any alleged deficiency or violation
material to the financial condition or operations of such Insurance Company from
any Governmental Authority, (e) each written report on examination of financial
condition or market conduct (whether in draft or final form) of any Insurance
Company issued by any applicable Governmental Authority and (f) all other
information and documents concerning its business, properties and personnel as
the Investors may reasonably request; provided, however, that all notices,
reports, information and documents that are designated in writing by the
Company, in good faith, as confidential shall be kept confidential, with the
exception that any such items may be provided to the Investors' accountants,
counsel, financial advisers, actuaries and other agents, unless such disclosure
is made in connection with a court or regulatory proceeding or required by law
or such notices, reports, information or documents become available to the
public generally or through a third party.
(b) The Company shall, through the Demutualization Date, cause
its senior management to inform on a regular basis and in good faith the
Investors concerning the management of the Company's and its Subsidiaries'
businesses.
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SECTION 6.10. Plan of Demutualization. (a)(i) The Company shall
continue its efforts to prepare and complete a Plan with the goal of the
Demutualization Date occurring in the latter part of 1998. For purposes of the
preceding sentence, the inclusion of terms in the Plan relating to matters not
specifically addressed in Exhibit 1 shall not be deemed to be inconsistent with
such Exhibit so long as such matters are not incompatible with the matters
specifically addressed in Exhibit 1. The Company shall use its commercially
reasonable efforts to implement a Plan on the timetable provided in Exhibit 1,
and shall permit the Investors to review all documents (including the plan of
operation and actuarial projections required by Section 7312(e)(i)(H)) to be
filed or delivered to any Governmental Authority or otherwise in connection with
the Plan). Without limitation of the foregoing, the Company will, as promptly as
practicable after the date hereof, and in any event no later than June 30, 1998,
recommend to the Board that a Plan based upon the proposed summary terms of the
Plan set forth in Exhibit 1 be adopted by the Board. If such Plan is approved
and adopted by the Board, the Company shall use its commercially reasonable
efforts promptly to obtain all regulatory approvals of and consents to the Plan
required to be obtained by the Company or any of its Subsidiaries under any
Applicable Insurance Law (including without limitation the approval of the Plan
by the Superintendent), and the Company shall submit the Plan to its
policyholders and use its commercially reasonable efforts to obtain the approval
of the Plan by such policyholders. The Company shall use its commercially
reasonable efforts to cause the Plan to become effective in accordance with its
terms and the provisions of Section 7312.
(ii) Prior to the Demutualization Date, the Holding Company
shall take all necessary corporate action to duly and validly authorize the
issue and delivery of (i) the shares of Holding Company Common Stock to be
issued upon exercise of the Warrants and (ii) the shares of Convertible
Preferred Stock and shares of Holding Company Common Stock issuable upon
conversion of the Convertible Preferred Stock. The Company and the Holding
Company shall cause all such shares of Holding Company Common Stock and
Convertible Preferred Stock, if any, to be duly authorized and, upon such
issuance, to be (A) validly issued, fully paid and nonassessable, and (B) free
and clear of all Liens.
(iii) Nothing in this Section 6.10(a) shall prevent the Company
from accepting an Investment Proposal, nor shall failure to comply with this
Section 6.10(a) after acceptance of an Investment Proposal be a breach of this
Agreement.
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(b) The Company and the Holding Company will prepare and file
with the SEC the S-1 as soon as practicable after the filing of a Plan with the
Superintendent, and will use its best efforts to cause the S-1 to become
effective in a timely fashion consistent with a goal of the Demutualization Date
occurring in the latter part of 1998 and the effectiveness of the S-1 to occur
on or prior to the Demutualization Date. The Company will prepare the Proxy
Statement and will cause the Proxy Statement to be mailed to the Company's
policyholders prior to approval of the Plan by the Superintendent in a timely
fashion consistent with the prior sentence. If at any time prior to the IPO or
the approval of the Plan by the Company's policyholders, there shall occur any
event that should be set forth in an amendment or supplement to the S-1 or the
Proxy Statement, as the case may be, the Company and the Holding Company will
promptly prepare and (to the extent required by applicable law or regulation)
distribute or mail to its policyholders, an appropriate amendment or supplement
thereto.
(c) The Company and the Holding Company shall keep the Investors
informed of their progress and of any material developments in connection with
the preparation and approval of the Plan, the preparation and mailing of the
Proxy Statement and the preparation, filing and effectiveness of the S-1. The
Company and the Holding Company will not mail or use the Proxy Statement, or any
amendment or supplement thereto, and will not use any Prospectus, or any
amendment or supplement thereto, without the prior approval of the Investors of
any material therein relating to the Investors or any of their Subsidiaries or
Affiliates.
(d) (i) In connection with the use of the Proxy Statement and
the S-1, the Company and the Holding Company will, jointly and severally,
indemnify, defend and hold harmless, to the extent permitted by law, each
Investor and its Subsidiaries and Affiliates, and each of their respective
partners, officers, directors and agents and each person (as defined in Section
2(2) of the Securities Act), if any, who controls each Investor within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act or
any similar Federal statute then in force, against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation
and reasonable attorneys' fees) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the Proxy
Statement, the S-1 or the Prospectus, or any amendment or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be
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stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any such untrue statement or alleged untrue statement
or such omission or alleged omission contained in information furnished in
writing by such Investor expressly for use in the Proxy Statement, the S-1 or
the Prospectus, or any amendment or supplement thereto. If, in connection with
the Proxy Statement, the S-1 or the Prospectus, or any amendment or supplement
thereto, an Investor shall furnish written information to the Company or the
Holding Company expressly for use therein, such Investor will indemnify, defend
and hold harmless, to the extent permitted by law, the Company and the Holding
Company and their respective directors, officers and agents against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation and reasonable attorneys' fees) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated in the Proxy
Statement, the S-1 or the Prospectus or any amendment or supplement thereto
necessary to make the statements therein not misleading, but only insofar as
such untrue statement or alleged untrue statement or such omission or alleged
omission is contained in information so furnished in writing by such Investor
expressly for use therein. Any person entitled to indemnification under the
provisions of this Section 6.10(d) shall (x) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification,
provided that the failure of any indemnified party to give notice as provided in
this Agreement shall not relieve the indemnifying party of its obligations under
this Section 6.10(d), except to the extent that the indemnifying party is
actually prejudiced by the failure to give such notice, and (y) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, permit
such indemnifying party to assume the defense of such claim, with counsel
reasonably satisfactory to the indemnified party; and in any event, such
indemnifying party shall not be subject to any liability for any settlement made
without its consent (which shall not be unreasonably withheld). In the event an
indemnifying party shall not be entitled, or elects not, to assume the defense
of a claim, such indemnifying party shall not be obligated to pay the fees and
expenses of more than one counsel (plus one local counsel in each relevant
jurisdiction) for all parties indemnified by such indemnifying party under this
Section 6.10(d) in respect of such claim, unless in the reasonable judgment of
any such indemnified party a conflict of interest may exist between such
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indemnified party and any other of such indemnified parties in respect of such
claim. The indemnification provided in this Section 6.10(d) shall remain in full
force and effect, regardless of any investigation made by or on behalf of any
indemnified party.
(ii) If the indemnification provided for in the first sentence
of Section 6.10(d) is due in accordance with its terms but is for any reason
held by a court or an arbitrator to be unavailable from the Company or the
Holding Company, on grounds of policy or otherwise, then the Company, the
Holding Company and the Investors shall contribute to the aggregate losses,
claims, damages, liabilities and expenses to which the Company or the Holding
Company, on the one hand, and the Investors, on the other, may be subject in
such proportion as is appropriate to reflect the relative fault of the Company
and the Holding Company, on the one hand, and of the Investors, on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company, the Holding Company
and the Investors shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission of a material fact relates to information supplied
by the Company or the Holding Company, on the one hand, or by the Investors, on
the other, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Investors agree that it would not be just and equitable if contribution
pursuant to this Section 4.7(d)(ii) were determined by pro rata allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to in the two immediately preceding sentences.
SECTION 6.11. Regulatory Filings. (a) The Company and the
Holding Company will furnish the Investors, their Subsidiaries and Affiliates
with such information as they may reasonably request in connection with any
application, notification or filing the Investors and/or their Subsidiaries and
Affiliates may make to applicable Governmental Authorities in connection with or
as a result of the Transactions, any Approval obtained in connection with the
Transactions or otherwise in connection with the acquisition or ownership of the
Subject Securities by the Investors and/or their Subsidiaries and Affiliates,
including without limitation those under any Applicable Insurance Laws. The
Company and the Holding Company will cause each of its Subsidiaries to cooperate
with the
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Investors, their Subsidiaries and Affiliates, to the extent they may reasonably
request, to enable them to make such applications, notifications or filings as
promptly as practicable.
(b) At such times as contemplated by the time schedule contained
in Exhibit 1, the Company and its Subsidiaries shall prepare and file with the
appropriate Governmental Authorities all documentation and information required
by law or requested by any such Governmental Authority to be filed by the
Company and its Subsidiaries to permit the consummation of the Transactions,
including, without limitation, (i) any notifications and filings required to be
made by the HSR Act, (ii) notifications and filings required to be made under
any Applicable Insurance Laws, (iii) any necessary applications, reports or
other documents to be filed by the Company or any of its Subsidiaries with the
SEC, the NYSE, the NASD, any other regulatory or self-regulatory organization
and the securities commissions of States in which any of the Company's
Subsidiaries acts as a broker-dealer or investment adviser and (iv) other
notifications and filings referred to in Schedule 3.1(d). The Company shall, or
shall cause each of its Subsidiaries to, perform all such other actions
reasonably necessary to obtain favorable action from any such Governmental
Authority consistent with the time schedule contained in Exhibit 1.
(c) The Company shall use its best efforts, and shall cause its
Subsidiaries to use their best efforts, to obtain all approvals or consents
required in connection with the Transactions, including with respect to any
"assignment" resulting from the Transactions or any "assignment" of any contract
to which the Company or any of its Subsidiaries is a party under the Investment
Company Act or the Investment Advisers Act, including without limitation the
following:
(i) with respect to each Fund, approvals by (A) the board of
directors thereof or persons with similar responsibilities of a new
underwriting or distribution contract, (B) the board of directors
thereof or persons with similar responsibilities of a new investment
management contract and (C) the holders of the voting securities of such
U.S. Fund of a new investment management contract, in each case such
agreements to contain terms and conditions substantially equivalent to
present agreements for such U.S. Fund; and
(ii) with respect to each advisory agreement other than an
advisory agreement for a U.S. Fund, any consent or approval of the
client that may be required
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under any United States Federal or State statute or regulation.
(d) The Company shall use its best efforts to obtain a
"no-action" letter from the staff of the SEC with respect to the exemption,
pursuant to Section 3(a)(10) of the Securities Act, from the registration
requirements of the Securities Act of the Holding Company Common Stock to be
issued pursuant to the Plan (other than Holding Company Common Stock to be
issued in the IPO). In the event the Company, despite its best efforts, does not
obtain such letter, the Company will cause the S-1 to register under the
Securities Act all the Holding Company Common Stock to be issued pursuant to the
Plan.
(e) The Company shall not deliver to any Governmental Authority
any application, notification, filing or other document that describes or refers
to the Investors, any of Affiliates without affording the Investors a reasonable
opportunity to review and comment on such application, notification, filing or
other document and without the prior approval by the Investors of such
description or reference (which approval will not be unreasonably withheld). The
Company shall promptly deliver to the Principal Investor copies of all
applications, notifications, filings (other than those with respect to Policy
forms) or other documents filed with any Governmental Authority by the Company
or any of its Subsidiaries with respect to the transactions contemplated by the
Transaction Agreements, and copies of all correspondence to and from such
Governmental Authority in connection therewith.
(f) The Company shall, from and after the date hereof and for so
long as any Investors or their Subsidiaries or Affiliates shall Beneficially Own
5% or more of the Holding Company Common Stock or shall own Warrants or
Convertible Preferred Stock representing the right to Beneficially Own 5% or
more of the Holding Company Common Stock, provide the Investors with quarterly
updates of the information set forth in Schedule 3.1(w) and called for by
Section 3.1(w) hereof.
SECTION 6.12. Entire Agreement; No Third-Party Beneficiaries.
This Agreement (together with the Registration Rights Agreement and the other
documents and instruments referred to herein) (a) constitutes the entire
agreement and understanding and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) except as otherwise expressly specified herein, is
not
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intended to confer upon any person other than the parties and the Holders any
rights or remedies hereunder.
SECTION 6.13. Notices. Any notice, demand, election, request,
consent or other communication required or permitted to be given hereunder shall
be in writing and shall be effective (a) when personally delivered or delivered
by telecopy on a Business Day during normal business hours (at the place of
receipt) at the address or number designated below or (b) on the second Business
Day following the date of mailing by overnight courier, fully prepaid, addressed
to such address, whichever shall first occur. The addresses for such
communications shall be:
If to the Company:
The Mutual Life Insurance Company of New York
1740 Broadway
New York, New York 10019
Attention: Richard Mulroy, Esq.
Facsimile: (212) 708-2977
If to the Holding Company:
MONY Financial Services Corporation
1740 Broadway
New York, New York 10019
Attention: Richard Mulroy, Esq.
Facsimile: (212) 708-2977
in either case with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Attention: William Rosenblatt, Esq.
Facsimile: (212) 259-6333
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If to the Investors to them care of the Principal Investor:
The Principal Investor
GS Mezzanine Partners, L.P.
85 Broad Street
New York, New York
Attention: David J. Greenwald
Facsimile: (212) 902-3000
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: William Torchiana, Esq.
Facsimile: (212) 558-3588
Any party hereto may from time to time change its address for communications
under this Section 6.13 by giving at least 5 days' notice of such changed
address to the other party hereto.
SECTION 6.14. Amendments and Waivers. This Agreement may not be
amended, supplemented or discharged, and none of its provisions may be modified,
except expressly by an instrument in writing signed by the party to be charged.
The parties hereto may amend this Agreement without notice to or the consent of
any third party. Any term or provision of this Agreement may be waived, but only
in writing by the party which is entitled to the benefit of that provision. No
waiver by any party of any default with respect to any provision, condition or
requirement hereof shall be deemed to be a continuing waiver in the future
thereof or a waiver of any other provision, condition or requirement hereof; nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right accruing to it thereafter. The act
of the Principal Investor shall be the act of the Investors under this Section
6.14.
SECTION 6.15. Counterparts. This Agreement may be executed in
one or more counterparts, which together shall constitute but one instrument. It
shall not be necessary for each party to sign each counterpart so long as each
party has signed at least one counterpart.
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SECTION 6.16. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
legal representatives. This Agreement shall not be assigned, in whole or in
part, by any party hereto.
SECTION 6.17. Reproduction of Documents. This Agreement and all
documents relating thereto, including without limitation (i) consents, waivers,
amendments and modifications that may hereafter be executed; (ii) documents
received by the Investors and their Subsidiaries and Affiliates at any closing
(except the Subject Securities themselves); and (iii) financial statements,
certificates and other information previously or hereafter furnished in
connection herewith, may be reproduced by any photographic, photostatic,
microfilm, microcard, miniature photographic or other similar process and any
original document so reproduced may be destroyed. The Company agrees and
stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the regular course of
business) and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. This Section 6.17 shall
not prohibit any party hereto from contesting any such reproduction to the same
extent that it could contest the original, or from introducing evidence to
demonstrate the inaccuracy of any such reproduction.
SECTION 6.18. Construction. Each covenant contained herein shall
be construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provisions herein refers to action
to be taken by any person, or which such person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such person, whether or not expressly specified in such provision.
SECTION 6.19. Incorporation. The Annex of Defined Terms and all
Exhibits and Schedules attached hereto are incorporated as part of this
Agreement as if fully set forth herein.
SECTION 6.20. Waiver of Jury Trial. Each party hereby waives any
right it may have to a trial by jury in respect of any action, proceeding or
litigation directly or
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indirectly arising out of, under or in connection with, this Agreement or any of
the Transactions or Subject Securities.
SECTION 6.21. Designation of Principal Investor. The Investors
designate and appoint GS Mezzanine Partners, L.P. to be the "Principal Investor"
under this Agreement and acknowledge and agree that the Principal Investor shall
be acting on behalf of all of the Investors with respect to the actions
specified in this Agreement that shall or may be taken by the Principal
Investor.
SECTION 6.22. Interpretation. When a reference is made in this
Agreement to a Section, Article, Schedule or Exhibit, such reference shall be to
a Section, Article, Schedule or Exhibit of this Agreement unless otherwise
indicated or unless the context shall otherwise require. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
SECTION 6.23. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
IN WITNESS WHEREOF, the Company, the Holding Company and the
Investors have caused this Agreement to be duly executed by their respective
authorized officers as of the date first above written.
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By: /s/ Kenneth M. Levine
----------------------------------
Name: Kenneth M. Levine
Title: Executive Vice President
MONY FINANCIAL SERVICES CORPORATION
By: /s/ Kenneth M. Levine
----------------------------------
Name: Kenneth M. Levine
Title: Executive Vice President
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GS MEZZANINE PARTNERS, L.P.
By: GS Mezzanine Advisors, L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Eve M. Gerriets
----------------------------------
Name: Eve M. Gerriets
Title: Vice President
GS MEZZANINE PARTNERS OFFSHORE, L.P.
By: GS Mezzanine Advisors
(Cayman), L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Eve M. Gerriets
----------------------------------
Name: Eve M. Gerriets
Title: Vice President
STONE STREET FUND 1997, L.P.
By: Stone Street Asset Corp.,
its general partner
By:/s/ Eve M. Gerriets
----------------------------------
Name: Eve M. Gerriets
Title: Vice President
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BRIDGE STREET FUND 1997, L.P.
By: Stone Street Asset Corp.,
its managing general partner
By: /s/ Eve M. Gerriets
----------------------------------
Name: Eve M. Gerriets
Title: Vice President
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ANNEX
DEFINED TERMS
As used in this Agreement and the Exhibits and Schedules hereto,
the following terms have the respective meanings set forth below or set forth in
the Section hereof following such term. The words "hereof", "herein", and
"hereunder" and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Except with respect to the term "Plan", the terms defined in the
singular shall have a comparable meaning when used in the plural, and vice
versa. Unless the context otherwise requires, any reference to a statute, rule
or regulation refers to the same (including any successor statute, rule or
regulation thereto) as it may be amended from time to time.
"AFFILIATE" has the meaning assigned to such term in Rule 12b-2
under the Exchange Act.
This "AGREEMENT" means this Investment Agreement, dated as of
December 30, 1997, among the Company, Holding Company and Investors.
"ALTERNATIVE TRANSACTION" has the meaning specified in Section
14 of the form of Warrant.
"ANNUAL STATEMENTS" means annual statutory statements filed
pursuant to Applicable Insurance Laws by any Insurance Company (including
without limitation the annual statements of any separate accounts), together
with all exhibits and schedules thereto, and financial statements relating
thereto, and any actuarial opinion, affirmation or certification filed in
connection therewith.
"APPLICABLE INSURANCE LAWS" means insurance laws, rules and
regulations of the jurisdiction of domicile of or otherwise applicable to an
Insurance Company.
"APPROVALS" means collectively, all authorizations, approvals,
orders, consents, licenses, certificates or permits of, or registrations,
notices, qualifications or filings with, any Governmental Authority.
"ASSOCIATE" has the meaning assigned to such term in Rule 12b-2
under the Exchange Act.
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"AUDITED ENTITY" means the Company, MLOA, and their respective
Subsidiaries.
"BENEFICIALLY OWN" has the meaning set forth in Rule 13d-3 under
the Exchange Act.
"BENEFIT PLANS" means all benefit plans, contracts or
arrangements covering Employees, including, but not limited to, "employee
benefit plans" within the meaning of Section 3(3) of ERISA, and plans of
deferred compensation.
"BOARD" means the Board of Trustees of the Company or the Board
of Directors of the Holding Company, as the context requires.
"BROKER-DEALER SUBSIDIARIES" means each Subsidiary of the
Company which is engaged in the business of acting as a broker-dealer.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are required or authorized
by law to be closed.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the recitals to this
Agreement.
"CONSENTS" means, collectively, all consents, approvals,
authorizations, licenses or orders of, or registrations or filings with, or
notices to, any Governmental Authority.
"CONTRACTS" means the following contracts, agreements,
commitments or arrangements, written or, to the knowledge of the Company and
only to the extent that they represent future liabilities in excess of
$1,000,000, unwritten, to which the Company or any of its Subsidiaries is a
party or by which any of their respective assets or properties are or may be
bound:
(i) all Contracts out of the ordinary course of business
representing future liabilities in excess of $5,000,000 that are
non-terminable without penalty upon not more than 30 days' notice;
(ii) all Contracts (including, without limitation, Contracts
relating to loans or advances other than margin loans made in the
ordinary course of
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business, but excluding Policies issued in the ordinary course of
business and excluding obligations under any Benefit Plan) with any
current or former officer or director of the Company or of any
Significant Subsidiary, or any of the 30 highest compensated agency
managers and agents of the Company or any of its Subsidiaries and the
name and position of each such person and the expiration date of each
such Contract (and specifying whether such Contract contains any
change-in-control provisions);
(iii) all Contracts with any person containing any provision or
covenant limiting the ability of the Company or of any Significant
Subsidiary to engage in any line of business or compete with any person;
(iv) all partnership or joint venture Contracts as of March 31,
1997 (and all such Contracts after such date that are material) with any
person (other than participations in reinsurance arrangements and
underwriting agreements entered into in the ordinary course of business,
and agreements relating to partnerships (x) in which neither the Company
nor any of its Subsidiaries is a general partner or (y) in which no
person other than the Company or its wholly owned Subsidiaries is a
partner);
(v) Contracts relating to nonrecourse mortgage borrowing in the
ordinary course of business (other than guarantees thereof), and all
Contracts relating to Indebtedness of the Company or any of its
Subsidiaries in a principal amount of $25,000,000 or more;
(vi) all leases, subleases or rental or use Contracts to which
the Company or any of its Subsidiaries is a party with respect to real
or personal property used by the Company or such Subsidiary in the
conduct of its business operations or affairs and providing for annual
rental payments to be paid by or on behalf of the Company or such
Subsidiary in excess of $5,000,000;
(vii) in the case of the Company or any Significant Subsidiary,
all Contracts with any labor union or association, other than Contracts
entered into in the ordinary course of the business of managing and
operating real property;
(viii) all Contracts pursuant to which any business unit was
sold since January 1, 1994 (or with
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respect to any insurance business units, January 1, 1992);
(ix) the top ten investment advisory Contracts or Contracts for
investment management, measured by 1996 annual revenues of each of the
Company and MLOA;
(x) except with respect to real estate joint ventures which are
Subsidiaries, all Contracts between the Company or any Subsidiary of the
Company and any of their Affiliates or Associates, other than Contracts
(a) made in the ordinary course of business consistent with past
practice at prices and on terms and conditions not less favorable to the
Company or such Subsidiary than could be obtained on an arms'-length
basis from unrelated third parties or (b) between the Company or any
wholly owned Subsidiary of the Company, on the one hand, and any other
wholly owned Subsidiary of the Company, on the other; and
(xi) all other Contracts material to the business or operations
of the Company and its Subsidiaries taken as a whole and not otherwise
referred to in clauses (i) through (x) above.
"CONVERTIBLE PREFERRED STOCK" has the meaning set forth in
Section 1.3 hereof.
"CONVERTIBLE PREFERRED STOCK ISSUANCE DATE" has the meaning set
forth in Section 2.4 hereof.
"CONVERTIBLE PREFERRED STOCK PURCHASE PRICE" has the meaning set
forth in Section 1.2 hereof.
"DEMUTUALIZATION DATE" means the date the Plan becomes effective
pursuant to Section 7312 or, if later, the first date following such
effectiveness on which shares of Holding Company Common Stock are first
distributed to Company policyholders.
"EMPLOYEES" means current employees or former employees of the
Company and its Subsidiaries.
"ENTERPRISE" means Enterprise Capital Management, Inc.
"ENVIRONMENTAL LAW" means any law, regulation, order, decree,
permit, authorization, opinion, common law or requirement of any Governmental
Authority relating to the handling, use, presence, disposal, release or
threatened
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release of any hazardous or toxic substance, the protection of the environment
or human health and safety or noise, odor, wetlands, pollution, contamination or
any injury or threat of injury to persons or property.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" means any entity which is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the
Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXCHANGE NOTICE" has the meaning set forth in Section 1.4
hereof.
"EXERCISE PRICE" has the meaning set forth in the Warrants.
"EXPENSES" means all out-of-pocket fees and expenses, incurred
or paid by or on behalf of the Investors or any of their Subsidiaries or
Affiliates directly or indirectly in connection with the Transactions (including
but not limited to the due diligence review and negotiations preceding this
Agreement) or the consummation of any of the transactions contemplated by this
Agreement (including without limitation the Plan and the IPO), including but not
limited to all fees and expenses of counsel, accountants, actuaries, experts and
consultants to the Investors.
"EXPIRATION DATE" means the date that is the later of (i)18
months after the First Closing Date and (ii) the Demutualization Date.
"FIRST CLOSING" has the meaning set forth in Section 2.1 hereof.
"FIRST CLOSING DATE" has the meaning set forth in Section 2.1
hereof.
"FIRST CLOSING FEE" has the meaning set forth in Section 2.2(j)
hereof.
"FUND" means, for purposes of Section 3.1(r)(ii), any investment
company registered under the Investment Company Act to which the Company or any
of its Subsidiaries provides
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investment advisory services, for which a prospectus or other offering material
has stated an intention to qualify as a RIC.
"GAAP" means, at any time, generally accepted accounting
principles in the United States as are consistently applied by the Holding
Company at such time.
"GAAP EQUITY" means the consolidated stockholders' equity of the
Holding Company as determined in accordance with GAAP.
"GOVERNMENTAL AUTHORITY" and, as the context may require,
"GOVERNMENTAL AUTHORITIES" means any Federal, State, local, foreign or other
court, administrative agency or commission, insurance or securities regulatory
authority or other governmental authority or instrumentality or regulatory or
self-regulatory body or securities or commodities exchange.
"GRADATION" means a gradation within a rating category of a
rating agency or a change from the lowest or highest gradation within a rating
category to the next lower or higher, respectively, rating category of such
rating agency, which shall include "+" and "-" in the case of Standard & Poor's
Ratings Group and A.M. Best and "1", "2" and "3" in the case of Moody's Investor
Service, Inc. (for example, a reduction from BB+ to BB or from BB- to B+ or from
Ba1 to Ba2 would constitute a reduction of one Gradation).
"HAZARDOUS SUBSTANCE" means any substance that is: listed,
classified or regulated as a hazardous substance or a hazardous waste pursuant
to any Environmental Law; any petroleum product or by-product,
asbestos-containing material, lead-containing paint, polychlorinated biphenyls,
source material, byproduct material or special nuclear material as defined by or
pursuant to the Atomic Energy Act; or any other substance which is the subject
of regulatory action by any Government Authority or otherwise subject to any
Environmental Law.
"HOLDING COMPANY" has the meaning set forth in the recitals.
"HOLDING COMPANY COMMON STOCK" has the meaning set forth in the
recitals.
"HOLDING COMPANY NOTES" has the meaning specified in Section 1.3
hereof.
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"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and the regulations thereunder.
"INDEBTEDNESS" means (without duplication), with respect to any
person, whether recourse is to all or a portion of the assets of such person and
whether or not contingent, (i) every obligation of such person for money
borrowed, (ii) every obligation of such person evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such person
(other than such a facility utilized to secure obligations under reinsurance or
retrocession agreements), (iv) every obligation of such person issued or assumed
as the deferred purchase price of property or services (including securities
repurchase agreements but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not overdue or
which are being contested in good faith), (v) every capital lease obligation of
such person, (vi) all preferred stock issued by such person and (vii) every
obligation of the type referred to in clauses (i) through (iv) of another person
and all dividends of another person the payment of which, in either case, such
person has guaranteed or is responsible or liable for, directly or indirectly,
as obligor, guarantor or otherwise. The "amount" or "principal amount" of
Indebtedness at any time of determination represented by (a) any contingent
Indebtedness, shall be the maximum principal amount hereof, (b) any Indebtedness
issued at a price that is less than the principal amount at maturity thereof,
shall be the amount of the liability in respect thereof determined in accordance
with generally accepted accounting principles, and (c) any preferred stock,
shall be the maximum voluntary or involuntary liquidation preference plus
accrued and unpaid dividends in respect thereof, in each case as of such time of
determination.
"INSURANCE COMPANY" means each of the Company, MLOA and any
other Company Subsidiary engaged in the business of insurance.
"INSURANCE LICENSE" means a license, certificate of authority,
permit or other authorization to transact insurance.
"INVESTMENT ADVISER SUBSIDIARY" means each subsidiary of the
Company which is engaged in the business of acting as an investment adviser.
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"INVESTMENT ADVISERS ACT" means the Investment Advisers Act of
1940, as amended.
"INVESTMENT COMPANY ACT" means the Investment Company Act of
1940, as amended.
"INVESTMENT PROPOSAL" means any proposal or offer (in connection
with the conversion of the Company to a stock life insurance company or
otherwise), other than a proposal or offer by the Investors or any of their
Subsidiaries or Affiliates, for a merger, consolidation or other business
combination involving the Company, the Holding Company or any Significant
Subsidiary or any proposal or offer, other than a proposal or offer by the
Investors or any of their Affiliates, to acquire in any manner, directly or
indirectly, an equity interest in or any voting securities of or a substantial
portion of the assets of the Company, the Holding Company or any Significant
Subsidiary (whether in a transaction comparable to the one contemplated hereby
or otherwise).
"INVESTOR DIRECTOR" means the Director nominated to the Board
pursuant to Section 4.9 hereof.
"INVESTORS" has the meaning set forth in the recitals to this
Agreement.
"IPO" means an initial public offering of Holding Company Common
Stock effected in connection with the Plan.
"LIENS" means liens, pledges, mortgages, security interests,
claims, leases, charges, options, rights of first refusal, easements, servitude,
encumbrances and any other restrictions or limitations whatsoever.
"LIFE INSURANCE BUSINESS" means the underwriting, marketing and
selling in all or any part of the States of life insurance Policies.
"LITIGATION" means, collectively, all claims, actions,
proceedings, arbitrations, investigations, inquiries, charges or complaints
before or by any Governmental Authority or any private arbitration tribunal.
"MATERIAL ADVERSE EFFECT" has the meaning set forth in Section
3.1(a).
"MATERIAL OWNED PROPERTY" means real property owned in fee or
leased (other than operating leases) by the Company or any of its Subsidiaries,
or the Company and any of its
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Subsidiaries, either directly or through any interest of the Company or any such
Subsidiary in any joint venture, in each case which real property as of December
31, 1996, had a market value of $40,000,000 or more or in which the Company
and/or any of its Subsidiaries had invested, as of such date, $30,000,000 or
more.
"MLOA" means MONY Life Insurance Company of America.
"MONY BROKERAGE" means MONY Brokerage, Inc.
"MONY FUNDING" means MONY Funding, Inc.
"MONY SECURITIES" means MONY Securities Corporation.
"MORTGAGE" means, with respect to each Mortgage Loan, the note
or notes or other evidences of indebtedness evidencing such loan and the
mortgage, deed of trust or similar document securing such loan.
"MORTGAGE LOAN" means each loan made, purchased or otherwise
acquired by the Company or any of its Subsidiaries that is secured by any
interest in real property, together with the Mortgage.
"NASD" means the National Association of Securities Dealers,
Inc.
"NOTES" has the meaning specified in Section 1.1.
"NOTICES" means all notices, reports, documents or other filed
information.
"NYID" means the Insurance Department of the State of New York.
"NYIL" means the Insurance Law of the State of New York.
"NYSE" means the New York Stock Exchange, Inc.
"PENSION PLAN" means any of the Plans which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA.
"PERMITTED LIENS" means (i) Liens reflected in the Annual
Statements delivered to the Investors pursuant to Section 3.1(h)(iii) and other
mortgages entered into since
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December 31, 1996, and Liens on securities since June 30, 1997, in either case
in the ordinary course of business consistent with past practice, (ii) the
claims of materialmen, carriers, landlords and like persons, and Liens securing
taxes, assessments, governmental charges or levies not yet due, all of which are
not yet delinquent or are being contested in good faith, so long as such contest
does not involve any substantial danger of the sale, forfeiture or loss of any
material assets of the Company or such subsidiary; (iii) statutory liens on
special deposit funds held by state regulatory authorities; (iv) Permitted Real
Property Liens; and (v) other Liens (excluding Liens on Securities) that do not
have a Material Adverse Effect.
"PERMITTED REAL PROPERTY LIENS" means Liens that are (i) claims
of mechanics, carriers, workmen, repairmen or other similar Liens arising or
incurred in the ordinary course of business or which are being contested in good
faith, (ii) pending condemnations, (iii) for taxes, assessments or other
governmental charges not yet due and payable or which are being contested in
good faith, (iv) statutory Liens of landlords and mortgagees of landlords, (v)
leases or subleases granted to others, (vi) in the case of leasehold interests,
Liens, if any, on the fee estate in the property subject to the lease, (vii)
zoning, building or other similar governmental restrictions or (viii) easements,
covenants, rights of way or other similar restrictions or other imperfections of
title (provided that the items described in clauses (i) through (viii) are
insured over pursuant to a title insurance policy or do not in any case or in
the aggregate materially impair the market value of, such Material Owned
Properties taken as a whole).
"PERSON" means any individual, corporation, partnership, firm,
joint venture, association, joint stock company, limited liability company,
trust, unincorporated organization, governmental or regulatory authority or
other entity.
"PLAN" means a plan of reorganization, as the same may be
amended from time to time, for the conversion of the Company under Section 7312
from a mutual life insurance company to a stock life insurance company, which
plan shall implement the terms set forth in Exhibit 1, shall not contain any
terms materially inconsistent with those set forth in Exhibit 1 or in any of the
Transaction Agreements and shall include such other terms as shall be necessary
to obtain the approval of the Superintendent.
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"PLANS" means all employee benefit plans, other than
"multiemployer plans" within the meaning of Section 3(37) of ERISA, covering
Employees.
"POLICIES" means insurance policies, annuity contracts and
guaranteed interest contracts and riders thereto.
"PRINCIPAL INVESTOR" has the meaning specified in Section 6.21
hereof.
"PROSPECTUS" means the prospectus for use in connection with the
IPO, as it may be amended or supplemented from time to time.
"PROXY STATEMENT" means an information or proxy statement to be
used in connection with obtaining the required approval of the Plan by the
policyholders of the Company.
"QUARTERLY STATEMENTS" means quarterly statutory statements filed
pursuant to Applicable Insurance Laws by any Insurance Company, together with
all exhibits and schedules thereto.
"REAL PROPERTY" means each Material Owned Property and any other
property owned by the Company or any Subsidiary either directly or through any
interest of the Company or any Subsidiary in any joint venture.
"REAL PROPERTY APPROVALS" means, collectively, (1) any consent
or approval required under any of the real estate joint venture agreements, real
estate leases, mortgage loans and other real estate related agreements set forth
in Schedule 3.1(e) hereto and (2) any consent or approval required under any
other real estate joint venture agreement, any real estate lease, any other
mortgage in respect of which the Company or any of its Subsidiaries is mortgagor
or any other real estate related agreements, the failure to obtain which
consents or approvals specified in this clause (2) would not in any case or in
the aggregate have a Material Adverse Effect.
"REGISTRATION RIGHTS AGREEMENT" means the agreement executed in
substantially the form set forth in Exhibit 3 hereto.
"REINSURANCE AGREEMENTS" means contractual treaties and
agreements regarding reinsurance, coinsurance, excess insurance, ceding of
insurance, assumption of insurance or indemnification with respect to insurance
to which any Insurance Company is a party.
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"RIC" means a regulated investment company under the Code.
"RULE 144" means Rule 144 promulgated under the Securities Act.
"RULE 144A" means Rule 144A promulgated under the Securities
Act.
"S-1" means a registration statement on Form S-1, including the
related Prospectus, covering the shares of Holding Company Common Stock to be
issued in the IPO or otherwise in connection with the Plan.
"SAP" means statutory accounting practices prescribed or
permitted by an applicable Governmental Authority and applied on a consistent
basis.
"SAP SURPLUS" means the sum of Surplus and Asset Valuation
Reserve calculated in accordance with SAP.
"SEC" means the Securities and Exchange Commission.
"SEC DOCUMENTS" has the meaning set forth in Section 3.1(i)
hereto.
"SECOND CLOSING" has the meaning set forth in Section 2.4
hereto.
"SECOND CLOSING DATE" has the meaning set forth in Section 2.4
hereto.
"SECOND CLOSING FEE" has the meaning set forth in Section
2.5(l).
"SECTION 1307 INDEBTEDNESS" means Indebtedness of an Insurance
Company evidenced by surplus notes issued by the Insurance Company pursuant to
Section 1307 of the New York Insurance Law, other than Indebtedness that is
convertible or exchangeable into equity of such Insurance Company or of any of
its Affiliates.
"SECTION 7312" means Section 7312 of the NYIL.
"SECURITIES ACT" means the Securities Act of 1933.
"SECURITY" means each security as such term is defined in
Section 2(1) of the Securities Act, but shall not
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include securities referred to in Section 3(a)(2) or (8) of the Securities Act
or interests registered under the Securities Act in any of the separate accounts
of the Company or MLOA.
"SEPARATE ACCOUNTS" means the separate accounts of the Insurance
Companies.
"SIGNIFICANT SUBSIDIARY" means any of the following: (A) MLOA
and Enterprise, (B) in the case of the Company prior to the conversion of the
Company from mutual to stock form pursuant to Section 7312, the Holding Company,
and in the case of the Holding Company at or after the conversion of the Company
from mutual to stock form pursuant to Section 7312, the Company, (C) any other
"significant subsidiary", as such term is defined in Rule 1-02 of Regulation S-X
under the Securities Act, of the Company or of the Holding Company, and (D) any
Subsidiary of the Company or of the Holding Company of which any Significant
Subsidiary is a Subsidiary.
"STATES" means, collectively, the states of the United States,
the District of Columbia, the Commonwealth of Puerto Rico or any possession or
territory of the United States.
"SUBJECT SECURITIES" means, collectively, the Notes, the Holding
Company Notes, the Warrants, the Convertible Preferred Stock and the Holding
Company Common Stock.
"SUBSEQUENT CLOSING" means any closing in connection with (i)
the exchange of the Notes for the Holding Company Notes or (ii) the issuance (a)
of Holding Company Common Stock pursuant to the Warrants or (b) of Holding
Company Common Stock pursuant to the conversion or redemption of Convertible
Preferred Stock.
"SUBSIDIARY" means, as to any Person, (A) in the case of the
Investors or any of their Affiliates, a second person of which securities or
other ownership interests representing more than 50% of the ordinary voting
power are, at the time any determination is being made, owned or controlled by
the first person or one or more Subsidiaries of such person or a combination
thereof and (B) in the case of the Company or the Holding Company, a second
person of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or a general
partnership interest are, at the time any determination is being made, owned,
controlled or held by the first person or one or more Subsidiaries of such
person or a combination thereof, provided that the term "Subsidiary" shall not
include (x) any limited partnership in which neither the Investors nor
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the Company nor any of their respective Subsidiaries has an interest as a
general partner, (y) any person where (A) the Investors, the Company or their
respective Subsidiaries own securities of or other ownership interests in such
person representing more than 50% of the equity and 50% or less of the ordinary
voting power, (B) such securities or other ownership interests are held in the
investment portfolio of the Investors, the Company or any of their respective
Subsidiaries or Affiliates and (C) neither the Company, the Investors nor any of
their respective Subsidiaries or Affiliates controls such person or (z) any
person as to which control by the Investors, the Company or any of their
respective Subsidiaries or Affiliates has been negated by the establishment of a
voting trust or voting agreement.
"SUPERINTENDENT" means the Superintendent of Insurance of the
State of New York.
"TAXES" means all Federal, State, county, local, foreign and
other taxes, assessments, duties or similar charges of any kind whatsoever,
including, without limitation, corporate franchise, income, sales, premium, use,
ad valorem, gross receipts, value added, profits, license, withholding, payroll,
employment, excise, property (other than real property ad valorem or other
similar taxes), customs and occupation taxes, and including, without limitation,
any interest, penalties and additions imposed with respect to such amounts.
"THE INSURANCE SECURITIES LAWS OF THE STATE OF NEW YORK" means
insurance securities laws set forth in the New York Insurance Law or the
Regulations thereunder.
"TO THE KNOWLEDGE OF THE COMPANY" or any similar phrase means to
the knowledge of any of the senior officers of the Company or any of the
licensed professional personnel of the Company's legal department who, on or
prior to the date of this Agreement, were involved in the negotiation of this
Agreement or the preparation of any of the Schedules, with such officers and
licensed professional personnel being deemed to have made reasonable inquiry of
the appropriate personnel of the Company, each Significant Subsidiary and each
other relevant Subsidiary of the Company with respect to the matter in question.
"TRADEMARKS" means material domestic trademarks, service marks,
assured names with the owner or user thereof, logos, trade names and copyrights.
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"TRANSACTION AGREEMENTS" means, collectively, this Agreement,
the Subject Securities, the Registration Rights Agreement and the Fiscal Agency
Agreement.
"TRANSACTIONS" means the execution and delivery by the Company
or the Holding Company, as the case may be, of the Transaction Agreements, the
issue and sale of the Subject Securities by the Company or the Holding Company,
as the case may be, the issue and delivery of the shares of Holding Company
Common Stock upon the exercise of Warrants or conversion of Convertible
Preferred Stock, the adoption and consummation of a Plan, the performance by the
Company, the Holding Company or any other Subsidiary of the Company of their
respective obligations under the Transaction Agreements, or the consummation of
the transactions contemplated by the Transaction Agreements.
"TRANSACTIONS CONTEMPLATED" by this Agreement includes, but is
not restricted to, the consummation of a Plan and of the IPO.
"U.S. FUND" means an investment company registered under the
Investment Company Act.
"WARRANT PURCHASE PRICE" has the meaning set forth in Section
1.2 hereof.
"WARRANTS" has the meaning set forth in Section 1.3 hereof.
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Exhibit 1 to the
Investment Agreement
FUNDAMENTAL TERMS OF PLAN OF REORGANIZATION
Capitalized terms used herein but not defined herein shall
have the respective meanings specified for such terms in the Investment
Agreement.
1. PURPOSE OF REORGANIZATION.
The principal purpose of the reorganization of the Company
pursuant to the Plan (the "Reorganization") is to convert the Company from a
mutual life insurer to a stock life insurer thereby permitting it to obtain
equity capital for the Company from sources that are unavailable to it as a
mutual insurer. Such equity capital is expected to enhance the Company's
business and competitive position and to strengthen its capital base. The
Reorganization will provide Eligible Policyholders (defined herein) with shares
of Holding Company Common Stock or, under circumstances specified in the Plan,
cash or Policy Credits (defined herein) in exchange for their policyholders'
membership interest, as such term is defined in paragraph (a)(3) of Section 7312
("Policyholders' Membership Interest"), in the Company.
2. FORM OF REORGANIZATION.
The Company shall be converted from a mutual life insurer into
a stock life insurer, which shall be a wholly owned subsidiary of the Holding
Company, pursuant to a plan of reorganization under paragraph (d)(1) or
paragraph (d)(4) of Section 7312 that is fair and equitable to policyholders.
3. APPROVAL OF PLAN.
(a) Adoption by Board of Directors. Prior to
submission of the Plan to the policyholders, the Company's Board of Trustee's
shall adopt the Plan in compliance with paragraph (e)(1) of Section 7312.
(b) Mailing of Notices and Other Information. As soon
as practicable after the Plan is adopted by the Company's Board of Directors,
the Company shall mail to appropriate policyholders notices relating to the
public hearing with respect to the Plan and the policyholders vote on a proposal
to approve the Plan and such other explanatory information as the Superintendent
shall approve or require, which shall comply with the applicable provisions of
Section 7312, including paragraph (e)(3), subsection (i) and paragraph (k)(1).
In addition, the Company shall publish notice of the public hearing in
compliance with subsection (i) of Section 7312.
<PAGE> 87
(c) Public Hearing. The Superintendent shall hold a
public hearing as provided in subsection (i) of Section 7312.
(d) Approval by Policyholders. At least thirty days
after notice of the policyholder vote is mailed to policyholders, but not later
than ninety days after the approval of the Plan by the Superintendent, a
proposal to approve the Plan shall be submitted to a vote of the policyholders
in compliance with subsection (k) of Section 7312. If the Plan is approved by
the policyholders and the Superintendent, the Company shall promptly submit the
appropriate documents and certifications to the Superintendent in compliance
with paragraph (k)(11) of Section 7312.
(e) Filing of Plan. If the Plan is approved by the
policyholders and the Superintendent, the Company shall, as soon as practicable
thereafter, file the Plan with the Superintendent and the Clerk of New York
County in compliance with subsection (1) of Section 7312.
4. EFFECTIVENESS OF PLAN.
(a) Determination of Plan Effective Date. The Plan
Effective Date shall be as indicated in the Plan as the earlier of (i) the
closing date of the IPO or (ii) a stated date which shall not be later than six
months after the date on which the Plan is approved by the Superintendent
pursuant to subsection (j) of Section 7312.
(b) Amendment of Holding Company Charter and By-Laws.
Prior to the Plan Effective Date, the charter and by-laws of the Holding Company
shall be amended and restated, in a manner mutually satisfactory to the Company
and the Investors, so as to permit the consummation of the Plan and the
Transactions contemplated by the Investment Agreement.
(c) The Reorganization. On the Plan Effective Date:
(i) the Company shall by operation of
Section 7312 become a stock insurer;
(ii) the Company's charter and by-laws shall
be amended and restated in accordance with the Plan;
(iii) the Policyholders' Membership Interest
shall be extinguished in accordance with Section 7312, and Eligible
Policyholders shall receive all the Holding Company Common Stock to be
issued as of the Plan Effective Date except for shares of the Holding
Company Common Stock to be issued as provided in clause (vii) below;
(iv) cash or Policy Credits (defined herein)
shall be paid or allocated to certain Eligible Policyholders as
provided in section 8 hereof;
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<PAGE> 88
(v) the Company shall issue shares of its
common stock, par value $1.00 per share, representing all of its issued
and outstanding common stock to the Holding Company;
(vi) the Company shall surrender to the
Holding company and the Holding Company shall cancel all shares of
Holding Company Common Stock previously issued by the Holding Company
to the Company and held by the Company immediately prior to the Plan
Effective Date; and
(vii) if there is an IPO on the Plan
Effective Date, the Holding Company shall issue Holding Company Common
Stock in the IPO in exchange for cash.
The Company, as reorganized, shall be a
continuation of the corporate existence of the Company, and the
Company's name shall as indicated in the Plan. The Company and the
Holding Company shall use the proceeds of the sale of the Notes and
the Convertible Preferred Stock and the proceeds of the IPO (in excess
of an amount equal to the sum of the Transaction Expenses and the
aggregate value of cash and Policy credits paid or allocated by the
Company as provided in Section 8 hereof) for the support of the
Company's life insurance operations. The parties acknowledge that in
connection with the Superintendent's order approving the Plan, the
Superintendent may require the Holding Company to contribute the Notes
to the Company.
5. THE EXCHANGE OF NOTES FOR HOLDING COMPANY SECURITIES;
PURCHASE OF WARRANT SHARES.
After the Demutualization Date, at the option of the
Investors, the Notes shall be exchanged for Holding Company Notes, on the terms,
conditions and dates set forth in section 1.4 of the Investment Agreement. After
the Demutualization Date subject to the conditions contained therein, the
Holding Company shall sell shares of Convertible Preferred Stock to the
Investors, at the request of the Company, as provided in section 1.3 of the
Investment Agreement.
In addition, the Holders shall have the right to purchase the
Warrant Shares on the terms and conditions and on the date set forth in the
Warrants issued pursuant to Section 1.2 of the Investment Agreement.
6. ELIGIBLE POLICYHOLDERS.
The Plan shall specify a fair and equitable method for
determining the class of policyholders who shall be entitled to receive
consideration under the Plan ("Eligible Policyholders"). Each Eligible
Policyholder shall be allocated consideration on a fair and equitable basis.
7. PAYMENT OF CONSIDERATION OTHER THAN HOLDING COMPANY COMMON
STOCK.
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<PAGE> 89
The Plan may contain a provision which provides that an
Eligible Policyholder shall receive cash or Policy Credits in lieu of Holding
Company Common Stock if such Eligible Policyholder is entitled to receive fewer
than a certain minimum number of shares of Holding Company Common Stock or meets
such other fair and equitable criteria that are specified in the Plan; provided,
however, that the aggregate amount of consideration payable to eligible
Policyholders in cash and Policy Credits in lieu of Holding Company Common Stock
pursuant to the Plan shall not exceed a specified dollar amount.
Whenever consideration is to be paid to an Eligible
Policyholder in cash or Policy Credits pursuant to the Plan in lieu of shares of
Holding Company Common Stock, the amount of such consideration shall be equal to
the number of shares otherwise payable to such Eligible Policyholder multiplied
by the IPO Price or in the absence of an IPO, a percentage of book value (not to
exceed 70%) as indicated in the Plan. "Policy Credits" shall mean additional
death benefits, premium credits, additional annuity benefits or increases in
policy account value.
8. IPO
The Holding Company shall issue shares of Holding Company
Common Stock in the IPO. The proceeds of the IPO shall be used to provide funds
for the cash payments to Eligible Policyholders, to cover the Transaction
Expenses and for additional equity capital.
9. METHOD OF OPERATION FOR PARTICIPATING BUSINESS.
(a) Establishment of Closed Block. The Company shall
establish a closed block of participating policies and contracts pursuant to
paragraph (d)(5) of Section 7312 (the "Closed Block") that shall consist of
those participating life and health insurance and annuity policies and contracts
in force on the Plan Effective Date and specified in the Plan.
(b) Allocation of Assets to Closed Block. The Company
shall allocate assets to the Closed Block in an amount which together with
anticipated revenue from the policies and contracts included in the Closed Block
is reasonably expected to be sufficient to support such business including, but
not limited to, provisions for payment of claims, expenses and taxes, and to
provide for continuation of dividend scales in effect on the date of adoption of
the Plan by the Company's Board of Trustees, if the experience underlying such
scales continues, Assets shall be allocated to the Closed Block as of December
31, 1997, with appropriate adjustments from such date to the Plan Effective
Date.
Invested assets shall be allocated to the Closed
Block on an appropriate basis stated in the Plan by transferring from the
general account of the Company invested assets in the amount required to be
allocated to the Closed Block. U.S. Policy loans on policies included in the
Closed Block, shall be included in their entirety in the Closed Block (and
policy loans on policies not in the Closed Block shall be excluded in their
entirety). Investments in operating subsidiaries of the Company shall be
excluded from the Closed Block.
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<PAGE> 90
(c) Operation of the Closed Block. The Closed Block shall be
operated for the exclusive benefit of the policies and contracts included
therein for policyholder dividend purposes only, which dividends shall be
supported solely by assets allocated to the Closed Block, in accordance with the
following principles and others that may be specified in the Plan:
(i) All cash flow of the Closed Block business and
initial Closed Block assets and of the investment and reinvestment
thereof shall be allocated to the Closed Block and shall constitute the
Closed Block assets at all times following the Plan Effective Date.
(ii) Dividends, interest crediting rates and
nonguaranteed premiums on Closed Block business shall be adjusted to
reflect changes in experience after 1997, which adjustments may contain
provision for smoothing experience over a period of time. Negative cash
flow in the Closed Block shall be supported by internal loans from the
rest of the general account, which loans shall be subject to a
reasonable rate of interest.
(iii) The Closed Block shall not be charged for any
Federal tax liability accrued with respect to operations of the Company
prior to January 1, 1998.
10. COSTS AND EXPENSES.
The Company and the Holding Company shall deliver to the
Superintendent a written undertaking in compliance with subsection (p) of
Section 7312 specifying that the Holding Company (or the Company, if the Company
is not demutualized) shall bear all costs and expenses incurred by the Company,
the Holding Company and, other than normal operating expenses, the NYID in
connection with the Plan. The Investors shall not be liable for the payment or
reimbursement of any such costs and expenses.
11. LISTING OF HOLDING COMPANY COMMON STOCK.
The Holding Company shall list the Holding Company Common
Stock on a national securities exchange or on the NASDAQ National Market System,
effective as of the Plan Effective Date. Such listing shall be in satisfaction
of any duty the Company or the Holding Company may have to encourage and assist
in the establishment of a public market for shares of Holding Company Common
Stock.
12. OPERATION OF THE COMPANY AFTER REORGANIZATION.
A plan of operation for the Company including actuarial
projections for a ten-year period shall be filed with the Plan.
13. AMENDMENT OF WITHDRAWAL OF PLAN.
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The Company's Board of Directors shall be permitted to amend
or withdraw the Plan at any time prior to the Plan Effective Date only in
compliance with subsection (f) of Section 7312.
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<PAGE> 92
Exhibit 2A
Form of Fiscal Agency Agreement
See Exhibit 10.3 to MONY S-1 Registration Statement
7
<PAGE> 93
Exhibit 2-B
Form of Warrant
See Exhibit 4.3 to MONY S-1 Registration Statement
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<PAGE> 94
EXHIBIT 2-C
Terms of
Holding Company Notes
Amount: Up to $115 million. The Holding Company Notes shall
be exchanged on the basis of one dollar of principal
amount for each outstanding dollar of principal
amount of Notes exchanged.
Issuer: Holding Company.
Maturity: Fifteen years from date of issuance.
Coupon: 9-1/2% per annum, unless the Notes have a different
interest rate, in which case the interest rate shall
be identical to the Notes. The Holding Company Notes
shall bear interest from and including the last date
on which interest on the Initial Notes was paid.
Interest June 30 and December 31 of each year, commencing the
Payment Dates: first such date after issuance.
Form: Fully registered, in denominations of $1,000 and
integral multiples thereof.
Optional
Redemption: None.
Sinking Fund: None.
Ranking: Subordinated to Senior Debt of the Holding Company as follows: Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Holding Company, the holders of Senior Debt will
first be entitled to receive payment in full of principal of (and premium, if
any) and interest, if any, on such Senior Debt before the holders of the Holding
Company Notes will be entitled to receive or retain any payment in respect of
the principal of or interest on the Holding Company Notes. In the event of the
acceleration of the maturity of any Holding Company Notes, the holders of all
Senior Debt outstanding at the time of such acceleration will first be entitled
to receive payment in full of all amounts due thereon before the holders of the
Holding Company Notes will be entitled to receive any payment upon the principal
of or interest on the Holding Company Notes.
No payments on account of principal or interest in
respect of the Holding Company Notes may be made if
there shall have occurred and be continuing a default
in any payment with respect to Senior Debt, or an
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<PAGE> 95
event of default with respect to any Senior Debt
resulting in the acceleration of the maturity
thereof, or if any judicial proceeding shall be
pending with respect to any such default.
"Senior Debt" means the principal of (and premium, if
any) and interest, if any (including interest
accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the
Holding Company to the extent that such claim for
post-petition interest is allowed in such
proceeding), on Indebtedness of the Holding Company
(other than Indebtedness described in clause (vi) of
the definition of Indebtedness), whether incurred on
or prior to the date of issuance of the Holding
Company Notes or thereafter incurred, unless, in the
instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is
provided that such obligations are not superior in
right of payment to the Holding Company Notes or to
other Indebtedness which is pari passu with, or
subordinated to, the Holding Company Notes.
"Indebtedness" means (without duplication), with
respect to any person, whether recourse is to all or
a portion of the assets of such person and whether or
not contingent, (i) every obligation of such person
for money borrowed, (ii) every obligation of such
person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred
in connection with the acquisition of property,
assets or businesses, (iii) every reimbursement
obligation of such person with respect to letters of
credit, bankers' acceptances or similar facilities
issued for the account of such person (other than in
respect of such facilities issued to secure
reinsurance or retrocession agreements), (iv) every
obligation of such person issued or assumed as the
deferred purchase price of property or services
(including securities repurchase agreements but
excluding trade accounts payable or accrued
liabilities arising in the ordinary course of
business which are not overdue or which are being
contested in good faith), (v) every capital lease
obligation of such person, (vi) all preferred stock
issued by such person and (vii) every obligation of
the type referred to in clauses (i) through (v) of
another person and all dividends of another person
the payment of which, in either case, such person has
guaranteed or is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise. The
"amount" or "principal amount" of Indebtedness at any
time of determination represented by (a) any
contingent Indebtedness, shall be the maximum
principal amount hereof, (b) any Indebtedness issued
at a price that is less than the principal amount at
maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance
with generally accepted accounting principles, and
(c) any preferred stock, shall be the maximum
voluntary or involuntary liquidation preference plus
accrued and unpaid dividends in respect thereof, in
each case as of such time of determination.
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Covenants: The Indenture governing the Holding Company Notes
shall contain customary covenants for comparable
public insurance holding company indebtedness
relating to the assumption of the Holding Company
Notes by a successor in a merger, consolidation or
sale of assets, and limitations on liens upon or
disposition of certain property of the Holding
Company, including covenants requiring the payment of
principal and interest, maintenance of existence and
properties and payment of taxes and other claims.
Events of Default: (i) Failure to pay principal when due;
(ii) Failure to pay interest when due, continued
for 30 days;
(iii) Failure to comply with any covenant
contained in the Indenture continued for 30
days after notice to the Holding Company by
the Trustee or the holders of at least 25%
in aggregate principal amount of Holding
Company Notes;
(iv) Failure to pay when due, or acceleration of
the payment of principal of, any other
indebtedness of the Holding Company or any
Significant Subsidiary having, individually
or in the aggregate, an outstanding
principal amount of at least $25 million;
(v) Bankruptcy, insolvency, etc. of the Holding
Company or any Significant Subsidiary; and
(vi) Other customary events of default.
Upon the occurrence and continuance of an Event of
Default, the Trustee or the holders of at least 25%
in aggregate principal amount of the Holding Company
Notes may declare the principal of all of the Holding
Company Notes to be immediately due and payable
(except in the case of the bankruptcy event of
default, in which case the Holding Company Notes
shall automatically become due and payable).
Modification Modifications and amendments of the Indenture may be
and Waiver: made with the consent of the holders of a majority in
aggregate principal amount of the Holding Company
Notes; provided, however, that no such modification
or amendment may, without the consent of the holder
of each Exchanged Initial Note affected thereby, (a)
change the stated maturity of the principal of, or
any installment of interest on, any Note, (b) reduce
the principal amount of, or interest on, any Note,
(c) change the place or currency of payment, (d)
impair the right to institute suit for the
enforcement of any payment or with respect to any
Note, (e) reduce the above-stated percentage of
Holding Company Notes necessary to modify or amend
the Indenture, (f) modify any provisions of the
Indenture relating to the modification and amendment
of the Indenture or the waiver of past defaults, or
(g) modify the Subordination provisions in a manner
adverse to the holder.
The holders of a majority in aggregate principal
amount of the Holding Company Notes may waive any
past default under the Indenture, except a default in
the payment of principal or interest.
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Registration Rights: In the event the Holding Company Notes have not been
registered under the Securities Act prior to
issuance, as soon as practicable after the issuance
of the Holding Company Notes the Holding Company will
file with the SEC a registration statement relating
to an exchange offer pursuant to which the Holding
Company will offer to exchange notes that are
substantially identical to the Holding Company Notes
for the outstanding Holding Company Notes and will
effect the exchange offer. In the event that (i)
applicable interpretations of the staff of the SEC do
not permit the Holding Company to effect the exchange
offer or (ii) if any Holding Company Notes held by
any holder would not be freely transferable under the
Securities Act upon consummation of the exchange
offer, as soon as practicable the Holding Company
will, in lieu of (or, in the case of clause (ii), in
addition to) effecting the exchange offer, file a
registration statement relating to a shelf
registration of the Holding Company Notes for resale
by the holders thereof and will cause such
registration statement to remain effective for a
period of up to three years after the date of
original issuance of the Holding Company Notes
(subject to blackouts not to exceed 60 days in any 12
month period). In the event that (i) the registration
statement relating to the exchange offer or the
resale registration, as applicable, has not become
effective within 120 days following the date of
original issuance of the Holding Company Notes, (ii)
the exchange offer has not been consummated within 35
days after the effective date of the exchange offer
registration statement or (iii) any registration
statement required by the foregoing provisions ceases
to be effective (except as permitted) without being
succeeded immediately by an additional effective
registration statement, then the per annum interest
rate on the Holding Company Notes will increase by
0.5% for the period from the occurrence of any such
event until such time as no such event is applicable.
Indenture: To be issued under an indenture governed by the Trust
Indenture Act of 1939, as amended.
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EXHIBIT 2-D
Terms of
Convertible Preferred Stock
Issuer: Holding Company.
Liquidation Preference: In the event of the liquidation, dissolution or
winding up of the Holding Company, the holders of the
Convertible Preferred Stock will be entitled to
receive a liquidation preference equal to $100 per
share plus accrued and unpaid dividends to the date
of distribution. In the event the assets available
for distribution to the holders of the Convertible
Preferred Stock and stock ranking on a parity with
the Convertible Preferred Stock are insufficient to
pay the respective preferential amounts in full, such
assets shall be distributed ratably in proportion to
the preferential amounts payable thereon.
Amount: 1,000,000 shares.
Dividends: Cumulative from the date of issuance payable
quarterly in cash at a rate equal to the ten-year
Treasury Rate (determined in accordance with standard
market practice as reported in the Federal Reserve
Bank of New York "Composite 3:30 P.M. Quotations for
U.S. Government Securities") in effect on the date of
issuance.
Mandatory Redemption: The Holding Company shall be required to redeem all
outstanding shares of the Convertible Preferred Stock
on the earlier of (i) the tenth anniversary of the
date of issuance of the Convertible Preferred Stock
or (ii) December 31, 2013, at a price equal to $100
per share plus accumulated and unpaid dividends to
the redemption date (the "Mandatory Redemption
Price"). The Mandatory Redemption Price is payable in
cash or, at the option of the Holding Company but
subject to the conditions described in the following
sentences, in newly issued fully paid and
non-assessable shares of Holding Company Common
Stock. The number of shares of Holding Company Common
Stock to be delivered in payment of the Mandatory
Redemption Price in lieu of cash shall be determined
by dividing a number that is equal to 110% of the
Mandatory Redemption Price by the value of the
Holding Company Common Stock, which for this purpose
shall be equal to the average of the Closing Price
(as defined in the Warrant) of the Holding Company
Common Stock on the 20 Trading Days (as defined in
the Warrant) immediately preceding the redemption
date. Payment of the Mandatory Redemption Price may
not be made in Holding Company
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<PAGE> 99
Common Stock unless the shares of Holding Company
Common Stock to be delivered (i) either have been
registered under the Securities Act of 1933 prior to
delivery or will be freely transferable without being
subject to any transfer restrictions under the
Securities Act of 1933 upon issuance and delivery,
(ii) have been listed or approved for quotation upon
issuance on the principal stock exchange or
inter-dealer quotation system on which the Holding
Company Common Stock is then approved for listing or
quotation and (iii) either have been duly registered,
qualified or approved for issuance and delivery under
any applicable state blue sky, securities or
insurance laws prior to issuance and delivery or will
be freely transferable without being subject to any
transfer restrictions under any such laws without
such registration, qualification or approval, as
applicable.
Optional Redemption: The Holding Company may redeem the Convertible
Preferred Stock at its option, in whole or in part,
at any time after the third anniversary of the
issuance of the Convertible Preferred Stock, upon not
less than 30 or more than 60 days' notice, at a price
equal to $100 per share plus accumulated and unpaid
dividends to the redemption date, if the Closing
Price of the Holding Company Common Stock exceeds
200% of the then applicable conversion price of the
Convertible Preferred Stock for a period of at least
20 consecutive Trading Days ending within 10 days of
the date on which notice of such redemption is given.
Conversion Rights: The Convertible Preferred Stock will be convertible
at the option of the holder at any time after the
date of original issuance unless previously redeemed
at an initial conversion price equal to the initial
Exercise Price of the Warrant. The conversion price
will be subject to the same anti-dilution adjustments
as the Exercise Price of the Warrant as well as the
one-time adjustment described below under "Special
Adjustment to Conversion Price."
Special Adjustment to
Conversion Price: If on the third anniversary of the original issuance
of the Convertible Preferred Stock the conversion
price is greater than 70% of the then book value per
share of Holding Company Common Stock determined in
accordance with GAAP on such date, the conversion
price shall be reset at such time so that the
conversion price will be equal to 70% of such book
value per share. After the resetting of the
conversion price, if any, the conversion price will
continue to be
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<PAGE> 100
subject to the same anti-dilution adjustments
described above under "Conversion Rights."
Voting Rights: Except as indicated below or otherwise required by
law, holders of Convertible Preferred Stock will have
no voting rights. If (i) at any time the equivalent
of six quarterly dividends payable on the Preferred
Stock are accrued and unpaid, or (ii) the Holding
Company fails to make any payment upon mandatory
redemption of the Convertible Preferred Stock (each
of (i) and (ii) being a "Triggering Event"), (a) the
number of directors of the Holding Company will be
increased by two and, subject to obtaining any
necessary regulatory approvals, which the Holding
Company agrees to use its best efforts to obtain as
soon as practicable after the occurrence of a
Triggering Event, the holders of all outstanding
shares of Convertible Preferred Stock, voting
separately as a class, will be entitled to elect the
additional two directors and (b) the dividend rate on
the Convertible Preferred Stock shall automatically
increase by 100 basis points for the period from and
including the date of the occurrence of such
Triggering Event. The two additional directors shall
serve and the increased dividend rate shall be
payable until all dividends accrued and unpaid have
been paid or declared and funds set aside to provide
for payment in full or the Holding Company fulfills
its mandatory redemption obligation, as the case may
be.
In addition, without the vote or consent of the holders of at least a majority
of the shares of Convertible Preferred Stock then outstanding, the Holding
Company may not (a) create or issue or increase the authorized number of shares
of any class or series of stock ranking prior to the Convertible Preferred Stock
either as to dividends or upon liquidation, dissolution or winding up, or any
security convertible into or exercisable or exchangeable for such stock or (b)
amend, alter or repeal any of the provisions of the Certificate of Incorporation
so as to affect adversely any right, preference, privilege or voting power of
the Convertible Preferred Stock or the holders thereof; provided however, that
any increase in the amount of authorized preferred stock or the creation and
issuance of any other class, of preferred stock, or any increase in the amount
of authorized shares of such class or of any other class of preferred stock, in
each case ranking on a parity with or junior to the Convertible Preferred Stock
with respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up, will not be deemed to affect adversely
such rights, preferences or voting powers.
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<PAGE> 101
Exhibit 3
Form of Registration Right Agreement
See Exhibit 10.2 to MONY S-1 Registration Statement
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<PAGE> 102
Private Resale Terms
Disclosure Document: From and after the date following six months after
the First Closing Date, the Company shall prepare a
disclosure document to be used in connection with
private resales of the Company Notes pursuant to
Section 1.6(b) which shall be acceptable to the
holders selling Company Notes and which shall include
narrative and financial disclosure concerning the
Company and its operations substantially consistent
in scope with that used in connection with the sale
of the Company's 11-1/4% Surplus Notes due 2024.
Management Assistance: The Company shall make its senior management
reasonably available to the selling holders and
prospective purchasers of the Company Notes and
provide reasonable assistance to the selling holders
in the marketing of the Company Notes consistent with
that provided in connection with the sale of the
Company's 11-1/4% Surplus Notes due 2024.
Underwritten Offerings: The selling holders shall have the right to sell in
unregistered underwritten offerings and to require
that the Company and the selling holders enter into a
purchase agreement. The terms and conditions of, and
the obligations of the Company with respect to, any
such underwritten offerings shall be consistent with
those contemplated by the Registration Rights
Agreement and the underwriting of the Company's
11-1/4% Surplus Notes due 2024..
Indemnification: Whether or not a purchase agreement is entered into,
the selling holders shall have the right to require
that the Company and the selling holders enter into
an agreement providing for reciprocal indemnification
and contribution with respect to any disclosure
document prepared and used in connection with any
private resale that is consistent with the
indemnification and contribution provisions contained
in Section 2.9 of the Registration Rights Agreement.
Opinions: The Company shall provide or cause to be provided to
the purchasers an opinion of counsel as to the
validity and enforceability of the Company Notes
being sold.
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EXHIBIT 5-A
Opinion of Senior Vice President
and General Counsel of the Company at First Closing
(i) The Company and each of its Subsidiaries has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of its respective jurisdiction of
incorporation, with full corporate power and authority to own its
properties and conduct its business as currently conducted and to
perform its obligations under the Contracts to which its is a party.
(ii) Each of the Company, the Holding Company and
each other Significant Subsidiary of the Company is duly qualified as a
foreign corporation or partnership to transact business and is in good
standing in each jurisdiction in which it owns or leases substantial
properties or in which the conduct of its business requires such
qualification, except where the failure to be so qualified and in good
standing would not, in any case or in the aggregate, have a Material
Adverse Effect.
(iii) All of the issued shares of capital stock of
each Subsidiary of the Company have been duly and validly authorized
and issued, are fully paid and non-assessable and (except for
directors' qualifying shares) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims.
(iv) Each of the Company and MLOA is duly licensed as
an insurance company in its respective jurisdiction of incorporation
and is duly licensed or authorized as an insurer in each other
jurisdiction where it is required to be so licensed or authorized to
conduct its business as currently conducted or proposed to be
conducted, in each case with such exceptions, individually or in the
aggregate, as would not have a Material Adverse Effect; each of the
Company and MLOA is in compliance with the requirements of its
Applicable Insurance Laws, and has filed all Notices required to be
filed thereunder, in each case, with such exceptions, individually or
in the aggregate, as would not have a Material Adverse Effect; and,
except as set forth on Schedule 3.1(o), neither the Company nor MLOA
has received any notification from any insurance regulatory authority
to the effect that any additional Approval from such insurance
regulatory authority is needed to be obtained by the Company or MLOA in
any case where it could be reasonably expected that obtaining such
Approvals or the failure to obtain such Approvals would have a Material
Adverse Effect.
(v) No Approval is required to be obtained, made or
given, and no Notice is required to be filed, by or with respect to the
Company, the Holding Company or any other Subsidiary of the Company in
connection with the execution and delivery by the Company or the
Holding Company, as the case may be, of the Transaction Agreements, the
issue and sale of the Notes and the Warrants, the issue and delivery of
the Holding Company Notes and the Convertible Preferred Stock, the
issue and delivery in exchange for Warrants or Convertible Preferred
Stock of the shares of Holding Company Common Stock to be issued and so
delivered by the Holding Company pursuant thereto, the
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<PAGE> 104
adoption and consummation of a Plan, the performance by the Company,
the Holding Company or any other Subsidiary of the Company of their
respective obligations under the Transaction Agreements, or the
consummation of the Transactions, other than (a) under the HSR Act with
respect to the acquisition of Holding Company Common Stock in exchange
for Warrants or Convertible Preferred Stock, (b) under the insurance
laws of the States of New York and Arizona with respect to the
effectuation of a Plan and the IPO and the acquisition of Holding
Company Common Stock in exchange for Warrants or Convertible Preferred
Stock, (c) registration of the shares of Holding Company Common Stock,
the Holding Company Notes and the Convertible Preferred Stock under the
Securities Act and the Exchange Act (if applicable) and any securities
and insurance securities laws of any State with respect to the issuance
of the Holding Company Notes and Convertible Preferred Stock and the
effectuation of a Plan and the IPO, (d) filings, at any time, of tax
returns, tax reports and tax information statements and (e) as
otherwise specified on Schedule 3.1(d); and other than the
Superintendent, no Governmental Authority has authority to disapprove
any payment on the Notes under any Applicable Insurance Laws.
(vi) None of the execution and delivery of any of the
Investment Agreement, the compliance by the Company and the Holding
Company, as applicable, with all of the provisions of the Transaction
Agreements and the consummation of any of the Transactions will (i)
conflict with or result in a breach of any provision of the Certificate
of Incorporation or By-Laws (or other organizational documents) of the
Company, the Holding Company or any other Subsidiary of the Company
(assuming, with respect to the Transactions to be consummated after the
First Closing, the amendment of such organizational documents of the
Company and of the Holding Company as contemplated by Exhibit 1 and by
a Plan) or (ii) except (A) with respect to the termination of the
investment advisory contracts entered into by the Company or any
Subsidiary of the Company as an investment adviser that are subject to
the Investment Advisers Act or the Investment Company Act, (B) with
respect to (1) any consent or approval required under any of the real
estate joint venture agreements, real estate leases, mortgage loans and
other real estate related agreements set forth in Schedule 3.1(e) and
(2) any Real Property Approvals, and (C) as otherwise specified in
Schedule 3.1(e), result in any conflict with, breach of or default
(with or without notice or lapse of time or both) under, or give rise
to any right of termination, cancellation or acceleration of any
obligation or loss of any benefit under, or result in the imposition of
any Liens on any of their respective properties or assets under, or
require any consent or approval which has not been obtained with
respect to, (1) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement or instrument or permit,
concession, franchise or license to which the Company, the Holding
Company or any other Subsidiary of the Company is a party or by which
the Company, the Holding Company or any other Subsidiary of the Company
or any of their respective properties or assets may be bound, except
where such conflict, breach or default, termination, cancellation or
acceleration, imposition or failure to obtain any consent or approval
referred to in this clause (1) would not in any case or in the
aggregate have a Material Adverse Effect, or (2) any order, decree or
injunction or, assuming that the Approvals referred to in clauses (a)
through (e) of paragraph (v) above have been obtained or made, any law,
rule or regulation applicable to the Company, the Holding Company or
any other Subsidiary of the
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<PAGE> 105
Company or any of their respective properties or assets, with such
exceptions, individually or in the aggregate, as would not be
reasonably likely to (x) have a Material Adverse Effect, (y) affect the
validity of any of the Subject Securities or (z) prevent the
consummation of any of the Transactions.
(vii) Each Broker-Dealer Subsidiary and each
Investment Adviser Subsidiary is duly licensed or registered as a
broker-dealer or investment adviser, as the case may be, in each
jurisdiction (including the United States) where it is required to be
so licensed or registered to conduct its business as currently
conducted or as proposed to be conducted, in each case, with such
exceptions, individually or in the aggregate, as would not have a
Material Adverse Effect; each Broker-Dealer Subsidiary and Investment
Adviser Subsidiary has all other necessary Approvals of and from all
applicable regulatory authorities to conduct their respective
businesses as currently conducted or as proposed to be conducted, in
each case with such exceptions, individually or in the aggregate, as
would not have a Material Adverse Effect; except as set forth on
Schedule 3.1(o), none of the Broker-Dealer Subsidiaries or Investment
Adviser Subsidiaries has received any notification from any applicable
regulatory authority to the effect that any additional Approvals from
such regulatory authority are needed to be obtained by such subsidiary
in any case where it could be reasonably expected that (x) any of the
Broker-Dealer Subsidiaries or Investment Adviser Subsidiaries would in
fact be required either to obtain any such additional Approvals or
cease or otherwise limit engaging in certain business and (y) the
process of obtaining such Approvals or limiting such business would
have a Material Adverse Effect; and each Broker-Dealer Subsidiary and
Investment Adviser Subsidiary is in compliance with the requirements of
the applicable broker-dealer and investment adviser laws and
regulations of each jurisdiction which is applicable to such
subsidiary, and has filed all Notices required to be filed thereunder,
in each case with such exceptions, individually or in the aggregate, as
would not have a Material Adverse Effect.
(viii) Each Insurance Company possesses an Insurance
License in each State or other jurisdiction in which such Insurance
Company is required to possess an Insurance License, except where the
failure to possess Insurance Licenses would not, individually or in the
aggregate, have a Material Adverse Effect. All such Insurance Licenses
are in full force and effect and neither the Company nor any Subsidiary
of the Company has received any notice of any event, inquiry,
investigation or proceeding that would reasonably be expected to result
in the suspension, revocation or limitation of any such Insurance
License, except where the failure to possess Insurance Licenses would
not, individually or in the aggregate, have a Material Adverse Effect,
and to the knowledge of the Insurance Companies, there is no
sustainable basis for any such suspension, revocation or limitation.
(ix) Except as set forth in Schedule 3.1(n) and other
than Litigation relating to taxes, there is no Litigation now pending,
or, to the knowledge of such counsel, threatened, against or relating
to the Company or any of its Subsidiaries, or any director or officer
of the Company or any of its Significant Subsidiaries in his capacity
as such, or the assets, properties or business of the Company or any of
its Subsidiaries (whether or not covered by insurance) (A) involving a
claim made prior to the date of the Investment
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<PAGE> 106
Agreement of more than $5,000,000, (B) which could adversely affect the
ability of the Company or the Holding Company to consummate any of the
Transactions, (C) which could reasonably be expected to have a Material
Adverse Effect, (D) involving any former officers or directors of the
Company or any of its Subsidiaries as a party adverse to the Company or
any of its Subsidiaries, (E) involving criminal proceedings or
investigations against or targeting the Company, any of its
Subsidiaries or any of such directors or officers in their capacity as
such, (F) involving extraordinary regulatory proceedings, (G) adverse
to the Company or any sponsoring Subsidiaries involving any claims,
whether individual or class action, relating to life insurance or
annuity-related sales practices, including "churning", "vanishing
premium", "replacement", "policy illustration" or similar claims or (H)
involving any investment advisory client of the Company or any of its
Subsidiaries with assets under management in excess of $50,000,000 and
adverse to the Company or any of its Subsidiaries.
(x) Except as set forth in Schedule 3.1(n), neither
the Company nor any of its Subsidiaries nor any of their respective
officers or directors is subject to any permanent, preliminary or
temporary injunction or prohibitive order, judgment or decree of any
Governmental Authority which could adversely affect the ability of the
Company or the Holding Company to consummate the Transactions or which
(x) restricts in any material respect the ability of the Company or of
any Significant Subsidiary to conduct its business or to engage in any
other business or (y) enjoins or prohibits any officer or director of
the Company or of any Significant Subsidiary from taking, or requires
any of such officers or directors to take, in his capacity as such, any
action of any kind or enjoins or prohibits any such officer or director
from violating any law or regulation.
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EXHIBIT 5-B
Opinion of Dewey Ballantine
at First Closing
(i) The Company has been duly organized and is
validly existing as a mutual life insurance company in good standing
under the laws of the State of New York, with corporate power and
authority to own its properties and conduct its business as currently
conducted.
(ii) The Holding Company has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of the State of Delaware.
(iii) Each of the Company and the Holding Company has
full corporate power and authority to execute and deliver the
Transaction Agreements and such other instruments to be executed by it
pursuant to the Investment Agreement and to perform its obligations
thereunder in accordance with their respective terms; the Company has
full corporate power and authority to issue and sell the Notes and the
Holding Company has full corporate power and authority to issue and
sell the Warrants, to issue the Holding Company Notes and the
Convertible Preferred Stock and to perform its obligations thereunder
in accordance with their respective terms; each of the Company and the
Holding Company has full corporate power and authority to consummate a
Plan, subject to approval thereof by the Superintendent and the
policyholders of the Company in accordance with Section 7312 and any
changes in their respective certificates of incorporation or by-laws
provided for in a Plan.
(iv) Each of the Company and the Holding Company has
taken all necessary corporate action to duly and validly authorize its
execution and delivery of the Transaction Agreements and the other
instruments to be executed by it pursuant to the Investment Agreement
and the consummation of the Transactions (except with respect to the
adoption of a Plan by the Board and the approval of the IPO); each of
the Investment Agreement and the Registration Rights Agreement has been
duly executed and delivered by the Company and the Holding Company and
constitutes a valid and legally binding obligation of each of the
Company and the Holding Company, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, rehabilitation, liquidation,
reorganization, moratorium and similar laws of general applicability
relating to creditors' rights and to general equity principles,
regardless of whether enforceability is considered in a proceeding at
law or in equity; provided, however, that such counsel expresses no
opinion on the enforceability of Section 2.9 of the Registration Rights
Agreement.
(v) The provisions of Section 203 of the General
Corporation Law of the State of Delaware will not apply to the
Investors or their Subsidiaries or to the transactions contemplated by
Investment Agreement.
<PAGE> 108
(vi) The Notes have been duly authorized, executed,
issued and delivered and constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms
and entitled to the benefits of the Fiscal Agency Agreement, subject to
bankruptcy, insolvency, rehabilitation, liquidation, reorganization,
moratorium and similar laws of general applicability relating to
creditors' rights or rights of creditors of insurance companies
generally and to general equity principles, regardless of whether
enforceability is considered in a proceeding at law or in equity,
including, without limitation, Section 1307 of the New York Insurance
Law, free and clear of all Liens, except for those arising out of any
action or inaction of the holders thereof.
(vii) The Fiscal Agency Agreement has been duly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Fiscal Agent, constitutes
a valid and legally binding instrument, subject to bankruptcy,
insolvency, rehabilitation, liquidation, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights or rights of creditors of insurance companies
generally and to general principles of equity, regardless of whether
enforceability is considered in a proceeding at law or in equity,
including, without limitation, Section 1307 of the New York Insurance
Law.
(viii) The Warrants have been duly authorized,
executed, issued and delivered by each of the Holding Company and the
Company and constitute valid and legally binding obligations of each of
the Holding Company and the Company, subject to bankruptcy, insolvency,
rehabilitation, liquidation, reorganization, moratorium and similar
laws of general applicability relating to creditors' rights or rights
of creditors of insurance companies generally and to general equity
principles, regardless of whether enforceability is considered in a
proceeding at law or in equity, free and clear of all Liens, except for
those arising out of any action or inaction of the holders thereof; and
the shares of Holding Company Common Stock issuable upon exercise of
the Warrants have been duly authorized and reserved for issuance upon
such exercise.
(ix) No Approval of or with any United States or New
York court or insurance regulatory agency or other governmental body
having jurisdiction over the Company or its Subsidiaries known to such
counsel is required to be obtained, made or given, and no Notice is
required to be filed with any such court or governmental body, by or
with respect to the Company, the Holding Company or any other
Subsidiary of the Company in connection with the execution and delivery
by the Company and the Holding Company of the Transaction Agreements,
the issue and sale of the Notes and the Warrants, the issue and
delivery of the Holding Company Notes and the Convertible Preferred
Stock, the issue and delivery in exchange for Warrants or Convertible
Preferred Stock of the shares of Holding Company Common Stock to be
issued and so delivered by the Holding Company pursuant thereto, the
adoption and consummation of a Plan, the performance by the Company,
the Holding Company or any other Subsidiary of the Company of their
respective obligations under the Transaction Agreements, or the
consummation of the Transactions, other than (a) under the HSR Act with
respect to the acquisition of Holding Company Common Stock in exchange
for Warrants or Convertible Preferred Stock, (b) under the insurance
laws of the States of New York and Arizona with respect to the
effectuation of a Plan and the IPO and the acquisition of
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<PAGE> 109
Holding Company Common Stock in exchange for Warrants or Convertible
Preferred Stock, (c) registration of the shares of Holding Company
Common Stock, the Holding Company Notes and the Convertible Preferred
Stock under the Securities Act and the Exchange Act (if applicable) and
any securities and insurance securities laws of any State with respect
to the issuance of a Holding Company Notes and Convertible Preferred
Stock and the effectuation of a Plan and a IPO, (d) filings, at any
time, of tax returns, tax reports and tax information statements and
(e) as otherwise specified on Schedule 3.1(d); and other than the
Superintendent, no Governmental Authority has authority to disapprove
any payment on the Notes under any Applicable Insurance Laws.
(x) None of the execution and delivery of any of the
Investment Agreement, the compliance by the Company and the Holding
Company, as applicable, with all of the provisions of the Transaction
Agreements and the consummation of any of the Transactions will (i)
conflict with or result in a breach of any provision of the Certificate
of Incorporation or By-Laws (or other organizational documents) of the
Company or the Holding Company (assuming, with respect to the
Transactions to be consummated after the First Closing, the amendment
of such organizational documents of the Company and of the Holding
Company as contemplated by Exhibit 1 and by a Plan) or (ii) conflict
with or result in breach or violation of any order, decree or
injunction known to such counsel or, assuming that the Approvals
referred to in clauses (a) through (e) of paragraph (ix) above have
been obtained or made, any United States or New York statute or any
rule or regulation known to such counsel of any United States or New
York court or insurance regulatory authority or other governmental
agency or body having jurisdiction over the Company or any of its
Subsidiaries or properties, with such exceptions, individually or in
the aggregate, as would not be reasonably likely to (x) have a Material
Adverse Effect, (y) affect the validity of any of the Subject
Securities or (z) prevent the consummation of any of the Transactions.
(xi) Neither the registration of the Notes or the
Warrants under the Securities Act, nor the qualification of an
indenture under the Trust Indenture Act of 1939, as amended, with
respect to the Notes, is required for the offer and sale of the Notes
and the Warrants to the Investors pursuant to the Investment Agreement.
(xii) Neither the Company nor the Holding Company is
an open-end investment company, unit investment trust or face-amount
certificate company that is or is required to be registered under the
Investment Company Act, although certain separate accounts of the
Company are registered as investment companies under the Investment
Company Act.
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EXHIBIT 6
Opinion of Sullivan & Cromwell
at First Closing
(i) Each Investor has full partnership power and
authority to execute and deliver the Investment Agreement and the
Registration Rights Agreement and to perform its obligations thereunder
in accordance with their respective terms.
(ii) Each Investor has taken all necessary
partnership action to duly and validly authorize the execution and
delivery of the Investment Agreement and the Registration Rights
Agreement.
(iii) Each of the Investment Agreement and the
Registration Rights Agreement has been duly executed and delivered by
each Investor and constitutes a valid and legally binding obligation of
such Investor, enforceable in accordance with its terms subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights; provided, however, that such counsel expresses no
opinion with respect to the provisions set forth in Section 2.9 of the
Registration Rights Agreement.
(iv) The execution and delivery by each Investor of
the Investment Agreement and the Registration Rights Agreement, the
purchase by each Investor of the Notes and Warrants to be purchased by
such Investor and the performance by such Investor of its obligations
under the Investment Agreement and the Registration Rights Agreement
will not (a) violate such Investor's partnership agreement or (b)
violate any Federal law of the United States or law of the State of New
York applicable to such Investor; provided, however, that, for purposes
of this paragraph (iv), such counsel expresses no opinion with respect
to Federal or state securities laws, other antifraud laws, fraudulent
transfer laws and the Employee Retirement Income Security Act of 1974
and related laws; provided, further, that insofar as performance by
such Investor of its obligations under each of the Investment Agreement
and the Registration Rights Agreement is concerned, we express no
opinion as to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or affecting credits'
rights.
(v) No Approval of or with any United States or New
York court or insurance regulatory agency or other United States or New
York governmental body having jurisdiction over the Investors known to
such counsel is required to be obtained, made or given in connection
with the execution and delivery by the Investors of the Investment
Agreement and the Registration Rights Agreement, the purchase by the
Investors of the Notes and Warrants and the performance by the
Investors of their obligations under the Investment Agreement and the
Registration Rights Agreement.
<PAGE> 111
EXHIBIT 7-A
Opinion of Senior Vice President
and General Counsel of the Company at Second Closing
(i) The Holding Company and each of its Subsidiaries
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its respective jurisdiction of
incorporation, with full corporate power and authority to own its
properties and conduct its business as currently conducted and to
perform its obligations under the Contracts to which its is a party.
(ii) Each of the Holding Company, the Company and
each other Significant Subsidiary of the Holding Company is duly
qualified as a foreign corporation or partnership to transact business
and is in good standing in each jurisdiction in which it owns or leases
substantial properties or in which the conduct of its business requires
such qualification, except where the failure to be so qualified and in
good standing would not, in any case or in the aggregate, have a
Material Adverse Effect.
(iii) All of the issued shares of capital stock of
each Subsidiary of the Holding Company have been duly and validly
authorized and issued, are fully paid and non-assessable and (except
for directors' qualifying shares) are owned directly or indirectly by
the Holding Company, free and clear of all liens, encumbrances,
equities or claims.
(iv) Each of the Company and MLOA is duly licensed as
an insurance company in its respective jurisdiction of incorporation
and is duly licensed or authorized as an insurer in each other
jurisdiction where it is required to be so licensed or authorized to
conduct its business as currently conducted or proposed to be
conducted, in each case with such exceptions, individually or in the
aggregate, as would not have a Material Adverse Effect; each of the
Company and MLOA is in compliance with the requirements of its
Applicable Insurance Laws, and has filed all Notices required to be
filed thereunder, in each case, with such exceptions, individually or
in the aggregate, as would not have a Material Adverse Effect; and,
except as set forth on Schedule 3.1(o), neither the Company nor MLOA
has received any notification from any insurance regulatory authority
to the effect that any additional Approval from such insurance
regulatory authority is needed to be obtained by the Company or MLOA in
any case where it could be reasonably expected that obtaining such
Approvals or the failure to obtain such Approvals would have a Material
Adverse Effect.
(v) No Approval is required to be obtained, made or
given, and no Notice is required to be filed, by or with respect to the
Holding Company, the Company or any other Subsidiary of the Holding
Company in connection with the issue and sale of the Convertible
Preferred Stock, the issue and delivery of the Holding Company Notes,
the issue and delivery in exchange for Warrants or Convertible
Preferred Stock of the shares of Holding Company Common Stock to be
issued and so delivered by the Holding
<PAGE> 112
Company pursuant thereto, the performance by the Holding Company, the
Company or any other Subsidiary of the Holding Company of their
respective obligations under the Transaction Agreements, or the
consummation of the Transactions, other than (a) under the HSR Act with
respect to the acquisition of Holding Company Common Stock in exchange
for Warrants or Convertible Preferred Stock, (b) under the insurance
laws of the States of New York and Arizona with respect to the
effectuation of the IPO and the acquisition of Holding Company Common
Stock in exchange for Warrants or Convertible Preferred Stock, (c)
registration of the shares of Holding Company Common Stock, the Holding
Company Notes and the Convertible Preferred Stock under the Securities
Act and the Exchange Act (if applicable) and any securities and
insurance securities laws of any State with respect to the issuance of
the Holding Company Notes and Convertible Preferred Stock and the
effectuation of the IPO, (d) filings, at any time, of tax returns, tax
reports and tax information statements and (e) as otherwise specified
on Schedule 3.1(d); and other than the Superintendent, no Governmental
Authority has authority to disapprove any payment on the Convertible
Preferred Stock under any Applicable Insurance Laws.
(vi) None of the issue and sale of the Convertible
Preferred Stock, the compliance by the Holding Company and the Company,
as applicable, with all of the provisions of the Transaction Agreements
and the consummation of any of the Transactions will (i) conflict with
or result in a breach of any provision of the Certificate of
Incorporation or By-Laws (or other organizational documents) of the
Holding Company, the Company or any other Subsidiary of the Holding
Company or (ii) except (A) with respect to the termination of the
investment advisory contracts entered into by the Company or any
Subsidiary of the Holding Company as an investment adviser that are
subject to the Investment Advisers Act or the Investment Company Act,
(B) with respect to (1) any consent or approval required under any of
the real estate joint venture agreements, real estate leases, mortgage
loans and other real estate related agreements set forth in Schedule
3.1(e) and (2) any Real Property Approvals, and (C) as otherwise
specified in Schedule 3.1(e), result in any conflict with, breach of or
default (with or without notice or lapse of time or both) under, or
give rise to any right of termination, cancellation or acceleration of
any obligation or loss of any benefit under, or result in the
imposition of any Liens on any of their respective properties or assets
under, or require any consent or approval which has not been obtained
with respect to, (1) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement or instrument or permit,
concession, franchise or license to which the Holding Company, the
Company or any other Subsidiary of the Company is a party or by which
the Holding Company, the Company or any other Subsidiary of the Company
or any of their respective properties or assets may be bound, except
where such conflict, breach or default, termination, cancellation or
acceleration, imposition or failure to obtain any consent or approval
referred to in this clause (1) would not in any case or in the
aggregate have a Material Adverse Effect, or (2) any order, decree or
injunction or, assuming that the Approvals referred to in clauses (a)
through (e) of paragraph (v) above have been obtained or made, any law,
rule or regulation applicable to the Holding Company, the Company or
any other Subsidiary of the Company or any of their respective
properties or assets, with such exceptions, individually or in the
aggregate, as would not be reasonably likely to (x) have
2
<PAGE> 113
a Material Adverse Effect, (y) affect the validity of any of the
Subject Securities or (z) prevent the consummation of any of the
Transactions.
(vii) Each Broker-Dealer Subsidiary and each
Investment Adviser Subsidiary is duly licensed or registered as a
broker-dealer or investment adviser, as the case may be, in each
jurisdiction (including the United States) where it is required to be
so licensed or registered to conduct its business as currently
conducted or as proposed to be conducted, in each case, with such
exceptions, individually or in the aggregate, as would not have a
Material Adverse Effect; each Broker-Dealer Subsidiary and Investment
Adviser Subsidiary has all other necessary Approvals of and from all
applicable regulatory authorities to conduct their respective
businesses as currently conducted or as proposed to be conducted, in
each case with such exceptions, individually or in the aggregate, as
would not have a Material Adverse Effect; except as set forth on
Schedule 3.1(o), none of the Broker-Dealer Subsidiaries or Investment
Adviser Subsidiaries has received any notification from any applicable
regulatory authority to the effect that any additional Approvals from
such regulatory authority are needed to be obtained by such subsidiary
in any case where it could be reasonably expected that (x) any of the
Broker-Dealer Subsidiaries or Investment Adviser Subsidiaries would in
fact be required either to obtain any such additional Approvals or
cease or otherwise limit engaging in certain business and (y) the
process of obtaining such Approvals or limiting such business would
have a Material Adverse Effect; and each Broker-Dealer Subsidiary and
Investment Adviser Subsidiary is in compliance with the requirements of
the applicable broker-dealer and investment adviser laws and
regulations of each jurisdiction which is applicable to such
subsidiary, and has filed all Notices required to be filed thereunder,
in each case with such exceptions, individually or in the aggregate, as
would not have a Material Adverse Effect.
(viii) Each Insurance Company possesses an Insurance
License in each State or other jurisdiction in which such Insurance
Company is required to possess an Insurance License, except where the
failure to possess Insurance Licenses would not, individually or in the
aggregate, have a Material Adverse Effect. All such Insurance Licenses
are in full force and effect and neither the Company nor any other
Subsidiary of the Holding Company has received any notice of any event,
inquiry, investigation or proceeding that would reasonably be expected
to result in the suspension, revocation or limitation of any such
Insurance License, except where the failure to possess Insurance
Licenses would not, individually or in the aggregate, have a Material
Adverse Effect, and to the knowledge of the Insurance Companies, there
is no sustainable basis for any such suspension, revocation or
limitation.
(ix) Except as set forth in Schedule 3.1(n) and other
than Litigation relating to taxes, there is no Litigation now pending,
or, to the knowledge of such counsel, threatened, against or relating
to the Holding Company or any of its Subsidiaries, or any director or
officer of the Holding Company or any of its Significant Subsidiaries
in his capacity as such, or the assets, properties or business of the
Holding Company or any of its Subsidiaries (whether or not covered by
insurance) (A) involving a claim made prior to the date of the
Investment Agreement of more than $5,000,000, (B) which could adversely
affect the ability of the Holding Company or the Company to consummate
any
3
<PAGE> 114
of the Transactions, (C) which could reasonably be expected to have a
Material Adverse Effect, (D) involving any former officers or directors
of the Holding Company or any of its Subsidiaries as a party adverse to
the Holding Company or any of its Subsidiaries, (E) involving criminal
proceedings or investigations against or targeting the Holding Company,
any of its Subsidiaries or any of such directors or officers in their
capacity as such, (F) involving extraordinary regulatory proceedings,
(G) adverse to the Holding Company or any sponsoring Subsidiaries
involving any claims, whether individual or class action, relating to
life insurance or annuity-related sales practices, including
"churning", "vanishing premium", "replacement", "policy illustration"
or similar claims or (H) involving any investment advisory client of
the Holding Company or any of its Subsidiaries with assets under
management in excess of $50,000,000 and adverse to the Holding Company
or any of its Subsidiaries.
(x) Except as set forth in Schedule 3.1(n), neither
the Holding Company nor any of its Subsidiaries nor any of their
respective officers or directors is subject to any permanent,
preliminary or temporary injunction or prohibitive order, judgment or
decree of any Governmental Authority which could adversely affect the
ability of the Holding Company or the Company to consummate the
Transactions or which (x) restricts in any material respect the ability
of the Holding Company or of any Significant Subsidiary to conduct its
business or to engage in any other business or (y) enjoins or prohibits
any officer or director of the Holding Company or of any Significant
Subsidiary from taking, or requires any of such officers or directors
to take, in his capacity as such, any action of any kind or enjoins or
prohibits any such officer or director from violating any law or
regulation.
4
<PAGE> 115
EXHIBIT 7-B
Opinion of Dewey Ballantine
at Second Closing
(i) The Holding Company has been duly organized and
is validly existing as a mutual life insurance company in good standing
under the laws of the State of New York, with corporate power and
authority to own its properties and conduct its business as currently
conducted.
(ii) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Delaware, with corporate power and authority to own its
properties and conduct its business as currently conducted.
(iii) The Holding Company has full corporate power
and authority to issue the Convertible Preferred Stock and the Holding
Company Notes and to perform its obligations thereunder in accordance
with their respective terms.
(iv) Each of the Holding Company and the Company has
taken all necessary corporate action to duly and validly authorize its
execution and delivery of the Convertible Preferred Stock and the other
instruments to be executed by it pursuant to the Investment Agreement
and the consummation of the Transactions; each of the Investment
Agreement and the Registration Rights Agreement constitutes a valid and
legally binding obligation of each of the Holding Company and the
Company, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, rehabilitation, liquidation, reorganization,
moratorium and similar laws of general applicability relating to
creditors' rights and to general equity principles, regardless of
whether enforceability is considered in a proceeding at law or in
equity; provided, however, that such counsel expresses no opinion on
the enforceabiltiy of Section 2.9 of the Registration Rights Agreement.
(v) The provisions of Section 203 of the General
Corporation Law of the State of Delaware will not apply to the
Investors or their Subsidiaries or to the transactions contemplated by
Investment Agreement.
(vi) The Convertible Preferred Stock been duly
authorized and validly issued and is fully paid and non-assessable,
free and clear of all Lien; no holder of Convertible Preferred Stock is
or will be subject to personal liability by reason of being such a
holder; and the shares of Holding Company Common Stock issuable upon
conversion of such Convertible Preferred Stock have been duly
authorized and reserved for issuance upon such conversion.
(vii) The Fiscal Agency Agreement constitutes a valid
and legally binding instrument, subject to bankruptcy, insolvency,
rehabilitation, liquidation, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights or rights of creditors of insurance companies generally and to
general principles of
<PAGE> 116
equity, regardless of whether enforceability is considered in a
proceeding at law or in equity, including, without limitation, Section
1307 of the New York Insurance Law.
(viii) The Warrants constitute valid and legally
binding obligations of each of the Holding Company and the Company,
subject to bankruptcy, insolvency, rehabilitation, liquidation,
reorganization, moratorium and similar laws of general applicability
relating to creditors' rights or rights of creditors of insurance
companies generally and to general equity principles, regardless of
whether enforceability is considered in a proceeding at law or in
equity, free and clear of all Liens, except for those arising out of
any action or inaction of the holders thereof.
(ix) No Approval of or with any United States or New
York court or insurance regulatory agency or other governmental body
having jurisdiction over the Holding Company or its Subsidiaries known
to such counsel is required to be obtained, made or given, and no
Notice is required to be filed with any such court or governmental
body, by or with respect to the Holding Company, the Company or any
other Subsidiary of the Holding Company in connection with the issue
and sale of the Convertible Preferred Stock, the issue and delivery of
the Holding Company Notes, the issue and delivery in exchange for
Warrants or Convertible Preferred Stock of the shares of Holding
Company Common Stock to be issued and so delivered by the Holding
Company pursuant thereto, the performance by the Holding Company, the
Company or any other Subsidiary of the Holding Company of their
respective obligations under the Transaction Agreements, or the
consummation of the Transactions, other than (a) under the HSR Act with
respect to the acquisition of Holding Company Common Stock in exchange
for Warrants or Convertible Preferred Stock, (b) under the insurance
laws of the States of New York and Arizona with respect to the
effectuation of the IPO and the acquisition of Holding Company Common
Stock in exchange for Warrants or Convertible Preferred Stock, (c)
registration of the shares of Holding Company Common Stock, the Holding
Company Notes and the Convertible Preferred Stock under the Securities
Act and the Exchange Act (if applicable) and any securities and
insurance securities laws of any State with respect to the issuance of
a Holding Company Notes and Convertible Preferred Stock and the
effectuation of a Plan and a IPO, (d) filings, at any time, of tax
returns, tax reports and tax information statements and (e) as
otherwise specified on Schedule 3.1(d); and other than the
Superintendent, no Governmental Authority has authority to disapprove
any payment on the Convertible Preferred Stock under any Applicable
Insurance Laws.
(x) None of the issue and sale of the Convertible
Preferred Stock, the compliance by the Holding Company and the Company,
as applicable, with all of the provisions of the Transaction Agreements
and the consummation of any of the Transactions will (i) conflict with
or result in a breach of any provision of the Certificate of
Incorporation or By-Laws (or other organizational documents) of the
Holding Company or the Company or (ii) conflict with or result in
breach or violation of any order, decree or injunction known to such
counsel or, assuming that the Approvals referred to in clauses (a)
through (e) of paragraph (ix) above have been obtained or made, any
United States or New York statute or any rule or regulation known to
such counsel of any United States or New York court or insurance
regulatory authority or other
2
<PAGE> 117
governmental agency or body having jurisdiction over the Company or any
of its Subsidiaries or properties, with such exceptions, individually
or in the aggregate, as would not be reasonably likely to (x) have a
Material Adverse Effect, (y) affect the validity of any of the Subject
Securities or (z) prevent the consummation of any of the Transactions.
(xi) The registration of the Convertible Preferred
Stock under the Securities Act has been effected.
(xii) The Company is not an open-end investment
company, unit investment trust or face-amount certificate company that
is or is required to be registered under the Investment Company Act,
although certain separate accounts of the Company are registered as
investment companies under the Investment Company Act.
3
<PAGE> 118
EXHIBIT 8
Opinion of Sullivan & Cromwell
at Second Closing
(i) Each of the Investment Agreement and the
Registration Rights Agreement constitutes a valid and legally binding
obligation of each Investor, enforceable in accordance with its terms
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights; provided, however, that such counsel
expresses no opinion with respect to the provisions set forth in
Section 2.9 of the Registration Rights Agreement.
(ii) The purchase by each Investor of the
Convertible Preferred Stock will not (a) violate such Investor's
partnership agreement or (b) violate any Federal law of the United
States or law of the State of New York applicable to such Investor;
provided, however, that, for purposes of this paragraph (iv), such
counsel expresses no opinion with respect to Federal or state
securities laws, other antifraud laws, fraudulent transfer laws and the
Employee Retirement Income Security Act of 1974 and related laws.
(iii) No Approval of or with any United States or
New York court or insurance regulatory agency or other United States or
New York governmental body having jurisdiction over the Investors known
to such counsel is required to be obtained, made or given in connection
with the purchase by the Investors of the Convertible Preferred Stock.
<PAGE> 119
EXHIBIT 9-A
Opinion of Senior Vice President
and General Counsel of the Company at Subsequent Closing
(i) The Holding Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full
corporate power and authority to own its properties and conduct its
business.
(ii) No Approval is required to be obtained, made
or given, and no Notice is required to be filed, by or with respect to
the Holding Company or any Subsidiary of the Holding Company in
connection with the issue and delivery by the Holding Company of the
Subject Securities being issued at such Subsequent Closing or the
compliance by the Holding Company with all of the provisions of such
Subject Securities.
Neither the issue and delivery of the Subject Securities being issued at
such Subsequent Closing nor the compliance by the Holding Company with all
of the provisions of such Subject Securities will (i) conflict with or
result in a breach of any provision of the Certificate of Incorporation or
By-Laws of the Holding Company or (ii) result in any conflict with, breach
of or default (with or without notice or lapse of time or both) under, or
give rise to any right of termination, cancellation or acceleration of any
obligation or loss of any benefit under, or result in the imposition of any
Liens on any of the respective properties or assets of the Holding Company
or any Subsidiary of the Holding Company under, or require any consent or
approval which has not been obtained with respect to, (1) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement
or instrument or permit, concession, franchise or license to which the
Holding Company or any Subsidiary of the Holding Company is a party or by
which the Holding Company or any Subsidiary of the Holding Company or any
of their respective properties or assets may be bound, except where such
conflict, breach or default, termination, cancellation or acceleration,
imposition or failure to obtain any consent or approval referred to in this
clause (1) would not in any case or in the aggregate have a Material
Adverse Effect, or (2) any order, decree, injunction, law, rule or
regulation applicable to the Holding Company or any Subsidiary of the
Holding Company or any of their respective properties or assets, with such
exceptions, individually or in the aggregate, as would not be reasonably
likely to (x) have a Material Adverse Effect or (y) affect the validity of
such Subject Securities.
<PAGE> 120
EXHIBIT 9-B
Opinion of Dewey Ballantine
at Subsequent Closing
(i) The Holding Company has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of the State of Delaware.
[If Holding Company Notes are being issued:
(ii) The Subject Securities being issued at such
Subsequent Closing have been duly authorized, executed, issued and
delivered, free and clear of all Liens; the indenture pursuant to which
such Subject Securities are being issued has been duly authorized,
executed and delivered by the Holding Company; such Subsequent
Securities and indentures constitute valid and legally binding
obligations of the Holding Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, rehabilitation, liquidation,
reorganization, moratorium and similar laws of general applicability
relating to creditors' rights or rights of creditors of insurance
companies generally and to general equity principles, regardless of
whether enforceability is considered in a proceeding at law or in
equity, including, without limitation, Section 1307 of the New York
Insurance Law; and such Subject Securities are entitled to the benefits
of such indenture.]
[If Holding Company Common Stock is being issued:
(iii) The Subject Securities being issued at such
Subsequent Closing have been duly authorized and validly issued and are
fully paid and non-assessable, free and clear of all Liens; and no
holder of such Subject Securities is or will be subject to personal
liability by reason of being such a holder.]
(iv) No Approval of or with any United States,
New York or Delaware court or insurance regulatory agency or other
governmental body having jurisdiction over the Holding Company or its
Subsidiaries known to such counsel is required to be obtained, made or
given, and no Notice is required to be filed with any such court or
governmental body, by or with respect to the Holding Company or any
Subsidiary of the Holding Company in connection with the issue and
delivery of the Subject Securities being issued at such Subsequent
Closing or the compliance by the Holding Company with all of the
provisions of such Subject Securities.
(v) Neither the issue and delivery of the Subject
Securities being issued at such Subsequent Closing or the compliance by
the Holding Company with all of the provisions of such Subject
Securities will (i) conflict with or result in a breach of any
provision of the Certificate of Incorporation or By-Laws of the Holding
Company or (ii)
-6-
<PAGE> 121
conflict with or result in breach or violation of any order, decree, or
injunction known to such counsel or any United States, New York or
Delaware statute or any rule or regulation known to such counsel of any
United States, New York or Delaware court or insurance regulatory
authority or other governmental agency or body having jurisdiction over
the Holding Company or any of its Subsidiaries or properties, with such
exceptions, individually or in the aggregate, as would not be
reasonably likely to (x) have a Material Adverse Effect or (y) affect
the validity of such Subject Securities.
-7-
<PAGE> 122
Schedule 1.1
Note Investors
INVESTORS:
The following is the initial list of the Investors and the proposed allocation
among such Investors with respect to the Notes. In the event that any other
potential Investor listed below becomes an Investor, the allocations will be
modified to reflect such new Investor.
GS Mezzanine Partners, L.P. $72,428,000
GS Mezzanine Partners Offshore, $38,892,000
Offshore, L.P.
Stone Street Fund 1997, L.P. $ 2,477,000
Bridge Street Fund 1997, $ 1,203,000
L.P.
Total $115,000,000
OTHER POTENTIAL INVESTORS:
Any direct or indirect Subsidiary of GS Mezzanine Partners, L.P. Any direct or
indirect Subsidiary of GS Mezzanine Partners Offshore, L.P.
The Goldman Sachs Group, L.P.
<PAGE> 123
Schedule 1.3
Convertible Preferred Stock Investors
INVESTORS:
The following is the initial list of the Investors and the proposed allocation
among such Investors with respect to the Convertible Preferred Stock. In the
event that any other potential Investor listed below becomes an Investor, the
allocations will be modified to reflect such new Investor.
GS Mezzanine Partners, L.P. 629,810 shares
GS Mezzanine Partners Offshore, L.P. 338,190 shares
Stone Street Fund 1997, L.P. 21,540 shares
Bridge Street Fund 1997, L.P. 10,460 shares
Total 1,000,000 shares
OTHER POTENTIAL INVESTORS:
Any direct or indirect Subsidiary of GS Mezzanine Partners, L.P. Any direct or
indirect Subsidiary of GS Mezzanine Partners Offshore, L.P.
The Goldman Sachs Group, L.P.
<PAGE> 124
Schedule 1.2
Warrant Investors
INVESTORS:
The following is the initial list of the Investors and the proposed allocation
among such Investors with respect to the Warrants. In the event that any other
potential Investor listed below becomes an Investor, the allocations will be
modified to reflect such new Investor.
<TABLE>
<CAPTION>
(percentage of fully
diluted Holding Company Common
Stock issuable
upon exercise of Warrants) Purchase Price
-------------------------- --------------
<S> <C> <C>
GS Mezzanine Partners, L.P. 4.40866087% $6,298,087
GS Mezzanine Partners 2.36733913% $3,381,913
Offshore, L.P.
Stone Street Fund 1997, L.P. 0.15077391% $215,391
Bridge Street Fund 1997, L.P. 0.07322609% $104,609
Total 7.00% $10,000,000
</TABLE>
OTHER POTENTIAL INVESTORS:
Any direct or indirect Subsidiary of GS Mezzanine Partners, L.P. Any direct or
indirect Subsidiary of GS Mezzanine Partners Offshore, L.P.
The Goldman Sachs Group, L.P.
<PAGE> 125
SCHEDULE 3.1(d)
CONSENTS
The issue and sale of the Subject Securities subsequent to the first closing may
require regulatory approval to be obtained, made or given, or notice required
if:
(1) any purchaser of an equity security is deemed under appropriate
statute to be a control person of any insurance subsidiary;
(2) there is any change in statute or regulation in an applicable
jurisdiction subsequent to the date thereof; and
(3) a company which becomes a subsidiary of the Company or the Holding
Company causes the Company or the Holding Company to become subject to
a statute or regulation which requires such an approval or notice.
<PAGE> 126
SCHEDULE 3.1(e)
CONFLICTS
NO EXCEPTIONS
<PAGE> 127
SCHEDULE 3.1(f)
SUBSIDIARIES
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Name State of Incorporation
- ---- ----------------------
<S> <C>
ARES Holdings, Inc. Delaware
ARES, Inc. Connecticut
Enterprise Capital Management, Inc. Georgia
Enterprise Fund Distributors, Inc. Delaware
1740 Advisers, Inc. New York
MONY Brokerage, Inc. Delaware
MBI Insurance Agency of Alabama, Inc. Alabama
MBI Insurance Agency of Massachusetts, Inc. Massachusetts
MBI Insurance Agency of New Mexico, Inc. New Mexico
MBI Insurance Agency of Ohio, Inc. Ohio*
MBI Insurance Agency of Texas, Inc. Texas
MONY CS, Inc. Georgia
MONY Credit Corporation New York
MONY Financial Services Corporation Delaware
MONY Funding, Inc. Delaware
MONY International Holdings, Inc. Delaware
MONY Life Insurance Company of the Americas, Ltd. Cayman Islands
MONY Bank & Trust Company of the Americas, Ltd. Cayman Islands
MONY International Life Insurance Company Seguros Argentina
de Vida S.A.
MONY Realty Partners, Inc. Delaware
MONY Securities Corp. New York
1740 Ventures, Inc. New York
</TABLE>
*This subsidiary has been formed, however, no shares have been issued and no
officers or directors have been elected or appointed.
<PAGE> 128
SIGNIFICANT SUBSIDIARIES
<TABLE>
<CAPTION>
Shares Owned
Subsidiary Authorized Issued Outstanding
by Company Incorporated Stock Stock Stock
- ----------------- ------------ ----- ----- -----------
<S> <C> <C> <C> <C>
MONY Life Insurance Arizona 5,000,000 Shares 2,500,000 2,500,000
100%
Company of America Common Stock
$1.00 Par Value
Enterprise Capital Georgia 10,000 Shares 500 500
100% Management, Inc. Common Stock
$0.10 Par Value
</TABLE>
<PAGE> 129
SCHEDULE 3.1(h)
FINANCIAL STATEMENTS AND INFORMATION
NO EXCEPTIONS
<PAGE> 130
SCHEDULE 3.1(i)
SEC DOCUMENTS
NO EXCEPTIONS
<PAGE> 131
SCHEDULE 3.1(j)
CERTAIN CHANGES/EVENTS
NO EXCEPTIONS
<PAGE> 132
SCHEDULE 3.1(k)
ASSETS
SECTION 3.1(k)(i) - MATERIAL OWNED PROPERTIES
NO EXCEPTIONS
SECTION 3.1(k)(ii)(c) - MORTGAGE LOANS CLASSIFIED AS IN THE PROCESS OF
FORECLOSURE
NO EXCEPTIONS
SECTION 3.1(k)(ii)(c) - MORTGAGE LOANS PAST DUE MORE THAN 90 DAYS
As of December 31, 1996, $2,273,629 in aggregate principal amount of mortgages
were past due more then 90 days.
As of November 30, 1997, $441,293 in aggregate principal amount of mortgages
were past due more then 90 days.
SECTION 3.1(k)(iii) - ENVIRONMENTAL MATTERS
The Company is aware of the presence of Hazardous Substances at the following
Real Properties, but has not been requested to take any remedial action.
Property Hazardous Substance
- -------- -------------------
1740 Broadway Asbestos
New York, NY 10019
MONY Towers Asbestos
1 MONY Plaza
Syracuse Street
Syracuse, NY 13221
55 Elm Street Automotive Contaminants
Hartford, CT 06106
<PAGE> 133
SCHEDULE 3.1(l)
LIABILITIES AND RESERVES
NO EXCEPTIONS
<PAGE> 134
SCHEDULE 3.1(n)
LITIGATION
In late 1995 and during 1996 a number of purported class actions were
commenced in various state and federal courts against the Company alleging
Company officials engaged in deceptive sales practices in connection with the
sale of "vanishing premium" whole and universal life policies during the period
1980 to present. A list of the actions commenced follows. Although the claims
asserted in each case are not identical, they seek substantially the same relief
under essentially the same theories of recovery (i.e., breach of contract,
fraud, negligent misrepresentation, negligent supervision and training, breach
of fiduciary duty, unjust enrichment and violation of state insurance and/or
deceptive business practice laws.) The Company has answered the complaints in
each action (except for one that is being voluntarily held in abeyance), has
denied any liability or wrongdoing, and has asserted numerous affirmative
defenses.
The Goshen action being the first filed action, has progressed far
beyond any other action. On June 7, 1996, the New York State Supreme Court
certified a nationwide class in Goshen consisting of all persons or entities who
have, or at the time of the policy's termination had, an ownership interest in a
whole or universal life insurance policy issued by the Company and sold on an
alleged "vanishing premium" basis during the period January 1, 1982 to December
31, 1995. On March 27, 1997, following the conclusion of the opt-out period for
class members, the Company filed a motion to dismiss or alternatively, for
summary judgment on all counts of the complaint. On October 21, 1997, the Goshen
Court granted the Company's summary judgment motion and dismissed with prejudice
the entire certified nationwide class action. Plaintiffs have filed a notice of
appeal to the Appellate Division, First Department and the Company intends
vigorously to oppose the appeal.
None of the other putative class actions has been certified or
progressed beyond the pleading stage. All of them have been consolidated and
transferred by the Judicial Panel on Multidistrict Litigation to the United
States District Court for the District of Massachusetts in In re Mutual Life
Insurance Company of New York Premium Litigation, MDL No. 1143, or were being
voluntarily held in abeyance pending the outcome of Goshen . The Massachusetts
District Court in the Multidistrict Litigation has entered a Stipulated Case
Management Order and Coordination Plan recognizing the Goshen case as the lead
case and essentially holding all of the federal cases in abeyance pending the
outcome of the Goshen action. The Company intends to seek the dismissal of these
putative class actions in light of the Goshen outcome.
<PAGE> 135
CLASS ACTIONS
Goshen v. The Mutual Life Insurance Company of New York and MONY Life
Insurance Company of America, Supreme Court, New York County, New York (1995)
(certified nationwide class) ("Goshen");
McLean v. The Mutual Life Insurance Company of New York, United States
District Court for the District of Massachusetts (1996) (coordinated with other
actions in MDL No. 1143) (seeking certification of a nationwide class);
Snipes v. The Mutual Life Insurance Company of New York, United States
District Court for the Northern District of Mississippi (1995) (transferred to
the United States District Court for the District of Massachusetts for
coordination with MDL No. 1143) (seeking certification of a nationwide class);
Woodson v. The Mutual Life Insurance Company of New York and MONY Life
Insurance Company of America, et al., District Court, Parish of St. Landry,
Louisiana (1996) (removed and transferred to the United States District Court of
the District of Massachusetts for coordination with MDL No. 1143) (seeking
certification of a nationwide class of opt-outs from the Goshen litigation);
Ballard v. The Mutual Life Insurance Company of New York, et al.,
Circuit Court, Lamar County, Alabama (1996) (removed and transferred to the
United States District Court of the District of Massachusetts for coordination
with MDL No. 1143) (seeking certification of a class of Alabama policyholders);
and
Henning v. The Mutual Life Insurance Company of New York and MONY Life
Insurance Company of America, Supreme Court, New York County (1996) (voluntarily
held in abeyance pending the outcome of the Goshen action) (seeking
certification of a nationwide class)
NO FURTHER EXCEPTIONS AS TO ANY OTHER MATTER SET FORTH IN SECTION 3.1(n)(i) OR
(ii)
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SCHEDULE 3.1(o)
COMPLIANCE WITH LAWS
NO EXCEPTIONS
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SCHEDULE 3.1(q)
BROKERS AND FINDERS
NO EXCEPTIONS
<PAGE> 138
SCHEDULE 3.1(r)
TAXES
DEFICIENCIES - NO EXCEPTIONS
STATUS OF INTERNAL REVENUE SERVICE EXAMINATIONS OF, OR ANY OTHER PROCEEDINGS
RELATING TO, THE TAX RETURNS OF THE COMPANY AND EACH OF ITS SUBSIDIARIES.
Internal Revenue Service examinations have been completed through 1987.
Returns for the years 1988 and 1989 are on appeal at the Appellate level of the
Internal Revenue Service. All outstanding matters relating to these appeals have
been discussed and resolved. These years are closed subject to possible
adjustment of losses carried back from later years.
Returns for the years 1990 and 1991 are currently being audited. Currently there
have been no significant adjustments.
<PAGE> 139
SCHEDULE 3.1(t)
INSURANCE BUSINESS
NO EXCEPTIONS
<PAGE> 140
SCHEDULE 3.1(u)
REINSURANCE
NO EXCEPTIONS
<PAGE> 141
SCHEDULE 3.1(v)
INTELLECTUAL PROPERTY
The use of the Company's Trademarks by Significant Subsidiaries have
been granted under revocable licenses which may be revoked by the Company at any
time without prior notice.
<PAGE> 142
SCHEDULE 3.1(w)
VARIABLE PRODUCT MATTERS
As of September 30, 1997, the following is a list of:
A. EACH REGISTERED INVESTMENT COMPANY ADVISED BY THE COMPANY OR AN "AFFILIATED
PERSON" OF THE COMPANY (AS DEFINED IN THE INVESTMENT COMPANY ACT). (Note:
Investment adviser or subadviser which is the Company or an affiliated person of
the Company is identified in parenthesis)
ADVISED BY THE COMPANY OR A DIRECT OR INDIRECT SUBSIDIARY OF THE COMPANY: MONY
Series Fund, Inc. (MONY Life Insurance Company of America) Enterprise
Accumulation Trust (Enterprise Capital Management, Inc.) Enterprise Group of
Funds, Inc. (Enterprise Capital Management, Inc.) Diversified Investors
Portfolios -- Money Market, Intermediate Government Bond,
Government/Corporate Bond and Equity Income Series (1740 Advisors, Inc.
(subadviser))
ADVISER AND SUBADVISER OF THE INVESTMENT COMPANY AND NOT OTHERWISE AN AFFILIATE
OF THE COMPANY IS AN AFFILIATE OF THE COMPANY BY VIRTUE OF THE COMPANY'S
OWNERSHIP OF 5% OR MORE OF THE OUTSTANDING SHARES OF THE INVESTMENT COMPANY:
Diversified Investors Portfolios (through Keynote Series Account)
-- Equity Growth Series (Diversified Investment Advisers, Inc. --
investment adviser; Chancellor LGT Asset Management, Inc. --
subadviser; ownership as of 9/30/97 -- 2.13%)
Diversified Investors Portfolios (through MONY Pooled Account)
-- High Quality Bond Series (Diversified Investment Advisers, Inc. --
investment adviser; Merganser Capital Management Corporation
-- subadviser; ownership as of 9/30/97 -- 32.13%)
-- High-Yield Bond Series (Diversified Investment Advisers, Inc.
-- investment adviser; Delaware Investment Advisers --
subadviser; ownership as of 9/30/97 -- 22.31%)
-- Equity Value Series (Diversified Investment Advisers, Inc.
-- investment adviser; Ark Asset Management Co., Inc. --
subadviser; ownership as of 9/30/97 -- 4.08%)
-- Growth & Income Series (Diversified Investment Advisers, Inc.
-- investment adviser; Putnam Advisory Company, Inc. --
subadviser; ownership as of 9/30/97 -- 8.03%)
-- Equity Growth Series (Diversified Investment Advisers, Inc.
-- investment adviser; Chancellor LGT Asset Management, Inc.
-- subadviser; ownership as of 9/30/97 -- 3.38%)
-- Special Equity Series (Diversified Investment Advisers, Inc.
-- investment adviser; Pilgrim Baxter & Associates, Ltd., Ark
Asset Management Co.,
<PAGE> 143
Inc., Liberty Investment Management and Westport Asset
Management, Inc. -- subadvisers; ownership as of 9/30/97 --
29.13%)
-- International Equity Series (Diversified Investment Advisers, Inc.
-- investment adviser; Capital Guardian Trust Company --
subadviser; ownership as of 9/30/97 -- 23.14%)
NOTE: The Company through Keynote Series Account and MONY Pooled Accounts owned
at 9/30/97 23.62% of Diversified Investors Portfolios if all series were
considered as one series.
OCC Accumulation Trust
-- Equity Portfolio (OpCap Advisors -- investment adviser; ownership as
of 9/30/97 -- 12.31%)
-- Small Cap Portfolio (OpCap Advisors -- investment adviser; ownership
as of 9/30/97 -- 5.75%)
-- Global Equity Portfolio (OpCap Advisors -- investment adviser;
ownership as of 9/30/97 -- 0.00%)
-- Managed Portfolio (OpCap Advisors -- investment adviser; ownership
as of 9/30/97 -- 17.98%)
-- U.S. Government Income Portfolio (OpCap Advisors -- investment
adviser; ownership as of 9/30/97 -- 31.78%)
-- Money Market Portfolio (OpCap Advisors -- investment adviser;
ownership as of 9/30/97 -- 61.76%)
NOTE: The Company and MONY Life Insurance Company of America owned at 9/30/97
23.58% of OCC Accumulation Trust if all portfolios were considered as one
portfolio.
ADVISER AND SUBADVISER OF THE INVESTMENT COMPANY NOT OTHERWISE AN AFFILIATE OF
THE COMPANY IS AN AFFILIATE OF THE COMPANY BY VIRTUE OF THE COMMON BOARD OF
TRUSTEES OF DIVERSIFIED INVESTORS PORTFOLIOS:
-- Balanced Series (Diversified Investment Advisers, Inc., --
investment adviser; Institutional Capital Corporation --
subadviser; ownership as of 9/30/97 -- 1.22% through Keynote
Series Account and 0.84% through MONY Pooled Accounts)
-- Aggressive Equity Series (Diversified Investment Advisers, Inc. --
investment adviser; McKinley Capital Management Inc. --
subadviser; ownership as of 9/30/97 -- 4.34%)
B. EACH REGISTERED INVESTMENT COMPANY OF WHICH THE COMPANY OR AN "AFFILIATED
PERSON" IS THE PRINCIPAL UNDERWRITER. (Note: Principal Underwriter identified in
parenthesis)
MONY Series Fund, Inc. (MONY Securities Corp.)
Enterprise Accumulation Trust (Enterprise Fund Distributors, Inc.)
Enterprise Group of Funds, Inc. (Enterprise Fund Distributors, Inc.)
<PAGE> 144
MONY Variable Account A (MONY Securities Corp.)
MONY Variable Account L (MONY Securities Corp.)
MONY Variable Account S (MONY Securities Corp.)
MONY America Variable Account A (MONY Securities Corp.)
MONY America Variable Account L (MONY Securities Corp.)
MONY America Variable Account S (MONY Securities Corp.)
Keynote Series Account (MONY Securities Corp.)
C. FOR EACH REGISTERED INVESTMENT COMPANY LISTED ABOVE, A DETAILED DESCRIPTION
OF THE RELATIONSHIPS BETWEEN SUCH COMPANY AND ITS ADVISER AND ANY SUBADVISERS
AND ANY OTHER BASES FOR SUCH AFFILIATION. (Note: Investment adviser and
sub-adviser, if any, identified for each portfolio)
MONY Series Fund, Inc.
All portfolios - MONY Life Insurance Company of America is a wholly
owned, direct subsidiary of the Company and the Company and
MONY Life Insurance Company of America own all the outstanding
shares of each of the portfolios.
Enterprise Accumulation Trust
All portfolios -- Enterprise Capital Management, Inc. is a wholly
owned, indirect subsidiary of the Company and the Company and
MONY Life Insurance Company of America own all the outstanding
shares of each of the portfolios.
Subadvisers--
Managed Portfolio -- OpCap Advisors
Small Cap Portfolio --GAMCO Investors, Inc.
Equity Portfolio -- OpCap Advisors
International Growth Portfolio -- Brinson Partners, Inc.
High Yield Bond Portfolio
-- Caywood - Scholl Capital Management, Inc.
Enterprise Group of Funds, Inc. (Note: does not accept separate account money)
All portfolios -- Enterprise Capital Management, Inc. is a wholly
owned, indirect subsidiary of the Company and the members of
the Board of Directors are all also members of the Board of
Trustees of the Enterprise Accumulation Trust.
Subadvisors--
Growth Portfolio -- Montag & Caldwell, Inc.
Capital Appreciation Portfolio -- Provident Investment
Counsel, Inc.
Small Company Value Portfolio -- GAMCO Investors, Inc.
International Growth Portfolio -- Brinson Partners, Inc.
Government Securities Portfolio -- TCW Funds Management, Inc.
High-Yield Bond Portfolio -- Caywood-Scholl Capital
Management, Inc.
<PAGE> 145
Tax-Exempt Income Portfolio -- Morgan Stanley Asset
Management, Inc.
Managed Portfolio -- OpCap Advisors
Equity Income Portfolio -- 1740 Advisers, Inc.
Equity Portfolio -- OpCap Advisors
Available on or about July 1, 1997 --
Growth and Income Portfolio -- Retirement System
Investors, Inc.
OCC Accumulation Trust --
All portfolios -- the Company and MONY Life Insurance Company of
America own more than 5% of the outstanding shares of each of
the portfolios except for the Global Equity Portfolio.
The following registered investment companies are unit investment trusts and do
not have investment advisers:
MONY Variable Account A
MONY Variable Account L
MONY Variable Account S
MONY America Variable Account A
MONY America Variable Account L
MONY America Variable Account S
Keynote Series Account
D. FOR EACH COMPANY LISTED ABOVE WHICH IS "CONTROLLED" BY THE COMPANY WITHIN THE
MEANING OF SECTION 2(a)(9) OF THE INVESTMENT COMPANY ACT, THE FACTUAL BASIS FOR
SUCH CONTROL.
MONY Series Fund, Inc., Enterprise Accumulation Trust and OCC Accumulation Trust
may be deemed to be "controlled" by the Company and its wholly owned subsidiary,
MONY Life Insurance Company of America because, under the insurance laws of the
States of New York and Arizona the assets of the separate accounts established
by such insurance companies are held by the insurance company.
MONY Life Insurance Company of America, MONY Securities Corp., Enterprise
Capital Management, Inc., Enterprise Fund Distributors, Inc. and 1740 Advisers,
Inc. are direct or indirect wholly owned subsidiaries of the Company by virtue
of the direct or indirect ownership of 100% of the issued and outstanding voting
stock of each such company. No other investment adviser or subadviser is
directly or indirectly "controlled" by the Company. MONY Brokerage, Inc. does
not provide investment advisory services to investment companies.
<PAGE> 1
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
Among
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
MONY FINANCIAL SERVICES CORPORATION
and
THE INVESTORS NAMED HEREIN
Dated as of December 30, 1997
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This AGREEMENT is made as of December 30, 1997, among The Mutual Life
Insurance Company of New York, a New York mutual life insurance company (the
"Company"), MONY Financial Services Corporation, a Delaware corporation (the
"Holding Company"), and the purchasers of Warrants identified on Schedule 1
hereto (the "Investors").
WHEREAS, the Holding Company has agreed to issue and sell, and the
Investors have agreed to purchase, pursuant to the Investment Agreement, dated
as of December 30, 1997 (the "Investment Agreement"), among the Company, the
Holding Company and the Investors, the Warrants and certain other securities of
the Company and the Holding Company, subject to the terms and conditions set
forth in the Investment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein and in the Investment Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to and on the terms and conditions herein set forth,
the parties hereto agree as follows:
1. Definitions.
Except as otherwise specified herein, capitalized terms used herein but
not defined herein have the meanings assigned to them in the Investment
Agreement, as in effect on the date hereof. In addition, for purposes of this
Agreement, the following terms have the following respective meanings:
"Holding Company Common Stock Equivalents" means any securities
convertible into, or exercisable or exchangeable for, shares of Holding Company
Common Stock, including the Warrants and the Convertible Preferred Stock.
"Holder" means any Investor or any of its Subsidiaries or Affiliates
which as of the date hereof or hereafter shall hold Registrable Securities or
Convertible Preferred Stock.
"Major Holder" means with respect to any registration the Holder that
is deemed to have included the largest number of shares of Holding Company
Common Stock in such registration. In the case of Warrants, the number of shares
of Holding Company Common Stock deemed to be included by a Holder shall be the
number of shares of Holding Company Common Stock issuable upon exercise of the
Warrants being included in such registration.
"Registrable Securities" means (i) the Warrants held by any Holder,
(ii) all shares of Holding Company Common Stock issuable upon exercise of any
Warrant held by any Holder and (iii) the shares of Holding Company Common Stock
issuable upon conversion of any
<PAGE> 3
Convertible Preferred Stock held by any Holder. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
been declared effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, or (ii) such
securities shall have been sold to a Person not a Holder pursuant to Rule 144
(or any successor provision) under the Securities Act and in compliance with the
requirements of paragraphs (f) and (g) of Rule 144 (notwithstanding the
provisions of paragraph (k) of such Rule) (or any successor provision).
"S-1", "S-2" and "S-3" mean a registration statement on Form S-1, S-2
and S-3, respectively.
Unless the context otherwise requires, any reference to a statute, rule or
regulation refers to the same (including any successor statute, rule or
regulation thereto) as it may be amended from time to time.
2. Registration Rights.
2.1. Demand Registrations.
(a) (i) Subject to Sections 2.1(b) and 2.3 below, at any
time and from time to time after the Demutualization Date each Holder shall have
the right to require the Holding Company to file a registration statement under
the Securities Act covering all or any part of their respective Registrable
Securities, by delivering a written request therefor to the Holding Company
specifying the number of Registrable Securities to be included in such
registration by such Holder and the intended method of distribution thereof. All
such requests by any Holder pursuant to this Section 2.1(a)(i) are referred to
herein as "Demand Registration Requests," and the registrations so requested are
referred to herein as "Demand Registrations" (with respect to any Demand
Registration, the Holder(s) making such demand for registration being referred
to as the "Initiating Holder"). As promptly as practicable, but no later than
ten days after receipt of a Demand Registration Request, the Holding Company
shall give written notice (the "Demand Exercise Notice") of such Demand
Registration Request to all Holders of record of Registrable Securities and
Convertible Preferred Stock.
(ii) The Holding Company, subject to Sections 2.3 and
2.6, shall include in a Demand Registration (x) the Registrable Securities of
the Initiating Holder and (y) the Registrable Securities of any other Holder
which shall have made a written request to the Holding Company for inclusion in
such registration (which request shall specify the maximum number of Registrable
Securities intended to be disposed of by such Holder) within 15 Business Days
after the receipt of the Demand Exercise Notice (or, 10 Business Days if, at the
request of the Initiating Holder, the Holding Company states in such written
notice or gives
2
<PAGE> 4
telephonic notice to all Holders, with written confirmation to follow promptly
thereafter, that such registration will be on an S-3).
(iii) The Holding Company shall, as expeditiously as
possible, use its commercially reasonable efforts to (x) effect such
registration under the Securities Act (including, without limitation, by means
of a shelf registration pursuant to Rule 415 under the Securities Act if so
requested and if the Holding Company is then eligible to use such a
registration) of the Registrable Securities which the Holding Company has been
so requested to register, for distribution in accordance with such intended
method of distribution, and (y) if requested by the Initiating Holder, obtain
acceleration of the effective date of the registration statement relating to
such registration.
(b) The Demand Registration rights granted in Section 2.1(a)
to the Holders are subject to the following limitations: (i) each registration
in respect of a Demand Registration Request must include, in the aggregate
(based on the Holding Company Common Stock or shares of Holding Company Common
Stock issuable pursuant to Holding Company Common Stock Equivalents included in
such registration by all Holders and all holders of Additional Piggyback Rights
(as defined below) participating in such registration), shares of Holding
Company Common Stock having, in the aggregate, a fair market value immediately
prior to such registration of at least $50 million; (ii) the Holding Company
shall not be required to cause a registration pursuant to Section 2.1(a)(i) to
be declared effective within a period of 180 days after the date either (A) any
other registration statement of the Holding Company declared effective pursuant
to a Demand Registration Request was declared effective or (B) the registration
statement relating to the IPO was declared effective; (iii) the Holding Company
shall not be required to effect, in the aggregate, without regard to the Holder
of Registrable Securities making such request, more than three Demand
Registrations; (iv) the Holding Company may postpone filing a registration
statement relating to a Demand Registration Request for a reasonable period of
time, but not more than 120 days after receipt of the Demand Registration
Request, as is necessary to prepare audited financial statements of the Holding
Company for its most recently completed fiscal year or unaudited quarterly
financial statements reasonably required in the registration statement (and in
no event shall the Holding Company be required to prepare such quarterly
financial statements for use in the initial filing of a registration statement
to be filed more than 90 days after the end of the quarter in question); and (v)
if the Board of Directors of the Holding Company, in its good faith judgment,
determines that any registration of Registrable Securities should not be made or
continued because it would materially interfere with any material financing,
acquisition, corporate reorganization or merger or other transaction involving
the Holding Company or any of its subsidiaries (a "Valid Business Reason"), (x)
the Holding Company may postpone filing a registration statement relating to a
Demand Registration Request until such Valid Business Reason no longer exists,
but in no event for more than 90 days, and (y) in case a registration statement
has been filed relating to a Demand Registration Request, the Holding Company
may cause such registration statement to be withdrawn and its effectiveness
terminated or may
3
<PAGE> 5
postpone amending or supplementing such registration statement until such Valid
Business Reason no longer exists, but in no event for more than 90 days (such
period of postponement or withdrawal under subclause(s) (x) or (y) of this
clause (v), the "Postponement Period"); and the Holding Company shall give
written notice of its determination to postpone or withdraw the registration
statement and of the fact that the Valid Business Reason for such postponement
or withdrawal no longer exists, in each case, promptly after the occurrence
thereof; provided, however, the Holding Company shall not be permitted to
postpone or withdraw the registration statement filed in response to a Demand
Registration Request after the expiration of any Postponement Period until 12
months after the expiration of such Postponement Period, except pursuant to
request of the Initiating Holder.
If the Holding Company shall give any notice of postponement or withdrawal
of any registration statement, the Holding Company shall not, during the period
of postponement or withdrawal, register any Holding Company Common Stock, other
than pursuant to a registration statement on Form S-4 or S-8 (or an equivalent
registration form then in effect) or other applicable form with respect to any
benefit plan or with respect to any dividend reinvestment plan. Each Holder of
Registrable Securities agrees that, upon receipt of any notice from the Holding
Company that the Holding Company has determined to withdraw any registration
statement pursuant to clause (v) above, such Holder will discontinue its
disposition of Registrable Securities pursuant to such registration statement
and, if so directed by the Holding Company, will deliver to the Holding Company
(at the Holding Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of the prospectus covering such Registrable
Securities that was in effect at the time of receipt of such notice. If the
Holding Company shall have withdrawn or prematurely terminated a registration
statement filed under Section 2.1(a)(i) (whether pursuant to clause (v) above or
as a result of any stop order, injunction or other order or requirement of the
SEC or any other governmental agency or court), the Holding Company shall not be
considered to have effected an effective registration for the purposes of this
Agreement until the Holding Company shall have filed a new registration
statement covering the Registrable Securities covered by the withdrawn
registration statement and such registration statement shall have been declared
effective and shall not have been withdrawn or prematurely terminated. If the
Holding Company shall give any notice of withdrawal or postponement of a
registration statement, the Holding Company shall, at such time as the Valid
Business Reason that caused such withdrawal or postponement no longer exists
(but in no event later than 90 days after the date of the postponement or
withdrawal), use its commercially reasonable efforts to effect the registration
under the Securities Act of the Registrable Securities covered by the withdrawn
or postponed registration statement in accordance with this Section 2.1 (unless
the Initiating Holder shall have withdrawn such request, in which case the
Holding Company shall not be considered to have effected an effective
registration for the purposes of this Agreement), and such registration shall
not be withdrawn or postponed pursuant to clause (v) above.
4
<PAGE> 6
In the event that a Demand Registration Request is made and
then later withdrawn by the Initiating Holder (other than a withdrawal in
connection with a postponement or withdrawal made pursuant to clause (v) above),
the Holding Company shall be considered to have effected an effective
registration unless it is reimbursed for any out-of-pocket expenses incurred in
connection with such Demand Registration.
(c) The Holding Company, subject to Sections 2.3 and 2.6, may
elect to include in any registration statement and offering made pursuant to
Section 2.1(a)(i), (i) authorized but unissued shares of Holding Company Common
Stock, Holding Company Common Stock held by the Holding Company as treasury
shares or, if the Major Holder consents, other Holding Company equity securities
and (ii) any other shares of Holding Company Common Stock which are requested to
be included in such registration pursuant to the exercise of piggyback
registration rights granted by the Holding Company after the date hereof which
are not inconsistent with the rights granted in, or otherwise conflict with the
terms of, this Agreement ("Additional Piggyback Rights"); provided, however,
that such inclusion shall be permitted only to the extent that it is pursuant to
and subject to the terms of the underwriting agreement or arrangements, if any,
entered into by the Initiating Holder.
(d) In connection with any Demand Registration, the Initiating
Holder shall have the right to designate the managing underwriter for such
registration, provided that such managing underwriter is reasonably satisfactory
to the Holding Company. To the extent required by applicable law, a Qualified
Independent Underwriter (as defined in Conduct Rule 2720 of the National
Association of Securities Dealers, Inc.) shall be retained, and the Holding
Company shall pay all fees and expenses of such Qualified Independent
Underwriter, as such, unless the Holding Company shall have requested the
Initiating Holder to designate a co-managing underwriter that would be a
Qualified Independent Underwriter and the Initiating Holder shall not have
complied with such request, in which case the participating Holders shall pay
all fees and expenses of such Qualified Independent Underwriter.
2.2. Piggyback Registrations.
(a) If, at any time, the Holding Company proposes or is
required to register any of its equity securities under the Securities Act
(other than pursuant to (i) registrations on such form or similar form(s) solely
for registration of securities in connection with an employee benefit plan or
dividend reinvestment plan or acquisition or (ii) a Demand Registration under
Section 2.1) on an S-1, S-2 or S-3 (or an equivalent general registration form
then in effect), whether or not for its own account, the Holding Company shall
give prompt written notice of its intention to do so to each of the Holders of
record of Registrable Securities and Convertible Preferred Stock. Such notice
shall specify, at a minimum, the number and class of securities so proposed to
be registered, the proposed date of filing of such registration statement, any
proposed means of distribution of such securities and any proposed managing
underwriter or underwriters of such securities. Upon the written request of any
5
<PAGE> 7
Holder, made within 15 Business Days following the receipt of any such written
notice (which request shall specify the maximum number of Registrable Securities
intended to be disposed of by such Holder and the intended method of
distribution thereof), the Holding Company shall, subject to Sections 2.2(b),
2.3 and 2.6 hereof, use its commercially reasonable efforts to cause all such
Registrable Securities, the Holders of which have so requested the registration
thereof, to be registered under the Securities Act (with the securities which
the Holding Company at the time proposes to register) to permit the sale or
other disposition by the Holders (in accordance with the intended method of
distribution thereof) of the Registrable Securities to be so registered. There
is no limitation on the number of such piggyback registrations pursuant to the
preceding sentence which the Holding Company is obligated to effect. No
registration effected under this Section 2.2(a) shall relieve the Holding
Company of its obligations to effect Demand Registrations.
(b) If, at any time after giving written notice of its
intention to register any equity securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Holding Company shall determine for any reason not to register or to delay
registration of such equity securities, the Holding Company may, at its
election, give written notice of such determination to all Holders of record of
Registrable Securities and Convertible Preferred Stock and (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such abandoned registration,
without prejudice, however, to the rights of Holders under Section 2.1, and (ii)
in the case of a determination to delay such registration of its equity
securities, shall be permitted to delay the registration of such Registrable
Securities for the same period as the delay in registering such other equity
securities.
(c) Any Holder shall have the right to withdraw its request
for inclusion of its Registrable Securities in any registration statement
pursuant to this Section 2.2 by giving written notice to the Holding Company of
its request to withdraw; provided, however, that (i) such request must be made
in writing prior to the execution of the underwriting agreement and (ii) such
withdrawal shall be irrevocable.
2.3. Allocation of Securities Included in Registration Statement.
(a) If any requested registration pursuant to Section 2.1
involves an underwritten offering and the manager of such offering (or a
co-managing underwriter of such offering, if Goldman, Sachs & Co. or one of its
Affiliates is the lead managing underwriter of such offering) shall advise the
Holding Company in writing that, in its opinion, the number of securities
requested to be included in such registration by the Holders or any other
persons (including those shares of Holding Company Common Stock requested by the
Holding Company or by holders exercising Additional Piggyback Rights to be
included in such registration) exceeds the largest number (the "Section 2.1 Sale
Number") that can be sold in an
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orderly manner in such offering within a price range acceptable to the
Initiating Holder, the Holding Company shall include in such registration:
(i) all Registrable Securities requested to be included in
such registration by Holders of Registrable Securities; provided, however, that,
if the number of such Registrable Securities exceeds the Section 2.1 Sale
Number, the number of such Registrable Securities (not to exceed the Section 2.1
Sale Number) to be included in such registration shall be allocated as the
Holders determine;
(ii) to the extent that the number of Registrable Securities
to be included by all Holders is less than the Section 2.1 Sale Number, shares
of Holding Company Common Stock that the Holding Company proposes to register;
and
(iii) to the extent that the number of Registrable
Securities to be included by all Holders and the number of securities to be
included by the Holding Company is less than the Section 2.1 Sale Number, any
other shares of Holding Company Common Stock that the holders thereof propose to
register pursuant to the exercise of Additional Piggyback Rights.
If, as a result of the proration provisions of this Section 2.3(a), any
Holder shall not be entitled to include all Registrable Securities in a
registration that such Holder has requested be included, such Holder may elect
to withdraw his request to include Registrable Securities in such registration
or may reduce the number requested to be included; provided, however, that (x)
such request must be made in writing prior to the execution of the underwriting
agreement and (y) such withdrawal shall be irrevocable.
(b) If any registration pursuant to Section 2.2 involves an underwritten
offering and the managing underwriter shall advise the Holding Company that, in
its view, the number of securities requested to be included in such registration
exceeds the number (the "Section 2.2 Sale Number") that can be sold in an
orderly manner in such registration within a price range acceptable to the
Holding Company, the Holding Company shall include in such registration:
(i) all Holding Company Common Stock or Holding Company Common
Stock Equivalents that the Holding Company proposes to register for its own
account (the "Holding Company Securities");
(ii) if the number of Holding Company Securities is zero, all
securities being included in such registration either pursuant to the terms of
any contractual demand registration rights which may be granted to any Person
other than a Holder or held by other Persons for whom the registration was
initiated ("Other Demand Rights"); and
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(iii) (x) to the extent that the number of Holding Company
Securities is more than zero but less than the Section 2.2 Sale Number, all
securities being included in such registration pursuant to the terms of any
Other Demand Rights and all Registrable Securities requested to be included in
such registration by Holders of Registrable Securities; provided, however, that,
if the number of such Registrable Securities, securities being included pursuant
to Other Demand Rights and Holding Company Securities exceeds the Section 2.2
Sale Number, the aggregate number of such Registrable Securities and securities
being included pursuant to Other Demand Rights (not to exceed the Section 2.2
Sale Number) to be included in such registration shall be allocated on a pro
rata basis among all Holders requesting that Registrable Securities be included
in such registration and all Persons exercising Other Demand Rights based on the
number of Registrable Securities then owned by each such Holder or Person, as
applicable, requesting inclusion in relation to the aggregate number of
Registrable Securities then owned by all such Holders requesting inclusion and
all Persons exercising Other Demand Rights; and
(y) to the extent that the number of Holding Company
Securities is zero, and the number of securities being included pursuant to
Other Demand Rights is less than the Section 2.2 Sale Number, all Registrable
Securities requested to be included in such registration by Holders of
Registrable Securities, provided, however, that, if the number of such
Registrable Securities and securities being included pursuant to Other Demand
Rights exceeds the Section 2.2 Sale Number, the aggregate number of such
Registrable Securities (not to exceed the Section 2.2 Sale Number) to be
included in such registration shall be allocated on a pro rata basis among all
Holders requesting that Registrable Securities be included in such registration
based on the number of Registrable Securities then owned by each such Holder
requesting inclusion in relation to the aggregate number of Registrable
Securities then owned by all such Holders requesting inclusion, or allocated as
otherwise agreed by such Holders requesting inclusion.
2.4. Registration Procedures. If and whenever the Holding Company is
required by the provisions of this Agreement to use its commercially reasonable
efforts to effect or cause the registration of any Registrable Securities under
the Securities Act as provided in this Agreement, the Holding Company shall, as
expeditiously as possible (but, in any event, subject to the limitations of
Section 2.1(b), within 60 days after a Demand Registration Request in the case
of Section 2.4(a)):
(a) prepare and file with the SEC a registration statement on
an appropriate registration form for the disposition of such Registrable
Securities in accordance with the intended method of disposition thereof, which
form shall be available for the sale of the Registrable Securities by the
selling Holders thereof, and such registration statement shall comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required to be filed therewith, and the Holding
Company shall use its commercially reasonable efforts to cause such registration
statement to become and
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remain effective for the period specified in Section 2.4(b) below (provided,
however, that before filing a registration statement or prospectus or any
amendments or supplements thereto, or comparable statements under securities or
blue sky laws (which for purposes of this Agreement shall include any insurance
securities laws) of any jurisdiction, the Holding Company will furnish to one
counsel for the Holders participating in the planned offering (selected by the
Initiating Holder, in the case of a registration pursuant to Section 2.1, and
selected by the Major Holder, in the case of a registration pursuant to Section
2.2, and in either case reasonably acceptable to the Holding Company) and the
underwriters, if any, copies of all such documents proposed to be filed
(including all exhibits thereto), which documents will be subject to the
reasonable review and reasonable comment of such counsel, and the Holding
Company shall not file any registration statement or amendment thereto or any
prospectus or supplement thereto to which the Holders of a majority of the
Registrable Securities covered by such registration statement or the
underwriters, if any, shall reasonably object in writing);
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all Registrable Securities covered by such registration
statement in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement until the earlier of
(i) such time as all of the Registrable Securities covered by such registration
statement have been so disposed of by the seller or sellers or (ii) 180 days
after such registration statement becomes effective;
(c) furnish, without charge, to each seller of such
Registrable Securities and each underwriter (which term for purposes of this
Agreement shall include a person deemed to be an underwriter within the meaning
of Section 2(11) of the Securities Act and any placement agent or sales agent),
if any, of the securities covered by such registration statement one executed
copy each and such number of conformed copies of such registration statement and
of each amendment and supplement thereto (in each case including all exhibits),
such numbers of copies of the prospectus included in such registration statement
(including each preliminary prospectus) in conformity with the requirements of
the Securities Act, and such other documents, as such seller and underwriter may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such seller (the Holding Company hereby
consenting to the use in accordance with all applicable law of each such
registration statement (or amendment or post-effective amendment thereto) and
each such prospectus (or preliminary prospectus or supplement thereto) by each
such seller of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such registration statement or prospectus);
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(d) use its commercially reasonable efforts to register or
qualify the Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such United States jurisdictions as
any sellers of Registrable Securities or any managing underwriter, if any, shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such sellers or underwriter, if any,
to consummate the disposition of the Registrable Securities in such
jurisdictions, except that in no event shall the Holding Company be required to
qualify to do business as a foreign corporation in any jurisdiction where it
would not, but for the requirements of this paragraph (d), be required to be so
qualified, to subject itself to taxation in any such jurisdiction or to consent
to general service of process in any such jurisdiction;
(e) promptly notify each Holder selling Registrable Securities
covered by such registration statement and each managing underwriter, if any,
and confirm such advice in writing: (i) when the registration statement, any
pre-effective amendment, the prospectus or any prospectus supplement related
thereto or post-effective amendment to the registration statement has been filed
and, with respect to the registration statement or any post-effective amendment,
when the same has become effective; (ii) of any comments by the SEC or state
securities authority or request by the SEC or state securities authority for
amendments or supplements to the registration statement or the prospectus
related thereto or for additional information; (iii) of the issuance by the SEC
of any stop order suspending the effectiveness of the registration statement or
the initiation of any proceedings for that purpose; (iv) of the receipt by the
Holding Company of any notification with respect to the suspension of the
qualification of any Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation of any proceeding for such
purpose; (v) of the existence of any fact of which the Holding Company becomes
aware which results in the registration statement, the prospectus related
thereto or any document incorporated therein by reference containing an untrue
statement of a material fact or omitting to state a material fact required to be
stated therein or necessary to make any statement therein not misleading in
light of the circumstances then existing; and (vi) if at any time the
representations and warranties contemplated by any underwriting agreement,
securities sale agreement, or other similar agreement, relating to the offering
shall cease to be true and correct in all material respects; and, if the
notification relates to an event described in clause (v), the Holding Company
shall promptly prepare and furnish to each such seller and each underwriter, if
any, a reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading;
(f) comply in all material respects with all applicable rules
and regulations of the SEC, and make generally available to its security
holders, as soon as reasonably practicable after the effective date of the
registration statement (and in any event within 16 months thereafter), an
earnings statement (which need not be audited) covering the period of at
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<PAGE> 12
least twelve consecutive months beginning with the first day of the Holding
Company's first calendar quarter after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder;
(g) (i) cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities issued by the Holding Company are then listed (if any),
if the listing of such Registrable Securities is then permitted under the rules
of such exchange, or (ii) if no similar securities are then so listed, to either
cause all such Registrable Securities to be listed on a national securities
exchange or to secure designation of all such Registrable Securities as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1 of the
Exchange Act or, failing that, secure NASDAQ authorization for such shares and,
without limiting the generality of the foregoing, take all actions that may be
required by the Holding Company as the issuer of such Registrable Securities in
order to facilitate the managing underwriter's arranging for the registration of
at least two market makers as such with respect to such shares with the National
Association of Securities Dealers, Inc. (the "NASD");
(h) enter into such customary agreements (including, if
applicable, an underwriting agreement), in form and substance satisfactory to
the Major Holder, and take such other actions as the Major Holder shall
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
(i) whether or not an agreement of the type referred to in
Section 2.4(h) hereof is entered into and whether or not any portion of the
offering contemplated by such registration statement is an underwritten offering
or is made through a placement or sales agent or any other entity, (i) make such
representations and warranties to the Holders participating in such registration
and the underwriters, if any, thereof in form, substance and scope as are
customarily made in connection with an offering of Holding Company Common Stock
or other equity securities pursuant to any appropriate agreement and/or to a
registration statement filed on the form applicable to such registration; (ii)
obtain opinions of inside and outside counsel to the Holding Company addressed
to the Holders participating in such registration and the underwriters, if any,
in customary form and covering such matters, of the type customarily covered by
such opinions, as the managing underwriters, if any, and as the Major Holder may
reasonably request, which opinions shall be reasonably satisfactory to the
managing underwriter, if any, and the Major Holder; (iii) obtain a "cold
comfort" letter or letters from the independent certified public accountants of
the Holding Company (the "Accountants") addressed to the Holders and the
underwriters, if any, thereof, dated (I) the effective date of such registration
statement and (II) the date of the closing under the underwriting agreement
relating thereto, such letter or letters to be in customary form and covering
such matters of the type customarily covered, from time to time, by letters of
such type and such other financial matters as the managing underwriters, if any,
and as the Major Holder may reasonably request, which letter or letters shall be
reasonably satisfactory to the managing underwriter, if
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any, and the Major Holder (subject to receipt by the Accountants of such letters
or other representations reasonably requested by the Accountants if such letters
or representations are then required under the guidelines of the American
Institute of Certified Public Accountants to be provided to the Accountants);
and (iv) deliver such documents and certificates, including officers'
certificates, as may be reasonably requested by the Major Holder and the
placement or sale agent, if any, therefor and the managing underwriters, if any,
thereof to evidence the accuracy of the representations and warranties made
pursuant to clause (i) above and the compliance with or satisfaction of any
agreements or conditions contained in the underwriting agreement or other
agreement entered into by the Holding Company;
(j) deliver promptly to the Major Holder and each underwriter,
if any, copies of all correspondence between the SEC and the Holding Company,
its counsel or auditors and all memoranda relating to discussions with the SEC
or its staff with respect to the registration statement, other than those
portions of any such correspondence and memoranda which contain information
subject to attorney-client privilege with respect to the Holding Company, and,
upon receipt of such confidentiality agreements as the Holding Company may
reasonably request, make reasonably available for inspection by any seller of
such Registrable Securities covered by such registration statement, by any
underwriter, if any, participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent financial and
other records, pertinent corporate documents and properties of the Holding
Company, and cause all of the Holding Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement;
(k) use its commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of the registration
statement;
(l) use its commercially reasonable efforts to obtain the
consent or approval of each governmental agency or authority, whether federal,
state or local, which may be required to effect such registration or the
offering or sale in connection therewith or to enable the Holders covered by
such registration statement to offer, or to consummate the disposition of, their
Registrable Securities;
(m) provide and cause to be maintained a transfer agent and
registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(n) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the registration statement;
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(o) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate as a
member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Conduct of the NASD) thereof,
whether as a holder of such Registrable Securities or as an underwriter, or a
broker or dealer in respect thereof, or otherwise, assist such broker-dealer in
complying with the requirements of such Rules of Conduct;
(p) make reasonably available its employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking into account
the needs of the Holding Company's businesses and the requirements of the
marketing process) in the marketing of Registrable Securities in any
underwritten offering;
(q) promptly prior to the filing of any document which is to
be incorporated by reference into the registration statement or the prospectus
(after the initial filing of such registration statement) provide copies of such
document to counsel for the selling holders of Registrable Securities and to
each managing underwriter, if any, and make the Holding Company's
representatives reasonably available for discussion of such document and make
such changes in such document concerning the selling holders prior to the filing
thereof as counsel for such selling holders or underwriters may reasonably
request;
(r) cooperate with the selling Holders of Registrable
Securities and the managing underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the underwriters or, if not an underwritten offering, in
accordance with the instructions of the selling Holders of Registrable
Securities at least two business days prior to any sale of Registrable
Securities and instruct any transfer agent and registrar of Registrable
Securities to release any stop transfer orders in respect thereof; and
(s) take all such other commercially reasonable actions as are
necessary or advisable in order to expedite or facilitate the disposition of
such Registrable Securities.
The Holding Company may require as a condition precedent to
the Holding Company's obligations under this Section 2.4 that each seller of
Registrable Securities as to which any registration is being effected furnish
the Holding Company such information regarding such seller and the distribution
of such securities as the Holding Company may from time to time reasonably
request provided that such information shall be used only in connection with
such registration.
Each Holder of Registrable Securities agrees that upon receipt
of any notice from the Holding Company of the happening of any event of the kind
described in clause (v) of
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paragraph (e) of this Section 2.4, such Holder will discontinue such Holder's
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by paragraph (e) of this
Section 2.4 and, if so directed by the Holding Company, will deliver to the
Holding Company (at the Holding Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the prospectus
covering such Registrable Securities that was in effect at the time of receipt
of such notice. In the event the Holding Company shall give any such notice, the
applicable period mentioned in paragraph (b) of this Section 2.4 shall be
extended by the number of days during such period from and including the date of
the giving of such notice to and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
paragraph (e) of this Section 2.4.
If any such registration statement or comparable statement under state
securities or blue sky laws refers to any Holder by name or otherwise as the
Holder of any securities of the Holding Company, then such Holder shall have the
right to require (i) the insertion therein of language, in form and substance
satisfactory to such Holder and the Holding Company, to the effect that the
holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Holding Company's
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Holding Company
or (ii) in the event that such reference to such Holder by name or otherwise is
not in the judgment of the Holding Company, as advised by counsel, required by
the Securities Act or any similar federal statute or any state securities or
blue sky law then in force, the deletion of the reference to such Holder.
2.5 Registration Expenses.
(a) "Expenses" shall mean any and all fees and expenses
incident to the Holding Company's performance of or compliance with this Article
2, including, without limitation: (i) SEC, stock exchange or NASD registration
and filing fees and all listing fees and fees with respect to the inclusion of
securities in NASDAQ, (ii) fees and expenses in connection with the
qualification of Registrable Securities for offering and sale under state
securities or blue sky laws and in connection with the preparation of a blue sky
survey, including, without limitation, reasonable fees and expenses of blue sky
counsel, (iii) printing and copying expenses, (iv) messenger and delivery
expenses, (v) expenses incurred in connection with any road show, (vi) fees and
disbursements of counsel for the Holding Company, (vii) with respect to each
registration, the reasonable fees and disbursements of one counsel for the
selling Holder(s) (selected by the Initiating Holder, in the case of a
registration pursuant to Section 2.1, and selected by the Major Holder, in the
case of a registration pursuant to Section 2.2), (viii) fees and disbursements
of all independent public accountants (including the expenses of any audit
and/or "cold comfort" letter) and fees and expenses of other persons, including
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special experts, retained by the Holding Company, (ix) subject to Section
2.1(d), fees and expenses payable to a Qualified Independent Underwriter and (x)
any other fees and disbursements of underwriters, if any, customarily paid by
issuers or sellers of securities (collectively, "Expenses").
(b) The Holding Company shall pay all Expenses with respect to
any Demand Registration. The Holding Company (as between the Holding Company and
any Holder) shall pay all Expenses with respect to any Piggyback Registration.
(c) Notwithstanding the foregoing, each Holder of Registrable
Securities being registered shall pay all underwriting discounts and commissions
and any transfer taxes, if any, attributable to the sale of such Registrable
Securities, pro rata with respect to payments of discounts and commissions in
accordance with the number of Registrable Securities sold in the offering by
such Holder.
2.6. Certain Limitations on Registration Rights. In the case of any
registration under Section 2.1 pursuant to an underwritten offering, or in the
case of a registration under Section 2.2 if the Holding Company has determined
to enter into an underwriting agreement in connection therewith, all securities
to be included in such registration shall be subject to an underwriting
agreement and no person may participate in such registration unless such person
agrees to sell such person's securities on the basis provided therein and
completes and executes all reasonable questionnaires, and other documents
(including custody agreements and powers of attorney) which must be executed in
connection therewith, and provides such other information to the Holding Company
or the underwriter as may be necessary to register such Person's securities.
2.7. Limitations on Sale or Distribution of Other Securities. The
Holding Company hereby agrees that if it shall previously have received a
request for registration pursuant to Section 2.1 or 2.2, and if such previous
registration shall not have been withdrawn or abandoned, the Holding Company
shall not effect any registration of any of its securities under the Securities
Act (other than a registration on Form S-4 or Form S-8 or any successor or
similar form which is then in effect or other applicable form with respect to
any benefit plan or with respect to any dividend reinvestment plan), whether or
not for sale for its own account, until a period of 90 days, or in the case of
an IPO, 180 days shall have elapsed from the effective date of such previous
registration; and the Holding Company shall so provide in any registration
rights agreements hereafter entered into with respect to any of its securities.
2.8. No Required Sale. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
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2.9. Indemnification.
(a) In the event of any registration of any securities of the
Holding Company under the Securities Act pursuant to this Article 2, the Holding
Company will, and hereby does, indemnify and hold harmless, to the fullest
extent permitted by law, each Holder of Registrable Securities, its directors,
officers, fiduciaries, employees and stockholders or general and limited
partners (and the directors, officers, employees and stockholders thereof), each
other Person who participates as an underwriter or a Qualified Independent
Underwriter, if any, in the offering or sale of such securities, each officer,
director, employee, stockholder or partner of such underwriter or Qualified
Independent Underwriter, and each other Person, if any, who controls such seller
or any such underwriter within the meaning of the Securities Act, against any
and all losses, claims, damages or liabilities, joint or several, actions or
proceedings (whether commenced or threatened) and expenses (including reasonable
fees of counsel and any amounts paid in any settlement effected with the Holding
Company's consent, which consent shall not be unreasonably withheld or delayed
if the Holding Company has not assumed the defense of the action or proceeding)
to which each such indemnified party may become subject under the Securities Act
or otherwise (collectively, "Claims"), insofar as such Claims arise out of or
are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement under which such
securities were registered under the Securities Act or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus or any amendment or supplement thereto,
together with the documents incorporated by reference therein, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or (iii) any
violation by the Holding Company of any federal, state or common law rule or
regulation applicable to the Holding Company and relating to action required of
or inaction by the Holding Company in connection with any such registration, and
the Holding Company will reimburse any indemnified party for any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such Claim as such expenses are incurred;
provided, however, that the Holding Company shall not be liable to any such
indemnified party in any such case to the extent such Claim arises out of or is
based upon any untrue statement or alleged untrue statement of a material fact
or omission or alleged omission of a material fact made in such registration
statement or amendment thereof or supplement thereto or in any such prospectus
or any preliminary, final or summary prospectus in reliance upon and in
conformity with written information furnished to the Holding Company by or on
behalf of such indemnified party specifically for use therein. Such indemnity
and reimbursement of expenses shall remain in full force and effect regardless
of any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such seller.
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(b) Each Holder of Registrable Securities that are included in
the securities as to which any registration under Section 2.1 or 2.2 is being
effected (and, if the Holding Company requires as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 2.1 or 2.2, any underwriter and Qualified Independent Underwriter, if
any) shall, severally and not jointly, indemnify and hold harmless (in the same
manner and to the same extent as set forth in paragraph (a) of this Section 2.9)
the Holding Company, its officers, employees, stockholders and directors, each
Person controlling the Holding Company within the meaning of the Securities Act
and all other prospective sellers and their directors, officers, general and
limited partners and respective controlling Persons with respect to any untrue
statement or alleged untrue statement of any material fact in, or omission or
alleged omission of any material fact from, such registration statement, any
preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Holding Company or its representatives by or on
behalf of such Holder (or underwriter or Qualified Independent Underwriter, if
any,) specifically for use therein and reimburse such indemnified party for any
legal or other expenses reasonably incurred in connection with investigating or
defending any such Claim as such expenses are incurred; provided, however, that
the aggregate amount which any such Holder shall be required to pay pursuant to
this Section 2.9(b) and Sections 2.9(c) and (e) shall in no case be greater than
the amount of the net proceeds received by such person upon the sale of the
Registrable Securities pursuant to the registration statement giving rise to
such claim. Such indemnity and reimbursement of expenses shall remain in full
force and effect regardless of any investigation made by or on behalf of such
indemnified party and shall survive the transfer of such securities by such
Holder.
(c) Any person entitled to indemnification under this
Agreement shall notify promptly the indemnifying party in writing of the
commencement of any action or proceeding with respect to which a claim for
indemnification may be made pursuant to this Section 2.9, but the failure of any
indemnified party to provide such notice shall not relieve the indemnifying
party of its obligations under the preceding paragraphs of this Section 2.9,
except to the extent the indemnifying party is materially prejudiced thereby and
shall not relieve the indemnifying party from any liability which it may have to
any indemnified party otherwise than under this Section 2.9. In case any action
or proceeding is brought against an indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, unless in the reasonable opinion of outside
counsel to the indemnified party a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim, to assume the
defense thereof jointly with any other indemnifying party similarly notified, to
the extent that it chooses, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party that it so chooses, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such
17
<PAGE> 19
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that (i) if the indemnifying party
fails to take reasonable steps necessary to defend diligently the action or
proceeding within 20 days after receiving notice from such indemnified party
that the indemnified party believes it has failed to do so; or (ii) if such
indemnified party who is a defendant in any action or proceeding which is also
brought against the indemnifying party reasonably shall have concluded that
there may be one or more legal defenses available to such indemnified party,
which are not available to the indemnifying party; then, in any such case, the
indemnified party shall have the right to assume or continue its own defense as
set forth above (but with no more than one firm of counsel for all indemnified
parties in each jurisdiction, except to the extent any indemnified party or
parties reasonably shall have concluded that there may be legal defenses
available to such party or parties which are not available to the other
indemnified parties or to the extent representation of all indemnified parties
by the same counsel is otherwise inappropriate under applicable standards of
professional conduct) and the indemnifying party shall be liable for any
expenses therefor. No indemnifying party shall, without the written consent of
the indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (A) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (B) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(d) If for any reason the foregoing indemnity is unavailable
or is insufficient to hold harmless an indemnified party under Sections 2.9(a)
or (b), then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of any Claim in such proportion as
is appropriate to reflect the relative fault of the indemnifying party, on the
one hand, and the indemnified party, on the other hand, with respect to such
offering of securities. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. If, however, the
allocation provided in the second preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative faults but also the relative benefits of the
indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 2.9(d) were to be determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the preceding sentences
of this Section 2.9(d). The amount paid or payable in respect of any Claim shall
be deemed to include any legal or other expenses
18
<PAGE> 20
reasonably incurred by such indemnified party in connection with investigating
or defending any such Claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding anything in this Section 2.9(d) to the
contrary, no indemnifying party (other than the Holding Company) shall be
required pursuant to this Section 2.9(d) to contribute any amount in excess of
the net proceeds received by such indemnifying party from the sale of
Registrable Securities in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate, less the amount of any
indemnification payment made by such indemnifying party pursuant to Section
2.9(b).
(e) The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the transfer
of the Registrable Securities by any such party.
(f) The indemnification and contribution required by this
Section 2.9 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred. Any amounts advanced by an
indemnifying party to an indemnified party pursuant to this Section 2.9 shall be
returned to such indemnifying party if it shall be finally determined by a court
in a judgment not subject to appeal or final review that such indemnified party
was not entitled to indemnification by such indemnifying party.
3. General.
3.1. Holdback. If requested by the managing underwriter of an
underwritten offering, the Holders participating in such offering shall agree
not to sell any Registrable Securities during a period not to exceed 90 days
beginning on the date of the underwriting agreement for such offering, except as
a part of such underwritten offering.
3.2. Rule 144. If the Holding Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act in
respect of the Holding Company Common Stock or any Holding Company Common Stock
Equivalents, the Holding Company covenants that (i)it will timely file the
reports required to be filed by it under the Securities Act or the Exchange Act
(including, but not limited to, the reports under Sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c)(1) of Rule 144 under the Securities
Act and the rules and regulations adopted by the SEC thereunder), and (ii) will
take such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (A) Rule 144 under the
19
<PAGE> 21
Securities Act, or (B) any similar rule or regulation hereafter adopted by the
SEC. Upon the request of any Holder of Registrable Securities, the Holding
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
3.3. Nominees for Beneficial Owners. If Registrable Securities are held
by a nominee for the beneficial owner thereof, the beneficial owner thereof may,
at its option, be treated as the Holder of such Registrable Securities for
purposes of any request or other action by any Holder or Holders of Registrable
Securities pursuant to this Agreement (or any determination of any number or
percentage of Registrable Securities held by any Holder or Holders of
Registrable Securities contemplated by this Agreement), provided that the
Holding Company shall have received assurances reasonably satisfactory to it of
such beneficial ownership.
3.4. Amendments and Waivers. This Agreement may be amended, modified,
supplemented or waived only upon the written agreement of the party against whom
enforcement of such amendment, modification, supplement or waiver is sought.
3.5. Notices. All notices required under this Agreement shall be made
as provided in the Investment Agreement.
3.6. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties and then successors and legal representatives. No party
shall assign this Agreement or any rights hereunder to any other Person.
(b) This Agreement (with the documents referred to herein)
embodies the entire agreement and understanding between the parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
(c) This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New York without giving
effect to the conflicts of law principles thereof.
(d) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
section references are to this Agreement unless otherwise expressly provided.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
20
<PAGE> 22
(f) Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
(g) The parties hereto acknowledge that there would be no
adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to
injunctive relief, including specific performance, to enforce such obligations
without the posting of any bond, and, if any action should be brought in equity
to enforce any of the provisions of this Agreement, none of the parties hereto
shall, to the extent permitted by law, raise the defense that there is an
adequate remedy at law.
(h) Each party hereto shall do and perform or cause to be done
and performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
3.7. No Inconsistent Agreements. The rights granted to the holders of
Registrable Securities hereunder do not in any way conflict with and are not
inconsistent with any other agreements to which the Company or the Holding
Company is a party or by which it is bound. Neither the Company nor the Holding
Company shall enter into any agreement with respect to its securities which is
inconsistent with the rights granted in this Agreement or otherwise conflicts
with the provisions hereof.
21
<PAGE> 23
IN WITNESS WHEREOF, the undersigned have executed this Registration
Rights Agreement as of the date set forth above.
MONY FINANCIAL SERVICES CORPORATION
By: /s/ Kenneth M. Levine
------------------------------------
Name: Kenneth M. Levine
Title: Executive Vice President
THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK
By: /s/ Kenneth M. Levine
------------------------------------
Name: Kenneth M. Levine
Title: Executive Vice President
GS MEZZANINE PARTNERS, L.P.
By: GS Mezzanine Advisors, L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Eve M. Gerriets
------------------------------------
Name: Eve M. Gerriets
Title: Vice President
22
<PAGE> 24
GS MEZZANINE PARTNERS OFFSHORE, L.P.
By: GS Mezzanine Advisors
(Cayman),L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Eve M. Gerriets
------------------------------------
Name: Eve M. Gerriets
Title: Vice President
STONE STREET FUND 1997, L.P.
By: Stone Street Asset Corp.,
its general partner
By: /s/ Eve M. Gerriets
------------------------------------
Name: Eve M. Gerriets
Title: Vice President
BRIDGE STREET FUND 1997, L.P.
By: Stone Street Asset Corp.,
its managing general partner
By: /s/ Eve M. Gerriets
------------------------------------
Name: Eve M. Gerriets
Title: Vice President
23
<PAGE> 25
SCHEDULE I
INVESTORS
GS MEZZANINE PARTNERS, L.P.
GS MEZZANINE PARTNERS OFFSHORE, L.P.
STONE STREET FUND 1997, L.P.
BRIDGE STREET FUND 1997, L.P.
24
<PAGE> 1
Exhibit 10.3
FISCAL AGENCY AGREEMENT
between
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK,
Issuer
and
CITIBANK, N.A.,
Fiscal Agent
--------------------------
Dated as of December 30, 1997
--------------------------
Series A Surplus Notes
<PAGE> 2
TABLE OF CONTENTS
1. The Securities.....................................................1
(a) General..........................................................1
(b) Forms of Securities..............................................1
(c) Book-Entry Provisions............................................3
(d) Denominations....................................................4
2. Fiscal Agent; Other Agents.........................................4
3. Authentication.....................................................5
4. Payment and Cancellation...........................................6
(a) Payment..........................................................6
(b) Cancellation.....................................................7
5. Global Securities..................................................7
6. Registration, Transfer and Exchange of Securities..................8
(a) General..........................................................8
(b) Transfer of Global Securities and Interests Therein..............9
(c) Transfers of Definitive Securities...............................9
(d) Successive Registrations........................................10
(e) Information.....................................................10
(f) Suspension......................................................10
(g) Legends.........................................................10
(h) Repurchase......................................................11
(i) Redemption......................................................11
7. Delivery of Certain Information...................................11
(a) Rule 144A Information...........................................11
(b) Periodic Reports................................................11
8. Conditions of Fiscal Agent's Obligations..........................12
(a) Compensation and Indemnity......................................12
(b) Agency..........................................................12
(c) Advice of Counsel...............................................13
(d) Reliance........................................................13
(e) Interest in Securities, etc.....................................13
(f) Non-Liability for Interest......................................13
(g) Certifications..................................................13
(h) No Implied Obligations..........................................13
9. Resignation and Appointment of Successor..........................14
(a) Fiscal Agent and Paying Agent...................................14
(b) Resignation and Removal.........................................14
(c) Successors......................................................15
(d) Acknowledgement.................................................15
(e) Merger, Consolidation, etc......................................16
i
<PAGE> 3
10. Meetings and Amendments...........................................16
(a) Calling of Meeting, Notice and Quorum...........................16
(b) Approval........................................................17
(c) Binding Nature of Amendments, Notices, Notations,
etc.............................................................19
(d) "Outstanding" Defined.............................................19
11. Governing Law.....................................................20
12. Notices...........................................................20
13. Separability......................................................21
14. Headings..........................................................21
15. Counterparts......................................................21
EXHIBIT A FORM OF DEFINITIVE SECURITIES......................A-1
EXHIBIT B FORM OF GLOBAL SECURITIES..........................B-1
EXHIBIT C FORM OF TRANSFER CERTIFICATE FOR
EXCHANGE OR TRANSFER OF RESTRICTED
DEFINITIVE SECURITY................................C-1
ii
<PAGE> 4
FISCAL AGENCY AGREEMENT, dated as of December 30, 1997 between THE
MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a mutual life insurance corporation
organized under the laws of the State of New York (the "Issuer"), having its
principal office at 1740 Broadway, New York, New York, and CITIBANK, N.A., a
national banking association organized under the laws of the United States of
America, as Fiscal Agent (together with any successor as Fiscal Agent hereunder,
the "Fiscal Agent"). The Exhibits attached hereto shall be deemed to be a part
of this Agreement.
1. The Securities.
(a)General. This Agreement is made in respect of up to $115,000,000
aggregate principal amount of Series A Surplus Notes of the Issuer, scheduled to
mature on December 30, 2012 (the "Series A Notes" or the "Securities"). The
Securities shall bear interest thereon at the rate set forth in the Securities.
Claims based upon the Securities will rank below all Indebtedness, Policy Claims
and Other Creditor Claims (each as hereinafter defined), in accordance with
Section 7435 of the New York Insurance Law (together with any successor
provision, and as may be hereafter amended from time to time, "Section 7435").
The payment by the Issuer of principal and interest on the Securities shall be
conditioned upon the payment restrictions set forth in paragraphs 4 and 10 of
the Series A Notes (the "Payment Restrictions"). The Series A Notes are
scheduled to mature on December 30, 2012 (the "Final Scheduled Maturity Date").
Any reference herein to the term "principal" or the principal amount of the
Series A Notes shall include the amount of premium, if any, payable upon
redemption thereof in accordance with paragraph 15 thereof. Any reference herein
to the term "Scheduled Maturity Date" or other date for the payment of principal
of the Series A Notes shall include (i) the Final Scheduled Maturity Date, or
(ii) the date upon which any state or federal agency obtains an order or grants
approval for the rehabilitation, liquidation, conservation or dissolution of the
Issuer.
(b)Forms of Securities. The Securities are being offered and sold by
the Issuer pursuant to an Investment Agreement, dated as of December 30, 1997
(the "Investment Agreement"), between the Issuer, MONY Financial Services
Corporation (the "Holding Company") and the Investors named therein (the
"Investors").
(i)The Securities (other than Global Securities, as
hereinafter defined) offered and sold pursuant to the Investment
Agreement to "accredited investors", within the meaning of Rule 501(a)
of the Securities Act of 1933, as
<PAGE> 5
amended (the "Act"), shall be issued in definitive, fully registered
form without interest coupons, substantially in the form of Security
attached as Exhibit A hereto, with such applicable legends as are
provided for in Exhibit A ("Definitive Securities"). Upon transfer of
any Definitive Security, registration of such transfer shall be
effected in accordance with Section 6 hereof.
(ii)The Securities offered and sold in reliance on Rule 144A
("Rule 144A") under the Act pursuant to the Investment Agreement shall
be issued in the form of Global Securities (the "Global Securities") in
definitive, fully registered form without interest coupons,
substantially in the form of Security attached as Exhibit B hereto,
with such applicable legends as are provided for in Exhibit B. Each
such Global Security shall be registered in the name of a nominee of
The Depository Trust Company (the "Depositary") and deposited with the
Fiscal Agent, at its New York office, as custodian for the Depositary,
duly executed by the Issuer and authenticated by the Fiscal Agent as
hereinafter provided. The aggregate principal amount of each Global
Security may from time to time be increased or decreased by adjustments
made on the records of the Fiscal Agent, as custodian for the
Depositary, as hereinafter provided.
All Securities shall be issued substantially in the form of Security
attached hereto as either Exhibit A or Exhibit B and shall be executed manually
or in facsimile on behalf of the Issuer by any two of its Chairman of the Board,
President, Chief Financial Officer, Executive Vice Presidents, Senior Vice
Presidents or Secretary (the "Authorized Officers"), notwithstanding that such
officers, or any of them, shall have ceased, for any reason, to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of any such Security. The Securities (i) may also
have such additional provisions, omissions, variations or substitutions as are
not inconsistent with the provisions of this Agreement, and (ii) may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with this Agreement,
any law or with any rules made pursuant thereto or with the rules of any
securities exchange, insurance regulatory or other governmental agency or
depositary therefor or as may, consistently herewith, be determined by the
Authorized Officers executing such Securities, in each case (i) and (ii) as
conclusively evidenced by their execution of such Securities. All Securities
shall be otherwise substantially identical except as to maturity, interest rate,
denomination and as otherwise provided herein.
2
<PAGE> 6
(c) Book-Entry Provisions . This Section 1(c) shall apply to
all Global Securities.
The Issuer shall execute and the Fiscal Agent shall, in accordance
with this Section 1(c), authenticate and deliver one or more Global Securities
as required to be issued pursuant to Section 1(b) hereof, which (A) shall be
registered in the name of the Depositary or its nominee, (B) shall be delivered
by the Fiscal Agent to the Depositary or pursuant to the Depositary's
instructions and (C) shall bear legends substantially to the following effect:
"Unless this Security is presented by an authorized representative
of [insert name of Depositary] to the Issuer or its agent for
registration of transfer, exchange or payment, and any Security
issued in exchange for this Security or any portion hereof is
registered in the name of [insert name of nominee of Depositary] or
in such other name as is requested by an authorized representative
of [insert name of Depositary] (and any payment is made to [insert
name of nominee of Depositary] or to such other entity as is
requested by an authorized representative of [insert name of
Depositary]), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON OTHER THAN [insert name of Depositary]
OR A NOMINEE THEREOF IS WRONGFUL inasmuch as the registered owner
hereof, [insert name of nominee of Depositary], has an interest
herein."
"This Security is a Global Security within the meaning of the Fiscal
Agency Agreement referred to hereinafter. This Global Security may
not be exchanged, in whole or in part, for a Security registered in
the name of any person other than [insert name of Depositary] or a
nominee thereof, except in the limited circumstances set forth in
Section 5 of the Fiscal Agency Agreement, and may not be
transferred, in whole or in part, except in accordance with the
restrictions set forth in Section 6(b) of the Fiscal Agency
Agreement. Beneficial interests in this Global Security may not be
transferred except in accordance with Section 6(b) of the Fiscal
Agency Agreement."
Neither any members of, or participants in, the Depositary ("Agent
Members") nor any other persons on whose
3
<PAGE> 7
behalf Agent Members may act shall have any rights under this Fiscal Agency
Agreement with respect to any Global Security registered in the name of the
Depositary or any nominee thereof, or under any such Global Security, and the
Depositary or such nominee, as the case may be, may be treated by the Issuer,
the Fiscal Agent and any agent of the Issuer or the Fiscal Agent as the absolute
owner and holder of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the
Fiscal Agent or any agent of the Issuer or the Fiscal Agent from giving effect
to any written certification, proxy or other authorization furnished by the
Depositary or such nominee, as the case may be, or impair, as between the
Depositary, its Agent Members and any other person on whose behalf an Agent
Member may act, the operation of customary practices of such persons governing
the exercise of the rights of a holder of any Security.
(d)Denominations. The Securities and beneficial interests in
Global Securities shall be issuable in minimum denominations of $150,000 and any
amount in excess thereof that is an integral multiple of $1,000.
2.Fiscal Agent; Other Agents.
The Issuer hereby appoints CITIBANK, N.A., acting through its
corporate trust office at 111 Wall Street, 5th Floor, Zone 2, New York, New York
10043 in the Borough of Manhattan, The City of New York (together, the
"Corporate Trust Office"), as fiscal agent of the Issuer in respect of the
Securities upon the terms and subject to the conditions herein set forth, and
CITIBANK, N.A. hereby accepts such appointment. CITIBANK, N.A., and any
successor or successors as such fiscal agent qualified and appointed in
accordance with Section 9 hereof, are herein called the "Fiscal Agent". The
Fiscal Agent shall have the powers and authority granted to and conferred upon
it in the Securities and hereby and such further powers and authority to act on
behalf of the Issuer as may be mutually agreed upon by the Issuer and the Fiscal
Agent. The Fiscal Agent shall keep a copy of this Agreement available for
inspection during normal business hours at its Corporate Trust Office. The
Fiscal Agent or any Paying Agent (as defined below) shall also act as Transfer
Agent (as defined below). All of the terms and provisions with respect to such
powers and authority contained in the Securities are subject to and governed by
the terms and provisions hereof.
The Issuer may, at its discretion, appoint one or more agents (a
"Paying Agent" or "Paying Agents") for the payment, to the extent permitted
under the Payment Restrictions, of the principal of and any interest on the
Securities, and one or more agents (a "Transfer Agent" or "Transfer Agents") for
the transfer
4
<PAGE> 8
and exchange of Securities, at such place or places as the Issuer may determine;
provided, however, that the Issuer shall at all times maintain a Paying Agent
and Transfer Agent in the Borough of Manhattan, The City of New York (which
Paying Agent and Transfer Agent may be the Fiscal Agent). The Issuer hereby
initially appoints the Fiscal Agent at its Corporate Trust Office as principal
Paying Agent, Transfer Agent, authenticating agent and securities registrar, and
the Fiscal Agent hereby accepts such appointment. Each Transfer Agent shall act
as a security registrar and there shall be kept at the office of each Transfer
Agent a register in which, subject to such reasonable regulations as the Issuer
may prescribe, the Issuer shall provide for the registration of Securities and
the registration of transfers of Securities. The Issuer shall promptly notify
the Fiscal Agent of the name and address of any other Paying Agent or Transfer
Agent appointed by it and will notify the Fiscal Agent of the resignation or
termination of any such Paying Agent or Transfer Agent. Subject to the
provisions of Section 9(c) hereof, the Issuer may vary or terminate the
appointment of any such Paying Agent or Transfer Agent at any time and from time
to time upon giving not less than 90 days' notice to such Paying Agent or
Transfer Agent, as the case may be, and to the Fiscal Agent. The Issuer shall
cause notice of any resignation, termination or appointment of the Fiscal Agent
or any Paying Agent or Transfer Agent and of any change in the office through
which any such Agent will act to be provided to holders of Securities.
3. Authentication.
The Fiscal Agent is authorized, upon receipt of Securities duly
executed on behalf of the Issuer for the purposes of the original issuance of
Securities, (i) to authenticate said Securities in an aggregate principal amount
not exceeding $115,000,000 of Series A Notes and to deliver said Securities in
accordance with the written order or orders of the Issuer signed on its behalf
by an Authorized Officer and (ii) thereafter to authenticate and deliver
Securities in accordance with the provisions therein and hereinafter set forth.
The Fiscal Agent may, with the consent of the Issuer, appoint by an
instrument or instruments in writing one or more agents (which may include
itself) for the authentication of the Securities and, with such consent, vary or
terminate any such appointment upon written notice and approve any change in the
office through which any authenticating agent acts. The Issuer (by written
notice to the Fiscal Agent and the authenticating agent whose appointment is to
be terminated) may also terminate any such appointment at any time. The Fiscal
Agent hereby agrees to solicit written acceptances from the entities concerned
(in form and substance satisfactory to the Issuer) of such appointments. In its
acceptance of such appointment, each such
5
<PAGE> 9
authenticating agent shall agree to act as an authenticating agent pursuant to
the terms and conditions of this Agreement.
4. Payment and Cancellation.
(a)Payment . For so long as the Fiscal Agent is acting as a Paying
Agent hereunder, the Issuer, subject to the Payment Restrictions, shall provide
to the Fiscal Agent, in immediately available funds on or prior to 10:00 a.m.,
New York time, on each date on which a payment of principal of or any interest
on the Securities shall be scheduled, as set forth in the text of the
Securities, such amount, in U.S. dollars, as is necessary to make such payment,
and the Issuer hereby authorizes and directs the Fiscal Agent from funds so
provided to it to make or cause to be made payment of the principal of and any
interest, as the case may be, on the Securities in the manner, at the times and
for the purposes set forth herein and in the text of said Securities; provided
that (1) any permitted payment of interest on the Securities may be made by
check mailed to the persons (the "registered owners") in whose names such
Securities are registered on the register maintained pursuant to Section 6
hereof at the close of business on the record dates designated in the text of
the Securities and (2) the Issuer will not provide any such funds to the Fiscal
Agent prior to such time as the relevant payment of principal or interest is
approved by the Superintendent of Insurance of the State of New York (the
"Superintendent"). Permitted payments of principal of or any interest on the
Securities may be made, in the case of a registered owner of at least $1,000,000
(or any lesser amount at the discretion of the Issuer) aggregate principal
amount of Securities, by wire transfer to an account maintained by the payee
with a bank if such registered owner so elects by giving notice to the Fiscal
Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept
at its discretion) prior to the date on which such payments are scheduled to be
made, of such election and of the account to which payment is to be made. Unless
such designation is revoked, any such designation made by such holder with
respect to such Securities shall remain in effect with respect to any future
payments with respect to such Securities payable to such holder. The Issuer
shall pay any reasonable administrative costs in connection with making any such
payments. The Fiscal Agent shall arrange directly with any other Paying Agent
who may have been appointed by the Issuer pursuant to the provisions of Section
2 hereof for the payment, subject to the Payment Restrictions, from funds so
paid by the Issuer of the principal of and any interest on the Securities in the
manner, at the times and for the purposes set forth herein and in the text of
said Securities. Notwithstanding the foregoing, the Issuer may provide directly
to a Paying Agent funds for the payment, subject to the Payment Restrictions, of
the principal thereof and interest payable thereon under an agreement with
respect to such funds containing substantially the
6
<PAGE> 10
same terms and conditions set forth in this Section 4(a) and in Section 8(b)
hereof; and the Fiscal Agent shall have no responsibility with respect to any
funds so provided by the Issuer to any such Paying Agent.
Payments of principal of and interest on the Securities shall be
made in the manner set forth in the Securities, including the Payment
Restrictions set forth therein.
(b) Cancellation . All Securities delivered to the Fiscal Agent (or any
other Agent appointed by the Issuer pursuant to Section 2 hereof) for payment or
registration of transfer or exchange as provided herein or in the Securities
shall be marked "cancelled" and, in the case of any other such Agent, forwarded
to the Fiscal Agent. All such Securities shall be destroyed by the Fiscal Agent
or such other person as may be jointly designated by the Issuer and the Fiscal
Agent, which shall thereupon furnish certificates of such destruction to the
Issuer.
5. Global Securities.
(a) Notwithstanding any other provisions of this Agreement or the
Securities, a Global Security shall not be exchanged in whole or in part for a
Security registered in the name of any person other than the Depositary or one
or more nominees thereof; provided that a Global Security may also be exchanged
for Securities registered in the names of any person designated by the
Depositary in the event that (i) the Depositary has notified the Issuer that it
is unwilling or unable to continue as Depositary for such Global Security or
such Depositary has ceased to be a "clearing agency" registered under the
Securities Exchange Act of 1934 (as may be hereafter amended from time to time,
the "Exchange Act"), (ii) an event described in paragraph 14(a) or the first
sentence of paragraph 14(b) of the Securities has occurred and is continuing
with respect to the Securities, (iii) a request for certificates has been made
upon 60 days' prior written notice given to the Fiscal Agent in accordance with
the Depositary's customary procedures and a copy of such notice has been
received by the Issuer from the Fiscal Agent, or (iv) the holder of an interest
(other than the initial purchaser thereof) in such Global Security has notified
the Fiscal Agent and registrar in writing that it is transferring such
beneficial interest to an Accredited Investor who is not a "qualified
institutional buyer" within the meaning of Rule 144A, who is required to hold
its beneficial interest in the Securities in the form of a Definitive Security.
Any Global Security exchanged pursuant to clause (i) above shall be so exchanged
in whole and not in part and any Global Security exchanged pursuant to clause
(ii), (iii) or (iv) above may be exchanged in whole or from time to time in part
as directed by the Depositary. Any Security issued in exchange for a Global
Security or any portion thereof shall be a Global Security, unless such Security
is
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registered in the name of a person other than the Depositary or a nominee
thereof.
(b) Securities issued in exchange for a Global Security or any
portion thereof shall be issued in definitive, fully registered form, without
interest coupons, shall have an aggregate principal amount equal to that of such
Global Security or portion thereof to be so exchanged, shall be registered in
such names and be in such authorized denominations as the Depositary shall
designate and shall bear the applicable legends provided for herein. Any Global
Security to be exchanged in whole shall be surrendered by the Depositary to the
Transfer Agent located in the Borough of Manhattan, The City of New York, to be
so exchanged. With regard to any Global Security to be exchanged in part, either
such Global Security shall be so surrendered for exchange or, if the Fiscal
Agent is acting as custodian for the Depositary or its nominee with respect to
such Global Security, the principal amount thereof shall be reduced, by an
amount equal to the portion thereof to be so exchanged, by means of an
appropriate adjustment made on the records of the Fiscal Agent. Upon any such
surrender or adjustment, the Fiscal Agent shall authenticate and deliver the
Security issuable on such exchange to or upon the order of the Depositary or an
authorized representative thereof. Any Security delivered in exchange for the
Global Security or any portion thereof shall, except as otherwise provided by
Section 6(h), bear the legend regarding transfer restrictions applicable to the
Global Security set forth on the form of Security attached as Exhibit B hereto.
(c) Subject to the provisions of Section 1(c) above, the registered
holder may grant proxies and otherwise authorize any person, including Agent
Members and persons that may hold interests through Agent Members, to take any
action which a holder is entitled to take under this Fiscal Agency Agreement or
the Securities.
(d) In the event of the occurrence of any of the events specified in
paragraph (a) of this Section 5, the Issuer will promptly make available to the
Fiscal Agent a reasonable supply of Definitive Securities.
6. Registration, Transfer and Exchange of Securities.
(a) General. The Fiscal Agent, as agent of the Issuer for this purpose,
shall maintain at its Corporate Trust Office in the Borough of Manhattan, The
City of New York, a register of Securities for the registration of Securities
and the transfers and exchanges thereof. Subject to the provisions of this
Section 6, upon presentation for transfer or exchange of any Security at the
office of any Transfer Agent accompanied by a written instrument of transfer or
exchange in the form approved by the
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Issuer (it being understood that, until notice to the contrary is given to
holders of Securities, the Issuer shall be deemed to have approved the form of
instrument of transfer or exchange, if any, printed on any Security), executed
by the registered holder, in person or by such holder's attorney thereunto duly
authorized in writing, such Security shall be transferred upon the register for
the Securities, and a new Security shall be authenticated and issued in the name
of the transferee.
(b) Transfer of Global Securities and Interests Therein. A Global
Security may not be transferred, in whole or in part, to any person other than
the Depositary or a nominee thereof, and no such transfer to any such other
person may be registered; provided that this Section 6(b) shall not prohibit any
transfer of a Security that is issued in exchange for a Global Security but is
not itself a Global Security. No transfer of a Security to any person shall be
effective under this Agreement or the Securities unless and until such Security
has been registered in the name of such person.
(c)Transfers of Definitive Securities. If a holder of Definitive
Securities wishes at any time to transfer such Definitive Securities or to
exchange such Definitive Securities, such transfer or exchange may be effected
only in accordance with the provisions of this Section 6(c). So long as the
Definitive Securities are held by the Investors and their subsidiaries and
affiliates, no transfer certificate is necessary for transfers by them in
accordance with Section 1.6(d) of the Investment Agreement. Upon the receipt by
the Fiscal Agent, as Transfer Agent, at its office in The City of New York of
(i) a Definitive Security accompanied by a written and executed instrument of
transfer or exchange as provided in Section 6(a) and (ii) if such Definitive
Security bears the legend containing transfer restrictions set forth in the
second paragraph of legends in the form of Security attached hereto as Exhibit
A-1, the following additional information and documents, as applicable:
(1) if such Definitive Security is owned by the holder thereof and
is being exchanged, without transfer, or if such Definitive Security is
being transferred pursuant to an exemption from registration in accordance
with Rule 144A, Rule 144 or Regulation S under the Act, a certification
from such holder to that effect, substantially in the form of Exhibit C
hereto; or
(2) if the Definitive Security being transferred or exchanged
contains a restrictive legend, certification to the effect that such
transfer or exchange is in accordance with the restrictions contained in
such legend if required by the Fiscal Agent,
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the Fiscal Agent shall register the transfer of such Definitive Security or
exchange such Definitive Security for an equal principal amount of Definitive
Securities of other authorized denominations.
To permit registrations of transfers and exchanges, the Issuer shall
execute and the Fiscal Agent (or an authenticating agent appointed pursuant to
Section 2) shall authenticate and deliver Definitive Securities at the Fiscal
Agent's or any Transfer Agent's request. No service charge shall be made for any
registration of transfer or exchange, but the Issuer may require payment of a
sum sufficient to cover any transfer tax or other governmental charge payable in
connection with any registration of transfer or exchange.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Issuer, subject to the
Payment Restrictions, evidencing the same debt, and the applicable provisions of
this Fiscal Agency Agreement shall apply equally thereto, as the Securities
surrendered upon such registration of transfer or exchange.
(d) Successive Registrations. Successive registrations and
registrations of transfers and exchanges as aforesaid may be made from time to
time as desired, and each such registration shall be noted on the Security
register. No service charge shall be made for any registration of transfer or
exchange of the Securities, but the Fiscal Agent may require payment of a sum
sufficient to cover any transfer tax or other governmental charge payable in
connection therewith and any other amounts required to be paid by the provisions
of the Securities.
(e)Information. Any Transfer Agent appointed pursuant to Section 2
hereof shall provide to the Fiscal Agent such information as the Fiscal Agent
may reasonably require in connection with the delivery by such Transfer Agent of
Securities upon transfer or exchange of Securities.
(f) Suspension. No Transfer Agent shall be required to make
registrations of transfer or exchange of Securities during any periods
designated in the text of the Securities as periods during which such
registration of transfer and exchanges need not be made.
(g) Legends. If Securities are issued upon the transfer, exchange or
replacement of Securities not bearing the legends required, as applicable, by
the form of Security attached as Exhibit A or Exhibit B hereto (collectively,
the "Legend"), the Securities so issued shall not bear the Legend. If Securities
are issued upon the transfer, exchange or replacement of Securities bearing the
Legend, or if a request is made to remove the Legend on a Security, the
Securities so issued shall
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bear the Legend, or the Legend shall not be removed, as the case may be, unless
there is delivered to the Issuer such satisfactory evidence, which may include
an opinion of independent counsel licensed to practice law in the State of New
York, as may be reasonably required by the Issuer that neither the Legend nor
the restrictions on transfer set forth therein are required to ensure that
transfers thereof comply with the provisions of Rule 144A, Rule 144 or
Regulation S under the Act or that such Securities are not "restricted
securities" within the meaning of Rule 144 under the Act. Upon provision of such
satisfactory evidence, the Fiscal Agent, at the direction of the Issuer, shall
authenticate and deliver a Security that does not bear the Legend. The Issuer
agrees to indemnify the Fiscal Agent for, and to hold it harmless against, any
loss, liability or expense, including the fees and expenses of counsel,
reasonably incurred, arising out of or in connection with actions taken or
omitted by the Fiscal Agent in reliance upon such legal opinion and the delivery
of a Security that does not bear a Legend.
(h) Repurchase. With the prior approval of the Superintendent, the
Issuer and any person that constitutes an affiliate of the Issuer within the
meaning of the Act may at any time purchase Securities in the open market or
otherwise at any price, for its own account or the account of others. Any
Security so purchased by the Issuer or any such affiliate for its own account
shall be promptly surrendered to the Fiscal Agent for cancellation and shall not
thereafter be re-issued or resold.
(i) Redemption. The Securities shall not be redeemable by the Issuer
prior to Final Scheduled Maturity Date.
7. Delivery of Certain Information.
(a) Rule 144A Information. At any time when the Issuer is not subject
to Section 13 or 15(d) of the Exchange Act, upon the request of a holder of a
Security or beneficial interest in a Global Security, the Issuer shall promptly
furnish or cause to be furnished "Rule 144A Information" (as defined below) to
such holder, or to a prospective purchaser of such Security or interest
designated by such holder, in order to permit compliance by such holder with
Rule 144A under the Act in connection with the resale of such Security by such
holder. "Rule 144A Information" shall be such information as is specified
pursuant to paragraph (d)(4) of Rule 144A (or any successor provision thereto),
as such provisions (or successor provision) may be amended from time to time.
(b) Periodic Reports. The Issuer shall deliver (or shall cause the
Fiscal Agent to deliver) to each holder of a Security, promptly after such items
are available, one copy of each annual report to policyholders of the Issuer. In
addition, upon the written request of a holder of a Security or beneficial
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<PAGE> 15
interest in a Global Security, the Issuer shall promptly furnish or cause to be
furnished to such holder one copy of the annual and quarterly statutory-basis
financial statements of the Issuer as filed by the Issuer with the New York
Department of Insurance.
8. Conditions of Fiscal Agent's Obligations.
The Fiscal Agent accepts its obligations herein set forth upon the
terms and conditions hereof, including the following, to all of which the Issuer
agrees and all of which are applicable to the Securities and the holders from
time to time thereof:
(a) Compensation and Indemnity. The Fiscal Agent shall be entitled to
reasonable compensation as agreed with the Issuer for all services rendered by
it, and the Issuer agrees promptly to pay such compensation and to reimburse the
Fiscal Agent for the reasonable out-of-pocket expenses (including reasonable
counsel fees and expenses) incurred by it in connection with or arising out of
its services hereunder, or the issuance of the Securities and their offering and
sale. The Issuer also agrees to indemnify the Fiscal Agent for, and to hold it
harmless against, any loss, damage, claim, liability or expense, incurred
without negligence or bad faith, arising out of or in connection with its acting
as Fiscal Agent hereunder, as well as the reasonable costs and expenses of
defending against any claim of liability in the premises. The obligations of the
Issuer under this Section 8(a) shall survive payment of all the Securities or
the resignation or removal of the Fiscal Agent.
(b) Agency. In acting under this Agreement and in connection with the
Securities, the Fiscal Agent is acting solely as agent of the Issuer and does
not assume any responsibility for the correctness of the recitals in the
Securities (except for the correctness of the statement in its certificate of
authentication thereon) or any obligation or relationship of agency or trust,
for or with any of the owners or holders of the Securities, except that all
funds held by the Fiscal Agent for the payment of principal of and any interest
on the Securities, to the extent permitted under the Payment Restrictions, shall
be held in trust for such owners or holders, as the case may be, as set forth
herein and in the Securities; provided, however, that monies held in respect of
the Securities remaining unclaimed at the end of two years after such principal
and such interest shall have become payable in accordance with the Payment
Restrictions (whether at the Scheduled Maturity Date or otherwise) and monies
sufficient therefor shall have been duly made available for payment shall,
together with any interest made available for payment thereon, be repaid to the
Issuer. Upon such repayment, the aforesaid trust with respect to the Securities
shall terminate and all liability of the Fiscal Agent and Paying Agents with
respect to such funds shall thereupon cease.
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(c) Advice of Counsel. The Fiscal Agent and any Paying Agent or
Transfer Agent appointed by the Issuer pursuant to Section 2 hereof may consult
with their respective counsel or other independent counsel satisfactory to them,
and the opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered by them hereunder in good
faith and without negligence and in accordance with such opinion.
(d)Reliance. The Fiscal Agent and any Paying Agent or Transfer Agent
appointed by the Issuer pursuant to Section 2 hereof each shall be protected and
shall incur no liability for or in respect of any action taken or thing suffered
by it in reliance upon any Security, notice, direction, consent, certificate,
affidavit, statement, or other paper or document believed by it, in good faith
and without negligence, to be genuine and to have been passed upon or signed by
the proper parties.
(e) Interest in Securities, etc. The Fiscal Agent, any Paying Agent or
Transfer Agent appointed by the Issuer pursuant to Section 2 hereof and their
respective officers, directors and employees may become the owners of, or
acquire any interest in, any Securities, with the same rights that they would
have if they were not the Fiscal Agent, such other Paying Agent or Transfer
Agent or such person, and may engage or be interested in any financial or other
transaction with the Issuer, and may act on, or as depositary, trustee or agent
for, any committee or body of holders of Securities or other obligations of the
Issuer, as freely as if they were not the Fiscal Agent, such other Paying Agent
or Transfer Agent or such person.
(f) Non-Liability for Interest. Subject to any agreement between the
Issuer and the Fiscal Agent to the contrary, absent bad faith or negligence, the
Fiscal Agent shall not be under any liability for interest on monies at any time
received by it pursuant to any of the provisions of this Agreement or the
Securities.
(g) Certifications. Whenever in the administration of this Agreement
the Fiscal Agent shall deem it desirable that a matter of fact be proved or
established prior to taking, suffering or omitting any action hereunder, the
Fiscal Agent (unless other evidence be herein specifically prescribed) may, in
the absence of bad faith or negligence on its part, rely upon a certificate
signed by an Authorized Officer and delivered to the Fiscal Agent as to such
matter of fact.
(h) No Implied Obligations. The duties and obligations of the Fiscal
Agent and the Issuer with respect to matters governed by this Agreement shall be
determined solely by the express provisions hereof, and neither the Fiscal Agent
nor the Issuer shall be liable except for the performance of such
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duties and obligations as are specifically set forth in this Agreement and the
Securities, as applicable, and no implied covenants or obligations shall be read
into this Agreement or the Securities against either the Fiscal Agent or the
Issuer. Nothing in this Agreement shall be construed to require the Fiscal Agent
to advance or expend its own funds.
9. Resignation and Appointment of Successor.
(a) Fiscal Agent and Paying Agent. The Issuer agrees, for the benefit
of the holders from time to time of the Securities, that there shall at all
times be a Fiscal Agent hereunder which shall be a bank or trust company
organized and doing business under the laws of the United States of America or
the State of New York, in good standing and having an established place of
business in the Borough of Manhattan, The City of New York, and authorized under
such laws to exercise corporate trust powers, until all the Securities
authenticated and delivered hereunder (i) shall have been delivered to the
Fiscal Agent for cancellation or (ii) have become payable, with the approval of
the Superintendent, and monies sufficient to pay the full principal of and any
interest remaining unpaid on the Securities shall have been made available for
payment and either paid or returned to the Issuer as provided herein and in such
Securities.
(b) Resignation and Removal. The Fiscal Agent may at any time resign by
giving written notice to the Issuer of such intention on its part, specifying
the date on which its desired resignation shall become effective, provided that
such date shall not be less than 60 days from the date on which such notice is
given, unless the Issuer agrees to accept shorter notice. The Fiscal Agent
hereunder may be removed at any time by the filing with it of an instrument in
writing signed on behalf of the Issuer and specifying such removal and the date
when it shall become effective. Notwithstanding the dates of effectiveness of
resignation or removal, as the case may be, to be specified in accordance with
the preceding sentences, such resignation or removal shall take effect only upon
the appointment by the Issuer, as hereinafter provided, of a successor Fiscal
Agent (which, to qualify as such, shall for all purposes hereunder be a bank or
trust company organized and doing business under the laws of the United States
of America or of the State of New York, in good standing and having or having an
affiliate which has an established place of business in the Borough of
Manhattan, The City of New York, authorized under such laws to exercise
corporate trust powers and having a combined capital and surplus in excess of
$50,000,000) and the acceptance of such appointment by such successor Fiscal
Agent. Upon its resignation or removal, the Fiscal Agent shall be entitled to
payment by the Issuer pursuant to Section 8(a) hereof, to the date of
termination.
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(c) Successors. In case at any time the Fiscal Agent (or any Paying
Agent if such Paying Agent is the only Paying Agent located in a place where, by
the terms of the Securities or this Agreement, the Issuer is required to
maintain a Paying Agent) shall resign, or shall be removed, or shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or shall file a
voluntary petition in bankruptcy or make an assignment for the benefit of its
creditors or consent to the appointment of a receiver of all or any substantial
part of its property, or shall admit in writing its inability to pay or meet its
debts as they severally mature, or if a receiver of it or of all or any
substantial part of its property shall be appointed, or if an order of any court
shall be entered approving any petition filed by or against it under the
provisions of applicable receivership, bankruptcy, insolvency or other similar
legislation, or if any public officer shall take charge or control of it or of
its property or affairs, for the purpose of rehabilitation, conservation or
liquidation, a successor Fiscal Agent or Paying Agent, as the case may be,
qualified as aforesaid, shall be appointed by the Issuer by an instrument in
writing, filed with the successor Fiscal Agent or Paying Agent, as the case may
be, and the predecessor Fiscal Agent or Paying Agent, as the case may be. Upon
the appointment as aforesaid of a successor Fiscal Agent or Paying Agent, as the
case may be, and acceptance by such successor of such appointment, the Fiscal
Agent or Paying Agent, as the case may be, so succeeded shall cease to be Fiscal
Agent or Paying Agent, as the case may be, hereunder. If no successor Fiscal
Agent or other Paying Agent, as the case may be, shall have been so appointed by
the Issuer and shall have accepted appointment as hereinafter provided, and, in
the case of such other Paying Agent, if such other Paying Agent is the only
Paying Agent located in a place where, by the terms of the Securities or this
Agreement, the Issuer is required to maintain a Paying Agent, then any holder of
a Security on behalf of himself and all others similarly situated, or the Fiscal
Agent, may petition any court of competent jurisdiction for the appointment of a
successor fiscal or paying agent, as the case may be. The Issuer shall give
prompt written notice to each other Paying Agent of the appointment of a
successor Fiscal Agent.
(d) Acknowledgement. Any successor Fiscal Agent appointed hereunder
shall execute, acknowledge and deliver to its predecessor and to the Issuer an
instrument accepting such appointment hereunder, and thereupon such successor
Fiscal Agent, without any further act, deed or conveyance, shall become vested
with all the authority, rights, powers, trusts, immunities, duties and
obligations of such predecessor with like effect as if originally named as
Fiscal Agent hereunder and all provisions hereof shall be binding on such
successor Fiscal Agent, and such predecessor, upon payment of its compensation
and reimbursement of its disbursements then unpaid, shall thereupon become
obligated to transfer, deliver and pay over, and such successor
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Fiscal Agent shall be entitled to receive, all monies, securities, books,
records or other property on deposit with or held by such predecessor as Fiscal
Agent hereunder.
(e) Merger, Consolidation, etc. Any bank or trust company into
which the Fiscal Agent hereunder may be merged, or resulting from any merger or
consolidation to which the Fiscal Agent shall be a party, or to which the Fiscal
Agent shall sell or otherwise transfer all or substantially all the assets and
business of the Fiscal Agent, provided that it shall be qualified as aforesaid,
shall be the successor Fiscal Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto.
10. Meetings and Amendments.
(a)Calling of Meeting, Notice and Quorum. A meeting of holders
of Securities may be called at any time and from time to time to make, give or
take any request, demand, authorization, direction, notice, consent, waiver or
other action provided by this Agreement or the Securities to be made, given or
taken by holders of Securities or to modify, amend or supplement the terms of
the Securities or this Agreement as hereinafter provided, and subject to the
requirement hereinafter set forth that the Issuer and the Fiscal Agent may, only
with the prior approval of the Superintendent, modify, amend or supplement this
Fiscal Agency Agreement or the terms of the Securities or give consents or
waivers or take other actions with respect thereto. The Fiscal Agent may at any
time call a meeting of holders of Securities for any such purpose to be held at
such time and at such place in the Borough of Manhattan, The City of New York as
the Fiscal Agent shall determine. Notice of every meeting of holders of
Securities, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be given as
provided in the terms of the Securities, not less than 30 nor more than 60 days
prior to the date fixed for the meeting (provided that, in the case of any
meeting to be reconvened after adjournment for lack of a quorum, such notice
shall be so given not less then 15 nor more than 60 days prior to the date fixed
for such meeting). In case at any time the Issuer or the holders of at least 10%
in aggregate principal amount of the Outstanding Securities(as defined in
subsection (d) of this Section) shall have requested the Fiscal Agent to call a
meeting of the holders of Securities for any such purpose, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, the Fiscal Agent shall call such meeting for such purposes by giving
notice thereof.
To be entitled to vote at any meeting of holders of Securities, a
person shall be a holder of Outstanding Securities or a person duly appointed by
an instrument in writing as proxy
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for such a holder. The persons entitled to vote a majority in principal amount
of the Outstanding Securities shall constitute a quorum. At the reconvening of
any meeting adjourned for a lack of a quorum, the persons entitled to vote 25%
in principal amount of the Outstanding Securities shall constitute a quorum for
the taking of any action set forth in the notice of the original meeting. The
Fiscal Agent may make such reasonable and customary regulations consistent
herewith as it shall deem advisable for any meeting of holders of Securities
with respect to the proof of the appointment of proxies in respect of holders of
Securities, the record date for determining the registered owners of Securities
who are entitled to vote at such meeting (which date shall be designated by the
Fiscal Agent and set forth in the notice calling such meeting hereinabove
referred to and which shall be not less than 15 nor more than 60 days prior to
such meeting; provided that nothing in this paragraph shall be construed to
render ineffective any action taken by holders of the requisite principal amount
of Outstanding Securities on the date such action is taken), the adjournment and
chairmanship of such meeting, the appointment and duties of inspectors of votes,
the submission and examination of proxies, certificates and other evidence of
the right to vote, and such other matters concerning the conduct of the meeting
as it shall deem appropriate.
(b) Approval. (i) At any meeting of holders of Securities duly called
and held as specified above, upon the affirmative vote, in person or by proxy
thereunto duly authorized in writing, of the holders of not less than a majority
in aggregate principal amount of the Securities then Outstanding represented at
such meeting, or (ii) with the written consent of the holders of not less than a
majority in aggregate principal amount of the Securities then Outstanding, in
each case (i) or (ii) the Issuer and the Fiscal Agent may, with the prior
approval of the Superintendent, modify, amend or supplement the terms of the
Securities or this Agreement in any way, and the holders of Securities may make,
take or give any request, demand, authorization, direction, notice, consent,
waiver (including waiver of future compliance or past failure to perform) or
other action provided by this Agreement or the Securities to be made, given or
taken by holders of Securities; provided, however, that any such action,
modification, amendment or supplement to be effected pursuant to clause (i) of
this subsection (b) shall be approved by the holders of not less than 25% of the
aggregate principal amount of Securities then Outstanding; and provided,
further, that no such action, modification, amendment or supplement, however
effected, may, without the consent of the holder of each Security affected
thereby, (A) change the Scheduled Interest Payment Date or Scheduled Maturity
Date (in each case, as defined in the Securities) of the principal of or any
installment of interest on any Security, (B) reduce the principal amount of any
Security or the interest rate thereon, or, if applicable, the premium payable,
if any, with respect to a
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redemption thereof, (C) change the currency in which, or the required place at
which, payment with respect to interest or principal in respect of the
Securities is payable, (D) change the Issuer's obligations under Section 7(a)
hereof in any manner adverse to the interests of the holder of a Security, (E)
impair the right of a holder of a Security to institute suit for the enforcement
of any payment, if such payment is permitted under the Payment Restrictions, on
or with respect to any Security, (F) reduce the above-stated percentage of the
principal amount of Outstanding Securities the vote or consent of the holders of
which is necessary to modify, amend or supplement this Agreement or the terms
and conditions of the Securities or to make, take or give any request, demand,
authorization, direction, notice, consent, waiver (including waiver of any
future compliance or past failure to perform) or other action provided hereby or
thereby to be made, taken or given, (G) reduce the percentage in aggregate
principal amount of Outstanding Securities that constitutes the quorum required
at any meeting of holders of Securities at which a resolution is adopted, (H)
change the restrictions on payment set forth in the Securities in a manner
adverse to such holder, or (I) change the provisions of Paragraph 10 of the
Securities in a manner adverse to such holder.
The Issuer and the Fiscal Agent may, with the prior approval of the
Superintendent, without the vote or consent of any holder of Securities, amend
this Agreement or the Securities for the purpose of (a) adding to the covenants
of the Issuer for the benefit of the holders of Securities, or (b) surrendering
any right or power conferred upon the Issuer, or (c) securing the Securities or
(d) evidencing the succession of another corporation to the Issuer and the
assumption by such successor of the covenants and obligations of the Issuer
herein and in the Securities as permitted by this Agreement and the Securities,
or (e) modifying the restrictions on, and procedures for, resale and other
transfers of the Securities to the extent required or permitted by any change in
applicable law or regulation, or the interpretation thereof, or in practices
relating to the resale or transfer of restricted securities generally, or (f)
accommodating the issuance, if any, of Securities in book-entry or certificated
form and matters related thereto which do not adversely affect the interest of
any Security holder in any material respect, or (g) curing any ambiguity or
correcting or supplementing any defective provision contained herein or in the
Securities in a manner which does not adversely affect the interest of any
Security holder in any material respect, or (h) effecting any amendment which
the Issuer and the Fiscal Agent may determine is necessary or desirable and
which shall not adversely affect the interest of any Security holder.
It shall not be necessary for the vote or consent of the holders of
Securities to approve the particular form of any
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proposed modification, amendment, supplement, request, demand, authorization,
direction, notice, consent, waiver or other action, but it shall be sufficient
if such vote or consent shall approve the substance thereof.
The Fiscal Agent may request an opinion of counsel in connection
with any amendment or supplement entered into hereunder.
(c) Binding Nature of Amendments, Notices, Notations, etc. Any
instrument given by or on behalf of any holder of a Security in connection with
any consent to or vote for any such modification, amendment, supplement,
request, demand, authorization, direction, notice, consent, waiver or other
action shall be irrevocable once given and shall be conclusive and binding on
all subsequent holders of such Security or any Security issued directly or
indirectly in exchange or substitution therefor or in lieu thereof. Any such
modification, amendment, supplement, request, demand, authorization, direction,
notice, consent, waiver or other action taken, made or given in accordance with
Section 10(b) hereof shall be conclusive and binding on all holders of
Securities, whether or not they have given such consent or cast such vote or
were present at any meeting, and whether or not notation of such modification,
amendment, supplement, request, demand, authorization, direction, notice,
consent, waiver or other action is made upon the Securities. Notice of any
modification or amendment of, supplement to, or request, demand, authorization,
direction, notice, consent, waiver or other action with respect to the
Securities or this Agreement (other than for purposes of curing any ambiguity or
of curing, correcting or supplementing any defective provision hereof or
thereof) shall be given to each holder of Securities affected thereby, in all
cases as provided in the Securities.
Securities authenticated and delivered after the effectiveness of
any such modification, amendment, supplement, request, demand, authorization,
direction, notice, consent, waiver or other action may bear a notation in the
form approved by the Fiscal Agent and the Issuer as to any matter provided for
in such modification, amendment, supplement, request, demand, authorization,
direction, notice, consent, waiver or other action. New Securities modified to
conform, in the opinion of the Fiscal Agent and the Issuer, to any such
modification, amendment, supplement, request, demand, authorization, direction,
notice, consent, waiver or other action taken, made or given in accordance with
Section 10(b) hereof may be prepared by the Issuer, authenticated by the Fiscal
Agent and delivered in exchange for Outstanding Securities.
(d)"Outstanding" Defined. For purposes of the provisions of
this Agreement and the Securities, any Security
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<PAGE> 23
authenticated and delivered pursuant to this Agreement shall, as of any date of
determination, be deemed to be "Outstanding", except:
(i) Securities theretofore cancelled by the Fiscal Agent
or delivered to the Fiscal Agent for cancellation;
(ii) Securities which have become payable, to the extent
permitted under the Payment Restrictions, at the Scheduled Maturity Date
or otherwise, and with respect to which, in each case, monies sufficient
to pay the principal thereof and any interest thereon shall have been
paid; and
(iii) Securities in lieu of or in substitution for which other
Securities shall have been authenticated and delivered pursuant to this
Agreement;
provided, however, that in determining whether the holders of the requisite
principal amount of Outstanding Securities are present at a meeting of holders
of Securities for quorum purposes or have consented to or voted in favor of any
request, demand, authorization, direction, notice, consent, waiver, amendment,
modification or supplement hereunder, Securities owned directly or indirectly by
the Issuer, or any affiliate of the Issuer, shall be disregarded and deemed not
to be Outstanding.
11. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, WITHOUT
REFERENCE TO CONFLICTS OF LAWS PROVISIONS.
12. Notices.
All notices or communications hereunder, except as herein otherwise
specifically provided, shall be in writing, shall specify this Agreement by name
and date and shall identify the Securities, and if sent to the Fiscal Agent
shall be delivered, transmitted by facsimile or telegraphed to it at CITIBANK,
N.A., Corporate Agency and Trust Administration, 111 Wall Street, 5th Floor,
Zone 2, New York, New York 10043, Attention: Florence Mills, Senior Trust
Officer, telephone: (212) 657-7824, facsimile: (212) 657-4024, and if sent to
the Issuer shall be delivered, transmitted by facsimile or telegraphed to it at
The Mutual Life Insurance Company of New York, 1740 Broadway, New York, New York
10019, Attention: Kenneth M. Levine, Executive Vice President and Chief
Investment Officer, telephone: (212) 708-2907, facsimile: (212) 708-2995. The
foregoing addresses for notices or communications may be
20
<PAGE> 24
changed by written notice given by the addressee to each party hereto, and the
addressee's address shall be deemed changed for all purposes from and after the
giving of such notice.
If the Fiscal Agent shall receive any notice or demand addressed to
the Issuer by the holder of a Security, the Fiscal Agent shall promptly forward
such notice or demand to the Issuer.
13. Separability.
In case any provision in this Agreement or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
14. Headings.
The section headings herein are for convenience of reference only
and shall not affect the construction hereof.
15. Counterparts.
This Agreement may be executed in one or more counterparts, and by
each party separately on a separate counterpart, and each such counterpart when
executed and delivered shall be deemed to be an original. Such counterparts
shall together constitute one and the same instrument.
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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Fiscal
Agency Agreement as of the date first above written.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW
YORK
By: /s/ Richard E. Mulroy
-------------------------------
Name: Richard E. Mulroy
Title: Senior Vice President
CITIBANK, N.A.
By: /s/ F. Mills
-------------------------------
Name: F. Mills
Title: Senior Trust Officer
22
<PAGE> 26
EXHIBIT A
FORM OF DEFINITIVE SECURITY
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM AND IN ACCORDANCE WITH THE FISCAL AGENCY AGREEMENT, COPIES OF WHICH
ARE AVAILABLE FOR INSPECTION AT THE CORPORATE TRUST OFFICE OF THE FISCAL AGENT.
EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS
SECURITY MAY BE RELYING ON THE EXEMPTION FROM SUCH REGISTRATION PROVIDED BY RULE
144A UNDER THE ACT (TOGETHER WITH ANY SUCCESSOR PROVISION AND AS MAY BE
HEREAFTER AMENDED FROM TIME TO TIME, "RULE 144A").
[INCLUDE UNLESS, PURSUANT TO SECTION 6(g) OF THE FISCAL AGENCY AGREEMENT,
THE ISSUER DETERMINES THAT THE LEGEND MAY BE REMOVED] -- THE HOLDER OF THIS
SECURITY AGREES FOR THE BENEFIT OF THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
("MONY") THAT (A) THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A, (OR ANY SUCCESSOR
PROVISION THERETO, AND AS MAY HEREAFTER BE AMENDED FROM TIME TO TIME) UNDER THE
ACT IN A TRANSACTION IN ACCORDANCE WITH RULE 144A, (II) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S (TOGETHER
WITH ANY SUCCESSOR PROVISION, AND AS MAY HEREAFTER BE AMENDED FROM TIME TO TIME,
"REGULATION S") UNDER THE ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 (OR ANY SUCCESSOR PROVISION THERETO, AND AS MAY HEREAFTER
BE AMENDED FROM TIME TO TIME) UNDER THE ACT (IF AVAILABLE) OR (IV) TO AN
INSTITUTIONAL INVESTOR WHO IS AN "ACCREDITED INVESTOR," AS DEFINED IN RULE
501(a)(1), (2), (3) or (7) UNDER THE ACT, IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES, AND (B) THAT THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESTRICTIONS REFERRED TO IN (A) ABOVE.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF MONY THAT, IF THE
HOLDER PROPOSES TO SELL OR TRANSFER THIS SECURITY TO ANY EMPLOYEE BENEFIT PLAN
(AS DEFINED IN SECTION 3 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974,
AS AMENDED), THE HOLDER WILL COMPLY WITH THE RESTRICTIONS SET FORTH IN PARAGRAPH
9 HEREOF.
ALL PAYMENTS OF PRINCIPAL AND INTEREST ON THIS SECURITY MAY ONLY BE MADE
OUT OF MONY'S FREE AND DIVISIBLE SURPLUS AND WITH THE PRIOR APPROVAL OF THE
SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK (THE "SUPERINTENDENT"), IN
ACCORDANCE WITH
A-1
<PAGE> 27
SECTION 1307 OF THE NEW YORK INSURANCE LAW (TOGETHER WITH ANY SUCCESSOR
PROVISION, AND AS MAY BE HEREAFTER AMENDED FROM TIME TO TIME, "SECTION 1307").
THERE ARE NO GUIDELINES OR INTERPRETATIONS AS TO THE EXTENT OF THE
SUPERINTENDENT'S DISCRETION UNDER SECTION 1307 IN DETERMINING WHETHER THE
FINANCIAL CONDITION OF MONY WARRANTS THE MAKING OF SUCH PAYMENTS.
2
<PAGE> 28
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
Series A Surplus Note scheduled to mature on
December 30, 2012
No. R-_____ $
Issue Date:
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a mutual life insurance
company organized under the laws of the State of New York (herein called the
"Issuer"), for value received, hereby promises to pay, subject to the approval
of the Superintendent pursuant to Section 1307, to ______________________, or
registered assigns, the principal sum of ___________________United States
dollars ($________) on December 30, 2012 (the "Final Scheduled Maturity Date"),
and to pay interest thereon, subject to the approval of the Superintendent
pursuant to Section 1307, from December 30, 1997, or from the most recent
Scheduled Interest Payment Date to which interest has been paid or duly provided
for, semi-annually in arrears on June 30 and December 31 in each year,
commencing June 30, 1998 (each a "Scheduled Interest Payment Date", which term
shall also include any other dates on which the payment of interest herein may
be due in accordance with paragraph 4(a) hereof), at the rate of 9 1/2% per
annum, until the principal hereof is paid or duly provided for. Any reference
herein to the term "Scheduled Maturity Date" or other date for the payment of
principal of this Security shall include the Final Scheduled Maturity Date and
the date upon which any state or federal agency obtains an order or grants
approval for the rehabilitation, liquidation, conservation or dissolution of the
Issuer. As specified on the reverse hereof, all payments of principal of or
interest on this Security may be made only out of the Issuer's free and
divisible surplus and only with the prior approval of the Superintendent. The
interest so payable, and punctually paid or duly provided for, on any Scheduled
Interest Payment Date shall be paid, in accordance with the terms of the Fiscal
Agency Agreement hereinafter referred to, to the person (the "registered
holder") in whose name this Security (or one or more predecessor Securities) is
registered at the close of business on June 15 or December 15 (whether or not a
business day), as the case may be (each a "Regular Record Date"), next preceding
such Scheduled Interest Payment Date. Interest on the Securities shall be
calculated on the basis of a 360-day year of twelve 30-day months. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the registered holder on such Regular Record Date and shall be paid
to the person in whose name this Security (or one or more predecessor
Securities) is registered at the close of business on a special record date for
the payment of such interest to be fixed by the Issuer, notice whereof shall be
given to registered
3
<PAGE> 29
holders of the Securities not less than 15 days prior to such special record
date.
Principal of this Security shall be payable against surrender hereof at
the corporate trust office of the Fiscal Agent hereinafter referred to and at
the offices of such other Paying Agents as the Issuer shall have appointed
pursuant to the Fiscal Agency Agreement. Payments of principal of the Securities
shall be made only against surrender of the Securities. Payments of interest on
this Security may be made, in accordance with the foregoing and subject to
applicable laws and regulations, by check mailed on or before the Scheduled
Interest Payment Date of such payment to the person entitled thereto at such
person's address appearing on the aforementioned register. In the case of a
registered holder of at least $1,000,000 (or any lesser amount at the discretion
of the Issuer) aggregate principal amount of Securities, payments of principal
or interest may be made by wire transfer to an account maintained by the payee
with a bank if such registered holder so elects by giving notice to the Fiscal
Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept
at its discretion) prior to the applicable Scheduled Interest Payment Date or
Scheduled Maturity Date hereof, of such election and of the account to which
payments are to be made. Unless such designation is revoked, any such
designation made by such holder with respect to such securities shall remain in
effect with respect to any future payments with respect to such Securities
payable to such holder. The Issuer agrees that until this Security has been
delivered to the Fiscal Agent for cancellation, or monies sufficient to pay the
full principal of and interest remaining unpaid on this Security have been made
available for payment and either paid or returned to the Issuer as provided
herein, it will at all times maintain offices or agencies in the Borough of
Manhattan, The City of New York and for the payment of the principal of and
interest on the Securities as herein provided.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
This Security may be executed by the Issuer by manual or facsimile
signatures, and such signatures may be executed on separate counterparts.
Unless the certificate of authentication hereon has been executed by
the Fiscal Agent by manual signature, this Security shall not be valid or
obligatory for any purpose.
4
<PAGE> 30
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed.
Dated:
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By: -----------------------------
Name:
Title:
By: -----------------------------
Name:
Title:
This is one of the Securities referred to in the within-mentioned
Fiscal Agency Agreement.
CITIBANK, N.A.
as Fiscal Agent
By: -----------------------------
Authorized Officer
5
<PAGE> 31
FORM OF REVERSE
1. This Security is one of a duly authorized issue of Series A Surplus
Notes scheduled to mature on December 30, 2012 of the Issuer (herein called the
"Securities" or "Notes"), limited in aggregate principal amount to
$115,000,000. The Issuer and CITIBANK, N.A. (as "Fiscal Agent") have entered
into a Fiscal Agency Agreement, dated as of December 30, 1997 (such instrument,
as it may be duly amended from time to time, is herein called the "Fiscal
Agency Agreement"), which provides for the mechanism for issuing the Securities
and, inter alia, sets forth certain duties of the Fiscal Agent in connection
therewith. As used herein, the term "Fiscal Agent" includes any successor
fiscal agent under the Fiscal Agency Agreement. Copies of the Fiscal Agency
Agreement are on file and available for inspection at the corporate trust office
of the Fiscal Agent in the Borough of Manhattan, The City of New York. Holders
of Securities are referred to the Fiscal Agency Agreement for a statement of
the terms thereof, including those relating to transfer, payment, exchanges and
certain other matters. The Fiscal Agent or any Paying Agent shall also act as
Transfer Agent and Securities registrar. Terms used herein which are defined in
the Fiscal Agency Agreement but not otherwise defined herein shall have the
meanings assigned to such terms in the Fiscal Agency Agreement.
The Securities are direct and unsecured obligations of the Issuer and,
subject to the payment restrictions contained in paragraphs 4 and 10 hereof
(the "Payment Restrictions"), are scheduled to mature on December 30, 2012.
Section 1307 provides that the Securities are not part of the legal liabilities
of the Issuer and are not a basis of any set-off against the Issuer.
2. The Securities are issuable only in fully registered form without
coupons. Securities are issuable in minimum denominations of $150,000 and
integral multiples of $1,000 above that amount.
3. The Issuer shall maintain, in the Borough of Manhattan, The City of
New York, a Transfer Agent where Securities may be registered or surrendered
for registration of transfer or exchange. The Issuer has initially appointed
the Corporate Trust Office of the Fiscal Agent as its Transfer Agent in the
Borough of Manhattan, The City of New York. The Issuer shall cause each
Transfer Agent to act as a Securities registrar and shall cause to be kept at
the office of each Transfer Agent a register in which, subject to such
reasonable regulations as it may prescribe, the Issuer shall provide for the
registration of Securities and registration of transfers of Securities. The
Issuer reserves the right to vary or terminate the appointment of any Transfer
Agent or to appoint additional or other Transfer Agents or to approve any
change in the office through which any
6
<PAGE> 32
Transfer Agent acts, provided that there shall at all times be a Transfer Agent
in the Borough of Manhattan, The City of New York. The Issuer shall cause
notice of any resignation, termination or appointment of the Fiscal Agent or
any Paying Agent or Transfer Agent and of any change in the office through
which any such Agent shall act to be provided to holders of Securities.
Subject to the restrictions set forth herein and in the Fiscal Agency
Agreement, the transfer of a Security is registrable on the aforementioned
register upon surrender of such Security at any Transfer Agent duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Issuer duly executed by, the registered holder thereof or his attorney duly
authorized in writing. Upon such surrender of this Security for registration of
transfer, the Issuer shall execute, and the Fiscal Agent shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities, dated the date of authentication thereof, of any authorized
denominations and of a like aggregate principal amount.
Subject to the restrictions set forth herein and in the Fiscal Agency
Agreement, at the option of the registered holder upon request confirmed in
writing, Securities may be exchanged for Securities of any authorized
denominations and aggregate principal amount upon surrender of the Securities to
be exchanged at the office of any Transfer Agent. Whenever any Securities are so
surrendered for exchange, the Issuer shall execute, and the Fiscal Agent shall
authenticate and deliver, the Securities which the registered holder making the
exchange is entitled to receive. Any registration of transfer or exchange shall
be effected upon the Issuer being satisfied with the documents of title and
identity of the person making the request and subject to the restrictions set
forth in the immediately following paragraph and such reasonable regulations as
the Issuer may from time to time agree with the Fiscal Agent.
Securities may not be redeemed by the Issuer, in whole or in part, prior
to the Final Scheduled Maturity Date.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Issuer, evidencing the same
debt, and entitled to the same benefits, as the Securities surrendered upon
such registration of transfer or exchange. No service charge shall be made for
any registration of transfer or exchange, but the Issuer may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Issuer, the Fiscal Agent and any agent of the Issuer or the Fiscal Agent may
treat the person in whose name this Security is registered as the absolute
owner hereof for all purposes, whether or not this Security be overdue,
7
<PAGE> 33
and neither the Issuer nor the Fiscal Agent nor any such agent shall be
affected by notice to the contrary.
4. (a) Notwithstanding anything to the contrary set forth herein or in
the Fiscal Agency Agreement, any payment of principal of, interest on or any
monies owing with respect to this Security, whether at the Scheduled Interest
Payment Date or Scheduled Maturity Date specified herein or otherwise, may be
made only (i) out of the free and divisible surplus of the Issuer which the
Superintendent determines to be available for such payments under Section 1307
and (ii) with the prior approval of the Superintendent whenever, in his
judgment, the financial condition of the Issuer warrants such payment, in
accordance with Section 1307. If the Superintendent does not approve the making
of any payment of principal of or interest on this Security on the Scheduled
Interest Payment Date or Scheduled Maturity Date thereof, as specified herein,
the Scheduled Interest Payment Date or Scheduled Maturity Date, as the case may
be, shall be extended and such payment shall be made by the Issuer on the next
following Business Day on which the Issuer shall have the approval of the
Superintendent to make such payment. Interest will continue to accrue on any
such unpaid principal through the actual date of payment at the rate of
interest stated on the face hereof. Interest will not accrue on interest with
respect to which the Scheduled Interest Payment Date has been extended, during
the period of such extension. If the Superintendent approves a payment of
principal of or interest on the Securities in an amount that is less than the
full amount of principal of and interest on the Securities then scheduled to be
paid in respect of the Securities, payment of such partial amount shall be made
pro rata among Security holders as their interests may appear.
(b) Any payment of principal of or interest on any Security as to
which the approval of the Superintendent has been obtained and which is not
punctually paid or duly provided for on the Scheduled Interest Payment Date or
Scheduled Maturity Date thereof, as set forth herein (such payment being
referred to as an "Unpaid Amount"), will forthwith cease to be payable to the
registered owner of this Security on the relevant record date designated
herein, and such Unpaid Amount will instead be payable to the registered owner
of this Security on a subsequent special record date. The Issuer shall fix the
special record date and payment date for the payment of any Unpaid Amount. At
least 15 days before the special record date, the Issuer shall mail to each
holder of the Securities and the Fiscal Agent a notice that states the special
record date, payment date and amount of interest or principal to be paid. On
the payment date set forth in such notice, the Paying Agent shall pay the
amount of interest or principal to be so paid to each holder of the Securities
in the manner set forth in Section 4(a) of the Fiscal Agency Agreement.
8
<PAGE> 34
5. (a) For so long as the Fiscal Agent is acting as a Payment Agent
hereunder, the Issuer shall provide, subject to the Payment Restrictions, to the
Fiscal Agent in immediately available funds on or prior to 10:00 a.m., New York
time, of each date on which a payment of principal of or any interest on this
Security is payable, as set forth herein, such amounts as are necessary (with
any amounts then held by the Fiscal Agent and available for the purpose) to make
such payment, and the Issuer hereby authorizes and directs the Fiscal Agent from
funds so provided to it to make or cause to be made payment of the principal of
and any interest, as the case may be, on this Security as set forth herein and
in the Fiscal Agency Agreement. Payments of principal of or any interest on the
Securities may be made, in the case of a registered holder of at least
$1,000,000 (or any lesser amount at the discretion of the Issuer) principal
amount of Securities, by wire transfer to an account maintained by the payee
with a bank if such registered holder so elects by giving notice to the Fiscal
Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept
at its discretion) prior to the date on which such payments are scheduled to be
made, of such election and of the account to which payments are to be made.
Unless such designation is revoked, any such designation made by such holder
with respect to such Securities shall remain in effect with respect to any
future payments with respect to such Securities payable to such holder. The
Issuer shall pay any reasonable administrative costs in connection with making
any such payments. The Fiscal Agent shall arrange directly with any other Paying
Agent who may have been appointed by the Issuer pursuant to the provisions of
Section 2 of the Fiscal Agency Agreement for the payment from funds so paid by
the Issuer of the principal of and any interest on this Security. Any monies
held in respect of this Security remaining unclaimed at the end of two years
after such principal and such interest shall have become payable in accordance
with the Payment Restrictions (whether at the Scheduled Maturity Date or
otherwise) and monies sufficient therefor shall have been duly made available
for payment shall, together with any interest made available for payment
thereon, be repaid to the Issuer upon written request and upon such repayment
all liability of the Fiscal Agent with respect thereto shall cease, without,
however, limiting in any way any obligation the Issuer may have to pay the
principal of and interest on this Security, subject to the Payment Restrictions.
(b) In any case where the Scheduled Interest Payment Date or
Scheduled Maturity Date of any Security shall be at any place of payment a day
on which banking institutions are not carrying out transactions in U.S. dollars
or are authorized or obligated by law or executive order to close, then payment
of principal or interest need not be made on such date at such place but may be
made on the next succeeding day at such place which is not a day on which
banking institutions in the applicable jurisdiction are generally authorized or
obligated by law or executive order to close (a "Business Day"), with the same
force and effect as if made on the Scheduled Interest Payment Date or
9
<PAGE> 35
Scheduled Maturity Date thereof, and no interest shall accrue for the period
after such date.
6. The Issuer shall pay all stamp and other duties, if any, which may
be imposed by the United States of America or any governmental entity or any
political subdivision thereof or taxing authority of or in the foregoing with
respect to the Fiscal Agency Agreement or the initial issuance of this
Security. Except as otherwise specifically provided in this Security, the
Issuer shall not be required to make any payment with respect to any tax, duty,
assessment or other governmental charge of whatever nature imposed or levied by
any government or any political subdivision or taxing authority thereof or
therein.
7. For so long as any of the Securities remain Outstanding or any amount
remains unpaid on any of the Securities,
(a) Except with respect to transactions covered by Paragraph 8 hereof,
the Issuer will do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, material rights
(charter and statutory) and franchise; provided, however, that the Issuer
shall not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Issuer and that the Issuer has used its
best efforts to not disadvantage in any material respect the holders of the
Securities, or that not preserving such right or franchise is in the best
interest of the policyholders of the Issuer having considered the interests of
the holders of the Securities.
(b) The Issuer will not be or become an open-end investment company, unit
investment trust or face-amount certificate company that is or is required to
be registered under Section 8 of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), if such action would cause the Issuer to be in
violation of the Investment Company Act at any time prior to payment in full of
the Securities.
(c) The Issuer shall use its best efforts to obtain the approval of the
Superintendent in accordance with Section 1307 for the payment by the Issuer
of interest on and principal of the Securities on the Scheduled Interest Payment
Dates of Scheduled Maturity Dates thereof, and, in the event any such approval
has not been obtained for any such payment at or prior to the Scheduled
Interest Payment Date or Scheduled Maturity Date thereof, as the case may be,
to continue to use its best efforts to obtain such approval promptly
thereafter. Not less than 45 days prior to the Scheduled Interest Payment Date
or Scheduled Maturity Date thereof (excluding any such Scheduled Maturity Date
which arises as a result of the obtaining of an order or the granting of
approval for the rehabilitation, liquidation, conservation or dissolution of
the Issuer), the Issuer will seek
10
<PAGE> 36
the approval of the Superintendent to make each payment of interest on and
principal of the Securities. In addition, the Issuer shall notify or cause to be
notified each holder and the Fiscal Agent no later than 5 Business Days (as
defined herein) prior to the Scheduled Interest Payment Date for interest on or
the Scheduled Maturity Date for principal of any Security (excluding any such
Scheduled Maturity Date which arises as a result of the obtaining of an order or
the granting of approval for the rehabilitation, liquidation, conservation or
dissolution of the Issuer) in the event that the Superintendent has not then
approved the making of any such payment on such Scheduled Interest Payment Date
or such Scheduled Maturity Date, and thereafter shall promptly notify each
holder and the Fiscal Agent in the event that the Issuer shall have failed to
make any such payment on any such Scheduled Interest Payment Date or such
Scheduled Maturity Date. Without limiting the Issuer's obligations set forth in
this paragraph, it is understood that, to the extent authorized by the Issuer's
Board of Directors, the Issuer may continue to declare policyowner dividends and
to make dividend payments on its participating policies even though payments on
the Securities may not have been approved by the Superintendent, regardless of
the effect any such declaration or payment may have on the Superintendent's
decision regarding payment of interest on or principal of the Securities.
8. For so long as any of the Securities remain Outstanding or any
amounts remain unpaid on any of the Securities, the Issuer may convert itself
from a mutual life insurance company into a stock life insurance company (such
conversion, a "demutualization"), merge or consolidate with or into any other
corporation or sell, convey, transfer or otherwise dispose of all or
substantially all of its assets to any person, firm or corporation, if (i)(A) in
the case of a merger or consolidation, the Issuer is the surviving corporation
or (B) in the case of a merger or consolidation where the Issuer is not the
surviving corporation and in the case of any such sale, conveyance, transfer or
other disposition, the successor corporation is a corporation organized and
existing under the laws of the United States or a State thereof and such
corporation expressly assumes by supplemental fiscal agency agreement all the
obligations of the Issuer under the Securities and the Fiscal Agency Agreement,
(ii) at the time of any such demutualization, merger or consolidation, or such
sale, conveyance, transfer or other disposition, the Issuer shall not have
failed to make payment of interest on or principal of the Securities after
having received the Superintendent's prior approval to make such payment and
(iii) the Issuer has delivered to the Fiscal Agent an Officer's Certificate
stating that such demutualization, merger, consolidation, sale, conveyance,
transfer or other disposition complies with this paragraph and that all
conditions precedent herein provided for relating to such transaction have been
complied with. In the event of the assumption by a successor corporation of the
obligations of the Issuer as provided in clause (i)(B) of the immediately
preceding sentence, such
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<PAGE> 37
successor corporation shall succeed to and be substituted for the Issuer
hereunder and under the Fiscal Agency Agreement and all such obligations of the
Issuer shall terminate.
9. No employee benefit plan within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the
prohibited transaction provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), as to which the Issuer is a party in interest or a
disqualified person (each a "Plan"), and no Person acting on behalf of a Plan,
may acquire this Security, unless the acquisition of the Security is exempt
under one or more of Prohibited Transaction exemptions 84-14, 90-1, 91-38 or
96-23 (or any amendment thereof) or another applicable exemption from the
prohibitions under Section 406 of ERISA and Section 4975 of the Code. The
purchase by any Person of this Security shall constitute a representation by
such Person to the Issuer and the Fiscal Agent that such Person either (i) is
not a Plan or (ii) is a Plan, and may acquire this Security under an applicable
exemption from the prohibitions under Section 406 of ERISA and Section 4975 of
the Code. The restrictions on purchases of the Securities set forth in this
Paragraph 9 are in addition to those otherwise set forth in Section 6 of the
Fiscal Agency Agreement and under applicable law.
10. (a) The Issuer agrees, and each Security holder by accepting a
Security agrees, that the indebtedness evidenced by the Securities is
subordinated in right of payment, to the extent and in the manner provided in
this Section, to the prior payment in full of all Indebtedness, Policy Claims
and Other Creditor Claims (each as hereinafter defined), in accordance with
Section 7435 of the New York Insurance Law (together with any successor
provision, and as may be hereafter amended from time to time, "Section 7435").
(b) Upon any distribution to creditors of the Issuer in any rehabilitation,
liquidation, conservation, dissolution or reorganization proceeding relating to
the Issuer or its property, the priority of claims of Security holders shall be
determined in accordance with Section 7435. In a proceeding commenced under
Article 74 of the New York Insurance Law, claims for principal of or interest on
the Securities constitute Class 7 claims under Section 7435, as currently in
effect. If the Superintendent approves a payment of principal of or interest on
the Securities in an amount that is less than the full amount of principal of
and interest on the Securities then scheduled to be paid in respect of the
Securities, payment of such partial amount shall be made pro rata among Security
holders as their interests may appear.
(c) If a distribution is made to Security holders that, because of this
Section, should not have been made to them, the Security holders who receive the
distribution shall hold it in trust for holders of Policy Claims, Indebtedness
and Other
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<PAGE> 38
Creditor Claims and pay it over to them as their interest may appear.
(d) The Issuer shall promptly notify the Fiscal Agent and the Paying
Agent of any facts known to the Issuer that would cause a payment of principal
of or interest on the Securities to violate this Section.
(e) This Section defines the relative rights of Security holders, on the
one hand, and holders of any other claims, in accordance with Section 7435, on
the other hand. Nothing in this Security or the Fiscal Agency Agreement shall
(i) impair, as between the Issuer and Security holders, the obligation of the
Issuer which is, subject to the Payment Restrictions, absolute and
unconditional to pay principal of and interest on the Securities in accordance
with their terms; (ii) affect the relative rights of Security holders and
creditors of the Issuer, other than holders of Policy Claims, Indebtedness or
Other Creditor Claims; or (iii) prevent the Fiscal Agent or any Security holder
from exercising any available remedies upon a breach by the Issuer of its
obligations hereunder, subject to the rights of holders of Policy Claims,
Indebtedness or Other Creditor Claims to receive distributions otherwise
payable to Security holders.
(f) No right of any holder of Policy Claims, Indebtedness or Other
Creditor Claims to enforce the subordination of the indebtedness evidenced by
the Securities shall be impaired by any act or failure to act by the Issuer or
by its failure to comply with the terms of this Fiscal Agency Agreement.
(g) Each holder of Securities, by acceptance thereof, authorizes and
directs the Fiscal Agent on its behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Section and
appoints the Fiscal Agent its attorney-in-fact for any and all such purposes.
As used herein, "Indebtedness" of the Issuer shall mean (i) all existing
or future indebtedness of the Issuer for borrowed money, (ii) all existing or
future indebtedness for borrowed money of other persons, the payment of which
is guaranteed by the Issuer, (iii) all existing or future obligations of the
Issuer under any agreement obligating the Issuer to cause another person to
maintain a minimum level of net worth, or otherwise to ensure the solvency of
such person and (iv) any expense or any claim or amount, to the extent that
payment of principal of and interest on the Securities is required by law to be
subordinated to the prior payment thereof. Any obligation of the Issuer which
by its express terms is subordinated in right of payment to, or ranks equally
with, the Securities, or any indebtedness or other obligation of any separate
account of the Issuer, shall not constitute Indebtedness. However, under
current law the Issuer cannot incur any indebtedness which by its terms is
subordinate to the Securities. In addition, any other
13
<PAGE> 39
surplus notes or similar obligations of the Issuer (including the Issuer's
11-1/4% Surplus Notes scheduled to mature on August 15, 2024) shall not
constitute Indebtedness and will rank pari passu with the Securities.
As used herein, "Policy Claims" shall mean all existing or future claims
of policyholders or beneficiaries, as the case may be, under any and all
existing or future policies, endorsements, riders and other contracts of
insurance, annuity contracts (including, without limitation, guaranteed
investment contracts) and funding agreements issued, assumed or renewed by the
Issuer on or prior to the date hereof or hereafter created, all claims arising
under separate account agreements to the extent such claims are not fully
discharged by the assets held by the Issuer in the applicable separate accounts
and all claims of The Life Insurance Company Guaranty Corporation of New York
or any other guaranty corporation or association of New York or any other
jurisdiction, other than claims described in clause (i) of the definition of
"Other Creditor Claims" below and claims for interest.
As used herein, "Other Creditor Claims" shall mean all other claims which,
pursuant to Section 7435, have priority over claims with respect to the
Securities. Under Section 7435 as currently in effect, such other claims
include (i) claims with respect to the actual and necessary costs and expenses
of administration incurred by a liquidator, conservator, rehabilitator or
ancillary rehabilitator under Section 7435; (ii) claims with respect to the
actual and necessary costs and expenses of administration incurred by The Life
Insurance Guaranty Corporation or The Life Insurance Company Guaranty
Corporation of New York, (iii) claims of The Life Insurance Company Guaranty
Corporation for certain funds loaned to the Superintendent under Section 7713(d)
of the New York Insurance Law; (iv) debts up to $1,200 due to employees for
services performed within one year of the commencement of rehabilitation,
liquidation, conservation, dissolution or reorganization proceedings; (v)
claims for payment for goods furnished or services rendered in the ordinary
course of business within 90 days of the declaration of the impairment or
insolvency of the Issuer; (vi) claims of the federal or any state or local
government (except in the case of claims for a penalty or forfeiture which are
included only to the extent of pecuniary loss and reasonable costs occasioned
by the act giving rise to the forfeiture or penalty); and (vii) claims of
general creditors and all other claims having priority under Section 7435.
11. For so long as any of the Securities remain Outstanding or any amount
remains unpaid on any of the Securities, the Issuer shall, in accordance with
Rule 144A, comply with the terms of the agreements set forth in Section 7 of
the Fiscal Agency Agreement. The provisions of Sections 7 and 8 of the Fiscal
Agency Agreement are hereby incorporated mutatis mutandis herein.
14
<PAGE> 40
12. In case this Security shall become mutilated, defaced, destroyed, lost
or stolen, the Issuer will execute and upon the Issuer's request the Fiscal
Agent shall authenticate and deliver a new Security, having a number not
contemporaneously outstanding, of like tenor (including the same date of
issuance) and equal principal amount, registered in the same manner, dated the
date of its authentication and bearing interest from the date to which interest
has been paid on this Security, in exchange and substitution for this Security
(upon surrender and cancellation thereof) or in lieu of and substitution for
this Security. In the case where this Security is destroyed, lost or stolen,
the applicant for a substituted Security shall furnish to the Issuer such
security or indemnity as may be required by the Issuer to save it and the
Fiscal Agent harmless, and, in every case of destruction, loss or theft of this
Security, the applicant shall also furnish to the Issuer satisfactory evidence
of the destruction, loss or theft of this Security and of the ownership
thereof; provided, however, that if the registered holder hereof is, in the
judgment of the Issuer, an institution of recognized responsibility, such
holder's written agreement of indemnity shall be deemed to be satisfactory for
the issuance of a new Security in lieu of and substitution for this Security.
The Fiscal Agent shall authenticate any such substituted Security and deliver
the same only upon written request or authorization of the Issuer. Upon the
issuance of any substituted Security, the Issuer may require the payment by the
registered holder thereof of a sum sufficient to cover fees and expenses
connected therewith. In case this Security has matured or is about to mature
and shall become mutilated or defaced or be destroyed, lost or stolen, the
Issuer may, subject to the Payment Restrictions, instead of issuing a
substitute Security, pay or authorize the payment of the same (without
surrender thereof except if this Security is mutilated or defaced) upon
compliance by the registered holder with the provisions of this Paragraph 12
as hereinabove set forth.
13. Section 10 of the Fiscal Agency Agreement, which Section is hereby
incorporated mutatis mutandis by reference herein, provides that, with certain
exceptions as therein provided and with the consent of the holders of a
majority of the principal amount of the Outstanding Securities present at a
meeting duly called pursuant thereto or by written consent of such percentage of
the principal amount of all Outstanding Securities, the Issuer and the Fiscal
Agent may, with the prior approval of the Superintendent, modify, amend or
supplement the Fiscal Agency Agreement (with respect to the Securities only and
not any other Securities that may be issued under the Fiscal Agency Agreement)
or the terms of the Securities or may give consents or waivers or take other
actions with respect thereto. Any such modification, amendment, supplement,
consent, waiver or other action shall be conclusive and binding on the holder
of this Security and on all future holders of this Security and of any Security
issued upon the registration of transfer hereof or in exchange heretofore or in
lieu hereof, whether or not notation
15
<PAGE> 41
thereof is made upon this Security. The Fiscal Agency Agreement and the terms of
the Securities may, with the prior approval of the Superintendent, be modified
or amended by the Issuer and the Fiscal Agent, without the consent of any
holders of Securities, for the purpose of (a) adding to the covenants of the
Issuer for the benefit of the holders of Securities, or (b) surrendering any
right or power conferred upon the Issuer, or (c) securing the Securities
pursuant to the requirements hereof, thereof or otherwise, or (d) evidencing the
succession of another corporation to the Issuer and the assumption by such
successor of the covenants and obligations of the Issuer herein and in the
Fiscal Agency Agreement as permitted by the Securities and the Fiscal Agency
Agreement, or (e) modifying the restrictions on, and procedures for, resale and
other transfers of the Securities to the extent required or permitted by any
change in applicable law or regulation (or the interpretation thereof) or in
practices relating to the resale or transfer of restricted securities generally,
or (f) accommodating the issuance, if any, of Securities in book-entry or
certificated form and matters related thereto which do not adversely affect the
interest of any Security holder in any material respect, or (g) curing any
ambiguity or correcting or supplementing any defective provision contained
herein or in the Fiscal Agency Agreement in a manner which does not adversely
affect the interest of any Security holder in any material respect, or (h)
effecting any amendment which the Issuer and the Fiscal Agent may determine is
necessary or desirable and which shall not adversely affect the interest of any
Security holder, to all of which each holder of any Security, by acceptance
thereof, consents.
14. Holders of Securities may enforce the Fiscal Agency Agreement
or the Securities only in the manner set forth below.
(a) In the event that any state or federal agency shall obtain an
order or grant approval for the rehabilitation, liquidation, conservation or
dissolution of the Issuer, the Securities will upon the obtaining of such an
order or the granting of such approval immediately mature in full (subject to
the provisions of the next sentence) without any action on the part of the
Fiscal Agent or any holder of the Securities, with payment thereon being subject
to the Payment Restrictions, and any restrictions imposed as a consequence of,
or pursuant to, such proceedings. Notwithstanding any other provision of this
Security or the Fiscal Agency Agreement, in no event shall the Fiscal Agent or
any holder of the Securities be entitled to declare the Securities to
immediately mature or otherwise be immediately payable.
(b) In the event that the Superintendent approves in whole or in
part a payment of any interest on or principal of any Securities and the Issuer
fails to pay the full amount of such approved payment on the date such amount is
scheduled to be paid, such approved amount will be immediately payable on such
date
16
<PAGE> 42
without any action on the part of the Fiscal Agent or any holder of Securities.
In the event that the Issuer fails to perform any of its other obligations
hereunder or under the Fiscal Agency Agreement, each holder of the Securities
may pursue any available remedy to enforce the performance of any provision of
such Securities or the Fiscal Agency Agreement; provided, however, that such
remedy shall in no event include the right to declare the Securities
immediately payable, and shall in no circumstances be inconsistent with the
provisions of Section 1307. A delay or omission by any Security holder in
exercising any right or remedy accruing as a result of the Issuer's failure to
perform its obligations hereunder or under the Fiscal Agency Agreement and the
continuation thereof shall not impair such right or remedy or constitute a
waiver of or acquiescence in such non-performance by the Issuer. To the extent
permitted by law, no remedy is exclusive of any other remedy and all remedies
are cumulative.
(c) Notwithstanding any other provision of this Security or the
Fiscal Agency Agreement, the right of any holder of Securities to receive
payment of the principal of and interest on such holder's Securities on or after
the respective Scheduled Interest Payment Dates or Scheduled Maturity Date
expressed in such Securities, or to bring suit for the enforcement of any such
payment on or after such respective Scheduled Interest Payment Dates or
Scheduled Maturity Date, in each case subject to such payment on such dates
having received the approval of the Superintendent pursuant to the Payment
Restrictions, including the approval of the Superintendent pursuant to Section
1307, is absolute and unconditional and shall not be impaired or affected
without the consent of the holder.
15. No reference herein to the Fiscal Agency Agreement and no
provision of this Security or of the Fiscal Agency Agreement shall alter or
impair the obligation of the Issuer, subject to the Payment Restrictions, to
pay the principal of and interest on this Security at the times, place and
rate, and in the coin or currency, herein prescribed.
17
<PAGE> 43
EXHIBIT B
FORM OF GLOBAL SECURITY
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM AND IN ACCORDANCE WITH THE FISCAL AGENCY AGREEMENT, COPIES
OF WHICH ARE AVAILABLE FOR INSPECTION AT THE CORPORATE TRUST OFFICE OF THE
FISCAL AGENT. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM SUCH REGISTRATION PROVIDED
BY RULE 144A UNDER THE ACT (TOGETHER WITH ANY SUCCESSOR PROVISION AND AS SUCH
MAY HEREAFTER BE AMENDED FROM TIME TO TIME), "RULE 144A").
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
[INSERT NAME OF DEPOSITARY] TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IN EXCHANGE FOR THIS
SECURITY OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF [INSERT NAME OF
NOMINEE OF DEPOSITARY] OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF [INSERT NAME OF DEPOSITARY] (AND ANY PAYMENT IS MADE TO
[INSERT NAME OF NOMINEE OF DEPOSITARY] OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF [INSERT NAME OF DEPOSITARY]), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN
[INSERT NAME OF DEPOSITARY] OR A NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, [INSERT NAME OF NOMINEE OF DEPOSITARY], HAS AN INTEREST
HEREIN.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE FISCAL
AGENCY AGREEMENT REFERRED TO HEREINAFTER. THIS GLOBAL SECURITY MAY NOT BE
EXCHANGED, IN WHOLE OR IN PART, FOR A SECURITY REGISTERED IN THE NAME OF ANY
PERSON OTHER THAN [INSERT NAME OF DEPOSITARY] OR A NOMINEE THEREOF, EXCEPT IN
THE LIMITED CIRCUMSTANCES SET FORTH IN SECTION 5 OF THE FISCAL AGENCY AGREEMENT,
AND MAY NOT BE TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 6(B) OF THE FISCAL AGENCY AGREEMENT.
BENEFICIAL INTERESTS IN THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT IN
ACCORDANCE WITH SECTION 6(B) OF THE FISCAL AGENCY AGREEMENT.
[INCLUDE UNLESS, PURSUANT TO SECTION 6(g) OF THE FISCAL AGENCY
AGREEMENT, THE ISSUER DETERMINES THAT THE LEGEND
B-1
<PAGE> 44
MAY BE REMOVED] -- THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
MUTUAL LIFE INSURANCE COMPANY OF NEW YORK ("MONY") THAT (A) THIS SECURITY MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (I) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS
DEFINED IN RULE 144A (OR ANY SUCCESSOR PROVISION THERETO, AND AS MAY HEREAFTER
BE AMENDED FROM TIME TO TIME) UNDER THE ACT, IN A TRANSACTION IN ACCORDANCE WITH
RULE 144A, (II) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE
904 OF REGULATION S (TOGETHER WITH ANY SUCCESSOR PROVISION, AND AS MAY HEREAFTER
BE AMENDED FROM TIME TO TIME, "REGULATION S") UNDER THE ACT OR (III) PURSUANT TO
AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 (OR ANY SUCCESSOR PROVISION
THERETO, AND AS MAY HEREAFTER BE AMENDED FROM TIME TO TIME) UNDER THE ACT, (IF
AVAILABLE) OR (IV) TO AN INSTITUTIONAL INVESTOR WHO IS AN "ACCREDITED INVESTOR,"
AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE ACT, IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE ACT, IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES, AND (B) THAT THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF
THIS SECURITY FROM IT OF THE RESTRICTIONS REFERRED TO IN (A) ABOVE.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF MONY THAT, IF
THE HOLDER PROPOSES TO SELL OR TRANSFER THIS SECURITY TO ANY EMPLOYEE BENEFIT
PLAN (AS DEFINED IN SECTION 3 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED), THE HOLDER WILL COMPLY WITH THE RESTRICTIONS SET FORTH IN
PARAGRAPH 9 HEREOF.
ALL PAYMENTS OF PRINCIPAL AND INTEREST ON THIS SECURITY MAY ONLY BE
MADE OUT OF THE FREE AND DIVISIBLE SURPLUS OF MONY AND WITH THE PRIOR APPROVAL
OF THE SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK (THE
"SUPERINTENDENT"), IN ACCORDANCE WITH SECTION 1307 OF THE NEW YORK INSURANCE LAW
(TOGETHER WITH ANY SUCCESSOR PROVISION, AND AS MAY BE HEREAFTER AMENDED FROM
TIME TO TIME, "SECTION 1307"). THERE ARE NO GUIDELINES OR INTERPRETATIONS AS TO
THE EXTENT OF THE SUPERINTENDENT'S DISCRETION UNDER SECTION 1307 IN DETERMINING
WHETHER THE FINANCIAL CONDITION OF MONY WARRANTS THE MAKING OF SUCH PAYMENTS.
2
<PAGE> 45
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
Series A Surplus Note scheduled to mature on
December 30, 2012
CUSIP NO.:__________
No. R-____ $
Issue Date:
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a mutual life
insurance company organized under the laws of the State of New York (herein
called the "Issuer"), for value received, hereby promises to pay, subject to the
approval of the Superintendent pursuant to Section 1307, to
______________________, or registered assigns, the principal sum of
______________ United States dollars ($_________), or such other amount (not to
exceed one hundred fifteen million dollars ($115,000,000) when taken together
with all of the Issuer's Series A Surplus Notes scheduled to mature on December
30, 2012, issued and outstanding in definitive certificated form or in the form
of another Global Security) as may from time to time represent the principal
amount of the Issuer's Series A Surplus Notes in respect of which beneficial
interests are held through the Depositary in the form of a Global Security, on
December 30, 2012 (the "Final Scheduled Maturity Date"), and to pay interest
thereon, subject to the approval of the Superintendent pursuant to Section 1307,
from December 30, 1997 or from the most recent Scheduled Interest Payment Date
to which interest has been paid or duly provided for, semi-annually in arrears
on June 30 and December 31 in each year, commencing June 30, 1998(each a
"Scheduled Interest Payment Date", which term shall also include any other dates
on which the payment of interest herein may be due in accordance with paragraph
4(a) hereof), at the rate of 9-1/2% per annum. Any reference herein to the term
"Scheduled Maturity Date" or other date for the payment of principal of this
Security shall include the Final Scheduled Maturity Date, the date upon which
any state or federal agency obtains an order or grants approval for the
rehabilitation, liquidation, conservation or dissolution of the Issuer. As
specified on the reverse hereof, all payments of principal of or interest on
this Security may be made only out of the Issuer's free and divisible surplus
and only with the prior approval of the Superintendent. The interest so payable,
and punctually paid or duly provided
3
<PAGE> 46
for, on any Scheduled Interest Payment Date shall be paid, in accordance with
the terms of the Fiscal Agency Agreement hereinafter referred to, to the person
(the "registered holder") in whose name this Security (or one or more
predecessor Securities) is registered at the close of business on June 15 or
December 15 (whether or not a business day), as the case may be (each a "Regular
Record Date"), next preceding such Scheduled Interest Payment Date. Interest on
the Securities shall be calculated on the basis of a 360-day year of twelve
30-day months. Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the registered holder on such Regular
Record Date and shall be paid to the person in whose name this Security (or one
or more predecessor Securities) is registered at the close of business on a
special record date for the payment of such interest to be fixed by the Issuer,
notice whereof shall be given to registered holders of the Securities not less
than 15 days prior to such special record date.
Principal of this Security shall be payable against surrender hereof
at the corporate trust office of the Fiscal Agent hereinafter referred to and at
the offices of such other Paying Agents as the Issuer shall have appointed
pursuant to the Fiscal Agency Agreement. Payments of principal of the Securities
shall be made only against surrender of the Securities. Payments of interest on
this Security may be made, in accordance with the foregoing and subject to
applicable laws and regulations, by check mailed on or before the Scheduled
Interest Payment Date of such payment to the person entitled thereto at such
person's address appearing on the aforementioned register. In the case of a
registered holder of at least $1,000,000 (or any lesser amount at the discretion
of the Issuer) aggregate principal amount of Securities, payments of principal
or interest may be made by wire transfer to an account maintained by the payee
with a bank if such registered holder so elects by giving notice to the Fiscal
Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept
at its discretion) prior to the applicable Scheduled Interest Payment Date or
Scheduled Maturity Date hereof, of such election and of the account to which
payments are to be made. Unless such designation is revoked, any such
designation made by such holder with respect to such securities shall remain in
effect with respect to any future payments with respect to such Securities
payable to such holder. The Issuer agrees that until this Security has been
delivered to the Fiscal Agent for cancellation, or monies sufficient to pay the
full principal of and interest remaining unpaid on this Security have been made
4
<PAGE> 47
available for payment and either paid or returned to the Issuer as provided
herein, it will at all times maintain offices or agencies in the Borough of
Manhattan, The City of New York for the payment of the principal of and interest
on the Securities as herein provided.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Security may be executed by the Issuer by manual or facsimile
signatures, and such signatures may be executed on separate counterparts.
Unless the certificate of authentication hereon has been executed by
the Fiscal Agent by manual signature, this Security shall not be valid or
obligatory for any purpose.
5
<PAGE> 48
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed.
Dated:
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By:__________________________
Name:
Title:
By:__________________________
Name:
Title:
This is one of the Securities referred to in the within-mentioned
Fiscal Agency Agreement.
CITIBANK, N.A.
as Fiscal Agent
By:__________________________
Authorized Officer
6
<PAGE> 49
FORM OF REVERSE
1. This Security is one of a duly authorized issue of Series A
Surplus Notes scheduled to mature on December 30, 2012 (herein called the
"Securities" or "Notes"), limited in aggregate principal amount to one hundred
fifteen million dollars ($115,000,000). The Issuer and CITIBANK, N.A. (as
"Fiscal Agent") have entered into a Fiscal Agency Agreement, dated as of
December 30, 1997 (such instrument, as it may be duly amended from time to time,
is herein called the "Fiscal Agency Agreement"), which provides for the
mechanism for issuing the Securities and, inter alia, sets forth certain duties
of the Fiscal Agent in connection therewith. As used herein, the term "Fiscal
Agent" includes any successor fiscal agent under the Fiscal Agency Agreement.
Copies of the Fiscal Agency Agreement are on file and available for inspection
at the corporate trust office of the Fiscal Agent in the Borough of Manhattan,
The City of New York. Holders of Securities are referred to the Fiscal Agency
Agreement for a statement of the terms thereof, including those relating to
transfer, payment, exchanges and certain other matters. The Fiscal Agent or any
Paying Agent shall also act as Transfer Agent and Securities registrar. Terms
used herein which are defined in the Fiscal Agency Agreement but not otherwise
defined herein shall have the meanings assigned to such terms in the Fiscal
Agency Agreement.
The Securities are direct and unsecured obligations of the Issuer
and, subject to the payment restrictions contained in paragraphs 4 and 10 hereof
(the "Payment Restrictions"), are scheduled to mature on December 30, 2012.
Section 1307 provides that the Securities are not part of the legal liabilities
of the Issuer and are not a basis of any set-off against the Issuer.
2. The Securities are issuable only in fully registered form without
coupons. Securities are issuable in minimum denominations of $150,000 and
integral multiples of $1,000 above that amount.
3. The Issuer shall maintain, in the Borough of Manhattan, The City
of New York, a Transfer Agent where Securities may be registered or surrendered
for registration of transfer or exchange. The Issuer has initially appointed the
Corporate Trust Office of the Fiscal Agent as its Transfer Agent in the Borough
of Manhattan, The City of New York. The Issuer shall cause each Transfer Agent
to act as a Securities registrar
7
<PAGE> 50
and shall cause to be kept at the office of each Transfer Agent a register in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Securities and registration of transfers
of Securities. The Issuer reserves the right to vary or terminate the
appointment of any Transfer Agent or to appoint additional or other Transfer
Agents or to approve any change in the office through which any Transfer Agent
acts, provided that there shall at all times be a Transfer Agent in the Borough
of Manhattan, The City of New York. The Issuer shall cause notice of any
resignation, termination or appointment of the Fiscal Agent or any Paying Agent
or Transfer Agent and of any change in the office through which any such Agent
shall act to be provided to holders of Securities.
Subject to the restrictions set forth herein and in the Fiscal
Agency Agreement, the transfer of a Security is registrable on the
aforementioned register upon surrender of such Security at any Transfer Agent
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer duly executed by, the registered holder thereof or
his attorney duly authorized in writing. Upon such surrender of this Security
for registration of transfer, the Issuer shall execute, and the Fiscal Agent
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities, dated the date of authentication
thereof, of any authorized denominations and of a like aggregate principal
amount.
Subject to the restrictions set forth herein and in the Fiscal
Agency Agreement, at the option of the registered holder upon request confirmed
in writing, Securities may be exchanged for Securities of any authorized
denominations and aggregate principal amount upon surrender of the Securities to
be exchanged at the office of any Transfer Agent. Whenever any Securities are so
surrendered for exchange, the Issuer shall execute, and the Fiscal Agent shall
authenticate and deliver, the Securities which the registered holder making the
exchange is entitled to receive. Any registration of transfer or exchange shall
be effected upon the Issuer being satisfied with the documents of title and
identity of the person making the request and subject to the restrictions set
forth in the immediately following paragraph and such reasonable regulations as
the Issuer may from time to time agree with the Fiscal Agent.
Securities may not be redeemed by the Issuer, in whole or in part,
prior to the Final Scheduled Maturity Date.
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<PAGE> 51
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Issuer, evidencing the same
debt, and entitled to the same benefits, as the Securities surrendered upon such
registration of transfer or exchange. No service charge shall be made for any
registration of transfer or exchange, but the Issuer may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Issuer, the Fiscal Agent and any agent of the Issuer or the Fiscal
Agent may treat the person in whose name this Security is registered as the
absolute owner hereof for all purposes, whether or not this Security be overdue,
and neither the Issuer nor the Fiscal Agent nor any such agent shall be affected
by notice to the contrary.
4. (a) Notwithstanding anything to the contrary set forth herein or
in the Fiscal Agency Agreement, any payment of principal of, interest on or any
monies owing with respect to this Security, whether at the Scheduled Interest
Payment Date or Scheduled Maturity Date specified herein or otherwise, may be
made only (i) out of the free and divisible surplus of the Issuer which the
Superintendent determines to be available for such payments under Section 1307
and (ii) with the prior approval of the Superintendent whenever, in his
judgment, the financial condition of the Issuer warrants such payment, in
accordance with Section 1307. If the Superintendent does not approve the making
of any payment of principal of or interest on this Security on the Scheduled
Interest Payment Date or Scheduled Maturity Date thereof, as specified herein,
the Scheduled Interest Payment Date or Scheduled Maturity Date, as the case may
be, shall be extended and such payment shall be made by the Issuer on the next
following Business Day on which the Issuer shall have the approval of the
Superintendent to make such payment. Interest will continue to accrue on any
such unpaid principal through the actual date of payment at the rate of interest
stated on the face hereof. Interest will not accrue on interest with respect to
which the Scheduled Interest Payment Date has been extended, during the period
of such extension. If the Superintendent approves a payment of principal of or
interest on the Securities in an amount that is less than the full amount of
principal of and interest on the Securities then scheduled to be paid in respect
of the Securities, payment of such partial amount shall be made pro rata among
Security holders as their interests may appear.
9
<PAGE> 52
(b) Any payment of principal of or interest on any Security as to
which the approval of the Superintendent has been obtained and which is not
punctually paid or duly provided for on the Scheduled Interest Payment Date or
Scheduled Maturity Date thereof, as set forth herein (such payment being
referred to as an "Unpaid Amount"), will forthwith cease to be payable to the
registered owner of this Security on the relevant record date designated herein,
and such Unpaid Amount will instead be payable to the registered owner of this
Security on a subsequent special record date. The Issuer shall fix the special
record date and payment date for the payment of any Unpaid Amount. At least 15
days before the special record date, the Issuer shall mail to each holder of the
Securities and the Fiscal Agent a notice that states the special record date,
payment date and amount of interest or principal to be paid. On the payment date
set forth in such notice, the Paying Agent shall pay the amount of interest or
principal to be so paid to each holder of the Securities in the manner set forth
in Section 4(a) of the Fiscal Agency Agreement.
5. (a) For so long as the Fiscal Agent is acting as a Paying Agent
hereunder, the Issuer shall provide, subject to the Payment Restrictions, to the
Fiscal Agent in immediately available funds on or prior to 10:00 a.m., New York
time, of each date on which a payment of principal of or any interest on this
Security is payable, as set forth herein, such amounts as are necessary (with
any amounts then held by the Fiscal Agent and available for the purpose) to make
such payment, and the Issuer hereby authorizes and directs the Fiscal Agent from
funds so provided to it to make or cause to be made payment of the principal of
and any interest, as the case may be, on this Security as set forth herein and
in the Fiscal Agency Agreement. Payments of principal of or any interest on the
Securities may be made, in the case of a registered holder of at least
$1,000,000 (or any lesser amount at the discretion of the Issuer) principal
amount of Securities, by wire transfer to an account maintained by the payee
with a bank if such registered holder so elects by giving notice to the Fiscal
Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept
at its discretion) prior to the date on which such payments are scheduled to be
made, of such election and of the account to which payments are to be made.
Unless such designation is revoked, any such designation made by such holder
with respect to such Securities shall remain in effect with respect to any
future payments with respect to such Securities payable to such holder. The
Issuer shall pay any reasonable administrative
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<PAGE> 53
costs in connection with making any such payments. The Fiscal Agent shall
arrange directly with any other Paying Agent who may have been appointed by the
Issuer pursuant to the provisions of Section 2 of the Fiscal Agency Agreement
for the payment from funds so paid by the Issuer of the principal of and any
interest on this Security. Any monies held in respect of this Security remaining
unclaimed at the end of two years after such principal and such interest shall
have become payable in accordance with the Payment Restrictions (whether at the
Scheduled Maturity Date or otherwise) and monies sufficient therefor shall have
been duly made available for payment shall, together with any interest made
available for payment thereon, be repaid to the Issuer upon written request and
upon such repayment all liability of the Fiscal Agent with respect thereto shall
cease, without, however, limiting in any way any obligation the Issuer may have
to pay the principal of and interest on this Security, subject to the Payment
Restrictions.
(b) In any case where the Scheduled Interest Payment Date or
Scheduled Maturity Date of any Security shall be at any place of payment a day
on which banking institutions are not carrying out transactions in U.S. dollars
or are authorized or obligated by law or executive order to close, then payment
of principal or interest need not be made on such date at such place but may be
made on the next succeeding day at such place which is not a day on which
banking institutions in the applicable jurisdiction are generally authorized or
obligated by law or executive order to close (a "Business Day"), with the same
force and effect as if made on the Scheduled Interest Payment Date or Scheduled
Maturity Date thereof, and no interest shall accrue for the period after such
date.
6. The Issuer shall pay all stamp and other duties, if any, which
may be imposed by the United States of America or any governmental entity or any
political subdivision thereof or taxing authority of or in the foregoing with
respect to the Fiscal Agency Agreement or the initial issuance of this Security.
Except as otherwise specifically provided in this Security, the Issuer shall not
be required to make any payment with respect to any tax, duty, assessment or
other governmental charge of whatever nature imposed or levied by any government
or any political subdivision or taxing authority thereof or therein.
7. For so long as any of the Securities remain Outstanding or any
amount remains unpaid on any of the Securities,
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<PAGE> 54
(a) Except with respect to transactions covered by Paragraph 8
hereof, the Issuer will do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, material rights
(charter and statutory) and franchise; provided, however, that the Issuer shall
not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Issuer and that the Issuer has used its
best efforts to not disadvantage in any material respect the holders of the
Securities, or that not preserving such right or franchise is in the best
interest of the policyholders of the Issuer having considered the interests of
the holders of the Securities.
(b) The Issuer will not be or become an open-end investment company,
unit investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), if such action would cause the Issuer to
be in violation of the Investment Company Act at any time prior to payment in
full of the Securities.
(c) The Issuer shall use its best efforts to obtain the approval of
the Superintendent in accordance with Section 1307 for the payment by the Issuer
of interest on and principal of the Securities on the Scheduled Interest Payment
Dates or Scheduled Maturity Dates thereof, and, in the event any such approval
has not been obtained for any such payment at or prior to the Scheduled Interest
Payment Date or Scheduled Maturity Date thereof, as the case may be, to continue
to use its best efforts to obtain such approval promptly thereafter. Not less
than 45 days prior to the Scheduled Interest Payment Date or Scheduled Maturity
Date thereof (excluding any such Scheduled Maturity Date which arises as a
result of the obtaining of an order or the granting of approval for the
rehabilitation, liquidation, conservation or dissolution of the Issuer), the
Issuer will seek the approval of the Superintendent to make each payment of
interest on and principal of the Securities. In addition, the Issuer shall
notify or cause to be notified each holder and the Fiscal Agent no later than 5
Business Days (as defined herein) prior to the Scheduled Interest Payment Date
for interest on or the Scheduled Maturity Date for principal of any Security
(excluding any such Scheduled Maturity Date which arises as a result of the
obtaining of an order or the granting of approval for the rehabilitation,
liquidation, conservation or dissolution of the Issuer) in the event that the
Superintendent
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<PAGE> 55
has not then approved the making of any such payment on such Scheduled Interest
Payment Date or such Scheduled Maturity Date, and thereafter shall promptly
notify each holder and the Fiscal Agent in the event that the Issuer shall have
failed to make any such payment on any such Scheduled Interest Payment Date or
such Scheduled Maturity Date. Without limiting the Issuer's obligations set
forth in this paragraph, it is understood that, to the extent authorized by the
Issuer's Board of Directors, the Issuer may continue to declare policyowner
dividends and to make dividend payments on its participating policies even
though payments on the Securities may not have been approved by the
Superintendent, regardless of the effect any such declaration or payment may
have on the Superintendent's decision regarding payment of interest on or
principal of the Securities.
8. For so long as any of the Securities remain Outstanding or any
amounts remain unpaid on any of the Securities, the Issuer may convert itself
from a mutual life insurance company into a stock life insurance company (such
conversion, a "demutualization"), merge or consolidate with or into any other
corporation or sell, convey, transfer or otherwise dispose of all or
substantially all of its assets to any person, firm or corporation, if (i) (A)
in the case of a merger or consolidation, the Issuer is the surviving
corporation or (B) in the case of a merger or consolidation where the Issuer is
not the surviving corporation and in the case of any such sale, conveyance,
transfer or other disposition, the successor corporation is a corporation
organized and existing under the laws of the United States or a State thereof
and such corporation expressly assumes by supplemental fiscal agency agreement
all the obligations of the Issuer under the Securities and the Fiscal Agency
Agreement, (ii) at the time of any such demutualization, merger or
consolidation, or such sale, conveyance, transfer or other disposition, the
Issuer shall not have failed to make payment of interest on or principal of the
Securities after having received the Superintendent's prior approval to make
such payment and (iii) the Issuer has delivered to the Fiscal Agent an Officer's
Certificate stating that such demutualization, merger, consolidation, sale,
conveyance, transfer or other disposition complies with this paragraph and that
all conditions precedent herein provided for relating to such transaction have
been complied with. In the event of the assumption by a successor corporation of
the obligations of the Issuer as provided in clause (i)(B) of the immediately
preceding sentence, such successor corporation shall succeed to and be
substituted for the Issuer hereunder and under the Fiscal Agency
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Agreement and all such obligations of the Issuer shall terminate.
9. No employee benefit plan within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
the prohibited transaction provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), as to which the Issuer is a party in interest or a
disqualified person (each a "Plan"), and no Person acting on behalf of a Plan,
may acquire this Security, unless the acquisition of the Security is exempt
under one or more of Prohibited Transaction exemptions 84-14, 90-1, 91-38 or
96-23 (or any amendment thereof) or another applicable exemption from the
prohibitions under Section 406 of ERISA and Section 4975 of the Code. The
purchase by any Person of this Security shall constitute a representation by
such Person to the Issuer and the Fiscal Agent that such Person either (i) is
not a Plan or (ii) is a Plan, and may acquire this Security under an applicable
exemption from the prohibitions under Section 406 of ERISA and Section 4975 of
the Code. The restrictions on purchases of the Securities set forth in this
Paragraph 9 are in addition to those otherwise set forth in Section 6 of the
Fiscal Agency Agreement and under applicable law.
10. (a) The Issuer agrees, and each Security holder by accepting a
Security agrees, that the indebtedness evidenced by the Securities is
subordinated in right of payment, to the extent and in the manner provided in
this Section, to the prior payment in full of all Indebtedness, Policy Claims
and Other Creditor Claims (each as hereinafter defined), in accordance with
Section 7435 of the New York Insurance Law (together with any successor
provision, and as may be hereafter amended from time to time, "Section 7435").
(b) Upon any distribution to creditors of the Issuer in any
rehabilitation, liquidation, conservation, dissolution or reorganization
proceeding relating to the Issuer or its property, the priority of claims of
Security holders shall be determined in accordance with Section 7435. In a
proceeding commenced under Article 74 of the New York Insurance Law, claims for
principal of or interest on the Securities constitute Class 7 claims under
Section 7435, as currently in effect. If the Superintendent approves a payment
of principal of or interest on the Securities in an amount that is less than the
full amount of principal of and interest on the Securities then scheduled to be
paid in respect of the Securities, payment of
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<PAGE> 57
such partial amount shall be made pro rata among Security holders as their
interests may appear.
(c) If a distribution is made to Security holders that, because of
this Section, should not have been made to them, the Security holders who
receive the distribution shall hold it in trust for holders of Policy Claims,
Indebtedness and Other Creditor Claims and pay it over to them as their
interests may appear.
(d) The Issuer shall promptly notify the Fiscal Agent and the Paying
Agent of any facts known to the Issuer that would cause a payment of principal
of or interest on the Securities to violate this Section.
(e) This Section defines the relative rights of Security holders, on
the one hand, and holders of any other claims, in accordance with Section 7435,
on the other hand. Nothing in this Security or the Fiscal Agency Agreement shall
(i) impair, as between the Issuer and Security holders, the obligation of the
Issuer which is, subject to the Payment Restrictions, absolute and unconditional
to pay principal of and interest on the Securities in accordance with their
terms; (ii) affect the relative rights of Security holders and creditors of the
Issuer, other than holders of Policy Claims, Indebtedness or Other Creditor
Claims; or (iii) prevent the Fiscal Agent or any Security holder from exercising
any available remedies upon a breach by the Issuer of its obligations hereunder,
subject to the rights of holders of Policy Claims, Indebtedness or Other
Creditor Claims to receive distributions otherwise payable to Security holders.
(f) No right of any holder of Policy Claims, Indebtedness or Other
Creditor Claims to enforce the subordination of the indebtedness evidenced by
the Securities shall be impaired by any act or failure to act by the Issuer or
by its failure to comply with the terms of this Fiscal Agency Agreement.
(g) Each holder of Securities, by acceptance thereof, authorizes and
directs the Fiscal Agent on its behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Section and
appoints the Fiscal Agent its attorney-in-fact for any and all such purposes.
As used herein, "Indebtedness" of the Issuer shall mean (i) all
existing or future indebtedness of the Issuer for
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borrowed money, (ii) all existing or future indebtedness for borrowed money of
other persons, the payment of which is guaranteed by the Issuer, (iii) all
existing or future obligations of the Issuer under any agreement obligating the
Issuer to cause another person to maintain a minimum level of net worth, or
otherwise to ensure the solvency of such person and (iv) any expense or any
claim or amount, to the extent that payment of principal of and interest on the
Securities is required by law to be subordinated to the prior payment thereof.
Any obligation of the Issuer which by its express terms is subordinated in right
of payment to, or ranks equally with, the Securities, or any indebtedness or
other obligation of any separate account of the Issuer, shall not constitute
Indebtedness. However, under current law the Issuer cannot incur any
indebtedness which by its terms is subordinate to the Securities. In addition,
any other surplus notes or similar obligations of the Issuer (including the
Issuer's 11-1/4% scheduled to mature on August 15, 2004) shall not constitute
Indebtedness and will rank pari passu with the Securities.
As used herein, "Policy Claims" shall mean all existing or future
claims of policyholders or beneficiaries, as the case may be, under any and all
existing or future policies, endorsements, riders and other contracts of
insurance, annuity contracts (including, without limitation, guaranteed
investment contracts) and funding agreements issued, assumed or renewed by the
Issuer on or prior to the date hereof or hereafter created, all claims arising
under separate account agreements to the extent such claims are not fully
discharged by the assets held by the Issuer in the applicable separate accounts
and all claims of The Life Insurance Company Guaranty Corporation of New York or
any other guaranty corporation or association of New York or any other
jurisdiction, other than claims described in clause (i) of the definition of
"Other Creditor Claims" below and claims for interest.
As used herein, "Other Creditor Claims" shall mean all other claims
which, pursuant to Section 7435, have priority over claims with respect to the
Securities. Under Section 7435 as currently in effect, such other claims include
(i) claims with respect to the actual and necessary costs and expenses of
administration incurred by a liquidator, conservator, rehabilitator or ancillary
rehabilitator under Section 7435; (ii) claims with respect to the actual and
necessary costs and expenses of administration incurred by The Life Insurance
Guaranty Corporation or The Life Insurance Company Guaranty Corporation of New
York; (iii) claims of The Life Insurance
16
<PAGE> 59
Company Guaranty Corporation for certain funds loaned to the Superintendent
under Section 7713(d) of the New York Insurance Law; (iv) debts up to $1,200 due
to employees for services performed within one year of the commencement of
rehabilitation, liquidation, conservation, dissolution or reorganization
proceedings; (v) claims for payment for goods furnished or services rendered in
the ordinary course of business within 90 days of the declaration of the
impairment or insolvency of the Issuer; (vi) claims of the federal or any state
or local government (except in the case of claims for a penalty or forfeiture
which are included only to the extent of pecuniary loss and reasonable costs
occasioned by the act giving rise to the forfeiture or penalty); and (vii)
claims of general creditors and all other claims having priority under Section
7435.
11. For so long as any of the Securities remain Outstanding or any
amount remains unpaid on any of the Securities, the Issuer shall, in accordance
with Rule 144A, comply with the terms of the agreements set forth in Section 7
of the Fiscal Agency Agreement. The provisions of Sections 7 and 8 of the Fiscal
Agency Agreement are hereby incorporated mutatis mutandis herein.
12. In case this Security shall become mutilated, defaced,
destroyed, lost or stolen, the Issuer will execute and upon the Issuer's request
the Fiscal Agent shall authenticate and deliver a new Security, having a number
not contemporaneously outstanding, of like tenor (including the same date of
issuance) and equal principal amount, registered in the same manner, dated the
date of its authentication and bearing interest from the date to which interest
has been paid on this Security, in exchange and substitution for this Security
(upon surrender and cancellation thereof) or in lieu of and substitution for
this Security. In the case where this Security is destroyed, lost or stolen, the
applicant for a substituted Security shall furnish to the Issuer such security
or indemnity as may be required by the Issuer to save it and the Fiscal Agent
harmless, and, in every case of destruction, loss or theft of this Security, the
applicant shall also furnish to the Issuer satisfactory evidence of the
destruction, loss or theft of this Security and of the ownership thereof;
provided, however, that if the registered holder hereof is, in the judgment of
the Issuer, an institution of recognized responsibility, such holder's written
agreement of indemnity shall be deemed to be satisfactory for the issuance of a
new Security in lieu of and substitution for this Security. The Fiscal Agent
shall
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authenticate any such substituted Security and deliver the same only upon
written request or authorization of the Issuer. Upon the issuance of any
substituted Security, the Issuer may require the payment by the registered
holder thereof of a sum sufficient to cover fees and expenses connected
therewith. In case this Security has matured or is about to mature and shall
become mutilated or defaced or be destroyed, lost or stolen, the Issuer may,
subject to the Payment Restrictions, instead of issuing a substitute Security,
pay or authorize the payment of the same (without surrender thereof except if
this Security is mutilated or defaced) upon compliance by the registered holder
with the provisions of this Paragraph 12 as hereinabove set forth.
13. Section 10 of the Fiscal Agency Agreement, which Section is
hereby incorporated mutatis mutandis by reference herein, provides that, with
certain exceptions as therein provided and with the consent of the holders of a
majority of the principal amount of the Outstanding Securities present at a
meeting duly called pursuant thereto or by written consent of such percentage of
the principal amount of all Outstanding Securities, the Issuer and the Fiscal
Agent may, with the prior approval of the Superintendent, modify, amend or
supplement the Fiscal Agency Agreement (with respect to the Securities only and
not any other Securities that may be issued under the Fiscal Agency Agreement)
or the terms of the Securities or may give consents or waivers or take other
actions with respect thereto. Any such modification, amendment, supplement,
consent, waiver or other action shall be conclusive and binding on the holder of
this Security and on all future holders of this Security and of any Security
issued upon the registration of transfer hereof or in exchange heretofore or in
lieu hereof, whether or not notation thereof is made upon this Security. The
Fiscal Agency Agreement and the terms of the Securities may, with the prior
approval of the Superintendent, be modified or amended by the Issuer and the
Fiscal Agent, without the consent of any holders of Securities, for the purpose
of (a) adding to the covenants of the Issuer for the benefit of the holders of
Securities, or (b) surrendering any right or power conferred upon the Issuer, or
(c) securing the Securities pursuant to the requirements hereof, thereof or
otherwise, or (d) evidencing the succession of another corporation to the Issuer
and the assumption by such successor of the covenants and obligations of the
Issuer herein and in the Fiscal Agency Agreement as permitted by the Securities
and the Fiscal Agency Agreement, or (e) modifying the restrictions on, and
procedures for, resale and other transfers of the Securities to the extent
required or permitted by any change in applicable law or regulation (or the
interpretation
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<PAGE> 61
thereof) or in practices relating to the resale or transfer of restricted
securities generally, or (f) accommodating the issuance, if any, of Securities
in book-entry or certificated form and matters related thereto which do not
adversely affect the interest of any Security holder in any material respect, or
(g) curing any ambiguity or correcting or supplementing any defective provision
contained herein or in the Fiscal Agency Agreement in a manner which does not
adversely affect the interest of any Security holder in any material respect, or
(h) effecting any amendment which the Issuer and the Fiscal Agent may determine
is necessary or desirable and which shall not adversely affect the interest of
any Security holder, to all of which each holder of any Security, by acceptance
thereof, consents.
14. Holders of Securities may enforce the Fiscal Agency Agreement or
the Securities only in the manner set forth below.
(a) In the event that any state or federal agency shall obtain an
order or grant approval for the rehabilitation, liquidation, conservation or
dissolution of the Issuer, the Securities will upon the obtaining of such an
order or the granting of such approval immediately mature in full (subject to
the provisions of the next sentence) without any action on the part of the
Fiscal Agent or any holder of the Securities, with payment thereon being subject
to the Payment Restrictions, and any restrictions imposed as a consequence of,
or pursuant to, such proceedings. Notwithstanding any other provision of this
Security or the Fiscal Agency Agreement, in no event shall the Fiscal Agent or
any holder of the Securities be entitled to declare the Securities to
immediately mature or otherwise be immediately payable.
(b) In the event that the Superintendent approves in whole or in
part a payment of any interest on or principal of any Securities and the Issuer
fails to pay the full amount of such approved payment on the date such amount is
scheduled to be paid, such approved amount will be immediately payable on such
date without any action on the part of the Fiscal Agent or any holder of
Securities. In the event that the Issuer fails to perform any of its other
obligations hereunder or under the Fiscal Agency Agreement, each holder of the
Securities may pursue any available remedy to enforce the performance of any
provision of such Securities or the Fiscal Agency Agreement; provided, however,
that such remedy shall in no event include the right to declare the Securities
immediately payable, and
19
<PAGE> 62
shall in no circumstances be inconsistent with the provisions of Section 1307. A
delay or omission by any Security holder in exercising any right or remedy
accruing as a result of the Issuer's failure to perform its obligations
hereunder or under the Fiscal Agency Agreement and the continuation thereof
shall not impair such right or remedy or constitute a waiver of or acquiescence
in such non-performance by the Issuer. To the extent permitted by law, no remedy
is exclusive of any other remedy and all remedies are cumulative.
(c) Notwithstanding any other provision of this Security or the
Fiscal Agency Agreement, the right of any holder of Securities to receive
payment of the principal of and interest on such holder's Securities on or after
the respective Scheduled Interest Payment Dates or Scheduled Maturity Date
expressed in such Securities, or to bring suit for the enforcement of any such
payment on or after such respective Scheduled Interest Payment Dates or
Scheduled Maturity Date, in each case subject to such payment on such dates
having received the approval of the Superintendent pursuant to the Payment
Restrictions, including the approval of the Superintendent pursuant to Section
1307, is absolute and unconditional and shall not be impaired or affected
without the consent of the holder.
15. No reference herein to the Fiscal Agency Agreement and no
provision of this Security or of the Fiscal Agency Agreement shall alter or
impair the obligation of the Issuer, subject to the Payment Restrictions, to pay
the principal of and interest on this Security at the times, place and rate, and
in the coin or currency, herein prescribed.
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EXHIBIT C
FORM OF TRANSFER CERTIFICATE
FOR EXCHANGE OR TRANSFER OF
DEFINITIVE SECURITY
CITIBANK, N.A.
as Fiscal Agent
111 Wall Street, 5th Floor
Zone 2
New York, New York 10043
Re: The Mutual Life Insurance Company of New York, Series A
Surplus Notes (the "Securities")
Reference is hereby made to the Fiscal Agency Agreement, dated as of
December 30, 1997 (the "Fiscal Agency Agreement"), between The Mutual Life
Insurance Company of New York, as Issuer, and CITIBANK, N.A., as Fiscal Agent.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Fiscal Agency Agreement.
This letter relates to $_________________ principal amount of
Definitive Securities held by [insert name of transferor] (the "Transferor").
The Transferor has requested an exchange or transfer of such Securities.
In connection with such request and in respect of such Securities,
the Transferor does hereby certify that (i) such Securities are owned by the
Transferor and are being exchanged without transfer or (ii) such transfer has
been effected pursuant to and in accordance with Rule 144A, Rule 144 or Rule 903
or Rule 904 under the United States Securities Act of 1933, as amended (the
"Act"), and accordingly the Transferor does hereby further certify that:
I. if the transfer is being effected pursuant to and in accordance
with Rule 144A under the Act, that the Securities are being transferred to
a person that the Transferor reasonably believes is purchasing the
Securities for its own account, or for one or more accounts with respect
to which such person exercises sole investment discretion, and such person
and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A, in each case in a transaction meeting the
require-
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<PAGE> 64
ments of Rule 144A and in accordance with any applicable securities
laws of any state of the United States or any other jurisdiction; or
II. if the transfer has been effected pursuant to Rule 144, the
Securities have been transferred in a transaction permitted by Rule 144;
or
III. if the transfer has been effected pursuant to Rule 903 or 904:
(1) the offer of the Securities was not made to a person
in the United States;
(2) either:
(A) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any person acting on its behalf reasonably believed that the
transferee was outside the United States, or
(B) the transaction was executed in, on or through the
facilities of a designated offshore securities market and
neither the Transferor nor any person acting on its behalf
knows that the transaction was pre-arranged with a buyer in
the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Act.
2
<PAGE> 65
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuer and the Investors. Terms used in this
certificate and not otherwise defined in the Fiscal Agency Agreement have the
meanings set forth in Regulation S under the Act.
[Insert Name of Transferor]
By:________________________
Name:
Title:
Dated: ______________, ____
cc: The Mutual Life Insurance Company of New York
3
<PAGE> 1
Exhibit 10.4
AMENDED AND RESTATED REINSURANCE AGREEMENT
referred to as the "Agreement"
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
OF
NEW YORK, NEW YORK
referred to in this Agreement as the "Company"
AND
LIFE REASSURANCE CORPORATION OF AMERICA
OF
STAMFORD, CONNECTICUT
referred to in this Agreement as "Life Re"
AGREEMENT #8888-1
[Life Re Logo]
<PAGE> 2
This Amended and Restated Reinsurance Agreement (this "Agreement") amends
and fully restates the Reinsurance Agreement between the Company and Life Re
entered into on May 25, 1994, with an effective date for the reinsurance of
January 1, 1994.
The Company and Life Re mutually agree to reinsure on the terms and
conditions set forth below. This Agreement is solely between the Company and
Life Re, and performance of the obligations of each party under this Agreement
shall be rendered solely to the other party. In no instance will anyone other
than the Company or Life Re have any rights under this Agreement.
ARTICLE I
REINSURANCE
The Company will cede and Life Re will accept 50% of the Company's rights,
obligations, liabilities and risks associated with the insurance policies, plans
and/or riders set forth in Schedule A that went into paid up status on or before
December 31, 1993. The policies set forth in Schedule A that are reinsured under
this Agreement are hereinafter referred to collectively as "Reinsured Policies"
and individually as a "Reinsured Policy." The 50% of the Company's business
associated with the Reinsured Policies is hereinafter referred to as "Life Re's
Share." Life Re will have no liability for any policies any part of which are
currently reinsured by the Company.
ARTICLE II
REINSURANCE LIABILITY
The liability of Life Re on any Reinsured Policy begins and ends at the
same time as that of the Company; however, Life Re will have no liability for
claims incurred before January 1, 1994.
ARTICLE III
PLAN AND AMOUNT OF INSURANCE
1. Plan
Reinsurance under this Agreement is on a funds withheld basis according to
Life Re's Share, subject to the terms and conditions of policy forms issued by
the Company for the Reinsured Policies in existence as of the effective date of
this Agreement.
2. Reductions and Terminations
Reinsurance amounts are calculated in terms of coverages on a "per policy"
basis. If any of the Reinsured Policies on an insured are reduced or terminated,
reinsurance under this Agreement on such Reinsured Policies will be reduced in
proportion to Life Re's Share.
<PAGE> 3
3. Reinstatements
A Reinsured Policy originally ceded under this Agreement, that is reduced,
terminated, lapsed or surrendered, and later reinstated to paid up status by the
Company pursuant to the policy provisions, will be accepted for reinsurance by
Life Re up to such amount as would be in force if such Reinsured Policy had not
been reduced, terminated, lapsed or surrendered. The Company will pay to Life
Re, Life Re's Share of any payments or interest that the Company received for
reinstatement.
ARTICLE IV
PROCEDURES FOR REINSURANCE
1. Initial Consideration
Within 15 days of the date of execution of this Agreement, Life Re will pay
to the Company initial consideration equal to $10,450,000.00, plus an amount
equal to the reserves for dividend liabilities on Life Re's Share of the
Reinsured Policies.
2. Establishment of Reserves
Within 15 days of the date of execution of this Agreement, the Company will
establish a dedicated portfolio consisting of cash equal to (i) the statutory
reserves (including reserves for substandard policies and dividend liabilities)
on Life Re's Share of the Reinsured Policies as of January 1, 1994 as set forth
in Schedule A and (ii) interest on such reserves from January 1, 1994 to the
date of payment at an effective annual rate of interest equal to 7%. The assets
held in the dedicated portfolio are hereinafter referred to as the "Withheld
Assets." A list of the assets comprising the Withheld Assets at the inception of
this Agreement are set forth in Schedule B.
3. Treaty Quarter
The three month period ending on the last day of each March, June,
September, and December is referred to herein as a "Treaty Quarter."
4. Withdrawal and Surrender Benefits and Dividends
Life Re's Share of death benefits, withdrawal benefits, surrender benefits,
maturities, Annual Policy Dividends (as defined below), and Policy Termination
Dividends (as defined below) will be paid after the end of each Treaty Quarter
within 30 calendar days after Life Re receives from the Company the Quarterly
Reports described in Article IV, 6, below, showing the amount of actual
payments, increased with interest. Interest will be calculated from the midpoint
of the quarter such amounts are paid by the Company to the date they are paid by
Life Re, at an effective annual rate of interest equal to the three month
Treasury Bill rate, as of the midpoint of the quarter such amounts are paid by
the Company. Such payments will be made by (i) the release of assets from the
Withheld Assets by the Company, in consultation with Life Re, (ii) the release
of cash
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<PAGE> 4
from the Withheld Assets, (iii) direct payment by Life Re to the Company, or
(iv) any combination of the above.
5. Expense Allowances
Life Re will pay to the Company an annual expense allowance equal to Life
Re's Share of $15.00 for each Reinsured Policy. Such expense allowance will be
payable in quarterly installments within thirty (30) days after Life Re receives
from the Company the Quarterly Reports described in Article IV,6, below, based
on the number of Reinsured Policies in effect as of the end of such Treaty
Quarter. Payment will be made as described in Article IV, 4.
6. Quarterly Reports
Within thirty (30) calendar days following the end of a Treaty Quarter, the
Company will forward to Life Re a statement of transactions in substantially the
form shown in Schedule C ("Quarterly Report") and as may be amended from time to
time by the mutual written consent of the Company and Life Re. If a balance is
due the Company, Life Re will remit such amount to the Company, with interest as
provided in Article IV,4, above, within 30 calendar days of receiving the
Quarterly Report. With the Quarterly Report, the Company will provide a list of
assets comprising the Withheld Assets and the value of such assets as reported
on the Company's financial statements.
7. Interest Maintenance Reserve
When a Withheld Asset which is subject to the interest maintenance reserve
statutory accounting principles applicable to the Company is sold, an interest
maintenance reserve applicable to the Withheld Assets under this Agreement will
be established for purposes of this Agreement (the "IMR") and the following
occur:
The realized gain on the sold Withheld Asset is not credited at
the time of sale to the investment earnings on the Withheld Assets. The
value of the Withheld Assets required to be held will be increased by
the amount of the related interest maintenance reserve as calculated by
the Company for inclusion in its statutory financial statements. Life
Re will pay to the Company from the Withheld Assets an amount equal to
the statutory gain from the sale of such asset minus the amount of the
IMR established. As this payment is assumed to cover the Company's tax
cost, the amount of the payment divided by the realized gain is deemed
the "Tax Rate" for the specific asset sold. Such payment will be made
within 30 calendar days of receiving the Quarterly Report and such
payment will include interest from the date the Withheld Asset was sold
at an effective annual rate of interest equal to the three-month
Treasury Bill rate as of the date the Withheld Asset was sold.
As the Company amortizes the related interest maintenance
reserve, the Company will credit to the investment earnings on the
Withheld Assets the amount amortized for the asset sold divided by I
minus the Tax Rate. Such payment will be made as described in Article
IV, 4.
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<PAGE> 5
8. Withheld Assets
The Withheld Assets will be held by the Company in an amount equal to the
statutory reserves (including the IMR and the Company's estimated dividend
liabilities) on Life Re's Share of the Reinsured Policies. The investment of the
Withheld Assets will be managed by an investment advisor (the "Advisor")
approved by both the Company and Life Re. The Advisor will manage the Withheld
Assets in accordance with the Investment Guidelines attached hereto as Schedule
D. Any investment income or gain received from the Withheld Assets will be
considered Withheld Assets.
Life Re is solely responsible for the payment of any fees charged by the
Advisor for managing the Withheld Assets. Such fees will be paid directly by
Life Re and will not be paid out of the Withheld Assets.
If at any time the value of the Withheld Assets (as reflected on the
Company's financial statements prepared in accordance with statutory accounting
principles) should be less than the statutory reserves (including the IMR and
the Company's estimated dividend liabilities) on Life Re's Share of the
Reinsured Policies, Life Re will transfer to the Company cash or other assets
which meet the requirements of the Investment Guidelines in an amount sufficient
so that the value of the Withheld Assets equals or exceeds the statutory
reserves (including the IMR and the Company's estimated dividend liabilities) on
Life Re's Share of the Reinsured Policies.
If the value of the Withheld Assets (as reflected on the Company's
financial statements prepared in accordance with statutory accounting
principles) exceeds the statutory reserves (including the IMR and the Company's
estimated dividend liabilities) on Life Re's Share of the Reinsured Policies,
Life Re may elect to have all or some portion of the excess paid to Life Re.
Life Re may elect to have either cash or assets transferred from the Withheld
Assets to Life Re; however, Life Re must ensure that after any such transfer the
value of the Withheld Assets equals or exceeds the statutory reserves (including
the IMR and the Company's estimated dividend liabilities) on Life Re's Share of
the Reinsured Policies. If the value of the Withheld Assets (as reflected on the
Company's financial statements prepared in accordance with statutory accounting
principles) exceeds the statutory reserves (including the IMR and the Company's
estimated dividend liabilities) on Life Re's Share of the Reinsured Policies by
more than 5% of the statutory reserves (including the Company's estimated
dividend liabilities), the Company will automatically pay to Life Re from the
Withheld Assets an amount necessary to reduce such excess to less than 5% of the
statutory reserves (including the IMR and the Company's estimated dividend
liabilities).
Within thirty (30) days of the end of each month, the Advisor will provide
the Company with a report that reflects duration and rating of each Withheld
Asset. If at any time the Withheld Assets fail to meet the requirements of the
Investment Guidelines, Life Re will correct such failure within thirty (30) days
of receiving notice of such failure.
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<PAGE> 6
9. DAC Tax
The Company and Life Re hereby agree to make an election pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulations issued December 1992, under
Section 848 of the Internal Revenue Code of 1986, as amended. This election
shall be effective for 1993 and for all subsequent taxable years for which this
Agreement remains in effect. The Company and Life Re also agree to the
following:
(a) The term "party" will refer to either the Company of Life Re as
appropriate.
(b) The terms use in this Article are defined by reference to
Regulation Section 1.848-2 in effect December 1992.
(c) The party with the net positive consideration for this Agreement
for each taxable year will capitalize specified policy acquisition
expenses with respect to this Agreement without regard to the
general deductions limitation of Section 848(c)(1).
(d) Both parties agree to exchange information pertaining to the amount
of net consideration under this Agreement each year to ensure
consistency or is otherwise required by the Internal Revenue
Service.
(e) The Company will submit a schedule to Life Re by May 1 of each year
of its calculation of the net consideration for the preceding
calendar year. This schedule of calculations will be accompanied by
a statement signed by an officer of the Company stating that the
Company will report such net consideration in its tax return for
the preceding calendar year.
(f) Life Re may contest such calculation by providing an alternative
calculation to the Company in writing within thirty (30) days of
Life Re's receipt of the Company's calculation. If Life Re does not
so notify the Company, Life Re will report the net consideration as
determined by the Company in Life Re's tax return for the previous
calendar year.
(g) If Life Re contests the Company's calculation of the net
consideration, the parties will act in good faith to reach an
agreement as to the correct amount within thirty (30) days of the
date Life Re submits its alternative calculation. If the Company
and Life Re reach agreement on an amount of net consideration, each
party shall report such amount in their respective tax returns for
the previous calendar year.
5
<PAGE> 7
ARTICLE V
LIABILITY FOR PAYMENTS
1. Age Adjustment
If the amount of any Reinsured Policy is changed because of a misstatement
of age, Life Re will share in any adjustments in proportion to Life Re's Share.
2. Commissions
Life Re will not participate with the Company in any agent commissions or
other similar compensation paid by the Company in connection with a Reinsured
Policy.
ARTICLE VI
BENEFITS
1. POLICYHOLDER BENEFITS
A. Annual Policy Dividends
Life Re will reimburse the Company for Life Re's Share of
dividends credited to the policyholder on the anniversary of
any Reinsured Policy ("Annual Policy Dividend"). The Company
shall have sole responsibility for setting the formula for
determining the Annual Policy Dividend and Life Re shall be
bound by the Company's determination.
B. Policy Termination Dividends
Life Re will reimburse the Company for Life Re's Share of
dividends paid to the policyholder on the termination of any
Reinsured Policy ("Policy Termination Dividend"). The Company
shall have sole responsibility for setting the formula for
determining the Policy Termination Dividend and Life Re shall
be bound by the Company's determination.
C. Reduction in Annual Policy Dividends
If the dividend interest rate used to determine the Annual
Policy Dividend for 1994 (payable in 1995) is reduced from the
rate used for the Annual Policy Dividend for 1993, Life Re
will pay additional consideration to the Company for the
reinsurance within thirty (30) days after the Annual Policy
Dividend for 1994 is established by the Board of Trustees of
the Company at its 1994 meeting regarding dividends. The
amount paid is based on the number of basis points by which
the dividend interest rate is reduced. For this purpose, the
reduction in the dividend interest is defined as:
.4438L5 + .1435L6 + .0214L8 + .3913LV,
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<PAGE> 8
where L5, L6, L8 and LV, are the dividend interest rate
reductions for policies with 5%, 6%, 8%, and variable loan
rates, respectively.
The amount Life Re will pay the Company for each basis point
by which the dividend interest rate used to determine the
Annual Policy Dividend is reduced will be determined by the
following formulas:
(1) For reductions up to and including 37.4 basis points, Life
Re will pay the Company the greater of $0.00 or the amount
determined using the following formula:
((Basis point reduction) x $39,775) - $500,000
(2) For reductions in excess of 37.4 basis points, Life Re
will pay the Company the amount determined using the
following formula:
$987,500 + ((basis point reduction - 37.4 basis points)
x $23,400)
D. Policy Loans
Life Re will not participate with the Company on policy loans
on any Reinsured Policy.
E. Settlement Options
Life Re will not participate in settlement options.
2. CLAIM BENEFITS
A. Notification
Unless otherwise requested by Life Re, the Company will notify
Life Re of claims involving any Reinsured Policy at the time
the Quarterly Report is delivered to Life Re. The Company will
furnish Life Re claim information and, upon request by Life
Re, copies of all claim papers and proofs.
B. Authorization for Payment
Life Re will follow the decision of the Company on payment of
a claim arising from a Reinsured Policy, other than as
provided in Article VI,2,D. Life Re will pay Life Re's Share
of such claims to the Company in full. Payment will be made as
described in Article IV, 4.
C. Expenses
Life Re will share in the claim expense of any contest or
compromise of a claim in proportion to Life Re's Share. Life
Re will share in the total
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<PAGE> 9
amount of an reduction in liability in proportion to Life Re's
Share. Claim expense includes, but is not limited to, cost of
investigation, legal fees, court costs, and interest charges.
Compensation of salaried officers and employees will not be
reimbursed by Life Re.
Life Re will pay Life Re's Share of any extracontractual or
punitive damages assessed against the Company for any
Reinsured Policy under this Agreement if each of the following
conditions is met:
(a) The primary basis for the award of extracontractual or
punitive damages was the Company's denial of a claim under
the Reinsured Policy;
(b) Before any action by the Company indicating to the
claimant that the claim is being denied or contested, Life
Re must have had the opportunity to review the claim file;
and
(c) Life Re must have agreed that the claim should be denied
or contested.
Life Re also will reimburse the Company for Life Re's Share of
reasonable legal fees incurred in defense of extracontractual
or punitive damages.
D. Contested Claims
Whenever the Company has formed a preliminary opinion that a
claim might be denied or contested, and before any final
action by the Company indicating to the claimant that the
claim is being denied or contested, the Company will give Life
Re the opportunity to review the complete claim file. Life Re
will review the file promptly and, at its option, (i) pay Life
Re's Share as if the claim was not contested, in full
discharge of its obligation to the Company for that claim or
(ii) after consultation with the Company, join in the contest,
or ratify the denial.
If Life Re joins in the contest, or ratifies the denial, of a
claim, Life Re will communicate to the Company Life Re's
decision to pay Life Re's Share of the ultimate claim expense.
ARTICLE VII
INSOLVENCY
All reinsurance under this Agreement will be paid by Life Re directly to
the Company, its liquidator, receiver, or statutory successor, on the basis of
the liability of the Company under the Reinsured Policies without diminution
because of the insolvency of the Company. In the event of the insolvency of the
Company, the liquidator, receiver, or statutory successor of the Company will
give written notice of a pending claim against the Company on any Reinsured
Policy within a reasonable time after the claim is filed in
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<PAGE> 10
the insolvency proceedings. While the claim is pending, Life Re may investigate
and interpose, at its own expense, in the proceedings where the claim is to be
adjudicated, any defenses which it may deem available to the Company or its
liquidator, receiver, or statutory successor. The expense incurred by Life Re
will be charged, subject to court approval, against the Company as an expense of
liquidation to the extent of a proportionate share of the benefit that accrues
to the Company as a result of the defenses by Life Re. Where two or more
reinsurers are involved and a majority in interest elect to defend a claim, the
expense will be apportioned in accordance with the terms of this Agreement as if
the expense had been incurred by the Company.
ARTICLE VIII
ARBITRATION
Life Re and the Company intend that any dispute between them under or with
respect to this Agreement be resolved without resort to any litigation.
Accordingly, Life Re and the Company agree that they will negotiate diligently
and in good faith to agree on a mutually satisfactory resolution of any such
dispute; provided, however, that if any such dispute cannot be so resolved by
them within sixty (60) calendar days (or such longer period as the parties may
agree) after commencing such negotiations, Life Re and the Company agree that
they will submit such dispute to arbitration in the manner specified herein, and
such arbitration proceeding will be conducted in accordance with the rules of
the American Arbitration Association.
The arbitration hearing will be before a panel of three arbitrators, each
of whom must be a present or former officer of a life insurance or life
reinsurance company, other than the Company or Life Re or any of their
affiliates. Life Re and the Company will each appoint one arbitrator by written
notification to the other party within thirty (30) calendar days after the date
of the mailing of the notification initiating the arbitration. These two
arbitrators will then select the third arbitrator within sixty (60) calendar
days after the date of the mailing of the notification initiating arbitration.
If either Life Re or the Company fail to appoint an arbitrator, or should
the two arbitrators be unable to agree upon the choice of a third arbitrator,
the arbitrator will be selected by the American Arbitration Association or its
successor organization or (if necessary) the president of any similar
organization designated by lot of Life Re and the Company within thirty (30)
calendar days after the request.
The vote or approval of a majority of the arbitrators will decide any
question considered by the arbitrators; provided, however, that if no two
arbitrators reach the same decision, then the average of the two closest
mathematical determinations will constitute the decision of all three
arbitrators. The place of arbitration will be New York, New York. Each decision
(including without limitation each award) of the arbitrators will be final and
binding on all parties and will be nonappealable, and (at the request of either
of Life Re or the Company) any award of the arbitrators may be confirmed by a
judgment entered by any court of competent jurisdiction. Each party will be
responsible for paying (i) all fees and expenses charged by its respective
counsel, accountants, actuaries, and
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<PAGE> 11
other representatives in conjunction with such arbitration and (ii) one-half of
the fees and expenses charged by each arbitrator.
ARTICLE IX
GENERAL PROVISIONS
1. Exchanges and Conversions
Any Reinsured Policy that is exchanged for or converted to a policy issued
by the Company that is not a Reinsured Policy will be treated as a surrender.
Any Reinsured Policy that is no longer on paid up status will be treated as a
surrender.
2. Policy Forms and Rates
Upon request, the Company will furnish Life Re with a copy of its
application forms, policy and rider forms, premium and non-forfeiture value
manuals, reserve tables, actuarial memoranda, and any other forms or tables
needed for proper handling of reinsurance under this Agreement. Life Re must
agree in writing before incurring additional liability resulting from any
voluntary changes to policies, policy riders or amendments reinsured under this
Agreement.
3. Errors and Omissions
If either the Company or Life Re fails to perform an obligation under this
Agreement, and such failure is the result of an Error on the part of the Company
or Life Re, such Error will be corrected by restoring both the Company and Life
Re to the positions they would have occupied had no such Error occurred. For
this purpose, "Error" means any clerical mistake made inadvertently, excluding
errors of judgment and all other forms of error.
4. Offset
Any amount under this Agreement which either the Company or Life Re is
contractually obligated to pay to the other party may be paid out of any amount
which is due and unpaid under this Agreement. The application of this offset
provision will not be deemed to constitute diminution in the event of
insolvency.
5. Inspection
Upon reasonable notice, Life Re may inspect any and all books, records,
documents or similar information relating to or affecting reinsurance under this
Agreement at the home office of the Company during normal business hours. Upon
reasonable notice, the Company may inspect any and all books, records, documents
or similar information relating to or affecting reinsurance under this Agreement
at the home office of Life Re during normal business hours.
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<PAGE> 12
6. Entire Agreement
This Agreement and the Schedules attached hereto supersede all prior
discussions and written and oral agreements between the parties with respect to
the subject matter of this Agreement. This Agreement and the Schedules attached
hereto contain the sole and entire agreement between the parties hereto with
respect to the subject matter hereof.
7. Amendment
This Agreement may be modified or amended only by a writing duly executed
by or on behalf of the Company and Life Re.
8. Counterparts
This Agreement may be executed simultaneously in any number of
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument.
9. No Assignment
Except as otherwise provided herein, neither party hereto may assign this
Agreement or any right hereunder or part hereof without the prior written
consent of the other party hereto. In the event of the insolvency of the
Company, Life Re does hereby grant to the Company's liquidator, receiver or
other statutory successor the unilateral right to assign the Company's interest
under this Agreement to any other insurance company.
Life Re will not retrocede Life Re's Share of the Reinsured Policies under
this Agreement to a life insurance company that is not a licensed or authorized
reinsurer in the State of New York without the prior approval of the New York
Department of Insurance.
10. Binding Effect
This Agreement is binding upon and will inure to the benefit of the parties
and their respective successors and permitted assignees.
11. Notices
Any notice, request, instruction, or other document to be given hereunder
by any party hereto to the other party hereto shall be in writing and (i)
delivered personally, (ii) sent by facsimile, (iii) delivered by overnight
express, or (iv) sent by registered or certified mail, postage prepaid, as
follows:
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<PAGE> 13
If to the Company, to:
The Mutual Life Insurance Company of New York
Glenpointe Centre West
Teaneck, New Jersey 07666-6888
Attention: Phillip A. Eisenberg, Senior Vice President and
Chief Actuary Facsimile: 201/907-5998
If to Life Re, to:
Life Reassurance Corporation of America
969 High Ridge Road
Stamford, Connecticut 06905
Attention: Claudia E. Cannataro, Vice President
Facsimile: 203/321-3200
or at such other address for a party as shall be specified by like notice. Each
notice or other communication required or permitted under this Agreement that is
addressed as provided in this Article IX, 11 will, if delivered personally or by
overnight express, be deemed given upon delivery; will, if delivered by
facsimile or similar facsimile transmission, be deemed delivered when
electronically confirmed; and shall, if delivered by mail in the manner
described above, be deemed given on the third business day after the day it is
deposited in a regular depository of the United States Mail.
12. Invalid Provisions
If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under any present or future law, and if the rights or obligations
of the Company or Life Re under this Agreement will not be materially and
adversely affected thereby, (1) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid, or unenforceable provision or by its
severance herefrom, and (iv) in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid, and enforceable provision as similar in terms to such illegal,
invalid, or unenforceable provision as may be possible.
If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under any present or future law, and if the rights or obligations
of the Company or Life Re under this Agreement would be materially and adversely
affected thereby, the Company and Life Re agree to negotiate in good faith to
amend this Agreement so that each of the parties is in as similar a position as
possible to that held immediately prior to any provision of this Agreement being
held illegal, invalid, or unenforceable.
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<PAGE> 14
ARTICLE X
DURATION OF AGREEMENT
This Agreement will be effective on and after January 1, 1994. This
Agreement is unlimited in duration but may be amended by mutual consent of the
Company and Life Re. The reinsurance provided hereunder will remain in force
until termination of the Reinsured Policies in accordance with the terms of this
Agreement.
A. This Agreement may be terminated by the Company (in its sole
discretion) if Life Re does not transfer additional assets to
the Company to become Withheld Assets as required by Article
IV,8, and does not correct such failure within the time period
specified. If the Company terminates this Agreement, the
Company will recapture the Reinsured Policies effective as of
the end of the calendar quarter in which Life Re receives
notice of such termination. Upon recapture, all outstanding
amounts owed under this Agreement will be settled.
In addition, before termination and recapture, Life Re and the
Company will appoint a mutually acceptable actuary who is not
affiliated with either Life Re or the Company to value the
future profits of Life Re's Share of the Reinsured Policies by
measuring the future cash flows on the Withheld Assets minus
the future cash flows on Life Re's Share of the liabilities on
the Reinsured Policies. The actuary will follow the guidelines
attached in Schedule E in conducting the valuation. Upon
receipt of the independent actuary's valuation of the future
profits, the Company will pay Life Re, concurrently with the
recapture, an amount equal to (i) the present value of such
future profits (including the Company's current estimated
dividend liabilities) minus (ii) the lesser of (a)
$1,000,000.00 or (b) 25 % of the present value of such future
profits plus (iii) if any, Withheld Assets in excess of the
statutory reserves (including the IMR) and the Company's
current estimated dividend liabilities. The expenses of the
independent actuary will be paid by the Company and Life Re
equally.
B. If this Agreement is declared invalid or is otherwise
terminated (other than under the provisions of paragraph A.,
above), the Company will recapture the Reinsured Policies.
Upon recapture, all outstanding amounts owed under this
Agreement will be settled.
In addition, before recapture, Life Re and the Company will
appoint a mutually acceptable actuary who is not affiliated
with either Life Re or the Company to value the future profits
of Life Re's Share of the Reinsured Policies by measuring the
future cash flows on the Withheld Assets minus the future cash
flows on Life Re's Share of the liabilities on the Reinsured
Policies. The actuary will follow the guidelines attached in
Schedule E in conducting the valuation. Upon receipt of the
independent actuary's valuation of the future profits, the
Company will pay Life Re,
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<PAGE> 15
concurrently with the recapture, an amount equal to (i) the
present value of such future profits (including, the Company's
current estimated dividend liabilities) plus (ii) if any,
Withheld Assets in excess of the statutory reserves (including
the IMR) and the Company's current estimated dividend
liabilities. The expenses of the independent actuary will be
paid by the Company and Life Re equally.
ARTICLE XI
EXECUTION
IN WITNESS WHEREOF, Life Re and the Company have executed this Amended and
Restated Reinsurance Agreement on the date set forth below to amend and restate
the Reinsurance Agreement between the Company and Life Re entered into on May
25, 1994, with an effective date for the reinsurance January 1, 1994.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
Date: February 10, 1995 By: /s/ Edward P. Bank
Name: Edward P. Bank
Title: Vice President & Deputy
General Counsel
LIFE REASSURANCE CORPORATION OF AMERICA
Date: February 9, 1995 By: /s/ W. Weldon Wilson
Name: W. Weldon Wilson
Title: Senior Vice President
14
<PAGE> 16
SCHEDULE A
SCHEDULE OF REINSURED POLICIES
AGREEMENT #8888-1
The Reinsured Policies consist of the Company's paid-up
policies in force as of December 31, 1993, excluding growth option riders. These
policies are identified by the following paid-up group codes on the Company's
valuation system:
0001-0 0005-0 0006-0 0008-0 0180-0 0190-0 0210-0
0101-0 0101-1 0102-0 0102-1 0108-0 0110-0 0111-0
0201-0 0202-0 0207-0 0211-0 0213-0 0214-0 0401-0
0402-0 0407-0 0410-0 0412-0 0413-0 0451-0 0452-0
0460-0 0462-0 0463-0 0499-0 0501-0 0502-0 0504-0
0510-0 0512-0 0513-0 0551-0 0552-0 0562-0 0563-0
0701-0 0701-1 0701-2 0701-4 0701-5 0702-0 0710-0
0712-0 0713-0 0751-0 0751-1 0751-2 0751-3 0751-4
0751-5 0752-0 0762-0 0763-0 0799-0 0801-0 0802-0
0810-0 0851-0 0852-0 1012-0 1051-0 1201-0 1251-0
1551-0
The following are excluded from the reinsured block: (i)
policies issued in Canada; (ii) any policy any part of which is already ceded to
another company; (iii) policies issued with a 1980 CSO valuation basis; and (iv)
for policies with spouse and/or children's riders, the secondary insured when
such status was in effect as of December 31, 1993 (as designated by the
Company's indices 974, 978, or 990).
On May 20, 1994, the Company provided Life Re with a seriatim
tape listing of the policies to be reinsured. This listing will be viewed as a
closed block and only the policies therein are reinsured. Any policies which are
later found to belong to the block, but are not on the tape listing, are not
reinsured.
As of December 31, 1993, the liabilities reinsured (50% quota
share) are as follows:
Reserves (standard) $120,075,635.00
Reserves (substandard) $ 226,640.00
Dividend liability $ 2,285,884.00
<PAGE> 17
SCHEDULE B
AGREEMENT #8888-1
WITHHELD ASSETS AS OF MAY 25, 1994
<PAGE> 18
SCHEDULE B
SAVR MONTH END LOT BOOK
05/31/94
<TABLE>
<CAPTION>
BOOK ORIGINAL TRADE INVEST-
SHARES/PAR VALUE COST DATE MENT YEAR YIELD
----------------- ------------ ---------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
001TLRE 02 010100206BF10 AT&T CAPITAL CORP. NOTES 4.20000 1994/06/01
1 940531I0104 4,000,000.0000 3,999,533.33 3,999,533.33 05/31/94 9405 99.9883332500 4.200000
TOTAL FOR 010100206BF10 4,000,000.0000 3,999,533.33 3,999,533.33
001TLRE 02 010102635SF36 AMERICAN GENERAL CORP 4.35000 1994/06/03
1 94052700101 4,000,000.0000 3,996,772.22 3,996,772.22 05/27/94 9405 99.9193055000 4.150000
TOTAL FOR 010102635SF36 4,000,000.0000 3,996,772.22 3,996,772.22
00111RE 02 030103739KF36 AON CORP NOTES 4.20000 1994/06/03
1 940527I0108 4,000,000.0000 3,996,733.33 3,996,733.33 05/27/94 9405 99.9183332500 4.200000
TOTAL FOR 010303739KF36 4,000,000.0000 3,996,733.33 3,996,733.33
001TLRE 02 0101046003AAA ASSOCIATES CORP OF NA NOTES 4.12000 1994/06/02
1 940526H0106 4,000,000.0000 3,996,795.56 3,996,795.56 05/26/94 9405 99.89198890000 4.120000
TOTAL FOR 0101046803AAA 4,800,000.0000 3,996,795.56 3,596,795.56
001TLRE 02 010105527BF94 BASF NOTES 4.20000 1994/06/09
1 940526I0102 4,000,000.0000 3,993,466.67 3,993,466.67 05/26/94 9405 99.8366667500 4.200000
TOTAL FOR 010105527BF94 4,000,000.0000 3,993,466.67 3,993,466.67
001TLRE 02 010105589SF36 BT SECURITIES INC. NOTES 4.15000 1994/06/03
1 940531K0301 4,000,000.0000 3,996,772.22 3,996,772.22 05/27/94 9405 99.9193055000 4.150000
TOTAL FOR 010105589SF35 4,000,000.0000 3,996,772.22 3,996,772.22
0013TLRE 02 010107815KFA8 BELL SOUTH TELECOMM. NOTES 4.20000 1994/06/10
1 940526K0304 3,000,000.0000 2,994,750.00 2,994,750.00 05/26/94 9405 99.8250000000 4.200000
TOTAL FOR 010107815KFAB 3,000,000.0000 2,994,750.00 2,994,750.00
001TLRE 02 010108143SF12 BEMIS COMPANIES 4.25000 1994/06/01
1 94053100303 4,008,000.0000 3,999,527.78 5,999,527.78 5/31/94 9405 99.9881945000 4.250000
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
BOOK ORIGINAL TRADE INVEST-
SHARES/PAR VALUE COST DATE MENT YEAR YIELD
--------------- ------------ --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL FOR 010108343SF12 4,000,000.0000 3,999,527.78 3,999,527.78
001TLRE 02 010121667FF92 COOPER INDUSTRIES NOTES 4.13090 1994/06/09
0 94052630105 4,000,000.0000 3,993,497.78 3,993,497.78 05/26/94 9405 99.8374445000 4.180000
TOTAL FOR 010123667FF9Z 4,000,000.0000 3,993,497.78 3,993,497.78
001TLRE 02 310323787FF35 DONNELLEY (R.R.) & SONS NOTES 4.30000 1994/06/01
0 04053110393 4,000,000.0000 3,999,522.22 3,999,522.22 05/31/94 9405 99.98005555000 4.300000
TOTAL FOR 010125787FF35 4,000,000.0000 3,999,522.22 3,999,522.22
0017LRE 02 0303263540F80 DUPONE INC. NOTES 4.15000 1994/06/05
3 940526H9304 4,000,000.0000 3,994,005.56 3,994,005.56 05/26/94 9504 99.8501390000 4.150000
TOTAL FOR 0101263548F80 4,000,000.0000 3,994,005.56 3,994,005.56
001TLRE 02 010130230WF11 EXXON IMPERIAL CORP. 4.10000 1994/06/01
3 94052600101 4,000,000.000 3,997,266.67 3,997,266.67 05/26/94 9405 99.9316667500 4.100000
TOTAL FOR 010130230WF11 4,000,000.0000 3,997,266.67 3,997,266.67
001TLRE 02 0101369605GFI G.E. COMPANIES NOTES 4.15000 1994/06/02
3 94052610103 4,000,000.0000 3,996,772.22 3,996,772.22 05/26/94 9405 99.9193055000 4.150400
TOTAL FOR 030136960SGF1 4,000,000.0000 3,996,772.22 3,996,772.22
0037TLRE 02 0101381420F31 GOLDMAN SACHS & CO. NOTES 4.15000 1994/06/03
3 940527H0105 4,000,000.0000 3,996,772.22 3,996,772.22 05/27/94 9405 99.9193055000 4.150000
TOTAL FOR 010181420F31 4,000,000.0000 3,996,772.22 3,996,772.22
[TEXT [TEXT ILLEGIBLE] [TEXT ILLEGIBLE] [data
ILLEGIBLE] illegible]
3 94053100301 4,000,000.0000 3,999,527.78 3,999,527.78 05/31/94 9405 99.9881945000 4.250000
TOTAL FOR 01034280X3F18 4,000,000.0000 3,999,527.78 3,999,527.78
</TABLE>
B-2
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
001TLRE 02 010144181DF39 HOUSEHOLD FINANCE CO. 4.12500 1994/06/03
1 94052600105 4,000,000.0000 3,996,333.33 3,996,333.33 05/26/94 9405 99.9083332500 4.12500
TOTAL FOR 0103441310F39 4,000,000.0000 3,996,333.33 3,996,333.33
0015TLRE 02 010150000BF13 KOCH INDUSTRIES NOTES 4.278000 1994/06/01
1 94053310102 4,000,000.0000 3,999,525.56 3,999,525.56 05/31/94 9405 99.9881390000 4.270000
TOTAL FOR 010150000BF13 4,000,000.0000 3,999,525.56 3,999,525.56
001TLRE 02 010159012XF22 MERRILL LYNCH & CO. NOTES 4.15000 1994/06/02
3 940526X0302 4,000,000.0000 3,996,772.22 3,996,772.22 05/26/94 9405 59.9193055000 4.150000
TOTAL FOR 010159018KF22 4,000,000.0000 3,996,772.22 3,996,772.22
0013TLRE 02 010161166BF10 MONSANTO INC. 4.28000 1994/06/01
3 94053100302 4,000,000.0000 3,999,524.44 3,999,524.44 05/31/94 9405 99.9881110000 4.280000
TOTAL FOR 010163366BF10 4,000,000.0000 3,999,524.44 3,999,524.44
001TLRE 02 010163743DF22 NATIONAL RURAL NOTES 4.15000 1994/06/02
UTILITIES
3 940526I0106 4,000,000.0000 3,996,772.22 3,996,772.22 05/26/94 9405 99.9193055000 4.150000
TOTAL FOR 010163743DF22 4,000,000.0000 3,996,772.22 3,996,772.22
001TLRE 02 030164419BF19 NEW ENGLAND POWER CO. NOTES 4.25000 1994/06/01
3 940531H0201 4,000,000.0000 3,999,527.78 3,999,527.78 05/31/94 9405 99.9881945000 4.250000
TOTAL FOR 010164419BF19 4,000,000.0000 3,999,527.78 3,999,527.78
001TLRE 02 010170905FF75 PENNSYLVANIA POWER NOTES 4.20000 1994/06/07
& LIGHT
3 940526H0101 4,000,000.0000 3,994,400.00 3,994,400.00 05/26/94 9405 99.8600000000 4.200000
TOTAL FOR 010170905FF75 4,000,000.0000 3,994,400.00 3,994,400.00
001TLRE 02 010171815FFLS PHILIP MORRIS CO. NOTES 4.20000 1994/06/01
1 940531H0203 4,000,000.0000 3,999,533.33 3,999,533.33 05/31/94 9405 99.9883332500 4.200000
TOTAL FOR 010171815FF15 4,000,000.0000 3,999,533.33 3,999,533.33
0001TLRE 02 010174740FSH2 QUAKER OATS CO. NOTES 4.15000 1994/06/02
3 040526X0305 4,000,000.0000 3,996,772.22 3,996,772.22 05/26/94 9405 99.9193055000 4.350000
TOTAL FOR 010174740FSH3 4,000,000.0000 3,996,772.22 3,996,772.22
</TABLE>
B-3
<PAGE> 21
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0013TLRE 02 140183237BF76 SMITH KLINE BEECHAM CO NOTES 4.17000 1994/06/07
3 040520H0103 4,000,000.0000 3,994,440.00 3,994,440.00 05/26/94 9405 99.8610000000 4.170000
TOTAL FOR 140133237BF76 4,000,000.0000 3,994,440.00 3,994,440.00
00131TLRE 02 010190262DF30 UBS FINANCE CO. NOTES 4.30000 1994/06/01
1 040530IF0202 4,000,000.0000 3,999,522.22 3,999,522.22 05/31/94 9405 99.980555000 4.300000
TOTAL FOR 010390262DF18 4,000,000.0000 3,999,522.22 3,999,522.22
TOTAL FOR SUB-ACCT 02 103,000,000.0000 102,924,838.88 102,924,838.88 4,314,666.17 4.192*
</TABLE>
* WEIGHTED AVERAGE YIELD RATE
Cash in the portfolio of $10,005,537.12
B-4
<PAGE> 22
SCHEDULE C
AGREEMENT #8888-1
QUARTERLY REPORT
<PAGE> 23
SCHEDULE C
LIFE REASSURANCE CORPORATION OF AMERICA
SELF ADMINISTERED/BULK REINSURANCE SUMMARY REPORTING FORM
<TABLE>
<S> <C> <C>
Ceding Company ____________ Reinsurer ________________ Treaty/Account # _______________
Period Experience as for __ Life Re's Share _________% Three Month Treasury Bill Rate ____%
# Days in Interest Calculation _______
Contact ___________________ Date ______________________ Phone #_____________________
</TABLE>
SECTION I - ACCOUNTING FOR INSURANCE OPERATIONS
1) Adjustment to Original Consideration 1)
2) Reinstatements 2)
Benefits Paid
3) Surrenders 3)
4) Maturities 4)
5) Annual Policy Dividends 5)
6) Policy Termination Dividends 6)
7) Claims 7)
8) Claims Allowance 8)
9) Expense Allowance 9)
--------------------
Total TOTAL
--------------------
10) Interest 10)
11) Net Due to (Life Re) Company 11)
SECTION II - ACCOUNTING - FOR INVESTMENTS
1) Policy Reserves 1)
2) Dividend Liability 2)
3) Investment Maintenance Reserve 3)
4) Amounts Due & Unpaid 4)
5) Total Required Assets (1) + (2) + (3) + (4) 5)
6) Maximum Withheld Assets (5) @ 1.05 6)
--------------------
TOTAL WITHHELD ASSETS Total
--------------------
SECTION III - POLICY EXHIBIT INFORMATION
<TABLE>
<CAPTION>
Current Period Year-to-Date
No. of Amt. of No. of Amt. of
Policies Rein (000) Policies Rein (000)
--------------------- ----------------------------
<S> <C> <C>
A. Inforce Beg. of Period A.
1. Reinstatements 1.
2. Other Increases 2.
a) Total Inc (1+2) a)
3. Death 3.
4. Lapses 4.
5. Surrenders 5.
6. Expiry/Maturity 6.
7. Other Decreases 7.
b) Total Dec (3+4+5+6+7) b)
B. Inforce End of Period (A + a - b) B.
</TABLE>
<PAGE> 24
SCHEDULE D
AGREEMENT #8888-1
INVESTMENT GUIDELINES
The dedicated portfolio (the "Dedicated Portfolio") for the
Withheld Assets shall be subject to (i) the laws of the State of New York
governing the investments that may be made by a New York domiciled insurance
company, and (ii) the restrictions, limitations and requirements of these
Investment Guidelines. If the laws of the State of New York are more restrictive
as to any type of investment permitted under these Investment Guidelines, the
laws of the State of New York will control the investments that may be made in
the Dedicated Portfolio.
SECTION I GENERAL REQUIREMENTS
(1) The weighted (by book value) average adjusted modified duration of the
portfolio of Cash Equivalents and Long Term Investments will be less than 7.5 at
the end of each calendar quarter.
(2) The weighted (by book value) average quality of the Long Term Investments
portfolio will be at least A2/A at the end of each calendar quarter, determined
in a manner consistent with the methods used by Life Re Corporation in its
filings with the Securities and Exchange Commission.
(3) The sum of the book values of Cash Equivalents, Long Term Investments and
Other Assets will equal or exceed the amount of Withheld Assets required at the
end of each month. The book value of investments in a single issuer shall not be
larger than 4% of the Dedicated Portfolio at the end of any calendar quarter,
except that U.S. Government, agency or U.S. Government guaranteed issues shall
not be included in this restriction.
(4) All debt investments are U.S. dollar pay.
(5) In addition to the general limitations set forth in Paragraphs (1) through
(4) of this Section I, the Dedicated Portfolio shall be subject to the
diversification and other limitations set forth in Section II below.
SECTION II PERMISSIBLE INVESTMENTS
The Dedicated Portfolio shall only invest in the following
categories of investments:
<PAGE> 25
(1) Cash Equivalents
The Dedicated Portfolio may invest in any of the following
investments subject to the terms, conditions, and limitations set forth below,
providing that all mature within 365 days of the date of acquisition:
(a) U.S. Government Securities. U.S. Government securities and
securities of an agency of the U.S. Government;
(b) Certificates of Deposit. Negotiable certificates of deposit and
bankers' acceptances issued by (i) any U.S. commercial bank rated C or better by
Keefe Bruvette; or (ii) any European, Canadian or Japanese commercial bank rated
2 or better by Keefe Bruyette and which have assets in excess of US $50 billion;
(c) Commercial Paper. (i) Commercial paper rated A-1 or better by S&P
or P-1 or better by Moody's;
(d) Repurchase Agreements. Repurchase agreements relating only
Government securities from the Dedicated Portfolio at the cost of such
securities to the Dedicated Portfolio plus accrued interest within a specified
time; provided, however, (i) that the value of the collateral underlying such
repurchase agreements shall at all times be at least equal to the repurchase
price of the securities subject to the agreement less any accrued interest
earned under such agreement; (ii) that such repurchase agreements shall have a
term of not more than thirty days; (iii) that the other party to such repurchase
agreements shall be a corporation incorporated under the laws of the United
States of America or any state of the United States of America and shall be an
eligible Commercial Paper issuer as defined in (c) above or shall be an eligible
issuer of certificates of deposit described in (b) above; and (iv) that such
repurchase agreements shall entitle the Dedicated Portfolio to take delivery of
the collateral underlying such agreements at the time the Dedicated Portfolio
enters into such agreements; and
(e) Tax-Exempt Notes. Tax-exempt notes; provided, however, that at the
time of each investment such Tax-exempt Notes shall be rated by either Moody's
or S&P as follows: (i) Moody's: MIG I for notes; P-1 for commercial paper; or
(ii) S&P: SP-1 for short-term municipal notes; A-1+ or A-1 for commercial paper.
For purposes of this provision, Tax-exempt Notes shall include such securities
as Tax Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes,
Construction Loan Notes, and Tax-exempt commercial paper.
(2) Long Term Investments
The Dedicated Portfolio may invest in the following investments
subject to the terms, conditions, and limitations set forth below providing that
all mature more than 365 days from the date of acquisition:
D-2
<PAGE> 26
(a) United States Obligations.
The Dedicated Portfolio may invest in (a) direct obligations of
the United States of America for the payment of money, or obligations for the
payment of money to the extent guaranteed or insured as to the payment of
principal and interest by the United States of America; and (b) direct
obligations for the payment of money, issued by an agency or instrumentality of
the United States of America, or obligations for the payment of the money to the
extent guaranteed or insured as to the payment of principal and interest by an
agency or instrumentality of the United States of America.
(b) Corporate Obligations.
The Dedicated Portfolio may invest in bonds and notes of a
solvent business corporation, on the following conditions:
i) The corporation shall be incorporated under the
laws of the United States of America or any
state of the United States of America;
ii) The corporation shall have net worth of not
less than $10 million;
iii) No such obligation, guarantee, or insurance of
the corporation shall have been in default as
to principal or interest during the 5 years
preceding the date of investment; and
iv) The issue shall be rated by either Moody's or
S&P.
(c) Municipal Obligations.
The Dedicated Portfolio may invest in the debt obligations
issued by states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, or multistate agencies or authorities, the interest from
which is exempt from federal income tax on the following conditions:
i) The obligations may be either so called
"general obligation" bonds or "revenue" issues
as those terms are commonly understood;
ii) The issue shall be rated by either Moody's or
S&P.
D-3
<PAGE> 27
(d) Collateralized Mortgage Obligations.
The Dedicated Portfolio may invest in collateralized mortgage
obligations provided they are rated by either Moody's or S&P.
(e) Financial Futures Contracts and Options.
The Dedicated Portfolio may enter into exchange traded
financial futures contracts and acquire exchange traded put and call options
under terms and conditions regulated by, or substantially similar to those terms
and conditions required by, a federal regulatory agency, but only to the extent
that such financial futures contracts or options are entered into or acquired as
part of a hedging transaction. For purposes of this provision, a "hedging
transaction" shall mean the opening or closing (as such transaction may be
adjusted from time to time) of one or more financial futures contracts or
options which can reasonably be expected to minimize or reduce the price or
interest rate risk relating to those assets or liabilities of the Dedicated
Portfolio which are subject to the hedging transaction. No more than 20% of the
value of the Withheld Assets may be hedged in this manner at any one time.
(3) Other Investments
Irrespective of the above limitations, the Dedicated Portfolio
may invest up to a maximum of 10% of its assets in investments not provided for
in (1) or (2) above.
D-4
<PAGE> 28
SCHEDULE E
AGREEMENT #8888-1
In determining the present value of future profits, the
independent actuary will adhere to the following guidelines:
(1) Assumptions for lapse, surrender and mortality will be
based upon actual experience of the Company on the Reinsured Policies. Future
improvement or deterioration in these assumptions will not be used unless events
causing future improvement or deterioration are known at the time of such
present value calculation and can be demonstrated to apply to the Reinsured
Policies.
(2) Assumptions for termination dividends and all components of
annual dividends will be based upon the scale then currently applicable. Future
changes in the scale which are assumed or proposed, but not yet approved by the
Company's Board of Trustees, may not be utilized.
(3) Maintenance expenses are assumed to be $15 per policy.
(4) The earnings rate used for the investment income on the
assets will be set using the current rate which can be earned on the Withheld
Assets then existing.
(5) The profit stream will be discounted using a rate of 14.75%
before the effect of taxes.
(6) No target surplus or assumption for target surplus will be
included in the calculation.
If, due to current regulatory or environmental conditions, any
of the above guidelines do not meet then current standards of actuarial
practice, the independent actuary may deviate from the guidelines.
<PAGE> 1
Exhibit 10.5
AMENDMENT TO A9004
AUTOMATIC INDEMNITY REINSURANCE AGREEMENT
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NEW YORK, NEW YORK
AND
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
NEW YORK, NEW YORK
COINSURANCE/MODCO
December 30, 1995
<PAGE> 2
CONTENTS
ARTICLE I REINSURANCE COVERAGE
ARTICLE II COMMENCEMENT and TERMINATION of LIABILITY
ARTICLE III GENERAL PROVISIONS
ARTICLE IV DEFINITION of REINSURANCE PREMIUM
ARTICLE V DEFINITION of FORMULA DIVIDENDS
ARTICLE VI DEFINITION of REINSURANCE BENEFITS
ARTICLE VII ACCOUNTING and REPORTING
ARTICLE VIII REINSURING CLAUSE and CONTRACTURAL CONDITIONS
ARTICLE IX EXECUTORY CONTRACT and BANKRUPTCY SETOFF
ARTICLE X INSOLVENCY
ARTICLE XI ARBITRATION, LITIGATION and CHOICE of LAW
ARTICLE XII DURATION OF AGREEMENT
ARTICLE XIII ACCOUNTING upon TERMINATION of AGREEMENT
ARTICLE XIV EXECUTION
SCHEDULE A POLICY LISTING
SCHEDULE B COMMISSION and EXPENSE ALLOWANCES
SCHEDULE C REPORTS
SCHEDULE D QUARTERLY ACCOUNTING PERIOD REINSURANCE REPORTS
SCHEDULE E INTEREST RATES
ADDENDUM 1
ACCOUNTING WORKSHEET
i
<PAGE> 3
PORTFOLIO INDEMNITY REINSURANCE AGREEMENT
This Agreement is an amendment to A9004 and incorporates and replaces all
previous writings and amendments thereto.
This Agreement is made and entered into between THE MUTUAL LIFE INSURANCE
COMPANY of NEW YORK, of New York, New York, a corporation organized under the
laws of the State of New York, hereinafter referred to as the "Company," and THE
GUARDIAN LIFE INSURANCE COMPANY of AMERICA of New York, New York, a corporation
organized under the laws of the State of New York, hereinafter referred to as
the "Reinsurer."
The Company and the Reinsurer mutually agree to reinsure on the terms and
conditions stated herein. This Agreement is an indemnity reinsurance agreement
solely between the Company and the Reinsurer and the performance of the
obligations of each party under this Agreement shall be rendered solely to the
other party. In no instance shall anyone other than the Company or the Reinsurer
have any rights under this Agreement, and the Company shall be and remain solely
liable to any insured, contract owner, or beneficiary under any policy reinsured
hereunder.
This Agreement shall constitute the entire agreement between the parties with
respect to the business reinsured hereunder. There are no understandings between
the parties other than as expressed in this Agreement. This Agreement, and any
Amendment, change or modification of this Agreement shall be null and void
unless signed by both parties in duplicate.
<PAGE> 4
ARTICLE I
REINSURANCE COVERAGE
1. This Agreement is Amendment #7 to the existing treaty A9004, between the
parties, and the fourth quarter, 1995 risk charges shall be computed using the
pre-amended terms. This Agreement merges all prior amendments and the prior
Agreement into a new document.
Effective the 31st day of December, 1995, hereinafter referred to as the
"EFFECTIVE DATE," the Company agrees to reinsure with the Reinsurer the risks
under the Policies issued by the Company, as described in Schedule A, and
business previously ceded under this Agreement is recaptured, and, with respect
to such reinsurance the Reinsurer agrees to indemnify the Company against the
risks assumed by the Company, except as herein provided.
ARTICLE II
COMMENCEMENT AND TERMINATION OF LIABILITY
1. The liability of the Reinsurer on reinsurance ceded hereunder shall commence
on the later of the Effective Date and the date the liability of the Company
commences.
2. The liability of the Reinsurer on all reinsurance hereunder shall terminate
simultaneously with that of the Company unless, prior to such date, the
Agreement is terminated as otherwise provided herein. If the Agreement is so
terminated, the liability of the Reinsurer shall cease on the date of
termination, hereinafter referred to as the "TERMINATION DATE."
ARTICLE III
GENERAL PROVISIONS
1. Plan of Reinsurance. This indemnity reinsurance agreement shall be on the
combination coinsurance/modified coinsurance plan.
2. Reserves. The "Reserves" are defined in Schedule A.
3. Extra Contractual Damages. The Reinsurer does not indemnify and shall not be
liable for any of the Company's Extra contractual damages, including but not
limited to actual punitive, exemplary or compensatory damages; excluded damages
include but are not limited to damages or liability of any kind whatsoever
resulting from, but not limited to: negligent, reckless or intentional wrongs,
fraud, oppression, bad faith, or strict liability, arising from claims related
to breach of contract or any form of tortious conduct unless the Reinsurer is
the cause of same. If the Company is ordered by a court to make refunds
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to policyholders on any policy, the policy shall be considered a recaptured
contract, and subject to the provisions of the Addendum 1.
4. Policy Administration. The Company shall administer the Policies reinsured
hereunder and shall perform all accounting for such Policies.
5. Inspection. At any reasonable time, each party or its designated
representative may inspect, during normal business hours, at the offices where
such records are located, the papers and any and all other books or documents of
the other relating to reinsurance under this Agreement. The information obtained
shall be used only for reinsurance purposes and shall be kept confidential
except to the extent disclosure is required by law. The Reinsurer's rights under
this paragraph shall survive termination of this Agreement.
6. Premium Taxes. The reinsurance allowances for any taxes paid by the Company
in connection with the contracts reinsured hereunder are included as part of the
Company's expense allowance granted by the Reinsurer in accordance with Schedule
B of this Agreement. The Reinsurer will not reimburse the Company for any
premium taxes, Federal, state or local taxes, or any licenses or other fees
allocated directly or indirectly to the risks reinsured, with the exception of
the DAC tax charge as addressed in Addendum 1, it being expressly understood
that the Company shall be solely liable for all such amounts that may be owed by
it.
7. Conditions. The reinsurance hereunder is subject to the same limitations and
conditions as the Policies written by the Company which are reinsured hereunder,
unless otherwise expressly provided in this Agreement.
8. Misunderstandings and Oversights. If any non-material delay, omission, error
or failure to pay amounts due or to perform any other act required by this
Agreement is unintentional and caused by misunderstanding or oversight, the
Company and the Reinsurer will adjust the situation to what it would have been
had the misunderstanding or oversight not occurred. The party that first
discovers such non-material oversight or incorrect act as a result of the
misunderstanding will notify the other party in writing promptly upon discovery
of the misunderstanding or oversight. The parties shall act to correct the
error, omission or oversight within twenty (20) days of notification of the
problem. In the event that any delay, omission, error or failure is or becomes
material (where "material" is defined in this Article), or is not corrected
within a reasonable time following receipt of notice as described hereinabove,
the offended party shall be entitled to a remedy, as outlined in the Arbitration
Clause. However, this section shall not be construed as a waiver by either party
of their right to enforce strictly the terms of this Agreement. For the purposes
of this paragraph a material delay shall be equal to a full accounting period
beyond the due date of the information. With respect to materiality of the
omission or error, the definition in this Article shall apply.
9. Age or Sex Adjustment. If the Company's liability under any of the contracts
reinsured under this Agreement is changed because of a misstatement of age or
sex, the Reinsurer will share in the change proportionately to the amount
reinsured hereunder.
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10. Reinstatements. If a contract reinsured hereunder that was reduced,
terminated, or lapsed, is reinstated, the reinsurance for such contract under
this Agreement will be reinstated automatically to the amount that would be in
force if the contract had not been reduced, terminated, or lapsed. The Company
will pay to the Reinsurer the Reinsurer's proportionate share of all amounts
collected from, or charged to, the insured.
11. Amendments. This Agreement shall be amended only by written agreement signed
in duplicate by duly authorized officer of the Company and Reinsurer
respectively.
12. Internal and External Replacements. An internal or external replacement of
any contracts reinsured hereunder, pursuant to a program of internal or external
replacement, shall be considered as a recaptured contract and not a surrender
unless the reinsurance is continued for the new contract. It shall be subject to
a Recapture Fee as defined in Addendum 1.
An internal replacement shall include all Policies which are reinsured under
this Agreement which under a program initiated by the Company after the
Effective Date of this Agreement are surrendered, and within 6 months before or
after termination are covered under a new policy written by the Company or an
affiliate.
An external replacement program shall consist of a program entered into by the
Company with a non-affiliated company to replace the contracts reinsured
hereunder for a contract with another insurer.
13. Policy Changes or Reserve Changes. The Company must provide written
notification to the Reinsurer of any change in the terms or conditions of any
contract reinsured hereunder or in the calculation of the Reserves within
fifteen (15) days after the change is initiated. If the Reinsurer accepts any
such change, the Company and the Reinsurer shall share proportionately in any
increase or decrease in the Company's liability which results from such change.
If the change is voluntary on the part of the Company and if the Reinsurer does
not accept such change, the Reinsurer's liability under this Agreement shall be
determined as if no such change occurred. If the change is not voluntary on the
part of the Company, the Reinsurer shall participate in such change.
14. Conditional Receipt. A Policy under this treaty is not considered in force
until the policy is issued. Under no circumstances will claims under the
conditional receipt coverage be recognized as a claim under the provisions of
this treaty.
15. Territory. The Reinsurer's liability shall be limited to Policies issued in
the United States of America, its territories and possessions, Puerto Rico, and
Canada.
16. Currency. All payments and accounts shall be made in United States Dollars,
and all fractional amounts shall be rounded to the nearest whole dollar. For the
purposes of this Agreement, where the Company receives premiums or pays benefits
in currencies other than United States Dollars, such premiums and benefits shall
be converted into United States Dollars at the actual rates of exchange at which
such premiums and benefits are entered in the Company's books.
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17. Delayed Payments. Should the payment due either the Reinsurer or the Company
be delayed beyond the due date specified in herein, such delayed payment shall
accrue interest as specified in Schedule E, but not with negative interest.
18. Successors and Assigns. This Agreement cannot be assigned by the Company or
Reinsurer without the prior written approval of the other party. However, any
successor of the Company by operation of law, including, without limitation, any
liquidator, rehabilitator, receiver or conservator, shall have the unilateral
right to assign this Agreement without the consent of the Reinsurer. The
Reinsurer shall be given written notice of any such assignment. The provisions
of this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective permitted successors and
assigns.
19. Notices. All notices hereunder shall be in writing and shall become
effective when received. Any written notice shall be by either certified or
registered mail, return receipt requested or overnight delivery service
(providing for delivery receipt) or delivered by hand. All notices under this
Agreement shall be addressed as follows:
If to the Company:
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
Glenpointe Center West (73-2)
Teaneck, New Jersey 07666-6888
Attention: Phillip A. Eisenberg, FSA
If to the Reinsurer:
The Guardian Life Insurance Company of America
201 Park Avenue South, Location 15C
New York, New York 10003
Attention: Frank Hall
20. Compliance with Applicable Laws and Regulations.
a. Agreement to be Construed in Accordance with Existing Law. It is the
intention of the parties that this Agreement comply with all existing applicable
laws and regulations, as exist on the effective date of the Original Agreement.
b. Amendment and/or Termination Upon Failure to Comply. In the event that it is
determined by an insurance regulatory authority or the Internal Revenue Service
or by either party upon the advice of an insurance regulatory authority or the
Internal Revenue Service that this Agreement fails to conform to the
requirements of existing applicable laws and regulations and that the Agreement
may be brought into conformity with said requirements only by means of a
material change to the Agreement, or in the event that such laws or regulations
are changed subsequent to the Effective Date and such change has a material
adverse effect on either party or requires a material change to the Agreement in
order for the Agreement to conform with applicable laws and regulations, the
parties shall exercise reasonable efforts to reach an agreement to amend the
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<PAGE> 8
Agreement so as to return the parties to the economic position that they would
have been in had no such change occurred. If the parties are unable to reach an
agreement to amend the Agreement, then the differences between the parties shall
be resolved through arbitration in accordance with the provisions of Article X.
In the event that any change required to conform the Agreement to the
requirements of applicable law or regulation is not material, the Agreement
shall be amended accordingly. In no event, however, shall this provision prevent
either party from exercising any right it otherwise has under this Agreement.
c. Notification of Disapproval or Change in Law. The Company shall promptly
notify the Reinsurer of any disapprovals or required changes regarding the
Agreement that are made by any insurance regulatory authorities. The Reinsurer
shall be allowed to defend the Agreement on its own behalf with such authorities
after consultation with the Company.
21. Statement of Actuarial Opinion. The Company shall send to the Reinsurer a
Statement of Actuarial Opinion as specified in Schedule D, part K.
22. Assessments and Tax Changes. If the Reinsurer is assessed any additional
Federal, state or local premium or sales taxes, or assessments for insolvencies
or rehabilitations, or any other assessments as a result of assuming the
business reinsured, and the Company received a deduction for such amounts, the
Reinsurer shall be reimbursed for such assessment or tax. Such assessment will
include any increase in the section 848 charges for "deferred acquisition costs"
but shall not include any change in the corporate income tax rate.
23. Utmost Good Faith. Both parties promise "utmost good faith" (uberrimae
fidei) and each is under the positive duty to report any adverse information
with respect to its solvency or with respect to the particular facts which
relate to the Policies reinsured.
24. No Waiver. The acceptance of the net accounting reports and the sums due
under this agreement shall NEVER constitute a waiver by either Party with regard
to fraud.
25. Limitations on Assignment. No assignment of rights or delegation of duties
of the Company or the Reinsurer shall be effective unless approved by the Other
Party in writing, signed in duplicate. Further, such assignment shall not
operate as a novation, but merely as a delegation of duties, and the assignor
shall remain liable to the Other Party as a surety and the Other Party shall
have no duties to the assignee beyond that as specified herein.
26. Material relied on. The material relied on includes the PTS profits runs and
the ratings of the Company from Moody's, Standard & Poor's and A.M. Best.
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ARTICLE IV
DEFINITION of REINSURANCE PREMIUM
The Reinsurance Premium equals (1)+(3)-(2), which is payable
to the reinsurer if positive, and payable to the ceder if negative, according to
the terms of the Reinsuring Clause.
1. Initial Reinsurance Premium. The Initial Reinsurance Premium is the net of
(a)-(b), as defined below as computed on the Effective Date. The Initial
Reinsurance Premium may be positive (due the Reinsurer) or negative (due to the
Company), or zero.
a. The Initial Coinsurance Reserves, as defined in Schedule A, less any
premium deficiency reserves on the quota share of the Policies cited in
Schedule A.
b. The Initial Allowance as specified in Schedule B.
2. Terminal Premium. On full or partial recapture the Company and Reinsurer
shall compute a Terminal Premium, which shall equal the Recapture Fee (defined
in Addendum 1), less the Coinsurance Reserves, plus any premium deficiency
reserves.
3. Quarterly Reinsurance Premium. The Quarterly Reinsurance Premium shall be the
net of (a)+(b)-(c)-(d)-(e)+(f) as defined below, and may be positive (due to the
Reinsurer) or negative (due to the Company).
a. Reinsurer's Share of Policy Premium. Policy Premiums are the gross
premiums, including contract fees, collected from the policyholder with
respect to the Risks Reinsured hereunder and described on Schedule A
hereto, reduced by an amount equal to the Reinsurer's share of
reinsurance premiums INCURRED by the Company for risks ceded under
other reinsurance agreements. The Reinsurer's share of the Policy
Premium is specified in Schedule A. Incurred Premiums equal paid
premiums plus the increase in due plus deferred less advance premiums.
b. Recapture Fee. On a full or partial recapture there shall be a
Recapture Fee as defined in Addendum 1.
c. Allowances.
(a) Initial Allowances. The Initial Allowances as set forth in Schedule
B of this Agreement.
(b) Quarterly Allowances. The Allowances, which shall include an
allowance for premium tax, are set forth in Schedule B of this
Agreement.
d. Surrender and Endowment Payments. Surrender and endowment payments shall
equal the surrender and endowment payments INCURRED by the Company on the Risks
Reinsured, net of any reinsurance coverages due and payable from other
reinsurers of the Policies reinsured hereunder, regardless of whether such
amounts
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due from other reinsurers are in fact or as a matter of law deemed to be
collectible or uncollectible. In order to reimbursed, the surrender or
endowment payments must have occurred after the Effective Date and on or
before the Termination Date.
e. Policyholder Dividends. Policyholder dividends are determined by the next
article.
f. Modco reserve adjustment. Equals the beginning modco reserve plus interest
at the modco rate defined in the Schedule E, less then ending modco
reserve.
g. Experience Refunds. As determined by Schedule F.
4. Indivisibility of Reinsurance Premium. It is expressly understood that the
pluses and minuses used to compute reinsurance premium shall never be treated as
severable or divisible.
ARTICLE V
DEFINITION of FORMULA DIVIDENDS
1. For Accounting Periods beginning after December 31, 1995, the Reinsurer will
reimburse the Ceding Company for its quota share of dividends paid under
policies reinsured hereunder, in accordance with paragraphs 2 through 7 below.
2. Regardless of any other provision of this Reinsurance Agreement. the
Reinsurer shall in no event reimburse the Company any amount in excess of the
dividend amounts paid by the Company with respect to the policies reinsured
hereunder with respect to any year.
3. The dividend reimbursement for any year shall not exceed the greater of: (a)
the formula dividends produced by Schedule Va and Schedule Vd; and (b) the
dividends produced by the "last acceptable scale," based on policy durations of
the reinsured business in that year. The "last acceptable scale" is Mony's
dividend scale for the most recent year when dividends paid by the Company did
not exceed the formula dividends produced by Schedule Va and Vd. For purposes of
this Article, the dividend scale for a calendar year is the dividend rate
adopted by the Ceding Company for that year for payment of dividends in that
calendar year on policies reinsured hereunder and for illustrations made that
year of dividends on such policies in subsequent calendar years.
4. If for any year the dividend reimbursement exceeds the formula dividends
produced by Schedule Va, Vd, this year shall be designated an "Excess Year."
5. The Reinsurer does not have to reimburse fully dividends paid by the Ceding
Company for any "Excess Year" which occurs immediately after any three
consecutive Excess Years, or for the sixth Excess Year occurring after any five
Excess Years within the preceding eight-year period. For any such year and the
four succeeding years, the
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dividend reimbursement shall be the formula dividends produced by Schedule Va,
and Vd.
6. If the intended effects of this Article as understood by the parties to this
Agreement are altered by a new law, regulation, or rule of court, or regulatory
authority having jurisdiction over the parties to this Agreement, excluding any
such actions taken in relation to the rehabilitation,liquidation or conservation
of the ceding company, the Reinsurer and the Ceding Company shall use their best
efforts to renegotiate the Agreement or the affected provisions so that neither
party achieves an unexpected benefit or adverse result from the operation of
this Article.
7. Formula Dividend. For Accounting Periods beginning after December 31, 1995,
the Formula dividend will equal the product of (i) multiplied by (ii) for those
policies reinsured hereunder, where:
(i) equals the Statutory Reinsured Exhibit 8 Reserve at the
beginning of the current Accounting Period, determined in
accordance with the reserve methods used on 12/31/95, times
the number of calendar quarters that have to date ended during
the current calendar year divided by 4;
(ii) equals (d) + (a) {(b)-(c)}
where (a) equals the Dividend Multiples described in Schedule
Va; and (d) equals the Basic Dividend Factors described in
Schedule Vd; (b) equals the Modified Coinsurance Interest Rate
for the prior year; and (c) equals 6.83%, which was the rate
used to compute the dividend projections, upon which the
factors in Schedule Va and Schedule Vd were calculated.
Notwithstanding the above, the aggregate value of (ii) must be
positive.
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Article V - Schedule Vd
The "Dividend Factors"
1995 Scale Dividends - as percent of beginning reserve
VB VB VB VB
0-3 4 5-8 9-10
1995 3.85% 4.26% 4.75% 4.05%
1996 3.90 4.25 4.73 4.15
1997 3.92 4.24 4.70 4.26
1998 3.95 4.23 4.67 4.37
1999 3.96 4.22 4.64 4.43
2000 3.97 4.20 4.61 4.47
2001 3.98 4.20 4.58 4.51
2002 3.98 4.19 4.55 4.53
2003 3.98 4.18 4.53 4.57
2004 3.99 4.18 4.50 4.61
2005 3.98 4.17 4.47 4.62
2006 3.98 4.17 4.44 4.61
2007 3.98 4.16 4.43 4.61
2008 3.99 4.16 4.41 4.60
2009 3.99 4.16 4.38 4.58
2010 4.00 4.15 4.35 4.57
2011 4.00 4.15 4.32 4.56
2012 4.01 4.16 4.30 4.55
2013 4.02 4.16 4.28 4.55
2014 4.02 4.17 4.26 4.55
2015 4.03 4.17 4.24 4.55
2016 4.03 4.17 4.23 4.55
2017 4.03 4.17 4.22 4.56
2018 4.03 4.17 4.21 4.56
2019 4.03 4.17 4.20 4.57
2020 4.03 4.18 4.19 4.56
2021 4.03 4.18 4.19 4.56
2022 4.04 4.18 4.18 4.56
2023 4.05 4.18 4.17 4.56
2024 4.06 4.18 4.16 4.56
2025 4.07 4.19 4.15 4.56
2026 4.08 4.19 4.15 4.57
2027 4.09 4.20 4.14 4.58
2028 4.10 4.21 4.14 4.57
2029 4.10 4.22 4.14 4.57
2030 4.10 4.23 4.13 4.57
2031 4.10 4.23 4.12 4.58
32-up 4.09 4.24 4.12 4.58
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Article-V-Schedule Va
The "Dividend Multiples"
Decrease in Dividend rate compared to Earned rate
VB VB VB VB
0-3 4 5-8 9-10
1995
1996 75.39% 74.14% 79.77% 80.00%
1997 75.66% 74.28% 79.67% 80.25%
1998 75.91% 74.44% 79.63% 80.51%
1999 76.17% 74.62% 79.62% 80.77%
2000 76.42% 74.81% 79.66% 81.03%
2001 76.64% 75.01% 79.71% 81.28%
2002 76.84% 75.24% 79.77% 81.54%
2003 77.04% 75.47% 79.86% 81.80%
2004 77.24% 75.71% 79.86% 82.03%
2005 77.45% 75.95% 79.83% 82.31%
2006 77.58% 76.18% 79.83% 82.54%
2007 77.90% 76.49% 79.81% 82.82%
2008 78.20% 76.73% 79.80% 83.11%
2009 78.48% 76.96% 79.84% 83.40%
2010 79.79% 77.20% 79.87% 83.72%
2011 79.08% 77.47% 79.89% 84.04%
2012 79.40% 77.68% 80.04% 84.38%
2013 79.72% 77.96% 80.11% 84.72%
2014 80.12% 78.24% 80.22% 85.07%
2015 80.47% 78.51% 80.38% 85.42%
2016 80.97% 78.82% 80.50% 85.78%
2017 81.36% 79.12% 80.64% 86.03%
2018 81.75% 79.47% 80.65% 86.37%
2019 82.10% 79.76% 80.73% 86.61%
2020 82.67% 80.08% 80.88% 86.89%
2021 82.91% 80.36% 80.91% 87.39%
2022 83.32% 80.65% 80.94% 87.72%
2023 83.74% 80.95% 81.31% 88.12%
2024 84.12% 81.23% 81.43% 88.47%
2025 84.53% 81.52% 81.63% 88.85%
2026 84.96% 81.86% 81.78% 88.88%
2027 85.35% 82.15% 81.91% 89.69%
2028 85.85% 82.37% 82.04% 89.58%
2029 86.41% 82.65% 83.13% 90.05%
2030 87.00% 82.80% 82.23% 90.58%
2031 87.61% 83.00% 82.35% 90.72%
2032 88.05% 83.11% 83.48% 90.96%
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ARTICLE VI
DEFINITION of REINSURANCE BENEFITS
The Reinsurance Benefits shall equal the death benefits.
1. Death Benefits. These equal the death benefits INCURRED by the Company on the
portion of any contract reinsured hereunder. This equals the Death Benefits paid
by the company, excluding extra contractual damages, plus the increase in the
reserve for Due and Unpaid Claims.
The amount is reduced by other reinsurance benefits deemed payable from other
reinsurers, on reinsurance in force on the effective date of this Agreement,
regardless if such amounts due from the other reinsurers are in fact or as a
matter of law deemed to be collectible or uncollectible.
In order to be reimbursed, the death must have occurred after the Effective Date
and before the Termination Date.
2. Disability Waiver and Accidental Death. These benefits shall not be ceded.
3. In the case of a claim on a policy reinsured hereunder, whether the claim
payment is made under the policy conditions or compromised for a lesser amount,
the settlement made by the Company shall be unconditionally binding upon the
Reinsurer.
4. The Company shall, on request, furnish the Reinsurer with copies of the
proofs of claim, together with any information the Company may possess in
connection with the claim.
5. Compromised Claims. On claims that are contested, the Reinsurer's share of
the "claim settlement cost" shall be in the same proportion that the net amount
at risk reinsured with the Reinsurer bears to the total net amount at risk of
the Company under all Policies respecting that individual being contested by the
Company and shall share in the total amount of any reduction in liability in the
same proportion. Compensation of salaried officers and employees of the Company
shall not be considered claim settlement cost, and there shall be no additional
reimbursement for the claim settlement costs of uncontested claims. Furthermore,
the Reinsurer shall not share in that part of any expense which constitutes
Noncontractual Damages or Amounts or Extra contractual Damages or Amounts.
ARTICLE VII
ACCOUNTING and REPORTING
1. Accounting and Reporting Periods. The "Accounting Period" for this Agreement,
other than the first or last, shall be the calendar year. The first Accounting
Period is from
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the Effective Date until the end of the then current calendar year. The last
Accounting Period shall be from the beginning of the last calendar year until
the Termination Date. The "Reporting Period" shall be the Calendar Quarter.
2. Reports
(a) An Initial Reinsurance Report, as prescribed in Schedule C shall be provided
by the Company to the Reinsurer within thirty (30) days following the Effective
Date, but in no case later than February 15, 1996.
(b) Quarterly Reinsurance Reports and any cash payment due therewith, if any, as
prescribed Schedule D shall be provided by the Company to the Reinsurer within
thirty (30) days following the end of each calendar quarter. In turn the
Reinsurer shall have thirty (30) days to provide the Company with any cash
payment due, if any.
(c) Annual Reinsurance Reports, as prescribed in Schedule D shall be provided by
the Company to the Reinsurer within thirty (30) days following the end of each
calendar year, or as indicated in Schedule D.
ARTICLE VIII
REINSURING CLAUSE and CONDITIONS PRECEDENT
1. Reinsuring Clause. Despite the use of the word "paid," "payable" or
"incurred" elsewhere in this Agreement, nothing shall be owed or paid either
party, except as determined by this section of this Article.
The "cash flow" shall be the algebraic excess of Reinsurance Premiums over
Reinsurance Benefits. If negative, such shall be paid to the Company. If
positive such shall be payable to the Reinsurer, and applied as described in
Paragraph 2.
If such amounts cannot be determined at such date on an exact basis, such
payments may be determined on an estimated basis and any final adjustments are
to be made within six (6) weeks after the end of the Accounting Period.
The Initial Reinsurance Premium is due on the Effective Date. If positive it is
payable to the Reinsurer, as described in the following paragraph, and if
negative it is paid to the Company.
The Terminal Reinsurance Premium is due on the Termination Date. If positive it
is paid to the Reinsurer, and if negative it is paid to the Company.
2. Cash Payments and Coinsurance Reserve Adjustments. If the Cash Flow, as
defined above is positive, this amount (which is an asset of the Reinsurer)
shall be applied as follows:
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(a) first, as a cash payment to the Reinsurer to cover the risk and DAC charges,
and then increase the Experience Account Asset if such is negative, until the
Experience Account Asset reaches zero;
(b) second, any remaining amount shall be applied to reduce the reinsurer's
liability namely the Coinsurance Reserve (and increase the modco reserve); but
the Coinsurance Reserve (minus the Premium Deficiency Reserves) shall not be
reduced below zero; and
(c) third, any excess of the Cash Flow less risk and DAC charges over the
Coinsurance Reserve shall be paid to the Reinsurer in cash.
If the Cash Flow is negative, this amount (which is an asset of the Company)
shall be paid in cash.
3. Consideration. The performance of all promises of one party shall be deemed
the consideration for the performance of all the promises of the other party.
(Restatement Second of Contracts Section 232).
4. Conditions Precedent - Payment of Prior Quarterly Settlements. It is a
condition precedent to the Reinsurer's liability to pay any amount for the
current or future quarterly settlements, that the Company shall pay all amounts
due the Reinsurer from prior quarterly settlements. (Restatement Second of
Contracts Section 237).
5. Recoupment and Failure of Consideration. If either party of the Agreement
fails to perform this Agreement in full, then the other party has the right to
suspend performance, and if the defaults cannot be cured, within 90 days
following delivery of written notice from the non-defaulting party to the
defaulting party, to terminate the Agreement. (Restatement Second of
Contracts Section 237, Section 238).
Alternatively, the non-defaulting party can recoup damages from future quarterly
settlements.
6. Gain or Loss Clause. The various items of account, such as reinsurance
premium and reinsurance claims, shall not be deemed to be separate debts, but
shall be used to determine quarterly settlement.
ARTICLE IX
EXECUTORY CONTRACT and SETOFF
1. Setoff with other contracts. On the bankruptcy of either party of the
Agreement all independent debts on unrelated contracts between the parties shall
be setoff to the extent:
(a) the debt from the creditor to the bankrupt arose pre-petition.
(b) the debt from the bankrupt to the creditor arose pre-petition.
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(c) the debts are mutual, meaning they are between the two parties to this
Agreement, and in the same right and the same capacity.
2. Adequate Assurance. On the bankruptcy of the Company, the Reinsurer's future
performance is conditioned on receiving adequate assurance of future
performance, as defined in the Uniform Commercial Code, Section 2-206, and the
Official Comments thereunder.
3. Ipso Facto Clause. If the receiver of one of the Parties assigns the rights
or delegates the duties of this Agreement, and the assignee becomes bankrupt,
then the Other Party may immediately terminate the Agreement without further
performance.
4. Executory Contract. On the insolvency of either Party to the Agreement, the
receiver of the Bankrupt, with respect to future quarterly settlements, may
affirm or reject the Agreement, but not affirm the rewards and reject the
burdens. If this Agreement is neither affirmed nor rejected within 120 days
after a Party is placed into liquidation, then the Agreement shall be deemed to
be rejected.
If either Party is placed into bankruptcy, but not in liquidation, then the
Other Party may request Adequate Assurance of continued performance and first
priority administrative expense with respect to future performance prior to the
time the Agreement is either affirmed or rejected, and if such is not provided,
then, after 120 days, the Other Party may treat its future performance as
cancelled.
In the gap period between the petition date and the date the Agreement is
assumed or rejected, the Other Party shall not be compelled to perform unless
the Bankrupt Party actually performs.
5. Insolvency or Bankruptcy. The terms "Insolvency" and "Bankruptcy" are assumed
to be synonyms. Bankruptcy shall include, but not be limited to, any action by
the State Insurance Department to place the Insurer in delinquency proceedings,
including conservatorship, receivership, rehabilitation, reorganization,
"adjustment of debts," or "voluntary supervision," or liquidation.
ARTICLE X
INSOLVENCY of COMPANY
1. In the event of the insolvency of the Company, payments due the Company on
all reinsurance made, ceded, renewed or otherwise becoming effective under this
Agreement shall be payable by the Reinsurer directly to the Company or to its
liquidator, receiver, or statutory successor on the basis of the liability of
the Company under the policy or Policies reinsured without diminution because of
the insolvency of the Company. It is understood, however, that in the event of
the insolvency of the Company, the Reinsurer shall be given written notice of
the pendency of a claim against the Insolvent Company on a policy reinsured
within a reasonable time after such claim is filed in the insolvency proceeding
and that during the pendency of such claim the Reinsurer may investigate
15
<PAGE> 18
such claim and interpose, at its own expense, in the proceeding where such claim
is to be adjudicated any defense or defenses which it may deem available to the
Company or its liquidator or receiver or statutory successor.
2. It is further understood that the expense thus incurred by the Reinsurer
shall be chargeable, subject to court approval, against the insolvent Company as
part of the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to the Company solely as a result of the defense
undertaken by the Reinsurer. Where two or more assuming reinsurers are involved
in the same claim and a majority in interest elect to interpose defense to such
claim, the expense shall be apportioned in accordance with the terms of this
Agreement as though such expense had been incurred by the Company.
ARTICLE XI
ARBITRATION, LITIGATION and CHOICE OF LAW and FORUM
1. Arbitration
A. Any dispute arising from or relating to this Reinsurance Agreement or any
transaction contemplated hereby or effected hereunder shall be submitted to and
decided by arbitration in the manner hereinafter set forth. The arbitrators
shall be disinterested and unbiased officers, or former officers, of either life
insurance companies or the reinsurance departments of property and casualty
insurance companies (other than, in each instance, either party to this
Reinsurance Agreement or any affiliate of either party), and be knowledgeable in
the insurance and reinsurance business. The party requesting arbitration
(hereinafter referred to as the "claimant") shall appoint an arbitrator and give
written notice thereof to the other party (hereinafter referred to as the
"respondent") together with the claimant's notice of its intent to arbitrate.
Within thirty (30) days after receiving such notice, the respondent shall also
appoint an arbitrator and shall give written notice thereof to the claimant. If
the respondent shall fail to appoint an arbitrator within such thirty (30) day
period, the claimant shall select the second arbitrator.
B. Prior to instituting a hearing, the two arbitrators chosen pursuant to
paragraph A above shall choose a third arbitrator (hereinafter referred to as
the "umpire"). If, within thirty (30) days following the appointment of the
second arbitrator, the two arbitrators fail to agree upon the appointment of an
umpire, each of them shall nominate five candidates within twenty (20) days
thereafter. Each arbitrator shall then decline four of the candidates proposed
by the other arbitrator. The umpire shall be chosen by lot from the two
remaining candidates. Should the chosen umpire refuse to serve, the other
remaining candidate shall be appointed umpire. Should the other remaining
candidate also refuse to serve as umpire, the two arbitrators shall repeat the
process set forth in this paragraph B until successful.
C. Any arbitration instituted pursuant to this article shall be held in New
York, New York. The laws of the State of New York shall govern the
interpretation and
16
<PAGE> 19
application of this Reinsurance Agreement. All proceedings before the panel
shall be informal and the panel shall not be bound by any formal rules of
evidence. Cross-examination and rebuttal shall be permitted. The panel shall
have the power to fix all procedural rules relating to the arbitration
proceeding. In reaching any decision, the arbitrators shall give due
consideration to customary and standard practices in the reinsurance business.
The arbitrators shall decide by a majority vote. The decision of the panel shall
be in writing and shall state the reasons therefor. There shall be no appeal
from their decision. Judgement may be entered on the decision of the arbitrators
by any court having jurisdiction.
D. If each party has chosen one arbitrator, each party shall bear the expense of
its arbitrator. If one party has chosen the first two arbitrators, the parties
shall jointly and equally bear the expense of such arbitrators. In either case,
the parties shall jointly and equally bear the expense of the umpire. In
addition, each party shall bear the expense of any outside attorneys or
consultants employed by it.
E. Submission of a matter to arbitration shall be a condition precedent to any
right to seek injunction or other provisional relief pending the arbitration of
a matter subject to arbitration pursuant to this Reinsurance Agreement.
2. Consent to Jurisdiction
The intent of the parties to this Reinsurance Agreement is that all disputes
arising from or relating to this Reinsurance Agreement or any transaction
contemplated hereby or effected hereunder be submitted to and decided by
arbitration. If for any reason, however, any such dispute is not submitted to or
decided by arbitration, each party hereto irrevocably submits to the
non-exclusive jurisdiction of any Federal court sitting in the City of New York,
Borough of Manhattan (and, to the extent that such Federal courts do not have
jurisdiction, to the jurisdiction of any New York State court sitting in the
State of New York, Borough of Manhattan) over any suit, action or proceeding
arising from or related to such dispute. To the fullest extent it may
effectively do so under applicable law, each party and its successors or assigns
or any receiver of such party, irrevocably waives and agrees not to assert, by
way of motion as a defense or otherwise, any claim that is not subject to the
subject-matter jurisdiction of any court, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
3. Notice of Arbitration; Service of Process
Any notices of the submission of a dispute to arbitration shall be sent by
registered or certified mail, postage prepaid, return receipt requested, to the
address of the party specified, and to the attention of the person specified, in
this Agreement. In addition for purposes of any suit, action or proceeding
referred to section 2 above, each party consents to process being served in the
same manner, and agrees that such service (i) shall be deemed in every respect
effective service of process upon such party in any such suit,
17
<PAGE> 20
action or proceeding and (ii) shall, to the fullest extent permitted by law, be
taken and held to be valid personal service upon and personal delivery to such
party.
4. Choice of Law
As stated above, in any arbitration proceeding, the laws of the State of New
York shall govern the interpretation and application of this Reinsurance
Agreement. In addition, for purposes of any suit, action or proceeding referred
to in section 2 above, this Reinsurance Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of New York, except that: (i) no effect shall be given to
the principles of conflict of laws thereof; and (ii) and if the application of
New York law would prevent arbitration, the arbitrability of the dispute shall
be determined by the laws of the state of domicile of the ceding Company.
5. Survival
The provisions of this Article shall survive the termination of this Reinsurance
Agreement.
ARTICLE XII
DURATION OF AGREEMENT
1. Automatic Termination. If at the end of an accounting period, none of the
Policies reinsured hereunder are in force, this Agreement shall automatically
terminate.
2. Cancellation Due to Nonpayment. The Reinsurer may elect to cancel this
Agreement if the Company fails to pay Reinsurance Premiums or other amounts due
the Reinsurer, when due, provided the Reinsurer has given at least thirty (30)
days prior written notice of its intent to cancel. The Company may avoid
cancellation by paying all Reinsurance Premiums that are either delinquent or
then due on or before the effective date of such election to terminate the
Agreement. A Party may cancel if the duties of the agreement are assigned to
another without its permission, or if the other is Bankrupt and fails to give
adequate assurance of future performance, or if the other seeks to repudiate its
performance.
3. Recapture. The Company may recapture on or after January 2, 1998.
4. Termination of Liability. If recapture is elected by the Company, or if the
Agreement is cancelled, subject to the provisions of paragraphs 2 or 3 of this
Article, both the Company and the Reinsurer shall be obligated to make and shall
make the payments set forth in Article XIII, and Article VII.
18
<PAGE> 21
ARTICLE XIII
ACCOUNTING upon TERMINATION of AGREEMENT
1. In the event that this Agreement is terminated pursuant to the provisions of
Article XI, a terminal accounting and settlement shall take place.
2. The terminal accounting shall include:
(i) the Net Amount Due from the Accounting Period Reinsurance Report for
the final Accounting Period, plus,
(ii) the Terminal Premium.
3. In the event that, subsequent to the terminal accounting and settlement as
above provided, an adjustment is made with respect to any amount taken into
account pursuant to Schedule D, a supplementary accounting shall take place
pursuant to paragraph 2 of this Article. Any amount owed to the Reinsurer or the
Company by reason of such supplementary accounting shall be paid promptly upon
the completion thereof.
4. In the event of a partial recapture the recapture provisions will apply to
the amount of business terminated.
ARTICLE XIV
EXECUTION
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their duly authorized representatives.
THE MUTUAL LIFE INSURANCE COMPANY of NEW YORK
By: /s/ Phillip A. Eisenberg Sr. VP & Chief Actuary
------------------------ ------------------
Title
Attest:
By: /s/ Arnold N. Greenspoon AVP & Actuary
------------------------- -----------------
Title
Date:3/1/96
19
<PAGE> 22
THE GUARDIAN LIFE INSURANCE COMPANY of AMERICA
By:
--------------------------------- ------------------------
Title
Attest:
By: /s/ Thomas Harris Actuarial Associate
Title
Date: 2/28/96
20
<PAGE> 23
SCHEDULE A
POLICY LISTING
1. Under this Agreement, the Reinsurer reinsures a 38% quota share of the risks
on the blocks of insurance contracts issued by the Company, in force on
12/31/95, and described below:
All Premium Paying life insurance policies, excluding Canadian policies,
is of the Effective Date of this Agreement and any paid-up additions on
those policies valued assuming American Experience, 1941 CSO, or 1958
CSO mortality and interest races of 4.0 percent or less, except for
policies with the following index numbers: 0060-0, 0512-0, 0990-9,
0513-0, 0520-0 and 0525-0.
The Reinsurer will not participate in disability waiver, accidental death
benefits or other miscellaneous benefits. Transfers to non-forfeiture status
(extended term and reduced paid up, but not automatic premium loans) shall be
considered surrenders.
2. The Reinsurer's share of the Policy Premium, as defined in Article IV, shall
equal 100% times the applicable quota share percentage shown above.
3. The Initial Total Reserves shall equal the Exhibit 8 reserve (mortality),
unreduced for due and deferred premiums; plus the Exhibit 7 reserve (dividends),
as reported on page 3, lines 7.1, 7.2 and 8 of the NAIC blank. The Initial Modco
Reserve shall equal the Initial Reserve less the premium deficiency reserve, and
less the Initial Allowance. The Initial Coinsurance Reserve shall equal the
Initial Reserve, less the Initial Modco Reserve.
21
<PAGE> 24
SCHEDULE B
ALLOWANCES AND COINSURANCE PERCENTAGE
The INITIAL ALLOWANCE shall be the lesser of 5.5% of the Initial Total Reserve
(excluding any premium deficiency reserve) and $44 million.
The policy allowances shall be 7% of the policy premium (excluding premium
derived from policyholder dividends).
COINSURANCE RESERVES
The Initial Coinsurance Reserves shall include the premium deficiency reserves
plus the quota share of the excess of Other Exhibit 8 Statutory Reserves over
Tax Reserves, and then tax deductible Exhibit 8 Reserves so that the Total
Coinsurance Reserves on the effective date are equal to the Initial Allowance.
Any reduction in the coinsurance reserves due to a coinsurance reserve
adjustment shall first be made in the Exhibit 8 tax deductible reserves, until
such Exhibit 8 reserves are reduced to zero. The coinsurance reserve adjustments
are zero when the coinsurance reserve is reduced to zero.
"Exhibit 8" refers to Exhibit 8 of the Annual Statement Blank, filed with the
Company's state of domicile.
22
<PAGE> 25
SCHEDULE C
INITIAL REINSURANCE REPORT
1. In force by policy form
i. Policy count
-----------------
ii. Amount ceded
-----------------
iii. Reserves
-----------------
2. Accounting Transaction - Initial Reinsurance Consideration equals net of:
i. Due Reinsurer
Initial Reinsurance Premium
-----------------
ii. Due Company
Initial Allowance
-----------------
23
<PAGE> 26
SCHEDULE D - PART I
QUARTERLY REPORTING PERIOD REINSURANCE REPORTS
from MUTUAL OF NEW YORK
to THE GUARDIAN LIFE INSURANCE COMPANY
for the quarter ending __/__/__
A. REINSURANCE PREMIUM
1. Reinsurer's Share of Policy Premium
-------------
a. Policy Premium
-------------
b. Premiums from Dividends
-------------
2. Recapture Fees
3. Allowances (Schedule B)
a. Per policy
-------------
b. Percent of premium
-------------
4. Surrender and Endowment Payments
-------------
5. Policyholder Dividends
-------------
6. Modco reserve adjustment
a. Beg Reserve
-------------
b. Modco rate
-------------
c. Interest on the above
-------------
d. Ending Reserve
-------------
e. Adjustment = (a)+(c)-(d)
-------------
7. Experience Refund
-------------
REINSURANCE PREMIUM
= (1)-(2)-(3)-(4)-(5)+(6)
-------------
REINSURANCE BENEFITS
1. Death Benefits
a. Death Benefits Paid
-------------
b. Expense of Compromised Claims
-------------
c. Beginning Claim Reserve
-------------
d. Ending Claim Reserve
-------------
e. Incurred = a+b+c-b
-------------
2. Disability Waiver
3. Accidental Death
REINSURANCE BENEFITS = (1)+(2)+(3)
-------------
CASH FLOW = Premium-Benefits
(Owed to Reinsurer if positive, owed to Co. if negative.)
-------------
Increase in Coinsurance Reserve
(before coinsurance reserve adjustment)
-------------
24
<PAGE> 27
SCHEDULE D - PART I
QUARTERLY REPORTING PERIOD REINSURANCE REPORTS
from MUTUAL OF NEW YORK
to THE GUARDIAN LIFE INSURANCE COMPANY
for the quarter ending __/__/__
B. POLICY INFORMATION
Policy Count Face Amount
Beginning
------------ -----------
Additions
------------ -----------
Deaths
------------ -----------
Surrenders
------------ -----------
Matured Endowments
------------ -----------
Other Subtractions
------------ -----------
Ending
------------ -----------
C. RESERVE INFORMATION - TOTAL RESERVE
Exhibit 8A Reserve
------------
Exhibit 8D
------------
Exhibit 8E
------------
Exhibit 8F
------------
+ Advance Premium
------------
- - Due Premium
------------
- - Deferred Premium
------------
NET RESERVE
------------
+ Exhibit 8G1 Defic Res.
------------
NET RESERVE incl. Defic.
------------
D. RESERVE BY TYPE - EXCLUDING PREMIUM DEFICIENCY RESERVES, WHICH ARE COINSURED.
Total Modco Coins.
Beginning Reserve
------------- ------------- --------------
Ending Reserve
------------- ------------- --------------
Coins. Res. Adj.
------------- ------------- --------------
Ending after CRA
------------- ------------- --------------
25
<PAGE> 28
SCHEDULE D - PART II
ANNUAL REPORTS
The following reports shall be supplied to the Reinsurer.
A* Policy Exhibit
B* Additional Policy Exhibit Information - page 26.
C* Analysis of Increase in Reserves - page 7 of NAIC blank
D* New York State Analysis of Reserves
E DAC Premiums, under Section 848 of the Internal Revenue Code (see addendum 1
and 2)
F Tax Reserves
G Audited Statutory and, if available, GAAP statements
H Policy by Policy in force listing (in NYS format, if available)
I* Leverage Worksheet
J Any management letter from the Company's external auditors regarding
reinsurance ceded.
K* Statement of Actuarial Opinion.
L Examination Reports. Any triennial or quinquennial examination report of
the Company's state of domicile.
M Modco interest calculation - showing X, Y, I, and CG.
N* Section 848 DAC Premium
The description of some of the asterisk marked items (*) is given in more detail
in an addendum.
26
<PAGE> 29
SCHEDULE E
INTEREST RATES
1. The Modified Coinsurance Interest Rate shall equal:
rate = (I + CG) / .5 (X + Y-I - CG).
Here "I" equals investment income (Exhibit 2 line 10, column 7). Here "CG"
equals realized capital gains (Exhibit 3 line 10, column 4) plus unrealized
capital gains (Exhibit 4 line 10, column 4). Here "X" and "Y" equals the
beginning and end of year "asset base." The "asset base" equals invested assets
(page 2 line 10a), plus accrued investment income (Exhibit 2, line 10, columns
3+4-2-5) less borrowed money (page 3 line 22), less any write in liability which
is in the nature of borrowed money. The I, CG, X, and Y terms shall include the
investment income and assets attributable to the Aegon block. (All line numbers
are with respect to the 1994 annual statement, and shall be adjusted if the line
numbers change.)
If the modco rate is not available for a given reporting period it shall be
based on the most recent annual statement data, and then trued up later.
2. Quarterly Interest on delayed payments due the Company or the Reinsurer shall
be the modco rate, but not lower than one-fourth the valuation rate.
3. The Quarterly Experience Account Interest Rate shall be equal to the rate
defined in paragraph 2, above.
4. The Quarterly Risk Charge shall be deducted quarterly from the Experience
Account Asset, and be based on the EAB at the beginning of the quarter (or on
the Effective Date) for the first quarter. On the first $20 million of the EAB
the risk charge shall equal:
1995-1996 0.375%
1997-1998 0.625%
1999-later 0.75%
Any EAB amounts over $20 million shall have a risk charge of 0.3%.
SCHEDULE F - EXPERIENCE REFUNDS
The Experience Refund for 1996 and 1997 shall equal the excess of
Reinsurance Premiums less Reinsurance Benefits computed without regard for the
Experience Refund, and less any loss carryforward accumulated at interest at the
Schedule E rate, and less excess capital gains for 1996 or 1997, where "excess
capital gains" shall equal any capital gains in excess of 75 basis points times
the modco reserves, and less any risk and DAC charges. The loss carryforward for
1996 shall be zero. The loss carryforward for 1997
27
<PAGE> 30
shall equal any excess of 1996 Reinsurance Benefits over Reinsurance Premiums
over the 1996 risk and DAC charges. After 1997 the experience refunds shall be
discretionary with the reinsurer. For each quarter during 1996-1997 the payments
to the parties shall reflect an estimated experience refunds, based on the year
to date results.
28
<PAGE> 31
ADDENDUM 1
FORMULAS
1. CASH FLOW (CF). The Cash flow on the effecting date shall equal the Initial
Reinsurance Consideration. The Cash Flow for any subsequent quarter shall equal
the Reinsurance Premiums less the Reinsurance Benefits. The Cash Flow shall also
include the Terminal Premium for any contracts recaptured during the quarter,
prior to the Termination Date.
2. NET CASH FLOW. The Net Cash Flow shall equal the Cash Flow less the DAC
charges, the risk and profit charges, and any Coinsurance Reserve Adjustments.
3. EXPERIENCE ACCOUNT INTEREST. The quarterly Experience Account interest rate
shall equal the rate shown in Schedule E.
4. EXPERIENCE ACCOUNT ASSETS (EAA). On the effective date of this Agreement the
Experience Account Assets shall equal zero. At the end of a calendar quarter the
EAA shall equal the EAA at the beginning of the quarter plus one quarter's
interest on such amount plus the Net Cash Flow during the quarter.
5. EXPERIENCE ACCOUNT BALANCE (EAB). The EAB shall equal the EAA less the
coinsurance reserves, including any premium deficiency reserves.
6. DAC CHARGE. The initial DAC charge percentage shall be 0.85% for individual
life. The DAC charge calculation assumes a 35% tax rate, 7.7%/2.05%/1.75%
capitalization rate and 10 year amortization period and will be modified if any
of these factors change. The DAC charge percentage shall apply to the
"reinsurance premium" as defined by IRS regulations.
7. DEFERRED ACQUISITION COST TAX ELECTION
The Company and the Reinsurer hereby agree to the following pursuant to Section
1.848-2(g)(8) of the Income Tax Regulations issued December 29, 1992, under
Section 848 of the Internal Revenue code 1986, as amended. This election shall
be effective for 1991 and all subsequent taxable years for which this Agreement
remains in effect.
a. The term "Party" will refer to either the Company or the Reinsurer as
appropriate.
b. The terms used in this Article are defined by reference to Treasury
Regulations Section 1.848-2 in effect as of December 29, 1992.
c. The Party with the net positive consideration for this Agreement for each
taxable year will capitalize specified policy acquisition expenses with respect
to this Agreement without regard to the general deductions limitation of IRC
Section 848(c)(1).
29
<PAGE> 32
d. Both Parties agree to exchange information pertaining to the amount of net
consideration under this Agreement each year to ensure consistency. The parties
also agree to exchange information which may be otherwise required by the IRS.
e. The Company will submit a schedule to the Reinsurer by April 1 of each year
of its calculation of the net consideration of the preceding calendar year. This
schedule will be accompanied by a statement signed by an officer of the Company
stating that the Company will report such net consideration in its tax return
for the preceding calendar year.
f. The Reinsurer may contest such calculation by providing an alternate
calculation to the Company in writing within 30 days of the Reinsurer's receipt
of the Company's calculation. If the Reinsurer does not so notify the Company,
the Reinsurer will report the net consideration as determined by the Company in
the Reinsurer's tax return for the previous calendar year.
g. If the Reinsurer contests the Company's calculation of the net consideration,
the parties will act in good faith to reach an agreement as to the correct
amount within 30 days of the date the Reinsurer submits its alternate
calculation. If the Reinsurer and the Company reach an agreement on an amount of
net consideration, each party shall report such amount in their respective tax
returns for the previous calendar year.
h. If the Company and Reinsurer both disagree upon the final net consideration
then the parties shall seek a remedy as set forth in the Arbitration Article of
this Agreement.
Any future tax changes which benefit the Company with an adverse impact on the
Reinsurer, or conversely, shall also be reflected in the DAC charge.
8. RISK CHARGE. The Risk charge shall be as defined in SCHEDULE E.
9. RECAPTURE FEE. The Recapture Fee shall equal the absolute value of the EAB,
if such is negative.
If the entire treaty is recaptured by the Company before 1/2/1998, there shall
be an additional risk charge equal to:
Absolute Value of the EAB on the date before recaptured times the
current year's quarterly risk charge, times the following factor, if
positive:
factor = (8 - #quarters inforce)/8.
30
<PAGE> 33
ACCOUNTING WORKSHEET FOR EARLY RECAPTURE under Addendum I
EXPERIENCE ACCOUNT BALANCE
1. Beg. Experience Account Assets (EAA)
---------------
2a. Interest rate on EAA
---------------
2b. Interest = (1)(2a)
---------------
3. Net Cash Flow
---------------
4. Ending EAA = (1)+(2b)+(3)
---------------
5. Coinsurance Reserve excl. Premium. Defic.
---------------
6. Ending Experience Account Balance EAB = (4)-(5)
---------------
31
<PAGE> 34
ADDENDUM 2 - VARIOUS FORMS
A. POLICY EXHIBIT - PAGE 25 NAIC BLANK
Policy Count Face Amount
------------ -----------
a. In force beg. of period
------------ -----------
b. Increase
------------ -----------
c. Deaths
------------ -----------
d. Maturities
------------ -----------
e. Surrenders
------------ -----------
f. Expires
------------ -----------
g. Lapses
------------ -----------
h. Other Decreases
------------ -----------
i. Inforce end of period
------------ -----------
B. ADDITIONAL POLICY EXHIBIT INFORMATION - PAGE 26 NAIC BLANK
Number Amount
------------ -----------
23. Additions by Dividends
24. Other paid-up Insurance
25. Debit Ordinary Insurance
<TABLE>
<CAPTION>
Issued During Year In Force End of Year
------------------ --------------------
Number Amount Number Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
26. Term Policies - decreasing
27. Term Policies - other
28. Other term insurance -
decreasing
29. Other term insurance
29B. Term Additions
29C. Extended Term Insurance -
total
29D. Whole Life and Endowment -
total
29E. Total
</TABLE>
Issued During Year In Force End of Year
------------------ --------------------
Non-Par Non-Par
------- -------
30. Industrial
31. Ordinary
31A. Credit Life
32
<PAGE> 35
SCHEDULE D - PART II (continued)
32. Group
C. EXHIBIT OF NUMBER OF POLICIES AND CERTIFICATES - PAGE 27 NAIC BLANK
1. In force end of previous year
---------------
2. Issued during year
---------------
3. Reinsurance assumed
---------------
4. Increased during year
---------------
5. Totals (Lines 1 through 4)
Deductions: ---------------
6. Decreased (Net)
---------------
7. Reinsurance
---------------
8. Totals (Lines 6 and 7)
---------------
9. In force end of year
---------------
10. Income Now Payable: Amt Payable
---------------
11. Deferred Fully Paid: Acc. Balance
---------------
12. Deferred Not Fully Paid: Acc. Balance
---------------
D. ANALYSIS OF INCREASE IN RESERVES - PAGE 7 NAIC BLANK
1. Reserve December 31 of prior year
---------------
2. Tabular Net Premiums
---------------
4. Tabular Interest
---------------
5. Tabular Less Actual Reserve Released
---------------
7. Other Increases (net)
---------------
9. Tabular Cost
---------------
10. Reserves Released by Death
---------------
11. Res. Released by Other Term. (net)
---------------
15. Res. December 31 of current year
---------------
33
<PAGE> 36
SCHEDULE D - PART II (continued)
E. NEW YORK STATE ANALYSIS OF RESERVES (EXHIBIT 8 WITH FACE AMOUNTS)
<TABLE>
<CAPTION>
Total Industrial Ordinary Group
----- ---------- -------- -----
Amt Res Amt Res Amt Res Amt Res
--- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
I. Life Insurance
A. Other than
Credit
B. Credit
</TABLE>
Ordinary Group
-------- -----
Amt Res Amt Res
--- --- --- ---
II. Supplemental Contracts
III. Additional Accidental Death Benefits
IV. Disability Active Lives:
V. Disability - Disabled Lives:
VI. Deficiency and Miscellaneous Reserves:
Tabular detail by policy showing age, sex, policy number, face amount, reserve
factor and reserves for all reserves ceded on a coinsurance plan. Such detail
shall be supplied in duplicate in either paper, microfiche or machine readable.
If the latter is chosen, it must be formatted according to New York State
requirements.
34
<PAGE> 37
SCHEDULE D - PART II (continued)
I. LEVERAGE WORKSHEET
1. Invested Assets
---------------
2. Statutory Surplus
---------------
3. AVR
---------------
4. IMR
---------------
5. 1/2 Dividend Provision
---------------
6. Premium Deficiency Res.
---------------
7. Sum (2) through (6)
---------------
8. Holding Co. Securities
---------------
9. Securitization/Levelization
---------------
10. Surplus relief, net of tax
---------------
11. Sum (8) through (10)
---------------
12. Ratio (11)/(7)
---------------
K. STATEMENT OF ACTUARIAL OPINION
Within forty-five (45) days after the close of the calendar year the Company
shall send to the Reinsurer a Statement of Actuarial Opinion certifying that the
total reserves reinsured hereunder:
(a) Are computed based on generally accepted actuarial standards (but not
encompassing asset adequacy analysis);
(b) Produce values at least as great as those specified in the underlying
contracts;
(c) Produce values that are in aggregate at least as great as the minimum
required amount in the State of New York, and in all material respects
in all other jurisdictions in which the Company is licensed; and
(d) Include provisions for all actuarial reserves and related items.
Based upon third quarter results, the Company shall provide to the Reinsurer,
within ninety (90) days from the end of the third quarter, data necessary to
determine the adequacy of the reserves for risks covered under this Agreement.
N. REINSURANCE QUESTIONNAIRE FOR FEDERAL INCOME TAX DETERMINATIONS
The purpose of this questionnaire is to secure sufficient information
to allow Guardian Life Insurance Company of America to account properly under
the federal income tax rules for the reinsurance agreement we have with you.
35
<PAGE> 38
SCHEDULE D - PART II (continued)
Please provide us with the following information:
1. Are you either
(a) A company that is subject to U.S. taxation directly, under the
provisions of subchapter L of chapter 1 of the Internal Revenue Code (i.e., is
an insurance company liable for filing Form 1120L or Form-PC), or
(b) A company that is subject indirectly to U.S. taxation under the
provisions of subpart F of subchapter N of chapter 1 of the Internal Revenue
Code (i.e., is a "controlled foreign corporation" within the meaning of Internal
Revenue Code Section 957)?
Answer: Yes No
------- -------
2. If your answer to 1 is no, have you entered into a closing agreement
with the Internal Revenue Service to be subject to U.S. taxation with respect to
reinsurance income pursuant to Treasury Regulation Section 1.848-2(h)(ii)(B)?
Answer: Yes No
------- -------
(If your answer is yes, please provide a copy of the closing agreement.)
Company Name: The Mutual Life Insurance Company of New York
Signed by: Title:
------------------------ -----------------------
Date: Print Name:
----------------------------- ------------------
36
<PAGE> 39
19__ NET CONSIDERATIONS
COMPANY NAME
----------------------------------------
19 CONSIDERATIONS UNDER CONTRACTS DATED PRIOR TO 11-15-91:
--
$
-------------
19 CONSIDERATIONS UNDER CONTRACTS DATED 11-15-91 AND AFTER:
--
$
-------------
AGREE
---------
DISAGREE
---------
If you disagree with the above figures, please attach supporting data with your
calculations.
VERIFIED BY:
-----------------------
DATED:
-----------------------------
Please return this form by July 15th to:
Thomas Harris
Actuarial Associate
The Guardian Life Insurance Company of America
201 Park Avenue South - Mail Station 15C
New York, New York 10003
37
<PAGE> 1
Exhibit 10.6
AMENDMENT NO. VIII
TO THE
PORTFOLIO INDEMNITY REINSURANCE AGREEMENT (A90-04)
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NEW YORK, NEW YORK
AND
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
NEW YORK, NEW YORK
Except as hereinafter specified, all the terms and conditions of the Reinsurance
Agreement effective the 31st day of December, 1990, amendments and addenda
thereto, shall apply, and this Amendment is to be attached to and made part of
the aforesaid Agreement.
It is mutually agreed that effective the 31st day of December, 1995 the
following shall apply:
1. "Contents page" - REVISED.
2. Article III, Paragraph 26. "Material relied on" - REVISED.
3. Article IV, "Definition of Reinsurance Premium" - REVISED.
4. Article VIII, "Reinsuring Clause & Conditions Precedent" - REVISED.
5. Article IX, "Executory Contract and Set off" - REMOVED (Material covered
under General Contract Law).
6. Article X, "Insolvency of Company" - RELABELED Article IX.
7. Article XI, Arbitration, Litigation, and Choice of Law and Forum" -
RELABELED Article X.
8. Article XII, "Duration of Agreement" - Relabeled Article XI and paragraph 2
- REVISED.
9. Article XIII, "Accounting upon Termination of Agreement" - RELABELED Article
XII.
10. Article XIV, "Execution" - RELABELED Article XIII.
11. Schedule A -REVISED.
12. Schedule D, Part 1 - "Quarterly Reporting Period Reinsurance Reports" -
REVISED.
13. Schedule D, Part II, Section G - "Audited Statutory and, if available, GAAP
statements" - REMOVED.
14. Schedule D, Part II, Section I; "Leverage Worksheet" - REMOVED.
15. Schedule D, Part II, Section L; "Examination Reports" - REMOVED.
16. Schedule D, Part II, Section N; "Reinsurance Questionnaire For Federal
Income Tax Considerations" - REMOVED.
17. Schedule D, Part II, Section H; "Policy by policy in force listing (in NYS
format, if available" - RELABELED Section G.
18. Schedule D, Part II, Section J; "Any management letter from the Company's
external auditors regarding reinsurance ceded" - RELABELED Section H.
19. Schedule D, Part II, Section K; "Statement of Actuarial Opinion with respect
to policies reinsured" - RELABELED Section I.
20. Schedule D, Part II, Section M; "Modco interest calculation - showing X, Y,
I, and CG" RELABELED Section J.
21. Schedule D, Part II, Section N; "Section 848 DAC Premium" - RELABELED
Section K.
22. "Net Considerations Page" - REMOVED.
<PAGE> 2
23. Schedule E, "Interest Rates" - REVISED.
24. Schedule F, "Experience Refund" - REVISED.
25. Addendum 1, paragraph 1; "Cash Flow (CF)" - REVISED.
<PAGE> 3
CONTENTS
ARTICLE I REINSURANCE COVERAGE
ARTICLE II COMMENCEMENT AND TERMINATION OF LIABILITY
ARTICLE III GENERAL PROVISIONS
ARTICLE IV DEFINITION OF REINSURANCE PREMIUM
ARTICLE V DEFINITION OF FORMULA DIVIDENDS
ARTICLE VI DEFINITION OF REINSURANCE BENEFITS
ARTICLE VII ACCOUNTING AND REPORTING
ARTICLE VIII REINSURING CLAUSE AND CONTRACTUAL CONDITIONS
ARTICLE IX INSOLVENCY
ARTICLE X ARBITRATION, LITIGATION AND CHOICE of LAW
ARTICLE XI DURATION OF AGREEMENT
ARTICLE XII ACCOUNTING UPON TERMINATION OF AGREEMENT
ARTICLE XIII EXECUTION
SCHEDULE A POLICY LISTING
SCHEDULE B COMMISSION AND EXPENSE ALLOWANCES
SCHEDULE C REPORTS
SCHEDULE D QUARTERLY ACCOUNTING PERIOD REINSURANCE REPORTS
SCHEDULE E INTEREST RATES
SCHEDULE F EXPERIENCE REFUND
ADDENDUM 1
ACCOUNTING WORKSHEET
<PAGE> 4
ARTICLE III
GENERAL PROVISIONS
26. Material relied on. The material relied on includes the PTS profit runs but
the Company has made no guarantees with respect to these runs.
ARTICLE IV
DEFINITION OF REINSURANCE PREMIUM
The Reinsurance Premium equals (1)+(3)-(2), which is payable to the
reinsurer if positive, and payable to the ceder if negative, according to
the terms of the "Reinsuring Clause."
1. Initial Reinsurance Premium. The Initial Reinsurance Premium is the net of
(a)-(b), as defined below, as computed on the "Effective Date." The Initial
Reinsurance Premium may be positive (due the Reinsurer) or negative (due to the
Company), or zero.
a. The Initial Coinsurance Reserves, as defined in Schedule A, less any
premium deficiency reserves on the quota share of the Policies cited in
Schedule A.
b. The Initial Allowance as specified in Schedule B.
2. Terminal Premium. On full or partial recapture the Company and Reinsurer
shall compute a Terminal Premium, which shall equal the Recapture Fee (defined
in Addendum 1), less the Coinsurance Reserves.
3. Quarterly Reinsurance Premium. The Quarterly Reinsurance Premium shall be
the net of (a)+(b)-(c)-(d)-(e)+(f)-(g) as defined below, and may be positive
(due to the Reinsurer) or negative (due to the Company).
a. Reinsurer's Share of Policy Premium. Policy Premiums are the gross
premiums, including contract fees, collected from the policyholder with
respect to the Risks Reinsured hereunder and described on Schedule A hereto,
reduced by an amount equal to the Reinsurer's share of reinsurance premiums
INCURRED by the Company for risks ceded under other reinsurance agreements.
The Reinsurer's share of the Policy Premium is specified in Schedule A.
Incurred Premiums equal paid premiums plus the increase in due plus deferred
less advance premiums.
b. Recapture Fee. On a full or partial recapture there shall be a Recapture
Fee as defined in Addendum 1.
c. Allowances.
<PAGE> 5
(a) Initial Allowances. The Initial allowances as set forth in Schedule
B of this Agreement
(b) Quarterly Allowances. The Allowances, which shall include an
allowance for premium tax, are set forth in Schedule B of this
Agreement.
d. Surrender and Endowment Payments. Surrender and endowment payments shall
equal the surrender and endowment payments INCURRED by the Company on the
Risks Reinsured, net of any reinsurance coverages due and payable from other
reinsurers of the Policies reinsured hereunder, regardless of whether such
amounts due from other reinsurers are in fact or as a matter of law deemed
to be collectible or uncollectible. In order to be reimbursed, the surrender
or endowment payments must have occurred after the Effective Date and on or
before the Termination Date.
e. Policyholder Dividends. Policyholder dividends are determined by the next
article.
f. Modco reserve adjustment. Equals the beginning modco reserve plus
interest at the modco rate defined in the Schedule E less then ending modco
reserve.
g. Experience Refunds, as determined by Schedule F.
4. Indivisibility of Reinsurance Premium. It is expressly understood that
the pluses and minuses used to compute reinsurance premium shall never be
treated as severable or divisible.
5
<PAGE> 6
PAGE LEFT BLANK TO ACCOMMODATE NUMBERING (NO TEXT)
ARTICLE V
ARTICLE VI
ARTICLE VII
6
<PAGE> 7
ARTICLE VIII
REINSURING CLAUSE AND CONDITIONS PRECEDENT
1. Reinsuring Clause. Despite the use of the word "paid", "payable" or
"incured" elsewhere in this agreement, nothing shall be owed or paid either
party, except as determined by this section of this Article.
The "cash flow" shall be the algebraic excess of Reinsurance Premiums over
Reinsurance Benefits. If negative, such shall be paid to the Company. If
positive such shall be payable to the Reinsurer, and applied as described in
Paragraph 2.
If such amounts cannot be determined at such date on an exact basis, such
payments may be determined on an estimated basis and any final adjustments are
to be made within six (6) weeks after the end of the Accounting Period.
The Initial Reinsurance Premium is due on the Effective Date. If positive it is
payable to the Reinsurer, as described in the following paragraph, and if
negative it is paid to the Company.
The Terminal Reinsurance Premium is due on the Termination Date. If positive is
it paid to the Reinsurer, and if negative is it paid to the Company.
2. Cash Payments and Coinsurance Reserve Adjustments. If the Cash Flow, as
defined above is positive, this amount (which is an asset of the Reinsurer)
shall be applied as follows:
(a) first, as a cash payment to the Reinsurer to cover the risk and DAC
charges, and then increase the Experience Account Asset if such is
negative, until the Experience Account Asset reaches zero;
(b) second, any remaining amount shall be applied to reduce the
reinsurer's liability, namely the Coinsurance Reserve (and increase
the modco reserve); but the Coinsurance Reserve (minus the Premium
Deficiency Reserves) shall not be reduced below zero, and
(c) third, any excess of the Cash Flow less risk and DAC charges over
the Coinsurance Reserve shall be paid to the Reinsurer in cash.
If the Cash Flow is negative, this amount (which is an asset of the Company)
shall be paid in cash.
3. Recoupment and Failure of Consideration. If either party of the Agreement
fails to perform this Agreement in full, then the other party has the right to
suspend performance, and if the defaults cannot be cured, without 90 days
following delivery of written notice from the non-defaulting party to the
defaulting party, to terminate the Agreement. Alternatively, the non-defaulting
party can recoup damages from future quarterly settlements.
7
<PAGE> 8
ARTICLE IX
INSOLVENCY OF COMPANY
1. In the event of the insolvency of the Company, payments due the Company on
all reinsurance made, ceded, renewed or otherwise becoming effective under this
Agreement shall be payable by the Reinsurer directly to the Company or to its
liquidator, receiver, or statutory successor on the basis of the liability of
the Company under the policy or Policies reinsured without diminution because of
the insolvency of the Company. It is understood, however, that in the event of
the insolvency of the Company, the Reinsurer shall be given written notice of
the pendency of a claim against the Insolvent Company on a policy reinsured
within a reasonable time after such claim is filed in the insolvency proceeding
and that during the pendency of such claim the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding where such claim is
to be adjudicated any defense or defenses which it may deem available to the
Company or its liquidator or receiver or statutory successor.
2. It is further understood that the expense thus incurred by the Reinsurer
shall be chargeable, subject to court approval, against the insolvent Company as
part of the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to the Company solely as a result of the defense
undertaken by the Reinsurer. Where two or more assuming reinsurers are involved
in the same claim and a majority in interest elect to interpose defense to such
claim, the expense shall be apportioned in accordance with the terms of this
Agreement as though such expense had been incurred by the Company.
8
<PAGE> 9
ARTICLE X
ARBITRATION, LITIGATION AND CHOICE OF LAW AND FORUM
1. Arbitration
A. Any dispute arising from or relating to this Reinsurance Agreement or
any transaction contemplated hereby or effected hereunder shall be
submitted to and decided by arbitration in the manner hereinafter set
forth. The arbitrators shall be disinterested and unbiased officers, or
former officers, of either life insurance companies or the reinsurance
departments of property and casualty insurance companies (other than, in
each instance, either party to this Reinsurance Agreement or any
affiliate of either party), and be knowledgeable in the insurance and
reinsurance business. The party requesting arbitration (hereinafter
referred to as the "claimant") shall appoint an arbitrator and give
written notice thereof to the other party (hereinafter referred to as
the "respondent") together with the claimant's notice of its intent to
arbitrate. Within thirty (30) days after receiving such notice, the
respondent shall also appoint an arbitrator and shall give written
notice thereof to the claimant. If the respondent shall fail to appoint
an arbitrator within such thirty (30) day period, the claimant shall
select the second arbitrator.
B. Prior to instituting a hearing, the two arbitrators chosen pursuant to
paragraph A above shall choose a third arbitrator (hereinafter referred
to as the "umpire"). If, within thirty (30) days following the
appointment of the second arbitrator, the two arbitrators fail to agree
upon the appointment of an umpire, each of them shall nominate five
candidates within twenty (20) days thereafter. Each arbitrator shall
then decline four of the candidates proposed by the other arbitrator.
The umpire shall be chosen by lot from the two remaining candidates.
Should the chosen umpire refuse to serve, the other remaining candidate
shall be appointed umpire. Should the other remaining candidate also
refuse to serve as umpire, the two arbitrators shall repeat the process
set forth in this paragraph B until successful.
C. Any arbitration instituted pursuant to this Article shall be held in New
York, New York. The laws of the State of New York shall govern the
interpretation and application of this Reinsurance Agreement. All
proceedings before the panel shall be informal and the panel shall not
be bound by any formal rules of evidence. Cross examination and rebuttal
shall be permitted. The panel shall have the power to fix all procedural
rules relating to the arbitration proceeding. In reaching any decision,
the arbitrators shall give due consideration to customary and standard
practices in the reinsurance business. The arbitrators shall decide by a
majority vote. The decision of the panel shall be in writing and shall
state the reasons therefor. There shall be no appeal from their
decision. Judgment may be entered on the decision of the arbitrators by
any court having jurisdiction.
D. If each party has chosen one arbitrator, each party shall bear the
expense of its arbitrator. If one party has chosen the first two
arbitrators, the parties shall jointly and equally bear the expense of
such arbitrators. In either case, the parties shall
9
<PAGE> 10
jointly and equally bear the expense of the umpire. In addition, each
party shall bear the expense of any outside attorneys or consultants
employed by it.
E. Submission of a matter to arbitration shall be a condition precedent to
any right to seek injunction or other provisional relief pending the
arbitration of a matter subject to arbitration pursuant to this
Reinsurance Agreement.
2. Consent to Jurisdiction
The intent of the parties to this Reinsurance Agreement is that all
disputes arising from or relating to this Reinsurance Agreement or any
transaction contemplated hereby or effected hereunder be submitted to
and decided by arbitration. If for any reason, however, any such dispute
is not submitted to or decided by arbitration, each party hereto
irrevocably submits to the non-exclusive jurisdiction of any Federal
court sitting in the City of New York, Borough of Manhattan (and, to the
extent that such Federal courts do not have jurisdiction, to the
jurisdiction of any New York State court sitting in the State of New
York, Borough of Manhattan) over any suit, action or proceeding arising
from or related to such dispute. To the fullest extent it may
effectively do so under applicable law, each party and its successors or
assigns or any receiver of such party, irrevocably waives and agrees not
to assert, by way of motion as a defense or otherwise, any claim that is
not subject to the subject-matter jurisdiction of any court, any
objection that it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding brought in any court and any
claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
3. Notice of Arbitration; Service of Process
Any notices of the submission of a dispute to arbitration shall be sent
by registered or certified mail, postage prepaid, return receipt
requested, to the address of the party specified, and to the attention
of the person specified, in this Agreement. In addition for purposes of
any suit, action or proceeding referred to section 2 above, each party
consents to process being served in the same manner, and agrees that
such service (i) shall be deemed in every respect effective service of
process upon such party in any such suit, action or proceeding and (ii)
shall, to the fullest extent permitted by law, be taken and held to be
valid personal service upon and personal delivery to such party.
4. Choice of Law
As stated above, in any arbitration proceeding, the laws of the State of
New York shall govern the interpretation and application of this
Reinsurance Agreement. In addition, for purposes of any suit, action or
proceeding referred to in section 2 above, this Reinsurance Agreement
shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by the laws of the State of New York,
except that: (i) no effect shall be given to the principles of conflict
of laws thereof; and (ii) and if the application of New York law would
prevent arbitration, the arbitrability of the dispute shall be
determined by the laws of the state of domicile of the ceding Company.
10
<PAGE> 11
5. Survival
The provisions of this Article shall survive the termination of this Reinsurance
Agreement.
11
<PAGE> 12
ARTICLE XI
DURATION OF AGREEMENT
1. Automatic Termination. If at the end of an accounting period, none of the
Policies reinsured hereunder are in force, this Agreement shall automatically
terminate.
2. Cancellation Due to Nonpayment. The Reinsurer may elect to cancel this
Agreement if the Company fails to pay Reinsurance Premiums or other amounts due
the Reinsurer, when due, provided the Reinsurer has given at least thirty (30)
days prior written notice of its intent to cancel. The Company may avoid
cancellation by paying all Reinsurance Premiums that are either delinquent or
then due on or before the effective date of such election to terminate the
Agreement. A Party may cancel if the duties of the Agreement are assigned by the
Superintendent of Insurance acting as a Trustee in the event of an insolvency.
3. Recapture. The Company may recapture on or after January 2, 1998.
4. Termination of Liability. If recapture is elected by the Company, or if the
Agreement is cancelled, subject to the provisions of paragraph 2 or 3 of this
Article, both the Company and the Reinsurer shall be obligated to make and shall
make the payments set forth in Article XII and Article VII.
12
<PAGE> 13
ARTICLE XII
ACCOUNTING UPON TERMINATION OF AGREEMENT
1. In the event that this Agreement is terminated pursuant to the provisions of
Article XI, a terminal accounting and settlement shall take place.
2. The terminal accounting shall include:
(i) the Net Amount Due from the Accounting Period Reinsurance Report for the
final Accounting Period, plus,
(ii) the Terminal Premium.
3. In the event that, subsequent to the terminal accounting and settlement as
above provided, an adjustment is made with respect to any amount taken into
account pursuant to Schedule D, a supplementary accounting shall take place
pursuant to paragraph 2 of this Article. Any amount owed to the Reinsurer or
the Company by reason of such supplementary accounting shall be paid
promptly upon the completion thereof.
4. In the event of a partial recapture the recapture provisions will apply to
the amount of business terminated.
13
<PAGE> 14
ARTICLE XIII
EXECUTION
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be executed
in duplicate by their duly authorized representatives.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Phillip A. Eisenberg, Sr. VP & Chief Actuary
------------------------- ----------------------
Title
Attest:
By: /s/ Arnold N. Greenspoon AVP & Actuary
------------------------ -------------
Title
Date: 11/12/96
--------
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
By: /s/ Thomas S. Kabile , Sr. VP
----------------------------------- ------
Title
Attest:
By: /s/ Jeremy Stern Vice President
---------------- --------------
Title
Date: 11/13/96
--------
14
<PAGE> 15
SCHEDULE A
POLICY LISTING
1. Under this Agreement, the Reinsurer reinsures a 38% quota share of the
risks on the blocks of insurance contracts issued by the Company, inforce
on 12/31/95, and described below:
All Premium Paying life insurance policies, excluding
Canadian policies, as of the Effective Date of this
Agreement and any paid-up additions on those policies
valued assuming American Experience, 1941 CSO, or 1958 CSO
mortality and interest rates of 4.0 percent or less,
except for policies with the following index numbers:
0060-0, 0512-0, 0990-9, 0513-0, 0520-0 and 0525-0.
The Reinsurer will not participate in disability waiver, accidental death
benefits or other miscellaneous benefits. Transfers to non-forfeiture
status (extended term and reduced paid up, but not automatic premium loans)
shall be considered surrenders.
2. The Reinsurer's share of the Policy Premium, as defined in Article IV,
shall equal 100% times the applicable quota share percentage shown above.
3. The Initial Total Reserves shall equal the Exhibit 8 reserve (mortality),
unreduced for due and deferred premiums; plus the Exhibit 7 reserve
(dividends), as reported on page 3 lines 7.1, 7.2 and 8 of the NAIC blank.
The Initial Modco Reserve shall equal the Initial Total Reserves less the
Initial Allowance. The Initial Coinsurance Reserve shall equal the Initial
Total Reserves less the Initial Modco Reserve.
15
<PAGE> 16
SCHEDULE D - PART I
QUARTERLY REPORTING PERIOD REINSURANCE REPORTS
FROM MUTUAL OF NEW YORK
TO THE GUARDIAN LIFE INSURANCE COMPANY
for the quarter ending __/__/__
<TABLE>
<CAPTION>
<S> <C>
A. Reinsurance Premium
1. Reinsurer's Share of Policy Premium
a. Policy Premium _______________
b. Premiums from Dividends _______________
2. Recapture Fees
3. Allowances (Schedule B)
a. Per policy _______________
b. Percent of premium _______________
4. Surrender and Endowment Payments _______________
5. Policyholder Dividends _______________
6. Modco reserve adjustment
a. Beg Reserve _______________
b. Modco rate _______________
c. Interest on the above _______________
d. Ending Reserve _______________
e. Adjustment = (a)+(c)-(d) _______________
7. Experience Refund _______________
REINSURANCE PREMIUM
= (1)+(2)-(3)-(4)-(5)+(6)-(7) _______________
REINSURANCE BENEFITS
1. Death Benefits
a. Death Benefits Paid _______________
b. Expense of Compromised Claims _______________
c. Beginning Claim Reserve _______________
d. Ending Claim Reserve _______________
e. Incurred = a+b+c-b _______________
REINSURANCE BENEFITS = (1)+(2)+(3) _______________
CASH FLOW = Premium - Benefits
(Owed to Reinsurer if positive, owed to Co. if negative.) _______________
Increase in Coinsurance Reserve _______________
(before coinsurance reserve adjustment)
</TABLE>
16
<PAGE> 17
SCHEDULE D - PART I
QUARTERLY REPORTING PERIOD REINSURANCE REPORTS
FROM MUTUAL OF NEW YORK
TO THE GUARDIAN LIFE INSURANCE COMPANY
for the quarter ending __/__/__
<TABLE>
<CAPTION>
<S> <C> <C>
B. Policy Information
Policy Count Face Amount
Beginning ___________ ____________
Additions ___________ ____________
Deaths ___________ ____________
Surrenders ___________ ____________
Matured Endowments ___________ ____________
Other Subtractions ___________ ____________
Ending ___________ ____________
C. Reserve Information - Total Reserve
Exhibit 8A Reserve ___________
Exhibit 8D ___________
Exhibit 8E ___________
Exhibit 8F ___________
+ Advance Premium ___________
- - Due Premium ___________
- - Deferred Premium ___________
NET RESERVE ___________
+ Exhibit 8G1 Defic Res. ___________
NET RESERVE incl. Defic. ___________
D. Reserve by Type - excluding Premium Deficiency Reserves, which are coinsured.
</TABLE>
<TABLE>
<CAPTION>
Total Modco Coins.
<S> <C> <C> <C>
Beginning Reserve __________ __________ __________
Ending Reserve __________ __________ __________
Coins. Res. Adj. __________ __________ __________
Ending after CPA __________ __________ __________
</TABLE>
17
<PAGE> 18
SCHEDULE D - PART II
ANNUAL REPORTS
The following reports shall be supplied to the Reinsurer.
A* Policy Exhibit
B* Additional Policy Exhibit Information - page 26.
C* Analysis of Increase in Reserves - page 7 of NAIC blank
D* New York State Analysis of Reserves
E DAC Premiums, under Section 848 of the Internal Revenue Code (see addenda 1
and 2)
F Tax Reserves
G Policy by Policy in force listing (in NYS format, if available)
H Any management letter from the Company's external auditors regarding
reinsurance ceded
I* Statement of Actuarial Opinion with respect to policies reinsured
J Modco interest calculation - showing X, Y, I, and CG
K* Section 848 DAC Premium
The description of some of the asterisk marked items (*) is given in more detail
in an addendum.
18
<PAGE> 19
SCHEDULE E
INTEREST RATES
1. The Modified Coinsurance Interest Rate shall equal:
rate = (I+CG) / .5 (X+Y-I-CG)
Here "I" equals investment income (Exhibit 2, line 10, column 7). Here "CG"
equals realized capital gains (Exhibit 3, line 10, column 4) plus
unrealized capital gains (Exhibit 4, line 10, column 4). Here "X" and "Y"
equal the beginning and end of year "asset base." The "asset base" equals
invested assets (page 2, line 10a), plus accrued investment income (Exhibit
2, line 10, columns 3+4-2-5) less borrowed money (page 3, line 22), less
any write in liability which is in the nature of borrowed money. The I, CG,
X and Y terms shall include the investment income and assets attributable
to the Aegon block. (All line numbers are with respect to the 1994 annual
statement, and shall be adjusted if the line numbers change.)
If the modco rate is not available for a given reporting period it shall be
based on the most recent annual statement data, and then trued up as of the
2nd Quarter of the following year.
2. Quarterly Interest on delayed payments due the Company or the Reinsurer
shall be the modco rate, but not lower than one-fourth the valuation rate.
3. The Quarterly Experience Account Interest Rate shall be equal to the rate
defined in paragraph 2 above, but not greater than the modco rate.
4. The Quarterly Risk Charge shall be deducted quarterly from the Experience
Account Asset, and be based on the Coinsurance Reserves at the beginning of
the quarter (or on the Effective Date) for the first quarter.
On the first $20 million of the Coinsurance Reserves the risk charge shall
equal:
1995-1996 0.375%
1997-1998 0.625%
1999-later 0.75%
Any Coinsurance Reserves over $20 million shall have a risk charge of 0.3%.
19
<PAGE> 20
SCHEDULE F
EXPERIENCE REFUND
The Experience Refund for 1996 and 1997 shall equal the excess of
Reinsurance Premiums less Reinsurance Benefits computed without
regard for the Experience Refund, and less any loss carryforward
accumulated at interest at the Schedule E rate, and less excess
capital gains for 1996 or 1997, where "excess capital gains"
shall equal any capital gains in excess of 75 basis points times
the modco reserves, and less any risk and DAC charges. The loss
carryforward for 1996 shall be zero. The loss carryforward for
1997 shall equal any excess of 1996 Reinsurance Benefits over
Reinsurance Premiums over the 1996 risk and DAC charges. After
1997 the experience refunds shall be discretionary with the
reinsurer. For each quarter during 1996-1997 the payments to the
parties shall reflect an estimated experience refund, based on
the year to date results.
20
<PAGE> 21
ADDENDUM 1
FORMULAS
1. CASH FLOW (CF). The Cash flow on the effective date shall equal
the Initial Premium. The Cash Flow for any subsequent quarter
shall equal the Reinsurance Premiums less the Reinsurance
Benefits. The Cash Flow shall also include the Terminal Premium
for any contracts recaptured during the quarter, prior to the
Termination Date.
21
<PAGE> 1
EXHIBIT 10.7
AMENDMENT NO. IX
TO THE
PORTFOLIO INDEMNITY REINSURANCE AGREEMENT (A90-04)
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NEW YORK, NEW YORK
AND
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
NEW YORK, NEW YORK
Except as hereinafter specified, all the terms and conditions of the Reinsurance
Agreement effective the 31st day of December, 1990, amendments and addenda
thereto, shall apply, and this Amendment is to be attached to and made part of
the aforesaid Agreement.
It is mutually agreed that effective the 31st day of December, 1995 Article III,
paragraph 18; Article XI, paragraph 2 and Schedule E, paragraph 4 have been
revised.
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ARTICLE III
GENERAL PROVISIONS
18. Successors and Assigns. This Agreement cannot be assigned by the Company or
Reinsurer without the prior written approval of the other party. The Reinsurer
shall be given written notice of any such assignment. The provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto and their respective permitted successors and assigns.
ARTICLE XI
DURATION OF AGREEMENT
2. Cancellation Due to Nonpayment. The Reinsurer may elect to cancel this
Agreement if the Company fails to pay Reinsurance Premiums or other amounts due
the Reinsurer, when due, provided the Reinsurer has given at least thirty (30)
days prior written notice of its intent to cancel. The Company may avoid
cancellation by paying all Reinsurance Premiums that are either delinquent or
then due on or before the effective date of such election to terminate the
Agreement.
SCHEDULE E
INTEREST RATES
4. The Quarterly Risk Charge shall be deducted quarterly from the Experience
Account Asset, and be based on the Coinsurance Reserves at the beginning of the
quarter (or on the Effective Date) for the first quarter.
On the first $20 million of the Coinsurance Reserves the risk charge shall
equal:
1995-1997 0.375%
1998 0.5%
1999 0.625%
2000 - later 0.75%
Any Coinsurance Reserves over $20 million shall have a risk charge of 0.3%.
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EXECUTION
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their duly authorized representatives.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Phillip A. Eisenberg, Sr. VP & Chief Actuary
Title
Attest:
By: /s/ Arnold N. Greenspoon, AVP & Actuary
Title
Date: 12/31/96,
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
By:/s/ Thomas S. Kabile, Sr. VP
Title
Attest:
By: /s/ Thomas Harris, Actuarial Associate
Title
Date: 12/30/96
3
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Exhibit 10.8
AMENDMENT ELEVEN
TO
REINSURANCE AGREEMENT
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK ("CEDING COMPANY")
AND
LYNDON LIFE INSURANCE COMPANY ("CEDING COMPANY")
(FORMERLY KNOWN AS "ITT LYNDON LIFE INSURANCE COMPANY")
WHEREAS, Ceding Company and Reinsurer entered into Reinsurance Agreement 1290-46
effective December 31, 1990 (the "Agreement") under which Reinsurer reinsures
participating whole life policies directly written by Ceding Company; and
WHEREAS, Ceding Company and Reinsurer each desire to amend the Agreement in
order to provide for the Reinsurer's participation in dividends paid by the
Ceding Company; and
WHEREAS, the modifications resulting from this and previous amendments are
distributed throughout the Agreement in a manner which would make a conventional
amendment difficult to read; and
WHEREAS, Ceding Company and Reinsurer have agreed to amend and restate the
Agreement so that only one document need be read.
NOW THEREFORE, in consideration of the foregoing and the mutual promises herein
contained, it is agreed that the document attached hereto amends and restates
the Agreement effective December 31, 1995 and sets forth all the rights and
obligations of the parties.
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IN WITNESS WHEREOF, this Amendment Eleven is executed in duplicate on the dates
indicated below with an effective date of December 31, 1995.
ATTEST: THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
("Ceding Company")
By: /s/ Arnold N. Greenspoon By: /s/ Phillip A. Eisenberg
Title: AVP & Actuary Title: Sr. VP & Chief Actuary
Date: 2/9/96 Date: 2/9/96
ATTEST: LYNDON LIFE INSURANCE COMPANY
("Reinsurer")
By: /s/ Gregg O. Caioler By: /s/ Roland Anderson
Title: VP & Controller Title: President
Date: 2/7/96 Date: 2/7/96
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AMENDED AND RESTATED REINSURANCE AGREEMENT
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
NEW YORK, NEW YORK
referred to as the "Ceding Company"
AND
LYNDON LIFE INSURANCE COMPANY
(formerly ITT Lyndon Life Insurance Company)
ST. LOUIS, MISSOURI
referred to as the "Reinsurer"
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TABLE OF CONTENTS
Page
ARTICLE I GENERAL PROVISIONS.......................................2
ARTICLE II REINSURANCE PREMIUMS.....................................7
ARTICLE III ALLOWANCE................................................9
ARTICLE IV BENEFIT PAYMENTS........................................10
ARTICLE V DIVIDENDS...............................................12
ARTICLE VI DIVIDEND LIABILITY......................................16
ARTICLE VII MODIFIED COINSURANCE LIABILITY ADJUSTMENT...............20
ARTICLE VIII EXPENSE AND RISK CHARGE.................................22
ARTICLE IX EXPERIENCE REFUND.......................................26
ARTICLE X ACCOUNTING AND SETTLEMENTS..............................29
ARTICLE XI DURATION AND RECAPTURE..................................34
ARTICLE XII TERMINAL ACCOUNTING AND SETTLEMENT......................36
ARTICLE XIII PROXY TAX REIMBURSEMENT.................................38
ARTICLE XIV REPRESENTATIONS.........................................39
ARTICLE XV ARBITRATION.............................................40
ARTICLE XVI INSOLVENCY..............................................41
ARTICLE XVII INTERMEDIARY............................................42
ARTICLE XVIII EXECUTION AND EFFECTIVE DATE............................43
SCHEDULE A POLICIES AND RISKS REINSURED............................45
SCHEDULE B RESERVES................................................47
SCHEDULE C QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS............55
SCHEDULE D MODIFIED COINSURANCE INTEREST RATE......................62
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Page
SCHEDULE E BASIC DIVIDEND FACTORS.................................65
SCHEDULE F DIVIDEND MULTIPLES.....................................66
SCHEDULE G CEDING COMPANY DATA....................................67
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REINSURANCE AGREEMENT
This Agreement was made and entered into by and between The Mutual Life
Insurance Company of New York (hereinafter referred to as the
"Ceding Company") and Lyndon Life Insurance Company
(hereinafter referred to as the "Reinsurer") effective
December 31, 1990. This restatement of the Agreement will be
effective beginning on December 31, 1995 (the "Effective
Date").
The Ceding Company and the Reinsurer mutually agree to reinsure on the
terms and conditions stated herein. This Agreement is an
indemnity reinsurance agreement solely between the Ceding
Company and the Reinsurer, and performance of the obligations
of each party under this Agreement will be rendered solely to
the other party. In no instance, except as described in
Article XVI hereunder, will anyone other than the Ceding
Company or the Reinsurer have any rights under this Agreement,
and the Ceding Company will be and remain the only party
hereunder that is liable to any insured, policyowner or
beneficiary under any policy reinsured hereunder.
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ARTICLE I
GENERAL PROVISIONS
1. Policies and Risks Reinsured. The Reinsurer agrees to indemnify the
Ceding Company for, and the Ceding Company agrees to reinsure with the
Reinsurer, according to the terms and conditions hereof, the portion of
the risks under the policies described in Schedule A attached hereto.
2. Coverages and Exclusions.
A. Only the permanent life insurance policies described in
schedule A are reinsured under this Agreement.
B. The policies reinsured hereunder and described in Schedule A,
Paragraph 2 include any paid-up additions purchased with
dividends on those policies.
C. Riders providing additional life insurance benefits,
accidental death benefits, waiver of premium benefits, or
other "miscellaneous" benefits are not reinsured under this
Agreement.
D. The Reinsurer will not participate in policy loans on policies
reinsured hereunder.
3. Plan of Reinsurance. This indemnity reinsurance is a combination of
coinsurance and modified coinsurance. The Ceding Company will retain,
control and own all assets held in relation to the Modified Coinsurance
Reserve and the Retained Dividend Liability.
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4. Expenses. The Reinsurer will bear no part of the expenses incurred in
connection with the policies reinsured hereunder, except as otherwise
provided herein.
5. Dividends. Beginning December 31, 1995, the Reinsurer will reimburse
the Ceding Company for Dividends paid to the owners of the policies
reinsured hereunder in accordance with, and to the extent described in
Article V. Prior to December 31, 1995, the Reinsurer will have no
liability to the Ceding Company for reimbursement of, and will not
reimburse the Ceding Company for, dividends to policyholders.
6. Policy Changes. The Ceding Company must provide written notification to
the Reinsurer of the Ceding Company's implementation of any change
which both: (a) affects the original terms or conditions of any policy
reinsured hereunder, and (b) is voluntarily on the part of the Ceding
Company, not later than fifteen (15) days after the change takes
effect. The Reinsurer will provide written notification to the Ceding
Company as to the Reinsurer's acceptance or rejection of the change
within fifteen (15) days after receipt of notice of the change. If the
Reinsurer accepts any such change, the Ceding Company and the Reinsurer
will share, proportionately to the amount reinsured hereunder, in any
increase or decrease in the Ceding Company's liability which results
from such change. If the Reinsurer rejects any such change, the
Reinsurer's liability under this Agreement will be determined as if no
such change had occurred.
7. No Extracontractual Damages. The Reinsurer does not indemnify the
Ceding Company for, and will not be liable for, any extracontractual
damages or
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extracontractual liability resulting from fraud, oppression, bad
faith, strict liability, or negligent, reckless or intentional wrongs
on the part of the Ceding Company or its directors, officers, employees
and agents. The following types of damages are examples of damages that
would be excluded from this Agreement for the conduct described above:
actual damages, damages for emotional distress, and punitive or
exemplary damages.
8. Policy Administration. The Ceding Company will administer the policies
reinsured hereunder and will perform all accounting for such policies.
9. Inspection. At any reasonable time, the Reinsurer may inspect, during
normal business hours, at the appropriate office of the Ceding Company,
the original papers and any and all other books or documents relating
to or affecting reinsurance under this Agreement. The Reinsurer will
not use any information obtained through any inspection pursuant to
this Paragraph for any purpose not relating to reinsurance hereinunder.
10. Taxes. The allowance for any premium taxes paid in connection with the
policies reinsured hereunder is included in the Commission and Expense
Allowance as described in Article III. The Reinsurer will not reimburse
the Ceding Company for any other taxes paid by the Ceding Company in
connection with the policies reinsured hereunder.
11. Condition. The reinsurance hereunder is subject to the same limitations
and conditions as the policies issued by the Ceding Company which are
reinsured hereunder, except as otherwise provided in this Agreement.
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12. Misunderstandings and Oversights. If any failure to pay amounts due or
to perform any other act required by this Agreement is unintentional
and caused by misunderstanding or oversight, the Ceding Company and the
Reinsurer will adjust the situation to what it would have been had the
misunderstanding or oversight not occurred.
13. Adjustments. If the Ceding Company's liability under any of the
policies reinsured hereunder is changed because of a misstatement of
age, sex or any other material fact, the Reinsurer will share in the
change proportionately to the amount reinsured hereunder, and will make
any and all proportional adjustments with the Ceding Company.
14. Reinstatements. If a policy reinsured hereunder lapses, and is
subsequently reinstated while this Agreement is in force, the
reinsurance for such policy will be reinstated automatically. The
Ceding Company will pay the Reinsurer the Reinsurer's proportionate
share of all amounts received by the Ceding Company in connection with
the reinstatement of the policy. In addition, the Ceding Company will
pay the Reinsurer any Cash Surrender Values previously reimbursed by
the Reinsurer as a result of such lapse, if such lapse resulted in
extended term insurance or reduced paid-up insurance.
15. Assignment. Neither the Ceding Company nor the Reinsurer may assign any
of its rights, duties or obligations under this Agreement without the
prior written consent of the other party.
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16. Amendments. This Agreement may be amended only by written agreement of
the parties.
17. Entire Agreement. The terms expressed herein constitute the entire
agreement between the parties with respect to the policies reinsured
hereunder. There are no understandings between the parties with respect
to the policies reinsured hereunder other than as expressed in this
Agreement.
18. Election to Determine Specified Policy Acquisition Expenses. The Ceding
Company and the Reinsurer agree that the party with net positive
consideration under this Agreement will capitalize specified policy
acquisition expenses with respect to policies reinsured under this
Agreement without regard to the general deductions limitation of
Section 848(c)(1) of the Internal Revenue Code of 1986, as amended. The
Ceding Company and the Reinsurer will exchange information pertaining
to the amount of net consideration under this Agreement each year to
ensure consistency. The Ceding Company will submit a schedule to the
Reinsurer by June 1 of each year of its calculation of the net
consideration for the preceding taxable year. The Reinsurer may contest
the calculation in writing within thirty (30) days of receipt of the
Ceding Company's schedule. Any differences will be resolved between the
parties so that consistent amounts are reported on the respective tax
returns for the preceding taxable year. This election to capitalize
specified policy acquisition expenses without regard to the general
deductions limitation is effective for the 1995 taxable year and for
all subsequent taxable years during which the Agreement remains in
effect.
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ARTICLE II
REINSURANCE PREMIUMS
1. Reinsurance Premiums. The Ceding Company will pay the Reinsurer
Reinsurance Premiums on all policies in effect under this Agreement in
an amount equal to the sum of:
(i) that portion of the gross base policy premiums collected
during the Accounting Period by the Ceding Company which
corresponds to the applicable portion of the policies
reinsured hereunder, plus
(ii) that portion of any dividends on those policies described in
Schedule A, Paragraph 2 used during the Accounting Period to
purchase paid-up additional insurance which corresponds to the
portion of the paid-up additions reinsured hereunder.
The Reinsurance Premiums paid to the Reinsurer by the Ceding Company
will be remitted to the Reinsurer at the end of the Accounting Period
during which the gross premiums were collected by the Ceding Company
and the Reinsurer will treat any such Reinsurance Premiums as paid
premium for annual statement purposes regardless of the mode of
collection by the Ceding Company on the policies reinsured hereunder.
2. Ceded Reinsurance Premiums. The Reinsurer will reimburse the Ceding
Company for any Ceded Reinsurance Premiums attributable to the portions
of the policies
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reinsured hereunder which are paid by the Ceding Company under yearly
renewable term reinsurance agreements as described in Article IV,
Paragraph 7.
3. Supplemental Consideration. On December 31, 1995, the Ceding Company
will pay the Reinsurer a Supplemental Consideration equal to the sum of
(a) the Net Statutory Reserve, as described in Schedule B, Paragraph 6,
calculated as of December 31, 1995 with respect to the policies assumed
as of December 31, 1995 and described in Schedule A, Paragraph 2, plus
(b) the Retained Dividend Liability determined in accordance with
Article VI, Paragraph 3, calculated as of December 31, 1995 with
respect to the policies assumed as of December 31, 1995 and described
in Schedule A, Paragraph 2.
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ARTICLE III
ALLOWANCE
Commission and Expense Allowance. The Reinsurer will pay the Ceding
Company a Commission and Expense Allowance at the end of each
Accounting Period equal to 7 percent times that portion of the gross
base policy premiums collected by the Ceding Company during the current
Accounting Period, as described in Article II, Paragraph 1, item (i),
which corresponds to the portion of the policies reinsured hereunder.
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ARTICLE IV
BENEFIT PAYMENTS
1. Benefit Payments. Benefit Payments, as referred to in this Agreement,
means the Reinsurer's quota share of (i) Claims as described in
Paragraph 2 below, and (ii) Cash Surrender Values as described in
Paragraph 3 below.
2. Claims. The Reinsurer will pay the Ceding Company that portion of the
Claims paid by the Ceding Company on policies reinsured hereunder which
corresponds to the portion of the policies reinsured hereunder.
3. Cash Surrender Values. The Reinsurer will pay the Ceding Company that
portion of the Cash Surrender Values paid by the Ceding Company on
policies reinsured hereunder which corresponds to the portion of the
policies reinsured hereunder. For purposes of this Agreement, policies
lapsing to Extended Term Insurance or Reduced Paid-Up Insurance will be
treated as surrenders.
4. Notice. The Ceding Company will notify the Reinsurer each Accounting
Period after receipt of any information regarding Claims on policies
reinsured hereunder in accordance with Schedule C. The reinsurance
claim and copies of notification, claim papers, and proofs will be
furnished the Reinsurer upon request.
5. Liability and Payment. The Reinsurer will accept the decision of the
Ceding Company with respect to payment of a Claim on a policy reinsured
hereunder. The Reinsurer will pay its proportionate share of Claims in
a lump sum to the Ceding Company without regard to the form of
settlement by the Ceding Company.
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6. Contested Claims. The Ceding Company will advise the Reinsurer of its
intention to contest, compromise or litigate any Claims involving
policies reinsured hereunder. The Reinsurer will pay its share of the
expense of such contests, in addition to its share of Claims, or it may
choose not to participate. If the Reinsurer chooses not to participate,
it will discharge its liability by payment to the Ceding Company of the
full amount of its liability on the policy reinsured.
7. Facility of Reinsurance. The Ceding Company has entered into certain
YRT reinsurance treaties with respect to the policies reinsured
hereunder and described in Schedule A. The death benefits paid under
this Agreement will be net of the death benefits paid under those
reinsurance treaties and in no event will exceed the product of the sum
of $3 million, plus the associated Statutory Reinsured Reserve
released, on any single life times the corresponding quota share
percentage assumed by the Reinsurer as described in Schedule A.
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ARTICLE V
DIVIDENDS
1. Dividends. For Accounting Periods ending December 31, 1995 and
thereafter, the Reinsurer will reimburse the Ceding Company for the
dividends paid by the Ceding Company on the policies reinsured
hereunder as follows. This reimbursement (referred to as "Dividends")
shall be determined as the greater of (a) and (b), where:
(a) is the Formula Dividend determined in accordance with
Paragraph 4 below, and
(b) is the Reinsurer's quota share of an amount of dividends
determined using the Last Acceptable Scale, as defined in
Paragraph 3 below.
In no event, however, shall the Dividends paid by the Reinsurer during
any Accounting Period exceed the Reinsurer's quota share of the
dividends actually paid by the Ceding Company during the Accounting
Period with respect to the policies reinsured hereunder. As an
additional limitation, for any Accounting Period designated an
Exception Year, as defined in Paragraph 5 below, and the four
Accounting Periods immediately subsequent to such Exception Year, the
Dividends shall be determined as the Formula Dividend determined in
accordance with Paragraph 4 below.
2. Non-Conformity. If the operation of this Article V, and/or Article VI,
is determined by a court or regularly body, having jurisdiction over
this Agreement or the Ceding Company, to violate any law, rule or
regulation applicable to the Ceding Company,
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excluding any determination made in relation to the rehabilitation,
liquidation, or conservation of the Ceding Company, the Reinsurer and
the Ceding Company shall use their best efforts to renegotiate this
Agreement or the terms of this Article V, and Article VI, so that
neither party achieves an unexpected benefit or adverse result from the
terms or operation of this Article V, and/or the following Article VI.
3. Last Acceptable Scale. The Last Acceptable Scale is defined as the
Ceding Company's dividend scale for the most recent year during which
the Reinsurer's quota share of the dividends paid by the Ceding Company
did not exceed the Formula Dividend determined in accordance with
Paragraph 4 below. For purposes of this Article, the dividend scale for
any Accounting Period is determined by the dividend rate adopted by the
Ceding Company for the purposes of determining the payment of
dividends, during that same Accounting Period, on policies reinsured
hereunder and for making illustrations during that Accounting Period of
dividends to be paid by the Ceding Company on the policies reinsured
hereunder in subsequent Account Periods.
4. Formula Dividend. The Formula Dividend shall be determined as the sum,
by valuation basis, of the product of (i) multiplied by the sum of (ii)
plus (iii) for those policies reinsured hereunder, where:
(i) equals the applicable Statutory Reinsured Reserve by valuation
basis at the beginning of the current Accounting Period
determined in accordance with Schedule B, Paragraph 5, times
the number of calendar quarters that have to date ended during
the current Accounting Period, divided by 4;
(ii) equals the applicable Basic Dividend Factor by valuation basis
described in Schedule E for the current Accounting Period; and
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(iii) equals (a) x [(b) - (c)], where:
(a) equals the applicable Dividend Multiple by valuation
basis described in Schedule F for the current
Accounting Period;
(b) equals the Modified Coinsurance Interest Rate
described in Schedule D, Paragraph 1, for the
immediately preceding Accounting Period; and
(c) equals .0683.
Nothwithstanding the above, the sum of (ii) plus (iii), used in the
calculation of the Formula Dividend above for any Accounting Period
with respect to any policy reinsured hereunder, must always be greater
than or equal to zero.
5. Exception Year. An Exception Year is defined as any Accounting Period
in which either (a) or (b) have occurred, where:
(a) is the occurrence of an Excess Year, as described in
Paragraph 6 below, during each of the three
immediately preceding Accounting Periods; and
(b) is the occurrence of an Excess Year, as described in
Paragraph 6 below, both during the immediately
preceding Accounting Period and during any five
Accounting Periods within the preceding eight
Accounting Periods.
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6. Excess Year. An Excess Year is defined as an Accounting Period during which
Dividends exceed the Formula Dividend determined in accordance with
Paragraph 4 above.
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ARTICLE VI
DIVIDEND LIABILITY
1. Dividend Liability. For Accounting Periods ending December 31, 1995 and
thereafter, the Reinsurer will participate in the liability established
by the Ceding Company for the payment of dividends on the policies
reinsured hereunder as follows. This participation on the part of the
Reinsurer (referred to as the "Dividend Liability") shall be determined
as the greater of (a) and (b), where:
(a) is the Formula Liability determined in accordance
with paragraph 4 below, and
(b) is the Reinsurer's quota share of a liability
determined using the Last Acceptable Scale, as
defined in Article V, Paragraph 3. This liability
will be calculated by the Ceding Company, with
respect to the portion of the policies reinsured
hereunder, based on the discounted value of the
dividends payable during the twelve month period
following the last day of the last completed calendar
quarter. With the exception of the dividend scale
used, these calculations will be consistent with
those used to produce the sum of the following from
the Ceding Company's Annual Statement:
Item Annual Statement Reference
---- --------------------------
Policyholders' Dividends Page 3, Column 1, Line 6
Due and Unpaid
Dividends Apportioned Page 3, Column 1, Line 7.1
For Payment
Dividends Not Yet Page 3, Column 1, Line 7.2
Apportioned
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In no event, however, shall the Dividend Liability participated in by the
Reinsurer during any Accounting Period exceed the Reinsurer's quota share of the
dividend liability actually established by the Ceding Company during the
Accounting Period with respect to the policies reinsured hereunder.
The actual dividend liability will be equal to the sum of the following
liabilities as set forth in the Ceding Company's Annual Statement:
Item Annual Statement Reference
---- --------------------------
Policyholders' Dividends Page 3, Column 1, Line 6
Due and Unpaid
Dividends Apportioned Page 3, Column 1, Line 7.1
For Payment
Dividends Not Yet Page 3, Column 1, Line 7.2
Apportioned
As an additional limitation, for the quarterly settlements, described in Article
X, Paragraph 3, as of March 31, June 30 and September 30 of: (a) any Accounting
Period designated an Exception Year, as defined in Article V, Paragraph 5, and
(b) the four Accounting Periods immediately subsequent to such Exception Year,
the Dividend Liability shall be determined as the Formula Liability determined
in accordance with Paragraph 4 below. For the quarterly settlements, described
in Article X, Paragraph 3, as of December 31 of: (c) any Accounting Period
immediately preceding an Exception Year, (d) any Accounting Period designated an
Exception Year, and (e) the three Accounting Periods immediately subsequent to
such Exception Year, the Dividend Liability shall be determined as the Formula
Liability determined in accordance with Paragraph 4 below.
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2. Coinsured Dividend Liability. The Coinsured Dividend Liability at the
end of any Accounting Period is equal to the lesser of: (a) the
Dividend Liability, as defined in Paragraph 1 above, or (b) $16
million. The Reinsurer will establish a dividend liability on its
Annual Statement in the amount of the Coinsured Dividend Liability.
3. Retained Dividend Liability. The Retained Dividend Liability at the end
of any Accounting Period is equal to the net of: (a) the Dividend
Liability determined in accordance with Paragraph 1 above, minus (b)
the Coinsured Dividend Liability determined in accordance with
Paragraph 2 above. The Reinsurer will reimburse the Ceding Company each
Accounting Period for increases in the Retained Dividend Liability
through the operation of the Modified Coinsurance Liability Adjustment
as described in Article VII.
4. Formula Liability. The Formula Liability shall be determined as the
sum, by valuation basis, of the product of (i) multiplied by the sum of
(ii) plus (iii) for those policies reinsured hereunder, where:
(i) equals the Statutory Reinsured Reserve by valuation
basis at the end of the current Accounting Period
determined in accordance with Schedule B, paragraph
5;
(ii) equals the applicable Basic Dividend Factor by
valuation basis described in Schedule E for the
Accounting Period immediately following the current
Accounting Period; and
(iii) equals (a) x [(b) - (c)], where:
(a) equals the applicable Dividend Multiple by
valuation basis
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described in Schedule F for the Accounting
Period immediately following the current
Account Period;
(b) equals the annualized equivalent of the
Modified Coinsurance Interest Rate described
in Schedule D, Paragraph 1, for the current
Accounting Period; and
(c) equals .0683.
Nothwithstanding the above, the sum of (ii) plus (iii), used in the calculation
of the Formula Liability above for any Accounting Period with respect to any
policy reinsured hereunder, must always be greater than or equal to zero.
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ARTICLE VII
MODIFIED COINSURANCE LIABILITY ADJUSTMENT
Modified Coinsurance Liability Adjustment.
A. The Modified Coinsurance Liability Adjustment will be computed each
Accounting Period equal to (i) plus (ii) minus (iii) minus (iv) minus
(v) minus (vi), where:
(i) equals the total amount of the Modified Coinsurance Reserve
determined in accordance with Schedule B, Paragraph 4, at the
end of the current Accounting Period on the policies reinsured
hereunder;
(ii) equals the Retained Dividend Liability, as described in
Article VI, Paragraph 3, at the end of the current Accounting
Period;
(iii) equals the total amount of the Modified Coinsurance Reserve
determined in accordance with Schedule B, Paragraph 4, at the
beginning of the current Accounting Period on the policies
reinsured hereunder;
(iv) equals the Retained Dividend Liability, as described in
Article VI, Paragraph 3, at the beginning of the current
Accounting Period;
(v) equals the Modified Coinsurance Reserve at the beginning of
the current Accounting Period on the policies reinsured
hereunder times the Modified Coinsurance Interest Rate as
described in Schedule D, Paragraph 1; and
(vi) equals the Retained Dividend Liability, as described in
Article VI, Paragraph 3, at the beginning of the current
Accounting Period on policies
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reinsured hereunder times the Modified Coinsurance Interest
Rate as described in Schedule D, Paragraph 1.
In the Accounting Period in which termination of this Agreement occurs,
the reference in (i) above to "the end of the current Accounting
Period" refers to the terminal accounting date as described in Article
XII, Paragraph 2.
B. For any Accounting Period in which the amount computed in A. above is
positive, the Reinsurer will pay the Ceding Company such amount. For
any Accounting Period in which the amount computed in A. above is
negative, the Ceding Company will pay the Reinsurer the absolute value
of such amount.
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ARTICLE VIII
EXPENSE AND RISK CHARGE
Expense and Risk Charge. The Expense and Risk Charge for each calendar
quarter payable to the Reinsurer by the Ceding Company, will be equal
to the sum of (i) plus (ii) plus (iii), where:
(i) equals the Expense and Risk Charge Rate, as defined
below, times the Expense and Risk Charge Base, as
defined below;
(ii) equals .5 percent times the excess of the Statutory
Reinsured Reserve at the end of the current calendar
quarter determined in accordance with Schedule B,
Paragraph 5, over the Net Statutory Reserve at the
end of the current calendar quarter determined in
accordance with Schedule B, Paragraph 6; and
(iii) equals .5 percent times the Coinsured Dividend
Liability at the end of the current calendar quarter
determined in accordance with Article VI, Paragraph
2.
The Expense and Risk Charge Rate applicable to the Expense and Risk
Charge equation described above is defined as follows:
22
<PAGE> 28
For Calendar
Quarters Ending During Expense and Risk Charge Rate
---------------------- ----------------------------
1995 through 1997 .5000%
1998 and thereafter .5025%
The Expense and Risk Charge Base applicable to the Expense and Risk
Charge equation described above is defined as follows:
For Calendar
Quarters Ending During Expense and Risk Charge Base
---------------------- ----------------------------
1995 through 1997 the greater of: (a) the
Minimum Net Coinsurance
Reserve determined in
accordance with Schedule
B, Paragraph 7, or (b)
quantity (iv) as defined
below, but never less than
zero
1998 and thereafter (iv) as defined below, but
never less than zero,
where:
(iv) equals the sum of:
(a) the Net Coinsurance Reserve at the beginning of the
current Accounting Period determined in accordance
with Schedule B, Paragraph 3, plus
23
<PAGE> 29
(b) the Statutory Reinsured Reserve at the end of the
current Accounting Period determined in accordance
with Schedule B, Paragraph 5, plus
(c) the Retained Dividend Liability at the end of the
current Accounting Period determined in accordance
with Article VI, Paragraph 3, plus
(d) the Ceded Reinsurance Premiums for the current
Accounting Period determined in accordance with
Article II, Paragraph 2, plus
(e) Benefit Payments for the current Accounting Period as
described in Article IV, plus
(f) Dividends for the current Accounting Period
determined in accordance with Article V, Paragraph 1,
plus
(g) the Commission and Expense Allowance for the current
Accounting Period determined in accordance with
Article III, minus
(h) the Statutory Reinsured Reserve at the beginning of
the current Accounting Period determined in
accordance with Schedule B, Paragraph 5, minus
(i) the Retained Dividend Liability at the beginning of
the current Accounting Period determined in
accordance with Article VI, Paragraph 3, minus
24
<PAGE> 30
(j) interest on the Modified Coinsurance Reserve for the
current Accounting Period determined in accordance
with Article VII, Part A., item (v), minus
(k) interest on the Retained Dividend Liability for the
current Accounting Period determined in accordance
with Article VII, Part A, item (vi), minus
(l) Reinsurance Premiums for the current Account Period
determined in accordance with Article II, Paragraph
1, minus
(m) the sum of any Expense and Risk Charge for the
preceding calendar quarters which have ended during
the current Accounting Period.
In no event will the Expense and Risk Charge payable be less than
$55,000 for any calendar quarter.
25
<PAGE> 31
ARTICLE IX
EXPERIENCE REFUND
1. General. An Experience Refund will be paid by the Reinsurer to the
Ceding Company at the end of each Accounting Period with respect to the
reinsurance hereunder, if the operation of the Experience Refund
formula detailed in Paragraph 2 below produces a positive amount for
that Accounting Period. If the operation of the Experience Refund
formula produces a negative amount for the current Accounting Period,
then the Experience Refund formula in Paragraph 2 will be adjusted to a
calendar year-to-date basis. If there is a remaining negative amount,
then the Experience Refund is set equal to zero and the remaining
negative amount will be carried forward and included in the Memorandum
Account calculation as described in Article X, Paragraph 9, and will be
offset against any future positive Experience Refunds in accordance
with item (ii) (f) of the formula detailed in Paragraph 2 below. No
Experience Refund will be paid by the Reinsurer to the Ceding Company
after the Net Coinsurance Percentage, as defined in Schedule B,
Paragraph 1, becomes zero.
26
<PAGE> 32
2. Formula. With respect to each Accounting Period, the Experience Refund
will be equal to (i) minus (ii), where:
(i) equals the sum of
(a) Reinsurance Premiums determined in
accordance with Article II, Paragraph 1,
plus
(b) any Supplemental Consideration payable
during the current Accounting Period
determined in accordance with Article II,
Paragraph 3; and
(ii) equals the sum of:
(a) Ceded Reinsurance Premiums determined in
accordance with Article II, Paragraph 2,
plus
(b) Benefit Payments as described in Article IV,
plus
(c) Dividends determined in accordance with
Article V, Paragraph 1, plus
(d) the Commission and Expense Allowance
determined in accordance with Article III,
plus
(e) the Modified Coinsurance Liability
Adjustment determined in accordance with
Article VII, plus
(f) the balance of the Memorandum Account at the
end of the preceding Accounting Period, with
accrued interest thereon, determined in
accordance with Article X, Paragraph 9, plus
27
<PAGE> 33
(g) the sum of the Expense and Risk Charge for
each calendar quarter which has ended during
the current Accounting Period determined in
accordance with Article VIII.
28
<PAGE> 34
ARTICLE X
ACCOUNTING AND SETTLEMENTS
1. Annual Accounting Period. Each Accounting Period under this Agreement
will be a calendar year, except that: (a) the first annual Accounting
Period runs from January 1, 1995 through the last day of the calendar
year during which January 1,1995 falls, and (b) the final Accounting
Period runs from the end of the preceding Accounting Period until the
terminal accounting date of this Agreement as described in Article XI,
Paragraph 2.
2. Quarterly Accounting Reports. Accounting reports in the form of
Schedule C will be submitted to the Reinsurer by the Ceding Company for
each calendar quarter not later than thirty (30) days after the end of
each calendar quarter of the Accounting Period to which they pertain.
Such reports will include information for the Accounting Period on the
amount of Reinsurance Premiums, Ceded Reinsurance Premiums,
Supplemental Consideration, Commission and Expense Allowance, Benefit
Payments, Dividends, Experience Refund, Memorandum Account, Expense and
Risk Charge, Modified Coinsurance Reserve, Coninsurance Reserve,
Statutory Reinsured Reserve, Net Statutory Reserve, Dividend Liability,
Coinsured Dividend Liability and Retained Dividend Liability.
3. Quarterly Settlements.
A. Within thirty (30) days after the end of each calendar
quarter, the Ceding Company will pay the Reinsurer the
year-to-date sum of:
(i) the Reinsurance Premiums determined in accordance
with Article II, Paragraph 1, plus
29
<PAGE> 35
(ii) any Supplemental Consideration payable during the
current Accounting Period determined in accordance
with Article II, Paragraph 3, plus
(iii) any Modified Coinsurance Liability Adjustment payable
to the Reinsurer determined in accordance with
Article VII, plus
(iv) any quarterly settlement payments paid by the
Reinsurer to the Ceding Company for all preceding
calendar quarters of the current Accounting Period.
B. Simultaneously, the Reinsurer will pay the Ceding Company the
year-to-date sum of:
(i) Ceded Reinsurance Premiums determined in accordance
with Article II, Paragraph 2, plus
(ii) the amount of Benefit Payments paid during the
Accounting Period as described in Article IV, plus
(iii) Dividends determined in accordance with Article VII,
Paragraph 1, plus
(iv) the Commission and Expense Allowance determined in
accordance with Article III, plus
(v) any Modified Coinsurance Liability Adjustment payable
to the Ceding Company determined in accordance with
Article VII, plus
30
<PAGE> 36
(vi) any Experience Refund determined in accordance with
Article IX, plus
(vii) any quarterly settlement payments paid by the Ceding
Company to the Reinsurer for all preceding calendar
quarters of the current Accounting Period.
4. Amounts Due Quarterly. Except as otherwise specifically provided in
this Agreement, all amounts due to be paid to either the Ceding Company
or the Reinsurer under this Agreement will be determined on a net basis
as of the last day of each calendar quarter and will be due and payable
within thirty (30) days after the end of the calendar quarter.
5. Annual Accounting Reports. The Ceding Company will provide the
Reinsurer with annual accounting reports within thirty (30) days after
the end of the calendar year for which such reports are prepared. These
reports will contain sufficient information about the policies
reinsured hereunder to enable the Reinsurer to prepare its annual
financial reports and to verify information reported in Schedule C, and
will include Exhibit 8 by reserve basis, Page 7, Page 25 and Schedule S
of the NAIC Convention Blank.
6. Estimations. If the amounts, as defined in Paragraph 3 above, cannot be
determined at such dates as defined in Paragraph 4 above, on an exact
basis, such payments will be paid in accordance with a mutually agreed
upon formula which will approximate the actual payments. Adjustments
will then be made to reflect actual amounts within
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<PAGE> 37
ninety (90) days after the end of the calendar quarter for which
amounts were estimated.
7. Delayed Payments. For purposes of Paragraph 4 above, if there is a
delayed settlement of a payment due, there will be an interest penalty,
at the Modified Coinsurance Interest Rate described in Schedule D,
Paragraph 1, for the period that the amount is overdue. For purposes of
this Paragraph, a payment will be considered overdue thirty (30) days
after the date such payment is due.
8. Offset of Payments. All monies due either the Ceding Company or the
Reinsurer under this Agreement or any other reinsurance agreements will
be offset against each other, dollar for dollar, regardless of any
insolvency of either party.
9. Memorandum Account. Should the settlement formula under Paragraph 3
above, produce an amount due the Ceding Company, the Reinsurer will pay
such amount in cash or its equivalent within fifteen (15) days after
such report is received by the Reinsurer. The Reinsurer will establish
a "Memorandum Account" in which such amounts paid to the Ceding Company
and all future such payments will accrue with interest at the
Memorandum Account Rate described in Paragraph 10 below. The balance of
the Memorandum Account at the beginning of any Accounting Period will
equal the absolute value of any negative Experience Refund determined
in accordance with Article IX, Paragraph 2, for the preceding
Accounting Period. These losses, and accrued interest thereon, will be
carried forward to subsequent Account Periods and will be a deduction
item in the calculation of future Experience Refunds in accordance with
Article IX, Paragraph 2, item (ii)(f).
32
<PAGE> 38
10. Memorandum Account Rate. The Memorandum Account Rate for any Accounting
Period will be equal to the Modified Coinsurance Interest Rate as
described in Schedule D, Paragraph 1, but not less than zero.
11. Partial Recapture. If a percentage of all of the policies reinsured
hereunder and issued during an Accounting Period is recaptured in
accordance with Article XI, Paragraph 4, then the quarterly settlements
described above will thereafter be made with respect to the policies
not recaptured. Adjustments in the amounts due from either the Ceding
Company or the Reinsurer will be made accordingly.
33
<PAGE> 39
ARTICLE XI
DURATION AND RECAPTURE
1. Duration. Except as otherwise provided herein, this Agreement will be
unlimited in duration.
2. Reinsurer's Liability. The liability of the Reinsurer with respect to
any policy reinsured hereunder will begin simultaneously with that of
the Ceding Company, but not prior to the Effective Date of this
Agreement. The Reinsurer's liability with respect to any policy
reinsured hereunder will terminate on the earliest of: (i) the date
such policy is recaptured; (ii) the date the Ceding Company's liability
on such policy is terminated; or (iii) the date this Agreement is
terminated. Termination of the Reinsurer's liability is subject to
payments in respect of such liability in accordance with the provisions
of Article XII of this Agreement. In no event should the interpretation
of this Paragraph imply a unilateral right of the Reinsurer to
terminate this Agreement.
3. Termination for Nonpayment of Reinsurance Premiums or Other Amounts
Due. If the Ceding Company fails to pay the Reinsurance Premiums or any
other amounts due to the Reinsurer pursuant to this Agreement, within
seventy-five (75) days after the end of any Accounting Period, the
Reinsurer may terminate this Agreement subject to thirty (30) days
prior written notice to the Ceding Company.
4. Recapture. Beginning January 1, 1997, policies reinsured hereunder are
eligible for recapture, at the option of the Ceding Company, on any
January 1, or on any other date mutually agreed to in writing subject
to ninety (90) days prior written notice. Once policies reinsured
hereunder are eligible for recapture, the Ceding Company
34
<PAGE> 40
may elect to recapture either all of the policies reinsured hereunder
or some percentage of all of the policies reinsured hereunder. In no
event may the Ceding Company recapture a percentage of one or more of
the policies reinsured hereunder without recapturing an equal
percentage of all policies reinsured hereunder. This Agreement will
terminate if all policies reinsured hereunder are recaptured.
5. Internal Replacements. Should the Ceding Company, its affiliates,
successors or assigns, initiate a program of Internal Replacement that
would include any of the policies reinsured hereunder, the Ceding
Company will immediately notify the Reinsurer. For purposes of this
Agreement, such policies will be treated as recaptured rather than
surrendered, and such recapture will apply to all policies reinsured
hereunder. For purposes of this Agreement, the term "Internal
Replacement" will mean any instance in which a policy or any portion of
the cash value of a policy is exchanged for another policy or annuity,
not covered under this Agreement, which is written by the Ceding
Company, its affiliates, successors or assigns.
35
<PAGE> 41
ARTICLE XII
TERMINAL ACCOUNTING AND SETTLEMENT
1. Terminal Accounting. In the event that this Agreement is terminated in
accordance with Article XI, Paragraph 3, or all reinsurance under this
Agreement is recaptured in accordance with Article XI, Paragraph 4, a
Terminal Accounting and Settlement will take place.
2. Date. The terminal accounting date will be the earliest of: (1) the
effective date of recapture pursuant to any notice of recapture given
under this Agreement, (2) the effective date of termination pursuant to
any notice of termination given under this Agreement, or (3) any other
date mutually agreed to in writing.
3. Settlement. The Terminal Accounting and Settlement will consist of:
(a) the quarterly settlement as provided in Article X, Paragraph
3, computed as of the terminal accounting date; and
(b) payment by the Ceding Company to the Reinsurer of an amount
equal to the Modified Coinsurance Reserve on the policies
reinsured hereunder as of the terminal accounting date; and
(c) payment by the Reinsurer to the Ceding Company of a Terminal
Reserve Adjustment equal to the Modified Coinsurance Reserve
on the policies reinsured hereunder as of the terminal
accounting date;
(d) payment by the Ceding Company to the Reinsurer of any
Memorandum Account as described in Article X, Paragraph 9, as
of the terminal accounting date;
36
<PAGE> 42
(e) payment by the Ceding Company to the Reinsurer of an amount
equal to the Retained Dividend Liability on the policies
reinsured hereunder as of the terminal accounting date; and
(f) payment by the Reinsurer to the Ceding Company of a Terminal
Reserve Adjustment equal to the Retained Dividend Liability on
the policies reinsured hereunder as of the terminal accounting
date.
The Reinsurer will have no further liability for the reimbursement of
dividends following the Terminal Accounting and Settlement. If a
percentage of all the policies reinsured hereunder is recaptured in
accordance with Article XI, Paragraph 4, then the Terminal Accounting
and Settlement described above will be with respect to only the
percentage of such policies recaptured.
If the calculation of the Terminal Accounting and Settlement produces
an amount owing to the Ceding Company, such amount will be paid by the
Reinsurer to the Ceding Company. If the calculation of the Terminal
Accounting and Settlement produces an amount owing to the Reinsurer,
such amount will be paid by the Ceding Company to the Reinsurer.
4. Supplementary Accounting and Settlement. In the event that, subsequent
to the Terminal Accounting and Settlement as provided above, a change
is made with respect to any amounts due, a supplementary accounting
will take place pursuant to Paragraph 3 above. Any amount owed to the
Ceding Company or to the Reinsurer by reason of such supplementary
accounting will be paid promptly upon the completion thereof.
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<PAGE> 43
ARTICLE XIII
PROXY TAX REIMBURSEMENT
General. Pursuant to IRC Section 848, insurance companies are required to
capitalize and amortize specified policy acquisition expenses. The amount
capitalized is determined by proxy based on a percentage of "reinsurance
premiums" as defined in the IRS regulations relating to IRC Section 848. At the
Reinsurer's request, the Ceding Company will reimburse the Reinsurer for any
positive timing cost to the Reinsurer which results from the application of IRC
Section 848 to the policies reinsured hereunder and which the Reinsurer
considers material. At the Ceding Company's request, the Reinsurer will
reimburse the Ceding Company for the absolute value of any negative timing cost
to the Reinsurer which results from the application of IRC Section 848 to the
policies reinsured hereunder and which the Ceding Company considers material.
Any proxy tax reimbursements made in accordance with this provision will be
based on a formula to calculate timing cost, as referred to above, agreeable to
both the Ceding Company and the Reinsurer.
38
<PAGE> 44
ARTICLE XIV
REPRESENTATIONS
Representations. The Ceding Company acknowledges that, at the Reinsurer's
request, it has provided the Reinsurer with the Ceding Company Data described in
Schedule G prior to the execution of this Agreement by the Reinsurer. The Ceding
Company represents that all factual information contained in the Ceding Company
Data is complete and accurate as of the date the document containing the
information was prepared. The Ceding Company further represents that any
assumptions made in preparing the Ceding Company Data were based upon informed
judgment and are consistent with sound actuarial principles. The Ceding Company
further represents that it is not aware of any omissions, errors, changes or
discrepancies which would materially affect the Ceding Company Data. The
Reinsurer has relied on such data and the foregoing representations in entering
into this Agreement. It is understood, however, that the Ceding Company does not
guarantee the future performance of the policies reinsured hereunder.
39
<PAGE> 45
ARTICLE XV
ARBITRATION
1. General. All disputes and differences between the Ceding Company and
the Reinsurer on which an agreement cannot be reached will be decided
by arbitration. The arbitrators will construe this Agreement from the
standpoint of practical business and equitable principles and the
customs and practices of the insurance and reinsurance business, rather
than from the standpoint of strict law. The parties intend that the
arbitrators will make their decision with a view to effecting the
intent of this Agreement.
2. Method. Three arbitrators will decide any differences. They must be
impartial and present or former officers of life insurance companies
other than the parties to this Agreement or any company owned by, or
affiliated with, either party. One of the arbitrators will be appointed
by the Reinsurer, another by the Ceding Company, and the two
arbitrators thus appointed will select a third arbitrator before
arbitration begins. Should one of the parties decline to select an
arbitrator within thirty (30) days after the date of a written request
to do so, or should the two arbitrators selected by the parties not be
able to agree upon the choice of a third, the appointment(s) will be
left to the President of the American Arbitration Association or its
successor. The arbitrators will decide by a majority of votes and their
decision will be final and binding upon the parties. The costs of
arbitration, including the fees of the arbitrators, will be shared
equally by the parties unless the arbitrators decide otherwise. Any
counsel fees incurred by a party in the conduct of arbitration will be
paid by the party incurring the fees.
40
<PAGE> 46
ARTICLE XVI
INSOLVENCY
Insolvency. The portion of any risk or obligation assumed by the Reinsurer, when
such portion is ascertained, shall be payable on demand of the Ceding Company at
the same time as the Ceding Company shall pay its net retained position of such
risk or obligation, with reasonable provision for verification before payment,
and the reinsurance shall be payable by the Reinsurer, on the basis of the
liability of the Ceding Company under the contract or contracts reinsured
without diminution because of the insolvency of the Ceding Company. In the event
of insolvency and the appointment of a liquidator, receiver or statutory
successor of the Ceding Company, such portion shall be payable to such
liquidator, receiver or statutory successor immediately upon demand, with
reasonable provision for verification, on the basis of claims allowed against
the insolvent company by any court of competent jurisdiction or by any
liquidator, receiver or statutory successor of the company having authority to
allow such claims, without diminution because of such insolvency or because such
liquidator, receiver or statutory successor has failed to pay all or a portion
of any claims. Payments by the Reinsurer as above set forth shall be made
directly to the Ceding Company or to its liquidator, receiver or statutory
successor, except where the contract of insurance or reinsurance specifically
provides another payee of such reinsurance in the event of the insolvency of the
Ceding Company. The liquidator, receiver or statutory successor of the Ceding
Company will give the Reinsurer written notice of the pendency of a claim
against the Ceding Company on any policy reinsured within a reasonable time
after such claim is filed in the insolvency proceeding. During the pendency of
any such claim, the Reinsurer may investigate such
41
<PAGE> 47
claim and interpose in the Ceding Company's name (or in the name of the Ceding
Company's liquidator, receiver or statutory successor), in the proceeding where
such claim is to be adjudicated, any defense or defenses which the Reinsurer may
deem available to the Ceding Company or its liquidator, receiver or statutory
successor. The expense thus incurred by the Reinsurer will be chargeable,
subject to court approval, against the Ceding Company as a part of the expense
of liquidation to the extent of a proportionate share of the benefit which may
accrue to the Ceding Company solely as a result of the defense undertaken by the
Reinsurer.
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<PAGE> 48
ARTICLE XVII
INTERMEDIARY
Intermediary. The Reinsurer and the Ceding Company acknowledge the Reinsurer's
appointment of RGA/Swiss Financial Group, L.L.C. as the designated reinsurance
manager with respect to this Agreement and the business reinsured hereunder. The
Reinsurer hereby directs the Ceding Company to submit all notices and reports
required to be sent to the Reinsurer under this Agreement and remit all amounts
due the Reinsurer under this Agreement directly to RGA/Swiss Financial Group,
L.L.C. as the designated reinsurance manager of the Reinsurer. The Ceding
Company acknowledges the Reinsurer's request and agrees to forward all notices,
reports and remittances required to be sent to the Reinsurer under this
Agreement directly to RGA/Swiss Financial Group, L.L.C. RGA/Swiss Financial
Group, L.L.C. shall receive all notices, reports and remittances on behalf of
the Reinsurer and receipt of such notices, reports and remittances by RGA/Swiss
Financial Group, L.L.C. shall be deemed to be receipt by the Reinsurer.
The Reinsurer and the Ceding Company individually acknowledges that RGA/Swiss
Financial Group, L.L.C. has furnished each with evidence of its Delaware
Reinsurance Intermediary Manager's license. The Ceding Company further
acknowledges that RGA/Swiss Financial Group, L.L.C. has made written disclosure
at the time of negotiation of this Agreement, or its amendment, whichever is
applicable, in accordance with Section 32.1(f) of the New York Insurance
Regulations.
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<PAGE> 49
ARTICLE XVIII
EXECUTION AND EFFECTIVE DATE
In witness of the above, this Amended and Restated Reinsurance Agreement is
executed in duplicate on the dates indicated below with an Effective Date of
December 31, 1995.
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
ATTEST: ("Ceding Company")
By: /s/ Arnold N. Greenspoon By: /s/ Phillip A. Eisenberg
--------------------------------- ---------------------------------
Title: AVP & Actuary Title: Sr. VP & Chief Actuary
Date: 2/9/96 Date: 2/9/96
LYNDON LIFE INSURANCE COMPANY
ATTEST: ("Reinsurer")
By: /s/ Gregg O. Caioler By: /s/ Roland Anderson
--------------------------------- ---------------------------------
Title: VP & Controller Title: President
Date: 2/7/96 Date: 2/7/96
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<PAGE> 50
SCHEDULE A
POLICIES AND RISKS REINSURED
1. Policies and Risks Reinsured Prior to December 31, 1995. Prior to the
Effective Date of this Amended and Restated Reinsurance Agreement, the
Reinsurer reinsured a 40.5 percent quota share of the Ceding Company's
liability on those whole life insurance policies issued by the Ceding
Company from October 1985 through June 1988, under Policy Form Number
1-85. On the Effective Date of this Amended and Restated Reinsurance
Agreement, the Ceding Company will recapture entirely the policies
described above and simultaneously in their stead cede the business
described in Paragraph 2 below to the Reinsurer.
2. Policies and Risks Reinsured On and After December 31, 1995. Effective
December 31, 1995, the Reinsurer reinsures a 31 percent quota share of
the Ceding Company's liability on all permanent premium paying life
insurance policies as of the Effective Date of this Amended and
Restated Reinsurance Agreement and any paid-up additions on those
policies issued by the Ceding Company and valued on one of the
following bases:
<TABLE>
<CAPTION>
Valuation Mortality Interest
Basis Code Table Rate
---------- ----- ----
<S> <C> <C>
0 American Experience 3.00%
1 1941 CSO 2.25
2 1941 CSO 2.50
3 1941 CSO 3.00
4 1958 CSO 2.50
5 1958 CSO 3.50
6 1958 CSO 3.00
8 1958 CSO 3.00
9 1958 CSO 3.0%/2.0%
10 1958 CSO 4.00
</TABLE>
45
<PAGE> 51
The reinsurance provided under this Agreement excludes Canadian Business.
During the term of this Agreement, the Ceding Company will retain not less than
31 percent of the liability on the policies reinsured hereunder.
46
<PAGE> 52
SCHEDULE B
RESERVES
1. Net Coinsurance Percentage. Reinsurance hereunder will be a combination
of coinsurance and modified coinsurance, and the Net Coinsurance
Reserve, as described in Paragraph 3 below, is based on the Net
Coinsurance Percentage specified below:
Net Coinsurance Percentage
On December 31, 1995 the quotient of 100 times $31,222,000,
divided by the Net Statutory Reserve on the
last day of the current Accounting Period as
defined in Paragraph 6 below
After December 31, 1995 100 times (i) as defined below, but not to
exceed (iii) as defined below, and not less
than (ii) as defined below, dividend by the
amount of the Net Statutory Reserve on the
last day of the current Accounting Period as
defined in Paragraph 6 below, where:
(i) equals the sum of:
(a) the Net Coinsurance Reserve at the beginning
of the current Accounting Period determined
in accordance with Paragraph 3 below, plus
(b) the Statutory Reinsured Reserve at the end
of the current Accounting Period determined
in accordance with Paragraph 5 below, plus
(c) the Retained Dividend Liability at the end
of the current Accounting Period determined
in accordance with Article VI, Paragraph 3,
plus
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<PAGE> 53
(d) the Ceded Reinsurance Premiums determined in
accordance with Article II, Paragraph 2,
plus
(e) Benefit Payments as described in Article IV,
plus
(f) Dividends determined in accordance with
Article V, Paragraph 1, plus
(g) the Commission and Expense Allowance
determined in accordance with Article III,
plus
(h) the sum of the Expense and Risk Charge for
each calendar quarter which has ended during
the current Accounting Period determined in
accordance with Article VIII, plus
(i) the amount of the Memorandum Account at the
end of the preceding Accounting Period, with
accrued interest thereon, determined in
accordance with Article X, Paragraph 9,
minus
(j) the Statutory Reinsured Reserve at the
beginning of the current Accounting Period
determined in accordance with Paragraph 5
below, minus
(k) the Retained Dividend Liability at the
beginning of the current Accounting Period
determined in accordance with Article VI,
Paragraph 3, minus
(l) Reinsurance Premiums determined in
accordance with Article II, Paragraph 1,
minus
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<PAGE> 54
(m) interest on the Modified Coinsurance Reserve
as described in accordance with Article VII,
Part A., item (v); minus
(n) interest on Dividend Liability as described
in accordance with Article VII, Part A.,
item (vi); and
(ii) equals the Minimum Net Coinsurance Reserve determined
in accordance with Paragraph 7 below; and
(iii) equals the greater of (o) as defined below or the sum
of:
(o) the Net Coinsurance Reserve at the beginning
of the current Accounting Period, determined
in accordance with Paragraph 3 below, plus
(p) the Statutory Reinsured Reserve at the
beginning of the current Accounting Period,
determined in accordance with Paragraph 5
below, minus
(q) the Net Statutory Reserve at the beginning
of the current Accounting Period, determined
in accordance with Paragraph 6 below, minus
(r) the Statutory Reinsured Reserve at the end
of the current Accounting Period, determined
in accordance with Paragraph 5 below, plus
(s) the Net Statutory Reserve at the end of the
current Accounting Period, determined in
accordance with Paragraph 6 below.
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<PAGE> 55
2. Coinsurance Reserve. The Coinsurance Reserve is equal to (i) plus (ii),
where:
(i) equals the Net Coinsurance Reserve as described in Paragraph 3
below; and
(ii) equals the excess of the Statutory Reinsured Reserve as
defined in Paragraph 5 below, over the Net Statutory Reserve
as defined in Paragraph 6 below.
3. Net Coinsurance Reserve. The Net Coinsurance Reserve is equal to the
Net Coinsurance Percentage, as defined in Paragraph 1 above, times the
Net Statutory Reserve, as defined in Paragraph 6 below.
4. Modified Coinsurance Reserve. The Modified Coinsurance Reserve is equal
to (i) minus (ii), where:
(i) equals the Net Statutory Reserve as defined in Paragraph 6
below, and
(ii) equals the Net Coinsurance Reserve determined in accordance
with Paragraph 3 above.
At any time, the sum of the Coinsurance Reserve, as defined in
Paragraph 2 above, plus the Modified Coinsurance Reserve must be equal
to the Statutory Reinsured Reserve, as defined in Paragraph 5 below.
5. Statutory Reinsured Reserve. The term "Statutory Reinsured Reserve," as
used in this Agreement, means the statutory reserve on the position of
the policies
50
<PAGE> 56
reinsured hereunder as calculated by the Ceding Company under its
applicable State law.
6. Net Statutory Reserve. The term "Net Statutory Reserve," as used in
this Agreement, means the reserve as calculated according to the
methods described in Section 807 of the Internal Revenue Code of 1986.
7. Minimum Net Coinsurance Reserve. The Minimum Coinsurance Reserve is
defined below for each Accounting Period except that, if in any
Accounting Period (a) the Termination Rate, as defined in Paragraph 8
below, is greater than 0.15, (b) the compound annualized equivalent of
the Modified Coinsurance Interest Rate, as described in Schedule D,
Paragraph 1, its less than 5.5 percent, (c) the claims-paying ability
rating that Standard & Poor's Corporation assigns to the Ceding Company
is either discontinued or falls to or below BBB-, and/or (d) the
insurance financial strength rating that Moody's Investors Services
assigns to the Ceding Company is either discontinued or falls to or
below Baa3, then the Reinsurer may elect to define the Minimum Net
Coinsurance Reserve as an amount equal to or less than the amounts
specified below for the first Accounting Period in the current calendar
year and for all Accounting Periods thereafter:
51
<PAGE> 57
For Accounting
Periods Ending During Minimum Net Coinsurance Reserve
--------------------- -------------------------------
December 31, 1995 through $50,222,000, minus (i), as defined
December 31, 1997 below, minus (ii), as defined below
January 1, 1998 and Zero
thereafter
(i) equals (a) minus (b), where:
(a) equals the Statutory Reinsured Reserve at
the end of the current Accounting Period, as
defined in Paragraph 5 above; and
(b) equals the Net Statutory Reserve at the end
of the current Accounting Period, as defined
in Paragraph 6 above; and
(ii) equals the Coinsured Dividend Liability at the end of
the current Accounting Period determined in
accordance with Article VI, Paragraph 2.
8. Termination Rate. For Accounting Periods ending December 31,
1995 through December 31, 1996, the Termination Rate will be
equal to 1 - [(i) - (ii)], where:
52
<PAGE> 58
(i) equals the total number of policies reinsured
hereunder and described in Schedule A, as of the date
the current Accounting Period ends; and
(ii) equals
- for the calendar quarter ending December 31,
1995 only, 467,763;
- for the calendar quarter ending March 31,
1996 only, 459,841;
- for the calendar quarter ending June 30,
1996 only, 451,920;
- for the calendar quarter ending September
30, 1996 only, 443,998; and
- for the calendar quarter ending December 31,
1996 only, 437,000.
For Accounting Periods ending January 1, 1997 and thereafter, the Termination
Rate will be equal to 1 - [(iii) - (iv)], where:
(iii) equals the total number of policies reinsured
hereunder and described in Schedule A, as of the date
the current Accounting Period ends; and
53
<PAGE> 59
(iv) equals the total number of policies reinsured
hereunder and described in Schedule A, as of the date
one year prior to the date the current Accounting
Period ends.
9. Reserve Strengthening. Any increase in reserves resulting from a
reserve strengthening with respect to the policies reinsured hereunder
initiated by the Ceding Company will be paid by the Ceding Company to
the Reinsurer at the end of the Accounting Period during which the
reserve strengthening occurs. This Paragraph applies to strengthening
affecting either or both the Statutory Reinsured Reserve or the Net
Statutory Reserve.
54
<PAGE> 60
SCHEDULE C
QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS
FROM CEDING COMPANY TO REINSURER
Reporting Quarter:______________
Calendar Year:_________________
Date Report Completed:_________
<TABLE>
<CAPTION>
1. Reinsurance Premiums (Article II, Paragraph 1)
<S> <C> <C>
a. Gross Premiums collected on policies
described in Schedule A, Paragraph 1 _______
b. Gross Premiums collected on policies
described in Schedule A, Paragraph 2 _______
c. Dividends used to purchase paid-up
additional insurance _______
Reinsurance Premiums = a + b + c _______
2. Ceded Reinsurance Premiums (Article II,
Paragraph 2) _______
3. Supplemental Consideration (Article II, Paragraph 3) _______
4. Benefit Payments (Article IV)
a. Death Benefits _______
b. Cash Surrender Values _______
Benefit Payments = a + b _______
5. Dividends (Article V, Paragraph 1) _______
6. Modified Coinsurance Liability Adjustment (Article VII)
a. Modified Coinsurance Reserve beginning of
current Accounting Period _______
b. Retained Dividend Liability beginning of
current Accounting Period _______
c. Modified Coinsurance Reserve end of
current Accounting Period _______
d. Retained Dividend Liability end of
current Accounting Period _______
e. Equals c + d - b - a _______
f. Modified Coinsurance Interest Rate
(Schedule D, Paragraph 1) _______
g. Equals f x (a + b) _______
Modified Coinsurance Reserve Adjustment = e - g _______
</TABLE>
55
<PAGE> 61
<TABLE>
<CAPTION>
<S> <C> <C>
7. Memorandum Account (Article X, Paragraph 9) _______
8. Expense and Risk Charge (Article VIII)
a. First calendar quarter _______
b. Second calendar quarter _______
c. Third calendar quarter _______
d. Fourth calendar quarter _______
9. Commission and Expense Allowance (Article III) _______
10. Experience Refund = 1 - 2 - 4 - 5 - 6 - 7 - 8 - 9
(If negative, see Article IX) _______
11. Sum of net payments paid during all preceding
calendar quarters of the current Accounting Period _______
12. Cash Settlement = 1 - 2 + 3 - 4 - 5 - 6 - 9 - 10 - 11 _______
_______
</TABLE>
Supplemental Information - Policies described in Schedule A, Paragraph 2
<TABLE>
<CAPTION>
Number Statutory Net
of Reinsured Statutory Memorandum Dividend
Policies In Force Reserve Reserve Account Liability
-------- -------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ______ ______ ______ ______ ______ ______
+ Additions ______ ______ ______ ______ ______ ______
- - Terminations ______ ______ ______ ______ ______ ______
End of Period ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______
</TABLE>
<TABLE>
<CAPTION>
Reinsurer's Net
Dividend Coinsurance
Liability Reserve
--------- -------
<S> <C> <C>
Beginning of Period ______________ ______________
+ Additions ______________ ______________
- - Terminations ______________ ______________
End of Period ______________ ______________
______________ ______________
</TABLE>
56
<PAGE> 62
Termination Rate (Schedule B, Paragraph 8)
For Accounting Periods ending December 31, 1995 through December 31, 1996:
Calendar Quarter Ending
<TABLE>
<CAPTION>
12/31/95 3/31/96 6/30/96 9/30/96 12/31/96
<S> <C> <C> <C> <C> <C>
a. Total number of policies as of the date
current Accounting Period ends _______ ______ ______ ______ ______
b. Total number of policies deemed to be
inforce as of the date one year prior to
the date current Accounting Period
ends 467,763 459,841 451,920 443,998 437,000
c. Termination Rate = [1 - (a - b)]
_______ _______ _______ _______ _______
</TABLE>
<TABLE>
<CAPTION>
For Accounting Periods ending January 1, 1997 and thereafter:
<S> <C> <C>
d. Total number of policies as of the date the
current Accounting Period ends ___________
e. Total number of policies as of the date one year
prior to the date current Accounting Period ends ___________
f. Termination Rate = 1 - (d - e) ===========
Unadjusted Interest Rate (Schedule D, Paragraph 3)
(Based on Dividend Rate Accounting Pool)
(i) Net Investment Income for current calendar year _______
(ii) Sum of:
(a) Net Realized Capital Gains and (Losses) on
Investments for current calendar year __________
(b) Net Unrealized Capital Gains and (Losses)
on Investments for current calendar year __________
(iii) Subtotals, Cash and Invested Assets for current
calendar year ___________
(iv) Subtotals, Cash and Invested Assets for preceding
calendar year ____________
(v) Investment Income Due and Accrued for current
calendar year _____________
</TABLE>
57
<PAGE> 63
<TABLE>
<CAPTION>
<S> <C> <C>
(vi) Investment Income Due and Accrued for
preceding calendar year _____________
(vii) Borrowed Money for current calendar year _____________
(viii) Borrowed Money for preceding calendar year _____________
(ix) Adjusted Exhibit 2 Rate = _____________
_____________
2 x [(i) + (ii)]
______________________________________________________
(iii) + (iv) + (v) + (vi) - (vii) - (viii) - (i) - (ii)
</TABLE>
58
<PAGE> 64
Dividends (Article V)
1. Formula Dividend (Paragraph 4)
<TABLE>
<CAPTION>
Policies
valued
Policies using
Policies Policies valued 1958 CSO
valued valued using Mortality
using using 1958 CSO and
American 1958 CSO Mortality Interest
Experience Mortality and 3.0% other than
or 1941 CSO and 2.5% or 3.5% 2.5% or 3.0%
Mortality Interest Interest or 3.5% Total
--------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
(a) Dividend Multiples, current
Accounting Period (Schedule F)
--------- -------- -------- -------
(b) Modified Coinsurance Interest Rate,
immediately preceding Accounting
Period (Schedule D)
--------- -------- -------- -------
(c) equals .0683 .0683 .0683 .0683
--------- -------- -------- -------
(d) equals a x (b - c)
--------- -------- -------- -------
(e) Basic Dividend Factors current
Accounting Period (Schedule E)
--------- -------- -------- -------
(f) Statutory Reinsured Reserve,
beginning of current Accounting
Period
--------- -------- -------- -------
(g) equals .25 times the number of
calendar quarters that have to date
ended during the current Accounting
Period
--------- -------- -------- -------
(h) equals f x g x (d + e)
--------- -------- -------- -------- ------
2. The Reinsurer's quota share of an amount of dividends determined using
the Last Acceptable Scale, as defined in Article V, Paragraph 3 ------
3. The Reinsurer's quota share of the dividends actually paid by the
Ceding Company during the Accounting Period with respect to the
policies reinsured hereunder ------
4. Dividends equals the greater of 1. and 2. but not to exceed 3., as
defined above, unless either the current Accounting Period or any of
the four immediately preceding Accounting Periods was designated an
Exception Year in accordance with Article V, Paragraph 5. In the latter
case Dividends will be equal to 1. above. ------
</TABLE>
59
<PAGE> 65
Dividend Liability (Article VI)
1. Formula Liability (Paragraph 4)
<TABLE>
<CAPTION>
Policies
valued
Policies using
Policies Policies valued 1958 CSO
valued valued using Mortality
using using 1958 CSO and
American 1958 CSO Mortality Interest
Experience Mortality and 3.0% other than
or 1941 CSO and 2.5% or 3.5% 2.5% or 3.0%
Mortality Interest Interest or 3.5% Total
--------- -------- -------- ------- -----
<S> <C> <C> <C> <C> <C>
(a) Dividend Multiples, Accounting
Period immediately following
current Accounting Period (Schedule
F)
--------- -------- -------- -------
(b) Annualized equivalent of Modified
Coinsurance Interest Rate, current
Accounting Period (Schedule D)
--------- -------- -------- -------
(c) equals .0683 .0683 .0683 .0683
--------- -------- -------- -------
(d) equals a x (b - c)
--------- -------- -------- -------
(e) Basic Dividend Factors Accounting
Period immediately following
current Accounting Period (Schedule
E)
--------- -------- -------- -------
(f) Statutory Reinsured Reserve, end of
current Accounting Period
--------- -------- -------- ------- -------
(g) equals f x (d + e)
--------- -------- -------- ------- -------
2. The Reinsurer's quota share of a dividend liability determined using
the Last Acceptable Scale, as defined in Article V, Paragraph 3
-----
</TABLE>
60
<PAGE> 66
<TABLE>
<S> <C>
3. The Reinsurer's quota share of the dividend liability actually
established by the Ceding Company during the Accounting Period with
respect to the policies reinsured hereunder
-----
4. The Dividend Liability equals the greater of 1. and 2. but not to
exceed 3., as defined above, unless either the current Accounting
Period or any of the four immediately preceding Accounting Periods was
designated an Exception Year in accordance with Article V, Paragraph 5.
In the latter case Dividend Liability will be equal to 1. above.
-----
5. Coinsured Dividend Liability equals the lesser of 4. or $16 million
6. Retained Dividend Liability equals 4. - 5.
-----
</TABLE>
61
<PAGE> 67
SCHEDULE D
MODIFIED COINSURANCE INTEREST RATE
1. Modified Coinsurance Interest Rate. The Modified Coinsurance Interest
Rate for any Accounting Period will be equal to the Ceding Company's
Unadjusted Interest Rate, as described in Paragraph 3 below, for the
Accounting Period based on the performance of the assets comprising the
Ceding Company's Dividend Rate Accounting Pool, as described in
Paragraph 2 below.
2. Dividend Rate Accounting Pool. For purposes of this Agreement, the
Dividend Rate Accounting Pool will include all assets and the
performance thereof used in the determination of the Ceding Company's
Unadjusted Interest Rate, as described in Paragraph 3 below. The assets
to be included in the Dividend Rate Accounting Pool are as described in
(a) and (b) below:
(a) all cash, invested assets and investment income due and
accrued, net of any borrowed money, as reported in the Ceding
Company's Annual Statement; and
(b) all cash, invested assets, and investment income due and
accrued, net of any borrowed money, reported in the Annual
Statement of AUSA Life Insurance Company, Inc., Cedar Rapids,
Iowa as a result of the Asset Transfer and Acquisition
Agreement by and among the Ceding Company, AEGON USA, Inc., and
AUSA Life Insurance Company, Inc., dated December 31, 1993.
Wherever specific figures from the Dividend Rate Accounting Pool are
referenced in this Amended and Restated Reinsurance Agreement, those
figures shall be derived as the sum of the corresponding figures
from(a) and (b) above.
3. Unadjusted Interest Rate. For purposes of this Agreement, the
Unadjusted Interest Rate for any Accounting Period will be equal to
2 x [(i) + (ii)]
-------------------------------------------------------,
(iii) + (iv) + (v) + (vi) - (vii) - (viii) - (i) - (ii) where:
(i) equals the Net Investment Income determined in
accordance with Page 10, Exhibit 2, Column 7, Line
16, of the Dividend Rate Accounting Pool for the
current Accounting Period;
(ii) equals the sum of (a) plus (b), where:
(a) equals the portion of Net Realized Capital
Gains and (Losses) on Investments,
determined in accordance with
62
<PAGE> 68
Page 11, Exhibit 3, Column 4, Line 10, of
the Dividend Rate Accounting Pool for the
current Accounting Period;
(b) equals the portion of Net Unrealized Capital
Gains and (Losses) on Investments,
determined in accordance with Page 11,
Exhibit 4, Column 4, Line 10 of the Dividend
Rate Accounting Pool for the current
Accounting Period;
(iii) equals Subtotals, Cash and Invested Assets determined
in accordance with Page 2, Column 1, Line 10A, of the
Dividend Rate Accounting Pool for the current
Accounting Period;
(iv) equals Subtotals, Cash and Invested Assets determined
in accordance with Page 2, Column 1, Line 10A, of the
Dividend Rate Accounting Pool for the preceding
Accounting Period;
(v) equals Investment Income Due and Accrued determined in
accordance with Page 2, Column 1, Line 16, of the
Dividend Rate Accounting Pool for the current
Accounting Period;
(vi) equals Investment Income Due and Accrued determined in
accordance with Page 2, Column 1, Line 16, of the
Dividend Rate Accounting Pool for the preceding
Accounting Period;
(vii) equals Borrowed Money determined in accordance with
Page 3, Column 1, Line 22, of the Dividend Rate
Accounting Pool for the current Accounting Period; and
(viii) equals Borrowed Money determined in accordance with
Page 3, Column 1, Line 22, of the Dividend Rate
Accounting Pool for the preceding Accounting Period.
If the Annual Statement blank is changed or modified, such that the
items described above do not appear on the pages, exhibits, columns and
lines referred to above, or if they should be eliminated or combined
with other amounts, then they will be determined in accordance with a
method satisfactory to the Reinsurer and the Ceding Company.
The Ceding Company will also calculate an Alternate Rate for each
Accounting Period. For purposes of this Agreement, the Alternate Rate
will be equal to the Unadjusted Interest Rate based on quarterly
compounded calculations. If the
63
<PAGE> 69
Unadjusted Interest Rate for any Accounting Period is less than the
Alternative Rate for that Accounting Period, minus 25 basis points,
then the Modified Coinsurance Interest Rate for the Accounting Period
will be equal to the Alternative Rate.
64
<PAGE> 70
SCHEDULE E
BASIC DIVIDEND FACTORS
Basic Dividend Factors. Basic Dividend Factor for each Accounting
Period for all policies reinsured hereunder will be equal to the
appropriate figures taken from the table below:
<TABLE>
<CAPTION>
Policies valued Policies valued Policies valued
using American Policies valued using 1958 CSO using 1958 CSO
Experience or using 1958 CSO Mortality and Mortality and
Accounting 1941 CSO Mortality and 3.0% or Interest other than
Period Mortality 2.5% Interest 3.5% Interest 2.5% or 3.0% or 3.5%
- ------ --------- ------------- ------------- --------------------
<S> <C> <C> <C> <C>
1995 0% 0% 0% 0%
1996 3.90% 4.25% 4.73% 4.15%
1997 3.92% 4.24% 4.70% 4.26%
1998 3.95% 4.23% 4.67% 4.37%
1999 3.96% 4.22% 4.64% 4.43%
2000 3.97% 4.20% 4.61% 4.47%
2001 3.98% 4.20% 4.58% 4.51%
2002 3.98% 4.19% 4.55% 4.53%
2003 3.98% 4.18% 4.53% 4.57%
2004 3.99% 4.18% 4.50% 4.61%
2005 3.98% 4.17% 4.47% 4.62%
2006 3.98% 4.17% 4.44% 4.61%
2007 3.98% 4.16% 4.43% 4.61%
2008 3.99% 4.16% 4.41% 4.60%
2009 3.99% 4.16% 4.38% 4.58%
2010 4.00% 4.15% 4.35% 4.57%
2011 4.00% 4.15% 4.32% 4.56%
2012 4.01% 4.16% 4.30% 4.55%
2013 4.02% 4.16% 4.28% 4.55%
2014 4.02% 4.17% 4.26% 4.55%
2015 and thereafter 4.23% 4.37% 4.44% 4.75%
</TABLE>
65
<PAGE> 71
SCHEDULE F
DIVIDEND MULTIPLES
Dividend Multiples. Dividend Multiple for each Accounting Period for
all policies reinsured hereunder will be equal to the appropriate
figures taken from the table below:
<TABLE>
<CAPTION>
Policies valued Policies valued Policies valued
using American Policies valued using 1958 CSO using 1958 CSO
Experience or using 1958 CSO Mortality and Mortality and
Accounting 1941 CSO Mortality and 3.0% or Interest other than
Period Mortality 2.5% Interest 3.5% Interest 2.5% or 3.0% or 3.5%
- ------ --------- ------------- ------------- --------------------
<S> <C> <C> <C> <C>
1995 0% 0% 0% 0%
1996 75.39% 74.14% 79.77% 80.00%
1997 75.66% 74.28% 79.67% 80.25%
1998 75.91% 74.44% 79.63% 80.51%
1999 76.17% 74.62% 79.62% 80.77%
2000 76.42% 74.81% 79.66% 81.03%
2001 76.64% 75.01% 79.71% 81.28%
2002 76.84% 75.24% 79.77% 81.54%
2003 77.04% 75.47% 79.86% 81.80%
2004 77.24% 75.71% 79.86% 82.03%
2005 77.45% 75.95% 79.83% 82.31%
2006 77.58% 76.18% 79.83% 82.54%
2007 77.90% 76.49% 79.81% 82.82%
2008 78.20% 76.73% 79.80% 83.11%
2009 78.48% 76.96% 79.84% 83.40%
2010 78.79% 77.20% 79.87% 83.72%
2011 79.08% 77.47% 79.89% 84.04%
2012 79.40% 77.68% 80.04% 84.38%
2013 79.72% 77.96% 80.11% 84.72%
2014 80.12% 78.24% 80.22% 85.07%
2015 and thereafter 80.47% 78.51% 80.38% 85.42%
</TABLE>
66
<PAGE> 72
SCHEDULE G
CEDING COMPANY DATA
- - Quarterly accounting settlement reports provided to the Reinsurer in
accordance with this Agreement since fourth quarter 1990
- - Special Valuation Summary as of June 30, 1990 for the reinsured block
by form, index, year and age group
- - Summary of policy count and face amount for the reinsured block as of
June 30, 1990 by year of issue
- - Facsimile dated December 24, 1992 from Michael Slipowitz of the Ceding
Company to G. William Boyd of the Reinsurer which included AIDS
mortality information from 1983 through 1992
- - Quarterly accounting settlement reports received under this Agreement
since inception
- - Summary of policy count, face amount, and reserves inforce by plan
codes as of December 31, 1994 for the additional policies reinsured
effective July 1, 1995
- - Diskettes containing a seriatim listing of all policies and riders in
valuation bases 0 through 10 as of December 31, 1994
- - October 23, 1995 letter from Ellen Lavino of MONY to Larry Fischer of
RGA/Swiss with descriptions of several plans to be reinsured and
premium rates for the Keyman policy series
- - August 18, 1995 facsimile from Arnold Greenspoon of MONY to Bill Boyd
of RGA/Swiss which states that the dividend factors and formula in the
treaty is an appropriate proxy for MONY's actual dividend payments
based on the following assumptions:
1) the projection model accurately captures the policies in the
block;
2) assumptions are matched by experience; and
3) the dividend scale remains unchanged except for the interest
factor
These items were neither intended by the Ceding Company nor interpreted
by the Reinsurer to be a guarantee of future performance of the
reinsured block. These items were, however, relied upon by the
Reinsurer as being an accurate statement regarding the Ceding Company's
policies as of the date they were provided to the Reinsuer.
67
<PAGE> 73
- - Projections of the block of business reinsured effective December 31,
1995 under various sets of assumptions with respect to mortality,
lapses, and interest rates for each of four policy groupings: valuation
bases 0 through 3; valuation basis 4; valuation bases 5 through 8; and
valuation bases 9 and 10. These projections were neither intended by
the Ceding Company nor interpreted by the Reinsurer to be a guarantee
of future performance of the reinsured policies. These items were,
however, relied upon by the Reinsurer as being an accurate statement
regarding the Ceding Company's policies as of the date they were
provided to the Reinsurer
- - Summary of policy count, face amount, and reserves inforce by plan code
and valuation basis as of December 31, 1993, December 31, 1994 and
September 30, 1995
- - Mortality study covering exposures during 1992 and 1993
- - Lapse study covering exposures during 1993 and 1994
- - Policy forms for following policy series reinsured effective December
31, 1995: Whole Life, Flexible Whole Life, MONY-1, MONYProvider, Whole
Life with Increasing Premiums, and Executive Equity
- - May 26, 1995 letter from Arnold Greenspoon (MONY) to Bill Boyd
(RGA/Swiss) in which 5 percent of base policy premium is represented to
reflect direct renewal expenses with respect to the policies reinsured
effective December 31, 1995
68
<PAGE> 1
Exhibit 10.9
ASSIGNMENT AND NOVATION AGREEMENT
WHEREAS, The Mutual Life Insurance Company of New York (the "Ceding
Company") and Lyndon Life Insurance Company (formerly ITT Lyndon Life Insurance
Company and hereinafter referred to as "ITTLL") entered into Reinsurance
Agreement Number 1290-46, effective December 31, 1990 and amended the same by
Amendment One Number 1290-46-A1, effective December 31, 1990, Amendment Number
Two 1290-46-A2, effective June 30, 1991, Amendment Three Number 1290-46-A3,
effective December 31, 1991, Amendment Four Number 1290-46-A4, effective January
1, 1992, Amendment Five Number 1290-46-A5, effective July 1, 1992, Amendment Six
Number 1290-46-A6, effective December 31, 1992, Amendment Seven Number
1290-46-A7, effective April 1, 1993, Amendment Eight Number 1290-46-A8,
effective December 31, 1993, Amendment Nine Number 1290-46-A9, effective January
1, 1995 Amendment Ten Number 1290-46-A10, effective December 31, 1995, and
Amendment Eleven Number 1290-46-A11, effective December 31, 1995 (collectively
referred to as the "Agreement") under which ITTLL assumes a 40.5 percent quota
share of certain par whole life insurance policies issued by the Ceding Company
(the "Reinsured Business"); and
WHEREAS, by this Agreement and Novation Agreement (the
"Assignment"), the Ceding Company, ITTLL and RGA Reinsurance Company ("RGA")
mutually agree that RGA will assume the Reinsured Business on the same terms and
conditions described in the Agreement, except as specified below, a copy of
which is attached hereto and incorporated herein.
1
<PAGE> 2
NOW THEREFORE, in consideration of the foregoing and other mutual
promises contained herein, the parties agree as follows.
1. CHANGE OF COMPANY. RGA will assume the Reinsured Business, as of the
Effective Date of this Assignment, and wherever the terms
"Reinsurer" or "ITT Lyndon Life Insurance Company" are used in the
Agreement, these terms shall be deemed to refer to RGA.
2. REPORTS, SETTLEMENTS AND NOTICES. All monies, consideration, reports
or notices to the Reinsurer under the Agreement will from the
Effective Date of this Agreement forward to be sent directly to
RGA/Swiss Financial Group, L.L.C. to the attention of:
Frank A. Alvarez
President and Treasurer
RGA/Swiss Financial Group, L.L.C.
660 Madison Ridge Center Drive, Suite 300
St. Louis, Missouri 63141
3. LIABILITY. As of the Effective Date of this Assignment, it is
understood that ITTLL is no longer the reinsurer of the Reinsured
Business, that ITTLL has been released from all obligations
expressed, implied, or arising under the Agreement on or after the
Effective Date of this Assignment, and that all obligations,
properties, rights, monies, considerations, accounting and/or
liabilities of the Reinsurer, as described under the Agreement with
respect to the Reinsured Business will become the sole obligations,
properties, rights, monies, considerations, accounting and/or
liabilities of RGA.
4. EFFECTIVE DATE. The Effective Date of this Agreement is January 1,
1996.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
to be executed in triplicate on the dates indicated below.
ATTEST: THE MUTUAL LIFE INSURANCE COMPANY OF NEW
YORK ("Ceding Company")
By: /s/ Arnold N. Greenspoon By: /s/ Phillip A. Eisenberg
------------------------ ------------------------
Title: VP & Actuary Title: Sr. VP & Chief Actuary
Date: 3/27/96 Date: 3/27/96
ATTEST: LYNDON LIFE INSURANCE COMPANY
("ITTLL")
By: /s/ Gregg O. Caioler By: /s/ Roland Anderson
------------------------ ---------------------------
Title: VP and Controller Title: President
Date: 3/26/96 Date: 3/26/96
ATTEST: RGA REINSURANCE COMPANY("RGA")
By: /s/ James W. Daller By: /s/ Paul A. Salente
------------------------ ---------------------------
Title: 2nd VP & Actuary Title: Senior Vice President
Date: 3/29/96 Date: 3/29/96
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<PAGE> 1
Exhibit 10.10
AMENDMENT TWELVE
ATTACHED TO AND MADE A PART OF THE
AMENDED AND RESTATED REINSURANCE AGREEMENT NUMBER 1290-46
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
"Ceding Company"
AND
RGA REINSURANCE COMPANY
"Reinsurer"
<PAGE> 2
The Ceding Company and the Reinsurer agree to amend this Reinsurance Agreement
as follows:
I. The following Paragraph 19 is added to ARTICLE I, GENERAL PROVISIONS:
19. Intermediary. The Reinsurer and the Ceding Company acknowledge the
Reinsurer's appointment of RGA/Swiss Financial Group, L.L.C. as the
designated reinsurance manager with respect to this Agreement and
the business reinsured hereunder. The Reinsurer hereby directs the
Ceding Company to submit all notices and reports required to be sent
to the Reinsurer under this Agreement and remit all amounts due the
Reinsurer under this Agreement directly to RGA/Swiss Financial
Group, L.L.C. as the designated reinsurance manager of the
Reinsurer. The Ceding Company acknowledges the Reinsurer's request
and agrees to forward all notices, reports and remittances required
to be sent to the Reinsurer under this Agreement directly to
RGA/Swiss Financial Group, L.L.C. RGA/Swiss Financial Group, L.L.C.
shall receive all notices, reports and remittances on behalf of the
Reinsurer and receipt of such notices, reports and remittances by
RGA/Swiss Financial Group, L.L.C. shall be deemed to be receipt by
the Reinsurer.
The Reinsurer and the Ceding Company individually acknowledge that
RGA/Swiss Financial Group, L.L.C. has made written disclosure at the
time of negotiation of this Agreement, or its amendment, whichever
is applicable, in accordance with Section 32.1(f) of the New York
Insurance Regulations.
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In witness of the above, this Amendment Thirteen is executed in duplicate on the
dates indicated below with an Effective Date of January 1, 1996.
ATTEST: THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK ("Ceding Company")
By: /s/ Arnold N. Greenspoon By: /s/ Phillip A. Eisenberg
--------------------------- -----------------------------
Title: AVP & Actuary Title: Sr. VP & Chief Actuary
--------------------------- -----------------------------
Date: 3/27/96 Date: 3/27/96
--------------------------- -----------------------------
ATTEST: LYNDON LIFE INSURANCE COMPANY
("Reinsurer")
By: /s/ James W. Daller By: /s/ Paul A. Salente
--------------------------- -----------------------------
Title: 2nd VP & Actuary Title: Senior Vice President
--------------------------- -----------------------------
Date: 3/29/96 Date: 3/29/96
--------------------------- -----------------------------
2
<PAGE> 1
Exhibit 10.11
AMENDMENT THIRTEEN
ATTACHED TO AND MADE A PART OF THE
AMENDED AND RESTATED REINSURANCE AGREEMENT NUMBER 1290-46
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
"Ceding Company"
AND
RGA REINSURANCE COMPANY
"Reinsurer"
<PAGE> 2
The Ceding Company and the Reinsurer agree to amend this Reinsurance Agreement
as follows:
I. ARTICLE I, GENERAL PROVISIONS, Paragraph 19, is replaced in its entirety
by the following:
19. Intermediary. The Reinsurer and the Ceding Company acknowledge the
Reinsurer's appointment of RGA/Swiss Financial Group, L.L.C. as the
designated reinsurance manager with respect to this Agreement and
the business reinsured hereunder. The Reinsurer hereby directs the
Ceding Company to submit all notices and reports required to be sent
to the Reinsurer under this Agreement and remit all amounts due the
Reinsurer under this Agreement directly to RGA/Swiss Financial
Group, L.L.C. as the designated reinsurance manager of the
Reinsurer. The Ceding Company acknowledges the Reinsurer's request
and agrees to forward all notices, reports and remittances required
to be sent to the Reinsurer under this Agreement directly to
RGA/Swiss Financial Group, L.L.C. RGA/Swiss Financial Group, L.L.C.
shall receive all notices, reports and remittances on behalf of the
Reinsurer and receipt of such notices, reports and remittances by
RGA/Swiss Financial Group, L.L.C. RGA/Swiss Financial Group, L.L.C.
shall be deemed to be receipt by the Reinsurer.
The Reinsurer and the Ceding Company individually acknowledge that
RGA/Swiss Financial Group, L.L.C. has made written disclosure at the
time of negotiation of this Agreement, or its amendment, whichever
is applicable, in accordance with Section 32.1(f) of the New York
Insurance Regulations.
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<PAGE> 3
II. ARTICLE V, DIVIDENDS, Paragraph 6, is replaced in its entirety by the
following:
6. Excess Year. An Excess Year is defined as any Accounting Period
during which the dividend reimbursement exceeds the Formula Dividend
determined in accordance with Paragraph 4 above.
III. ARTICLE X, ACCOUNTING AND SETTLEMENTS, Paragraph 8, is replaced in its
entirety by the following:
8. Offset of Payments. All monies due either the Ceding Company or the
Reinsurer under this Agreement will be offset against each other,
dollar for dollar, regardless of any insolvency of either party.
IV. ARTICLE XVI, INSOLVENCY, is replaced in its entirety by the following:
Insolvency. In the event of the Ceding Company's insolvency, any
payments due the Ceding Company from the Reinsurer pursuant to the
terms of this Agreement will be made directly to the Ceding Company
or its conservator, liquidator, receiver or statutory successor. The
reinsurance will be payable by the Reinsurer on the basis of the
liability of the Ceding Company under the policies reinsured without
diminution because of the insolvency of the Ceding Company. The
conservator, liquidator, receiver or statutory successor of the
Ceding Company will give the Reinsurer written notice of the
pendency of a claim against the Ceding Company on any policy
reinsured within a reasonable time after such claim is filed in the
insolvency proceeding. During the pendency of
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<PAGE> 4
any such claim, the Reinsurer may investigate such claim and
interpose in the Ceding Company's name (or in the name of the Ceding
Company's conservator, liquidator, receiver or statutory successor),
in the proceeding where such claim is to be adjudicated. Any defense
or defenses which the Reinsurer may deem available to the Ceding
Company or its conservator, liquidator, receiver or statutory
successor. The expense thus incurred by the Reinsurer will be
chargeable, subject to court approval, against the Ceding Company as
a part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the Ceding
Company solely as a result of the defense undertaken by the
Reinsurer.
V. SCHEDULE G, CEDING COMPANY DATA, is replaced in its entirety by the
following:
- Quarterly accounting settlement reports provided to the Reinsurer in
accordance with this Agreement since fourth quarter 1990
- Special Valuation Summary as of June 30, 1990 for the reinsured
block by form, index, year and age group
- Summary of policy count and face amount for the reinsured block as
of June 30, 1990 by year of issue
- Facsimile dated December 24, 1992 from Michael Slipowitz of the
Ceding Company to G. William Boyd of the Reinsurer which included
AIDS mortality information from 1983 through 1992
- Quarterly accounting settlement reports received under this
Agreement since inception
- Summary of policy count, face amount, and reserves inforce by plan
codes as of December 31, 1994 for the additional policies reinsured
effective July 1, 1995
- Diskettes containing a seriatim listing of all policies and riders
in valuation bases 0 through 10 as of December 31, 1994
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<PAGE> 5
- October 23, 1995 letter from Ellen Lavino of MONY to Larry Fischer
of RGA/Swiss with descriptions of several plans to be reinsured and
premium rates for the Keyman policy series
- August 18, 1995 facsimile from Arnold Greenspoon of MONY to Bill
Boyd of RGA/Swiss which states that the dividend factors and formula
in the treaty is an appropriate proxy for MONY's actual dividend
payments based on the following assumptions:
1) the projection model accurately captures the policies in the
block;
2) assumptions are matched by experience; and
3) the dividend scale remains unchanged except for the interest
factor
- These items were neither intended by the Ceding Company nor
interpreted by the Reinsurer to be a guarantee of future performance
of the reinsured block. These items were, however, relied upon and
used by the Ceding Company and the Reinsurer as the basis for the
development of the values in Schedules E and F.
- Projections of the block of business reinsured effective December
31, 1995 under various sets of assumptions with respect to
mortality, lapses, and interest rates for each of four policy
groupings: valuation bases 0 through 3; valuation basis 4; valuation
bases 5 through 8; and valuation bases 9 and 10. These projections
were neither intended by the Ceding Company nor interpreted by the
Reinsurer to be a guarantee of future performance of the reinsured
policies. These items were, however, relied upon and used by the
Ceding Company and the Reinsurer as the basis for the development of
the values in Schedules E and F.
- Summary of policy count, face amount, and reserves inforce by plan
code and valuation basis as of December 31, 1993, December 31, 1994
and September 30, 1995
- Mortality study covering exposures during 1992 and 1993
- Lapse study covering exposures during 1993 and 1994
- Policy forms for the following policy series reinsured effective
December 31, 1995: Whole Life, Flexible Whole Life, MONY-1,
MONYProvider, Whole Life with Increasing Premiums, and Executive
Equity
- May 26, 1995 letter from Arnold Greenspoon (MONY) to Bill Boyd
(RGA/Swiss) in which 7 percent of base policy premium is represented
to reflect direct renewal expenses with respect to the policies
reinsured effective December 31, 1995
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<PAGE> 6
In witness of the above, this Amendment Thirteen is executed in duplicate on the
dates indicated below with an Effective Date of January 1, 1996.
ATTEST: THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK ("Ceding Company")
By: /s/ Arnold N. Greenspoon By: /s/ Phillip A. Eisenberg
--------------------------- ------------------------------
Title: AVP & Actuary Title: Sr. VP & Chief Actuary
--------------------------- ------------------------------
Date: 11/15/96 Date: 11/15/96
--------------------------- ------------------------------
ATTEST: LYNDON LIFE INSURANCE COMPANY
("Reinsurer")
By: /s/ James W. Daller By: /s/ Paul A. Salente
--------------------------- ------------------------------
Title: Actuarial Vice President Title: Senior Vice President
--------------------------- ------------------------------
Date: 11/13/96 Date: 11/13/96
--------------------------- ------------------------------
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<PAGE> 1
Exhibit 10.12
AGREEMENT OF LEASE
BETWEEN
1740 BROADWAY ASSOCIATES L.P.,
LANDLORD
AND
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK,
TENANT
1740 BROADWAY
NEW YORK, NEW YORK
<PAGE> 2
AGREEMENT OF LEASE, made as of the 17th day of December, 1990,
between 1740 BROADWAY ASSOCIATES L.P., a Delaware limited partnership having an
office c/o Mendik Realty Company, Inc., 330 Madison Avenue, New York, New York
10017, and THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a New York corporation
having an address at 1740 Broadway, New York, New York 10019.
W I T N E S S E T H:
The parties hereto, for themselves, their legal representatives,
successors and assigns, hereby covenant as follows.
DEFINITIONS
"AAA" shall have the meaning set forth in Section 12.8 hereof.
"Additional Lease" shall have the meaning set forth in Section
40.1 hereof.
"Additional Lease Proposal" shall have the meaning set forth in
Section 40.1 hereof.
"Additional Space" shall have the meaning set forth in Section
40.1 hereof.
"Additional Space Appraiser" shall have the meaning set forth in
Section 40.3 hereof.
"Additional Space Commencement Date" shall have the meaning set
forth in Section 40.6 hereof.
"Additional Space Fair Market Rent" shall have the meaning set forth
in Section 40.2 hereof.
"Additional Space Mutual Determination" shall have the meaning set
forth in Section 40.3 hereof.
"Additional Space Rental Value" shall have the meaning set forth in
Section 40.3 hereof.
"Additional Space Rent Notice" shall have the meaning set forth in
Section 40.3 hereof.
"Affiliate" shall mean a Person which shall (1) Control, (2) be
under the Control of, or (3) be under common Control with the Person in
question.
"Alteration Fee" shall have the meaning set forth in Section 3.2
hereof.
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<PAGE> 3
"Alterations" shall mean alterations, installations, improvements,
additions or other physical changes, (other than decorations, such as painting,
carpeting and wall coverings) in or about the Premises made prior to or during
the Term.
"Applicable Rate" shall mean the lesser of (x) two (2) percentage
points above the then current Base Rate, and (y) the maximum rate permitted by
applicable law.
"Appraiser" shall have the meaning set forth in Section 39.3
hereof.
"Assessed Valuation" shall have the meaning set forth in Section
27.1 hereof.
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq., or
any statute of similar nature and purpose.
"Basement Premises" shall mean the portion of the basement floor of
the Building, as set forth on the floor plan attached hereto and made a part
hereof as Exhibit "A-8".
"Base Operating Expenses" shall have the meaning set forth in
Section 27.1 hereof.
"Base Rate" shall mean the rate of interest publicly announced from
time to time by The Chase Manhattan Bank, N.A., or its successor, as its "prime
lending rate" (or such other term as may be used by The Chase Manhattan Bank,
N.A., from time to time, for the rate presently referred to as its "prime
lending rate"), which rate was 10% on November 1, 1990.
"Base Taxes" shall have the meaning set forth in Section 27.1
hereof.
"Building" shall mean all the building, equipment and other
improvements and appurtenances of every kind and description now located or
hereafter erected, constructed or placed upon the land and any and all
alterations, and replacements thereof, additions thereto and substitutions
therefore, known by the address of 1740 Broadway, New York, New York.
"Building Electricity Expense" shall have the meaning set forth in
Section 27.1 hereof.
"Building Systems" shall mean the mechanical, gas, electrical,
sanitary, heating, air conditioning, ventilating, elevator, plumbing,
life-safety, telecommunications, cable television and other service systems of
the Building.
"Business Days" shall mean all days, excluding Saturdays, Sundays
and all days observed by either the State of New York or the Federal Government
and by the labor unions servicing the Building as legal holidays.
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<PAGE> 4
"Commencement Date" shall have the meaning set forth in Section
1.1 hereof.
"Comparison Year" shall have the meaning set forth in Section
27.1 hereof.
"Consumer Price Index" shall mean the Consumer Price Index for All
Urban Consumers published by the Bureau of Labor Statistics of the United States
Department of Labor, New York, N.Y. - Northeastern N.J. Area, All Items
(1982-84=100), or any successor index thereto, appropriately adjusted. In the
event that the Consumer Price Index is converted to a different standard
reference base or otherwise revised, the determination of adjustments provided
for herein shall be made with the use of such conversion factor, formula or
table for converting the Consumer Price Index as may be published by the Bureau
of Labor Statistics or, if said Bureau shall not publish the same, then with the
use of such conversion factor, formula or table as may be published by
Prentice-Hall, Inc., or any other nationally recognized publisher of similar
statistical information. If the Consumer Price Index ceases to be published, and
there is no successor thereto, such other index as Landlord and Tenant shall
agree upon in writing shall be substituted for the Consumer Price Index. If
Landlord and Tenant are unable to agree as to such substituted index, such
matter shall be submitted to the American Arbitration Association or any
successor organization for determination in accordance with the regulations and
procedures thereof then obtaining for commercial arbitration.
"Contract" shall have the meaning set forth in Section 37.13
hereof.
"Control" or "control" shall mean ownership of more than fifty
percent (50%) of the outstanding voting stock (of all classes of stock entitled
to vote) of a corporation or other majority equity and control interest if not a
corporation and the possession of power to direct or cause the direction of the
management and policy of such corporation or other entity, whether through the
ownership of voting securities, by statute or according to the provisions of a
contract.
"Cost per Kilowatt Hour" shall have the meaning set forth in Section
13.2 hereof.
"Current Electrical Year" shall have the meaning set forth in
Section 27.7 hereof.
"Current Year" shall have the meaning set forth in Section 27.4
hereof.
"Deficiency" shall have the meaning set forth in Section 17.2
hereof.
"Eight Year Space" shall mean, collectively the Eighth Floor
Premises and the Ninth Floor Premises.
"Eight Year Space Expiration Date" shall have the meaning set forth
in Section 39.1 hereof.
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<PAGE> 5
"Eight Year Space Renewal Notice" shall have the meaning set forth
in Section 39.1 hereof.
"Eight Year Space Renewal Option" shall have the meaning set forth
in Section 39.1 hereof.
"Eight Year Space Renewal Term" shall have the meaning set forth in
Section 39.1 hereof.
"Eight Year Space Term" shall have the meaning set forth in Section
39.1 hereof.
"Eighth Floor Premises" shall mean the eighth (8th) floor of the
Building, as set forth on the floor plan attached hereto and made a part hereof
as Exhibit "A-1".
"8th Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"Electricity Additional Rent" shall have the meaning set forth in
Section 13.2 hereof.
"Electricity Fee" shall have the meaning set forth in Section
13.4 hereof.
"Eleventh Floor Premises" shall mean the eleventh (11th) floor of
the Building, as set forth on the floor plan attached hereto and made a part
hereof as Exhibit "A-4".
"11th Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"Escalation Rent" shall mean, individually or collectively, the Tax
Payment and the Operating Payment.
"Event of Default" shall have the meaning set forth in Section
16.1 hereof.
"Expiration Date" shall mean, with respect to each portion of the
Premises, the Fixed Expiration Date for such portion of the Premises or such
earlier or later date on which the term of this Lease shall sooner or later end
pursuant to any of the terms, conditions or covenants of this Lease or pursuant
to law.
"Fair Market Rent" shall have the meaning set forth in Section 39.3
hereof.
"5th Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"1st Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"Fixed Expiration Date" shall mean (i) January 31, 1991 with respect
to the Temporary Second Floor Premises, (ii) the day immediately preceding the
eighth (8th) anniversary of the Commencement Date (or, if the Commencement Date
shall occur
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on other than on the first day of the month, the last day of the month in which
the eighth (8th) anniversary of the Commencement Date occurs), with respect to
the Eight Year Space, (iii) the day immediately preceding the tenth (10th)
anniversary of the Commencement Date (or, if the Commencement Date shall occur
on other than on the first day of the month, the last day of the month in which
the tenth (10th) anniversary of the Commencement Date occurs), with respect to
the Ten Year Space, and (iv) the day immediately preceding the twelfth (12th)
anniversary of the Commencement Date (or, if the Commencement Date shall occur
on other than on the first day of the month, the last day of the month in which
the twelfth (12th) anniversary of the Commencement Date occurs), with respect to
the Twelve Year Space.
"Fixed Rent" shall have the meaning set forth in Section 1.1 hereof.
"Floor Additional Space" shall have the meaning set forth in Section
40.1 hereof.
"4th Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"Garage Premises" shall mean the portion of the ground floor of the
Building, as set forth on the floor plan attached hereto and made a part hereof
as Exhibit "A-9".
"Governmental Authority (Authorities)" shall mean the United States
of America, the State of New York, the City of New York, any political
subdivision thereof and any agency, department, commission, board, bureau or
instrumentality of any of the foregoing, or any quasi-governmental authority,
now existing or hereafter created, having jurisdiction over the Real Property or
any portion thereof.
"HVAC" shall mean heat, ventilation and air conditioning.
"HVAC Systems" shall mean the Building Systems providing HVAC.
"Increase" shall have the meaning set forth in Section 27.7
hereof.
"Indemnitees" shall mean Landlord, any predecessor-in-interest to
Landlord, the partners comprising Landlord, the partners comprising any
predecessor-in-interest to Landlord, Landlord's managing agent and each of their
partners, shareholders, officers, directors, employees, agents and contractors.
"Landlord", on the date as of which this Lease is made, shall mean
1740 Broadway Associates, a Delaware limited partnership, but thereafter
"Landlord" shall mean only the fee owner of the Real Property or if there shall
exist a Superior Lease, the tenant thereunder.
"Landlord's Additional Space Determination" shall have the meaning
set forth in Section 40.3 hereof.
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"Landlord's Determination" shall have the meaning set forth in
Section 39.3 hereof.
"Landlord's Offer" shall have the meaning set forth in Section
41.1 hereof.
"Landlord's Sublease" shall have the meaning set forth in Section
12.6(A)(3).
"Lessor(s)" shall mean a lessor under a Superior Lease.
"Letter of Intent" shall have the meaning set forth in Section
41.1 hereof.
"Long Lead Work" shall mean any item, other than an item which is,
or is a component of, a Building-wide Building System which is necessary for the
normal operation of office space, which is not a stock item and must be
specially manufactured, fabricated or installed or is of such an unusual,
delicate or fragile nature that there is a substantial risk that
(i) there will be a delay in its manufacture, fabrication, delivery
or installation, or
(ii) after delivery, such item will need to be reshipped or
redelivered or repaired
so that the item in question would delay the completion of standard items even
though the items of Long Lead Work in question are (1) ordered together with the
other items required and (2) installed or performed (after the manufacture or
fabrication thereof) in the order and sequence that such Long Lead Work and
other items are normally installed or performed in accordance with good
construction practice.
"MONY" shall mean the Mutual Life Insurance Company of New York, a
New York corporation, any corporation which is a successor to the Mutual Life
Insurance Company of New York either by merger or consolidation, and any
purchaser of all or substantially all of the assets of the Mutual Life Insurance
Company of New York (provided such purchaser shall have also assumed
substantially all of the liabilities of the Mutual Life Insurance Company of New
York).
"Mortgage(s)" shall mean any trust indenture or mortgage which may
now or hereafter affect the Real Property, the Building or any Superior Lease
and the leasehold interest created thereby, and all renewals, extensions,
supplements, amendments, modifications, consolidations and replacements thereof
or thereto, substitutions therefor, and advances made thereunder.
"Mortgagee(s)" shall mean any trustee, mortgagee or holder of a
Mortgage.
"Mutual Determination" shall have the meaning set forth in Section
39.3 hereof.
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"Ninth Floor Premises" shall mean the ninth (9th) floor of the
Building, as set forth on the floor plan attached hereto and made a part hereof
as Exhibit "A-2".
"9th Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"Nondisturbance Agreement" shall have the meaning set forth in
Section 7.1 hereof.
"Office Premises" shall mean, collectively, Eighth Floor Premises,
the Ninth Floor Premises, the Tenth Floor Premises, the Eleventh Floor Premises,
the Twelfth Floor Premises, the Thirteenth Floor Premises, the Second Floor
Premises, the Temporary Second Floor Premises and shall also include any
Additional Space commencing as of the relevant Additional Space Commencement
Date.
"Operating Expenses" shall have the meaning set forth in Section
27.1 hereof.
"Operating Payment" shall have the meaning set forth in Section
27.4 hereof.
"Operating Statement" shall have the meaning set forth in Section
27.1 hereof.
"Operating Year" shall have the meaning set forth in Section 27.1
hereof.
"Operation of the Property" shall mean the maintenance, repair and
management of the Real Property and the curbs, sidewalks and areas adjacent
thereto.
"Overtime Periods" shall have the meaning set forth in Section
28.3 hereof.
"Parties" shall have the meaning set forth in Section 37.2 hereof.
"Partner" or "partner" shall mean any partner of Tenant, any
employee of a professional corporation which is a partner of Tenant, and any
shareholder of Tenant if Tenant shall become a professional corporation.
"Partnership Tenant" shall have the meaning set forth in Article
29 hereof.
"Person(s) or person(s)" shall mean any natural person or persons, a
partnership, a corporation and any other form of business or legal association
or entity.
"Premises" shall mean, collectively, the Office Premises, the
Basement Premises and the Garage Premises.
"Prevailing Rate" shall have the meaning set forth in Section
12.6 hereof.
"Proposed Sublease Space" shall have the meaning set forth in
Section 12.6(A)(3) hereof.
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<PAGE> 9
"Real Property" shall mean the Building, together with the plot of
land upon which it stands.
"Recapture Space" shall have the meaning set forth in Section
12.6 hereof.
"Recapture Sublease" shall have the meaning set forth in Section
12.6 hereof.
"Rental" shall mean and be deemed to include Fixed Rent, Escalation
Rent, Electricity Additional Rent, all additional rent and any other sums
payable by Tenant hereunder.
"Rental Value" shall have the meaning set forth in Section 39.3
hereof.
"Rent Notice" shall have the meaning set forth in Section 39.3
hereof.
"Rent Per Square Foot" shall have the meaning set forth in Section
12.7 hereof.
"Requirements" shall mean all present and future laws, rules,
orders, ordinances, regulations, statutes, requirements, codes and executive
orders, extraordinary as well as ordinary, of all Governmental Authorities now
existing or hereafter created, and of any and all of their departments and
bureaus, and of any applicable fire rating bureau, or other body exercising
similar functions, affecting the Real Property, or any street, avenue or
sidewalk comprising a part of or in front thereof or any vault in or under the
same, or requiring removal of any encroachment, or affecting the maintenance,
use or occupation of the Real Property.
"Rules and Regulations" shall mean the Building rules and
regulations annexed hereto and made a part hereof as Schedule A-1, and the
Alteration rules and regulations annexed hereto and made a part hereof as
Schedule A-2, and such other and further reasonable rules and regulations as
Landlord or Landlord's agents may from time to time adopt on such notice to be
given as Landlord may elect, subject to Tenant's right to dispute the
reasonableness thereof as provided in Article 8 hereof.
"Second Floor Additional Space" shall have the meaning set forth in
Section 40.1 hereof.
"Second Floor Premises" shall mean the portion of the second (2nd)
floor of the Building, as set forth on the floor plan attached hereto and made a
part hereof as Exhibit "A-7".
"2nd Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"Security Areas" shall have the meaning set forth in Section 14.1
hereof.
"Setback Areas" shall have the meaning set forth in Section 2.1
hereof.
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<PAGE> 10
"7th Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"6th Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"Space Factor" shall mean the sum of the amounts set forth under the
column entitled "Space Factor" on Exhibit "C" annexed hereto and made a part
hereof, as such amounts may be decreased pursuant to the terms hereof, provided
that the amount set forth opposite any portion of the Premises with respect to
which the Expiration Date shall have occurred shall not be included in
determining the Space Factor from and after such Expiration Date.
"Specialty Alterations" shall mean alterations, installations,
improvements, additions or other physical changes made prior to or during the
Term consisting of kitchens, cafeterias, dining rooms, executive bathrooms,
raised computer floors, computer installations, vaults, libraries, internal
staircases, dumbwaiters, pneumatic tubes, vertical and horizontal transportation
systems, all Tenant's signs on the facade and on top of the Building, the
"Weather Star", and other Alterations that relate to Tenant's special
requirements.
"Sublease Expenses" shall have the meaning set forth in Section
12.7 hereof.
"Sublease Loss" shall have the meaning set forth in Section 12.7
hereof.
"Sublease Profit" shall have the meaning set forth in Section
12.7 hereof.
"Sublease Rent" shall have the meaning set forth in Section 12.7
hereof.
"Sublease Rent Per Square Foot" shall have the meaning set forth in
Section 12.7 hereof.
"Superior Lease(s)" shall mean all ground or underlying leases of
the Real Property or the Building heretofore or hereafter made by Landlord and
all renewals, extensions, supplements, amendments and modifications thereof.
"Taxes" shall have the meaning set forth in Section 27.1 hereof.
"Tax Payment" shall have the meaning set forth in Section 27.2
hereof.
"Tax Statement" shall have the meaning set forth in Section 27.1
hereof.
"Tax Year" shall have the meaning set forth in Section 27.1 hereof.
"Temporary Second Floor Premises" shall mean the portion of the
second (2nd) floor of the Building, as set forth on the floor plan attached
hereto and made a part hereof as Exhibit "A-10".
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"Tenant" on the date as of which this Lease is made shall moan MONY,
but thereafter "Tenant" shall mean only the tenant under this Lease at the time
in question; provided, however, that the originally named tenant and any
assignee of this Lease shall not be released from liability hereunder in the
event of any assignment of this Lease.
"Tenant Statement" shall have the meaning set forth in Section
12.6(B) hereof.
"Tenant's Additional Space Determination" shall have the meaning set
forth in Section 40.3 hereof.
"Tenant's Advisor" shall have the meaning set forth in Article 34
hereof.
"Tenant's Determination" shall have the meaning set forth in
Section 39.3 hereof.
"Tenant's Property" shall mean Tenant's movable fixtures and movable
partitions, telephone and other equipment, furniture, furnishings, decorations
and other items of personal property.
"Tenant's Share" shall mean the sum of the percentages set forth
under the column entitled "Tenant's Share" on Exhibit "C" annexed hereto and
made a part hereof, as such percentages may be decreased pursuant to the terms
hereof, provided that the percentage set forth opposite any portion of the
Premises with respect to which the Expiration Date shall have occurred shall not
be included in determining Tenant's Share from and after such Expiration Date.
"Tentative Monthly Electrical Charge" shall have the meaning set
forth in Section 27.7 hereof.
"Tentative Monthly Escalation Charge" shall have the meaning set
forth in Section 27.4 hereof.
"Ten Year Space" shall mean, collectively, the Tenth Floor Premises,
the Eleventh Floor Premises, the Second Floor Premises, the Basement Premises
and the Garage Premises.
"Ten Year Space Expiration Date" shall have the meaning set forth in
Section 39.1 hereof.
"Ten Year Space Renewal Notice" shall have the meaning set forth in
Section 39.1 hereof.
"Ten Year Space Renewal Option" shall have the meaning set forth in
Section 39.1 hereof.
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"Ten Year Space Renewal Term" shall have the meaning set forth in
Section 39.1 hereof.
"Ten Year Space Term" shall have the meaning set forth in Section
39.1 hereof.
"Tenth Floor Premises" shall mean the tenth (10th) floor of the
Building, as set forth on the floor plan attached hereto and made a part hereof
as Exhibit "A-3".
"10th Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"Term" shall mean a term which shall commence on the Commencement
Date and shall expire, with respect to the applicable portion of the Premises,
on the Expiration Date applicable to such portion of the Premises.
"Termination Date" shall have the meaning set forth in Section
12.6 hereof.
"3rd Rental Period" shall have the meaning set forth in Section 1.1
hereof.
"Thirteenth Floor Premises" shall mean the thirteenth (13th) floor
of the Building, as set forth on the floor plan attached hereto and made a part
hereof as Exhibit "A-6".
"Thirteenth Floor Setback Area" shall have the meaning set forth in
Section 2.1 hereof.
"Three Month Average" shall have the meaning set forth in Section
13.4 hereof.
"Twelfth Floor Premises" shall mean the twelfth (12th) floor of the
Building, as set forth on the floor plan attached hereto and made a part hereof
as Exhibit "A-5".
"Twelve Year Space" shall mean, collectively, the Twelfth Floor
Premises and the Thirteenth Floor Premises.
"Twelve Year Space Expiration Date" shall have the meaning set forth
in Section 39.1 hereof.
"Twelve Year Space Renewal Notice" shall have the meaning set forth
in Section 39.1 hereof.
"Twelve Year Space Renewal Option" shall have the meaning set forth
in Section 39.1 hereof.
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"Twelve Year Space Renewal Term" shall have the meaning set forth in
Section 39.1 hereof.
"Twelve Year Space Term" shall have the meaning set forth in Section
39.1 hereof.
"Unavoidable Delays" shall have the meaning set forth in Article
25 hereof.
ARTICLE 1
DEMISE, PREMISES, TERM, RENT
Section 1.1 Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the Premises for the Term to commence on the date hereof (the
"Commencement Date") and to end on (i) January 31, 1991, with respect to the
Temporary Second Floor Premises, (ii) the day immediately preceding the eighth
(8th) anniversary of the Commencement Date (or, if the Commencement Date shall
occur other than on first day of the month, the last day of the month in which
the eighth (8th) anniversary of the Commencement Date occurs), with respect to
the Eighth Floor Premises and Ninth Floor Premises, (iii) the day immediately
preceding the tenth (10th) anniversary of the Commencement Date (or, if the
Commencement Date shall occur other than on first day of the month, the last day
of the month in which the tenth (10th) anniversary of the Commencement Date
occurs), with respect to the Tenth Floor Premises, Eleventh Floor Premises,
Second Floor Premises, Basement Premises and Garage Premises, and (iv) the day
immediately preceding the twelfth (12th) anniversary of the Commencement Date
(or, if the Commencement Date shall occur other than on first day of the month,
the last day of the month in which the twelfth (12th) anniversary of the
Commencement Date occurs), with respect to the Twelfth Floor Premises and the
Thirteenth Floor Premises, at an annual rent (the "Fixed Rent") of:
(1) Five Million Three Hundred Four Thousand One Hundred Eighty-Four
Dollars ($5,304,184) per annum for the period commencing on the Commencement
Date and ending on the day immediately preceding the first (1st) anniversary of
the Commencement Date, or if the Commencement Date shall occur other than on the
first day of the month, ending on the last day of the month in which the first
(1st) anniversary of the Commencement Date occurs ($442,015.33 per month) (the
"1st Rental Period");
(2) Five Million Three Hundred Eight Thousand One Hundred
Eighty-Four Dollars ($5,308,184) per annum for the period commencing on the day
next succeeding the end of the 1st Rental Period and ending on the first (1st)
anniversary of the last day of the 1st Rental Period ($442,348.67 per month)
(the "2nd Rental Period");
(3) Five Million Three Hundred Twelve Thousand Three Hundred
Eighty-Four Dollars ($5,312,384) per annum for the period commencing on the day
next succeeding the end of the 2nd Rental Period and ending on the first (1st)
anniversary of the last day of the 2nd Rental Period ($442,698.67 per month)
(the "3rd Rental Period");
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(4) Five Million Three Hundred Sixteen Thousand Seven Hundred
Ninety-Four Dollars ($5,316,794) per annum for the period commencing on the day
next succeeding the end of the 3rd Rental Period and ending on the first (1st)
anniversary of the last day of the 3rd Rental Period ($443,066.17 per month)
(the "4th Rental Period");
(5) Five Million Three Hundred Twenty-One Thousand Four Hundred
Twenty-Five Dollars ($5,321,425) per annum for the period commencing on the day
next succeeding the end of the 4th Rental Period and ending on the first (1st)
anniversary of the last day of the 4th Rental Period ($443,452.08 per month)
(the "5th Rental Period");
(6) Six Million One Hundred Sixty-Two Thousand Five Hundred
Seventy-Seven Dollars ($6,162,577) per annum for the period commencing on the
day next succeeding the end of the 5th Rental Period and ending on the first
(1st) anniversary of the last day of the 5th Rental Period ($513,548.08 per
month) (the "6th Rental Period");
(7) Six Million One Hundred Sixty-Seven Thousand Six Hundred
Eighty-Two Dollars ($6,167,682) per annum for the period commencing on the day
next succeeding the end of the 6th Rental Period and ending on the first (1st)
anniversary of the last day of the 6th Rental Period ($513,973.50 per month)
(the "7th Rental Period");
(8) Six Million One Hundred Seventy-Three Thousand Forty-Two Dollars
($6,173,042) per annum for the period commencing on the day next succeeding the
end of the 7th Rental Period and ending on the first (1st) anniversary of the
last day of the 7th Rental Period ($514,420.17 per month) (the "8th Rental
Period");
(9) Four Million Six Thousand Eight Hundred Twenty-Six Dollars
($4,006,826) per annum for the period commencing on the day next succeeding the
and of the 8th Rental Period and ending on the first (1st) anniversary of the
last day of the 8th Rental Period ($333,902.17 per month) (the "9th Rental
Period");
(10) Four Million Twelve Thousand Seven Hundred Thirty-Six Dollars
($4,012,736) per annum for the period commencing on the day next succeeding the
end of the 9th Rental Period and ending on the first (1st) anniversary of the
last day of the 9th Rental Period ($334,394.67 per month) (the "10th Rental
Period"); and
(11) One Million Five Hundred Fifty-Eight Thousand Nine Hundred
Eight Dollars ($1,558,908) per annum for the period commencing on the day next
succeeding the end of the 10th Rental Period and ending on the day immediately
preceding the twelfth (12th) anniversary of the Commencement Date ($129,909 per
month) (the "11th Rental Period"), which Tenant agrees to pay in lawful money of
the United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, in equal monthly installments in
advance, on the first (1st) day of each calendar month during the Term
commencing on the Commencement Date, at the office of Landlord or such other
place as Landlord may designate, without any set-off, offset, abatement or
deduction whatsoever. At the request of Landlord, Fixed
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Rent shall be payable when due by wire transfer of funds to an account
designated from time to time by Landlord.
Section 1.2 If the Commencement Date shall occur on a date other
than the first (1st) day of any calendar month, then, on the Commencement Date
Tenant shall pay to Landlord a sum equal to Fourteen Thousand Five Hundred
Thirty-Two and 01/100 Dollars ($14,532.01), multiplied by the number of calendar
days in the period from the Commencement Date to the last day of the month in
which the Commencement Date shall occur, both dates inclusive.
ARTICLE 2
USE AND OCCUPANCY
Section 2.1 (A) (1) Tenant shall use and occupy (i) the Office
Premises as general, administrative and executive offices, and for other lawful
uses incidental thereto and, during the period through and including the twelfth
(12th) anniversary of the Commencement Date, as the world headquarters of MONY,
containing executive offices of MONY, and for no other purpose, (ii) the
Basement Premises for storage use ancillary to its use of the Office Premises,
and for no other purpose, and (iii) the Garage Premises as a garage for the
parking of two (2) automobiles of Tenant and its offices (provided and for so
long as the same is permitted under the Certificate of Occupancy for the
Building), and for no other purpose. During the period through and including the
eighth (8th) anniversary of the Commencement Date, MONY shall occupy for the
operation of its business not less than 118,500 rentable square feet of Office
Space. In connection with, and incidental to, Tenant's use of the Office
Premises for general and executive offices as provided in this Section 2.1,
Tenant, at its sole cost and expense and upon compliance with all applicable
Requirements, may use (i) a portion of the Office Premises as a kitchen and
cafeteria facility for the preparation and dispensing of food to its officers,
employees and business guests (but not for use as a public restaurant), (ii) a
portion of the Office Premises as an executive dining room for use by Tenant's
officers, employees and quests (but not for use as a public restaurant), (iii)
portions of the Office Premises as a mail room, word processing center,
reproduction and copying facility for Tenant's own business requirements and the
operation of computers for Tenant's own business requirements and (iv) a portion
of the Office Premises as a day care center for the children of the officers and
employees of Tenant, provided, in each instance, that Tenant shall obtain all
permits required by any Governmental Authorities for the operation thereof and
shall otherwise comply with the provisions of this Lease, including, without
limitation, the provisions of Article 3 hereof. Subject to the terms and
provisions of this Lease and all Rules and Regulations, Tenant shall have access
to the Premises twenty-four (24) hours a day, seven (7) days a week.
(2) Tenant acknowledges and agrees that the covenant of MONY
to occupy the Office Premises as its world headquarters, containing executive
offices, for the period through and including the twelfth (12th) anniversary of
the Commencement Date, and the covenant of MONY to occupy for the operation of
its business not less than 118,500 rentable square feet of the Office Premises
during the period through and including the eighth (8th) anniversary of the
Commencement Date are
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each material inducements to the execution and delivery by Landlord of this
Lease. The parties recognize and agree that the damage to Landlord resulting
from any failure by Tenant to fully observe such covenants as aforesaid will be
extremely substantial, will exceed the amount of the Fixed Rent and Rental
reserved hereunder, and will be impossible to accurately measure. Tenant
therefore agrees that if Tenant shall fail to fully observe such covenants, as
aforesaid, Landlord shall be entitled to pursue all rights and remedies Landlord
may have hereunder or at law or in equity, including, without limitation, the
remedy of specific performance.
(3) At the request of Landlord, Tenant shall discuss with
Landlord the feasibility of making Tenant's dining facility available for use by
other tenants and occupants of the Building and their officers, employees and
business guests. Landlord agrees that Tenant has no obligation to make Tenant's
dining facility so available.
(B) (1) Landlord and Tenant agree that the Building setbacks
adjoining the Premises (the "Setback Areas") are not a part of the Premises and,
except as expressly provided in this paragraph (B)(1), neither Tenant nor its
officers, employees, agents or contractors may enter upon or use such Areas. No
Fixed Rent, Electricity Additional Rent, Space Factor or Tenant's Share shall be
attributed to such Areas. Subject to the provisions of this paragraph (B)(1) and
all Requirements, Tenant may cause the Setback Area adjacent to the Thirteenth
Floor Premises (the "Thirteenth Floor Setback Area") to be landscaped and may
cause supplemental HVAC units to be located on all other Setback Areas. Any such
work shall be performed at Tenant's sole cost and expense in accordance with the
provisions of Article 3 of this Lease and shall be subject to the prior written
approval of Landlord, which approval shall not be unreasonably withheld or
delayed, provided that the existence of such landscaping or any such HVAC unit
or the installation thereof (i) does not require any structural alterations,
(ii) is not visible from the street, (iii) provides for drainage and protective
decking adequate, in Landlord's sole judgment, to protect the Building, (iv)
does not affect any part of the Building other than the Setback Area, (v) does
not affect any service required to be furnished by Landlord to Tenant or to any
other tenant or occupant of the Building, (vi) does not affect the proper
functioning of any Building System, (vii) does not reduce the value or utility
of the Building, and (viii) does not affect the certificate of occupancy for the
Building or the Premises or any actions, proceedings or efforts to obtain any
such certificate of occupancy. Landlord shall not be deemed to be unreasonable
with respect to withholding its consent to any proposed landscaping which meets
the criteria set forth in this Section 2.1(B)(1) if the Lessor or Mortgagee, as
the case may be, shall withhold its consent. Tenant, at its sole cost and
expense, shall cause all landscaping to be maintained by a reputable landscaping
contractor in accordance with a landscaping maintenance plan approved by
Landlord, which approval shall not be unreasonably withheld or delayed, and
shall cause the HVAC units to be maintained by a reputable HVAC contractor,
which landscaping contractor and HVAC contractor shall be subject to Landlord's
prior written approval, which approval shall not be unreasonably withheld or
delayed. Subject to all Requirements and to the provisions of this Lease and all
Rules and Regulations, Tenant, its officers, employees and business guests may
enter upon and use on an exclusive basis (subject to Landlord's right of access
as provided in this Lease) the Thirteenth Floor
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Setback Area from time to time, for social gatherings and as a sitting area,
provided that Tenant shall be responsible, at its sole cost and expense, for all
damage which results from such use. Landlord may at all times use the Setback
Areas in connection with any cleaning, maintenance or repair of the Building,
and Landlord's use of such Areas shall not entitle Tenant to any set-off, offset
or abatement of Rental, or any claim of constructive eviction. Within ten (10)
days after demand by Landlord, Tenant shall make all changes to the existing
landscaping and HVAC units and condition of the Setback Areas necessary to
comply with the provisions of this Lease, including, without limitation, the
provisions of this Section 2.1(B)(1).
(2) Subject to the terms and provisions of this Section
2.1(B)(2) and Article 3 hereof, Tenant, upon request, shall have access to (i)
all shaft areas of the Building for the installation in such shaft areas of
Tenant's electrical, telecommunications and plumbing conduits and lines and (ii)
to the Building-wide wiring and conduits for the use thereof in connection with
the operation of Tenant's equipment located in the Premises. Such access to the
shaft areas of the Building and the Building-wide wiring and conduits shall be
on a non-exclusive basis, together with the access and use thereof by Landlord
and the other tenants and occupants of the Building, and shall be granted to the
extent required by Tenant for the purposes set forth above, but in no event
shall Landlord be required to permit Tenant to use any portion of the shaft
areas of the Building in excess of Tenant's Share of the portion of the shaft
areas not (i) used for the Building Systems or otherwise used by Landlord in
connection with the operation of the Building, (ii) reserved by Landlord for the
anticipated requirements of the Building Systems or the operation of the
Building or (iii) reserved by Landlord for the anticipated requirements of all
tenants of the Building on a Building-wide basis. No Fixed Rent, Tenant's Share
or Space Factor shall be attributed to the shaft areas of the Building. At any
time during the Term, either Landlord or Tenant may, at such party's sole cost
and expense, demolish the existing vertical inter-office mail room which is
serviced by the shaft areas of the Building and remove the existing conveyor
system located in the shaft areas of the Building; provided, however, that if
Tenant shall desire to perform the same Tenant shall comply with all of the
provisions of this Lease regarding the performance of an Alteration, including,
without limitation, the provisions of Article 3 hereof.
Section 2.2 (A) Tenant shall not use the Premises or any part
thereof, or permit the Premises or any part thereof to be used, (1) for the
business of photographic, multilith or multigraph reproductions or offset
printing, except in connection with, either directly or indirectly, Tenant's own
business and/or activities, (2) for a banking, trust company, depository,
guarantee or safe deposit business, in each case to the extent the same involves
off-the-street transactions with the general public for retail customer
services, (3) as a savings bank, a savings and loan association, or as a loan
company, in each case to the extent the same involves off-the-street
transactions with the general public for retail customer services, (4) for the
sale of travelers checks, money orders, drafts, foreign exchange or letters of
credit or for the receipt of money for transmission, in each case to the extent
the same involves off-the-street transactions with the general public for retail
customer services, (5) as a stock broker's or dealer's office or for the
underwriting or sale of securities, in each case to the extent the same involves
off-the-street transactions with the general public for retail customer
services, (6) by the
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United States government, the City or State of New York, any foreign government,
the United Nations or any agency or department of any of the foregoing or any
other Person having sovereign or diplomatic immunity, or by any
quasi-governmental agency, such as the United States Postal Service, (7) as a
restaurant or bar or for the sale of confectionery, soda or other beverages,
sandwiches, ice cream or baked goods or for the preparation, dispensing or
consumption of food or beverages in any manner whatsoever, except for
consumption by Tenant's officers, employees and business guests, (8) as an
employment agency, executive search firm or similar enterprise, labor union,
school, or vocational training center (except for the training of employees of
Tenant intended to be employed at the Premises), (9) as a barber shop or beauty
salon, (10) by any healthcare professional or healthcare service organization
providing medical services at the Premises or (11) for any use involving the use
of chemicals or hazardous substances other than those incidental to general
office use and otherwise expressly permitted under the provisions of this
Leases.
(B) In connection with, and incidental to, Tenant's use of the
Premises for general and executive offices as provided in this Article 2, and in
addition to the kitchen and cafeteria facilities referred to in Section
2.1(A)(1) above, Tenant, at its sole cost and expense and upon compliance with
all applicable Requirements, may install "dryer" or similar units in the
Premises for the purpose of warming food for the officers, employees and
business guests of Tenant (but not for use as a public restaurant), provided
that Tenant shall obtain all permits required by any Governmental Authorities
for the operation thereof and such installation shall comply with the provisions
of this Lease, including, without limitation, Article 3 hereof. Tenant may also
install, at its sole cost and expense and subject to and in compliance with the
provisions of Articles 3 and 4 hereof, vending machines for the exclusive use of
the officers, employees and business guests of Tenant, each of which vending
machines (if it dispenses any beverages or other liquids or refrigerates) shall
have a waterproof pan located thereunder, connected to a drain.
ARTICLE 3
ALTERATIONS
Section 3.1 (A) Except as provided in Section 3.4 hereof, Tenant
shall not make any Alterations without Landlord's prior consent. Landlord shall
not unreasonably withhold or delay its consent to any proposed nonstructural
Alterations, provided that such Alterations (i) are not visible from the outside
of the Building, (ii) do not affect any part of the Building other than the
Premises, (iii) do not affect any service required to be furnished by Landlord
to Tenant or to any other tenant or occupant of the Building, (iv) do not affect
the proper functioning of any Building System, (v) do not reduce the value or
utility of the Building, and (vi) do not affect the certificate of occupancy for
the Building or the Premises or any actions, proceedings or efforts to obtain
any such certificate of occupancy.
(B) (1) Except as hereinafter sot forth, prior to making any
Alterations, Tenant shall (i) submit to Landlord detailed plans and
specifications (including layout, architectural, mechanical and structural
drawings) for each proposed
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Alteration and shall not commence any such Alteration without first obtaining
Landlord's approval of such plans and specifications (except with respect to any
nonstructural Alteration referred to in Section 3.4 hereof for which Landlord's
approval is not required), which, in the case of nonstructural Alterations which
meet the criteria set forth in Section 3.1(A) above, shall not be unreasonably
withheld or delayed, (ii) at Tenant's expense, obtain all permits, approvals and
certificates required by any Governmental Authorities, it being agreed that all
filings with Governmental Authorities to obtain such permits, approvals and
certificates shall be made, at Tenant's expense, by a Person designated by
Landlord, and (iii) furnish to Landlord duplicate original policies or
certificates thereof of worker's compensation (covering all persons to be
employed by Tenant, and Tenant's contractors and subcontractors in connection
with such Alteration) and comprehensive public liability (including property
damage coverage) insurance in such form, with such companies, for such periods
and in such amounts as Landlord may reasonably approve, naming Landlord and its
agents, any Lessor and any Mortgagee, as additional insureds. Upon completion of
such Alteration, Tenant, at Tenant's expense, shall obtain certificates of final
approval of such Alteration required by any Governmental Authority and shall
furnish Landlord with copies thereof, together with the "as-built" plans and
specifications for such Alterations, it being agreed that all filings with
Governmental Authorities to obtain such permits, approvals and certificates
shall be made, at Tenant's expense, by a Person designated by Landlord, provided
such Person designated by Landlord shall provide its services at a rate
competitive with those of other Persons providing similar services for
comparable alteration projects in midtown Manhattan. All Alterations shall be
made and performed substantially in accordance with the plans and specifications
therefor as approved by Landlord, all Requirements, the Rules and Regulations,
and all rules and regulations relating to Alterations promulgated by Landlord in
its reasonable judgment. All materials and equipment to be incorporated in the
Premises as a result of any Alterations or a part thereof shall be first quality
and no such materials or equipment (other than Tenant's Property) shall be
subject to any lien, encumbrance, chattel mortgage or title retention or
security agreement. All Alteration(s) requiring the consent of Landlord shall be
performed only under the supervision of an independent licensed architect or an
independent licensed mechanical engineer.
(2) If Landlord shall fail to disapprove Tenant's final plans
and specifications for any Alteration within twelve (12) Business Days, or
within eight (8) Business Days (with respect to any resubmission of disapproved
plans), after Landlord's receipt thereof (provided in each instance the same
shall be of a scope and scale reasonably susceptible of review in such periods),
Landlord shall be deemed to have approved such plans and specifications. Any
disapproval given by Landlord shall be accompanied by a statement of the reasons
for such disapproval. Landlord reserves the right to disapprove any plans and
specifications in part, to reserve approval of items shown thereon pending its
review and approval of other plans and specifications, and to condition its
approval upon Tenant making revisions to the plans and specifications or
supplying additional information. Any review or approval by Landlord of any
plans and/or specifications with respect to any Alteration is solely for
Landlord's benefit, and without any representation or warranty whatsoever to
Tenant or any other Person with respect to the adequacy, correctness or
efficiency thereof or otherwise.
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(C) Tenant shall be permitted to perform Alterations during the
hours of 8:00 A.M. to 6:00 P.M. on Business Days, provided that such work shall
not interfere with or interrupt the operation and maintenance of the Building or
unreasonably interfere with or interrupt the use and occupancy of the Building
by other tenants in the Building. Otherwise, Alterations shall be performed at
such times and in such manner as Landlord may from time to time reasonably
designate. All Tenant's Property installed by Tenant and all Alterations in and
to the Premises which may be made by Tenant at its own cost and expense prior to
and during the Term, shall remain the property of Tenant. Upon the Expiration
Date, Tenant shall remove Tenant's Property from the Premises, Tenant's signs on
the outside and in the lobby of the Building, all internal staircases, vaults
(other than the large vault in the basement of the Building existing on the date
hereof) and kitchens (including all equipment, tiled floors and tiled walls (but
excluding all other walls) and ventilation duct work serving the kitchens), and,
at Tenant's option, Tenant also may remove all other Alterations made by Tenant
to the Premises, provided, however, in any case, that Tenant shall repair and
restore in a good and workerlike manner to good condition any damage to the
Premises or the Building caused by such removal (including, without limitation,
reslabbing any openings in the slabs remaining after the removal of the internal
staircases, and refireproofing such areas), and Tenant shall comply with all
applicable provisions of this Lease regarding Alterations (including, without
limitation, the provisions of this Article 3 and all Alteration Rules and
Regulations) in connection with such removal. Notwithstanding the foregoing, in
addition to Landlord's rights pursuant to Article 15 hereof, if Tenant shall
desire to remove the "Weather Star" on the Expiration Date, Tenant shall so
notify Landlord not earlier than one hundred eighty (180) nor later than sixty
(60) days prior to the Expiration Date. If Landlord, within ten (10) Business
Days after delivery by Tenant of such notice, shall notify Tenant that Landlord
elects not to permit the "Weather Star" to be removed, Tenant may not remove the
"Weather Star". If Landlord shall notify Tenant within such ten (10) Business
Day period that Landlord elects to permit the "Weather Star" to be removed, or
if Landlord shall fail or refuse to respond to Tenant's notice within such ten
(10) Business Day period, Tenant, subject to and in accordance with the
provisions of this Lease regarding Alterations (including, without limitation,
the provisions of this Article 3 and all Alteration Rules and Regulations), by
the Expiration Date shall remove the "Weather Star" and shall restore to good
and worker like manner and to good condition any damages to the Building caused
by such removal. Notwithstanding anything to the contrary contained herein, in
addition to Landlord's rights pursuant to Article 15 hereof, Landlord, upon
notice given at least thirty (30) days prior to the Fixed Expiration Date or
upon such shorter notice as is reasonable under the circumstances upon the
earlier expiration of the Term, may require Tenant to remove the "Weather Star",
and to repair and restore in a good and worker like manner to good condition any
damage to the Premises or the Building caused by such removal, and Tenant shall
comply with all applicable provisions of this Lease regarding Alterations
(including, without limitation, the provisions of this Article 3 and all
Alteration Rules and Regulations) in connection with such removal.
Notwithstanding the foregoing, if Landlord shall require Tenant to remove the
"Weather Star" as aforesaid, Tenant, within fifteen (15) days after receipt of
Landlord's notice (with respect to which date time shall be of the essence), may
notify Landlord that, in lieu of removing the "Weather Star", Tenant has elected
to pay to
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Landlord, as additional rent hereunder, the sum of Two Hundred Thousand Dollars
($200,000), which sum shall be paid to Landlord with such notification.
(D) (1) All Alterations shall be performed, at Tenant's sole cost
and expense, by contractors, subcontractors or mechanics approved by Landlord
(which approval shall not be unreasonably withheld or delayed). Prior to making
an Alteration, at Tenant's request, Landlord shall furnish Tenant with a list of
not less than five (5) contractors who may perform Alterations to the Premises
on behalf of Tenant. If Tenant engages any contractor set forth on the list,
Tenant shall not be required to obtain Landlord's consent for such contractor
unless, prior to the earlier of (a) entering into a contract with such
contractor, and (b) the commencement of work by such contractor, Landlord shall
notify Tenant that such contractor has been removed from the list. If Landlord
shall fail to notify Tenant in writing of its disapproval of any contractor,
subcontractor or mechanic, and the reasons therefor, within five (5) days after
Tenant's request for Landlord's approval thereof, Landlord shall be deemed to
have approved such contractor, subcontractor or mechanic for the performance of
such Alteration.
(2) Notwithstanding the foregoing, with respect to any
Alteration affecting any Building System, Tenant shall select a contractor from
a list of not less than five (5) approved contractors furnished by Landlord to
Tenant.
(E) Any mechanic's lien filed against the Premises or the Real
Property for work claimed to have been done for, or materials claimed to have
been furnished to, Tenant shall be discharged by Tenant within thirty (30) days
after Tenant shall have received notice thereof, at Tenant's expense, by payment
or filing the bond required by law. Tenant shall not, at any time prior to or
during the Term, directly or indirectly employ, or permit the employment of, any
contractor, mechanic or laborer in the Premises, whether in connection with any
Alteration or otherwise, if such employment would interfere or cause any
conflict with other contractors, mechanics or laborers engaged in the
construction, maintenance or operation of the Building by Landlord, Tenant or
others, or of any adjacent property owned by Landlord. In the event of any such
interference or conflict, Tenant, upon demand of Landlord, shall cause all
contractors, mechanics or laborers causing such interference or conflict to
leave the Building immediately.
Section 3.2 Tenant shall pay to Landlord, as additional rent, in
connection with any Alterations, a fee (the "Alteration Fee") equal to the
reasonable out of pocket costs and expenses incurred by Landlord and its agents
in connection with such Alterations. Any amounts payable under this Section 3.2
shall be paid within ten (10) Business Days after demand therefor.
Section 3.3 Upon the request of Tenant, Landlord, at Tenant's cost
and expense, shall join in any applications for any permits, approvals or
certificates required to be obtained by Tenant in connection with any permitted
Alteration (provided that the provisions of the applicable Requirement shall
require that Landlord join in such application) and shall otherwise cooperate
with Tenant in connection herewith, provided that Landlord shall not be
obligated to incur any cost or expense, including, without
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limitation, attorneys' fees and disbursements, or suffer any liability in
connection therewith.
Section 3.4 Anything contained in this Lease to the contrary
notwithstanding, Landlord's consent shall not be required with respect to any
nonstructural Alteration, provided that such Alteration (i) is not visible from
the outside of the Building, (ii) does not affect any part of the Building other
than the Premises, (iii) does not affect any service required to be furnished by
Landlord to any other tenant or occupant of the Building, (iv) does not affect
the proper functioning of any Building System, (v) does not impair or diminish
the value or utility of the Building, (vi) does not affect or violate the
provisions of the certificate of occupancy for the Building or the Premises or
any actions, proceedings or efforts to obtain any such certificate of occupancy,
and (vii) the estimated cost of the labor and materials for which shall not
exceed One Hundred Thousand Dollars ($100,000), which amount shall be increased
on the third (3rd) anniversary of the Commencement Date and annually thereafter
by the percentage increase, if any, in the consumer Price Index from that in
effect on the date immediately preceding the Commencement Date, either
individually or in the aggregate with other nonstructural Alterations
constructed within any twelve (12) month period; provided, however, that at
least ten (10) days prior to making any such nonstructural Alteration, Tenant
shall submit to Landlord for informational purposes only the detailed plans and
specifications for such Alteration, as required by Section 3.1(B)(1)(i) hereof,
and any such Alteration shall otherwise be performed in compliance with the
provisions of this Article 3.
ARTICLE 4
REPAIRS-FLOOR LOAD
Section 4.1 Landlord shall operate, maintain and make all necessary
repairs (both structural and nonstructural) to the part of Building Systems
which provide service to the Premises (but not to the distribution portions of
such Building Systems which exclusively service the Premises) and the public
portions of the Building, both exterior and interior, in conformance with
standards applicable to first class office buildings in midtown Manhattan. All
damage or injury to the Premises caused by or resulting from the carelessness,
omission, neglect or improper conduct of, or alterations or repairs made by,
Landlord or its agents, employees, contractors or subcontractors shall be
repaired by Landlord. Tenant, at Tenant's sole cost and
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expense, shall take good care of the Premises and the fixtures, equipment and
appurtenances therein and the distribution systems and shall make all
nonstructural repairs thereto as and when needed to preserve them in good
working order and condition, except for reasonable wear and tear, obsolescence
and damage for which Tenant is not responsible pursuant to the provisions of
Article 10 hereof. Notwithstanding the foregoing, all damage or injury to the
Premises or to any other part of the Building and Building Systems, or to its
fixtures, equipment and appurtenances, whether requiring structural or
nonstructural repairs, caused by or resulting from carelessness, omission,
neglect or improper conduct of, or Alterations made by, Tenant, Tenant's agents,
employees, contractors, subcontractors, subtenants, assigns, invitees or
licensees, shall be repaired at Tenant's sole cost and expense, by Tenant to the
reasonable satisfaction of Landlord (if the required repairs are nonstructural
in nature and do not affect any Building System), or by Landlord (if the
required repairs are structural in nature or affect any Building System). All of
the aforesaid repairs shall be of first quality and of a class consistent with
first class office building work or construction and shall be made in accordance
with the provisions of Article 3 hereof. If Tenant fails after ten (10) Business
Days' notice (or such shorter period as may be required due to an emergency) to
proceed with due diligence to make repairs required to be made by Tenant, the
same may be made by Landlord at the expense of Tenant, and the expenses thereof
incurred by Landlord, with interest thereon at the Applicable Rate from the date
such expense was incurred to the date such amount is paid by Tenant to Landlord,
shall be forthwith paid to Landlord as additional rent after rendition of a bill
or statement therefor. Tenant shall give Landlord prompt notice of any defective
condition in the Building or in any Building System, located in, servicing or
passing through the Premises.
Section 4.2 Tenant shall not place a load upon any floor of the
Premises exceeding the "live load" limitations set forth on the certificate of
occupancy for the Premises, as the same may be modified from time to time.
Tenant shall not move any safe, heavy machinery, heavy equipment, freight, bulky
matter or fixtures into or out of the Building without Landlord's prior consent,
which consent shall not be unreasonably withheld, and shall make payment to
Landlord of Landlord's out of pocket costs, if any, in connection therewith. If
such safe, machinery, equipment, freight, bulky matter or fixtures requires
special-handling, Tenant shall employ only persons holding a Master Rigger's
license to do said work. All work in connection therewith shall comply with all
Requirements and the Rules and Regulations, and shall be done during such hours
as Landlord may reasonably designate. Business machines and mechanical equipment
shall be placed and maintained by Tenant at Tenant's expense in settings
sufficient in Landlord's reasonable judgment to absorb and prevent vibration,
noise and annoyance. Except as expressly provided in this Lease, there shall be
no allowance to Tenant for a diminution of rental value and no liability on the
part of Landlord by reason of inconvenience, annoyance or injury to business
arising from Landlord, Tenant or others making, or failing to make, any repairs,
alterations, additions or improvements in or to any portion of the Building or
the Premises, or in or to fixtures, appurtenances or equipment thereof.
Section 4.3 Landlord shall use its reasonable efforts to minimize
interference with Tenant's use and occupancy of the Premises in making any
repairs, alterations, additions or improvements; provided, however, that
Landlord shall have no obligation to employ contractors or labor at so-called
overtime or other premium pay rates or to incur any other overtime costs or
expenses whatsoever, except that Landlord, at its expense but subject to
recoupment pursuant to Article 27 hereof, shall employ contractors or labor at
so-called overtime or other premium pay rates if necessary to make any repair
required to be made by it hereunder to remedy any condition that either (i)
except in the case of a fire or other casualty, results in a denial of access
to the Premises, (ii) threatens the health or safety of any occupant of the
Premises, or (iii) except in the case of a fire or other casualty, materially
interferes with Tenant's ability to conduct its business in any portion of the
Premises. In all other cases, at Tenant's request, Landlord
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shall employ contractors or labor at so-called overtime or other premium pay
rates and incur any other overtime costs or expenses in making any repairs,
alterations, additions or improvements, and Tenant shall pay to Landlord, as
additional rent, within ten (10) Business Days after demand, an amount equal to
the difference between the overtime or other premium pay rates and the regular
pay rates for such labor and any other overtime costs or expenses so incurred.
If more than one tenant of the Building shall request that Landlord incur the
same overtime or premium costs or expenses during the same period, the charge by
Landlord for such overtime or premium costs or expenses shall be equitably
allocated by Landlord among all such tenants of the Building (including Tenant).
Section 4.4 Both the design and decoration of the elevator areas of
each entire floor of the Premises and the public corridors of any floor of the
Premises occupied by more than one (1) occupant (as a result of a subletting or
occupancy arrangement, if any, in accordance with Article 12 hereof) shall be
subject to Landlord's approval, which approval shall not be unreasonably
withheld or delayed and, if Landlord shall fail to disapprove Tenant's final
plans and specifications for such design and decoration within twelve (12)
Business Days (or, with respect to any resubmission of any disapproved plans,
within eight (8) Business Days) after Landlord's receipt thereof (provided in
each instance the same shall be of a scope and scale reasonably susceptible of
review in such periods), Landlord shall be deemed to have approved such plans
and specifications. Such elevator areas and public corridors shall be maintained
and kept clean by Tenant to Landlord's reasonable satisfaction. Nothing
contained in the foregoing sentence, however, shall vitiate Landlord's
obligation to clean the Premises as provided in Section 28.4 hereof.
ARTICLE 5
WINDOW CLEANING
Tenant shall not clean, nor require, permit, suffer or allow any
window in the Premises to be cleaned from the outside in violation of Section
202 of the Labor Law, or any other Requirement, or of the rules of the Board of
Standards and Appeals, or of any other board or body having or asserting
jurisdiction.
ARTICLE 6
REQUIREMENTS OF LAW
Section 6.1 (A) Tenant, at its sole cost and expense, shall comply
with all Requirements applicable to the use and occupancy of the Premises,
including, without limitation, those applicable to the making of any Alterations
therein or the result of the making thereof, except that (other than with
respect to the making of Alterations or the result of the making thereof) Tenant
shall not be under any obligation to make any Alteration in order to comply with
any Requirement applicable to (i) the mere general "office" use (as opposed to
the manner of use) of the Office Premises, or (ii) the mere general "storage"
use (as opposed to the manner of use) of the Basement Premises, in each event
unless otherwise expressly required herein. Tenant shall not do or permit to
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be done any act or thing upon the Premises which will invalidate or be in
conflict with a standard "all-risk" insurance policy; and shall not do, or
permit anything to be done in or upon the Premises, or bring or keep anything
therein, except as now or hereafter permitted by the New York City Fire
Department, New York Board of Fire Underwriters, the Insurance Services Office
or other authority having jurisdiction or any insurer of Landlord or Tenant, and
then only in such quantity and manner of storage as not to increase the rate for
fire insurance applicable to the Building, or use the Premises in a manner (as
opposed to mere use as general "offices", "storage" and "garage" provided above)
which shall increase the rate of fire insurance on the Building or on property
located therein, over that in similar type buildings or in effect on the
Commencement Date. If by reason of Tenant's failure to comply with the
provisions of this Article, the fire insurance rate shall be higher than it
otherwise would be, then Tenant shall desist from doing or permitting to be done
any such act or thing and shall reimburse Landlord, as additional rent
hereunder, for that part of all fire insurance premiums thereafter paid by
Landlord which shall have been charged because of such failure by Tenant, and
shall make such reimbursement upon demand by Landlord. In any action or
proceeding wherein Landlord and Tenant are parties, a schedule or "make up" of
rates for the Building or the Premises issued by the Insurance Services Office,
any other body fixing such fire insurance rates or written confirmation from
Landlord's insurer, shall be conclusive evidence of the facts therein stated and
of the several items and charges in the fire insurance rates then applicable to
the Building.
(B) Landlord, at its sole cost and expense (but subject to
recoupment as provided in Article 27 hereof), shall comply with all other
Requirements applicable to the Premise's and those portions of the Building not
leased to and occupied by Tenants of the Building or available for leasing,
subject to Landlord's right to contest the applicability or legality thereof.
Section 6.2 Tenant, at its sole cost and expense and after notice to
Landlord, may contest by appropriate proceedings prosecuted diligently and in
good faith, the legality or applicability of any Requirement affecting the
Premises, provided that (a) Landlord (or any Indemnitee) shall not be subject to
imprisonment or to prosecution for a crime, nor shall the Real Property or any
part thereof be subject to being condemned or vacated, nor shall the certificate
of occupancy for the Premises or the Building, if any, be suspended or
threatened to be suspended by reason of non-compliance or by reason of such
contest; (b) before the commencement of such contest, if Landlord or any
Indemnitee may be subject to any civil fines or penalties or other criminal
penalties or criminal fines or if Landlord or any Indemnitees may be liable to
any independent third party as a result of such noncompliance, Tenant shall
furnish to Landlord, at Tenant's option, either (i) a bond of a surety company
satisfactory to Landlord, in form and substance reasonably satisfactory to
Landlord, and in an amount equal to the sum of (A) the cost of such compliance,
(B) the criminal or civil penalties or fines that may accrue by reason of such
non-compliance (as reasonably estimated by Landlord), and (C) the amount of such
liability to independent third parties (as reasonably estimated by Landlord),
and shall indemnify Landlord (and any Indemnitee) against the cost of such
compliance and liability resulting from or incurred in connection with such
contest or non-compliance (except that Tenant shall not be required to furnish
such bond
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to Landlord if it has otherwise furnished any similar bond required by law to
the appropriate Governmental Authority and has named Landlord as a beneficiary
thereunder) or (ii) other security reasonably satisfactory in all respects to
Landlord; (c) such non-compliance or contest shall not constitute or result in a
violation (either with the giving of notice or the passage of time or both) of
the terms of any Mortgage or Superior Lease, or if such Superior Lease or
Mortgage shall condition such non-compliance or contest upon the taking of
action or furnishing of security by Landlord, such action shall be taken or such
security shall be furnished at the expense of Tenant; and (d) Tenant shall keep
Landlord regularly advised as to the status of such proceedings. Without
limiting the applicability of the foregoing, Landlord (or any Indemnitee) shall
be deemed subject to prosecution for a crime if Landlord (or any Indemnitee), a
Lessor, a Mortgagee or any of their officers, directors, partners, shareholders,
agents or employees is charged with a crime of any kind whatsoever, unless such
charges are withdrawn ten (10) days before Landlord (or any Indemnitees), such
Lessor or such Mortgagee or such officer, director, partner, shareholder, agent
or employee, as the case may be, is required to plead or answer thereto.
ARTICLE 7
SUBORDINATION
Section 7.1 (A) Provided that (a) a Mortgagee shall execute and
deliver to Tenant an agreement to the effect that, if there shall be a
foreclosure of its Mortgage, such Mortgagee will not make Tenant a party
defendant to such foreclosure (unless required by law), evict Tenant, disturb
Tenant's possession under this Lease, or terminate or disturb Tenant's leasehold
estate or rights hereunder, and will recognize Tenant as the direct tenant of
such Mortgagee on the same terms and conditions as are contained in this Lease,
subject to the provisions hereinafter set forth, provided no Event of Default
shall have occurred and be continuing hereunder, or (b) a Lessor shall execute
and deliver to Tenant an agreement to the effect that if its Superior Lease
shall terminate or be terminated for any reason, Lessor will not evict Tenant,
disturb Tenant's possession under the Lease, or terminate or disturb Tenant's
leasehold estate or rights hereunder, and will recognize Tenant as the direct
tenant of such Lessor on the same terms and conditions as are contained in this
Lease (subject to the provisions hereinafter set forth), provided no Event of
Default shall have occurred and be continuing and Lessor shall not make Tenant a
party in any action to terminate such Superior Lease or to remove or evict
Tenant from the Premises provided no Event of Default shall have occurred and be
continuing (any such agreement, or any agreement of similar import, from a
Mortgagee or a Lessor, as the case may be, being hereinafter referred to as a
"Nondisturbance Agreement"), this Lease shall be subject and subordinate to such
Superior Lease and/or to such Mortgage. This clause shall be self-operative and
no further instrument of subordination shall be required from Tenant to make the
interest of any Lessor or Mortgagee superior to the interest of Tenant
hereunder. Tenant shall not do anything that would constitute a default under
any Superior Lease or Mortgage, or omit to do anything that Tenant is obligated
to do under the terms of this Lease so as to cause Landlord to be in default
thereunder. If the date of expiration of any Superior Lease shall be the same
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day as the Expiration Date, the Term shall end and expire twelve (12) hours
prior to the expiration of the Superior Lease.
(B) Any Nondisturbance Agreement may be made on the condition
that neither the Mortgagee nor the Lessor, as the case may be, nor anyone
claiming by, through or under such Mortgagee or Lessor, as the case may be,
including a purchaser at a foreclosure sale, shall be:
(1) liable for any act or omission of any prior landlord
(including, without limitation, the then defaulting landlord), or
(2) subject to any defense or offsets which Tenant may
have against any prior landlord (including, without limitation, the then
defaulting Landlord), or
(3) bound by any payment of Rental which Tenant may have
made to any prior landlord (including, without limitation, the then defaulting
Landlord) more than thirty (30) days in advance of the date upon which such
payment was due, or
(4) bound by any obligation to make any payment to or on
behalf of Tenant, or
(5) bound by any obligation to perform any work or to
make improvements to the Premises, except for (i.) repairs and maintenance
pursuant to the provisions of Article 4 hereof, provided, however, that with
respect to any such repairs or maintenance the need for which arose prior to the
date upon which such owner, Lessor, or Mortgagee shall be entitled to possession
of the Premises, such owner, Lessor or Mortgagee shall not be liable for the
fact that such repairs or maintenance were not performed by any then-prior
Landlord in a timely fashion, (ii) repairs to the Premises or any part thereof
as a result of damage by fire or other casualty pursuant to Article 10 hereof,
but only to the extent that such repairs can be reasonably made from the net
proceeds of any insurance actually made available to such Lessor or Mortgagee,
and (iii) repairs to the Premises as a result of a partial condemnation pursuant
to Article 11 hereof, but only to the extent that such repairs can be reasonably
made from the net proceeds of any award mad available to such Lessor or
Mortgagee, or
(6) bound by any amendment or modification of this Lease
made without its consent, or
(7) bound to return Tenant's security deposit, if any,
until such deposit has come into its actual possession and Tenant would be
entitled to such security deposit pursuant to the terms of this Lease.
(C) If required by the Mortgagee or the Lessor, within ten
(10) Business Days after notice thereof, Tenant shall join in any Nondisturbance
Agreement to indicate its concurrence with the provisions thereof and its
agreement that if at any time prior to the expiration of the Term, any Superior
Lease shall terminate or be terminated
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for any reason or any Mortgagee comes into possession of the Real Property or
the Building or the estate created by any Superior Lease by receiver or
otherwise, Tenant shall attorn, from time to time, to any owner of the Real
Property or the Building, or such Lessor or Mortgage or any person acquiring the
interest of Landlord as a result of any such termination, or as a result of a
foreclosure of the Mortgage or the granting of a dead in lieu of foreclosure, as
the case may be, as Tenant's landlord hereunder, upon the then executory terms
and conditions of this Lease for the remainder of the Term, provided that such
owner, Lessor or Mortgagee, as the case may be, or receiver caused to be
appointed by any of the foregoing, shall then be entitled to possession of the
Premises. Tenant shall promptly so accept, execute and deliver any
Nondisturbance Agreement proposed by any such Mortgagee or Lessor which conforms
to the provisions of this Article 7. Any such Nondisturbance Agreement may also
contain other terms and conditions as may otherwise be required by such
Mortgagee or Lessor, as the case may be, which do not increase Tenant's monetary
obligations under this Lease, or adversely affect or diminish the rights, or
increase the other obligations of Tenant under this Lease, by more than a de
minimis amount.
Section 7.2 If (i) a Lessor shall not have delivered a
Nondisturbance Agreement and if at any time prior to the expiration of the Term,
any Superior Lease shall terminate or be terminated for any reason or (ii) if a
Mortgagee shall not have delivered a Nondisturbance Agreement and if at any time
prior to the expiration of the Term, any Mortgagee comes into possession of the
Real Property or the Building or the estate created by any Superior Lease by
receiver or otherwise, Tenant agrees, upon demand of any owner of the Real
Property or the Building, or of any such Lessor, or of any such Mortgagee in
possession of the Real Property or the Building, to attorn, from time to time,
to any such owner, Lessor or Mortgagee or any person acquiring the interest of
Landlord as a result of any such termination, or as a result of a foreclosure of
the Mortgage or the granting of a deed in lieu of foreclosure, as the case may
be, as Tenant's Landlord hereunder, upon the then executory terms and conditions
of this Lease, subject to the provisions of Section 7.1 hereof, for the
remainder of the Term, provided that such owner, Lessor or Mortgagee, as the
case may be, or receiver caused to be appointed by any of the foreg6ing, shall
then be entitled to possession of the Premises. The provisions of this Section
7.2 shall ensure to the benefit of any such owner, Lessor or Mortgagee, and
shall be self-operative upon any such demand, and no further instrument shall be
required to give effect to said provisions. Tenant, however, upon demand of any
such owner, Lessor or Mortgagee, shall execute, from time to time, instruments,
in recordable form, in confirmation of the foregoing provisions of this Section
7.2, satisfactory to any such owner, Lessor or Mortgagee, acknowledging such
attornment and setting forth the terms and conditions of its tenancy.
Section 7.3 From time to time, within five (5) Business Days next
following written request by Landlord, any Mortgagee or any Lessor, Tenant shall
deliver to Landlord, such Mortgagee or such Lessor a written statement executed
by Tenant, in form-reasonably satisfactory to Landlord, such Mortgagee or such
Lessor, (1) stating that this Lease is then in full force and effect and has not
been modified (or if modified, setting forth all modifications), (2) setting
forth the date to which the Fixed Rent, additional rent and other items of
Rental have been paid, (3) stating whether or not, to the
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best knowledge of Tenant, Landlord is in default under this Lease, and, if
Landlord is in default, setting forth the specific nature of all such defaults,
and (4) as to any other matters reasonably requested by Landlord, such mortgagee
or such Lessor and related to this Lease. Tenant acknowledges that any statement
delivered pursuant to this Section 7.3 may be relied upon by any purchaser or
owner of the Real Property or the Building, or Landlord's interest in the Real
Property or the Building or any Superior Lease, or by any Mortgagee, or by an
assignees of any mortgage, or by any Lessor, or by any assignee of any Lessor.
Section 7.4 From time to time, within five (5) Business Days next
following written request by Tenant, Landlord shall deliver to Tenant a written
statement executed by Landlord (i) stating that this Lease is then in full force
and effect and has not been modified (or if modified, setting forth all
modifications), (ii) setting forth the date to which the Fixed Rent, all
additional rent and any other items of Rental have been paid, (iii) stating
whether or not, to the best knowledge of Landlord (but without having made any
investigation), Tenant is in default under this Lease, and, if Tenant is in
default, setting forth the specific nature of all such defaults, and (iv) as to
any other matters reasonably requested by Tenant and related to this Lease.
Section 7.5 As long as any Superior Lease or Mortgage shall exist,
Tenant shall not seek to terminate this Lease by reason of any act or omission
of Landlord until Tenant shall have given written notice of such act or omission
to all Lessors and Mortgagees at such addresses as shall have been furnished to
Tenant by such Lessors and Mortgagees and, except with respect to any act or
omission of Landlord which materially interferes with Tenant's use of any
material portion of the Premises, if any such Lessor or Mortgagee, as the case
may be, shall have notified Tenant within ten (10) Business Days following
receipt of such notice of its intention to remedy such act or omission, until a
reasonable period of time shall have elapsed following the giving of such
notice, during which period such Lessors and Mortgagees shall have the right,
but not the obligation, to remedy such act or omission.
Section 7.6 Tenant hereby irrevocably waives any and all right(s) it
may have in connection with any zoning lot merger or transfer of development
rights with respect to the Real Property including, without limitation, any
rights it may have to be a party to, to contest, or to execute, any Declaration
of Restrictions (as such term is defined in Section 12-10 of the Zoning
Resolution of The City of New York effective December 15, 1961, as amended) with
respect to the Real Property, which would cause the Premises to be merged with
or unmerged from any other zoning lot pursuant to such Zoning Resolution or to
any document of a similar nature and purpose, and Tenant agrees that this Lease
shall be subject and subordinate to any Declaration of Restrictions or any other
document of similar nature and purpose now or hereafter affecting the Real
Property. In confirmation of such subordination and waiver, Tenant shall execute
and deliver promptly any certificate or instrument that Landlord reasonably may
request.
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ARTICLE 8
RULES AND REGULATIONS
Tenant and Tenant's contractors, employees, agents, visitors,
invitees and licensees shall comply with the Rules and Regulations. Tenant shall
have the right to dispute the reasonableness of any additional Rule or
Regulation hereafter adopted by Landlord. If Tenant disputes the reasonableness
of any additional Rule or Regulation hereafter adopted by Landlord, the dispute
shall be determined by arbitration in the City of New York in accordance with
the rules and regulations then obtaining of the American Arbitration Association
or its successor. Any such determination shall be final and conclusive upon the
parties hereto. The right to dispute the reasonableness of any additional Rule
or Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice upon Landlord within thirty (30) days after
receipt by Tenant of notice of the adoption of any such additional Rule or
Regulation, which notice shall contain a statement referring to the waiver of
Tenant's right to dispute such Rule or Regulation unless such dispute is
asserted in the manner and within the time period set forth in this Article 8.
Nothing in this Lease contained shall be construed to impose upon Landlord any
duty or obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease against any other tenant, and Landlord shall not
be liable to Tenant for violation of the same by any other tenant, its
employees, agents, visitors or licensees, except that, other than as a result of
special circumstances applicable to Tenant or any other tenant of the Building,
Landlord shall not enforce any Rule or Regulation against Tenant which Landlord
shall not then generally be enforcing against all other office tenants in the
Building (other than Landlord or its Affiliates). If there is any conflict
between the Rules or Regulations and the terms or provisions of this Lease, the
terms and provisions of this Lease shall control.
ARTICLE 9
INSURANCE, PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
Section 9.1 (A) Any Building employee to whom any property shall be
entrusted by or on behalf of Tenant shall be deemed to be acting as Tenant's
agent with respect to such property and neither Landlord nor its agents shall be
liable for any damage to property of Tenant or of others entrusted to employees
of the Building, nor for the loss of or damage to any property of Tenant or
others by theft or otherwise. Neither Landlord nor its agents shall be liable
for any injury (or death) to persons or damage to property, or interruption of
Tenant's business, resulting from fire or other casualty; nor shall Landlord or
its agents be liable for any such injury (or death) to persons or damage caused
by other tenants or persons in the Building or caused by construction of any
private, public or quasi-public work; nor shall Landlord be liable for any
injury (or death) to persons or damage to property or improvements, or
interruption of Tenant's business, resulting from any latent defect in the
Premises or in the Building (provided that the foregoing shall not relieve
Landlord from its obligations, if any, to repair such latent defect pursuant to
the provisions of Article 4 hereof), or resulting from the existence of
asbestos, asbestos-containing materials, polychlorinated biphanyls or other
matters which are, or may be, or may become, environmental hazards, unless the
same were installed by
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Landlord subsequent to the date hereof. Anything in this Article 9 to the
contrary notwithstanding, except as set forth in Articles 4, 10, 13, 28 and 35
of this Lease and otherwise as expressly provided herein, Landlord shall not be
relieved from responsibility for any loss or damage caused wholly or in part by
the negligent acts or omissions of Landlord. Nothing in the foregoing sentence
shall affect any right of Landlord to the indemnity from Tenant to which
Landlord may be entitled under Article 35 hereof in order to recoup for payments
made to compensate for losses of third parties.
(B) If at any time any windows of the Premises are temporarily
closed, darkened or bricked-up due to any Requirement or by reason of repairs,
maintenance, alterations, or improvements to the Building, or any of such
windows are permanently closed, darkened or bricked-up due to any Requirement
(unless the same is the result of Landlord's negligence or its failure to comply
with any Requirement), Landlord shall not be liable for any damage Tenant may
sustain thereby and Tenant shall not be entitled to any compensation therefor,
nor abatement or diminution of Fixed Tenant from its obligations hereunder, nor
constitute an actual or constructive eviction, in whole or in part, by reason of
inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's
business, or otherwise, nor impose any liability upon Landlord or its agents. If
at any time the windows of the Premises are temporarily closed, darkened or
bricked-up, as aforesaid, Landlord shall perform such repairs, maintenance,
alterations or improvements and comply with the applicable Requirements with
reasonable diligence and otherwise take such action as may be reasonably
necessary to minimize the period during which such windows are temporarily
closed, darkened, or bricked-up. Tenant expressly acknowledges that the windows
of the Premises on the easterly side of the Building are "lot line" windows and
therefore may have to be closed, darkened or bricked-up during the Term. If such
windows have to be closed, darkened or bricked-up as aforesaid (i) Tenant shall
provide Landlord, its agents and contractors, with access to the Premises to
perform such work with respect to such windows, (ii) Landlord, in accordance
with the provisions of Section 4.3 hereof, at its sole cost and expense (but
subject to recoupment pursuant to Article 27 hereof) shall cause such work to be
performed and (iii) Tenant shall not be entitled to any offset, set-off or
abatement, or any claim of constructive eviction, in connection with the
performance of such work or as a result of such windows being closed, darkened
or bricked-up as aforesaid.
(C) Tenant shall notify Landlord of any fire or accident in
the Premises reasonably promptly after an officer of Tenant has notice thereof.
Section 9.2 Tenant shall obtain and keep in full force and effect
(i) an "all risk" insurance policy for Tenant's Specialty Alterations and
Tenant's Property at the Premises, and (ii) a policy of commercial general
liability and property damage insurance on an occurrence basis, with a broad
form contractual liability endorsement. Such policies shall provide that Tenant
is named as the insured. Landlord, Landlord's managing agent, Landlord's other
agents as Landlord may reasonably designate and who perform work in or in
connection with the Building, and any Lessors and any Mortgagees (whose names
shall have been furnished to Tenant) shall be added as additional insureds, as
their respective interests may appear with respect to the insurance required to
be carried pursuant to clause (i) above, and only to the extent of the named
insured's
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negligence with respect to the insurance required to be carried pursuant to
clause (ii) above. Such policy with respect to clause (ii) above shall include a
provision under which the insurer agrees to indemnify and hold Landlord,
Landlord's managing agent, Landlord's agent and such Lessors and Mortgagees
harmless from and against, subject to the limits of liability set forth in this
Section 9.2, all cost, expense and liability arising out of, or based upon, any
and all claims, accidents, injuries and damages mentioned in Article 35. In
addition, the policy required to be carried pursuant to clause (ii) above shall
contain a provision that (a) no act or omission of Tenant shall affect or limit
the obligation of the insurer to pay the amount of any loss sustained, other
than a willful failure by Tenant to notify its insurer of a loss under such
policy, (b) the policy shall be non-cancelable with respect to Landlord,
Landlord's managing agent, Landlord's other agents and such Lessors and
Mortgagees (whose names and addresses shall have been furnished to Tenant)
unless thirty (30) days' prior written notice shall have been given to Landlord,
Landlord's managing agent, Landlord's other agents and such Lessors and
Mortgagees (whose names and addresses shall have been furnished to Tenant) by
mail, which notice shall contain the policy number and the names of the insured
and (c) the policy may not be amended, modified or supplemented in any manner
which causes the coverage thereunder to be in violation of the provisions of
this Article 9 without the prior written consent of Landlord, Landlord's
managing agent, Landlord's other agents and such Lessors and Mortgagors. In
addition, upon receipt by Tenant of any notice of cancellation or any other
notice from the insurance carrier which may adversely affect the coverage of the
insureds under such policy of insurance, Tenant shall immediately deliver to
Landlord and any other additional insured hereunder a copy of such notice. The
minimum amounts of liability under the policy of insurance required to be
carried pursuant to clause (ii) above shall be a combined single limit with
respect to each occurrence in an amount of $5,000,000 for injury (or death) to
persons and damage to property, which amount shall be increased from time to
time to that amount of insurance which in Landlord's reasonable judgment is then
being customarily required by prudent landlords of first-class buildings in Now
York City. All insurance required to be carried by Tenant pursuant to the terms
of this Lease shall be effected under valid and enforceable policies issued by
reputable and independent insurers permitted to do business in the State of New
York, and rated in Best's Insurance Guide, or any successor thereto (or if there
be none, an organization having a national reputation) as having a general
policyholder rating of "A" and a financial rating of at least "XIII". Tenant's
insurance required hereunder may be effected by a policy or policies of blanket
insurance which cover other properties in addition to the Premises, but only if
(i) the protection afforded thereunder is not less than that which would have
been afforded under a separate policy or policies relating only to the Premises,
(ii) such blanket policy shall include a provision that the aggregate limit
shall apply separately to the Premises and (iii) in all other respects such
policy shall comply with the other provisions of this Article 9.
Section 9.3 Landlord shall obtain and keep in full force and effect
(a) insurance against loss or damage by fire and other casualty to the Building,
including tenant's Alterations (exclusive of Specialty Alterations), as may be
insurable under then available standard forms of "all-risk" insurance policies,
in an amount equal to one hundred percent (100%) of the replacement value
thereof or in such lesser amount as will avoid co-insurance (including an
"agreed amount" endorsement) and (b) such other types
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of insurance as in Landlord's reasonable judgment shall be consistent with that
maintained by prudent owners of first class office buildings in Manhattan,
provided, however, that Landlord shall not be required to obtain or carry any
insurance which it reasonably determines is not economically prudent to carry.
Notwithstanding the foregoing, Landlord shall not be liable to Tenant for any
failure to insure, replace or restore any Alterations unless Tenant shall have
notified Landlord of the completion of such Alterations and of the cost thereof,
and shall have maintained adequate records with respect to such Alterations to
facilitate the adjustment of any insurance claims with respect thereto. Tenant
shall cooperate with Landlord and Landlord's insurance companies in the
adjustment of any claims for any damage to the Building or such Alterations. All
claims with respect to any damage covered by insurance carried by Landlord shall
be filed with Landlord's insurance carrier. All insurance required to be carried
by Landlord pursuant to the terms of this Lease shall be effected under valid
and enforceable policies issued by reputable and independent insurers permitted
to do business in the State of New York.
Section 9.4 On or prior to the Commencement Date, each party shall
deliver to the other appropriate certificates of insurance, including evidence
of waivers of subrogation required pursuant to Section 10.5 hereof, required to
be carried by such party pursuant to this Article 9. Tenant shall, within seven
(7) days after Landlord's request therefor, provide Landlord with all policies
of insurance required to be carried by Tenant hereunder. Evidence of each
renewal or replacement of a policy shall be delivered by each party to the other
within thirty (30) days after the expiration of such party's policy.
Section 9.5 Tenant acknowledges that Landlord shall not carry
insurance on, and shall not be responsible for damage to, Tenant's Property or
Specialty Alterations, and that Landlord shall not carry insurance against, or
be responsible for any loss suffered by Tenant due to, interruption of Tenant's
business.
ARTICLE 10
DESTRUCTION-FIRE OR OTHER CAUSE
Section 10.1(A) If the Premises (including Alterations other
than Specialty Alterations) shall be damaged by fire or other casualty, and if
Tenant shall give prompt notice thereof to Landlord, the damage shall be
diligently repaired by and at the expense of Landlord to substantially the
condition prior to the damage, and until the later of (a) the date on which such
repairs which are required to be performed by Landlord (excluding Long Lead
Work) shall be substantially completed (of which substantial completion Landlord
shall promptly notify Tenant) and (b) the date upon which Tenant shall have
substantially completed the performance of its Specialty Alterations, excluding
Long Lead Work (but in no event later than ninety (90) days after the earlier of
(x) the date specified in the notice delivered by Landlord to Tenant pursuant to
Section 10.1(8)(1) hereof and (y) the date on which the repairs which are
required to be performed by Landlord (excluding Long Lead Work) shall be
substantially completed), the Fixed Rent, Escalation Rent and Space Factor shall
be reduced in the proportion which the ratio between the area of the part of the
Premises which is not usable by Tenant, as determined by Landlord in its
reasonable discretion, bears to the total area of
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the Premises immediately prior to such casualty and Tenant's Share shall be
redetermined based upon the proportion in which the ratio between the rentable
area of the Premises remaining after such casualty bears to the rentable area of
the Building remaining after such casualty (in each case taking into account
which portion of the Premises is damaged and making an adjustment for the fact
that (i) the Fixed Rent per rentable square foot is different with respect to
the various portions of the Premises and (ii) Tenant's Share has been determined
without regard to Basement Space or Garage Space). Upon the substantial
completion of such repairs (excluding Long Lead Work), Landlord shall diligently
prosecute to completion any items of Long Load Work remaining to be completed.
Landlord shall have no obligation to repair any damage to, or to replace, any
Specialty Alterations or Tenant's Property. In addition, Landlord shall not be
obligated to repair any damage to, or to replace, any Alterations unless Tenant
shall have notified Landlord of the completion of such Alterations and the cost
thereof, and shall have maintained adequate records with respect to such
Alterations. Landlord shall use its reasonable efforts to minimize interference
with Tenant's use and occupancy in making any repairs pursuant to this Section.
(B) Prior to the substantial completion of Landlord's repair
obligations set forth in Section 10.1 (A) hereof, Landlord shall provide Tenant
and Tenant's contractor, subcontractors and materialmen access to the Premises
to perform Specialty Alterations, on the following terms and conditions (but not
to occupy the same for the conduct of business):
(1) Tenant shall not commence work in any portion of the
Premises until the date specified in a notice from Landlord to Tenant stating
that the repairs required to be made by Landlord have been or will be completed
to the extent reasonably necessary, in Landlord's discretion, to permit the
commencement of the Specialty Alterations then prudent to be performed in
accordance with good construction practice in the portion of the Premises in
question without interference with, and consistent with the performance of, the
repairs remaining to be performed.
(2) Such access by Tenant shall be deemed to be subject
to all of the applicable provisions of this Lease, including, without
limitation, Tenant's obligation to pay to Landlord the Electricity Additional
Rent as more particularly set forth in Article 13 hereof, except that there
shall be no obligation on the part of Tenant solely because of such access to
pay any Fixed Rent or Escalation Rent with respect to the affected portion of
the Premises for any period prior to substantial completion of the repairs.
(3) It is expressly understood that if Landlord shall be
prevented from substantially completing the repairs due to any acts of Tenant,
its agents, servants, employees or contractors, including, without limitation,
by reason of the performance of any Specialty Alteration, by reason of Tenant's
failure or refusal to comply or to cause its architects, engineers, designers
and contractors to comply with any of Tenant's obligations described or referred
to in this Lease, or if such repairs are not completed because under good
construction scheduling practice such repairs should be performed after
completion of any Specialty Alteration, then such repairs shall be
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deemed substantially complete on the date when the repairs would have been
substantially complete but for such delay and the expiration of the abatement of
the Tenant's obligations hereunder shall not be postponed by reason of such
delay. Any additional costs to Landlord to complete any repairs occasioned by
such delay shall be paid by Tenant to Landlord within ten (10) Business Days
after demand, as additional rent.
Section 10.2 Anything contained in Section 10.1 hereof to the
contrary notwithstanding, if the Building shall be so damaged by fire or other
casualty that, in Landlord's reasonable opinion, substantial alteration,
demolition, or reconstruction of the Building shall be required, then Landlord,
at Landlord's option, may, not later than ninety (90) days following the damage,
give Tenant a notice in writing terminating this Lease, provided that (i) if the
Premises are substantially damaged or rendered substantially untenantable,
Landlord may not terminate this Lease unless it shall elect to terminate leases
(including this Lease) affecting at least eighty percent (80%) of the rentable
area of the Building (excluding any rentable area occupied by Landlord or its
Affiliates) substantially damaged or rendered substantially untenantable and
leased under leases which Landlord may terminate as a result thereof, and (ii)
if the Premises are not substantially damaged or rendered substantially
untenantable, Landlord may not terminate this Lease unless it shall elect to
terminate leases (including this Lease), affecting at least fifty percent (50%)
of the rentable area of the Building (excluding any rentable area occupied by
Landlord or its Affiliates). If Landlord elects to terminate this Lease, the
Term shall expire upon a date set by Landlord, but not sooner than the tenth
(10th) day after such notice is given, and Tenant shall vacate the Premises and
surrender the same to Landlord in accordance with the provisions of Article 20
hereof. Upon the termination of this Lease under the conditions provided for in
this Section 10.2, the Fixed Rent and Escalation Rent shall be apportioned and
any prepaid portion of Fixed Rent and Escalation Rent for any period after such
date shall be refunded by Landlord to Tenant.
Section 10.3 (A) Within forty-five (45) days after notice-to
Landlord of any damage described in Section 10.1 hereof, Landlord shall deliver
to Tenant a statement prepared by a reputable contractor setting forth such
contractor's estimate as to the time required to repair such damage, exclusive
of time required to repair any Specialty Alterations (which are Tenant's
obligation to repair) or to perform Long Lead Work. If the estimated time period
exceeds twelve (12) months from the date of such statement, and as a result of
such casualty Tenant shall not be able during such twelve (12) month period to
reasonably use the Premises for its business purposes, Tenant may elect to
terminate this Lease by notice to Landlord not later than thirty (30) days
following receipt of such statement. If Tenant makes such election, the Term
shall expire upon the thirtieth (30th) day after notice of such election is
given by Tenant, and Tenant shall vacate the Premises and surrender the same to
Landlord in accordance with the provisions of Article 20 hereof. If Tenant shall
not have elected to terminate this Lease pursuant to this Article 10 (or is not
entitled to terminate this Lease pursuant to this Article 10), the damage shall
be diligently repaired by and at the expense of Landlord as and to the extent
set forth in Section 10.1 hereof.
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(B) Except as expressly set forth in this Section 10.3, Tenant
shall have no other options to cancel this Lease under this Article 10.
Section 10.4 This Article 10 constitutes an express agreement
governing any case of damage or destruction of the Premises or the Building by
fire or other casualty, and Section 227 of the Real Property Law of the State of
New York, which provides for such contingency in the absence of an express
agreement, and any other law of like nature and purpose now or hereafter in
force shall have no application in any such case.
Section 10.5 The parties hereto shall procure an appropriate clause
in, or endorsement on, any fire or extended coverage or "all risk" insurance
covering the Premises, the Building and personal property, fixtures and
equipment located thereon or therein, pursuant to which the insurance companies
waive subrogation or consent to a waiver of right of recovery and having
obtained such clauses or endorsements of waiver of subrogation or consent to a
waiver of right of recovery, will not make any claim against or seek to recover
from the other for any loss or damage to its property or the property of others
resulting from fire or other hazards covered by such fire and extended coverage
or "all risk" insurance, provided, however, that the release, discharge,
exoneration and covenant not to sue herein contained shall be limited by and be
coextensive with the terms and provisions of the waiver of subrogation clause or
endorsements or clauses or endorsements consenting to a waiver of right of
recovery. If the payment of an additional premium is required for the inclusion
of such waiver of subrogation provision, each party shall advise the other of
the amount of any such additional premiums and the other party at its own
election may, but shall not be obligated to, pay the same. If such other party
shall not elect to pay such additional premium, the first party shall not be
required to obtain such waiver of subrogation provision. If either party shall
be unable to obtain the inclusion of such clause even with the payment of an
additional premium, then such party shall attempt to name the other party as an
additional insured (but not a loss payee) under the policy. If the payment of an
additional premium is required for naming the other party as an additional
insured (but not a loss payee), each party shall advise the other of the amount
of any such additional premium and the other party at its own election may, but
shall not be obligated to, pay the same. If such other party shall not elect to
pay such additional premium or if it shall not be possible to have the other
party named as an additional insured (but not loss payee), even with the payment
of an additional premium, then (in either event) such party shall so notify the
first party and the first party shall not have the obligation to name the other
party as an additional insured. Tenant acknowledges that Landlord shall not
carry insurance on and shall not be responsible for damage to, Tenant's Property
or Specialty Alterations, and that Landlord shall not carry insurance against,
or be responsible for any loss suffered by Tenant due to, interruption of
Tenant's business.
ARTICLE 11
EMINENT DOMAIN
Section 11.1 If the whole of the Real Property, the Building or the
Premises shall be acquired or condemned for any public or quasi-public use or
purpose,
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this Lease and the Term shall end as of the date of the vesting of title with
the same effect as if said date were the Expiration Date. If only a part of the
Real Property and not the entire Premises shall be so acquired or condemned
then, (1) except as hereinafter provided in this Section 11.1, this Lease and
the Term shall continue in force and effect, but, if a part of the Premises is
included in the part of the Real Property so acquired or condemned, from and
after the date of the vesting of title, the Fixed Rent and the Space Factor
shall be reduced in the proportion which the area of the part of the Premises so
acquired or condemned bears to the total area of the Premises immediately prior
to such acquisition or condemnation and Tenant's Share shall be redetermined
based upon the proportion in which the ratio between the rentable area of the
Premises remaining after such acquisition or condemnation bears to the rentable
area of the Building remaining after such acquisition or condemnation (in each
case taking into account which portion of the Premises is taken and making an
adjustment for the fact that (i) the Fixed Rent per rentable square foot is
different with respect to the various portions of the Premises and (ii) Tenant's
Share has been determined without regard to Basement Space or Garage Space); (2)
whether or not the Premises shall be affected thereby, Landlord, at Landlord's
option, may give to Tenant, within sixty (60) days next following the date upon
which Landlord shall have received notice of vesting of title, a thirty (30)
days' notice of termination of this Lease if Landlord shall elect to terminate
leases (including this Lease), affecting at least fifty percent (50%) of the
rentable area of the Building (excluding any rentable area leased by Landlord or
its Affiliates); and (3) if the part of the Real Property so acquired or
condemned shall contain more than twenty-five percent (25%) of the total area of
the Office Premises immediately prior to such acquisition or condemnation, or
if, by reason of such acquisition or condemnation, Tenant no longer has
reasonable means of access to the Office Premises, Tenant, at Tenant's option,
may give to Landlord, within sixty (60) days next following the date upon which
Tenant shall have received notice of vesting of title, a thirty (30) days'
notice of termination of this Lease. If any such thirty (30) days' notice of
termination is given by Landlord or Tenant, this Lease and the Term shall come
to an end and expire upon the expiration of said thirty (30) days with the same
effect as if the date of expiration of said thirty (30) days were the Expiration
Date. If a part of the Premises shall be so acquired or condemned and this Lease
and the Term shall not be terminated pursuant to the foregoing provisions of
this Section 11.1, Landlord, at Landlord's expense, shall restore that part of
the Premises not so acquired or condemned to a self-contained rental unit
inclusive of Tenant's Alterations (other than Specialty Alterations) contained
in such remaining portion of the Premises immediately prior to such acquisition
or condemnation. Upon the termination of this Lease and the Term pursuant to the
provisions of this Section 11.1, the Fixed Rent, Electricity Additional Rent,
Escalation Rent and all other items of Rental shall be apportioned and any
prepaid portion of Fixed Rent, Electricity Additional Rent, Escalation Rent and
all other items of Rental for any period after such date shall be refunded by
Landlord to Tenant.
Section 11.2 In the event of any such acquisition or condemnation of
all or any part of the Real Property, Landlord shall be entitled to receive the
entire award for any such acquisition or condemnation, Tenant shall have no
claim against Landlord or the condemning authority for the value of any
unexpired portion of the Term and Tenant hereby expressly assigns to Landlord
all of its right in and to any such award. Nothing contained in this Section
11.2 shall be deemed to prevent Tenant from making a separate
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claim in any condemnation proceedings for the then value of any Tenant's
Property included in such taking, and for any moving expenses, provided that the
foregoing does not reduce the award otherwise payable to Landlord.
Section 11.3 If the whole or any part of the Premises shall be
acquired or condemned temporarily during the Term for any public or quasi-public
use or purpose, Tenant shall give prompt notice thereof to Landlord and the Term
shall not be reduced or affected in any way and Tenant shall continue to pay in
full all items of Rental payable by Tenant hereunder without reduction or
abatement, and Tenant shall be entitled to receive for itself any award or
payments for such use, provided, however, that:
(i) if the acquisition or condemnation is for a period
not extending beyond the Term and if such award or payment is made less
frequently than in monthly installments, the same shall be paid to and held by
Landlord as a fund which Landlord shall apply from time to time to the Rental
payable by Tenant hereunder, except that, if by reason of such acquisition or
condemnation changes or alterations are required to be made to the Premises
which would necessitate an expenditure to restore the Premises, then a portion
of such award or payment reasonably considered by Landlord as appropriate to
cover the expenses of the restoration shall be retained by Landlord, without
application as aforesaid, and applied toward the restoration of the Premises as
provided in Section 11.1 hereof; or
(ii) if the acquisition or condemnation is for a period
extending beyond the Term, such award or payment shall be apportioned between
Landlord and Tenant as of the Expiration Date; Tenant's share thereof, if paid
less frequently than in monthly installments, shall be paid to Landlord and
applied in accordance with the provisions of clause (i) above, provided,
however, that the amount of any award or payment allowed or retained for
restoration of the Premises shall remain the property of Landlord if this Lease
shall expire prior to the restoration of the Premises.
ARTICLE 12
ASSIGNMENT, SUBLETTING, MORTGAGE, ETC.
Section 12.1(A) Except as expressly permitted herein, Tenant,
without the prior consent of Landlord in each instance, shall not (a) assign its
rights or delegate its duties under this Lease (whether by operation of law,
transfers of interests in Tenant or otherwise), mortgage or incumber its
interest in this Lease, in whole or in part, (b) sublet, or permit the
subletting of, the Premises or any part thereof, or (c) permit the Premises or
any part thereof to be occupied or used for desk space, mailing privileges or
otherwise, by any Person other than Tenant.
(B) If this Lease is assigned to any person or entity pursuant
to the provisions of the Bankruptcy Code, any and all monies or other
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant or of
the estate of Tenant within the meaning of the Bankruptcy Code. Any and all
monies or other consideration constituting Landlord's
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property under the preceding sentence not paid or delivered to Landlord shall be
held in trust for the benefit of Landlord and shall be promptly paid to or
turned over to Landlord.
Section 12.2(A) If Tenant's interest in this Lease is assigned in
violation of the provisions of this Article 12, such assignment shall be void
and of no force and effect against Landlord; provided, however, that Landlord
may collect an amount equal to the then Fixed Rent plus any other item of Rental
from the assignee as a fee for its use and occupancy, and shall apply the net
amount collected to the Fixed Rent and other items of Rental reserved in this
Lease. If the Premises or any part thereof are sublet to, or occupied by, or
used by, any Person other than Tenant, whether or not in violation of this
Article 12, Landlord, after the occurrence of an Event of Default by Tenant
under this Lease, including, without limitation, a subletting or occupancy in
violation of this Article 12, may collect any item of Rental or other sums paid
by the subtenant, user or occupant as a fee for its use and occupancy, shall
apply the net amount collected to the Fixed Rent and other items of Rental
reserved in this Lease and, provided that no Event of Default shall have
occurred and be continuing, the excess, if any, shall be split equally between
Landlord and Tenant. No such assignment, subletting, occupancy or use, whether
with or without Landlord's prior consent, nor any such collection or application
of Rental or fee for use and occupancy, shall be deemed a waiver by Landlord of
any term, covenant or condition of this Lease or the acceptance by Landlord of
such assignee, subtenant, occupant or user as tenant hereunder. The consent by
Landlord to any assignment, subletting, occupancy or use shall not relieve
Tenant from its obligation to obtain the express prior consent of Landlord to
any further assignment, subletting, occupancy or use.
(B) Tenant shall reimburse Landlord on demand for any
reasonable out of pocket costs that may be incurred by Landlord in connection
with any proposed assignment of Tenant's interest in this Lease, any proposed
subletting of the Premises or any part thereof or any assignment of Tenant's
interest in this Lease or subletting of the Premises or any part thereof by any
Person whose rights derive from Tenant, including, without limitation, any
reasonable processing fee, reasonable attorneys' fees and disbursements and the
reasonable out of pocket costs of making investigations as to the acceptability
of the proposed subtenant or the proposed assignee. Tenant shall engage, as
exclusive leasing agent for Tenant with respect to any proposed subletting of
the Premises or any part thereof or any proposed assignment of Tenant's interest
in this lease, such broker as shall be approved by Landlord, which approval
shall not be unreasonably withheld or delayed. If Landlord shall deny its
approval of any broker proposed by Tenant, Landlord, simultaneously with its
denial of its consent to Tenant's proposed broker, shall deliver to Tenant a
list of not less than five (5) brokers, who are not Affiliates of Landlord or
the managing agent for the Building, acceptable to Landlord. If Tenant shall
select a broker from such list, Tenant shall not be required to obtain the
consent of Landlord for its use of such broker, but shall, simultaneously with
its engagement of such broker, notify Landlord thereof. Landlord may remove any
or all of such brokers from such list from time to time; provided, however, that
any broker removed from such list shall be replaced by Landlord with a broker
who is not an Affiliate of Landlord or its managing agent for the Building.
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(C) Neither any assignment of Tenant's interest in this Lease
nor any subletting, occupancy or use of the Premises or any part thereof by any
Person other than Tenant, nor any collection of Rental by Landlord from any
Person other than Tenant as provided in this Section 12.2, nor any application
of any such Rental as provided in this Section 12.2 shall, in any circumstances,
relieve Tenant of its obligations under this Lease on Tenant's part to be
observed and performed and, subsequent to any assignment, Tenant's liability
hereunder shall continue notwithstanding any subsequent modification or
amendment hereof or the release of any subsequent tenant hereunder from any
liability, to all of which Tenant hereby consents in advance.
(D) Any Person to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed without further act or deed to
have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall execute and deliver to Landlord
upon demand an instrument confirming such assumption. No such assignment of this
Lease shall relieve Tenant of its obligations hereunder and, subsequent to any
such assignment, Tenant's liability hereunder shall continue notwithstanding any
subsequent modification or amendment hereof (other than a modification or
amendment hereof which increases the obligations of Tenant hereunder, to the
extent of such increase) or the release of any subsequent tenant hereunder from
any liability, to all of which Tenant hereby consents in advance.
Section 12.3(A) If Tenant assumes this Lease and proposes to assign
the same pursuant to the provisions of the Bankruptcy Code to any Person who
shall have made a bona fide offer to accept an assignment of this Lease on terms
acceptable to Tenant, then-notice of such proposed assignment shall be given to
Landlord by Tenant no later than twenty (20) days after receipt by Tenant of
such bona fide offer, but in any event no later than ten (10) days prior to the
date that Tenant shall make application to a court of competent jurisdiction for
authority and approval to enter into such assignment and assumption. Such notice
shall set forth (a) the name and address of such Person, (b) all of the terms
and conditions of such offer, and (c) adequate assurance of future performance
by such Person under the Lease as set forth in Paragraph (B) below, including,
without limitation, the assurance referred to in Section 365(b)(3) of the
Bankruptcy Code. Landlord shall have the prior right and option, to be exercised
by notice to Tenant given at any time prior to the effective date of such
proposed assignment, to accept an assignment of this Lease upon the same terms
and conditions and for the same consideration, if any, as the bona fide offer
made by such Person, less any brokerage commissions which would otherwise be
payable by Tenant out of the consideration to be paid by such Person in
connection with the assignment of this Lease.
(B) The term "adequate assurance of future performance" as
used in this Lease shall mean that any proposed assignee shall, among other
things, (a) deposit with Landlord on the assumption of this Lease the sum of the
then Fixed Rent as security for the faithful performance and observance by such
assignee of the terms and obligations of this Lease, which sum shall be held by
Landlord, (b) furnish Landlord with financial statements of such assignee for
the prior three (3) fiscal years, as finally determined after an audit and
certified as correct by a certified public accountant, which
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financial statements shall show a net worth of at least six (6) times the then
Fixed Rent for each of such three (3) years, (c) grant to Landlord a security
interest in such property of the proposed assignee as Landlord shall deem
necessary to secure such assignee's future performance under this Lease, and (d)
provide such other information or take such action as Landlord, in its
reasonable judgment shall determine is necessary to provide adequate assurance
of the performance-by such assignee of its obligations under the Lease.
Section 12.4(A) Tenant shall have the privilege, subject to the
terms and conditions hereinafter set forth, without the consent of Landlord,
without Landlord having the right granted in Section 12.6(B) hereof to recapture
and without being subject to the provisions of Section 12.7 hereof, to assign
its interest in this Lease (i) to any corporation which is a successor to Tenant
either by merger or consolidation, or as a result of a change by Tenant from a
mutual company to a stock company, (ii) to a purchaser of all or substantially
all of Tenant's assets (provided such purchaser shall have also assumed
substantially all of Tenant's liabilities) or (iii) to an Affiliate of Tenant.
Tenant shall have the privilege, subject to the terms and conditions hereinafter
set forth, without the consent of Landlord, without Landlord having the right
granted in Section 12.6(B) hereof to recapture and without being subject to the
provisions of Section 12.7 hereof, to sublease all or any portion of the
Premises to a Person which shall be an Affiliate of Tenant. Any assignment or
subletting described above may only be made upon the condition that (a) the
principal purpose of such assignment or sublease is not the acquisition of
Tenant's interest in this Lease or to circumvent the provisions of Section 12.1
of this Article, (b) in the case of an assignment other than to an Affiliate of
Tenant, any such assignee shall have a net worth, determined in accordance with
generally accepted accounting principles, consistently applied, after giving
effect to such assignment, equal to Tenant's net worth, as so determined, on the
date immediately preceding the date of such assignment, in the case of an
assignment of this Lease, MONY shall continue to occupy for its business not
less than 118,500 rentable square feet of Office Premises during the period
through and including the eighth (8th) anniversary of the Commencement Date and
the Premises shall continue to be used as the world headquarters of MONY,
containing executive offices, during the period through and including the
twelfth (12th) anniversary of the Commencement Date, and (d) in the case of any
subleasing of the Premises, after giving effect to such subleasing (i) during
the period through and including the eighth (8th) anniversary of the
Commencement Date, MONY shall continue to occupy for the operation of its
business not less than 118,500 rentable square feet of Office Premises and (ii)
during the period through and including the twelfth (12th) anniversary of the
Commencement Date, MONY shall continue to use the portion of the Premises
occupied by it as its world headquarters, containing executive offices. Any
sublease to an Affiliate shall be expressly subject to all of the terms,
covenants, conditions and obligations on Tenant's part to be observed and
performed under this Lease and the further condition and restriction that the
sublease shall not be modified without the prior written consent of Landlord,
which consent shall not be unreasonably withheld, or assigned, encumbered or
otherwise transferred or the subleased premises further sublet by the subtenant
in whole or in part, or any part thereof suffered or permitted by the subtenant
to be used or occupied by others, without complying with the provisions of this
Article 12, including, without limitation, the provisions of Section
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12.7 hereof, provided, however, that the provisions of Section 12.6(D)(2) of
this Lease shall not be applicable to any such further subletting. Tenant shall,
not later than five (5) Business days prior to such subletting or assignment,
notify Landlord of its intention to so sublease the Premises or assign the Lease
and shall, within ten (10) Business Days after execution thereof, deliver to
Landlord either (x) a duplicate original instrument of assignment in form and
substance reasonably satisfactory to Landlord, duly executed by Tenant, together
with an instrument in form and substance reasonably satisfactory to Landlord,
duly executed by the assignee, in which such assignee shall assume observance
and performance of, and agree to be personally bound by, all of the terms,
covenants and conditions of this Lease on Tenant's part to be observed and
performed, as to which agreement Landlord shall be named as a third-party
beneficiary, or (y) a duplicate original sublease in form and substance
reasonably satisfactory to Landlord, duly executed by Tenant and the subtenant.
(B) Except in connection with a transfer on the Lease pursuant
to clause (i) of Section 12.4(A) hereof, either a transfer (including the
issuance of treasury stock or the creation and issuance of new stock or a new
class of stock) of a controlling interest in the shares of Tenant (if Tenant is
a corporation or trust) or a transfer of a majority of the total interest in
Tenant (if Tenant is a partnership or other entity) at any one time or over a
period of time through a series of transfers, shall be deemed an assignment of
this Lease and shall be subject to all of the provisions of this Article 12,
including, without limitation, the requirement that Tenant obtain Landlord's
prior consent thereto. The transfer of shares of Tenant (if Tenant is a
corporation or trust) for purposes of this Section 12.4 shall not include the
sale of shares by persons other than those deemed "insiders" within the meaning
of the Securities Exchange Act of 1934, as amended, which sale is effected
through the "over-the-counter market" or through any recognized stock exchange.
(C) If all or any portion of the Premises shall be subleased
to any Affiliate of Tenant, or if this Lease shall be assigned to an Affiliate
of Tenant, and such Affiliate shall no longer (i) Control, (ii) be under common
Control with, or (iii) be under Control of, Tenant, then Tenant shall, within
ten (10) days thereafter, request the consent of Landlord to the continued
subleasing or assignment to such former Affiliate, subject to and in accordance
with all of the terms and conditions of this Article 12, including, without
limitation, Landlord's rights of recapture and subleasing pursuant to Section
12.6 hereof, as if such subleasing or assignment to such former Affiliate were
first being proposed to Landlord. If Landlord shall not consent or be deemed to
have consented to such continued subleasing or assignment subject to and in
accordance with the provisions of Article 12, then Tenant, within five (5) days
after the date on which Landlord shall have notified Tenant that Landlord does
not consent to such subleasing or assignment, shall (i) terminate such sublease
and cause the subtenant to vacate the subleased space or (ii) cause the Lease to
be assigned from the assignee to Tenant and cause the assignee to vacate the
Premises, as the case may be.
Section 12.5 If, at any time after the originally named Tenant
herein may have assigned Tenant's interest in this Lease, this Lease shall be
disaffirmed or rejected in any proceeding of the types described in paragraph
(E) of section 16.1 hereof, or in any
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similar proceeding, or in the event of termination of this Lease by reason of
any such proceeding or by reason of lapse of time following notice of
termination given pursuant to said Article 16 based upon any of the Events of
Default set forth in such paragraph, any prior Tenant, including, without
limitation, the originally named Tenant, upon request of Landlord given within
thirty (30) days next following any such disaffirmance, rejection or termination
(and actual notice thereof to Landlord in the event of a disaffirmance or
rejection or in the event of termination other than by act of Landlord), shall
(1) pay to Landlord all Fixed Rent, Escalation Rent and other items of Rental
due and owing by the assignee to Landlord under this Lease to and including the
date of such disaffirmance, rejection or termination, and (2) as "tenant", enter
into a new lease with Landlord of the Premises for a term commencing on the
effective date of such disaffirmance, rejection or termination and ending on the
Expiration Date, unless sooner terminated as in such lease provided, at the same
Fixed Rent and upon the then executory terms, covenants and conditions as are
contained in this Lease, except that (a) Tenant's rights under the new lease
shall be subject to the possessory rights of the assignee under this Lease and
the possessory rights of any person claiming through or under such assignee or
by virtue of any statute or of any order of any court, (b) such new lease shall
require all defaults existing under this Lease to be cured by Tenant with due
diligence, and (c) such new lease shall require Tenant to pay all Escalation
Rent reserved in this Lease which, had this Lease not been so disaffirmed,
rejected or terminated, would have accrued under the provisions of Article 27
hereof after the date of such disaffirmance, rejection or termination with
respect to any period prior thereto. If any such prior Tenant shall default in
its obligation to enter into said new lease for a period of ten (10) days next
following Landlord's request therefor, then, in addition to all other rights and
remedies by reason of such default, either at law or in equity, Landlord shall
have the same rights and remedies against such Tenant as if such Tenant had
entered into such new lease and such now lease had thereafter been terminated as
of the commencement date thereof by reason of such Tenant's default thereunder.
Section 12.6 (A) (1) Notwithstanding the provisions of Section 12.1
hereof, other than with respect to any portion of the Premises as to which
Tenant has exercised any Renewal Option, if Landlord shall not exercise its
rights pursuant to paragraph (B) of this Section 12.6, Landlord shall not
unreasonably withhold its consent to any subletting of the Office Premises,
provided that:
(a) the Office Premises shall not, without Landlord's
prior consent, have been listed or otherwise publicly advertised for subletting
at a rental rate less than the prevailing rental rate set by Landlord for
comparable space in the Building or if there is no comparable space the
prevailing rental rate reasonably determined by Landlord (the "Prevailing
Rate");
(b) no Event of Default shall have occurred and be
continuing;
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(c) upon the date Tenant delivers the Tenant Statement
to Landlord and upon the date immediately preceding the commencement date of any
sublease approved by Landlord, the proposed subtenant shall have a financial
standing (taking into consideration the obligations of the proposed subtenant
under the sublease) reasonably satisfactory to Landlord, be of a character, be
engaged in a business, and propose to use the Office Premises in a manner in
keeping with the standards in such respects of the other tenancies in the
Building;
(d) if Landlord has or within six (6) months thereafter
reasonably expects to have suitable space available in the Building, the
proposed subtenant shall not be a Person with whom Landlord is negotiating or
discussing to lease space in the Building which is competitive with the Premises
at the time of receipt of a Tenant Statement; if Tenant shall propose to
sublease space and is about to commence negotiations with a tenant, subtenant or
prospective subtenant, Tenant shall advise Landlord of the identity of such
prospective subtenant and Landlord shall promptly advise Tenant if the execution
of a sublease with such tenant, subtenant or prospective subtenant would violate
the provisions of this clause (d);
(e) except with respect to the conversion of the Twelfth
Floor Premises to office use, the character of the business to be conducted or
the proposed use of the Office Premises by the proposed subtenant shall not (a)
be likely to increase Landlord's Operating Expenses beyond that which would be
incurred for use by Tenant or for use in accordance with the standards of use of
other tenancies in the Building; (b) increase the burden on existing cleaning
services or elevators over the burden prior to such proposed subletting; or (c)
violate any provision or restrictions herein relating to the use or occupancy of
the Office Premises; if Landlord shall have consented to a sublease and, as a
result of the use and occupancy of the subleased portion of the Office Premises
by the subtenant, Operating Expenses are increased above those occasioned by
normal office use, then Tenant shall pay to Landlord, within ten (10) days after
demand, as additional rent, all resulting increases in operating expenses;
(f) the subletting shall be expressly subject to all of
the terms, covenants, conditions and obligations on Tenant's part to be observed
and performed under this Lease and the further condition and restriction that
the sublease shall not be modified without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, or assigned,
encumbered or otherwise transferred or the subleased premises further sublet by
the subtenant in whole or in part, or any part thereof suffered or permitted by
the subtenant to be used or occupied by others, without complying with the
provisions of this Article 12, including, without limitation, the provisions of
Section 12.7 hereof, provided, however, that the provisions of Section
12.6(D)(2) of this Lease shall not be applicable to any such further subletting;
(g) the subletting (including all renewals or extensions
thereof) shall end no later than one (1) day before the earliest Fixed
Expiration Date applicable to any portion of the proposed sublet space and shall
not be for a term of less than two (2) years unless it commences less than two
(2) years before the earliest Fixed Expiration Date applicable to any portion of
the proposed sublet space;
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(h) no subletting shall be for less than five thousand
(5,000) contiguous rentable square feet of the Office Premises and at no time
shall there be more than four (4) occupants, including Tenant, on any one (1)
floor of the Office Premises;
(i) such sublease shall expressly provide that in the
event of termination, re-entry or dispossess of Tenant by Landlord under this
Lease, Landlord may, at its option, take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and such subtenant, at
Landlord's option, shall attorn to Landlord pursuant to the then executory
provisions of such sublease, except that Landlord shall not be:
(i) liable any act or omission of Tenant under
such sublease, or
(ii) subject to any defense or offsets which such
subtenant may have against Tenant, or
(iii) bound by any previous payment which such
subtenant may have made to Tenant of more than thirty (30) days in advance of
the date upon which such payment was due, unless previously approved by
Landlord, or
(iv) bound by any obligation to make any payment
to or on behalf of such subtenant, or
(v) bound by any obligation to perform any work or
to make improvements to the Office Premises, or portion thereof demised by such
sublease, or
(vi) bound by any amendment or modification of
such sublease made without its consent, or
(vii) bound to return such subtenant's security
deposit, if any, until such deposit has come into its actual possession and such
subtenant would be entitled to such security deposit pursuant to the terms of
such sublease, and
(j) after giving effect to such subleasing, during the
period through and including the eighth (8th) anniversary of the Commencement
Date, MONY shall continue to occupy for the conduct of its business not less
than 118,500 rentable square feet of Office Space and, during the period through
and including the twelfth (12th) anniversary of the Commencement Date, MONY
shall continue to use that portion of the Premises occupied by it as its world
headquarters, containing executive offices.
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If Tenant proposes to sublet a portion of the Office Premises then, unless the
context otherwise requires, references in this Section 12.6 to the Office
Premises shall be deemed to refer to the portion of the Office Premises proposed
to be sublet by Tenant.
(2) If Landlord shall fail to notify Tenant of its refusal to
consent to any sublease, or shall fail to deliver a statement of Landlord's
reasons for refusing to consent to the same, in either case within fifteen (15)
days after the receipt by Landlord of a fully executed sublease and (a)
information as to the nature and character of the business of the proposed
subtenant, (b) financial information regarding the subtenant in reasonable
detail and (c) any other information that Landlord may reasonably request, then
Landlord shall be deemed to have consented to such sublease.
(3) Notwithstanding the foregoing, if the proposed sublease
presented to Landlord for its consent shall provide for a rental rate of less
than ninety percent (90%) of the Prevailing Rate, Landlord, at its option
exercised within fifteen (15) days after its receipt of the documents and
information referred to in Section 12.6(A)(2) hereof, may elect to sublet, in
its name or that of its designee, the space proposed to be sublet (the "Proposed
Sublease Space") for the term of such proposed sublease. If Landlord exercises
such option, the sublease to Landlord or its designee of the Proposed Sublease
Space (the "Landlord's Sublease") shall be at the rental rate set forth in the
proposed sublease, shall otherwise be on the same terms and conditions as are
contained in the proposed sublease, except as are irrelevant or inapplicable and
except as otherwise set forth in Sections 12.6(E) and 12.6(F) hereof.
(B) At least ninety (90) days prior to any proposed subletting of
the Premises, Tenant shall submit a statement to Landlord (a "Tenant Statement")
containing the following information: (a) a description of the portion of the
Premises to be sublet and (b) the proposed commencement of the term of such
proposed subletting, together with a statement specifically directing Landlord's
attention to the provisions of this Section 12.6(B) requiring Landlord to
respond to Tenant's request within thirty (30) days after Landlord's receipt of
the Tenant Statement. Other than with respect to a subletting which meets the
criteria set forth in paragraph (D)(2) of this Section 12.6, Landlord shall have
the right, exercisable by notice to Tenant within thirty (30) days after
Landlord's receipt of the Tenant Statement, at Landlord's election either (i) to
terminate this Lease for the balance of the Term with respect to the portion of
the Premises which is the subject of the Tenant Statement (the "Recapture
Space"), as of the proposed commencement of the term of the proposed subletting,
as set forth in the Tenant Statement (the "Termination Date") or (ii) to sublet,
in its name or that of its designee, the Recapture Space from Tenant for a term
commencing on the date set forth in the Tenant Statement as the proposed
commencement of the term of the proposed subletting and ending one (1) day prior
to the Fixed Expiration Date applicable to the Recapture Space, on the terms and
conditions of this Lease, subject to the further provisions of Paragraph (D) of
this Section 12.6. If Landlord shall fail to notify Tenant within said thirty
(30) day period of Landlord's intention to exercise its rights pursuant to this
Section 12.6(B) hereof, Tenant may attempt to sublease the space set forth in
the Tenant Statement, upon compliance and in accordance with the terms and
conditions of this Lease, including, without limitation, paragraph (A) of this
Section 12.6. Tenant shall keep Landlord
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informed periodically regarding its efforts to sublease the Premises. If Tenant
shall not deliver to Landlord a request for consent to sublease pursuant to
Section 12.6(A) hereof by the first (1st) anniversary of the date of the
delivery of the Tenant Statement to Landlord, then the provisions of Section
12.1 and this Section 12.6 shall again be applicable to any other proposed
subletting. If Tenant shall deliver such request to Landlord within such one (1)
year period as aforesaid, then the provisions of Section 12.6(A) shall apply.
(C) If Landlord exercises its option to terminate this Lease with
respect to the Recapture Space as provided in Section 12.6(B) hereof, (i) prior
to the Termination Date, Tenant, at its sole cost and expense, shall make such
Alterations as may be required or reasonably deemed necessary by Landlord to
physically separate the Recapture Space, if such space constitutes a portion of
a floor or is connected to another floor of the Premises by an internal
stairway, from the balance of the floor or such other floor, as the case may be,
and to provide appropriate means of ingress to and egress thereto and to the
public portions of the balance of the floor, such as toilets, janitor's closets,
telephone and electrical closets, fire stairs, elevator lobbies, etc., (ii)
Tenant shall vacate and surrender the Recapture Space on or before the
Termination Date in accordance with Article 20 hereof and the Term with respect
to the Recapture Space shall end on the Termination Date as if it were the
Expiration Date, and (iii) from and after the Termination Date, the Fixed Rent,
Escalation Rent and Space Factor shall be reduced in the proportion which the
ratio between the area of the Recapture Space bears to the total area of the
Premises immediately prior to the Termination Date, and Tenant's Share shall be
redetermined based upon the proportion in which the ratio between the rentable
area of the Premises remaining after the Termination Date bears to the rentable
area of the Building (in each case taking into account which portion of the
Premises is recaptured and making an adjustment for the fact that (a) the Fixed
Rent per rentable square foot is different with respect to the various portions
of the Premises and (b) Tenant's Share has been determined without regard to
Basement Space or Garage Space).
(D) (1) If Landlord exercises its option to sublet the Recapture
Space pursuant to Section 12.6(B) hereof, such sublease to Landlord or its
designee as subtenant (each, a "Recapture Sublease") shall be at a rental equal
to the Fixed Rent attributable to the Recapture Space multiplied by the number
of rentable square feet of the Recapture Space, and otherwise upon the same
terms and conditions as those contained in this Lease (as modified by the Tenant
Statement), except such as are irrelevant or inapplicable and except as
otherwise expressly set forth to the contrary in this paragraph (D) or paragraph
(F) hereof.
(2) Landlord may not exercise its right to terminate the Lease
or sublease the Recapture Space pursuant to paragraph (B) of this Section 12.6
with respect to any proposed sublease of Office Space (i) the term of which,
including all renewals and extensions, does not exceed three (3) years and (ii)
the expiration of which term, including all renewals and extensions, shall occur
not later than eighteen (18) months prior to the earliest Fixed Expiration Date
applicable to any portion of the proposed sublet space. Notwithstanding anything
to the contrary contained herein, any
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subletting of the type described in this paragraph (D)(2) shall be subject to
every other provision of this Article 12.
(E) (1) If Landlord exercises its option to sublet in its name or
that of its designee the Proposed Sublease Space pursuant to Section 12.6(A)(3)
hereof, the Landlord's Sublease shall provide that at the expiration of the term
of the Landlord's Sublease, all items in the nature of Specialty Alterations
made for such subtenant in connection with such subleasing shall be removed and
Tenant shall accept the Proposed Sublease Space in its then existing condition
with all movable fixtures, movable partitions, telephone and other equipment,
furniture, furnishings and other items of personal property of Landlord or its
designee removed.
(2) If Landlord is unable to give Tenant possession of the
Proposed Sublease Space at the expiration of the term of the Landlord's Sublease
by reason of the holding over or retention of possession of any tenant or other
occupant, then (x) Landlord shall continue to pay all charges previously
payable, and comply with all other obligations, under the Landlord's Sublease
until the date upon which Landlord shall give Tenant possession of the Proposed
Sublease Space free of occupancies, (y) neither the Expiration Date nor the
validity of this Lease shall be affected, and (z) Tenant waives any rights under
Section 223-a of the Real Property Law of New York, or any successor statute of
similar import, to rescind this Lease and further waives the right to recover
any damages from Landlord which may result from the failure of Landlord to
deliver possession of the Proposed Sublease Space at the end of the term of the
Landlord's Sublease. Landlord, however, shall promptly institute and thereafter
diligently prosecute such dispossess actions or other actions or proceedings
against such tenant or occupant as Landlord shall deem appropriate in order to
obtain possession of the Proposed Sublease Space. If such tenant or occupant
shall pay to Landlord for the period of any holdover by such tenant or occupant
rental in excess of the Fixed Rent and additional rent attributable to the
Proposed Sublease Space for the period of such holdover, then Landlord, after
deducting from such amount all costs and expenses incurred by Landlord in
connection with dispossessing such tenant or occupant, shall credit Tenant the
amount of such excess, if any, against the immediately succeeding payments of
Fixed Rent under the Lease.
(F) (1) If Landlord shall exercise its option to sublet the
Recapture Space pursuant to Section 12.6(B) hereof, or if Landlord shall
exercise its option to sublet the Proposed Sublease Space pursuant to Section
12.6(A)(3) hereof, then the Recapture Sublease or Landlord's Sublease, as the
case may be, shall:
(a) give the subtenant the unqualified and unrestricted
right, without Tenant's permission, to assign such Recapture Sublease and to
further sublet the Recapture Space, or to assign such Landlord's Sublease and to
further sublet the Proposed Sublease Space, as the case may be, or any part
thereof to any Person befitting a first class office building in midtown
Manhattan, and to make any and all changes, alterations, and improvements in the
Recapture Space or the Proposed Sublease Space, as the case may be;
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(b) provide that (i) the parties to such Recapture
Sublease or Landlord's Sublease, as the case may be, expressly negate any
intention that any estate created under such Sublease be merged with any other
estate held by either of said parties, and (ii) prior to the commencement of the
term of such Sublease, Tenant, at its sole cost and expense, shall make such
Alterations as may be required or reasonably deemed necessary by the subtenant
to physically separate the Recapture Space or the Proposed Sublease Space, as
the case may be, if such Space constitutes a portion of a floor or is connected
to another floor of the Premises by an internal stairway, from the balance of
the floor or such other floor, as the case may be, and to provide appropriate
means of ingress to and egress thereto and to the public portions of the balance
of the floor, such as toilets, janitor's closets, telephone and electrical
closets, fire stairs, elevator lobbies, etc.; and
(c) provide that the subtenant or occupant may use and
occupy the Recapture Space or the Proposed Sublease Space, as the case may be,
for any lawful purpose designated by Landlord consistent with a first class
office building in midtown Manhattan (without regard to any limitation set forth
in the Tenant Statement or the proposed sublease submitted to Landlord under
Section 12.6(A)(3), as the case may be).
(2) Performance by Landlord, or its designee, under a
Recapture Sublease or a Landlord's Sublease, as the case may be, shall be deemed
performance by Tenant of any similar obligation under this Lease and Tenant
shall not be liable for any default under this Lease or deemed to be in default
hereunder if such default is occasioned by or arises from any act or omission of
the subtenant under the Recapture Sublease or the Landlord's Sublease, as the
case may be, or is occasioned by or arises from any act or omission of any
occupant under the Recapture Sublease or the Landlord's Sublease, as the case
may be. If Landlord or its designee shall fail or refuse to pay any rent or
additional rent due under a Recapture Sublease or a Landlord's Sublease, as the
case may be, within the time periods provided in such Sublease, Tenant may
withhold the payment of the corresponding rental amount due under this Lease,
and Tenant shall not be in default as a result thereof, provided that Tenant
shall pay such amount due under this Lease within seven (7) Business Days after
receiving the corresponding amount from Landlord or its designee under the
Recapture Sublease or the Landlord's Sublease, as the case may be.
(3) The failure by Landlord to exercise its option under
Section 12.6(A)(3) or Section 12.6(B) with respect to any subletting shall not
be deemed a waiver of such option with respect to any extension of such
subletting or any subsequent subletting of the Premises affected thereby.
Section 12.7(A) In connection with any subletting of all or any
portion of the Premises by Tenant, an Affiliate of Tenant or any Person deriving
his right of occupancy from Tenant, Tenant shall pay to Landlord an amount equal
to fifty percent (50%) of any Sublease Profit derived therefrom. Notwithstanding
the foregoing, if at any time there shall exist more than one sublease with
respect to the Premises pursuant to which rent has commenced to be paid and if
under any such sublease there shall be a
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Sublease Loss, then Tenant may offset the amount of such Sublease Loss incurred
during any month from the Sublease Profit realized in such month. All sums
payable hereunder by Tenant shall be calculated on an annualized basis, but
shall be paid to Landlord, as additional rent, within ten (10) days after
receipt thereof by Tenant.
(B) For purposes of this Lease:
(1) "Rent Per Square Foot" shall mean the sum of the
then Fixed Rent, Escalation Rent and Electricity Additional Rent divided by the
Space Factor of the portion of the Premises being sublet.
(2) "Sublease Profit" shall mean the product of (x) the
Sublease Rent Per Square Foot less the Rent Per Square Foot, and (y) the number
of rentable square feet constituting the portion of the Premises sublet by
Tenant, if such number is a positive number, and if such number is a negative
number such amount shall be "Sublease Loss".
(3) "Sublease Rent" shall mean any rent or other
consideration paid to Tenant directly or indirectly by any subtenant or any
other amount received by Tenant (including, without limitation, any lump sum
payments) from or in connection with any subletting (including, but not limited
to, sums paid for the sale or rental, or consideration received on account of
any contribution, of Tenant's Property or sums paid in connection with the
supply of electricity or HVAC) less the Sublease Expenses.
(4) "Sublease Expenses" shall mean: (i) in the event of
a sale of Tenant's Property, the then unamortized or undepreciated cost thereof
determined on the basis of Tenant's federal income tax returns, (ii) the
reasonable out-of-pocket costs and expenses of Tenant in making such sublease,
such as brokers' fees, attorneys' fees, and advertising fees paid to unrelated
third parties, (iii) any sums paid to Landlord pursuant to Section 12.2(B)
hereof, (iv) the cost of improvements or alterations made or paid for by Tenant
expressly and solely for the purpose of preparing that portion of the Premises
for such subtenancy, and (v) rent concessions and abatements, and lease takeover
liabilities. In determining Sublease Rent, the costs set forth in clauses (i),
(ii), (iii), (iv) and (v) shall be amortized on a straight-line basis over the
term of such sublease with interest thereon at the Base Rate (but in no event
greater than twelve percent (12%) per annum).
(5) "Sublease Rent Per Square Foot" shall mean the
Sublease Rent divided by the rentable square feet of the space demised under the
sublease in question.
(6) Sublease Profit and Sublease Loss shall be
recalculated from time to time to reflect any corrections in the prior
calculation thereof due to (i) subsequent payments received or made by Tenant,
(ii) the final adjustment of payments to be made by or to Tenant, and (iii)
mistake. Promptly after receipt or final adjustment of any such payments or
discovery of any such mistake, Tenant shall submit
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to Landlord a recalculation of the Sublease Profit and/or Sublease Loss, and an
adjustment shall be made between Landlord and Tenant, on account of prior
payments made or credits received pursuant to this Section 12.7.
Section 12.8 (A) If there is a dispute between Landlord and Tenant
as to the reasonableness of Landlord's refusal to consent to any subletting
where Landlord has agreed not to unreasonably withhold its consent, Tenant may,
at its option, as its sole and exclusive remedy, submit such dispute to
arbitration in the City of New York under the Expedited Procedures provisions of
the Commercial Arbitration Rules of the American Arbitration Association or any
successor (the "AAA") (presently Sections 53 through 57 and, to the extent
applicable, Section 19); provided, however, that with respect to any such
arbitration (i) the list of arbitrators referred to in Rule 54 shall be returned
within five (5) days from the date of mailing, (ii) the parties shall notify the
AAA by telephone within four (4) days of any objections to the arbitrator
appointed and will have no right to object if the arbitrator so appointed was on
the list submitted by the AAA and was not objected to in accordance with the
second paragraph of Rule 54, (iii) the Notice of Hearing referred to in Rule 55
shall be four (4) days in advance of the hearing, (iv) the hearing shall be held
within seven (7) days after the appointment of the arbitrator, (v) the
arbitrator shall have no right to award damages and the sole remedy which may be
awarded by the arbitrator shall be to grant the consent requested and (vi) the
decision of the arbitrator shall be final and conclusive on the parties.
(B) The arbitrators conducting any arbitration shall be bound
by the provisions of this Lease and shall not have the power to add to, subtract
from, or otherwise modify such provisions. Landlord and Tenant agree to sign all
documents and to do all other things necessary to submit any such matter to
arbitration and further agree to and hereby do, waive any and all rights they or
either of them may at any time have to revoke their agreement hereunder to
submit to arbitration and to abide by the decision rendered thereunder. Each of
the arbitrators shall have at least ten (10) years' experience in the business
of managing real estate or acting as a real estate broker dealing with
first-class office buildings located in Manhattan. The losing party in any
arbitration hereunder shall pay the reasonable counsel fees and expenses, if
any, of both parties in connection with any arbitration or other action or
proceeding brought under this Section 12.8, including the expenses and fees of
the arbitrators selected.
ARTICLE 13
ELECTRICITY
Section 13.1 Tenant shall at all times comply with the rules,
regulations, terms and conditions applicable to service, equipment, wiring and
requirements of the public utility supplying electricity to the Building. The
risers serving the Office Premises shall be capable of supplying three and
one-half (3.5) watts of electricity per rentable square foot of the Office
Premises, and Tenant shall not use any electrical equipment which, in Landlord's
reasonable judgment, would exceed such capacity or interfere with the,
electrical service to other tenants of the Building. Landlord shall dedicate one
(1) three hundred (300) amp switch located in the Building to Tenant for its
use. Notwithstanding the foregoing, if and for as long as Tenant shall not
require the use of all
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of the power provided by such switch, then Landlord may use the switch and the
power provided thereby to supply electricity to the Building or any tenant
therein. If Tenant can demonstrate to Landlord's reasonable satisfaction that it
requires electrical capacity in addition to the three and one-half (3.5) watts
of electricity per rentable square foot of the Office Premises plus the capacity
of the three hundred (300) amp switch and Landlord, after taking into account
the capacity of the Building, the current and anticipated needs of the Building
and all present and future occupants thereof, determines that it can deliver
such additional capacity to Tenant without obtaining additional capacity from
the public utility servicing the Building, Landlord, after Tenant's request and
at Tenant's sole cost and expense, shall make such capacity available to Tenant,
through the existing risers and conduits of the Building. Subject to the
provisions of this Lease Landlord shall be required to provide electricity to
the Garage Premises and Basement Premises solely for the operation of normal
lighting, and electricity for the operation in the Garage Premises of a heating
unit with an electrical consumption not materially in excess of the unit located
in the Garage Premises on the date hereof, and Tenant shall not install any
additional or other electronic equipment in either the Garage Premises or the
Basement Premises. Landlord shall, at Tenant's sole cost and expense, separately
submeter Tenant's signs to the extent such signs are not currently separately
submetered. In the event that, in Landlord's reasonable judgment, Tenant's
electrical requirements in excess of three and one-half (3.5) watts of
electricity per rentable square foot of the Office Premises plus the capacity of
the three hundred (300) amp switch necessitate installation of an additional
riser, risers or other proper and necessary equipment, Landlord shall so notify
Tenant of same. Within five (5) Business Days after receipt of such notice,
Tenant shall either cease such use of such additional electricity or shall
request that additional electricity capacity (specifying the amount requested)
be made available to Tenant. Landlord, in Landlord's reasonable judgment shall
determine whether to make available such additional electricity capacity to
Tenant and the amount of such additional electricity capacity to be made
available. If Landlord shall agree to make available additional electrical
capacity and the same necessitates installation of an additional riser, risers
or other proper and necessary equipment, including, without limitation, any
switchgear, the same shall be installed by Landlord. All reasonable costs and
expenses of making any such installation shall be paid by Tenant, and shall be
chargeable and collectible as additional rent and paid within ten (10) Business
Days after the rendition of a bill to Tenant therefor, which bill shall be
accompanied by invoices for such work paid or to be paid. Landlord shall bill
Tenant for the same not more frequently than once per month. Landlord shall not
be liable in any way to Tenant for any failure or defect in the supply or
character of electric service furnished to the Premises by reason of any
requirement, act or omission of the utility serving the Building or for any
other reason not attributable to the negligence of Landlord, whether electricity
is provided by public or private utility or by any electricity generation system
owned and operated by Landlord.
Section 13.2 (A) Unless Landlord is required to have Tenant obtain
electricity from the public utility company furnishing electricity to the
Building pursuant to the provisions of Section 13.3 hereof, electricity shall be
furnished by Landlord to the Premises and to Tenant's signage and Tenant shall
pay to Landlord, as additional rent for the furnishing of electricity to the
Office Premises and to Tenant's signage, an amount equal to (i) the product of
(x) the Cost Per Kilowatt Hour, and (y) Tenant's demand and
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consumption of electricity as determined by meters or submeters plus (ii) an
amount equal to seven percent (7%) of the amount set forth in clause (i) above,
exclusive of sales or other taxes, as Landlord's administrative charge for
overhead and supervision. Tenant shall also pay to Landlord, as additional rent,
Tenant's Share of the Building Electricity Expense pursuant to the terms and
provisions of Article 27 hereof. Tenant's Share of the Building Electricity
Expense and the amount to be paid by Tenant to Landlord pursuant to this Section
13.2 for the furnishing of electricity to the Office Premises and Tenant's
signage are hereinafter collectively referred to as "Electricity Additional
Rent".
(B) "Cost per Kilowatt Hour" shall mean the total cost (net of
sales and other taxes) for electricity incurred by Landlord to the public
utility servicing the Building to service the Building during a particular time
period (including all applicable surcharges, demand charges, energy charges,
fuel adjustment charges, time-of-day charges, rate adjustment charges, and other
factors used by the public utility in computing its charges to Landlord and
other suns payable in respect thereof) divided by the total kilowatt hours
consumed at the Building during such period.
(C) Tenant shall pay when due all sales or other taxes, if
any, which shall be payable by Landlord or Tenant as a result of the electricity
purchased by Landlord and the electricity supplied to Tenant pursuant to this
Section 13.2.
(D) Where more than one motor measures the electricity
supplied to Tenant, the electricity rendered through each meter may be computed
and billed separately in accordance with the provisions hereinabove set forth.
Bills for the Electricity Additional Rent, based on and setting forth the
readings of the applicable meters and submeters located in the Building and the
Premises or, with respect to Building Electricity Expenses, if electrical
consumption thereunder is based upon a public light and power study or similar
survey, attaching such study or survey, shall be rendered to Tenant at such time
as Landlord may elect, and Tenant shall pay the amount shown thereon to Landlord
within ten (10) days after receipt of such bill, but not more frequently than
once per month.
Section 13.3 If Landlord shall be required by any Requirement or by
the public utility servicing the Building to discontinue furnishing electricity
to Tenant this Lease shall continue in full force and effect and shall be
unaffected thereby, except only that from and after the effective date of such
discontinuance, Landlord shall not be obligated to furnish electricity to Tenant
and Tenant shall not be obligated to pay those items of Electricity Additional
Rent. If Landlord so discontinues furnishing electricity to Tenant, Tenant shall
use diligent efforts to obtain electric energy directly from the public utility
furnishing electric service to the Building. The costs of such service shall be
paid by Tenant directly to such public utility. Such electricity may be
furnished to Tenant by means of the existing electrical facilities serving the
Premises, at no charge, to the extent the same are available, suitable and safe
for such purposes as reasonably determined by Landlord. All motors and all
additional panel boards, feeders, risers, wiring and other conductors and
equipment which may be required to obtain electricity shall be installed by
Landlord and all reasonable costs and expenses thereof shall be paid by Tenant
as additional rent within ten (10) Business Days after rendition to Tenant of a
bill therefor,
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which bill shall be accompanied by invoices for such work paid or to be paid.
Provided Tenant shall use and continue to use diligent efforts to obtain
electric energy directly from the public utility, Landlord, to the extent
permitted by applicable Requirements, shall not discontinue furnishing
electricity to the Premises until such installations have been made and Tenant
shall be able to obtain electricity directly from the public utility.
Section 13.4 If any of Tenant's signs are not currently separately
submetered, then prior to Landlord's installation of the submeters measuring the
electrical consumption of any Tenant's sign, and such submeters becoming
operational, Tenant shall pay to Landlord, a fee (the "Electricity Fee") in
consideration of Landlord furnishing electricity to such signs. The Electricity
Fee shall only be payable with respect to the period prior to Landlord's
installation of such submeters. Upon such installation by Landlord, and
thereafter, Tenant shall pay Electricity Additional Rent based upon the demand
and consumption shown on such submeters, as more particularly set forth in
Section 13.2 hereof. The Electricity Fee shall be an amount reasonably
determined by Landlord, from time to time, to equal the amount which Landlord
would have received if such submeters were installed. Landlord shall render a
bill to Tenant for such Electricity Fee from time to time, but not more
frequently than monthly, and Tenant shall pay such Electricity Fee to Landlord,
as additional rent, within ten (10) days after receipt of such bill. Landlord
and Tenant agree that after such submeters are installed and operational and
electricity is being furnished to such signs pursuant to Section 13.2 hereof for
a three (3) month period, the Electricity Fee shall be adjusted based on the
average of the Electricity Additional Rent ("Three Month Average") payable by
Tenant for such three (3) month period with respect to such signs. If the Three
Month Average shall exceed the Electricity Fee, Tenant shall, within ten (10)
Business Days after demand therefor, pay such excess to Landlord, and if the
Electricity Fee shall exceed the Three Month Average, Landlord, at its option,
shall either promptly refund to Tenant such excess or shall credit such excess
against immediately subsequent payments of Electricity Additional Rent next
becoming due and payable hereunder.
ARTICLE 14
ACCESS TO PREMISES
Section 14.1 (A) Subject to the provisions hereinafter set forth,
Tenant shall permit Landlord, Landlord's agents, representatives, contractors
and employees and public utilities servicing the Building to erect, use and,
maintain, concealed ducts, pipes and conduits in and through the Premises.
Landlord, Landlord's agents, representatives, contractors, and employees and the
agents, representatives, contractors, and employees of public utilities
servicing the Building shall have the right to enter the Premises at all
reasonable times upon reasonable prior notice (except in the case of an
emergency in which event Landlord and Landlord's agents, representatives,
contractors, and employees may enter without prior notice to Tenant), which
notice may be oral, to examine the same, to show them to prospective purchasers,
or prospective or existing Mortgagees or Lessors, and to make such repairs,
alterations, improvements, additions or restorations (i) as Landlord may deem
necessary or desirable to the Premises or to any other portion of the Building,
or (ii) which Landlord may elect to perform following ten (10) Business
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Days after notice, except in the case of an emergency (in which event Landlord
and Landlord's agents, representatives, contractors, and employees may enter
without prior notice to Tenant), following Tenant's failure to make repairs or
perform any work which Tenant is obligated to make or perform under this Lease,
or (iii) for the purpose of complying with any Requirements, a Superior Lease or
a Mortgage, and Landlord shall be allowed to take all material into and upon the
Premises that may be required therefor without the same constituting an eviction
or constructive eviction of Tenant in whole or in part and the Fixed Rent (and
any other item of Rental) shall in no wise abate while said repairs,
alterations, improvements, additions or restorations are being made, by reason
of loss or interruption of business of Tenant, or otherwise. Promptly following
the performance of such repairs, alterations, improvements, additions or
restorations (other than those performed pursuant to clause (ii) of this Section
14.1(A)) Landlord shall restore the Premises substantially to the condition
which existed prior to the performance of such repairs, alterations,
improvements, additions or restorations. Tenant shall provide Landlord with keys
or combinations or other electronic access to all doors in and to the Premises,
and no additional locks or bolts of any kind shall be placed upon any of the
doors in or to the Premises, nor shall any changes be made in existing locks or
in the mechanism thereof unless Tenant shall promptly provide Landlord with the
keys or combinations or other electronic access thereto. Notwithstanding the
foregoing, Tenant may, from time to time by written notice to Landlord,
designate certain areas within the Premises as "Security Areas" and may withhold
from Landlord the keys or combinations to such areas. At no time shall the
aggregate area of such Security Areas exceed fifteen thousand (15,000) rentable
square feet. Landlord agrees that neither Landlord nor its agents,
representatives, contractors or employees shall have the right to enter the
Security Areas without (a) reasonable advance notice to Tenant and (b) a
representative of Tenant being present, other than in the event of an emergency
or in the event that, after such reasonable advance notice, Tenant shall fail to
make its representative available.
(B) Any work performed or installations made pursuant to this
Article 14 shall be made with reasonable diligence and otherwise pursuant to the
provisions of Section 4.3 hereof.
(C) Except as hereinafter provided, any pipes, ducts, or
conduits installed in or through the Premises after the date hereof pursuant to
this Article 14 shall be concealed behind, beneath or within partitioning,
columns, ceilings or floors located or to be located in the Premises.
Notwithstanding the foregoing, any such pipes, ducts, or conduits may be furred
at points immediately adjacent to partitioning columns or ceilings located or to
be located in the Premises, provided that the same are completely furred and
that the installation of such pipes, ducts, or conduits, when completed, shall
not reduce the usable area of the Premises beyond a de minimis amount.
Section 14.2 During the eighteen (18) month period prior to the
Expiration Date applicable to any portion of the Premises or the expiration of
any renewal or extended term for such portion of the Premises (unless Tenant has
exercised its Renewal Option for such portion of the Premises for a Renewal Term
which has not yet commenced), Landlord may exhibit such portion of the Premises
to prospective tenants thereof. In addition, during the period between the date
Landlord notifies Tenant
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of the exercise of Landlord's right pursuant to Section 12.6(B) hereof, to
terminate the Lease with respect to the Recapture Premises or to sublease the
Recapture Premises, as the case may be, and the Termination Date or the
commencement date of such sublease, as the case may be, Tenant may exhibit the
Recapture Space to prospective Tenants thereof.
Section 14.3 If Tenant shall not be present when for any reason
entry into the Premises shall be necessary or permissible, Landlord or
Landlord's agents, representatives, contractors or employees may enter the same
without rendering Landlord or such agents liable therefor if during such entry
Landlord or Landlord's agents shall accord reasonable care under the
circumstances to Tenant's Property, and without in any manner affecting this
Lease. Nothing herein contained, however, shall be deemed or construed to impose
upon Landlord any obligation, responsibility or liability whatsoever, for the
care, supervision or repair of the Building or any part thereof, other than as
herein provided.
Section 14.4 Landlord also shall have the right at any time, without
the same constituting an actual or constructive eviction and without incurring
any liability to Tenant therefor, to change the arrangement or location of
entrances or passageways, doors and doorways, and corridors, elevators, stairs,
toilets, or other public parts of the Building and to change the name of the
Building or the designation by which the Building is commonly known (subject to
the provisions of Article 15 hereof), or the number by which the Building is
commonly known, provided any such change does not (a) unreasonably reduce,
interfere with or deprive Tenant of access to the Building or the Premises, (b)
reduce the rentable area (except by a de minimis amount) of the Premises or (c)
detract from the character and reputation of the Building as a first class
office building. All parts (except surfaces facing the interior of the Premises)
of all walls, windows and doors bounding the Premises (including exterior
Building walls, exterior core corridor walls, exterior doors and entrances), all
balconies, terraces and roofs adjacent to the Premises, all space in or adjacent
to the Premises used for shafts, stacks, stairways, chutes, pipes, conduits,
ducts, fan rooms, heating, air cooling, plumbing and other mechanical
facilities, service closets and other Building facilities are not part of the
Premises, and Landlord shall have the use thereof, as well as access thereto
through the Premises for the purposes of operation, maintenance, alteration and
repair.
Section 14.5 Upon reasonable advance notice to Landlord, Tenant and
its agents, employees and contractors shall have access on Business Days between
9:00 A.M. and 5:00 P.M., when accompanied by a representative of Landlord, to
(i) the electrical closets, air conditioning rooms and telephone closets
servicing the Premises to perform work thereon, subject to the provisions of
this Lease including, without limitation, Article 3 hereof and (ii) to the
meters and submeters measuring electrical consumption billed to Tenant, for
purposes of verifying the readings of such meters and submeters. If Tenant shall
request such access at any time on other than on Business Days between 9:00 A.M.
and 5:00 P.M., Tenant shall pay to Landlord within ten (10) Business Days after
demand therefor, as additional rent, a reasonable fee for the service of
providing Landlord's representative.
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ARTICLE 15
SIGNAGE
Section 15.1 Provided that The Mutual Life Insurance Company of New
York shall occupy for the conduct of its business and as its world headquarters,
containing executive offices, not less than 118,500 rentable square feet of
Office Premises, subject to compliance with all Requirements and approvals of
Governmental Authorities, (i) Tenant shall have the right to operate and
maintain the signs identifying The Mutual Life Insurance Company of New York
currently located on the outside of the Building and in the lobby of the
Building and the "Weather Star", and (ii) the Building shall be named "The MONY
Building". As long as The Mutual Life Insurance Company of New York shall be
Tenant hereunder, subject to the provisions of Section 15.5 hereof, Tenant may
not remove any of Tenant's signs or the "Weather Star" without prior written
notice to and the prior written consent of Landlord, which consent Landlord may
withhold in its sole discretion, and, Landlord may require that (i) Tenant
maintain any or all of such signs and/or the "Weather Star" and (ii) the
Building be named "The MONY Building". If at any time The Mutual Life Insurance
Company of New York shall occupy for the conduct of its business less than
118,500 rentable square feet of the Office Premises, Landlord, at its option,
may notify Tenant that Landlord elects that Tenant remove, within thirty (30)
days after delivery of such notice, any or all of Tenant's signs and/or the
"Weather Star", at Tenant's sole cost and expense, and may thereafter cause the
Building to be known by any other name or no name other than its street address,
provided, however, in such event (i) Landlord shall thereupon be deemed to have
waived the covenant that MONY occupy the Premises through the twelfth (12th)
anniversary of the Commencement Date as its world headquarters and (ii) from and
after the date of the removal of any of the signs identifying Tenant located on
the top of the Building or the large sign identifying Tenant located on the
street level facade of the Building between the main entrance of the Building
and West 55th Street (or the removal of any permitted replacements of any of
such signs), Tenant shall no longer be obligated to operate, maintain or repair
the "Weather Star". If Landlord shall require Tenant to remove the "Weather
Star" as aforesaid, Tenant, within fifteen (15) days after receipt of Landlord's
notice (with respect to which date time shall be of the essence), may notify
Landlord that, in lieu of removing the "Weather Star", Tenant shall pay to
Landlord, as additional rent hereunder, simultaneously with the delivery by
Tenant of its notice, the sum of Two Hundred Thousand Dollars ($200,000).
Section 15.2 From and after the later to occur of (i) the expiration
or sooner termination of this lease and (ii) the date upon which all of Tenant's
signage shall be removed from the Building, Landlord shall not suffer or permit
any signage on the outside of the Building identifying the Building as "The MONY
Building" or any signs on the outside of the Building identifying The Mutual
Life Insurance Company of New York, but may, at its option, permit the "Weather
Star" to remain on the Building.
Section 15.3 Subject to the provisions of this Article 15, Tenant
shall keep, maintain and repair all Tenant's signage and the "Weather Star" at
Tenant's sole cost and expense as required consistent with the first class
character of the Building, and shall operate all such signage and the "Weather
Star" at all times in substantially the same
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manner as the same is operated on the Commencement Date. Notwithstanding the
foregoing, Tenant shall not be in default of the foregoing covenants for as long
as Tenant is prevented or delayed from complying with such covenants by reason
of strikes, accident, governmental preemption, failure of any Building System or
inability to obtain materials, in each instance not resulting from Tenant's
actions or failure to act. Tenant shall engage, subject to the provisions of
this Lease, and subject to the prior written approval of Landlord, which
approval shall not be unreasonably withheld or delayed, a reputable contractor
or contractors to maintain and repair all such signage and the "Weather Star".
Landlord, at Tenant's sole cost and expense and in accordance with the
provisions of Article 13 hereof, shall provide electricity to all electrical
signs and the "Weather Star".
Section 15.4 Other than as required pursuant to any Requirement, as
long as the Building is named "The MONY Building", Landlord shall not cause or
suffer any sign to be placed upon the roof of the Building or the outside of the
Building or in the Building lobby identifying the Building by any other name.
The foregoing shall not be deemed to prohibit any sign which identifies the
Building solely by its street address (provided the same do not detract from the
character and reputation of the Building as a first class office building), any
sign required by any Requirement, or any signs in the lobby of the Building or
on the facade of the Building on or about the street level which identify the
owner of the Building, the managing agent of the Building or any tenants of the
Building, provided, however, that with respect to any signs on the facade of the
Building on or about the street level which identify any other tenants of the
Building (other than retail tenants of the Building) (i) such signs shall be
less prominent than the signs on the facade of the Building which identify
Tenant (taking into account the size and proximity of the signs identifying
Tenant to the signs identifying such other tenants) and (ii) prior to causing
such signs to be placed upon the facade of the Building as aforesaid, Landlord
shall consult with Tenant, provided that after such consultation Landlord may
cause such signs to be placed upon the facade of the Building on or about the
street level which meet the foregoing criteria.
Section 15.5 If Tenant shall desire or be required to replace any of
its signage, such replaced signage shall be subject to the prior written
approval of Landlord, which approval shall not be unreasonably withheld or
delayed (and which approval shall be given or denied, or deemed to have been
given, within the time periods and in the manner set forth in Section 3.1(B)(2)
hereof), and the same shall be performed in accordance with the provisions of
this Lease including Article 3 hereof.
ARTICLE 16
DEFAULT
Section 16.1 Each of the following events shall be an "Event of
Default" hereunder:
(A) If Tenant shall default in the payment when due of any
installment of Fixed Rent and such default shall continue for seven (7) Business
Days after notice of such default is given to Tenant, or in the payment when due
of any other
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item of Rental and such default shall continue for seven (7) Business Days after
notice of such default is given to Tenant, except that if Landlord shall have
given three (3) such notices in any twelve (12) month period, Tenant shall not
be entitled to any further notice of its delinquency in the payment of Rental
until such time as twelve (12) consecutive months shall have elapsed without
Tenant having defaulted in any such payment; or
(B) if Tenant shall default in the observance or performance
of any term, covenant or condition on Tenant's part to be observed or performed
under any Additional Lease or any other lease with Landlord or Landlord's
predecessor in interest of space in the Building and such default shall continue
beyond any grace period set forth in such other lease for the remedying of such
default; or,
(C) if MONY does not at any time through and including the
eighth (8th) anniversary of the Commencement Date occupy for the operation of
its business at least 118,500 rentable square feet of the Office Premises (other
than as a result of any of the circumstances described in Articles 10 and 11 of
this Lease or by reason of any act or omission on the part of Landlord); or
(D) if Tenant's interest or any portion thereof in this Lease
shall devolve upon or pass to any person, whether by operation of law or
otherwise, except as expressly permitted under Article 12 hereof; or
(E) (1) if Tenant shall generally not, or shall be unable to,
or shall admit in writing its inability to, pay its debts as they become due; or
(2) if Tenant shall commence or institute any case,
proceeding or other action (A) seeking relief on its behalf as debtor, or to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property; or
(3) if Tenant shall make a general assignment for the
benefit of creditors; or
(4) if any case, proceeding or other action shall be
commenced or instituted against Tenant (A) seeking to have an order for relief
entered against it as debtor or to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts under
any existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, which in either of such
cases (i) results in any such entry of an order for relief, adjudication of
bankruptcy or
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insolvency or such an appointment or the issuance or entry of any other order
having a similar effect or (ii) remains undismissed for a period of sixty (60)
days; or
(5) if any case, proceeding or other action shall be
commenced or instituted against Tenant seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its property which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within sixty (60) days from the entry thereof; or
(6) if Tenant shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clauses (2), (3), (4) or (5) above; or
(7) if a trustee, receiver or other custodian is
appointed for any substantial part of the assets of Tenant which appointment is
not vacated or stayed within seven (7) Business Days; or
(F) if Tenant shall fail more than three (3) times during any
twelve (12) month period to pay any installment of Fixed Rent when due or any
other item of Rental when due (unless Tenant, by the date such other item of
Rental was due, has notified Landlord in writing that Tenant disputes the
payment thereof), after receipt of the notice and the expiration of the
applicable grace period pursuant to the provisions of paragraph (A) above, if
such notice and grace period are then required; or
(G) if Tenant shall fail to pay any installments of Fixed Rent
or items of Rental within the time period specified in Section 16.1(A) hereof,
and Landlord shall bring more than one (1) summary dispossess proceeding during
any twelve (12) month period; or
(H) if Tenant shall fail to observe or perform any other term,
covenant or condition of this Lease on Tenant's part to be observed or performed
within the time period provided for in this Lease, or if no time period is
provided hereunder, within thirty (30) days after notice by Landlord to Tenant,
or if such term, covenant or condition is of such a nature that it cannot with
due diligence be completely observed or performed within said thirty (30) day
period, if Tenant shall not commence within said period of thirty (30) days, or
shall not thereafter diligently prosecute to completion, all steps necessary to
observe or perform such term, covenant or condition.
Section 16.2(A) If an Event of Default (i) described in Section
16.1(E) hereof shall occur, or (ii) described in Sections 16.1(B), (C), (D),
(F), (G) or (H) shall occur and Landlord, at any time thereafter, at its option
gives written notice to Tenant stating that this Lease and the Term with respect
to the entire Premises shall expire and terminate on the date Landlord shall
give Tenant such notice, then this Lease and the Term and all rights of Tenant
under this Lease shall expire and terminate as if the date on which the Event of
Default described in clause (i) above occurred or the date such notice is given
to Tenant by Landlord, pursuant to clause (ii) above, as the case may be, were
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the Fixed Expiration Date or the last day of the Renewal Term, as the case may
be, with respect to the entire Premises, and Tenant immediately shall quit and
surrender the Premises, but Tenant shall nonetheless be liable for all of its
obligations hereunder, as provided for in Articles 17 and 18 hereof. Anything
contained herein to the contrary notwithstanding, if such termination shall be
stayed by order of any court having jurisdiction over any proceeding described
in Section 16.1(E) hereof, or by federal or state statute, then, following the
expiration of any such stay, or if the trustee appointed in any such proceeding,
Tenant or Tenant as debtor-in-possession shall fail to assume Tenant's
obligations under this Lease within the period prescribed therefor by law or
within one hundred twenty (120) days after entry of the order for relief or as
may be allowed by the court, or if said trustee, Tenant or Tenant as
debtor-in-possession shall fail to provide adequate protection of Landlord's
right, title and interest in and to the Premises or adequate assurance of the
complete and continuous future performance of Tenant's obligations under this
Lease as provided in Section 12.3(B), Landlord, to the extent permitted by law
or by leave of the court having jurisdiction over such proceeding, shall have
the right, at its election, to terminate this Lease on five (5) days' notice to
Tenant, Tenant as debtor-in-possession or said trustee and upon the expiration
of said five (5) day period this Lease shall cease and expire as aforesaid and
Tenant, Tenant as debtor-in-possession or said trustee shall immediately quit
and surrender the Premises as aforesaid, but Tenant shall nonetheless be liable
for all of its obligations hereunder, as provided for in Articles 17 and 18
hereof.
(B) If an Event of Default described in Section 16.1(A) hereof
shall occur, or this Lease shall be terminated as provided in Section 16.2(A)
hereof, Landlord, without notice, may reenter and repossess the Premises using
such force for that purpose as may be necessary without being liable to
indictment, prosecution or damages therefor and may dispossess Tenant by summary
proceedings or otherwise.
Section 16.3 If at any time, (i) Tenant shall comprise two (2) or
more persons, or (ii) Tenant's obligations under this Lease shall have been
guaranteed by any person other than Tenant, or (iii) Tenant's interest in this
Lease shall have been assigned, the word "Tenant", as used in Section 16.1(E),
shall be deemed to mean any one or more of the persons primarily or secondarily
liable for Tenant's obligations under this Lease. Any monies received by
Landlord from or on behalf of Tenant during the pendency of any proceeding of
the types referred to in Section 16.1(E) shall be deemed paid as compensation
for the use and occupation of the Premises and the acceptance of any such
compensation by Landlord shall not be deemed an acceptance of Rental or a waiver
on the part of Landlord of any rights under Section 16.2.
ARTICLE 17
REMEDIES AND DAMAGES
Section 17.1(A) If there shall occur any Event of Default, and this
Lease and the Term shall expire and come to an end as provided in Article 16
hereof:
(1) Tenant shall quit and peacefully surrender the
Premises to Landlord, and Landlord and its agents may immediately, or at any
time after
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such Event of Default or after the date upon which this Lease and the Term shall
expire and come to an end, re-enter the Premises or any part thereof, without
notice, either by summary proceedings, or by any other applicable action or
proceeding, or by force or otherwise (without being liable to indictment,
prosecution or damages therefor), and may repossess the Premises and dispossess
Tenant and any other persons from the Premises and remove any and all of their
property and effects from the Premises; and
(2) Landlord, at Landlord's option, may relet the whole
or any portion or portions of the Premises from time to time, either in the name
of Landlord or otherwise, to such tenant or tenants, for such term or terms
ending before, on or after the Expiration Date, at such rental or rentals and
upon such other conditions, which may include concessions and free rent periods,
as Landlord, in its sole discretion, may determine; provided, however, that
Landlord shall have no obligation to relet the Premises or any part thereof and
shall in no event be liable for refusal or failure to relet the Premises or any
part thereof, or, in the event of any such reletting, for refusal or failure to
collect any rent due upon any such reletting, and no such refusal or failure
shall operate to relieve Tenant of any liability under this Lease or otherwise
affect any such liability, and Landlord, at Landlord's option, may make such
repairs, replacements, alterations, additions, improvements, decorations and
other physical changes in and to the Premises as Landlord, in its sole
discretion, considers advisable or necessary in connection with any such
reletting or proposed reletting, without relieving Tenant of any liability under
this Lease or otherwise affecting any such liability.
(B) Tenant hereby waives the service of any notice of
intention to re-enter or to institute legal proceedings to that end which may
otherwise be required to be given under any present or future law. Tenant, on
its own behalf and on behalf of all persons claiming through or under Tenant,
including all creditors, does further hereby waive any and all rights which
Tenant and all such persons might otherwise have under any present or future law
to redeem the Premises, or to re-enter or repossess the Premises, or to restore
the operation of this Lease, after (a) Tenant shall have been dispossessed by a
judgment or by warrant of any court or judge, or (b) any re-entry by Landlord,
or (c) any expiration or termination of this Lease and the Term, whether such
dispossess, re-entry, expiration or termination shall be by operation of law or
pursuant to the provisions of this Lease. The words "re-enter," "re-entry" and
"re-entered" as used in this Lease shall not be deemed to be restricted to their
technical legal meanings. In the event of a breach or threatened breach by
Tenant, or any persons claiming through or under Tenant, of any term, covenant
or condition of this Lease, Landlord shall have the right to enjoin such breach
and the right to invoke any other remedy allowed by law or in equity as if
re-entry, summary proceedings and other special remedies were not provided in
this Lease for such breach. The right to invoke the remedies hereinbefore set
forth are cumulative and shall not preclude Landlord from invoking any other
remedy allowed at law or in equity.
Section 17.2(A) If this Lease and the Term shall expire and come to
an end as provided in Article 16 hereof, or by or under any summary proceeding
or any other action or proceeding, or if Landlord shall re-enter the Premises as
provided in
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Section 17.1, or by or under any summary proceeding or any other action or
proceeding, then, in any of said events:
(1) Tenant shall pay to Landlord all Fixed Rent,
Escalation Rent, Electricity Additional Rent and other items of Rental payable
under this Lease by Tenant to Landlord to the date upon which this Lease and the
Term shall have expired and come to an end or to the date of re-entry upon the
Premises by Landlord, as the case may be;
(2) Tenant also shall be liable for and shall pay to
Landlord, as damages, any deficiency (referred to as "Deficiency") between the
Rental for the period which otherwise would have constituted the unexpired
portion of the Term and the net amount, if any, of rents collected under any
reletting effected pursuant to the provisions of clause (2) of Section 17.1 (A)
for any part of such period (first deducting from the rents collected under any
such reletting all of Landlord's expenses in connection with the termination of
this Lease, Landlord's re-entry upon the Premises and with such reletting,
including, but not limited to, all repossession costs, brokerage commissions,
legal expenses, attorneys' fees and disbursements, alteration costs,
contribution to work and other expenses of preparing the Premises for such
reletting); any such Deficiency shall be paid in monthly installments by Tenant
on the days specified in this Lease for payment of installments of Fixed Rent,
Landlord shall be entitled to recover from Tenant each monthly Deficiency as the
same shall arise, and no suit to collect the amount of the Deficiency for any
month shall prejudice Landlord's right to collect the Deficiency for any
subsequent month by a similar proceeding; and
(3) whether or not Landlord shall have collected any
monthly Deficiency as aforesaid, Landlord shall be entitled to recover from
Tenant, and Tenant shall pay to Landlord, on demand, in lieu of any further
Deficiency as and for liquidated and agreed final damages, a sum equal to the
amount by which the Rental for the period which otherwise would have constituted
the unexpired portion of the Term exceeds the then fair and reasonable rental
value of the Premises for the same period, both discounted to present worth at
the Base Rate less the aggregate amount of Deficiencies theretofore collected by
Landlord pursuant to the provisions of clause (A)(2) of this Section 17.2 for
the same period; if, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the Premises, or any part thereof, shall have
been relet by Landlord for the period which otherwise would have constituted the
unexpired portion of the Term, or any part thereof, the amount of rent reserved
upon such reletting shall be deemed, prima facie, to be the fair and reasonable
rental value for the part or the whole of the Premises so relet during the term
of the reletting.
(B) If the Premises, or any part thereof, shall be relet
together with other space in the Building, the rents collected or reserved under
any such reletting and the expenses of any such reletting shall be equitably
apportioned for the purposes of this Section 17.2. Tenant shall in no event be
entitled to any rents collected or payable under any reletting, whether or not
such rents shall exceed the Fixed Rent reserved in this Lease. Solely for the
purposes of Section 17.2(A)(3), the term "Escalation Rent" as used
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therein shall mean the Escalation Rent in effect immediately prior to the
Expiration Date, or the date of re-entry upon the Premises by Landlord, as the
case may be, adjusted to reflect any increase pursuant to the provisions of
Article 27 hereof for the Operating Year immediately preceding such event.
Nothing contained in Article 16 hereof or this Article 17 shall be deemed to
limit or preclude the recovery by Landlord from Tenant of the maximum amount
allowed to be obtained as damages by any statute or rule of law, or of any sums
or damages to which Landlord may be entitled in addition to the damages set
forth in this Section 17.2.
ARTICLE 18
FEES AND EXPENSES
Section 18.1(A) If Tenant shall be in default under this Lease,
Landlord may, but shall not be obligated to, (1) as provided in Section 14.1
hereof, perform the same for the account of Tenant, or (2) make any expenditure
or incur any obligation for the payment of money, and the cost thereof, with
interest thereon at the Applicable Rate, shall be deemed to be additional rent
hereunder and shall be paid by Tenant to Landlord within ten (10) days of
rendition of any bill or statement to Tenant therefor and if the Term of this
Lease shall have expired at the time of making of such expenditures or incurring
of such obligations, such sums shall be recoverable by Landlord as damages.
(B) In any action or proceeding between Landlord and Tenant
relating to this Lease, the losing party shall reimburse the prevailing party
for the cost of instituting, prosecuting or defending any such action or
proceeding including, without limitation, reasonable attorneys' fees and
disbursements. If neither party shall wholly prevail, such costs of a party
shall be reimbursed by the reimbursing party in inverse proportion to the extent
to which the reimbursing party prevailed. Any amounts required to be reimbursed
hereunder by either party, together with interest thereon at the Base Rate,
shall be paid by such party within ten (10) days after rendition of a bill or
statement therefor, and if such amount shall not be paid within such ten (10)
day period, interest on such costs shall thereafter accrue at the Applicable
Rate, and not the Base Rate. Any amounts required to be paid by Tenant hereunder
shall be deemed to be additional rent hereunder, and if the term of this Lease
shall have expired at the time of making of any expenditures or incurring of any
obligations referred to in this Section 18.1(B) by Landlord, such sums shall be
recoverable by Landlord as damages.
Section 18.2 If Tenant shall fail to pay any installment of Fixed
Rent, Escalation Rent or any other item of Rental when due and such failure
shall continue beyond the expiration of any applicable notice and grace periods
provided for in this Lease, Tenant shall pay to Landlord, in addition to such
installment of Fixed Rent, Escalation Rent or other item of Rental, as the case
may be, as a late charge and as additional rent, a sum equal to interest at the
Applicable Rate on the amount unpaid, computed from the date such payment was
due to and including the date of payment.
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ARTICLE 19
NO REPRESENTATIONS BY LANDLORD
Section 19.1 Landlord and Landlord's agents and representatives have
made no representations or Premises with respect to the Building, the Real
Property or the Premises except as herein expressly set forth, and no rights,
easements or licenses are acquired by Tenant by implication or otherwise except
as expressly set forth herein. Tenant acknowledges that it is selling the Real
Property to Landlord on the date hereof, is currently in possession of the
Premises, is fully familiar with the condition thereof, and accepts possession
of the Premises in the condition which exists on the Commencement Date "as is",
and Landlord shall have no obligation to perform any work or make any
installations in order to prepare the Premises for Tenant's occupancy.
Section 19.2 Tenant acknowledges that the Premises and other
portions of the Building contain asbestos, asbestos-containing materials,
polychlorinated biphanyls and other items which are or may be, or may become,
environmental hazards. Tenant agrees that it shall not claim or seek any damages
against Landlord as a result of the existence of the foregoing, but if Landlord
shall fail or refuse to remove (i) the accessible asbestos located in the
Building, (ii) the asbestos located in the columns on the fourth (4th), fifth
(5th) and sixth (6th) floors of the Building and (iii) the light ballasts
containing polychlorinated biphenyls, in each case in the areas described in the
"Report of Survey for Radon Gas and Materials Suspected of Containing
Asbestiform Minerals at MONY Headquarters, 1740 Broadway, New York, New York"
prepared for Chase Investors Management Corporation, New York, Now York, by Law
Engineering, Inc., Project No. WO-8236A, dated September, 1990, by the second
(2nd) anniversary of the Commencement Date (which date shall be subject to
extension due to Unavoidable Delays), then Tenant's agreement not to claim or
seek any damages against Landlord as a result of the existence of the substances
referred to in clauses (i), (ii) and (iii) above shall thereafter be ineffective
and void with respect to claims arising after said date as a result of the
failure to remove said items.
Section 19.3 Without limiting the generality of Section 6.1 above,
Tenant agrees that if any action is required to put the restrooms in the Twelfth
Floor Premises or the Thirteenth Floor Premises in compliance with any existing
Requirements, including, without limitation, Local Law 58 of 1987, or any future
Requirement (to the extent such violation of such future Requirement results
from the physical condition which fails to comply with any existing Requirement
which should have been complied with by Tenant pursuant to the provisions of
this Section 19.3) relating to accessibility by handicapped persons, then such
actions shall forthwith be performed by Tenant at its sole expense. Moreover, if
any violations are placed of record against the Building because of Tenant's
failure to take any action as contemplated by this Section 19.3, then Tenant
shall, at its sole expense, forthwith cause such violations to be removed of
record and Tenant hereby indemnifies, defends and saves and holds harmless
Landlord from and against any and all loss, cost, demand, liability and expense
(including without limitation, fines, penalties and reasonable attorneys' fees
and disbursements) which Landlord may incur by reason of any failure of Tenant
to take any action as contemplated by this Section 19.3.
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Section 19.4 The provisions of this Article 19 shall survive the
expiration or sooner termination of the Term hereof.
ARTICLE 20
END OF TERM
Upon the expiration or other termination of this Lease with respect
to any portion of the Premises, Tenant shall quit and surrender to Landlord such
portion of the Premises, vacant, broom clean, in good order and condition,
ordinary wear and tear and damage for which Tenant is not responsible under the
terms of this Lease excepted, and otherwise in compliance with the provisions of
Article 3 hereof. Tenant expressly waives, for itself and for any person
claiming through or under Tenant, any rights which Tenant or any such person may
have under the provisions of Section 2201 of the New York Civil Practice Law and
Rules and of any successor law of like import then in force in connection with
any holdover summary proceedings which Landlord may institute to enforce the
foregoing provisions of this Article 20. Tenant acknowledges that possession of
the portion of the Premises with respect to which the Term is then expiring must
be surrendered to Landlord on the Expiration Date. Tenant agrees to indemnify
and save Landlord harmless from and against all claims, losses, damages,
liabilities, costs and expenses (including, without limitation, attorneys' fees
and disbursements) resulting from delay by Tenant in so surrendering such
portion of the Premises, including, without limitation, any claims made by any
succeeding tenant founded on such delay. The parties recognize and agree that
the damage to Landlord resulting from any failure by Tenant to timely surrender
as aforesaid possession of the portion of the Premises the Term with respect to
which is then expiring will be extremely substantial, will exceed the amount of
the monthly installments of the Fixed Rent and Rental theretofore payable
hereunder with respect to such portion of the Premises, and will be impossible
to accurately measure. Tenant therefore agrees that if possession of the portion
of the Premises the Term with respect to which is then expiring is not
surrendered to Landlord on the Expiration Date, in addition to any other rights
or remedies Landlord may have hereunder or at law (including, without
limitation, Landlord's right to terminate this Lease with respect to the entire
Premises), and without in any manner limiting Landlord's right to demonstrate
and collect any damages suffered by Landlord and arising from Tenant's failure
to surrender such portion of the Premises as provided herein, Tenant shall pay
to Landlord on account of use and occupancy of such portion of the Premises for
each month and for each portion of any month during which Tenant holds over in
such portion of the Premises after the Expiration Date, a sum equal to (i) one
and one-half (1.5) times the aggregate of that portion of the Fixed Rent,
Escalation Rent and Rental which was payable under this Lease during the last
month of the Term with respect to such portion of the Premises (other than the
Temporary Second Floor Premises) or (ii) Twenty-Five Thousand Four Hundred
Sixty-Seven Dollars ($25,467) with respect to any holding over in the Temporary
Second Floor Premises. Nothing herein contained shall be deemed to permit Tenant
to retain possession of the portion of the Premises the Term with respect to
which is then expiring after the Expiration Date or to limit in any manner
Landlord's right to regain possession of such portion of the Premises through
summary proceedings, or otherwise, and no acceptance by Landlord of payments
from Tenant after the Expiration
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Date applicable to such portion of the Premises shall be deemed to be other than
on account of the amount to be paid by Tenant with respect to any other portion
of the Premises or in accordance with the provisions of this Article 20. The
provisions of this Article 20 shall survive the Expiration Date.
ARTICLE 21
QUIET ENJOYMENT
Provided this Lease has not been terminated pursuant to any of its
provisions, Tenant may peaceably and quietly enjoy the Premises subject,
nevertheless, to the terms and conditions of this Lease.
ARTICLE 22
POSSESSION
Section 22.1 Tenant acknowledges that, except as set forth in
Section 22.2 hereof, Landlord has delivered possession of the Premises on the
Commencement Date.
Section 22.2 Tenant acknowledges that Landlord will not deliver
possession on the Commencement Date of those portions of the Basement Premises
designated as Room 6 and Room 9 on Exhibit "A-8" annexed to this Lease. Tenant
waives any right to rescind this Lease under Section 223-a of the New York Real
Property Law or any successor statute of similar nature and purpose then in
force and further waives the right to recover any damages which may result from
Landlord's failure for any reason to deliver possession of such portions of the
Basement Premises on the Commencement Date. Provided Tenant is not responsible
for Landlord's inability to give possession of Room 6 of the Basement Premises,
Tenant's obligation to pay Fixed Rent with respect to Room 6 of the Basement
Premises in the amount set forth below shall not commence until the possession
of such portion of the Basement Premises is given or such portion of the
Basement Premises is available for occupancy by Tenant. Provided Tenant is not
responsible for Landlord's inability to give possession of Room 9 of the
Basement Premises, Tenant's obligation to pay Fixed Rent with respect to Room 9
of the Basement Premises in the amount set forth below shall not commence until
possession of such portion of the Basement Premises is given or such portion of
the Basement Premises is available for occupancy by Tenant. No such failure to
give possession on the Commencement Date shall in any wise affect the validity
of this Lease or the obligations of Tenant hereunder or give rise to any claim
for damages by Tenant or claim for rescission of this Lease, nor shall the same
be construed in any wise to extend the Term. The provisions of this Article are
intended to constitute an "express provision to the contrary" within the meaning
of Section 223-a of the New York Real Property Law. Landlord shall use its
reasonable efforts to promptly deliver possession of such portions of the
Basement Premises to Tenant. Landlord and Tenant acknowledge and agree that for
the purposes of this Section 22.2 (i) the Fixed Rent attributable to Room 6
during the 1st Rental Period is Four and 87/100 Dollars ($4.87) per day, (ii)
the Fixed Rent attributable to Room 9 during the 1st Rental Period is Twenty and
87/100 Dollars
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($20.87) per day, (iii) commencing on the first day of the 2nd Rental Period and
thereafter on the first day of each Rental Period, the Fixed Rent attributable
to such portions of the Basement Premises shall be one hundred five percent
(105%) of the Fixed Rent attributable to such portion of the Basement Premises
during the immediately preceding Rental Period and (iv) no Tenant's Share is
attributable to such portions of the Basement Premises.
ARTICLE 23
NO WAIVER
Section 23.1 No act or thing done by Landlord or Landlord's agents
during the Term shall be deemed an acceptance of a surrender of the Premises,
and no agreement to accept such surrender shall be valid unless in writing
signed by Landlord. No employee of Landlord or of Landlord's agents shall have
any power to accept the keys of the Premises prior to the termination of this
Lease. The delivery of keys to any employee of Landlord or of Landlord's agents
shall not operate as a termination of this Lease or a surrender of the Premises.
In the event Tenant at any time desires to have Landlord sublet the Premises for
Tenant's account, Landlord or Landlord's agents are authorized to receive said
keys for such purpose without releasing Tenant from any of the obligations under
this Lease, and Tenant hereby relieves Landlord of any liability for loss of or
damage to any of Tenant's effects in connection with such subletting.
Section 23.2 The failure of Landlord to seek redress for violation
of, or to insist upon the strict performance of, any covenant or condition of
this Lease, or any of the Rules and Regulations set forth or hereafter adopted
by Landlord, shall not prevent a subsequent act, which would have originally
constituted a violation of the provisions of this Lease, from having all of the
force and effect of an original violation of the provisions of this Lease. The
receipt by Landlord of Fixed Rent, Escalation Rent or any other item of Rental
with knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. The failure of Landlord to enforce any of the Rules and
Regulations set forth, or hereafter adopted, against Tenant or any other tenant
in the Building shall not be deemed a waiver of any such Rules and Regulations.
No provision of this Lease shall be deemed to have been waived by Landlord,
unless such waiver be in writing signed by Landlord. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly Fixed Rent or other item
of Rental herein stipulated shall be deemed to be other than on account of the
earliest stipulated Fixed Rent or other item of Rental, or as Landlord may elect
to apply same, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Fixed Rent or other item of Rental be
deemed an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such Fixed Rent
or other item of Rental or to pursue any other remedy provided in this Lease.
Except for the Contract and the documents executed pursuant thereto or in
connection therewith, this Lease contains the entire agreement between the
parties and all prior negotiations and agreements are merged herein. Any
executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of this Lease in whole or in part unless such
executory agreement is in writing and signed by the
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party against whom enforcement of the change, modification, discharge or
abandonment is sought.
Section 23.3 The failure of Tenant to seek redress for violation of,
or to insist upon the strict performance of, any covenant or condition of this
Lease on Landlord's part to be performed, shall not be deemed a waiver of such
breach or prevent a subsequent act which would have originally constituted a
violation of the provisions of this Lease from having all of the force and
effect of an original violation of the provisions of this Lease. The payment by
Tenant of Fixed Rent, Escalation Rent or any other item of Rental or performance
of any obligation of Tenant hereunder with knowledge of any breach of any
covenant of this Lease shall not be deemed a waiver of such breach, and payment
of the same by Tenant shall be without prejudice to Tenant's right to pursue any
remedy against Landlord in this Lease provided.
ARTICLE 24
WAIVER OF TRIAL BY JURY
The respective parties hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the
Premises, or for the enforcement of any remedy under any statute, emergency or
otherwise. If Landlord commences any summary proceeding against Tenant, Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding (unless failure to impose such counterclaim would preclude
Tenant from asserting in a separate action the claim which is the subject of
such counterclaim), and will not seek to consolidate such proceeding with any
other action which may have been or will be brought in any other court by
Tenant.
ARTICLE 25
INABILITY TO PERFORM
This Lease and the obligation of Tenant to pay Rental hereunder and
perform all of the other covenants and agreements hereunder on the part of
Tenant to be performed shall in no wise be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease expressly
or impliedly to be performed by Landlord or because Landlord is unable to make,
or is delayed in making any repairs, additions, alterations, improvements or
decorations or is unable to supply or is delayed in providing any service or
supplying any equipment or fixtures, if Landlord is prevented or delayed from so
doing by reason of strikes or labor troubles or by accident, or by any cause
whatsoever beyond Landlord's control, including, but not limited to, laws,
governmental preemption in connection with a national emergency or by reason of
any Requirements of any Governmental Authority or by reason of failure of the
HVAC, electrical, plumbing, or other Building Systems in the Building, or by
reason of the conditions of supply and demand which have been or are affected by
war or other
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emergency, or by the failure or delay by Tenant in providing Landlord access to
any Security Areas ("Unavoidable Delays").
ARTICLE 26
BILLS AND NOTICES
Except as otherwise expressly provided in this Lease, any bills,
statements, consents, notices, demands, requests or other communications given
or required to be given under this Lease shall be in writing and shall be deemed
sufficiently given or rendered if delivered by hand (against a signed receipt)
or by Express Mail or other commercial overnight courier service which provides
a signed receipt or if sent by registered or certified mail (return receipt
requested) addressed
if to Tenant (a) at Tenant's address set forth in this Lease, Attn.:
Senior Vice President for Real Estate, or (b) at any place where Tenant or
any agent or employee of Tenant may be found if mailed subsequent to
Tenant's vacating, deserting, abandoning or surrendering the Premises, or
if to Landlord at Landlord's address set forth in this Lease, Attn.:
David R. Greenbaum, and with copies to (x) Chase Investors Management
Corporation, 1211 Avenue of the Americas, New York, New York 10036, Attn:
William J. Schwartz, and (y) each Mortgagee and Lessor which shall have
requested same, by notice given in accordance with the provisions of this
Article 26 at the address designated by such Mortgagee or Lessor, or
to such other address(es) as Landlord, Tenant or any Mortgagee or Lessor may
designate as its new address(es) for such purpose by notice given to the other
in accordance with the provisions of this Article 26. Any such bill, statement,
consent, notice, demand, request or other communication shall be deemed to have
been rendered or given on the date when it shall have been hand delivered (or
upon refusal to accept delivery) or on the Business Day after the date upon
which it shall have been sent by commercial overnight courier service or three
(3) Business Days from when it shall have been mailed as provided in this
Article 26. Anything contained herein to the contrary notwithstanding, any
operating Statement, Tax Statement or any other bill, statement, consent,
notice, demand, request or other communication from Landlord to Tenant with
respect to any item of Rental (other than any "default notice" if required
hereunder) may be sent to Tenant by regular United States mail.
ARTICLE 27
ESCALATION
Section 27.1 For the purposes of this Article 271 the following
terms shall have the meanings set forth below.
(A) "Assessed Valuation" shall mean the amount for which the
Real Property is assessed pursuant to applicable provisions of the New York City
Charter
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and of the Administrative Code of the City of New York for the purpose
of imposition of Taxes.
(B) "Base Operating Expenses" shall mean an amount equal to
Two Million Eight Hundred Ninety-Five Thousand Eight Hundred Fifty
Dollars.($2,895,850).
(C) "Base Taxes" shall mean an amount equal to Two Million
Eight Hundred Ninety-Seven Thousand Three Hundred Seventy-Nine Dollars
($2,897,379).
(D) "Building Electricity Expense" shall mean an amount equal
to the product of (a) the Cost Per Kilowatt Hour of the electricity supplied to
(i) all portions of the Building, other than those portions leased to tenants or
available for leasing and (ii) all garage, storage and basement areas of the
Building, and the Building Systems, and (b) the demand and consumption of
electricity in such areas as determined by meters, submeters or by a public
light-and power study or similar survey. If any such meters, submeters or public
light and power study or similar survey also measures electricity supplied to
other areas of the Building, Landlord shall reasonably apportion the consumption
shown on such meters, submeters, study or survey among such areas. Where more
than one meter or submeter measures the electricity referred to in this
paragraph (D), the electricity rendered through each meter or submeter may be
computed and billed separately in accordance with the provisions of this Article
27.
(E) (1) "Operating Expenses" shall mean the aggregate of those
costs and expenses (and taxes, if any, thereon, including, without limitation,
sales and value-added taxes) paid or incurred by or on behalf of Landlord
(whether directly or through independent contractors) in respect of the
Operation of the Property which are properly chargeable to the Operation of the
Property together with and including (without limitation) the costs of gas, oil,
steam, water, sewer rental, HVAC and other utilities (excluding electricity)
furnished to the Building and utility taxes, and the expenses incurred in
connection with the Operation of the Property such as insurance premiums,
attorneys' fees and disbursements (exclusive of any such fees and disbursements
incurred in applying for any reduction of Taxes) and auditing and other
professional fees and expenses, but specifically excluding:
(i) Taxes,
(ii) franchise or income taxes imposed upon Landlord,
(iii) debt service on Mortgages or other indebtedness
relating to the Real Property (other than debt service on equipment leases),
(iv) all costs incurred in connection with leasing,
attempting to lease or renewing a lease for space in the Building including,
without limitation, brokerage commissions and legal, architectural, engineering
and space planning fees and disbursements,
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(v) capital improvements (except as otherwise provided
herein),
(vi) the cost of electrical energy furnished to the
Building,
(vii) the cost of tenant installations and decorations
incurred in connection with preparing or altering space for a tenant,
(viii) salaries of personnel above the grade of building
manager and such building manager's supervisor,
(ix) rent paid under Superior Leases,
(x) any expense for which Landlord is otherwise
compensated through the proceeds of insurance or is otherwise compensated by any
tenant (including Tenant) of the Building for services in excess of the services
Landlord is obligated to furnish to Tenant hereunder,
(xi) legal fees incurred in connection with any
negotiation of, or disputes arising out of, any space lease in the Building,
(xii) depreciation, except as provided herein,
(xiii) any fee or expenditure paid (a) to any Person
which shall Control, be under the Control of, or be under common Control with
Landlord, any general partner, any officer above the rank of vice president, or
member of any Board of Directors of Landlord or of any Person described in this
clause (xiii) or (b) to any person who is a relative by blood (to the first
degree of consanguinity, lineal or lateral) or marriage of any such persons, in
each case in excess of the amount which would be paid in the absence of such
relationships,
(xiv) financing and refinancing costs (and all charges
and fees related thereto) other than with respect to equipment leasing,
(xv) the cost of any work or service performed for any
tenant (including Tenant) to the extent such work or service is in excess of the
work or service which Landlord is required to furnish Tenant under this Lease at
the expense of Landlord, other than any extra work or service required pursuant
to a lease existing as of the date hereof,
(xvi) the costs and expenses (including interest,
penalties and damages) incurred by Landlord due to (a) the willful or negligent
violation of any Requirement, (b) a default by Landlord under any Mortgage or
Superior Lease or any other lease for space in the Building, or (c) Landlord's
negligence or willful misconduct,
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(xvii) advertising and promotional expenditures,
(xviii) expenses incurred in connection with the
relocation of any tenant of the Building,
(xix) the rental value of any leasing, management or
leasing and management office maintained by Landlord or its agent in the
Building; provided, however, that the portion of any such management office not
in excess of one thousand (1,000) rentable square feet, or the portion of any
leasing and management office devoted to the management of the Building and not
in excess of one thousand (1,000) rentable square feet, may be included in
Operating Expenses,
(xx) the rental value of any Building-wide special
facility in the Building (such as any Building-wide health club or cafeteria);
provided, however, that the rental value of up to seven thousand (7,000)
rentable square feet of space, in the aggregate, devoted to all such
Building-wide special facilities less the income, if any, received by Landlord
from such Building-wide special facilities (or the proportionate share of such
income attributable to such seven thousand (7,000) rentable square feet of
space, as the case may be) may be included in Operating Expenses if such special
facilities are open solely to the tenants and other occupants of the Building
and their invitees and guests,
(xxi) rent and other charges under any Superior Lease,
and
(xxii) transfer taxes, conveyance taxes and other costs
incurred by Landlord in connection with the transfer of the Real Property and/or
the Building or any interest therein; except, however, that if Landlord is not
furnishing any particular work or service (the cost of which if performed by
Landlord would constitute an Operating Expense) to a tenant (including, without
limitation, Tenant) who has undertaken to perform such work or service in lieu
of the performance thereof by Landlord, Operating Expenses shall be deemed to be
increased by an amount equal to the additional Operating Expenses 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. Any 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 in excess of any work or service that Landlord is obligated
to furnish to Tenant at Landlord's expense shall be deducted from Operating
Expenses otherwise chargeable to the Operation of the Property. Any insurance
proceeds received with respect to any item previously included as an Operating
Expense shall be deducted from Operating Expenses for the Operating Year in
which such proceeds are received.
(2) In determining the amount of Operating Expenses for
any Operating Year, if less than all of the Building rentable area shall have
been occupied by tenant(s) at any time during any such Operating Year, Operating
Expenses shall be determined for such Operating Year to be an amount equal to
the like expenses
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which would normally be expected to be incurred, in Landlord's
sole judgment, had all such areas been occupied throughout such Operating Year.
(3) (a) If any capital improvement is made during any
Operating Year in compliance with a Requirement or in lieu of a repair, then the
cost of such improvement (in excess of the amounts set forth on Exhibit "D"
annexed hereto and made a part hereof first expended after the Commencement Date
for the capital improvements described and set forth opposite such amounts)
shall be included in Operating Expenses for the Operating Year in which such
improvement was made; provided, however, to the extent the cost of such
improvement is required to be capitalized for federal income tax purposes, such
cost shall be amortized over the useful economic life of such improvement as
reasonably estimated by Landlord, and the annual amortization, together with
interest thereon at the then Base Rate, of such improvement shall be deemed an
Operating Expense in each of the Operating Years during which such cost of the
improvement is amortized.
(b) If any capital improvement is made during any
Operating Year either for the purpose of saving or reducing Operating Expenses
(as, for example, a labor-saving improvement), then the cost of such improvement
shall be included in Operating Expenses for the Operating Year in which such
improvement was made; provided, however, such cost shall be amortized over such
period of time as Landlord reasonably estimates such savings or reduction in
Operating Expenses will equal the cost of such improvement and the annual
amortization, together with interest thereon at the then Base Rate, of such
improvement shall be deemed an Operating Expense in each of the Operating Years
during which such cost of the improvement is amortized.
(F) "Operating Statement" shall mean a statement in reasonable
detail by categories of Operating Expenses setting forth a comparison of the
Operating Expenses for an Operating Year with the Base Operating Expenses and
the Escalation Rent for the preceding Operating Year pursuant to the provisions
of this Article 27.
(G) "Operating Year" shall mean the calendar year within which
the Commencement Date occurs and each subsequent calendar year for any part or
all of which Escalation Rent shall be payable pursuant to this Article 27.
(H) "Taxes" shall mean the aggregate amount of real estate
taxes and any general or special assessments (exclusive of penalties and
interest thereon) imposed upon the Real Property (including, without limitation,
(i) any fee, tax or charge imposed by any Governmental Authority for any vaults,
vault space or other space within or outside the boundaries of the Real
Property, other than those leased to tenants of the Building, and (ii) any taxes
or assessments levied after the date of this Lease in whole or in part for
public benefits to the Real Property or the Building, without taking into
account any discount that Landlord may receive by virtue of any early payment of
Taxes, provided, however, that if Landlord shall have received a discount by
virtue of any early payment of Taxes and Tenant shall have made the
corresponding Tax Payment to Landlord prior to the date of Landlord's early
payment of Taxes within the time period
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required under this Lease, then Taxes shall take into account such discount
received by Landlord by virtue of its early payment of Taxes; provided, that if
because of any change in the taxation of real estate, any other tax or
assessment, however denominated (including, without limitation, any franchise,
income, profit, sales, us, occupancy, gross receipts or rental tax) is imposed
upon Landlord or the owner of the Real Property or the Building, or the
occupancy, rents or income therefrom, in substitution for any of the foregoing
Taxes, such other tax or assessment shall be deemed part of Taxes computed as if
Landlord's sole asset were the Real Property. With respect to any Tax Year, all
expenses, including attorneys' fees and disbursements, experts' and other
witnesses' fees, incurred in contesting the validity or amount of any Taxes or
in obtaining a refund of Taxes shall be considered as part of the Taxes for such
Tax Year. Anything contained herein to the contrary notwithstanding, Taxes shall
not be deemed to include (w) any taxes on Landlord's income, (x) franchise
taxes, (y) estate or inheritance taxes or (z) any similar taxes imposed on
Landlord, unless such taxes are levied, assessed or imposed in lieu of or as a
substitute for the whole or any part of the taxes, assessments, levies,
impositions which now constitute Taxes.
(I) "Tax Statement" shall mean a statement in reasonable
detail setting forth a comparison of the Taxes for a Tax Year with the Base
Taxes.
(J) "Tax Year" shall mean the period July 1 through June 30
(or such other period as hereinafter may be duly adopted by the Governmental
Authority then imposing taxes as its fiscal year for real estate tax purposes),
any portion of which occurs during the Term.
Section 27.2(A) If the Taxes payable for any Tax Year (any part or
all of which falls within the Term from and after the Commencement Date) shall
represent an increase above the Base Taxes, then Tenant shall pay as additional
rent for such Tax Year and continuing thereafter until a new Tax Statement is
rendered to Tenant, Tenant's Share of such increase (the "Tax Payment") as shown
on the Tax Statement with respect to such Tax Year. The Taxes shall be computed
initially on the basis of the Assessed Valuation in effect at the time the Tax
Statement is rendered (as the Taxes may have been settled or finally adjudicated
prior to such time) regardless of any then pending application, proceeding or
appeal respecting the reduction of any such Assessed Valuation, but shall be
subject to subsequent adjustment as provided in Section 27.3(A) hereof.
(B) At any time during or after the Term, Landlord may render
to Tenant a Tax Statement or Statements showing (i) a comparison of the Taxes
for the Tax Year with the Base Taxes and (ii) the amount of the Tax Payment
resulting from such comparison. Tenant shall pay to Landlord, within ten (10)
Business Days after delivery by Landlord to Tenant of a bill therefore, but in
no event sooner than twenty (20) days prior to the date the corresponding
payment is due by Landlord to the Governmental Authority an amount equal to the
product of the Tax Payment and fraction, the numerator of which is the portion
of the Taxes next becoming due and owing by Landlord for the then current Tax
Year and the denominator of which is the Taxes for the current Tax Year. If the
Tax Year established by the applicable Governmental Authority shall be
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changed, any Taxes for the Tax Year prior to such change which are included
within the new Tax Year and which were the subject of a prior Tax Statement
shall be apportioned for the purpose of calculating the Tax Payment payable with
respect to such new Tax Year. Landlord's failure to render a Tax Statement
during or with respect to any Tax Year shall not prejudice Landlord's right to
render a Tax Statement during or with respect to any subsequent Tax Year, and
shall not eliminate or reduce Tenant's obligation to make Tax Payments for such
Tax Year. Whenever so requested, but no more than once a year, Landlord shall
furnish Tenant with a reproduced copy of the tax bill (or receipted bill) for
the Taxes for the current or next succeeding Tax Year (if theretofore issued by
the Governmental Authority).
Section 27.3(A) Only Landlord shall be eligible to institute tax
reduction or other proceedings to reduce the Assessed Valuation. Landlord agrees
that, if requested by Tenant in writing not later than thirty (30) days prior to
the last date on which a notice of protest of the assessed valuation of the
Building may be filed, Landlord shall file a notice of protest of the assessed
valuation of the Building, but Landlord shall have no further obligation to
Tenant with respect thereto. In the event that, after a Tax Statement has been
sent to Tenant, an Assessed Valuation which had been utilized in computing the
Taxes for a Tax Year is reduced (as a result of settlement, final determination
of legal proceedings or otherwise), and as a result thereof a refund of Taxes is
actually received by or on behalf of Landlord, then, promptly after receipt of
such refund, Landlord shall send Tenant a Tax Statement adjusting the Taxes for
such Tax Year (taking into account the expenses mentioned in Section 27.1(G)
hereof) and setting forth Tenant's Share of such refund and Tenant shall be
entitled to receive such Share either, at Landlord's option, by way of a credit
against the Fixed Rent next becoming due after the sending of such Tax Statement
or by a refund to the extent no further Fixed Rent is due; provided, however,
that Tenant's Share of such refund shall be limited to the portion of the Tax
Payment, if any, which Tenant had theretofore paid to Landlord attributable to
increases in Taxes for the Tax Year to which the refund is applicable on the
basis of the Assessed Valuation before it had been reduced.
(B) In the event that the Real Property is sold (other than
pursuant to a foreclosure of any Mortgage or a deed in lieu of foreclosure)
prior to the first (1st) anniversary of the Commencement Date for a purchase
price which exceeds One Hundred Forty Million Dollars ($140,000,000), and as a
result thereof the Assessed Valuation shall be higher than it would have been
but for such sale at such price, there shall be excluded from Taxes for purposes
of determining the Tax Payment the amount of the increase in Taxes which is
attributable to the portion of the sale price in excess of One Hundred Forty
Million Dollars ($140,000,000).
Section 27.4(A) If the Operating Expenses for any Operating Year
(any part or all of which falls within the Term from and after the Commencement
Date) shall be greater than the Base Operating Expenses, then Tenant shall pay
as additional rent for such Operating Year and continuing thereafter until a now
Operating Statement is rendered to Tenant, Tenant's Share of such increase (the
"Operating Payment") as hereinafter provided.
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(B) At any time during or after the Term Landlord may render
to Tenant an Operating Statement or Statements showing (i) a comparison of the
Operating Expenses for the Operating Year in question with the Base Operating
Expenses, and (ii) the amount of the Operating Payment resulting from such
comparison. Landlord's failure to render an Operating Statement during or with
respect to any Operating Year in question shall not prejudice Landlord's right
to render an Operating Statement during or with respect to any subsequent
Operating Year, and shall not eliminate or reduce Tenant's obligation to make
payments of the Operating Payment pursuant to this Article 27 for such Operating
Year provided that an Operating Statement is delivered within two (2) years
following the end of the Operating Year in question.
(C) On the first day of the month following the furnishing to
Tenant of an Operating Statement, Tenant shall pay to Landlord a sum equal to
1/12th of the Operating Payment shown thereon to be due for the preceding
Operating Year multiplied by the number of months (and any fraction thereof) of
the Term then elapsed since the commencement of such Operating Year in which
such operating Statement is delivered, less Operating Payments theretofore made
by Tenant for such Operating Year and thereafter, commencing with the then
current monthly installment of Fixed Rent and continuing monthly thereafter
until rendition of the next succeeding Operating Statement, Tenant shall pay on
account of the Operating Payment for such Year an amount equal to 1/12th of the
Operating Payment shown thereon to be due for the preceding Operating Year. Any
Operating Payment shall be collectible by Landlord in the same manner as Fixed
Rent.
(D) (1) As used in this Section 27.4, (i) "Tentative Monthly
Escalation Charge" shall mean a sum equal to 1/12th of the product of (a)
Tenant's Share, and (b) the difference between (x) Landlord's reasonable
estimate of Operating Expenses for the Current Year and (y) the Base Operating
Expenses, and (ii) "Current Year" shall mean the Operating Year in or for which
a demand is made upon Tenant for payment of a Tentative Monthly Escalation
Charge.
(2) At any time in any Operating Year, Landlord, at its
option, in lieu of the payments required under Section 27.4(C) hereof, may
demand and collect from Tenant, as additional rent, a sum equal to the Tentative
Monthly Escalation Charge multiplied by the number of months in said Operating
Year preceding the demand and reduced by the sum of all payments theretofore
made under Section 27.4(C) with respect to said Operating Year, and thereafter,
commencing with the month in which the demand is made and continuing thereafter
for each month remaining in said Operating Year, Tenant shall pay to Landlord
the Tentative Monthly Escalation Charge. Any amount due to Landlord under this
Section 27.4(D) may be included by Landlord in any Operating Statement rendered
to Tenant as provided in Section 27.4(B) hereof.
(E) (1) After the end of the Current Year and at any time that
Landlord renders an Operating Statement or Statements to Tenant as provided in
Section 27.4(B) hereof with respect to the comparison of the Operating Expenses
for said Operating Year or Current Year, with the Base Operating Expenses, as
the case may be, the amounts, if any, collected by Landlord from Tenant under
Section 27.4(C) or (D) on
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account of the Operating Payment or the Tentative Monthly Escalation Charge, as
the case may be, shall be calculated, and, if the amount so collected is less
than or exceeds the amount actually due under said operating Statement for the
Operating Year, a reconciliation shall be made as follows: Tenant shall be
debited with any Operating Payment shown on such Operating Statement and
credited with the amounts, if any, paid by Tenant on account in accordance with
the provisions of subsection (C) and subsection (D)(2) of this Section 27.4 for
the Operating Year in question. Tenant shall pay any net debit balance to
Landlord within fifteen (15) Business Days next following rendition by Landlord
of an invoice for such net debit balance; at Tenant's option, any net credit
balance shall be either (i) applied against the next accruing monthly
installments of Fixed Rent or (ii) paid to Tenant within fifteen (15) Business
Days after Tenant's request for payment.
(2) If the sum of the Tentative Monthly Escalation
Charges and payments made by Tenant in accordance with subsection (C) of this
Section 27.4 for any Operating Year shall be greater than the Operating Payment
for the immediately preceding Operating Year and if the sum of the Tentative
Monthly Escalation Charges and payments made by Tenant in accordance with
subsection (C) of this Section 27.4 for any Operating Year shall have exceeded
the operating Payment for such Operating Year by more than five percent (5%),
interest at the Base Rate on the overpayment, calculated from the date of such
overpayment to the dates on which such amounts are credited or paid to Tenant,
shall be credited to Tenant against the succeeding monthly installments of Fixed
Rent or paid to Tenant within fifteen (15) Business Days after Tenant's request
for payment. Notwithstanding the foregoing, if such interest is not credited or
paid as aforesaid, interest at the Applicable Rate on the overpayment,
calculated from the dates on which such overpayment were required to have been
credited or paid to Tenant, as aforesaid, to the dates on which such amounts are
credited or paid to Tenant, shall be credited to Tenant against the succeeding
monthly installments of Fixed Rent or paid to Tenant within fifteen (15)
Business Days after Tenant's request for payment. Any amount owing to Tenant
subsequent to the Term shall be paid to Tenant within ten (10) Business Days
after a final determination has been made of the amount due to Tenant.
Section 27.5 Any Operating Statement sent to Tenant shall be
conclusively binding upon Tenant unless, within ninety (90) days after such
Statement is sent, Tenant shall send a written notice to Landlord objecting to
such Statement and specifying the respects in which such Statement is disputed.
If such notice is sent, Tenant (and/or its independent certified public
accountants, provided they are either the certified public accountants regularly
employed by Tenant or one of the so-called "big-six" accounting firms or such
other independent certified public accountants as Landlord shall approve, which
approval shall not be unreasonably withheld or delayed) at its sole cost and
expense may, within one hundred eighty (180) days after delivery to Tenant of
such Operating Statement (which one hundred eighty (180) day period shall be
extended one (1) day for each day during the pendency of any dispute between
Landlord and Tenant as to the approval of Tenant's accountants), examine
Landlord's books and records at Landlord's office in Now York City relating to
the operation of the Property to determine the accuracy of the Operating
Statement. Tenant recognizes the confidential nature of
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such books and records and agrees to maintain the information obtained from such
examination in strict confidence. In addition, prior to examining Landlord's
books and records, Tenant's certified public accountants shall be required to
execute and deliver to Landlord an agreement, in form and substance reasonably
satisfactory to Landlord, pursuant to which such certified public accountants
shall agree to keep all information obtained from such examination (other than
information which was or becomes known to the general public through no act,
deed or omission of Tenant's certified public accountants) in strict confidence
provided, however, that Tenant's certified public accountants, after reasonable
notice to Landlord, may disclose such information to the extent required
pursuant to a subpoena or order issued by a court or other governmental body or
agency. If after such examination, Tenant still disputes such Operating
Statement, either party may refer the decision of the issues raised to a
reputable independent firm of certified public accountants, selected by Landlord
and approved by Tenant, which approval shall not be unreasonably withheld or
delayed as long as such certified public accounting firm is one of the so-called
"big-six" public accounting firms, and the decision of such accountants shall be
conclusively binding upon the parties. The fees and expenses involved in the
decision referred to in the immediately preceding sentence shall be borne by the
unsuccessful party (and if both parties are partially successful, such fees and
expenses shall be apportioned between Landlord and Tenant in inverse proportion
to the amount by which such decision is favorable to each party).
Notwithstanding the giving of such notice by Tenant, and pending the resolution
of any such dispute, Tenant shall pay to Landlord when due the amount shown on
any such Operating Statement, as provided in Section 27.4 hereof.
Section 27.6 The expiration or termination of this Lease during any
Operating Year or Tax Year shall not affect the rights or obligations of the
parties hereto respecting any payments of Operating Payments for such Operating
Year and any payments of Tax Payments for such Tax Year, or any payment of
Tenant's Share of Base Building Electricity for such year and any Operating
Statement relating to such operating Payment and any Tax Statement relating to
such Tax Payment, and any bill for Tenant's Share of Base Building Electricity
may be sent to Tenant subsequent to, and all such rights and obligations shall
survive, any such expiration or termination. In determining the amount of the
operating Payment for the Operating Year or the Tax Payment for the Tax Year in
which the Term shall expire, the payment of the Operating Payment for such
Operating Year or the Tax Payment for the Tax Year shall be prorated based on
the number of days of the Term which fall within such Operating Year or Tax
Year, as the case may be. Any payments due under such Operating Statement or Tax
Statement shall be payable within thirty (30) days after such Statement is sent
to Tenant.
Section 27.7 (A) Tenant shall pay to Landlord, as additional rent,
Tenant's Share of the Building Electricity Expenses. Bills for the payment of
Tenant's Share of Building Electricity shall be rendered to Tenant at such time
as Landlord may elect, and Tenant shall pay the amount shown thereon to Landlord
within ten (10) Business Days after receipt of such bill.
(B) (1) As used in this Section 27.7, (i) "Tentative Monthly
Electricity Charge" shall mean a sum equal to 1/12th of Tenant's Share of
Landlord's
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reasonable estimate of Base Building Electricity for the Current Electricity
Year, and (ii) "Current Electrical Year" shall mean the year in or for which a
demand is made upon Tenant for payment of a Tentative Monthly Electricity
Charge.
(2) At any time in any year, Landlord, at its option, in
lieu of the payments required under Section 27.7(A) hereof, may demand and
collect from Tenant, as additional rent, a sum equal to the Tentative Monthly
Electricity Charge multiplied by the number of months in said year preceding the
demand and reduced by the sum of all payments theretofore made under Section
27.7(A) with respect to said year, and thereafter, commencing with the month in
which the demand is made and continuing thereafter for each month remaining in
said year, Tenant shall pay to Landlord the Tentative Monthly Electricity
Charge. Any amount due to Landlord under this Section 27.7(B) may be included by
Landlord in any bill rendered to Tenant as provided in Section 27.7(A) hereof.
(C) (1) After the end of the Current Electricity Year and at
any time that Landlord renders a bill to Tenant as provided in Section 27.7(A)
hereof, the amounts, if any, collected by Landlord from Tenant under Section
27.7(A) or (B) on account of Tenant's Share of Base Building Electricity or the
Tentative Monthly Electricity Charge, as the case may be, shall be calculated,
and, if the amount so collected is less than or exceeds the amount actually due,
a reconciliation shall be made as follows: Tenant shall be debited with any
payments of Tenant's Share of Base Building Electricity and credited with the
amounts, if any, paid by Tenant on account in accordance with the provisions of
this Section 27.7 for the year in question. Tenant shall pay any net debit
balance to Landlord within fifteen (15) Business Days next following rendition
by Landlord of an invoice for such net debit balance; at Tenant's option, any
net credit balance shall be either (i) applied against the next accruing monthly
installments of Fixed Rent or (ii) paid to Tenant within fifteen (15) Business
Days after Tenant's request for payment.
(2) If the sum of the Tentative Monthly Electricity
charges for any year shall be greater than Tenant's Share of Base Building
Electricity for the immediately preceding year and if the sum of the Tentative
Monthly Electricity Charges for any year shall have exceeded Tenant's Share of
Base Building Electricity for such year by more than five percent (5%), interest
at the Base Rate on the overpayment, calculated from the date of such
overpayment to the dates on which such amounts are credited or paid to Tenant,
shall be credited or paid to Tenant against the succeeding monthly installments
of Fixed Rent or paid to Tenant within fifteen (15) Business Days after Tenant's
request for payment. Notwithstanding the foregoing, if such interest is not
credited or paid as aforesaid, interest at the Applicable Rate on the
overpayment, calculated from the dates on which such overpayment were required
to have been credited or paid to Tenant, as aforesaid, to the dates on which
such amounts are credited or paid to Tenant shall be credited to Tenant against
the succeeding monthly installments of Fixed Rent or paid to Tenant within
fifteen (15) Business Days after Tenants request for payment. Any amount owing
to Tenant subsequent to the Term, together with all interest accrued thereon, as
aforesaid, shall be paid to Tenant within ten (10) Business Days after a final
determination has been made of the amount due to Tenant.
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(D) Any bill for Tenant's Share of Base Building Electricity
sent to Tenant shall be conclusively binding upon Tenant unless, within ninety
(90) days after such bill is sent, Tenant shall send a written notice to
Landlord objecting to such bill and specifying the respects in which such bill
is disputed. If such notice is sent, Tenant (and/or its independent certified
public accountants, provided they are either the certified public accountants
regularly employed by Tenant or one of the so-called "big-six" accounting firms
or such other independent certified public accountants as Landlord shall
approve, which approval shall not be unreasonably withheld or delayed) at its
sole cost and expense may, within one hundred eighty (180) days after delivery
to Tenant of such bill (which one hundred eighty (180) day period shall be
extended one (1) day for each day during the pendency of any dispute between
Landlord and Tenant as to the approval of Tenant's accountants), examine
Landlord's Building electricity books and records at Landlord's office in Now
York City relating to determine the accuracy of the bill. Tenant recognizes the
confidential nature of such books and records and agrees to maintain the
information obtained from such examination in strict confidence. In addition,
prior to examining Landlord's books and records, Tenant's certified public
accountants shall be required to execute and deliver to Landlord an agreement,
in form and substance reasonably satisfactory to Landlord, pursuant to which
such certified public accountants shall agree to keep all information obtained
from such examination in strict confidence. If after such examination, Tenant
still disputes such bill, either party may refer the decision of the issues
raised to a reputable independent firm of certified public accountants, selected
by Landlord and approved by Tenant, which approval shall not be unreasonably
withheld or delayed as long as such certified public accounting firm is one of
the so-called "big-six" public accounting firms, and the decision of such
accountants shall be conclusively binding upon the parties. The fees and
expenses involved in the decision referred to in the immediately preceding
sentence shall be borne by the unsuccessful party (and if both parties are
partially successful, such fees and expenses shall be apportioned between
Landlord and Tenant in inverse proportion to the amount by which such decision
is favorable to each party). Notwithstanding the giving of such notice by
Tenant, and pending the resolution of any such dispute, Tenant shall pay to
Landlord when due the amount shown on any such bills, as provided in Section
27.7 hereof.
ARTICLE 28
SERVICES
Section 28.1(A) Landlord shall provide (i) not less than six (6)
passenger elevators to serve the Office Premises on a non-exclusive basis on
Business Days from 8:00 A.M. to 6:00 P.M., provided, however, that if any tenant
or other occupant of the portion of the Building serviced by the same elevator
bank which services the Premises shall be entitled to more than six (6)
passenger elevators on a nonexclusive basis on Business Days from 8:00 A.M. to
6:00 P.M., Landlord shall provide Tenant with the same number of non-exclusive
passenger elevators, on Business Days from 8:00 A.M. to 6:00 P.M., as such other
tenant or occupant is entitled, (ii) not less than three (3) passenger elevators
servicing the Office Premises on a non-exclusive basis on Business Days from
6:00 P.M. to 8:00 P.M. and from 8:00 A.M. to 1:00 P.M.
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on Saturdays (other than those Saturdays observed by the State of New York or
the Federal Government and by the labor unions servicing the Building as legal
holidays), and (iii) one (1) passenger elevator subject to call at all other
times.
(B) Landlord shall provide one (1) freight elevator which
shall serve the entire Building on call, subject to Landlord's use thereof in
connection with providing any service to the Building or any tenant or occupant
thereof, on a "first come, first served" basis on Business Days from 8:00 A.M.
to 5:00 P.M., and, subject to Landlord's use thereof in connection with
providing any service to the Building or any tenant or occupant thereof, on a
reservation, "first come, first served" basis from 5:00 P.M. to 8:00 A.M. on
Business Days and at any time on days other than Business Days. If Tenant shall
use the freight elevator serving the Office Premises and the Basement Premises
between 5:00 P.M. and 8:00 A.M. on Business Days or at any time on any other
days, Tenant shall pay Landlord, as additional rent for such use, the standard
rates then fixed by Landlord for the Building, or if no such rates are then
fixed, at reasonable rates.
(C) Landlord shall not be required to furnish any freight
elevator services during the hours from 5:00 P.M. to 8:00 A.M. on Business Days
and at any time on days other than Business Days unless Landlord has received
advance notice from Tenant requesting such services prior to 2:00 P.M. of the
day upon which such service is requested or by 2:00 P.M. of the last preceding
Business Day if such periods are to occur on a day other than a Business Day.
(D) Tenant acknowledges and agrees that if Tenant shall move into or
out of any portion of the Building, or shall move into or out of the Premises
any unusual quantities of items other than those used in the ordinary course of
its business activities, Tenant shall cause the same to be performed other than
during the hours from 8:00 A.M. to 5:00 P.M. on Business Days.
Section 28.2 Landlord, at Landlord's expense, (but subject to
recoupment pursuant to Article 27 hereof) shall furnish and distribute to the
Office Premises through the HVAC System, when required for the comfortable
occupancy of the Office Premises, HVAC in accordance with the specifications set
forth in Schedule C annexed hereto and made a part hereof, on a year round basis
from 8:00 A.M. to 6:00 P.M. on Business Days and, provided that Landlord has
received advance notice from Tenant requesting such service by 3:00 P.M. of the
last preceding Business Day, from 8:00 A.M. to 1:00 P.M. on Saturdays (other
than those Saturdays observed by the State of New York or the Federal Government
and by the labor unions servicing the Building as legal holidays). Landlord,
throughout the Term, shall have free access to any and all mechanical
installations of Landlord, including, but not limited to, air-cooling, fan,
ventilating and machine rooms and electrical closets; Tenant shall not construct
partitions or other obstructions which may interfere with Landlord's free access
thereto, or interfere with the moving of Landlord's equipment to and from the
enclosures containing said installations. Neither Tenant, nor its agents,
employees or contractors shall at any time enter the said enclosures or tamper
with, adjust or touch or otherwise in any manner affect said mechanical
installations. Tenant shall at all times cooperate fully with
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Landlord and abide by all of the regulations and requirements which Landlord may
prescribe for the proper functioning and protection of the HVAC System.
Notwithstanding anything to the contrary contained in this Lease, the HVAC
services which Landlord is obligated to supply shall not be required to meet the
specifications set forth on Schedule "C" of this Lease if the draperies or
blinds for the windows of the Office Premises are not drawn and closed whenever
the HVAC System is in operation and the position of the sun so requires such
drawing and closing.
Section 28.3 The Fixed Rent does not reflect or include any charge
to Tenant for the furnishing or distributing of any necessary HVAC to the
Premises during periods other than the hours and days set forth above ("Overtime
Periods"). Accordingly, if Landlord shall furnish such HVAC to the Office
Premises at the request of Tenant during Overtime Periods, Tenant shall pay
Landlord additional rent for such services at the standard rates then fixed by
Landlord for the Building, or if no such rates are then fixed, at reasonable
rates. Landlord shall not be required to furnish any such services during any
Overtime Periods unless Landlord has received advance notice from Tenant
requesting such services prior to 3:00 P.M. of the day upon which such services
are requested or by 3:00 P.M. of the last preceding Business Day if such
Overtime Periods are to occur on a day other than a Business Day. If Tenant
fails to give Landlord such advance notice, then, failure by Landlord to furnish
or distribute any such services during such Overtime Periods shall not
constitute an actual or constructive eviction, in whole or in part, or entitle
Tenant to any abatement or diminution of Rental, or relieve Tenant from any of
its obligations under this Lease, or impose any liability upon Landlord or its
agents by reason of inconvenience or annoyance to Tenant, or injury to or
interruption of Tenant's business or otherwise. If more than one tenant
utilizing the same system as Tenant requests the same Overtime Periods for the
same services as Tenant, the charge by Landlord for the same shall be equitably
allocated by Landlord among all tenants of the Building (including Tenant)
utilizing such system for such Overtime Period.
Section 28.4 (A) Provided Tenant shall keep the Office Premises in
order, Landlord, at Landlord's expense, subject to recoupment pursuant to
Article 27 hereof, shall cause the Office Premises, excluding any portions
thereof used for the storage, preparation, service or consumption of food or
beverages and any Security Areas, to be cleaned, substantially in accordance
with the standards set forth in Schedule B annexed hereto and made a part
hereof. Tenant shall pay to Landlord the cost of removal of any of Tenant's
refuse and rubbish from the Office Premises and the Building to the extent that
the same exceeds the refuse and rubbish usually attendant upon the use of such
Premises as offices, as well as the cost of removal of "wet trash". Bills for
the same shall be rendered by Landlord to Tenant at such time as Landlord may
elect and shall be due and payable when rendered as additional rent. Tenant, at
Tenant's sole cost and expense, shall cause the Security Areas and all portions
of the Premises used for the storage, preparation, service or consumption of
food or beverages to be cleaned daily in a manner reasonably satisfactory to
Landlord, and to be exterminated against infestation by vermin, rodents or
roaches regularly and, in addition, whenever there shall be evidence of any
infestation. Any such exterminating shall be done at Tenant's sole cost and
expense, in a manner reasonably satisfactory to Landlord, and by Persons
approved by Landlord, which approval shall not be unreasonably withhold or
delayed. In connection with any
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cleaning services to the Security Areas and the portions of the Premises used
for the storage, preparation, service or consumption of food or beverages, or
any cleaning services which Tenant shall perform in addition to the services
provided by Landlord as aforesaid, Tenant shall employ the cleaning contractor
providing cleaning services to the Building on behalf of Landlord, provided such
cleaning contractor furnishes such services to Tenant at competitive rates.
Tenant shall comply with any recycling program and/or refuse disposal program
(including, without limitation, any program related to the recycling, separation
or other disposal of paper, plastic, glass or metals) which Landlord shall
impose or which shall be required pursuant to any Requirements.
(B) If the Premises are not being cleaned by Landlord or its
contractor in accordance with the provisions of Section 28.4(A) hereof, or if
Tenant shall experience the theft of its property attributable to the persons
performing such cleaning services, Tenant may notify Landlord of the same, which
notice shall set forth in reasonable detail the manner in which the Premises are
not being cleaned in accordance with Section 28.4(A) hereof or the thefts
attributable to the cleaning personnel. If (i) Landlord shall fail to cause the
Premises to be cleaned in accordance with the provisions of Section 28.4(A)
hereof within thirty (30) days after delivery of such notice or, if the same may
not be accomplished within such thirty (30) day period, provided Landlord shall
commence within such thirty (30) day period to accomplish the same and
thereafter diligently pursues the same, or (ii) Landlord shall fail, within
thirty (30) days after determining to its reasonable satisfaction the identity
of the cleaning personnel who caused such theft, to cause such cleaning
personnel to no longer perform cleaning services at the Premises or, if the same
may not be accomplished within such thirty (30) day period, provided Landlord
shall commence within such thirty (30) day period to accomplish the same and
thereafter diligently pursue the same, then, in either such event, Tenant may
notify Landlord that it intends to engage a cleaning contractor, subject to and
in accordance with the terms and provisions of this Lease, to clean the
Premises, as of a date specified in Tenant's notice, which date shall be not
less than thirty (30) days after the date of delivery of such Tenant notice. As
of such date (i) Landlord shall no longer be obligated to clean the Premises,
(ii) the Fixed Rent, the Base Operating Expenses and the Operating Expenses
shall be appropriately adjusted to reflect the fact that Landlord is no longer
obligated to clean the Premises, and (iii) Tenant shall engage, at its sole cost
and expense, and subject to all Requirements, the terms and provisions of this
Lease and all Rules and Regulations, such cleaning contractor as shall be
approved by Landlord, which approval shall not be unreasonably withheld or
delayed, to clean the Premises daily in a manner reasonably satisfactory to
Landlord.
(C) With respect to any cleaning contractor which Tenant shall
engage pursuant to the provisions of this Section 28.4 (other than the cleaning
contractor performing cleaning of the Building on behalf of Landlord), (i)
Tenant shall cause such cleaning contractor to obtain and maintain liability
insurance and such other insurance as Landlord, Landlord's managing agent,
Landlord's other agents and any Lessors and Mortgagees as additional insureds,
providing coverage in such amounts and with such carriers as Landlord shall
reasonably require (but not in amounts in excess of the amounts which Landlord
causes to be carried by the cleaning contractor providing cleaning services to
the Building on behalf of Landlord), and upon demand Tenant shall provide
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Landlord with evidence of the same, and (ii) Tenant shall indemnify Landlord and
the Indemnitees from and against any and all loss, cost, demand, liability or
expense (including, without limitation, attorneys' fees and disbursements) which
Landlord may incur as a result of or in connection with the cleaning of the
Premises by Tenant's cleaning contractor, which indemnity shall survive the
Expiration Date.
Section 28.5 If the New York Board of Fire Underwriters or the
Insurance Services Office or any Governmental Authority, department or official
of the state or city government or any insurer of Landlord or Tenant shall
require or recommend that any changes, modifications, alterations or additional
sprinkler heads or other equipment be made or supplied by reason of Tenant's
business, or the location of the partitions, trade fixtures, or other contents
of the Premises, Landlord shall promptly make and supply such changes,
modifications, alterations, additional sprinkler heads or other equipment and
the reasonable cost and expense thereof shall be paid by Tenant as additional
rent within ten (10) Business Days after rendition to Tenant of a bill therefor,
which bill shall be accompanied by applicable invoices which have been paid or
are to be paid.
Section 28.6 Landlord shall provide to the Office Premises hot and
cold water for ordinary drinking, cleaning and lavatory purposes and for
ordinary use in Tenant's "dryer" or similar units. If Tenant requires, uses or
consumes water for any purpose in addition to ordinary drinking, cleaning or
lavatory purposes or in addition to ordinary use in Tenant's "dryer" or similar
units (including, without limitation, for use in Tenant's kitchen), Landlord may
install a water meter and thereby measure Tenant's water consumption for all
such additional purposes. In such event Tenant shall pay Landlord, as additional
rent, within ten (10) Business Days after rendition by Landlord to Tenant of a
bill therefor, (1) the cost of the meter and the cost of the installation
thereof and through the duration of Tenant's occupancy Tenant shall keep said
meter and equipment in good working order and repair at Tenant's own cost and
expense; and (2) the cost of water consumed as shown on said meter, together
with the sewer rent, charge and any other levy payable in connection therewith.
Section 28.7 Landlord reserves the right to stop service of the HVAC
System or the elevator, electrical, plumbing or other Building Systems when
necessary, by reason of accident or emergency, or for repairs, additions,
alterations, replacements or improvements in the reasonable judgment of Landlord
desirable or necessary to be made, until said repairs, alterations, replacements
or improvements shall have been completed (which repairs, additions,
alterations, replacements and improvements shall be performed in accordance with
Section 4.3 hereof). Landlord shall have no responsibility or liability for
interruption, curtailment or failure to supply HVAC, elevator, electrical,
plumbing or other Building Systems when prevented by Unavoidable Delays or by
any Requirement of any Governmental Authority or due to the exercise of its
right to stop service as provided in this Article 28. The exercise of such right
or such failure by Landlord shall not constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any compensation or to any
abatement or diminution of Rental, or relieve Tenant from any of its obligations
under this Lease, or impose any liability upon Landlord or its agents by reason
of inconvenience or annoyance to Tenant, or injury to or interruption of
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Tenant's business, or otherwise. Landlord shall use its diligent efforts to
restore any interrupted service, and Landlord, at its expense but subject to
recoupment pursuant to Article 27 hereof, shall employ contractors or labor at
so-called overtime or other premium pay rates if necessary to restore any
service that either (i) except in the case of a fire or other casualty, results
in a denial of access to the Premises, (ii) threatens the health or safety of
any occupant of the Premises, or (iii) except in the case of a fire or other
casualty, materially interferes with Tenant's ability to conduct its business in
any portion of the Premises. In all other cases, at Tenant's request, Landlord
shall employ contractors or labor at so-called overtime or other premium pay
rates and incur any other overtime costs or expenses in restoring such services,
and Tenant shall pay to Landlord, as additional rent, within ten (10) Business
Days after demand, an amount equal to the difference between the overtime or
other premium pay rates and the regular pay rates for such labor and any other
overtime costs or expenses so incurred. If more than one tenant of the Building
shall request that Landlord incur the same overtime or premium costs or
expenses, the charge by Landlord for the same shall be equitably allocated by
Landlord among all tenants of the Building (including Tenant) requesting the
same.
Section 28.8 Tenant shall be entitled to the lesser of (i) Tenant's
Share of all listings or (ii) fifty (50) listings, on the standard directory in
the Building, if one is installed.
Section 28.9 It is expressly understood and agreed that Landlord is
not obligated to provide any service to the Garage Premises or the Basement
Premises whatsoever except for (i) electricity, as set forth in Article 13
hereof, elevator service, as provided in section 28.1 hereof, and ventilation to
the extent required by and in accordance with all Requirements.
ARTICLE 29
PARTNERSHIP TENANT
If Tenant is a partnership or a professional corporation (or is
comprised of two (2) or more Persons, individually or as co-partners of a
partnership or shareholders of a professional corporation) or if Tenant's
interest in this Lease shall be assigned to a partnership or a professional
corporation (or to two (2) or more Persons, individually or as co-partners of a
partnership or shareholders of a professional corporation) pursuant to Article
12 hereof (any such partnership, professional corporation and such Persons are
referred to in this Article 29 as "Partnership Tenant"), the following
provisions shall apply to such Partnership Tenant: (a) the liability of each of
the parties comprising Partnership Tenant shall be joint and several; (b) each
of the parties comprising Partnership Tenant hereby consents in advance to, and
agrees to be bound by (x) any written instrument which may hereafter be executed
by Partnership Tenant or any successor entity, changing, modifying, extending or
discharging this Lease, in whole or in part, or surrendering all or any part of
the Premises to Landlord, and (y) any notices, demands, requests or other
communications which may hereafter be given by Partnership Tenant or by any of
the parties comprising Partnership Tenant; (c) any bills, statements, notices,
demands, requests or other communications given or rendered to Partnership
Tenant or to any of such parties shall be binding upon Partnership Tenant and
all such
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parties; (d) if Partnership Tenant shall admit new partners or shareholders, as
the case may be, all of such new partners or shareholders, as the case may be,
shall, by their admission to Partnership Tenant, be deemed to have assumed joint
and several liability for the performance of all of the terms, covenants and
conditions of this Lease on Tenant's part to be observed and performed; and (e)
Partnership Tenant shall give prompt notice to Landlord of the admission of any
such new partners or shareholders, as the case may be, and upon demand of
Landlord, shall cause each such new partner or shareholder, as the case may be,
to execute and deliver to Landlord an agreement in form satisfactory to
Landlord, wherein each such new partner or shareholder, as the case may be,
shall assume joint and several liability for the observance and performance of
all the terms, covenants and conditions of this Lease on Tenant's part to be
observed and performed (but neither Landlord's failure to request any such
agreement nor the failure of any such new partner or shareholder, as the case
may be, to execute or deliver any such agreement to Landlord shall vitiate the
provisions of clause (d) of this Article 29).
ARTICLE 30
VAULT SPACE
Notwithstanding anything contained in this Lease or indicated on any
sketch, blueprint or plan, any vaults, vault space or other space outside the
boundaries of the Real Property are not included in the Premises. Landlord makes
no representation as to the location of the boundaries of the Real Property. All
vaults and vault space and all other space outside the boundaries of the Real
Property which Tenant may be permitted to use or occupy are to be used or
occupied under a revocable license, and if any such license shall be revoked, or
if the amount of such space shall be diminished or required by any Governmental
Authority or by any public-utility company, such revocation, diminution or
requisition shall not constitute an accrual or constructive eviction, in whole
or in part, or entitle Tenant to any abatement or diminution of Rental, or
relieve Tenant from any of its obligations under this Lease, or impose any
liability upon Landlord. Any fee, tax or charge imposed by any Governmental
Authority for any such vaults, vault space or other space occupied by Tenant
shall be paid by Tenant.
ARTICLE 31
INTENTIONALLY OMITTED
ARTICLE 32
CAPTIONS
The captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this Lease nor
the intent of any provision thereof.
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ARTICLE 33
PARTIES BOUND
The covenants, conditions and agreements contained in this Lease
shall bind and inure to the benefit of Landlord and Tenant and their respective
legal representatives, successors, and, except as otherwise provided in this
Lease, their assigns.
ARTICLE 34
BROKER
Each party represents and warrants to the other that it has not
dealt with any broker or Person in connection with this Lease. The execution and
delivery of this Lease by each party shall be conclusive evidence that such
party has relied upon the foregoing representation and warranty. Tenant shall
indemnify and hold Landlord harmless from and against any and all claims for
commission, fee or other compensation by any Person who shall claim to have
dealt with Tenant in connection with this Lease and for any and all costs
incurred by Landlord in connection with such claims, including, without
limitation, reasonable attorneys' fees and disbursements. Landlord shall
indemnify and hold Tenant harmless from and against any and all claims for
commission, fee or other compensation any Person who shall claim to have dealt
with Landlord in connection with this Lease and for any and all costs incurred
by Tenant in connection with such claims, including, without limitation,
reasonable attorneys' fees and disbursements. Tenant acknowledges that Goldman,
Sachs & Co. ("Tenant's Advisor") has acted as Tenant's advisor with respect to
the sale of the Real Property by Tenant to Landlord and the execution of this
Lease. Tenant shall pay any fee or other compensation due to Tenant's Advisor,
and shall indemnify and hold Landlord harmless from and against any and all
claims for any fee or other compensation made by Tenant's Advisor against
Landlord and arising out of the execution of this Lease, and for any and all
costs incurred by Landlord in connection with such claims, including, without
limitation, reasonable attorneys' fees and disbursements. The provisions of this
Article 34 shall survive the Expiration Date.
ARTICLE 35
INDEMNITY
Section 35.1(A) Tenant shall not do or permit any act or thing to be
done upon the Premises which may subject Landlord to any liability or
responsibility for injury, damages to persons or property or to any liability by
reason of any violation of any Requirement, and shall exercise such control over
the Premises as to fully protect Landlord against any such liability. Tenant
shall indemnify and save the Indemnitees harmless from and against (a) all
claims of whatever nature against the Indemnitees arising from any act, omission
or negligence of Tenant, its contractors, licensees, agents, servants,
employees, invitees or visitors, (b) all claims against the Indemnitees arising
from any accident, injury or damage whatsoever caused to any person or to the
property of any person and occurring during the Term in or about the Premises,
(c) all claims against the Indemnitees arising from any accident, injury or
damage occurring outside of
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the Premises but anywhere within or about the Real Property, where such
accident, injury or damage results or is claimed to have resulted from an act,
omission or negligence of Tenant or Tenant's contractors, subtenants, assignees,
licensees, agents, servants, employees, invitees or visitors, and (d) any
breach, violation or non-performance of any Requirement or any covenant,
condition or agreement in this Lease set forth and contained on the part of
Tenant to be fulfilled, kept, observed and performed. This indemnity and hold
harmless agreement shall include indemnity from and against any and all
liability, fines, suits, demands, costs and expenses of any kind or nature
(including, without limitation, attorneys' fees and disbursements) incurred in
or in connection with any such claim or proceeding brought thereon, and the
defense thereof but except with respect to claims with respect to bodily injury
or death, shall be limited to the extent any insurance proceeds collectible by
Landlord under policies owned by Landlord or such injured party with respect to
such damage or injury are insufficient to satisfy same. Tenant shall have no
liability for any consequential damages suffered either by Landlord or by any
party claiming through Landlord.
(B) Except as provided in Articles 4, 9, 10, 13, 28, 36 and 37
hereof and otherwise as expressly provided herein, Landlord shall indemnify and
save Tenant its shareholders, directors, officers, Partners, employees and
agents harmless from and against all claims against Tenant arising from any
damage to the Premises and any bodily injury to Tenant's employees, agents or
invitees resulting from the acts, omissions or negligence of Landlord or its
contractors, assigns, licensees, agents, servants, employees, invitees or
visitors. This indemnity and hold harmless agreement shall include indemnity
from and against any and all liability, fines, suits, demands, costs and
expenses of any kind or nature (including, without limitation, reasonable
attorneys' fees and disbursements) incurred in or in connection with any such
claim or proceeding brought thereon, but shall be limited to the extent any
insurance proceeds collectible by Tenant or such injured party with respect to
such damage or injury are insufficient to satisfy same. Landlord shall have no
liability for any consequential damages suffered either by Tenant or by any
party claiming through Tenant.
Section 35.2 If any claim, action or proceeding is made or brought
against either party, which claim, action or proceeding the other party shall be
obligated to indemnify such first party against pursuant to the terms of this
Lease, then, upon demand by the indemnified party, the indemnifying party, at
its sole cost and expense, shall resist or defend such claim, action or
proceeding in the indemnified party's name, if necessary, by such attorneys as
the indemnified party shall approve, which approval shall not be unreasonably
withheld. Attorneys for the indemnifying party's insurer, are hereby deemed
approved for purposes of this Section 35.2. Notwithstanding the foregoing, an
indemnified party may retain its own attorneys to defend or assist in defending
any claim, action or proceeding involving potential liability of Five Million
Dollars ($5,000,000) or more in circumstances where the insurance coverage is
less than the potential liability of such claim, action or proceeding, and the
indemnifying party shall pay the reasonable fees and disbursements of such
attorneys. The provisions of this Article 35 shall survive the expiration or
earlier termination of this Lease.
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ARTICLE 36
ADJACENT EXCAVATION-SHORING
If an excavation shall be made upon land adjacent to the Premises,
or shall be authorized to be made, Tenant, upon reasonable advance notice, shall
afford to the person causing or authorized to cause such excavation, a license
to enter upon the Premises for the purpose of doing such work as said person
shall deem necessary to preserve the wall or the Building from injury or damage
and to support the same by proper foundations, without any claim for damages or
indemnity against Landlord, or diminution or abatement of Rental, provided that
Tenant shall continue to have access to the Premises and the Building.
ARTICLE 37
MISCELLANEOUS
Section 37.1 This Lease is offered for signature by Tenant and it is
understood that this Lease shall not be binding upon Landlord or Tenant unless
and until Landlord and Tenant shall have executed and unconditionally delivered
a fully executed copy of this Lease to each other.
Section 37.2 The obligations of Landlord under this Lease which
relate to the period from and after the date of the sale, conveyance, assignment
or transfer by Landlord of its interest in the Building or the Real Property, as
the case may be, shall not be binding upon Landlord named herein after such
sale, conveyance, assignment or transfer by such Landlord (or upon any
subsequent landlord after the sale, conveyance, assignment or transfer by such
subsequent landlord of its interest in the Building or the Real Property, as the
case may be) and in the event of any such sale, conveyance, assignment or
transfer, the transferring Landlord shall be and hereby is entirely freed and
relieved of all covenants and obligations of Landlord hereunder which relate to
the period from and after the date of such sale, conveyance, assignment or
transfer. It shall be deemed and construed without further agreement between
Landlord and Tenant or their successors in interest or among Landlord, Tenant
and any purchaser, assignee or transferee of the interest of Landlord in the
Building or the Real Property, as the case may be, that such purchaser, assignee
or transferee, subject to the limitations on liability contained in this Lease,
has assumed and agreed to carry out any and all obligations of Landlord under
this Lease which relate to the period from and after the date of the sale,
conveyance, assignment or transfer by Landlord of its interest in the Building
or the Real Property, as the case may be. The obligations of Landlord under this
Lease which relate to the period prior to the date of the sale, conveyance,
assignment or transfer by Landlord of its interest in the Building or the Real
Property, as the case may be, shall not be binding upon Landlord named herein
after such sale, conveyance, assignment or transfer by such Landlord (or upon
any subsequent landlord after the sale, conveyance, assignment or transfer by
such subsequent landlord of its interest in the Building or the Real Property,
as the case may be), and in the event of any such sale, conveyance assignment or
transfer, the transferring Landlord shall be and hereby is entirely freed and
relieved of all covenants and obligations of Landlord hereunder which relate to
the period prior to such sale, conveyance, assignment or transfer, provided that
the purchaser,
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assignee or transferee shall have assumed such obligations, subject to the
limitations on liability contained in this Lease. The partners, shareholders,
directors, officers and principals, direct and indirect, of Landlord
(collectively, the "Parties") shall not be liable for the performance of
Landlord's obligations under this Lease. Tenant shall look solely to Landlord to
enforce Landlord's obligations hereunder and shall not seek any damages against
any of the Parties. The liability of Landlord for Landlord's obligations under
this Lease shall be limited to Landlord's interest in the Real Property and
Tenant shall not look to any other property or assets of Landlord or the
property or assets of any of the Parties in seeking either to enforce Landlord's
obligations under this Lease or to satisfy a judgment for Landlord's failure to
perform such obligations.
Section 37.3 Notwithstanding anything contained in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated Fixed Rent, Escalation Rent,
additional rent or Rental, shall constitute rent for the purposes of Section
502(b)(7) of the Bankruptcy Code.
Section 37.4 Tenant's liability for all items of Rental and all
other unperformed obligations of Tenant shall survive the Expiration Date.
Section 37.5 Tenant shall reimburse Landlord as additional rent,
within ten (10) Business Days after rendition of a statement, for all
expenditures made by, or damages or fines sustained or incurred by, Landlord,
due to any default by Tenant under this Lease, with interest thereon at the
Applicable Rate.
Section 37.6 Neither this Lease nor any memorandum thereof shall be
recorded.
Section 37.7 Tenant hereby waives any claim against Landlord which
Tenant may have based upon any assertion that Landlord has unreasonably withhold
or unreasonably delayed any consent or approval requested by Tenant, and Tenant
agrees that its sole remedy shall be an action or proceeding to enforce any
related provision or for specific performance, injunction or declaratory
judgment. In the event of a determination that such consent or approval has been
unreasonably withheld or delayed, the requested consent or approval shall be
deemed to have been granted; however, Landlord shall have no liability to Tenant
for its refusal or failure to give such consent or approval. Tenant's sole
remedy for Landlord's unreasonably withholding or delaying consent or approval
shall be as provided in this Section 37.7.
Section 37.8 Except for the Contract and the documents executed
pursuant thereto or in connection therewith, this Lease contains the entire
agreement between the parties and supersedes all prior understandings, if any,
with respect thereto. This Lease shall not be modified, changed, or
supplemented, except by a written instrument executed by both parties.
Section 37.9 Tenant hereby (a) irrevocably consents and submits to
the jurisdiction of any Federal, state, county or municipal court sitting in the
State of New
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York in respect to any action or proceeding brought therein by Landlord against
Tenant concerning any matters arising out of or in any way relating to this
Lease; (b) irrevocably waives all objections as to venue and any and all rights
it may have to seek a change of venue with respect to any such action or
proceedings; (c) agrees that the laws of the State of New York shall govern in
any such action or proceeding and waives any defense to any action or proceeding
granted by the laws of any other country or jurisdiction unless such defense is
also allowed by the laws of the State of New York; and (d) agrees that any final
judgment rendered against it in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit on the judgment
or in any other manner provided by law. Tenant further agrees that any action or
proceeding by Tenant against Landlord in respect to any matters arising out of
or in any way relating to this Lease shall be brought only in a federal, state,
county or municipal court in the State of New York, County of New York.
Section 37.10 Provided that MONY shall occupy not less than 118,500
rentable square feet of the Premises for the operation of its business, and as
the world headquarters of MONY, containing executive offices, and provided MONY
is not in default under this Lease, Landlord agrees that, prior to engaging any
managing agent for the Building other than Mendik Realty Company, Inc.,
Landlord's managing agent as of the date hereof, Landlord shall consult with
MONY. Notwithstanding the foregoing, MONY expressly acknowledges and agrees that
the selection of any capable managing agent for the Building shall be at the
sole discretion of Landlord.
Section 37.11 (a) All of the Schedules and Exhibits attached hereto
are incorporated in and made a part of this Lease, but, in the event of any
inconsistency between the terms and provisions of this Lease and the terms and
provisions of the Schedules and Exhibits hereto, the terms and provisions of
this Lease shall control. Wherever appropriate in this Lease, personal pronouns
shall be deemed to include the other genders and the singular to include the
plural. All Article and Section references set forth herein shall, unless the
context otherwise specifically requires, be deemed references to the Articles
and Sections of this Lease.
(b) If any term, covenant, condition or provision of
this Lease, or the application thereof to any person or circumstance, shall ever
be held to be invalid or unenforceable, then in each such event the remainder of
this Lease or the application of such term, covenant, condition or provision to
any other Person or any other circumstance (other than those as to which it
shall be invalid or unenforceable) shall not be thereby affected, and each term,
covenant, condition and provision hereof shall remain valid and enforceable to
the fullest extent permitted by law.
Section 37.12 All references in this Lease to the consent or
approval of Landlord shall be deemed to mean the written consent or approval of
Landlord and no consent or approval of Landlord shall be effective for any
purpose unless such consent or approval is set forth in a written instrument
executed by Landlord.
Section 37.13 Notwithstanding anything to the contrary contained in
this Lease, including, without limitation, the provisions of Articles 6 and 28
hereof, if (i) any
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representation or warranty made by Tenant in the Agreement of Purchase and Sale,
dated as of the date hereof, between Tenant, as seller, and Landlord, as
purchaser, for the sale and purchase of the Real Property (the "Contract")
including, without limitation, the representations and warranties contained in
Section 7.43 of the Contract, shall be untrue when made or remade, as provided
in the Contract, (ii) Landlord, as provided in Article 26 of the Contract, shall
have commenced a suit or delivered a notice to seller under the Contract with
respect to such representation or warranty within the applicable time period set
forth in Article 26 of the Contract, and (iii) Landlord is unable to provide any
service or perform any covenant on Landlord's part to be performed under this
Lease, which service Landlord would have been able to provide or which covenant
Landlord would have been able to perform if such representation or warranty were
true, then Landlord shall not be obligated to provide such service or perform
such covenant, and Tenant shall have no right of offset, set-off or abatement as
a result thereof, shall have no claim against Landlord for constructive eviction
or otherwise, and shall have no other right or remedy against Landlord, as a
result thereof.
ARTICLE 38
RENT CONTROL
If at the commencement of, or at any time or times during the Term
of this Lease, the Rental reserved in this Lease shall not be fully collectible
by reason of any Requirement, Tenant shall enter into such agreements and take
such other steps (without additional expense to Tenant) as Landlord may request
and as may be legally permissible to permit Landlord to collect the maximum
rents which may from time to time during the continuance of such legal rent
restriction be legally permissible (and not in excess of the amounts reserved
therefor under this Lease). Upon the termination of such legal rent restriction
prior to the expiration of the Term, (a) the Rental shall become and thereafter
be payable hereunder in accordance with the amounts reserved in this Lease for
the periods following such termination, and (b) Tenant shall pay to Landlord, if
legally permissible, an amount equal to (i) the items of Rental which would have
been paid pursuant to this Lease but for such legal rent restriction less (ii)
the rents paid by Tenant to Landlord during the period or periods such legal
rent restriction was in effect.
ARTICLE 39
RENEWAL TERM
Section 39.1(A) Subject to the provisions of Section 39.4 hereof,
Tenant shall have the option (each, an "Eight Year Space Renewal Option") to
extend the term of this Lease with respect to the Eight Year Space for four (4)
additional periods of five (5) years each (each, an "Eight Year Space Renewal
Term"), each of which Eight Year Space Renewal Terms shall commence on the date
immediately succeeding the eighth (8th) anniversary of the Commencement Date, or
if the Commencement Date shall occur other than on the first day of the month,
on the date immediately succeeding the last day of the month in which the eighth
(8th) anniversary of the Commencement Date shall occur (the "Eight Year Space
Expiration Date"; the period between the Commencement Date and the Eight Year
Space Expiration Date being hereinafter
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referred to as the "Eight Year Space Term") or the then current Eight Year Space
Renewal Term, as the case may be, and end on the fifth (5th) anniversary of the
expiration of the Eight Year Space Term or the then current Eight Year Space
Renewal Term, as the case may be, provided that (a) this Lease shall not have
been previously terminated, (b) no Event of Default shall have occurred and be
continuing (x) on the date Tenant gives Landlord written notice (each, an "Eight
Year Space Renewal Notice") of Tenant's election to exercise the Eight Year
Space Renewal option, and (y) on the expiration of the Eight Year Space Term or
the then current Eight Year Space Renewal Term, as the case may be, provided,
however, that with respect to any Event of Default which may occur without
Landlord being required to deliver to Tenant a notice of default (other than an
Event of Default under Section 16.1(E) of this Lease) then, solely for the
purposes of this Section 39.1, no such Event of Default shall be deemed to have
occurred unless Landlord shall have delivered to Tenant a notice thereof and
Tenant shall have failed or refused to cure the same within seven (7) Business
Days after delivery of such notice, and (c) Tenant and its Affiliates shall
occupy not less than eighty percent (80%) of the rentable area of the Eight Year
Space on the date the applicable Eight Year Space Renewal Notice is given and on
the first (1st) day of the applicable Eight Year Space Renewal Term. Each such
Eight Year Space Renewal Option may be exercised only with respect to the entire
Eight Year Space and shall be exercisable by Tenant delivering the applicable
Eight Year Space Renewal Notice to Landlord at least eighteen (18) months prior
to the expiration of the Eight Year Space Term or the then applicable Eight Year
Space Renewal Term, as the case may be. Time is of the essence with respect to
the giving of each Eight Year Space Renewal Notice. Upon the giving of the Eight
Year Space Renewal Notice with respect to the fourth Eight Year Space Renewal
Term, Tenant shall have no further right or option to extend or renew the Term.
(B) Subject to the provisions of Section 39.4 hereof, Tenant
shall have the option (each, a "Ten Year Space Renewal Option") to extend the
term of this Lease with respect to the Ten Year Space for four (4) additional
periods of five (5) years each (each, a "Ten Year Space Renewal Term"), each of
which Ten Year Space Renewal Terms shall commence on the date immediately
succeeding the tenth (10th) anniversary of the Commencement Date, or if the
Commencement Date shall occur other than on the first day of the month, on the
date immediately succeeding the last day of the month in which the tenth (10th)
anniversary of the Commencement Date shall occur (the "Ten Year Space Expiration
Date; the period between the Commencement Date and the Ten Year Space Expiration
Date being hereinafter referred to as the "Ten Year Space Term") or the then
current Ten Year Space Renewal Term, as the case may be, and end on the fifth
(5th) anniversary of the expiration of the Ten Year Space Term or the then
current Ten Year Space Renewal Term, as the case may be, provided that (a) this
Lease shall not have been previously terminated, (b) no Event of Default shall
have occurred and be continuing (x) on the date Tenant gives Landlord written
notice (each, an "Ten Year Space Renewal Notice") of Tenant's election to
exercise the Ten Year Space Renewal Option, and (y) on the expiration of the Ten
Year Space Term or the then current Ten Year Space Renewal Term, as the case may
be, provided, however, that with respect to any Event of Default which may occur
without Landlord being required to deliver to Tenant a notice of default (other
than an Event of Default under Section 16.1(E) of this Lease) then, solely for
the purposes of this Section 39.1, no such Event of
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Default shall be deemed to have occurred unless Landlord shall have delivered to
Tenant a notice thereof and Tenant shall have failed or refused to cure the same
within seven (7) Business Days after delivery of such notice, and (c) Tenant and
its Affiliates shall occupy not less than eighty percent (80%) of the rentable
area of the Ten Year Space on the date the applicable Ten Year Space Renewal
Notice is given and on the first (1st) day of the applicable Ten Year Space
Renewal Term. Each such Ten Year Space Renewal Option may be exercised only with
respect to the entire Ten Year Space and shall be exercisable by Tenant
delivering the applicable Ten Year Space Renewal Notice to Landlord at least
eighteen (18) months prior to the expiration of the Ten Year Space Term or the
then applicable Ten Year Space Renewal Term, as the case may be. Time is of the
essence with respect to the giving of each Ten Year Space Renewal Notice. Upon
the giving of the Ten Year Space Renewal Notice with respect to the fourth Ten
Year Space Renewal Term, Tenant shall have no further right or option to extend
or renew the Term.
(C) Subject to the provisions of Section 39.4 hereof, Tenant
shall have the option (each, a "Twelve Year Space Renewal Option") to extend the
term of this Lease with respect to the Twelve Year Space for four (4) additional
periods of five (5) years each (each, a "Twelve Year Space Renewal Term"), each
of which Twelve Year Space Renewal Terms shall commence on the date immediately
succeeding the twelfth (12th) anniversary of the Commencement Date, or if the
Commencement Date shall occur other than on the first day of the month, on the
date immediately succeeding the last day of the month in which the twelfth
(12th) anniversary of the Commencement Date shall occur (the "Twelve Year Space
Expiration Date; the period between the Commencement Date and the Twelve Year
Space Expiration Date being hereinafter referred to as the "Twelve Year Space
Term") or the then current Twelve Year Space Renewal Term, as the case may be,
and end on the fifth (5th) anniversary of the expiration of the Twelve Year
Space Term or the then current Twelve Year Renewal Term, as the case may be,
provided that (a) this Lease shall not have been previously terminated, (b) no
Event of Default shall have occurred and be continuing (x) on the date Tenant
gives Landlord written notice (each, an "Twelve Year Space Renewal Notice") of
Tenant's election to exercise the Twelve Year Space Renewal Option, and (y) on
the expiration of the Twelve Year Space Term or the then current Twelve Year
Space Renewal Term, as the case may be, provided, however, that with respect to
any Event of Default which may occur without Landlord being required to deliver
to Tenant a notice of default (other than an Event of Default under Section
16.1(E) of this Lease) then, solely for the purposes of this Section 39.1, no
such Event of Default shall be deemed to have occurred unless Landlord shall
have delivered to Tenant a notice thereof and Tenant shall have failed or
refused to cure the same within seven (7) Business Days after delivery of such
notice, and (c) Tenant and its Affiliates shall occupy not less than eighty
percent (80%) of the rentable area of the Twelve Year Space on the date the
applicable Twelve Year Space Renewal Notice is given and on the first (1st) day
of the applicable Twelve Year Space Renewal Term. Each such Twelve Year Space
Renewal Option may be exercised only with respect to the entire Twelve Year
Space and shall be exercisable by Tenant delivering the applicable Twelve Year
Space Renewal Notice to Landlord at least eighteen (18) months prior to the
expiration of the Twelve Year Space Term or the then applicable Twelve Year
Space Renewal Term, as the case may be. Time is of the essence with respect to
the giving of each Twelve Year Space Renewal Notice. Upon the giving
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of the Twelve Year Space Renewal Notice with respect to the fourth Twelve Year
Space Renewal Term, Tenant shall have no further right or option to extend or
renew the Term.
Section 39.2 If Tenant exercises a Renewal Option, the applicable
Renewal Term shall be upon the same terms, covenants and conditions as those
contained in this Lease, except that the Fixed Rent with respect to the Eight
Year Space, Ten Year Space or Twelve Year Space, as the case may be, shall be
deemed to mean the Fixed Rent as determined pursuant to Section 39.3 hereof.
Section 39.3 For each Renewal Term the Fixed Rent shall be
determined as follows:
(A) The Fixed Rent for the Eight Year Space, Ten Year Space or
Twelve Year Space, as the case may be, for the applicable Renewal Term shall be
an amount equal to the greater of (a) the annual fair market rental value of
such Space (the "Fair Market Rent") on the first day of the applicable Renewal
Term, and (b) the Fixed Rent payable with respect to such Space immediately
prior to the expiration of the Eight Year Space Term, Ten Year Space Term or
Twelve Year Space Term, as the case may be (as such Fixed Rent is set forth on
Exhibit "C" hereof) or the expiration of such Space's then-current Renewal Term,
as the case may be, (the greater value of (a) and (b) being hereinafter referred
to as the "Rental Value"). The Fair Market Rent shall be determined on the
assumption that the Eight Year Space, Ten Year Space or Twelve Year Space, as
the case may be, is free and clear of all leases and tenancies (including this
Lease), that such Space is available in the then rental market for comparable
first class office buildings in midtown Manhattan, that Landlord has had a
reasonable time to locate a tenant who rents with the knowledge of the uses to
which such Space can be adapted, and that neither Landlord nor the prospective
tenant is under any compulsion to rent, and taking into account all other
relevant factors.
(B) For purposes of determining the Fair Market Rent, the
following procedure shall apply:
(1) Landlord and Tenant shall each contemporaneously
deliver to the other, at Landlord's office, a written notice (each a "Rent
Notice"), on a date mutually agreed upon, but in no event later than one hundred
twenty (120) days prior to the expiration of the Eight Year Space Term, Ten Year
Space Term or Twelve Year Space Term, as the case may be, or such Space's
then-current Renewal Term, as the case may be, and if no date is mutually agreed
upon, then on the one hundred twentieth (120th) day prior to the expiration of
the Eight Year Space Term, Ten Year Space Term or Twelve Year Space Term, as the
case may be, or such Space's then-current Renewal Term, as the case may be,
which Rent Notice shall set forth each of their respective determinations of the
Rental Value (Landlord's determination of the Rental Value is referred to as
"Landlord's Determination" and Tenant's determination of the Rental Value is
referred to as "Tenant's Determination"). If Landlord shall fail or refuse to
give such Rent Notice as aforesaid, Landlord's Determination shall be deemed to
be equal to the Fixed Rent then payable by Tenant with respect to such Space on
the expiration of the Eight Year Space Term, Ten Year Space Term or Twelve Year
Space Term, as the case
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may be (as such Fixed Rent is set forth on Exhibit "C" hereof), or such Space's
then-current Renewal Term, as the case may be, and if Tenant shall fail or
refuse to give such Rent Notice as aforesaid, Tenant's Determination shall be
deemed to be the same as Landlord's Determination. If neither Landlord nor
Tenant shall deliver a Rent Notice as aforesaid, the Rental Value shall be
deemed to be equal to the Fixed Rent then payable by Tenant on the expiration of
the Eight Year Space Term, Ten Year Space Term or Twelve Year Space Term, as the
case may be (as such Fixed Rent is set forth on Exhibit "C" hereof), or such
Space's then-current Renewal Term, as the case may be.
(2) If Landlord's Determination and Tenant's
Determination are not equal and Tenant's Determination is lower than Landlord's
Determination, and either Determination exceeds an amount equal to the Fixed
Rent then payable by Tenant on the expiration of the Eight Year Space Term, Ten
Year Space Term or Twelve Year Space Term, as the case may be (as such Fixed
Rent is set forth on Exhibit "C" hereof), or such Space's then-current Renewal
Term, as the case may be, Landlord and Tenant shall attempt to agree upon the
Fair Market Rent. If Tenant's Determination is higher than Landlord's
Determination, the Fixed Rent for the Eight Year Space, Ten Year Space or Twelve
Year Space, as the case may be, for the Renewal Term shall be equal to Tenant's
Determination. If Landlord and Tenant shall mutually agree upon the
determination (the "Mutual Determination") of the Rental Value their
determination shall be the Rental Value, and shall be final and binding upon the
parties. If Landlord and Tenant shall be unable to reach a Mutual Determination
within ten (10) days after delivery of both Determinations to each party,
Landlord and Tenant shall jointly select an independent real estate appraiser
(the "Appraiser") whose fee shall be borne equally by Landlord and Tenant. In
the event that Landlord and Tenant shall be unable to jointly agree on the
designation of the Appraiser within five (5) days after they are requested to do
so by either party, then the parties agree to allow the American Arbitration
Association, or any successor organization to designate the Appraiser in
accordance with the rules, regulations and/or procedures then obtaining of the
American Arbitration Association or any successor organization.
(3) The Appraiser shall conduct such hearings and
investigations as he may deem appropriate and shall, within thirty (30) days
after the date of designation of the Appraiser, choose either Landlord's or
Tenant's Determination, and such choice by the Appraiser shall be conclusive and
binding upon Landlord and Tenant. Each party shall pay its own counsel fees and
expenses, if any, in connection with any arbitration under this Article. The
Appraiser appointed pursuant to this Article shall be an independent real estate
appraiser with at least ten (10) years' experience in leasing and valuation of
properties which are similar in character to the Building, and a member of the
American Institute of Appraisers of the National Association of Real Estate
Boards and a member of the Society of Real Estate Appraisers. The Appraiser
shall not have the power to add to, modify or change any of the provisions of
this Lease.
(4) It is expressly understood that any determination of
the Rental Value pursuant to this Article shall be based on the criteria stated
in Section 39.3 hereof.
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(C) After a determination has been made of the Rental Value
for a Renewal Term, the parties shall execute and deliver to each other an
instrument setting forth the Fixed Rent for the Eight Year Space, Ten Year Space
or Twelve Year Space, as the case may be, for such Renewal Term as hereinabove
determined.
(D) If the final determination of the Rental Value shall not
be made on or before the first day of the applicable Renewal Term in accordance
with the provisions of this Article, pending such final determination Tenant
shall continue to pay, as the Fixed Rent for the Eight Year Space, Ten Year
Space or Twelve Year Space, as the case may be, for such Renewal Term, an amount
equal to Landlord's Determination. If, based upon the final determination
hereunder of the Rental Value, the payments made by Tenant on account of the
Fixed Rent for such Space for such portion of such Renewal Term were greater
than the Fixed Rent for such Space payable for such Renewal Term, Landlord shall
refund to Tenant the amount of such excess within thirty (30) days after such
final determination, with interest on such amount, for the period from the dates
such overpayments were made by Tenant to the date repaid by Landlord, at the
Base Rate. Notwithstanding the foregoing, if such overpayment is not repaid by
Landlord within such thirty (30) day period, Landlord shall pay interest on the
amount of the overpayment by Tenant, for the period after the expiration of such
thirty (30) day period to the date such overpayment is repaid by Landlord, at
the Applicable Rate.
Section 39.4 Notwithstanding anything to the contrary contained in
this Article 39, if Tenant shall fail to exercise any of its Renewal Options
with respect to the Ten Year Space, Tenant may not thereafter exercise any
Renewal Option with respect to the Twelve Year Space unless, at the time
provided in this Article 39 for the exercise of any Renewal Option with respect
to the Twelve Year Space, neither the Eight Year Space nor the Ten Year Space,
nor any portion thereof, shall then comprise a portion of the Premises.
ARTICLE 40
ADDITIONAL SPACE
Section 40.1(A) Subject to the provisions of Section 40.5 hereof, if
at any time during the Term (i) an entire floor or any portion of a floor having
an area of ten thousand (10,000) rentable square feet or more which is above the
ground floor of the Building (other than any floor of the Building demised to
Tenant on the date hereof) (a "Floor Additional Space") or (ii) any portion of
the second floor of the Building, if the Second Floor Premises shall then
comprise a portion of the Premises (other than any space on the second floor of
the Building demised to Tenant on the date hereof (a "Second Floor Additional
Space"; any Floor Additional Space or Second Floor Additional Space is
hereinafter referred to as "Additional Space"), shall become vacant and
available for occupancy, then, provided that MONY is the Tenant hereunder and no
Event of Default has occurred and is continuing, Landlord, prior to offering to
lease such space to any Person, shall deliver a notice to MONY stating that
Landlord is prepared to enter into a lease for such Additional Space (the
"Additional Lease") with Tenant, which notice (the "Additional Lease Proposal")
shall specify with respect to such Additional Space (a) the Space Factor for the
Additional Space, (b) any "free rent" period to be
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included in the Additional Lease, (c) the work which Landlord will perform, if
any, to prepare such Additional Space for Tenant's initial occupancy, (d) the
amount of money, if any, which Landlord will provide to Tenant in connection
with the performance by Tenant of any such work, (e) the anticipated
commencement date of the tern, of the Additional Lease, (f) the fact that Tenant
shall have no right to assign the Additional Lease, in whole or in part, or
sublease all or any portion of the Additional Lease, and (g) any other
applicable terms and conditions not otherwise provided for in this Article 40.
(B) Any Additional Lease shall provide for a Fixed Rent
determined pursuant to the provisions of Section 40.2 and 40.3 hereof, shall
provide that any Event of Default by Tenant under this Lease shall be an Event
of Default under the Additional Lease and, except as otherwise provided herein,
shall otherwise be on the terms and conditions contained in this Lease
including, without limitation, the provisions regarding the payment of increases
of Taxes over Base Taxes and the payment of increases of Operating Expenses over
Base Operating Expenses, which provisions shall not change for the purpose of
calculating Escalation Rent payable under the Additional Lease. Such Additional
Lease shall further provide for a term of ten (10) years, with no renewal or
extension options, unless Tenant, in its notice to Landlord of its desire to
lease such Additional Space, shall notify Landlord that it desires that such
Additional Space be for a term expiring on the expiration, at Tenant's election
as designated in Tenant's notice, of the Eight Year Space, Ten Year Space or
Twelve Year Space. Notwithstanding the foregoing, Tenant may not elect that the
term of the Additional Lease expire on the expiration of the Eight Year Space,
Ten Year Space or Twelve Year Space, as the case may be, if the expiration date
with respect to such Space is earlier than the eighth (8th) anniversary of the
anticipated commencement date of the term of such Additional Lease unless,
simultaneously with its delivery of the notice expressing Tenant's intention to
lease such Additional Space, Tenant shall exercise the Renewal Option, if any,
then applicable to the Eight Year Space, Ten Year Space or Twelve Year Space, as
the case may be, so that the expiration date with respect to such Space shall be
not earlier than such eighth (8th) anniversary of the anticipated commencement
date of the term of the Additional Lease. If Tenant shall elect to lease the
Additional Space for a term which expires as of the expiration of the term with
respect to the Eight Year Space, Ten Year Space or Twelve Year Space, as the
case may be, (i) the Additional Lease shall provide that Tenant may renew the
term of the Additional Lease in accordance with the provisions of Article 39 of
this Lease, as if such Additional Space were Eight Year Space, Ten Year Space or
Twelve Year Space, as the case may be, provided that Tenant shall simultaneously
therewith under this Lease exercise its corresponding Eight Year Space Renewal
Option, Ten Year Space Renewal Option or Twelve Year Space Renewal Option, as
the case may be, and (ii) Tenant may not exercise under this Lease its Eight
Year Space Renewal Option, Ten Year Space Renewal option or Twelve Year Space
Renewal Option, as the case may be, unless, simultaneously therewith Tenant
shall exercise the corresponding renewal option under the Additional Lease.
(C) If Tenant desires to lease such Additional Space, Tenant
shall notify Landlord in writing within fifteen (15) days after delivery of
Landlord's notice. Time shall be of the essence with respect to Tenant's
delivery of said notice. If Tenant fails to notify Landlord of its intent to
lease such Additional Space within said
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fifteen (15) day period, Tenant shall have no right to lease such Additional
Space and Landlord shall have no obligation to lease such Additional Space to
Tenant and may offer to lease such Additional Space to others on any terms and
conditions that Landlord shall elect. If Tenant shall so notify Landlord of its
intention to lease the Additional Space in a timely manner as aforesaid,
Landlord shall, within twenty (20) days thereafter, deliver to Tenant for
signature an Additional Lease with respect to such Additional Space, which
Additional Lease shall reflect the provisions contained in the Additional Lease
Proposal and otherwise be on the terms and provisions set forth above. If the
Additional Lease is not executed by Tenant and returned to Landlord within ten
(10) Business Days after Landlord's delivery of such Additional Lease to Tenant,
with respect to which date time shall be of the essence, Tenant shall have no
right to lease such Additional Space and Landlord shall have no obligation to
lease such Additional Space to the Tenant and may offer to lease such Additional
Space to others on any terms and conditions that Landlord shall elect.
Section 40.2 The Fixed Rent for the term of the applicable
Additional Lease shall be an amount equal to the fair market rental value of
such Additional Space (the "Additional Space Fair Market Rent") on the first day
of such term. The Additional Space Fair Market Rent shall be determined on the
assumption that the Additional Space is free and clear of all leases and
tenancies, that the Additional Space is available in the then rental market for
comparable first class office buildings in midtown Manhattan, that Landlord has
had a reasonable time to locate a tenant who rents with the knowledge of the
uses to which the Additional Space can be adapted, and that neither Landlord nor
the prospective tenant is under any compulsion to rent, and taking into account
all other relevant factors.
Section 40.3 For purposes of determining the Additional Space Fair
Market Rent, the following procedure shall apply:
(1) Landlord and Tenant shall each contemporaneously
deliver to the other, at Landlord's office, a written notice (each an
"Additional Space Rent Notice") on a date mutually agreed upon, but in no event
later than thirty (30) days after the delivery by Tenant of its notice of its
intention to lease the Additional Space, and if no date is mutually agreed upon,
then on such thirtieth (30th) day, which Additional Space Rent Notice shall set
forth their respective determinations of the Additional Space Fair Market Rent
(Landlord's determination of the Additional Space Fair Market Rent is referred
to as "Landlord's Additional Space Determination" and Tenant's determination of
the Additional Space Fair Market Rent is referred to as "Tenant's Additional
Space Determination"). If Landlord shall fail or refuse to give such notice as
aforesaid, Landlord's Additional Space Determination shall be deemed to be an
amount (the "Additional Space Rental Value") equal to the product of (x) the
Space Factor of such Additional Space and (y) the highest Fixed Rent per square
foot payable by Tenant on the anticipated commencement date of such term (i) for
any portion of the Office Premises above the second floor of the Building, with
respect to any Floor Additional Space or (ii) for any portion of the second
floor of the Building, with respect to any Second Floor Additional Space, as the
case may be. If Tenant shall fail or refuse to give such notice as aforesaid,
the Additional Space Fair Market Rent shall be deemed to be the same as
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Landlord's Determination. If neither Landlord nor Tenant shall deliver a Rent
Notice as aforesaid, the Additional Space Fair Market Rent shall be deemed to be
equal to the Additional Space Rental Value.
(2) If Landlord's Additional Space Determination and
Tenant's Additional Space Determination are not equal, and Tenant's Additional
Space Determination is lower than Landlord's Additional Space Determination,
Landlord and Tenant shall attempt to agree upon the Additional Space Fair Market
Rent. If Tenant's Additional Space Determination is higher than Landlord's
Additional Space Determination, the Fixed Rent for the term of the Additional
Lease shall be equal to Tenant's Additional Space Determination. If Landlord and
Tenant shall mutually agree upon the determination (the "Additional Space Mutual
Determination") of the Additional Space Fair Market Rent, their determination
shall be the Additional Space Fair Market Rent, and shall be final and binding
upon the parties. If Landlord and Tenant shall be unable to reach an Additional
Space Mutual Determination within thirty (30) days after delivery of both
Determinations to each party, Landlord and Tenant shall jointly select an
independent real estate appraiser (the "Additional Space Appraiser") whose fee
shall be borne equally by Landlord and Tenant. In the event that Landlord and
Tenant shall be unable to jointly agree on the designation of the Additional
Space Appraiser within five (5) days after they are requested to do so by either
party, then the parties agree to allow the American Arbitration Association, or
any successor organization to designate the Additional Space Appraiser in
accordance with the rules, regulations and/or procedures then obtaining of the
American Arbitration Association or any successor organization.
(3) The Additional Space Appraiser shall conduct such
hearings and investigations as he may deem appropriate and shall, within thirty
(30) days after the date of designation of the Additional Space Appraiser,
choose either Landlord's or Tenant's Determination, and such choice by the
Additional Space Appraiser shall be conclusive and binding upon Landlord and
Tenant. Each party shall pay its own counsel fees and expenses, if any, in
connection with any arbitration under this Article. The Additional Space
Appraiser appointed pursuant to this Article shall be an independent real estate
appraiser with at least ton (10) years, experience in leasing and valuation of
properties which are similar in character to the Building, and a member of the
American Institute of Appraisers of the National Association of Real Estate
Boards and a member of the Society of Real Estate Appraisers. The Additional
Space Appraiser shall not have the power to add to, modify or change any of the
provisions of this Lease.
(4) It is expressly understood that any determination of
the Additional Space Fair Market Rent pursuant to this Article shall be based on
the criteria stated in Section 40.2 hereof.
Section 40.4(A) After a determination has been made of the
Additional Space Fair Market Rent for the term of an Additional Lease, the
parties shall execute and deliver to each other an instrument setting forth the
Fixed Rent for the term of such Additional Lease as hereinabove determined.
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(B) If the final determination of the Additional Space Fair
Market Rent shall not be made on or before the commencement of the term of an
Additional Lease, pending such final determination Tenant shall pay, as the
Fixed Rent for such Additional Space, the amount based upon Landlord's
Additional Space Determination. If, based upon the final determination hereunder
of the Additional Space Fair Market Rent, the payments made by Tenant on account
of the Fixed Rent for such period were greater than the Fixed Rent payable under
the Additional Lease for such period, Landlord shall credit to Tenant the amount
of such excess against the immediately succeeding installments of Fixed Rent
under the Additional Lease, with interest thereon, for the period from the date
such overpayments were made to the date such amounts are credited to Tenant, at
the Base Rate. Notwithstanding the foregoing, if Landlord shall fail or refuse
to credit such amounts to Tenant as aforesaid, then Landlord shall credit to
Tenant, against the immediately succeeding installment of Fixed Rent under the
Additional Lease, interest on the amount of such overpayments, for the period
from the date on which Landlord was required, pursuant to this Section 40.4(B),
to credit to Tenant the amount of such overpayment until the date such amounts
are credited to Tenant, at the Applicable Rate.
Section 40.5(A) Anything in this Article 40 to the contrary
notwithstanding, Landlord, without first being required to offer Additional
Space to Tenant, shall have the absolute right to lease such Additional Space
(i) for an additional term or terms to the tenant of such Additional Space at
the time, (ii) to any tenant in the Building which has a right of first offer or
right of first refusal with respect to, or has an option to lease, such
Additional Space as of the date hereof or (iii) to any Persons (other than
Persons who are Affiliates of Landlord) who shall lease the fourth (4th), fifth
(5th) or sixteenth (16th) floors after the date hereof and who shall be granted
a right of first offer or right of first refusal, or any other right or option
to lease such Additional Space.
(B) (1) From and after the date on which Tenant shall fail to
timely accept any offer to lease any Floor Additional Space pursuant to this
Article 40, Landlord shall have no further obligation to notify Tenant of, or to
lease to Tenant, such space or (if Landlord shall thereafter elect to offer any
portion of such space as a separate rental unit) any portion thereof, and Tenant
shall have no further right to lease such space or any portion of such space, as
aforesaid, pursuant to this Article 40. In addition, from and after the date on
which Tenant shall fail to timely accept any offer to lease any Floor Additional
Space pursuant to this Article 40, the amounts referred to in clause (ii) of
this Section 40.5(B)(1) and clause (ii) of Section 40.5(C) hereof shall each be
reduced by the rentable area of such Floor Additional Space. From and after the
date which is the earliest to occur of (i) the date on which Tenant shall fail
to have timely entered into an Additional Lease for a Floor Additional Space in
accordance with the provisions of this Article 40, after Tenant shall have
accepted an offer to lease any Full Floor Additional Space, (ii) the date on
which Tenant shall have leased, in the aggregate, more than fifty thousand
(50,000) rentable square feet of Floor Additional Space in the Building pursuant
to the provisions of this Article 40 and (iii) the date upon which MONY shall
not occupy at least 118,500 rentable square feet of space in the Building for
the operation of its business and as its world headquarters, containing
executive offices, Landlord shall have no further obligation to notify Tenant
of, or to lease to Tenant, any further Floor
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Additional Space, and Tenant shall have no further right to lease any Floor
Additional Space pursuant to this Article 40.
(2) From and after the date on which Tenant shall fail
to timely accept any offer to lease any Second Floor Additional Space pursuant
to this Article 40, Landlord shall have no further obligation to notify Tenant
of, or to lease to Tenant, such portion of the second floor of the Building or
(if Landlord shall thereafter elect to offer any portion of such space as a
separate rental unit) any portion thereof and Tenant shall have nor further
right to lease such space or any portion of such space pursuant to this Article
40. From after the date which is the earliest to occur of (i) the date on which
Tenant shall fail to have timely entered into an Additional Lease for any
Additional Space in accordance with the provisions of this Article 40, after
Tenant shall have accepted an offer to lease any Additional Space, (ii) the date
on which Tenant shall have leased the balance of the second floor in the
Building pursuant to the provisions of this Article 40, (iii) the date on which
the Second Floor Premises shall no longer comprise a portion of the Premises,
and (iv) the date upon which MONY shall not occupy at least 118,500 rentable
square feet of space in the Building for the operation of its business and as
its world headquarters, containing executive offices, Landlord shall have no
further obligation to notify Tenant of, or to lease to Tenant, any further
Second Floor Additional Space, and Tenant shall have no further right to lease
any Second Floor Additional Space pursuant to this Article 40.
(3) It is expressly understood and agreed that the
rights and obligations of Landlord and Tenant hereunder shall not apply to any
space in the Building (i) which is vacant, as of the date hereof, until such
space has been leased and thereafter is available to Landlord to lease and
Landlord elects to lease such space, and (ii) which is vacant and available for
occupancy but which Landlord is not, for any reason whatsoever, offering to
lease, until the date upon which Landlord shall elect to offer to lease such
space.
(C) Notwithstanding anything to the contrary contained in this
Article 40, Landlord shall have no obligation to offer or lease to Tenant as
Additional Space (i) any space which Landlord intends to lease if Landlord
intends to offer to lease such space together with space which Landlord is not
obligated to offer to Tenant under this Article 40 or (ii) if the acceptance by
Tenant of the space which Landlord intends to offer to lease would result in
Tenant having leased more than sixty thousand (60,000) rentable square feet of
Floor Additional Space.
Section 40.6 If Tenant shall accept any offer made by Landlord
pursuant to this Article 40 to lease Additional Space and shall have executed
and delivered an Additional Lease submitted by Landlord as aforesaid, and
Landlord is unable to give possession of such Additional Space to Tenant on the
date set forth in such Additional Lease as the commencement date with respect to
such Additional Space (the "Additional Space Commencement Date") because of the
holdings over or retention of possession of any tenant or occupant of such
Additional Space, Landlord shall not be subject to any liability for failure to
give possession of such Additional Space on such Additional Space Commencement
Date and the validity of such Additional Lease shall not be impaired
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under such circumstances nor shall the same be construed to extend the term of
such Additional Lease. Landlord, however, shall promptly institute and
thereafter diligently prosecute such dispossess actions or other actions or
proceedings against such tenant or occupant as Landlord shall deem appropriate
in order to obtain possession of the Additional Space. If such tenant or
occupant shall pay to Landlord rental for the period of holdover by such tenant
or occupant in excess of the Fixed Rent and additional rent which Tenant would
have paid under the Additional Lease for the period of such holdover, then
Landlord, after deducting from such amount all costs and expenses incurred by
Landlord in connection with dispossessing such tenant or occupant, shall credit
Tenant the amount of such excess, if any, against the immediately succeeding
payments of Fixed Rent under the Additional Lease.
ARTICLE 41
RIGHT OF FIRST OFFER
Section 41.1(A) If at any time prior to the later to occur of (a)
the twelfth (12th) anniversary of the Commencement Date and (b) the date upon
which MONY shall fail to occupy for the conduct of its business at lease 118,500
rentable square feet of the Office Premises or fail to occupy the Office
Premises as its world headquarters, containing executive offices, Landlord shall
desire to sell the Real Property (other than (i) a sale of the Real Property to
Landlord, any partner of Landlord or any Affiliate of either of the foregoing,
(ii) a sale together with a simultaneous leaseback of the Real Property, or
(iii) any other sale in the nature of a financing transaction), then, provided
that (x) MONY shall be the Tenant hereunder, (y) MONY shall occupy not less than
118,500 rentable square feet of the Premises for the operation of its business
and as its world headquarters, containing executive offices and (z) MONY is not
then in default hereunder, Landlord shall offer ("Landlord's Offer") to sell the
Real Property to MONY prior to offering the same to any other individual or
entity. Landlord's Offer shall be in writing and shall set forth the terms and
conditions upon which the Real Property is to be sold.
(B) Within thirty (30) days after delivery by Landlord to MONY
of Landlord's offer, Landlord and MONY shall endeavor in good faith to execute
and deliver to each other a mutually satisfactory letter setting forth MONY's
intention (the "Letter of Intent") to purchase the Real Property.
(C) If (a) the Letter of Intent is not executed and delivered
as aforesaid or (b) the Letter of Intent is executed and delivered as aforesaid,
but a contract of sale for the Real Property, mutually satisfactory to both
Landlord and MONY, is not executed and delivered (together with any payment
required to be mad thereunder by MONY to Landlord) to each other within thirty
(30) days after execution and delivery of the Letter of Intent, or (c) MONY
advises Landlord that it does not desire to purchase the Real Property, then
Landlord shall be free to offer to sell and to sell the Real Property to any
other individual or entity, on any terms and conditions, and Landlord shall not
thereafter be obligated to offer to sell the Real Property to MONY again. Until
the Letter of Intent has been executed, MONY, recognizing the confidential
nature of Landlord's decision to offer the Real Property for sale and any
information furnished to MONY in
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connection therewith, shall not disclose to any third party the fact of
Landlord's Offer or any of the information or materials furnished to it in
connection with Landlord's Offer.
Section 41.2 Upon any sale of the Real Property, the rights of MONY
under this Article shall terminate.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed
this Lease as of the day and year first above written.
1740 BROADWAY ASSOCIATES L.P.,
Landlord
By: Mendik 1740 Corp., a general
partner
By: /s/ David Greenbaum
--------------------
David R. Greenbaum,
Executive Vice President
By: New York Acres, Inc., a general
partner
By: /s/ Henry W. Haunss, Jr.
-------------------------
Henry W. Haunss, Jr.,
President
THE MUTUAL LIFE INSURANCE COMPANY OF NEW
YORK, Tenant
By: /s/ Michael Roth
-----------------
Michael Roth
Executive Vice President
Fed. Id. No. 13-1632487
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 14th day of December, 1990, before me personally came Michael
Roth, to me known, who, being by me duly sworn, did depose and say that he
resides at 20 Pond View Lane, Stamford, Connecticut 06903; that he is the
Executive Vice President of THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, the
corporation described and which executed the foregoing instrument; that he
signed his name thereto by order of the board of directors of said corporation.
/s/ Peter W. Martin
-------------------
Notary Public
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Schedule A-1
RULES AND REGULATIONS
(1) The sidewalks, entrances, passages, courts, elevators,
vestibules, stairways, corridors, or halls shall not be obstructed or encumbered
by Tenant or used for any purpose other than ingress and egress to and from the
Premises and for delivery of merchandise and equipment in prompt and efficient
manner, using elevators and passageways designated for such delivery by
Landlord.
(2) No awnings, air-conditioning units, fans or other projections
shall be attached to the outside walls of the Building. No curtains, blinds,
shades, or screens, other than those which conform to Building standards as
established by Landlord from time to time, shall be attached to or hung in, or
used in connection with, any window or door of the Premises, without the prior
written consent of Landlord which shall not be unreasonably withheld or delayed.
Such awnings, projections, curtains, blinds, shades, screens or other fixtures
must be of a quality, type, design and color, and attached in the manner
reasonably approved by Landlord. All electrical fixtures hung in offices or
spaces along the perimeter of the Premises must be of a quality, type, design
and bulb color consistent with a first class office building in midtown
Manhattan and consistent throughout Tenant's space in the Building. Landlord
hereby agrees that as of the date hereof such fixtures comply with the
foregoing.
(3) Except as set forth in this Lease, no sign, advertisement,
notice or other lettering shall be exhibited, inscribed, painted or affixed by
Tenant on any part of the outside of the Premises of any multi-tenanted floor or
on the outside of the Building or on the inside of the Premises if the same can
be seen from the outside of the Premises without the prior written consent of
Landlord (which consent, with respect to signs on the inside of the Premises
consistent with a first class office building in midtown Manhattan shall not be
unreasonably withheld or delayed) except that the name of Tenant may appear on
the entrance door of the Premises. In the event of the violation of the
foregoing by Tenant, if Tenant has refused to remove same after reasonable
notice from Landlord, Landlord may remove same without any liability, and may
charge the expense incurred by such removal to Tenant.
(4) The exterior windows and doors that reflect or admit light and
air into the Premises or the halls, passageways or other public places in the
building, shall not be covered or obstructed by Tenant.
(5) No showcases or other articles shall be put in front of or
affixed to any part of the exterior of the Building, nor placed in the halls,
corridors or vestibules of any multi-tenanted floors, nor shall any article
obstruct any air-conditioning supply or exhaust without the prior written
consent of Landlord.
(6) The water and wash closets and other plumbing fixtures shall not
be used for any purposes other than those for which they were constructed, and
no
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sweepings, rubbish, rags, acids or other substances shall be deposited therein.
All damages resulting from any misuse of the fixtures shall be borne by Tenant.
(7) Subject to the provisions of Article 3 of this Lease, Tenant
shall not in any way deface any part of the Premises or the Building. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed, and as Landlord may direct.
(8) No space in the Building shall be used for manufacturing, for
the storage of merchandise for sale to the general public, or for the sale of
merchandise, goods or property of any kind at auction or otherwise.
(9) Tenant shall not make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or neighboring
buildings or Premises or those having business with them whether by the use of
any musical instrument, radio, television set, talking machine, unmusical noise,
whistling, singing, or in any other way.
(10) Tenant, or any of Tenant's employees, agents,, contractors,
subcontractors, subtenants, assigns, visitors or license, shall not at any time
bring or keep upon the Premises any flammable, combustible or explosive fluid,
chemical or substance except such as are incidental to usual office occupancy.
(11) No additional locks or bolts of any kind hall be placed upon
any of the doors or windows by Tenant except an set forth in the Lease, in the
Security Areas, nor shall any changes be made in existing locks or the mechanism
thereof, unless Tenant promptly provides Landlord with the key or combination
thereto. Tenant must, upon the termination of its tenancy, return to Landlord
all keys of stores, offices and toilet rooms, and in the event of the loss of
any keys furnished at Landlord's expense, Tenant shall pay to Landlord the cost
thereof.
(12) No bicycles, vehicles or animals of any kind except for seeing
eye dogs shall be brought into or kept by Tenant in or about the Premises or the
Building, except, as set forth in the Lease, for the vehicles which may be kept
in the Garage Premises.
(13) All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place in the manner and
during the hours which Landlord or its agent reasonably may determine from time
to time. Landlord reserves the right to inspect all safes, freight or other
bulky articles to be brought into the Building and to exclude from the Building
all safes, freight or other bulky articles which violate any of these Rules and
Regulations or the Lease of which these Rules and Regulations are a part.
(14) Tenant shall not occupy or permit any portion of the Premises
demised to it to be occupied as an office for a public stenographer or typist,
or for the
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possession, storage, manufacture, or sale of liquor, narcotics, dope,
or as a barber or manicure shop, or as an employment bureau. Notwithstanding the
foregoing, subject to all Requirements Tenant may keep at the Premises
reasonable quantities of alcohol solely for the use of Tenant and its business
guests, but not as a public bar or otherwise. Tenant shall not engage or pay any
employees on the Premises, except those actually working for Tenant at the
Premises.
(15) Tenant shall not purchase spring water, ice, towels or other
like service, or accept barbering or boot-blacking services in the Premises,
from any company or persons not approved by Landlord, which approval shall not
be withheld or delayed unreasonably and at hours and under regulations other
than as reasonably fixed by Landlord.
(16) Landlord shall have the right to prohibit any advertising by
Tenant which identifies the Building and which, in Landlord's reasonable
opinion, tends to impair the reputation of the Building or its desirability as a
building for offices, and upon written notice from Landlord, Tenant shall
refrain from or discontinue such advertising.
(17) Landlord reserves the right to exclude from the Building
between the hours of 6 P.M. and 8 A.M. and at all hours on Saturdays, Sundays
and legal holidays all persons who do not present a pass to the Building signed
or approved by Landlord. Tenant shall be responsible for all persons for whom a
pass shall be issued at the request of Tenant and shall be liable to Landlord
for all acts of such persons.
(18) Tenant shall, at its expense, provide reasonable quantities of
artificial light for the employees of Landlord while doing janitor service or
other cleaning, and in making repairs or alterations in the Premises. Landlord
shall request that such employees turn off the lights when their work is
completed.
(19) The requirements of Tenant will be attended to only upon
written application at the office of the Building. Building employees shall not
perform any work or do anything outside of the regular duties, unless under
special instructions from the office of Landlord.
(20) Canvassing, soliciting and peddling in the Building is
prohibited and Tenant shall cooperate to prevent the same.
(21) There shall not be used in any space, or in the public halls of
the Building, either by Tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards.
(22) Except as specifically provided in Article 2 of this Lease,
Tenant shall not do any cooking, conduct any restaurant, luncheonette or
cafeteria for the sale or service of food or beverages to its employees or to
others, or cause or permit any odors of cooking or other processes or any
unusual or objectionable odors to emanate from the Premises. Tenant shall not
permit the delivery of any food or beverage to the Premises, except by such
persons delivering the same as shall be approved by Landlord, which approval
shall not be unreasonably withheld or delayed.
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(23) Landlord shall have the right to require that all messengers and other
Persons delivering packages, papers and other materials to Tenant (i) be
directed to deliver such packages, papers and other materials to a Person
designated by Landlord who will distribute the same to Tenant or (ii) be
escorted by a person designated by Landlord to deliver the same to Tenant.
110
<PAGE> 111
Schedule A-2
ALTERATION RULES AND REGULATIONS
A-2-1
<PAGE> 112
ALTERATION WORK PERFORMED
IN BUILDINGS OWNED OR MANAGED BY MENDIK REALTY COMPANY, INC.
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
ELECTRICAL.................................................. 5 - 6
GENERAL RULES............................................... 2 - 4
HEATING, VENTILATION, & A/C................................. - 7
HVAC - CONDENSER PIPING......................... 7 - 8
HVAC - CONTROLS................................. - 8
HVAC - DUCTS.................................... - 9
HVAC - PIPING & DUCT SUPPORTS................... - 9
HVAC - PIPING & DUCT INSULATION................. 9 - 11
LIGHTING STANDARDS.......................................... 15 - 16
INSURANCE................................................... 13 - 14
PLUMBING.................................................... 6 - 7
PROTECTION.................................................. - 4
TELEPHONES.................................................. - 6
TENANT'S RESPONSIBILITIES................................... - 1
TENANT'S & GEN. CONTRACTORS RESPONSIBILITIES............... - 2
</TABLE>
REV. JANUARY 1983
REV. MARCH 1985
REV. SEPT. 1985
REV. JUNE 1988
REV. APRIL 1990
REV. OCTOBER 1990
A-2-2
<PAGE> 113
RULES AND REGULATIONS FOR TENANT ALTERATION WORK PERFORMED IN BUILDINGS OWNED
AND MANAGED BY MENDIK REALTY COMPANY, INC.
[Rider 1]
TENANT'S RESPONSIBILITIES
1. TENANT MUST CONTACT THE BUILDING MANAGEMENT OFFICE BEFORE THE START OF ANY
CONSTRUCTION WORK. ANY REFERENCE HEREIN OR IN THE LEASE TO THE TERM
LANDLORD SHALL ALSO MEAN LESSEE AND VICE VERSA.
2. TENANT MUST SUBMIT THREE (3) SETS OF ALL ARCHITECTURAL, ELECTRICAL,
STRUCTURAL AND MECHANICAL DRAWINGS PRIOR TO THE START OF ANY WORK, FOR
APPROVAL BY BUILDING MANAGEMENT WITH BUILDING NOTICE APPLICATION OR
ALTERATION APPLICATION.
TENANT SHALL REIMBURSE [Rider 2] LANDLORD FOR BOTH REVIEW OF SUCH PLANS
AND INSPECTION OF SAME. ANY REFERENCE HEREIN OR IN THE LEASE TO THE TERM
LANDLORD SHALL ALSO MEAN OWNER AND VICE VERSA.
THE FILING OF ALL APPLICATIONS WITH THE NEW YORK CITY DEPARTMENT OF
BUILDINGS SHALL BE BY, THE ONLY EXPEDITER/CONSULTANT APPROVED BY BUILDING
MANAGEMENT; CHARLES RIZZO & ASSOCIATE, 11 PENNSYLVANIA PLAZA, NEW YORK,
NEW YORK 10001.
3. NO WORK IS TO BE DONE, OR MATERIAL OR EQUIPMENT DELIVERED TO THE BUILDING
UNTIL APPROVAL FOR SUCH WORK HAS BEEN ISSUED BY THE BUILDING MANAGEMENT.
4. UPON COMPLETION OF ANY ALTERATIONS OR ADDITIONS, TENANT OR TENANT'S
ARCHITECT SHALL DELIVER TO LANDLORD AN AMENDED CERTIFICATE OF OCCUPANCY OR
CERTIFICATE OF THE BOARD OF FIRE UNDERWRITERS AND SUCH OTHER PROOF AS MAY
BE REQUIRED BY OWNERS TO PROVE THAT ALL WORK HAS BEEN PERFORMED IN
ACCORDANCE WITH APPLICABLE LAWS. RULES AND REGULATIONS OF APPLICABLE
GOVERNMENTAL AUTHORITIES. TENANT SHALL ARRANGE WITH OWNER'S EXPEDITER TO
SCHEDULE INSPECTIONS FOR COMPLIANCE WITH LOCAL LAW #5. TENANT SHALL TAKE
ANY ACTION REQUIRED IN CONNECTION WITH SUCH
A-2-3
<PAGE> 114
COMPLIANCE AND TENANT SHALL INDEMNIFY OWNER FOR ANY FAILURE TO COMPLY
WITH LOCAL LAWS. THIS PARAGRAPH SHALL SURVIVE THE TERMINATION OF THE
LEASE. ALL FEES, PENALTIES AND EXPENSES INCURRED BY LANDLORD ON
TENANT'S BEHALF SHALL BE DEEMED TO BE ADDITIONAL RENT.
5. APPROVAL OF PLANS BY LANDLORD DOES NOT IMPLY OR SHOULD NOT BE DEEMED TO
IMPLY ANY OPINION OR JUDGEMENT AS TO THE FITNESS OF THE DRAWINGS FOR THEIR
INTENDED PURPOSE. AS AN EXAMPLE OF THE FOREGOING, BUT NOT LIMITED THERETO,
IN THE EVENT TENANT SUBMITS PLANS FOR ADDITIONAL HVAC CAPACITY. LANDLORD'S
APPROVAL OF PLANS DOES NOT INCLUDE AN OPINION AS TO THE ADEQUACY,
SUFFICIENCY OR QUALITY OF THE PLANS, NOR DOES LANDLORD'S APPROVAL EXPRESS
OPINION OF THE FITNESS OF THE PLANS FOR INTENDED USE OF ADDITIONAL HVAC
CAPACITY.
A-2-4
<PAGE> 115
TENANT & GENERAL CONTRACTOR'S RESPONSIBILITIES
1. CERTIFICATES OF INSURANCE FOR ALL TRADES (SEE PAGES 10 & 11).
2. A LIST OF SUB-CONTRACTORS FOR APPROVAL.
3. A COPY OF THE NEW YORK CITY BUILDING NOTICE NUMBER.
4. COPIES OF ALL CERTIFICATES (I.E. DEPARTMENT OF WATER SUPPLY, GAS,
ELECTRIC, & FIRE UNDERWRITERS).
5. A WORK SCHEDULE INDICATING USE OF FREIGHT ELEVATORS FOR DELIVERIES AND
RUBBISH REMOVAL (INFORMATION IS NEEDED [Rider three] [ONE (1) WEEK IN
ADVANCE OF WORK COMMENCEMENT) -- replaced by Rider three]. THERE WILL BE A
CHARGE FOR ALL ELEVATORS USED.
6. A COMPLETE SET OF "AS BUILT" DRAWINGS AND SIGNED OFF BUILDING PERMITS MUST
BE SUBMITTED WITHIN [Rider four] [THIRTY (30) DAYS OF JOB COMPLETION --
replaced by Rider four].
7. UPON COMPLETION OF ANY ALTERATION; BUILDING MANAGEMENT SHALL BE PROVIDED
WITH A PROPERLY EXECUTED WAIVER OF LIEN FROM ALL CONTRACTORS AND
SUBCONTRACTORS PROVIDING SERVICE AND/OR MATERIALS. THE WAIVER SHALL BE IN
THE FORM APPROVED BY THE BUILDING. COPIES WILL BE AVAILABLE, ON REQUEST,
FROM THE BUILDING MANAGEMENT OFFICE. (SEE SAMPLE "A")
GENERAL RULES
1. ONLY UNION LABOR SHALL BE EMPLOYED BY ALL TRADES. UNION AS HEREIN REFERRED
TO, SHALL BE A.F.L. UNIONS HAVING AGREEMENTS WITH THE BUILDING TRADES
EMPLOYERS OR NEW YORK.
2. ALL CONSTRUCTION MATERIALS SHALL BE DELIVERED TO THE JOB IN PROPER
CONTAINERS AND STORED IN THE TENANT'S WORK AREA. MATERIALS SHALL NOT BE
STORED IN PUBLIC AREAS. (I.E. FREIGHT LOBBIES, LOADING PLATFORMS, AND
PUBLIC CORRIDORS).
3. ALL FIRE EXITS SHALL BE KEPT CLEAR AND ACCESSIBLE AT ALL TIMES.
4. FIRE EXTINGUISHERS MUST BE ON THE JOB AT ALL TIMES. A.B.C. TYPE ALL
PURPOSE EXTINGUISHER SHALL BE USED.
<PAGE> 116
5. CITY PERMITS, FIRE WATCH (BY PERSONS CARRYING FORM 820-CERTIFICATE OF
QUALIFICATION AND FITNESS) AND PROTECTIVE BLANKETS ARE REQUIRED FOR ALL
BURNING AND WELDING.
6. [Rider five] [WORKMEN WILL -- replaced by Rider five] BE ASSIGNED TO ONE
TOILET AREA WHICH THE GENERAL CONTRACTOR WILL BE RESPONSIBLE FOR CLEANING.
7. ALL FIREPROOFING ON STEEL MUST BE REPLACED IF DAMAGED OR [Rider six]
[MISSING -- replaced by Rider six]. CONTACT THE LANDLORD THROUGH THE
BUILDING MANAGER'S OFFICE FOR INSPECTION AND APPROVAL BEFORE INSTALLING
CEILINGS.
8. ALL ABANDONED DUCTWORK, CONDUIT WIRING OR PIPING NOT NECESSARY FOR NEW
CONSTRUCTION USAGE MUST BE REMOVED FROM HUNG CEILING AREAS AND FL4DOR
DUCTS.
9. ALL ENTRANCE LOCKS SHALL BE COMPATIBLE WITH BUILDING MASTER KEYING SYSTEM.
10. ALL WORK PERFORMED THAT INCONVENIENCES OR DISTURBS OTHER TENANTS MUST BE
SCHEDULED BEFORE 8:00 A.M. OR AFTER 6:00 P.M. THE BUILDING MANAGER
RESERVES THE RIGHT TO STOP ANY WORK DURING THE NORMAL WORKING HOURS THAT
CAUSES A DISTURBANCE. [Rider seven]
11. ALL ITEMS THAT ARE SPECIFICALLY DESIGNATED FOR RE-USE, BUT DAMAGED DURING
ALTERATION, SHALL BE REPAIRED TO THE BUILDING MANAGER'S SATISFACTION OR
SHALL BE REPLACED BY ITEMS OF EQUAL QUALITY AND APPEARANCE AT NO EXPENSE
TO THE LANDLORD.
12. SHOULD IT BE NECESSARY FOR THE TENANT TO OCCUPY ANY PORTION OF THE
PREMISES OR SPACE BEFORE THE WORK IS COMPLETED, SUCH ACTION SHALL NOT
CONSTITUTE AN ACCEPTANCE OF ANY PART OF THE WORK UNLESS SO STATED IN
WRITING BY OWNER.
13. TENANT AGREES TO HOLD THE LANDL0RD HARMLESS FROM AND AGAINST ALL SUITS,
CLAIMS, ACTIONS, L0SSES COSTS, DAMAGES, OR EXPENSES, INCLUDING REASONABLE
ATTORNEY'S FEES AND DISBURSEMENTS AND INCLUDING CLAIMS FOR WORKMEN'S
COMPENSATION ARISING DIRECTLY OR INDIRECTLY FROM THE PERFORMANCE OF WORK
BY TENANT, ITS EMPLOYEES, AGENTS, SERVANTS, CONTRACTORS, OR
SUBCONTRACTORS.
<PAGE> 117
14. ALL WORK SHALL BE IN COMPLIANCE WITH ALL LOCAL LAWS, AND ALL NEW YORK CITY
CODE REQUIREMENTS AND OSHA REGULATIONS.
NOTWITHSTANDING THE FOREGOING, IF APPLICABLE GOVERNING CODES OR REGULATIONS
ARE LESS RESTRICTIVE THAN THE LANDLORD'S, THEN THE LANDLORD'S STANDARDS SHALL
BE THE CODES AND REGULATIONS FOLLOWED.
15. TENANT, GENERAL CONTRACTOR AND LANDLORD SHALL INSPECT PUBLIC AND FREIGHT
AREAS BEFORE THE START OF ANY WORK IN ORDER TO ESTABLISH RESPONSIBILITY
FOR ANY DAMAGES THAT MAY OCCUR.
PROTECTION
1. ALL RADIATOR AND INDUCTION UNITS MUST BE PROTECTED AGAINST DIRT AND DUST.
2. SHOE WIPING MATS MUST BE INSTALLED AT ALL OPENINGS BETWEEN PUBLIC AND
CONSTRUCTION AREAS AND KEPT CLEAN.
3. ALL WALLS, FLOORS, MAIL CHUTES AND STAIR DOORS IN PUBLIC AREAS SUBJECT TO
CONSTRUCTION TRAFFIC SHALL BE PROPERLY PROTECTED AS DIRECTED BY THE
BUILDING MANAGER.
4. ALL ELECTRIC POWER MUST BE DISCONNECTED BEFORE STARTING DEMOLITION.
TEMPORARY LIGHTING MUST BE INSTALLED.
5. TENANT AND CONTRACTOR SHALL TAKE ALL NECESSARY PRECAUTIONS TO PREVENT DIRT
AND DUST FROM PERMEATING THE BUILDING DURING THE PERFORMANCE OF THE WORK.
AT TENANT'S SOLE COST AND EXPENSE ALL CONSTRUCTION MATERIALS AND RUBBISH
SHALL BE PLACED IN CONTAINERS AND SHALL BE REMOVED ON A DAILY BASIS. ALL
CONSTRUCTION DEBRIS AND (AT THE COMPLETION OF THE JOB) EXCESS MATERIAL
MUST BE REMOVED FROM THE BUILDING BEFORE 8:00 A.M. OR AFTER 6:00 P.M.
CONTAINERS MUST NOT REMAIN ON THE SIDEWALK AFTER 8:00 A.M. UPON TENANT'S
FAILURE TO REMOVE RUBBISH, OWNER MAY REMOVE SAME AT TENANT'S SOLE COST AND
EXPENSE.
6. TENANT WILL BE CHARGED FOR SPECIAL CLEANING SERVICES AND REPAIRS
THROUGHOUT ANY PUBLIC AREAS AFFECTED BY CONTRACTORS.
7. MATERIALS, TOOLS AND EQUIPMENT SHALL NOT BE PLACED ON WINDOW SILLS OR
INDUCTION UNIT ENCLOSURES.
<PAGE> 118
8. THE BUILDING MANAGER'S OFFICE MUST BE CONTACTED REGARDING THE REMOVAL OF
HARDWARE, VENETIAN BLINDS AND OTHER BUILDING STANDARD REUSABLE EQUIPMENT.
9. ALL DOLLIES, HAND TRUCKS AND CONTAINERS MUST BE IN GOOD CONDITION AND HAVE
RUBBER WHEELS AND BUMPERS.
ELECTRICAL
1. CONTACT THE BUILDING'S CHIEF ENGINEER BEFORE STARTING ANY WORK.
2. ALL WIRING TO BE IN THINWALL (E.M.T.) 3/4 INCH MINIMUM SIZE. GREENFIELD
WILL BE PERMITTED ONLY IN EXISTING WALLS AND AS FIXTURE AND MOTOR
CONNECTIONS. B.X. MAY ONLY BE USED IN METAL PARTITIONS.
3. ALL WIRE TO BE MINIMUM #12.
4. ALL FIXTURES THAT ARE REMOVED AND REINSTALLED SHALL BE CLEANED AND
RELAMPED.
5. CORING, CHOPPING, AND CHASING OF CONCRETE MAY ONLY BE DONE BEFORE 8:00
A.M. AND AFTER 6:00 P.M. OR ON WEEKENDS.
6. ALL FIXTURES THAT ARE REMOVED AND NOT REUSED SHALL BE TURNED OVER TO THE
BUILDING MANAGER IF REQUESTED.
7. TELEPHONE OUTLETS SHALL BE 3/4 INCH E.M.T. MINIMUM TO HUNG CEILING IF
TEFL0N WIRE IS TO BE USED. OTHERWISE, 3/4 INCH E.M.T. IS TO BE INSTALLED
TO TELEPHONE CLOSET OR CABINET.
8. ALL OPEN FLOOR OUTLETS MUST BE CAPPED.
9. ALL TELEPHONE FLOOR OUTLETS SHALL BE INSTALLED WITH A TWO (2) INCH
DIAMETER AFTERSET.
10. CONDUIT LARGER THAN TWO (2) INCHES SHALL BE RIGID OR ALUMINUM.
11. ALL HOME RUNS FROM ELECTRIC CLOSETS TO FIRST JUNCTION BOX SHALL BE
ALUMINUM CONDUIT.
12. ALL BRANCH CIRCUIT AND FEEDER WIRING SHALL BE TAGGED AT EACH BOX OR PANEL.
TAGS SHALL INDICATE CIRCUIT NUMBERS. A COMPLETE PANEL DIRECTORY MUST BE
LISTED IN EACH PANEL.
<PAGE> 119
13. ELECTRIC CLOSETS SHALL BE CLEANED OUT OF ALL DEBRIS AND EXCESS MATERIAL.
ALL PANEL COVERS AND TRIMS MUST BE REINSTALLED. ALL HOLES IN SLABS OR
WALLS WILL BE SEALED WITH APPROVED FIRE RATED MATERIALS.
14. ALL WIRING ABANDONED IN FLOOR DUCTS SYSTEMS MUST BE REMOVED, INCLUDING
TELEPHONE WIRING, BACK TO SOURCE, AND ALL DUCTS MUST BE VACUUMED. ALL
TELEPHONE WIRING ABANDONED IN HUNG CEILING MUST BE REMOVED.
15. ALL COMPONENTS SHALL BE U.L. APPROVED.
16. ALL WORK REQUIRING AN ELECTRICAL SHUTDOWN WHICH WILL AFFECT OTHER FLOORS
OF THE BUILDING OR EVEN AFFECT THE NORMAL CONTINUATION OF CONSTRUCTION
WORK ON THESE FLOORS, SHALL BE DONE ON OVERTIME HOURS AND SHALL NOT
DISTURB CONTINUITY OF ELECTRICAL SERVICE TO EXISTING TENANTS ON THE
AFFECTED FLOORS.
17. EQUIPMENT NOT ASSOCIATED WITH ELECTRICAL SUPPLY OR DISTRIBUTION MUST NOT
BE MOUNTED OR STORED IN AN ELECTRICAL CLOSET (INCLUDES TELEPHONE, ALARM
EQUIPMENT, ETC).
TELEPHONES
1. ALL WIRING IN WALLS MUST BE RUN IN CONDUIT OR GREENFIELD AND OUTLETS MUST
HAVE OUTLET BOX AND COVER PLATE.
2. NO [Rider eight] [MORE THAN SIX (6) FEET OF -- replaced by Rider eight]
CABLE OR WIRE CAN BE RUN EXPOSED ALONG ANY WALL. NO EXPOSED WIRING MAY BE
RUN ON ANY FLOOR. ALL SUCH WIRING MUST BE PROPERLY COVERED.
3. CEILING TILES AND LIGHT FIXTURES CANNOT BE REMOVED WITHOUT PRIOR CONSENT
OF THE LANDLORD AND MUST BE REPLACED BY THE CONTRACTOR OR THE BUILDING
PERSONNEL WILL DO SO AND MAKE THE NECESSARY CHARGES TO THE TENANT.
4. PRIOR TO ANY NEW INSTALLATIONS, ALL OLD OR OBSOLETE WIRING MUST BE
REMOVED. ALL NEW EXPOSED CABLING THAT IS RUN IN THE CEILING MUST BE TEFLON
WIRE TELEPHONE WIRE THAT IS NOT TEFLON MUST BE RUN IN 3/4 INCH E.M.T. TO
TELEPHONE CLOSET OR CABINET. (NOTE: SEE "ELECTRICAL" SECTION).
PLUMBING
<PAGE> 120
1. ALL WATER SUPPLY TO A FLOOR SHALL ORIGINATE ON THE SAME FLOOR FROM THE
NEAREST WET COLUMN WITH PROPER ACCESS FOR MAINTENANCE. PIPES SUPPLYING
SUCH FIXTURES SHALL BE INSULATED TO PREVENT SWEATING OR HEAT LOSS.
2. BRASS [Rider nine] PIPE MUST BE USED TO ALL SUPPLY SERVICE CONNECTIONS.
3. ALL WASTE LINES SHALL BE PROPERLY PITCHED AND PIPED TO INSURE TOTAL
DRAINAGE SO AS NOT TO CREATE OR FORM TRAPS: (EXCEPT AS MAY BE REQUIRED)
(E.G. AIR HANDLING UNITS).
4. ALL WASTE LINE CONNECTIONS SHALL BE MADE BY MEANS OF LONG TURN OR 45
DEGREE "Y" FITTINGS AND SHALL MAINTAIN EXISTING CLEAN-CUT CONNECTIONS AT
FITTINGS.
5. ALL PIPING SHALL CONFORM TO THE PLUMBING CODE, DEPARTMENT OF BUILDINGS,
CITY OF NEW YORK, OR LANDLORD'S STANDARDS, WHICHEVER ARE MORE RESTRICTIVE.
HEATING, VENTILATION AIR CONDITIONING
1. DETAILED PLANS OF THE PROPOSED INSTALLATION SHOWING EQUIPMENT, INCLUDING
MAKE, MODEL, MEA OR BSA NUMBER, CAPACITY, ELECTRICAL REQUIREMENTS AND
RATINGS, WEIGHT, PHYSICAL DIMENSIONS, DUCTS OR DUCT ADDITIONS OR
REVISIONS, MANNER OF BRACING OR SUPPORT FOR ALL DUCTWORK, PLUS ALL
REQUIRED ELECTRICAL AND PLUMBING LINES INDICATING SIZE AND COMPOSITION OF
SUCH LINES.
2. COMPLIANCE MUST BE SHOWN WITH ALL APPLICABLE PROVISIONS OF LOCAL LAW NO.
5, INCLUDING LOCATION OF FIRE DAMPERS AND ACCESS PANELS, COMPARTMENTATION,
ETC.
3. PLANS SHOULD INDICATE REFRIGERATION, CONDENSER, CONDENSATE STEAM AND/OR
HOT WATER PIPING, WITH MATERIAL AND SIZE OF LINES DELINEATED.
HVAC - CONDENSER PIPING
1. CONDENSER WATER PIPING SHOULD BE BLACK IRON, SCHEDULE 40 OR 80 FOR LINES 2
1/2" OR SMALLER; SCHEDULE 80 FOR ALL PIPE 3" OR OVER. VALVES ARE TO BE
JENKINS 62U OR EQUAL OF DOMESTIC MANUFACTURE. CLOSE OR SHOULDER NIPPLES
WILL NOT BE APPROVED.
2. LOW PRESSURE STEAM LINES ARE TO FOLLOW SIMILAR GUIDELINES TO THOSE USED
FOR CONDENSED WATER PIPING, EXCEPT FOR
<PAGE> 121
FITTINGS WHICH ARE TO BE CASE STEAM FITTINGS WITH A MINIMUM 150 LBS.
RATING.
3. ALL LOW PRESSURE STEAM LINES UP TO 2 1/2" MAY BE THREADED USING APPROVED
LAMP WICK AND PIPE SEALING COMPOUNDS.
4. PIPING, 3" OR OVER, IS TO BE SCHEDULE [Rider ten] [80 -- replaced by Rider
ten] WELDED, WITH FLANGED CONNECTIONS TO VALVES, CONTROLS, ETC.
5. ALL MEDIUM AND HIGH PRESSURE STEAM LINES, REGARDLESS OF SIZE, ARE TO BE
SCHEDULE [Rider eleven] [80--replaced by Rider eleven] BLACK IRON WITH
HIGH PRESSURE FITTINGS.
6. ON PIPE DRAWINGS, SHOW ALL SPECIALTY ITEMS SUCH AS TRAPS, VALVES,
PROVISION FOR EXPANSION AND CONTROLS.
7. PROVIDE ON ALL MAIN FAN COILS, PUMPS, CONDENSERS, AND CHILLED WATER
EVAPORATORS, PRESSURE GAUGES AND THERMOMETERS ON ALL WATER ENTERING AND
LEAVING SIDES. GAUGES SHOULD BE MOUNTED ON CONTROLLABLE PIGTAILS WITH 1/4"
PORTS AND MANUAL CONTROL VALVES.
8. REFRIGERATION LIKES SHOULD BE COPPER WITH WROUGHT IRON FITTINGS, EITHER
TYPE "L" OR "K", BRAZED OR HARD SOLDERED. INDICATE LOCATION OF SIGHT
GLASSES, SOLENOIDS, FILTERS, PRESSURE CONTROLS, DEHYDRATORS, VALVES, ETC.
(ON SELF-CONTAINED UNITS SUCH DELINEATION WILL NOT BE REQUIRED). WHERE
CONTROL DEVICES ARE NOT WITHIN THE CASINGS, THESE ARE TO BE INDICATED.
PROVIDE IDENTIFICATION MANUFACTURER'S NAME AND TYPE ON SUCH ITEMS.
9. CONDENSATE PIPING MAY BE COPPER, TYPE "L" OR "K", OR GALVANIZED IRON. SHOW
RUNS, CONDENSATE PUMPS WITH INDICATED CAPACITY WHERE USED, AND DRAIN
OUTLETS.
10. COPPER TUBING MUST BE HARD SOLDERED OR BRAZED.
11. ALL CONDENSATE LINES ARE TO BE INSULATED WITH A MINIMUM OF 1/2" ARMAFLEX
OR EQUAL, OR 1" FIBERGLASS, PREMOLDED.
HVAC - CONTROLS
1. A CONTROL SCHEMATIC WITH SEQUENCE OF OPERATION SHOULD BE INCLUDED EITHER
ON THE PLAN OR ATTACHED THERETO. SHOW ALL CONTROLS, VAV'S AUTOMATIC
DAMPERS, ETC.
<PAGE> 122
2. CONTROLS MAY BE PNEUMATIC, ELECTRONIC, ELECTRIC OR FLUIDIC. HOWEVER, FINAL
DETERMINATION MUST HAVE INDIVIDUAL BUILDING APPROVED CONTROL SYSTEMS.
PNEUMATIC TUBING MAY BE FIREPROOF PLASTIC OR COPPER.
HVAC - DUCTS
1. ALL DUCTWORK MUST BE MADE OF METAL. FIBERGLASS, PLASTIC OR FLAMMABLE
MATERIAL WILL NOT BE PERMITTED.
2. EXCEPTIONS TO THE ABOVE MAY BE MADE WHERE CONNECTIONS TO LIGHT TROFFERS,
VAV BOXES OR CONTROL SYSTEM WOULD CAUSE A HARDSHIP. A MAXIMUM OF 7' WILL
BE PERMITTED FOR SUCH APPLICATIONS, PROVIDED THAT THE MATERIAL USED IS
FLEXIBLE METAL OR SOME OTHER MATERIAL CONFORMING TO FIREPROOF CLASS I
DUCTS AS DESCRIBED UNDER STANDARD FOR AIR DUCTS U.L. 181, NOVEMBER 1961,
AND PROVIDED THAT THE AIR TEMPERATURE IN THE DUCT DOES NOT EXCEED 250
DEGREES F.
3. ALL ELECTRICAL WIRING MUST BE ENCASED IN E.M.T. OR SIMILAR MATERIAL.
TEFLON COATED WIRE CARRYING A MAXIMUM OF 24 VOLTS MAY BE USED FOR CONTROL
WIRING.
HVAC - PIPING AND DUCT SUPPORTS
1. ALL DUCTWORK AND/OR PIPING MUST BE SUPPORTED IN CONFORMITY WITH DEPARTMENT
OF BUILDINGS RULES RELATING THERETO.
2. SUPPORT STRAPS OR HANGERS MUST BE CONNECTED TO A STRUCTURALLY SOUND MEMBER
IN OR AT THE CEILING. THE DROPPED CEILING CARRIERS MAY NOT BE USED FOR
SUCH PURPOSE, NOR WILL CUT NAILS DRIVEN INTO CONCRETE COVERING BE
ACCEPTED.
3. WHERE REQUIRED FOR VIBRATION ISOLATION, FLEXIBLE NONMETALLIC, FIRE
RETARDING ACOUSTICAL CONNECTORS NOT EXCEEDING 12" IN LENGTH SHOULD BE USED
IN THE DUCT SYSTEM. SUCH CONNECTION SHOULD BE INSTALLED ON ALL FANS,
CONDENSERS, OR EQUIPMENT OF NON- STATIC TYPE.
4. ON LONG STEAM OR HOT WATER RUNS, PROVISIONS SHOULD BE MADE BY PIPE DESIGN
OR THE USE OF SPECIALTY DEVICES FOR EXPANSION.
HVAC - PIPING AND DUCT INSULATION
<PAGE> 123
1. ALL PIPING LINES EXCEPT REFRIGERATION LIQUID OR HOT GAS LINES, AND ALL
SUPPLY AND OUTSIDE AIR DUCTS MUST BE INSULATED. WHERE BUILDING STANDARD
ALLOWS THE USE OF INSULATED DUCTS IN A HUNG CEILING USED AS A RETURN AIR
PLENUM OR EXPOSED IN THE CONDITIONED AREA, SUPPLY DUCTS WILL NOT BE
REQUIRED TO BE INSULATED.
2. FOR ALL OTHER SUCH PIPING AND DUCT APPLICATIONS, THE FOLLOWING WILL BE
APPLICABLE: (NOTE: CONDENSER WATER PIPING TO AND FROM WATER CONSERVING
TOWER SYSTEMS WILL NOT REQUIRE INSULATION UNLESS PIPING IS THROUGH A
CEILING PLENUM, IN WHICH CASE IT MUST BE INSULATED).
HOT WATER AND STEAM LINES INCLUDING FITTINGS AND VALVES MUST BE COVERED
WITH MOLDED FIBERGLASS, 4 LBS. PER CUBIC FOOT DENSITY, WITH FIRE RETARDING
LAMINATED COVER AND FINISH CEMENT, WHERE EXPOSED. COVER TO CONFORM TO NFPA
255 OR UL-723 REQUIREMENTS.
FLAME SPREAD 25
FUEL CONTRIBUTED 50
SMOKE DEVELOPED 50
FOR COLD WATER AND REFRIGERATION SUCTION LINES, INSULATION SHOULD BE AS
DESCRIBED ABOVE FOR HOT WATER LINES, OR MAY BE 1/2" ARMAFLEX OR EQUAL.
INSULATION 14UST BE APPLIED IN A CONTINUOUS PATTERN PROPERLY SEALED AND
SUPPORTED, AND COVERED BY OR INHERENTLY CAPABLE (ARMAFLEX) OR PROVIDING AN
UNBROKEN VAPOR BARRIER FOR THE ENTIRE LENGTH OF LINE.
OUTSIDE AIR DUCTS AND SUPPLY DUCTS IN NON-AIRCONDITIONED AREAS WILL
REQUIRE A COVERING OF 1 1/2" ALUMINUM BACK FIBERGLASS, APPLIED IN
ACCORDANCE WITH INDUSTRY STANDARDS.
CONDENSER DUCTS ON AIR COOLED UNITS MUST RAVE A MINIMUM OF 1" COATED
FIBERGLASS LINER ON BOTH AIR DISCHARGE AND INTAKE.
WATERPROOF CONNECTIONS AND INSULATED DUCTWORK WITH SUITABLE VAPOR BARRIER
WILL BE REQUIRED FOR ALL TOWER SUPPLY AND DISCHARGE DUCTS.
3. IN INSTALLING PIPE OR DUCT SUPPORTS, EXISTING FIREPROOFING SHALL NOT BE
DISTURBED. IF, HOWEVER, DISTURBANCE OF SUCH
<PAGE> 124
MATERIAL IS UNAVOIDABLE, ANY FIREPROOFING THAT IS DISTURBED OR REMOVED
FROM STEEL BEAMS OR ANY STRUCTURAL MEMBERS MUST BE RESTORED TO ITS
ORIGINAL CONDITION IMMEDIATELY UPON COMPLETION OF THIS PHASE OF THE
PROJECT.
4. NOTE THAT ALL PIPE OR DUCT SUPPORTS MUST BE BOLTED OR WELDED. NO CLAMP
DEVICES WILL BE ACCEPTED EXCEPT FOR A FULL BEAM CLAMP. FOLLOWING SUCH A
BEAM CLAMP INSTALLATION, FIREPROOFING WILL BE REQUIRED.
5. BUILDING DEPARTMENT REGULATIONS PERTAINING TO SUCH SUPPORTS WILL BE THE
MINIMUM ACCEPTABLE STANDARD.
6. ON ALL AIR COOLED EQUIPMENT USING BUILDING WINDOWS, IF LOCATION IS
ACCEPTABLE TO THE BUILDING MANAGER, STAINLESS STEEL OR EXTRUDED ALUMINUM
LOUVERS WILL BE REQUIRED. THESE MUST BE INDICATED. WHERE COLOR CONFLICTS
WOULD OCCUR WITH CONVENTIONAL METAL SURFACES, SUCH LOUVERS WILL BE
REQUIRED TO BE ANODYZED OR COLORED TO CONFORM TO SURROUNDING SURFACES.
7. ALL EQUIPMENT HAVING MOVING PARTS WILL BE REQUIRED TO BE MOUNTED ON OR
SUSPENDED BY PROPERLY DESIGNATED VIBRATION ABSORBERS.
MISC. BUILDING STANDARDS
1. CEILING TILES - U.S. GYPSUM #707 GLACIER WHITE 2'X2'
2. FIXTURES - PARALUX, 2 X 4, 24 CELL
- METALUX, 1.5 x 1.5 x 1
- ACRYLIC SILVER LOUVER
- MAXFLUX, 2' X 2', FLUORESCENT U TUBE
3. VENETIAN BLINDS - 1 INCH LEVOLAR BLINDS (OR EQUIVALENT) - ALABASTER COLOR.
4. BALLASTS - STANDARD TO BE DETERMINED IN THE NEAR FUTURE WHICH WILL BE
FOLLOWED BY AN UPDATE.
INSURANCE REQUIREMENTS FOR TENANT, VENDORS, & CONTRACTORS
PERFORMING TENANT ALTERATIONS
TENANT, ITS CONTRACTORS AND SUBCONTRACTORS AND VENDORS SHALL MAINTAIN, AT
THEIR SOLE COST, AND SHALL REQUIRE ANY OTHER SUB-CONTRACTOR THEY MAY ENGAGE
TO MAINTAIN, AT ALL TIMES, WHILE PERFORMING
<PAGE> 125
WORK HEREUNDER, THE INSURANCE SET FORTH BELOW WITH COMPANIES SATISFACTORY TO
OWNER. A CERTIFICATE OF INSURANCE (A "CERTIFICATE") EVIDENCING THE COVERAGE
SET FORTH BELOW, NAMING ( ) AND MENDIK REALTY AS ADDITIONAL INSUREDS SHALL BE
DELIVERED TO OWNER PRIOR TO THE COMMENCEMENT OF THE WORK. THE POLICY UNDER
WHICH THE CERTIFICATE WAS ISSUED SHALL BE DELIVERED TO OWNER UPON SEVEN (7)
DAYS WRITTEN NOTICE FROM OWNER. THE POLICY AND THE CERTIFICATE SHALL PROVIDE
FOR THIRTY (30) DAYS' NOTICE IN WRITING TO OWNER PRIOR TO CHANGE OR
CANCELLATION OF SUCH POLICY.
1. WORKERS COMPENSATION INSURANCE AS REQUIRED
BY THE STATE INCLUDING EMPLOYER'S LIABILITY
INSURANCE.
2. COMPREHENSIVE GENERAL LIABILITY INSURANCE,
INCLUDING PRODUCTS/COMPLETED OPERATIONS,
CONTRACTUAL LIABILITY, BROAD FORM PROPERTY
DAMAGE LIABILITY AND PERSONAL INJURY
LIABILITY, WITH LIMITS OF LIABILITY OF NOT
LESS THAN $3,000,000 PER OCCURRENCE. THE
INSURANCE COVERAGE MAY BE PROVIDED IN
COMBINATIONS OF PRIMARY GENERAL LIABILITY
AND EXCESS LIABILITY (UMBRELLA FORM).
3. AUTOMOBILE LIABILITY INCLUDING NON-OWNED AND
HIRED VEHICLE COVERAGE WITH LIMITS OF
LIABILITY OF $3,000,000 PER OCCURRENCE.
4. IN THE EVENT TENANT OR ITS CONTRACTORS, ARE
UNDERTAKING MAJOR ALTERATIONS, LANDLORD
<PAGE> 126
RESERVES THE RIGHT TO INCREASE THE AMOUNT OF
COVERAGE REQUIRED HEREUNDER. OWNER SHALL
RESERVE THE RIGHT TO REQUIRE TENANT OR ITS
CONTRACTORS TO PROCURE AN LANDLORD'S
PROTECTIVE POLICY.
MENDIK REALTY CO., INC.
BUILDING LIGHTING STANDARD
AS A RESULT OF EXTENSIVE RESEARCH INTO ENERGY EFFICIENT LAMPS AND BALLASTS, AND
A MORE AESTHETICALLY PLEASING FIXTURE, BY INDEPENDENT LABORATORIES, OUR OWN IN
HOUSE TESTING AND THE EFFORTS OF OTHER INDUSTRY PERSONNEL, THE SPECIFIC TYPE OF
BALLASTS AND LAMPS OUTLINED BELOW ARE, TO DATE, CONSIDERED THE BEST IN TERMS OF
QUALITY, RELIABILITY AND EFFICIENCY.
THEY NOW CONSTITUTE OUR BUILDING LIGHTING STANDARD.
THE RESULTS OF IMPLEMENTING THIS NEW STANDARD WILL INCREASE THE AVAILABILITY
OF ELECTRIC POWER AND BRING OUR BUILDINGS INTO COMPLIANCE WITH THE NEW YORK
STATE ENERGY OFFICE LIGHTING STANDARDS.
FLUORESCENT LIGHTING
2' x 4 ' Fixtures in Tenant Areas
ALL 2' X 4' FIXTURES WITHIN TENANT AREAS WILL HAVE NO MORE THAN THREE
LAMPS PER FIXTURE. THE TYPE OF LAMP UTILIZED SHOULD BE EITHER A GENERAL ELECTRIC
OR SYLVANIA SUPER SAVER 30 OR 34 WATT LAMP (WARM WHITE IS PREFERRED TO COOL
WHITE LAMPS). THE ACCOMPANYING BALLAST SHOULD BE THE TYPE BY TRIAD. IF ANOTHER
ELECTRONIC BALLAST TYPE IS REQUESTED BY A TENANT, A TENANT MUST RECEIVE OUR
APPROVAL.
THE SPECIFICATION FOR THE ACTUAL FIXTURES/TROFFERS WILL, OF COURSE, DEPEND ON
THE AMOUNT OF SPACE AVAILABLE ABOVE EACH CEILING AREA. THE L0UVER SHOULD BE OF
THE DUST-FREE, PARABOLIC, ACRYLIC AND/OR ALUMINUM TYPE. THERE IS FLEXIBILITY IN
CHOICE HERE AS SOME TENANTS KAY PREFER A LARGER-CELLED OR SMALLER-CELLED
PARABOLIC WUVER.
1' x 4' Fixtures in Tenant Areas
<PAGE> 127
ALL 1' X 4' FIXTURES WITHIN TENANT AREAS WILL HAVE NO MORE THAN TWO
LAMPS PER FIXTURE. THE TYPE OF LAMP UTILIZED SHOULD BE EITHER A GENERAL ELECTRIC
OR SYLVANIA SUPER SAVER 30 OR 34 WATT (WARM WHITE IS PREFERRED TO COOL WHITE
LAMPS). THE ACCOMPANYING BALLAST SHOULD BE THE TYPE BY TRIAD. IF ANOTHER
ELECTRONIC BALLAST TYPE IS REQUESTED BY A TENANT, TENANT MUST RECEIVE OUR
APPROVAL.
THE SPECIFICATION FOR THE ACTUAL FIXTURES/TROFFERS WILL, OF COURSE, DEPEND ON
THE AMOUNT OF SPACE AVAILABLE ABOVE EACH CEILING AREA. THE LOUVER SHOULD BE OF
THE DUST-FREE, PARABOLIC, ACRYLIC AND/OR ALUMINUM TYPE. THERE IS FLEXIBILITY IN
CHOICE HERE AS SOME TENANTS MAY PREFER A LARGER-CELLED OR SMALLER-CELLED
PARABOLIC L0UVER.
2' x 2' Fixtures in Tenant Areas
ALL 2' X 2' FIXTURES WITHIN TENANT AREAS WILL HAVE NO MORE THAN TWO U-34
WATT ENERGY-EFFICIENT LAMPS (WARM WHITE IS PREFERRED TO COOL WHITE LAMPS). THE
ACCOMPANYING BALLAST SHOULD BE THE TYPE BY TRIAD. IF ANOTHER ELECTRONIC BALLAST
TYPE IS REQUESTED BY A TENANT, TENANT MUST RECEIVE OUR APPROVAL.
THE SPECIFICATION FOR THE ACTUAL FIXTURES/TROFFERS WILL, OF COURSE, DEPEND ON
THE AMOUNT OF SPACE AVAILABLE ABOVE EACH CEILING AREA. THE LOUVER SHOULD BE OF
THE DUST-FREE, PARABOLIC, ACRYLIC AND/OR ALUMINUM TYPE. THERE IS FLEXIBILITY IN
CHOICE HERE AS SOME TENANTS MAY PREFER A LARGER-CELLED OR SMALLER-CELLED
PARABOLIC LOUVER.
INCANDESCENT LIGHTING IN CORRIDOR AND TENANT AREAS
ALL INCANDESCENT LAMPS SHOULD BE OF THE ENERGY-EFFICIENT TYPE. FOR EXAMPLE, A
150 WATT STANDARD INCANDESCENT LAMP CAN BE REPLACED WITH AN INCANDESCENT 90 WATT
PAR LAMP, WHICH PRODUCES THE SAME LIGHT OUTPUT AND SAVES 60 WATTS.
FOR YOUR INFORMATION AND FILES, ATTACHED ARE THE BROCHURES AND SPECIFICATIONS
FOR THE FIXTURES, LAMP AND BALLAST TYPES MENTIONED ABOVE.
Rider twelve
<PAGE> 128
SAMPLE "A"
GENERAL RELEASE, WAIVER OF LIEN
AND INDEMNIFICATION
TO: RE:
Mendik Realty Company, Inc.
The undersigned, in consideration of payments made to it, hereby waives and
releases all actions, debts, claims and demands against _______________________
and Mendik Realty Company, Inc. on account of or related to any and all work,
services, equipment and materials performed and furnished by it, in connection
with the construction of the improvements on real property referenced above; and
Hereby waives any mechanic's materialman's or like liens, and all rights to file
any such lion in the future against such real property on account of said work,
services, equipment and materials performed or furnished by it; and
Hereby represents and warrants that it agrees to and has paid and released of
record all mechanic's, materialman's and like liens filed before this date by
others in connection with work undertaken in connection with this project, and
hereby agrees promptly to pay, and release of record all mechanic's,
materialman's like liens affecting said real property, and to defend, indemnify
and save ______________________________________ and Mendik Realty Company, Inc.
harmless from and against any cost, liability, damage expense (including
attorney's fees) resulting directly or indirectly from any liens filed against
the real property or removal of same or from any breach of any representation or
warranty agreement contained herein; and
Hereby agrees to the amount of $ __________________ as final payment in
connection with work performed to the real property of the improvements thereon
and further agrees that there are no additional amounts due or owing.
DATE:_______________ ___________________________________
Company:
Name:
Title:
Sworn to before me this_____
day of ___________, 1990
_____________________________
Notary Public
<PAGE> 129
TENANT'S NAME:_________________________________________________________________
LOCATION OF ALTERATION:________________________________________________________
We are contemplating the following work in our premises:
(Please check appropriate space)
___ A major change in use or occupancy of our space
___ Renovations (Reconstruction)
___ Modify the present electrical system
___ Install or modify the present electrical system
___ Other (Please specify)_____________________________________________________
_______________________________________________________________________________
Please supply the following information:
1. Approximate square footage involved:_______________________________________
2. Name of Architect or Designer:_____________________________________________
Address:_____________________ Telephone:__________________________________
3. Name of person in your office responsible for the work:____________________
_____________________________ Telephone:__________________________________
4. Briefly describe the alteration work:______________________________________
_______________________________________________________________________________
5. Estimate starting date:______________ Completion:___________________________
6. Name and address of contractor performing the work:
_______________________________________________________________________________
_______________________________________________________________________________
7. Estimated cost of the work:________________________________________________
_______________________________________________________________________________
Requested by:__________________________________________________________________
Authorized officer:____________________________________________________________
Title:_________________________________________________________________________
Date:________________________
Consent granted by:____________________________________________________________
Authorized officer:____________________________________________________________
Title:_________________________________________________________________________
Date:________________________
PLEASE RETURN TO BUILDING MANAGER'S OFFICE
<PAGE> 130
RIDER TO RULES AND REGULATIONS FOR TENANT
ALTERATIONS WORK PERFORMED IN BUILDINGS OWNED
AND MANAGED BY MENDIK REALTY COMPANY, INC.
1. GENERAL MATTERS
SUBJECT TO COMPLIANCE WITH ALL REQUIREMENTS, THE STANDARDS FOR MATERIALS
CONTAINED IN THESE ALTERATION RULES AND REGULATIONS SHALL NOT BE
APPLICABLE TO MATERIALS INSTALLED BY TENANT IN THE PREMISES PRIOR TO THE
DATE OF THIS LEASE AND EXISTING IN THE PREMISES ON THE DATE OF THIS LEASE.
IN ADDITION, SUBJECT TO COMPLIANCE WITH ALL REQUIREMENTS, THE TERMS AND
PROVISIONS OF THIS LEASE AND THESE ALTERATION RULES AND REGULATIONS,
TENANT MAY REPLACE SUCH MATERIALS EXISTING ON THE DATE HEREOF WHICH ARE
NOT IN COMPLIANCE WITH THE STANDARDS SET FORTH IN THESE ALTERATION RULES
AND REGULATIONS WITH MATERIALS OF QUALITY EQUAL TO OR BETTER THAN THE
MATERIALS BEING REPLACED.
2. TO LANDLORD THE REASONABLE OUT-OF-POCKET COSTS OF
3. TWENTY-FOUR (24) HOURS IN ADVANCE OF WORK COMMENCEMENT AND IS SUBJECT TO
PRIOR RESERVATIONS BY LANDLORD AND OTHER TENANTS AND OCCUPANTS OF THE
BUILDING). TENANT SHALL USE ITS REASONABLE EFFORTS TO GIVE TO LANDLORD AS
MUCH ADVANCE NOTICE OF SUCH WORK SCHEDULE AS IS PRACTICABLE (BUT NOT LESS
THAN TWENTY-FOUR (24) HOURS ADVANCE NOTICE).
4. SIXTY (60) DAYS OF JOB COMPLETION. IF TENANT SHALL BE UNABLE TO DELIVER
SUCH SIGNED OFF BUILDING PERMITS WITHIN SUCH SIXTY (60) DAY PERIOD BECAUSE
OF DELAYS CAUSED BY ANY GOVERNMENTAL AUTHORITY THEN, SUBJECT TO COMPLIANCE
WITH ALL REQUIREMENTS, AND PROVIDED THAT TENANT SHALL AT ALL TIMES USE ITS
DILIGENT EFFORTS TO OBTAIN SUCH SIGNED OFF BUILDING PERMITS, SUCH SIXTY
(60) DAY PERIOD WITH RESPECT TO THE DELIVERY OF SUCH BUILDING PERMITS
SHALL BE EXTENDED BY THE PERIOD OF THE DELAY CAUSED BY THE GOVERNMENTAL
AUTHORITIES.
5. MALE AND FEMALE WORKERS WILL EACH
6. IF REMOVED BY TENANT, OR IF TENANT, PRIOR TO THE DATE HEREOF, IN ITS
CAPACITY AS OWNER OF THE BUILDING, SHALL HAVE FAILED TO INSTALL SUCH
FIREPROOFING AS REQUIRED PURSUANT TO A REQUIREMENT. IF TENANT SHALL
DISCOVER ANY
<PAGE> 131
MISSING FIREPROOFING WHICH IS NOT THE OBLIGATION OF TENANT TO REPLACE,
TENANT SHALL IMMEDIATELY NOTIFY LANDLORD THEREOF.
7. SUBJECT TO THE TERMS AND PROVISIONS OF THIS LEASE, ALL RULES AND
REGULATIONS AND THE RIGHTS OF OTHER TENANTS AND OCCUPANTS OF THE BUILDING,
TENANT MAY ENTER UPON THE SPACE OF OTHER TENANTS IN THE BUILDING AS
NECESSARY TO PERFORM ALTERATIONS TO THE PREMISES.
8. IN EXCESS OF THE RUN PERMITTED BY ANY APPLICABLE REQUIREMENT
9. OR COPPER
10. 40
11. 40
12. EMERGENCY LIGHTING
TENANT, AT ITS EXPENSE AND SUBJECT TO ALL REQUIREMENTS, TERMS AND
PROVISIONS OF THIS LEASE AND ALL RULES AND REGULATIONS, SHALL EITHER (A)
CONNECT ITS EMERGENCY LIGHTING TO THE BUILDING EMERGENCY ELECTRICAL
SYSTEM, PROVIDED THAT A RISER IS AVAILABLE THEREFOR AND PROVIDED THAT SUCH
USE BY TENANT DOES NOT EXCEED THE ELECTRICAL CAPACITY AVAILABLE TO TENANT,
OR (B) IF SUCH RISER OR CAPACITY IS NOT AVAILABLE, TENANT SHALL USE
BATTERY PACK FIXTURES.
V13-06551-058
rider rls®s BJM11
<PAGE> 132
Schedule B
CLEANING SPECIFICATIONS
The following services will be performed for Tenant, at the
specified frequencies on Business Day nights.
FLOOR MAINTENANCE
Sweep composition tile flooring ................Daily
Vacuum Carpeting ...............................Twice Weekly
Wash and wax composition tile flooring .........Once A Year
WALL MAINTENANCE
Remove fingerprints and other smudges from
all painted and fabric walls, doors, glass
inserts on doors, door frames ..................Daily
LAVATORY SUPPLIES
Provide and install toilet tissue, paper
seat covers, paper towel and liquid hand
soap to all dispensers in Men's and Ladies'
lavatories .....................................Daily
Feminine hygiene products will be stocked
in coin operated vending machines in the
Ladies' lavatories .............................Daily
LIGHT MAINTENANCE
High Dust Fixtures .............................Once A Year
INTERIOR GLASS MAINTENANCE
Remove fingermarks and other smudges
from interior glass surfaces ...................Daily
Wash glass surfaces ............................Daily
WASTE CONTAINERS
Empty waste cans and ash trays in
offices and elevator areas .....................Daily
B-1
<PAGE> 133
ELEVATOR LOBBIES
Clean and vacuum all carpeting .................Daily
Clean and polish all marble ....................Every 6 months
Clean all stainless steel ......................Every 3 months
EXTERIOR GLASS MAINTENANCE
Clean exterior glass of all
perimeter windows ..............................Every 3 months
Clean interior glass of all
perimeter windows ..............................Every 3 months
LAVATORIES
Clean and disinfect all
fixtures, floors and tiles .....................Daily
B-2
<PAGE> 134
Schedule C
HVAC SPECIFICATIONS
The Building air conditioning systems shall supply to the Premises a
minimum of 0.15 cfm. of outside fresh air per net rentable square foot and a
minimum combined total of 0.9 cfm. per net rentable square foot, and maintain
temperatures and relative humidities as specified below throughout the Premises,
either by the use varying amounts of outside air or by mechanical refrigeration.
<TABLE>
<CAPTION>
Outside Conditions Inside Conditions
------------------ -----------------
<S> <C>
0(Degree) - 65(Degree) db 72(Degree) +/- 3(Degree) db
(Maximum inside relative humidity shall in
any event, when outside temperature is 0-65
db, be limited to that which will not cause
condensation on the windows)
66(Degree) - 72(Degree) db 72(Degree)+/-3(Degree) db
73(Degree) - 82(Degree) db 74(Degree)+/-3(Degree) db, 50% RH+/-5%
83(Degree) - 90(Degree) db 76(Degree)+/-3(Degree) db, 50% RH+/-5%
91(Degree) - 95(Degree) db 78(Degree) max. db db, 50% RH +/- 5%
</TABLE>
C-1
<PAGE> 135
EXHIBIT A-1 through A-10
FLOOR PLANS
The following floor plans are annexed to and made a part of this
Lease solely to indicated the Premises by outlining and diagonal
marking. All areas, conditions, dimensions and locations are
approximate.
<PAGE> 136
Sample Form Entitled "Companies Affording Coverage"
<PAGE> 137
Diagram Entitled "8th Floor Plan"
<PAGE> 138
Diagram Entitled " 9th Floor Plan"
<PAGE> 139
Diagram Entitled "10th Floor Plan"
<PAGE> 140
Diagram Entitled "11th Floor Plan"
<PAGE> 141
Diagram Entitled "12th Floor Plan"
<PAGE> 142
Diagram Entitled "13th Floor Plan"
<PAGE> 143
Diagram Entitled "2nd Floor Plan"
<PAGE> 144
Exhibt "A-8"
Page 1 of 2
Diagram
<PAGE> 145
Exhibit "A-8"
Page 2 of 2
Diagram
<PAGE> 146
Diagram Entitled "1st Floor Plan"
<PAGE> 147
Diagram Entitled "1740, 18th Floor"
<PAGE> 1
EXHIBIT 10.13
AMENDMENT OF LEASE
THIS AMENDMENT OF LEASE (this "Amendment") dated as of April
26, 1996, between 1740 BROADWAY ASSOCIATES L.P., a Delaware limited partnership
having an office c/o Mendik Realty Company, Inc., 330 Madison Avenue, New York,
New York 10017 ("Landlord") and THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a
New York corporation having an office at 1740 Broadway, New York, New York 10019
("Tenant").
W I T N E S S E T H:
WHEREAS, by Agreement of Lease, dated as of December 17, 1990
(the "Lease"), Landlord leased to Tenant, and Tenant hired from Landlord,
certain premises (the "Original Premises") as more particularly described in the
Lease, in the building known as and by the address 1740 Broadway, New York, New
York (the "Building") and
WHEREAS, Tenant has requested, and Landlord has agreed, on the
terms and conditions hereinafter contained, to modify the Lease as hereinafter
provided.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and in the Lease, of Ten Dollars ($10) and of other good and
valuable consideration, the mutual receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto, for themselves, their legal
representatives, successors and assigns, hereby agree as follows:
1. Unless otherwise defined herein, all capitalized terms used
herein shall have the meanings ascribed to such terms in the Lease.
<PAGE> 2
2. The term of the Lease with respect to the Original Premises
and the Additional Premises (as defined in Paragraph 6 below; the Original
Premises and the Additional Premises, as the same may be increased pursuant
hereto by the Initial Additional Premises and the Option Space, collectively,
the "Premises") is hereby extended to May 31, 2016, upon all of the terms and
conditions of the Lease, as amended by this Amendment. All references in the
Lease to the Fixed Expiration Date shall be deemed to be references to May 31,
2016. Notwithstanding the foregoing (i) the Fixed Expiration Date in respect to
the Temporary Second Floor Premises occurred on January 31, 1991, the Temporary
Second Floor Premises are not a part of the Premises, and all references in the
Lease to the Temporary Second Floor Premises are hereby deleted, and (ii) the
Fixed Expiration Date in respect of the Tenth Floor Premises shall be December
31, 2000.
3. (A) Notwithstanding anything to the contrary contained in
the Lease, from and after June 1, 1996 (the "Effective Date"), the Fixed Rent in
respect of the Original Premises (other than the Tenth Floor Premises) shall be
as follows:
(i) Seven Hundred Twenty-Six Thousand Dollars
($726,000) per annum for the period commencing on June 1, 1996 and ending on
August 31, 1996 ($60,500 per month);
(ii)Seven Hundred Sixty-Six Thousand Eight Hundred
Thirty-Seven and 50/100 Dollars ($766,837.50) per annum for the period
commencing on September 1, 1996 and ending on November 30, 1996 ($63.903.13 per
month);
(iii) Four Million Four Hundred Sixty-Eight Thousand
One Hundred Thirty-Two and 50/100 Dollars ($4,468,132.50) per annum for the
period
2
<PAGE> 3
commencing on December 1, 1996 and ending on May 31, 2001 ($372,344.38
per month);
(iv)Five Million Twenty-Two Thousand Five Hundred
Twenty-Two and 50/100 Dollars ($5,022,522.50) per annum for the period
commencing on June 1, 2001 and ending on May 31, 2006 ($418,543.54 per month);
(v) Five Million Five Hundred Seventy-Six Thousand
Nine Hundred Twelve and 50/100 Dollars ($5,576,912.50) per annum for the period
commencing on June 1, 2006 and ending on May 31, 2011 ($464,742.71 per month);
and
(vi)Five Million Five Hundred Seventy-Six Thousand
Nine Hundred Twelve and 50/100 Dollars ($5,576,912.50) per annum for the period
commencing on June 1, 2011 and ending on May 31, 2016 ($464,742.71 per month).
B. Provided no Event of Default shall have occurred
and be continuing on the dates upon which the following credits are to be
granted, Tenant shall be entitled to a credit against Fixed Rent in the
aggregate amount of One Million Fifty-Nine Thousand Five Hundred Forty-Three and
60/100 Dollars ($1,059,543.60), to be applied in equal monthly installments of
Eight Thousand Eight Hundred Twenty-Nine and 53/100 Dollars ($8,829.53) on the
first day of each month during the period commencing on June 1, 2001 and ending
on May 31, 2011
4. (A) Notwithstanding anything to the contrary contained in
the Lease, from and after the Effective Date the Fixed Rent in respect of the
Tenth Floor Premises shall be One Million Sixty-Four Thousand Four Hundred
Twelve Dollars ($1,064,412) per annum for the period commencing on June 1, 1996
and ending on December 31, 2000 ($88,701 per month).
3
<PAGE> 4
B. Effective as of the Fixed Expiration Date in
respect of the Tenth Floor Premises, Tenant's Share shall be reduced by five and
six hundred forty-three one thousandths percent (5.643%), and the Space Factor
shall be reduced by 29,567.
5. (A) Landlord shall contribute an amount not to exceed One
Million Nine Hundred Forty-Two Thousand Two Hundred Sixty Dollars ($1,942,260)
(the "Original Premises Tenant Fund") toward the "hard costs" of the Alterations
(the "Original Premises Alterations") to be performed by Tenant to the Second
Floor Premises, the Eighth Floor Premises, the Ninth Floor Premises, the
Eleventh Floor Premises, the Twelfth Floor Premises, the Thirteenth Floor
Premises, and (solely to the extent hereinafter provided) space on the fourth
(4th) floor of the Building (the "Subleased Space") subleased by Tenant from
another tenant of the Building (collectively, the "Alteration Premises") during
the period from the Effective Date through the second (2nd) anniversary of the
Effective Date. For purposes of determining the "hard costs" of the Original
Premises Alterations, Landlord agrees that such "hard costs" may include the
professional fees (not in excess of ten percent (10%) of the Original Premises
Tenant Fund) of the architects, engineers and designers involved in the Original
Premises Alterations.
B. Landlord shall disburse a portion of the Original
Premises Tenant Fund to Tenant from time to time, within thirty (30) days after
receipt of the items set forth in Paragraph 5(C) hereof, provided that on the
date of a request and on the date of disbursement from the Original Premises
Tenant Fund no Event of Default shall have occurred and be continuing.
Notwithstanding the foregoing, any request for disbursement delivered to
Landlord during the period December 1 through December 15
4
<PAGE> 5
shall be disbursed by the 31st day of such month, provided that on the date of
the request and on the date of disbursement from the Original Premises Tenant
Fund no Event of Default shall have occurred and be continuing. Disbursements
from the Original Premises Tenant Fund shall not be made more frequently than
monthly, and shall be in an amount equal to the aggregate amounts theretofore
paid or payable (as certified by the Vice President, Corporate Services of
Tenant and Tenant's independent, licensed architect) to Tenant's contractors,
subcontractors, vendors and materialmen which have not been the subject of a
previous disbursement from the Original Premises Tenant Fund multiplied by a
fraction, the numerator of which is $1,942,260 and the denominator of which is
the total "hard costs" of the Original Premises Alterations as estimated by
Tenant's independent licensed architect and as approved by Landlord (which
approval shall not be unreasonably withheld or delayed), which fraction shall be
subject to readjustment as provided by Paragraph 5(C) hereof (but in no event
shall such fraction be greater than one (1)). In addition, in no event shall
more than Three Hundred Thousand Dollars ($300,000) be disbursed in respect of
Alterations to the Subleased Space.
C. Landlord's obligation to make disbursements from
the Original Premises Tenant Fund shall be subject to Landlord's verification of
the total cost of the Original Premises Alterations as estimated by Tenant's
independent licensed architect and receipt of: (a) a request for such
disbursement from Tenant signed by the Vice President, Corporate Services of
Tenant, together with the certification required by Paragraph 5(B) hereof, (b)
copies of all receipts, invoices and bills for the work completed and materials
furnished in connection with the Original Premises Alterations and incorporated
in or delivered to the Alteration Premises which are to be paid from the
requested
5
<PAGE> 6
disbursement or which have been paid by Tenant and for which Tenant is
seeking reimbursement, (c) copies of all contracts, work orders, change orders
and other materials relating to the work or materials which are the subject of
the requested disbursement or reimbursement, (d) if requested by Landlord,
waivers of lien from Tenant's general contractor or construction manager and all
major subcontractors involved in the performance of the Original Premises
Alterations relating to the portion of the Original Premises Alterations
theretofore performed and materials theretofore provided and for which previous
disbursements and/or the requested disbursement has been or is to be made
(except to the extent such waivers of lien were previously furnished to Landlord
upon a prior request), (e) a certificate of Tenant's independent licensed
architect stating (i) that, in his opinion, the portion of the Original Premises
Alterations theretofore completed and for which the disbursement is requested
was performed in a good and worker like manner and substantially in accordance
with the final detailed plans and specifications for such Original Premises
Alterations, as approved by Landlord, (ii) the percentage of completion of the
Original Premises Alterations as of the date of such certificate, (iii) the
revised estimated total "hard costs" to complete the Original Premises
Alterations and (f) the amount of the Alterations Fee then payable pursuant to
Section 3.2 of the Lease. If the revised estimated total "hard costs" of the
Original Premises Alterations increases above or decreases below the original
estimated total "hard costs" of the Original Premises Alterations by more than
five percent (5%), then the denominator of the fraction referred to in Paragraph
5(B) hereof shall be adjusted appropriately each time such "hard costs"
increases or decreases in increments of at least five percent (5%). If the
"hard costs" of the Original Premises Alterations decreases
6
<PAGE> 7
below the estimated cost thereof, then upon the completion (but for minor
punchlist items) of the Original Premises Alterations and the satisfaction of
the conditions set forth in Section 5(E) hereof, any portion of the Original
Premises Tenant Fund which has not been previously disbursed toward such "hard
costs" shall be disbursed by Landlord up to a maximum aggregate amount equal to
the lesser of (i) the total "hard costs" of the Original Premises Alterations
and (ii) the Original Premises Tenant Fund.
D. In no event shall the aggregate amount paid by
Landlord to Tenant under this Paragraph 5 exceed the amount of the Original
Premises Tenant Fund. Upon the completion of the Original Premises Alterations
and satisfaction of the conditions set forth in Paragraph 5(E) hereof, any
amount of the Original Premises Tenant Fund which has not been previously
disbursed and is not required to be disbursed pursuant to the provisions hereof
shall be retained by Landlord. Upon the disbursement of the entire Original
Premises Tenant Fund (or the portion thereof if upon completion of the Original
Premises Alterations the Original Premises Tenant Fund is not disbursed and is
not required to be disbursed pursuant to the provisions hereof), Landlord shall
have no further obligation or liability whatsoever to Tenant for further
disbursement of any portion of the Original Premises Tenant Fund to Tenant. It
is expressly understood and agreed that Tenant shall complete, at its sole cost
and expense, the Original Premises Alterations, whether or not the Original
Premises Tenant Fund is sufficient to fund such completion. Any costs to
complete the Original Premises Alterations in excess of the Original Premises
Tenant Fund shall be the sole responsibility and obligation of Tenant. In
connection with Tenant's performance of the Original Premises Alterations,
Landlord, at its sole cost and expense, shall repair any damage done to the
Premises or the Original
7
<PAGE> 8
Premises Alterations to the extent the same is due to the negligence or wrongful
acts or omissions of Landlord or its agents, employees or contractors.
E. Within sixty (60) days after completion (but for
minor punchlist items) of the Original Premises Alterations, Tenant shall
deliver to Landlord general releases and waivers of lien from all contractors,
subcontractors and materialmen involved in the performance of the Original
Premises Alterations and the materials furnished in connection therewith (unless
same previously were furnished pursuant to Paragraph 5(C) hereof), and a
certificate from tenant's independent licensed architect certifying that (i) in
his opinion the Original Premises Alterations have been performed in a good and
workerlike manner and completed (but for minor punchlist items) substantially in
accordance with the final detailed plans and specifications for such Original
Premises Alterations as approved by Landlord and (ii) to the best of his
knowledge, all contractors, subcontractors and materialmen have been paid all
amounts due and payable for the Original Premises Alterations and materials
furnished through such date.
F. If Landlord shall fail or refuse to disburse all
or any portion of the Original Premises Tenant Fund, the Additional Premises
Tenant Fund, or the Initial Additional Premises Tenant Fund when the same is
required to be disbursed pursuant to the provisions hereof, then Tenant may,
within sixty (60) days after such failure or refusal, notify Landlord of such
failure or refusal in writing. If Tenant shall notify Landlord as aforesaid and
Landlord shall fail or refuse to disburse the amount required to be disbursed
and specified in such notice by the date which is fifteen (15) days after
delivery of such notice, then, as Tenant's sole remedy (and as Landlord's sole
liability),
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Tenant may offset the amount required to be disbursed and specified in such
notice against the next succeeding installments of Fixed Rent and additional
rent thereafter payable under the Lease.
G. Notwithstanding anything to the contrary contained
in the Lease, (i) Tenant shall be entitled to three hundred fifty (350) hours in
the aggregate of free overtime freight elevator usage in connection with the
performance of the Original Premises Alterations, the Additional Premises
Initial Alterations and the Initial Additional Premises Initial Alterations,
(ii) in connection with the performance of Original Premises Alterations, the
Additional Premises Initial Alterations and the Initial Additional Premises
Initial Alterations, Tenant shall be entitled to, on prior request, but shall
not be required to pay for, overtime freight elevator usage during Business Days
from noon to 1:00 p.m. and Tenant shall have priority use of the freight
elevator during such hour, (iii) during the performance of the Original Premises
Alterations, the Additional Initial Premises Alterations and the Initial
Additional Premises Initial Alterations, except as set forth in clauses (i) and
(ii) above, Tenant shall pay for overtime freight elevator service at the rate
of Forty-Five Dollars ($45) per hour, and (iv) in connection with the
performance of the Original Premises Alterations, the Additional Premises
Initial Alterations and the Initial Additional Premises Initial Alterations, the
Alteration Fee payable by Tenant shall be equal to the reasonable out of pocket
costs and expenses incurred by Landlord and its agents to unrelated third
parties in connection with such Original Premises Alterations, the Additional
Premises Initial Alterations and the Initial Additional Premises Initial
Alterations, provided, however, that notwithstanding anything to the contrary
contained in the second paragraph of Paragraph No. 2 on Page 1
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of Schedule "A-2" of the Lease, the maximum amount which Tenant shall be
required to reimburse Landlord for its review of Tenant's initial submission
(but not any subsequent submission) of the plans and specifications for each of
the Original Premises Alterations, the Additional Premises Initial Alterations
and the Initial Additional Premises Initial Alterations shall not be greater
than Five Thousand Dollars ($5,000) per initial submission, which amount shall
be increased annually by the percentage increase, if any, in the Consumer Price
Index from that in effect on the date hereof.
H. Notwithstanding any provision of this Paragraph 5
to the contrary, Tenant shall not be required to deliver to Landlord any general
release or waiver of lien if Tenant shall be disputing in good faith the payment
which would otherwise entitle Tenant to such release or waiver, provided that
Tenant shall keep Landlord advised in a timely fashion of the status of such
dispute and the basis therefor and Tenant shall deliver to Landlord the general
release or waiver of lien when the dispute is settled. Nothing contained in this
Section, however, shall relieve Tenant from complying with the provisions of
Section 3.7(E) of the Lease.
6. (A) (1) Tenant hereby leases from Landlord the entire
rentable areas of the sixth (6th) floor of the Building as shown on Exhibit "A"
annexed hereto and made a part hereof (the "Sixth Floor Premises") and the
entire rentable area of the seventh (7th) floor of the Building as shown on
Exhibit "B" annexed hereto and made a part hereof (the "Seventh Floor
Premises"); the Sixth Floor Premises and the Seventh Floor Premises are
hereinafter referred to collectively as the "Additional Premises") for a term to
commence on the Additional Premises Commencement Date (hereinafter defined) and
to end on May 31, 2016, on all of the terms and conditions of the Lease, as
modified hereby. The
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"Additional Premises Commencement Date" shall be the date upon which Landlord
shall have delivered exclusive possession of the Additional Premises to Tenant
vacant, in "broom clean" condition, free from tenancies and occupancies (other
than tenancies and occupancies pursuant to this Lease), and with the work
("Landlord's Additional Premises Work") described as Exhibit "C" annexed hereto
and made a part hereof substantially completed. Upon the Additional Premises
Commencement Date, the Additional Premises shall be deemed a part of the Office
Premises for all purposes under the Lease, except as expressly provided herein.
Landlord shall give Tenant not less than ten (10) Business Days' notice of the
anticipated Additional Premises Commencement Date. Landlord covenants that if
Landlord consents to an early termination of the leases affecting the Additional
Premises (as opposed to an early termination of such leases which occurs without
Landlord's consent, such as, for example, pursuant to a provision of such leases
granting to the tenants under such leases an option or right to terminate, or a
termination pursuant to a default by the tenants under such leases), then the
Additional Premises Commencement Date shall not be earlier than June 1, 1997.
(2) Notwithstanding any provision of this Article 6
to the contrary, Tenant's obligation to lease from Landlord the Additional
Premises, and Landlord's obligation to lease to Tenant the Additional Premises,
shall be void and of no effect if such Additional Premises are leased by the
tenant under the lease with William Douglas McAdams, Inc. pursuant to a right or
option granted to such tenant prior to the date hereof or if the tenant under
the lease with Wells Rich Greene BDDP, Inc. existing as of the date hereof for
such Additional Premises shall renew its lease for the Additional Premises
pursuant to a right or option contained in such lease as of the date hereof. In
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addition, if Landlord is unable to deliver possession of any portion of the
Additional Premises by January 1, 1998 because of the holding over or retention
of possession of any tenant, undertenant or occupants in the Additional
Premises, then except as expressly provided in this Section, (i) Landlord shall
not be subject to any liability or failure to give possession on said date, (ii)
the validity of this Lease shall not be impaired under such circumstances, nor
shall the same be construed to extend the term of this Lease with respect to the
Additional Premises or otherwise, (iii) Tenant waives any right to rescind this
Lease under Section 223-a of the New York Real Property Law or any successor
statute of similar nature and purpose then in force, and (provided Landlord
fulfills its obligation under the following clause (v) hereof) further waives
the right to recover any damages which may result from Landlord's failure to
deliver possession of the Additional Premises or portion thereof to Tenant on
January 1, 1998 and agrees that the provisions of this Section shall constitute
an "express provision to the contrary" within the meaning of Section 223-a of
the New York Real Property law, (iv) provided Tenant is not responsible for such
inability to deliver possession, the Fixed Rent, Escalation Rent and all other
items of additional rent payable with respect to the portion of the Additional
Premises not delivered to Tenant shall be abated and the Additional Premises
Commencement Date with respect to the portion of the Additional Premises not
delivered to Tenant shall be postponed until ten (10) Business Days after
Landlord shall give Tenant notice that the Additional Premises or applicable
portion thereof is vacant and available for Tenant's occupancy, (v) Landlord, at
Landlord's expense, shall use its reasonable efforts to deliver possession of
the entire Additional Premises or applicable portion thereof to Tenant as soon
as practicable and in connection therewith shall
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promptly institute and diligently and in good faith prosecute holdover and any
other appropriate proceedings against the occupants of the Additional Premises
or applicable portion thereof, and (vi) if Landlord shall fail to deliver to
Tenant exclusive possession of the entire Additional Premises by June 30, 1998,
then Tenant, as its sole remedy, by not later than July 15, 1998, may elect to
revoke its right to lease the Additional Premises (or, if a portion thereof has
been previously delivered, the portion thereof not previously delivered), In
which event Tenant shall have no right to lease from Landlord, and Landlord
shall have no obligation to lease to Tenant, the Additional Premises (or, if a
portion thereof has been previously delivered, the portions thereof not
previously delivered).
(3) If Tenant's right to lease the Additional
Premises (or the portion thereof not previously delivered) shall be revoked or
become void or of no effect pursuant to this Paragraph 6, and if Landlord shall,
on or before January 14, 1999, have available up to sixty-one thousand five
hundred twenty-four (61,524) rentable square feet available for lease in the
Building, Landlord, from time to time, shall offer such available space (up to
sixty-one thousand five hundred twenty-four (61,524) rentable square feet) to
Tenant in writing. Tenant, within fifteen (15) days after receipt of Landlord's
notice(s) delivered from time to time, shall notify Landlord in writing if
Tenant elects to lease such space. If Tenant fails to deliver such notice within
such period, Tenant shall have no further right under this paragraph to lease
such offered space, subject to subsequent notices delivered by Landlord from
time to time on or before January 14, 1999. If Tenant shall notify Landlord of
its election to lease such space as aforesaid, then from and after the date of
delivery of such space to Tenant such space shall be deemed to be the
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Additional Premises for all purposes hereof. Notwithstanding the foregoing, if
Landlord shall have offered to Tenant, and Tenant shall have failed or refused
to lease, three (3) separate spaces of not less than fifteen thousand (15,000)
rentable square feet each, then Landlord shall thereafter have no obligation to
offer to Tenant, and Tenant shall have no right to lease, any space not
previously leased pursuant to this Paragraph 6(A)(3).
B. The Fixed Rent payable in respect of the
Additional Premises shall be as follows (it being agreed that if Tenant shall
lease from Landlord less than sixty-one thousand five hundred twenty-four
(61,524) rentable square feet of Additional Space pursuant to the provisions of
Paragraph 6(A) hereof, then the following amounts shall each be multiplied by a
fraction, the numerator of which is the number of rentable square feet of
Additional Premises leased by Tenant pursuant to Paragraph 6(A) hereof, and the
denominator of which is sixty-one thousand five hundred twenty-four (61,524)):
(i) One Million Six Hundred Sixty-One Thousand One
Hundred Forty-Eight Dollars ($1,661,148) per annum for the period commencing on
the Additional Premises Commencement Date and ending on May 31, 2001 ($138,429
per month);
(ii)One Million Nine Hundred Seven Thousand Two
Hundred Forty-Four Dollars ($1,907,244) per annum for the period commencing on
June 1, 2001 and ending on May 31, 2006 ($158,937 per month);
(iii) Two Million One Hundred Fifty-Three Thousand
Three Hundred Forty Dollars ($2,153,340) per annum for the period commencing on
June 1, 2006 and ending on May 31, 2011 ($179,445 per month); and
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(iv)Two Million Four Hundred Sixty Thousand Nine
Hundred Sixty Dollars ($2,460,960) per annum for the period commencing on June
1, 2011 and ending on May 31, 2016 ($205,080 per month).
C. From and after the Additional Premises
Commencement Date, (x) Tenant's Share shall be increased by eleven and seventy
four one hundredths percent (11.74%), (y) the Space Factor shall be increased by
61,524, and (z) Tenant shall be entitled to a credit against the first payments
of Fixed Rent payable under this Amendment in respect of the Additional Premises
in an aggregate amount equal to One Million Six Hundred Sixty-One Thousand One
Hundred Forty-Eight Dollars ($1,661,148), it being agreed that if Tenant shall
lease from Landlord less than sixty-one thousand five hundred twenty-four
(61,524) rentable square feet of Additional Premises pursuant to the provisions
of Paragraph 6(A) hereof, then each of the foregoing amounts shall each be
multiplied by a fraction, the numerator of which is the number of square feet of
Additional Premises leased by Tenant pursuant to Paragraph 6(A) hereof, and the
denominator of which is sixty-one thousand five hundred twenty-four (61,524).
D. Tenant shall accept the Additional Premises in its
then "as is" condition, and except for the performance of Landlord's Additional
Premises Work, Landlord shall have no obligation to prepare the same for
Tenant's occupancy or provide any money for the preparation of the same, except
that Landlord shall contribute an amount equal to Two Million Four Hundred Sixty
Thousand Nine Hundred Sixty Dollars ($2,460,960) (the "Additional Premises
Tenant Fund") toward the "hard costs" of performing the Alterations made by
Tenant to initially prepare the Additional Premises for occupancy by Tenant (the
"Additional Premises Initial Alterations") and the "hard
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costs" of performing Alterations to other portions of the Premises during the
period from the Additional Premises Commencement Date through the second (2nd)
anniversary of the Additional Premises Commencement Date; provided, however,
that not less than fifty percent (50%) of the Additional Premises Tenant Fund
must be applied toward the "hard costs" of performing the Additional Premises
Initial Alterations. For purposes of determining the "hard costs" of the
Additional Premises Initial Alterations, Landlord agrees that such "hard costs"
may include the professional fees (not in excess of ten percent (10%) of the
Additional Premises Tenant Fund) of the architects, engineers and designers
involved in the Additional Premises Initial Alterations. Notwithstanding the
foregoing, if Tenant shall lease from Landlord less than sixty-one thousand five
hundred twenty-four (61,524) rentable square feet of Additional Premises
pursuant to the provisions of Paragraph 6(A) hereof, then the amount of the
Additional Premises Tenant Fund shall be an amount equal to Two Million Four
Hundred Sixty Thousand Nine Hundred Sixty Dollars ($2.460,960) multiplied by a
fraction, the numerator of which is the number of square feet of Additional
Premises leased by Tenant pursuant to Paragraph 6(A) hereof, and the denominator
of which is sixty-one thousand five hundred twenty-four (61,524). The Additional
Premises Tenant Fund shall be disbursed on and subject to the provisions of
Paragraph 5 hereof, except that (i) all references therein to the "Original
Premises Tenant Fund," the "Original Premises Alterations", the "Alteration
Premises" and the number "$1,942,260" shall be deemed to be references to the
"Additional Premises Tenant Fund", the "Additional Premises Initial
Alterations", the "Additional Premises" and the number "$2,460,960" (or the
applicable portion thereof), respectively.
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E. Provided no Event of Default shall exist at (x) the time of
the delivery of Tenant's notice referred to this Section (E) or (y) on the
Initial Additional Premises Commencement Date, Tenant shall have the option,
exercisable by written notice delivered to Landlord within sixty (60) days after
the date hereof to lease the entire rentable area of the eighteenth (18th) floor
of the Building (the "18th Floor Premises") and/or nineteenth (19th) floor of
the Building (the "19th Floor Premises") (the "Initial Additional Premises") as
shown on Exhibit "E" annexed hereto and made a part hereof. If Tenant shall
deliver such notice as aforesaid, then Tenant shall be deemed to have leased
such Initial Additional Space for the period commencing on the Initial
Additional Premises Commencement Date and ending on the Fixed Expiration Date
(subject to the provisions of Article 39 hereof) on all the same terms and
conditions of this Lease, except as set forth in this Article. The "Initial
Additional Premises Commencement Date" shall be the date on or after March 1,
1998 upon which Landlord shall have delivered exclusive possession of the
Initial Additional Premises to Tenant vacant, in "broom clean" condition, free
from tenancies and occupancies (other than tenancies and occupancies pursuant to
this Lease), and with Landlord's Additional Premises Work substantially
completed in respect of the Initial Additional Premises. Upon the Initial
Additional Premises Commencement Date, the Initial Additional Premises shall be
deemed a part of the Office Premises for all purposes under the Lease, except as
expressly provided herein. Landlord shall give Tenant not less than ten (10)
Business Days' notice of the anticipated Initial Additional Premises
Commencement Date.
F. The Fixed Rent payable in respect of the Initial
Additional Premises shall be as follows:
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(x) If Tenant shall lease the 18th Floor Premises:
(i) Four Hundred Twenty-Eight Thousand Seven Hundred
Eighty-Seven Dollars ($428,787) per annum for the period commencing on the
Initial Additional Premises Commencement Date and ending on May 31, 2001
($35,732.25 per month);
(ii) Four Hundred Ninety-Two Thousand Three Hundred
Eleven Dollars ($492,311) per annum for the period commencing on June 1, 2001
and ending on May 31, 2006 ($41,025.92 per month);
(iii) Five Hundred Fifty-Five Thousand Eight Hundred
Thirty-Five Dollars ($555,835) per annum for the period commencing on June 1,
2006 and ending on May 31, 2011 ($46,319.58 per month); and
(iv)Six Hundred Thirty-Five Thousand Two Hundred
Forty Dollars ($635,240) per annum for the period commencing on June 1, 2011 and
ending on May 31, 2016 ($52,936.67 per month).
(y) If Tenant shall lease the 19th Floor Premises:
(i) Four Hundred Thirty-Six Thousand Four Hundred
Fifty-Five Dollars ($436,455) per annum for the period commencing on the Initial
Additional Premises Commencement Date and ending on May 31, 2001 ($36,371.25 per
month);
(ii) Five Hundred One Thousand One Hundred Fifteen
Dollars ($501,115) per annum for the period commencing on June 1, 2001 and
ending on May 31, 2006 ($41,759.58 per month);
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(iii) Five Hundred Sixty-Five Thousand Seven Hundred
Seventy-Five Dollars ($565,775) per annum for the period commencing on June 1,
2006 and ending on May 31, 2011 ($47,147.92 per month); and
(iv) Six Hundred Forty-Six Thousand Six Hundred
Dollars ($646,600) per annum for the period commencing on June 1, 2011 and
ending on May 31, 2016 ($53,883.33 per month).
G. From and after the Initial Additional Premises
Commencement Date in respect of the 18th Floor Premises, Tenant's Share shall be
increased by three and thirty-one one thousandths percent (3.031%), the Space
Factor shall be increased by 15,881 square feet, and Tenant shall be entitled to
a credit against the first payments of Fixed Rent payable under this Amendment
in respect of the 18th Floor Premises only in an aggregate amount equal to Four
Hundred Twenty-Eight Thousand Seven Hundred Eighty-Seven Dollars ($428,787).
From and after the Initial Additional Premises Commencement Date in rent of the
19th Floor Premises, Tenant's Share shall be increased by three and eighty-five
one thousandths percent (3.085%), the Space Factor shall be increased by 16,165,
and Tenant shall be entitled to a credit against the first payments of Fixed
Rent payable under this Amendment in respect of the 19th Floor Premises only in
an aggregate amount equal to Four Hundred Thirty-Six Thousand Four Hundred
Fifty-Five Thousand Dollars ($436,455).
H. Tenant shall accept the Initial Additional
Premises in its then "as is" condition, and except for the performance of
Landlord's Additional Premises Work in respect of the Initial Additional
Premises, Landlord shall have no obligation to prepare the same for Tenant's
occupancy or provide any money for the preparation of the
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same, except that Landlord shall contribute an amount equal to Six Hundred
Thirty-Five Thousand Two Hundred Forty Dollars ($635,240) (in respect of the
18th Floor Premises, if Tenant shall lease the 18th Floor Premises), and Six
Hundred Forty Six Thousand Six Hundred Dollars ($646,600) (in respect of the
19th Floor Premises, if Tenant shall lease the 19th Floor Premises) (the
"Initial Additional Premises Tenant Fund") toward the "hard costs" of performing
the Alterations made by Tenant to initially prepare the Initial Additional
Premises for occupancy by Tenant (the "Initial Additional Premises Initial
Alterations"). For purposes of determining the "hard costs" of the Initial
Additional Premises Initial Alterations, Landlord agrees that such "hard costs"
may include professional fees (not in excess of ten percent (10%) of the Initial
Additional Premises Tenant Fund) of the architects, engineers and designers
involved in the Initial Additional Premises Initial Alterations. The Initial
Additional Premises Tenant Fund shall be disbursed on and subject to the
provisions of Paragraph 5 hereof, except that (i) all references therein to the
"Original Premises Tenant Fund," the "Original Premises Alterations", the
"Alteration Premises" and the number "$1,942,260" shall be deemed to be
references to the "Initial Additional Premises Tenant Fund", the "Initial
Additional Premises Initial Alterations", the "Initial Additional Premises" and
the number "$635,240" (in respect of the 18th Floor Premises, if Tenant shall
lease the 18th Floor Premises) and "$646,600" (in respect of the 19th Floor
Premises, if Tenant shall lease the 19th Floor Premises), respectively.
I. Notwithstanding anything to the contrary contained
in the Lease or this Amendment, the Original Premises Tenant Fund, the
Additional Premises Tenant Fund, the Initial Additional Premises Tenant Fund,
the Landlord's Additional
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Premises Work, other work and the rent abatements and credits provided in
Sections 3(B), 5(F), 6(C), 6(E), 6(G) and 7(viii) of this Amendment are the only
Tenant improvement allowances, Landlord work letter obligations and free rent
periods (or credits in lieu thereof) being provided to Tenant under the Lease as
amended by this Amendment relating to the commencement of the term of the Lease
or the commencement of the term of the leasing of any additional space leased
pursuant to the Lease as amended b this Amendment, and are in lieu of any and
all similar such allowances, obligations and abatements, if any, provided for in
the Lease as it existed on the date prior to the date of this Amendment.
7. Effective as of the Effective Date, the Lease as it existed
is hereby modified as follows:
(i) In Section 13.2(A) of the Lease, the phrase
"seven percent (7%) of the amount set forth in clause (i) above, exclusive of
sales or other taxes" is hereby deleted and the following is hereby inserted in
lieu thereof: "Landlord's actual out of pocket expenses to unrelated third
parties in connection with reading and maintaining such meters."
(ii)Sections 27.l(B) and (C) of the Lease are hereby
deleted in their entirety and the following is hereby inserted in lieu thereof:
"(B) "Base Operating Expenses" shall mean the
Operating Expenses for the calendar year ending December 31,
1996.
(C) "Base Taxes" shall mean the Taxes for the
calendar year 1996, being calculated as fifty percent (50%) of
the sum of (i) Taxes for the Tax Year commencing July 1, 1995
and ending June 30, 1996 and (ii) Taxes for the Tax Year
commencing July 1, 1996 and ending June 30, 1997."
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(iii) In Section 27.1 (E)(2) of the Lease the phrase
"ninety-five percent (95%) of" is hereby inserted before the word "all" in both
instances in such Section in which such word appears. In addition, the term
"Operating Year" shall include the calendar year for which "Base Operating
Expenses" are computed.
(iv) The following is hereby added at the end of
27.3(A) of the Lease: "Landlord agrees that in prosecuting or settling any tax
reduction proceedings for the Building for Tax Years 1995-96 and 1996-97,
Landlord shall not in bad faith discriminate against Tax Years 1995-96 or
1996-97 in order to artificially lower the assessed valuation for such years as
compared to subsequent years, provided, however, that the foregoing shall not be
deemed to limit Landlord's exercise of its business judgment in prosecuting or
settlement tax reduction proceedings affecting the Building.
(v) The following is hereby added at the end of
Section 28.1 (B) of the Lease: "Notwithstanding the foregoing, but subject to
the provisions of Section 5(G) of this Amendment, no freight elevator service
will be provided on Business Days from 12:00 noon to 1:00 p.m."
(vi) In Section 3.l(B)(1) of the Lease, the word
"and" at the end of clause (ii) thereof is hereby deleted and the following is
hereby inserted in lieu thereof: "provided that such Person designated by
Landlord shall provide its services at a rate competitive with those of other
Persons providing similar services for comparable work in midtown Manhattan,
and,".
(vii) In Section 2.1(A)(1) of the Lease, clause (iii)
is hereby deleted and the following is hereby inserted in lieu thereof: "(iii)
the Garage Premises as a garage for the parking of three (3) automobiles of
Tenant and its officers (provided and for so
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long as the same is permitted under the Certificate of Occupancy for the
Building), and for no other purpose. "In consideration thereof, Tenant shall pay
to Landlord, as additional rent, for the use of the Garage Premises, Thirty-One
Thousand Five Hundred Dollars ($31,500) per annum ($2,625 per month) payable in
equal monthly installments on the first day of each month during the Term from
and after the date (the "Garage Premises Rent Commencement Date") which is (x)
ninety (90) days after the Effective Date (in respect of the two (2) parking
spaces currently occupied by Tenant; the additional rent for the use of such two
(2) parking spaces being Twenty-One Thousand Dollars ($21,000) per annum ($1,750
per month)) and (y) the later of (i) ninety (90) days after the Effective Date
and (ii) ninety (90) days after the date the third (3rd) parking space is
delivered to Tenant (in respect of the third parking space, which is not
currently occupied by Tenant); the additional rent for the use of such one (1)
parking space being Ten Thousand Five Hundred Dollars ($10,500) per annum ($875
per month)). Landlord shall deliver the third parking space by the date which is
one hundred twenty (120) days after the date hereof, provided, however, that if
Landlord shall fail to deliver such third parking space by such one hundred
twentieth (120th) date for any reason other than Unavoidable Delays or delays
caused by Tenant, then the Garage Premises Rent Commencement Date in respect of
such third parking space shall be adjourned one (1) day for each day after such
one hundred twentieth (120th) day until the third parking space is delivered.
Landlord agrees that it shall not seek or, except as required by Requirements,
permit any change to the certificate of occupancy for the Garage Premises which
would prohibit the use of the Garage Premises for parking purposes. Tenant
agrees that if any Governmental Authority shall require Tenant to cease parking
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automobiles in the Garage Premises, or reduce the number of cars that may be
parked there, that Tenant shall immediately so cease or reduce such parking, and
Landlord shall have no liability therefor, nor shall this Lease be affected,
except that (i) from and after the date Tenant is no longer permitted to park
any automobiles at the Garage Premises, Tenant shall not be required to pay the
additional rent for the Garage Premises specified above, and (ii) if Tenant is
required to reduce the number of automobiles parked at the Garage Premises, the
additional rent for the Garage Premises, as specified above, shall thereafter be
the additional rent for the Garage Premises, as specified above, multiplied by a
fraction, the numerator of which is the number of cars which, may be parked at
the Garage Premises and the denominator of which is three (3).
(viii) Upon the Additional Premises Commencement
Date, the Initial Additional Premises Commencement Date and the Option Space
Commencement Date, as the case may be, a Class-E multiplex panel shall be in
place on each floor of the Additional Premises, the Initial Additional Premises
and the Option Space, as the case may be.
(ix) The following is hereby added at the end of
Section 2.l(B)(2) of the Lease: "Notwithstanding the provisions of this Section
2.l(B)(2), Landlord hereby consents to the installation by Tenant, as an
Alteration, of a vertical conduit (not in except of four (4) inches in diameter)
installed in the electric closets of the Building running from the basement of
the Building to the nineteenth (19th) floor of the Building, for exclusive use
by Tenant for its cabling." Annexed hereto and made a part hereof as Exhibit "F"
is a plan showing the risers within the Building which, notwithstanding anything
to the contrary contained in Section 2.l(B)(2) of the Lease, are dedicated to
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Tenant's exclusive use. The shaft area granted to Tenant pursuant to this clause
(ix) shall be included in calculating the maximum shaft area which Landlord is
required to make available to Tenant pursuant to Section 2.l(B)(2) of the Lease.
(x) In Section 3.4(vii) of the Lease, references
therein to the phrases "One Hundred Thousand Dollars ($100,000)" and
"Commencement Date" are hereby replaced with the phrases "Two Hundred Thousand
Dollars ($200.000)" and "Effective Date," respectively.
(xi) In Section 7.1 (B)(2) of the Lease, the
following is hereby inserted immediately prior to the word "or" appearing in the
third (3rd) line thereof: "other than any offset permitted pursuant to the
provisions of Sections 3(B), 5(F), 6(C), 6(G) and 6(H) of the Amendment of Lease
(the "First Amendment"), dated as of April 26, 1996, between Landlord and
Tenant."
(xii) In Section 7.1(B)(4) of the Lease, the
following is hereby inserted immediately prior to the word "or" appearing in the
second (2nd) line thereof: "provided, however, that the foregoing shall not
vitiate the obligation of the Lessor or Mortgagee to recognize the offset
referred to in Section 7.1 (B)(2) hereof."
(xiii) The following is hereby inserted at the end of
12.2(C) of the Lease: "Notwithstanding the foregoing, the liability of any
assignor of Tenant's interest under this Lease pursuant to an assignment to
which Landlord has granted its written consent or pursuant to an assignment
which, pursuant to the provisions hereof, does not require Landlord's consent,
shall not be greater than the liability of such assignor under the Lease in the
form such Lease existed on the date of such assignment, without regard
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<PAGE> 26
to modifications made to the Lease subsequent to the date of such assignment
(other than those modifications, if any, consented to by assignor in writing)."
(xiv) The following is hereby inserted at the end of
Section 12.6 of the Lease:
(G)(1) If requested so to do by Tenant at the time of
Tenant's request for Landlord's consent to sublease, Landlord
shall, with respect to each Protected Subtenant, execute and
deliver a subordination, non-disturbance and attornment
agreement reasonably acceptable to Landlord and Tenant,
containing, among other things, provisions to the effect that,
if this Lease shall terminate or be terminated for any reason,
Landlord will recognize such subtenant as a direct tenant of
Landlord on the same terms and conditions as are contained in
its sublease (each a "Protected Sublease"), provided that (i)
no default shall have occurred under such sublease and be
continuing beyond any applicable notice and cure periods, (ii)
such sublease complies with the terms of this Lease in all
respects, (iii) such sublease does not, in Landlord's
reasonable judgment, increase Landlord's obligations above
those set forth herein or diminish Landlord's rights below
those set forth in this Lease, in either event by more than a
de minimis amount, (iv) such subtenant shall have a net worth,
at the time such sublease is entered into, at least equal to
the Protected Subtenant Required Minimum Net Worth, (v)
notwithstanding the rents payable under such sublease,
effective upon the termination of this Lease, the rents
payable under such sublease shall be adjusted to equal the
greater of (x) the total rent per rentable square foot payable
under this Lease times the number of rentable square feet
contained in the related sublet premises plus Escalation Rent
calculated in accordance with Article 27, except that the
number of rentable square feet in the sublet premises shall be
used for the purpose of determining "Tenant's Share" or (y)
the fixed rent plus additional rent payable in respect of
increases in Taxes and Operating Expenses pursuant to such
sublease, (vi) any right that such subtenant may have to
require its landlord to construct leasehold improvements or to
pay a work allowance shall not be binding on Landlord, (vii)
any modification of such sublease without the prior written
consent of Landlord shall render void the obligations of
Landlord under such
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<PAGE> 27
subordination, non-disturbance and attornment agreement if the
effect of such modification is to grant to such subtenant
rights or to impose upon Landlord obligations, following any
termination of this Lease, inconsistent with this Article 12,
and (viii) such agreement shall contain the provisions set
forth in Section 12.6(A)(1)(i) hereof.
(2) For purposes of this Lease, the term "Protected
Subtenant" shall mean any subtenant under a sublease for a
term of not less than five (5) years for sublet premises
consisting of not less than one (1) full floor of the Building
and that has a net worth at least equal to the Protected
Subtenant Required Minimum Net Worth. The term "Protected
Subtenant Required Minimum Net Worth" shall mean an amount
reasonably satisfactory to Landlord, taking into account the
financial obligations of the Protected Subtenant under the
Protected Sublease."
(xv) Tenant shall have the right to review and to
dispute Landlord's calculation of the charges for electricity pursuant to
Article 13 of the Lease, provided, however, that Tenant shall continue to pay
all electrical charges billed pending the outcome of such dispute.
(xvi) Landlord and Tenant acknowledge and agree that
the provisions of Section 22.1 of the Lease do not apply to any premises other
than premises initially demised under the Lease.
(xvii) Article 31 of the Lease is hereby deleted and
the following is hereby inserted in lieu thereof:
"ARTICLE 31
ANTENNA
Section 31.1. Landlord understands that during the
Term Tenant may require communication services in connection
with the operation of Tenant's business which would
necessitate the construction, installation, operation and use
by Tenant of a communication antenna, microwave and/or
satellite antenna or dish, together with related equipment,
mountings and supports (collectively, the "Antenna") and
replacement and/or substitutions thereof on
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<PAGE> 28
the roof of the Building. Subject to the rights of other
tenants in the Building and the terms of this Section 31.1,
Landlord shall make available to Tenant, for Tenant's own use
(and not for resale purposes) sufficient (as reasonably
determined by Landlord) space on the roof of the Building for
the Antenna at a location designated by Landlord (it being
agreed that in no event shall the area of the roof used by
Tenant for the Antenna exceed fifty (50) square feet).
Landlord shall have no obligation to reserve any portion of
the roof for Tenant's use and the use of the roof for such
purposes shall be allocated on a "first come, first served"
basis. Tenant's use of the roof of the Building shall be on a
nonexclusive basis. In connection with Tenant's use of the
roof of the Building, and subject to the rights of other
tenants in the Building, Landlord shall make available to
Tenant access to the roof for the construction, installation,
maintenance, repair, operation and use of the Antenna, as well
as reasonable space in the Building to run electrical and
telecommunications conduits from the Antenna to the Premises.
The installation of the Antenna shall constitute an Alteration
and shall be performed at Tenant's sole cost and expense
(including, without limitation, any costs and expenses in
connection with reinforcing the roof of the Building, if
required) in accordance with and subject to the provisions of
Article 3 hereof and except as otherwise expressly set forth
in this Article 31, the Antenna shall be deemed for all
purposes of this Lease to be a Specialty Alteration. All of
the provisions of this Lease with respect to Tenant's
obligations hereunder shall apply to the installation, use and
maintenance of the Antenna, including, without limitation,
provisions relating to compliance with Requirements,
insurance, indemnity, repairs and maintenance. The license
granted to Tenant in this Article 31 shall not be assignable
by Tenant separate and apart from this Lease.
Section 31.2. Landlord retains the right to use the
portion of the roof on which the Antenna is located for any
purpose whatsoever. Tenant shall use the Antenna so as not to
cause any interference to other tenants or Landlord in the
Building or interference with or disturbance to the reception
or transmission of communication signals by or from any
antenna, satellite dishes or similar equipment previously
installed by Landlord or any other tenant in the Building or
damage to or interference with the operation of the Building
or Building Systems. If after any Antenna is
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<PAGE> 29
installed by Tenant it is discovered that the Antenna causes
any such interference, damage or disturbance, then Tenant, at
its sole cost and expense, shall relocate its Antenna to
another area on the roof designated by Landlord. If such
interference or disturbance still occurs despite such
relocation, or if no portion of the roof is available for such
relocation. Tenant, at its sole cost and expense, shall remove
its Antenna from the roof of the Building. In the event Tenant
fails to relocate or remove the Antenna, Landlord may do so,
and Tenant shall promptly reimburse Landlord for any costs
incurred by Landlord in connection therewith. If any other
antenna or dish on the roof shall interfere with the operation
of the Antenna, Landlord and Tenant shall jointly use their
diligent good faith efforts to eliminate or minimize such
interference.
Section 31.3. If Tenant is in default under any
provision of this Article 31 then, without limiting Landlord's
rights and remedies Landlord may otherwise have under this
Lease, Tenant, upon written notice from Landlord, shall, at
Tenant's sole cost and expense immediately discontinue its use
of the Antenna and remove the same from the roof of the
Building.
Section 31.4. In addition to the right of Landlord to
cause Tenant to relocate the Antenna pursuant to Section 31.2
hereof, Landlord may at its option, at any time during the
Term after reasonable prior notice to Tenant (except in the
event of an emergency) relocate the Antenna to another area on
the roof designated by Landlord, provided that such relocation
does not cause the transmission or receipt of communication
signals to be materially interrupted or impaired other than
temporarily in connection with such relocation and, except as
set forth with respect to Landlord's right to cause Tenant to
relocate the Antenna pursuant to Section 31.2 hereof, such
relocation shall be performed at Landlord's sole cost and
expense.
Section 31.5. (A) Landlord shall not have any
obligations with respect to the Antenna or compliance with any
Requirements relating thereto (including, without limitation,
the obtaining of any required permits or licenses, or the
maintenance thereof), nor shall Landlord be responsible for
any damage that may be caused to Tenant or the Antenna by any
other tenant or occupant of the Building. Landlord makes no
representation that the Antenna will be able to receive or
transmit communication
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<PAGE> 30
signals without interference or disturbance (whether or not by
reason of the installation or use of similar equipment by
others on the roof) and Tenant agrees that Landlord shall not
be liable to Tenant therefor.
(B) Tenant, at Tenant's sole cost and expense, shall
paint and maintain the Antenna in white or such other color as
Landlord shall reasonably determine and shall install such
lightning rods or air terminals on or about the Antenna as
Landlord may reasonably require.
(C) Tenant shall (i) be solely responsible for any
damage caused to Landlord or any other Person or property as a
result of the installation, maintenance or use of the Antenna,
(ii) promptly pay any tax, license, permit or other fees or
charges imposed pursuant to any Requirements relating to the
installation, maintenance or use of the Antenna, (iii)
promptly comply with all precautions and safeguards
recommended by Landlord's insurance company and all
Governmental Authorities, and (iv) perform all necessary
repairs or replacements to, or maintenance of, the Antenna,
except that at Landlord's option, Landlord may elect to
perform such repairs, replacements or maintenance at Tenant's
sole cost and expense.
Section 31.6. Tenant acknowledges and agrees that the
privileges granted Tenant under this Article 31 shall merely
constitute a license and shall not, now or at any time after
the installation of the Antenna, be deemed to grant Tenant a
leasehold or other real property interest in the Building or
any portion thereof. The license granted to Tenant in this
Article 31 shall remain in effect at all times while the Lease
is in effect (subject to termination pursuant to the
provisions of this Article 31), and shall automatically
terminate and expire upon the expiration or earlier
termination of this Lease and the termination of such license
shall be self-operative and no further instrument shall be
required to effect such termination. The foregoing
notwithstanding, upon request by Landlord, Tenant, at Tenant's
sole cost and expense, promptly shall execute and deliver to
Landlord, in recordable form, any certificate or other
document confirming the termination of Tenant's right to use
the roof of the Building."
(xviii) In Article 26 of the Lease, (x) clause (a)
thereof is hereby deleted and the following is hereby inserted in lieu thereof:
"(a) at Tenant's address set
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<PAGE> 31
forth in this Lease, Attn: Mr. Joel Kampf, Vice President, Corporate Services,
with a copy to Tenant at its address set forth in this Lease, Attn: Patricia L.
Hartnett, Esq., Senior Counsel, or" and (y) clause (x) is hereby deleted and the
following is hereby inserted in lieu thereof: "(x) Portfolio U Holdings
Corporation, 400 Northcreek, Suite 700, 3715 Northside Parkway, Atlanta, Georgia
30327, Attn.: Vice President."
(xix) Section 37.6 of the Lease is hereby deleted and
the following is hereby inserted in lieu thereof:
"Section 37.6. This Lease shall not be recorded;
however, at the request of either party, Landlord and Tenant
shall promptly execute, acknowledge and deliver a memorandum
with respect to this Lease sufficient for recording."
(xx)Section 37.13 of the Lease is hereby deleted in
its entirety.
(xxi) Article 39 of the Lease is hereby deleted in
its entirety and the following is hereby inserted in lieu thereof:
"ARTICLE 39
RENEWAL TERMS
Section 39.1. Tenant shall have the option (each, a
"Renewal Option") to extend the term of this Lease for two (2)
additional periods of five (5) years each (each, a "Renewal
Term"), the first of which Renewal Terms shall commence on the
date immediately succeeding the Fixed Expiration Date and end
on the fifth (5th) anniversary of the Fixed Expiration Date,
and the second of which Renewal Terms shall commence on the
day next succeeding the last day of the first Renewal Term and
end on the tenth (10th) anniversary of the Fixed Expiration
Date, provided, in each instance, that (a) this Lease shall
not have been previously terminated, (b) no Event of Default
shall have occurred and be continuing (x) on the date Tenant
gives Landlord written notice (the "Renewal Notice") of
Tenant's election to exercise the applicable Renewal Option,
and (y) on the Fixed Expiration Date or the expiration of the
first Renewal Term, as the case may be (provided, however,
that with respect to any Event of
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Default which may occur without Landlord being required to
deliver to Tenant a notice of default (other than an Event of
Default under Section 16.1 (E) of this Lease) then, solely for
the purposes of this Section 39.1, no such Event of Default
shall be deemed to have occurred unless Landlord shall have
delivered to Tenant a notice thereof and Tenant shall have
failed or refused to cure the same within seven (7) Business
Days after delivery of such notice), and (c) Tenant and its
Affiliates shall occupy at least eighty percent (80%) of (x)
the Premises and any premises leased pursuant to Article 40
hereof (if Tenant shall be renewing the entire Premises) or
(y) the Twelfth Floor Premises and the Thirteenth Floor
Premises (collectively, the "Executive Premises") if Tenant
shall be renewing the Executive Premises only, in either event
on the date the Renewal Notice is given and on the first (lst)
day of the applicable Renewal Term. Each such Renewal Option
may be exercised with respect to either (i) the entire
Premises only or (ii) the entire Executive Premises only and,
in either event, shall be exercisable by Tenant delivering the
Renewal Notice to Landlord at least fifteen (15) months prior
to the Fixed Expiration Date or the last day of the first
Renewal Term, as the case may be. Time is of the essence with
respect to the giving of each Renewal Notice. Upon the giving
of the Renewal Notice with respect to the second Renewal Term,
Tenant shall have no further right or option to extend or
renew the Term.
Section 39.2. If Tenant exercises a Renewal Option,
the applicable Renewal Term shall be upon the same terms,
covenants and conditions as those contained in this Lease,
except that (i) the Fixed Rent shall be deemed to mean the
Fixed Rent as determined pursuant to Section 39.3 hereof, (ii)
Tenant shall not be entitled to any Original Premises Tenant
Fund, Additional Premises Tenant Fund or Initial Additional
Premises Tenant Fund, (iii) the provisions of Section 39.1 of
this Article relative to Tenant's right to renew the Term of
this Lease shall not be applicable during the second Renewal
Term and (iv) if the Renewal Premises shall consist solely of
the Executive Premises, the Space Factor shall be deemed to be
thirty-nine Thousand Nine Hundred Seventy-Two (39,972),
Tenant's Share shall be deemed to be seven and sixty-four one
hundredths percent (7.64%), and Tenant, its sole expense,
prior to the commencement of the applicable Renewal Term,
shall physically separate the Executive Premises from the
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balance of the Premises, and shall deliver the balance of the
Premises to Landlord in the condition required as if such date
were the Fixed Expiration Date in respect of the entire
Premises.
Section 39.3. For each Renewal Term the Fixed Rent
shall be determined as follows:
(A) The Fixed Rent for the Premises being renewed
(the "Renewal Premises") for the applicable Renewal Term shall
be an amount equal to the greater of (a) the annual fair
market rental value of the Renewal Premises (the "Fair Market
Rent") on the first day of the applicable Renewal Term
multiplied by ninety-five percent (95)%, and (b) the Fixed
Rent payable by Tenant in respect of the Renewal Premises
(determined, in respect of a renewal of Executive Premises
only, on a per square foot basis) on the Fixed Expiration Date
or the last day of the first Renewal Term, as the case may be
(the greater value of (a) and (b) being hereinafter referred
to as the "Rental Value"). The Fair Market Rent shall be
determined assuming that the Renewal Premises are free and
clear of all leases and tenancies (including this Lease), that
the Renewal Premises are available in the then rental market
for comparable first class office buildings in midtown
Manhattan, that Landlord has had a reasonable time to locate a
tenant who rents with the knowledge of the uses to which the
Renewal Premises can be adapted, and that neither Landlord nor
the prospective tenant is under any compulsion to rent, and
taking into account all other relevant factors (including,
without limitation, the fact that the Base Taxes and the Base
Operating Expenses provided in this Amendment shall not change
for the purpose of calculating the Escalation Rent payable
pursuant to Article 27 of the Lease, which payments shall
continue to be made during the applicable Renewal Term).
(B) For purposes of determining the Fair Market Rent,
the following procedure shall apply:
(1) Landlord and Tenant shall each contemporaneously
deliver to the other, at Landlord's office, a written notice
(each a "Rent Notice"), on a date mutually agreed upon, but in
no event later than one hundred twenty (120) days prior to the
Fixed Expiration Date or the last day of the first Renewal
Term, as the case may be, and if no date is mutually agreed
upon, then on the
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one hundred twentieth (120th) day prior to the Fixed
Expiration Date or the last day of the first Renewal Term, as
the case may be (or the next succeeding Business Day, if such
one hundred twentieth (120th) day is not a Business Day),
which Rent Notice shall set forth each of their respective
determinations of the Rental Value (Landlord's determination
of the Rental Value is referred to as "Landlord's
Determination" and Tenant's determination of the Rental Value
is referred to as "Tenant's Determination"). If Landlord shall
fail or refuse to give such Rent Notice as aforesaid,
Landlord's Determination shall be deemed to be equal to the
Fixed Rent then payable by Tenant in respect of the Renewal
Premises on the Fixed Expiration Date or the last day of the
first Renewal Term, as the case may be, and if Tenant shall
fail or refuse to give such Rent Notice as aforesaid, Tenant's
Determination shall be deemed to be the same as Landlord's
Determination. If neither Landlord nor Tenant shall deliver a
Rent Notice as aforesaid, the Rental Value shall be deemed to
be equal to the Fixed Rent then payable by Tenant in respect
of the Renewal Premises on the Fixed Expiration Date or the
last day of the first Renewal Term, as the case may be.
(2) If Landlord's Determination and Tenant's
Determination are not equal and Tenant's Determination is
lower than Landlord's Determination, and either Determination
exceeds an amount equal to the Fixed Rent then payable by
Tenant in respect of the Renewal Premises on the Fixed
Expiration Date or the last day of the first Renewal Term, as
the case may be, Landlord and Tenant shall attempt to agree
upon the Fair Market Rent. If Tenant's Determination is higher
than Landlord's Determination, the Fixed Rent for the
applicable Renewal Term shall be equal to Tenant's
Determination. If Landlord and Tenant shall mutually agree
upon the determination (the "Mutual Determination") of the
Rental Value their determination shall be the Fixed Rent for
the applicable Renewal Term, and shall be final and binding
upon the parties. If Landlord and Tenant shall be unable to
reach a Mutual Determination within ten (10) days after
delivery of both Determinations to each party, Landlord and
Tenant shall jointly select an independent real estate
appraiser (the "Appraiser") whose fee shall be borne equally
by Landlord and Tenant. In the event that Landlord and Tenant
shall be unable to jointly agree on the designation of the
Appraiser within five (5) days after they are requested to do
so by
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either party, then the parties agree to allow the American
Arbitration Association, or any successor organization to
designate the Appraiser in accordance with the rules,
regulations and/or procedures then obtaining of the American
Arbitration Association or any successor organization.
(3) The Appraiser shall conduct such hearings and
investigations as he may deem appropriate and shall, within
thirty (30) days after the date of designation of the
Appraiser, choose either Landlord's or Tenant's Determination,
and such choice by the Appraiser shall be conclusive and
binding upon Landlord and Tenant. Each party shall pay its own
counsel fees and expenses, if any, in connection with any
arbitration under this Article. The Appraiser appointed
pursuant to this Article shall be an independent real estate
appraiser with at least ten (10) years' experience in leasing
and valuation of properties which are similar in character to
the Building, and a member of the American Institute of
Appraisers of the National Association of Real Estate Boards
and a member of the Society of Real Estate Appraisers. The
Appraiser shall not have the power to add to, modify or change
any of the provisions of this Lease.
(4) It is expressly understood that any determination
of the Rental Value pursuant to this Article shall be based on
the criteria stated in Section 39.3(A) hereof.
(C) After a determination has been made of the Rental
Value for a Renewal Term, the parties shall execute and
deliver to each other an instrument setting forth the Fixed
Rent for such Renewal Term as hereinabove determined.
(D) If the final determination of the Rental Value
shall not be made on or before the first day of the applicable
Renewal Term in accordance with the provisions of this
Article, pending such final determination Tenant shall
continue to pay, as the Fixed Rent for such Renewal Term, an
amount equal to Landlord's Determination. If, based upon the
final determination hereunder of the Rental Value, the
payments made by Tenant on account of the Fixed Rent for such
portion of the Renewal Term were greater than the Fixed Rent
payable for such Renewal Term, Landlord shall refund to Tenant
the amount of such
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excess within thirty (30) days after such final determination,
with interest on such amount, for the period from the dates
such overpayments were made by Tenant to the date repaid by
Landlord, at the Base Rate. Notwithstanding the foregoing, if
such overpayment is not repaid by Landlord within such thirty
(30) day period, Landlord shall pay interest on the amount of
the overpayment by Tenant, for the period after the expiration
of such thirty (30) day period to the date such overpayment is
repaid by Landlord, at the Applicable Rate.
(E) In no event shall the Rental Value applicable to
any Renewal Term be less than as provided in Section
39.3(A)(b) hereof."
(xxii) Any Supplemental HVAC unit which Tenant, subject to
and in accordance with the provisions of the Lease, shall install in the Office
Premises may be vented out of the windows of the Premises (other than any
windows of the Premises which face Broadway), subject to Landlord's prior
written approval, which approval shall not be unreasonably withheld or delayed,
as to the location and appearance of such vents, and as to the type of vents and
louvers used.
(xxiii) All references in the Lease to the Eight Year Space,
Ten Year Space and Twelve Year Space are hereby deleted in their entirety.
(xxiv) All Fixed Rents referred to on Exhibit "C" of the
Lease are hereby deleted in their entirety.
(xxv) In Section 40.1(A) of the Lease, the 4th, 5th and 6th
lines thereof are hereby deleted and the following is hereby inserted in lieu
thereof:
"thousand (10,000) rentable square feet or more which
is located on the third (3rd), fourth (4th), fifth (5th) or
tenth (10th) floors of the Building (a "Floor")."
(xxvi) In Section 40.1(B) of the Lease, the portion of such
Section commencing with the 13th line of such Section and ending at the end of
such Section is
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hereby deleted, and the following is hereby inserted in lieu thereof: "further
provide for an expiration of the term of such Additional Lease being the Fixed
Expiration Date (subject to the provisions of Article 39 of the Lease) and for
increases in Fixed Rent in the same percentages, and on the same dates, as the
increases in Fixed Rent provided for in Paragraph 3 of this Amendment in respect
of the Original Premises."
(xxvii) The following is hereby inserted at the end of
Section 40.2 of the Lease:
"(including, without limitation, (x) the fact that
the Base Taxes and the Base Operating Expenses provided in
this Amendment shall not change for the purpose of calculating
the Escalation Rent payable pursuant to Article 27 of the
Lease, which payments shall continue to be made during the
term of the Additional Lease), and (y) the increases in Fixed
Rent contemplated by Section 40.l(B) of this Lease. In
addition, notwithstanding anything to the contrary contained
in this Article 40, in no event shall the Fixed Rent for the
term of the applicable Additional Lease be less than the
product of (i) the quotient of (x) the Fixed Rent for the
Office Premises on the day immediately preceding the
commencement of the term of the applicable Additional Lease
and (y) the Space Factor of such Office Premises, and (ii) the
rentable area of the space demised under such Additional
Lease."
(xxviii) In Section 40.5 of the Lease (a) the phrase "or
sixteenth (16th)" appearing in clause (A) thereof is hereby deleted and the
phrase "or third (3rd)" is hereby inserted in lieu thereof, and (b)
notwithstanding anything to the contrary contained in the Lease or this
Amendment, in no event shall Landlord be obligated to notify Tenant of any
Additional Space, nor shall Tenant have any right to lease any Additional Space,
if at the time of the Additional Space Commencement Date less than five (5)
years would remain on the term of this Lease (provided, however, that if Tenant
shall be entitled, at the time Tenant elects to exercise its right to lease the
Additional Space, to exercise a Renewal
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Option and does so exercise such option at the time or prior to the exercise of
the right to lease the Additional Space, and as a result thereof the remaining
term of the Lease is in excess of five (5) years, then the period of such
Renewal Term actually exercised shall be included in determining the remaining
balance of the term of the Lease).
(xxix) The following is hereby inserted as a new Article 42
of the Lease:
ARTICLE 42
OPTION SPACE
Section 42.1. Provided that the conditions set forth
in Section 42.2 hereof are satisfied, Tenant shall have the
option (the "Option") to lease (i) the entire tenth floor
(10th) of the Building as shown by cross-hatching on Exhibit
"D-1" attached hereto and made a part hereof (the "First
Option Space") on January 1, 2001 (such date or such earlier
date upon which the term shall commence with respect to such
Space pursuant to the provisions hereof, being referred to as
the "First Option Space Commencement Date"); and/or (ii) the
entire eighteenth (18th) floor of the Building as shown by
cross-hatching on Exhibit "D-2" attached hereto and made a
part hereof (the "Second Option Space") on March 1, 1998 (such
date or such earlier date upon which the term shall commence
with respect to such Space pursuant to the provisions hereof,
being referred to as the "Second Option Space Commencement
Date"); and/or (iii) the entire nineteenth (19th) floor of the
building as shown by cross-hatching on Exhibit "D-3" attached
hereto and made apart hereof (the "Third Option Space") on
March 1, 1998 (such date or such earlier date upon which the
term shall commence with respect to such Space pursuant to the
provisions hereof, being referred to as the "Third Option
Space Commencement Date"); (each of the option spaces referred
to in subparagraphs (i) through (iii) above are individually
and collectively referred to as the "Option Space") for a term
commencing on the First Option Space Commencement Date, the
Second Option Space Commencement Date and/or the Third Option
Space Commencement Date, as the case may be (such date with
respect to each of the First Option Space, the Second
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Option Space and the Third Option Space being referred to as
an "Option Space Commencement Date") and expiring, in each
case, on the Fixed Expiration Date (subject to the provisions
of Article 39 of the Lease). Notwithstanding the foregoing,
Tenant shall have no right to lease the Second Option Space,
if Tenant has exercised its option to lease, and Landlord has
delivered, the 18th Floor Premises pursuant to Section 6(E) of
the First Amendment, nor shall Tenant have the right to lease
the Third Option Space if Tenant has exercised its option to
lease, and Landlord has delivered, the 19th Floor Premises
pursuant to Section 6(E) of the First Amendment. In addition,
if Tenant shall elect to lease the First Option Space on or
about the First Option Space Commencement Date, such space
shall be leased pursuant to this Article 42 (and not pursuant
to Article 40), it being agreed that Tenant may only exercise
its option to lease the 10th floor of the Building pursuant to
Article 40 if Tenant does not exercise its right to lease such
space under this Article 42, another Person leases such space,
such space thereafter becomes vacant and Tenant otherwise has
the right to lease the same pursuant to Article 40 hereof.
Tenant may elect to lease the applicable Option Space by
giving Landlord notice of such election, (the "Option Notice")
at least twelve (12) months prior to the applicable Option
Space Commencement Date. Notwithstanding the foregoing, if the
Lease(s) for the applicable Option Space shall terminate prior
to the expiration date(s) of the lease(s), Landlord promptly
shall give notice (the "Early Option Notice") to Tenant of
such fact, identifying the Option Space and the date of the
Option Space Commencement Date. If Landlord shall give the
Early Option Notice as aforesaid, and if Tenant shall fail to
give the Option Notice within forty-five (45) days after
delivery of the Early Option Notice or shall elect not to
lease the applicable Option Space, Tenant shall have no
further right to lease such Option Space. If Tenant shall fail
to deliver the applicable Option Notice by the date set forth
herein or shall elect not to lease such Option Space, Tenant
shall have no further right to lease such Option Space and
Tenant's Option under this Article 42 with respect to such
Option Space shall be deemed to be waived and of no further
force and effect with respect to the applicable Option Space.
Tenant shall only have the right it to lease the First Option
Space, the Second Option Space and/or the Third Option Space
in whole (but not in part) pursuant to this Article 42. Except
as expressly provided in Section
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42.5 hereof, Tenant shall not have the right to revoke an
Option Notice delivered pursuant to this Article 42.
Section 42.2. It shall be a condition to Tenant's
right to exercise each Option that (i) MONY is Tenant on the
date the applicable Option Notice shall be given and on the
applicable Option Space Commencement Date (each such date with
respect to each Option being hereinafter referred to as the
"Relevant Date"); (ii) Tenant shall occupy not less than
118,500 square feet of Office Space in the Building on each
Relevant Date; (iii) Tenant shall occupy at least eighty
percent (80%) of the Premises as its executive offices for the
conduct of its business on the Relevant Date; (iv) Tenant
intends to occupy the Option Space for the conduct of its
business; and (v) no Event of Default shall have occurred and
be continuing on the Relevant Date (provided, however, that
with respect to any Event of Default which may occur without
Landlord being required to deliver to Tenant a notice of
default (other than an Event of Default under Section 16.1(E)
of the Lease) then, solely for purposes of this Section 42.2,
no such Event of Default shall be deemed to have occurred
unless Landlord shall have delivered to Tenant on notice
thereof and Tenant shall have failed or refused to cure the
same within seven (7) Business Days after delivery of such
notice).
Section 42.3. (A) If Tenant delivers the Option
Notice as aforesaid, with respect to the First Option Space,
then on the Option Space Commencement Date with respect to
such Option Space (i) the First Option Space shall be added to
and be deemed a part of the Premises upon all of the terms and
conditions of this Lease, except as specifically set forth in
this Article 42; (ii) the First Option Space shall be
delivered in its then "as is" condition, and Landlord shall
not be obligated to perform any work or make any installations
with respect thereto nor shall Tenant be entitled to any
Original Premises Tenant Fund, Additional Premises Tenant Fund
or Initial Additional Premises Tenant Fund; (iii) the Space
Factor and Tenant's Share shall each be increased by the Space
Factor and Tenant's Share respectively, with respect to such
Option Space as set forth on Exhibit "D-4" attached hereto;
(iv) the Fixed Rent shall be annually increased by the amount
determined pursuant to the provisions of Section 42.4 hereof;
(v) the Base Operating Expenses with respect to the First
Option Space shall be the Operating Expenses for the
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calendar year in which the applicable Option Space
Commencement Date shall occur; and (vi) the Base Taxes with
respect to the First Option Space shall be the Taxes for the
Tax Year in which the applicable Option Space Commencement
Date shall occur.
(B) If Tenant delivers the Option Notice as aforesaid
with respect to the Second Option Space, then on the Option
Space Commencement Date with respect to such Option Space (i)
the Second Option Space shall be added to and be deemed a part
of the Premises upon all of the terms and conditions of this
Lease. except as specifically set forth in this Article 42;
(ii) the Second Option Space shall be delivered in its then
"as is" condition, and Landlord shall not be obligated to
perform any work or make any installations with respect
thereto, nor shall Tenant be entitled to any Original Premises
Tenant Fund, Additional Premises Tenant Fund or Initial
Additional Premises Tenant Fund; (iii) the Space Factor and
Tenant's Share shall each be increased by the Space Factor and
Tenant's Share respectively, with respect to such Option Space
as set forth on Exhibit "D-4" attached hereto; and (iv) the
Fixed Rent shall be increased annually by the applicable
amount determined pursuant to the provisions of Section 42.4
hereof; (v) the Base Operating Expenses with respect to the
Second Option Space shall be the Operating Expenses for the
calendar year in which the applicable Option Space
Commencement Date shall occur; and (vi) the Base Taxes with
respect to the Second Option space shall be the Taxes for the
Tax Year in which the applicable Option Space Commencement
Date shall occur.
(C) If Tenant delivers the Option Notice as aforesaid
with respect to the Third Option Space, then on the Option
Space Commencement Date with respect to such Option Space (i)
the Third Option Space shall be added to and be deemed a part
of the Premises upon all of the terms and conditions of this
Lease, except as specifically set forth in this Article 42;
(ii) the Third Option Space shall be delivered in its then "as
is" condition, and Landlord shall not be obligated to perform
any work or make any installations, nor shall Tenant be
entitled to any Original Premises Tenant Fund, Additional
Premises Tenant Fund or Initial Additional Premises Tenant
Fund; (iii) the Space Factor and Tenant's Share shall each be
increased by the Space Factor and Tenant's Share respectively,
with respect to such Option Space as set forth
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on Exhibit "D-4" attached hereto; and (iv) the Fixed Rent
shall be increased annually by the amount determined pursuant
to the provisions of Section 42.4 hereof; (v) the Base
Operating Expenses with respect to the First Option Space
shall be the Operating Expenses for the calendar year in which
the applicable Option Space Commencement Date shall occur; and
(vi) the Base Taxes with respect to the First Option Space
shall be the Taxes for the Tax Year in which the applicable
Option Space Commencement Date shall occur.
Section 42.4. (A) Effective as of the applicable
Option Space Commencement Date, the Fixed Rent shall be
increased by an amount equal to the greater of (i) the annual
fair market rental value of the applicable Option Space (the
"Option Space Fair Market Rent") on the applicable Option
Space Commencement Date multiplied by ninety-five percent
(95%) and (ii) the Interim Amount (the greater of (i) and (ii)
being the "Option Space Rental Value"). The Option Space Fair
Market Rent shall be determined on the basis of the highest
and best use of the applicable Option Space as offices
assuming that the Option Space is free and clear of all leases
and tenancies (including this Lease), that the applicable
Option Space is available in the then rental market for
comparable first class office buildings in midtown Manhattan,
that Landlord has had a reasonable time to locate a tenant who
rents with the knowledge of the uses to which the applicable
Option Space can be adapted, and that neither Landlord nor the
prospective tenant is under any compulsion to rent, and taking
into account all other relevant factors.
(B) For purposes of determining the Option Space Fair
Market Rent, the following procedure shall apply:
(1) Landlord and Tenant shall each contemporaneously
deliver to the other, at Landlord's office, a written notice
(each, a "Rent Option Notice"), on a date mutually agreed
upon, but in no event later than one hundred (120) days prior
to the applicable Option Space Commencement Date, and if no
date is mutually agreed upon, then on the one hundred
twentieth (120th) day prior to the applicable Option Space
Commencement Date (or the next succeeding Business Day, if
such one hundred twentieth (120th) day is not a Business Day),
which Rent Option Notice shall set forth each of their
respective
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determinations of the Option Space Fair Market Rent, which
determinations may include increases in the Fixed Rent with
respect to the applicable Option Space over time (Landlord's
determination of the Option Space Fair Market Rent is referred
to as "Landlord's Option Determination" and Tenant's
determination of the Option Space Fair Market Rent is referred
to as "Tenant's Option Determination"). If Landlord shall fail
or refuse to give such Rent Option Notice as aforesaid,
Landlord's Option Determination shall be deemed to be equal to
the product of (i) the quotient of the sum of the Fixed Rent
and Escalation Rent for the Office Premises on the day
immediately preceding the applicable Option Space Commencement
Date and the then Space Factor (exclusive of the Space Factor
attributable to the Option Space), and (ii) the Space Factor
with respect to only the applicable Option Space (the "Interim
Amount"). If Tenant shall fail or refuse to give such Rent
Option Notice as aforesaid, Tenant's Option Determination
shall be deemed to be equal to the Interim Amount. If neither
Landlord nor Tenant shall deliver a Rent Option Notice as
aforesaid, the Option Space Fair Market Rent shall be deemed
to be equal to the Interim Amount.
(2) If Landlord's Option Determination and Tenant's
Option Determination are not equal and Tenant's Option
Determination is lower than Landlord's Option Determination,
Landlord and Tenant shall attempt to agree upon the Option
Space Fair Market Rent. If Tenant's Option Determination is
higher than Landlord's Option Determination, the increase in
Fixed Rent that becomes effective on the applicable Option
Space Commencement Date shall be equal to the average of (x)
Tenant's Option Determination and (y) Landlord's Option
Determination. If Landlord and Tenant shall mutually agree
upon the determination (the "Mutual Option Determination") of
the Option Space Fair Market Rent, their determination shall
be final and binding upon the parties. If Landlord and Tenant
shall be unable to reach a Mutual Option Determination within
thirty (30) days after delivery of both Determinations to each
party, Landlord and Tenant shall jointly select an independent
real estate broker, consultant or appraiser (the "Option
Appraiser") whose fee shall be borne equally by Landlord and
Tenant. In the event that Landlord and Tenant shall be unable
to jointly agree on the destination of the Option Appraiser
within five (5) days
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after they are requested to do so by either party, then the
parties agree to allow the American Arbitration Association,
or any successor organization, to designate the Option
Appraiser in accordance with the rules, regulations and/or
procedures then obtaining of the American Arbitration
Association or any successor organization.
(3) The Option Appraiser shall conduct such hearings
and investigations as he may deem appropriate and shall,
within thirty (30) days after the date of designation of the
Option Appraiser, choose either Landlord's or Tenant's Option
Determination, and such choice by the Option Appraiser shall
be conclusive and binding upon Landlord and Tenant. Each party
shall pay its own counsel fees and expenses, if any, in
connection with any arbitration under this Article. The Option
Appraiser appointed pursuant to this Article shall be an
independent real estate appraiser with at least ten (10)
years' experience in leasing or valuation of properties in
Manhattan which are similar in character to the Building, and
a member of the American Institute of Appraisers of the
National Association of Real Estate Boards and a member of the
Society of Real Estate Appraisers. The Option Appraiser shall
not have the power to add to, modify or change any of the
provisions of this Lease.
(4) It is expressly understood that any determination
of the Option Space Fair Market Rent pursuant to this Article
shall be based on the criteria stated in Section 42.4(A)
hereof.
(C) After a determination has been made of the Option
Space Fair Market Rent for the applicable Option Space, the
parties shall execute and deliver to each other an instrument
setting forth the Fixed Rent with respect to the applicable
Option Space effective as of the applicable Option Space
Commencement Date as hereinabove determined.
(D) If the final determination of the Option Space
Fair Market Rent shall not be made on or before the applicable
Option Space Commencement Date in accordance with the
provisions of this Article, pending such final determination
Tenant shall pay, as the increase in Fixed Rent which becomes
effective on the applicable Option Space Commencement Date, an
amount equal to the Interim Amount. If, based upon the final
determination
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hereunder of the Option Space Fair Market Rent, the payments
made by Tenant on account of such increase in Fixed Rent were
less than the increase in such Fixed Rent payable as of the
applicable Option Space Commencement Date, Tenant shall pay
the amount of such excess to Landlord within ten (10) days
after such final determination.
(E) In no event shall the Option Space Rental Value
applicable to any Option Space be less than as provided in
Section 42.4(A)(ii) hereof.
Section 42.5 If Landlord is unable to deliver
possession of the applicable Option Space on the applicable
Option Space Commencement Date because of the holding over or
retention of possession of any tenant, undertenant or
occupants in such Option Space, then except as expressly
provided in this Section 42.5, (i) Landlord shall not be
subject to any liability or failure to give possession on said
date or dates, (ii) the validity of this Lease shall not be
impaired under such circumstances, nor shall the same be
construed to extend the term of this Lease with respect to
such Option Space or otherwise, (iii) Tenant waives any right
to rescind this Lease under Section 223-a of the New York Real
Property Law or any successor statute of similar nature and
purpose then in force, and (provided Landlord fulfills its
obligation under the following clause (v) hereof) further
waives the right to recover any damages which may result from
Landlord's failure to deliver possession of the applicable
Option Space or portion thereof to Tenant on the applicable
Option Space Commencement Date and agrees that the provisions
of this Section 41.5 shall constitute an "express provision to
the contrary" within the meaning of Section 223-a of the New
York Real Property Law, (iv) provided Tenant is not
responsible for such inability to deliver possession, the
Fixed Rent, Escalation Rent and all other items of additional
rent payable with respect to such Option Space shall be abated
and the applicable Option Space Commencement Date shall be
postponed until ten (10) Business Days after Landlord shall
give Tenant notice that such Option Space or applicable
portion thereof is vacant and available for Tenant's
occupancy, (v) Landlord, at Landlord's expense, shall use its
reasonable efforts to deliver possession of such Option Space
or applicable portion thereof to Tenant and in connection
therewith, if necessary, shall promptly institute and
diligently and in good faith prosecute holdover and any other
appropriate
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proceedings against the occupant of such Option Space or
applicable portion thereof, and (vi) if Landlord shall fail to
deliver exclusive possession of such Option Space within one
hundred eighty (180) days after the applicable Option Space
Commencement Date, then Tenant, as its sole remedy, by not
later than fifteen (15) days after the expiration of such one
hundred eighty (180) day period, may revoke its Option Notice.
(xxx) Without limiting the provisions of Section 2.l(B)(1) of
the Lease, Landlord agrees that Landlord shall not unreasonably withhold or
delay its consent to Tenant's request to cause Tenant's supplemental HVAC units
to be located on Building setbacks which do not adjoin the Premises (the "Other
Setback Areas"), provided, however, that (x) the same shall not violate any
right granted to the tenant adjacent to such Other Setback Area at such time,
(y) the same shall be subject to all the provisions of the Lease regarding
supplemental HVAC units located or to be located on Setback Areas and the
further condition that such supplemental HVAC units must be located in such
position and in such manner as to minimize the effect of such units on other
tenants of the Building (including such other tenants' views and use and
occupancy of its premises), and with the understanding that Tenant shall not
have exclusive use of such Other Setback Areas, and (z) Landlord may, at any
time, in its sole discretion, notify Tenant that Tenant must remove any
supplemental HVAC unit from such Other Setback Area, and all appurtenant
equipment in connection therewith, at Tenant's expense, within thirty (30) days
after such notice from Landlord.
(xxxi) In Section 3.1 (C) of the Lease, the 17th, 18th and
19th lines are hereby deleted and the following is hereby inserted in lieu
thereof: "on the date hereof), and, at". In addition, Landlord and Tenant agree
that Alterations are not included within the definition of Tenant's Property.
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(xxxii) The last sentence of Item 14 of the Rules and
Regulations attached to the Lease is hereby deleted in its entirety.
(xxxiii) Annexed hereto and made a part hereof as Exhibit "G"
is the list of contractors approved by Landlord for the performance of the
Original Premises Alterations, the Additional Premises Initial Alterations and
the Initial Additional Premises Initial Alterations. Tenant may add to such list
contractors who are comparable in terms of size, quality and reputation to the
contractors contained on such list.
(xxxiv) The following changes are hereby incorporated into
Schedule "A-2" of the Lease:
(a) The first line of Paragraph 6 on Page 2 of
Schedule "A-2" of the Lease is hereby deleted and the
following is hereby inserted in lieu thereof': "A complete set
of "As-Built" drawings (or construction drawings marked to
show actual conditions) and signed off".
(b) The first two (2) sentences of Paragraph 2 on
Page 5 of Schedule "A-2" of the Lease are hereby deleted.
(c) Paragraph 7 on Page 5 of Schedule "A-2" of the
Lease is hereby deleted, and the following is hereby inserted
in lieu thereof: "All telephone outlets and wiring to be
installed in accordance with Requirements."
(d) Paragraph 1 under the Section entitled
"Telephones" on Page 6 of Schedule "A-2" of the Lease is
hereby deleted in its entirety.
(e) Paragraph 3 under the Section entitled
"HVAC-Ducts" on Page 9 of Schedule "A-2" of the Lease is
hereby deleted and the following is hereby inserted in lieu
thereof: "All electrical wiring and control wiring to be
installed in accordance with Requirements."
(f) The following is hereby inserted at the end of
each of Pages 12 and 16 of Schedule "A-2" of the Lease:
"Landlord agrees that the foregoing Section sets forth minimum
standards for Tenant installation of the items set
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forth in this Section, and that Tenant may make installations
which are of higher quality. Notwithstanding the foregoing,
Tenant acknowledges that the items specified in this Section
are the Building standard, and the cost of any replacement or
repair by Landlord of any items which are the subject of this
Section and which are not listed above shall be at Tenant's
expense, which expense may be greater than the expense which
Tenant would have incurred had Tenant installed Building
standard items.
(g) All references in Schedule "A-2" of the Lease to
window treatments are hereby deleted.
(xxxv) Landlord represents and warrants to Tenant that as
of the date hereof, no Superior Leases or Mortgages affect the Real Property.
(xxxvi) Clauses (ii) and (iii) of Section 40.5(B)(1) of the
Lease, clause (iv) of Section 40.5(B)(2) of the Lease, and Section 40.5(C) of
the Lease are each hereby deleted.
(xxxvii) Tenant acknowledges and agrees that Tenant's rights
and options contained in the Lease or this Amendment to lease any space other
than the Original Premises (including, without limitation, Tenant's rights and
options to lease the Additional Premises), the Initial Additional Premises, the
Additional Space and the Option Space) shall, in each instance, be subject to
any rights and options granted to William Douglas McAdams, Inc. (in respect of
the 2nd, 6th and 7th floors of the Building), Wells, Rich Greene BDDP, Inc. (in
respect of the entire Building), and Lankenau, Kovner & Kurtz (in respect of the
14th through 24th floors of the Building), in each event prior to the date of
this Amendment.
(xxxviii) Notwithstanding anything to the contrary contained
in the Lease or this Amendment, if Landlord shall implement an economic
incentive package for the benefit of a tenant or other occupant of the Building
(including, without limitation,
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Tenant) and, as a result thereof, Taxes shall be reduced or abated, in whole or
in part, with respect to all or any portion of the Building, then for purposes
of calculating the Tax Payment payable hereunder and under the Agreement of
Lease, dated as of December 17, 1990, between Landlord, as master landlord, and
Tenant, as master tenant, for space on the 18th and 19th floors of the Building,
for any space leased by Tenant (other than any space leased by Tenant which is
subject to payments in lieu of taxes), Taxes shall be the Taxes which would have
been payable without regard to such reduction or abatement.
(xxxix) Landlord shall consent to a sublease (the "IDA
Sublease") of all but not less than all of Tenant's interest in the Premises to
the New York City Industrial Development Agency (the "IDA") and a sub-sublease
(the "IDA Sub-sublease") by the IDA to Term, provided that (i) the IDA Sublease
is entered into simultaneously with the entering into of the IDA Sub-sublease,
(ii) the IDA Sublease and the IDA Sub-sublease (collectively, the "IDA Sublease
Documentation") are entered into for the sole purpose of implementing a sales
tax economic incentive package for Tenant, (iii) the IDA Sublease Documentation
shall grant no right of occupancy to an Person other than Tenant, (iv) the IDA
Sublease Documentation shall not release Tenant from any liability or Tenant
under the Lease, (v) the IDA Sublease Documentation shall not impose any
obligation or liability on Landlord, but shall not relieve Landlord from
Landlord's obligations under the Lease, (vi) Tenant shall comply with, and the
IDA Sublease Documentation shall be in compliance with and subject to, the
provisions of Section 12.6(A)(1) of the Lease (other than Sections 12.6(A)(1)(c)
and 12.6(A)(1)(i) thereof) and (vii) Tenant shall indemnify, defend and save and
hold Landlord harmless of and from any and all losses, costs, demands,
liabilities and expenses (including, without
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limitation, reasonable attorneys' fees and disbursements) which Landlord may
incur arising out of or in connection with the IDA Sublease Documentation;
provided however that Tenant's indemnity obligation shall not be deemed to
relieve Landlord of Landlord's obligations or liability under the Lease or limit
Landlord's rights or remedies under the Lease.
8. (A). Tenant has informed Landlord that certain reductions in the
cost of electricity to Tenant with respect to the Premises (the "BIR
Reductions") have been offered to Tenant by Consolidated Edison Company of New
York ("Consolidated Edison"). Landlord shall, at Tenant's sole cost and expense,
make the necessary filings, including execution of an agreement with
Consolidated Edison to provide to Tenant the entire economic benefit of the BIR
Reductions, reasonably required by the Tenant and Consolidated Edison to obtain
the BIR Reductions. Landlord and Tenant shall use their diligent good faith
efforts to agree upon the terms and manner in which to make available to Tenant
the BIR Reductions specifically identified by Consolidated Edison as for the
benefit of the Tenant, and shall negotiate in good faith documentation necessary
to effectuate the same (collectively, the "BIR Documentation"). Upon agreement
by the parties to the terms of the BIR Documentation, Landlord and Tenant shall
execute and deliver the BIR Documentation, provided the BIR Documentation is
commercially reasonable, is consistent with the provisions of this Article 8, is
otherwise consistent with documentation entered into in similar transactions
with Consolidated Edison, and imposes no material additional cost (unless the
same is paid by Tenant), obligation, risk or liability upon Landlord other than
the risk identified in Paragraph 8(B) which Tenant is agreeing to recompense
Landlord for subject to and in accordance with the provisions of
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said Paragraph 8(B)). Tenant agrees to pay the reasonable expenses incurred by
Landlord in connection with the transactions contemplated by this Article 8,
other than those expenses which Landlord would have incurred without regard to
the application of this Article 8.
B. If any tenant or occupant of the Building shall claim that
it is entitled to a reduction in any electricity payment or operating expense
escalation payment which such tenant or occupant would otherwise be obligated to
pay but for any action taken to implement the BIR Reductions, or but for the
implementation of the BIR Reductions (including, without limitation, the fact
that Landlord's electric rate for all or a portion of the Building may be
reduced and, accordingly, the fact that Operating Expenses may be reduced) then
Tenant shall pay to Landlord, as additional rent, the amount of such reduction.
Tenant shall be obligated to pay the same to Landlord regardless of whether such
other tenant or occupant of the Building shall have agreed with Landlord that a
pass through by Landlord to Tenant of a reduction in electricity costs at the
Building will not reduce electricity payments or escalation payments payable by
such tenant or occupant under its lease. Tenant agrees that (i) Landlord shall
have no obligation to challenge or commence or prosecute any action or
proceeding against any tenant or occupant of the Building who shall claim a
reduction in its electricity payment or operating expense payment, as aforesaid,
and (ii) Tenant shall not assert a claim against Landlord or any such tenant or
occupant, directly or indirectly (including, without limitation, any claim by
way of subrogation), as a result of any claim by such tenant or occupant for
reduction, as aforesaid, or any payment made by Tenant pursuant to this Article
8. Notwithstanding the provisions of this Section 8(B), if and to the extent
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pursuant to the BIR Documentation Landlord shall have been reimbursed for the
amount of such reductions, Landlord agrees that it shall not look to Tenant for
such reimbursement. Tenant's reimbursement obligations under this Article 8
shall survive the expiration or sooner termination of the Lease. Landlord and
Tenant each acknowledges that the BIR Reductions are to be entirely for the
benefit of Tenant, and are not for the benefit of Landlord or any other party.
C. Notwithstanding anything to the contrary contained in this
Lease, if Landlord shall implement an economic incentive package for the benefit
of a tenant or other occupant of the Building (including, without limitation,
Tenant) and, as a result thereof, Operating Expenses and/or Landlord's rate for
electricity shall be reduced or abated, in whole or in part, with respect to all
or any portion of the Building, then for purposes of calculating the payment
required to be made by Tenant in respect of electricity (x) pursuant to Article
13 of the Lease (with respect to an economic incentive package for the benefit
of tenants other than Tenant and, in respect of an economic incentive package
granted to Tenant, with respect to any portion of the Premises not subject to
BIR Reductions), (y) in respect of Building Electricity Expenses, and (z) in
respect of increases in the Operating Expenses, in each event under the Lease
and under the Agreement of Lease, dated as of December 17, 1990, between
Landlord, as master landlord, and Tenant, as master tenant, for space on the
18th and 19th floors of the Building, Landlord's electric costs and Operating
Expenses shall be the electric costs and Operating Expenses which would have
been payable without regard to such reduction or abatement.
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D. Landlord agrees that it shall use commercially reasonable
good faith efforts to include, in each lease for space in the Building which
Landlord shall enter into after the date hereof, a clause to the effect that if
Landlord shall implement, or shall have implemented, an economic incentive
package for the benefit of a tenant or other occupant of the Building and, as a
result thereof, Landlord's electric costs shall be reduced or abated, in whole
or in part, with respect to all or any portion of the Building, then for
purposes of calculating the electric costs and operating expense escalation
payment payable by such tenant, Landlord's electric costs and Building operating
expenses shall be the electric costs and Building operating payments which would
have been payable without regard to such reduction or abatement. Notwithstanding
the foregoing, Landlord shall not be obligated to include such clause in any
lease (i) after the date Tenant abandons its efforts to receive the BIR
Reductions or (ii) if Tenant shall obtain the BIR Reductions, and thereafter
such BIR Reductions shall terminate, after such termination. In addition, if
Landlord shall fail to obtain such clause in any new lease as hereinabove
provided, then Tenant shall have no obligation to reimburse Landlord, as
required by Section 8(B) above, with respect to any reduction in electric
payments or operating expenses to which the tenant under such lease may be
entitled.
9. Each party represents and warrants to the other that it has not
dealt with any broker or person in connection with this Amendment other than
Cushman & Wakefield, Inc. ("Broker"). The execution and delivery of this
Amendment by each party shall be conclusive evidence that such party has relied
upon the foregoing representation and warranty. Tenant shall indemnify and hold
Landlord harmless from and against any and all claims for commission, fee or
other compensation by any person
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or broker (other than Broker) who shall claim to have dealt with Tenant in
connection with this Amendment and for any and all costs incurred by Landlord in
connection with such claims, including, without limitation, reasonable
attorneys' fees and disbursements. Landlord shall indemnify and hold Tenant
harmless from and against any and all claims for commission, fee or other
compensation by any person or broker (including, without limitation, the Broker)
who shall claim to have dealt with Landlord in connection with this Amendment
and for any and all costs incurred by Tenant in connection with such claims,
including, without limitation, reasonable attorneys' fees and disbursements. The
provisions of this paragraph shall survive the Expiration Date.
10. The provisions of Section 37.2 of the Lease are hereby incorporated
by reference in this Amendment, as if set forth in full in this Amendment,
except that all references therein to the Lease shall be deemed to be references
to the Lease as amended by this Amendment.
11. Each party represents and warrants to the other that its execution
and delivery of this Amendment has been duly authorized, that the individual
executing this Amendment on behalf of such party has been duly authorized to do
so, and that no other action or approval is required with respect to this
transaction.
12. The Lease, as amended by this Amendment, constitutes the entire
understanding between the parties hereto with respect to the Premises and may
not be waived, changed, modified or discharged orally but only by an agreement
in writing signed by the party against whom enforcement of any such waiver,
change, modification or discharge is sought.
54
<PAGE> 55
13. This Amendment shall not be binding on or enforceable against
either party unless and until both parties shall have executed and delivered a
fully executed counterpart of this Amendment.
14. As modified by this Amendment, the Lease and all covenants,
agreements, terms and conditions thereof shall remain in full force and effect
and are hereby in all respects ratified and confirmed.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Amendment as of the day and year first above written.
1740 BROADWAY ASSOCIATES L.P.
By: Mendik 1740 Corp., a general partner
By: /s/ David R. Greenbaum
------------------------
Name: David R. Greenbaum
------------------
Title: President
-----------------
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Joel Kampf
------------------------
Name: Joel Kampf
------------------
Title: VP-Comp Services
-----------------
55
<PAGE> 56
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 26th day of April, 1996, before me personally came Joel
Kampf, to me known, who, being by me duly sworn, did depose and say that he
resides at 94 Westminster Rd, Chadam, NJ; that he is the Vice President of THE
MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, the corporation described and which
executed the foregoing instrument; and that he signed his name thereto by order
of the board of directors of said corporation.
/s/ Patricia L. Hartnett
------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 26th day of April, 1996, before me personally came
David R. Greenbaum, to me known, who, being by me duly sworn, did depose and say
that he resides at 330 Madison Ave, NY, NY; that he is the President of Mendik
1740 Corp., the corporation which is a general partner of 1740 BROADWAY
ASSOCIATES L.P., the limited partnership described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the board
of directors of said corporation and as the act and deed of said partnership.
/s/ Bernard J. Michael
----------------------
Notary Public
<PAGE> 57
EXHIBIT "A"
SIXTH FLOOR PREMISES
Diagram of 6th Floor
<PAGE> 58
EXHIBIT "B"
SEVENTH FLOOR PREMISES
Diagram of 7th Floor
<PAGE> 59
EXHIBIT "C"
LANDLORD'S ADDITIONAL PREMISES WORK
1. Landlord shall demolish the Additional Premises to Building standard
condition, and in connection therewith shall remove all accessible
asbestos required by Requirements to be removed from the Additional
Premises. Promptly after delivery by Tenant to Landlord of Tenant's
final plans and specifications for the Additional Premises Initial
Alterations, Landlord shall deliver to Tenant a Form ACP-5 for Tenant's
Additional Premises Initial Alterations (provided, however, that the
delivery of such Form ACP-5 shall not be deemed to be a condition to
the occurrence of the Additional Premises Commencement Date).
2. Landlord shall flash patch the floors in the Additional Premises and
repair holes in the floors of the Additional Premises where necessary,
in each event to Building standard condition.
3. Landlord shall patch holes in the core walls of the Additional Premises
where necessary to Building standard conditions.
4. All convector covers shall fit properly, and Landlord shall replace all
missing louvers.
5. Landlord shall install one Building standard ADA compliant bathroom
stall in each of the mens' and womens' bathrooms on each floor of the
Additional Premises.
6. Landlord shall leave all existing window treatments in the Additional
Premises in place, but shall have no obligation to install any window
treatments in the Additional Premises.
7. Landlord shall bring electricity, in a capacity not less than seven (7)
watts demand load per usable square foot of the Additional Premises, to
the risers at the Additional Premises. Tenant may, at Tenant's expense,
allocate such electricity throughout the Premises as Tenant shall
elect.
8. Landlord shall remove abandoned wiring in floor duct systems,
including, telephone wiring, back to source, and all such ducts shall
be vacuumed. Landlord shall remove all telephone wiring abandoned in
hung ceilings.
<PAGE> 60
EXHIBIT "D-1"
FIRST OPTION SPACE
Diagram of 10th Floor
<PAGE> 61
EXHIBIT "D-2"
SECOND OPTION SPACE
Diagram of 18th Floor
<PAGE> 62
EXHIBIT "D-3"
THIRD OPTION SPACE
Diagram of 19th Floor
<PAGE> 63
EXHIBIT "D-4"
TENANT SHARES AND SPACE FACTORS FOR
THE OPTION SPACES
<TABLE>
<CAPTION>
OPTION SPACE TENANT SHARE SPACE FACTOR
------------ ------------ ------------
<S> <C> <C>
10 5.643% 29,567
18 3.031% 15,881
19 3.085% 16,165
</TABLE>
<PAGE> 64
EXHIBIT "E"
INITIAL ADDITIONAL PREMISES
Diagram of 19th Floor
<PAGE> 65
EXHIBIT "F"
TENANT'S EXCLUSIVE RISERS
Diagram of 10th Floor and 19th Floor
<PAGE> 66
EXHIBIT "G"
APPROVED CONTRACTORS FOR THE ORIGINAL PREMISES ALTERATIONS,
THE ADDITIONAL PREMISES INITIAL ALTERATIONS AND
THE INITIAL ADDITIONAL PREMISES ALTERATIONS
<PAGE> 67
APPROVED CONTRACTORS LIST
GENERAL CONTRACTORS PHONE NUMBER CONTACT PERSON
- ------------------- ------------ --------------
Ambassador Construction (212) 922-1020 Irving Koven
Lehr Construction (212) 353-1160 Gerald Lazar
Ocean Valley Ent. (718) 776-0077 Gary Sherwood
Structure Tone (212) 481-6100 John White
TriStar Corp. (212) 486-0808 Bill Weiner
SUB-CONTRACTORS
ASBESTOS ABATEMENT
NAC (212) 219-0880 Mike Caputo
Abtron (516) 364-4678 Jim Thurston
Abatement Int. (718) 994-2000 Bill McKenzie
AWNINGS
Acme Awning Co. (718) 409-1881 Ken Cohen
BLINDS
Ultimate Services (203) 531-0623 David Marinelli
BOILERS
M.P.S. (718) 834-9393 Nick Papps
Marine Welding (212) 991-3203 William Falco
CERAMIC
Quarry Tile (212) 679-8889 Helen Stember
Port Morris (718) 378-6100 Vincent Lauricell
CONCRETE
Melva (718) 482-1932 Chris Satalias
Ocean Valley Ent. (718) 776-0077 Gary-Sherwood
Landsite Contractinq (516) 938-8200 Adriano P. Lott
Francis A. Lee Exterior Restoration
Corp. (516) 938-2000 Francis A. Lee
CONVECTORS/COVERS
Steel Towne (718) 369-3637 Eugene Wong
Wenig Corp. (718) 542-3600 Ray Zimmerman
Hack Environmental (914) 946-3800 Ken Hack
Airflux (516) 752-1234 Al Wenksus
DEMOLITION
General Container, Inc. (718) 834-8100 Charlie Raffa
Advance Carting (212) 691-3200 Gene Skawronski
Ritaway (212) 458-8900 Nick Verna
DaCosta Demolition (718) 565-8588 Ernie DaCosta
DRYWALL/SHEETROCK
CLK Construction (212) 986-4580 Cary Koven
Dejil (718) 939-3700 Sy Levine
Ess a Vee (718) 786-1100 Tony Verderame
John Moresky (516) 735-7015 John Maresky
<PAGE> 68
MET Construction (718) 392-9400 Dan Masterson
Nordic Interiors, Inc. (718) 456-7000 Lloyd Jacobson
Ocean Valley Ent. (718) 776-0077 Gary Sherwood
Sweeney & Harkin Carpentry Dry
Wall Corp. (718) 392-0190 Don Masterson
ELECTRIC
Forest Electric (212) 594-4110 Phil Altheia
I Lite (212) 262-9488 Anthony Izza
T.C. Miller (212) 924-6650 Jonathan Feldberg
C.W. Green (212) 267-0440 James Angus
Egg Electric (212) 675-6406 Ellen Aschendorf
FLOORING
Ashland Industries, Inc. (914) 777-4507 Carmine Notaro
Lorraine Flooring (718) 482-0068 Stephen Varderame
FOLDING WALLS
Flexwall
Modernfold Doors (212) 684-4210 Robert Styles
National (Midhattan) (212) 924-1567 Edmund Crecco
GLASS REPLACEMENT
East Side Glass (212) 674-8355 Mark Rosen
Knickerbocker Glass (212) 247-8500 Sidney Glasser
H.V.A.C.
Omega Cooling (212) 268-7100 Ron Irving
Nelson Air Device (718) 729-3801 Nelson Blitz
Delphi Mechanical (718) 204-5500 Peter Manos Sr./Jr.
P.J. Mechanical (212) 243-2555 Mitchell Singer
P & L Mechanical (212) 966-6054 Tom Lacorazza
Penguin Air Conditioning (718) 706-2503 William Ash
Refrigeration Resources (516) 921-5149 George Gerlinsky
HARDWARE/DOORLOCKS
Midtown (212) 730-2052 Bill Gerrara
Weinstein & Holtzman (212) 233-4651 Jeff Hymowitz
HARDWARE/BUILDING SUPPLIES
Crest Supply (212) 967-2276 Vincent Zerbo
Consolidated Supply (718) 824-2033 Mark Wisner
LATH & ACOUSTICS
Ess & Vee Acoustical (718) 786-1100 Tony Verderame
Superior (516) 352-0300 Quinn Mesorana
LIGHTING
Speclite (516) 822-8800 James Willey
Project Lighting (718) 417-8182 Tony Capranzano
MARBLE
Quarry Title (212) 679-8889 Helen Stember
Joe Cochoran (516) 423-8737 Joe Cochoran
MASONARY/PLASTER
12
<PAGE> 69
Belcraft (718) 784-5505 Greg Ozzino
Indelicato (718) 409-9022 Ed DiGiacomo
METAL/GLASS PARTITION
F&F (201) 402-7710 Eric Frank
Metralite (718) 961-1770 Don Silverman
Acme (718) 384-7800 George De Feis
Abbott
PAINTING
Bond Painting (212) 944-0070 Stuart Feld
J.I. Hass (212) 687-6678 Jay Hass
Hudson Shatz (212) 757-6363 George Story
Wexler Services Corp. (212) 245-1110 Vera Young
PLUMBING
B & Z Mechanical (212) 967-2276 Bill Bowerman
American Contracting (212) 736-6618 Richard Silver
PAR Plumbing (516) 887-4000 Sandi Deutsch
WIRE MESH
Acorn Wire & Iron Works (212) 697-7370 Bert Damone
RAISED FLOOR
(Gayle, King, Carr) (212) FA5-5400 Val Bonanno
Floating Floors
Donn Floors
(Wener Krebs)
Raised Floors (201) 778-2444 Eric Lagerstrum
Computer Floors (201) 340-3666 Tor Sundlin
American Computer Floors
C-Teg Mfg. (212) 686-8994
RIGGING
Aalco Transport & Storage (516) 789-8000 Jeff Krevat
Francis A. Lee Exterior Restoration
Corp. (516) 938-2000 Francis A. Lee
ROLLING DOORS
Franklin Sq. Iron Works (201) 612-1995 Richie Singer
Amer. Overhead Door
Atlas Doors (201) 572-5700 Tom Eodice
Doors Unlimited (212) 269-8513
Miric Industries (212) 594-9898 Mike Petrico
ROOFING
A. Best (718) 779-3003 Lon Best
Melva Const. Corp. (718) 482-1932 Chris Batalias
Arrow Restoration (718) 729-0411 Marshall Geller
Empire National Const. Corp. (212) 594-1800 Paul Pfeifer
SCREENS
LeJac (516) 334-0855 Todd Morris
Raven (212) 534-8408 Martin Soss
Jenteen (201) 755-2127 Jerry Segal
13
<PAGE> 70
SECURITY
Guard Technologies, Inc. (609) 452-2052 Darius Nevin
SIGNS
Ensign Systems, Inc. (718) 416-2052 Kevin Ryan
Engraphics (212) 691-0777 Susan Perdoch
Forest Sign Co. (212) 319-0100 Richard McGovern
SPRINKLER
CGA Associates (201) 696-2208 Carl Guinta
Columbia Mechanical (212) 594-3014 Nick Pizzone
Sirina Fire Protection (516) 942-0400 Tony Florez
Abco Peerless Sprinkler (516) 294-6850 Tim Bowe
STRUCTURAL STEEL & STEEL WORK
Burgess Steel Products (212) 563-6000 Eugene Guerin
Franklin Iron Works (212) 863-5001 Richie Singer
Koenig Iron Works (21) 924-4333 Norman Rosenbaum
Jaravi
TOILET ARTICLES
LeJac (516) 334-0855 Tod Morris
Flush Metal (718) 784-3380 Jack Rubin
Jenteen
WATERPROOFING
Melva (718) 482-1932 Chris Batalias
A. Best Contracting (718) 779-3003 Lon Best
Arrow Restoration (718) 729-0411 Marshall Geller
Francis A. Lee Exterior &
Restoration Corp. (516) 938-2000 Francis A. Lee
Empire National Const. Corp. (212) 594-1800 paul Pfeifer
WOODEN FLOORS
Capital (Hoboken) (212) 925-6633
Designated Wood Flooring Center (212) 228-1050 Arnold Beinberg
Elite Flooring Robert Rutledge
WOODWORKERS
Antal (212) 755-1020
Millwright Woodwork Martin Sherlock
Midhattan
Capital
Nordic (718) 456-7000 Lloyd Jacobson
Infra-Structures (516) 243-0700 Robert Larson
WINDOWS
Air Master (718) 932-3434 Mark Wisner
Metro Windows (516) 360-8811 Elliot Glasser
14
<PAGE> 1
EXHIBIT 10.14
SECOND AMENDMENT OF LEASE
THIS SECOND AMENDMENT OF LEASE (this "Amendment") dated as of
August 6, 1996, between 1740 BROADWAY ASSOCIATES L.P., a Delaware limited
partnership having an office c/o Mendik Realty Company, Inc., 330 Madison
Avenue, New York, New York 10017 ("Landlord") and THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK, a New York corporation having an office at 1740 Broadway,
New York, New York 10019 ("Tenant").
W I T N E S S E T H:
WHEREAS, by Agreement of Lease, dated as of December 17, 1990,
as amended by the Amendment of Lease (the "First Amendment"), dated as of April
26, 1996, each between Landlord and Tenant (the Agreement of Lease as so amended
being collectively referred to as the "Lease") Landlord leased to Tenant, and
Tenant hired from Landlord, certain premises as more particularly described in
the Lease, in the building known as and by the address 1740 Broadway, New York,
New York (the "Building") and
WHEREAS, Tenant has requested, and Landlord has agreed, on the
terms and conditions hereinafter contained, to modify the Lease as hereinafter
provided.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and in the Lease, of Ten Dollars ($10) and of other good and
valuable consideration. the mutual receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto, for themselves, their legal
representatives, successors and assigns, hereby agree as follows:
<PAGE> 2
1. Unless otherwise defined herein, all capitalized terms used
herein shall have the meanings ascribed to such terms in the Lease.
2. Sections (A) through (D) of Paragraph 6 of the First
Amendment shall hereby be deleted.
3. (A) Tenant hereby leases from Landlord the entire rentable
areas of the sixth (6th) floor of the Building as shown on Exhibit "A" annexed
hereto and made a part hereof (the "Sixth Floor Premises") for a term to
commence on August l, 1996 ("Sixth Floor Premises Commencement Date") and to end
on May 31, 2016, on all of the terms and conditions of the Lease, as modified
hereby. Upon the Sixth Floor Premises Commencement Date, the Sixth Floor
Premises shall be delivered in "broom clean" condition, free from tenancies and
occupancies (other than occupancies pursuant to the Lease), and shall be deemed
a part of the Office Premises for all purposes under the Lease, except as
expressly provided herein.
(B) The Fixed Rent payable in respect of the Sixth Floor
Premises shall be as follows:
(i) Five Hundred Fifty-Three Thousand Seven Hundred Sixteen
Dollars ($553,716) per annum for the period commencing on the Sixth Floor
Premises Commencement Date and ending on May 31, 1997 ($46,143 per month);
(ii) Eight Hundred Thirty Thousand Five Hundred Seventy-Four
Dollars ($830,574) per annum for the period commencing on the June 1, 1997 and
ending on May 31, 2001 ($69,214.50 per month);
2
<PAGE> 3
(iii) Nine Hundred Fifty-Three Thousand Six Hundred Twenty-Two
Dollars ($953,622) per annum for the period commencing on June 1, 2001 and
ending on May 31, 2006 ($79,468.50 per month);
(iv) One Million Seventy-Six Thousand Six Hundred Seventy
Dollars ($1,076,670) per annum for the period commencing on June 1, 2006 and
ending on May 31, 20.11 ($89,722.50 per month); and
(v) One Million Two Hundred Thirty Thousand Four Hundred
Eighty Dollars ($1,230,480) per annum for the period commencing on June 1, 2011
and ending on May 31, 2016 ($102,540 per month).
(C) From and after the Sixth Floor Premises Commencement Date,
(x) Tenant's Share shall be increased by five and eighty-seven one hundredths
percent (5.87%), (y) the Space Factor shall be increased by 30,762, and (z)
Tenant shall be entitled to a credit against the payments of Fixed Rent payable
under this Amendment in respect of the Sixth Floor Premises in an aggregate
amount equal to Eight Hundred Thirty Thousand Five Hundred Seventy-Four Dollars
($830,574) to be applied in twelve (12) equal monthly installments against the
Fixed Rent payable with respect to the Sixth Floor Premises for the months of
January, 1990 through December, 1998.
(D) (1) Tenant shall accept the Sixth Floor Premises in its
then "as is" condition and Landlord shall have no obligation to perform any work
or- make any installations in order to prepare the same for Tenant's occupancy
or provide any money for the preparation of the same, except as set forth in
this Paragraph 3 hereof.
(2) Landlord, at its sole cost and expense, shall
commence the work described on Exhibit "C" annexed hereto and made a part hereof
3
<PAGE> 4
with respect to the Sixth Floor Premises by the earlier of (i) June 1, 1997 and
(ii) the date (not earlier than May 1, 1997), which is thirty (30) days after
written notice from Tenant to Landlord requesting that Landlord commence such
work with respect to the Sixth Floor Premises, and shall thereafter diligently
prosecute the same to completion. Tenant hereby acknowledges and agrees that
Landlord shall be performing such work after the date possession of the Sixth
Floor Premises shall have been delivered to Tenant.
(E) (1) Landlord shall contribute an amount equal to One
Million Two Hundred Thirty Thousand Four Hundred Eighty Dollars ($1,230,480)
(the "Sixth Floor Tenant Fund") toward the "hard costs" of performing the
Alterations made by Tenant to initially prepare the Sixth Floor Premises for
occupancy by Tenant (the "Sixth Floor Initial Alterations") and the "hard costs"
of performing Alterations to other portions of the Premises during the period
from the Sixth Floor Premises Commencement Date through the second (2nd)
anniversary of the Sixth Floor Premises Commencement Date; provided, however,
that not less than fifty percent (50%) of the Sixth Floor Tenant Fund must be
applied toward the "hard costs" of performing the Sixth Floor Initial
Alterations. For purposes of determining the "hard costs" of the Sixth Floor
Initial Alterations, Landlord agrees that such "hard costs" may include the
professional fees (not in excess of ten percent (10%) of the Sixth Floor Tenant
Fund) of the architects, engineers and designers involved in the Sixth Floor
Initial Alterations.
(2) The Sixth Floor Tenant Fund shall be disbursed on
and subject to the provisions of Paragraph 5 of the First Amendment, except that
(i) all references therein to the "Original Premises Tenant Fund," the "Original
Premises Alterations", the "Alterations Premises" and the number "$1,942,260"
shall be deemed to
4
<PAGE> 5
be references to the "Sixth Floor Tenant Fund", the "Sixth Floor Initial
Alterations", the "Sixth Floor Premises" and the number "$1,230,480"
respectively, and (ii) notwithstanding any provision hereof to the contrary, in
no event shall any disbursement from the Sixth Floor Tenant Fund be required to
be made prior to June 1, 1997.
(F) If Landlord is unable to deliver possession of any portion
of the Sixth Floor Premises by August 1, 1996 because of the holding over or
retention of possession of any tenant, undertenant or occupants in the Sixth
Floor Premises, then except as expressly provided in this Section, (i) Landlord
shall not be subject to any liability or failure to give possession on said
date, (ii) the validity of this Lease shall not be impaired under such
circumstances, nor shall the same be construed to extend the term of this Lease
with respect to the Sixth Floor Premises or otherwise, (iii) Tenant waives any
right to rescind this Lease under Section 223-a of the New York Real Property
Law or any successor statute of similar nature and purpose then in force, and
(provided Landlord fulfills its obligation under the following clause (v)
hereof) further waives the right to recover any damages which may result from
Landlord's failure to deliver possession of the Sixth Floor Premises or portion
thereof to Tenant on August 1, 1996 and agrees that the provisions of this
Section shall constitute an "express provision to the contrary" within the
meaning of Section 223-a of the New York Real Property law, (iv) provided Tenant
is not responsible for such inability to deliver possession, the Fixed Rent,
Escalation Rent and all -other items of additional rent payable with respect to
the portion of the Sixth Floor Premises not delivered to Tenant shall be abated
and the Sixth Floor Premises Commencement Date with respect to the portion of
the Sixth Floor Premises not delivered to Tenant shall be postponed until ten
(10) Business Days after Landlord
5
<PAGE> 6
shall give Tenant notice that the Sixth Floor Premises or applicable portion
thereof is vacant and available for Tenant's occupancy, (v) Landlord, at
Landlord's expense, shall use its reasonable efforts to deliver possession of
the entire Sixth Floor Premises or applicable portion thereof to Tenant as soon
as practicable and in connection therewith shall promptly institute and
diligently and in good faith prosecute holdover and any other appropriate
proceedings against the occupants of the Sixth Floor Premises or applicable
portion thereof, (vi) if Landlord shall fail to deliver to Tenant exclusive
possession of the entire Sixth Floor Premises by January 31, 1997, then Tenant,
as its sole remedy, by not later than February 15, 1997, may elect to revoke its
right to lease the Sixth Floor Premises (or, if a portion thereof has been
previously delivered, the portion thereof not previously delivered), in which
event Tenant shall have no right to lease from Landlord, and Landlord shall have
no obligation to lease to Tenant, the Sixth Floor Premises (or, if a portion
thereof has been previously delivered, the portions thereof not previously
delivered), and (vii) if Landlord shall collect from the tenant of the Sixth
Floor Premises any holdover rental in respect of the Sixth Floor Premises with
respect to the period from and after August 1, 1996 (which holdover rental shall
be deemed to be only the base rental for such tenant's use and occupancy of the
Sixth Floor Premises after August 1, 1996, and shall specifically exclude all
other sums, including, without limitation, any lease termination payment,
payments in respect of electricity, taxes or operating expenses, reimbursement
of expenses or indemnification obligations of such tenant) in excess of the
rental payable by such tenant in respect of the Sixth Floor Premises for the
month of July, 1996, then after deducting Landlord's costs of collecting such
amounts and of obtaining possession of the Sixth Floor Premises (including costs
of prosecuting
6
<PAGE> 7
holdover or other proceedings against such tenant), Landlord shall pay to Tenant
the amount of such excess.
4. (A) Tenant hereby leases from Landlord the entire rentable
areas of the seventh (7th) floor of the Building as shown on Exhibit "B" annexed
hereto and made a part hereof (the "Seventh Floor Premises") for a term to
commence on January 1, 1997 ("Seventh Floor Premises Commencement Date") and to
end on May 31, 2016, on all of the terms and conditions of the Lease, as
modified hereby. Upon the Seventh Floor Premises Commencement Date, the Seventh
Floor Premises shall be delivered in "broom clean" condition, free from
tenancies and occupancies (other than occupants pursuant to the Lease and the
License Agreement (hereinafter defined), except for the License (hereinafter
defined) and shall be deemed a part of the Office Premises for all purposes
under the Lease, except as expressly provided herein.
(B) The Fixed Rent payable in respect of the Seventh Floor
Premises shall be as follows:
(i) Eight Hundred Thirty Thousand Five Hundred Seventy-Four
Dollars ($830,574) per annum for the period commencing on the Seventh Floor
Premises Commencement Date and ending on May 31, 2001 ($69,214.50 per month);
(ii) Nine Hundred Fifty-Three Thousand Six Hundred Twenty-Two
Dollars ($953,622) per annum for the period commencing on June 1, 2001 and
ending on May 31, 2006 ($79,468.50 per month);
(iii) One Million Seventy-Six Thousand Six Hundred Seventy
Dollars ($1,076,670) per annum for the period commencing on June 1, 2006 and
ending on May 31, 2011 ($89,722.50 per month); and
7
<PAGE> 8
(iv) One Million Two Hundred Thirty Thousand Four Hundred
Thirty Thousand Four Hundred Eighty Dollars ($1,230,480) per annum for the
period commencing on June 1, 2011 and ending on May 31, 2016 ($102,540 per
month).
(C) From and after the Seventh Floor Premises Commencement
Date, (x) Tenant's Share shall be increased by five and eighty-seven one
hundredths percent (5.87%), (y) the Space Factor shall be increased by 30,762,
and (z) Tenant shall be entitled to a credit against the first twelve (12)
payments of Fixed Rent payable under this Amendment in respect of the Seventh
Floor Premises in an aggregate amount equal to Eight Hundred Thirty Thousand
Five Hundred Seventy-Four Dollars ($830,574).
(D) (1) Tenant shall accept the Seventh Floor Premises in its
then "as is" condition and Landlord shall have no obligation to perform any work
or make any installations in order to prepare the same for Tenant's occupancy
(except as provided in Paragraph 4(E) hereof) or provide any money for the
preparation of the same, except that Landlord shall contribute an amount equal
to One Million Two Hundred Thirty Thousand Four Hundred Eight Dollars
($1,230,480) (the "Seventh Floor Tenant Fund") toward the "hard costs" of
performing the Alterations made by Tenant to initially prepare the Seventh Floor
Premises for occupancy by Tenant (the "Seventh Floor Initial Alterations") and
the "hard costs" of performing Alterations to other portions of the Premises
during the period from the Seventh Floor Premises Commencement Date through the
second (2nd) anniversary of the Seventh Floor Premises Commencement Date;
provided, however, that not less than fifty percent (50%) of the Seventh Floor
Tenant Fund must be applied toward the "hard costs" of performing the Seventh
Floor Initial Alterations. For purposes of determining the "hard costs" of the
Seventh Floor Initial Alterations,
8
<PAGE> 9
Landlord agrees that such "hard costs" may include the professional fees (not in
excess of ten percent (10%) of the Seventh Floor Tenant Fund) of the architects,
engineers and designers involved in the Seventh Floor Initial Alterations.
(2) The Seventh Floor Tenant Fund shall be disbursed
on and subject to the provisions of Paragraph 5 of the First Amendment, except
that (i) all references therein to the "Original Premises Tenant Fund, " the
"Original Premises Alterations", the "Alteration Premises" and the number
"$1,942,260" shall be deemed to be references to the "Seventh Floor Tenant
Fund", the "Seventh Floor Initial Alterations", the "Seventh Floor Premises" and
the number "$1,230,480", respectively.
(E) Landlord, at its sole cost and expense, shall commence the
work described on Exhibit "C" annexed hereto and made a part hereof (i) with
respect to the .' Seventh Floor Premises other dm the Licensed Premises by the
Seventh Floor Premises Commencement Date, and shall thereafter diligently
prosecute the same to completion, and (ii) with respect to the Licensed Premises
promptly after the date the Licensee (hereinafter defined) has vacated and
surrendered possession of the Licensed Premises. Tenant hereby acknowledges and
agrees that Landlord shall be performing such work after the date possession of
the Seventh Floor Premises shall have been delivered to Tenant.
(F) If Landlord is unable to deliver possession of any portion
of the Seventh Floor Premises by January 1, 1997 because of the holding over or
retention of possession of any tenant, undertenant or occupants in the Seventh
Floor Premises, then except as expressly provided in this Section, (i) Landlord
shall not be subject to any liability or failure to give possession on said
date, (ii) the validity of this Lease shall not
9
<PAGE> 10
be impaired under such circumstances, nor shall the same be construed to extend
the term of this Lease with respect to the Seventh Floor Premises or otherwise,
(iii) Tenant waives any right to rescind this Lease under Section 223-a of the
New York Real Property Law or any successor statute of similar nature and
purpose then in force, and (provided Landlord fulfills its obligation under the
following clause (v) hereof) further waives the right to recover any damages
which may result from Landlord's failure to deliver possession of the Seventh
Floor Premises or portion thereof to Tenant on January 1, 1997 and agrees that
the provisions of this Section shall constitute an "express provision to the
contrary" within the meaning of Section 223-a of the New York Real Property law,
(iv) provided Tenant is not responsible for such inability to deliver
possession, the Fixed Rent, Escalation Rent and all other items of additional
rent payable with respect to the portion of the Seventh Floor Premises not
delivered to Tenant shall be abated and the Seventh Floor Premises Commencement
Date with respect to the portion of the Seventh Floor Premises not delivered to
Tenant shall be postponed until ten (10) Business Days after Landlord shall give
Tenant notice that the Seventh Floor Premises or applicable portion thereof is
vacant and available for Tenant's occupancy, (v) Landlord, at Landlord's
expense, shall use its reasonable efforts to deliver possession of the entire
Seventh Floor Premises or applicable portion thereof to Tenant as soon as
practicable and in connection therewith shall promptly institute and diligently
and in good faith prosecute holdover and any other appropriate proceedings
against the occupants of the Seventh Floor Premises or applicable portion
thereof, (vi) if Landlord shall fail to deliver to Tenant exclusive possession
of the entire Seventh Floor Premises (other than the Licensed Area and/or the
area occupied by Lankenau (hereinafter defined) by June 30,
10
<PAGE> 11
1997, then Tenant, as its sole remedy, by not later than July 15, 1997, may
elect to revoke its right to lease the Seventh Floor Premises (or, if a portion
thereof has been previously delivered, the portion thereof not previously
delivered), in which event Tenant shall have no right to lease from Landlord,
and Landlord shall have no obligation to lease to Tenant, the Seventh Floor
Premises (or, if a portion thereof has been previously delivered, the portions
thereof not previously delivered), and (vii) if Landlord shall collect from the
tenant of the Seventh Floor Premises any holdover rental in respect of the
Seventh Floor Premises with respect to the period from and after January 1, 1997
(which holdover rental shall be deemed to be only the base rental for such
tenant's use and occupancy of the Seventh Floor Premises after August 1, 1996,
and shall specifically exclude all other sums, including, without limitation,
any lease termination payment, payments in respect of electricity, taxes or
operating expenses, reimbursement of expenses or indemnification obligations of
such tenant) in excess of the rental payable by such tenant in respect of the
Seventh Floor Premises for the month of December, 1996, then after deducting
Landlord's costs of collecting such amount and obtaining possession of the
Seventh Floor Premises (including costs of prosecuting holdover or other
proceedings against such tenant), Landlord shall pay to Tenant the amount of
such excess. Notwithstanding the foregoing, Landlord shall have no obligation to
deliver possession of (i) the Licensed Premises until after the Licensee shall
have vacated and surrendered possession of the Licensed Premises or (ii) the
area occupied by Lankenau until after Lankenau shall have vacated and
surrendered possession of such area.
5. For purposes of the First Amendment, (i) the "Additional
Premises" shall mean, collectively, the Sixth Floor Premises and the Seventh
Floor Premises, (ii) the
11
<PAGE> 12
"Additional Premises Commencement Date" shall mean (x) with respect to the Sixth
Floor Premises, the Sixth Floor Premises Commencement Date and (y) with respect
to the Seventh Floor Premises, the Seventh Floor Premises Commencement Date,
(iii) "Landlord's Additional Premises Work" shall mean the work listed on
Exhibit "C" annexed hereto and made a part hereof, to be performed to each of
the Sixth Floor Premises and the Seventh Floor Premises, (iv) the "Additional
Premises Tenant Fund" shall mean (x) with respect to the Sixth Floor Premises,
the Sixth Floor Premises Tenant Fund and (y) with respect to the Seventh Floor
Premises, the Seventh Floor Premises Tenant Fund, and (v) the "Additional
Premises Initial Alterations" shall mean (x) with respect to the Sixth Floor
Premises, the Sixth Floor Premises Initial Alterations and (y) with respect to
the Seventh Floor Premises, the Seventh Floor Premises Initial Alterations.
6. Simultaneously herewith, Tenant, as licensor, is entering
into a license agreement (the "License") with Wells, Rich, Greene BDDP, Inc.
("Licensee") as licensee, with respect to a portion of the Seventh Floor
Premises (the "Licensed Premises") for a term to expire on March 31, 1997.
Landlord hereby consents to the execution and delivery of the License. Tenant
agrees that it shall not modify or amend any of the terms or provisions of the
License (including, without limitation, any extension of the term of the
License). Tenant acknowledges that Licensee shall perform alterations to the
Licensed Area to cause the Licensed Area to be a separate, fire-rated area,
including (i) replacement of glass doors with fire-rated doors and (ii)
replacement of any non fire-rated demising walls with fire rated demising walls,
and Tenant hereby consents to the same. Tenant also acknowledges that Licensee
has represented to Landlord that Tenant has
12
<PAGE> 13
granted to Lankenau Kovner & Kurtz ("Lankenau") the right to occupy less than
three hundred (300) square feet of space on the Seventh Floor Premises as a
month to month occupant, and Licensee has covenanted to Landlord that, at
Licensee's sole cost and expense, Licensee shall cause Lankenau to vacate and
surrender such space by not later than November 30. 1996. From and after the
Seventh Floor Commencement Date, at all times during the term of the License
Tenant shall provide Licensee with reasonable access to the Licensed Area
through the Seventh Floor Premises, 24 hours per day, 7 days per week, shall not
interfere with Licensee's use and occupancy of the Licensed Premises, and shall
indemnify, defend and save and hold Landlord harmless from and against any
losses, costs, liabilities and expenses (including attorneys' fees and
disbursements) arising from any claim by Licensee that Licensee has been denied
such access by Tenant or, that Tenant has interfered with Licensee's use and
occupancy of the License A Premises. Tenant shall deliver to Landlord copies of
all notices it delivers under the License or with respect to the Licensed Area
or the area occupied by Lankenau simultaneously with Tenant's delivery thereof,
and shall deliver to Landlord, promptly after Tenant's receipt thereof, copies
of all notices it receives with respect to the License, the Licensed Area, or
the area occupied by Lankenau.
7. Each party represents and warrants to the other that it has
not dealt with any broker or person in connection with this Amendment other than
Cushman & Wakefield, Inc. ("Broker"). The execution and delivery of this
Amendment by each party shall be conclusive evidence that such party has relied
upon the foregoing representation and warranty. Tenant shall indemnify and hold
Landlord harmless from and against any and all claims for commission, fee or
other compensation by any person or broker (other
13
<PAGE> 14
than Broker) who shall claim to have dealt with Tenant in connection with this
Amendment and for any and all costs incurred by Landlord in connection with such
claims, including, without limitation. reasonable attorneys' fees and
disbursements. Landlord shall indemnify and hold Tenant harmless from and
against any and all claims for commission, fee or other compensation by any
person or broker (including, without limitation, the Broker) who shall claim to
have dealt with Landlord in connection with this Amendment and for any and all
costs incurred by Tenant in connection with such claims, including, without
limitation, reasonable attorneys' fees and disbursements. The provisions of this
Paragraph shall survive the Expiration Date.
8. The provisions of Section 37.2 of the Lease are hereby
incorporated by reference in this Amendment, as if set forth in full in this
Amendment, except that all references therein to the Lease shall be deemed to be
references to the Lease as amended by this Amendment.
9. Each party represents and warrants to the other that its
execution and delivery of this Amendment has been duly authorized, that the
individual executing this Amendment on behalf of such party has been duly
authorized to do so, and that no other action or approval is required with
respect to this transaction.
10. The Lease, as amended by this Amendment, constitutes the
entire understanding between the parties hereto with respect to the Premises and
may not be waived, changed, modified or discharged orally but only by an
agreement in writing signed by the party against whom enforcement of any such
waiver, change, modification or discharge is sought.
14
<PAGE> 15
11. This Amendment shall not be binding on or enforceable
against either party unless and until both parties shall have executed and
delivered a fully executed counterpart of this Amendment.
12. This Amendment may be executed in counterparts, each of
which shall be deemed an original and together shall constitute a single
agreement.
13. As modified by this Amendment, the Lease and all
covenants, agreements, terms and conditions thereof shall remain in full force
and effect and are hereby in all respects ratified and confirmed.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed
this Amendment as of the day and year first above written.
1740 BROADWAY ASSOCIATES L.P.
By: Mendik 1740 Corp., a general partner
By:
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
THE MUTUAL LIFE INSURANCE CO) Y OF NEW YORK
By: /s/ Richard E. Mulroy, Jr.
---------------------------------------
Name: Richard E. Mulroy, Jr.
Title: Senior Vice President
15
<PAGE> 16
13. As modified by this Amendment, the Lease and all
covenants, agreements, terms and conditions thereof shall remain in full force
and effect and are hereby in all respects ratified and confirmed.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed
this Amendment as of the day and year first above written.
1740 BROADWAY ASSOCIATES L.P.
By: Mendik 1740 Corp., a general partner
By: /s/ David R. Greenbaum
-------------------------------------
Name: David R. Greenbaum
--------------------------------
Title: Executive Vice President
--------------------------------
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By:
-------------------------------------------
Name:
-------------------------------------
Title"
-------------------------------------
16
<PAGE> 17
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 2nd day of August 1996, before me personally came
Richard E. Mulroy, to me known, who being by me duly sworn, did depose and say
that he resides at 355 Kensington Drive, Ridgewood, NJ 07450; that he is the
Senior Vice President of THE MUTUAL LIFE COMPANY OF NEW YORK, the corporation
described and which executed the foregoing instrument; and that he signed his
name thereto by order of the board of directors of said corporation.
/s/ Patricia L. Hartnett
------------------------
Notary Public
[stamped Patricia L. Hartnet, Notary Public, State of New York No. 31-4807146,
Qualified in New York County, Term Expires February 28, 1997 ]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 1st day of August 1996, before me personally came David
R. Greenbaum, to me known, who, being by me duly sworn, depose and say that he
resides at 1000 Park Avenue, New York, NY 10028; that he is the Exec. Vice
President of Mendik 1740 Corp., the corporation which is a general partner of
1740 BROADWAY ASSOCIATES L.P., the limited partnership described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the board of directors of said corporation and as the act and deed of said
partnership.
/s/ Madeline T. Couton
----------------------------
Notary Public
[stamped Madeline T. Couton, Notary Public of New York, No 31-5837979, Qualified
in New York County, Commission Expires October 31, 1996]
17
<PAGE> 18
EXHIBIT "A"
SIXTH FLOOR PREMISES
Diagram of 6th Floor
18
<PAGE> 19
EXHIBIT "B"
SEVENTH FLOOR PREMISES
Diagram of 7th Floor
19
<PAGE> 20
EXHIBIT "C"
LANDLORD'S ADDITIONAL PREMISES WORK
1. Landlord shall demolish the Additional Premises to Building standard
condition, and in connection therewith shall remove all accessible
asbestos required by Requirements to be removed from the Additional
Premises. Promptly after delivery by Tenant to Landlord of Tenant's
final plans and specifications for the Additional Premises Initial
Alterations, Landlord shall deliver to Tenant a Form ACP-5 for Tenant's
Additional Premises Initial Alterations (provided, however, that the
delivery of such Form ACP5 shall not be deemed to be a condition to the
occurrence of the Additional Premises Commencement Date).
2. Landlord shall flash patch the floors in the Additional Premises and
repair holes in the floors of the Additional Premises where necessary,
in each event to Building standard condition.
3. Landlord shall patch holes in the core walls of the Additional Premises
where necessary to Building standard conditions.
4. All convector covers shall fit properly, and Landlord shall replace all
missing louvers.
5. Landlord shall install one Building standard ADA compliant bathroom
stall in each of the mens' and womens' bathrooms on each floor of the
Additional Premises.
6. Landlord shall leave all existing window treatments in the Additional
Premises in place, but shall have no obligation to install any window
treatments in the Additional Premises.
7. Landlord shall bring electricity, in a capacity not less than seven (7)
watts demand load per usable square foot of the Additional Premises, to
the risers at the Additional Premises. Tenant may, at Tenant's expense,
allocate such electricity throughout the Premises as Tenant shall
elect.
8. Landlord shall remove abandoned wiring in floor duct systems, including
telephone wiring, back to source, and all such ducts shall be vacuumed.
Landlord shall remove all telephone wiring abandoned in hung ceilings.
20
<PAGE> 1
EXHIBIT 10.15
THIRD AMENDMENT OF LEASE
THIS THIRD AMENDMENT OF LEASE (this "Amendment") dated as of
December 18th, 1996, between 1740 BROADWAY ASSOCIATES L.P., a Delaware limited
partnership having an office c/o Mendik Realty Company, Inc., 330 Madison
Avenue, New York, New York 10017 ("Landlord") and THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK, a New York corporation having an office at 1740 Broadway,
New York, New York 10019 ("Tenant").
W I T N E S S E T H:
WHEREAS, by Agreement of Lease, dated as of December 17,1990
(the "Original Lease"), as amended by an Amendment of Lease, dated as of April
26, 1996 (the "First Amendment") and a Second Amendment of Lease, dated as of
August 6, 1996 (the "Second Amendment", the Original Lease, as amended by the
First Amendment and the Second Amendment, is hereinafter collectively referred
to as the "Lease"), Landlord leased to Tenant, and Tenant hired from Landlord,
certain premises (the "Premises") as more particularly described in the Lease,
in the building known as and by the address 1740 Broadway, New York, New York
(the "Building"); and
WHEREAS, Tenant has requested, and Landlord has agreed, on
the terms and conditions hereinafter contained, to modify the Lease as
hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants c
herein and in the Lease, of Ten Dollars ($10) and of other good and valuable
consideration, the mutual receipt and legal sufficiency of which are hereby
acknowledged, the parties
<PAGE> 2
hereto, for themselves, their legal representatives, successors and assigns,
hereby agree as follows:
1. Unless otherwise defined herein, all capitalized terms used
herein shall have the meanings ascribed to such terms in the Lease.
2. Landlord and Tenant acknowledge and agree that, prior to
the date hereof, Tenant exercised its option, pursuant to Paragraph 6(E) of the
First Amendment, to lease the portion of the Initial Additional Premises
consisting of the 19th Floor Premises, but elected not to exercise its option,
pursuant to Paragraph 6(E) of the First Amendment, to lease the portion of the
Initial Additional Premises consisting of the 18th Floor Premises.
Notwithstanding anything contained to the contrary in Paragraph 6(E) of the
First Amendment, Landlord hereby agrees to extend the date by which Tenant may
notify Landlord of its election to lease the portion of the Initial Additional
Premises consisting of the 18th Floor Premises, in accordance with the
provisions of Paragraph 6(E) of the Lease, to October 31, 1997. In addition,
Tenant shall no longer have the right to lease the Second Option Space or the
Third Option Space pursuant to Article 42 of the Lease. All references in
Article 42 of the Lease to "Option Space" shall be deemed to be references to
the First Option Space only.
3. Each party represents and warrants to the other that it has
not dealt with any broker or person in connection with this Amendment other than
Cushman & Wakefield, Inc. ("Broker"). The execution and delivery of this
Amendment by each party shall be conclusive evidence that such party has relied
upon the foregoing representation and warranty. Tenant shall indemnify and hold
Landlord harmless from and against any and all claims for commission, fee or
other compensation by any person or broker (other
2
<PAGE> 3
than Broker) who shall claim to have dealt with Tenant in connection with this
Amendment and for any and all costs incurred by Landlord in connection with such
claims, including, without limitation, reasonable attorneys' fees and
disbursements. Landlord shall indemnify and hold Tenant harmless from and
against any and all claims for commission, fee or other compensation by any
person or broker (including, without limitation, the Broker) who shall claim to
have dealt with Landlord in connection with this Amendment and for any and all
costs incurred by Tenant in connection with such claims, including, without
limitation, reasonable attorneys' fees and disbursements. The provisions of this
Paragraph shall survive the Expiration Date.
4. The provisions of Section 37.2 of the Lease are hereby
incorporated by reference in this Amendment, as if set forth in full in this
Amendment, except that all references therein to the Lease shall be deemed to be
references to the Lease as amended by this Amendment.
5. The Lease, as amended by this Amendment, constitutes the
entire understanding between the parties hereto with respect to the Premises and
may not be waived, changed, modified or discharged orally but only by an
agreement in writing signed by the party against whom enforcement of any such
waiver, change, modification or discharge is sought.
6. This Amendment shall not be binding on or enforceable
against either party unless and until both parties shall have executed and
delivered a fully executed counterpart of this Amendment.
3
<PAGE> 4
7. As modified by this Amendment, the Lease and all covenants,
agreements, terms and conditions thereof shall remain in full force and effect
and are hereby in all respects ratified and confirmed.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed
this Amendment as of the day and year first above written.
1740 BROADWAY ASSOCIATES L.P.
By: Mendik 1740 Corp., a general partner
By: /s/ David Greenbaum
-------------------------
Name: David Greenbaum
Title: President
THE MUTUAL LIKE INSURANCE COMPANY OF NEW YORK
By: /s/ Joel Kampf
---------------------------
Name: Joel Kampf
Title: Vice President - Corporate Services
4
<PAGE> 5
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 13th day of December, 1996, before me personally came
Joel Kampf, to me known, who being by me duly sworn, did depose and say that he
resides at 1740 Broadway NY, NY; that he is the VP - Corporate Services of THE
MUTUAL LIFE COMPANY OF NEW YORK, the corporation described and which executed
the foregoing instrument; and that he signed his name thereto by order of the
board of directors of said corporation.
/s/ Patricia L. Hartnett
------------------------
Notary Public
PATRICIA L. HARTNETT
Notary Public, State of Now York
No. 31-4807148
Oualified in New York County
Term Expires February 28, 1997
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 18th day of December, 1996, before me personally came
David R. Greenbaum, to me known, who, being by me duly sworn, depose and say
that he resides at 1000 Park Avenue, New York, NY 10028; that he is the
President of Mendik 1740 Corp., the corporation which is a general partner of
1740 BROADWAY ASSOCIATES L.P., the limited partnership described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the board of directors of said corporation and as the act and deed of said
partnership.
/s/ Madeline T. Couton
----------------------
Notary Public
MADELINE T COUTON
Notary Public, State of New York
No. 31-6837979
Commission Expires October 31, 1998
<PAGE> 1
EXHIBIT 10.16
FOURTH AMENDMENT OF LEASE
THIS FOURTH AMENDMENT OF LEASE (this "Amendment") dated as of
January 14, 1997 between 1740 BROADWAY ASSOCIATES L.P., a Delaware limited
partnership having an office c/o Mendik Realty Company, Inc., 330 Madison
Avenue, New York, New York 10017 ("Landlord") and THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK, a New York corporation having an office at 1740 Broadway,
New York, New York 10019 ("Tenant").
WITNESSETH:
WHEREAS, by Agreement of Lease, dated as of December 17, 1990
(the "Original Lease"), as amended by an Amendment of Lease, dated as of April
26, 1996 (the "First Amendment"), a Second Amendment of Lease. dated as of
August 6. 1996 (the "Second Amendment") and a Third Amendment of Lease, dated as
of December 18, 1996 (the "Third Amendment"; the Original Lease, as amended by
the First Amendment, the Second Amendment and the Third Amendment, is
hereinafter collectively referred to as the "Lease"), Landlord leased to Tenant,
and Tenant hired from Landlord, certain premises (the "Premises") as more
particularly described in the Lease, in the building known as and by the address
1740 Broadway, New York, New York (the "Building"); and
WHEREAS, Tenant has requested, and Landlord has agreed, on the
terms and conditions hereinafter contained, to modify the Lease as hereinafter
provided.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and in the Lease, of Ten Dollars ($10) and of other good and
valuable consideration, the mutual receipt and legal sufficiency of which are
hereby
<PAGE> 2
acknowledged, the parties hereto, for themselves, their legal representatives,
successors and assigns, hereby agree as follows:
1. Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings ascribed to such terms in the Lease.
2. Effective as of the date hereof, the lease is hereby amended as
follows:
(i.) In Section 3(C) of the Second Amendment, the phrase
"June, 1997 through May, 1998" is hereby deleted and the phrase "January, 1998
through December, 1998" is hereby inserted in lieu thereof.
(ii.) In Section 4(C) of the Second Amendment (x) the phrase
"first twelve (12)" is hereby deleted and (y) the following is hereby inserted
at the end of Section 4(C): "to be applied in twelve (12) equal monthly
installments against Fixed Rent payable with respect to the Seventh Floor
Premises for the months of January, 1998, through December, 1998."
(iii.) In each of Sections 3(E)(1) and 4(E)(1) of the Second
Amendment, the phrase "One Million Two Hundred Thirty Thousand Four Hundred
Eighty Dollars ($1,230,480)" is hereby deleted and the phrase "One Million Two
Hundred Ninety Thousand Four Hundred Eighty Dollars ($1,290,480)" is hereby
inserted in lieu thereof.
(iv.) In each of Sections 3(E)(2) and 4(E)(2) of the Second
Amendment, the phrase "$1,230,480" is hereby deleted and the phrase "$1,290,480"
is hereby inserted in lieu thereof.
3. Each party represents and warrants to the other that it has not
dealt with any broker or person in connection with this Amendment other than
Cushman &
2
<PAGE> 3
Wakefield, Inc. ("Broker"). The execution and delivery of this Amendment by each
party shall be conclusive evidence that such party has relied upon the foregoing
representation and warranty. Tenant shall indemnify and hold Landlord harmless
from and against any and all claims for commission, fee or other compensation by
any person or broker (other than Broker) who shall claim to have dealt with
Tenant in connection with this Amendment and for any and all costs incurred by
Landlord in connection with such claims, including, without limitation,
reasonable attorneys' fees and disbursements. Landlord shall indemnify and hold
Tenant harmless from and against any and all claims for commission, fee or other
compensation by any person or broker (including, without limitation, the Broker)
who shall claim to have dealt with Landlord in connection with this Amendment
and for any and all costs incurred by Tenant in connection with such claims,
including, without limitation, reasonable attorneys' fees and disbursements. The
provisions of this Paragraph shall survive the Expiration Date.
4. The provisions of Section 37.2 of the Lease are hereby
incorporated by reference in this Amendment, as if set forth in full in this
Amendment, except that all references therein to the Lease shall be deemed to be
references to the Lease as amended by this Amendment.
5. The Lease, as amended by this Amendment, constitutes the
entire understanding between the parties hereto with respect to the Premises and
may not be waived, changed, modified or discharged orally but only by an
agreement in writing signed by the party against whom enforcement of any such
waiver, change, modification or discharge is sought.
3
<PAGE> 4
6. This Amendment shall not be binding on or enforceable
against either party unless and until both parties shall have executed and
delivered a fully executed counterpart of this Amendment.
7. As modified by this Amendment, the Lease and all covenants,
agreement terms and conditions thereof shall remain in full force and effect and
are hereby in all respects ratified and confirmed.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed
this Amendment as of the day and year first above written.
1740 BROADWAY ASSOCIATES L.P.
By: Mendik 1740 Corp., a general partner
By: /s/ David Greenbaum
----------------------------------
Name: David R. Greenbaum
Title: President
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By: /s/ Joel Kampf
------------------------------
Name: Joel Kampf
Title: VP
4
<PAGE> 5
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 10th day of January, 1997, before me personally came Joel Kampf, to me
known, who, being by me duly sworn, did depose and say that he resides at 1740
Broadway, New York, New York 10019; that he is the Vice President Corporate
Services of THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, the corporation
described and which executed the foregoing instrument; and that he signed his
name thereto by order of the board of directors of said corporation.
/s/ Patricia L. Hartnett
Notary Public
Stamped:
Patricia L. Hartnett
Notary Public, State of New York
No. 31-4807148
Qualified in New York County
Term Expires February 28, 1997
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 14th day of January 1997 before me personally came David R. Greenbaum, to
me known, who, being by me duly sworn, did depose and say that he resides at
1000 Park Avenue, New York, New York; that he is President of Mendik 1740 Corp.,
the corporation which is a general partner of 1740 BROADWAY ASSOCIATES L.P., the
limited partnership described in and which executed the foregoing instrument;
and that he
<PAGE> 6
signed his name thereto by order of the board of directors of said corporation
and as the act and deed of said partnership.
/s/ Madeline T. Couton
----------------------
Notary Public
Stamped:
Madeline T. Couton
Notary Public, State of New York
No. 01005837979
Qualified in New York County
Commission Expires
October 13,1998
2
<PAGE> 1
EXHIBIT 10.17
FIFTH AMENDMENT OF LEASE
THIS FIFTH AMENDMENT OF LEASE (this "Amendment") dated as of
May 30, 1997, between 1740 BROADWAY ASSOCIATES L.P., a Delaware limited
partnership having an office c/o Mendik Realty Company, Inc., 330 Madison
Avenue, New York, New York 10017 ("Landlord") and THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK, a New York corporation having an office at 1740 Broadway,
New York, New York 10019 ("Tenant").
W I T N E S S E T H:
WHEREAS, by Agreement of Lease, dated as of December 17, 1990
(the "Original Lease"), as amended by an Amendment of Lease, dated as of April
26, 1996 (the "First Amendment"), a Second Amendment of Lease, dated as of
August 6, 1996 (the "Second Amendment"), a Third Amendment of Lease, dated as of
December 18, 1996 (the "Third Amendment") and a Fourth Amendment of Lease, dated
as of January 14, 1997, the Original Lease, as amended by the First Amendment,
the Second Amendment, the Third Amendment and the Fourth Amendment, is
hereinafter collectively referred to as the "Lease"), Landlord leased to Tenant,
and Tenant hired from Landlord, certain premises (the "Premises") as more
particularly described in the Lease, in the building known as and by the address
1740 Broadway, New York, New York (the "Building"); and
WHEREAS, Mendik 1740 Corp. (the "Corporation") and Tenant
entered into a letter agreement, dated as of April 26, 1996, as amended by
amendments thereto
<PAGE> 2
dated December 18, 1996 and January 14, 1997 (collectively, the "Letter
Agreement") with respect to the conversion of the Building to a condominium form
of ownership and;
WHEREAS, Landlord delivered to Tenant a letter (the "Notice"),
dated April__, 1997, pursuant to which Landlord elected to convert the Building
to a condominium form of Ownership; and
WHEREAS, pursuant to the Letter Agreement, the Lease is to be
amended as provided herein in the event Landlord has delivered to Tenant the
Notice.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and in the Lease, of Ten Dollars ($10) and of other good and
valuable consideration, the mutual receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto, for themselves, their legal
representatives, successors and assigns, hereby agree as follows:
1. Unless otherwise defined herein, all capitalized terms used
herein shall have the meaning ascribed to such terms in the Lease.
2. Effective as of the date hereof, the lease is hereby
amended as follows:
A. Landlord and Tenant hereafter shall continuously
and in good faith use their diligent efforts to implement the economic
incentives offered to Tenant by the City of New York (the "City") and the New
York City Industrial Development Agency (the "IDA") in the form of reductions in
Taxes and commercial rent and occupancy taxes (the "Economic Incentive
Package"). For purposes hereof, it is expressly agreed that the Economic
Incentive Package does not include sales tax incentives or the BIR Reductions.
Landlord acknowledges that the implementation of the Economic Incentive Package
shall entail, among other things, converting the Building to
2
<PAGE> 3
a condominium form of ownership, deeding units leased to Tenant to the IDA for
subsequent lease to Landlord, subleasing such units to Tenant, exempting such
units deeded to the IDA from Taxes, and entering into certain other subleases
between Tenant and the IDA. Notwithstanding any provision hereof to the
contrary, Tenant acknowledges that, in connection with the implementation of the
Economic Incentive Package, in no event shall Landlord be required to mortgage
its interest in the Building or the Real Property or the income earned
therefrom.
B. Landlord and Tenant each acknowledges that the
Economic Incentive Package is to be entirely for the benefit of Tenant, and is
not for the benefit of Landlord or any other party. Notwithstanding the
foregoing, except to the extent provided in the final sentence of this Section
2(B) and in Section 2(K) hereof, if any other tenant or occupant shall claim
that it is entitled to a reduction in any real estate tax escalation payment
which such other tenant or occupant would otherwise be obligated to pay but for
any action taken to implement the Economic Incentive Package, or but for the
implementation of the Economic Incentive Package (including, without limitation,
the fact that all or any portion of the Building shall be exempt from the
payment of Taxes, or shall be subject to payments in lieu of real estate taxes)
and such claim shall be sustained pursuant to a final non-appealable
adjudication, then Tenant shall pay to Landlord, as additional rent, the amount
of such reduction, provided that Landlord shall have diligently and in good
faith defended such claim, and shall have consulted with Tenant in connection
therewith, as provided herein. Tenant shall also pay to Landlord, as additional
rent, the reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by Landlord in defending
any
3
<PAGE> 4
such claim. Landlord shall diligently and in good faith defend and such claim
made by such tenant or occupant using counsel reasonably acceptable to Tenant
(it being agreed that Proskauer Rose LLP are deemed to be acceptable to Tenant),
and shall consult with Tenant in connection therewith. Notwithstanding the
provisions of this Section 2(B), if and to the extent pursuant to Documentation
(hereinafter defined), Landlord shall be reimbursed for the amount of such
reductions and such costs and expenses, or if and to the extent such tenant or
occupant shall reimburse Landlord for such costs and expenses, Landlord shall
not look to Tenant for the amount reimbursed.
C. Landlord and Tenant shall negotiate in good faith
documentation to implement the Economic Incentive Package (collectively, the
"Documentation") and, upon agreement by the parties to the terms of the
Documentation, shall execute the Documentation, provided the Documentation is
commercially reasonable, is consistent with the provisions hereof, and is
otherwise consistent with documentation entered into in similar transactions
with the City and the IDA. Tenant agrees to pay the reasonable expenses incurred
by Landlord in connection with the transactions contemplated hereby (including
all costs of negotiating the Documentation, except as expressly provided below,
and all costs of removing the condominium regime from the Building within six
(6) months after the termination of the Economic Incentive Package), other than
(i) those expenses which Landlord would have incurred without regard to the
application hereof, and (ii) legal fees and disbursements incurred by Landlord
in connection with the negotiation of the Documentation. Tenant shall pay for
all of Tenant's expenses in connection with the transactions contemplated
hereby, except that Landlord shall contribute an amount not to exceed Thirty
Thousand Dollars
4
<PAGE> 5
($30,000) (the "Fund") toward Tenant's actual, reasonable out-of-pocket legal
fees in the preparation and negotiation of the plan (the "Condominium Plan") for
conversion of the Building to a condominium form of ownership. Landlord shall
disburse a portion of the Fund to Tenant from time to time, within thirty (30)
days after receipt of the items set forth herein, provided that on the date of a
request and on the date of disbursement from the Fund no Event of Default shall
have occurred and be continuing. Disbursements from the Fund shall not be made
more frequently than monthly, and shall be in an amount equal to the aggregate
amounts theretofore paid or payable (as certified by an officer of Tenant) to
Tenant's attorneys which have not been the subject of a previous disbursement
from the Fund. Landlord's obligation to make the disbursements from the Fund
shall be subject to Landlord's receipt of a request for such disbursement from
Tenant signed by an officer of Tenant, together with the certification required
above and copies of all receipts, invoices and bills for the legal fees incurred
in connection with the preparation and negotiation of the Condominium Plan which
are to be paid from the requested disbursement or which have been paid by Tenant
and for which Tenant is seeking reimbursement. In no event shall the aggregate
amount paid by Landlord to Tenant under this Paragraph 3 exceed the amount of
the Fund. Upon the completion of the Condominium Plan, any amount of the Fund
which has not been previously disbursed shall be retained by Landlord. Upon the
disbursement of the entire Fund (or the portion thereof if upon completion of
the Condominium Plan the Fund is not exhausted), Landlord shall have no further
obligation or liability whatsoever to Tenant for further disbursement of any
portion of the Fund to Tenant. Any costs to complete the
5
<PAGE> 6
Condominium Plan in excess of the Fund shall be the sole responsibility and
obligation of the Tenant.
D. If as a result of a requirement of the City or the IDA
Landlord shall be required to execute any Documentation or take any action to
implement the Economic Incentive Package and Landlord shall refuse to execute or
perform the same, then Landlord shall have no obligation to convert the Building
to a condominium form of ownership or otherwise implement the Economic Incentive
Package, provided that, if the reason for Landlord's refusal is that the
Documentation requires that Landlord mortgage its interest in the Building or
the Real Property or the income earned therefrom, then the First Amendment shall
be deemed to be modified by the provisions of Section 2(E) hereof. If any
dispute shall arise between Landlord and Tenant as to whether any Documentation
to be executed by Landlord or Tenant complies with the provisions hereof
(including Section 2(D) hereof) and, accordingly, whether Landlord or Tenant is
obligated to execute the same, either party may submit such dispute to expedited
binding arbitration in the City of New York under the Expedited Procedures
provisions of the Commercial Arbitration Rules of the American Arbitration
Association or any successor thereto. The authority of the arbitrator shall be
limited solely to determining whether such Documentation complies with the
provision hereof and, accordingly, whether Landlord or Tenant, as the case may
be, is obligated to execute such Documentation. The reasonable arbitration costs
of the successful party to such arbitration (including, without limitation, such
party's reasonable attorneys' fees and disbursements) shall be paid by the
losing party. If the arbitrator shall determine that Tenant is obligated to
execute such Documentation and Tenant shall fail or refuse to execute the same
promptly after written
6
<PAGE> 7
notice of the arbitrator's decision is delivered to Tenant, then Landlord shall
have no further obligation to convert the Building to condominium ownership or
otherwise implement the Economic Incentive Package, and the First Amendment
shall be deemed to be modified by the provisions of Section 2(E) hereof. If the
arbitrator shall determine that Landlord is obligated to execute such
Documentation and, notwithstanding such determination, Landlord shall fail or
refuse to execute the same within five (5) Business Days after written notice of
the arbitrator's decision is delivered to Landlord, then Landlord shall have no
obligation to convert the Building to a condominium form of ownership or
otherwise implement the Economic Incentive Package, the First Amendment shall
not be deemed to be modified by the provisions of Section 2(E) hereof, and
Tenant, as its sole remedy, shall be entitled to receive the arbitration fees,
attorneys' fees and disbursements referred to herein. If the arbitrator shall
determine that Landlord is not obligated to execute such Documentation and the
arbitrator does not determine that Tenant must execute other Documentation in
lieu thereof, and if Landlord shall fail or refuse, within five (5) Business
Days after receipt of the determination of the arbitrator to execute such
Documentation to be executed by Landlord, the First Amendment shall be deemed to
be modified by the provisions of Section 2(E) hereof.
E. If Landlord shall deliver the Notice and the Building shall
be converted to a condominium form of ownership, or if pursuant to the express
provisions hereof, the First Amendment is deemed to be modified by the
provisions of this Section 2(E), then (i) Section 3(A)(vi) of the First
Amendment shall be deemed deleted and the following shall be inserted in lieu
thereof: "(vi) Six Million Two Hundred Sixty-Nine Thousand Nine Hundred Dollars
($6,269,900) per annum for the period commencing on
7
<PAGE> 8
June 1, 2011 and ending on May 31, 2016 ($522,499.71 per month)"; and (ii)
Section 3(B) of the First Amendment shall be deemed deleted. If the Building
shall be converted to a condominium form of ownership in order to implement the
Economic Incentive Package, then the following shall be inserted at the end of
Article 3 of the First Amendment: "If the Building is converted to a condominium
form of ownership in order to implement the Economic incentive Package, and the
Taxes in respect of any condominium unit(s) leased solely to Tenant shall be
abated as a result thereof, the Fixed Rent payable under this Lease shall be
reduced, for the period that such unit(s) are subject to such abatement, by an
amount equal to the Base Taxes multiplied by the percentage interest ascribed to
such unit(s) in the Declaration of Condominium for the Building to be entered
into in connection with the conversion of the Building to a condominium form of
ownership. If any Taxes shall be payable for such unit(s) during the period that
such unit(s) are subject to an abatement, Tenant shall pay the same to Landlord
as additional rent within ten (10) days after demand therefor (but in no event
prior to fifteen (15) days prior to the date such Taxes are payable to the
applicable Governmental Authorities). No Tax Payments shall be payable with
respect to any unit(s) as to which Taxes are abated as provided herein for as
long as Taxes are abated for such unit(s) as provided herein. It is contemplated
that any payments in lieu of real estate taxes with respect to such unit(s) will
be paid by Tenant directly to the City or the IDA."
F. Notwithstanding any provision hereof to the contrary,
Landlord shall have no obligation to convert the Building to a condominium form
of ownership or otherwise implement the Economic Incentive Package, and the
First Amendment shall be deemed to be modified by the provision of Section 2(E)
hereof, if Tenant shall elect not
8
<PAGE> 9
to receive the Economic Incentive Package specified in the Resolution from the
City and the IDA or such Economic Incentive Package is not available to Tenant
by reason of Tenant's failing to execute any Documentation required by the City
or the IDA or otherwise failing to comply with the requirements of the City or
the IDA.
G. If, at any time after the Building has been converted to a
condominium form of ownership pursuant to the provision hereof, Tenant shall at
any time elect to terminate or abandon the portion of the Economic Incentive
Package consisting of reduced, abated or exempted Taxes, then upon request by
Tenant, Landlord shall reasonably cooperate with Tenant in connection therewith,
at Tenant's sole cost and expense.
H. If the Building has been submitted to condominium form of
ownership and if Landlord shall fail or refuse to contest the asserted valuation
(including the commencement and prosecution of applicable tax certiorari
proceedings) for the Building, then Tenant may, to the extent permitted by
Requirements and not prohibited by the Documentation, with no cost, expense or
liability to Landlord, contest the assessed valuation of any condominium units
leased or subleased by Landlord or the IDA solely to Tenant. Landlord shall
reasonably cooperate with Tenant in connection therewith, provided the same
shall impose no cost, expense or liability on Landlord.
I. Landlord and Tenant acknowledge that no transfer of the
Real Property to the IDA which may be entered into in order to implement the
Economic Incentive Package shall be deemed to be (x) a transfer of Landlord's
interest in the Real Property for purposes of Section 37.2 or Article 41 of the
Lease, or (y) an acquisition, taking or condemnation for purposes of Article 11
of the Lease.
9
<PAGE> 10
J. Intentionally Omitted.
K. Subject to the provisions of this Section 2(K), Landlord
shall include, in each lease for space in the Building which Landlord shall
enter into after the date hereof, a clause to the effect that if Landlord shall
implement, or shall have implemented, an economic incentive package for the
benefit of a tenant or other occupant of the Building and, as a result thereof,
Taxes shall be reduced or abated, in whole or in part, with respect to all or
any portion of the Building, then for purposes of calculating the tax escalation
payment payable by such tenant for any space leased by such tenant (other than
any space leased by such tenant which is subject to payments in lieu of taxes),
Taxes shall be the Taxes which would have been payable without regard to such
reduction or abatement. Notwithstanding the foregoing, (i) if Landlord shall not
include such clause in any such lease, Tenant shall have no obligation to
reimburse Landlord, as required by Section 2(B) hereof, with respect to any
reduction in real estate tax escalation payments to which the tenant under such
lease may be entitled or the costs and expenses incurred by Landlord in
attempting to collect such real estate tax escalation payments from such taxes,
and (ii) Landlord shall not be obligated to include such clause in any lease
after (x) the date Landlord otherwise is no longer obligated to convert the
Building to a condominium form of ownership, or (y) if the Building has been
converted, after the termination of the condominium or the Economic Incentive
Package.
L. Subject to the provisions of this Section 2(L), Landlord
shall include in each lease for space in the Building which Landlord shall enter
into after the date hereof a clause to the effect that if there shall be
implemented an economic incentive package for the benefit of the Tenant or other
occupant of the Building and, as result
10
<PAGE> 11
thereof, Landlord's electric costs shall be reduced or abated in whole or in
part with respect to all or any portion of the Building, then for purposes of
calculating the electric costs and operating expense escalation payment payable
by such tenant, Landlord's electric costs and operating expense escalation
payment payable by such tenants. Landlord's electric costs and Building
operating expenses shall be the electric costs and Building operating payments
which would have been payable with regard to such reduction or abatement.
Notwithstanding the foregoing, (i) if Landlord shall not include such clause in
any such lease, Tenant shall have no obligation to reimburse Landlord, as
required by Section 8(B) of the First Amendment, with respect to any reduction
in electric payments or operating expenses to which the tenant under such lease
may be entitled and (ii) Landlord shall not be obligated to include such clause
in any lease after (x) the date Tenant abandons its efforts to receive the BIR
Reductions, (y) if Tenant shall receive the BIR Reductions, after the
termination of the BIR Reductions or (z) the date electricity consumed at the
Premises leased by Tenant which are subject to the BIR Reductions are directly
metered for electricity.
3. Each party represents and warrants to the other that it has
not dealt with any broker or person in connection with this Amendment other than
Cushman & Wakefield, Inc. ("Broker"). The execution and delivery of this
Amendment by each party shall be conclusive evidence that such party has relied
upon the foregoing representation and warranty. Tenant shall indemnify and hold
Landlord harmless from and against any and all claims for commission, fee or
other compensation by any person or broker (other than Broker) who shall claim
to have dealt with Tenant in connection with this Amendment and for any and all
costs incurred by Landlord in connection with
11
<PAGE> 12
such claims, including, without limitation, reasonable attorneys' fees and
disbursements. Landlord shall indemnify and hold Tenant harmless from and
against any and all claims for commission, fee or other compensation by any
person or broker (including, without limitation, the Broker) who shall claim to
have dealt with Landlord in connection with this Amendment and for any and all
costs incurred by Tenant in connection with such claims, including, without
limitation, reasonable attorneys' fees and disbursements. The provisions of this
Paragraph shall survive the Expiration Date.
4. The provisions of Section 37.2 of the Lease are hereby
incorporated by reference in this Amendment, as if set forth in full in this
Amendment, except that all references therein to the Lease shall be deemed to be
references to the Lease as amended by this Amendment.
5. The Lease, as amended by this Amendment, constitutes the
entire understanding between the parties hereto with respect to the Premises and
may not be waived, changed, modified or discharged orally but only by an
agreement in writing signed by the party against whom enforcement of any such
waiver, change, modification or discharge is sought.
6. This Amendment shall not be binding on or enforceable
against either party unless and until both parties shall have executed and
delivered a fully executed counterpart of this Amendment.
7. As modified by this Amendment, the Lease and all covenants,
agreements, terms and conditions thereof shall remain in full force and effect
and are hereby in all respects ratified and confirmed.
12
<PAGE> 13
IN WITNESS WHEREOF, Landlord and Tenant have duly executed
this Amendment as of the day and year first above written.
1740 BROADWAY ASSOCIATES L.P.
By: Vornado 1740 Broadway Associates, L.L.C.
By: Vornado Realty Trust as authorized signatory
By: /s/ Susan Schmider
----------------------
Susan D. Schmider, Secretary
THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK
By: /s/ Edward P. Bank
----------------------
Name: Edward P. Bank
Title: Vice President
13
<PAGE> 14
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 25th day of June, 1997, before me personally came JOEL
KAMPF, to me known, who, being by me duly sworn, did depose and say that he
resides at 1740 Broadway, New York, New York 10019; that he is the Vice
President Corporate Services of THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK,
the corporation described and which executed the foregoing instrument; and that
he signed his name thereto by order of the board of directors of said
corporation.
/s/ Julie M. Lew
----------------
Notary Public
Stamped: Julie M. Lew, Notary Public, State of New York, No. 03-4980291,
Qualified in Bronx County, Commission Expires April 15, 1999
STATE OF NEW JERSEY )
) SS.:
COUNTY OF )
On the 25h day of June, 1997, before me personally came Susan
D. Schmider, to me known, who, being by me duly sworn, did depose and say that
she resides at Park 80w, PLII, Saddle Brook, NJ 07663; that she is the Secretary
of Vornado Realty Trust which is the Authorized Signatory of 1740 Broadway
Associates L.L.C., which is a general partner of 1740 BROADWAY ASSOCIATES L.P.,
the limited partnership described in and which executed the foregoing
instrument; and that she signed her name thereto by order of the members of said
liability company and as the act and deed of said partnership.
/s/ Ann Pelligra
----------------------
Notary Public
Stamped: Ann Peligra, Notary Public of New Jersey, My Commission Expires Feb.
25, 2001
14
<PAGE> 1
Exhibit 10.18
[MENDIK 1740 CORP. LETTERHEAD]
As of April 26, 1996
The Mutual Life Insurance Company
of New York
1740 Broadway
New York, New York 10019
1740 Broadway
New York, New York
Gentlemen:
Reference is made to the Amendment of Lease (the "Amendment"), dated
as of the date hereof, between 1740 Broadway Associates L.P. ("Landlord") and
The Mutual Life Insurance Company of New York ("Tenant"). Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings
ascribed to such terms in the Amendment.
A. Tenant has informed Mendik 1740 Corp. (the" Company"), a general
partner of Landlord, that, among other economic incentives offered to Tenant,
certain economic incentives (the "Economic Incentive Package") in the form of
reductions in Real Estate Taxes and commercial rent and occupancy taxes have
been offered to Tenant by The City of New York (the "City") and the New York
City Industrial Development Agency (the "IDA") pursuant to IDA Resolution, dated
March 12, 1996, and ,IDA Resolution dated April 9, 1996 (collectively, the
"Resolution"), a true, complete and correct copy of which is annexed hereto and
made a part hereof as Exhibit "A". For purposes of this letter, it is expressly
agreed that the Economic Incentive Package does not include sales tax incentives
or the BIR Reductions (as such term is
<PAGE> 2
The Mutual Life Insurance Company
of New York
as of April 26, 1996
Page 4
defined in the Lease). The Company and Tenant acknowledge that in order for the
Economic Incentive Package to be made available to Tenant, the Building must be
converted to a condominium form of ownership and various other actions must be
taken to implement the Economic Incentive Package. The Company has informed
Tenant that Nancy Creek, Inc., the other general partner of Landlord, is not
prepared to convert the Building to a condominium form of ownership or otherwise
implement the Economic Incentive Package, and that as a result thereof, and in
order to partially compensate Tenant for some of the economic benefits it
otherwise would have received if the Economic Incentive Package were
implemented, the Fixed Rent under the Amendment has been reduced below the
amount originally contemplated. The Company and Tenant agree that if, prior to
December 31, 1996, Landlord shall deliver the Notice (hereinafter defined), then
the Company shall cause Landlord to, and Tenant shall, enter into a modification
of the Lease (the "Modification"), containing in substance the provisions
specified in Exhibit "B" annexed hereto and made a part hereof. If Landlord
shall deliver the Notice and Landlord and Tenant shall fail to enter into the
Modification within ten (10) Business Days after delivery of the Notice, then
the Lease shall be deemed to be modified by the provisions of Exhibit B hereof
and, at the request of either party, Landlord and Tenant shall execute and
deliver to each other an agreement confirming such modification of the
Amendment, provided, however, that the failure of Landlord or Tenant to execute
or deliver the same shall not vitiate the automatic modification of the
Amendment pursuant to the provisions hereof. Notwithstanding the foregoing,
Tenant acknowledges and agrees that Landlord shall have no obligation
<PAGE> 3
The Mutual Life Insurance Company
of New York
as of April 26, 1996
Page 4
whatsoever to convert the Building to a condominium form of ownership or
otherwise take any action to implement the Economic Incentive Package, even
though, as a result thereof, Tenant will not be able to receive the benefits of
the Economic Incentive Package.
B. Landlord, in its sole and absolute discretion, may elect to
convert the Building to condominium form of ownership and otherwise implement
the Economic Incentive Package and enter into the Modification by written notice
(the "Notice") (which Notice shall be, except as set forth in this letter,
unconditional and irrevocable), signed by all general partners of Landlord (in
which Landlord shall represent and warrant to Tenant in the Notice that all
general partners of Landlord have signed the Notice), delivered to Tenant not
later than December 31, 1996, in respect of which date time shall be of the
essence.
C. The Company agrees that it shall cause Landlord to use its
diligent, good faith, commercially reasonable efforts to include, in each lease
for space in the Building which Landlord shall enter into after the date hereof,
a clause to the effect that if Landlord shall implement, or shall have
implemented, an economic incentive package for the benefit of a tenant or other
occupant of the Building and, as a result thereof, Taxes shall be reduced or
abated, in whole or in part, with respect to all or any portion of the Building,
then for purposes of calculating the tax escalation payment payable by such
tenant for any space leased by such tenant (other than any space leased by such
tenant which is subject to payments in lieu of taxes), Taxes shall be the Taxes
which would have been payable without regard to such reduction or abatement.
Notwithstanding the foregoing, Landlord shall not be obligated to include such
clause
<PAGE> 4
The Mutual Life Insurance Company
of New York
as of April 26, 1996
Page 4
in any lease after (i) December 31, 1996 (if the Notice has not been delivered
by such date), and that if Landlord shall have delivered the Notice by such
date, Landlord shall be required to include such clause in leases entered into
after December 31, 1996 as and to the extent required in Exhibit "B" hereof.
If the foregoing accurately reflects your understanding of our
agreement, please sign letter where indicated below.
MENDIK 1740 CORP.
By: /s/ David R. Greenbaum
---------------------
Name: David R. Greenbaum
------------------
Title: President
---------
ACCEPTED & AGREED TO:
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By: /s/ Joel Kampf
--------------
Name: Joel Kampf
----------
Title VP - Corp Services
------------------
<PAGE> 5
EXHIBIT "A"
The Resolution
<PAGE> 6
RESOLUTION OF THE NEW YORK CITY INDUSTRIAL DEVELOPMENT AGENCY
AUTHORIZING THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK AND
CERTAIN AFFILIATES TO ACQUIRE, RENOVATE, EQUIP AND MAINTAIN FROM
TIME TO TIME A CERTAIN COMMERCIAL FACILITY CONSISTING OF THE
CONSTRUCTION FROM TIME TO TIME OF LEASEHOLD IMPROVEMENTS AND
RENOVATIONS TO CERTAIN LEASED PREMISES WITHIN A BUILDING, AND THE
ACQUISITION, LEASING, INSTALLATION AND MAINTENANCE FROM TIME TO TIME
OF MACHINERY, EQUIPMENT AND CERTAIN OTHER TANGIBLE PERSONAL PROPERTY
AT SUCH BUILDING WITHIN THE CITY OF NEW YORK, ALL FOR THE PROVIDING
OF CORPORATE HEADQUARTERS AND INSURANCE SERVICES, ANNUITIES MUTUAL
FUNDS AND SECURITIES AND RELATED OPERATIONS, FOR SALE OR LEASE TO
THE AGENCY AND SUBSEQUENT LEASE TO THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK AND/OR ONE OR MORE OF ITS AFFILIATES AND TO TAKE OTHER
PRELIMINARY ACTION
WHEREAS, The Mutual Life Insurance Company of New York (the
"Company") has entered into negotiations with officials of the New York City
Industrial Development Agency (the "Agency") with respect to the acquisition,
renovation, equipping and maintaining by the Agency from time to time with the
proceeds of a bond issue of a certain commercial facility consisting of the
construction from time to time of leasehold improvements and renovations to
those certain premises leased to the Company at 1740 Broadway, New York, New
York, and the acquisition, leasing, installation and maintenance from time to
time of machinery, equipment and certain other tangible personal property to be
installed and located at 1740 Broadway, New York, New York, all for the
providing of corporate headquarters, insurance services, annuities, mutual funds
and securities and related operations of the Company and certain affiliates (the
"Project") and the lease of the Project to the company and/or one or more of its
affiliates; and
WHEREAS, the Company has submitted a Project Application, to the
Agency to initiate the accomplishment of the above; and
WHEREAS, the Application and related materials submitted to the
Agency set forth certain information with respect to the Company and the
Project, including the following: that the Company currently leases
approximately 137,000 square feet of space at 1740 Broadway, which leases expire
over the next six years; that the Company desires to extend its leases at 1740
Broadway for a twenty-year period, which new leases would include assuming
additional new space in 1996 to accommodate expected growth; that the Company
has explored a number of alternatives to remaining at 1740 Broadway, including
relocating outside of New York City, particularly, to Syracuse, New York and
Teaneck, New Jersey; that the Company analyzed the financial implications of
such a move and determined that remaining in the City
A-1
<PAGE> 7
would cost the Company more than relocating; that relocating to a site outside
of the City would allow the Company to effectively service its clients at a
significantly lower cost; that in order to induce the Company to retain its
offices within the City and to reduce the competitive cost differential, the
Agency and appropriate officials of the City entered into negotiations with the
Company to secure satisfactory public financial incentives and thereby induce
the Company to remain and expand its existing operations within the City; that
financial assistance from the Agency in the form of real estate tax abatements
and sales and/or use tax exemptions for the Project is a vital element in
bridging the cost differential between the New York City and Syracuse and
Teaneck locations and retaining the operations in New York City and the benefits
will help lower the Company's cost of doing business in New York City, is an
essential component of the Company's decision to remain within the City and will
obviate the need to relocate; that in the absence of the Agency benefits, it
would not be economically feasible and justifiable for the Company to continue
maintaining operations in the City; that based upon the public financial
incentives provided through the Agency, the Company and its affiliates desire to
proceed with the Project in the City; that the Company presently employs
approximately 200 full-time and part-time employees in New York City, that the
Company would construct first class insurance services offices in the space to
be assumed in 1996 and undertake the renovation of its existing space, as well
as replace certain equipment; that the Company desires to undertake the Project
to maintain and enhance its competitive position in the insurance services
community; and
WHEREAS, based upon the Application, the Agency hereby determines
that Agency financing assistance is necessary to encourage the Company to
proceed with the Project; and
WHEREAS, the Agency desires to further induce the Company and its
affiliates with respect to the Project, if by so doing it is able to encourage
the Company and its affiliates to proceed with the Project; and
WHEREAS, the Project should not be delayed by the requirement of
determining the details of a bond issue, which cannot be immediately
accomplished, and the Company has agreed to extend its own funds with respect to
the Project, subject to reimbursement from the proceeds of the bonds;
NOW, THEREFORE, THE NEW YORK CITY INDUSTRIAL DEVELOPMENT AGENCY
HEREBY RESOLVES AS FOLLOWS:
Section 1. The Agency hereby determines that the acquisition,
renovation, equipping, installing and maintaining of the Project and the
financing thereof by the Agency pursuant to the New York State Industrial
Development Agency Act will promote and is authorized by and will be in
furtherance of the policy of the State as set forth in said Act. The agency
further hereby determines, on the basis of the Application of the Company and
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<PAGE> 8
supplemental information furnished by the Company, as follows: (a) it would not
have financed the Project except to induce the location of the Project in the
area to be served by the Project as there is demonstrable need for the Project
and the services it offers; (b) but for the availability of Agency financing for
the Project in such area, the Project would not be economically feasible; (c)
there will be no substantial adverse disruption of existing employment or
facilities of a similar nature to the Project in such area; and (d) the Project
will provide substantial employment and substantial capital investment. The
Agency further determines that the portion of any facilities or property
comprising the Project which is primarily used in making retail sales of goods
or services to customers who personally visit such facilities within the meaning
of Section 862 of the New York General Municipal Law constitutes not more than
one-third of the total Project cost. The Agency also determines that
(y) the Project shall not result in the removal of any
facility or plant of the Company or any other occupant or user of the
Project from outside of the City (but within the State of New York) to
within the City or in the abandonment of one or more facilities or plants
of the Company or any other occupant or user of the Project located within
the State of New York but outside of the City; and
(z) no funds of the Agency shall be used in connection with
the Project for the purpose of preventing the establishment of an
industrial or manufacturing plant or for the purpose of advertising or
promotional materials which depict elected or appointed government
officials in either print or electronic media, nor shall any funds of the
Agency be given in connection with the Project to any group or
organization which is attempting to prevent the establishment of an
industrial or manufacturing plant within the State of New York.
Section 2. The Agency hereby authorizes the Company and its
affiliates to proceed with the Project as herein authorized, which Project will
be financed through the issuance of the bonds of the Agency, which bonds will be
special obligations of the Agency payable solely from the revenues and other
amounts derived pursuant to a lease of the Project.
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<PAGE> 9
Section 3. The Agency will undertake, as soon as it is furnished
with sufficient information as to the particular amount, interest rate,
maturities, redemption and other terms, the purchaser, the security and other
conditions to permit the authorization, issuance and sale of the bonds, to use
its best efforts to proceed, subject to agreement among the Agency, the Company
and the purchaser of the bonds as to terms in all agreements to be entered into
with respect to the Project, with the issuance of the bonds to finance the
Project in an amount not to exceed $28,500,000.
Section 4. The officers of the Agency and other appropriate
officials of the Agency and its agents and employees are hereby authorized and
directed to take whatever steps may be necessary to cooperate with the Company
and its affiliates to assist in the acquisition, renovation, equipping,
installing and maintaining of the Project.
Section 5. The Company and its affiliates are authorized to initiate
the acquisition, renovation, equipping, installation and maintaining of the
Project and to advance such funds as may be necessary to accomplish such
purposes, subject to reimbursement for all qualifying expenditures out of the
proceeds of the bonds to be issued by the Agency. The Agency is hereby
authorized to enter into such agreements (including, without limitation, a
pre-bond issuance sales tax letter and related indemnification agreement, a
sublease of 1740 Broadway from the Company to the Agency (the "Interim Lease")
and a sub-sublease of such space from the Agency to the Company (the "Interim
Sublease")) with the Company and one or more of its affiliates as the Chairman,
Vice Chairman, Executive Director or Deputy Executive Director may deem
necessary in order to accomplish the above.
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<PAGE> 10
Section 6. Any qualified costs incurred by the Company or any
affiliate in initiating the acquisition, renovation, equipping, installing and
maintaining of the Project shall be reimbursed by the Agency from the proceeds
of the bonds; provided that the Agency incurs no liability with respect thereto
except as otherwise provided in this resolution.
Section 7. The Agency is hereby authorized to cause the Company and
its affiliates to proceed with the Project, the agreed costs thereof to be paid
by the Agency by the application of the proceeds of the bonds, all as
particularly authorized by the terms and provisions of the agreements to be
entered into by the Agency. The proper officers of the Agency are hereby
authorized to acquire the Project machinery and equipment from the seller(s) or
lessor(s) thereof and to accept a lease and/or bill(s) of sale therefor through
the application of a portion of the proceeds of the bonds. The Company and its
affiliates are authorized to proceed with the Project on behalf of the Agency as
set forth in the pre-bond issuance sales tax letter and related indemnification
agreement, the Interim Lease and the Interim Sublease; provided, however, that
it is acknowledged and agreed by the Company and its affiliates that (i) nominal
title to or other interest of the Agency in the Project shall be in the Agency
for financing purposes only, and (ii) the Company and its affiliates are hereby
constituted an agent for the Agency solely for the purpose of effecting the
Project and the Agency shall have no personal liability for any such action
taken by the Company or an affiliate for such purpose.
Section 8. Any expenses incurred by the Agency with respect to the
Project and the financing thereof shall be reimbursed out of the proceeds of the
bonds, or, in the event such proceeds are insufficient after payment of other
costs of the Project or bonds are not issued by the Agency due to inability to
consummate the transaction herein contemplated (other than by
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<PAGE> 11
fault of the Agency), shall be paid by the Company. By acceptance hereof, the
Company agrees to pay such expenses and further agree to indemnify the Agency,
its members, directors, employees and agents and hold the Agency and such
persons harmless against claims for losses, damage or injury or any expenses or
damages incurred as a result of action taken by or on behalf of the Agency in
good faith with respect to the Project and the financing thereof.
Section 9. This resolution is subject to the approval of a private
investigative report with respect to the Company. The provisions of this
resolution shall continue to be effective until one year from the date hereof
whereupon the Agency may, at its option, terminate the effectiveness of this
resolution (except with respect to the matters contained in Section 8 hereof)
unless prior to the expiration of such year (i) the Agency shall by subsequent
resolution extend the effective period of this resolution, (ii) the Agency shall
adopt a resolution authorizing the issuance of the Agency's bonds or notes to
finance the costs of the Project as herein authorized or (iii) the Company shall
be continuing to take affirmative steps to secure financing for the Project.
Section 10. The Agency hereby determines, based upon information
furnished to the Agency by the Company and such other information as the Agency
has deemed necessary to make this determination, that the Project, an unlisted
action, pursuant to the State Environmental Quality Review Act, being Article 8
of the New York Environmental Conservation Law and the implementing regulations,
will not have a significant effect on the environment and that a Draft
Environmental Impact Statement will not be prepared. The reasons supporting this
determination are as follows:
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<PAGE> 12
(a) The Project will not result in a substantial adverse change in
existing air quality, traffic or noise levels.
(b) The Project will not result in the impairment of the character
or quality of important historical, archeological, architectural, or aesthetic
resources or of existing community or neighborhood character.
(c) The Project will not result in the creation of a hazard to human
health.
(d) No other significant effects upon the environment that would
require the preparation of an Environmental Impact Statement are foreseeable.
Section 11. The officers of the Agency are hereby designated the
authorized representatives of the Agency and each of them is hereby authorized
and directed to execute and deliver any and all papers, instruments, opinions,
certificates, affidavits and other documents and to do and cause to be done any
and all acts and things necessary or proper for carrying out this Resolution.
Section 12. In connection with the Project, the Agency intends to
grant the Company and its affiliates financing assistance in the form of real
estate tax abatements and sales and/or use tax exemptions.
Section 13. This resolution shall take effect immediately.
ADOPTED: March 12, 1996
Accepted: ______________, 1996
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By:______________________
ATTEST:
(SEAL)
_____________________
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<PAGE> 13
RESOLUTION OF THE NEW YORK CITY INDUSTRIAL DEVELOPMENT AGENCY
AMENDING A RESOLUTION ADOPTED BY THE AGENCY ON MARCH 12, 1996 AND
ENTITLED "RESOLUTION OF THE NEW YORK CITY INDUSTRIAL DEVELOPMENT
AGENCY AUTHORIZING THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK AND
CERTAIN AFFILIATES TO ACQUIRE, RENOVATE, EQUIP AND MAINTAIN FROM
TIME TO TIME A CERTAIN COMMERCIAL FACILITY CONSISTING OF THE
CONSTRUCTION FROM TIME TO TIME OF LEASEHOLD IMPROVEMENTS AND
RENOVATIONS TO CERTAIN LEASED PREMISES WITHIN A BUILDING, AND THE
ACQUISITION, LEASING. INSTALLATION AND MAINTENANCE FROM TIME TO TIME
OF MACHINERY, EQUIPMENT AND CERTAIN OTHER TANGIBLE PERSONAL PROPERTY
AT SUCH BUILDING WITHIN THE CITY OF NEW YORK, ALL FOR THE PROVIDING
OF CORPORATE HEADQUARTERS AND INSURANCE SERVICES, ANNUITIES, MUTUAL
FUNDS AND SECURITIES AND RELATED OPERATIONS, FOR SALE OR LEASE TO
THE AGENCY AND SUBSEQUENT LEASE TO THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK AND/OR ONE OR MORE OF ITS AFFILIATES AND TO TAKE OTHER
PRELIMINARY ACTION"
WHEREAS, on March 12, 1996 the New York City Industrial Development
Agency (the "Agency") adopted a resolution entitled "Resolution of the New York
City Industrial Development Agency authorizing The Mutual Life Insurance Company
of New York and certain affiliates to acquire, renovate, equip and maintain from
time to time a certain commercial facility consisting of the construction from
time to time of leasehold improvements and renovations to certain leased
premises within a building, and the acquisition, leasing, installation and
maintenance from time to time of machinery, equipment and certain other tangible
personal property at such building within The City of New York, all for the
providing of corporate headquarters and insurance services, annuities, mutual
funds and securities and related operations, for sale or lease to the Agency and
subsequent lease to The Mutual Life Insurance Company of New York and/or one or
more of its affiliates and to take other preliminary action" (the "Prior
Resolution"); and
WHEREAS, it was contemplated pursuant to the Prior Resolution that
the Project building, at which certain premises are to be leased to The Mutual
Life Insurance Company of New York (the "Company") for the effectuation of the
Project, would be condominiumized to permit the Agency to provide real estate
tax benefits to the Company as part of the financial assistance being provided
by the Agency; and
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<PAGE> 14
WHEREAS, the Company has advised the Agency that the owner of the
Project building may be unwilling to subject the building to a condominium
regime from concern (y) in conveying title to any portion of the building to the
Agency, and (z) that the other tenants in the Project building may seek to make
claim under their leases that the respective real estate tax liability of such
tenants as part of their rent should be reduced as a result therefrom; and
WHEREAS, it has been proposed that the Agency amend the Prior
Resolution such that the financial assistance to be provided by the Agency for
the Project be adjusted to accommodate these concerns;
NOW, THEREFORE, BE IT RESOLVED BY THE NEW YORK CITY INDUSTRIAL
DEVELOPMENT AGENCY AS FOLLOWS:
Section 1. In order to effectuate the Project, the Agency hereby
approves the following changes in the financial assistance to be provided to the
Company for the Project pursuant to the Prior Resolution:
(a) the amount of real property tax savings shall be increased by up
to $600,000 on a net present value basis unless the condominium structure for
the Project building shall be implemented by August 30, 1996; and
(b) in the event that any of the aforementioned other tenants of the
Project building shall successfully judicially challenge their respective real
estate tax liability under their commercial leases at the Project building, and
the owner of the Project building shall suffer a loss of real estate tax rental
revenues as a result of the condominium structure, the Agency shall increase its
real estate tax savings for the Project by an amount equal to one-half (1/2) of
such loss but not to exceed $1,400,000 on a net present value basis; or
(c) in the event that the condominium structure shall not be capable
of being implemented, the Agency shall increase its sales tax savings for the
Project from $1,500,000 on a net present value basis to $2,300,000 (also on a
net present value basis) and thereby increase the maximum amount of bonds to be
issued from $28,500,000 to an amount not to exceed S47,500,000.
Section 14. This Resolution is to take effect immediately.
ADOPTED: April 9, 1996
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<PAGE> 15
EXHIBIT "B"
1. Landlord and Tenant hereafter shall continuously and in good
faith use their diligent efforts to implement the Economic Incentive Package.
Landlord acknowledges that the implementation of the Economic Incentive Package
shall entail, among other things, converting the Building to a condominium form
of ownership, deeding units leased to Tenant to the IDA for subsequent lease to
Landlord, subleasing such units to Tenant, exempting such units deeded to the
IDA from Taxes, and entering into certain other subleases between Tenant and the
IDA. Notwithstanding any provision hereof to the contrary, Tenant acknowledges
that, in connection with the implementation of the Economic Incentive Package,
in no event shall Landlord be required to mortgage its interest in the Building
or the Real Property or the income earned therefrom.
2. Landlord and Tenant each acknowledges that the Economic Incentive
Package is to be entirely for the benefit of Tenant, and is not for the benefit
of Landlord or any other party. Notwithstanding the foregoing, except to the
extent provided in the final sentence of this Section 2 and in Section 11
hereof, if any other tenant or occupant shall claim that it is entitled to a
reduction in any real estate tax escalation payment which such other tenant or
occupant would otherwise be obligated to pay but for any action taken to
implement the Economic Incentive Package, or but for the implementation of the
Economic Incentive Package (including, without limitation, the fact that all or
any portion of the Building shall be exempt from the payment of Taxes, or shall
be subject to payments in lieu of real estate taxes) and such claim shall be
sustained pursuant to a final non-appealable adjudication, then Tenant shall pay
to Landlord, as additional rent, the amount of such reduction, provided that
Landlord shall have diligently and in good faith
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<PAGE> 16
defended such claim, and shall have consulted with Tenant in connection
therewith, as provided herein. Tenant shall also pay to Landlord, as additional
rent, the reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by Landlord in defending
any such claim. Landlord shall diligently and in good faith defend any such
claim made by such tenant or occupant using counsel reasonably acceptable to
Tenant (it being agreed that Proskauer Rose Goetz & Mendelsohn LLP are deemed
to be acceptable to Tenant), and shall consult with Tenant in connection
therewith. Notwithstanding the provisions of this Section 2, if and to the
extent pursuant to the Documentation Landlord shall be reimbursed for the amount
of such reductions and such costs and expenses, or if and to the extent such
tenant or occupant shall reimburse Landlord for such costs and expenses,
Landlord shall not look to Tenant for the amount reimbursed.
3. Landlord and Tenant shall negotiate in good faith documentation
to implement the Economic Incentive Package (collectively, the "Documentation")
and, upon agreement by the parties to the terms of the Documentation, shall
execute the Documentation, provided the Documentation is commercially
reasonable, is consistent with the provisions hereof, and is otherwise
consistent with documentation entered into in similar transactions with the City
and the IDA. Tenant agrees to pay the reasonable expenses incurred by Landlord
in connection with the transactions contemplated hereby (including all costs of
negotiating the Documentation and all costs of removing the condominium regime
from the Building within six (6) months after the termination of the Economic
Incentive Package), other than those expenses which Landlord would have incurred
without regard to the application hereof, provided that the legal fees and
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<PAGE> 17
disbursements incurred by Landlord in connection with such transactions shall be
limited to the legal fees and disbursements (exclusive of disbursements
consisting of the legal fees of another law firm) of (i) one law firm and (ii)
if Landlord has separate tax counsel, the legal fees and disbursements of such
tax counsel.
4. If as a result of a requirement of the City or the IDA Landlord
shall be required to execute any Documentation or take any action to implement
the Economic Incentive Package and Landlord shall refuse to execute or perform
the same, then Landlord shall have no obligation to convert the Building to a
condominium form of ownership or otherwise implement the Economic Incentive
Package, provided that, if the reason for Landlord's refusal is that the
Documentation requires that Landlord mortgage its interest in the Building or
the Real Property or the income earned therefrom, then the Amendment shall be
deemed to be modified by the provisions of Section 5 hereof. If any dispute
shall arise between Landlord and Tenant as to whether any Documentation to be
executed by Landlord or Tenant complies with the provisions hereof (including
Section 4 hereof) and, accordingly, whether Landlord or Tenant is obligated to
execute the same, either party may submit such dispute to expedited binding
arbitration in the City of New York under the Expedited Procedures provisions of
the Commercial Arbitration Rules of the American Arbitration Association or any
successor thereto. The authority of the arbitrator shall be limited solely to
determining whether such Documentation complies with the provision hereof and,
accordingly, whether Landlord or Tenant, as the case may be, is obligated to
execute such Documentation. The reasonable arbitration costs of the successful
party to such arbitration (including, without limitation, such party's
reasonable attorneys' fees and disbursements) shall be paid by the losing party.
If the arbitrator shall
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<PAGE> 18
determine that Tenant is obligated to execute such Documentation and Tenant
shall fail or refuse to execute the same promptly after written notice of the
arbitrator's decision is delivered to Tenant, then Landlord shall have no
further obligation to convert the Building to condominium ownership or otherwise
implement the Economic Incentive Package, and the Amendment shall be deemed to
be modified by the provisions of Section 5 hereof. If the arbitrator shall
determine that Landlord is obligated to execute such Documentation and,
notwithstanding such determination, Landlord shall fail or refuse to execute the
same within five (5) Business Days after written notice of the arbitrator's
decision is delivered to Landlord, then Landlord shall have no obligation to
convert the Building to a condominium form of ownership or otherwise implement
the Economic Incentive Package, the Amendment shall not be deemed to be modified
by the provisions of Section 5 hereof, and Tenant, as its sole remedy, shall be
entitled to receive the arbitration fees, attorneys' fees and disbursements
referred to herein. If the arbitrator shall determine that Landlord is not
obligated to execute such Documentation and the arbitrator does not determine
that Tenant must execute other Documentation in lieu thereof, and if Landlord
shall fail or refuse, within five (5) Business Days after receipt of the
determination of the arbitrator to execute such Documentation to be executed by
Landlord, the Amendment shall be deemed to be modified by the provisions of
Section 5 hereof.
5. If Landlord shall deliver the Notice and the Building shall be
converted to a condominium form of ownership, or if pursuant to the express
provisions hereof, the Amendment is deemed to be modified by the provisions of
this Section 5, then (i) Section 3(A)(vi) of the Amendment shall be deemed
deleted and the following shall be
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<PAGE> 19
inserted in lieu thereof: "(vi) Six Million Two Hundred Sixty-Nine Thousand Nine
Hundred Dollars ($6,269,900) per annum for the period commencing on June 1, 2011
and ending on May 31, 2016 ($522,499.71 per month)"; and (ii) Section 3(B) of
the Amendment shall be deemed deleted. If the Building shall be converted to a
condominium form of ownership in order to implement the Economic Incentive
Package, then the following shall be inserted at the end of Article 3 of the
Amendment: "If the Building is converted to a condominium form of ownership in
order to implement the Economic Incentive Package, and the Taxes in respect of
any condominium unit(s) leased solely to Tenant shall be abated as a result
thereof, the Fixed Rent payable under this Lease shall be reduced, for the
period that such unit(s) are subject to such abatement, by an amount equal to
the Base Taxes multiplied by the percentage interest ascribed to such unit(s) in
the Declaration of Condominium for the Building to be entered into in connection
with the conversion of the Building to a condominium form of ownership. If any
Taxes shall be payable for such unit(s) during the period that such unit(s) are
subject to an abatement, Tenant shall pay the same to Landlord as additional
rent within ten (10) days after demand therefor (but in no event prior to
fifteen (15) days prior to the date such Taxes are payable to the applicable
Governmental Authorities). No Tax Payments shall be payable with respect to any
unit(s) as to which Taxes are abated as provided herein for as long as Taxes are
abated for such unit(s) as provided herein. It is contemplated that any payments
in lieu of real estate taxes with respect to such unit(s) will be paid by Tenant
directly to the City or the IDA."
6. Notwithstanding any provision hereof to the contrary, Landlord
shall have no obligation to convert the Building to a condominium form of
ownership or
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<PAGE> 20
otherwise implement the Economic Incentive Package, and the Amendment shall be
deemed to be modified by the provisions of Section 5 hereof, if Tenant shall
elect not to receive the Economic Incentive Package specified in the Resolution
from the City and the IDA or such Economic Incentive Package is not available to
Tenant by reason of Tenant's failing to execute any Documentation required by
the City or the IDA or otherwise failing to comply with the requirements of the
City or the IDA.
7. If, at any time after the Building has been converted to a
condominium form of ownership pursuant to the provision hereof, Tenant shall at
any time elect to terminate or abandon the portion of the Economic Incentive
Package consisting of reduced, abated or exempted Taxes, then upon request by
Tenant, Landlord shall reasonably cooperate with Tenant in connection therewith,
at Tenant's sole cost and expense.
8. If the Building has been submitted to condominium form of
ownership and if Landlord shall fail or refuse to contest the assessed valuation
(including the commencement and prosecution of applicable tax certiorari
proceedings) for the Building, then Tenant may, to the extent permitted by
Requirements and not prohibited by the Documentation, with no cost, expense or
liability to Landlord, contest the assessed valuation of any condominium units
leased or subleased by Landlord or the IDA solely to Tenant. Landlord shall
reasonably cooperate with Tenant in connection therewith, provided the same
shall impose no cost, expense or liability on Landlord.
9. Landlord and Tenant acknowledge that no transfer of the Real
Property to the IDA which may be entered into in order to implement the Economic
Incentive Package shall be deemed to be (x) a transfer of Landlord's interest in
the Real
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<PAGE> 21
Property for purposes of Section 37.2 or Article 41 of the Lease, or (y) an
acquisition, taking or condemnation for purposes of Article 11 of the Lease.
10. If, pursuant to the provisions hereof, the Amendment shall be
deemed modified by the provisions of Section 5 hereof then, at the request of
either party, Landlord and Tenant shall execute and deliver to each other an
agreement confirming such modification of the Amendment, provided, however, that
the failure of Landlord or Tenant to execute or deliver the same shall not
vitiate the automatic modification of the Amendment pursuant to the provisions
hereof.
11. Subject to the provisions of this Section 11, Landlord shall
include, in each lease for space in the Building which Landlord shall enter into
after the date hereof, a clause to the effect that if Landlord shall implement,
or shall have implemented, an economic incentive package for the benefit of a
tenant or other occupant of the Building and, as a result thereof, Taxes shall
be reduced or abated, in whole or in part, with respect to all or any portion of
the Building, then for purposes of calculating the tax escalation payment
payable by such tenant for any space leased by such tenant (other than any space
leased by such tenant which is subject to payments in lieu of taxes), Taxes
shall be the Taxes which would have been payable without regard to such
reduction or abatement. Notwithstanding the foregoing, (i) if Landlord shall not
include such clause in any such lease, Tenant shall have no obligation to
reimburse Landlord, as required by Section 2 hereof, with respect to any
reduction in real estate tax escalation payments to which the tenant under such
lease may be entitled or the costs and expenses incurred by Landlord in
attempting to collect such real estate tax escalation payments from such taxes,
and (ii) Landlord shall not be obligated to include such clause in any lease
after (x) the date
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<PAGE> 22
Landlord otherwise is no longer obligated to convert the Building to a
condominium form of ownership, or (y) if the Building has been converted, after
the termination of the condominium or the Economic Incentive Package.
12. Subject to the provisions of this Section 12, Landlord shall
include in each lease for space in the Building which Landlord shall enter into
after the date hereof a clause to the effect that if there shall be implemented
an economic incentive package for the benefit of the Tenant or other occupant of
the Building, and as a result thereof, Landlord's electric costs shall be
reduced or abated in whole or in part with respect to all or any portion of the
Building, then for purposes of calculating the electric costs and operating
expense escalation payment payable by such tenant, Landlord's electric costs and
Building operating expenses shall be the electric costs and Building operating
payments which would have been payable without regard to such reduction or
abatement. Notwithstanding the foregoing, (i) if Landlord shall not include such
clause in any such lease, Tenant shall have no obligation to reimburse Landlord,
as required by Section 8(B) of the Amendment, with respect to any reduction in
electric payments or operating expenses to which the tenant under such lease may
be entitled and (ii) Landlord shall not be obligated to include such clause in
any lease after (x) the date Tenant abandons its efforts to receive the BIR
Reductions, (y) if Tenant shall receive the BIR Reductions, after the
termination of the BIR Reductions or (z) the date electricity consumed at the
Premises leased by Tenant which are subject to the BIR Reductions are directly
metered for electricity.
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<PAGE> 1
Exhibit 10.19
[MENDIK 1740 CORP. LETTERHEAD]
As of December 18, 1996
The Mutual Life Insurance Company
of New York
1740 Broadway
New York, New York 10019
1740 Broadway
New York, New York
Gentlemen:
Reference is made to the letter agreement (the "Letter"), dated as
of April 26, 1996, between 1740 Broadway Associates L.P. ("Landlord") and The
Mutual Life Insurance Company of New York ("Tenant"). Unless otherwise defined
herein, all capitalized terms used herein shall have the meanings ascribed to
such terms in the Letter.
Landlord and Tenant have entered into a Third Amendment of Lease
(the "Amendment"), dated as of the date hereof. In connection with the
Amendment, Landlord and Tenant have agreed to amend the Letter as follows:
1. All references to "December 31, 1996" contained in paragraphs A,
B and C of the Letter are hereby deleted and replaced with "April 30, 1997."
2. The last sentence of Paragraph 3 of Exhibit "B" attached to the
Letter shall be deleted in its entirety and the following shall be substituted
therefor:
<PAGE> 2
"Tenant agrees to pay the reasonable expenses incurred by Landlord
in connection with the transactions contemplated hereby (including
all costs of negotiating the Documentation, except as expressly
provided below, and all costs of removing the condominium regime
from the Building within six (6) months after the termination of the
Economic Incentive Package), other than (i) those expenses which
Landlord would have incurred without regard to the application
hereof, and (ii) legal fees and disbursements incurred by Landlord
in connection with the negotiation of the Documentation."
3. Except as expressly modified by this agreement, all covenants,
agreements, terms and conditions of the Letter shall remain in full force and
effect and are hereby in all respects ratified and confirmed.
2
<PAGE> 3
If the foregoing accurately reflects your understanding of our
agreement, please sign this letter where indicated below.
MENDIK 1740 CORP.
By: /s/ David Greenbaum
---------------------
Name: David Greenbaum
---------------
Title:
---------------
ACCEPTED & AGREED TO:
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By: /s/ Joel Kampf
--------------
Name: Joel Kampf
----------
Title: Vice President, Corporate Services
----------------------------------
3
<PAGE> 1
Exhibit 10.20
[MENDIK 1740 CORP. LETTERHEAD]
As of January 14, 1997
The Mutual Life Insurance Company
of New York
1740 Broadway
New York, New York 10019
1740 Broadway
New York, New York
Gentlemen:
Reference is made to the letter agreement (the "Original
Letter"), dated as of April 26, 1996, between 1740 Broadway Associates L.P.
("Landlord") and The Mutual Life Insurance Company of New York ("Tenant"), as
amended by a letter agreement (the "Amendment"), dated as of December 18, 1996
(collectively, the "Letter"). Unless otherwise defined herein, all capitalized
terms used herein shall have the meanings ascribed to such terms in the Letter.
Landlord and Tenant have entered into a Fourth Amendment of
Lease (the "Amendment"), dated as of the date hereof. In connection with the
Amendment, Landlord and Tenant have agreed to amend the Letter as follows:
1. The following is hereby inserted at the end of Paragraph 3 of Exhibit
"B" attached to the Letter:
<PAGE> 2
"Tenant shall pay for all Tenant's expenses in connection with
the transactions contemplated hereby, except that Landlord
shall contribute an amount not to exceed Thirty Thousand
Dollars ($30,000) (the "Fund") toward Tenant's actual,
reasonable out-of-pocket legal fees in the preparation and
negotiation of the plan (the "Condominium Plan") for
conversion of the Building to a condominium form of ownership.
Landlord shall disburse a portion of the Fund to Tenant from
time to time, within thirty (30) days after receipt of the
items set forth herein, provided that on the date of a request
and on the date of disbursement from the Fund no Event of
Default shall have occurred and be continuing. Disbursements
from the Fund shall not be made more frequently than monthly,
and shall be in an amount equal to the aggregate amounts
theretofore paid or payable (as certified by an officer of
Tenant) to Tenant's attorneys which have not been the subject
of a previous disbursement from the Fund. Landlord's
obligation to make the disbursements from the Fund shall be
subject to Landlord's receipt of a request for such
disbursement from Tenant signed by an officer of Tenant,
together with the certification required above and copies of
all receipts, invoices and bills for the legal fees incurred
in connection with the preparation and negotiation of the
Condominium Plan which are to be paid from the requested
disbursement or which have been paid by Tenant and for which
Tenant is seeking reimbursement. In no event shall the
aggregate amount paid by Landlord to Tenant under this
Paragraph 3
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exceed the amount of the Fund. Upon the completion of the
Condominium Plan, any amount of the Fund which has not been
previously disbursed shall be retained by Landlord. Upon the
disbursement of the entire Fund (or the portion thereof if
upon completion of the Condominium Plan the Fund is not
exhausted), Landlord shall have no further obligation or
liability whatsoever to Tenant for further disbursement of any
portion of the Fund to Tenant. Any costs to complete the
Condominium Plan in excess of the Fund shall be the sole
responsibility and obligation of the Tenant."
2. Except as expressly modified by this agreement, all covenants,
agreements, terms and conditions of the Letter shall remain in full
force and effect and are hereby in all respects ratified and confirmed.
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If the foregoing accurately reflects your understanding of our
agreement, please sign this letter where indicated below.
MENDIK 1740 CORP.
By: /s/ David Greenbaum
-------------------
Name: David R. Greenbaum
------------------
Title: President
---------
ACCEPTED & AGREED TO
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By: /s/ Joel Kampf
--------------
Name: Joel Kampf
----------
Title: VP
--
4
<PAGE> 1
EXHIBIT 10.21
AGREEMENT OF LEASE
MONY Plaza
Syracuse, New York
CONTINENTAL TOWERS,
Landlord
and
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK,
Tenant
Dated as of December 21, 1988
<PAGE> 2
TABLE OF CONTENTS
ARTICLE NO. DESCRIPTION PAGE NO.
Article 1. PREMISES 1
Article 2. TERM 1
Article 3. RENT 2
Article 4. TAXES. ASSESSMENTS, AND UTILITIES 2
Article 5. ALTERATIONS AND IMPROVEMENTS TO PREMISES 4
Article 6. TITLE TO BUILDINGS AND FIXTURES 5
Article 7. QUIET ENJOYMENT OF THE PREMISES 5
Article 8. SUBORDINATION OF LEASE 5
Article 9. MORTGAGING THE PREMISES 6
Article 10. USE OF PREMISES 6
Article 11. NO UNLAWFUL OR OBJECTIONABLE USE 6
Article 12. MAINTENANCE OF PREMISES 6
Article 13. FIRE AND OTHER CASUALTY 7
Article 14. INSURANCE ON PREMISES 8
Article 15. SIGNS AND ADVERTISING MATTER 9
Article 16. MECHANICS' AND OTHER LIENS 9
Article 17. PAINTING AND DECORATION 10
Article 18. INDEMNIFICATION 10
Article 19. TENANT'S COVENANTS 11
Article 20. LANDLORD'S RIGHT OF INSPECTION 11
Article 21. ASSIGNMENT AND SUBLETTING 12
Article 22. DEFAULT PROVISIONS 13
Article 23. FURTHER MAINTENANCE AND USE OBLIGATIONS
OF TENANT 14
Article 24. CONDEMNATION 14
Article 25. WAIVER OF LANDLORD 15
Article 26. HOLDING OVER 16
Article 27. OPTION TO RENEW 16
Article 28. SUCCESSION 17
Article 29. SURRENDER OF PREMISES 17
Article 30. ASBESTOS REMOVAL/HAZARDOUS WASTES 17
Article 31. BROKER'S COMMISSIONS 18
Article 32. NOTICES 19
Article 33. CAPTIONS 19
Article 34. GOVERNING LAW AND JURISDICTION 20
Article 35. EXCULPATION 20
Article 36. INTERPRETATION 20
Article 37. SEVERABILITY 20
Article 38. ESTOPPEL CERTIFICATES 21
1
<PAGE> 3
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE (this "Lease"), made as of the day of December,
1988, is by and between CONTINENTAL TOWERS, a New York general partnership, with
its principal place of business at c/o Green & Seifter, Attorneys, P.C.; 900 One
Lincoln Center; Syracuse, NY 13202, (hereinafter referred to as "Landlord") and
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a New York corporation, having an
office at 1740 Broadway, New York, New York 10019, (hereinafter referred to as
"Tenant").
W I T N E S S E T H:
Landlord has purchased from Tenant the premises, which are more fully
defined below. The purchase was made in accordance with the terms and conditions
of an Agreement of Sale and Purchase/Leaseback of the premises between Landlord
and Tenant dated October 27, 1988 (the "Agreement"). The Agreement is attached
hereto as Exhibit A and is hereby incorporated by reference. As part of the
Agreement, Landlord and Tenant have agreed that Tenant shall lease the premises
from Landlord. In the case of any conflict between the provisions of the
Agreement and the provisions of this Lease, the provisions of this Lease shall
govern.
Therefore, in consideration of the rent hereinafter required to be paid
and the performance of the covenants and agreements hereinafter provided,
Landlord and Tenant by these presents hereby covenant and agree as follows:
ARTICLE 1. PREMISES
Landlord does hereby lease and demise unto Tenant and Tenant does
hereby rent from Landlord, subject to the terms and conditions of this Lease,
the parcel of land and the improvements thereon consisting of two (2) office
towers of 19 stories each connected by a 5-story office wing, which improvements
contain approximately 734,927 square feet of gross building area and
approximately 578,970 square feet of net rentable office area, subject to the
terms of that certain lease agreement dated December 31, 1968 between Tenant and
the City of Syracuse and subject to that certain operating agreement dated
August 1, 1981, copies of which lease and operating agreement are attached as
Exhibits H and J to the Agreement, located at 100-120 Madison Onondaga County,
New York, said parcel of land being more particularly described in Exhibit B
attached hereto and made a part hereof, together with all fixtures, equipment,
and other property purchased by Landlord from Tenant, all of the above being
hereinafter called the "Premises."
ARTICLE 2. TERM
This Lease shall be an initial or original term of twenty (20) years
commencing as of the date hereof and ending on the day of December, 2008, plus
any extended term as hereinafter provided.
<PAGE> 4
ARTICLE 3. RENT
Tenant covenants and agrees to pay unto Landlord the base net rentals
in accordance with Exhibit C attached hereto and made a part hereof commencing
as of the date hereof and on the first day of each and every month hereafter, in
advance, through the entire term of this Lease, together with such increase of
said annual and monthly fixed net rent, in accordance with the provisions of
this Lease as hereinafter provided. If Landlord so requires, Tenant shall make
all or part of the rental payments directly to Landlord's lender provided Tenant
receives written notice from Landlord directing Tenant to make such payments to
lender.
All rent (including all sums payable as rent in accordance with the
preceding paragraph and as hereinafter provided) shall be construed in every
instance as an absolute net rent payable by Tenant to Landlord.
This Lease is an absolute net lease, and the annual rent and all other
sums payable hereunder to or on behalf of Landlord shall be paid without notice
or demand and without setoff, counterclaim, abatement, suspension, deduction, or
defense. It is the express intent of the parties hereto that the annual rent
provided to be paid by Tenant to Landlord under the terms of Article 3 hereof
shall be an absolute net rent payable to Landlord and that Tenant shall, in any
or all events and at its sole cost and expense and in addition to the said
monthly rental, pay any and all other items of expense in connection with the
Premises of whatever nature, including but not limited to all taxes and
assessments imposed by any governmental authority on the Premises, the building
now or hereafter existing thereon or attached thereto, the contents thereof, and
the use thereof, together with the procurement and maintenance by Tenant of the
insurance hereinafter specified. This Lease shall always be construed in order
to effectuate the foregoing declared intent of the parties hereto. If Tenant or
Landlord shall so require, Landlord and Tenant shall enter into a memorandum of
lease, which shall be recorded in the appropriate land records in order to
document the terms and conditions hereof.
ARTICLE 4. TAXES. ASSESSMENTS, AND UTILITIES
Tenant agrees to pay when due or payable all charges for all utilities
(including gas, oil, water, and electricity) furnished to and consumed in the
operation of and used by the Premises. Tenant shall make its own arrangements
for all utilities, and Landlord shall be under no obligation to furnish any
utilities to the Premises. Landlord shall not be liable for any interruption or
failure in the supply of any such utilities to the Premises.
Landlord and Tenant hereby acknowledge that they have entered into that
certain agreement with the City of Syracuse dated December 1988, which agreement
requires certain payments thereunder in lieu of the payment of real estate
taxes. Tenant hereby agrees to make the payments due under the aforementioned
agreement.
Tenant further agrees that it will at all times keep sufficient heat in
the building to prevent the existing pipes therein from freezing. Tenant agrees
to pay all real estate taxes, assessments, water rents or rates, sewerage
charges, public dues, and similar
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charges of all kinds levied, assessed, or imposed or to be levied, assessed, or
imposed on or against the Premises (including land and any improvements now or
hereafter erected thereon) or, in lieu thereof or instead of an increase
therein, levied, assessed, or imposed as a capital levy or otherwise on the
rents receivable or received from the Premises during the term of this Lease so
that the rent for the Premises as set forth in Article 3 hereof shall always be
absolutely net to Landlord, as provided above. Landlord agrees, to the extent it
is permitted to do so under applicable law, to elect that such taxes,
assessments, water rates, public dues, or other charges be paid on an
installment basis in the maximum number of installments permissible. Landlord
further agrees that Tenant shall be liable only for such installments thereof
which become due and payable during the term of this Lease or any renewal
thereof.
Tenant will arrange with the appropriate taxing authority to have all
tax bills, special assessments, water rents or rates, sewerage charges, public
dues, and similar charges of all kinds levied against the Premises sent to
Tenant, and Tenant will pay the same to the applicable taxing authority before
the date when they become due and payable without interest or penalty. Tenant
shall send a receipted copy of such bill to Landlord promptly after such
payment. Tenant shall bear the cost of any penalty or interest resulting from a
late payment. If Tenant shall deem itself aggrieved by any such tax, it shall
communicate such fact to Landlord, and Tenant may, in its own name or in the
name of Landlord, but at the sole cost and expense of Tenant, contest in good
faith the validity of any taxes, assessments, water rates, public dues, or other
charges. Tenant shall not, however, withhold the payment of such taxes,
assessments, water rates, public dues, or other charges unless such charges may
be contested without payment. If requested by Tenant, Landlord shall join Tenant
in any such contest, provided that Tenant agrees to protect and save harmless
Landlord from all attorneys' fees, costs, and damages resulting from any such
proceedings or from the failure of Tenant to make any such payments. During the
term of this Lease, however, Landlord shall not be permitted to join in any such
contest as a matter of right unless Tenant has consented to Landlord joining in
such contest or Tenant has not exercised its option to renew this Lease within
the time provided. Tenant shall immediately upon the termination of such
proceedings pay all such taxes, assessments, water rates, public dues, or
charges and any and all damages, interest, penalties, costs, and expenses
arising therefrom that may be adjudged against the Premises. During the time
that any such taxes, assessments, water rates, public dues, or similar charges
are being so contested in good faith by Tenant and provided that Landlord is
notified in writing thereof and is thereafter kept fully informed as to the
outcome of the various stages of any such contest, Landlord shall have no right,
except as hereinafter stated, to pay the same. Landlord agrees to cooperate with
Tenant to such extent as Tenant shall reasonably request in any such contested
proceeding, it being understood that Tenant shall promptly reimburse Landlord
for all costs and expenses thereby incurred by Landlord.
Notwithstanding anything contained or implied in this Article 4 to the
contrary, Tenant shall not permit the Premises or any part thereof to be sold,
offered for sale, or advertised for sale because of nonpayment of any such
taxes, assessments, water rent or rates, public dues, or charges, even though
such item may then be in the process of being contested as aforesaid. In the
event of any such offering for sale or the advertisement of
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<PAGE> 6
sale of the Premises, by reason of any such nonpayment thereof, Tenant shall
forthwith pay said taxes, assessments, water rents or rates, public dues, or
charges, together with interest, penalties, and costs and do anything else
required to have the offering for sale or advertisement of sale withdrawn and
stopped. If Tenant fails to pay said taxes, assessments, water rents or rates,
public dues, or charges as aforesaid, Landlord may but shall not be obligated to
pay the same, and Tenant shall reimburse Landlord forthwith upon demand for the
amount so paid by Landlord and for all other costs, reasonable attorneys' fees,
expenses, and damages incurred by Landlord in connection therewith, together
with interest at the rate of fifteen percent (15%) per annum (hereinafter the
"Lease Interest Rate") on sums paid by Landlord, counting from the date of such
payment.
Nothing contained in this Lease shall require Tenant to pay any
franchise tax or any income, profit, estate, inheritance, succession tax, or
capital levy (other than a capital levy on rents as herein provided) assessed
against or payable by Landlord, nor shall any such tax be included within the
term real property taxes and assessments, provided, however, that if at any time
during the term of this Lease there shall be adopted by any applicable
governmental authority some other method of taxation on real estate as a
substitute or a modification in whole or in part for taxes on real estate, as
now levied (which substitute method of taxation is hereinafter collectively
referred to as "Substitute Taxes"), Tenant shall pay all such Substitute Taxes
as soon as they shall become due and payable. If the parties cannot agree
whether such Substitute Taxes are in substitution or modification in whole or in
part for taxes on real estate, as now levied, or on the extent to which Tenant
shall bear the cost of such Substitute Taxes, the matter shall be submitted to
arbitration by the parties in accordance with the rules then obtaining the
American Arbitration Association or its successor. In the event Landlord
advances sums to cover such Substitute Taxes pending resolution of whether such
Substitute Taxes are in substitution or modification in whole or in part for
real estate taxes that would be owed by Tenant and through arbitration it is
determined that Tenant is responsible for such Substitute Taxes or a portion
thereof, Tenant shall pay Landlord the Lease Interest Rate on those sums
advanced by Landlord for the whole or the portion of such Substitute Taxes that
are determined to be owed by Tenant.
ARTICLE 5. ALTERATIONS AND IMPROVEMENTS TO PREMISES
Tenant will not make any structural alterations to the exterior of the
Premises or any part thereof nor structural alterations to the interior which
would result in a reduction of the net rentable area of the Premises by more
than 5,000 NRA in the aggregate, during the term of the Lease and any renewals,
without first obtaining Landlord's written approval of such structural
alterations and changes, which approval shall not be unreasonably withheld or
delayed. Failure of Landlord to respond in writing to written notice by Tenant
of any such structural alterations and changes within 10 days' of receipt such
notice shall be deemed approval by Landlord.
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ARTICLE 6. TITLE TO BUILDINGS AND FIXTURES
Provided it is not in default, the Tenant is given the right to remove,
during the term of this Lease, such equipment and trade fixtures in the Leased
Premises as Tenant has paid for, provided same does not constitute part of the
realty (i.e., air conditioning or heating equipment). However, if the Tenant is
in default and moves out, or is dispossessed, and fails to remove any property,
equipment and trade fixtures, or other property within ten (10) days after such
default, dispossession, or removal, then and in that event, the said equipment
and trade fixtures or other property shall be deemed at the option of the
Landlord to be abandoned; or in lieu thereof, at the Landlord's option, the
Landlord may remove such property and charge the reasonable cost and expense of
removal and storage to the Tenant.
Anything to the contrary contained herein notwithstanding, it is
expressly understood and agreed that the Tenant may install, connect, and
operate equipment as may be deemed necessary by the Tenant for its business,
subject to compliance with applicable rules and regulations of governmental
boards and bureaus having jurisdiction thereof. Subject to the terms and
conditions of this Lease, the machinery, trade fixtures, and equipment belonging
to the Tenant shall, except as hereinabove specifically provided, at all times
be considered and intended to be personal property of the Tenant and not part of
the realty and shall be subject to removal by the Tenant, provided at the time
of such removal that the Tenant is not in default pursuant to the terms and
conditions of this Lease and that the Tenant, at its own cost and expense, pays
for any damage to the Leased Premises caused by such removal.
ARTICLE 7. QUIET ENJOYMENT OF THE PREMISES
So long as no default by Tenant has occurred and is continuing
hereunder, Landlord warrants peaceful and quiet enjoyment of the Premises by
Tenant against any act of Landlord or anyone claiming through Landlord; provided
that Landlord and its agents may enter upon and examine the Premises at
reasonable times and upon reasonable notice. Tenant reserves the right to
exclude certain security areas within the Premises from Landlord's examination.
Landlord hereby warrants that it has the right to lease the Premises.
ARTICLE 8. SUBORDINATION OF LEASE
Tenant agrees to subordinate this Lease to any future mortgage made by
Landlord to any bank, insurance company, or other lending institution; provided
that such mortgagee will agree not to disturb Tenant's rights and possession
while not in default hereunder and provided further that in the event of the
institution of foreclosure or other suit or proceeding under or pursuant to any
such mortgage, Tenant will not be made a party to any suit or proceeding, and
the same shall not affect the rights of Tenant under this Lease, but any
purchaser of said property under foreclosure or other suit or proceeding shall
take said property subject to this Lease. Tenant further agrees to execute such
nondisturbance, attornment, and subordination agreements or other similar
instruments as may reasonably be required by Landlord or such mortgages in form
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similar to the form attached to the Agreement. Such mortgagee(s) are hereinafter
referred to as "Lender." Failure of Tenant to execute such reasonable
nondisturbance, attornment, and subordination agreements, as aforesaid, within
ten (10) business days of written request by Landlord shall constitute a default
by Tenant hereunder. In addition, Tenant agrees to make reasonable changes to
the Lease form as may be reasonably requested by Lender, provided any such
changes do not, in the sole opinion of Tenant, materially affect the Tenant's
rights and obligations under the Lease.
ARTICLE 9. MORTGAGING THE PREMISES
Tenant shall not mortgage this Lease in whole or in part without the
prior written consent of the Landlord, which consent shall not be unreasonably
withheld, and, if required, the prior written consent of Lender.
ARTICLE 10. USE OF PREMISES
Tenant covenants and agrees to use and occupy the Leased Premises for
any lawful purposes.
ARTICLE 11. NO UNLAWFUL OR OBJECTIONABLE USE
Tenant, on behalf of itself and of all subtenants occupying space under
subleases covering portions of the Premises, agrees to make no unlawful use of
the Premises and agrees to comply with and carry out at its own cost and expense
all laws, ordinances, rules, regulations, and requirements affecting or
pertaining to the Premises.
ARTICLE 12. MAINTENANCE OF PREMISES
Tenant shall at all times take all measures (except for measures
completely beyond the control of Tenant) to keep the entire Premises (including
all entrances and vestibules), all partitions, windows, window frames, moldings,
glass, doors, door openers, fixtures, equipment, and appurtenances thereof
(including lighting, heating, electrical, plumbing, ventilating and air
conditioning fixtures and systems, and other mechanical equipment and
appurtenances), and all parts of the Premises in first-class condition and
repair as well as clean, orderly, sanitary, and safe, including but not limited
to doing such things as are necessary to cause the Premises to comply with
applicable laws, ordinances, rules, regulations, and orders by governmental and
public bodies and agencies. If replacement of equipment, fixtures, and
appurtenances thereof are necessary, to maintain the Property in a first class
condition, Tenant shall promptly replace the same with equipment, fixtures, and
appurtenances of substantially the same quality and shall repair all damage done
in or by said replacement.
Tenant agrees and acknowledges that it has accepted the Premises in "As
Is" condition. Tenant acknowledges that the Premises are in good order and
condition and are sufficient for all uses intended by Tenant.
Landlord shall have no obligation whatsoever with respect to the
maintenance of the Premises or any buildings or improvements thereon, whether
structural or
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nonstructural, foreseen or unforeseen, ordinary or extraordinary, all of such
maintenance to be undertaken by Tenant. Any alterations or repairs required by
public authorities shall be made by Tenant at Tenant's cost and expense. Tenant
shall comply with reasonable regulations of the fire or liability insurance
carriers who may provide insurance for the Premises as well as the requirements
promulgated by the Board of Fire Underwriters or such other appropriate agency
but only if required by law. Tenant shall return the Premises in good condition
at the end of the Lease term, reasonable wear and tear excepted.
ARTICLE 13. FIRE AND OTHER CASUALTY
(a) Except as provided herein, no loss or damage by fire or other
casualty, resulting in either partial or total destruction of any buildings or
buildings on the Premises, shall operate to terminate this Lease or to relieve
or discharge Tenant from the payment of rents or amounts collectible as rent as
they become due and payable or from the performance and fulfillment of any of
Tenant's obligations and undertakings herein. "Other casualty," as herein used,
among other things, shall include loss or damage resulting from known causes,
uprisings, and acts of God and the common enemy.
(b) If any building or improvements placed or to be placed on the
Premises, any part thereof, or any fixtures, equipment, and machinery
constituting a portion of the Premises used or intended to be used in connection
with the Premises, at any time or times during the continuance of this Lease,
shall be damaged or destroyed by fire or other casualty, Tenant, with all
reasonable diligence, shall:
(1) Repair, reconstruct, or replace such buildings or
improvements upon the same general plans and dimensions as
before the occurrence of such fire or other casualty or with
such changes or alterations as may be approved in writing by
Landlord, which approval shall not be unreasonably withheld;
and
(2) Repair, reconstruct, or replace such fixtures, equipment, and
machinery with like quality and value as before the occurrence
of such fire or other casualty or with such changes or
alterations as may be approved in writing by Landlord, which
approval shall not be unreasonably withheld.
Any such repairs, reconstruction or replacement shall be at the sole
cost and expense of Tenant and upon the completion thereof shall be free and
clear of all liens and encumbrances of any nature whatsoever, including
mechanics' liens. In the event such loss or damage by fire or other casualty
results in a loss of 33-1/3% of floor area of the Premises and such loss or
damage by fire or other casualty occurs after the first day of the third (3rd)
year prior to the end of the term or any extension hereof, Tenant, at its
option, upon thirty (30) days' notice in writing to Landlord, given at any time
within sixty (60) days after such loss or damage by fire or casualty, may elect
not to rebuild the Premises provided Tenant makes available to Landlord the
insurance proceeds insuring such fire or other casualty, as required by this
Lease, or pays to Landlord the agreed value of such
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loss and Tenant continues to pay the rent. In the event Landlord and Tenant
cannot agree on the agreed value of such loss, such value shall be determined
through arbitration by the parties in accordance with rules then obtaining of
the American Arbitration Association or its successor.
ARTICLE 14. INSURANCE ON PREMISES
Tenant, at its sole expense, shall obtain and keep in force during the
term hereof fire and extended coverage insurance on all buildings and
improvements that are or hereafter placed or built upon the Premises and on all
machinery, furniture, fixtures, and equipment of the nature acquired by Landlord
pursuant to the Agreement. The amount of such insurance shall never during the
term of this Lease be less than the greater of $66,000,000 for replacement of
the buildings only, or one hundred percent (100%) of the full replacement cost
of said buildings, improvements, machinery, fixtures, and equipment, exclusive
of foundations, which constitute a part of the Premises, with an annual
replacement cost endorsement, and Tenant will furnish to Landlord an annual
endorsement from its insurance carrier certifying that any such property is
insured to its full insurable value. Tenant hereby waives as against Landlord
any and all claims and demands of whatever nature for damages, loss, or injury
to the buildings and improvements that are or hereafter placed or built upon the
Premises and to the property of Tenant in, upon, or about the Premises which
shall result from fire or other hazards covered by such extended coverage
insurance. Tenant further agrees that each such policy of fire and extended
coverage insurance and all other policies of insurance on the Premises, which
shall be obtained by Tenant, whether required by the provisions of this Lease or
not, shall be made expressly subject to the provisions of this article and that
Tenant's insurers hereunder shall waive any right of subrogation against
Landlord.
All insurance provided for in this Article 14 and all renewals thereof
shall name Landlord as an additional insured and shall be issued by companies
reasonably approved by Landlord and any Lender. The term mortgagee or Lender as
used in this Lease shall not be deemed to include the mortgagee or lender, if
any, with respect to Tenant's interest in the Premises. The fire and extended
coverage insurance provided for herein shall be payable to Landlord, Lender, and
Tenant as their interests may appear, and any loss adjustment shall require the
joint written consent of Landlord, Lender, and Tenant. All policies shall be
subject to reasonable approval by Landlord as to form and substance and shall
expressly provide that such policies shall not be cancelled or altered without
thirty (30) days' prior written notice to Landlord and Lender. Landlord
acknowledges that Tenant may insure this Property under a blanket master policy,
in which event, only a certificate of endorsement to the master policy
reflecting the coverage will be provided.
All amounts that shall be received under any insurance policy mentioned
or described herein shall be made available to Tenant for payment of the cost of
repair, reconstruction, or replacement of any buildings, improvements,
furniture, fixtures, equipment, and machinery so damaged or destroyed. In the
event the Premises is security for a loan to Landlord, the loan documents shall
provide that the proceeds from such insurance shall be made available for
restoration of the Premises under such reasonable safeguards as may be imposed
by Lender. Any amount remaining from the proceeds of
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any such insurance funds after the repair, reconstruction, and replacement of
any buildings, improvements, furniture, fixtures, equipment, and machinery, as
herein required, if there be at that time no default on the part of Tenant in
the performance of its covenants or obligations hereunder, shall be immediately
paid to Tenant. In the event that Tenant fails or refuses to properly undertake
the reconstruction or replacement of any buildings or improvements or any
portion of the Premises damaged or destroyed by fire or other casualty within
ninety (90) days after the occurrence of such damage or destruction, Landlord
may retain and apply such insurance proceeds for said purposes, and it is hereby
authorized by Tenant to cause all of said restoration and reconstruction work to
be completed. If said insurance proceeds shall be insufficient in amount to
cover the cost of repair, reconstruction, or replacement of any buildings,
improvements, furniture, fixtures, equipment, and machinery, as herein required,
Tenant will promptly pay any deficiency to Landlord or at Landlord's direction,
except that during the last three (3) years of the term of this Lease Tenant
shall have the right to elect not to rebuild the Premises but may instead make
such insurance proceeds available to Landlord or pay to Landlord the agreed
value of such loss, all in accordance with the provisions of Article 13,
subparagraph (b) above.
Notwithstanding the foregoing provisions of this Article 14, at any
time while Tenant's net worth shall exceed Three Hundred Million and No/100
Dollars ($300,000,000.00) and at Tenant's sole discretion, Tenant may elect to
self insure its obligation to restore the Premises or Tenant may procure
insurance which may be insured under a blanket insurance policy covering the
Premises and other properties insured by Tenant. Tenant's right to self-insure
shall be subject to the reasonable approval of Landlord's Lender.
ARTICLE 15. SIGNS AND ADVERTISING MATTER
Tenant shall have the right to maintain and control all signage and
advertising matter, including signage and advertising on the roof of the
Premises, presently being maintained or hereinafter installed at the Premises,
provided that Tenant maintains such signage and advertising in compliance with
all applicable laws and insurance requirements. Landlord hereby agrees that
during the term of this Lease and any extension hereof, the Premises shall
remain known as "MONY Plaza," and Landlord shall not change the address or the
name of the Premises without obtaining Tenant's prior written consent. Provided
Tenant is not in default hereunder, Tenant shall have the right to change the
name of the Premises at its sole discretion without first obtaining Landlord's
prior consent.
ARTICLE 16. MECHANICS' AND OTHER LIENS
Tenant covenants and agrees to keep all of the Premises, every part
thereof, and all buildings and other improvements thereon free and clear of and
from any and all mechanics', materialmen's, and other liens for work or labor
done, services performed, or materials and appliances used in or about the
Premises for or in connection with any operations of Tenant, any alteration,
improvement, or repairs or additions which Tenant may make or permit or cause to
be made, or any work or construction by, for, or
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permitted by Tenant on or about the Premises, and at all times promptly and
fully to pay and discharge any and all claims upon which any such lien may or
could be based, and to save and hold Landlord and all of the Premises and all
buildings and improvements thereon free and harmless of and from any and all
such liens and claims of liens and suits or other proceedings pertaining
thereto.
Notwithstanding the foregoing, Tenant shall be permitted to contest
such mechanics', materialmen's, and other liens, provided that Landlord is
indemnified and held harmless from any claims arising from such liens. No
mechanics' or materialmen's liens, mortgages, or other liens of any character
whatsoever created or suffered by Tenant shall in any way or to any extent
affect the interest or rights of Landlord hereunder or its rights or interests
in any buildings or other improvements on the Premises or attach its title to or
rights in the Premises. In the event Landlord advances sums pursuant to the
terms of this Article 16, Tenant shall reimburse Landlord for such sums advanced
and reasonable costs in connection therewith due with the next payment of rent
due hereunder, with interest at the Lease Interest Rate due from the date such
funds are advanced. In the event Tenant's net worth shall fall below Three
Hundred Million and No/100 Dollars ($300,000,000.00) and Landlord's Lender
requires the posting of bond, or Landlord's title insurer requires the posting
of bond, Tenant shall post bond.
ARTICLE 17. PAINTING AND DECORATION
Tenant shall have the right to paint or decorate the interior and the
exterior of the Premises without first obtaining Landlord's written approval of
such painting or decoration. With respect to the interior of the Premises,
Tenant shall be permitted to perform tenant fitout, including but not limited to
relocation of walls, HVAC ducts, electrical outlets, and telephone outlets,
without obtaining Landlord's prior approval, provided that Tenant does not
impair the use of the Premises.
ARTICLE 18. INDEMNIFICATION
Tenant shall pay and shall protect, indemnify, and save harmless
Landlord against all liabilities, losses, damages, costs, expenses (including
reasonable attorneys' fees and reasonable expenses), causes of action, suits,
claims, demands, or judgments of any nature, except such resulting from the
gross and wanton acts of negligence of Landlord or its agents, arising from (a)
injury to or death of any person or damage to or loss of property on the
Premises or on adjoining sidewalks, streets, or ways or connected with the use,
conditions, or occupancy of any thereof and (b) violation of this Lease.
In furtherance of the above covenant of indemnification, Tenant agrees
to keep in force at its own expense, so long as this Lease remains in effect,
public liability insurance in companies reasonably acceptable to Landlord with
respect to the Premises, in form reasonably satisfactory to Landlord, covering
Landlord and Tenant, with minimum limits of Five Million and No/100 Dollars
($5,000,000.00) on account of bodily injuries to or death of one (1) person,
Twenty Million and No/100 Dollars ($20,000,000.00) on account of bodily injuries
to or death of more than one (1) person as a result of any one accident or
disaster, and property damage insurance with minimum limits of One Million and
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No/100 Dollars ($1,000,000.00), and Tenant reserves the right to provide such
coverage under the terms of a blanket insurance policy covering the Premises and
other properties for which Tenant maintains insurance coverage. Tenant shall
provide Landlord with a certificate or certificates insuring the Premises and
shall produce such other reasonable evidence of insurance as Landlord may
require. On the commencement of the term of this Lease and thereafter not less
than thirty (30) days prior to the expiration date of the policies of insurance
required by this Article 18, Tenant shall deliver to Landlord certificates or
binders of the insurer with respect thereto which are reasonably satisfactory to
Landlord accompanied by evidence of the payment of the premiums for the
policies. Said insurance policies, certificates, or binders relating thereto
shall name Landlord as an insured. All such insurance policies shall provide
that no cancellation thereof or material change therein shall be made unless
Landlord shall have been given twenty (20) days' prior written notice thereof
and that no act or omission by Tenant shall invalidate such policies as they
apply to Landlord.
Notwithstanding the foregoing provisions of this Article 18, at any
time while Tenant's net worth shall exceed Three Hundred Million and No/100
Dollars ($300,000,000.00), Tenant may elect to self insure its covenant of
indemnification or to procure such insurance coverage as Tenant deems necessary
in its sole discretion. Tenant's right to self-insure shall be subject to the
reasonable approval of Landlord's Lender.
ARTICLE 19. TENANT'S COVENANTS
Tenant covenants and agrees that it will perform all agreements herein
expressed on its part to be performed and that it will within thirty (30) days
of receipt of written notice specifying action desired by Landlord in connection
with any such covenant commence to comply with such notice and shall proceed
diligently to comply with such notice within such thirty (30) day period. Except
in the event of an emergency where no notice shall be required, if Tenant fails
to perform all agreements herein expressed within thirty (30) days of receipt of
written notice by Landlord specifying the action desired or if Tenant fails to
commence to perform such action within the aforesaid thirty (30) day period and
fails to diligently pursue the same, Landlord may effect compliance with the
terms hereof and collect from Tenant as additional rent the reasonable cost of
such compliance, together with interest at the Lease Interest Rate from the date
Landlord advances sums to effect performance, which payments of additional rent
shall be due with the next installment of rent due hereunder.
ARTICLE 20. LANDLORD'S RIGHT OF INSPECTION
Except in the event of an emergency, Landlord may, at any reasonable
time, upon furnishing at least two (2) days' prior written notice to Tenant, and
from time to time, enter upon the Premises for the purpose of inspection of any
buildings or improvements placed thereon and for such other purposes as may be
necessary or proper for the reasonable protection of its interest. Tenant
reserves the right, however, to exclude Landlord from areas within the Premises
which Tenant deems necessary to preserve its security and equipment and the
security and equipment of any subtenant within the
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Premises, as may be required under such subtenant's lease. Any entering upon the
Premises by Landlord shall not unreasonably interfere with the operations of
Tenant or any subtenant within the Premises.
ARTICLE 21. ASSIGNMENT AND SUBLETTING
Tenant will not sell, assign, mortgage, pledge, hypothecate, or in any
manner transfer this Lease or any interest therein without Landlord's prior
written consent and the written consent of the Lender, if required by such
Lender, which consent in either such case shall not be unreasonably withheld.
However, Tenant, without the consent of Landlord, may assign its interest
hereunder to a wholly-owned affiliate or other related entity of Tenant, so long
as Tenant remains primarily obligated and liable under this Lease. It is
understood and agreed that no such assignment whether to such wholly-owned
affiliate or other related entity or otherwise with the consent of Landlord,
shall limit or modify any power or right of Landlord hereunder or effect or
reduce any obligation of Tenant hereunder, and all such obligations shall
continue in full effect as obligations of a principal and not as of a guarantor
or surety, as though no assignment or subletting had been made. Consent by
Landlord and any Lender to any assignment shall not waive the necessity for
consent to any subsequent assignment. Any attempt at transfer, assignment,
license to use, hypothecation, or other alienation of this Lease, except as
expressly permitted herein, shall be void and shall confer no rights on third
parties. Notwithstanding any assignment, transfer, or other alienation of this
Lease, Tenant shall remain fully liable on this Lease and for the performance of
all terms, covenants, and provisions of this Lease.
Notwithstanding the above, Landlord hereby acknowledges that as of the
date of commencement of this Lease, Tenant is not occupying all of the leasable
space within the office buildings constructed on the Premises, and Tenant has
previously leased space in said office buildings to the tenants identified in
Exhibit D attached hereto and made a part hereof, such space having been leased
to such tenants only pursuant to the leases to them which Landlord has approved
as of the date hereof. Landlord hereby agrees that the tenants identified in
Exhibit D shall be treated as subtenants under the terms of this Lease and shall
remain as subtenants so long as their leases remain in full force and effect.
Landlord hereby also agrees that Tenant shall have the right to continue to
sublet all or portions of the Premises without obtaining Landlord's prior
written consent provided that such sublease does not extend beyond the term
hereof, and provided further that Landlord's consent, which consent shall not be
unreasonably withheld, shall be necessary for such subleases with subtenants who
at the time are not existing tenants within the Property, entered into within
the last 912 days of the initial Lease term, provided Tenant has not exercised
its option to renew, or in the last 912 days of the first renewal term, unless
Tenant has exercised its option to renew, or in the last 912 days of the second
renewal term. Landlord agrees that so long as no default has occurred or is
continuing under this Lease, Tenant shall have the right to collect and receive
all rents and other sums due pursuant to any sublease for its own uses and
purposes.
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ARTICLE 22. DEFAULT PROVISIONS
If any of the following events (herein referred to as "events of
default") shall occur, namely, if any default shall be made by Tenant in the
payment punctually when due and payable of any rent or other monies due
hereunder and such default shall continue for a period of three (3) days after
the date due; or if Tenant shall fail to furnish all insurance coverage as
required pursuant to the terms of this Lease; or if default shall be made by
Tenant in the performance of any other of the terms, covenants, or conditions
herein contained to be performed by Tenant and such default shall continue for a
period of thirty (30) days after written notice thereof to Tenant (provided that
in the case of any such default which cannot be cured by the payment of money
and cannot with diligence be cured within such thirty (30) day period, if Tenant
shall commence promptly to cure the same and thereafter prosecute the curing
thereof with diligence, the time within which such default may be cured shall be
extended for such period as is necessary to complete the curing thereof with
diligence); or if Tenant shall abandon the Premises, provided that Tenant shall
not be in default hereunder for abandonment of the Premises if Tenant continues
to pay the rent and all other sums due hereunder and continues to perform its
covenants with respect to the maintenance of the Premises; or if Tenant shall
admit in writing its inability to pay its debts generally as they become due,
file a petition in bankruptcy, insolvency, reorganization, readjustment of debt,
dissolution, or liquidation under any law or statute of the federal government
or any state government or any subdivision of either, now or hereafter in
effect, make an assignment for the benefit of its creditors, consent to or
acquiesce in the appointment of a receiver of itself or of the whole or any
substantial part of the Premises; if there shall be filed against Tenant any
involuntary petition in bankruptcy, insolvency, reorganization, readjustment of
debt, dissolution, or liquidation under any law or statute of the federal
government or any state government or any subdivision of either, now or
hereafter in effect, and such petition shall not have been dismissed within
ninety (90) days after the filing thereof; or if an order, judgment, or decree
shall be entered by any court of competent jurisdiction appointing, without the
consent of Tenant, a receiver of Tenant or of the whole or any substantial part
of the Premises, and such order, judgment, or decree shall not be vacated or set
aside or stayed within ninety (90) days from the date of such appointment; or if
a court of competent jurisdiction shall enter an order, judgment, or decree
approving a petition filed against Tenant under any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, or liquidation
law or statute of the federal government or any state government or any
subdivision of either, now or hereafter in effect, and such order, judgment, or
decree shall not be set aside or stayed within ninety (90) days from the date of
entry of such order, judgment, or decree, or a stay of such proceedings be
thereafter set aside; or if under the provisions of any other law for the relief
or aid of debtors, any court of competent jurisdiction shall assume custody or
control of Tenant or of the whole or any substantial part of the Premises and
such custody or control shall not be terminated within ninety (90) days from the
date of assumption of such custody or control; then in any of such event of
default, Landlord shall have the following options:
(a) To collect, by suit or otherwise, each installment of rent or other
sum as it becomes due and payable hereunder, together with interest at the Lease
Interest Rate
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from the date such installment of rent or other sum became due and payable, or
to enforce by suit or otherwise any other term or provision hereof on the part
of Tenant required to be kept or performed;
(b) To reenter and take possession of all or any part of the Premises,
with or without process of law, at any time after written notice to that effect
to Tenant, and Tenant shall immediately vacate the Premises and deliver
possession thereof to Landlord, and if Tenant does not so vacate, Landlord may
expel Tenant or any person occupying the Premises, using such force as may be
necessary, without being guilty of trespass, forcible entry, detainer, or other
tort, but nevertheless, Tenant shall, to the extent permitted by law, remain
liable for the unpaid rent and all other sums due and payable by Tenant
hereunder as such rent or other sums shall or would have become due and payable,
but there shall be credited against such unpaid rent the net proceeds realized
from the leasing of the Premises to a third party, after first deducting from
such proceeds all costs and expenses incurred in connection with such leasing,
including but not limited to reasonable advertising costs, attorneys' fees,
brokerage fees, and expenses of keeping the Premises in good order or preparing
the same for leasing; or
(c) To terminate this Lease, and in such event, Tenant agrees
immediately to surrender possession of the Premises and, to the extent permitted
by law, to pay to Landlord the amount of damage sustained by Landlord by reason
of Tenant's breach of this Lease.
ARTICLE 23. FURTHER MAINTENANCE AND USE OBLIGATIONS OF TENANT
Tenant agrees to maintain the Premises at its own expense in a clean,
orderly, and sanitary condition and free of insects, rodents, vermin, and other
pests; not to permit undue accumulation of garbage, trash, rubbish, and other
refuse and to remove the same at its own expense; to keep the ground surrounding
any building in a neat, orderly fashion; to remove all snow and ice from all
parking areas and walkways; and to conduct its business in the Premises in all
respects in a dignified manner.
ARTICLE 24. CONDEMNATION
If the whole or any substantial portion of the Premises shall be taken
under the power of eminent domain by any public or quasi-public authority so as
to preclude the use of the said Premises by Tenant in the conduct of its
business as hereinbefore provided, this Lease shall terminate on the day that
Tenant is required to yield possession thereof. If only a portion of the
Premises shall be taken under the power of eminent domain by a public or
quasi-public authority and such taking does not substantially impair the
usefulness of the Premises for the purposes for which the same are hereby
demised, Tenant shall make such repairs and alterations that may be necessary in
order to restore the Premises to a useful condition for Tenant, provided that
the proceeds of such condemnation award are paid to Tenant to be used by Tenant
for repair and restoration of the Premises. Tenant shall make the repairs and
restoration even though the amount of the award is insufficient for that
purpose, but if such award turns out to be greater than the cost of repair and
restoration, the surplus shall belong to Tenant, except such surplus
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which shall constitute the residual value of the condemned Property. In the
event the Premises is security for a loan to Landlord, the loan documents shall
provide that the proceeds from such condemnation shall be made available for
restoration of the Premises under such reasonable safeguards as may be imposed
by Lender. The rent hereinbefore provided shall be reduced proportionately as to
the portion of the Premises so taken until and unless they are subsequently
restored or repaired, said adjustment of rent to be made as of the date Tenant
is required to yield possession of a portion of the Premises as hereinbefore
provided.
In the event such taking of a portion of the Premises results in a loss
of 33-1/3% or more of the floor area of the Premises, such taking of a portion
of the Premises occurs after the first day of the third (3rd) lease year prior
to the end of the term hereof, the rent hereinbefore provided shall be reduced
proportionately as to the portion of the Premises so taken, said adjustment of
rent to be made as of the date Tenant is required to yield possession of such
portion of the Premises, in which event, all compensation awarded for any such
taking of the Premises shall belong to and be the property of Landlord,
provided, however, that Landlord shall not be entitled to any portion of any
specific separate award made to Tenant for loss of business or for the cost of
removal and the relocation of stock, fixtures, or any equipment installed at the
cost and expense of Tenant and with the permission of Landlord as provided
hereinbefore and/or hereafter, provided that Tenant actually and promptly
removes such stock, fixtures, or equipment.
ARTICLE 25. WAIVER OF LANDLORD
If any action or proceeding is instituted or if other steps are taken
by Landlord and a compromise, part payment, or settlement thereof shall be made,
either before or after judgment, the same shall not constitute or operate as a
waiver by Landlord of any right, covenant, or provision of or under this Lease
or of any subsequent breach or breaches thereof nor of this Lease itself unless
so specified in writing in such settlement. No waiver of any default under or
breach or violation of any provision or covenant of this Lease shall constitute
or operate as a waiver of such provision or covenant or of any subsequent
default thereunder or breach or violation thereof, and no delay, failure, or
omission in exercising or enforcing any right, privilege, or option under this
Lease shall constitute a waiver, abandonment, or relinquishment thereof or
prohibit or prevent any election under or enforcement or exercise of any
provision, right, privilege, or option herein contained or granted. No waiver of
any provision hereof by Landlord shall be deemed to have been made unless and
until such waiver shall have been reduced to writing and signed by Landlord. The
receipt by Landlord of rent with knowledge of any breach or default under this
Lease shall not constitute or operate as a waiver of such breach, violation, or
default. Payment by Tenant or receipt by Landlord of any lesser amount than the
stipulated rent or other sums due Landlord shall operate only as a payment on
account of said rent or other sums; no endorsement or statement on any check or
other remittance or in any communication accompanying or relating to such
payment shall operate as a compromise or accord and satisfaction unless the same
is approved in writing by Landlord, and Landlord may accept such check,
remittance, or payment without prejudice to its right to recover the balance of
said rent or other sums due by Tenant and pursue any other remedy allowable by
law or under this Lease.
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ARTICLE 26. HOLDING OVER
Any holding over after the expiration of the term hereof and any
renewals, extensions, or modifications thereof must be with the prior written
consent of Landlord and shall be construed to be a tenancy from month to month
at the rents herein specified for the then last lease year, as identified in
Exhibit C or as Exhibit C may be amended due to the exercise of any renewal
option by Tenant, (prorated on a monthly basis) and shall otherwise be on the
terms and conditions herein specified.
ARTICLE 27. OPTION TO RENEW
Provided that Tenant shall furnish written notice to Landlord by
certified or registered mail, postage prepaid, at least nine hundred twelve
(912) days prior to the termination of the original term of this Lease and at
least nine hundred twelve (912) days prior to the expiration of any Extended
Term (as provided for below), Tenant shall have two (2) consecutive options to
renew this Lease (provided, however, that no default exists on the part of
Tenant under the terms of this Lease, both as of the date of furnishing said
notice of intention to renew and as of the first date of commencement of the
applicable renewal period), and each such option shall be for an additional term
of five (5) years (Extended Term), commencing as of the day immediately
following the termination of the initial term of this Lease or any Extended
Term. Within thirty (30) days of Tenant's notice to exercise its option to renew
or to extend the term of this Lease, Landlord shall notify Tenant of the new
fixed minimum base rent, which shall be equal to 90% of the then market rate for
net leases for similar properties located in the Syracuse MSA. In the event
Tenant finds such new base rent acceptable, Tenant shall notify Landlord in
writing of such acceptance within thirty (30) days of receipt of Landlord's
notice setting forth the new base rent. In the event Tenant finds such new base
rent unacceptable, Tenant shall notify Landlord in writing of such
unacceptability within thirty (30) days of receipt of Landlord's notice setting
forth the new base rent. Within ten (10) business days of receipt of Tenant's
notice, Landlord and Tenant shall each nominate and appoint one (1) appraiser.
Upon the appointment of the two (2) appraisers, the two (2) appraisers so
appointed shall, within ten (10) business days of their appointment and before
exchanging views as to the then market rate for net leases for similar
properties located in the Syracuse MSA, appoint in writing a third appraiser and
shall give written notice of such appointment to Landlord and Tenant. The
appraisers selected pursuant hereto shall be sworn faithfully and fairly to
determine the then market rate for net leases for similar properties located in
the Syracuse MSA. The three (3) appraisers shall afford both Landlord and Tenant
a hearing and the right to submit evidence with the privilege of
cross-examination on the questions at issue. As soon as reasonably possible
after the Landlord and Tenant have been heard, each of the appraisers shall
prepare a written report, and they shall then make their determination of the
then market rate for net leases for similar properties located in the Syracuse
MSA upon the basis of those written reports. In the event the three (3)
appraisers are unable to agree upon a determination, the base rent shall be an
amount equal to 90% of the average of the two (2) closest rates contained in the
reports submitted by the three (3) appraisers. The appraisers shall make their
determination in writing and shall give notice of the same to Landlord and
Tenant. In the event Tenant finds such appraised new base rent to be
unacceptable, Tenant shall
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notify Landlord in writing of such unacceptability within thirty (30) days of
receipt of the appraiser's notice setting forth the new base rent, in which
event the option to renew shall be deemed waived by Tenant. Landlord and Tenant
shall each pay the fees and expenses of the appraiser whom they selected, and
the fee and any general expenses of the third appraiser shall be divided equally
between Landlord and Tenant. In the event any appraiser appointed as aforesaid
shall thereafter become unable or unwilling to act, such appraiser's successor
shall be appointed in the same manner as provided above. Any appraiser appointed
hereunder shall have no less than five (5) years' experience in the appraisal of
real property and shall hold the professional designation of M.A.I.
ARTICLE 28. SUCCESSION
This Lease and all of the covenants, agreements, conditions, and
provisions herein contained shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, successors, and assigns, as the
case may be. The term "Landlord" as used herein shall include the heirs,
successors, and assigns of Landlord and assigns of the reversionary estate under
this Lease. The term "Tenant" as used herein shall include the successors of
Tenant and the assigns of the entire leasehold estate under this Lease.
ARTICLE 29. SURRENDER OF PREMISES
On the last day or earlier permitted termination of the Lease term,
Tenant shall quit and surrender the Premises in good and orderly condition and
repair (reasonable wear and tear excepted) and shall deliver and surrender the
Premises to the Landlord peaceably Prior to the expiration of the Lease, Tenant
shall remove all of its personal property, equipment, and trade fixtures, from
the Premises. All personal property not removed by Tenant shall be deemed
abandoned by Tenant, and Landlord reserves the right to charge the reasonable
cost of such removal to the Tenant, which obligation shall survive the Lease
termination and surrender hereinabove provided. If the Premises be not
surrendered by the end of the Lease term, as it may be extended, and Tenant
holds over without the consent of Landlord as called for in Section 26, Tenant
shall pay rental to Landlord on a month-to-month basis at 150% of the rents
herein specified for the then last Lease year (prorated on a monthly basis). If
Tenant's alterations or improvements are not removed by the end of the Lease
term, as it may be extended, Tenant shall indemnify Landlord against loss or
liability resulting from Tenant's failure to remove the alterations. Tenant
shall deliver the Premises to Landlord in compliance with all applicable zoning
and municipal regulations.
ARTICLE 30. ASBESTOS REMOVAL/HAZARDOUS WASTES
Tenant hereby agrees at its sole cost and expense to remove and dispose
of all asbestos containing materials ("ACMs") existing in a friable condition
and all ACMs existing in a nonfriable condition (except for ACMs found in areas
not accessible by the general public, which areas can be maintained or
encapsulated with minimal danger of future damages and such ACMs as exist in
small quantities, which shall be allowed to remain unless such ACMs are required
by law to be removed. Generally, the ACMs will consist of certain types of pipe
and boiler insulation which are presently confined to
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equipment rooms and boiler rooms, behind closed walls and confined to specific
pieces of equipment) from the Premises as required by law or by the end of
Tenant's initial term under this Lease, whichever is earlier. Any ACM removal
and/or abatement actions initiated by Tenant shall be performed by contractors
and workmen licensed, certified, and experienced for and in ACM removal and/or
abatement. All safety and health precautions required by the EPA, OSHA, and
state and local authorities shall be complied with.
Tenant hereby agrees to indemnify and hold Landlord, its principals,
successors and/or assigns and the Landlord's mortgage lender harmless from and
against any and all reasonable costs, expenses, attorneys' and legal fees,
charges, liability, loss, or damages assessed or otherwise determined in or
arising from or in connection with any judgments, record, claims, suits,
demands, proceedings, and investigations (collectively "Claims") arising from or
related to any ACMs or ACM removal and/or abatement actions by Tenant or its
agents in and about the Premises, including but not limited to Claims by any
former, present, or future tenant; any former, present, or future employee,
agent, guest, or invitee of such tenant; or any present or future employee,
agent, guest, or invitee of Tenant, provided such Claims do not arise as the
result of a condition created by Landlord; or, subsequent to the expiration of
this Lease and vacation of the Premises by Tenant, by other intervening third
parties. During the term of this Lease, Tenant shall not knowingly permit any
tenant to create, store, or release or to allow the creation, storage, or
release of any "Hazardous Substances" (as hereinafter defined) on the Premises
unless such creation, storage, or release is in full compliance with the
applicable, federal, state, or local environmental statute, regulation, or
ordinance.
For the purposes hereof, "Hazardous Substances" shall mean asbestos and
any substance or material defined or designated as a hazardous or toxic
substance or other similar term by any federal, state, or local environmental
statute, regulation, or ordinance presently in effect or that may be promulgated
in the future, as such statutes, regulations, or ordinances may be amended from
time to time.
ARTICLE 31. BROKER'S COMMISSIONS
Landlord and Tenant hereby represent and warrant to each other that no
real estate broker(s) has been employed in connection with this Lease and hereby
agree to indemnify, protect, defend, and hold each other harmless against and
with respect to any obligation, liability, or claim of liability based in any
way on any agreements, arrangements, or understandings claimed to have been made
or actually made by Landlord or Tenant, as the case may be, with any third party
with respect to this Lease.
Notwithstanding the foregoing, Tenant shall pay and shall be solely
responsible for existing and renewal lease commissions for leases signed by
Tenant as former owner of the Premises.
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ARTICLE 32. NOTICES
Any notice required or permitted by this Lease to be given by either
party to the other shall be in writing and may be personally delivered or sent
by either overnight courier service or by registered or certified mail properly
addressed to the said parties their agents, representatives, successors, or
assigns, or some one of them, at the last known address of such addressee and
deposited with the United States Postal Service or with such overnight courier
service, and the date of such deposit shall be deemed the date of giving such
notice. Until further notice in writing to the contrary, all notices to Landlord
and Tenant shall be sent to the following addresses:
TO LANDLORD: Continental Towers
c/o Green & Seifter, Attorneys, P.C.
900 One Lincoln Center
Syracuse, New York 13202
with a copy to:
Green & Seifter, Attorneys, P.C.
900 One Lincoln Center
Syracuse, New York 13202
Attention: Lowell A. Seifter, Esq.
TO TENANT: The Mutual Life Insurance Company of New York
1 MONY Plaza
Syracuse, New York 13202
Attention: Director of Building Services
with a copy to:
The Mutual Life Insurance Company of New York
1740 Broadway, Mail Drop 10-06
New York, New York 10019
Attention: Vice President-Real Estate Asset Management
ARTICLE 33. CAPTIONS
Captions and section numbers appearing in this Lease are inserted only
as a matter of convenience and in no way define, limit, construe, or describe
the scope or intent of such section of this Lease and shall not in any way
affect this Lease.
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ARTICLE 34. GOVERNING LAW AND JURISDICTION
This Lease shall be construed under and governed by the laws of the
State of New York. The parties acknowledge that this Lease has been drafted,
negotiated, made, delivered, and consummated in the State of New York.
ARTICLE 35. EXCULPATION
The term "Landlord" as used in this Lease shall be limited to mean and include
only the then lawful owner (at the time in question) of the Premises, and in the
event of any transfer or transfers of said estate, Landlord herein named (and in
case of any subsequent transfers or conveyances, the then grantor) shall be
automatically freed and relieved from and after the date of such transfer and
conveyance of all liability with respect to the performance of any covenants and
agreements on the part of Landlord contained in this Lease thereafter to be
performed. It is understood and agreed that if any Landlord or grantor shall
have committed a default prior to such transfer, Landlord or grantor committing
such default shall not be exempt from such liability attaching thereto; it being
intended that the covenants and agreements contained in this Lease on the part
of Landlord to be performed, subject to the provisions of this Lease, are
binding on Landlord, its successors, and assigns only during and in respect to
their successive periods of ownership.
Notwithstanding any provisions in this Lease to the contrary, Tenant
shall look solely to the estate and property of Landlord in the land and
building of which the Premises are a part for the satisfaction of Tenant's
remedies for the collection of a judgment (or other judicial process) requiring
the payment of money by Landlord in the event of any default or breach by
Landlord with respect to any of the terms, covenants, and conditions of this
Lease to be observed and/or performed by Landlord and no other property or
assets of Landlord shall be subject to levy, execution, or other enforcement
procedure for the satisfaction of Tenant's remedies.
ARTICLE 36. INTERPRETATION
It is hereby agreed that this Lease and all of the terms and provisions
hereof contain and represent the only agreement between the parties hereto as of
this date, and the same shall not be amended, modified, or changed in any manner
whatsoever except by an agreement in writing between Landlord and Tenant and/or
their successors and assigns.
ARTICLE 37. SEVERABILITY
In the event that any provision of this Lease shall be determined
invalid or unenforceable in accordance with applicable law, such provision
shall, insofar as possible, be construed or applied in such manner as will
permit enforcement. Otherwise, this Lease shall be construed as if such
provision had never been made a part hereof.
20
<PAGE> 23
ARTICLE 38. ESTOPPEL CERTIFICATES
Upon not less than thirty (30) days' prior written request, Tenant
agrees to execute, acknowledge, and deliver a statement in writing certifying
that this Lease is unmodified, in full force and effect (or if there have been
any modifications, the same are in full force and effect as modified and stating
the modifications), and the dates to which the basic rent hereof and other
charges have been paid and any other information reasonably requested. Any such
statement delivered pursuant to this article may be relied upon by any
prospective purchaser, mortgagee, or lending source. Upon not less than thirty
(30) days' prior written request, Landlord agrees to execute, acknowledge, and
deliver a statement in writing certifying, if applicable, that Tenant is current
and is not in default with respect to any monetary obligations or covenants
hereunder. Any reasonable requests of Tenant for certification of Landlord with
respect to compliance by Tenant with any other covenants or obligations of
Tenant hereunder will be given due consideration by Landlord. Appropriate
certification in response to such requests shall be in the sole discretion of
Landlord reasonably exercised.
21
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Lease as of the day and year first written above.
AS TO LANDLORD:
CONTINENTAL TOWERS,
a New York general partnership
By: Twin Towers Investors, L.P.,
a general partner
By: Continental Realty
of New York, Inc.,
WITNESS its general partner
/s/ Gayle Seiger By: /s/ Lowell A. Seifter
- --------------------- ---------------------
Lowell A. Seifter
/s/ S. William Lee Assistant Secretary
- --------------------
By: Continental Realty Fund
Limited Partnership,
a general partner
By: Continental Realty
of New York, Inc.,
WITNESS its general partner
/s/ Gayle Seiger By: /s/ Lowell A. Seifter
- -------------------- ----------------------
Lowell A. Seifter
/s/ S. William Lee Assistant Secretary
- --------------------
AS TO TENANT:
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK,
WITNESS a New York corporation
/s/Kevin M Walsh By: /s/ Richard Ridioff
- --------------------- -------------------
Richard Ridioff
/s/ James A. Haldeman Vice President for
- --------------------- Investment Management
Attest:
By: /s/ Edward R. Dawrem
--------------------
Its: Assistant Secretary
-------------------
22
<PAGE> 25
EXHIBIT A
Copy of Agreement of Sale and Purchase/Leaseback
<PAGE> 26
CONTINENTAL REALTY OF NEW YORK, INC.
900 One Lincoln Center
Syracuse, New York 13202
October 27, 1998
The Mutual Life Insurance
Company of New York
1740 Broadway
New York, NY 10019
Attention: James A. Haldeman
Re: MONY Tower III
Dear Jim:
This letter is to constitute a letter of intent for Continental Realty
of New York, Inc. ("CRNY"), or its assignee, so long as the assignee is an
entity in which CRNY is a principal owner, to purchase and develop the
"Southerly Half of Block" as shown on Exhibit "A" attached hereto (the "South
Site") and the property described herein in paragraph A(l); on the following
general terms and conditions:
A. Conditioned upon CRNY's agreements in B(l)-(S), MONY agrees
to:
(1) Sell to CRNY all its ownership interests in the block
bounded by Harrison Street, Warren Street, Adams Street and Harrison Place at a
price equal to MONY's total costs including but not limited to demolition costs
and costs of improvements to the property; and
(2) Sell to CRNY the South Site, including land and air
rights, at a price to be computed based upon the fair market value of the
buildable square footage; and
(3) Assign to CRNY all of its interests in the current MONY
Garage,
B. Conditioned upon MONY's agreements in A(l)-(3), CRNY agrees at
its sole expense to:
(1) Purchase all the City of Syracuse's ownership and
leasehold interest in the Parking Garage; and
(2) Restructure and refurbish in a good and workmanlike manner
the existing Parking Garage, or whatever portion thereof is retained, retaining
at least the two
<PAGE> 27
The Mutual Life Insurance
Company of New York
October 27, 1988
Page 2
sub levels below grade, to adequate and approved standards, however, pending
such restructuring and refurbishing, the truck entrances along South Montgomery
Street shall remain unobstructed; and
(3) Subject to approval of the design by MONY, build an office
building of approximately 200,000 square feet ("MONY Tower III") on the South
Site and give MONY the option to lease 50,000 square feet five years at the then
market rate for leases of similar size and duration but in no event greater than
a pre-set rate in the Syracuse MSA, following completion of the building; and
(4) Build, or have built in a good and workmanlike manner,
sufficient parking spaces (which for the purposes hereof shall be defined as
1.75 spaces for every 1,000 square feet of net rentable area) to adequately
service MONY Towers 1, 11 and III, which parking spaces shall be built prior to
construction of the MONY Tower III identified above; and
(5) Effect an overall stabilization in MONY's real estate tax
obligations at the assessed rate in effect as of the date hereof.
C. Subject to D and E below, which are legally enforceable
obligations, this letter is merely an evidence of the intent of MONY and CRNY
and does not constitute legally binding obligations on either party.
D. From the date hereof through March 31, 1989 MONY agrees to
negotiate solely with CRNY to arrive at definitive agreements to carry out the
intent expressed herein, provided however that the parties hereto can agree to
extend the provisions hereof for an additional three (3) month period so long as
the parties continue negotiations in good faith.
E. MONY hereby grants to CRNY, in consideration of CRNY's
execution of an Agreement of Sale and Purchase Leaseback ("Purchase Agreement")
and execution of an Agreement of Lease, a Right of First Refusal for a period of
one year from the closing date set forth in the Purchase Agreement. Before MONY
may sell the South Site or the property described in Paragraph A(l) of this
Letter of Intent, it shall first provide CRNY with a copy of a bona fide
third-party offer and CRNY shall have thirty (30) days to agree to purchase on
the same terms as those contained in the third-party offer and within
2
<PAGE> 28
The Mutual Life Insurance
Company of New York
October 27, 1988
Page 3
the same time frame. If CRNY does not notify MONY in writing of its decision to
exercise its Right of First Refusal within such thirty (30) day period, MONY
shall be free to sell the property and this Right of First Refusal shall lapse.
Very truly yours,
CONTINENTAL REALTY OF NEW YORK, INC.
By /s/ Edward Green
---------------------
AGREED, TO AND ACCEPTED this
27th day of October, 1988
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By /s/ James Haldeman
------------------------
3
<PAGE> 29
AGREEMENT OF SALE AND PURCHASE/LEASEBACK
THIS AGREEMENT, made and entered into as of the 27th day of October,
1988, by and between THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a New York
corporation, with its principal place of business at 1740 Broadway, New York,
New York 10019, ("Seller") and CONTINENTAL REALTY OF NEW YORK, INC., a New York
corporation, with its principal place of business at c/o Green & Seifter,
Attorneys, P.C.; 900 One Lincoln Center; Syracuse, NY 13202, ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is the owner of a certain parcel of land containing
approximately 2.17 acres more or less located in the City of Syracuse, Onondaga
County, New York with building and improvements thereon, a legal description of
which is attached hereto as Exhibit A and made a part hereof, which Seller
desires to sell and Purchaser desires to purchase.
NOW, THEREFORE, for and in consideration of the covenants and
agreements hereinafter set forth and other good and valuable considerations, in
hand paid by Purchaser to Seller, the receipt and sufficiency whereof are hereby
acknowledged, Seller and Purchaser hereby covenant and agree as follows:
1. Sale of Property. Seller will sell to Purchaser and Purchaser
will purchase from Seller the following, upon the terms and conditions
hereinafter set forth:
(a) Fee simple title to that certain tract of real property
and the building and improvements thereon commonly known as "MONY Plaza,"
located at 100-120 Madison Street, Syracuse, Onondaga County, New York, which
building consists of two (2) office towers of 19 stories each connected by a
5-story office wing containing approximately 734,927 square feet of gross
building area and approximately 578,970 square feet of net rentable office area,
and which real property is more particularly described in Exhibit A attached
hereto, and all personal property described in Exhibit B attached hereto.
(b) All rights, privileges, and easements appurtenant to said
real property, including without limitation all minerals, oil, gas, and other
hydrocarbon substances in, on, or under said real property, as well as all
development rights, air rights, water, water rights, and water stock relating to
said real property, and any easements, rights-of-way, or other appurtenances
used in connection with the beneficial use and enjoyment of said real property.
(c) All right, title, and interest of Seller in and to any
unpaid awards for damages in any taking in eminent domain or by reason of change
of grade of any street.
(d) All of the interest of Seller in any intangible property
now or hereafter owned by Seller in said real property, improvements, and
personalty, including
<PAGE> 30
without limitation the right to use any trade style or name now used in
connection with said real property (excluding the right to utilize the name
"MONY" or "MONY Plaza" or any derivation of the name "MONY", but only provided
Seller consents in writing to the use of such name) and any contract or lease
rights, agreements, utility contracts, or other rights relating to the
ownership, use, and operation of the property. Excluded from the terms hereof
shall be the interest of Seller, the City of Syracuse, and Syracuse Parking
Center, Inc., as such interests appear within the terms of the various leases,
subleases, and other agreements identified within Section 16 hereof.
All of the above being hereinafter collectively referred to as the
"Property."
Purchaser agrees to accept the aforesaid Property "As Is" in its
present condition and, further, subject to such state of facts as would be
disclosed by (i) a current, accurate survey, provided such facts do not
unreasonably interfere with the current use of the Property nor render the
Property unmarketable, (ii) personal inspection of the Property, and (iii) Level
1, environmental and hazardous materials site evaluation, all of which are
without any representations or warranties of any nature whatsoever by Seller;
provided however that this Agreement shall be contingent upon a satisfactory
engineering inspection and a Level I Environmental and Hazardous Materials Site
Evaluation of the Property, which Purchaser agrees to have performed within two
(2) weeks from the date hereof. In the event the Level I evaluation reveals the
need for further testing, such further testing shall be performed within two
weeks of such revelation. Provided further, however, that Purchaser shall have
no right to cancel this Agreement in the event of any non-material defect. In
the event there is a "material defect" (as hereinafter defined) within the
Property, Purchaser shall notify Seller in writing within five (5) business days
after receipt of such engineering inspection report or environmental evaluation,
and Seller at its sole election shall have the right to cure such defect, which
cure shall be commenced within thirty (30) days-of receipt of Purchaser's
notice. Seller shall notify Purchaser of its election to cure within ten (10)
business days after receipt of Purchaser's notice. In the event such cure cannot
be accomplished within said thirty (30) day period, Seller shall not be in
default hereunder provided Seller commences to cure such material defect within
the aforesaid thirty (30) day period and diligently pursues the same, in which
event the "Closing Date" (as hereinafter defined) shall not be delayed provided
Purchaser's lender would fund a loan to Purchaser pending completion of such
repair and/or remediation of the Property. For the purposes hereof, a "material
defect" shall mean a defect which is so substantial in nature as to allow a
purchaser under a contract of sale in New York to terminate the contract of sale
upon discovery. In connection with the making of an engineering inspection or
environmental evaluation of the Property, Seller agrees that it shall provide
Purchaser with a copy of any asbestos studies that Seller performs or has
performed at that Property in connection with Seller's ownership of the Property
or its obligations set forth below. Upon receipt of such report, Purchaser shall
have ten (10) business days to have such report reviewed by an independent
expert of Purchaser's choosing. Subject to the provisions of the Lease referred
to in Section 15, Purchaser undertakes to assume and perform any and all
liabilities and obligations in connection with the Property accruing from and
after the Closing Date (as hereinafter defined), except those assumed herein by
the Seller. Notwithstanding the foregoing, Seller agrees at its sole cost and
expense to remove and dispose of all asbestos containing
2
<PAGE> 31
materials ("ACMs") existing in a friable condition and all ACMs existing in a
nonfriable condition (except for ACMs found in areas not accessible by the
general public, which areas can be maintained or encapsulated with minimal
danger of future damages and such ACMs exist in small quantities, which shall be
allowed to remain unless such ACMs are required by law to be removed. Generally,
the ACMs will consist of certain types of pipe and boiler insulation which are
presently confined to equipment rooms and boiler rooms, behind closed walls and
confined to specific pieces of equipment.) from the Property as required by law
or by the end of Seller's first lease term as "Tenant" within the Property, as
more particularly described within Section 15 below, whichever is earlier. Any
ACM removal and/or abatement actions initiated by Seller shall be performed by
contractors and workmen licensed, certified, and experienced for and in ACM
removal and/or abatement. All safety and health precautions required by the EPA,
OSHA, and state and local authorities shall be complied with.
Seller hereby agrees to indemnify and hold Purchaser, its principals,
successors, and/or assigns, and Purchaser's mortgage lender harmless from and
against any and all reasonable costs, expenses, attorneys' and legal fees,
charges, liability, loss or damages assessed or otherwise determined in or
arising from or in connection with any judgments, orders, claims, suits,
demands, proceedings and investigations (collectively "Claims") arising from or
related to any ACMs or ACM removal and/or abatement actions by Seller, or its
agents, in and about the Property, including but not limited to Claims by any
former, present, or future tenant; any former, present, or future employee,
agent, guest, or invitee of such tenant; or any present or future employee,
agent, guest, or invitee of Seller, provided such Claims do not arise as the
result of a condition created by Purchaser; or, subsequent to the expiration of
the lease referred to in Section 15 below and vacation of the Property by the
Tenant pursuant thereto by other intervening third parties. The provisions
hereof shall survive Closing and the delivery of the deed.
Notwithstanding the provisions hereinabove set forth, the existence of
any ACM'S within the Property shall not be deemed a "material defect" nor give
rise to the right of Purchaser to terminate this Agreement.
2. Purchase Price and Time Payment. The purchase price is
Sixty-Six Million Two Hundred Thousand and No/100 Dollars ($66,200,000.00)
payable as follows:
(a) Simultaneously with the signing of this Agreement,
Purchaser shall deliver to Seller a deposit of $2,000,000.00, (hereinafter the
"Deposit") in the form of a check, subject to collection. Interest earned on the
Deposit at a rate of $330 per day from the date Purchaser's check clears,
through the day before Closing, shall be the property of Purchaser and credited
against the Purchase Price at Closing.
(b) Subject to the Provision of Section 6(d), Purchaser shall
deliver to Seller $64,200,000.00 at Closing,-which funds shall be delivered to
Seller by Federal Funds wire transfer to the account of Seller or by certified
or cashier's check payable to Seller, as Seller shall direct by no later than
2:00 p.m. of the day of Closing.
3
<PAGE> 32
3. Miscellaneous Adjustments and Prorations. There shall be no
adjustment between the parties for fixed rentals, percentage rentals, tenant
security deposits, real estate taxes, assessments, water, and other utility
bills, it being the intention of the parties hereto that simultaneously with
delivery of the deed by the Seller to the Purchaser on the Closing Date that the
Property be leased back to the Seller by the Purchaser on a triple net lease
basis, as provided in Paragraph 15 hereof, and that the Seller shall remain
responsible for paying such items during the term of such triple net lease and
all extensions thereof.
4. Closing Costs. Seller shall pay at Closing (as hereinafter
defined) the New York State Real Property Transfer Gains Tax and the New York
State Transfer Tax. Purchaser shall pay at Closing the premium for its owner's
and lender's title insurance fee, mortgage tax (if applicable), and all filing
and recording fees, including the costs of recording the deed. Seller and
Purchaser hereby agree to cooperate in the execution of any and all tax forms
required to be filed in connection with this transaction.
5. Accounting Data. Seller agrees that Purchaser and its duly
authorized accountants and representatives may, during reasonable business
hours, review Seller's books and records pertaining to the operations of the
Property. If in the reasonable opinion of Purchaser's counsel any federal or
state regulatory agencies or commissions would require audited statements of the
operations of the Property, then and in that event, Purchaser and its duly
authorized representatives shall have the right to audit the books and records
of Seller, provided, however, that preparation of any audited or unaudited
accounting reports or statements by Purchaser's accountants shall not be deemed
to constitute a warranty or representation by Seller that the matters contained
in such audits are accurate
6. Purchaser's Investigations: Title: Survey: and Mortgage.
(a) Purchaser's Investigation. Seller shall make available to
Purchaser for Purchaser's review at 1 MONY Plaza, Harrison Street, Syracuse, New
York, the following: rent roll and all Tenant Leases affecting the Property, as
well as any other documents or instruments of a nonconfidential nature relating
to the operation of the Property which Purchaser may reasonably request,
including without limitation (i) copies of all maintenance and supply service
contracts and a list of any such contracts that are unwritten; (ii) warranties
and guaranties, if any, covering any equipment, machinery, or other personal
property or fixtures on the Property; (iii) copies of all certificates of
occupancy and any other governmental licenses or approvals, if any, relating to
any portion of the Property in the possession of Seller. In all instances, the
documents and information provided to Purchaser in connection with its
investigation shall be kept confidential. Seller represents that it is currently
spending approximately $9.60 per square foot to operate the Premises. Purchaser
shall have fifteen (15) days from the date hereof to investigate Seller's
operating statements and related documentation, and in the event Purchaser's
investigation reveals that Seller's representation is substantially inaccurate,
Purchaser shall have the right to terminate this Agreement and receive a return
of the Deposit by providing Seller with written notice of such termination
within the aforementioned fifteen (15) day period.
4
<PAGE> 33
(b) Title. Within ten (10) business days of the date of this
Agreement, Purchaser shall obtain at its sole cost and expense a preliminary
title commitment of then current date covering the Property, accompanied by
copies of all documents referred to in the report, which title report shall have
been issued by a title insurance company licensed to do business in the state in
which the Property is located and which Property is subject to those exceptions
appearing on Exhibit C (the "Permitted Title Exceptions"), provided such
exceptions do not render title unmarketable, and no other exceptions. Within
thirty (30) days from the date hereof, Purchaser shall notify Seller in writing
of any objections it has to title, and provided such objection can be cured or
insured over, such objection shall not give rise to any right to terminate this
Agreement by Purchaser.
(c) Survey. Within ten (10) business days of the date of this
Agreement, Seller shall obtain at its sole cost and expense a plat of survey
prepared by a registered land surveyor licensed to do business in the State of
New York.
(d) Mortgage. Seller and Purchaser have agreed that the Seller
shall provide and the Purchaser shall accept first mortgage financing provided
by the Seller and secured by the Property, and in connection with such financing
Purchaser shall deposit with Seller an additional sum of one million and no/100
($1,000,000) dollars which deposit shall be in compliance with Section 2 above,
within one week from the date hereof, and which financing shall be provided on
the following terms and conditions:
1. Borrower: Purchaser or Purchaser's assignee, as provided
for in Section 19(j)
2. Amount: $56,000,000
3. Term: 5 years
4. Interest Rate: Nine and three quarters (9.75%) percent per
annum payable monthly in arrears.
5. Amortization: None.
6. Loan Prepayment: Prepayment shall be permitted at any time on any
interest installment date upon thirty (30) days
prior written notice to prepay the loan in full,
but not in part, upon payment in addition to
such principal amount and all interest accrued
thereon, of a prepayment premium equal to the
greater of the following:
A. The product obtained by multiplying:
1. The difference obtained by subtracting from
9.75% the then current yield rate on the U.S.
Treasury Note with a maturity date closest to
the fifth anniversary of the loan as such yield
is reported in The Wall Street Journal or
similar
5
<PAGE> 34
publication on the fifth business day
preceding the prepayment date. If there are more
than one U.S. Treasury Note with a maturity date
as specified above, the average of such yield
rates shall be utilized, times;
2. The number of years and fraction thereof
remaining between the prepayment date and the
fifth anniversary of the loan, times;
3. The unpaid principal amount; or
B. One (1%) percent of the principal amount in
the event the loan is held by a party other than
Seller or its wholly owned subsidiaries, or
one-half of one (.50%) percent in the event the
loan is held by Seller or one of its wholly
owned subsidiaries.
7. Loan Documentation: All loan documentation is to be satisfactory
to Lender and its Counsel and be on forms
customarily used by MONY for similar loans.
The loan documents are to include, among
other things, an assignment of the Purchaser's
interest in the Lease referred to in Section
15 and an authorization by Purchaser as
Landlord' to MONY as Tenant thereunder to
effect payment of the Lease payments directly
to Lender to cover any interest payments due
under the loan.
8. Costs: Purchaser shall pay for all reasonable costs
related to the loan, including, but not
limited to, the mortgage recording tax,
recording fees, title insurance for the
Lender and Lender's attorneys' fees. In the
event MONY is the Lender, Purchaser shall pay to
MONY a Processing Fee of $30,000 and no
attorneys' fees for closing the loan shall be
payable.
9. Secondary Financing: Up to $5 Million will be permitted provided it
is furnished by a reputable financial
institution customarily in the business of
making such loans, or by a pension or union
sponsored retirement fund.
7. Risk of Loss. Destruction. Condemnation.
(a) Risk of loss or damage to the Property or any part thereof
by fire or other casualty from the date of this Agreement to the Closing Date
shall be on Seller.
(b) If prior to the Closing the Property or any part aged by
fire or any other cause of whatsoever nature, Seller shall promptly give
Purchaser written notice of such damage. If the cost for repairing such damage
shall, in the reasonable judgment of Purchaser, exceed $6,000,000.00, Purchaser
shall have the option, by written notice
6
<PAGE> 35
delivered to Seller within ten (10) days of Seller's written notice of damage to
Purchaser, either (i) to require Seller to convey the Property to Purchaser in
its damaged condition or (ii) to terminate this Agreement. Should Purchaser
elect to terminate this Agreement, after notice by Purchaser to Seller and after
a return of the Deposit to Purchaser, neither party hereto shall thereafter have
any further rights or obligations hereunder. If the cost for repairing such
damage shall, in the reasonable judgment of Purchaser, not exceed $6,000,000, or
if it elects to require Seller to convey the Property to Purchaser in its
damaged condition, and Purchaser and Seller shall enter into the Lease as
specified in Section 15 hereof, and all of Seller's obligations under said
Lease, including the payment of rent and repair and/or restoration of the
Property, shall thereupon commence.
(c) If during the pendency of this Agreement and prior to the
Closing Date condemnation proceedings are commenced (or threatened)
with-respect to the Property or any other land or interest herein subject to
this Agreement, which proceedings threaten to take a material portion of the
Property (as hereinafter defined), Purchaser may, at its election, terminate
this Agreement by written notice to Seller within ten (10) days after Seller's
notification to Purchaser of the commencement of condemnation proceedings. For
the purpose herein set forth, a material portion of the Property shall mean a
taking which results in a loss of 33-1/3% of the floor space within the
Property. In the event of such termination and upon return of the Deposit to
Purchaser, neither party hereto shall thereafter have any further duties or
obligations hereunder. If Purchaser fails to exercise such right to terminate
within the period prescribed, then the Seller and the Purchaser, by their
respective attorneys, shall have the right to, appear and to defend their
respective interests in the Property in such condemnation proceedings, and the
right to any award in condemnation shall be assigned to Purchaser at Closing and
shall not reduce the purchase price, but such condemnation shall give Seller the
right to reduce the payments due under the lease referred to in Section 15 below
in the same proportion as the award bears to the Purchase Price.
8. Closing. The parties hereby establish the following terms,
conditions, and procedures for the consummation of the sale of the Property as
set forth hereinbelow:
(a) Closing Procedures. This transaction shall be closed on
such date, time, and at such place as is mutually agreeable to the parties
hereto (herein "Closing Date" and "Closing") but no later than December 22,
1988, time being of the essence.
At the Closing, Seller shall cause to be delivered the following items,
and the failure of Seller to deliver any such items shall relieve Purchaser of
its obligations to purchase hereunder:
(1) A Bargain and Sale Deed with Covenant against
Grantor's Acts and lien, covenant pursuant to Section
13 of the Lien Law in form and substance satisfactory
to the title insurer, duly executed and. acknowledged
by Seller, in recordable form, conveying fee title to
the Property to Purchaser.
7
<PAGE> 36
(2) Any and all original documents (or copies thereof if
Seller does not possess the originals) of the type
described in Paragraph 6(a) not previously delivered
to Purchaser. Seller hereby agrees that it shall
provide such reasonable documentation as may be
required by the title insurer or Purchaser's mortgage
lender in order to facilitate the Closing of this
transaction.
(3) Copies of any and all plans, permits, certificates of
occupancy, or any other governmental approvals,
permits, applications, or certificates affecting or
relating to the Property which Seller may have in its
possession.
(4) An assignment of any warranties, guaranties, and/or
service contracts, if applicable, which may affect or
relate to the Property and only if such warranties,
guaranties, and/or service contracts extend beyond
the term of the Lease contemplated within Section 15
hereof. During the term of such Lease, warranties,
guaranties, and/or service contracts shall remain the
property of Seller.
(5) The Lease, as specified in Section 15, is
substantially that as attached hereto as Exhibit D,
duly executed and acknowledged by Seller.
(6) Such corporate resolutions, duly executed,
acknowledged, and adopted, as may be necessary for
Seller to perform all obligations arising under or in
connection with this Agreement.
(7) Reasonable written evidence dated no earlier than
fifteen (15) days prior to Closing that the Property
is free of any violations of any governmental
regulations affecting the Property.
At the Closing, Purchaser shall cause to be delivered the following
items, and the failure of Purchaser to deliver any such items shall relieve
Seller of its obligations to sell hereunder:
(1) Nondisturbance, Attornment, and Subordination
Agreement from Purchaser's lender, if any,
substantially in the form of Exhibit E attached
hereto.
(b) Delivery of Purchase Price. On the Closing Date, Purchaser shall
deliver to Seller the balance of the purchase price calculated pursuant to the
Closing Statement to be prepared by the parties in accordance with the
provisions of subparagraph (c) herein below.
(c) Purchase Price Adjustments and Prorations. The following
adjustments and prorations (which shall be on a daily basis) shall be calculated
as of the Closing Date as hereinabove defined. The parties agree that they shall
prepare in form mutually satisfactory to them a Closing Statement, as of the
Closing Date, wherein they shall set
8
<PAGE> 37
forth in reasonable detail the calculations of all of the adjustments and
prorations as hereinafter provided, if any, as well as the costs set forth in
subparagraph (d) hereinbelow.
(d) Cost of Closing.
Seller shall pay at Closing:
(1) The full, New York State Transfer Tax;
(2) The full New York State Real Property Transfer Gains
Tax;
(3) Its own attorney's fees, if any.
(4) All other usual closing costs and expenses
customarily the responsibility of Seller.
Purchaser shall pay at Closing:
(1) All intangible (and any other) taxes and recording or
filing costs associated with recording and/or filing
the deed and any loan documents entered into, in
connection with Purchaser's financing of the purchase
of the Property;
(2) The entire cost and expense of owner's policy of
title insurance and lender's policy of title
insurance (if applicable) elsewhere described herein;
(3) The full cost of recording deed (excluding the New
York State Transfer Tax and the New York State Real
Property Transfer Gains Tax);
(4) Its own attorneys' fees; and Lenders attorneys' fees
or Processing Fees to MONY should Purchaser elect to
take the Floating Rate Loan referred to in Section
6(d).
(5) All other usual closing costs and expenses
customarily the responsibility of Purchaser.
(e) Title Insurance. Purchaser shall at its own costs and expense
obtain at Closing a lender's policy of title insurance for any financing that it
has obtained in connection with the purchase of the Property and an owner's
policy of title insurance, such title policies to be issued by a title insurance
company acceptable to Purchaser and its lender, insuring the lenders mortgage as
a first priority lien on the fee simple title to the Property, subject only to
such exceptions as Purchaser's lender shall have approved as contained in the
preliminary title report pursuant to Paragraph 6(b) and the standard exceptions
contained in such policies of title insurance. Purchaser agrees in obtaining
9
<PAGE> 38
such title insurance to protect Metro Land Services, Inc. to the extent of not
less than 25% of the gross title insurance premiums paid.
9. Representations and Warranties of Seller. Seller specifically
represents and warrants to Purchaser, both now and as of the Closing Date and
thereafter, where applicable, each and all of the following:
(a) On the Closing Date, Seller will be the owner of and have
title in fee simple to all the improvements situated thereon and shall know of
no possessory or other rights affecting the Property (other than those revealed
in Section 16 below and in the preliminary title report referred to herein)
prior to the Closing and as set forth on the attached Exhibit F ("Tenant
Leases/Possessory Rights").
(b) The legal description of the land as set forth in Exhibit
A attached hereto is substantially the same description as contained in the deed
pursuant to which Seller acquired its title, except as more particularly
described in Section 16 below, pertaining to the exclusion of the property and
the improvements thereon subject to the therein defined "City Lease South."
(c) There are no outstanding contracts made by Seller for any
improvements to the Property which have not been fully paid for, and Seller
shall cause to be discharged any and all mechanics' or materialmen's liens
arising from work for which Seller has contracted. Notwithstanding the
foregoing, in the event any mechanics' or materialmen's liens arise as a result
of work being performed on Seller's behalf, Seller reserves the right to contest
such liens provided that such lien is bonded over or other security is provided
to the title insurer so that it may insure over such mechanics' or materialmen's
lien.
(d) No notice has come to the attention of the officers of
Seller of any condemnation actions against the Property or any part thereof.
(e) No notice has come to the attention of the officers of
Seller of any special assessments against the Property other than those special
assessments set forth in the preliminary title commitment to be obtained
pursuant to Paragraph 6(b).
(f) No notice has come to the attention of the officers of
Seller of any violations of any governmental regulations affecting the Property.
(g) To the best of Seller's knowledge, Seller, as landlord, is
not in default under the terms and conditions of any Tenant Leases. Seller, as
landlord, has received no notice of any default on the part of any tenant under
any of the Tenant Leases.
(h) Seller is a corporation validly existing, in good
standing, and authorized to do business in the State of New York, and Seller has
full power and authority to execute and deliver this Agreement and to perform
all obligations arising under or in connection with this Agreement.
10
<PAGE> 39
10. Breach of Warranties.
(a) Prior to the Closing Date, Purchaser shall notify Seller
of any breach of warranties discovered by Purchaser prior to the Closing Date.
In the event a material breach is discovered, Purchaser may either (i) terminate
this Agreement with no liability on its part or (ii) give notice that it intends
to complete the purchase irrespective of the breach, in which event the Closing
will take place as scheduled, and such breach will be considered waived. In the
event Purchaser elects to terminate this Agreement due to a material breach by
Seller, Seller shall reimburse Purchaser for its reasonable out-of-pocket
expenses incurred as a result of entering into this Agreement, and Seller shall
return the Deposit to Purchaser.
(b) In the event that Seller should fail to consummate this
Agreement for any reason, except Purchaser's default, Purchaser may (i) declare
this Agreement null and void, and Seller shall reimburse Purchaser for its
reasonable out-of-pocket expenses incurred as a result of entering into this
Agreement and shall return the Deposit to Purchaser, and thereafter, neither
Seller nor Purchaser shall have any further duties or obligations to the other
hereunder, or (ii) enforce specific performance of Seller's duties and
obligations under this Agreement.
(c) In the event that Purchaser should fail to consummate this
Agreement for any reason, except Seller's default or the termination of this
Agreement pursuant to the various termination provisions hereof, Seller may
retain the deposit paid by Purchaser to Seller pursuant to the terms of
Paragraph 2(a) hereof, which shall be Seller's sole remedy at law or in equity.
11. Modification or Alteration of Leases. With respect to the
Property and subject to the provisions of the Lease referred to in Section 15,
Seller shall be permitted to continue after execution of this Agreement to enter
into any modifications, alterations, or changes of any lease, contract, or
agreement, relating to the Property unless such modification, alteration, or
change of lease, contract, or agreement requires performance after the
expiration of Seller's lease term as "Tenant," as such term may be extended
pursuant to the terms of the lease and as more particularly described in Section
15 below.
12. Broker's Commissions. Seller and Purchaser hereby represent
and warrant to each other that no sales broker(s) have been employed in
connection with the sales transaction contemplated hereby and agree to
indemnify, protect, defend, and hold each other harmless against and with
respect to any obligation, liability, or claim of liability based in any way on
any agreements, arrangements, or understandings claimed to have been made or
actually made by Seller or Purchaser, as the case may be, with any third party
as to the sale of the Property.
Seller shall pay and shall be solely responsible for existing and
renewal lease commissions for leases signed by Seller.
13. Effect of Invalidation. If any one or more of the provisions
of this Agreement is for any reason held to be invalid, illegal, or
unenforceable in any respect by
11
<PAGE> 40
any court, such invalidity, illegality, or unenforceability shall not affect the
validity and enforceability of any other provisions hereof, and this Agreement
shall be construed as though such invalid, illegal, or unenforceable provision
had never been contained herein. This provision shall not apply with respect to
the following Sections of this Agreement: 1, 2, 3, 4, 6, 7, 8, 9, 10, 15, 16, 18
and 19.
14. Notices. Any notice, demand, or document which either party is
required or may desire to give or deliver to or make upon the other party shall,
in the case of a notice or demand, be in writing and shall be personally
delivered or given or made by United States registered or certified mail, with
postage thereon fully prepaid, addressed as follows, subject to the right of
either party to designate a different address for itself by notice similarly
given:
TO SELLER: The Mutual Life Insurance Company of New York
1740 Broadway, Mail Drop 10-01
New York, New York 10019
Attention: Mr. Richard Ridloff
Vice President for
Investment Management
with a copy to:
The Mutual Life Insurance Company of New York
2302 Parklake Drive, N.E., Suite 300
Atlanta, Georgia 30345
Attention: Kevin M. Walsh, Esq.
Counsel-MONY Real Estate
Investment Management
TO PURCHASER: Continental Realty of New York, Inc.
c/o Green & Seifter, Attorneys, P.C.
900 One Lincoln Center
Syracuse, NY 13202 with a copy to:
Green & Seifter, Attorneys, P.C.
900 One Lincoln Center
Syracuse, New York 13202
Attention: Lowell A. Seifter, Esq.
Any notice, demand, or document so given or delivered or made shall be
deemed to be given, delivered, or made on the day of actual delivery as shown by
the addressee's registry or certification receipt or on the third day after the
same is deposited in the United States mail, whichever is earlier in time. Any
such notice, demand, or document not given, delivered, or made by registered or
certified mail, as aforesaid, shall be
12
<PAGE> 41
deemed to be given, delivered, or made upon receipt of the same by the party or
parties to whom the same is to be given, delivered, or made.
15. Leaseback of Property. At Closing, Purchaser and Seller shall
enter into a lease, the terms of which shall provide, among other things, that
Seller shall leaseback the Property, including the improvements thereon from
Purchaser, on a triple net basis for a term of twenty (20) years with two (2)
five (5) year renewal options, the form of such lease to be substantially that
as attached hereto as Exhibit D.
16. Parking Garage. Seller is currently subleasing space within
the garage below the Property and adjacent to the Property (hereinafter the
"Parking Garage") from the City of Syracuse pursuant to the terms of that
certain lease dated January 1, 1973 (hereinafter "Sublease"), a copy of which is
attached hereto as Exhibit G. The City of Syracuse is the tenant of portions of
the Parking Garage pursuant to the terms of the two (2) following leases: (1)
lease dated December 31, 1968 by and between Seller, as landlord, and the City
of Syracuse, as tenant, which lease was recorded on June 13, 1969 in the Office
of the Clerk of the County of Onondaga, New York, in Book 2405 of Deeds at page
734, (hereinafter "City Lease North"), a copy of which is attached hereto as
Exhibit H, and (2) lease dated December 31, 1968 by and between Seller, as
landlord, and the City of Syracuse, as tenant, which lease was recorded on June
13, 1969 in the Office of the Clerk of the County of Onondaga, New York, in Book
2405 of Deeds at page 753, (hereinafter "City Lease South"), a copy of which is
attached hereto as Exhibit I. The Parking Garage is currently being operated by
Syracuse Parking Center, Inc., a New York corporation, pursuant to the terms of
an Operating Agreement dated August 1, 1981, a copy of which is attached hereto
as Exhibit J. It is the intent of the Parties hereto that the Parking Garage be
operated, as a single unit. So long as Seller, or its successors or assigns, is
the owner of the portion of the Parking Garage presently subject to the City
Lease South, or the land thereunder, and such portion is operated in whole or in
part as a parking garage with spaces available on a non-exclusive basis to
tenants of the Property, Seller shall have the right to operate the Parking
Garage as a single unit, including that portion of the Parking Garage presently
subject to the City Lease North, without payment of consideration other than
Seller's obligation to sell the Property to Purchaser and all income to be
derived from the operation of the Parking Garage, whether during the term of the
Lease contemplated in Section 15 above or thereafter, shall be the property of
the operator of the Parking Garage. Seller reserves the right to enter into or
consent to any amendment, modification or termination of the City Lease North,
the Sublease, the City Lease South and/or the Operating Agreement without the
prior consent of Purchaser provided any such amendments, modifications or
terminations do not totally preclude tenants of the Property from the
non-exclusive use of the Parking Garage. Seller agrees to consult with Purchaser
on any such amendments, modifications or terminations provided however that
Purchaser's advice to Seller shall under no circumstances be binding on Seller.
The provisions hereof shall survive delivery of the deed.
17. Signage. Notwithstanding the sale of the Property from Seller to
Purchaser and at all times during the term of the lease identified in Section 15
above and all renewals and replacements thereof, Purchaser agrees that (i) the
Property shall remain
13
<PAGE> 42
known as MONY Plaza or such other name as Seller may designate, (ii) Seller
shall be permitted to retain and replace its existing signage on the Property,
and (iii) Seller shall be permitted to continue to do so as long as such signage
is in compliance with the local zoning ordinances. This section shall survive
delivery of the deed hereunder.
18. Nonforeign Certificate. On the date of Closing, Seller shall
deliver to Purchaser a certification that Seller is not a nonresident alien (a
foreign corporation, partnership, trust, or estate, as defined in the Internal
Revenue Code and Treasury Regulations promulgated thereunder.
19. Miscellaneous.
(a) Entire Agreement. This Agreement contains the entire
agreement between the parties in respect of the matters herein set forth,
supersedes all prior agreements between the parties may not be modified,
amended, or terminated except by a written agreement signed by both of the
parties hereto.
(b) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall for all purposes be deemed to be an
original, and all of which together shall constitute but one and the same
Agreement of the parties.
(c) Captions. The captions of the paragraphs and subparagraphs
of this Agreement are for convenience only and shall not be considered or
referred to in resolving questions of interpretation or construction.
(d) Attorney's Fees. Should either party hereto institute any
action or proceeding in any court to enforce any provision of this Agreement,
the prevailing party shall be entitled to receive from the losing party such
amount as the court may adjudge to be reasonable attorney's fees for the
services rendered the prevailing party in such action or proceeding.
(e) Applicable Law. This Agreement and the transaction
contemplated herein shall be governed by and construed under the laws of the
State of New York.
(f) Waiver. No waiver by Seller or Purchaser of any breach
respectively by Purchaser or Seller of any provisions of this Agreement shall be
deemed or construed to be a waiver of any subsequent or continuing breach of the
same or any other provision of this Agreement; nor shall any forebearance by
Purchaser or Seller from the exercise of a remedy for any such breach be deemed
or construed to be a waiver by Purchaser or Seller of any of their respective
rights or remedies with respect to such breach(es).
(g) Notification. Upon Purchaser's request, Seller shall
execute all reasonable notices to tenants, contractors, or other persons of the
change in ownership of the Property.
14
<PAGE> 43
(h) Meaning of Phrases. The use herein by Seller of the
phrases "to the best of Seller's knowledge," "Seller is not aware of any,"
"Seller has received no notice of," and phrases of similar import shall not mean
or imply that Seller has made any independent investigation into the matter as
to which such phrase is used or has any duty to make investigation. Seller's
obligation in such regard and the only duty it has hereunder is to review the
books and records pertaining to the Property in its possession.
(i) Representations and Warranties. Representations and
warranties made by the parties to this Agreement shall survive the Closing only
if and to the extent expressly so stated.
(j) Amendment and Assignment. This Agreement may not be
assigned by the parties hereto and may only be amended by a writing signed by
Seller and Purchaser. Purchaser, however, shall be permitted to assign this
Agreement without first obtaining Seller's prior written consent to an entity in
which Purchaser is a principal owner, including but not limited to a general
partner in a limited partnership; provided such assignment takes place by no
later than November 15, 1988. Purchaser or its assignee agrees to provide to
Seller by November 15, 1988 any required gains tax affidavit.
(k) Time of the Essence. Seller and Purchaser hereby agree
that time is of the essence with regard to the matters set forth herein.
15
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Sale and Purchase/Leaseback as of the day and year first written above.
SELLER:
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK,
a New York corporation
/s/ Richard Ridloff
-------------------
Witness: By: Richard Ridloff, Vice President for
Investment Management
/s/ Kevin M. Walsh
- ------------------
Attest:
/s/ Peter J. O'Hara
- -------------------
By: /s/ Cliente K. Krubah
---------------------
Its: Assistant Secretary
PURCHASER:
CONTINENTAL REALTY OF NEW YORK,
INC.,
WITNESS: a New York corporation
Witness:
/s/ Peter J. O'Hara By: /s/ Edward S. Green
- ------------------- -----------------------
Edward S. Green, Treasurer
/s/ Kevin M. Walsh
- ------------------
Attest:
By: /s/ Lowell A. Seifter, Asst. Secretary
----------------------------------------
16
<PAGE> 45
EXHIBIT B
Property Description
ALL THAT TRACT OR PARCEL OF LAND situate in the City of Syracuse,
County of Onondaga, and State of New York, and being a portion of Block #134 in
said City, and being more particularly described as follows:
BEGINNING at the intersection of the present easterly line of South
Warren Street with the present southerly line of Madison Street, said point of
intersection being the northwesterly corner of Block #134;
Thence South 89(degree) 47'10" East, along said southerly line of
Madison Street, a distance of 471.79 feet to the northeasterly corner of said
Block #134;
Thence South 0(degree) 06'00" West, along the present westerly line of
Montgomery Street, a distance of 180.51 feet to the northeasterly corner of a
permanent easement conveyed to the City of Syracuse by The Mutual Life Insurance
Company of New York by deed recorded in the Onondaga County Clerk's Office in
Liber of Deeds #2395, Page #140;
Thence North 89(degree) 49'40" West, along the northerly line of said
permanent easement and being parallel to the northerly line of Harrison Street,
a distance of 471.66 feet to its intersection with said easterly line of South
Warren Street;
Thence North 0(degree) 03'30" East, along said easterly line of said
South Warren Street, a distance of 180.86 feet to the place of beginning.
Containing 85,233.26 square feet of land, or 1.956 acres of land, more or less.
The hereinabove described parcel of land is subject to any and all
easements and/or rights-of-way of record and to that certain lease with the City
of Syracuse, as tenant, which lease was recorded on June 13, 1969 in the Office
of the Clerk of the County of Onondaga, New York in Book of Deeds 2405, Page
734, for which The Mutual Life Insurance Company of New York reserves its rights
thereunder.
<PAGE> 46
EXHIBIT C
Annual Lease Payments
<TABLE>
<CAPTION>
Lease Year Monthly Installments Annual Payment
---------- -------------------- --------------
<S> <C> <C>
1 $487,500.00 $5,850,000
2 497,250.00 5,967,000
3 507,195.00 6,086,340
4 517,338.91 6,208,067
5 527,685.66 6,332,228
6 538,239.41 6,458,873
7 549,004.16 6,588,050
8 559,984.25 6,719,811
9 571,183.91 6,854,207
10 582,607.66 6,991,292
11 594,259.75 7,131,117
12 606,145.00 7,273,740
13 618,267.83 7,419,214
14 630,633.25 7,567,599
15 643,245.91 7,718,951
16 656,110.83 7,873,330
17 669,233.00 8,030,796
18 682,617.66 8,191,412
19 696,270.00 8,355,241
20 710,195.41 8,522,345
</TABLE>
<PAGE> 47
EXHIBIT D
List of Tenants
<PAGE> 48
MONY TOWER 1-RENT ROLL
<TABLE>
<CAPTION>
TENANT SPACE SQUARE FEET RENT PER YEAR
------ ----- ----------- -------------
<S> <C> <C> <C>
Mutual of New York Subcellar-Wing 4,805 N/A
Mutual of New York Cellar-Wing 4,141 N/A
Chase Lincoln First Ground Floor and Basement (Ground 11,900 $ 71,000.00
Floor 8,900) (Basement 3,000)
U.S. Air Ground Floor, Basement, and 10,200 110,508.00
Mezzanine
(Basement = 8,000)
(Mezzanine = 4,000
Mutual of New York 2nd-5th Wing 81,448 N/A
(20,362 x 4)
Mutual of New York 2nd-12th Floor (12,428 x 11) 136,708 N/A
Hancock & Estabrook 13th and 14th Floors 24,856 447,408.00
Marsh & McLennan, Inc. 15th Floor 5,943 106,974.00
Langan Grossman Kinney & Dwyer 15th Floor 5,755 86,325.00
Storage 2,160.00
Vacant 15th Floor 555 0.00
Eagan Real Estate, Inc. 16th Floor 6,827 122,886.00
Mutual of New York 16th Floor 5,601 N/A
Price Waterhouse & Co. 17th Floor 12,428 173,992.00
Ernst & Whinney 18th Floor 12,428 196,362.40
Ernst & Whinney 19th Floor 5,143 81,259.40
Guardian Life Insurance 19th Floor 2,355 36,570.22
Mutual of New York 19th Floor 4,930 N/A
TOTALS 336,023 $1,435,418.02
</TABLE>
<TABLE>
<CAPTION>
RENT PER ESCALATED RENT
TENANT RENT PER MONTH SQUARE FOOT EFFECTIVE DATE
------ -------------- ----------- --------------
<S> <C> <C> <C>
Mutual of New York N/A $16.00
Mutual of New York N/A 16.00
Chase Lincoln First $5,916.67 5.97
U.S. Air 9,209.00 10.83
Mutual of New York N/A 16.00
Mutual of New York N/A 16.00
Hancock & Estabrook 37,284.00 18.00 N/A
Marsh & McLennan, Inc. 8,914.50 18.00 N/A
Langan Grossman Kinney & Dwyer 7,193.75 15.00 N/A
180.00 Storage
Vacant 0.00 --
Eagan Real Estate, Inc. 10,240.50 18.00 N/A
Mutual of New York N/A N/A
Price Waterhouse & Co. 14,499.33 14.00 1/l/90-12/31/94
Ernst & Whinney 16,363.58 15.80 N/A
Ernst & Whinney 6,771.62 15.80 11/l/89-10/31/94
Guardian Life Insurance 3,047.52 15.53 4/l/89-3/31/92
Mutual of New York N/A N/A N/A
</TABLE>
1. U.S. Air will vacate premises 12/31/88.
2. Marsh & McLennan, Inc. will vacate premises 8/31/88.
3. Langan Grossman Kinney & Dwyer will vacate premises 11/30/88.
1
<PAGE> 49
<TABLE>
<CAPTION>
MONY TOWER 1 - RENT ROLL (cont'd)
ESCALATED RENT TAX INSURANCE
TENANT ANNUAL AMOUNT LEASE EXPIRES OPTIONS ESCALATION ESCALATION
------ ------------- ------------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Mutual of New York N/A N/A N/A N/A
Mutual of New York N/A N/A N/A N/A
Chase Lincoln First 03/31/97 None 2.85% N/A
U.S. Air 12/31/81 None 3.39% 3.39%
Mutual of New York N/A N/A N/A N/A
Mutual of New York N/A N/A N/A N/A
Hancock & Estabrook N/A None 04/30/90 N/A N/A
Marsh & McLennan, Inc. N/A 12/31/88 None N/A N/A
Langan Grossman Kinney & Dwyer N/A 11/30/88 (1) 5-Year Option N/A N/A
Exercise by 3/1/88
Vacant
Eagan Real Estate, Inc. N/A 05/31/93 None N/A N/A
Mutual of New York N/A N/A N/A N/A
Price Waterhouse & Co. $223,704.00 12/31/94 None N/A N/A
Ernst & Whinney N/A 10/31/94 See Below See Below See Below
Ernst & Whinney 333,849.00 10/31/94 (1) 5-Year Option N/A N/A
(Max.)
Guardian Life Insurance Co. 40,035.00 03/31/921 None N/A N/A
Mutual of New York N/A N/A N/A N/A N/A
</TABLE>
2
<PAGE> 50
MONY TOWER 2 - RENT ROLL
<TABLE>
<CAPTION>
RENT PER RENT PER
TENANT SPACE SQUARE FEET YEAR MONTH
------ ----- ----------- ---- -----
<S> <C> <C> <C> <C>
Mutual of New York Subcellar 5,500 N/A N/A
Mutual of New York Cellar 5,800 N/A N/A
Mutual of New York lst Floor 9,480 N/A N/A
Mutual of New York 2nd-5th Floor 49,712 N/A N/A
(12,428 x 4)
Mutual of New York 6th Floor 12,428 N/A N/A
Metropolitan Tops'n Temps 7th Floor 677 $ 8,462.50 $ 705.21
Mutual of New York 7th Floor 7,092 N/A N/A
Insurance Company of North America 7th Floor 4,659 74,544.00 6,212.00
Mutual of New York 8th Floor 8,927 N/A N/A
Mutual of New York 9th Floor 9,398 N/A N/A
American Home Assurance 9th Floor 534 8,010.00 667.50
Mutual Life Ins. Co. Agency 9th Floor 1,563 26,571.00 2,214.25
10th-18th Floor
Mutual of New York (12,428 x 9) 111,852 N/A N/A
Mutual Life Ins. Co. of New York - 17,606.3
Syracuse Agency 19th Floor 12,428 211,275.96 3
------- -----------
TOTALS 240,050 $328,863.46
</TABLE>
<TABLE>
<CAPTION>
RENT PER SQUARE ESCALATED RENT
TENANT FOOT EFFECTIVE DATE
------ ---- --------------
<S> <C> <C>
Mutual of New York 16.00 N/A
Mutual of New York 16.00 N/A
Mutual of New York 16.00 N/A
Mutual of New York 16.00 N/A
Mutual of New York 16.00 N/A
Metropolitan Tops'n Temps 12.50 1/l/88-12/31/88
Mutual of New York 16.00 N/A
Insurance Company of North America 16.00 N/A
Mutual of New York 16.00 N/A
Mutual of New York N/A N/A
American Home Assurance 15.00 N/A
Mutual Life Ins. Co. Agency 17.00 N/A
Mutual of New York 16.00 N/A
Mutual Life Ins. Co. of New York -
Syracuse Agency 17.00
</TABLE>
1. Insurance Company of North America/CIGNA will vacate premises 3/31/89 or
sooner.
2. American Home Assurance Co. will vacate premises 8/31/88.
3
<PAGE> 51
MONY TOWER 2 - RENT ROLL (cont'd)
<TABLE>
<CAPTION>
ESCALATED RENT OPERATING EXPENSE
TENANT ANNUAL AMOUNT LEASE EXPIRES OPTIONS PRO RATA SHARE BASE YEAR ELECTRIC
- -------------------------- -------------- ------------- -------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mutual of New York N/A N/A N/A N/A N/A
Mutual of New York N/A N/A N/A N/A N/A
Mutual of New York N/A N/A N/A N/A N/A
Mutual of New York N/A N/A N/A N/A N/A
Metropolitan Tops'n Temps $11,509.00 12/31/88 None .2% 1979 $ 39.49/month
Mutual of New York N/A N/A N/A N/A N/A
Insurance Company of North America N/A 03/31/89 None 1.9 1979 N/A
Mutual of New York N/A N/A N/A N/A N/A
Mutual of New York N/A N/A N/A N/A N/A
American Home Assurance Co. N/A 12/31/88 None .229% 1984 $ 31.50/month
Mutual Life Ins. Co. - Agency N/A 04/30/92 None .64% 1988 $104.20/month
Mutual of New York N/A N/A N/A N/A N/A
Mutual Life Ins. Co. of 04/30/92 None 5% 1984 N/A
New York - Syracuse Agency
</TABLE>
4
<PAGE> 1
EXHIBIT 10.22
FIRST AMENDMENT TO LEASE
This First Amendment to Lease is entered into as of January
14, 1994, by and between CONTINENTAL TOWERS, a New York general partnership,
hereinafter referred to as "Landlord" and THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK, a New York corporation, hereinafter referred to as "Tenant".
WHEREAS, as of December 21, 1988, Landlord and Tenant entered
into that certain Agreement of Lease (the "Lease") relating to the premises (the
"Premises") located at 100-120 Madison Street Syracuse, New York also known as
MONY Towers, a memorandum of which Lease was recorded in the Onondaga County
Clerk's Office on December 22, 1988 in Book 3499, Page 128;
WHEREAS, Landlord and Tenant desire to amend the Lease in
certain respects;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as
follows:
1. Article 2. Article 2 of the Lease is hereby amended by
extending the ending date of the initial term of the Lease from December 21,
2008 to December 31, 2008.
2. Article 3. Article 3 of the Lease is hereby amended by
adding the following paragraph at the end thereof.
Notwithstanding the provisions of the previous
paragraph or anything else to the contrary contained in this
Lease, Landlord and Tenant agree that if (a) the interest of
Tenant hereunder and of the "Lender" under an Amended and
Restated Loan Agreement of even date herewith between The
Mutual Life Insurance Company of New York ("MONY"), as
"Lender," and Landlord, as "Borrower" (the "Loan Agreement"),
are each held by either MONY or by an affiliate of MONY (but
not by any other successor to MONYs interest therein, other
than a successor to MONY in a merger, consolidation or other
corporate reorganization of MONY), and (b) Tenant has paid all
rent previously due under the Lease but (c) any scheduled debt
service payment to be made on the Note (as such term is
defined in the Loan Agreement) prior to the date the rent
payment in question shall become due shall not have been paid
to the Lender under the Note, or if so paid shall have been
required to be repaid to Borrower or its estate in bankruptcy,
then the monthly rent next coming due under the Lease in the
next month(s) shall be reduced dollar for dollar by the amount
of any such deficiency in payment of debt service (or the
amount so repaid) until the sum of such reduction equals the
amount of such deficiency (or the amount so repaid, but in no
event shall any such reduction reduce the rent payable under
the Lease below a monthly
<PAGE> 2
amount of $50,713.00). Such reduction in rent shall be
automatically effective and shall not be retroactively
affected by any subsequent payment of such debt service, but
such reduction shall result in a reduction of the amounts
owing under the Note in the same manner as such debt service
would have been applied under the Note as originally
scheduled. The determination of scheduled debt service to be
paid under the Note shall be made without taking into account
(i.e., as if the same had not occurred) any subsequent
acceleration of the Note or any stay of payment of,
modification of, or cancellation of the Note which occurs by
reason of, or in, a case under Title 11 of the United States
Code or any replacement or supplemental statute or any state
law governing bankruptcy or insolvency or fraudulent
transfers, but shall cease to be effective upon payment in
full of all amounts due and owing under the Note and Loan
Agreement.
3. Article 4. Article 4 of the Lease is hereby amended by
deleting the words "dated December _____, 1988" in the second line of the second
paragraph thereof and replacing them with the following: "and the City of
Syracuse Industrial Development Agency, dated as of December 21, 1988."
4. Article 13. Article 13 of the Lease is hereby amended by
deleting the words "Tenant continues to pay the rent" in the thirteenth line of
the third paragraph thereof and replacing them with the following: "; provided,
further, that in either such event Tenant shall continue to perform its
obligations hereunder and pay rent when it is due and payable for the remainder
of the term without any offset, abatement or reduction."
5. Article 14. Article 14 of the Lease is hereby amended by:
(a) inserting the following sentence at the end
of the fourth paragraph thereof: "If Tenants
net worth is less than the amount described
above, Tenant may still elect to insure
under a blanket policy, provided such
blanket policy contains the coverage
described above and is otherwise reasonably
satisfactory to Landlord"; and
(b) inserting the following paragraph at the end
of said Article:
"Notwithstanding anything to the contrary contained
in this Article 14 or elsewhere in this Lease, so long as the
Tenant has a net worth exceeding Three Hundred Million Dollars
($300,000,000), (x) the proceeds of any property insurance
shall be paid directly to the Tenant to be applied to the
restoration of the Premises as provided above and (y) Tenant
shall have the sole right to adjust any loss with the
insurance company. In any other circumstances such insurance
proceeds shall be adjusted as provided in the second paragraph
hereof and held by (and applied in accordance with the terms
of this Article 14 (including any
2
<PAGE> 3
"reasonable safeguards" imposed by Lender) as the restoration
proceeds) a depository selected by Tenant who shall be a
savings bank, savings and loan association, commercial bank or
trust company or insurance company, in each case, having a
combined capital and surplus or net worth of at least
$100,000,000, provided, however, if the first mortgagee of
Landlord's interest in the Premises qualifies under the above
standard it may elect, by notice to Tenant to act as such
depository. Landlord agrees to cooperate with Tenant in any
such adjustment and payment of insurance proceeds described
above, including, without limitation, endorsing any check to
the party to receive the same hereunder."
6. Article 19. Article 19 of the Lease is hereby amended by
inserting at the end thereof the following as a new sentence: "Nothing in this
Article 19 shall be deemed to grant to Tenant cure periods for defaults beyond
those cure periods specifically set forth in Article 22 hereof. "
7. Article 21. The term "related party" as used in Article 21
of the Lease shall include a transferee of all or a substantial portion of the
assets of Tenant
8. Article 22. Article 22 of the Lease is hereby amended by:
(a) replacing the word "due" on the fifth line
thereof with the words "Tenant received
notice from Landlord of such default;" and
(b) deleting the words "or if Tenant shall fail
to furnish all insurance coverages required
pursuant to the terms of this Lease" on the
fifth and sixth lines thereof".
9. Article 24. Article 24 of the Lease is hereby amended by
replacing the word "are" on the twelfth line of the first paragraph thereof with
the words "shall be".
10. Ramifications. Except as specifically herein amended, all
terms, provisions, conditions and exhibits contained in the Lease shall remain
unmodified and in full force and effect. Any terms used in this First Amendment
and not otherwise defined herein shall have the same definition as in the Lease.
In the event that any provision of this First Amendment shall conflict with the
terms, provisions, conditions and exhibits of the Lease, the terms, provisions,
conditions and exhibits of this First Amendment shall govern and control. All
references in the Lease to "this Lease", "herein" or terms of similar import
shall refer to the Lease as amended hereby and as the same may be hereafter
amended.
11. Counterparts. This First Amendment may be executed in any
number of counterparts and by each of the undersigned on separate counterparts,
and each such counterpart shall be deemed to be an original but all such
counterparts put together shall constitute but one and the same First Amendment.
3
<PAGE> 4
12. Successors and Assigns. This First Amendment shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
13. Captions. The captions used in this First Amendment are
provided for convenience and reference only and should not be used in construing
this First Amendment.
14. Effect of Default on Rights of Tenant. Whenever in the
Lease, including, without limitation, Articles 8 and 27 thereof reference is
made to the rights of Tenant being contingent upon the nonoccurrence of a
default under this Lease (or where Landlord is entitled to take certain actions
upon the occurrence of such a default), the same shall be deemed to refer to a
default under the Lease which is continuing beyond applicable notice and grace
period thereunder. The foregoing shall not apply, however, to the provisions of
Articles 19 and 22 of the Lease.
15. Memorandum of Lease. Landlord and Tenant hereby agree that
they shall at the request of either party, execute a memorandum of the Lease (if
not previously recorded) and this Amendment setting forth such matters as me
necessary to comply with applicable statutory requirements. Both Landlord and
Tenant agree to cause such memorandum to be recorded in the real estate records
of the county where the Premises are located and to execute and deliver all
necessary transfer tax returns and other instruments necessary to permit such
recording. Landlord agrees that it shall pay all recording charges, fees and
taxes incurred in connection with recording such memorandum.
IN WITNESS WHEREOF, this First Amendment has been duly executed and
delivered by the undersigned as of the day and year first above written.
LANDLORD:
CONTINENTAL TOWERS, a New York
general partnership
By: Twin Towers Investors, L.P., a New
York limited partnership, general
partner
By: Continental Realty of New
York, Inc., a New York
corporation, general partner
By: /s/ Lowell A. Seifter
---------------------
Name: Lowell A. Seifter
Title:Asst. Sec.
4
<PAGE> 5
By: Continental Realty Funding Limited
Partnership, a New York limited
partnership, general partner
By: Continental Realty of New
York, Inc., a New York
corporation, general partner
By: /s/ Lowell A. Seifter
---------------------
Name: Lowell A. Seifter
Title: Asst. Sec.
TENANT:
THE MUTUAL LIFE INSURANCE COMPANY OF NEW
YORK, a New York corporation
By: /s/ Kenneth M. Levine
---------------------
Name: Kenneth M. Levine
Title: Executive VP
5
<PAGE> 6
MEMORANDUM OF FIRST AMENDMENT TO LEASE PURSUANT TO
SECTION 291-CC OF THE REAL PROPERTY LAW OF
THE STATE OF NEW YORK
BETWEEN
CONTINENTAL TOWERS
"LANDLORD"
AND
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
"TENANT"
LOCATION OF PREMISES
Street Address: 100-120 Madison Street
City or Town of: Syracuse
County of: Onondaga
State of: New York
Block: P/O 134
After recording, please return to:
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
One New York Plaza
New York, New York 10004
Attention: Joel London, Esq.
<PAGE> 7
MEMORANDUM OF FIRST AMENDMENT TO LEASE
PURSUANT TO SECTION 291-CC
OF THE REAL PROPERTY LAW OF THE STATE OF NEW YORK
NAME AND ADDRESS OF LANDLORD
Continental Towers
c/o Green & Scifter, Attorneys, P.C.
900 One Lincoln Center
Syracuse, New York 13202
NAME AND ADDRESS OF TENANT
The Mutual Life Insurance Company of New York
1740 Broadway
New York, New York 10019
DATE AND EXECUTION OF LEASE AND ANNEXED SCHEDULE A, B, AND C
As of December 21, 1988
FIRST AMENDMENT TO LEASE
The Lease dated as of December 21, 1988 between the above-named Landlord
and Tenant was amended by a First Amendment to Lease between the above-named
Landlord and Tenant dated as of January 14, 1994.
AMENDMENT TO TERM OF LEASE
The initial or original lease term has been amend by extending the ending
date of the initial term of the lease from December 21, 2008 to December 31,
2008.
RENEWAL PERIODS
The tenant has the option to renew the lease for each of two (2) separate
and successive periods of five (5) years each after the expiration of the
initial lease term. The right to renew the lease shall be exercised by written
notice to the landlord, not less than nine hundred twelve (912) days before the
expiration of the then current term of the lease.
DESCRIPTION OF LEASED PREMISES AS CONTAINED IN THE AGREEMENT OF LEASE
Two (2) office towers of 19 stories each connected by a 5-story office
wing, located at 100-120 Madison Street, Syracuse, Onondaga County, New York,
the land being more particularly described in Schedule A attached hereto and
made a part hereof.
<PAGE> 8
The Lease and First Amendment to Lease contain other provisions not
described herein; the purpose of this Memorandum being to provide notice thereof
pursuant to the terms of Section 291-cc of the Real Property Law of the State of
New York.
This Memorandum of First Amendment to the Lease, endorsed by the
signatures of the parties hereto, is signed and sealed this 14th day of January,
1994.
LANDLORD:
CONTINENTAL TOWERS,
a New York general partnership
By: Twin Towers Investors, L.P.,
a general partner
By: Continental Realty of New York, Inc.,
its general partner
By:/s/ Lowell A. Seifter
------------------------
Name: Lowell A. Seifter
Title: Ass't Sec.
By: Continental Realty Fund Limited Partnership,
a general partner
By: Continental Realty of New York, Inc.,
its general partner
By: /s/ Lowell A. Seifter
------------------------
Name: Lowell A. Seifter
Title: Ass't Sec.
TENANT
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK,
a New York corporation
By: /s/ Kenneth M. Levine
------------------------
Name: Kenneth M. Levine
Title: Executive VP
2
<PAGE> 9
STATE OF NEW YORK )
) ss.:
COUNTY OF New York )
On this 14th day of January, 1994, before me personally came
Lowell A. Seifter to me personally known and who, being duly sworn by me, did
depose and say that he resides in Dewit, NY; that he is the Asst. Sec. of
Continental Realty of New York, Inc., the corporation which executed the
foregoing instrument as the general partner of each of Continental Realty Fund
Limited Partnership and Twin Towers Investors, L.P., as general partners of
CONTINENTAL TOWERS, the partnership which is a party to the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation, as the act of said corporation as general partner
of the general partners of Continental Towers.
/s/ Jacqueline I. Heitner
--------------------------
Notary Public
Stamped: Jacqueline I. Heitner
Notary Public, State of New York
No. 41-4972230
Qualified in Queens County
Commission Expires September 24, 1994
My Commission expires:
<PAGE> 10
STATE OF NEW YORK )
) ss.:
COUNTY OF New York )
On this 14th day of January, 1994, before me personally came
Kenneth M. Levine to me known, who, being duly sworn, did depose and say that he
resides at River Vale, NJ, and that he is the Executive VP of THE MUTUAL LIFE
INSURANCE COMPANY OF NEW YORK, the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/ Patricia L. Hartnett
--------------------------
Notary Public
Stamped: Patricia L. Hartnett
Notary Public, State of New York
No. 31-4807148
Qualified in New York County
Term Expires February 28, 1995
<PAGE> 11
SCHEDULE A
PROPERTY DESCRIPTION
ALL THAT TRACT OR PARCEL OF LAND situate in the City of
Syracuse, County of Onondaga, and State of New York, and being a portion of
Block #134 in said City, and being more particularly described as follows:
BEGINNING at the intersection of the present easterly line of
South Warren Street with the present southerly line of Madison Street, said
point of intersection being the northwesterly corner of Block #134;
Thence South 89(degree)47'10" East, along said southerly line
of Madison Street, a distance of 471.79 feet to the northeasterly corner of said
Block # 134;
Thence South 0(degree)06'00" West, along the present westerly
line of Montgomery Street, a distance of 180.51 feet to the northeasterly corner
of a permanent easement conveyed to the City of Syracuse by The Mutual Life
Insurance Company of New York by deed recorded in the Onondaga County Clerk's
Office in Liber of Deeds #2395, Page #140;
Thence North 89(degree)49'40" West, along the northerly fine
of said permanent easement and being parallel to the northerly line of Harrison
Street a distance of 471.66 feet to its intersection with said easterly line of
South Warren Street;
Thence North 0(degree)03'30" East, along said easterly fine of
said South Warren Street, a distance of 180.86 feet to the place of beginning.
Containing 85,233.26 square feet of land, or 1.956 acres of land, more or less.
The hereinabove described parcel of land is subject to any and
all easements and/or rights-of-way of record and to that certain lease with the
City of Syracuse, as tenant, which lease was recorded on June 13, 1969 in the
Office of the Clerk of the County of Onondaga, New York in Book of Deeds 2405,
page 734, for which The Mutual Life Insurance Company of New York reserves its
rights thereunder.
Schedule A
<PAGE> 1
EXHIBIT 10.23
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease is entered into as of October
15, 1997 by and between CONTINENTAL TOWERS, a New York general partnership,
hereafter referred to as "Landlord" and THE MUTUAL LIFE INSURANCE COMPANY OF NEW
YORK, a New York corporation, hereafter referred to as "Tenant".
WHEREAS, as of December 21, 1988, Landlord and Tenant entered
into that certain Agreement of Lease (the "Lease") relating to the premises (the
"Premises") located at 100-120 Madison Street, Syracuse, New York, also known as
MONY Towers, a memorandum of which Lease was recorded in the Onondaga County
Clerk's Office on December 22, 1988 in Book 3499, page 128; and
WHEREAS, as of January 14, 1994, Landlord and Tenant entered
into that certain First Amendment to Lease (the "First Amendment"), a memorandum
of which First Amendment was recorded in the Onondaga County Clerk's Office on
January 18, 1994 in Book 3901 of Deeds, page 8; and
WHEREAS, as of October 15, 1997, Tenant assigned to Landlord,
et al., a right of way and easement reserved in a deed dated October 15, 1997
from Tenant to the City of Syracuse, which deed was recorded in the Onondaga
County Clerk's Office on October 20, 1997 in Book 4192 of Deeds at page 9; and
WHEREAS, Landlord and Tenant desire to amend the Lease, as
amended, to grant to Tenant a right of way and easement over and through the
premises assigned to Landlord;
NOW THEREFORE,
In consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. ARTICLE 1. Article 1 of the Lease is hereby amended by
granting Tenant, its successors and assigns, a right of way and easement
("Easement") for persons and motor vehicles on, over, across and through the
premises described in Schedule A attached to this Second Amendment and
incorporated herein ("the easement premises") for the purpose of obtaining
ingress to and egress from the vehicular ramp(s) at Montgomery Street that
lead(s) to and from the bottom level of the premises to the loading docks
serving the office buildings located on the parcel of real property described on
Schedule B attached to this Second Amendment and incorporated herein. This
Easement is subject to any and all easements, rights of way of record,
restrictions of record and zoning rules and regulations. This Easement shall
terminate automatically six months after the office buildings located on the
parcel of real property described on
<PAGE> 2
Schedule B have not been used or are not under repair for future use for a
continuous period of at least one year and, in such event, Tenant, by its
acceptance of this Easement, hereby agrees that upon demand of the Landlord, it
will reconvey the Easement to the Landlord.
2. INGRESS AND EGRESS. Subject to reasonable provisions for
security, Tenant shall have the right of free ingress and egress to and from the
easement premises for all purposes set forth in this Easement.
3. MAINTENANCE. Tenant shall, at its own expense, at all times
take all measures to keep and maintain the easement premises in first-class
condition and repair, including all the making of structural and non-structural
repairs and replacements, and to keep the easement premises in a clean, orderly,
sanitary and safe condition, including but not limited to doing such things as
are necessary to comply with applicable laws, ordinances, rules, regulations and
orders by governmental and public bodies and agencies. Tenant shall, at its own
expense, (a) keep the easement premises free of insects, rodents, vermin and
other pests; (b) not permit undue accumulation of garbage, trash, rubbish and
other refuse and shall remove the same; (c) keep the easement premises and the
vehicular ramps in a neat, orderly fashion; (d) remove all snow and ice from the
easement premises; and (e) conduct its operation of the easement premises in all
respects in a dignified manner. Tenant agrees to repair or pay for any damage
done to the easement premises caused by Tenant in exercising the rights, powers
and privileges granted by this Easement.
4. USE OF EASEMENT PREMISES BY LANDLORD. The right to use the
easement premises for any purpose not interfering or inconsistent with this
Easement is expressly reserved by Landlord, provided, however, that Landlord
shall neither build, erect, construct or place upon the easement premises
anything of a permanent nature or character to interfere with the easement
premises.
5. RUNNING OF BENEFITS AND BURDENS. All provisions of this
Easement, including the benefits and burdens, run with the land and are binding
upon and inure to the assigns, successors, lessees, tenants and representatives
of the parties thereto.
6. RAMIFICATIONS. Except as specifically herein amended, all
terms, provisions, conditions and exhibits contained in the Lease shall remain
unmodified and in full force and effect. Any terms used in this Second Amendment
and not otherwise defined herein shall have the same definition as in the Lease.
In the event that any provision of this Second Amendment shall conflict with the
terms, provisions, conditions and exhibits of the Lease, the terms, provisions,
conditions and exhibits of this Second Amendment shall govern and control. All
references in the Lease to "this Lease", "herein" or terms of similar import
shall refer to the Lease as amended hereby and as the same may be hereafter
amended.
2
<PAGE> 3
7. COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts and by each of the undersigned on separate counterparts,
and each such counterpart shall be deemed to be an original, but all such
counterparts put together shall constitute but one and the same Second
Amendment.
8. CAPTIONS. The captions used in this Second Amendment are
provided for convenience and reference only and should not be used in construing
this Second Amendment.
9. MEMORANDUM OF LEASE. Landlord and Tenant hereby agree that
they shall, at the request of either party, execute a memorandum of the First
Amendment (if not previously recorded) and this Second Amendment setting forth
such matters as are necessary to comply with applicable statutory requirements.
Both Landlord and Tenant agree to cause such memorandum to be recorded in the
real estate records of the county where the premises are located and to execute
and deliver all necessary transfer tax returns and other instruments necessary
to permit such recording. Landlord agrees that it shall pay all recording
charges, fees and taxes incurred in connection with recording such memorandum.
This Second Amendment has been duly executed and delivered by
the undersigned as of the day and year first above written.
CONTINENTAL TOWERS
a New York General Partnership
By: Twin Towers Investors, L.P., a New York
limited partnership, general partner
By: Continental Realty of New York,
Inc., a New York corporation,
general partner
By:/s/ Lowell A. Seifter
---------------------
Lowell A. Seifter
Assistant Secretary
3
<PAGE> 4
By: Continental Realty Funding Limited
Partnership, a New York Limited
partnership, general partner
By: Continental Realty of New York,
Inc., a New York corporation,
general partner
By:/s/ Lowell A. Seifter
---------------------
Lowell A. Seifter
Assistant Secretary
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Edward P. Bank
---------------------
Name: Edward P. Bank
Title: VP & Deputy General Counsel
4
<PAGE> 5
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) ss.:
On the 4th day of November, 1997, before me personally came
LOWELL A. SEIFTER, to me known, who, being by me duly sworn, did depose and say
that he is the Assistant Secretary of CONTINENTAL REALTY OF NEW YORK, INC., the
corporation which executed the foregoing instrument as the general partner of
TWIN TOWERS INVESTORS, L.P., a general partner of CONTINENTAL TOWERS, the
partnership described in and which executed the above instrument, and that he
signed his name thereto by order of the Board of Directors of said corporation,
as the act of said corporation, as general partner of a general partner of
Continental Towers.
/s/ Dina M. Ranger
------------------
Notary Public
Stamped: Dina M. Ranger, Notary Public, State of New York, No. 01RA5048359,
Qualified in Onondaga County, Commission Expires August 21, 1999
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) ss.:
On the day of 4th day of November, 1997, before me- personally
came LOWELL A. SEIFTER, to me known, who, being by me duly sworn, did depose and
say that he is the Assistant Secretary of CONTINENTAL REALTY OF NEW YORK, INC.,
the corporation which executed the foregoing instrument as the general partner
of CONTINENTAL REALTY FUNDING LIMITED PARTNERSHIP, a general partner of
CONTINENTAL TOWERS, the partnership described in and which executed the above
instrument, and that he signed his name thereto by order of the Board of
Directors of said corporation, as the act of said corporation, as general
partner of a general partner of Continental Towers.
/s/ Dina M. Ranger
------------------
Notary Public
Stamped: Dina M. Ranger, Notary Public, State of New York, No. 01RA5048359,
Qualified in Onondaga County, Commission Expires August 21, 1999
<PAGE> 6
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On this 31 day of October 1997, before me personally came
EDWARD P. BANK, to me known, who, being by me duly sworn did depose and say that
he resides in New York, New York, that he is the Vice President of THE MUTUAL
LIFE INSURANCE COMPANY OF NEW YORK, the corporation described in and which
executed the above instrument, and that he signed his name thereto by order of
the Board of Directors of said corporation.
/s/ Patricia L. Hartnett
------------------------
Notary Public
Stamped: Patricia L. Hartnett, Notary Public of New York, No.31-4807148,
Qualified in New York County, Term Expires February 28, 1999
<PAGE> 7
SCHEDULE A
All that certain real property situate in the City of
Syracuse, County of Onondaga and State of New York, being part of Block 134 in
said City, and being more particularly described as follows:
Beginning at a point in the westerly boundary of Montgomery
Street, said point being N 0(0) 06' 00" E, measured along said westerly street
boundary, a distance of 85.91 feet from its intersection with the northerly
boundary of Harrison Street; running thence through said Block 134, the
following 9 courses and distances:
1. N 30(degree) 31' 22" W, 19.96 feet to a point of curvature;
2. Northwesterly, following a curve to the left having a
radius of 48.00 feet, an arc distance of 68.33 feet to a
point of tangency;
3. S 67(degree) 54' 53" W, 37.45 feet to a point designated
"Point A" for future reference;
4. S 67(degree) 54' 53" W, 4.55 feet;
5. N 89(degree) 40' 58" W, 84.82 feet to a point designated
"Point B," for future reference;
6. N 89(degree) 40' 58" W, 29.70 feet to a point of curvature;
7. Northwesterly, following a curve to the right having a
radius of 58.32 feet, an arc distance of 41.64 feet to a
point of tangency;
8. N 48(degree) 46' 18" W, 21.25 feet;
9. N 0(degree) 50' 22" W, 44.03 feet to a point, said point
being 179.69 feet distant northerly, measured at right
angles, from the northerly boundary of Harrison Street;
thence S 89(degree) 49' 40" E on a line parallel with said
northerly boundary of Harrison Street, a distance of 22.09
feet to a point; thence continuing through said Block 134,
the following 7 courses and distances:
1. S 27(degree) 22' 57" E, 38.33 feet to a point of curvature;
2. Southeasterly, following a curve to the left having a
radius of 21.70 feet, an arc distance of 12.79 feet to a
point of tangency;
3. S 61(degree) 08' 37" E, 6.86 feet;
4. S 89(degree) 40' 58" E, 80.47 feet to a point of curvature;
A-1
<PAGE> 8
5. Easterly, following a curve to the left having a radius of
88.70 feet, an arc distance of 28.59 feet to a point of
tangency;
6. N 71(degree) 50' 58" E, 46.35 feet;
7. S 89(degree) 50' 32" E, 70.67 feet to a point in the
westerly boundary of Montgomery Street; thence S 0(degree)
06' 00" W along said westerly street boundary, a distance
of 66.39 feet to the point of beginning.
Excepting from the above described Permanent Easement, all
that certain real property lying above (and not below) the horizontal plane
having an elevation of 37.0 feet above that certain Datum Level known as City of
Syracuse Datum Level, bounded and described as follows:
Beginning at a point in the southerly boundary of the above
described Permanent Easement, said point being designated "Point A" therein;
running thence along said southerly boundary, the following 2 courses and
distances:
1. S 67(degree) 54' 53" W, 4.55 feet;
2. N 89(degree) 40' 58" W, 84.82 feet to "Point B" designated
therein; thence N 0(degree) 06' 00" E, a distance of 26.05
feet to a point in the northerly boundary of said Permanent
Easement; thence along said northerly boundary, the
following 3 courses and distances:
1. S 89(degree) 40' 58" E, 50.51 feet to a point of curvature;
2. Easterly, following a curve to the left having a radius of
88.70 feet, an arc distance of 28.59 feet to a point of
tangency;
3. N 71(degree) 50' 58" E, 10.96 feet;
4. thence S 0(degree) 06' 00" W, a distance of 32.35 feet to
the point of beginning.
Also, excepting from the above described Permanent Easement,
all that certain real property lying above (and not below) the horizontal plane
having an elevation of 25.0 feet above the above referenced City of Syracuse
Datum Level, bounded and described as follows:
Beginning at a point in the southerly boundary of the above
described Permanent Easement, said point being designated "Point B" therein;
running thence along the southerly and westerly boundary of said Permanent
Easement, the following 4 courses and distances:
1. N 89(degree) 40' 58" W, 29.70 feet to a point of curvature;
A-2
<PAGE> 9
2. Northerly, following a curve to the right having a radius
of 58.32 feet, an arc distance of 41.64 feet to a point of
tangency;
3. N 48(degree) 46' 18" W, 21.25 feet;
4. N 0(degree) 50' 22" W, 44.03 feet to a point in the
northerly boundary of said Permanent Easement; thence S
89(degree) 49' 40" E along said northerly boundary, a
distance of 22.09 feet to a point; thence along the
northeasterly and northerly boundary of said Permanent
Easement, the following 4 courses and distances:
1. S 27(degree) 22' 57" E, 38.33 feet to a point of curvature;
2. Southeasterly, following a curve to the left having a
radius of 21.70 feet, an arc distance of 12.79 feet to a
point of tangency;
3. S 61(degree) 08' 37" E, 6.86 feet;
4. S 89(degree) 40' 58" E, 29.96 feet;
thence S 0(degree) 06' 00" a distance of 26.05 feet to the
point of beginning.
A-3
<PAGE> 10
SCHEDULE B
ALL THAT TRACT OR PARCEL OF LAND situate in the City of
Syracuse, County of Onondaga and State of New York and being a portion of Block
#134 in said City, and being more particularly described as follows:
Beginning at a point in the southerly boundary of Madison
Street at its intersection with the easterly boundary of South Warren Street;
running thence S 89(degree) 47' 10" E along said southerly boundary of Madison
Street, a distance of 471.97 feet to its intersection with the westerly boundary
of Montgomery Street; thence S 0(degree) 06' 00" W along said westerly street
boundary, a distance of 179.26 feet to a point; thence N 89(degree) 49' 40" W
through said Block 134, a distance of 471.84 feet to a point in the easterly
boundary of South Warren Street; thence N 0(degree) 03' 30" E along said
easterly street boundary, a distance of 179.61 feet to the point of beginning,
containing 84,677 square feet = 1.944 acres, more or less.
B-1
<PAGE> 1
Exhibit 10.24
THE MONY GROUP INC.
1998 STOCK INCENTIVE PLAN
SECTION 1.
PURPOSE
1.1. The purpose of the "THE MONY GROUP INC. 1998 STOCK
INCENTIVE PLAN" (the "Plan") is to foster and promote the long-term financial
success of the Company and materially increase shareholder value by (a)
motivating superior performance by means of performance-related incentives, (b)
encouraging and providing for the acquisition of an ownership interest in the
Company by employees and agents and (c) enabling the Company to attract and
retain the services of outstanding personnel upon whose judgment, interest, and
special effort the successful conduct of its operations is largely dependent.
SECTION 2.
DEFINITIONS
2.1. Definitions. Whenever used herein, the following terms
shall have the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Agent" means an "insurance agent" as defined in
Section 2101 of the New York Insurance Law.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means (i) the willful failure by the
Participant to perform substantially his duties as an Employee or Agent of the
Company (other than due to physical or mental illness) after reasonable notice
to the Participant of such failure, (ii) the Participant's engaging in serious
misconduct that is injurious to the Company or any Subsidiary in any way,
including, without limitation, by way of damage to their respective reputations
or standings in their respective industries, (iii) the Participant having been
convicted of, or entered a plea of nolo contendere to, a crime that constitutes
a felony or (iv) the breach by the Participant of any written covenant or
agreement with the Company or any Subsidiary not to disclose any information
pertaining to the Company or any Subsidiary or not to compete or interfere with
the Company or any Subsidiary.
<PAGE> 2
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means the Human Resources Committee of the
Board, which shall consist of two or more members, each of whom shall be
"nonemployee directors" within the meaning of Rule 16b-3, as promulgated under
the Act.
(g) "Company" means The MONY Group Inc., a Delaware
corporation, and any successor thereto.
(h) "Demutualization" means the demutualization of The
Mutual Life Insurance Company of New York pursuant to a plan of reorganization
approved by the New York State Superintendent of Insurance under Section 7312 of
the New York Insurance Law.
(i) "Disability" means permanent and total disability as
defined in Section 22(e)(3) of the Code (or any successor provision thereto).
(j) "Employee" means any officer or other key employee of
the Company or any Subsidiary (as determined by the Committee in its sole
discretion); provided, however, that with respect to Incentive Stock Options,
"Employee" means any person who is considered an employee of the Company or any
Subsidiary for purposes of Treasury RegulationSection1.421-7(h).
(k) "Fair Market Value" means, on any date, the closing
prices of the Stock as reported on the consolidated tape of the New York Stock
Exchange (or on such other recognized quotation system on which the trading
prices of the Stock are quoted at the relevant time) on such date. In the event
that there are no Stock transactions reported on such tape (or such other
system) on such date, Fair Market Value shall mean the closing price on the
immediately preceding date on which Stock transactions were so reported.
(l) "Initial Public Offering" means the first day as of
which sales of Stock are made to the public pursuant to the first underwritten
public offering of the Stock.
(m) "Option" means the right to purchase Stock at a stated
price for a specified period of time. For purposes of the Plan, an Option may be
either (i) an "Incentive Stock Option" (ISO) within the meaning of Section 422
of the Code or (ii) an option which is not an Incentive Stock Option (a
"Nonstatutory Stock Option" (NSO)).
(n) "Participant" means any Employee or Agent designated by
the Committee to participate in the Plan.
2
<PAGE> 3
(o) "Service" means service on behalf of the Company or its
Subsidiaries by an Employee or Agent.
(p) "Stock" means the common stock of the Company, par
value $0.01 per share.
(q) "Subsidiary" means any corporation or partnership in
which the Company owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock of such corporation or of the
capital interest or profits interest of such partnership.
(r) "Superintendent" means the New York State
Superintendent of Insurance.
2.2. Gender and Number. Except when otherwise indicated by
the context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
SECTION 3.
ELIGIBILITY AND PARTICIPATION
Participants in the Plan shall be those Employees and
Agents selected by the Committee to be granted Options pursuant to Section 6.
SECTION 4.
POWERS OF THE COMMITTEE
4.1. Power to Grant. The Committee shall determine the
Participants to whom Options shall be granted and the terms and conditions of
any and all such Options. The Committee may establish different terms and
conditions for different Participants and for the same Participant for each
Option such Participant may receive, whether or not granted at different times.
Notwithstanding any other contrary provisions in the Plan, (i) no Options shall
be granted prior to the first anniversary of the Initial Public Offering and
(ii) any grant of Options after the first and prior to the fifth anniversary of
the Initial Public Offering shall be subject to the advance approval of the
Superintendent.
4.2. Administration. The Committee shall be responsible for
the administration of the Plan. The Committee, by majority action thereof, is
authorized to prescribe, amend, and rescind rules and regulations relating to
the Plan, to provide for conditions deemed necessary or advisable to protect the
interests of the Company, and to make all other determinations necessary or
advisable for the administration and interpretation of the Plan in order to
carry out its provisions and purposes. Determinations, interpretations, or other
actions made or taken by the Committee pursuant to the provisions of the Plan
shall be final, binding, and conclusive for all purposes and upon all persons.
3
<PAGE> 4
SECTION 5.
STOCK SUBJECT TO PLAN
5.1. Number. Subject to the provisions of Section 5.3, the
number of shares of Stock issuable under the Plan shall not exceed __________.*
The shares to be delivered under the Plan may consist, in whole or in part, of
treasury Stock or authorized but unissued Stock, not reserved for any other
purpose.
5.2. Cancelled, Terminated, or Forfeited Option. Any shares
of Stock subject to an Option which for any reason is cancelled, terminated or
otherwise settled without the issuance of any Stock shall again be available for
Options under the Plan.
5.3. Adjustment in Capitalization. In the event of any
Stock dividend or Stock split, recapitalization (including, without limitation,
the payment of an extraordinary dividend), merger, consolidation, combination,
spin-off, distribution of assets to stockholders (other than ordinary cash
dividends), exchange of shares, or other similar corporate change, the aggregate
number and kind of shares of Stock available for options under Section 5.1 or
subject to outstanding Options and the respective exercise prices applicable to
outstanding Options may be appropriately adjusted by the Committee, in its
discretion, and the Committee's determination shall be conclusive; provided,
however, that no adjustment shall occur by reason of the issuance of Stock in
accordance with the Demutualization and that any fractional shares resulting
from any such adjustment shall be disregarded.
SECTION 6.
STOCK OPTIONS
6.1. Grant of Options. Subject to the provisions of Section
4.1, Options may be granted to Employees or Agents at such time or times as
shall be determined by the Committee. Options granted under the Plan may be of
two types: (i) Incentive Stock Options and (ii) Nonstatutory Stock Options;
provided, however, that the terms of any Incentive Stock Option shall satisfy
the conditions applicable to Incentive Stock Options under the provisions of
Section 422(b) of the Code as in effect on the date this Plan is adopted. The
Committee shall have complete discretion in determining the number of Options,
if any, to be granted to an Employee or Agent; provided, however, that in no
event shall any Participant be granted Options covering an aggregate number of
shares of Stock which exceeds ten percent of the maximum number of shares of
Stock issuable under the Plan. Each Option shall be evidenced by an option
agreement that shall specify the type of Option granted, the exercise price, the
duration of the Option, the number of shares of Stock to which the Option
pertains, and such other terms and conditions as the Committee shall determine
which are not inconsistent with the provisions of the Plan (including, without
limitation, Sections 6.2, 6.3, 7 and 9.1). Notwithstanding the
- --------
* The number to be added will be 5% of the number of shares of Stock outstanding
as of the date of the Initial Public Offering.
4
<PAGE> 5
foregoing, any Options granted to a Participant who is an Agent shall comply
with the provisions of Section 4228 of the New York Insurance Law and any
regulations thereunder.
6.2. Option Price. Nonstatutory Stock Options and Incentive
Stock Options granted pursuant to the Plan shall have an exercise price no less
than the Fair Market Value of a share of Stock on the date the Option is
granted.
6.3. Exercise of Options. One-third of each Nonstatutory
Stock Option or Incentive Stock Option granted pursuant to the Plan shall become
exercisable on each of the first three anniversaries of the date such Option is
granted. Subject to the provisions of Section 7, once any portion of any Option
has become exercisable it shall remain exercisable for its full term. The
Committee shall determine the term of such Nonstatutory Stock Option or
Incentive Stock Option granted, but in no event shall any such Option be
exercisable for more than 10 years after the date on which it is granted.
6.4. Payment. The Committee shall establish procedures
governing the exercise of Options, which shall require that written notice of
exercise be given and that the Option price be paid in full in cash or cash
equivalents, including by personal check, at the time of exercise. The Committee
may, in its discretion, permit a Participant to make payment in Stock already
owned by him, valued at its Fair Market Value on the date of exercise, as
partial or full payment of the exercise price. As soon as practicable after
receipt of a written exercise notice and full payment of the exercise price, the
Company shall deliver to the Participant a certificate or certificates
representing the acquired shares of Stock.
6.5. Incentive Stock Options. Notwithstanding anything in
the Plan to the contrary, no term of this Plan relating to Incentive Stock
Options shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify the Plan
under Section 422 of the Code, or, without the consent of any Participant
affected thereby, to disqualify any Incentive Stock Option under such Section
422.
SECTION 7.
TERMINATION OF SERVICE
7.1. Termination of Service Due to Death or Disability. In
the event a Participant's Service terminates by reason of death or Disability,
any Options granted to such Participant shall continue to vest in accordance
with Section 6.3 as if the Participant's Service had not terminated. Vested
Options may be exercised by the Participant, or the Participant's designated
beneficiary, and if none is named, in accordance with Section 9.2, at any time
prior to the expiration of the term of the Options or within three (3) years (or
such shorter period as the Committee shall determine at the time of grant)
following the Participant's termination of Service, whichever period is shorter.
5
<PAGE> 6
7.2. Termination of Service For Cause. In the event a
Participant's Service is terminated for Cause, any Options granted to such
Participant which are then outstanding shall be forfeited.
7.3. Termination of Service for Any Other Reason. Unless
otherwise determined by the Committee at or after the time of grant, in the
event the Service of the Participant shall terminate for any reason other than
one described in Section 7.1 or 7.2, any Options granted to such Participant
which are exercisable at the date of the Participant's termination of Service
may be exercised at any time prior to the expiration of the term of the Options
or the thirtieth day following the Participant's termination of Service,
whichever period is shorter. Any Options which are not exercisable or vested at
the time of such termination shall be forfeited.
SECTION 8.
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Board at any time may terminate or suspend the Plan,
and from time to time may amend or modify the Plan; provided, however, that any
amendment which would (i) increase the number of shares available for issuance
under the Plan (ii) lower the minimum exercise price at which an Option may be
granted or (iii) extend the term of the Plan or the maximum term for Options
granted hereunder shall be subject to the approval of the Company's
shareholders. Notwithstanding the foregoing, no amendment, modification or
termination of the Plan shall be effective prior to the fifth anniversary of the
Initial Public Offering without the advance approval of the Superintendent. No
amendment, modification, or termination of the Plan shall in any manner
adversely affect any Option previously granted under the Plan, without the
consent of the Participant.
SECTION 9.
MISCELLANEOUS PROVISIONS
9.1. Nontransferability of Options. Except as provided
below, Options granted under the Plan may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution and all rights with respect to Options granted
to a Participant under the Plan shall be exercisable during his lifetime only by
such Participant.
9.2. Beneficiary Designation. Each Participant under the
Plan may from time to time name any beneficiary or beneficiaries (who may be
named contingently or successively) to whom any benefit under the Plan is to be
paid or by whom any right under the Plan is to be exercised in case of his
death. Each designation will revoke all prior designations by the same
Participant and shall be in a form prescribed by the Committee in writing during
his lifetime. In the absence of any such designation,
6
<PAGE> 7
benefits remaining unpaid at the Participant's death shall be paid to or
exercised by the Participant's surviving spouse, if any, or otherwise to or by
his estate.
9.3. No Guarantee of Service or Participation. Nothing in
the Plan shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate any Participant's Service at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary or affiliate. No Employee or Agent shall have a right to be selected
as a Participant, or, having been so selected, to receive any future Options.
9.4. Tax Withholding. The Company shall have the power to
withhold, or require a Participant to remit to the Company, an amount sufficient
to satisfy Federal, state, and local withholding tax requirements on any Option
under the Plan, and the Company may defer issuance of Stock until such
requirements are satisfied. The Committee may, in its discretion, permit a
Participant to elect, subject to such conditions as the Committee shall impose,
(i) to have shares of Stock otherwise issuable under the Plan withheld by the
Company or (ii) to deliver to the Company previously acquired shares of Stock
having a Fair Market Value sufficient to satisfy all or part of the
Participant's estimated total Federal, state, and local tax obligation
associated with the transaction.
9.5. Indemnification. Each person who is or shall have been
a member of the Committee or of the Board shall be indemnified and held harmless
by the Company against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be made a party or
in which he may be involved by reason of any action taken or failure to act
under the Plan (in the absence of bad faith) and against and from any and all
amounts paid by him in settlement thereof, with the Company's approval, or paid
by him in satisfaction of any judgment in any such action, suit, or proceeding
against him, provided he shall give the Company an opportunity, at its own
expense, to handle and defend the same before he undertakes to handle and defend
it on his own behalf. The foregoing right of indemnification shall not be
exclusive and shall be independent of any other rights of indemnification to
which such persons may be entitled under the Company's Certificate of
Incorporation or By-laws, by contract, as a matter of law, or otherwise.
9.6. No Limitation on Compensation. Nothing in the Plan
shall be construed to limit the right of the Company to establish other plans,
provided that the Company shall not be permitted to establish any other stock
option or stock incentive plans prior to the fifth anniversary of the Initial
Public Offering without the advance approval of the Superintendent.
9.7. Requirements of Law. The granting of Options and the
issuance of shares of Stock shall be subject to and all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
7
<PAGE> 8
9.8. Term of Plan. The Plan shall be effective upon its
adoption by the Board and its approval by the Superintendent in accordance with
Section 7312(w) of the New York Insurance Law. The Plan shall continue in
effect, unless sooner terminated pursuant to Section 8, until the tenth
anniversary of the date on which it is adopted by the Board.
9.9. Governing Law. The Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the laws of the State of
Delaware, without regard to principles of conflict of laws.
9.10. No Impact On Benefits. Except as may otherwise be
specifically stated under any employee benefit plan, policy or program of the
Company, Options shall not be treated as compensation for purposes of
calculating a Participant's rights or benefits under any such plan, policy or
program.
9.11. No Constraint on Corporate Action. Nothing in this
Plan shall be construed (i) to limit, impair or otherwise affect the Company's
right or power to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, or to merge or consolidate, or
dissolve, liquidate, sell, or transfer all or any part of its business or assets
or (ii) except as provided in Section 8, to limit the right or power of the
Company or any of its Subsidiaries to take any action which such entity deems to
be necessary or appropriate.
8
<PAGE> 1
EXHIBIT 10.25
ASSET TRANSFER AND ACQUISITION AGREEMENT
By and Among
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK,
AEGON USA, INC.
and
AUSA LIFE INSURANCE COMPANY, INC.
Dated as of December 31, 1993
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.01. Definitions..............................................................4
Accounts Receivables.....................................................4
Acquiring Parties........................................................4
Acquisition Proposal.....................................................4
Administrative Services Agreement........................................5
Advisers Act.............................................................5
AEGON....................................................................5
AEGON Financial Statements...............................................5
AEGON's Auditor..........................................................5
AEGON Controlled Group...................................................5
Affiliate................................................................5
Agreement Regarding Payments Made Relating to
Assumption Reinsurance Agreement.........................................5
Agreement Regarding Payments Made Relating to
Indemnity Reinsurance Agreement..........................................6
Allocation...............................................................6
Ancillary Agreements.....................................................6
Antitrust Division.......................................................6
Asserted Liability.......................................................6
Assigned and Assumed Contracts...........................................6
Assigned Leases..........................................................7
Assumed Liabilities......................................................7
Assumption Agreement.....................................................8
Assumption Reinsurance Agreement.........................................8
Audited Financial Statement..............................................8
AUSA Life................................................................8
AUSA Life Separate Accounts..............................................8
AUSA Life's Auditor......................................................8
Bill of Sale and General Assignment......................................8
Bond Transfer Documents..................................................8
Books and Records........................................................8
Business.................................................................9
Business Day.............................................................9
Buyout Options...........................................................9
Claims Notice............................................................9
Closing..................................................................9
Closing Balance Sheet....................................................9
Closing Date............................................................10
i
<PAGE> 3
COBRA Continuation Benefits.............................................10
Code....................................................................10
Coinsurance and Assumption Agreement....................................10
Commission..............................................................10
Continuing Employees....................................................10
Custodial Accounts......................................................10
Custodial Balances......................................................10
DISC....................................................................10
Diversified.............................................................11
Diversified Investors Portfolio.........................................11
Diversified Stock.......................................................11
Employee Benefit Plans..................................................11
ERISA...................................................................11
Exchange Act............................................................11
Excluded Liability......................................................11
Extra Contractual Obligations...........................................12
Final Balance Sheet.....................................................13
FTC.....................................................................13
Funds...................................................................13
Furniture Sublease......................................................13
GAAP....................................................................13
Hazardous Materials.....................................................13
HSR Act.................................................................13
"Indemnity Reinsurance Agreement".......................................13
Initial Principal Amount................................................13
Insurance Contracts.....................................................14
Insurance Liabilities...................................................14
Intangible Assets.......................................................14
Intellectual Property...................................................15
Interim AEGON Financial Statements......................................15
IRS.....................................................................15
Investment Asset Put Election...........................................15
Investment Assets.......................................................15
Investment Management Agreement.........................................15
knowledge...............................................................15
Leased Real Property....................................................16
Leases..................................................................16
Licensed Software.......................................................16
Lien or Encumbrance.....................................................16
Losses..................................................................16
Manager.................................................................16
Material Adverse Effect.................................................16
MONY....................................................................17
MONY Annual Statements..................................................17
ii
<PAGE> 4
MONY Quarterly Statements...............................................17
MONY Separate Accounts..................................................17
MONY's Auditor..........................................................17
Mortgage Loans..........................................................17
Mortgage Loan Documents.................................................18
Mortgage Loan Transfer Documents........................................18
NAIC....................................................................18
1940 Act................................................................18
New York SAP............................................................18
Non-Compete Period......................................................18
Non-Insurance Liabilities...............................................18
Non-Investment Assets...................................................18
Novated Contracts.......................................................18
Owned Software..........................................................18
Pension Sales Agreement.................................................18
Permits.................................................................19
Permitted Liens and Encumbrances........................................19
Person..................................................................19
Plans...................................................................19
Portfolio Cross Section.................................................19
Preliminary Balance Sheet...............................................20
Proposed Balance Sheet..................................................20
Put Events..............................................................20
Rejected Investment Asset...............................................20
"related to" or "arising in connection with"............................20
Reserve Ratio...........................................................20
SAP.....................................................................20
Securities Act..........................................................21
Seller Employees........................................................21
Selling Parties.........................................................21
Separate Accounts.......................................................21
Series A Note Purchase Agreement........................................21
Series A Notes..........................................................21
Series B Note Purchase Agreement........................................21
Series B Notes..........................................................22
Significant Brokers.....................................................22
Specimen Plans..........................................................22
Subleases...............................................................22
Subsidiary..............................................................22
Substitute Investment Asset.............................................22
Substitution Period.....................................................22
Survival Period.........................................................23
Tangible Assets.........................................................23
Target Corporations.....................................................23
338 Elections...........................................................23
iii
<PAGE> 5
Taxes or Tax............................................................23
Tax Reduction Amount....................................................24
Tax Return..............................................................24
Third Party Accountant..................................................24
Trademark Assignment....................................................24
Transfer Documents......................................................24
Transferee Notice.......................................................24
Transferred Assets......................................................24
Transition and Computer Services Agreement..............................25
WARN....................................................................25
Welfare Plan............................................................25
ARTICLE II
TRANSFER AND ACQUISITION OF ASSETS
2.01. Acquisition of Transferred Assets and Assumption of Assumed
Liabilities.............................................................25
2.02. Cash Consideration......................................................26
2.03. Place and Date of Closing...............................................27
2.04. Preliminary, Closing and Final Balance Sheets...........................27
2.05. Post-Closing Adjustment.................................................31
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MONY
3.01. Organization, Standing and Authority of MONY............................35
3.02. Authorization...........................................................35
3.03. Business Operating Condition............................................36
3.04. Assets..................................................................37
3.05. Contracts and Other Agreements..........................................41
3.06. Actions and Proceedings.................................................46
3.07. No Conflict or Violation................................................46
3.08. Consents and Approvals..................................................47
3.09. Computer Software.......................................................47
3.10. Intellectual Property...................................................48
3.11. Brokerage and Financial Advisers........................................48
3.12. Compliance with Laws....................................................49
3.13. Permits, Licenses and Franchises........................................49
3.14. Insurance Business......................................................50
3.15. Regulatory Filings......................................................51
3.16. Statutory Statements....................................................51
3.17. Labor Disputes; Compliance..............................................53
3.18. Agents..................................................................53
3.19. Threats of Cancellation.................................................54
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<PAGE> 6
3.20. Liabilities and Reserves................................................55
3.21. Benefit Plans...........................................................56
3.22. Specimen Plans..........................................................58
3.23. Taxes...................................................................61
3.24. Reinsurance.............................................................62
3.25. Banking Arrangements....................................................62
3.26. Absence of Certain Changes or Events....................................62
3.27. Mortgage Loans..........................................................64
3.28. Other Sale Arrangement..................................................72
3.29. Separate Accounts.......................................................72
3.30. Funds...................................................................73
3.31. Insurance...............................................................75
3.32. Compliance Certificates.................................................75
3.33. Completeness of Statements..............................................75
3.34. Capitalization..........................................................76
3.35. Position of Listed Personnel............................................76
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AEGON
4.01. Organization and Standing...............................................76
4.02. Authorization...........................................................77
4.03. No Conflict or Violation................................................77
4.04. Consents and Approvals..................................................78
4.05. Brokerage and Financial Advisers........................................79
4.06. Capitalization..........................................................79
4.07. Actions and Proceedings.................................................79
4.08. Compliance with Laws....................................................80
4.09. Permits, Licenses and Franchises........................................80
4.10. Regulatory Filings......................................................81
4.11. GAAP Financial Statements...............................................81
4.12. Statutory Statements....................................................82
4.13. Absence of Certain Changes or Events....................................83
4.14. Completeness of Statements..............................................83
4.15. Common Parent...........................................................84
ARTICLE V
COVENANTS
5.01 Conduct of Business ....................................................84
5.02 Certain Transactions....................................................88
5.03 Substitutions for Investment Assets ....................................89
5.04 Investigations..........................................................96
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<PAGE> 7
5.05 Continued Access........................................................97
5.06 HSR Act Filings.........................................................99
5.07. Consents and Reasonable Efforts.........................................99
5.08. Representations and Warranties.........................................100
5.09. Further Assurances.....................................................101
5.10 Use of Names...........................................................102
5.11 Expenses...............................................................102
5.12 Banking Arrangements...................................................103
5.13 MONY's Agents..........................................................104
5.14 Leases.................................................................104
5.15 Series A Notes.........................................................105
5.16 Series B Notes.........................................................106
5.17 Assumption Reinsurance Agreement.......................................106
5.18 Indemnity Reinsurance Agreement........................................106
5.19 Agreement Regarding Payments Made Relating to Assumption
Reinsurance Agreement..................................................106
5.20 Agreement Regarding Payments Made Relating to
Indemnity Reinsurance Agreement........................................106
5.21 Transition and Computer Services Agreement.............................107
5.22 Administrative Services Agreement......................................107
5.23 Investment Management Agreement........................................107
5.24 Bill of Sale and General Assignment and
Trademark Assignment...................................................107
5.25 Assumption Agreement...................................................107
5.26 Mortgage Loan Transfer Documents.......................................107
5.27 Bond Transfer Documents................................................108
5.28 Pension Sales Agreement................................................108
5.29 Coinsurance and Assumption Agreement...................................108
5.30 Furniture Sublease.....................................................108
5.31 Employment and Employee Benefit Plans..................................108
5.32 Separate Accounts......................................................116
5.33 Property Insurance Proceeds............................................119
5.34 Purchase Price Allocation..............................................119
5.35 Allocation of Taxes....................................................121
5.36 Section 338(h)(10) Election............................................121
5.37 Lender Title Insurance Updates.........................................121
5.38 Borrower's Estoppel....................................................122
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<PAGE> 8
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATION
OF AEGON AND AUSA LIFE TO CLOSE
6.01. Representations and Covenants..........................................123
6.02. Other Agreements.......................................................124
6.03. Governmental and Regulatory Consents and
Approvals..............................................................124
6.04. Third Party Consents...................................................126
6.05. Possession of Assets; Instruments of Conveyance........................127
6.06. Opinions of Counsel to MONY............................................127
6.07. Injunction.............................................................127
6.08. Agents.................................................................127
6.09. Leases.................................................................127
6.10. Environmental Assessment...............................................128
6.11. Ratings................................................................128
6.12. Employment Agreements..................................................128
6.13. Series A Notes.........................................................129
6.14. Series B Notes.........................................................129
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION
OF MONY TO CLOSE
7.01. Representations and Covenants..........................................129
7.02. Other Agreements.......................................................130
7.03. Governmental and Regulatory
Consents and Approvals.................................................130
7.04. Third Party Consents...................................................132
7.05. Opinion of Counsel to AEGON and AUSA Life..............................132
7.06. Injunction.............................................................133
7.07. Ratings................................................................133
7.08. AUSA Life's Ratings....................................................133
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ARTICLE VIII
AGREEMENTS NOT TO COMPETE
8.01. MONY's Non-Compete.....................................................133
ARTICLE IX
CERTAIN POST-CLOSING COVENANTS
9.01. Maintenance of Business................................................136
9.02. Material Adverse Effect................................................139
9.03. Buyout Option..........................................................139
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
10.01 Survival of Representations and Warranties.............................141
ARTICLE XI
INDEMNIFICATION
11.01 obligation to Indemnify................................................142
11.02 Tax Adjustment.........................................................145
11.03 Notice of Asserted Liability...........................................145
11.04 Opportunity to Defend..................................................146
11.05 Indemnification Payments...............................................147
ARTICLE XII
TERMINATION PRIOR TO CLOSING
12.01 Termination of Agreement...............................................147
12.02 Survival...............................................................149
ARTICLE XIII
MISCELLANEOUS
13.01 Publicity..............................................................149
13.02 Notices................................................................150
13.03 Entire Agreement.......................................................151
13.04 Waivers and Amendments; Non-Contractual
Remedies; Preservation of Remedies.....................................151
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13.05 Governing Law..........................................................152
13.06 Binding Effect; Assignment.............................................152
13.07 Interpretation.........................................................153
13.08 No Third Party Beneficiaries...........................................154
13.09 Counterparts...........................................................154
13.10 Other Agreements, Exhibits and Schedules...............................154
13.11 Headings...............................................................154
13.12 Further Agreement......................................................154
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EXHIBITS
Exhibit A - Form of Assumption Reinsurance Agreement
Exhibit B - Form of Indemnity Reinsurance Agreement
Exhibit C - Form of Agreement Regarding Payments Made Relating to
Assumption Reinsurance Agreement
Exhibit D - Form of Agreement Regarding Payments Made Relating to
Indemnity Reinsurance Agreement
Exhibit E - Form of Transition and Computer Services Agreement
Exhibit F - Form of Administrative Services Agreement
Exhibit G - Form of Investment Management Agreement
Exhibit H - Form of Bill of Sale and General Assignment
Exhibit I - Trademark Assignment
Exhibit J - Form of Assumption Agreement
Exhibit K - Form of Mortgage Loan Transfer Documents
Exhibit L - Form of Bond Transfer Documents
Exhibit M - Form of Pension Sales Agreement
Exhibit N - Form of Coinsurance and Assumption Agreement
Exhibit 0 - Form of Series A Note Purchase Agreement
Exhibit P - Form of Series B Note Purchase Agreement
Exhibit Q - Furniture Sublease
Exhibit R - Form of information concerning Leased Real Property
contemplated by Schedule 3.04 hereto
Exhibit S - Form of information concerning the Mortgage Loans contemplated
by Schedule 1.01(J) hereto
Exhibit T - Form of Agency Agreement
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Exhibit U - Form of Waiver Agreement
Exhibit V - Form of Borrower's Estoppel
Exhibit W - Form of Opinion of General Counsel of MONY
Exhibit X - Form of opinion of Dewey Ballantine
Exhibit Y - Form of Opinion of General Counsel of AEGON and AUSA Life
Exhibit Z - Form of Opinion of LeBoeuf, Lamb, Leiby & MacRae
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SCHEDULES
Schedule 1 - Description of the Business
Schedule 1.01(A) - Assigned and Assumed Contracts
Schedule 1.01(B) - Custodial Balances
Schedule 1.01(C) - Funds
Schedule 1.01(D) - Insurance Contracts
Schedule 1.01(E) - Intangible Assets
Schedule 1.01(F) - Investment Assets (other than Mortgage Loans)
Schedule 1.01(G) - Certain Employees of MONY
Schedule 1.01(H) - Certain Employees of AEGON
Schedule 1.01(I) - MONY Separate Accounts
Schedule 1.01(J) - Mortgage Loans
Schedule 1.01W - Mortgage Loan Information
Schedule 1.01(L) - Tangible Assets
Schedule 2.02 - Consideration
Schedule 2.04 - Preliminary Balance Sheet
Schedule 3.01 - Charter and By-laws of the Selling Parties
Schedule 3.03 - Business Operating Condition
Schedule 3.04 - Leased Real Property
Schedule 3.05 - Contracts and Other Agreements
Schedule 3.07 - No Conflict or Violation
Schedule 3.08 - Consents and Approvals
Schedule 3.09 - Computer Software
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Schedule 3.10 - Intellectual Property
Schedule 3.12 - Compliance with Laws
Schedule 3.13(A) - Permits, Licenses and Franchises
Schedule 3.13(B) - Due Organization, Standing and Authority of the
Manager
Schedule 3.13(C) - Due Organization, Standing and Authority of
Diversified
Schedule 3.13(D) - Due Organization, Standing and Authority of DISC
Schedule 3.14 - Insurance Business
Schedule 3.15 - Regulatory Filings
Schedule 3.18(A) - Agents and Brokers
Schedule 3.18(B) - Significant Brokers
Schedule 3.19 - Threats of Cancellation
Schedule 3.20 - Reserves
Schedule 3.21 - Plans
Schedule 3.22 - Specimen Plans
Schedule 3.25 - Banking Arrangements
Schedule 3.26 - Absence of Certain Changes or Events
Schedule 3.27 - Mortgage Loan Borrowers
Schedule 3.30 - Funds
Schedule 3.31 - Insurance Policies
Schedule 4.01(A) - Charter and By-laws of the Acquiring Parties
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Schedule 4.03 - No Conflict or Violation by the Acquiring Parties
Schedule 4.04 - Consents and Approvals of the Acquiring Parties
Schedule 4.08 - Compliance with Laws by the Acquiring Parties
Schedule 4.09 - Permits, Licenses and Franchises of AUSA Life
Schedule 4.10 - Regulatory Filings of the Acquiring Parties
Schedule 4.13 - Absence of Certain Changes or Events with respect
to AEGON
Schedule 5.01 - Conduct of Business
Schedule 5.03(A) - Substitute Investment Assets
Schedule 5.03(B) - Rejected Assets
Schedule 5.03(C) - Material Defects Concerning Investment Assets
Schedule 5.10 - Use of Names
Schedule 5.13 - MONY's Agents
Schedule 5.14 - Assigned Leases
Schedule 5.31(A) - Employment Records Maintenance and Access
Agreement
Schedule 5.31(B) - Continuing Employees
Schedule 5.32(A) - Separate Accounts
Schedule 5.32(B) - MONY Separate Accounts
Schedule 5.32(C) AUSA Life Separate Accounts
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<PAGE> 16
Schedule 6.03 - Governmental and Regulatory Consents and Approvals
Schedule 9.01(A) - Existing Assumption Business Payments and Other
Matters Related to Assumption Reinsurance
Agreement
Schedule 9.01(B) - Existing Indemnity Business Payments and Other
Matters Related to Indemnity Insurance Agreement
Schedule 9.01(C) - Weighted Average Rating
Schedule 9.01(D) - Interest Crediting Rate
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<PAGE> 17
ASSET TRANSFER AND ACQUISITION AGREEMENT
This ASSET TRANSFER AND ACQUISITION AGREEMENT (this "Agreement"), dated as
of December 31, 1993, by and among The Mutual Life Insurance Company of New
York, a New York domiciled mutual life insurance company ("MONY"), AEGON USA,
Inc., an Iowa corporation ("AEGON"), and AUSA Life Insurance Company, Inc., a
New York domiciled stock insurance company and a wholly owned subsidiary of
AEGON ("AUSA Life").
W I T N E S S E T H:
A. The Acquisition. Upon the terms and subject to the conditions of this
Agreement, MONY wishes to sell, and AEGON wishes to acquire, through AUSA Life,
the group pension insurance business and operations of MONY as described in
Schedule 1 hereto (the "Business").
B. The Investments. Upon the terms and subject to the conditions of this
Agreement, MONY wishes to purchase from AEGON at the Closing (as defined below)
(i) up to $150 million aggregate principal amount of the Series A Notes (as
defined below) and (ii) $50 million aggregate principal amount of the Series B
Notes (as defined below).
C. The Documents. Upon the terms and subject to the conditions of this
Agreement, at the Closing, in order to effectuate the foregoing, the parties
hereto will execute and deliver, or cause their respective subsidiaries to
execute and deliver, as the case may be, the following agreements and
instruments dated as of the Closing Date (as defined below)
<PAGE> 18
or a date prior thereto: (i) MONY and AUSA Life will enter into the Assumption
Reinsurance Agreement (as defined below), providing, among other things, for the
assumption by AUSA Life of all of the contracts of insurance of MONY which
relate to or arise under the Business, (ii) MONY and AUSA Life will enter into
the Indemnity Reinsurance Agreement (as defined below), providing, among other
things, for the indemnity reinsurance of the general account liabilities of MONY
under the contracts of insurance which are the subject of the Assumption
Reinsurance Agreement, pending assumption of such contracts by AUSA Life on a
novation basis, (iii) MONY and AUSA Life will enter into the Agreement Regarding
Payments Made Relating to Assumption Reinsurance Agreement (as defined below),
providing, among other things, for payments to be made by AUSA Life to MONY
relating to the Assumption Reinsurance Agreement, (iv) MONY and AUSA Life will
enter into the Agreement Regarding Payments Made Relating to Indemnity
Reinsurance Agreement (as defined below) providing, among other things, for
payments to be made by AUSA Life to MONY relating to the Indemnity Reinsurance
Agreement, (v) MONY and Diversified (as defined below) will enter into the
Transition and Computer Services Agreement (as defined below), providing, among
other things, for MONY's provision of certain computer and ancillary services to
Diversified during a transition period following the Closing Date, (vi) MONY and
Diversified will enter into the Administrative Services Agreement (as defined
below), providing, among other things, for the provision by Diversified of
certain administrative services to MONY during a transition period following the
Closing Date, (vii) the manager (as defined below) and AUSA Life will enter into
the Investment Management Agreement (as defined below), providing, among other
things, for the Manager's provision of investment
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<PAGE> 19
management services to AUSA Life with respect to the Investment Assets (as
defined below) being transferred to AUSA Life pursuant to this Agreement, the
Assumption Reinsurance Agreement and the Indemnity Reinsurance Agreement, (viii)
MONY will execute and deliver to AUSA Life the Bill of Sale and General
Assignment (as defined below), the Trademark Assignment (as defined below), the
Mortgage Loan Transfer Documents (as defined below) and the Bond Transfer
Documents (as defined below), providing for the transfer and conveyance of
certain assets of MONY relating to the Business, as defined and described herein
and in the Ancillary Agreements (as defined below), (ix) AUSA Life will execute
and deliver to MONY the Assumption Agreement (as defined below), providing for
the assumption by AUSA Life of certain non-insurance liabilities of MONY
relating to the Business, (x) MONY and AUSA Life will enter into the Pension
Sales Agreement (as defined below), providing for the marketing after the
Closing of the insurance products relating to the Business, (xi) MONY and AUSA
Life will enter into the Coinsurance and Assumption Agreement (as defined
below), providing, among other things, for AUSA Life to coinsure the contracts
of insurance issued up to one year after closing (or such longer period as the
parties thereto may mutually agree upon) by MONY in specified states, which
contracts relate to the Business, (xii) MONY and AEGON will enter into the
Series A Note Purchase Agreement, providing, among other things, for the
purchase by MONY of the Series A Notes, (xiii) MONY and AEGON will enter into
the Series B Note Purchase Agreement, providing, among other things, for the
purchase by MONY of the Series B Notes and (xix) MONY and AUSA Life will enter
into the Furniture Sublease (as defined below),
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<PAGE> 20
providing, among other things, for the sublease by MONY to AUSA Life of certain
furniture for use in connection with the Business.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, and in reliance upon the representations, warranties, conditions
and covenants contained herein, and intending to be legally bound hereby, MONY,
AEGON and AUSA Life do hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The following terms shall have the respective
meanings set forth below throughout this Agreement:
"Accounts Receivable" means all accounts receivable of MONY existing as of
the Closing Date relating to the Business, including, without limitation,
uncollected annuity considerations, agents, balances and other accounts
receivable relating to the Insurance Contracts.
"Acquiring Parties" means AEGON and AUSA Life.
"Acquisition Proposal" means any inquiry, offer or other proposal by any
Person or group of Persons (other than AEGON or its Affiliates) concerning any
acquisition, merger, consolidation, liquidation, dissolution, disposition of
assets or other transaction that would result in the transfer of the Business or
any portion thereof to any such Person or group of Persons, other than in the
ordinary course of business (or pursuant to the transactions contemplated by
this Agreement).
4
<PAGE> 21
"Administrative Services Agreement" means the Administrative Services
Agreement which is substantially in the form of Exhibit F hereto.
"Advisers Act" means the Investment Advisers Act of 1940, as amended.
"AEGON" shall have the meaning set forth in the first paragraph of this
Agreement.
"AEGON Financial Statements" shall have the meaning set forth in Section
4.11 hereof.
"AEGON's Auditor" shall have the meaning set forth in Section 2.05
hereof.
"AEGON Controlled Group" means AEGON and its Affiliates, including without
limitation, AUSA Life and, subsequent to the Closing, Diversified and DISC.
"Affiliate" means, with respect to any Person, at the time in question,
any other Person controlling, controlled by or under common control with such
Person. Control for purposes of this definition shall have the meaning set forth
in Section 1501(a)(2) of the New York Insurance Law.
"Agreement Regarding Payments Made Relating to Assumption Reinsurance
Agreement" means the Agreement Regarding Payments Made Relating to Assumption
Reinsurance Agreement which is substantially in the form of Exhibit C hereto.
5
<PAGE> 22
"Agreement Regarding Payments Made Relating to Indemnity Reinsurance
Agreement" means the Agreement Regarding Payments Made Relating to Indemnity
Reinsurance Agreement which is substantially in the form of Exhibit D hereto.
"Allocation" shall have the meaning set forth in Section 5.34 hereof.
"Ancillary Agreements" means the Assumption Reinsurance Agreement, the
Indemnity Reinsurance Agreement, the Agreement Regarding Payments Made Relating
to Assumption Reinsurance Agreement, the Agreement Regarding Payments Made
Relating to Indemnity Reinsurance Agreement, the Transition and Computer
Services Agreement, the Administrative Services Agreement, the Investment
Management Agreement, the Bill of Sale and General Assignment, the Trademark
Assignment, the Assumption Agreement, the Mortgage Loan Transfer Documents, the
Bond Transfer Documents, the Pension Sales Agreement, the Coinsurance and
Assumption Agreement, the Series A Note Purchase Agreement, the Series B Note
Purchase Agreement, the Furniture Sublease, the Series A Notes and the Series B
Notes.
"Antitrust Division" shall have the meaning set forth in Section 5.06
hereof.
"Asserted Liability" shall have the meaning set forth in Section 11.03
hereof.
"Assigned and Assumed Contracts" means all written contracts, agreements,
leases (including, without limitation, leases of real, personal, tangible and
intangible property), licenses of Licensed Software used in the conduct of the
Business, Permits, rights, obligations or other commitments of MONY related to
the Business, which are
6
<PAGE> 23
listed on Schedule 1.01(A) hereto, but excluding any of the foregoing which are
terminated prior to the Closing.
"Assigned Leases" shall have the meaning set forth in Section 5.14
hereof.
"Assumed Liabilities" means the following liabilities and obligations of
MONY, whether absolute, fixed, contingent or otherwise and whether known or
unknown: (i) the Insurance Liabilities, (ii) all liabilities and obligations of
MONY arising after the Closing Date that are attributable to the Assigned and
Assumed Contracts to the extent that such liabilities and obligations are based
on events occurring after the Closing Date, (iii) all liabilities and
obligations with respect to third party assets which are, or become, subject to
escheat to any states or other jurisdictions, including any reserves therefor,
but only to the extent that such third party assets are included in the
Transferred Assets and transferred to AUSA Life pursuant to this Agreement, (iv)
all liabilities and obligations occurring after the Closing Date relating to any
Transferred Asset or Separate Account asset to the extent that such liability is
based on events arising after the Closing Date, and (v) those other liabilities
of MONY reflected in the Final Balance Sheet but, in connection with each such
liability, other than the statutory insurance reserves, only in the amounts
reflected or reserved against in the Final Balance Sheet; provided that in no
event shall the Assumed Liabilities include any Extra Contractual Obligations or
obligations or liabilities of MONY or the Manager arising out of the performance
of their obligations under the Investment Management Agreement.
7
<PAGE> 24
"Assumption Agreement" means the Assumption Agreement which is
substantially in the form of Exhibit J hereto.
"Assumption Reinsurance Agreement" means the Assumption Reinsurance
Agreement which is substantially in the form of Exhibit A hereto.
"Audited Financial Statement" shall have the meaning set forth in Section
3.16 hereof.
"AUSA Life" shall have the meaning set forth in the first paragraph of
this Agreement.
"AUSA Life Separate Accounts" shall have the meaning set forth in Section
5.32 hereof.
"AUSA Life's Auditor" shall have the meaning set forth in Section 2.04
hereof.
"Bill of Sale and General Assignment" means the Bill of Sale and General
Assignment which is substantially in the form of Exhibit H hereto.
"Bond Transfer Documents" means the Bond Transfer Documents which are
substantially in the form of Exhibit L hereto.
"Books and Records" means (i) originals of all documentation with respect
to the Specimen Plans, and (ii) copies of all customer lists, policy
information, Insurance Contract forms and rating plans, disclosure and other
documents and filings required under applicable securities laws, administrative
(other than employment and personnel)
8
<PAGE> 25
records, claim records, sales records, files and records relating to regulatory
matters (including, without limitation, correspondence with regulatory
authorities), reinsurance records, underwriting records, accounting records and
all other data in the possession or control of MONY and primarily relating to or
otherwise reasonably required for the operation of the Business, including,
without limitation, any data base, magnetic or optical media and any other form
of recorded, computer generated or stored information or process; provided,
however, that Books and Records shall not include MONY's minute books and other
similar records or any records and files relating primarily to (a) any Excluded
Liabilities, (b) MONY's Permits to transact insurance business, (c) insurance
holding company act filings, or (d) federal, state, local or other returns or
reports of Taxes to the extent that the Books and Records referred to in clauses
(a) through (d) of this proviso are not reasonably required for the operation of
the Business by AUSA Life.
"Business" shall have the meaning set forth in Recital A of this
Agreement.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in both the States of Iowa and New York are permitted
or obligated by law to be closed.
"Buyout Option" shall have the meaning set forth in Section 9.03 hereof.
"Claims Notice" shall have the meaning set forth in Section 11.03
hereof.
"Closing" means the closing of the transactions contemplated by this
Agreement.
"Closing Balance Sheet" shall have the meaning set forth in Section 2.04
hereof.
9
<PAGE> 26
"Closing Date" means the last day of the month in which the last of the
conditions set forth in this Agreement have been satisfied or waived, or on such
other date as the parties may agree in writing; provided, however, if such date
is not a Business Day, the Closing Date shall be the immediately succeeding
Business Day.
"COBRA Continuation Benefits" shall have the meaning set forth in Section
3.21 hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.
"Coinsurance and Assumption Agreement" means the Coinsurance and
Assumption Agreement which is substantially in the form of Exhibit N hereto.
"Commission" means the Securities and Exchange Commission.
"Continuing Employees" shall have the meaning set forth in Section 5.31
hereof.
"Custodial Accounts" means those escrow, custodial, clearing, trust,
disbursement, funds collected, insurance proceeds to repair, replacement
reserves, general corporate or similar accounts (including any property
completion escrow account relating to the Mortgage Loans) which are listed on
Schedule 1.01(B) hereto.
"Custodial Balances" shall have the meaning set forth in Section 3.27
hereof.
"DISC" means Diversified Investors Securities Corp., a Delaware
corporation and a wholly owned subsidiary of Diversified.
10
<PAGE> 27
"Diversified" means Diversified Investment Advisors, Inc., a Delaware
corporation and a wholly owned subsidiary of MONY.
"Diversified Investors Portfolio" shall have the meaning set forth in
Section 5.32 hereof.
"Diversified Stock" means all of the issued and outstanding shares of
the capital stock of Diversified.
"Employee Benefit Plans" shall have the meaning set forth in Section 3.21
hereof.
"ERISA" shall have the meaning set forth in Section 3.21 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Liability" means any liability of MONY that is not an Assumed
Liability, including, without limitation, (i) any such liability for Taxes of
MONY (other than premium Taxes to the extent included in Insurance Liabilities)
for periods ending on or prior to the Closing Date relating to or arising in
connection with the Business or any Transferred Assets, (ii) any such liability
relating to or arising in connection with any litigation or proceeding to which
MONY is or becomes a party or to which any of the Acquiring Parties or their
Affiliates may become a party, based on events occurring on or prior to the
Closing Date, (iii) any such liability, other than an Assumed Liability,
accruing on or prior to the Closing relating to or arising in connection with
any conduct or action of any current or former Affiliate, director, officer,
employee, general agent, managing general agent, agent, broker, consultant or
representative of MONY, including,
11
<PAGE> 28
without limitation, pursuant to any contract or other agreement, (iv) any such
liability to the extent it is related to or arises in connection with any
business or operation of MONY other than the Business, (v) any Extra Contractual
Obligation, (vi) any such liability to holders of Insurance Contracts for
dividends under the terms and conditions of the Insurance Contracts based on the
divisible surplus of MONY as of the Closing Date, (vii) any such liability or
obligation for amounts payable for third party assets which are, or become,
subject to escheat to any states or other jurisdictions, including any reserves
therefor, to the extent that such third party assets are not included in the
Transferred Assets and transferred to AUSA Life pursuant to this Agreement, and
(viii) any such liability arising out of the use of a vesting schedule with
respect to employer contributions in connection with any Employee Benefit Plan
in effect on or prior to the Closing relating to a Specimen Plan which Employee
Benefit Plan is or was intended to be qualified under Section 403(b) of the
Code.
"Extra Contractual Obligations" means all liabilities for consequential,
exemplary, punitive or similar damages which relate to or arise in connection
with any alleged or actual act, error or omission by MONY, or any of its
Affiliates or any insurance agent of MONY or any of its Affiliates acting in
such agent's capacity as an insurance agent of MONY or such Affiliate of MONY,
whether intentional or otherwise, or from any reckless conduct or bad faith by
MONY or any of its Affiliates or any insurance agent of MONY or any of its
Affiliates acting in such agent's capacity as an insurance agent of MONY or such
Affiliate of MONY, in connection with the handling of any claim under any of the
Insurance Contracts or the Assigned and Assumed Contracts or in connection
12
<PAGE> 29
with the issuance, delivery or cancellation of any of the Insurance Contracts or
the Assigned and Assumed Contracts; limited however, with respect to the
Insurance Contracts, to acts, errors, omissions or other events occurring prior
to the respective dates of novation of the Insurance Contracts pursuant to the
Assumption Reinsurance Agreement.
"Final Balance Sheet" shall have the meaning set forth in Section 2.04
hereof.
"FTC" shall have the meaning set forth in Section 5.06 hereof.
"Funds" means those mutual funds set forth in Schedule 1.01(C) hereto.
"Furniture Sublease" means the Furniture Sublease which is substantially
in the form of Exhibit Q hereto.
"GAAP" shall mean United States generally accepted accounting principles
as in effect from time to time.
"Hazardous Materials" shall have the meaning set forth in Section 3.04
hereof.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder.
"Indemnity Reinsurance Agreement" means the Indemnity Reinsurance
Agreement which is substantially in the form of Exhibit B hereto.
"Initial Principal Amount" shall have the meaning set forth in Section 1
of the Series A Note Purchase Agreement.
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"Insurance Contracts" means all policies, binders, slips, certificates,
annuity contracts and participation agreements and other agreements of
insurance, whether individual or group, in effect as of the Closing Date
(including all supplements, endorsements, riders and ancillary agreements in
connection therewith) which are issued by MONY in connection with the Business.
The Insurance Contracts in effect on the date hereof are listed and described on
Schedule 1.01(D) hereto.
"Insurance Liabilities" means all liabilities and obligations arising
under the Insurance Contracts (including, without limitation, MONY Separate
Account liabilities relating to the Insurance Contracts, but excluding any Extra
Contractual Obligations), including without limitation: (i) all liability for
premium Taxes arising on account of premiums received by MONY or by agents of
MONY and actually remitted to AUSA Life or otherwise actually received by AUSA
Life after the Closing Date, (ii) all liability for returns or refunds of
premiums under the Insurance Contracts payable after the Closing Date and (iii)
all liability for commission payments and other compensation payable with
respect to the Business to or for the benefit of agents and brokers, to the
extent that such liability arises from events that occur after the Closing Date.
"Intangible Assets" means those marks, names, trademarks, service marks,
patents, patent rights, assumed names, logos, trade secrets, copyrights, trade
names, formulae, processes, proprietary rights, subrogation rights (including,
without limitation, assets realized as a result thereof), computer software,
confidential or proprietary information, actuarial data and assumptions relating
to the Insurance Contracts, prepayments, deferred charges, refunds, credits,
claims, benefits, Permits and other rights
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and interests of MONY related to the Business which are listed on Schedule
1.01(E) hereto.
"Intellectual Property" shall have the meaning set forth in Section
3.10 hereof.
"Interim AEGON Financial Statements" shall have the meaning set forth in
Section 4.11 hereof.
"IRS" means the Internal Revenue Service.
"Investment Asset Put Election" shall have the meaning set forth in
Section 5.03 hereof.
"Investment Assets" shall mean the Mortgage Loans and those additional
investment assets of MONY listed on Schedule 1.01(F) hereto, together with all
accrued interest and income thereon which will be payable to AUSA Life after the
Closing, excluding any such assets which become Rejected Investment Assets after
the Closing and, except for the purposes of Article VI hereof, including any
such assets which become Substitute Investment Assets after the Closing.
"Investment Management Agreement" means the Investment Management
Agreement which is substantially in the form of Exhibit G hereto.
"knowledge", as to MONY, means the knowledge of the employees of MONY
listed on Schedule 1.01(G) hereto. "knowledge", as to the Acquiring Parties,
means the knowledge of the employees of AEGON listed on Schedule 1.01(H) hereto.
"knowledge" of the employees listed on Schedules 1.01(G) hereto as a group and
1.01(H) hereto as a
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group shall include and be limited to actual knowledge as well as the knowledge
a reasonable business person would have obtained after making reasonable inquiry
and after exercising reasonable diligence, including legal diligence where the
issue involved relates to legal or regulatory matters) with respect to the
matter involved.
"Leased Real Property" shall have the meaning set forth in Section 3.04
hereof.
"Leases" shall have the meaning set forth in Section 3.04 hereof.
"Licensed Software" shall have the meaning set forth in Section 3.09
hereof.
"Lien or Encumbrance" means any lien, pledge, mortgage, security interest,
claim, lease, charge, option, right of first refusal, easement, servitude,
transfer restriction, encumbrance defense or any other restriction or limitation
whatsoever.
"Losses" shall have the meaning set forth in Section 11.01 hereof.
"Manager" shall mean 1740 Advisers, Inc., a New York corporation and a
wholly owned subsidiary of MONY.
"Material Adverse Effect" means a material adverse effect on the business,
operations, condition (financial or other), results of operations, properties,
assets or prospects of a Person or thing. Without limiting the generality of the
foregoing, with respect to the warranties, representations and covenants
contained in Sections 3.03, 3.06, 3.13, 4.03, 4.07, 4.08 and 5.03 hereof (but
not with respect to the conditions of closing set forth in Sections 6.01 and
7.01 hereof), any matter or occurrence involving a dollar
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amount in excess of the greater of (a) $25,000 or (b) an amount equal to 5
percent of the value of an asset or property shall be deemed to be material for
the purposes thereof.
"MONY" shall have the meaning set forth in the first paragraph of this
Agreement.
"MONY Annual Statements" shall have the meaning set forth in Section 3.16
hereof.
"MONY Quarterly Statements" shall have the meaning set forth in Section
3.16 hereof.
"MONY Separate Accounts" means those separate accounts of MONY listed on
Schedule 1.01(I) hereto.
"MONY's Auditor" shall have the meaning set forth in Section 2.04
hereof.
"Mortgage Loans" means the mortgage loans of MONY included in the
Investment Assets and listed on Schedule 1.01(J) hereto, excluding any such
mortgage loans which become Rejected Investment Assets after the Closing and,
except for the purposes of Article VI hereof, including any such mortgage loans
which become Substitute Investment Assets after the Closing. The aggregate
statutory carrying value of the Mortgage Loans, as reflected on the books of
MONY as of the Closing Date, will not be less than forty-one percent (41%) of
the aggregate statutory carrying value of all of the Investment Assets on such
date and such amount shall only be reduced by any cash or cash equivalent
substitutions as may be permitted pursuant to Section 5.03(a) hereof.
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"Mortgage Loan Documents" shall have the meaning set forth in Section 3.27
hereof.
"Mortgage Loan Transfer Documents" shall mean the Mortgage Loan Transfer
Documents which are substantially in the form of Exhibit K hereto.
"NAIC" means the National Association of Insurance Commissioners.
"1940 Act" means the Investment Company Act of 1940.
"New York SAP" means the statutory accounting principles and practices
prescribed or permitted by the Insurance Department of the State of New York.
"Non-Compete Period" shall have the meaning set forth in Section 8.01
hereof.
"Non-Insurance Liabilities" shall mean those Assumed Liabilities other
than Insurance Liabilities.
"Non-Investment Assets" shall mean those Transferred Assets other than
Investment Assets and MONY Separate Account assets.
"Novated Contracts" shall have the meaning set forth in the Assumption
Reinsurance Agreement.
"Owned Software" shall have the meaning set forth in Section 3.09
hereof.
"Pension Sales Agreement" means the Pension Sales Agreement which is
substantially in the form of Exhibit M hereto.
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"Permits" means all licenses, permits, orders, approvals, registrations,
authorizations, qualifications and filings with and under all Federal, state,
local or foreign laws and governmental or regulatory bodies.
"Permitted Liens and Encumbrances" mean, as to any assets or property, any
(i) Liens or Encumbrances securing Taxes, assessments or other governmental
charges which are not yet due or which are being diligently contested in good
faith by appropriate proceedings if adequate reserves have been established in
accordance with New York SAP, or in the case of Mortgage Loans, funds are held
in escrow sufficient to discharge such liens or the borrower has posted a bond
in the amount of such lien, and (ii) Liens or Encumbrances imposed by law or
incurred in the ordinary course of business with respect to the claims of
materialmen, mechanics, carriers, warehousemen, landlords and other Persons
which (a) are not yet due and payable and which do not materially detract from
the value of such property or assets or materially impair the use thereof in the
operation of the Business, or (b) are being diligently contested in good faith
and by proper proceedings if adequate reserves have been established with
respect thereto in accordance with New York SAP.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
governmental, judicial or regulatory body, business unit, division or other
entity.
"Plans" shall have the meaning set forth in Section 3.21 hereof.
"Portfolio Cross Section" shall have the meaning set forth in Section 2.05
hereof.
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"Preliminary Balance Sheet" shall have the meaning set forth in Section
2.04 hereof.
"Proposed Balance Sheet" shall have the meaning set forth in Section
2.04(c) hereof.
"Put Events" shall have the meaning set forth in Section 5.03 hereof.
"Rejected Investment Asset" shall have the meaning set forth in Section
5.03 hereof.
"related to" or "arising in connection with" or similar words, as they are
used herein, shall be construed to have the broadest most inclusive meaning that
can be reasonably ascribed to them.
"Reserve Ratio" means the ratio as of December 31, 1994 of (i) the
statutory reserves held by AUSA Life with respect to the general account
Insurance Liabilities under the Novated Contracts to (ii) the aggregate
statutory reserves held by MONY and AUSA Life with respect to the general
account Insurance Liabilities under all of the Insurance Contracts (whether or
not novated pursuant to the Assumption Reinsurance Agreements).
"SAP" means the statutory accounting principles and practices prescribed
or permitted by the Insurance Department of the State of New York with respect
to a life insurance company domiciled in New York, including all changes thereto
that may be promulgated from time to time; provided, however, that in the event
that any state or
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states having regulatory jurisdiction with respect to ten percent (10%) or more
of the Insurance Liabilities or, alternatively, the Federal government of the
United States, prescribe or permit accounting principles and practices which
would have the effect of reducing admitted assets or increasing statutory
liabilities, SAP as defined herein shall include such principles and practices
in lieu of corresponding practices and principles prescribed or permitted by New
York, but only with respect to the Insurance Liabilities subject to the
regulatory jurisdiction of such states or the federal government, as applicable
(including extraterritorial jurisdiction) and admitted assets relating thereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Employees" shall have the meaning set forth in Section 3.21
hereof.
"Selling Parties" shall have the meaning set forth in Section 3.01
hereof.
"Separate Accounts" means, collectively, MONY Separate Accounts and
AUSA Life Separate Accounts.
"Series A Note Purchase Agreement" means the Series A Note Purchase
Agreement which is substantially in the form of Exhibit O hereto.
"Series A Notes" shall have the meaning set forth in Section 5.15 hereof.
"Series B Note Purchase Agreement" means the Series B Note Purchase
Agreement which is substantially in the form of Exhibit P hereto.
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"Series B Notes" shall have the meaning set forth in Section 5.16 hereof.
"Significant Brokers" shall have the meaning set forth in Section 3.18
hereof.
"Specimen Plans" shall have the meaning set forth in Section 3.22
hereof.
"Subleases" shall have the meaning set forth in Section 5.14 hereof.
"Subsidiary" shall mean, with respect to any Person on a given date, (i)
any other Person of which a majority of the voting power of the equity
securities or equity interests is owned directly or indirectly by such Person
and (ii) any other Person the accounts of which, by virtue of an ownership
interest in it by such Person would be consolidated, in accordance with GAAP,
with those of such Person in its financial statements as of the applicable date.
"Substitute Investment Asset" shall have the meaning set forth in Section
5.03 hereof.
"Substitution Period" means, with respect to any Investment Asset, the
period commencing on the earlier of the date such asset is either (i) listed on
Schedule 1.01(F) or Schedule 1.01(J) hereto or (ii) transferred to AUSA Life as
a Substitute Investment Asset, and ending on the date which is the later of (i)
the date which is 178 days subsequent to the Closing Date or (ii) if MONY is
required under Section 5.03 hereof to give notice to AUSA Life of the occurrence
of a Put Event with respect to such Investment Asset after the commencement of
such period, the date which is two days subsequent to the date that AUSA Life
receives such notice from MONY; the Substitution Period with respect to all
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Investment Assets will in all events end on the date which is 180 days
subsequent to the Closing Date.
"Survival Period" shall have the meaning set forth in Section 10.01
hereof.
"Tangible Assets" means those tangible assets relating to the Business
which are listed on Schedule 1.01(L) hereto.
"Target Corporations" mean Diversified, DISC, and any other Subsidiary of
MONY the stock of which will be acquired, directly or indirectly, by AUSA Life
pursuant to this Agreement in a "qualified stock purchase" (as defined in
section 338(d) (3) of the Code).
"338 Elections" means the elections provided for in section 338(g) and
section 338(h) (10) of the Code and any similar elections under state or local
law the effects of which are substantially the same to MONY, AEGON, and AUSA
Life as the elections under section 338(g) and 338(h)(10).
"Taxes" (or "Tax" as the context may require) means all Federal, state,
county, local, foreign and other taxes, however denominated, of any kind
whatsoever (including, without limitation, income taxes, payroll and employee
withholding taxes, unemployment insurance, social security taxes (or other
similar taxes), estimated taxes, premium taxes, excise taxes, sales taxes, use
taxes, transfer taxes, gross receipts taxes, franchise taxes, ad valorem taxes,
severance taxes, capital property taxes, import duties and other
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governmental charges and assessments) and includes interest, additions to tax
and penalties with respect thereto, whether disputed or not.
"Tax Reduction Amount" means the amount by which any Tax benefit
recognized or utilized affects or reduces the Tax liability of an indemnified
party or an Affiliate thereof resulting from or arising out of any Loss to which
the indemnified party or such Affiliate is entitled to indemnification under
this Agreement.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement (including any schedule or attachment thereto
and any amendment thereof) relating to Taxes.
"Third Party Accountant" shall have the meaning set forth in Section 2.04
hereof.
"Trademark Assignment" means the Trademark Assignment which is
substantially in the form of Exhibit I hereto.
"Transfer Documents" means the Bill of Sale and General Assignment, the
Trademark Assignment, the Bond Transfer Documents and the Mortgage Loan
Transfer Documents.
"Transferee Notice" shall have the meaning set forth in Section 5.03
hereof.
"Transferred Assets" means the Tangible Assets, Diversified Stock, MONY
Separate Account assets, Intangible Assets, Accounts Receivable, Investment
Assets, Books and Records and Assigned and Assumed Contracts.
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"Transition and Computer Services Agreement" means the Transition and
Computer Services Agreement which is substantially in the form of Exhibit E
hereto.
"WARN" shall have the meaning set forth in Section 5.31 hereof.
"Welfare Plan" shall have the meaning set forth in Section 5.31 hereof.
ARTICLE II
TRANSFER AND ACQUISITION OF ASSETS
Section 2.01. Acquisition of Transferred Assets and Assumption of Assumed
Liabilities. (a) Upon the terms and subject to the conditions of this Agreement,
at the Closing, MONY shall sell, assign and transfer to AUSA Life and AUSA Life
shall acquire from MONY all of MONY's right, title and interest in the
Transferred Assets; provided, however, that as to the assets held in MONY
Separate Accounts, such transfers shall be made to AUSA Life Separate Accounts
and, in the event that one or more Permits required to transfer all of such
assets have not been obtained as of the Closing Date, such assets shall be
transferred to AUSA Life Separate Accounts, if at all, at the times specified in
the Assumption Reinsurance Agreement. All sales, assignments and transfers of
the Transferred Assets shall be effected by the Assumption Reinsurance
Agreement, the Indemnity Reinsurance Agreement, the Assumption Agreement and the
Transfer Documents. Notwithstanding anything in this Agreement to the contrary,
but subject to the provisions of Article VIII and Section 5.05 hereof, MONY
shall be entitled to keep and maintain copies of all Books and Records from and
after the Closing, and to
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have access to the originals of the Books and Records in accordance with the
terms hereof.
(b) Upon the terms and subject to the conditions of this Agreement, at the
Closing, AUSA Life shall assume the Insurance Liabilities pursuant to the
Indemnity Reinsurance Agreement and the Assumption Reinsurance Agreement.
(c) Upon the terms and subject to the conditions of this Agreement, at the
Closing, subject to any limitation on the ability to assign therein which does
not cause the failure of the conditions of Closing set forth herein or are
waived by the parties hereto, MONY shall assign and AUSA Life shall assume the
Assigned and Assumed Contracts and those Assumed Liabilities that are not
Insurance Liabilities, all pursuant to the Bill of Sale and General Assignment,
the Trademark Assignment and the Assumption Agreement.
(d) Any transfer or sales Tax or other governmentally imposed fees or
charges imposed upon the transfer, sale and recording of the Transferred Assets
shall be paid by MONY.
Section 2.02. Cash Consideration. The parties hereto acknowledge and agree
that, because of the difficulty of presently calculating an anticipated stream
of future distributable earnings on the Business, the Acquiring Parties will not
provide any cash amounts to the Selling Parties at the Closing as consideration
for the acquisition of the Business, other than any cash amounts payable with
respect to the transfer of Non-Investment Assets, as provided for in Section
2.05(c) hereof. Any additional cash
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consideration shall be determined and paid in accordance with the procedures set
forth in Schedule 2.02 hereto.
Section 2.03. Place and Date of Closing. The Closing shall take place in
the offices of LeBoeuf, Lamb, Leiby & MacRae, 125 West 55th Street, New York,
New York, at 10:00 a.m. New York time on the Closing Date or such other time or
place as the parties may mutually agree upon.
Section 2.04. Preliminary, Closing and Final Balance Sheets.
(a) Attached hereto as Schedule 2.04 is a balance sheet of the Business as
of March 31, 1993 (the "Preliminary Balance Sheet").
(b) On the Closing Date, MONY will provide to AUSA Life a balance sheet of
the Business as of the end of the second month preceding the Closing Date (the
"Closing Balance Sheet"), together with a certification of the chief financial
officer of MONY that the Closing Balance Sheet was prepared in accordance with
the books and records of MONY and in accordance with the accounting practices
set forth in Section 2.04(e) hereof.
(c) MONY shall, on or before the last day of the month following the
Closing Date, prepare a proposed balance sheet of the Business as of the close
of business on the Closing Date (the "Proposed Balance Sheet") along with a
certification of the chief financial officer of MONY that such balance sheet was
prepared in accordance with the books and records of MONY and in accordance with
the accounting practices set forth in
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Section 2.04(e) hereof. MONY shall consult with AUSA Life during the preparation
of the Proposed Balance Sheet, and shall otherwise inform AUSA Life of the
progress and results of the preparation of the Proposed Balance Sheet. Promptly
after the preparation of the Proposed Balance Sheet MONY shall deliver copies of
such balance sheet to independent public accountants designated by MONY (Mony's
Auditor"), to AUSA Life and to independent public accountants designated by AUSA
Life ("AUSA Life's Auditor"). AUSA Life's Auditor shall examine the Proposed
Balance Sheet, such examination to be conducted in accordance with generally
accepted statutory auditing standards without regard to materiality or amount in
order for AUSA Life's Auditor to prepare a statutory balance sheet of the
Business as of the Closing Date (the "Final Balance Sheet"), and to render an
opinion to AUSA Life that, subject to any determinations made by the Third Party
Accountant, the Final Balance Sheet so prepared by AUSA Life's Auditor presents
fairly the financial position of the Business at the Closing Date in conformity
with the accounting practices set forth in Section 2.04(e) hereof. MONY agrees
that AUSA Life's Auditor may have access to the accounting records of MONY and
the records of MONY's Auditor relating to the Business for the purpose of
conducting such audit.
(d) AUSA Life shall use commercially reasonable efforts to cause AUSA
Life's Auditor to deliver a full draft of the Final Balance Sheet to MONY's
Auditor within 120 days following the receipt by AUSA Life's Auditor of the
proposed balance sheet from MONY. MONY shall instruct MONY's Auditor to review
such draft and comment thereon within 45 days after receipt thereof. AUSA Life
agrees that MONY's Auditor
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may have access to the accounting records of AUSA Life and the records of AUSA
Life's Auditor relating to its preparation of the Final Balance Sheet for the
purpose of conducting their review. Any changes in the draft that are agreed to
by AUSA Life's Auditor and MONY's Auditor within 45 days of the aforementioned
delivery of the draft by AUSA Life's Auditor shall be incorporated into the
Final Balance Sheet. In the event that AUSA Life's Auditor and MONY's Auditor
are unable to agree on the manner in which any item or items should be treated
in the preparation of the Final Balance Sheet within 45 days of the
aforementioned delivery of the draft by AUSA Life's Auditor, separate written
reports of such item or items shall be made in concise form and shall be
submitted by each such accounting firm to MONY and AUSA Life for prompt
consideration and settlement. In the event MONY and AUSA Life cannot agree
thereon within twenty days after receipt of such reports, such item or items
shall be referred promptly to a nationally recognized independent accounting
firm other than AUSA Life's Auditor and MONY's Auditor (the "Third Party
Accountant) selected by mutual agreement of MONY and AUSA Life within five days
thereafter. The Third Party Accountant shall determine within 14 days the manner
in which such item or items shall be treated on the Final Balance Sheet
provided, however, that the dollar amount of each item in dispute shall be
determined between the range of dollar amounts proposed by MONY and AUSA Life,
respectively. The determinations by the Third Party Accountant as to the items
in dispute shall be in writing and shall be binding and conclusive on the
parties and shall be so reflected in the Final Balance Sheet. MONY and AUSA Life
shall each pay the cost of retaining its accountant. In addition, the fees,
costs and expenses of retaining the Third Party Accountant shall be allocated by
the Third Party Accountant
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between the parties, in accordance with the Third Party Accountant's judgment as
to the relative merits of the parties' proposals in respect of the disputed
items. Such determination shall be binding and conclusive on the parties.
Following the resolution of all disputed items, AUSA Life's Accountant shall
prepare the Final Balance Sheet and render its opinion and shall deliver copies
of such to MONY and AUSA Life.
(e) The Closing Balance Sheet, the Proposed Balance Sheet and the Final
Balance Sheet shall be prepared assuming for such purposes that the Transferred
Assets and the Assumed Liabilities were contributed to a fictitious corporate
entity licensed as an insurance company in each state of the United States and
domiciled in New York at the close of business on the Closing Date and that the
Insurance Contracts are effectively novated at such time pursuant to the
Assumption Reinsurance Agreement. The Closing Balance Sheet, the Proposed
Balance Sheet and the Final Balance Sheet shall reflect (i) Investment Assets
valued at their statutory carrying value on the books of MONY on the Closing
Date, (ii) all other Transferred Assets valued at their fair market value as
reflected on the Preliminary Balance Sheet or, if not so reflected, at their
fair market value as determined by the parties and (iii) other entries utilizing
the accounting practices utilized in the Preliminary Balance Sheet, provided
that if the applicable accounting practice for a particular entry is not
specified in the Preliminary Balance Sheet or in this Section 2.04(d), such
entry shall be determined in accordance with New York SAP. In addition, at the
option of MONY, the Closing Balance Sheet, the Proposed Balance Sheet and the
Final Balance Sheet may exclude reserves with respect to any liability relating
to
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or arising in connection with any litigation or proceeding to which MONY is a
party, other than reserves that have been established with respect to the
Insurance Liabilities.
Section 2.05. Post-Closing Adjustment.
(a) In the event the aggregate amount of Investment Assets reflected on
the Closing Balance Sheet and transferred to AUSA Life at the Closing is less
than the aggregate amount of general account Insurance Liabilities reflected on
the Final Balance Sheet, MONY shall transfer to AUSA Life additional investment
assets and/or cash or cash equivalents with a statutory carrying value on the
books of MONY on the date of such transfer equal to the amount of such
difference and, to the extent commercially practicable, representing a Portfolio
Cross-Section. For purposes hereof, "Portfolio Cross-Section" shall mean a mix
of investment assets composed of investments in each of the categories, types
and quality grades as those of the Investment Assets transferred to AUSA Life at
the Closing, and in the respective proportions that the aggregate amount of each
category, type or quality grade of such Investment Assets bears to the aggregate
amount of all of such Investment Assets as a whole, in all cases such assets to
be reasonably acceptable to AUSA Life or MONY, whichever is the recipient
thereof. In the event the aggregate amount of Investment Assets reflected on the
Closing Balance Sheet and transferred to AUSA Life at the Closing is more than
the aggregate amount of general account Insurance Liabilities reflected on the
Final Balance Sheet, AUSA Life shall transfer to MONY investment assets and/or
cash or cash equivalents valued on the Closing Date Balance Sheet in the amount
of such difference and, to the extent commercially practicable, representing a
Portfolio Cross Section. Notwithstanding the
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foregoing, any transfer required under this Section 2.05 shall consist
exclusively of cash or cash equivalents if the amount required to be transferred
is less than $3 million. Any transfer of Investment Assets and/or cash or cash
equivalents required under this Section 2.05 shall be made within ten Business
Days of the date of the delivery of the Final Balance Sheet to MONY and AUSA
Life.
Notwithstanding the foregoing, in the event that (i) the aggregate amount
of Investment Assets reflected on the Closing Balance Sheet and transferred to
AUSA Life at the Closing is greater than or less than the aggregate amount of
general account Insurance Liabilities reflected on the Proposed Balance Sheet
and (ii) such difference exceeds $20 million, MONY or AUSA Life, as applicable,
shall, with 10 days of the aforementioned delivery of the Proposed Balance Sheet
to AUSA Life, transfer to the other party investment assets and/or cash and cash
equivalents in an amount equal to such difference in accordance with the
procedures set forth above in this Section 2.05(a). In such event, the amount of
assets to be transferred by MONY to AEGON or by AEGON to MONY, as the case may
be, in accordance with this Section 2.05(a) following the delivery of the Final
Balance Sheet to MONY and AUSA Life, shall be calculated by adding to or
deducting from the amount of Investment Assets transferred to AUSA Life at the
Closing the amount of investment assets and/or cash and cash equivalents
transferred to AUSA Life or MONY, as applicable, following the delivery of the
Proposed Balance Sheet, and comparing such resulting amount to the aggregate
amount of general account Insurance liabilities reflected on the Final Balance
Sheet.
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(b) Following the final determination of the Investment Assets transferred
or transferable to AUSA Life in exchange for the assumption of the Insurance
Liabilities (including the exercise of any put rights by AUSA Life under Section
5.03 hereof), MONY and AUSA Life shall promptly prepare schedules of the
Investment Assets which shall be attached to the Indemnity Reinsurance Agreement
and the Assumption Reinsurance Agreement as specified below in this paragraph
(b).
The schedule so attached to the Assumption Reinsurance Agreement shall
consist of assets with a statutory carrying value as of the Closing Date equal
to the General Account Insurance Liabilities as of the Closing Date under the
Insurance Contracts which have, as of the date of the preparation of such
schedule, become Novated Contracts (as each such capitalized term is described
in the Assumption Reinsurance Agreement). The schedule so attached to the
Indemnity Reinsurance Agreement shall consist of those Investment Assets which
are not set forth on the schedule attached to the Assumption Reinsurance
Agreement. Investment Assets shall be allocated to the Indemnity Reinsurance
Agreement schedule (in lieu of allocation to the Assumption Reinsurance
Agreement schedule) in the following priorities:
(i) cash and cash equivalents and bonds rated NAIC-1 and NAIC-2 by the
NAIC, (ii) mortgages in good standing, (iii) bonds rated NAIC-3 by the NAIC,
(iv) bonds rated NAIC-4 by the NAIC, (v) restructured mortgage loans and (vi)
remaining assets. Assets shall be allocated to the Assumption Reinsurance
Agreement schedule in the reverse order of such priorities and shall be
allocated within such priorities as determined by AUSA Life.
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The schedules attached to the Assumption Reinsurance Agreement and the
Indemnity Reinsurance Agreement shall be revised by AUSA Life, from time to
time, to reflect additional novations of the Insurance Contracts, using the
priorities set forth above for allocating assets to such schedules. AUSA Life
shall promptly provide a true and correct copy of each such revised schedule to
MONY.
(c) In the event that the aggregate amount of Non-Investment Assets
reflected on the Closing Balance Sheet and transferred to AUSA Life at the
Closing is less than the aggregate amount of Non-Insurance Liabilities reflected
on the Final Balance Sheet, MONY shall within five business days of the date of
delivery of the Final Balance Sheet to MONY and AUSA Life, pay to AUSA Life an
amount equal to such difference by wire transfer of immediately available funds
to such account or accounts as AUSA Life shall reasonably designate to MONY in
writing. In the event that the aggregate amount of Non-Investment Assets
reflected on the Closing Balance Sheet and transferred to AUSA Life at the
Closing is more than the aggregate amount of Non-Insurance Liabilities reflected
on the Final Balance Sheet, AUSA Life shall within five Business Days of the
date of delivery of the Final Balance Sheet to MONY and AUSA Life, pay to MONY
an amount equal to such excess by wire transfer of immediately available funds
to such account or accounts as MONY shall reasonably designate to AUSA Life in
writing.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MONY
MONY hereby represents and warrants to AEGON and AUSA Life as follows:
Section 3.01. Organization, Standing and Authority of MONY. Each of
MONY and the Manager (collectively, the "Selling Parties"), Diversified and DISC
is duly organized, validly existing and in good standing under the laws of the
respective state of its domicile or incorporation. MONY has all requisite power
and authority to own, lease and operate the Transferred Assets and to carry on
the operations of the Business and the Transferred Assets as they are now being
conducted. The Manager has all requisite power and authority to own, lease and
operate its property and to conduct its business as it is now being conducted.
Attached hereto as Schedule 3.01 hereto are true, complete and correct copies of
the Charter and Bylaws or other charter or organizational documents of the
Selling Parties, Diversified and DISC, including all amendments thereto through
the date of this Agreement.
Section 3.02. Authorization. MONY has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement, and under
each of the Ancillary Agreements to be executed by it. The Manager has all
requisite power and authority to execute, deliver and perform its obligations
under each of the Ancillary Agreements to be executed by it. The execution and
delivery by MONY of this Agreement, the execution and delivery by the Selling
Parties of the Ancillary Agreements to be executed by each of them, and the
performance by the Selling Parties of their respective obligations under such
agreements, have been duly authorized. This
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Agreement has been, and on the Closing Date the Ancillary Agreements will be,
duly executed and delivered by the respective Selling Parties hereto or thereto;
and, subject to the due execution and delivery by the other parties to such
agreements, this Agreement is, and the Ancillary Agreements will, upon due
execution and delivery, be valid and binding obligations of the respective
Selling Parties party hereto or thereto, enforceable against such Selling
Parties in accordance with their terms.
Section 3.03. Business Operating Condition. The Transferred Assets, and
all assets leased or used by MONY pursuant to any of the Assigned and Assumed
Contracts or to be used by AUSA Life pursuant to the Transition and Computer
Services Agreement, include all assets of the Business necessary to conduct the
Business substantially as it is now being conducted. Schedule 1.01(D) hereto
sets forth a description of all Insurance Contracts which constitute part of the
Business on the date hereof. Schedule 1.01(L) hereto describes all furniture,
fixtures, machinery and equipment necessary to conduct the business and
operations of the Business in substantially the same manner as such business and
operations are carried on currently by MONY. Except as listed on Schedule
1.01(L) hereto, to MONY's knowledge all of such furniture, fixtures, machinery
and equipment are in the possession of MONY and in good working order and
condition for the purposes for which they are currently used other than as would
not have a Material Adverse Effect on the Business or the Transferred Assets.
All Accounts Receivable are legal obligations for payments due to MONY and arose
in the conduct of the Business. Except as listed on Schedule 3.03 hereto, to
MONY's knowledge, there are no refunds, discounts, setoffs or other adjustments
payable in
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respect of any such Accounts Receivable or any defenses, rights of set off,
assignments, restrictions, Liens or Encumbrances or conditions enforceable by
third parties on or affecting any Accounts Receivable other than as would not
have a Material Adverse Effect on the Business or the Transferred Assets.
Section 3.04. Assets.
(a) Leased Real Property.
(i) All real property leased by MONY and used primarily to
conduct the Business (the "Leased Real Property") is described on Schedule 3.04
hereto. All leases currently in effect relating to the Leased Real Property,
together with all amendments and modifications thereto (the "Leases") and all
other Assigned and Assumed Contracts relating to the Leased Real Property are
listed on Schedule 3.04 hereto. The information in Schedule 3.04 hereto is true
and correct and includes all material information concerning the Leases and the
Leased Real Property required by Schedule 3.04 hereto in substantially the form
of Exhibit R hereto.
(ii) Except as described on Schedule 3.04 hereto, to MONY's
knowledge, MONY is not in default under any of the material terms and provisions
of any of the Leases and has not received any written notice of any such
default.
(iii) There are no outstanding understandings or agreements
which may vary the terms and provisions of the Leases.
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(iv) MONY has only made alterations to the Leased Real
Property in substantial compliance with the terms of the Leases and all
applicable legal requirements.
(v) Except as described on Schedule 3.04 hereto, to MONY's
knowledge, there are no outstanding defaults on the part of the landlord or
lessor under any Lease.
(vi) Except as described on Schedule 3.04 hereto, MONY has not
exercised any option to extend the term of any Lease, or to terminate any Lease.
(vii) Except as described on Schedule 3.04 hereto, MONY has
not entered into any subleases of the Leased Real Property or granted any
licenses or occupancy rights with respect to the Leased Real Property.
(viii) Schedule 3.04 contains a true, complete and correct
list of all security deposits held by the lessors under the Leases as of the
date hereof.
(ix) Except as described on Schedule 3.04 hereto, MONY has not
granted or created any Liens or Encumbrances on the Leased Real Property,
including without limitation, leasehold mortgages of the Leased Real Property,
except for Permitted Liens and Encumbrances.
(x) Except as described on Schedule 3.04 hereto, to the
knowledge of MONY, the use and occupancy of the Leased Real Property by MONY is
in compliance with all applicable laws, regulations, statutes, ordinances,
judgments, decrees or orders including without limitation, those governing
zoning, subdivision, land development access, erosion and drainage control,
sewage collection and disposal, use, occupancy,
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building, fire, safety, access and environmental matters. Except as described on
Schedule 3.04 hereto, MONY has not received any written notice from any
governmental entity advising of a violation of any applicable building code,
environmental, zoning, subdivision, land development or land use laws,
regulations or ordinances or any other applicable local, state or Federal laws,
regulations or ordinances.
(xi) Except as described on Schedule 3.04 hereto, MONY has
neither knowledge of nor received any notice of any existing or proposed
assessments for public improvements imposed or to be imposed upon the Leased
Real Property which will remain unpaid at Closing.
(xii) The Permits listed on Schedule 3.04 hereto constitute
all Permits which are required for the present use and occupancy of the Leased
Real Property by MONY and each has been duly issued.
(xiii) Except as set forth in Schedule 3.04 hereto, to its
knowledge, MONY does not use, treat, store or dispose of, nor has it given
permission to any other party to use, treat, store or dispose of, whether
temporarily or permanently, any petroleum products or any Hazardous Materials
(as defined below) at, on or beneath the Leased Real Property in violation of
any Federal, state or local law, regulation or ordinance. Except as set forth in
Schedule 3.04 hereto, MONY does not have any knowledge of the presence, use,
treatment, storage, release or disposal of any petroleum products or any
Hazardous Materials at, on or beneath the Leased Real Property. For the purposes
of this Agreement, "Hazardous Materials" shall include, without limitation,
substances defined as "extremely
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hazardous substances", "hazardous substances", "hazardous materials", "hazardous
waste" or "toxic substances" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq.; the Emergency Planning and Community Right-To-Know Act, 42 U.S.C.
Sections 11001-11050; the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.; in similar statutes promulgated by the states in
which the Leased Real Property is located; and in the regulations adopted
pursuant to such laws.
(xiv) All Leased Real Property, including parking facilities
and access to public streets, is adequate and sufficient for the business
operations conducted as of the date hereof by MONY thereon.
(xv) Except as set forth in Schedule 3.04 hereto, all items of
personal property on or about the Leased Real Property (other than incidental
employee property) either are (a) Tangible Assets, or (b) leased under leases
that are Assigned and Assumed Contracts.
(xvi) All real property used by MONY to conduct the Business
is Leased Real Property.
(b) Title to Transferred Assets. MONY has good and marketable title to
all assets included in the Transferred Assets, free and clear of all Liens and
Encumbrances except, with respect to Transferred Assets which are not Investment
Assets, for Permitted Liens and Encumbrances.
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(c) Investment Assets. Except as set forth in Schedule 1.01(F) or
Schedule 1.01(J) hereto and except with respect to any Investment Assets that
are publicly traded securities, MONY received written representations from each
issuer of Investment Assets that the Investment Assets issued by such issuer
were duly authorized and issued by such issuer. Except as set forth in Schedule
1.01(F) or Schedule 1.01(J) hereto, each of such Investment Assets is negotiable
and no consent or other approval is required to be obtained by MONY to permit
MONY to convey, transfer and sell the Investment Assets to AUSA Life pursuant to
this Agreement and the Ancillary Agreements free and clear of all Liens and
Encumbrances.
Section 3.05. Contracts and Other Agreements.
(a) Contracts and Agreements Related to the Business. Schedule 3.05
hereto lists all contracts and other agreements hereinafter described in this
Section 3.05 hereof to which MONY is a party or by or to which it or any of its
assets or properties are bound or subject, other than the Insurance Contracts:
(i) contracts and other agreements with any current or former
officer, director, employee, consultant, or other representative (other than an
insurance agent or broker) of MONY relating to the Business pursuant to which
MONY has ongoing obligations calling for payments in any one year of more than
$25,000 in any one case or $100,000 in the aggregate, other than such contracts
and other agreements that are terminable at will by MONY,
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(ii) contracts and other agreements for the purchase or sale
of equipment or services or to make capital expenditures (whether through the
purchase of real or personal property or otherwise) in connection with the
Business, other than in the ordinary course of business (including agreements
for ordinary maintenance of equipment), calling for an aggregate purchase price
or payments in any one year of more than $25,000 in any one case or $100,000 in
the aggregate,
(iii) contracts and other agreements for the sale of any of
its assets or properties or for the grant to any Person of any preferential
rights to purchase or use any of its assets or properties, used in connection
with the Business, other than in the ordinary course of business,
(iv) joint venture and partnership agreements in connection
with the Business,
(v) contracts or other agreements under which it agrees to
indemnify any party in connection with the Business, other than indemnity
payments which could not reasonably be expected to exceed $25,000 in any one
case or $100,000 in the aggregate,
(vi) contracts and other agreements containing covenants of
MONY not to compete with any Person in the businesses conducted by the Business
or in any geographical area in connection with the Business or covenants of any
other Person not to compete with MONY in the businesses conducted by the
Business or in any geographical area in connection with the Business,
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(vii) contracts and other agreements relating to the making of
any loan in connection with the Business in excess of $25,000 in any one case or
$100,000 in the aggregate, other than Plan loans made in the ordinary course of
business,
(viii) contracts or other agreements relating to the borrowing
of money in connection with the Business, or the direct or indirect guaranty of
any obligation for, or an agreement to service, the repayment of borrowed money
in connection with the Business, or any other contingent obligations in respect
of indebtedness for borrowed money of any other Person in connection with the
Business in excess of $25,000 in any one case or $100,000 in the aggregate,
including, without limitation, (a) any agreement or arrangement relating to the
maintenance of compensating balances, (b) any agreement or arrangement with
respect to lines of credit, (c) any agreement to advance or supply funds to any
other Person other than in the ordinary course of business, (d) any agreement to
pay for property, products or services of any other Person even if such
property, products or services are not conveyed, delivered or rendered, (e) any
keep-well, make-whole or maintenance of working capital or earnings or similar
agreement, (f) any guaranty with respect to any lease or other similar periodic
payments to be made by any such Person or (g) any conditional sales contract,
chattel mortgage, equipment lease agreement or other security arrangement with
respect to personal property (other than unperfected purchase money security
interests created pursuant to sales confirmations issued by vendors),
(ix) contracts or other agreements under which MONY agrees to
share Tax liability of any third party in connection with the Business,
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(x) contracts or other agreements for or relating to computer
equipment or computer services used in connection with the Business other than
those set forth in Schedule 3.09 hereto calling for an aggregate purchase price
or payments in any one year of more than $25,000 in any one case or $100,000 in
the aggregate,
(xi) contracts or other agreements in which a party thereto
may require the audit of, or arbitration with respect to, any services provided
to such party by MONY in connection with the Business,
(xii) contracts or other agreements (other than Permits) with
any Federal, state or local government, agency or authority in connection with
the Business calling for payments in any one year of more than $25,000 in any
one case or $100,000 in the aggregate,
(xiii) express license agreements, either as licensor or
licensee in connection with the Business, other than those reflected in another
Schedule or Exhibit to this Agreement,
(xiv) contracts or other agreements relating to any derivative
instruments or securities or any "off-balance sheet" financing transaction in
connection with the Business, and
(xv) to the knowledge of MONY, any other contract or other
agreement relating to the Business whether or not made in the ordinary course of
business calling for
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payments in any one year of more than $50,000 in any one case or $100,000 in the
aggregate.
There has been made available to AUSA Life a true, complete and correct
copy of each of the contracts and other agreements listed on Schedule 3.05
hereto.
(b) Assigned and Assumed Contracts. Except for Assigned and Assumed
Contracts which are terminated in the ordinary course of business, each Assigned
and Assumed Contract is, or as of or upon the Closing Date will be, valid, in
full force and effect and binding upon MONY, or, on the Closing Date, upon AUSA
Life, and, to the knowledge of MONY, the other parties thereto in accordance
with its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors of
insurance companies or rights of creditors generally and by general principles
of equity, regardless of whether enforcement is sought in a proceeding at law or
in equity. Except as listed on Schedule 3.05 hereto, to MONY's knowledge, MONY
is not in default in any material respect under any Assigned and Assumed
Contracts. Except as listed on Schedule 3.05 hereto, MONY has not received any
written notice from any other party to any such Assigned and Assumed Contract of
the termination, or threatened termination, thereof, and except as listed on
Schedule 3.05 hereto, MONY has no knowledge of the occurrence of any event which
would allow such other party to terminate any such contract or agreement other
than in each case termination due to the expiration of the term of such contract
or agreement in the ordinary course of business.
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Section 3.06. Actions and Proceedings. Except as previously disclosed
to AEGON in writing, there are no outstanding orders, decrees or judgments by or
with any court, governmental agency, regulatory body or arbitration tribunal
which individually or in the aggregate have had or are likely to have a Material
Adverse Effect on the Business or the Transferred Assets. Except as previously
disclosed to AEGON in writing, to MONY's knowledge, there are no actions, suits,
arbitrations or legal, administrative or other proceedings (other than those
relating to insurance claims) pending or threatened against MONY, at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind which, if adversely determined, would individually or in the aggregate have
a Material Adverse Effect on the Business or the Transferred Assets.
Section 3.07. No Conflict or Violation. Except as disclosed in Schedule
3.07 hereto, the execution, delivery and performance by the Selling Parties of
this Agreement and the Ancillary Agreements to which each of them is a party and
the consummation of the transactions contemplated hereby and thereby in
accordance with the respective terms and conditions hereof and thereof will not
(a) violate any provision of the Charter, By-Laws or other charter or
organizational document of any of the Selling Parties, (b) to MONY's knowledge,
violate, conflict with or result in the breach of any of the terms of, result in
any modification of the effect of, otherwise give any other contracting party
the right to terminate, or constitute (or with notice or lapse of time or both,
constitute) a default under, any contract or other agreement relating to or
arising in connection with the Business or the Transferred Assets to which any
of the Selling Parties is a party or by
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or to which it or any of its assets or properties may be bound or subject, (c)
to MONY's knowledge, violate any order, judgment, injunction, award or decree of
any court, arbitrator or governmental or regulatory body against, or binding
upon, or any agreement with, or condition imposed by, any governmental or
regulatory body, foreign or domestic, binding upon any of the Selling Parties in
connection with the Business or the Transferred Assets or upon the Business or
the Transferred Assets, (d) to MONY's knowledge, violate any statute, law or
regulation of any jurisdiction or (e) to MONY's knowledge, result in the breach
of any of the terms or conditions of, constitute a default under, or otherwise
cause an impairment of, any Permit related to the Business or the Transferred
Assets.
Section 3.08. Consents and Approvals. Except as required under the HSR
Act or as set forth in Schedule 3.08 hereto and except for required Permits of
applicable insurance regulatory authorities, the execution, delivery and
performance by MONY of this Agreement, and by the Selling Parties of each of the
Ancillary Agreements to which each is a party and the consummation of the
transactions contemplated hereby and thereby in accordance with the respective
terms hereof and thereof do not require MONY or the Manager to obtain any vote
of policyholders or shareholders, respectively, or any consent, approval or
action of, or make any filing with or give any notice to, any Person.
Section 3.09. Computer Software. MONY has set forth in Schedule 3.09
hereto a true and complete listing of all computer software programs used in the
conduct of the Business which were developed primarily for such use. Schedule
3.09 hereto sets forth whether each such computer software program is (i) owned
by MONY (the "Owned
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Software") , (ii) licensed by MONY from a third party or (iii) licensed by a
third party and assigned by such third party to MONY in accordance with the
terms of such licenses (the software referred to in clauses (ii) and (iii)
hereof are collectively referred to herein as the "Licensed Software") . With
respect to Owned Software and Licensed Software which is included in the
Transferred Assets, except as listed on Schedule 3.09 hereto, to MONY's
knowledge, there are no infringement suits, actions or proceedings pending or,
to the knowledge of MONY, threatened against MONY with respect to any such
software.
Section 3.10. Intellectual Property. Schedule 3.10 hereto sets forth a
list of all marks, names, trademarks, service marks, patents, patent rights,
assumed names, logos, trade secrets, copyrights and trade names used by MONY in
connection with the conduct of the Business (the "Intellectual Property"). With
respect to the Intellectual Property which is included in the Transferred
Assets, MONY has the right to use all such Intellectual Property free and clear
of any royalty or other payment obligation, claims of infringement or Liens or
Encumbrances, except for Permitted Liens and Encumbrances. MONY has not received
any notice of any conflict with or violation or infringement of, any asserted
rights of any other Person with respect to any such Intellectual Property.
Section 3.11. Brokerage and Financial Advisers. No broker, finder or
financial adviser has acted directly or indirectly as such for, or is entitled
to any compensation from, MONY in connection with this Agreement or the
transactions contemplated hereby, except Goldman, Sachs & Co. and Wasserstein
Perella & Co., Inc. whose fees for services in connection with such transactions
will be paid by MONY.
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Section 3.12. Compliance with Laws. Except as listed on Schedule 3.12
hereto, to the knowledge of MONY, neither of the Selling Parties is in violation
of nor is there a default of the Selling Parties with respect to any applicable
order, judgment, writ, injunction, award or decree. Except as listed on Schedule
3.12 hereto, to the knowledge of MONY, neither of the Selling Parties is in
violation of any Federal, state, local or foreign law, ordinance or regulation
or any other requirement of any governmental or regulatory body, court or
arbitrator applicable to the Business or the Transferred Assets or has received
any written notice that any such violation is being alleged, in each case except
those that will be cured by the Selling Parties prior to, or by the act of,
Closing.
Section 3.13. Permits, Licenses and Franchises. Schedule 3.13(A) hereto
lists (i) all jurisdictions in which MONY is licensed to issue the Insurance
Contracts and (ii) the lines of business in connection with the Business which
MONY is authorized to transact in each such jurisdiction. MONY has been duly
authorized by the relevant state insurance regulatory authorities to issue the
Insurance Contracts that it is currently writing in the respective states in
which it conducts the Business. Except as listed on Schedule 3.13(A) hereto,
MONY has all other Permits necessary to conduct the Business in the manner and
in the areas in which the Business is presently being conducted, and all such
Permits are valid and in full force and effect. Except as listed on Schedule
3.13(A) hereto, to MONY's knowledge, MONY has not engaged in any activity which
would cause revocation or suspension of any such license or other Permit and no
action or proceeding looking to or contemplating the revocation or suspension of
any such license or Permit is pending or threatened. The Manager is duly
qualified or otherwise
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authorized to transact business and is in good standing in each jurisdiction
listed on Schedule 3.13(B) hereto, which are the only jurisdictions in which
such qualification, authorization or license is required by law in connection
with the business and operations of the Manager. To the knowledge of MONY, no
other jurisdiction has claimed, in writing or otherwise, that the Manager is
required in connection with the Business and the Transferred Assets to qualify
or otherwise be authorized or licensed therein. Each of Diversified and DISC is
duly qualified or otherwise authorized to transact business and is in good
standing in each jurisdiction listed on Schedules 3.13(C) and 3.13(D) hereto,
respectively. Diversified and DISC hold the permits listed on Schedules 3.13(C)
and 3.13(D) hereto, respectively, each of which is in full force and effect.
Section 3.14. Insurance Business. Except as listed on Schedule 3.14
hereto, to MONY's knowledge, all Insurance Contracts as now in force are in all
material respects, to the extent required under applicable law, on forms
approved by applicable insurance regulatory authorities or which have been filed
and not objected to by such authorities within the period provided for
objection, and such forms comply in all material respects with the insurance
statutes, regulations and rules applicable thereto. True, complete and correct
copies of such forms have been furnished or made available to AEGON, the
reference numbers of such forms are listed on Schedule 3.14 hereto and there are
no other forms of Insurance Contracts used in connection with the Business.
Premium rates established in connection with the Business which are required to
be filed with or approved by insurance regulatory authorities have been so filed
or approved, the
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premiums charged conform thereto in all material respects, and such premiums
comply in all material respects with the insurance statutes, regulations and
rules applicable thereto.
Section 3.15. Regulatory Filings. MONY has made available for
inspection by AEGON all registrations, filings, submissions made by MONY with
any governmental or regulatory body and reports of examinations with respect to
MONY issued by any such governmental or regulatory body to the extent that such
were made or issued on or subsequent to January 1, 1990 and relate to the
Business. Except as listed on Schedule 3.15 hereto, to MONY's knowledge, MONY
has filed all material reports, statements, documents, registrations, filings or
submissions required to be filed by MONY with any governmental or regulatory
body. Except as listed on Schedule 3.15 hereto, to MONY's knowledge, all such
registrations, filings and submissions were in compliance in all material
respects with applicable law when filed or as amended or supplemented, and no
material deficiencies have been asserted by any such governmental or regulatory
body with respect to such registrations, filings or submissions that have not
been satisfied.
Section 3.16. Statutory Statements. (a) On or prior to the date hereof,
MONY has delivered to AUSA Life true, complete and correct copies of the Annual
Statements of MONY and of the separate accounts of MONY as filed with the New
York Insurance Department for the years ended December 31, 1992, 1991 and 1990
together with all exhibits and schedules thereto ("the MONY Annual Statements").
MONY has furnished to AUSA Life a true, complete and correct copy of the
Quarterly Statements of MONY and of the separate accounts of MONY as filed with
the New York Insurance Department for the quarters ended September 30, 1993,
June 30, 1993 and March 31, 1993, together
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with all exhibits and schedules thereto ("the MONY Quarterly Statements"). The
MONY Annual Statements and the MONY Quarterly Statements have been prepared in
accordance with New York SAP throughout the periods involved and in accordance
with the books and records of MONY. Each of the statutory financial statements
contained in the MONY Annual Statements and the MONY Quarterly Statements fairly
and accurately presents or will fairly and accurately present, as the case may
be, in all material respects, the assets, liabilities and capital and surplus,
of MONY, as of the dates thereof in accordance with New York SAP, subject, in
the case of the MONY Quarterly Statements, to normal year-end adjustments and
any other adjustments described therein.
(b) On or prior to the date hereof, MONY has delivered to AUSA Life
true, correct and complete copies of (a) the audited consolidated balance sheet
of MONY and its Subsidiaries and the balance sheet of the separate accounts of
MONY as of December 31, 1992, prepared in accordance with New York SAP, together
with the notes thereon and the related reports of Coopers & Lybrand, the
independent certified public accountant of MONY, and (b) the audited
consolidated statements of income, capital and surplus, and cash flows of MONY
and its Subsidiaries and statements of income, capital and surplus and cash
flows of the separate accounts of MONY for the year ended December 31, 1992,
prepared in accordance with New York SAP, together with the notes thereon and
the related reports of Coopers & Lybrand (collectively, the "Audited Financial
Statements"). The Audited Financial Statements are based on the books and
records of MONY and its Subsidiaries, and the Audited Financial Statements have
been audited by Coopers & Lybrand and fairly present in all material respects
the consolidated financial
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position and results of operations of MONY and its Subsidiaries and of the
separate accounts of MONY as of the date and for the period indicated therein.
(c) The Preliminary Balance Sheet fairly presents the condition of the
Business as of March 31, 1993 solely in accordance with the accounting
principles utilized in the preparation of the Preliminary Balance Sheet.
Section 3.17. Labor Disputes; Compliance. No general work stoppage or
other significant labor dispute with respect to the Business is pending or, to
MONY's knowledge, threatened and, to MONY's knowledge, no application for
certification of a collective bargaining agent is pending or threatened with
respect to the Business. No employees of MONY involved with the Business are
covered by a collective bargaining agreement with MONY. MONY has complied in all
material respects with all laws relating to the employment and safety of labor,
including provisions relating to wages, hours, benefits, collective bargaining,
the payment of social security and similar Taxes, and all applicable
occupational safety and health acts, laws and regulations with respect to
employees employed in the Business.
Section 3.18. Agents. Schedule 3.18(A) hereto lists all of MONY's
agents and brokers as of the date hereof who have acted as agent or broker with
respect to Insurance Contracts which are in force and who were paid commissions
by MONY within the past 12 months. Set forth in Schedule 3.18(B) hereto is a
list of the insurance agents and brokers who were paid at least $10,000 in
commissions by MONY with respect to the Business during 1992 ("Significant
Brokers") MONY believes it enjoys good relations
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with each Significant Broker. Schedule 3.18(B) hereto sets forth (i) the
standard forms of agreements between MONY and its insurance agents and brokers
which relate to the Business, (ii) a list of those Significant Brokers as to
which such agreements are in effect and (iii) a list of those Significant
Brokers who have entered into other agency agreements with MONY which are in
effect. Except as set forth in Schedule 3.18(B) hereto, there are no other such
agreements, whether written or oral, between MONY and any Significant Brokers
providing for the compensation or indemnification of such agents or brokers in
connection with the Business or the provision of financing (whether in the form
of agents, balances, loans or otherwise) to such agents or brokers. Each of such
contracts and other agreements relating to the Business between MONY and the
Significant Brokers is valid, binding and in full force and effect in accordance
with its terms. Neither MONY nor, to MONY's knowledge, any Significant Broker is
in default in any material respect with respect to any such contract or such
other agreement and no such contract or other agreement between such parties
contains any provision providing that the other party thereto may terminate the
same by reason of the transactions contemplated by this Agreement.
Section 3.19. Threats of Cancellation. Except as disclosed in Schedule
3.19 hereto, since January 1, 1993 no policyholder or party to a joiner
agreement which individually or in the aggregate accounted for $5 million or
more in aggregate premium income and policyholder deposits relating to the
Business for the year ended December 31, 1992 has terminated or, to the
knowledge of MONY, has given written notice of termination of its relationship
with MONY.
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Section 3.20. Liabilities and Reserves.
(a) Each reserve established or reflected in MONY Annual Statement for
the year ended December 31, 1992, with respect to the Insurance Contracts was or
will be determined in accordance with generally accepted actuarial standards
consistently applied, was based on actuarial assumptions that were in accordance
with those called for in relevant policy and contract provisions, is fairly
stated in accordance with sound actuarial principles and is in compliance with
the requirements of the applicable insurance laws, rules and regulations of New
York and those of any other applicable jurisdictions. MONY has delivered to
AEGON true, correct and complete copies of the actuarial valuation reports
delivered to the New York Insurance Department for the years ended December 31,
1992 and 1991.
(b) MONY has delivered to AEGON true, complete and correct copies of
all analyses, reports and other data prepared by MONY or submitted by MONY to
insurance regulatory authorities relating to risk based capital calculations.
(c) Except for regular periodic assessments in the ordinary course of
business or except as set forth in Schedule 3.21 hereto, no claim or assessment
in connection with the Business is pending nor, to the knowledge of MONY,
threatened against it by any state insurance guaranty association in connection
with such association's fund relating to insolvent insurers.
(d) Except as listed on Schedule 3.20 hereto, neither Diversified nor
DISC has conducted any business operations and neither Diversified nor DISC has
any assets (other
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than the Permits set forth on Schedules 3.13(C) and 3.13(D) hereto) , or as of
the Closing Date will have any liability to any Person.
Section 3.21. Benefit Plans. (a) Except as set forth in Schedule 3.2.1
hereto, the Selling Parties do not maintain, contribute to or have any liability
with respect to any employee benefit plan ("Employee Benefit Plans") as that
term is defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") , or compensation program (collectively, the
"Plans") with respect to any employee or independent contractor involved in or
providing services to, the Business (the "Seller Employees"). Except as set
forth in Schedule 3.21 hereto, the Selling Parties have not made any commitment
and are not under any obligation to create or contribute to any Plan or to amend
any Plan except as required by applicable law.
(b) The Selling Parties have delivered, or made available, to the
Acquiring Parties true, complete and correct copies of the following documents,
as amended, relating to the Plans:
(i) Each Plan document currently in effect as to each Plan,
including any related trust agreements, custodial agreements, group annuity
contracts, insurance policies or other funding agreements or arrangements;
(ii) The most recent determination letter, if any, from the
Internal Revenue Service (the "IRS") with respect to each of the Plans intended
to be qualified under Section 401 of the Code and exempt from Taxes pursuant to
Section 501(a) of the Code;
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(iii) Actuarial valuations for the most recent Plan year for
which such valuations are available;
(iv) The most recent summary plan description;
(v) The most recent copy of any notice of material
modifications;
(vi) The most recently filed annual return/report on Form
5500, 5500-C or 5500-R; and
(vii) With respect to any deferred compensation agreements,
arrangements or programs intending to comply with the alternative reporting and
disclosure requirements under ERISA, any statements filed with the Department of
Labor pursuant to Department of Labor Regulation Section 2520.104-23 for such
agreements, arrangements or programs.
(c) The Selling Parties have complied, and will continue to comply,
with the medical continuation obligations established under the Consolidated
Omnibus Budget Reduction Act of 1985, as provided in Code Section 4980B and
ERISA Sections 601 et seq. ("COBRA Continuation Benefits"), with respect to MONY
Employees who do not become Continuing Employees and who prior to the Closing
devote a significant portion of their employment to the Business.
(d) Except as set forth in Schedule 3.21 hereto, the Selling Parties do
not maintain any Employee Benefit Plans which provide health, life,
hospitalization, medical,
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sickness or other similar benefits to retirees who were previously employed in
connection with the Business.
Section 3.22. Specimen Plans.
(a) Schedule 3.22 hereto sets forth all model plans, prototype plans
and similar documents which were provided by the Selling Parties to their
customers and used, in whole or in substantial part, in connection with the
Business (the "Specimen Plans").
(b) The Selling Parties have made available to AUSA Life copies of all
Specimen Plans and any other documents including, without limitation, all sales,
marketing or promotional materials, relating thereto.
(c) All Specimen Plans which are described on Schedule 3.22 hereto to
be, or which have been represented by MONY to the Selling Parties' customers as
being, plans meeting the requirements in their terms of the applicable Sections
of the Code and ERISA did meet those requirements in all material respects and,
with respect to Specimen Plans currently in use, continue to meet such
requirements in all material respects. All such Specimen Plans which are
considered prototype or master plans under IRS national office prototype and
master plan programs have received current IRS national office opinion letters,
copies of which have been provided to the Acquiring Parties; provided, however,
that MONY makes no representation or warranty with respect to the use of vesting
schedules in connection with plans intended to be qualified under Code Section
403(b).
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(d) Schedule 3.22 hereto includes a complete description of all actions
and notices required by the Acquiring Parties during the first 120 days
following the Closing Date with respect to Employee Benefit Plans which utilize
a Specimen Plan.
(e) Schedule 3.22 hereto includes a complete listing of all written
agreements (other than Insurance Contracts) whereby the Selling Parties are
obligated to provide administrative or other services for the Selling Parties'
customers in connection with an Employee Benefit Plan. The services provided by
the Selling Parties in connection with such Employee Benefit Plans have been
provided in accordance with ERISA, the Code, other applicable Federal and state
laws and the terms of applicable agreements, including, without limitation, the
issuance of certificates to plan participants in every applicable jurisdiction
and compliance with all reporting and disclosure requirements under ERISA and
the Code.
(f) The Selling Parties are not fiduciaries (within the meaning of
ERISA Section 3 (21) ) with respect to any Employee Benefit Plan, other than
with respect to the Employee Benefit Plans which are maintained for the Selling
Parties' employees, Separate Accounts and the assets of Employee Benefit Plans
which are invested by the Selling Parties on a discretionary basis.
(g) All files and records of MONY with respect to the Specimen Plans
and Service Agreements are complete in all material respects.
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(h) To the knowledge of MONY, the Selling Parties have advised each of
their customers in writing that the Selling Parties have not given legal advice
in connection with the Employee Benefit Plans of such customers.
(i) Each of the Selling Parties' customers for whom the Selling Parties
invest plan assets on a discretionary basis have properly completed and executed
a discretionary asset management agreement, the originals of which are in files
maintained by the Selling Parties and which have been made available to the
Acquiring Parties.
(j) Except as set forth on Schedule 3.22 hereto, to the knowledge of
MONY, each Employee Benefit Plan for the Selling Parties' customers, or
otherwise involving a Specimen Plan, which are intended to be qualified under
Code Section 403(b), are maintained by an employer as described in Code Section
403(b)(1)(A).
(k) Each eligible deferred compensation plan (within the meaning of
Code Section 457(b)) for the Selling Parties' customers, or otherwise involving
a Specimen Plan, was established by an eligible employer as described in Code
Section 457(e)(1). If such employer is an entity described in Code Section
457(e)(1)(B) which is not exempt from ERISA coverage pursuant to ERISA Section
4(b), such eligible deferred compensation plan is not subject to Part 4 of Title
I of ERISA pursuant to ERISA Section 401(a)(1).
(1) To the knowledge of MONY, all documents, promotional and sales
brochures and materials related to a Specimen Plan required to be filed or
approved by certain jurisdictions have been filed and/or approved in those
jurisdictions where so required.
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(m) Disclosure forms have been provided to Employee Benefit Plan
fiduciaries who are customers of MONY and are in files in connection with the
sales of products or services to any Employee Benefit Plan, if required by
Prohibited Transaction Exemption 84-24.
Section 3.23. Taxes.
(a) There are no Liens or Encumbrances on any of the Transferred Assets
that arose in connection with any failure (or alleged failure) of MONY to pay
any Tax.
(b) MONY has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor or policyholder.
(c) MONY and its Affiliates have not incurred, and will not incur, any
Taxes (whether or not shown on any Tax Return) which, to MONY's knowledge, will
become a liability of AEGON or AUSA Life as a transferee under any provision of
the Code or for any other reason.
(d) The unpaid Taxes of MONY and its Affiliates (i) did not, as of
December 31, 1992, exceed the reserve for Tax liability (rather than any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of the balance sheet of MONY and its
Affiliates contained in the Audited Financial Statement (rather than in any
notes thereto) and (ii) do not exceed that reserve as adjusted for the passage
of time through the Closing Date.
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Section 3.24. Reinsurance. There are no agreements, written or oral,
pursuant to which MONY cedes or retrocedes risks assumed under the Insurance
Contracts. There are no Insurance Contracts which are agreements of assumed
reinsurance.
Section 3.25. Banking Arrangements. Schedule 3.25 hereto contains a
complete and accurate list and description of (a) all bank accounts and with
respect to all such accounts other than the specified draft accounts, the
signatories thereto and (b) all lock box arrangements, used in whole or in part
in connection with the Business.
Section 3.26. Absence of Certain Changes or Events. As of the date
hereof, except as described on Schedule 3.26 hereto or except as expressly
contemplated or required by this Agreement, since January 1, 1993, MONY has
conducted the Business only in the ordinary course and there has not been (a)
any damage, destruction or loss, whether covered by insurance or not, to any
Transferred Asset, (b) the execution of any agreement with any officer of the
Business providing for his employment, or any increase in the compensation or in
severance or termination benefits payable or to become payable by MONY to the
employees of the Business, or any material increase in benefits under any
Benefit Plan or vacation plan or policy (whether or not legally binding)
maintained by MONY (or to which it contributes) providing benefits to any
present or former employee of the Business, except in any case in the ordinary
course of business consistent with prior practice, (c) any material change in
the underwriting, pricing, actuarial or investment practices or policies of the
Business, or any material change in its financial, tax or accounting practices
or policies, in either case including, without limitation, any basis for
establishing reserves and any depreciation or amortization policies or rates,
(d)
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any transaction, commitment, dispute, damage, destruction, loss or other event
or condition of any character (whether or not in the ordinary course of
business), individually or in the aggregate having, or which, insofar as
reasonably can be foreseen is likely to have, a Material Adverse Effect on the
Business or the Transferred Assets taken as a whole, other than events or
conditions relating to the life insurance industry generally and which have a
similar Material Adverse Effect on both MONY and life insurance subsidiaries of
AEGON (on a consolidated basis), (e) any indebtedness incurred by MONY for
borrowed money or any commitment to borrow money entered into or any guaranty
given by MONY in connection with the Business or the Transferred Assets, (f) any
sale, lease, abandonment, or other disposition by MONY of any assets necessary
to the conduct of the Business, other than in the ordinary course of business
and consistent with past practice, (g) the creation of any lien or encumbrance
relating to the Transferred Assets, other than Permitted Liens and Encumbrances,
(h) any capital expenditures relating to the business in excess of $2 million in
the aggregate, (i) to the knowledge of MONY, any waiver of any material rights
or of any cancellation of any material claims, debts or Accounts Receivable
relating to the Business and (j) any single fact or occurrence, or group of
facts or occurrences, (whether or not related and whether or not individually or
in the aggregate material) including any of the matters listed above in this
Section 3.26 that has had or is likely to have a Material Adverse Effect on
MONY, the Business or the Transferred Assets taken as a whole, other than events
or conditions relating to the life insurance industry generally and which have a
similar Material Adverse Effect on both MONY and AEGON (on a consolidated basis
with its Subsidiaries).
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Section 3.27. Mortgage Loans.
(a) Mortgage Loans. (i) Schedule 1.01(K) hereto sets forth information
concerning the Mortgage Loans in substantially the form of Exhibit S hereto, all
of which is true and correct. The originals of the mortgage loan documents
described on Schedule 1.01(K) (the "Mortgage Loan Documents") have been made
available to and at the Closing will be delivered to AUSA Life. There have been
no amendments or modifications to the Mortgage Loan Documents except in writing
and as described on Schedule 1.01(K) hereto. Any such amendment or modification
listed on Schedule 1.01(K) hereto has been recorded and/or filed in all places
necessary to perfect or continue the Mortgage Loan, as amended, as a valid first
priority lien on the related mortgaged property.
(ii) The Mortgage Loan Documents and each other document
evidencing, securing or guaranteeing the Mortgage Loans are legal, valid and
binding obligations of the obligor(s) thereof, enforceable in accordance with
their terms (except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors and
by general principles of equity, regardless of whether enforcement is sought in
a proceeding at law or in equity), and no claims to the contrary have been
asserted with respect thereto. Except as described on Schedule 3.27 hereto, no
obligor has been released by MONY or, to the knowledge of MONY, by operation of
law or otherwise, from any of its obligations under the Mortgage Loan Documents.
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(iii) Except as described on Schedule 3.27 hereto, MONY is the
sole owner and holder of the Mortgage Loans and the Mortgage Loan Documents and
has not (A) except as listed on Schedule 3.27 hereto, released, discharged,
sold, assigned, transferred or hypothecated all or any part of the Mortgage
Loans or the Mortgage Loan Documents, except for past assignments of various
Mortgage Loans to assignees who were Affiliates of MONY and who have reassigned
such Mortgage Loans back to MONY, nor (B) except as described on Schedule 3.27
hereto, taken any action that materially and adversely affects its rights as the
holder of such Mortgage Loans or waived or relinquished any of its material
rights or remedies there under.
(iv) Except as listed on Schedule 3.27 hereto, no borrower
under any of the Mortgage Loans has issued any indebtedness for any loans (other
than the Mortgage Loans) which are secured by a Lien or Encumbrance on any real
property described in any of the Mortgage Loan Documents as securing the
Mortgage Loans.
(v) The assignment of Mortgage Loan Documents from MONY to
AUSA Life pursuant to the Mortgage Transfer Documents is in a form suitable for
recordation under applicable law, is valid and sufficient to transfer, and does
transfer to AUSA Life all of MONY's right and title to, and interest in, the
Mortgage Loans, free and clear of any Lien or Encumbrance on such Mortgage
Loans.
(vi) No custodial balances with respect to the Mortgage Loans
are held by MONY or any party servicing the Mortgage Loans on behalf of MONY nor
do any obligations exist as of the date hereof for the future maintenance of
such custodial
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balances except for the custodial balances held in the Custodial Accounts (the
"Custodial Balances"). The Custodial Balances are the amounts actually received
by MONY from the borrower or others, plus earnings thereon, less all required
disbursements made by MONY pursuant to the Mortgage Loan Documents. All
Custodial Balances shall be transferred to AUSA Life at the time that the
Mortgage Loan to which they pertain is transferred to AUSA Life.
(vii) To MONY's knowledge, the interest being charged on any
of the Mortgage Loans does not exceed the maximum amount permitted by law.
(viii) MONY has no obligation to fund additional amounts with
respect to any of the Mortgage Loans. The proceeds of each Mortgage Loan have
been fully disbursed and all costs, fees and expenses payable to or by MONY in
connection with the making of the Mortgage Loans have been paid, and any and all
requirements as to completion of any on-site or off-site improvements, and as to
disbursements of any escrow funds therefore, have been complied with in all
material respects. MONY acknowledges and agrees that AUSA Life is not assuming
any obligation of MONY to fund any additional amounts that any borrower may be
entitled to receive pursuant to any Mortgage Loan.
(ix) To Mony's knowledge, except as described on Schedule 3.27
hereto, no taxes, assessments or insurance payments are in default with respect
to any of the properties securing the Mortgage Loans.
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(x) To MONY's knowledge, except as described on Schedule 3.27
hereto, no default exists under the Mortgage Loans which either alone, with
notice, or by the passage of time, would entitle its holder to accelerate the
maturity of any of the Mortgage Loans, or of any offsets or defenses which any
borrower could assert against its obligations under the Mortgage Loan Documents
or against the enforcement of MONY's rights thereunder nor to MONY's knowledge,
has an event of default existed during the previous 12 months. To MONY's
knowledge, MONY is not in default with respect to any of its material
obligations under the Mortgage Loan Documents. To MONY's knowledge, except as
described on Schedule 3.27 hereto, no borrower under any of the Mortgage Loans
is in default in connection with any other loan outstanding with MONY. To MONY's
knowledge, none of the borrowers under any of the Mortgage Loans and no general
partner thereof is involved as a debtor in, or has commenced as a debtor any
bankruptcy, insolvency or reorganization proceeding, and none of the borrowers
under any of the Mortgage Loans, and no general partner thereof, has
acknowledged or admitted its or their inability to pay their debts or
obligations as the same become due. Except as listed on Schedule 3.27 hereto, to
MONY's knowledge, no borrower has requested in writing to MONY a waiver of or
modification to any financial term or provision of the Mortgage Loan Documents
within the past 24 month period.
(xi) To MONY's knowledge, the Mortgage Loans are subject to no
rights of recision, set-off, counterclaim or defense, nor will the operation of
any of the terms of the Mortgage Loan Documents, or the exercise of any rights
thereunder, render the Mortgage Loan Documents unenforceable, in whole or in
part, or subject to any right of
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recision, set-off, counterclaim or defense, and no such right has been
previously asserted in writing to MONY with respect thereto.
(xii) To MONY's knowledge, MONY has not performed any act or
failed to perform any act that would impair the tax-exempt status of any
Mortgage Loan that was made with the intent of having the interest on the
Mortgage Loan be exempt from Federal income taxation.
(b) Security for Mortgage Loans. (i) MONY has no knowledge of any
material damage to or threat of condemnation, forfeiture or seizure of any real
property, or improvements located on any real property, described in any of the
Mortgage Loan Documents as securing any Mortgage Loans.
(ii) All collateral described in the security documents for
the Mortgage Loans was in existence as of the date of the execution of the
Mortgage Loan Documents, and no portion of any such collateral has been released
except as listed on Schedule 1.01(K) hereto.
(iii) Except as set forth on Schedule 3.27 hereto and except
for Taxes not yet delinquent and easements and restrictions which do not
adversely affect the marketability of title, the Mortgage Loan Documents create
first priority liens on the property (both real and personal) described therein.
The personal property securing each Mortgage Loan includes all personal property
necessary for the use and operation of the real property securing such Mortgage
Loan. There are no pending claims by MONY under any lender's policy of title
insurance covering any Mortgage Loan. To MONY's
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knowledge, there are no material circumstances or conditions with respect to any
of the properties securing the Mortgage Loans (other than renewals of leases at
maturity) that would or may reduce the value of such property by 25% or more
which have not been adequately reflected in the current carrying value of such
Mortgage Loan on the books of MONY, including, without limitation, matters
threatening or affecting title, matters affecting material tenancies and the
physical condition of such properties.
(iv) Except as set forth on Schedule 3.27 hereto, neither MONY
nor any of its Affiliates has received any notice advising of the existence or
threatened existence on or with respect to any of the property securing the
Mortgage Loans of any substance that, as of the date hereof, is a Hazardous
Material.
(v) Except as listed on Schedule 3.27 hereto, to MONY's
knowledge, there is no proceeding pending against MONY or any of its Affiliates
or any property securing a Mortgage Loan, or any pending or threatened
investigation or inquiry with respect to any of them, by a Federal, state or
local court, tribunal, administrative agency, department, commission, board or
other authority or instrumentality with respect to the presence of any materials
which as of the date hereof is a Hazardous Material on any of the property
securing the Mortgage Loans or the migration thereof from or to any other
property.
(c) Third Party Agreements. No party (other than the parties hereto and
the Manager) has any rights to service any of the Mortgage Loans on and after
the Closing Date.
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(d) Other. (i) To MONY's knowledge, the property securing each Mortgage
Loan is presently covered by each of the following described policy or policies
of insurance in which MONY is named as Mortgagee and loss payee under a standard
mortgage clause, or additional insured as to liability coverage, and named
insured as to title insurance:
(A) Extended coverage hazard insurance.
(B) Business interruption insurance, loss of rental income or business
income insurance.
(C) Property damage insurance.
(D) Flood insurance as required by the National Flood Insurance Act of
1968, as amended.
(E) Title insurance insuring that each Mortgage Loan creates a valid
and enforceable first priority lien on the security.
To MONY's knowledge, MONY has not done or failed to do, or caused to be done or
omitted to be done, any act the effect of which act or omission impairs or
invalidates (1) any of the policies described above, (2) any fidelity bond,
direct surety bond or errors and omissions insurance policy required upon the
making of any of the Mortgage Loans or (3) any surety or guaranty agreement with
respect to the Mortgage Loans.
(ii) To MONY's knowledge, none of the Mortgage Loans is
cross-defaulted or cross-collateralized with a loan not being transferred to
AUSA Life, and none of the property securing any of the Mortgage Loans requires
for its viability for the use intended, the use of property not secured by the
Mortgage Loans.
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(iii) MONY or an Affiliate of MONY is the sole named insured
on a policy of title insurance with respect to each of the Mortgage Loans, and
each of said title insurance policies insures MONY as the holder of a first
priority mortgage. To MONY's knowledge, MONY has not committed any act or
omission which would impair the insured's first priority lien status, or which
would be a defense to a claim under any of said title insurance policies. To
MONY's knowledge, MONY has not received any payment or other consideration from
any of the title insurance companies that issued any policy of title insurance
insuring the lien of any of the Mortgage Loans.
(iv) To MONY's knowledge, none of the borrowers under any of
the Mortgage Loans has made, and MONY has not received or accepted, any
prepayment of interest under any of the Mortgage Loans.
(v) MONY has not participated in the management or control of
any of the borrowers under the Mortgage Loans, and MONY has not participated in
the management, operation or control of the real property encumbered by any of
the Mortgage Loans or any of the improvements located on said real property. For
purposes of this paragraph, the foregoing shall be deemed not to include any
mortgage servicing activities involving the collection of principal and interest
or tax and insurance escrows.
(vi) Except as set forth on Schedule 3.27 hereto, MONY has no
obligation for the payment of any brokerage commissions, fees or compensation of
any kind with respect to any of the Mortgage Loans.
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(vii) Each of the Mortgage Loans has been allocated to MONY's
general account and no such Mortgage Loan has been allocated to or held by any
MONY Separate Account, including, without limitation, any MONY Separate Account
governed by or subject to ERISA.
(viii) To MONY's knowledge, the full amount of the mortgage
recording tax, and all similar taxes and charges has been paid in full with
respect to each Mortgage Loan.
Section 3.28. Other Sale Arrangement. MONY is not obligated or liable,
contingently or otherwise, for or with respect to negotiations, letters of
intent or commitments for the sale of all or any part of the Business or the
Transferred Assets to any Person other than AEGON and AUSA Life.
Section 3.29. Separate Accounts. (a) Each of MONY Separate Accounts is
duly and validly established and maintained under the laws of the State of New
York and is either excluded from the definition of an investment company
pursuant to section 3(c)(11) of the 1940 Act or is duly registered as an
investment company under such act; if registered, each such Separate Account is
operated in compliance with the 1940 Act, has filed all reports and amendments
of its registration statement required to be filed, and has been granted all
exemptive relief necessary for its operations as presently conducted. The
Insurance Contracts under which MONY Separate Account assets are held are duly
and validly issued and are either exempt from registration under the Securities
Act pursuant to Section 3(a)(2) of such act or were sold pursuant to an
effective registration statement
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under the Securities Act and any such registration statement is currently in
effect to the extent necessary to allow MONY to receive contributions under such
policies.
(b) To the extent required, the assets of each of MONY Separate
Accounts are adequately diversified within the meaning of Section 817(h) of the
Code.
Section 3.30. Funds.
(a) Each of the Funds is duly registered with the Commission as an
open-end management investment company under the 1940 Act, and since its
inception has been and is in material compliance with the 1940 Act, and the
Commission regulations promulgated thereunder, including the requirements to
file semiannual or annual reports on N-SAR with the Commission. Except as listed
on Schedule 3.30 hereto, (i) all shares of the Funds have been duly registered
under the Securities Act and any applicable state securities laws, all
registration fees have been timely paid, the prospectuses, statements of
additional information and sales materials of each Fund have been duly filed
with the Commission, and applicable state securities authorities and, as
applicable, the National Association of Securities Dealers, Inc. and each of the
Funds has filed with the Commission and other applicable Federal or state
agencies or authorities such notices or reports required under applicable law
for the conduct of its business or the ownership of its assets. Each of the
Funds is duly incorporated and in good standing under the laws of the state of
its incorporation or is a validly existing business trust under the laws of the
jurisdiction in which it was formed and is qualified as a foreign corporation or
business trust in each jurisdiction in which such qualification is necessary,
and
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(b) The Manager and Diversified are duly registered under the Advisers
Act and are in compliance with the rules and regulations of the Commission under
the Advisers Act. True, complete and correct copies of all of the investment
advisory agreements, administrative service agreements, transfer agency
agreements, underwriting agreements and forms of sales agreements between MONY
or any of its Affiliates (including, without limitation, MONY Separate
Accounts), on the one hand, and any of the Funds, on the other, and all other
material agreements between any of the Funds and third parties (i) have been
delivered to AUSA Life and are listed on Schedule 3.30 hereto, (ii) are in full
force and effect and (iii) comply in all material respects with the applicable
requirements of the 1940 Act, the Advisers Act, the Exchange Act and the rules
and regulations thereunder.
(c) Each of the Funds meets all requirements to be taxed as a regulated
investment company under Subchapter M of the Code or as a partnership and, with
respect to Funds operational during 1992, met all distribution requirements
necessary to avoid income or excise tax under the Code with respect to such
year.
(d) There are no special consent judgments or Commission orders on or
with respect to any of the Funds currently in effect which have had or could
have a Material Adverse Effect on such Fund. Except as contemplated by this
Agreement or as otherwise listed on Schedule 3.30 hereto, all orders of
exemption issued to any of the Funds by any regulatory agency, including the
Commission and the IRS, which are necessary and material to the conduct of the
business of any Fund have been obtained and are currently in full force and
effect, no proceeding has been commenced to revoke any such order and,
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to MONY's knowledge, no such proceeding is contemplated by any such regulatory
agency.
Section 3.31. Insurance. Schedule 3.31 hereto sets forth a list and
brief description of all policies or binders of fire, liability, product
liability, worker's compensation, vehicular, errors and omissions, fidelity and
surety coverage and other insurance relating to the Business and the Tangible
Assets held by MONY. To MONY's knowledge such policies and binders are valid and
enforceable in accordance with their terms and are in full force and effect,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting rights of creditors of insurance companies
or rights of creditors generally and by general principles of equity, regardless
or whether enforcement is sought in a proceeding at law or in equity. To MONY's
knowledge such policies and binders insure against risks and liabilities to the
extent and in the manner deemed appropriate and sufficient by MONY.
Section 3.32. Compliance Certificates. MONY has made available to AEGON
copies of all compliance and other similar certificates which MONY has received
with respect to the Investment Assets since January 1, 1992. Since January 1,
1992 each Person which is required to provide such a certificate to MONY with
respect to the Investment Assets has done so.
Section 3.33. Completeness of Statements. No representation or warranty
of MONY herein or in the schedules and Ancillary Agreements attached or
delivered pursuant hereto, all of which are expressly incorporated herein by
reference, and no
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written statement or certificate furnished or to be furnished by or on behalf of
MONY to AEGON or AUSA Life or their agents pursuant hereto or in connection with
the transactions contemplated hereby, contains or will contain on the Closing
Date any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements contained herein and
therein not misleading.
Section 3.34. Capitalization. The Diversified Stock constitutes all of
the issued and outstanding shares of capital stock of Diversified, was duly
authorized and validly issued, is, fully paid, non-assessable and free of
preemptive rights and is owned directly by MONY, free and clear of any Liens or
Encumbrances. All of the outstanding shares of capital stock of DISC have been
duly authorized and validly issued, are fully paid, non-assessable and free of
preemptive rights and are owned directly by Diversified, free and clear of any
Liens or Encumbrances.
Section 3.35. Position of Listed Personnel. The employees of MONY
listed on Schedule 1.01(G) hereto include all directors and officers of MONY
with management responsibility with respect to the Business or the Transferred
Assets.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AEGON
AEGON hereby represents and warrants to MONY as follows:
Section 4.01. Organization and Standing. Each of AEGON and AUSA Life
(collectively, the "Acquiring Parties") is a corporation duly organized, validly
existing and in good standing under the laws of its respective state of domicile
or incorporation.
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Each of the Acquiring Parties has all requisite power and authority to own,
lease and operate its assets, properties and business and to carry on the
operations of their businesses as they are now being conducted. Attached hereto
as Schedule 4.01(A) hereto are true, correct and complete copies of the Charter
and By-laws or other charter or organizational documents of the Acquiring
Parties, including all amendments thereto through the date of this Agreement.
Section 4.02. Authorization. Each of the Acquiring Parties has all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement, and under each of the Ancillary Agreements to be executed
by it. The execution and delivery by the Acquiring Parties of this Agreement and
the Ancillary Agreements and the performance by it of its obligations under such
agreements, have been duly authorized. This Agreement has been, and on the
Closing Date the Ancillary Agreements will be, duly executed and delivered by
the respective Acquiring Parties party hereto or thereto; and, subject to the
due execution and delivery by the other parties to such agreements, this
Agreement is, and the Ancillary Agreements will, upon due execution and
delivery, be valid and binding obligations of the respective Acquiring Parties
party hereto or thereto, enforceable against such Acquiring Parties in
accordance with their terms
Section 4.03. No Conflict or Violation. Except as disclosed in Schedule
4.03 hereto, the execution, delivery and performance by the Acquiring Parties of
this Agreement and the Ancillary Agreements to which each of them is a party and
the consummation of the transactions contemplated hereby and thereby in
accordance with
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the respective terms and conditions hereof and thereof will not (a) violate any
provision of the charter, Bylaws or other organizational document of any of the
Acquiring Parties, (b) to AEGON's knowledge, violate, conflict with or result in
the breach of any of the terms of, result in any modification of the effect of,
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time or both, constitute) a default under, any
contract or other agreement to which any of the Acquiring Parties is a party or
by or to which it or any of its assets or properties may be bound or subject,
(c) to AEGON's knowledge, violate any order, judgment, injunction, award or
decree of any court, arbitrator or governmental or regulatory body against, or
binding upon, or any agreement with, or condition imposed by, any governmental
or regulatory body, foreign or domestic, binding upon any of the Acquiring
Parties, (d) to AEGON's knowledge, violate any statute, law or regulation of any
jurisdiction which violation would have a Material Adverse Effect on the
Acquiring Parties or materially and adversely affect the ability of either of
the Acquiring Parties to consummate the transactions contemplated hereby or
(after giving effect to the Closing) have a Material Adverse Effect on the
Business, or (e) to AEGON's knowledge, result in the breach of any of the terms
or conditions of, constitute a default under, or otherwise cause an impairment
of, any Permit related to the business of any of the Acquiring Parties or
necessary to conduct the Business.
Section 4.04. Consents and Approvals. Except as required under the HSR
Act or as set forth in Schedule 4.04 hereto and except for required Permits of
applicable insurance regulatory authorities, the execution, delivery and
performance by the
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Acquiring Parties of this Agreement and each of the Ancillary Agreements to
which each is a party and the consummation of the transactions contemplated
hereby and thereby in accordance with the respective terms hereof and thereof do
not require AEGON or AUSA Life to obtain any consent, approval or action of, or
make any filing with or give any notice to, any Person.
Section 4.05. Brokerage and Financial Advisers. No broker, finder or
financial adviser has acted directly or indirectly as such for, or is entitled
to any compensation from, any of the Acquiring Parties in connection with this
Agreement or the transactions contemplated hereby.
Section 4.06. Capitalization. To AEGON's knowledge, all of the
outstanding shares of capital stock of AUSA Life have been duly authorized and
validly issued, are fully paid, non-assessable and free of preemptive rights and
are owned directly by AEGON, free and clear of any Liens or Encumbrances.
Section 4.07. Actions and Proceedings. Except as previously disclosed
to MONY in writing, there are no outstanding orders, decrees or judgments by or
with any court, governmental agency, regulatory body or arbitration tribunal
that, individually or in the aggregate, have had or are likely to have a
Material Adverse Effect on the Acquiring Parties, or materially and adversely
affect the ability of either of the Acquiring Parties to consummate the
transactions contemplated hereby or (after giving effect to the Closing) have a
Material Adverse Effect on the Business. Except as previously disclosed to MONY
in writing, to AEGON's knowledge, there are no actions, suits, arbitrations or
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legal, administrative or other proceedings (other than those relating to
insurance claims) pending or threatened, against any of the Acquiring Parties,
at law or in equity, or before or by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind which, if adversely determined, would, individually or in
the aggregate, have a Material Adverse Effect on the Acquiring Parties, or
materially and adversely affect the ability of either of the Acquiring Parties
to consummate the transactions contemplated hereby or (after giving effect to
the Closing) have a Material Adverse Effect on the Business.
Section 4.08. Compliance with Laws. Except as listed on Schedule 4.08
hereto, to AEGON's knowledge, neither of the Acquiring Parties is in violation
of nor is there a default of the Acquiring Parties with respect to any
applicable order, judgment, writ, injunction, award or decree. Except as listed
on Schedule 4.08 hereto, to AEGON's knowledge, neither of the Acquiring Parties
is in violation of any Federal, state, local or foreign law, ordinance or
regulation or any other requirement of any governmental or regulatory body,
court or arbitrator applicable with respect to any of the Acquiring Parties or
has received any written notice that any such violation is being alleged, in
each case except those that will be cured by the Acquiring Parties prior to, or
by the act of, Closing.
Section 4.09. Permits, Licenses and Franchises. AUSA Life has been duly
authorized by the relevant state insurance regulatory authorities to transact
each of the lines of insurance business in each of the jurisdictions as set
forth in Schedule 4.09 hereto. Except as listed on Schedule 4.09 hereto, AUSA
Life has all Permits necessary to the conduct of the Business in the manner and
in the areas in which the Business is
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presently being conducted, and all such Permits are valid and in full force and
effect. Except as listed on Schedule 4.09 hereto, to AEGON's knowledge, AUSA
Life has not engaged in any activity which would cause revocation or suspension
of any such Permit and no action or proceeding looking to or contemplating the
revocation or suspension of any such Permit is pending or threatened.
Section 4.10. Regulatory Filings. AEGON has made available for
inspection by MONY all registrations, filings, submissions made by AUSA Life
with any governmental or regulatory body and reports of examinations issued by
any such governmental or regulatory body to the extent that such were made or
issued on or subsequent to January 1, 1990 and are in the possession of AEGON.
Except as listed on Schedule 4.10 hereto, to AEGON's knowledge, the Acquiring
Parties have filed all reports, statements, documents, registrations, filings,
or submissions required to be filed by it with any governmental or regulatory
body. Except as listed on Schedule 4.10 hereto, to AEGON's knowledge, all such
registrations, filings and submissions were in compliance in all material
respects with applicable law when filed or as amended or supplemented, and no
material deficiencies have been asserted by any such governmental or regulatory
body with respect to such registrations, filings or submissions that have not
been satisfied.
Section 4.11. GAAP Financial Statements. On or prior to the date
hereof, AEGON has delivered to MONY true, correct and complete copies of (a) the
audited consolidated balance sheet of AEGON and its Subsidiaries as of December
31, 1992, prepared in accordance with generally accepted accounting principles
("GAAP"), together with the notes thereon and the related report of Ernst &
Young, the independent certified
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public accountant of AEGON and (b) the audited consolidated statements of
income, stockholders, equity and cash flows of AEGON and its Subsidiaries for
the year ended December 31, 1992, prepared in accordance with GAAP, together
with the notes thereon and the related report of Ernst & Young (collectively,
the "AEGON Financial Statements"). AEGON has delivered to MONY a true, correct
and complete copy of the consolidated balance sheet, and the related
consolidated statements of income, stockholders' equity and cash flows, of AEGON
and its Subsidiaries for the quarters ended September 30, 1993, June 30, 1993
and March 31, 1993, prepared in accordance with Dutch accounting principles (the
"Interim AEGON Financial Statements"). The AEGON Financial Statements and the
Interim AEGON Financial Statements are based on the books and records of AEGON
and its Subsidiaries, and AEGON Financial Statements have been prepared in
accordance with GAAP consistently applied, audited by Ernst & Young and fairly
present in all material respects the consolidated financial position and results
of operations of AEGON and its Subsidiaries as of the date and for the period
indicated therein.
Section 4.12. Statutory Statements. The Acquiring Parties have
furnished to MONY true, complete and correct copies of the Annual Statements of
AUSA Life as filed with the New York Insurance Department for the years ended
December 31, 1992, 1991 and 1990, together with all exhibits and schedules
thereto. The Acquiring Parties have furnished to MONY a true, complete and
correct copy of the Quarterly Statements of AUSA Life as filed with the New York
Insurance Department for the quarters ended
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September 30, 1993, June 30, 1993 and March 31, 1993, together with all exhibits
and schedules thereto.
Section 4.13. Absence of Certain Changes or Events. As of the date
hereof, except as listed on Schedule 4.13 hereto or except as expressly
contemplated or required by this Agreement, since January 1, 1993, there has not
been any change in the business, operations, condition (financial or otherwise),
results of operations, properties, prospects or assets of AEGON or in the
ability of AEGON to consummate the transactions contemplated hereby or in any
Ancillary Agreement that has had or is likely to have a Material Adverse Effect
on the Acquiring Parties, or materially and adversely affect the ability of any
of the Acquiring Parties to consummate the transactions contemplated hereby, or
(after giving effect to the Closing) have a Material Adverse Effect on the
Business, other than events or conditions relating to the life insurance
industry generally and which have a similar material Adverse Effect on both MONY
and the life insurance company Subsidiaries of AEGON (on a consolidated basis).
Section 4.14. Completeness of Statements. No representation or warranty
of AEGON herein or in the schedules and Ancillary Agreements attached or
delivered pursuant hereto, all of which are expressly incorporated herein by
reference, and no written statement or certificate furnished or to be furnished
by or on behalf of AEGON or AUSA Life to the Selling Parties or their agents
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain on the Closing Date any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
the statements contained herein and therein not misleading.
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Section 4.15. Common Parent. The immediate parent of AEGON is the
"common parent" of an "affiliated group" of corporations (as those terms are
used in section 1504 of the Code and the Treasury Regulations promulgated under
section 1502 of the Code) that has elected to file, and does file, consolidated
federal income tax returns, and such affiliated group includes AUSA Life as a
member corporation. AEGON is the agent of AUSA Life under Treasury Regulations
Section 1.1502-77, and AEGON has the authority to make the 338 Elections with
respect to AUSA Life's acquisition of the Target Corporations.
ARTICLE V
COVENANTS
Section 5.01. Conduct of Business. (a) Except as set forth in Schedule
5.01 hereto, prior to the Closing, MONY shall not without the prior written
consent of AEGON:
(i) mortgage, pledge or subject to any Lien or Encumbrance,
any of the Investment Assets or mortgage, pledge or subject to any Lien
or Encumbrance any other Transferred Assets, other than, in the case of
such other Transferred Assets, Permitted Liens and Encumbrances,
(ii) sell, assign, transfer, lease or otherwise dispose of any
of the Transferred Assets or cancel or compromise any debt or claim
related to the Business, except in each case in the ordinary course of
business and consistent with past practice,
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(iii) amend, terminate or waive any right relating to the
Business or the Transferred Assets, except in each case in the ordinary
course of business and consistent with past practice,
(iv) make any change in the wages, salaries or other
compensation (including material benefits under any Plans) of the
employees employed in the Business, or change any personnel policies or
employee benefits applicable to such employees, other than in the
ordinary course of business and consistent with past practice,
(v) execute any agreement providing for the employment of any
Person in connection with the Business or employ any Person in
connection with the Business who is not an employee as of the date
hereof whose annual compensation exceeds, or is expected to exceed,
$75,000,
(vi) except as otherwise permitted hereunder and except in the
ordinary course of business, enter into, modify, terminate, amend or
assume any contract, agreement, obligation, lease, license or
commitment relating to the Business or the Transferred Assets which by
its terms requires performance subsequent to the Closing Date or which
involves an aggregate monetary commitment or exposure for all such
contracts in excess of $50,000 annually,
(vii) incur any obligation or liability (fixed or contingent),
except normal trade or business obligations incurred in the ordinary
course of business and consistent with past practice, none of which
either individually or in the aggregate would have, or is reasonably
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likely to have a Material Adverse Effect on the Business or the
Transferred Assets taken as a whole,
(viii) discharge or satisfy any Lien or Encumbrance, except
for Permitted Liens or Encumbrances, on any Transferred Asset, except
in the ordinary course of business and consistent with past practices,
(ix) acquire any additional assets relating to the Business,
except for assets acquired in the ordinary course of business and
consistent with past practice,
(x) negotiate or enter into any new lease or modify any
existing Assigned and Assumed Contract affecting the Leased Real
Property,
(xi) knowingly transfer or grant any rights under any
Intellectual Property which constitute Intangible Assets, or
(xii) agree or commit to do any of the foregoing.
(b) Except as set forth in Schedule 5.01 hereto, prior to the
Closing, MONY shall, unless it shall receive the prior written consent of AEGON:
(i) operate the Business as presently operated and only in the
ordinary course and consistent with past practice and use commercially
reasonable efforts to preserve intact its present business organization
(including the retention of key employees) in connection with the
Business and to preserve its relationship with
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and the goodwill of its agents, brokers, customers, suppliers and other
Persons having business dealings with MONY in connection with the
Business,
(ii) use commercially reasonable efforts to maintain in force
all existing casualty and liability insurance policies insuring the
Transferred Assets or the Business, or policies providing substantially
similar coverage,
(iii) give notice to AEGON of any Material Adverse Effect with
respect to the Business or the Transferred Assets taken as a whole or
any event, occurrence or circumstance which MONY has knowledge of and
which is reasonably likely to cause a Material Adverse Effect with
respect to the Business or the Transferred Assets taken as a whole, as
promptly as practicable, but in no event more than forty-eight hours
after MONY acquires knowledge of any such event, occurrence or
circumstance,
(iv) use commercially reasonable efforts to maintain all of
the Tangible Assets in good operating condition, reasonable wear and
tear excepted, consistent with past practice, and take all steps
reasonably necessary to maintain the Intangible Assets, and
(v) use commercially reasonable efforts to maintain,
consistent with past practice, all inventories, spare parts, office
supplies and other expendable items included in the Transferred Assets.
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Section 5.02. Certain Transactions.
(a) Promptly following the execution of this Agreement, MONY shall
demand the prompt return to MONY or destruction of all confidential information
relating to the Business which had been provided to any person other than AEGON
or any governmental or regulatory authority for the purpose of an Acquisition
Proposal. At closing, subject to any limits on assignment thereof, MONY shall
assign to AEGON all of MONY's rights to limit or prohibit the disclosure of
confidential information related to the Business under existing confidentiality
agreements, and MONY's rights to limit or prohibit the disclosure of
confidential information related to the Business under such agreements shall be
included in the Assigned and Assumed Contracts.
(b) From the date of this Agreement through the Closing, neither MONY
nor any of its officers, employees, representatives or agents will, directly or
indirectly, solicit, encourage or initiate any negotiations or discussions with,
or provide any information to, or otherwise cooperate in any other manner with,
any Person or group (other than AUSA Life and its Affiliates) concerning any
direct or indirect sale or other disposition of the Business or all or any
portion of the Transferred Assets other than in the ordinary course of business.
MONY shall promptly inform AEGON in writing in the event any Person or group of
Persons shall discuss, negotiate or make an Acquisition Proposal.
(c) From the date of this Agreement, the Acquiring Parties shall
maintain the confidentiality of any confidential information with respect to
MONY furnished by or obtained from MONY since September 19, 1991 other than (i)
the Books and Records
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and (ii) other information relating to the Business or the Transferred Assets
provided to the Acquiring Parties as contemplated by this Agreement and the
Ancillary Agreements, unless such confidential information is readily
ascertainable from public or published information or trade sources or unless
either Acquiring Party is legally required (whether by binding court or
regulatory order, statute or otherwise) to disclose or reveal such information,
provided that the Acquiring Party shall only disclose such information to the
extent required to satisfy such legal requirement.
Section 5.03. Substitutions for Investment Assets.
Attached to this Agreement are Schedules 5.03(A), 5.03(B) and 5.03(C).
Schedule 5.03(A) sets forth additional assets which may be substituted for one
or more of the Investment Assets. Schedule 5.03(B) sets forth mortgage loans
which AUSA Life has previously rejected for inclusion on Schedule 1.01(J) due to
the environment report with respect to such mortgage loans not being acceptable
to AUSA Life. Schedule 5.03(C) sets forth material defects in the governing
documentation concerning certain Investment Assets, as specified on such
schedule on an asset by asset basis, such defects to constitute a Put Event
unless cured as provided herein.
(a) In the event that AUSA Life determines, within the Substitution
Period applicable to any Investment Asset, that one or more Put Events shall
have occurred or shall be existing within the Substitution Period with respect
to such Investment Asset, AUSA Life shall have the right: (i) on or prior to the
Closing Date, to require that such Investment Asset (the "Rejected Investment
Asset") be removed from Schedule 1.01(F)
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or Schedule 1.01(J), as the case may be, as an Investment Asset, and MONY shall,
on or prior to the Closing Date, substitute for the Rejected Investment Asset an
Investment Asset or Investment Assets from Schedule 5.03(A) hereto, as such
Schedule may be supplemented by MONY from time to time in the event that at any
time there shall be either no remaining Substitute Investment Assets listed on
such Schedule or no Substitute Investment Assets listed on such Schedule which
meet the criteria for substitution set forth in Section 5.03(d)(1) below (each,
a "Substitute Investment Asset"), reasonably acceptable to AUSA Life; (ii)
during the period commencing with the Closing Date and ending on the date which
is 165 days following the Closing Date, to require MONY to substitute a
Substitute Investment Asset for the Rejected Investment Asset; and (iii) during
the period commencing with the date which is 166 days following the Closing Date
and ending on the date which is 180 days following the Closing Date, to require
MONY to substitute, at the option of AUSA Life, a Substitute Investment Asset or
cash and cash equivalents for the Rejected Investment Asset; provided, however,
that in no event shall the aggregate amount of Investment Assets set forth on
Schedule 1.01(F) and Schedule 1.01(J) on the Closing Date which are substituted
as the result of a Put Event exceed an amount equal to ten percent (10% of such
Investment Assets, determined by reference to the statutory book value of such
Investment Assets as of the Closing Date; and provided, further, that in no
event shall the aggregate amount of cash and cash equivalents so substituted
exceed an amount equal to five percent (5%) of the statutory book value of the
Investment Assets on the Closing Date. Notwithstanding the foregoing, AUSA Life
may elect, upon written notice to MONY at or prior to the Closing, at its
option, to increase the cash and cash equivalent amounts limit set forth above
to ten
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percent (10%); provided, however, that in such event the right of AUSA
Life to require further substitutions of Investment Assets after such written
notice shall be limited to the Put Event set forth in subparagraph (B) below
(relating to environmental reports) and all other Put Events shall be of no
force or effect; and provided, further, that in such event, in making any
determination that such a Put Event has occurred, AUSA Life shall make such
determination in good faith and utilizing standards reasonably consistent with
those that were utilized by AUSA Life and AEGON in rejecting those assets set
forth on Schedule 5.03(B) hereto for inclusion on Schedule 1.01(i).
The substitutions contemplated by clauses (i), (ii) and (iii) above
shall be effected in accordance with the procedures set forth in subsections (b)
and (c) of this Section 5.03 ("Investment Asset Put Election").
Each of the following events constitutes a "Put Event" with respect to
an Investment Asset if such event is not cured by MONY to the reasonable
satisfaction of AUSA Life (and in accordance with the standard of care set forth
in Paragraph 29 of the Investment Management Agreement relative to the
management of Investment Assets) on or prior to the earlier of (i) the twentieth
day after the date MONY gives AUSA Life written notice of such event or (ii) the
second Business Day prior to the end of the Substitution Period applicable to
such Investment Asset:
(A) One or more of the material defects listed on Schedule
5.03(C) shall remain in existence with respect to the governing
documentation concerning an Investment Asset referred to on Schedule
5.03(C), or a material defect shall be in
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existence with respect to the governing documentation concerning a
Substitute Investment Asset.
(B) In the case of the Mortgage Loans and mortgage loans which
are Substitute Investment Assets for such Mortgage Loans, AUSA Life has
not received with respect to a Mortgage Loan a comprehensive
environmental report of the type referred to in Section 6.10 hereof or,
having received such report, any matter, condition, statement or fact
discussed in or disclosed by any such environmental report is not
acceptable to AUSA Life in the exercise of its reasonable discretion.
(C) In the case of the Mortgage Loans and mortgage loans which
are Substitute Investment Assets for such Mortgage Loans, AUSA Life has
not received on or prior to the Closing the commitment or title search,
as applicable, contemplated by Section 5.37 hereof with respect to a
Mortgage Loan which is included in the Investment Assets on or prior to
the Closing Date or, with respect to a Mortgage Loan which becomes a
Substitute Investment Asset after the Closing Date, AUSA Life has not
received such a commitment or title search with respect to such
Substitute Investment Asset on or prior to the date which is 165 days
following the Closing Date.
(D) In the case of the Mortgage Loans and mortgage loans which
are Substitute Investment Assets for such Mortgage Loans, AUSA Life has
not received, on or prior to the Closing, a Borrower's Estoppel
Certificate
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contemplated by Section 5.38 hereof from each borrower under a Mortgage
Loan which is included in the Investment Assets on or prior to the
Closing Date, or, with respect to a Mortgage Loan which becomes a
Substitute Investment Asset after the Closing, AUSA Life has not
received a Borrower's Estoppel Certificate with respect to such
Substitute Investment Asset on or prior to the date which is 165 days
following the Closing Date.
(E) There shall be existing on the Closing Date a material
breach, omission or inaccuracy in any of the representations or
warranties made by MONY herein with respect to an Investment Asset
which is listed on Schedule 1.01(F) or Schedule 1.01(J) hereto on the
date hereof, regardless of the knowledge of MONY, or with respect to a
Substitute Investment Asset, such a material breach, omission or
inaccuracy shall be existing on the date of substitution.
(F) In the case of any Investment Asset which is listed on
Schedule 1.01(F) hereto on the date hereof and which consists of
indebtedness for borrowed money, a payment default exists on or prior
to the Closing Date under any such Investment Asset or any agreement or
instrument pursuant to which any such Investment Asset was issued,
which default is not cured by the obligor (without waiver or
modification by MONY or an advance of funds by MONY) within 14 days of
the due date and which either alone, with notice, or by the passage of
time, would entitle MONY to accelerate the maturity of any such
indebtedness; or, MONY is in default on or prior to the Closing Date
with respect
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to any of its material obligations under the documents pursuant to
which such indebtedness was issued.
(G) In the case of any Mortgage Loan which is listed on
Schedule 1.01(J) hereto on the date hereof, a payment default exists on
or prior to the date which is 60 days following the Closing Date under
any such Mortgage Loan or any agreement or instrument pursuant to which
any such Mortgage Loan was issued, which default is not cured by the
obligor (without waiver or modification by MONY or an advance of funds
by MONY) within 14 days of the due date and which either alone, with
notice, or by the passage of time, would entitle MONY to accelerate the
maturity of any such indebtedness; or, with respect to a Mortgage Loan
which becomes a Substitute Investment Asset after the Closing Date, a
payment default or default by MONY as set forth above exists on or
prior to the date which is 60 days following the date on which such
Mortgage Loan became a Substitute Investment Asset.
(H) In the case of any Investment Asset which consists of
indebtedness for borrowed money or any such investment asset which are
Substitute Investment Assets for such Investment Assets (i) the Person
who is obligated to pay such indebtedness, (ii) any Person who owns the
security for such Investment Asset, (iii) any Person who is a general
partner of the Person who is obligated to pay such indebtedness and has
personal liability with respect thereto or (iv) any Person who is a
guarantor of the payment of such indebtedness, is involved, on or prior
to the Closing Date, as a debtor in any bankruptcy, insolvency or
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reorganization proceeding, or any such Person has, on or prior to the
Closing Date, commenced as a debtor any such proceeding or acknowledged
or admitted in writing its inability to pay its debts or obligations as
the same become due.
(b) MONY and AUSA Life shall each give written notice to the other
party promptly (but in no event more than one day) after it has knowledge of a
Put Event occurring during the Substitution Period.
(c) AUSA Life may make an Investment Asset Put Election with respect to
any Investment Asset by giving MONY notice of such Investment Asset Put Election
(a "Transferee Notice") during the applicable Substitution Period. Each
Transferee Notice shall identify the Rejected Investment Asset and certify the
Put Event upon which its rejection is based.
(d) On the first Business Day of each week during the Substitution
Period and, in addition, on the last day of the Substitution Period, MONY shall
transfer to AUSA Life either (i) Substitute Investment Assets having an
aggregate statutory carrying value on the books of MONY (as of such date) at
least equal to the aggregate statutory carrying value of the Rejected Investment
Assets during the previous week; which consist of a mix of types of assets which
is the same mix as such Rejected Investment Assets and which are of qualities
and maturities which are comparable to such Rejected Investment Assets; without
any of the characteristics described herein as Put Events; or (ii) cash or cash
equivalents in an amount equal to the aggregate statutory carrying value (as of
such date) of such Rejected Investment Assets, as applicable in accordance with
Section 5.03(a)
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hereof. AUSA Life shall simultaneously reconvey the Rejected Investment Assets
to MONY by appropriate transfer documents, but without warranty or
representation by AUSA Life except that AUSA Life shall represent that it has
not sold, assigned, transferred, modified or hypothecated such Rejected
Investment Assets to any other party or taken any action that materially and
adversely affects the rights of the holder of such Rejected Investment Assets,
except any such actions as were taken by the Manager as the agent of AUSA Life
or by AUSA Life at the direction of the Manager pursuant to the Investment
Management Agreement. MONY shall pay all costs of reconveyance. As of the date
of transfer, each Substitute Investment Asset shall be deemed an Investment
Asset and shall be subject to the same terms, conditions, agreements,
representations and warranties as are applicable to other Investment Assets
(including, without limitation, the provisions of this Section 5.03).
Section 5.04. Investigations. Prior to the Closing Date, the Acquiring
Parties shall be entitled, through their respective employees and
representatives, to make such investigation of the assets, liabilities, business
and operations of the Business or MONY, and such examination of the Books and
Records and financial condition of the Business or MONY, as the Acquiring
Parties may reasonably request. Prior to the Closing Date, the Selling Parties
shall be entitled, through their respective employees and representatives, to
make such investigation of the assets, liabilities, business and operations of
the Acquiring Parties and their Subsidiaries, and such examination of the books
and records and financial condition of the Acquiring Parties as any of the
Selling Parties may reasonably request. Any such investigation or examination
shall be
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conducted at reasonable times upon reasonable prior notice; and each of the
parties hereto, and their employees and representatives, including, without
limitation, counsel, investment bankers, and independent public accountants,
shall cooperate with the other's employees and representatives, as the case may
be, in connection with such review and examination.
Section 5.05. Continued Access. (a) For twelve years after the Closing
Date, or, if later, (i) such period as may be required by any Federal, state,
local or foreign governmental body or agency, (ii) the date on which the
Acquiring Parties and their Affiliates shall be fully and completely released by
MONY and its Affiliates from any and all liability relating to or arising out of
the transactions contemplated by this Agreement and the Ancillary Agreements,
(iii) with respect to a Tax matter, the date on which the applicable statute of
limitations (or any extension or waiver thereof) with respect to such Tax shall
expire or (iv) with respect to each Investment Asset, the date that such
Investment Asset is repaid or satisfied, MONY shall (i) allow AEGON, upon
reasonable prior notice and during regular business hours, through its employees
and representatives, the right, at AEGON's expense, to examine and make copies
of any books and records retained by MONY, to the extent they relate to the
Business or the Transferred Assets, for any reasonable business purpose
including, without limitation, the preparation or examination of Tax returns,
regulatory filings and financial statements and the conduct of any litigation or
regulatory dispute resolution, whether pending or threatened, concerning the
conduct of the Business prior to the Closing Date and (ii) maintain such book's
and records for AEGON's examination and copying. In addition,
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after such period MONY shall provide AEGON with reasonable access to such books
and records of MONY relating to matters identified in writing from time to time
to MONY involving the preparation or examination of Tax returns and financial
statements and the conduct of any litigation or regulatory dispute resolution.
Access to such books and records of MONY shall be at AEGON' s expense and may
not unreasonably interfere with MONY's business operations. In addition, MONY
shall make available to AEGON, subject to AEGON's reimbursement to MONY for
out-of-pocket expenses incurred by MONY in connection therewith, employees of
the Business and such other reasonable cooperation as may be requested by AEGON
in connection with any litigation or tax matter relating to the Business.
(b) For a period of twelve years after the Closing Date, or such longer
period referred to in subsection (a) hereof, AUSA Life shall (i) allow MONY,
during regular business hours, through its employees and representatives, the
right, at MONY's expense, to examine and make copies of the Books and Records
transferred to AEGON and AUSA Life at the Closing, for any reasonable business
purpose including, without limitation, the preparation or examination of Tax
returns, regulatory filings and financial statements and the conduct of any
litigation or regulatory dispute resolution whether pending or threatened, and
(ii) maintain such Books and Records for MONY's examination and copying. In
addition, after such period AUSA Life shall provide MONY with reasonable access
to the books and records relating to matters identified in writing from time to
time to AUSA Life involving the preparation or examination of Tax returns and
financial statements and the conduct of any litigation or regulatory dispute
resolution. Access to
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such records shall be at MONY's expense and may not unreasonably interfere with
AUSA Life's or any successor company's business operations. In addition, AUSA
Life shall make available to MONY, subject to MONY's reimbursement to AUSA Life
for out-of-pocket expenses incurred by AUSA Life in connection therewith, its
employees and such other cooperation as may be requested by MONY in connection
with any litigation or tax matter relating to the Business.
Section 5.06. HSR Act Filings. MONY, AEGON and AUSA Life shall, as
promptly as practicable, file, or cause to be filed, Notification and Report
Forms to be filed under the HSR Act with the Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division") in connection with the transactions contemplated by
this Agreement, the Ancillary Agreements and the other agreements contemplated
hereby and thereby, and shall use their respective reasonable efforts to respond
as promptly as practicable to all inquiries received from the FTC or the
Antitrust Division for additional information or documentation and to cause the
waiting periods under the HSR Act to terminate or expire at the earliest
possible date. MONY, on the one hand, and AEGON and AUSA Life, on the other
hand, shall each furnish to the other such necessary information and reasonable
assistance as the other may request in connection with its preparation of
necessary filings or submissions to any governmental or regulatory agency,
including, without limitation, any filings necessary under the provisions of the
HSR Act.
Section 5.07. Consents and Reasonable Efforts. MONY and AUSA Life will
cooperate and use commercially reasonable efforts to obtain all consents,
approvals and
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agreements of, and to give and make all notices and filings with, any
governmental authorities and regulatory agencies, necessary to authorize,
approve or permit the consummation of the transactions contemplated by this
Agreement, the Ancillary Agreements and the other agreements contemplated hereby
and thereby, including, without limitation, the Permits of insurance regulators
described in Section 6.03(c). MONY shall use commercially reasonable efforts to
obtain all approvals and consents to the transactions contemplated by this
Agreement and the Ancillary Agreements as set forth in Schedule 3.08 hereto,
including, without limitation all required consents and approvals for the
assignment and delegation to AUSA Life of MONY's rights and obligations under
the Assigned and Assumed Contracts (whether required by the terms of such
contracts or by the terms of this Agreement). AUSA Life will use commercially
reasonable efforts to obtain all approvals and consents to the transactions
contemplated by this Agreement and the Ancillary Agreements as set forth in
Schedule 4.04 hereto.
Section 5.08. Representations and Warranties. From the date hereof
through the Closing Date, (a) MONY shall, and MONY shall cause the Manager to,
use commercially reasonable efforts to conduct its affairs in such a manner so
that, except as otherwise contemplated or permitted by this Agreement, the
representations and warranties contained in Article III shall continue to be
true, complete and correct in all material respects on and as of the Closing
Date as if made on and as of the Closing Date (provided, however, to the extent
any such representation or warranty is already qualified by materiality, MONY
shall, and MONY shall cause the Manager to, use commercially reasonable efforts
to conduct its affairs in such a manner so that, except as otherwise
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contemplated or permitted by this Agreement, such representations and warranties
shall continue to be true, complete and correct in all respects on and as of the
Closing Date as if made on and as of the Closing Date), (b) the Acquiring
Parties shall use commercially reasonable efforts to conduct their affairs in
such a manner so that, except as otherwise contemplated or permitted by this
Agreement, the representations and warranties contained in Article IV shall
continue to be true and correct in all material respects on and as of the
Closing Date as if made on and as of the Closing Date, (provided, however, to
the extent any such representation or warranty is already qualified by
materiality, the Acquiring Parties shall use commercially reasonable efforts to
conduct their affairs in such a manner so that, except as otherwise contemplated
or permitted by this Agreement, such representations and warranties shall
continue to be true, complete and correct in all respects on and as of the
Closing Date as if made on and as of the Closing Date), (c) MONY shall notify
the Acquiring Parties promptly of any event, condition or circumstance known to
MONY occurring from the date hereof through the Closing Date that would
constitute a violation or breach of this Agreement by MONY and (d) the Acquiring
Parties shall notify MONY promptly of any event, condition or circumstance known
to the Acquiring Parties occurring from the date hereof through the Closing Date
that would constitute a violation or breach of this Agreement by the Acquiring
Parties.
Section 5.09. Further Assurances. (a) Upon the terms and subject to the
conditions herein provided, each of the Selling Parties and the Acquiring
Parties will use commercially reasonable efforts to take, or cause to be taken,
all action or do, or cause to be done, all things or execute any documents
necessary, proper or advisable to
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consummate and make effective the transactions contemplated by this Agreement,
the Ancillary Agreements and the other agreements contemplated hereby and
thereby.
(b) On and after the Closing Date, MONY and the Acquiring Parties will
take all reasonably appropriate action and execute any additional documents,
instruments or conveyances of any kind (not containing additional
representations and warranties) which may be reasonably necessary to carry out
any of the provisions hereof, including without limitation, putting AUSA Life in
full possession and operating control of the Transferred Assets and the
Business.
Section 5.10. Use of Names. Effective as of the Closing Date, MONY
shall grant, and by the execution of this Agreement shall be deemed to grant as
of the Closing Date, a perpetual, exclusive, non-transferable royalty-free
license to AUSA Life to use the words listed on Schedule 5.10 hereto; provided
that MONY shall retain the right to use such words and shall, at the direction
of AUSA Life, use such words in connection with the Coinsured Contracts (as
defined in the Coinsurance and Assumption Agreement).
Section 5.11. Expenses. The parties to this Agreement shall bear their
respective expenses incurred in connection with the preparation, execution and
performance of this Agreement and the transactions contemplated hereby,
including, without limitation, all fees and expenses of agents, representatives,
counsel, investment bankers, actuaries and accountants; provided, however, that
(a) the Acquiring Parties, on the one hand, and MONY, on the other hand, shall
equally share the cost of the filing fees in connection
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with the filings with the FTC and the Antitrust Division under the HSR Act with
respect to the transactions contemplated hereby, and (b) in the event that MONY
or either Acquiring Party shall terminate this Agreement in violation of Section
12.01 hereof, in addition to any other remedy available to the non-terminating
party at law or equity, the terminating party shall, upon provision to it of
reasonably adequate documentation by the non-terminating party or parties, bear
all such reasonable, out-of-pocket expenses incurred by the other parties
hereto, including, without limitation, attorneys' fees, from September 19, 1991
through the date of such termination in connection with the transactions
contemplated by this Agreement.
Section 5.12. Banking Arrangements. MONY and AUSA Life agree to
cooperate fully and use their best efforts to establish parallel accounts for
AUSA Life for the bank accounts and disbursement and lock box arrangements of
MONY used solely for the Business and listed on Schedule 3.25 hereto. On or
prior to the Closing, MONY shall provide AUSA Life with a complete and accurate
list of all policyholders or insureds of the Business utilizing nontraditional
funding mechanisms (Automated Clearing House (ACH) for electronic funds
transfer, paper depository transfer checks and bank wire transfers). MONY and
AUSA Life also agree to cooperate fully and use their best efforts to (a)
establish parallel accounts for AUSA Life for any of the accounts of MONY which
are not used solely for the Business as may be reasonably necessary to effect
the transactions contemplated herein and in the Ancillary Agreements and (b)
take actions necessary to permit AUSA Life to utilize, as of the Closing, the
nontraditional funding mechanisms (Automated Clearing House (ACH) for electronic
funds transfer, paper
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depository transfer checks and bank wire transfers) utilized in connection with
the Business.
Section 5.13. MONY's Agents. AUSA Life may contact insurance agents or
brokers selling policies and contracts of insurance or other products issued by
MONY for the purpose of engaging such agents or brokers to act on behalf of AUSA
Life to sell insurance products in the same lines as the Insurance Contracts.
MONY shall (i) encourage each of the agents and brokers listed on Schedule 5.13
hereto, on or prior to the Closing Date, to execute and deliver to AUSA Life an
agency agreement substantially in the form of Exhibit T hereto and (ii) issue to
each such agent or broker a waiver substantially in the form of Exhibit U hereto
providing for the waiver by MONY of any rights arising pursuant to MONY's
existing agency agreements to prohibit any such agents or brokers from selling
insurance contracts and policies in the same lines as the Insurance Contracts on
behalf of AUSA Life and its Affiliates.
Section 5.14. Leases. (a) Subject to the conditions set forth below,
MONY shall assign all of the Leases listed on Schedule 5.14 hereto (the
"Assigned Leases") to AUSA Life, or, at the option of AUSA Life, shall enter
into subleases with respect to such Assigned Leases (the "Subleases") with AUSA
Life, which Subleases shall be in form and substance reasonably satisfactory to
MONY and AUSA Life. MONY shall use commercially reasonable efforts to obtain and
deliver to AUSA Life consents and estoppel certificates from the landlords of
each of the Assigned Leases, such estoppel certificates and consents to be in
form and substance reasonably acceptable to AUSA Life; provided, however, that
AUSA Life shall cooperate with MONY in its efforts to
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obtain such documents, including by providing reasonable financial information
concerning AUSA Life.
(b) In addition to the foregoing, MONY shall cooperate with AUSA Life
in an attempt to obtain from the landlords of the Leased Real Property
amendments of the Assigned Leases amending any of the material terms of such
Leases which are not reasonably acceptable to AUSA Life.
(c) Prior to Closing, MONY shall operate the Leased Real Property
relating to the Assigned Leases in the ordinary course of business, including
without limitation, compliance in all material respects with the terms of all
Leases, service contracts, mortgages or other contractual obligations relating
to such Leased Real Property.
(d) At the time of the Closing, any work required to be performed by
MONY pursuant to written notice received by MONY from any public authority or
under the terms of the Leases or the Service Contracts with respect to any
Leased Real Property which relates to the Assigned Leases will have been
completed in accordance with the plans and specifications thereto, if any, and
fully paid for by MONY.
Section 5.15. Series A Notes. At the Closing, AEGON and MONY shall
enter into the Series A Note Purchase Agreement in substantially the form of
Exhibit O hereto pursuant to which AEGON shall, at the Closing, issue and sell,
and MONY shall purchase, up to $150 million aggregate principal amount of Series
A Notes (the "Series A Notes").
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Section 5.16. Series B Notes. At the Closing, AEGON and MONY shall
enter into the Series B Note Purchase Agreement in substantially the form of
Exhibit P hereto pursuant to which AEGON shall, at the Closing, issue and sell,
and MONY shall purchase, $50 million aggregate principal amount of Series B
Notes (the "Series B Notes").
Section 5.17. Assumption Reinsurance Agreement. At the Closing, MONY
and AUSA Life shall execute and deliver to each other the Assumption Reinsurance
Agreement in substantially the form of Exhibit A hereto.
Section 5.18. Indemnity Reinsurance Agreement. At the Closing, MONY and
AUSA Life shall execute and deliver to each other the Indemnity Reinsurance
Agreement in substantially the form of Exhibit B hereto.
Section 5.19. Agreement Regarding Payments Made Relating to Assumption
Reinsurance Agreement. At the Closing, MONY and AUSA Life shall execute and
deliver to each other the Agreement Regarding Payments Made Relating to
Assumption Reinsurance Agreement in substantially the form of Exhibit C hereto.
Section 5.20. Agreement Regarding Payments Made Relating to Indemnity
Reinsurance Agreement. At the Closing, MONY and AUSA Life shall execute and
deliver to each other the Agreement Regarding Payments Made Relating to
Indemnity Reinsurance Agreement in substantially the form of Exhibit D hereto.
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Section 5.21. Transition and Computer Services Agreement. At the
Closing, MONY and Diversified shall execute and deliver to each other the
Transition and Computer Services Agreement in substantially the form of Exhibit
E hereto.
Section 5.22. Administrative Services Agreement. At the Closing, MONY
and Diversified shall execute and deliver to each other the Administrative
Services Agreement in substantially the form of Exhibit F hereto.
Section 5.23. Investment Management Agreement. At the Closing, MONY and
AUSA Life will, and MONY will cause the Manager to, execute and deliver to each
other the Investment Management Agreement in substantially the form of Exhibit G
hereto.
Section 5.24. Bill of Sale and General Assignment and Trademark
Assignment. At the Closing, MONY shall execute and deliver to AUSA Life the Bill
of Sale and General Assignment in substantially the form of Exhibit H hereto and
the Trademark Assignment in substantially the form of Exhibit I hereto.
Section 5.25. Assumption Agreement. At the Closing, AUSA Life shall
execute and deliver to MONY the Assumption Agreement in substantially the form
of Exhibit J hereto.
Section 5.26. Mortgage Loan Transfer Documents. At the Closing, MONY
shall execute and deliver to AUSA Life the Mortgage Loan Transfer Documents in
substantially the form of Exhibit K hereto.
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Section 5.27. Bond Transfer Documents. At the Closing, MONY shall
execute and deliver to AUSA Life the Bond Transfer Documents in substantially
the form of Exhibit L hereto.
Section 5.28. Pension Sales Agreement. At the Closing, MONY and AUSA
Life shall execute and deliver to each other the Pension Sales Agreement
substantially in the form of Exhibit M hereto.
Section 5.29. Coinsurance and Assumption Agreement. At the Closing,
MONY and AUSA Life shall execute and deliver to each other the Coinsurance and
Assumption Agreement in substantially the form of Exhibit N hereto.
Section 5.30. Furniture Sublease. At the Closing, MONY and AUSA Life
shall execute and deliver to each other the Furniture Sublease in substantially
the form of Exhibit Q hereto.
Section 5.31. Employment and Employee Benefit Plans. (a) The AEGON
Controlled Group will not be obligated to maintain, establish or contribute to,
or have any current or future obligation for, any of the Plans. After the
Closing, the AEGON Controlled Group shall be responsible and liable for all
compensation, wages and benefits accruing to all Seller Employees who become
employees of the AEGON Controlled Group as of the Closing ("Continuing
Employees") pursuant to the terms of the plans, policies, programs and
arrangements maintained by the AEGON Controlled Group after the Closing Date.
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(b) The AEGON Controlled Group will not be obligated to pay any
incentive compensation, bonus, severance or similar payments to any Seller
Employees in connection with the transactions contemplated herein.
(c) The AEGON Controlled Group will not be obligated to provide COBRA
Continuation Benefits to any of Selling Parties, employees in connection with
the transactions contemplated herein. From and after the Closing Date, each
member of the AEGON Controlled Group will be obligated to provide COBRA
Continuation Benefits to all Continuing Employees which it employs following the
Closing Date (and their qualified beneficiaries) whenever such benefits become
due.
(d) No member of the AEGON Controlled Group shall be liable for any
actions, or failure to act, by the Selling Parties or their Affiliates on or
prior to the Closing Date with respect to any Employee Benefit Plan.
(e) MONY shall (i) encourage such MONY Employees as are designated in
writing by appropriate members of the AEGON Controlled Group to give to AEGON
such assurances of employment with the appropriate member of the AEGON
Controlled Group as are satisfactory to AEGON and (ii) to assist the appropriate
member of the AEGON Controlled Group in hiring such other MONY Employees as the
appropriate member of the AEGON Controlled Group has designated to the Selling
Parties, on terms to be negotiated between the appropriate member of the AEGON
Controlled Group and such employees. Schedule 5.31(A) sets forth the procedures
to be followed by MONY
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and the appropriate member of the AEGON Controlled Group with respect to the
employment records of such employees.
(f) MONY shall not at any time from and after the date hereof and prior
to the Closing Date effectuate a "plant closing" or "mass layoff", as those
terms are defined in the Worker Adjustment and Retraining and Notification Act,
29 U.S.C. Section 2101, et seq. ("WARN"), affecting in whole or in part any site
of employment, facility, operating unit or employee relating to the transactions
contemplated herein and the AEGON Controlled Group shall not take any action on
or after the Closing Date which results in the imposition on MONY of any
liabilities under WARN.
(g) For purposes of all pension plans (as defined in section 3(2) of
ERISA) of AUSA Life (whether or not qualified under Section 401(a) of the Code)
covering Continuing Employees after the Closing Date, the following rules shall
apply:
(i) AUSA Life shall take into account employment by each Continuing
Employee with MONY prior to the Closing Date for participation and
vesting purposes as if it had been employment with AUSA Life. Such
employment and the number of years a Continuing Employee participated
in MONY's defined benefit pension plan shall also be taken into account
in determining a Continuing Employee's fulfillment of the service
requirements for normal retirement under AUSA Life's defined benefit
pension plans.
(ii) All Continuing Employees shall be eligible for immediate
participation in AUSA Life's 401(k) plan and AUSA Life's defined
benefit pension plans. All
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Continuing Employees who meet compensation requirements for AUSA Life's
Executive Profit Sharing Plan shall be immediately eligible to
participate in such plan.
(iii) A Continuing Employee who is listed on Schedule 5.31(B) hereto
and who does not terminate employment prior to age 55 shall be eligible
for early retirement under AUSA Life's defined benefit pension plans
upon completing at least five years of combined employment with AUSA
Life and MONY and attaining age 55 (while employed by AUSA Life or
MONY) to the extent that such special early retirement provision does
not violate applicable qualification and discrimination provisions
under Code Sections 401(a) and 410(b).
(h) The following rules shall apply to Continuing Employees with
respect to welfare plans, as defined in section 3(l) of ERISA ("Welfare Plans"),
of AUSA Life:
(i) AUSA Life shall take into account a Continuing Employee's
employment by MONY prior to the Closing Date for purposes of
determining eligibility for retiree medical benefits and retiree life
insurance coverage and, in the case of Continuing Employees who are
full time employees, for purposes of determining eligibility for
long-term disability benefits. A Continuing Employee who is listed on
Schedule 5.31(B) hereto and who does not terminate employment prior to
age 55 shall be eligible for the retiree medical benefits and the
retiree life insurance coverage provided by AUSA Life, if any, at the
time of his retirement if at the
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time he terminates employment, his combined employment period with MONY
and AUSA Life equals at least five years and he has attained age 55.
(ii) Continuing Employees shall become eligible for participation in
any Welfare Plan of AUSA Life without regard to any pre-existing
conditions which are not excluded from coverage at the Closing Date as
pre-existing conditions under the applicable Welfare Plan of MONY, and
with respect to determining the covered expenses of such an employee
for the current year under any Welfare Plan of AUSA Life for purposes
of determining deductibles and other purposes, expenses incurred by
such employee under a Welfare Plan of MONY that provides the same type
of welfare benefit (whether or not such expenses have been, or will be,
paid or reimbursed under such Welfare Plan) shall be taken into account
as if such expenses had been incurred under the Welfare Plan of AUSA
Life.
(iii) Any Continuing Employees shall immediately be included in the
health care spending account and dependent care plans of AUSA Life for
the calendar year in which the Closing Date occurs, based upon, and to
the extent of, their elections and previous benefit payments under the
health care spending account and the dependent care plan of MONY,
provided that MONY shall transfer to AUSA Life cash equal to the
balances of such health care spending accounts maintained by MONY.
(iv) AUSA Life shall also take into account a Continuing Employee's
employment by MONY prior to the Closing Date for purposes of
determining
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such Continuing Employee's entitlement to vacation under AUSA Life's
vacation schedule. Through the end of calendar year 1994, any
Continuing Employee's entitlement to vacation under AUSA Life's
vacation accrual schedule shall not be less than the amount of days of
such Continuing Employee's entitlement to vacation on the Closing Date
based on MONY's vacation program as in effect immediately prior to the
Closing Date.
(v) Continuing Employees shall be eligible for immediate participation
in AUSA Life's medical and dental plans and group life insurance plan.
Full-time Continuing Employees shall also be eligible for immediate
participation in AUSA Life's short-term disability plan.
(vi) AUSA Life shall take into account a Continuing Employee's
employment by MONY prior to the Closing Date for purposes of
determining the benefit level under AUSA Life's short-term disability
program, except that in the case of a full-time employee with less than
two years of combined service, the benefits payable shall be based upon
the applicable schedule under MONY's short-term disability benefit
program on the Closing date.
(vii) Through the end of calendar year 1994, AUSA Life shall maintain
for each Continuing Employee, the amount of non-contributory life
insurance that would be applicable to such Continuing Employee had he
continued to be covered under MONY's non-contributory life insurance
program through such date.
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(i) For the 1993 calendar year, AUSA Life shall maintain the medical
and dental options (including HMO options) and the health care spending account
and dependent care plans that were offered by MONY to Continuing Employees
immediately prior to the Closing and shall maintain the employee contribution
rates for such options during such 1993 calendar year. MONY shall administer
such plans for AUSA Life through the end of 1993 and AUSA Life shall have the
option to require MONY to administer such plans for AUSA Life through the end of
1994 (or any portion thereof); provided, however, that MONY may, at its option,
discontinue its administration of such plans, if AUSA Life makes any changes in
such plans other than a change which reduces the number of options offered by
AUSA Life to Continuing Employees as compared to the number of options offered
by MONY to its employees at the time of such reduction. MONY shall have no
liability with respect to any claims incurred under such plans by Continuing
Employees after the Closing and, to the extent MONY pays any such claims on
behalf of AUSA Life, which claims were appropriately paid under such plans, MONY
shall be entitled to prompt reimbursement from AUSA Life. MONY shall also be
entitled to prompt reimbursement of any expenses incurred by it with respect to
an outside party with respect to the Continuing Employees for the period after
the Closing in connection with the administration of such plans. AUSA Life shall
promptly notify MONY of any change in the employment status of any Continuing
Employee affecting MONY's administration of such plans.
(j) AUSA Life shall allow direct rollovers of the accounts of
Continuing Employees under MONY's Investment Plan to AUSA Life's 401(k) Plan,
including the
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rollover of outstanding loan balances under such Investment Plan. MONY and AUSA
Life shall take such actions as shall be necessary to facilitate such rollovers,
including the amendment of their respective plans. MONY agrees to take all steps
necessary to cause MONY's Investment Plan to meet all applicable Code
requirements for qualified plans including, but not limited to Code Sections
401(a) and 401(k), as of the date of such rollovers.
(k) AUSA Life shall maintain MONY's "lump sum loan" program after the
Closing with respect to all loans outstanding under such program on the Closing
Date and with respect to any salary increases that become effective within 12
months following the Closing. At the Closing, AUSA Life shall make a lump-sum
cash payment to MONY equal to the total outstanding balances of loans to
Continuing Employees under such program as of the Closing Date.
(l) Through the end of calendar year 1994, AUSA Life shall maintain,
with respect to Continuing Employees who are participants in MONY's Split Dollar
Life Plan at Closing, the amount of life insurance in effect at the time of the
Closing under such Split Dollar Life Plan.
(m) AUSA Life shall establish a gain sharing plan for non-officers and,
for purposes of determining a Continuing Employee's eligibility for such plan,
AUSA Life shall take into account such Continuing Employees employment by MONY
prior to the Closing Date. Such plan shall be maintained for a minimum of a
five-year period from
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the Closing, subject to AUSA Life's right to amend or modify its terms on an
annual basis.
(n) AUSA Life shall take into account a Continuing Employee's
employment by MONY prior to the Closing Date for purposes of determining such
employee's eligibility for AUSA Life's Stock Option Plan.
(o) MONY agrees that AUSA Life has the right to alter, amend, modify
and terminate its employee benefit plans and compensation programs with respect
to its employees and that no provision herein shall affect AUSA Life's right to
do so; provided, however, that no such alteration, amendment or modification
shall be made or adopted which would contravene the provisions of subsections
(g)(i), (g)(iii), (h)(i), (h)(iv), (h)(vi), (h)(vii), (k), (l) and (n) of this
Section 5.31. No individual or entity, including but not limited to Continuing
Employees, shall have rights as a result of any provisions of this Agreement to
require AUSA Life to maintain a plan or program or specific provisions thereof;
provided, however, with respect to provisions of this Section which provide that
AUSA Life shall provide a certain benefit through a specific date, AUSA Life
agrees to do so.
(p) The rules established in this Section 5.31 shall also apply to
plans maintained or contributed to by members of the AEGON Controlled Group
other than AUSA Life that provide benefits to Continuing Employees.
Section 5.32. Separate Accounts. (a) On or prior to the Closing Date,
MONY shall take all legal actions and shall prepare and deliver to AUSA Life all
regulatory
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filings necessary to organize and register under the 1940 Act a mutual fund
under the name "Diversified Investors Portfolios" and, except as disclosed in
Schedule 5.32(A) hereto, each of the representations and warranties of MONY
contained in Section 3.30 as to the Funds shall be true and correct as to
Diversified Investors Portfolios upon the making of such filings by AUSA Life
after the Closing with appropriate regulatory authorities.
(b) On or prior to the Closing Date, MONY shall prepare and deliver to
AUSA Life all regulatory filings necessary to effect the transfer of assets from
MONY Series Fund Inc. to a series open-end investment company to be registered
under the 1940 Act ("Diversified Investors Portfolios") and the substitution of
shares of Diversified Investors Portfolios for shares of MONY Series Fund Inc.
as assets of those MONY Separate Accounts listed on Schedule 5.32(B) hereto,
including amendments to the registration statements of such Separate Accounts
under the Securities Act and the 1940 Act, and shall have no reason to believe
that such filings will not become effective after being made by AUSA Life after
the Closing.
(c) On or prior to the Closing Date, MONY shall prepare forms of
investment advisory contracts between Diversified and Diversified Investors
Portfolios under terms reasonably acceptable to AUSA Life, such contracts to be
executed immediately after Closing. MONY shall cause Diversified Investors
Portfolios not to enter into any advisory or administrative services agreement
with any other party prior to the Closing.
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(d) On or prior to the Closing Date, AUSA Life shall take all such
corporate actions and make all filings with regulatory authorities as may be
necessary to cause the separate accounts described on Schedule 5.32(C) hereto
(the "AUSA Life Separate Accounts") to be duly and validly established and
maintained under the laws of the State of New York.
(e) On or prior to the Closing Date, MONY shall prepare all necessary
filings and AUSA Life shall take all such corporate actions and make such
filings with regulatory authorities as may be necessary:
(i) to cause AUSA Life Separate Accounts, except for those
AUSA Life Separate Accounts excluded from the definition of an
investment company pursuant to Section 3(c)(11) of the 1940 Act, to be
duly registered as investment companies under the 1940 Act;
(ii) to assure that the transfer of MONY Separate Account
assets to AUSA Life Separate Accounts will not violate any provision of
the 1940 Act or any rules of the Commission and that AUSA Life will be
authorized to deduct from AUSA Life Separate Accounts the same charges
which MONY deducts from MONY Separate Accounts; and
(iii) to cause AUSA Life insurance contracts under which AUSA
Life Separate Accounts assets will be held to be duly registered under
the 1940 Act and the Securities Act, except for those AUSA Life
insurance contracts under
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which AUSA Life Separate Account assets will be held which are exempt
from registration under the 1940 Act or the Securities Act,
respectively.
Section 5.33. Property Insurance Proceeds. In the event a casualty
occurs with respect to any of the Tangible Assets after the date hereof and
repairs have not been completed prior to Closing, or in the event a casualty
occurs with respect to any of the properties or improvements thereon encumbered
by a Mortgage Loan after the date hereof and, in either event, MONY is the loss
payee with respect to insurance covering such casualty, MONY agrees to assign
such insurance claims to AUSA Life at the Closing and to deliver to AUSA Life at
the Closing any insurance proceeds that have not been disbursed to effect
repairs with respect to any such properties.
Section 5.34. Purchase Price Allocation. (a) Within thirty days after
the completion of the Final Balance Sheet, MONY and AUSA Life shall prepare a
schedule, mutually agreeable to the parties hereto, allocating the Assumed
Liabilities and any other cash consideration paid by AUSA Life to MONY for the
Non Investment Assets pursuant to Section 2.05(b) of this Agreement among the
Transferred Assets and any other property transferred from MONY to the Acquiring
Parties pursuant to this Agreement and the Ancillary Agreements (the
"Allocation"). The amount allocated to the stock of Diversified, DISC, and any
other Target Corporation shall be further allocated among the assets of such
corporations in accordance with the regulations promulgated under section
338(b)(5) of the Code. The Allocation shall be prepared in accordance with
section 1060 of the Code. The parties shall negotiate in good faith in
connection with the preparation of the Allocation. In the event that the parties
are not able to agree to the Allocation
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within such thirty day period, then MONY and AUSA Life shall retain an
independent certified public accounting firm of national standing and reputation
selected by mutual agreement of MONY and AUSA Life to prepare the Allocation.
Each party shall cooperate with, and use all reasonable efforts to assist, such
accounting firm in connection with the preparation of the Allocation. The
Allocation determined by such accounting firm shall be binding upon the parties
hereto.
(b) The parties hereto acknowledge that the Allocation will be
determined pursuant to arm's-length bargaining regarding the fair market values
of the Transferred Assets and other property transferred or deemed transferred
by MONY to the Acquiring Parties pursuant to this Agreement. The parties hereto
agree to be bound by the Allocation for purposes of determining any income,
gain, loss, depreciation or other deductions in respect of the Transferred
Assets and other such properties. The parties hereto further agree to prepare
and file all Tax Returns (including Form 8594) in a manner consistent with the
Allocation and not to take any position contrary to the Allocation in any
administrative or judicial proceeding. Notwithstanding the immediately preceding
two sentences, if the IRS, or any other governmental taxing authority,
challenges the Allocation in any administrative or judicial proceeding, MONY,
AEGON or AUSA Life, as the case may be, shall be allowed to settle or compromise
such dispute in any manner that such party determines to be practicable,
irrespective of whether such settlement is contrary to the Allocation. MONY,
AEGON and AUSA Life agree to prepare any other financial reports in a manner
substantially consistent with the Allocation.
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Section 5.35. Allocation of Taxes. All real and personal property Taxes
and similar ad valorem obligations with respect to the Transferred Assets for
assessment periods that commence on or before and end after the Closing Date
shall be apportioned between MONY and AUSA Life as of the end of the Closing
Date based on the number of days in any such period falling on or before and
after the Closing Date.
Section 5.36. Section 338(h)(10) Election. MONY and AEGON shall make
338 Elections with respect to the Target Corporations. MONY, AEGON, and AUSA
Life shall comply fully with all filing and other requirements necessary to
effectuate the 338 Elections on a timely basis and agree to cooperate in good
faith with each other in the preparation and timely filing of any Tax Returns
required to be filed in connection with the making of the 338 Elections,
including the exchange of information and the joint preparation and filing of
Form 8023 (including related schedules). The fair market values, the "modified
aggregate deemed sales price," and the "adjusted grossed-up basis" (as those
terms are defined in the Treasury Regulations promulgated under section 338 of
the Code) of the assets of the Target Corporations shall be determined in
accordance with the Allocation.
Section 5.37. Lender Title Insurance Updates. On or prior to the
Closing Date, MONY shall, with respect to property described in the Mortgage
Loan Documents or securing a Mortgage Loan, which property is located outside
the State of New York, provide to AUSA Life a commitment from a title insurer or
title insurers acceptable to MONY and AUSA Life to issue upon recordation of the
Mortgage Loan Transfer Documents a title policy or an endorsement to the
lender's policies in effect as to the
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Mortgage Loans showing AUSA Life as the named insured and showing the Mortgage
Loan as a first lien on such property, subject only to liens for Taxes which are
not yet delinquent and easements and restrictions which do not adversely affect
the marketability of title. on or prior to the Closing Date MONY shall, with
respect to property described in the Mortgage Loan Documents or securing a
Mortgage Loan, which property is located in the State of New York, provide AUSA
Life with a title search from an insurer or insurers acceptable to MONY and AUSA
Life showing the Mortgage Loan as a first lien on such property subject only to
liens for Taxes which are not delinquent and easements and restrictions which do
not adversely affect the marketability of title. The commitment or search, as
applicable, shall also show all liens, encumbrances, easements or other
interests with respect to such property which are subordinate to the lien of
MONY. Such policy or endorsements shall be issued after Closing at the sole cost
and expense of MONY and such searches shall be conducted at the sole cost and
expense of MONY. On or prior to the Closing Date, MONY shall also deliver
appropriate UCC searches with respect to any personal property which is security
for a Mortgage Loan which relates to an apartment, a hotel or a retirement home,
which searches shall be dated prior, and as proximate as practicable, to the
Closing date (but in no event more than five Business Days prior to the Closing
Date) and showing no prior liens on such personal property.
Section 5.38. Borrower's Estoppel. On or prior to the Closing Date,
MONY shall provide to AUSA Life a Borrower's Estoppel in the form attached
hereto as Exhibit V from each borrower under the Mortgage Loans, confirming the
information given by MONY herein. If, after reasonable efforts by MONY, not all
estoppels are obtained,
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MONY shall execute such estoppels to the extent so allowed under the Mortgage
Loan Documents to bind the borrower with respect to such representations
pursuant to the terms of the Mortgage Loan Documents.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATION
OF AEGON AND AUSA LIFE CLOSE
The obligations of the Acquiring Parties under this Agreement are
subject to the satisfaction on or prior to the Closing of the following
conditions, any one or more of which may be waived by any of them to the extent
permitted by law:
Section 6.01. Representations and Covenants. The representations and
warranties of MONY contained in this Agreement shall be true and correct in all
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date, without regard to any qualification of any
such representations or warranties as to materiality or the knowledge of MONY,
except to the extent that the failure of any such representations and warranties
to be true and correct would not, individually or in the aggregate, have a
Material Adverse Effect on the Business or the Transferred Assets taken as a
whole; provided, however, that any such representations and warranties that are
given as of a particular date and relate solely to a particular date or period
shall be true and correct as of such date or period without regard to any
qualification of any such representations or warranties as to materiality or the
knowledge of MONY, except to the extent that the failure of any such
representations and warranties to be true and correct would not, individually or
in the aggregate, have a Material
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Adverse Effect on the Business or the Transferred Assets taken as a whole. The
Selling Parties shall have performed and complied in all material respects with
all covenants and agreements required by this Agreement to be performed or
complied with by the Selling Parties on or prior to the Closing. MONY shall
periodically until the Closing update the information contained in the Schedules
hereto between the date hereof and the Closing Date so that such Schedules shall
be true and correct in all respects on and as of the Closing Date and such
updated information contained in the Schedules hereto shall not affect the
obligations of the parties to proceed with the Closing (provided all other
conditions to the Closing are satisfied or waived) to the extent that such
information contained in the Schedules hereto as updated, individually or in the
aggregate, would not have a Material Adverse Effect on the Business or the
Transferred Assets taken as a whole. On the Closing Date, MONY shall have
delivered to AUSA Life a certificate of MONY, dated as of the Closing Date, and
signed by an executive officer of MONY as to the matters set forth in this
Section 6.01.
Section 6.02. Other Agreements. The Ancillary Agreements and each of
the other agreements and instruments contemplated hereby and thereby shall have
been duly executed and delivered by the respective Selling Parties on the
Closing Date and each of such agreements, documents and instruments shall be in
full force and effect with respect to the respective Selling Parties on the
Closing Date.
Section 6.03. Governmental and Regulatory Consents and Approvals. (a)
The waiting period required by any regulatory agency for the consummation of the
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transactions contemplated hereby, including, without limitation, the waiting
period prescribed by the HSR Act, shall have expired.
(b) (i) All required Permits from insurance regulators of jurisdictions
that require the approval of the Assumption Reinsurance Agreement shall have
been obtained with respect to Insurance Contracts which, when added to Insurance
Contracts issued in states which do not require such approval, represent at
least 70 percent but less than 100 percent of the Insurance Liabilities
(excluding MONY Separate Account liabilities), (ii) no jurisdiction listed on
Schedule 6.03 hereto shall have objected to the implementation of the Assumption
Reinsurance Agreement and (iii) no jurisdictions with regulatory authority as to
Insurance Contracts which represent 15 percent or more of the Insurance
Liabilities (excluding MONY Separate Account liabilities) in the aggregate shall
have objected to the implementation of the Assumption Reinsurance Agreement.
(c) Other than as provided in Section 6.03(b) or as contemplated by
Section 2.01 hereof with respect to Separate Accounts, all Permits from
governmental and regulatory bodies required of the Acquiring Parties and MONY to
consummate the transactions contemplated by this Agreement shall have been
obtained, unless the failure to obtain such Permits would not, individually or
in the aggregate, have a Material Adverse Effect on the Business or the
Transferred Assets taken as a whole, or materially and adversely affect the
ability of the parties to consummate the transactions contemplated hereby or
(after giving effect to the Closing) for AUSA Life to conduct the Business and
in addition, would not be unlawful.
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(d) Other than as provided in Section 6.03(b) or as contemplated by
Section 2.01 hereof as to Separate Accounts, all Permits from governmental and
regulatory bodies required to permit the Business as carried on currently by
MONY to continue to be carried on by AUSA Life in substantially the same manner
immediately following the Closing shall have been obtained, unless the failure
to obtain such Permits would not, individually or in the aggregate, materially
and adversely affect the ability of AUSA Life to carry on the Business
immediately following the Closing in substantially the same manner as the
Business was carried on by MONY prior to the Closing and, in addition, would not
be unlawful.
(e) In each case, the Permits required to be obtained pursuant to this
Section 6.03 shall have been obtained and shall be in full force and effect and
without conditions or limitations which are unacceptable to AUSA Life in the
exercise of its reasonable business judgment, and AUSA Life shall have been
furnished with appropriate evidence, reasonably satisfactory to it and its
counsel, of the granting of such Permits.
Section 6.04. Third Party Consents. All consents from parties set forth
in Schedule 3.08 hereto shall have been obtained without conditions or
limitations which are unacceptable to AUSA Life in the exercise of its
reasonable business judgment, and shall be in full force and effect, unless the
failure to obtain such consents would not, individually or in the aggregate,
have a Material Adverse Effect on the Business or the Transferred Assets taken
as a whole, or materially and adversely affect the ability of any of the parties
hereto to consummate the transactions contemplated hereby, or (after giving
effect to the Closing) for AUSA Life to conduct the Business.
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Section 6.05. Possession of Assets; Instruments of Conveyance. MONY
shall have delivered to AUSA Life at the Closing possession of the Transferred
Assets and the Transfer Documents shall effectively vest in AUSA Life all of the
right, title and interest of MONY in and to the Transferred Assets as provided
in this Agreement.
Section 6.06. Opinions of Counsel to MONY. AEGON shall have received
the opinion of the General Counsel of MONY dated as of the Closing Date,
addressed to AEGON and substantially in the form of Exhibit W hereto, and shall
have received the opinion of Dewey Ballantine, special counsel to MONY, dated as
of the Closing Date, addressed to AEGON and substantially in the form of Exhibit
X hereto.
Section 6.07. Injunction. There shall be no effective injunction, writ,
preliminary restraining order or any order of any nature issued by a court of
competent jurisdiction, directing that the transaction's provided for herein not
be consummated as herein provided.
Section 6.08. Agents. Significant Brokers who were paid at least
seventy-five percent (75%) of the aggregate commissions paid by MONY to
Significant Brokers for the year ended December 31, 1992 (excluding, however,
any Significant Broker who demands that his agency agreement with MONY be
renegotiated or revised as a condition of executing such an agency agreement)
shall have executed and delivered an agency agreement substantially in the form
of Exhibit T hereto.
Section 6.09. Leases. MONY shall have (i) assigned to AUSA Life all of
the Assigned Leases which AUSA Life has elected to assume pursuant to Section
5.14 or (ii)
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entered into the Subleases with respect to those Assigned Leases which AUSA Life
has exercised its option to Sublease.
Section 6.10. Environmental Assessment. AUSA Life shall have received
from MONY a comprehensive environmental report, in form and substance reasonably
satisfactory to AUSA Life, concerning the real property described in any
Mortgage Loan Document as securing any Mortgage Loan and the improvements on
such real property, which report shall be dated within 90 days prior to the
Closing Date, addressed to AUSA Life and prepared by an environmental consultant
reasonably satisfactory to AUSA Life. AUSA Life shall bear the costs and
expenses of such reports; provided, however, that MONY will reimburse AUSA Life
at the end of the Substitution Period for one-half the costs and expenses of
such reports to the extent that such reports relate to Mortgage Loans which are
finally determined to be Investment Assets and for 100% of the costs and
expenses of such reports to the extent that such reports relate to Rejected
Investment Assets and assets on Schedule 5.03(B) which do not finally become
Investment Assets.
Section 6.11. Ratings. AUSA Life shall have received confirmation in
form and substance reasonably satisfactory to AUSA Life, that as of the Closing
Date, the Standard & Poor's Claims-Paying Ability rating of MONY is BBB+ or
higher and the Duff & Phelps Corp. rating of MONY is BBB+ or higher.
Section 6.12. Employment Agreements. The Persons identified by AEGON to
MONY in writing prior to the date hereof shall have entered into employment
agreements with AUSA Life in form and substance reasonably satisfactory to AUSA
Life.
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Section 6.13. Series A Notes. MONY shall have purchased Series A Notes
in an aggregate principal amount equal to the Initial Principal Amount.
Section 6.14. Series B Notes. MONY shall have purchased $50 million
aggregate principal amount of Series B Notes.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION
OF MONY TO CLOSE
The obligations of MONY under this Agreement are subject to the
satisfaction on or prior to the Closing of the following conditions, any one or
more of which may be waived by it to the extent permitted by law:
Section 7.01. Representations and Covenants. The representations and
warranties of AEGON contained in this Agreement shall be true and correct in all
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date, without regard to any qualification of such
representations or warranties as to materiality or to the knowledge of the
Acquiring Parties, except to the extent that the failure of any such
representations and warranties to be true and correct would not, individually or
in the aggregate, materially and adversely affect the ability of the Acquiring
Parties to consummate the transactions contemplated hereby or (giving effect to
the Closing) to conduct the Business; provided, further, that any such
representations and warranties that are given as of a particular date and relate
solely to a particular date or period shall be true and correct in all respects
as of such date or period, without regard to any qualification of any such
representations or warranties as to materiality or the
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knowledge of the Acquiring Parties, except to the extent that the failure of
such representations and warranties to be true and correct would not,
individually or in the aggregate, materially and adversely affect the ability of
the Acquiring Parties to consummate the transactions contemplated hereby or
(giving effect to the Closing) to conduct the Business. The Acquiring Parties
shall have performed and complied in all material respects with all covenants
and agreements required by this Agreement to be performed or complied with by
the Acquiring Parties on or prior to the Closing Date. On the Closing Date,
AEGON shall have delivered to MONY a certificate of AEGON, dated as of the
Closing Date, and signed by an executive officer of AEGON to the foregoing
effect.
Section 7.02. Other Agreements. The Ancillary Agreements and each of
the other agreements and instruments contemplated hereby and thereby shall have
been duly executed and delivered by the respective Acquiring Parties on the
Closing Date and each of such agreements and instruments shall be in full force
and effect with respect to the respective Acquiring Parties on the Closing Date.
The Acquiring Parties shall have assumed the Assumed Liabilities.
Section 7.03. Governmental and Regulatory Consents and Approvals. (a)
The waiting period required by any regulatory agency for the consummation of the
transactions contemplated hereby, including, without limitation, the waiting
period prescribed by the HSR Act, shall have expired.
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(b) (i) All required Permits from state insurance regulators of
jurisdictions that require the approval of the Assumption Reinsurance Agreement
shall have been obtained with respect to Insurance Contracts which, when added
to Insurance Contracts issued in states which do not require such approval,
represent at least 70 percent but less than one hundred percent of the Insurance
Liabilities (excluding MONY Separate Account liabilities), (ii) no jurisdiction
listed on Schedule 6.03 hereto has objected to the implementation of the
Assumption Reinsurance Agreement and (iii) no jurisdictions with regulatory
authority with respect to Insurance Contracts which represent 15 percent or more
of the Insurance Liabilities (excluding MONY Separate Account liabilities) shall
have objected to the implementation of the Assumption Reinsurance Agreement.
(c) Other than as provided above in Section 7.03(b) or as contemplated
by Section 2.01 hereof, all Permits from governmental and regulatory bodies
required of the Acquiring Parties and MONY to consummate the transactions
contemplated by this Agreement shall have been obtained unless the failure to
obtain such Permits would not, individually or in the aggregate, materially and
adversely affect the ability of the parties to consummate the transactions
contemplated hereby, or (after giving effect to the Closing) for AUSA Life to
conduct the Business and, in addition, would not be unlawful.
(d) Other than as provided in Section 7.03(b), all Permits from
governmental and regulatory bodies required to permit the Business as carried on
currently by MONY to continue to be carried on by AUSA Life in substantially the
same manner immediately following the Closing shall have been obtained, unless
the failure to obtain such Permits would not, individually or in the aggregate,
materially and adversely affect the ability of
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AUSA Life to carry on the Business immediately following the Closing in
substantially the same manner as the Business was carried on by MONY prior to
the Closing and, in addition, would not be unlawful.
(e) In each case, the Permits required to be obtained pursuant to in
this Section 7.03 shall have been obtained and shall be in full force and effect
and without conditions or limitations which are unacceptable to MONY in the
exercise of its reasonable business judgment, and MONY shall have been furnished
with appropriate evidence, reasonably satisfactory to it and its counsel, of the
granting of such Permits.
Section 7.04. Third Party Consents. All consents from parties set forth
in Schedule 4.04 hereto shall have been obtained without conditions or
limitations which are unacceptable to MONY in the exercise of its reasonable
business judgment, and shall be in full force and effect, unless the failure to
obtain such consents would not, individually or in the aggregate, materially and
adversely affect the ability of any of the parties hereto to consummate the
transactions contemplated hereby, or (after giving effect to the Closing), for
AUSA Life to conduct the Business.
Section 7.05. Opinion of Counsel to AEGON and AUSA Life. MONY shall
have received the opinion of the General Counsel of AEGON and AUSA Life, dated
as of the Closing Date, addressed to MONY, substantially in the form of Exhibit
Y hereto and shall have received the opinion of LeBoeuf, Lamb, Leiby & MacRae,
special counsel to AEGON and AUSA Life, dated as of the Closing Date, addressed
to MONY and substantially in the form of Exhibit Z hereto.
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Section 7.06. Injunction. There shall be no effective injunction, writ,
preliminary restraining order or any order of any nature issued by a court of
competent jurisdiction, directing that the transactions provided for herein not
be consummated as herein provided.
Section 7.07. Ratings. MONY shall have received confirmation in form
and substance reasonably satisfactory to MONY, that the Series A Notes to be
issued at the Closing will be assigned a rating by Duff & Phelps Corp. of at
least BBB.
Section 7.08. AUSA Life's Ratings. MONY shall have received
confirmation in form and substance, reasonably satisfactory to MONY, that, as of
the Closing Date, AUSA Life has been assigned a rating of at least AA by Duff &
Phelps Corp. and by Standard & Poor's Corporation.
ARTICLE VIII
AGREEMENTS NOT TO COMPETE
Section 8.01. MONY's Non-Compete. (a) MONY agrees that following the
Closing Date (the "Non-Compete Period") MONY shall not, and MONY agrees that
none of its Affiliates shall directly or indirectly, in North America:
(i) Until the ninth anniversary of the Closing Date, provide
any incentive for any insurance agent of MONY or broker directly or
indirectly to, solicit any holder of an Insurance Contract for the
purpose of (aa) obtaining applications for new contracts which
constitute the Business or (bb) inducing or attempting to
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induce any such Person to cancel, replace, surrender, withdraw assets
or fail to make contributions to an Insurance Contract.
(ii) Until the ninth anniversary of the Closing Date, make any
statement in writing, orally or otherwise, concerning the Business that
has a reasonable likelihood of in any way injuring the relationship and
dealings of the Acquiring Parties or their Affiliates with their
employees, agents, customers or clients unless such statement is
required under applicable law,
(iii) Until the third anniversary of the Closing Date, (aa)
establish a sales force consisting of employees for the purpose of
soliciting applications for new contracts issued by MONY which would be
included in the Business if issued by AUSA Life or an Affiliate of AUSA
Life; or (bb) knowingly contract for the solicitation of applications
for contracts which would be included in the Business if issued by AUSA
Life or an Affiliate of AUSA Life with brokers (other than career
agents of MONY with respect to products or markets consistent with the
past practices in MONY's individual life insurance operation or with
respect to products or markets not actively utilized by MONY's pension
operation on the Closing Date) whose brokerage agreements with AUSA
Life or an affiliate of AUSA Life permit such brokers to sell such
contracts.
(iv) Until the ninth anniversary of the Closing Date, disclose
or reveal to any unauthorized Person or use any trade secret or other
confidential information relating to the Business, including, without
limitation, any customer lists, unless
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such trade secret or confidential information is readily ascertainable
from public or published information or trade sources or unless MONY is
legally required (whether by binding court or regulatory order, statute or
otherwise) to disclose or reveal such information, provided that MONY and
the Company shall only disclose such information to the extent required to
satisfy such legal requirement, or
(v) Until the ninth anniversary of the Closing Date, authorize or
grant any Person the right to use any Intellectual Property used in the
Business on or prior to the Closing Date in connection with any business
that would be competitive with the Business.
(b) In addition, MONY shall not dispose of any substantial part of the
business of MONY not included in the Business unless the transferee of such
business agrees to be bound by the terms of subparagraphs (ii), (iv) and (v) of
subsection (a) above as if it were MONY.
(c) AUSA Life and MONY acknowledge that any damage caused to AUSA Life by
reason of the breach by MONY or any purchaser of assets of MONY, or by any of
MONY's or such purchaser's Affiliates or any of their respective successors in
interest, of this Section 8.01 could not be adequately compensated for in
monetary damages alone; therefore, each party agrees that in addition to any
other remedies, at law or otherwise, AUSA Life shall be entitled to specific
performance of this Section 8.01 or an injunction
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to be issued by a court of competent jurisdiction restraining and enjoining any
violation of this Section 8.01.
(d) It is the intent and desire of the parties to this Agreement that the
provisions of this Section 8.01 shall be enforced to the fullest extent
permissible under applicable law. Accordingly, if any particular portion of this
Section 8.01 shall be adjudicated to be invalid or unenforceable, this Section
8.01 shall be amended to delete therefrom the portion thus adjudicated to be
invalid and unenforceable under such law.
ARTICLE IX
CERTAIN POST-CLOSING COVENANTS
Section 9.01. Maintenance of Business. From the Closing Date until the
later of (i) the date that the Agreement Regarding Payments Made Relating to
Assumption Reinsurance Agreement and the Agreement Regarding Payments Made
Relating to Indemnity Reinsurance Agreement shall terminate in accordance with
their terms or (ii) the satisfaction of all obligations of the parties set forth
in Schedules 9.01(A) and 9.01(B) hereto (or such shorter time as specified below
in this Section 9.01),
(a) AUSA Life will and AEGON will cause AUSA Life and Diversified to
operate the Business in a commercially reasonable manner intended, among other
objectives, to maximize the consideration to be paid to MONY pursuant to the
Agreement Regarding Payments Made Relating to Assumption Reinsurance Agreement
and the Agreement Regarding Payments Made Relating to Indemnity Reinsurance
Agreement, to the extent that to do so is, in the reasonable judgment of the
Board of
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Directors of AUSA Life, consistent with reasonable and prudent business
practices. MONY will cooperate fully with AUSA Life and Diversified in achieving
such results to the extent that to do so is, in the reasonable judgment of the
Board of Directors of MONY, consistent with reasonable and prudent business
practices; provided, however, that the foregoing shall not prevent AUSA Life and
Diversified from operating the Business in a manner that AUSA Life and
Diversified reasonably determine to be in compliance with all applicable law,
including, without limitation, ERISA.
(b) AUSA Life will, and AEGON will cause AUSA Life to, keep separate books
and records (including the Books and Records) with respect to the Business, the
Transferred Assets and the Assumed Liabilities, and will account for
underwriting, investment, operating and other profits, losses, reserves and
expenses in respect of the Business, the Transferred Assets and the Assumed
Liabilities separately from other profits, losses, reserves and expenses of the
Acquiring Parties in accordance with SAP. AEGON shall cause each of its other
Affiliates to, maintain its respective books and records of account in
accordance with the accounting information generated by the accounting
procedures set forth in Annex B to Schedule 9.01(A) to the Agreement and in
Annex B to Schedule 9.01(B) to this Agreement and, with respect to insurance
Company Affiliates, in accordance with SAP, in all cases to the extent such
books and records relate to Existing Business or Future Business (as each term
is defined therein).
(c) At all times, AUSA Life shall, and AEGON shall cause AUSA Life to, use
commercially reasonable efforts to maintain a weighted average rating by
Standard & Poor's Corporation determined in the manner set forth on Schedule
9.01(C) hereto.
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(d) Neither of the Acquiring Parties will, without the prior written
consent of MONY, which will not be unreasonably withheld or delayed, directly or
indirectly, except as required under applicable laws or regulations, (i) permit
the sale, lease, transfer or other disposition of a majority of the capital
stock of AUSA Life or of Diversified other than to an Affiliate of AEGON, (ii)
sell or otherwise dispose of any material part of the Business or the
Transferred Assets outside the ordinary course of business (including, without
limitation, by means of any bulk or assumption reinsurance arrangement) other
than to an Affiliate of AEGON, (iii) permit AUSA Life or Diversified to enter
into any merger, consolidation or other business combination other than with an
Affiliate of AEGON, (iv) permit AUSA Life or Diversified to wind up, liquidate
or dissolve its affairs, or adopt a plan of liquidation or dissolution, (v)
until the third anniversary of the Closing, cease writing new insurance
contracts of the type included in the Business or cease accepting new deposits
under the Insurance Contracts, (vi) waive or amend any material provision of any
Insurance Contract, (vii) until the fourth anniversary of the Closing, reduce
any fees or other charges applicable to AUSA Life Separate Accounts with respect
to the Existing Separate Account Business (as defined in Schedule 9.01(A)
hereto), or (viii) agree to do any of the foregoing; unless, with respect to any
of (i) through (viii) above, to fail to do so would have a Material Adverse
Effect on the Business or AUSA Life and, in the event of (ii) or (iii) above (or
agreeing to do (ii) or (iii) above), the acquiring party or the surviving party
(if other than AUSA Life or Diversified, as applicable) shall expressly assume
all of the liabilities and obligations of AUSA Life or Diversified hereunder, as
applicable, including all obligations of AUSA Life or Diversified under the
Ancillary Agreements, and, in the event of (iv) above, the
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Acquiring Parties enter into arrangements reasonably satisfactory to MONY for a
third party (which may be an Affiliate of AUSA Life) to assume the obligations
of AUSA Life or Diversified hereunder, as applicable, including all obligations
of AUSA Life or Diversified, as applicable, under the Ancillary Agreements.
(e) The Acquiring Parties and, as applicable, MONY shall comply with the
provisions contained in Schedule 9.01(A) and Schedule 9.01(B) hereto.
Section 9.02. Material Adverse Effect. MONY will provide AUSA Life with
notice within twenty-four hours after MONY acquires knowledge of any Material
Adverse Effect with respect to it and AUSA Life will provide MONY with notice
within twenty-four hours after AUSA Life acquires knowledge of any Material
Adverse Effect with respect to the Business or the Transferred Assets, occurring
between the Closing Date and the later of (i) the date the Agreement Regarding
Payments Made Relating to Assumption Reinsurance Agreement and the Agreement
Regarding Payments Made Relating to Indemnity Reinsurance Agreement terminate in
accordance with their terms or (ii) the satisfaction of all obligations of the
parties set forth in Schedule 9.01 hereto.
Section 9.03. Buyout Option. (a) For purposes of this Section 9.03, the
terms "Specified Investment Asset" and "Terminal Market Value" shall have the
respective meanings ascribed thereto in Schedule 2.02 to this Agreement.
Following the payment by the Acquiring Parties to MONY of the Consideration
pursuant to Section 2.02 hereof, MONY shall have the option (a "Buyout Option")
to purchase from AUSA Life (subject to the approval of the New York Insurance
Department) any then outstanding Specified
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Investment Asset held by AUSA Life at a purchase price, in cash, equal to the
Terminal Market Value of such Specified Investment Asset. MONY shall be entitled
to exercise the Buyout Option with respect to one or more Specified Investment
Assets by giving AUSA Life written notice of such exercise, at any time until
the thirtieth day following such payment of the Consideration. MONY shall submit
each such notice of exercise to the New York Insurance Department promptly
following delivery thereof to AUSA Life and shall use commercially reasonable
efforts to obtain the approval of the New York Insurance Department for such
purchase as soon as practical thereafter.
(b) In the event that the New York Insurance Department approves the
purchase of a Specified Investment Asset specified in any such notice of
exercise, the closing of the purchase of such Specified Investment Asset shall
be held at the offices of AUSA Life on the third Business Day following receipt
of such approval of the Department, or at such other place and time (following
receipt of such approval) as the parties may mutually agree upon. Each sale of a
Specified Investment Asset pursuant to this Section shall be by appropriate
transfer documents, and AUSA Life shall represent and warrant that it has not
sold, assigned, transferred, modified or hypothecated such Specified Investment
Asset to any other party or taken any action that would have a material adverse
effect on the rights of the holder of such Specified Investment Asset with
respect thereto (except for any such actions taken by the Manager as the agent
of AUSA Life or at the direction of the Manager pursuant to the Investment
Management Agreement).
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ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 10.01. Survival of Representations and Warranties. Notwithstanding
any right of the Acquiring Parties to investigate fully the affairs of MONY and
the Business and the accuracy of any representations and warranties of MONY, or
any right of MONY fully to investigate the business and affairs of the Acquiring
Parties, and the accuracy of the representations and warranties of the Acquiring
Parties, and notwithstanding any knowledge of facts determined or determinable
by the Acquiring Parties or MONY, as the case may be, pursuant to such
investigation or right of investigation, AEGON or MONY, as the case may be, have
the right to rely fully upon the representations and warranties of the other
contained in this Agreement. All statements contained in any Exhibit or Schedule
or other instrument or certificate given or delivered by any party hereunder to
the other herewith or at the Closing shall be deemed a representation and
warranty of such party under this Agreement. All such representations and
warranties shall survive the execution and delivery hereof; provided, however,
the representations and warranties of MONY herein shall terminate and expire on
the date on which the Agreement Regarding Payments Made Relating to Assumption
Reinsurance Agreement and the Agreement Regarding Payments Made Relating to
Indemnity Reinsurance Agreement shall terminate in accordance with its terms
(the "Survival Period"), except for (a) representations and warranties as to
which a Claims Notice (as defined below), action, suit, proceeding or
arbitration shall have been made or commenced prior to such expiration date,
which shall continue until such matters have been finally decided, settled or
adjudicated, (b) representations and warranties respecting a Tax, which shall
continue
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to survive until the later of (i) the lapse of the statute of limitations for
the assessment of such Tax or (ii) sixty (60) days after the final
administrative or judicial determination of such Tax, and (c) representations
and warranties which do not relate primarily to the Business or the Transferred
Assets, which shall terminate and expire on the second anniversary of the
Closing Date; and provided, further, that all of the representations and
warranties of AEGON shall terminate and expire on the second anniversary of the
Closing Date.
ARTICLE XI
INDEMNIFICATION
Section 11.01. Obligation to Indemnify. (a) Subject to the limitations set
forth in this Article XI, MONY agrees to indemnify, defend and hold harmless the
AEGON Controlled Group (and their directors, officers, employees, Affiliates,
successors and permitted assigns) from and against all Losses (as hereinafter
defined), based upon: (i) any claims, actions or proceedings relating to the
Assigned and Assumed Contracts which arise out of events occurring on or prior
to the Closing Date, (ii) any breach of or inaccuracy in the representations and
warranties without giving effect to (a) any knowledge or materiality
qualification therein or (b) any exceptions to such representations and
warranties or other disclosures set forth on the schedules thereto or otherwise
disclosed to the AEGON Controlled Group as contemplated by this Agreement, (iii)
any breach, nonfulfillment or default in the performance of any of the covenants
and agreements, of the Selling Parties contained in this Agreement, or in any
certificate or document delivered by the Selling Parties (or either of them)
pursuant to any
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of the provisions of, or in connection with, this Agreement, (iv) any Tax
liability of MONY or its Affiliates (including any related interest or
penalties) assessed against any member of the AEGON Controlled Group which
relates to Taxes arising out of or related to the Business for any taxable
period ending on or prior to the Closing Date or which is incurred as a result
of events which occur on the Closing Date, (v) any Excluded Liabilities and any
claim of any Person other than AEGON or its Affiliates with respect to or
arising out of any Excluded Liability, (vi) any liability assessed against any
member of the AEGON Controlled Group arising out of or relating to any Plan,
(vii) any failure by MONY to comply with any "bulk sales" laws applicable to the
transactions contemplated hereby and (viii) any fees or commissions incurred by
MONY in connection with the transactions contemplated by this Agreement.
Notwithstanding the foregoing, the indemnification by MONY herein with respect
to any breach or inaccuracy of any of its representations and warranties set
forth in Section 3.27(b)(iii) and Section 3.27(d)(i) shall continue to be
limited to the knowledge qualification contained therein and, in addition, the
indemnifications by MONY herein with respect to any breach or inaccuracy of any
of MONY's representations and warranties with respect to environmental matters
set forth in Section 3.04(a) shall be limited to those arising from the use and
occupancy by MONY of the Leased Real Property. As used in this Article XI, Loss
and/or Losses shall mean claims, losses, liabilities, damages, deficiencies,
costs or expenses (including, without limitation, as to losses incurred on or
prior to the second anniversary of the Closing Date, interest at the Base Rate
announced from time to time by Citibank, N.A, New York, New York, as its Base
Rate from the date any such Loss is
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suffered until such obligation to indemnify is actually paid, penalties and
reasonable attorneys' fees and disbursements).
(b) Subject to the limitations set forth in this Article XI, AEGON agrees
to indemnify, defend and hold harmless MONY (and its directors, officers,
employees, Affiliates, successors and permitted assigns) from and against all
Losses, based upon: (i) any breach of or inaccuracy in the representations and
warranties without giving effect to any knowledge or materiality qualification
therein or any exceptions to such representations and warranties set forth on
the schedules thereto, or any breach, nonfulfillment or default in the
performance of any of the covenants and agreements, of either of the Acquiring
Parties contained in this Agreement, or in any certificate or document delivered
by the Acquiring Parties (or any of them) pursuant to any of the provisions of,
or in connection with, this Agreement, (ii) any Tax liability (including any
related interest or penalties) which relates to Taxes arising out of or relating
to the Business or any Transferred Asset for any taxable period ending after the
Closing Date, (iii) any claims, actions or proceedings relating to the Assigned
and Assumed Contracts which arise out of events occurring after the Closing
Date, (iv) the Assumed Liabilities and any claim of any Person other than MONY
or its Affiliates with respect to or arising out of any Assumed Liability, (v)
any fees or commissions incurred by either Acquiring Party in connection with
the transactions contemplated by this Agreement or (vi) any actions taken by
Parent or AUSA Life after the Closing Date with respect to the Continuing
Employees.
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Section 11.02. Tax Adjustment. All Losses for which an indemnified party
is entitled to indemnification hereunder shall be computed net of insurance
proceeds received by the indemnified party or any Affiliate (decreased by Taxes,
if any, incurred as the result of such receipt). In addition, all Losses shall
be computed net of any Tax Reduction Amount. The indemnity payment for such
Losses shall be increased by Taxes, if any, incurred by the indemnified party as
the result of any payment under this Section 11.02. Solely for the purposes of
this Section 11.02 and notwithstanding Section 1.01, "Taxes" shall mean Federal,
state, county, local or foreign taxes, additional tax penalties or interest
thereon. If, after any payment of indemnity with respect to any Loss is made
hereunder by the indemnifying party, any insurance proceeds or Tax Reduction
Amount is received by the indemnified party with respect to such Loss, then the
indemnified party shall remit to the indemnifying party the lesser of (i) the
amount of the insurance proceeds (decreased by Taxes, if any, incurred as the
result of such receipt) or Tax Reduction Amount, if not previously taken into
account in computing the indemnity payment with respect to such Loss, and (ii)
any amounts previously paid by the indemnifying party pursuant to this Article
11 with respect to such Loss.
Section 11.03. Notice of Asserted Liability. Promptly after receipt by an
indemnified party hereunder of notice of any demand, claim or circumstances
which, with the lapse of time, would give rise to a claim or the commencement
(or threatened commencement) of any action, proceeding or investigation (an
"Asserted Liability") that may result in a Loss, such indemnified party shall
give written notice thereof (the "Claims Notice") to the indemnifying party. The
Claims Notice shall describe the
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Asserted Liability in reasonable detail and shall indicate the amount
(estimated, if necessary) of the Loss that has been or may be suffered by such
indemnified party.
Section 11.04. Opportunity to Defend. The indemnifying party may elect to
compromise or defend, at its own expense and by its own counsel, any Asserted
Liability; provided, however, that the indemnifying party may not compromise or
settle any Asserted Liability without the consent of the indemnified party or
parties unless such compromise or settlement requires no more than a monetary
payment for which the indemnified party or parties hereunder are fully
indemnified or involves other matters not binding upon the indemnified party or
parties. If the indemnifying party elects to compromise or defend such Asserted
Liability, it shall within 10 days (or sooner, if the nature of the Asserted
Liability so requires) notify the indemnified party or parties of its intent to
do so, and the indemnified party or parties shall cooperate, at the expense of
the indemnifying party with respect to out-of-pocket expenses of the indemnified
party or parties, in the compromise of, or defense against, such Asserted
Liability. If the indemnifying party elects not to compromise or defend the
Asserted Liability, fails to notify the indemnified party or parties of its
election as herein provided or contests its obligation to indemnify under
Section 11.01, the indemnified party or parties may pay, compromise or defend
such Asserted Liability in respect of any Asserted Liability for which the
indemnifying party may have an indemnification obligation under Section 11.01
hereof. In any event, the indemnified party or parties may participate, at its
sole expense, in the defense of such Asserted Liability in respect of any
Asserted Liability for
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which the indemnifying party may have an indemnification obligation under
Section 11.01.
Section 11.05. Indemnification Payments. Subject to a Party's right to
defend pursuant to Section 11.04 hereof, and indemnifying party hereunder shall
make an indemnification payment with respect to a Loss promptly after such Loss
is incurred. All such payments shall be made by wire transfer of immediately
available funds to such account or accounts as the indemnified party shall
designate to the indemnifying party in writing.
ARTICLE XII
TERMINATION PRIOR TO CLOSING
Section 12.01. Termination of Agreement. (a) This Agreement may be
terminated at any time prior to the Closing:
(i) By MONY in writing, if the Acquiring Parties shall (A) fail to
perform in any material respect their respective agreements contained
herein required to be performed by them on or prior to the Closing Date or
(B) breach any of their representations, warranties, covenants or
agreements contained herein, which breach would, individually or in the
aggregate, materially and adversely affect the ability of the Acquiring
Parties to consummate the transactions contemplated hereby or (after
giving effect to the Closing) to conduct the Business and which failure or
breach is not cured within ten (10) days after MONY has notified the
Acquiring Parties of its intent to terminate this Agreement pursuant to
this
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subsection (a)(i) of Section 12.01 or (C) if any of the conditions set
forth in Article VII, have not been fulfilled or waived, unless such
fulfillment has been frustrated or made impossible by any act or failure
to act of MONY or the Manager,
(ii) By AEGON in writing, if MONY shall (A) fail to perform in any
material respect its agreements contained herein required to be performed
on or prior to the Closing Date, or (B) breach any of its representations,
warranties, covenants or agreements contained herein, which breach would,
individually or in the aggregate, have a Material Adverse Effect on the
Business or the Transferred Assets taken as a whole, or materially and
adversely affect the ability of MONY to consummate the transactions
contemplated hereby, which failure or breach is not cured within ten (10)
days after AEGON has notified MONY of its intent to terminate this
Agreement pursuant to this subsection (a)(ii) of Section 12.01, or (C) if
any of the conditions set forth in Article VI hereof, have not been
fulfilled or waived, unless such fulfillment has been frustrated or made
impossible by any act or failure to act of AEGON or AUSA Life,
(iii) By MONY or AEGON in writing, if there shall be any order,
writ, injunction or decree of any court or governmental or regulatory
agency binding on AEGON, AUSA Life and/or MONY, which prohibits or
restrains AEGON, AUSA Life and/or MONY from consummating the transactions
contemplated hereby, provided that AEGON, AUSA Life and MONY, as the case
may be, shall
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have used its best efforts to have any such order, writ, injunction or
decree lifted and the same shall not have been lifted by December 31,
1993,
(iv) By either of MONY or AEGON in writing, if the Closing has not
occurred on or prior to December 31, 1993, unless the absence of such
occurrence shall be due to the failure of the party seeking to terminate
this Agreement to perform each of its obligations under this Agreement
required to be performed by it at on or prior to the Closing Date, and
(v) At any time on or prior to the Closing Date, by mutual written
consent of MONY and AEGON.
Section 12.02. Survival. If this Agreement is terminated and the
transactions contemplated hereby are not consummated as described above, this
Agreement shall become null and void and of no further force and effect, except
for (i) the provisions of this Agreement relating to the obligations of the
parties hereto to keep confidential and not to use certain information and data
obtained from the other parties hereto and (ii) the provisions of Sections 5.11,
13.01 and this Section 12.02.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Publicity. Except as may otherwise be required by law, no
release or announcement concerning this Agreement or the transactions
contemplated hereby shall be made without advance approval thereof by MONY,
AEGON and AUSA Life.
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The parties hereto shall cooperate with each other in making any release or
announcement.
Section 13.02. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally (by
courier or otherwise), telegraphed, telexed, sent by facsimile transmission or
sent by certified, registered or express mail, postage prepaid and return
receipt requested. Any such notice shall be deemed given when so delivered
personally, telegraphed, telexed or sent by facsimile transmission or, if
mailed, three days after the date of deposit in the United States mails, as
follows:
(i) AEGON USA, Inc.
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499
Attention: Chief Financial Officer
Telecopier No.: (319) 369-2218
With a concurrent copy to:
AEGON USA, Inc.
1111 North Charles Street
Baltimore, Maryland 21201
Attention: General Counsel
Telecopier No.: (410) 347-8685
(ii) If to MONY or the Manager to:
The Mutual Life Insurance Company
of New York
1740 Broadway
New York, New York 10019
Attention: Chief Executive Officer
Telecopier No.: (212) 708-2900
With a concurrent copy to:
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The Mutual Life Insurance Company
of New York
1740 Broadway
New York, New York 10019
Attention: General Counsel
Telecopier No.: (212) 708-2977
Any party may, by notice given in accordance with this Section 13.02 to
the other parties, designate another address or person for receipt of notices
hereunder provided that notice of such a change shall be effective upon receipt.
Section 13.03. Entire Agreement. This Agreement (including the Ancillary
Agreements, the other agreements contemplated hereby and thereby, the Exhibits
and the Schedules hereto) contains the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior agreements written
or oral, with respect thereto.
Section 13.04. Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, cancelled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by each of the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party on exercising any
right, power or privilege hereunder shall operate as a waiver thereof. Nor shall
any waiver on the part of any Party of any right, power or privilege, nor any
single or partial exercise of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such right, power or
privilege. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any party may otherwise have at law or
in equity.
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The rights and remedies of any party based upon, arising out of or otherwise in
respect of any inaccuracy in or breach of any representation, warranty, covenant
or agreement contained in this Agreement shall in no way be limited by the fact
that the act, omission, occurrence or other state of facts upon which any claim
of any inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in this Agreement (or
in any other agreement between the parties) as to which there is no inaccuracy
or breach.
Section 13.05. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
Section 13.06. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors,
permitted assigns and legal representatives. Neither this Agreement, nor any
right hereunder, may be assigned by any party (in whole or in part) without the
prior written consent of the other party hereto; provided, however, that AUSA
Life may assign all or any portion of its rights to be the transferee of any of
the Transferred Assets (other than the Books and Records) or any of the Assigned
and Assumed Contracts or all or any portion of the obligations to assume any
Assumed Liabilities (other than Insurance Liabilities), to any direct or
indirect wholly-owned subsidiary or subsidiaries of AEGON (provided that AEGON
shall, with respect to the assignment of any such obligations, guaranty to
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MONY only the performance of such obligation by such subsidiary or subsidiaries
thereunder, such guaranty to be in form and substance satisfactory to MONY).
Section 13.07. Interpretation. (a) Notwithstanding anything in this
Agreement to the contrary, no term or condition of this Agreement shall be
construed to supersede, restrict or otherwise limit any term or condition set
forth in any of the Ancillary Agreements or any other agreement contemplated
hereby or thereby, including, without limitation, any provision of the Series A
Notes or the Series B Notes relating to the payment of principal and interest
thereon.
(b) The parties acknowledge and agree that they may pursue judicial
remedies at law or equity in the event of a dispute with respect to the
interpretation or construction of this Agreement. In the event that an
alternative dispute resolution procedure is provided for in any of the Ancillary
Agreements or any other agreement contemplated hereby or thereby, and there is a
dispute with respect to the construction or interpretation of such Ancillary
Agreement, the dispute resolution procedure provided for in such Ancillary
Agreement shall be the procedure that shall apply with respect to the resolution
of such dispute.
(c) For purposes of this Agreement, the words "hereof", "herein", "hereby"
and other words of similar import refer to this Agreement as a whole unless
otherwise indicated. whenever the singular is used herein, the same shall
include the plural, and whenever the plural is used herein, the same shall
include the singular, where appropriate.
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Section 13.08. No Third Party Beneficiaries. Nothing in this Agreement is
intended or shall be construed to give any Person, other than the parties
hereto, their successors and permitted assigns, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision contained
herein.
Section 13.09. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
Section 13.10. Other Agreements, Exhibits and Schedules. The Exhibits and
the Schedules are a part of this Agreement as if fully set forth herein. All
references herein to Articles, Sections, subsections, paragraphs, subparagraphs,
clauses, Exhibits and Schedules shall be deemed references to such parts of this
Agreement, unless the context shall otherwise require.
Section 13.11. Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
Section 13.12. Further Agreement. If any of the rights or benefits
provided to the Acquiring Parties or MONY under this agreement, the Ancillary
Agreements or any agreement contemplated hereby or thereby cannot be effected
for any reason other than the failure of a condition set forth in Article VI or
VII hereof to be fulfilled, the Selling Parties and the Acquiring Parties shall
use their reasonable efforts to formulate and
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implement as soon as practicable arrangements designed to so provide all such
rights and benefits.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Michael I. Roth
-----------------------------
Name: Michael I. Roth
Title: Chairman & CEO
AEGON USA, INC.
By: /s/ Patrick S. Baird
-----------------------------
Name: Patrick S. Baird
Title: VP/CFO
AUSA LIFE INSURANCE COMPANY, INC.
By: /s/ Patrick S. Baird
-----------------------------
Name: Patrick S. Baird
Title: VP/CFO
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SCHEDULE 2.02 TO THE
ASSET TRANSFER AND
ACQUISITION AGREEMENT
CONSIDERATION
Capitalized terms used and not otherwise defined in this Schedule
shall have the respective meanings set forth in the Agreement or in Schedule
9.01 (A) to the Agreement.
1. Final Statement. Within ninety (90) days following the ninth
anniversary of the Closing Date, the Acquiring Parties shall prepare, and
deliver to MONY (together with delivery of the Existing Assumption Business
Payments Statement described in Schedule 9.01(A) hereto and the Existing
Indemnity Business Payments Statement described in Schedule 9.01(B) hereto for
the final Accounting Period ending on such ninth anniversary date), at the sole
expense of the Acquiring Parties, a statement setting forth, in reasonable
detail, the computation of the Consideration (as defined below), together with
supplemental schedules setting forth, in reasonable detail, the computation of
each component item of the Consideration described in Section 2 of this Schedule
(collectively, the "Final Statement"). The Final Statement shall be in form
reasonably satisfactory to MONY and shall be certified by the chief financial
officer of each of the Acquiring Parties as being based on the books and records
of the Acquiring Parties (in which books and records, full and correct entries
shall have been made of all financial and business transactions and all assets,
liabilities and results of operations of the Acquiring Parties, in accordance
with SAP consistently applied), and as having been prepared in accordance with
this Agreement. In addition, the Acquiring Parties shall deliver to MONY such
appropriate supporting documentation as MONY may reasonably request in
connection with the Consideration (or any component thereof). MONY shall be
entitled to object to any amounts or items contained in the Final Statement and
have such objections resolved pursuant to Sections 5 and 6 of Schedule 9.01 (A).
2. Consideration. Together with delivery of the Final Statement, the
Acquiring Parties shall pay MONY, by wire transfer of immediately available
funds as MONY shall instruct AUSA Life in writing, "Consideration" in an amount
(subject to reduction by the amount of any Net Asset Adjustment under Section 3
of this Schedule) equal to the aggregate of:
(a) an amount equal to 2.5% of the Existing General Account
Business as of the ninth anniversary of the Closing Date; plus
(b) twice the amount of Separate Account/Collective Investment
Account Net Revenues with respect to all Existing Business for the twelve (12)
month period ending on the ninth anniversary of the Closing Date, determined in
accordance with Annex D to Schedule 9.01(A) and Annex D to Schedule 9.01(B);
plus
<PAGE> 173
(c) four times the amount of all fees and charges due and payable
to, or otherwise accrued for the benefit of, AUSA Life or any of its affiliates
in respect of the Participating Annuities during the twelve (12) month period
ending on the ninth anniversary of the Closing Date; plus
(d) the amount by which (i) any statutory reserves held by AUSA Life
in respect of the Existing Business (other than Existing Business in respect of
Variable Separate Accounts and collective trusts and mutual funds) on the ninth
anniversary of the Closing Date (excluding any Voluntary Reserves and the
Interest Maintenance Reserve, the Asset Valuation Reserve and any Excess
Interest Reserves (defined, for purposes hereof, as reserves held in excess of
the amount of such Existing Business as a result of interest rate guarantees
under the terms of Insurance Contracts being above statutory interest valuation
rates, all determined in accordance with New York SAP as in effect on the
Closing Date) held by AUSA Life, it being understood that it is the intention of
the parties that AUSA Life shall retain liability for such Reserves) exceeds
(ii) the aggregate amount of Existing Business (other than Existing Business in
respect of Variable Separate Accounts and collective trusts and mutual funds) on
such ninth anniversary date; plus
(e) an amount (not to exceed $25 million in the aggregate) equal to
5% of the amount by which (i) the aggregate amount of statutory reserves held by
AUSA Life in respect of group pension insurance policies and contracts issued,
assumed or renewed by AUSA Life at any time from the Closing Date until such
ninth anniversary date, exceeds (ii) $18 billion (it being understood that such
$18 billion amount of group pension insurance business would reflect a 16.7%
minimum average annual growth rate in such business during the nine years ended
December 31, 2002, which growth rate is comparable to the 15-20% historic
average annual growth rate in MONY's group pension insurance business); minus
(f) the amount of any Aggregate Existing Assumption Business Deficit
with respect to the Novated Contracts, as shown on the Existing Assumption
Business Payments Statement with respect to the Novated Contracts for the final
Accounting Period;
provided, however, that in the event that the aggregate amount of general
account reserves recorded in respect of the Existing General Account Business
under participating insurance policies and contracts as of the ninth anniversary
of the Closing Date is greater than $400 million, then the portion of
Consideration under clauses (a) and (b) immediately above relating to such
Existing Business under such participating insurance policies and contracts
shall be halved (with the remainder of the foregoing, including clauses (c)
through (f) and the portion of Consideration under clauses (a) and (b) relating
to non-participating insurance policies and contracts, remaining unaffected)
(the "Special Consideration Adjustment"). For purposes of the foregoing:
"participating insurance policies and contracts" shall mean insurance policies
and contracts that provide for the right to participate in the divisible surplus
of the insurer under such policies and contracts to the extent that dividends
are apportioned thereon; and "non-participating insurance policies and
contracts" shall mean all other insurance policies and contracts.
<PAGE> 174
Notwithstanding anything herein or in the Ancillary Agreements to the contrary,
all calculations of the Threshold Amount (as defined in the Series A Note
Purchase Agreement) pursuant to any Ancillary Agreement shall be made without
giving effect to the Special Consideration Adjustment; without limiting the
generality of the foregoing, the amount described in Section 2(d)(ii) of the
Threshold Formula attached to the Series A Note Purchase Agreement shall be
calculated as through there were no Special Consideration Adjustment.
3. Net Asset Adjustment. (a) For purposes hereof:
(i) "Adjusted Book Value" shall mean, with respect to any
Specified Investment Asset (as defined below) on any date, the statutory
carrying value on the books of AUSA Life of such Specified Investment Asset on
such date, after giving effect to all write-downs, write-ups or other
adjustments required under SAP which have been taken into account in calculating
Existing Assumption Business Payments or Deficits in respect of the Novated
Contracts on or prior to such date (but without giving effect to any
write-downs, write-ups or other adjustments which have not been taken into
account in calculating any such Existing Assumption Business Payments or
Deficits);
(ii) "Specified Mortgage Loans" shall mean the Mortgage Loans
listed on Schedule 1.01 (J) to the Agreement which are allocable to the Novated
Contracts, all mortgage loan Substitute Investment Assets (if any) substituted
for any such Mortgage Loans, and all investments of income and proceeds realized
in respect of the Investment Assets allocable to the Novated Contracts in
mortgage loans made in accordance with the Investment Management Agreement;
(iii) "Specified Real Properties" shall mean all real properties
mortgaged as collateral security for any Specified Mortgage Loans allocable to
the Novated Contracts, which are acquired by AUSA Life through foreclosure,
acceptance of a deed in lieu of foreclosure or otherwise, and any real
properties acquired by AUSA Life in exchange for any such mortgaged real
properties;
(iv) "Specified Investment Assets" shall mean the Specified
Mortgage Loans and the Specified Real Properties, collectively; and
(v) "Terminal Market Value" shall have the same meaning as that of
the definition of "Market Value" set forth in Section 1608.2(f) of the Federal
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"),
except that the "as of" date of valuation for determining any Terminal Market
Value shall be the ninth anniversary of the Closing Date. The full text of such
definition of "Market Value" under Section 1608.2(f) of FIRREA is set forth in
Schedule 1 (b) to the Series A Note Purchase Agreement.
(b) Within forty-five (45) days following the ninth anniversary of
the Closing Date, the Acquiring Parties shall calculate, and deliver to MONY, a
schedule setting for the Adjusted Book Value and the Terminal Market Value of
each Specified Investment Asset then owned by AUSA Life. The amount by which (i)
the aggregate
<PAGE> 175
Adjusted book Value of all such Specified Investment Assets exceeds (ii) the
aggregate Terminal Market Value of all such Specified Investment Assets (the
"Net Asset Adjustment") shall be applied to the extent and in the manner
provided below. The Net Asset Adjustment shall be applied, in the first
instance, by reduction in the amount of that portion of the Consideration not
constituting the Withheld Amount, as such term is defined below. If the Net
Asset Adjustment exceeds the aggregate amount of that portion of the
Consideration not constituting the Withheld Amount, such excess amount of the
Net Asset Adjustment shall be applied, in the second instance, as an adjustment
to the aggregate outstanding principal amount of Series A Notes (pursuant to the
Series A Note Purchase Agreement) in an amount equal to such excess amount. If
the Net Asset Adjustment exceeds the aggregate amount of the portion of the
Consideration not constituting the Withheld Amount plus the aggregate
outstanding principal amount of Series A Notes, such remaining excess amount of
the Net Asset Adjustment shall be applied, in the third and final instance, by
reduction of that portion of the Withheld Amount of the Consideration, if any,
which is released to MONY or otherwise not applied to satisfy final judgments,
awards or settlements with respect to Claims (as defined below) pursuant to
Section 4 of this Schedule. MONY shall not be required to pay AUSA Life, or
otherwise be obligated with respect to, any amount of the Net Asset Adjustment
remaining after reduction in the amount of the Consideration (including the
Withheld Amount) and adjustment to the principal amount of all then outstanding
Series A Notes as described above.
4. Holdback. (a) In the event that, prior to the ninth anniversary
of the Closing Date, a third party asserts any claim or claims against AEGON or
AUSA Life with respect to the Investment Assets or the terms of the Investment
Management Agreement and AUSA Life notifies the Manager of such claim or claims
pursuant to Section 26 of the Investment Management Agreement prior to such
ninth anniversary date (each a "Claim"), and such Claim or Claims are not
discharged, satisfied or otherwise resolved prior to the time payment of the
Consideration is due hereunder (the "Payment Date"), the Acquiring Parties
shall, subject to the provisions below of this Section 4, be entitled to (i)
withhold payment of a portion of the Consideration due MONY, in an amount (not
to exceed the aggregate amount of the Consideration) equal to (A) the aggregate
amount of potential losses, liabilities, damages and costs, net of any
applicable insurance proceeds, tax benefits or other recoverables ("Damages"),
for which AUSA Life and AEGON are reasonably likely to be liable with respect to
all such unresolved Claims, determined as provided in subsection (b) immediately
below, less (B) the aggregate amount of any and all Investment Assets which are
used to satisfy any judgment, award or settlement (in whole or in part), or
otherwise applied, with respect to such Claims prior to the Payment Date (such
withheld portion of the Consideration, together with interest accrued thereon as
provided below, being referred to herein collectively as the "Withheld Amount"),
and (ii) apply any and all of the Withheld Amount (except to the extent required
to be released to MONY as provided below) to satisfy any final judgment, award
or settlement with respect to such unresolved Claims. Notwithstanding anything
herein to the contrary, the parties hereto agree that the Withheld Amount shall
in no event exceed the amount of Consideration otherwise payable to MONY.
<PAGE> 176
(b) The parties hereto shall, and MONY shall cause the Manager to,
attempt in good faith to mutually agree upon the amount of potential Damages for
which AUSA Life or AEGON are reasonably likely to be liable with respect to each
such unresolved Claim ("Potential Liability"). If the parties hereto and the
Manager are unable to agree upon the amount of such Potential Liability with
respect to any such unresolved Claims within ten (10) days following the ninth
anniversary of the Closing Date, the parties hereto shall, and MONY shall cause
the Manager to, jointly select and retain within five (5) days thereafter an
independent law firm (meeting the requirements of Section 26 (a) of the
Investment Management Agreement) to determine the amount of such Potential
Liability with respect to each such unresolved Claim in dispute (such firm
hereinafter referred to as the "Independent Counsel"). If AUSA Life and the
Manager are unable to mutually agree upon the selection of the Independent
Counsel, each of them shall promptly propose two independent law firms (meeting
the above-mentioned requirements) to the other, who shall promptly decline one
of the two candidate firms so proposed, and the Independent Counsel shall be
promptly selected from the remaining two candidate firms by drawing lots. Each
of the parties hereto shall, and MONY shall cause the Manager to, provide the
Independent Counsel with full and free access to their respective books and
records which are reasonably related to such unresolved Claims or potential
Damages with respect thereto. The Independent Counsel shall within fifteen (15)
days of its appointment provide a written report to the parties hereto and the
Manager, which report shall set forth the Independent Counsel's determination of
the amount, if any, of the Potential Liability of AUSA Life and AEGON with
respect to each such unresolved Claim for which such amount of Potential Damages
are in dispute. The Potential Liability, determined as provided above in this
subsection, in respect of each Claim which is not discharged, satisfied or
otherwise resolved prior to the Payment Date shall be utilized for purposes of
determining the Withheld Amount.
(c) All amounts constituting the Withheld Amount shall accrue
interest, from the Payment Date until such amounts are applied or released as
provided below, at a rate per annum equal to the 1-Year Treasury Rate (as
defined below) plus 1%. For purposes hereof, the "1-Year Treasury Rate" shall
mean, for any period, a fluctuating rate of interest per annum equal for each
day during such period to the yield of United States treasury securities having
a term to maturity of one (1) year, as announced by the Federal Reserve Bank of
New York on such date and reported in the Wall Street Journal (or if such day is
not a Business Day, for the next preceding Business Day).
(d) If the Manager shall have assumed the responsibility for the
investigation, defense and settlement of any unresolved Claim or Claims pursuant
to Section 26(b) of the Investment Management Agreement, the Manager shall
continue to exercise such responsibility in accordance with and subject to the
terms and provisions of Section 26 of the Investment Management Agreement
(including, without limitation, the provisions therein relating to the
assumption of control of such responsibilities by AUSA Life) following the ninth
anniversary of the Closing Date (notwithstanding any termination of the
Investment Management Agreement) until such Claim or Claims are discharged,
satisfied or otherwise resolved. In addition, if, by mutual agreement of the
parties hereto or in the opinion of the Independent Counsel, the Potential
Liability of AUSA Life and AEGON with respect to any unresolved Claim is less
than or equal to $5
<PAGE> 177
million, the Manager shall assume responsibility for the investigation, defense
and settlement of such Claim, in accordance with the terms and provisions of
such Section 26, until such Claim is discharged, satisfied or otherwise
resolved. Following such ninth anniversary, AUSA Life shall be responsible for
the investigation, defense or settlement of all other Claims for which the
Manager is not entitled to assume or exercise responsibility therefor. In the
event that the aggregate Potential Liability (determined as provided above) with
respect to all unresolved Claims for which the Manager is entitled to assume or
exercise responsibility following such ninth anniversary exceeds the amount of
the Consideration, AUSA Life may elect, upon written notice to the Manager
within 30 days after the Payment Date, to assume responsibility for that number
of such unresolved Claims (selected by commencing with the last asserted Claim
and proceeding in reverse chronological order based on the dates when such
Claims were asserted) having a total Potential Liability not greater than the
amount of such excess. The Manager shall have the right to consult with AUSA
Life with respect to any proposed settlement of any Claim for which AUSA Life
assumes or exercises responsibility, but AUSA Life shall retain ultimate
discretion in the defense and settlement thereof. The Manager and AUSA Life
shall use all reasonable efforts to discharge or otherwise resolve all such
unresolved Claims as soon as practicable after the Payment Date.
(e) AUSA Life shall be entitled to apply any or all of the Withheld
Amount to satisfy any final judgments, awards or settlements with respect to
such Claims. When any unresolved Claim is satisfied, discharged or otherwise
resolved, AUSA Life shall immediately release and pay to MONY, by wire transfer
of immediately available funds as MONY shall instruct AUSA Life in writing, (i)
the amount, if any, by which the Potential Liability determined as provided in
subsection (b) above and included in the Withheld Amount in respect of such
Claim (together with interest accrued thereon as provided above) exceeds the
total portion of the Withheld Amount applied as aforesaid with respect to such
Claim, or (ii) if no portion of the Withheld Amount is so applied with respect
to such Claim, the total amount of MONY's Potential Liability determined as
aforesaid and included in the Withheld Amount for such Claim, together with
interest accrued thereon as provided above.
5. Disputes. Notwithstanding the foregoing, MONY shall be entitled
to object to any amounts or items contained in the Final Statement (other than
the Terminal Market Values of Specified Mortgage Loans and Specified Real
Properties) and have such objections resolved pursuant to Sections 5 and 6 of
Schedule 9.01(A) to the Agreement; any additional amounts of Consideration
arising from the resolution of such objections as aforesaid shall be paid by the
Acquiring Parties to MONY, by wire transfer of immediately available funds as
MONY shall instruct the Acquiring Parties in writing, within five (5) days
following the resolution of all disputes, if any, relating to the Consideration
as contemplated by Sections 5 and 6 of Schedule 9.01(A).
<PAGE> 1
Exhibit 10.26
[LETTERHEAD OF AEGON USA, INC.]
SERIES A NOTE PURCHASE AGREEMENT
Dated as of December 31, 1993
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
1740 Broadway
New York, New York 10019
(together with its permitted or
registered successors and assigns,
being hereinafter called "MONY")
Dear Sirs:
AEGON USA, INC., an Iowa corporation (said corporation, together
with its successors and assigns, subject to Section 12.7 hereof, being
hereinafter called "AEGON"), upon the terms and subject to the conditions set
forth herein, hereby agrees with MONY as follows:
ARTICLE 1.E DEFINITIONS
(a) For all purposes of this Agreement and the Series A Notes, the
following definitions shall apply:
"Accounting Period" means any calendar year from 1994 to and
including 2002.
"Acquisition Agreement" means the Asset Transfer and Acquisition
Agreement dated as of December 31, 1993 by and among MONY, AEGON and AUSA Life.
<PAGE> 2
"Additional Series A Notes" means additional Series A Notes,
substantially in the form of Exhibit A hereto, issued from time to time pursuant
to Section 2.3 or 5.1 hereof.
"Adjusted Book Value" has the meaning set forth in Schedule 1(c)
hereto.
"AEGON" has the meaning set forth in the first paragraph of this
Agreement.
"AEGON Financial Statements" has the meaning set forth in Section
6.7 hereof.
"AEGON's Auditor" has the meaning set forth in Section 6.7 hereof.
"Agreement" means this Series A Note Purchase Agreement (including
the annexed Exhibits and Schedules) , originally accepted by MONY, and as it
may, from time to time, hereafter be amended, supplemented or modified in
accordance with its terms.
"Aggregate Existing Assumption Business Deficit" has the meaning set
forth in Schedule 9.01(A) to the Acquisition Agreement.
"Aggregate Existing Assumption Business Payments" has the meaning
set forth in Schedule 9.01 (A) to the Acquisition Agreement.
"Applicable SAP" means with respect to any Person, the statutory
accounting principles and practices prescribed or permitted by the insurance
regulatory authority of the state of domicile of such Person.
"Appraised Value" has the meaning set forth in Section 3.1(b)
hereof.
"AUSA Life" means AUSA Life Insurance Company, Inc., a New York
insurance company and an indirect wholly-owned subsidiary of AEGON.
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<PAGE> 3
"Change in Control" means any transaction pursuant to which (i)(a)
AUSA Life shall cease to be a direct or indirect subsidiary of AEGON NV or its
successors (through merger or otherwise) and (b) 50 percent or more of those
officers of AEGON listed on Schedule 1(a) hereto (or their successors in office
immediately prior to the public announcement of such transaction) shall cease to
be officers of AEGON within the period commencing with the public announcement
of such transaction and ending on that date which is six months after the
consummation of such transaction, or (ii) AUSA Life shall sell or otherwise
dispose of any material part of the Business or the Transferred Assets outside
the ordinary course of business (including, without limitation, by means of any
bulk or assumption reinsurance agreement) other than to a majority-owned
Subsidiary of AEGON.
"Consideration" has the meaning set forth in Schedule 2.02 to the
Acquisition Agreement.
"Control Reduction Amount" means, with respect to each holder of
Series A Notes who makes a demand for prepayment pursuant to Section 3.2 hereof
following a notice of Change in Control, a reduction in the amount of Series A
Notes to be prepaid equal to the product of (i) the amount by which (A) the
aggregate Adjusted Book Value of any Specified Mortgage Loans outstanding on the
date of the occurrence of such Change in Control and any Specified Real
Properties owned by AUSA Life on the date of the occurrence of such Change in
Control exceeds (B) the aggregate Terminal Market Value of such Specified
Mortgage Loans and Specified Real Properties (as determined for purposes of the
Threshold Amount calculation in connection with such prepayment) and (ii) a
fraction (X) the numerator of which shall be equal to the aggregate unpaid
principal
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<PAGE> 4
amount of the Series A Notes held by such holder on the date of the occurrence
of such Change in Control and (Y) the denominator of which shall be equal to the
aggregate unpaid principal amount of all Series A Notes outstanding on the date
of the occurrence of such Change in Control.
"Default" means a condition or event which with notice or after
lapse of time would constitute an Event of Default.
"Event of Default" has the meaning set forth in Section 11.1 hereof.
"Excess Amount" means, at any time, the amount by which the
Threshold Amount as of the thirty-first day of December of the immediately
preceding calendar year exceeds an amount equal to 15 percent of the sum of (i)
the aggregate statutory book value of the outstanding Specified Mortgage Loans
as of such date and (ii) the aggregate statutory book value of the Specified
Real Properties owned by AUSA Life as of such date.
"Existing Assumption Business Deficit" has the meaning set forth in
Schedule 9.01(A) to the Acquisition Agreement.
"Existing Assumption Business Payments" has the meaning set forth in
Schedule 9.01(A) to the Acquisition Agreement.
"Existing Indemnity Business Payments" has the meaning set forth in
Schedule 9.01(B) to the Acquisition Agreement.
"Final Statement" has the meaning set forth in Schedule 2.02 to
the Acquisition Agreement.
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<PAGE> 5
"Holder", with respect to any Series A Note, means the person shown
to be the holder of such Series A Note by the books for the registration of
Series A Notes required to be maintained in accordance with Section 4.1(a)
hereof.
"ILI" means International Life Investors Insurance Company, a New
York life insurance company and an indirect wholly-owned Subsidiary of AEGON.
"Index Rate" means, (i) with respect to the Series A Notes issued on
the date hereof a rate per annum equal to the sum of (a) the current yield at
the time of issuance on U.S. Treasury obligations of a duration most closely
equal to the term of such Series A Note to maturity and (b) 70 basis points (0.7
percent), (ii) with respect to Additional Series A Notes issued on or before
December 31, 1995, a rate per annum equal to the sum of (a) the current yield at
the time of issuance on two year U.S. Treasury obligations and (b) 100 basis
points (1.0 percent) and, (iii) with respect to Additional Series A Notes issued
after December 31, 1995 a rate per annum equal to the sum of (a) the current
yield at the time of issuance on one year U.S. Treasury obligations (or U.S.
Treasury obligations of such longer term to maturity as AEGON and the holders of
Series A Notes may mutually agree upon) and (b) 100 basis points (1.0 percent).
"Initial Principal Amount" means the sum of $150 million.
"Interest Payment Date" and "Interest Payment Dates" have the
respective meanings set forth in Section 2.1 hereof.
"Interim AEGON Financial Statements" has the meaning set forth in
Section 6.7 hereof.
"Life Subsidiary" means any Subsidiary of AEGON which is engaged in
life, annuity, accident or health insurance business.
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<PAGE> 6
"Material Adverse Effect" means a material adverse effect on the
business, operations, condition (financial or other), results of operations,
properties, assets or prospects of a Person.
"Material Subsidiaries" mean AUSA Life, First AUSA Life Insurance
Company, a Maryland life insurance company, ILI, Life Investors Insurance
Company of America, an Iowa life insurance company, Monumental Life Insurance
Company, a Maryland life insurance company, Bankers United Life Assurance Co.,
an Iowa life insurance company, Western Reserve Life Assurance Co. of Ohio, an
Ohio life insurance company, and PFL Life Insurance Company, an Iowa life
insurance company.
"Maturity Date" means that date which is five Business Days after
the date that the Final Statement is delivered to MONY and the Net Asset
Adjustment, if any, is determined, all in accordance with the provisions of
Schedule 2.02 to the Acquisition Agreement.
"Net Asset Adjustment" has the meaning set forth in Schedule 2.02
to the Acquisition Agreement.
"Prepayment Date" has the meaning set forth in Section 3.1 hereof.
"Payment Adjustment" means, with respect to the Series A Notes, the
reduction in the amount due and payable at maturity, upon the occurrence of a
Special Prepayment Event or upon acceleration as provided herein (i) in the case
of the maturity of the Series A Notes with the Consideration determined in
accordance with Schedule 2.02 to the Acquisition Agreement being a positive
number, by an amount equal to the amount, if any, by which the Net Asset
Adjustment exceeds the aggregate amount of the Consideration as so determined,
(ii) in the case of the maturity of the Series A Notes with
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<PAGE> 7
the Consideration as so determined being a negative number, by an amount equal
to the sum of the Net Asset Adjustment, if any, plus an amount equal to the
amount by which the Consideration as so determined is less than zero, or (iii)
in the case of the occurrence of a Special Prepayment Event or upon
acceleration, by an amount equal to the Aggregate Existing Assumption Business
Deficit, if any, in the Accounting Period immediately preceding the date of the
occurrence of such Special Prepayment Event or acceleration, increased by the
amount of any Existing Assumption Business Deficit (or reduced by the amount of
any Existing Assumption Business Payments, as the case may be), in the period
commencing with the first day of the then current Accounting Period and ending
on the last day of the most recently ended calendar quarter. So long as more
than one Series A Note is issued and outstanding and MONY or its nominee is the
sole holder of all of such Series A Notes, MONY or its nominee may apply the
Payment Adjustment to reduce the aggregate principal amount of the Series A
Notes held by MONY or such nominee on a pro rata basis or on such other basis as
shall be reasonably determined by MONY or its nominee, as the case may be. In
the event that MONY or its nominee is not the sole holder of all of the issued
and outstanding Series A Notes, any Payment Adjustment shall be applied pro rata
to the principal amount of all outstanding Series A Notes.
"Repayment Amount" means, in the aggregate, the Initial Principal
Amount as increased by the aggregate principal amount of all Additional Series A
Notes and, at maturity, upon the occurrence of a Special Prepayment Event or
upon acceleration, as reduced by the Payment Adjustment, if any; and, with
respect to a single Series A Note, an amount equal to that portion of the
principal amount of such Series A
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<PAGE> 8
Note which bears the same relationship to such principal amount as the Repayment
Amount, in the aggregate, bears to the aggregate principal amount of all
outstanding Series A Notes.
"Reserve Ratio" has the meaning set forth in the Acquisition
Agreement.
"Series A Note" and "Series A Notes" have the respective meanings
set forth in Section 2.1.
"Special Prepayment Event" means a special prepayment event
contemplated by Sections 3.1(b), 3.1(c), 3.1(d) or 3.2 hereof, as applicable.
"Specified Mortgage Loans" has the meaning set forth in Schedule
2.02 to the Acquisition Agreement.
"Specified Real Properties" has the meaning set forth in Schedule
2.02 to the Acquisition Agreement.
"S&P" means Standard & Poor's Corporation.
"Terminal Market Value" has the meaning set forth in Schedule 2.02
to the Acquisition Agreement.
"Threshold Amount" means the amount determined in accordance with
the Threshold Formula.
"Threshold Formula" means the formula contained in Schedule 1(b)
hereto.
(b) Capitalized terms used and not otherwise defined herein shall
have the respective meanings set forth in the Acquisition Agreement.
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<PAGE> 9
ARTICLE 2. ISSUANCE OF SERIES A NOTES
Section 2.1 Authorization of Series A Notes.
AEGON has duly authorized the issuance and sale, on the terms and in
the principal amount hereinafter provided, of AEGON's Series A Notes due on the
Maturity Date (said Series A Notes and any Additional Series A Notes issued
hereunder and any notes which may be issued in substitution or exchange for said
Series A Notes or Additional Series A Notes each hereinafter called a "Series A
Note" and collectively the "Series A Notes"). Each Series A Note will be in
fully-registered form, will bear interest on the unpaid principal amount
thereof, payable annually on the thirtieth day of June in each year (each, an
"Interest Payment Date" and collectively, the "Interest Payment Dates"), and at
maturity, at the applicable Index Rate, from the date of issuance of such Series
A Note until such Series A Note becomes due and payable (whether at maturity, by
acceleration or otherwise) and on any overdue portion of such principal amount
(including any overdue prepayment of principal) at the applicable Index Rate
plus 100 basis points per annum from the date the same becomes due and payable
(whether at maturity, by acceleration or otherwise) until paid and, to the
extent permitted by applicable law, on any overdue interest at the applicable
Index Rate plus 100 basis points per annum from the date the same becomes due
and payable (whether on an Interest Payment Date, at maturity, by acceleration
or otherwise) until paid. The Series A Notes will be in substantially the form
of Exhibit A hereto.
Section 2.2 Sale of Series A Notes; Closing.
(a) AEGON hereby agrees to issue and sell to MONY, and, upon the
terms and subject to the conditions hereof, MONY agrees to purchase from AEGON,
on the Closing Date, $150 million in aggregate principal amount of Series A
Notes, at an
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<PAGE> 10
aggregate purchase price equal to 100% of such principal amount. The closing
with respect to the sale and purchase of the Series A Notes shall be held on the
Closing Date at 10:00 a.m., New York City time, at the offices of LeBoeuf, Lamb,
Leiby & MacRae, 125 West 55th Street, New York, New York or such other time or
place as the parties may mutually agree upon.
(b) At the Closing, AEGON will deliver Series A Notes to MONY in the
form of a single printed Series A Note (or such greater number of Series A Notes
as MONY may reasonably designate to AEGON in writing) dated the Closing Date in
the Initial Principal Amount and duly registered in MONY's name (or in the name
of such nominee as MONY shall have designated to AEGON in writing before the
Closing Date), against payment therefor by wire transfer of immediately
available funds in the amount of the purchase price of such Series A Note or
Series A Notes to such account or accounts as AEGON shall designate in writing
to MONY.
Section 2.3 Purchase of Additional Series A Notes.
(a) So long as MONY shall hold any Series A Notes, MONY shall have
the option to purchase, from time to time and at any time, Additional Series A
Notes in an aggregate principal amount which shall not exceed, on a cumulative
basis, the sum of (i) an amount equal to the greater of (A) the Existing
Assumption Business Payments for the Accounting Period ending December 31, 1994
or (B) an amount equal to the Reserve Ratio times the sum of the Existing
Assumption Business Payments (or Existing Assumption Business Deficit, as the
case may be) and the Existing Indemnity Business Payments, if any, for the
Accounting Period ending December 31, 1994 and (ii) an amount equal to the
Aggregate Existing Assumption Business Payments with respect to
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<PAGE> 11
Accounting Periods commencing after December 31, 1994. Upon notice from MONY to
AEGON of its intention to so purchase Additional Series A Notes, AEGON shall
sell to MONY, upon the terms and subject to the conditions hereof, and MONY
shall purchase, Additional Series A Notes in an aggregate principal amount as
shall be designated in such notice at an aggregate purchase price equal to 100%
of such principal amount. Immediately upon such notice by MONY, AEGON shall
deliver to MONY Additional Series A Notes in the form of a single printed Series
A Note (or such greater number of Series A Notes as MONY may reasonably
designate to AEGON in writing) dated the date of such notice, in the aggregate
principal amount so designated and duly registered in MONY's name (or in the
name of such nominee as MONY shall have designated to AEGON in writing prior to
such date), against payment therefor by wire transfer or at the direction of
MONY of immediately available funds in the amount of the purchase price of such
Additional Series A Notes to such account or accounts as AEGON shall designate
in writing to MONY.
(b) Any Additional Series A Notes so issued shall be dated the
applicable purchase date, shall bear interest from and after such date at the
Index Rate, shall mature on the Maturity Date and shall be issued pursuant to
and shall be subject to the terms and conditions of this Agreement and shall
have the same rights and benefits as all other Series A Notes.
(c) So long as MONY or its nominee is the sole holder of all of the
Series A Notes, MONY or its nominee shall have the option, exercisable by
written notice to AEGON prior to the purchase of any Additional Series A Notes
in any year, to require that the Additional Series A Notes issued to MONY during
such calendar year
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<PAGE> 12
provide, in general, that any reduction in the aggregate principal amount of the
Series A Notes by the Control Reduction Amount or the Payment Adjustment shall
be applicable to such series of Series A Notes prior to the application of any
such reduction to the principal amount of the Series A Notes issued during all
prior calendar years and during all subsequent calendar years as to which MONY
does not exercise such option (it being understood that all Additional Series A
Notes issued during a particular calendar year (and any Series A Notes issued in
exchange thereof pursuant to Section 3.3(c) hereof or upon any transfer of such
Series A Notes) shall at all times be pari passu with respect to the application
of any such reduction).
ARTICLE 3. PREPAYMENT OF SERIES A NOTES
Section 3.1 Special Prepayment Events.
(a) Subsequent to December 31, 1996, MONY or AEGON may at any time
on or before January 31 of any year request in writing that MONY and AEGON
calculate the Threshold Amount as of the then immediately preceding December
31st. If such request is made, MONY and AEGON shall calculate the Threshold
Amount as of such date in accordance with the procedures set forth in the
Threshold Formula. AEGON agrees that on or prior to the twentieth day following
the final determination of the Threshold Amount in accordance with the Threshold
Formula (a "Prepayment Date"), it shall prepay that portion of the then
outstanding principal amount of the Series A Notes which equals the Excess
Amount, if any, applicable on such Prepayment Date, together with interest
accrued thereon as set forth below; provided, however, that the aggregate
principal amount of Series A Notes remaining outstanding after any such
prepayments shall not be less than the Initial Principal Amount; and provided,
further, that in the event AEGON shall request pursuant to Section 5.1(c) hereof
that MONY and AEGON also calculate
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<PAGE> 13
the Threshold Amount as of such date to determine the amount, if any, of
interest to be payable in cash on the next succeeding Interest Payment Date,
such prepayment shall not exceed an amount equal to the Excess Amount as
calculated less an amount equal to such interest to be paid in cash. So long as
more than one Series A Note is issued and outstanding and MONY or its nominee is
the sole holder of all of such Series A Notes, MONY or its nominee may apply the
amount to be received upon any prepayment pursuant to this Section 3.1(a) to
reduce the aggregate principal amount of the Series A Notes so held on a pro
rata basis or on such other basis as shall be reasonably determined by MONY or
its nominee, as the case may be. In the event that MONY or its nominee is not
the sole holder of all of the issued and outstanding Series A Notes, any such
prepayment shall be paid to the holders of the Series A Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts of the Series A Notes then outstanding and held by them. AEGON
shall give written notice of such prepayment to each such holder of a Series A
Note, not less than five days prior to each Prepayment Date, which notice shall
specify the principal amount of each holder's Series A Notes to be prepaid. All
such prepayments, if any, shall be made by wire transfer of immediately
available funds to such account as each such holder shall designate in writing
to AEGON.
(b) In the event that, at any time, AUSA Life shall fail to maintain
a weighted average rating by S&P determined in the manner set forth in Schedule
3.1(b) hereto, AEGON shall notify the holders of the Series A Notes of such
failure as soon as practicable (but in no event later than two Business Days)
thereafter. At any time while such failure shall exist (but not more than once
during any period in which any particular
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failure exists and is continuing throughout), holders of at least 25 percent in
aggregate unpaid principal amount of the Series A Notes then outstanding may
elect, at their sole option, to make a written demand to AEGON for a rating by
S&P of the Series A Notes and for the right to prepayment of each such holder's
Series A Notes, contingent on the rating so assigned, as described below. Within
ten days after such holders make such demand, AEGON shall retain, at its sole
expense, S&P to assign a rating to the Series A Notes. AEGON and such holders
shall use reasonable efforts to cause S&P to assign such rating within thirty
days of its engagement to do so. If S&P assigns a rating to the Series A Notes
of "BBB-" or higher, each Series A Note held by such holders shall mature and
become due and payable to the extent of the Repayment Amount, and AEGON shall
prepay that portion of the then outstanding principal amount of such holders'
Series A Notes which equals the Repayment Amount, together with interest accrued
thereon. If S&P assigns a rating to the Series A Notes which is lower than
"BBB-", then AEGON shall, at its sole expense, retain S&P to perform a valuation
of such holders' Series A Notes (the "Appraised Value"). AEGON and such holders
shall use reasonable efforts to cause S&P to perform such valuation and to
deliver a report of the Appraised Value to MONY and such holders, within fifteen
days after the date on which the rating of the Series A Notes is assigned as
described above. At any time within thirty days of the holders' receipt of such
report, each such holder may make written demand to AEGON for prepayment of such
holder's Series A Notes, and, upon such written demand, all of such holder's
Series A Notes shall mature and become due and payable to the extent of their
Appraised Value, and AEGON shall prepay that portion of the then outstanding
principal amount of such holder's Series A Notes which equals the
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<PAGE> 15
Appraised Value. All such prepayments, if any, shall be made by wire transfer of
immediately available funds to such account as each such holder shall designate
in writing to AEGON. AEGON shall make available during normal business hours to
S&P all books, records, work papers and other documents and information relating
to AEGON and the Series A Notes as S&P may reasonably request in connection with
the services contemplated under this Section 3.1(b), and S&P shall perform such
services in accordance with normal rating industry standards and practices. In
the event that S&P shall be unwilling or unable to perform any or all of the
services contemplated above, AEGON and MONY shall select one or more nationally
recognized rating firms reasonably acceptable to both parties to perform such
service or services.
(c) AEGON hereby represents and warrants that Schedule 3.1(c) hereto
sets forth a true and complete description of all capital and financial support
commitments with respect to AUSA Life or the Series A Notes heretofore made by
or on behalf of AEGON in its written communications with S&P. AEGON agrees to
promptly notify each holder of Series A Notes of any and all changes in the
contents of such Schedule following the date hereof, including, without
limitation, any additional capital and financial support commitments so made
hereafter. In the event that, at any time, AEGON is in material breach or
default of, or otherwise fails to perform or terminates, any of the capital and
financial support commitments described on Schedule 3.1 (c) hereto or in any
such notice (any such breach, default or termination referred to herein as a
"Financial Support Withdrawal"), AEGON shall notify the holders of the Series A
Notes of such Financial Support Withdrawal as soon as practicable (but in no
event later than five (5) Business Days) thereafter. Notwithstanding anything
herein to the contrary,
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<PAGE> 16
in the event that, at any time within six (6) months following any such
Financial Support Withdrawal, S&P shall lower its rating of AUSA Life and AUSA
Life shall fail to maintain a weighted average rating by S&P determined in the
manner set forth in Schedule 3.1 hereto (or AEGON notifies the holders of the
Series A Notes of such failure as provided herein) and AEGON is unable (within
twenty days following such rating downgrade) to obtain, and provide to each
holder of Series A Notes, a written statement from S&P to the effect that such
rating downgrade was not attributable in whole or in significant part to such
Financial Support Withdrawal, each holder of Series A Notes may, at any time
within sixty days of such downgrade and at its sole option, make a written
demand to AEGON for prepayment of such holder's Series A Notes. Upon any such
written demand for prepayment (and without any further action, including,
without limitation, any written demand for a rating by S&P of the Series A Notes
as contemplated by Section 3.1(b) above), each Series A Note held by such holder
shall mature and become due and payable to the extent of the Repayment Amount,
and AEGON shall prepay that portion of the then outstanding principal amount of
such holder's Series A Notes which equals the Repayment Amount, together with
interest accrued thereon. Any such prepayment shall be made by wire transfer of
immediately available funds to an account designated in writing by such holder.
(d) In the event that, at any time, AEGON and its operating
subsidiaries as a group are not assigned a rating by S&P of "A" or higher (or an
equivalent rating in the event that at any time hereafter S&P revises its rating
system), each of the Series A Notes shall mature and become due and payable to
the extent of the Repayment Amount, and AEGON shall prepay that portion of the
then outstanding principal amount of each
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<PAGE> 17
Series A Note which equals the Repayment Amount, together with interest accrued
thereon.
Section 3.2 Additional Special Prepayment Event.
Not fewer than twenty days prior to the occurrence of a Change in
Control, AEGON shall give notice thereof to the holders of the Series A Notes.
Each holder of a Series A Note may, within ten days of receipt of such notice,
make a written demand to AEGON for prepayment of such holder's Series A Notes.
If a holder of a Series A Note makes such demand, each Series A Note held by
such holder shall mature and become due and payable to the extent of the
Repayment Amount, simultaneously with the occurrence of such Change in Control,
and AEGON shall prepay that portion of the then outstanding principal amount of
such Series A Notes which equals the Repayment Amount, together with interest
accrued thereon; provided, however, that in the event a Change in Control shall
occur on or after January 1, 1997 MONY and AEGON shall calculate a Threshold
Amount as of the end of the calendar quarter immediately preceding the Change of
Control and, if such Threshold Amount shall be less than $75 million, then the
Repayment Amount of the Series A Notes to be prepaid as to each holder who shall
make such a demand shall be reduced by the Control Reduction Amount, and the
remaining Repayment Amount of such holder's Series A Notes to be prepaid,
together with all interest accrued thereon to the date of prepayment, shall
become due and payable on that date which is five Business Days after the date
such Threshold Amount is calculated. Prepayments pursuant to this Section 3.2(b)
shall be made in accordance with the payment procedures set forth in Section 5.1
hereof.
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<PAGE> 18
Section 3.3 Maturity, Surrender of Series A Notes on Payment or
Prepayment.
(a) The Repayment Amount of the Series A Notes will be due and
payable on the Maturity Date and each Series A Note will bear such maturity
date; provided, however, that in the event that MONY shall object to any amount
or items contained in the Final Statement (as provided for in Paragraph 4 of
Schedule 2.02 to the Acquisition Agreement), such portion of the Repayment
Amount of the Series A Notes which is not in dispute will be payable on the
Maturity Date, with the balance, if any (together with interest accrued
thereon), payable upon the resolution of such objections.
(b) In the case of each prepayment hereunder, the principal amount
of each Series A Note to be prepaid shall become due and payable on the date
such prepayment is required, together with interest on such principal amount
accrued to such date. From and after such date, interest shall accrue on such
principal and interest to the extent unpaid, in accordance with Section 2.1.
(c) Upon any partial prepayment of a Series A Note pursuant to
Section 3.1 or Section 3.2 hereof, such Series A Note may, at the option of the
holder thereof, be surrendered to AEGON, and in such event AEGON shall, pursuant
to Section 4.1 hereof, execute and deliver in exchange therefor a new Series A
Note in a principal amount equal to the principal amount remaining unpaid on the
surrendered Series A Note (without giving effect to any Payment Adjustment).
Concurrent with the payment of the entire Repayment Amount of any Series A Note
upon maturity, the holder of such Series A Note shall surrender such Series A
Note to AEGON for cancellation and no further amounts of principal shall be
payable thereunder.
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<PAGE> 19
ARTICLE 4. REGISTRATION, EXCHANGE AND REPLACEMENT OF SERIES A NOTES
Section 4.1 Registration, Registration of Transfer and Exchange.
(a) All Series A Notes issued from time to time under this Agreement
shall be registered as herein provided. AEGON will keep at its principal
executive office appropriate books for the initial registration and the
registration of transfers and exchanges of Series A Notes; and at such office
AEGON, at its own expense (except as provided below), will register Series A
Notes, any transfers thereof and any exchanges thereof pursuant to Section
3.3(c) hereof.
(b) Whenever any Series A Note shall be presented by the holder
thereof or its nominee at said office for exchange pursuant to Section 3.3(c)
hereof or registration of transfer, AEGON shall execute and, in exchange
therefor, shall deliver a new Series A Note or Series A Notes, registered in
such name or names and in such denominations as may be requested by such holder
or its nominee, but not less than $100,000 in the case of each new Series A Note
(unless the unpaid principal amount of the Series A Note presented is less than
or is not evenly divisible by $100,000, in which case in a denomination equal to
such unpaid principal amount or the portion of the unpaid principal amount in
excess of that which is evenly divisible by $100,000), aggregating the unpaid
principal amount thereon and dated the date to which interest has been paid on
the Series A Note so presented, or, if no interest has yet been so paid thereon,
then dated the date of the Series A Note so presented; provided, however, that
no transfer of any Series A Note shall be registered unless the transfer is
evidenced by a written instrument of transfer, in form reasonably satisfactory
to AEGON, executed by the registered owner of such Series A Note or by his
authorized attorney. The principal amount on each such
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<PAGE> 20
new Series A Note shall be due and payable on the same dates as the
corresponding principal amount remaining unpaid on the Series A Note so
presented. AEGON may require payment of a sum sufficient to cover any stamp tax
or other governmental charge imposed in respect of any transfer of a Series A
Note.
(c) AEGON may treat the Person in whose name any Series A Note is
last registered as the owner and holder of such Series A Note for all purposes
of this Agreement, and AEGON shall not be affected by any notice or knowledge to
the contrary.
Section 4.2 Replacement.
Upon receipt by AEGON of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Series A Note and (a) in the
case of any loss, theft or destruction, upon receipt by AEGON of indemnity or
security reasonably satisfactory to it (it being acknowledged and agreed that,
if the registered holder of any such Series A Note is MONY, MONY's certificate
and agreement of indemnity shall be deemed to be satisfactory) or (b) in the
case of any mutilation, upon surrender of such mutilated Series A Note for
cancellation, AEGON at its expense will execute and deliver in lieu thereof a
new Series A Note of like tenor, registered in the same manner and in the same
unpaid principal amount as the Series A Note being replaced and dated the date
to which interest has been paid on such Series A Note, or, if no interest has
yet been so paid thereon, then dated the date of such Series A Note.
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<PAGE> 21
ARTICLE 5. METHOD AND PLACE OF PAYMENT OF PRINCIPAL AND INTEREST
Section 5.1 Method and Place of Payment of Principal and Interest.
(a) Subject to Section 5.1(b) and 5.1(c) hereof, AEGON Will pay
punctually all amounts payable with respect to any Series A Notes held by any
holder or its nominee (without any presentment or surrender thereof and without
any notation of such payment being made thereon) by wire transfer of immediately
available funds to an account which is designated in writing by each such
holder. If MONY or any other holder sells or transfers any Series A Note, MONY
or such holder, as the case may be, will notify AEGON of the name and address of
the transferee, and will, prior to the delivery of such Series A Note, make a
notation on such Series A Note of the date to which interest has been paid
thereon.
(b) Notwithstanding anything in this Agreement to the contrary,
AEGON shall pay all interest due and payable on the Series A Notes prior to
January 1, 1997 through the issuance of Additional Series A Notes on each
Interest Payment Date prior to January 1, 1997. The aggregate principal amount
of the Additional Series A Notes to be so issued shall be equal to the aggregate
interest due and payable on each such Interest Payment Date. The aggregate
principal amount of Additional Series A Notes issued on each such Interest
Payment Date shall be allocated among the holders of the Series A Notes at the
time outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts of the Series A Notes then outstanding and held by each
such holder. Any Additional Series A Notes so issued shall be dated the
applicable Interest Payment Date, shall bear interest from and after such date
at the Index Rate, shall mature on the Maturity Date and shall be issued
pursuant to and shall be subject to the
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<PAGE> 22
terms and conditions of this Agreement and shall have the same rights and
benefits as all other Series A Notes.
(c) Notwithstanding anything in this Agreement to the contrary, on
each Interest Payment Date subsequent to December 31, 1996, AEGON shall pay
interest on all outstanding Series A Notes in cash unless it requests in writing
that MONY and AEGON calculate the Threshold Amount as of the December 31st
immediately preceding such Interest Payment Date. Such request must be made on
or before the January 31st prior to such Interest Payment Date. If such request
is made, MONY and AEGON shall calculate the Threshold Amount as of such December
31st in accordance with the procedures set forth in the Threshold Formula. In
such event, AEGON shall pay interest on the outstanding Series A Notes within
ten days of the final determination of the Threshold Amount, as follows:
(i) Such interest shall be paid in cash if the Threshold Amount so
calculated exceeds an amount equal to 15 percent of the sum of (x) the
aggregate statutory book value of the Specified Mortgage Loans outstanding
as of the immediately preceding December 31st and (y) the aggregate
statutory book value of the Specified Real Properties owned by AUSA Life
as of such date;
(ii) If the Threshold Amount so calculated exceeds an amount equal
to 5 percent of the sum of (x) the aggregate statutory book value of the
Specified Mortgage Loans outstanding as of the immediately preceding
December 31st and (y) the aggregate statutory book value of the Specified
Real Properties owned by AUSA Life as of such date, but is less than an
amount equal to 15 percent of such sum, then interest on the Initial
Principal Amount shall be paid in cash to the
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<PAGE> 23
extent that the Threshold Amount so calculated exceeds an amount equal to
5 percent of such sum, with the remaining interest on the outstanding
Series A Notes being paid in Additional Series A Notes or in cash, at
AEGON's option; and
(iii) If the Threshold Amount so calculated is less than five
percent of the sum of (x) the aggregate statutory book value of the
Specified Mortgage Loans outstanding as of the immediately preceding
December 31st and (y) the aggregate statutory book value of the Specified
Real Properties owned by AUSA Life as of such date, then interest on all
outstanding Series A Notes may be paid in Additional Series A Notes or
cash, at AEGON's option.
The aggregate principal amount of Additional Series A Notes issued
on an Interest Payment Date shall be allocated among the holders of the Series A
Notes at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts of the Series A Notes then outstanding and
held by each such holder. Any Additional Series A Notes so issued shall be dated
the applicable Interest Payment Date, shall bear interest from and after such
date at the Index Rate, shall mature on the Maturity Date and shall be issued
pursuant to and shall be subject to the terms and conditions of this Agreement
and shall have the same rights and benefits as all other Series A Notes.
ARTICLE 6. GENERAL REPRESENTATIONS AND WARRANTIES
AEGON hereby represents and warrants as follows:
Section 6.1 Organization and Authority.
Each of AEGON and AUSA Life is a corporation duly organized, validly
existing and in good standing under the laws of its state of domicile or
incorporation. Each of AEGON and AUSA Life has all requisite power and authority
to own, lease and
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<PAGE> 24
operate its assets, properties and business and to carry on the operations of
their businesses as they are now being conducted.
Section 6.2 Authorization.
AEGON has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement. The execution and delivery by
AEGON of this Agreement, and the performance by it of its obligations under such
agreement, have been duly authorized. This Agreement has been duly executed and
delivered by AEGON and, subject to the due execution and delivery by MONY, this
Agreement is a valid and binding obligation of AEGON, enforceable against AEGON
in accordance with its terms.
Section 6.3 No Conflict or Violation.
Except as disclosed in Schedule 6.3 hereto, the execution, delivery
and performance by AEGON of this Agreement and the consummation of the
transactions contemplated hereby in accordance with the respective terms and
conditions hereof will not (a) violate any provision of the charter, Bylaws or
other organizational document of AEGON, (b) to AEGON's knowledge, violate,
conflict with or result in the breach of any of the terms of, result in any
modification of the effect of, otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time, or both,
constitute) a default under, any contract or other agreement to which AEGON is a
party or by or to which it or any of its assets or properties may be bound or
subject, (c) to AEGON's knowledge, violate any order, judgment, injunction,
award or decree of any court, arbitrator or governmental or regulatory body
against, or binding upon, or any agreement with, or condition imposed by, any
governmental or regulatory body, foreign or domestic, binding upon AEGON, (d) to
AEGON's knowledge, violate any statute, law
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<PAGE> 25
or regulation of any jurisdiction which violation would have a Material Adverse
Effect with respect to AEGON or materially and adversely affect the ability of
AEGON to consummate the transactions contemplated hereby or (e) to AEGON's
knowledge, result in the breach of any of the terms or conditions of, constitute
a default under, or otherwise cause an impairment of, any Permit related to the
business of AEGON.
Section 6.4 Consents and Approvals.
Except as set forth in Schedule 6.4 hereto, the execution, delivery
and performance by AEGON of this Agreement and the consummation of the
transactions contemplated hereby in accordance with the terms hereof do not
require AEGON to obtain any consent, approval or action of, or make any filing
with or give any notice to, any Person.
Section 6.5 Issued and Outstanding Capital Stock.
To AEGON's knowledge, all of the outstanding shares of capital stock
of AUSA Life have been duly authorized and validly issued, are fully paid,
non-assessable and free of preemptive rights and are owned by AEGON free and
clear of any Liens or Encumbrances.
Section 6.6 Actions and Proceedings.
Except as previously disclosed to MONY in writing, there are no
outstanding orders, decrees or judgments by or with any court, governmental
agency, regulatory body or arbitration tribunal that, individually or in the
aggregate, have had or are likely to have a Material Adverse Effect on AEGON, or
materially and adversely affect the ability of AEGON to consummate the
transactions contemplated hereby. Except as previously disclosed to MONY in
writing, to AEGON's knowledge, there are
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<PAGE> 26
no actions, suits, arbitrations or legal, administrative or other proceedings
(other than those relating to insurance claims) pending or threatened against
AEGON, at law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind which, if adversely determined, would,
individually or in the aggregate, have a Material Adverse Effect on AEGON, or
materially and adversely affect the ability of AEGON to consummate the
transactions contemplated hereby.
Section 6.7 Financial Statements.
On or prior to the date hereof, AEGON has delivered to MONY true,
correct and complete copies of (a) the audited consolidated balance sheet of
AEGON and its Subsidiaries as of December 31, 1992, prepared in accordance with
GAAP, together with the notes thereon and the related report of Ernst & Young,
the independent certified public accountant of AEGON (the "AEGON's Auditor") and
(b) the audited consolidated statements of income, stockholders' equity and cash
flows of AEGON and its Subsidiaries for the year ended December 31, 1992,
prepared in accordance with GAAP, together with the notes thereon and the
related report of AEGON's Auditor (collectively, the "AEGON Financial
Statements"). AEGON has also delivered to MONY on or prior to the date hereof
true, correct and complete copies of the consolidated balance sheet, and the
related consolidated statements of income, stockholders' equity and cash flows,
of AEGON and its Subsidiaries for the period ended September 30, 1993, prepared
in accordance with Dutch accounting principles, together with the notes, if any,
thereon (the "Interim AEGON Financial Statements"). The AEGON Financial
Statements are, and the Interim AEGON Financial Statements will be, based on the
books and records of
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<PAGE> 27
AEGON and its Subsidiaries, and the AEGON Financial Statements have been
prepared in accordance with GAAP consistently applied, audited by AEGON's
Auditor, and fairly present in all material respects the consolidated financial
position and results of operations of AEGON and its Subsidiaries as of the date
and for the period indicated therein.
Section 6.8 No Material Adverse Effect.
Except as set forth in Schedule 6.8 hereto, or except as expressly
contemplated by the Acquisition Agreement, since January 1, 1993, there has not
been any material adverse change in the business, operations, condition
(financial or otherwise), results of operations, properties, assets or prospects
of AEGON or in the ability of AEGON to consummate the transactions contemplated
herein.
Section 6.9 Use of Proceeds.
The proceeds of the sale of the Series A Notes (other than the
proceeds from the sale of any Additional Series A Notes) shall be contributed by
AEGON to AUSA Life in order to increase its capital. The proceeds of the sale of
the Additional Series A Notes shall be contributed by AEGON to AUSA Life in
order to increase its capital or shall be used by AEGON for general corporate
purposes.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES RELATING TO SECURITIES ACT; MONY
REPRESENTATIONS
Section 7.1 MONY Representations.
By accepting this Agreement and by purchasing Series A Notes on the
Closing Date, MONY represents as follows:
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<PAGE> 28
(a) MONY has all requisite corporate power and authority to enter
into and perform its obligations under this Agreement, and to accept and to be
bound by the terms and conditions of the Series A Notes.
(b) Neither the execution and delivery of this Agreement, the
consummation of the transactions herein contemplated nor compliance with the
terms, conditions and provisions hereof by MONY will conflict with or result in
a material breach of any term, condition or provision of any law, or of any
rule, regulation, order, writ, injunction or decree of any court or other
governmental or public authority or agency, domestic or foreign (including any
right, license, franchise or other authorization granted by any such authority
or agency), or of any binding decision or ruling of any arbitrator, or of the
charter or by-laws of MONY or any contract or other agreement to which MONY is a
party, or by or to which it or any of its assets or property may be bound or
subject.
(c) MONY is purchasing Series A Notes for its own account for
investment and with no present intention of distributing such Series A Notes or
any part thereof, subject to the disposition of its property being within its
control.
ARTICLE 8. CLOSING CONDITIONS OF MONY
MONY's obligation to purchase and pay for the Series A Notes to be
purchased by MONY on the Closing Date shall be subject to the satisfaction or
waiver, on or prior to the Closing Date, of the following conditions precedent:
Section 8.1 Opinion of Counsel for AEGON.
MONY shall have received from Larry G. Brown, General Counsel to
AEGON, and from LeBoeuf, Lamb, Leiby & MacRae, special counsel to AEGON,
opinions substantially in the form of Exhibit B hereto.
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<PAGE> 29
Section 8.2 Representations of AEGON True.
The representations, warranties and statements by AEGON in Article 6
shall be true in all material respects on and as of the Closing Date with the
same force and effect as though such representations, warranties and statements
had been made on and as of the Closing Date.
Section 8.3 No Event of Default.
Upon the delivery of the Series A Notes, no Event of Default, or
condition or event which with notice or after lapse of time would constitute an
Event of Default, shall exist.
Section 8.4 Officers' Certificate of AEGON.
AEGON shall have delivered to MONY an Officers' Certificate of
AEGON, dated the Closing Date and satisfactory to MONY, confirming the
fulfillment of the closing conditions specified in Section 8.2 and Section 8.3
hereof.
Section 8.5 Acquisition Consummation.
Each of the Acquisition Agreement and the Ancillary Agreements shall
have been executed and delivered by each of the parties thereto, and shall be in
full force and effect. The transactions contemplated by the Acquisition
Agreement and the Ancillary Agreements (other than those contemplated by this
Agreement) shall have been consummated in compliance therewith and with
applicable law.
Section 8.6 Rating.
MONY shall have received confirmation, in form and substance
reasonably satisfactory to MONY, that the Series A Notes, upon issuance, will be
assigned a rating by Duff & Phelps, Inc. of at least BBB.
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<PAGE> 30
Section 8.7 Admitted Asset.
MONY shall have received confirmation, in form and substance
reasonably satisfactory to MONY, that it will initially be permitted to record
the Series A Notes on its books and records, and in all regulatory filings to be
made with the New York Insurance Department and other applicable governmental
and regulatory authorities, as admitted assets with an aggregate value equal to
the aggregate principal amount thereof.
ARTICLE 9. CLOSING CONDITIONS OF AEGON
AEGON's obligation to issue and sell the Series A Notes to MONY on
the Closing Date shall be subject to the satisfaction, on or prior to the
Closing Date, of the following conditions precedent:
Section 9.1 Representations of MONY True.
The representations, warranties and statements by MONY in Article 7
shall be true in all material respects on and as of the Closing Date with the
same effect as though such representations, warranties and statements had been
made on and as of the Closing Date.
Section 9.2 Officers' Certificate of MONY.
MONY shall have delivered to AEGON an Officers' Certificate of MONY,
dated the Closing Date and satisfactory to AEGON, confirming the fulfillment of
the closing condition specified in Section 9.1 hereof.
Section 9.3 Acquisition Consummation.
Each of the Acquisition Agreement and the Ancillary Agreements shall
have been executed and delivered by each of the parties thereto, and shall be in
full force and effect. The transactions contemplated by the Acquisition
Agreement and the
- 30 -
<PAGE> 31
Ancillary Agreements (other than those contemplated by this Agreement) shall
have been consummated in compliance therewith and with applicable law.
ARTICLE 10. AFFIRMATIVE COVENANTS
AEGON covenants and agrees that on and after the date hereof and so
long as any Series A Note is outstanding, AEGON will, and will cause AUSA Life
to, comply with the following provisions:
Section 10.1 Information Covenants.
AEGON will, and will cause AUSA Life to, furnish to MONY:
(a) as soon as, and if, available after the end of each of the first
three quarterly accounting periods in each fiscal year of AEGON all
quarterly consolidated financial statements of AEGON and its Subsidiaries
which AEGON prepares for its internal reporting purposes or otherwise;
(b) as soon as available after the end of each of the first three
quarterly accounting periods in each fiscal year of AUSA Life and each
other Life Subsidiary, the quarterly convention statement of AUSA Life and
each other Life Subsidiary as filed with the insurance regulatory
authority of the jurisdiction where it is domiciled for such fiscal
periods;
(c) as soon as available after the end of each fiscal year of AEGON,
true, correct and complete copies of (i) the audited consolidated balance
sheet of AEGON and its subsidiaries as of the end of such fiscal year,
prepared in accordance with GAAP, together with the notes thereon and (ii)
the audited consolidated statements of income, stockholders' equity and
cash flows of AEGON and its Subsidiaries for such fiscal year, prepared in
accordance with
- 31 -
<PAGE> 32
GAAP, together with the notes thereon, in each case together with the
related reports of AEGON's independent certified public accounting firm;
and
(d) as soon as available after the end of each fiscal year of AUSA
Life and each other Life Subsidiary, the annual convention statement of
each Life Subsidiary as filed with the insurance regulatory authority of
the jurisdiction where it is domiciled for such fiscal year.
Section 10.2 Notice of Default and Litigation.
AEGON will, and will cause AUSA Life to, furnish to MONY promptly,
and in any event within two (2) Business Days after AEGON or any of its
Subsidiaries obtains knowledge thereof, notice of the occurrence of any event
which constitutes a Default or Event of Default, which notice shall specify the
exact nature and extent thereof and what action AEGON or AUSA Life has taken or
proposes to take with respect thereto.
Section 10.3 Maintenance of Books and Records.
AEGON will, and will cause AUSA Life to, keep proper books of
records and accounts in which full and correct entries are made of all its
financial and business transactions and its assets, liabilities and results of
operations in accordance with GAAP and, as applicable, Applicable SAP.
Section 10.4 Taxes.
AEGON will, and will cause each of its Subsidiaries (including AUSA
Life) to, pay and discharge when due all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
profits, or upon any property belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid,
- 32 -
<PAGE> 33
might become a Lien or Encumbrance upon the property of AEGON or AUSA
Life, except for such taxes, assessments, charges, levies or claims (i)
with respect to which the failure to pay or discharge would not have a
Material Adverse Effect on AEGON and its Subsidiaries taken as a whole or
(ii) which are being diligently contested in good faith by appropriate
proceedings if adequate reserves have been established in accordance with
GAAP or Applicable SAP, as the case may be.
Section 10.5 Compliance with Law.
AEGON will, and will cause each of its Subsidiaries (including AUSA
Life) to, comply with all laws, rules, regulations, orders, licenses and permits
relating to or otherwise applicable to the conduct of its business or the
ownership of its properties, except those the non-compliance with which would
not have a Material Adverse Effect on AEGON and its Subsidiaries taken as a
whole.
Section 10.6 Maintenance of Business.
AEGON will, and will cause each of AUSA Life and Diversified to,
perform and observe the covenants required to be performed and observed by it
under Section 9.01 of the Acquisition Agreement.
ARTICLE 11. EVENTS OF DEFAULT
Section 11.1 Nature of Events.
Each of the following conditions or events shall constitute an
"Event of Default" hereunder:
(a) any payment or prepayment of principal of or interest on, any
Series A Note is not made on or before the date such payment or prepayment
is due and such failure continues for three Business Days after the holder
of any Series A Note has given written notice of such failure to AEGON;
- 33 -
<PAGE> 34
(b) AEGON fails to perform or observe any material covenant
condition or obligation (including Section 6.9 hereof) contained herein
and such failure continues for twenty days after the holder of any Series
A Note has given written notice of such failure to AEGON;
(c) any representation, warranty or statement by or on behalf of
AEGON contained in this Agreement, or any certificate, written statement
or other document furnished in accordance with the terms of this Agreement
shall be false or misleading in any material respect such that it shall
affect the ability of AEGON to pay when due, the principal of and interest
on the Series A Notes in accordance with the terms of the Series A Notes
and this Agreement;
(d) a custodian, receiver, rehabilitator, conservator, liquidator
or trustee of AEGON or any Material Subsidiary, or of any of their
respective properties or assets, is appointed or takes possession and such
appointment or possession remains in effect for more than forty-five days;
or AEGON or any Material Subsidiary generally fails to pay its
Indebtedness as it becomes due other than as a result of a good faith
dispute; or AEGON or any Material Subsidiary is adjudicated bankrupt or
insolvent; or an order for relief is entered under the Federal Bankruptcy
Code or under any other applicable law against AEGON or any Material
Subsidiary; or a petition is filed against AEGON or any Material
Subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution, rehabilitation, conservation or
liquidation law of any jurisdiction, whether now or subsequently in
effect, and is not dismissed within forty-five days after filing, or
- 34 -
<PAGE> 35
(e) AEGON or any Material Subsidiary files a petition in
voluntary bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution,
rehabilitation, conservation or liquidation law of any jurisdiction, whether now
or subsequently in effect; or consents to the filing of any petition against it
under any such law; or consents to the appointment of or taking possession by a
custodian, receiver, trustee, rehabilitator, conservator or liquidator of AEGON
or any Material Subsidiary, or of all or any part of its properties or assets,
or makes an assignment for the benefit of its creditors or policyholders.
Section 11.2 Default Remedies.
If an Event of Default exists, (a) (i) the holder of any
Series A Note then outstanding, with respect to an Event of Default under
Section 11.1(a) or (ii) hereof the holder or holders of at least 25% in
aggregate unpaid principal amount of the Series A Notes then outstanding, with
respect to any Event of Default under Section 11.1 (b) or (c) hereof, may
exercise any right, power or remedy permitted to it or any of them by law (it
being intended by the parties hereto that no remedy is to be exclusive and that
each remedy is to be cumulative), and shall have, in particular, without
limiting the generality of the foregoing, the right, by notice to AEGON, to
declare the entire Repayment Amount of and all interest accrued on such Series A
Note to be, and such principal amount and accrued interest shall thereupon
become, forthwith due and payable, without any presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived, and (b) in
the case of an Event of Default under Section 11.1(d) or (e) hereof, the entire
Repayment Amount of and all accrued interest and premium on the Series A
- 35 -
<PAGE> 36
Notes shall automatically become forthwith due and payable, without any
presentment, demand, protest, declaration or other notice of any kind
(including, without limitation, pursuant to clause (a) above), all of which are
hereby expressly waived. AEGON will forthwith pay to the holder of such Series A
Note the entire Repayment Amount of and interest accrued on such Series A Note.
No course of dealing on the part of any holder of a Series A Note or any delay
or failure on the part of any holder of a Series A Note to exercise any right
shall operate as a waiver of such right or otherwise prejudice such holder's
rights, powers and remedies.
At any time after the Repayment Amount of and interest accrued
on any Series A Note is declared due and payable, and before a judgment or
decree for payment of the money due has been obtained, the holders of at least a
majority in aggregate unpaid principal amount of Series A Notes then
outstanding, by written notice to AEGON, may rescind and annul such declaration
and its consequences if (i) all sums payable under the Series A Notes (except
any principal amount or interest on the Series A Notes which has become payable
solely by reason of such declaration) shall have been duly paid and (ii) all
Events of Default, other than nonpayment of amounts which have become due solely
by such declaration, have been cured or waived as provided in Section 12.2
hereof. No such rescission and annulment shall affect any subsequent Event of
Default or declaration or any right, power or remedy consequent thereon.
ARTICLE 12. MISCELLANEOUS
Section 12.1 Communications.
Whether or not expressly so stated in any provision of this
Agreement, but subject to Section 5.1 hereof, all notices, demands or other
communications provided for under this Agreement or under the Series A Notes
shall be in writing and shall be delivered
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<PAGE> 37
personally (by courier or otherwise), telegraphed, telexed, sent by facsimile
transmission or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally (by courier
or otherwise), telegraphed, telexed or sent by facsimile transmission or, if
mailed, three (3) days after the date of deposit in the United States mails, as
follows:
(a) If to AEGON to:
AEGON USA, Inc.
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499
Attention: Chief Financial Officer
Telecopier No.: 319-369-2218
With a concurrent copy to:
AEGON USA, Inc.
1111 North Charles Street
Baltimore, Maryland 21201
Attention: General Counsel
Telecopier No.: 410-347-8685
(b) If to MONY to:
The Mutual Life Insurance Company of New York
1740 Broadway
New York, New York 10019
Attention: Chief Executive Officer
Telecopier No.: (212) 708-2900
With a concurrent copy to:
The Mutual Life Insurance Company of New York
1740 Broadway
New York, New York 10019
Attention: General Counsel
Telecopier No.: (212) 708-2977
- 37 -
<PAGE> 38
(c) If to any holder of a Series A Note to the address of such
holder as it appears on the registration books maintained as provided
in Section 4.1 hereof (which address, in the case of MONY, shall be
initially MONY's address shown above.
Any party may, by notice given in accordance with this Section
12.1 to the other parties, designate another address or Person for receipt of
notices hereunder.
Section 12.2 Amendment and Waiver.
(a) No term, covenant, agreement or condition of this
Agreement may be amended, supplemented or modified, or compliance therewith
waived, except pursuant to one or more written instruments signed by the holders
of not less than two-thirds in aggregate unpaid principal amount Of the Series A
Notes at the time outstanding and AEGON; provided, however, that AEGON shall not
be required to sign any such written instrument pursuant to which the holders
waive any term, covenant, agreement or condition herein of AEGON and no such
amendment, supplement, modification or waiver shall, without the consent in
writing of the holders of all of the Series A Notes at the time outstanding,
subordinate or change the amount of, or change the date of final maturity of,
the principal of any of the Series A Notes, or change the amount of, or the
time, method or place for the making of, any prepayment of principal of any of
the Series A Notes, or reduce the amount of, or change the time of payment of,
interest on any of the Series A Notes, or change the provisions of this Section
12.2 as they affect the holders of the Series A Notes or the provisions of
Section 11.1 or 11.2 hereof. Any amendment, supplement, modification or waiver
pursuant to this Section 12.2 shall apply equally to all the holders of the
Series A Notes affected and shall be binding upon them, upon each future holder
of any Series A Note and upon AEGON.
- 38 -
<PAGE> 39
(b) AEGON will give prompt notice to all holders of the Series
A Notes of the effectiveness of any amendment, supplement, modification or
waiver entered into in accordance with the provisions of this Section 12.2. Such
notice shall state the terms of any such amendment, supplement, modification or
waiver and shall be accompanied by a conformed copy (which may be a composite
conformed copy) of each written instrument which embodies such amendment,
supplement, modification or waiver.
Section 12.3 Legal Holidays.
Whenever any payment hereunder or under any of the Series A
Notes shall be due on a Saturday, Sunday or day upon which banking institutions
at the place for such payment are authorized or required by law or executive
order to be closed (a "legal holiday"), such payment shall become due on the
next succeeding day which is not a legal holiday.
Section 12.4 Governing Law.
THIS AGREEMENT AND THE SERIES A NOTES ISSUED HEREUNDER SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
Section 12.5 Interpretation.
For purposes of this Agreement, the words "hereof", "herein",
"hereby" and other words of similar import refer to this Agreement as a whole
unless otherwise indicated. Whenever therein the singular is used, the same
shall include the plural, and whenever herein the plural is used, the same shall
include the singular, where appropriate.
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<PAGE> 40
Section 12.6 Table of Contents and Headings.
The table of contents and the headings of the Articles and
sections of this Agreement are intended for convenience of reference only and do
not constitute a part hereof, and shall not affect the interpretation of this
Agreement.
Section 12.7 Successors and Assigns.
This Agreement shall be binding upon the successors and
assigns of AEGON and inure to the benefit of MONY's successors and assigns. All
provisions of this Agreement are intended to be for the benefit of all holders,
from time to time, of the Series A Notes issued pursuant hereto, and shall be
enforceable by any such holder, whether or not an express assignment to such
holder of rights under this Agreement shall have been made by MONY or any of
MONY's successors or assigns.
Section 12.8 Integrated Agreements.
The calculation of the Repayment Amount as set forth in
Article I (Definitions) is the calculation of a single amount due under the
Series A Notes and such calculation shall not be construed to be an offset of
amounts debited or credited under the Acquisition Agreement or any Ancillary
Agreement, notwithstanding that the calculation includes amounts determined by
reference to such Agreements.
Section 12.9 Counterparts.
This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof signed by
less than all, but together signed by all of the parties hereto.
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<PAGE> 41
If the foregoing is satisfactory, please sign the form of
acceptance on the enclosed counterparts of this instrument and forward the same
to the undersigned, whereupon this instrument will become a binding agreement
between AEGON and MONY.
Very truly yours,
AEGON USA, INC.
By /s/ Patrick S. Baire
Name: Patrick S. Baire
Title: VP/CFO
The foregoing instrument
is hereby accepted on
December 31, 1993.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By /s/ Kenneth M. Levine
Name: Kenneth M. Levine
Title: EVP
- 41 -
<PAGE> 42
EXHIBIT A
THIS SERIES A NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER SUCH
REGISTRATION NOR SUCH AN EXEMPTION IS REQUIRED BY LAW.
AEGON USA, INC.
SERIES A NOTE DUE December 31, 2002
Dated: December 31, 1993
AEGON USA, INC., an Iowa corporation ("AEGON"), for value
received, hereby promises to pay to THE MUTUAL LIFE INSURANCE COMPANY OF NEW
YORK ("MONY") or registered assigns the principal amount of one hundred and
fifty million dollars ($150,000,000), subject to reduction pursuant to the
Principal Adjustment (as defined in the Series A Note Purchase Agreement
referred to below), or so much thereof as shall not theretofore have been
prepaid, on the Maturity Date (as defined in the Series A Note Purchase
Agreement referred to below); and to pay interest on the unpaid principal amount
hereof from the date of this Series A Note at 6.44% per annum on the thirtieth
day of June in each year (each, an "Interest Payment Date"), and at maturity,
A-1
<PAGE> 43
until the principal amount hereof shall become due and payable (whether at
maturity, by acceleration or otherwise). AEGON also promises to pay on demand
interest on any overdue principal (including any overdue prepayment of
principal) at 7.44% per annum from the date the same becomes due and payable
(whether at maturity, by acceleration or otherwise) until paid and, to the
extent permitted by applicable law, on any overdue interest at 7.44% per annum
from the date the same becomes due and payable (whether on an Interest Payment
Date, at maturity, by acceleration or otherwise) until paid.
Payments of principal and interest shall be made, by wire
transfer of immediately available funds to an account which is designated in
writing by the registered holder hereof (subject, however, to certain
circumstances under the Series A Note Purchase Agreement referred to below).
This Series A Note is one of a duly authorized issue of
AEGON's Series A Notes Due December 31, 2002 (the "Series A Notes"), issued
pursuant to a Series A Note Purchase Agreement, dated as of December 31, 1993,
between AEGON and MONY (the "Series A Note Purchase Agreement"). This Series A
Note may be prepaid in whole or in part in certain cases and the maturity hereof
may be accelerated as specified in the Series A Note Purchase Agreement. AEGON
agrees to make required payments on account of this Series A Note in accordance
with the provisions of the Series A Note Purchase Agreement. Reference is made
to the Series A Note Purchase Agreement for other terms and provisions thereof
affecting AEGON and the holders of the Series A Notes.
THIS SERIES A NOTE AND THE SERIES A NOTE PURCHASE AGREEMENT
HAVE BEEN DELIVERED IN THE STATE OF NEW YORK AND ARE TO BE GOVERNED BY AND TO BE
CONSTRUED IN
A-2
<PAGE> 44
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF.
AEGON USA, INC.
By ___________________________________
President
A-3
<PAGE> 45
EXHIBIT B-1
DRAFT
[AEGON LETTERHEAD]
December __, 1993
The Mutual Life Insurance Company
of New York
1740 Broadway
New York, New York 10019
Re: AEGON USA, Inc. $150,000,000 in Aggregate Principal
Amount of Series A Notes due December 31, 2002 and
$50,000,000 in Aggregate Principal Amount of Series
B Notes due December 31, 2002
Gentlemen:
I am General Counsel of AEGON USA, Inc., an Iowa corporation
("AEGON"). This opinion is being delivered to you in connection with the
issuance and sale by AEGON of $150,000,000 in aggregate principal amount of
AEGON's Series A Notes due December 31, 2002 (the "Series A Notes") to The
Mutual Life Insurance Company of New York, a New York domiciled mutual insurance
company ("MONY"), pursuant to the Series A Note Purchase Agreement dated as of
the date hereof between AEGON and MONY (the "Series A Note Purchase Agreement")
, and in connection with the issuance and sale by AEGON of $50,000,000 in
aggregate principal amount of AEGON's Series B Notes due December 31, 2002 (the
"Series B Notes") to MONY pursuant to the Series B Note Purchase Agreement dated
as of the date hereof between AEGON and MONY (the "Series B Note Purchase
Agreement").
This opinion is being delivered to you pursuant to each of the
Series A Note Purchase Agreement and the Series B Note Purchase Agreement.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Series A Note Purchase Agreement.
<PAGE> 46
The Mutual Life Insurance Company
of New York
December __, 1993
Page 2
In connection therewith, I have examined copies of (i) the
Series A Note Purchase Agreement, (ii) the Series B Note Purchase Agreement,
(iii) the Series A Notes, (iv) the Series B Notes, (v) the Certificate of
Incorporation of AEGON, (vi) the By-Laws of AEGON and (vii) a record of the
corporate proceedings of AEGON relating to the authorization of the issuance and
sale of the Series A Notes and the Series B Notes, including the execution and
delivery of the Series A Note Purchase Agreement and the Series B Note Purchase
Agreement. In addition, I have examined the originals (or copies certified or
otherwise identified to my satisfaction) of such other agreements, instruments,
certificates, documents and records and have reviewed such questions of law as I
have deemed necessary or appropriate for the purposes of the opinions rendered
herein.
In rendering the opinions expressed herein, I have assumed
without independent verification the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to me
as originals, the conformity to original documents of all documents submitted to
me as certified or photostatic copies and the authenticity of the originals of
such latter documents. In making my examination of documents executed by parties
other than AEGON, I have assumed that such parties had the power, corporate or
other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof. As to facts or questions of fact material to the
opinions expressed herein, I have also, when relevant facts were not
independently established or verified, been furnished with, and with your
consent have relied exclusively upon, the aforesaid documents, corporate
records, agreements, instruments and certificates.
Based upon the foregoing, and subject to the qualifications
stated herein, I am of the opinion that:
1. AEGON is a corporation duly incorporated, validly existing
and in good standing under the laws of Iowa.
2. AEGON has all requisite power and authority to own, lease
and operate its assets, properties and business and to carry on the operations
of its business as it is now being conducted.
3. AEGON has all requisite power and authority to execute,
deliver and perform its obligations under the Series A Note Purchase Agreement
and the Series B Note Purchase Agreement, and to issue and sell the Series A
Notes and the Series B Notes.
The execution and delivery by AEGON of the Series A Note Purchase Agreement and
the Series B Note Purchase Agreement, and the performance by AEGON of its
obligations thereunder, have been duly authorized by all necessary corporate
action.
<PAGE> 47
The Mutual Life Insurance Company
of New York
December __, 1993
Page 3
Each of the Series A Note Purchase Agreement and the Series B Note Purchase
Agreement has been duly executed and delivered by AEGON.
4. Each of the Series A Notes and the Series B Notes have been
duly authorized, executed and delivered by AEGON.
5. Except as set forth in Schedule 6.3 to the Series A Note
Purchase Agreement or Schedule 6.3 to the Series B Note Purchase Agreement, the
execution, delivery and performance by AEGON of the Series A Note Purchase
Agreement and the Series B Note Purchase Agreement and the consummation of the
transactions contemplated thereby in accordance with the terms and conditions
thereof will not (i) violate any provision of the charter, Bylaws or other
organizational documents of AEGON, (ii) violate, conflict with, or result in a
breach of any of the terms of, result in any modification of the effect of,
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time, or both, constitute) a default under, any
contract or other agreement to which AEGON is a party or by or to which it or
any of its assets or properties may be bound or subject, (iii) violate any
order, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body against, or binding upon, or any agreement with,
or condition imposed by, any governmental or regulatory body, foreign or
domestic, binding upon AEGON, (iv) violate any statute, law or regulation of any
jurisdiction or of any regulatory body, which violation would have a Material
Adverse Effect with respect to AEGON or materially and adversely affect the
ability of AEGON to consummate the transactions contemplated by the Series A
Note Purchase Agreement or the Series B Note Purchase Agreement or the ability
of AEGON to perform under the series A Notes or the Series B Notes, or (v)
result in the breach of any of the terms or conditions of, constitute a default
under, or otherwise cause an impairment of, any Permit related to the business
of AEGON.
6. Except as set forth in Schedule 6.4 to the Series A Note
Purchase Agreement or Schedule 6.4 to the Series B Note Purchase Agreement, the
execution, delivery and performance by AEGON of the Series A Note Purchase
Agreement and the Series B Note Purchase Agreement, and the consummation of the
transactions contemplated thereby in accordance with the terms thereof and the
issuance and sale of the Series A Notes and the Series B Notes do not require
AEGON to obtain any consent, approval or action of, or make any filing with or
give any notice to, any Person.
7. There are no outstanding orders, decrees, judgments, awards
or injunctions by or with any court, governmental agency, regulatory body or
arbitration tribunal that, individually or in the aggregate, have had or are
likely to have a Material Adverse Effect on AEGON, or materially and adversely
affect the ability of AEGON to consummate the transactions contemplated by the
Series A Note Purchase Agreement or the Series B Note Purchase Agreement or the
ability of AEGON to perform under the Series A Notes or the Series B Notes. To
my knowledge after due inquiry, there are no actions, suits, arbitrations or
legal, administrative or other proceedings (other than those relating to
insurance claims) pending or threatened against AEGON, at law or in equity,
<PAGE> 48
The Mutual Life Insurance Company
of New York
December __, 1993
Page 4
or before or by any governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind
which, if adversely determined, would, individually or in the aggregate, have a
Material Adverse Effect on AEGON or materially and adversely affect the ability
of AEGON to consummate the transactions contemplated by the Series A Note
Purchase Agreement or the Series B Note Purchase Agreement or the ability of
AEGON to perform under the Series A Notes or the Series B Notes.
In rendering the opinions expressed above, I have relied as to
matters of Iowa law on the opinion of even date herewith of Craig D. Vermie,
Esq., the Associate General counsel of AEGON, a copy of which is attached
hereto.
This letter and the opinions rendered herein are rendered
solely for your benefit and may not be delivered to or relied upon in any manner
by any other person or entity without my express written consent.
Very truly yours,
Larry G. Brown
Vice President and General Counsel
<PAGE> 49
EXHIBIT B-2
DRAFT
[LETTERHEAD OF CRAIG D. VERMIE]
December , 1993
Larry G. Brown, Esq.
Vice President and General Counsel
AEGON USA, Inc.
1111 North Charles Street
Baltimore, Maryland 21201
Re: AEGON USA, Inc. $150,000,000 in Aggregate Principal
Amount of Series A Notes due December 31, 2002 and
$50,000,000 in Aggregate Principal Amount of Series
B Notes due December 31, 2002
Dear Mr. Brown:
I am the Associate General Counsel of AEGON USA, Inc., an Iowa
corporation ("AEGON"). This opinion is being delivered to you in connection with
the issuance and sale by AEGON of $150,000,000 in aggregate principal amount of
AEGON's Series A Notes due December 31, 2002 (the "Series A Notes") to The
Mutual Life Insurance Company of New York, a New York domiciled mutual insurance
company ("MONY"), pursuant to the Series A Note Purchase Agreement dated as of
the date hereof between AEGON and MONY (the "Series A Note Purchase Agreement"),
and in connection with the issuance and sale by AEGON of $50,000,000 in
aggregate principal amount of AEGON's Series B Notes due December 31, 2002 (the
"Series B Notes") to MONY pursuant to the Series B Note Purchase Agreement dated
as of the date hereof between AEGON and MONY (the "Series B Note Purchase
Agreement").
This opinion is being delivered to you pursuant to each of the
Series A Note Purchase Agreement and the Series B Note Purchase Agreement.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Series A Note Purchase Agreement.
<PAGE> 50
Larry G. Brown, Esq.
Vice President and General Counsel
December __, 1993
Page 2
In connection therewith, I have examined copies of (i) the
Series A Note Purchase Agreement, (ii) the Series B Note Purchase Agreement,
(iii) the Series A Notes, (iv) the Series B Notes, (v) the Certificate of
Incorporation of AEGON, (vi) the By-Laws of AEGON and (vii) a record of the
corporate proceedings of AEGON relating to the authorization of the issuance and
sale of the Series A Notes and the Series B Notes, including the execution and
delivery of the Series A Note Purchase Agreement and the Series B Note Purchase
Agreement. In addition, I have examined the originals (or copies certified or
otherwise identified to my satisfaction) of such other agreements, instruments,
certificates, documents and records and have reviewed such questions of law as I
have deemed necessary or appropriate for the purposes of the opinions rendered
herein.
In rendering the opinions expressed herein, I have assumed
without independent verification the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to me
as originals, the conformity to original documents of all documents submitted to
me as certified or photostatic copies and the authenticity of the originals of
such latter documents. In making my examination of documents executed by parties
other than AEGON, I have assumed that such parties had the power, corporate or
other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof. As to facts or questions of fact material to the
opinions expressed herein, I have also, when relevant facts were not
independently established or verified, been furnished with, and with your
consent have relied exclusively upon, the aforesaid documents, corporate
records, agreements, instruments and certificates.
Based upon the foregoing, and subject to the qualifications
stated herein, I am of the opinion that:
1. AEGON is a corporation duly organized, validly existing and
in good standing under the laws of the State of Iowa.
2. AEGON has all requisite power and authority to own, lease
and operate its assets, properties and business and to carry on the operations
of its business as it is now being conducted.
3. AEGON has all requisite power and authority to execute,
deliver and perform its obligations under the Series A Note Purchase Agreement
and the Series B Note Purchase Agreement, and to issue and sell the Series A
Notes and the Series B Notes. The execution and delivery by AEGON of the Series
A Note Purchase Agreement and the Series B Note Purchase Agreement, and the
performance by AEGON of its obligations thereunder, have been duly authorized by
all necessary corporate action. Each of the Series A Note Purchase Agreement and
the Series B Note Purchase Agreement has been duly executed and delivered by
AEGON.
<PAGE> 51
Larry G. Brown, Esq.
Vice President and General Counsel
December __, 1993
Page 3
4. Each of the Series A Notes and the Series B Notes have been
duly authorized, executed and delivered by AEGON.
5. Except as set forth in schedule 6.3 to the Series A Note
Purchase Agreement or Schedule 6.3 to the Series B Note Purchase Agreement, the
execution, delivery and performance by AEGON of the Series A Note Purchase
Agreement and the Series B Note Purchase Agreement and the consummation of the
transactions contemplated thereby in accordance with the terms and conditions
thereof will not (i) violate any provision of the charter, Bylaws or other
organizational documents of AEGON, (ii) violate, conflict with, or result in a
breach of any of the terms of, result in any modification of the effect of,
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time, or both, constitute) a default under, any
contract or other agreement governed by and construed in accordance with the
laws of the State of Iowa to which AEGON is a party or by or to which it or any
of its assets or properties may be bound or subject, (iii) violate any order,
judgment, injunction, award or decree of any court, arbitrator or governmental
or regulatory body against, or binding upon, or any agreement with, or condition
imposed by, any governmental or regulatory body, foreign or domestic, binding
upon AEGON, (iv) violate any statute, law or regulation of the state of Iowa or
of any regulatory body thereof, which violation would have a Material Adverse
Effect with respect to AEGON or materially and adversely affect the ability of
AEGON to consummate the transactions contemplated by the Series A Note Purchase
Agreement or the Series B Note Purchase Agreement or the ability of AEGON to
perform under the Series A Notes or the Series B Notes, or (v) result in the
breach of any of the terms or conditions of, constitute a default under, or
otherwise cause an impairment of, any Permit related to the business of AEGON.
6. Except as set forth in Schedule 6.4 to the Series A Note
Purchase Agreement or Schedule 6.4 to the Series B Note Purchase Agreement, the
execution, delivery and performance by AEGON of the Series A Note Purchase
Agreement and the Series B Note Purchase Agreement, and the consummation of the
transactions contemplated thereby in accordance with the terms thereof and the
issuance and sale of the Series A Notes and the Series B Notes do not require
AEGON to obtain any consent, approval or action of, or make any filing with or
give any notice to, any Person in the State of Iowa.
7. There are no outstanding orders, decrees, judgments, awards
or injunctions by or with any court, governmental agency, regulatory body or
arbitration tribunal that, individually or in the aggregate, have had or are
likely to have a Material Adverse Effect on AEGON, or materially and adversely
affect the ability of AEGON to consummate the transactions contemplated by the
Series A Note Purchase Agreement or the Series B Note Purchase Agreement or the
ability of AEGON to perform under the Series A Notes or the Series B Notes. To
my knowledge after due inquiry, there are no actions, suits, arbitrations or
legal, administrative or other proceedings (other than those relating to
insurance claims) pending or threatened against AEGON, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
<PAGE> 52
Larry G. Brown, Esq.
Vice President and General Counsel
December __, 1993
Page 4
instrumentality, domestic or foreign, or before any arbitrator of any kind
which, if adversely determined, would, individually or in the aggregate, have a
Material Adverse Effect on AEGON or materially and adversely affect the ability
of AEGON to consummate the transactions contemplated by the Series A Note
Purchase Agreement or the Series B Note Purchase Agreement or the ability of
AEGON to perform under the Series A Notes or the Series B Notes.
The opinions expressed herein are limited to the laws of the
State of Iowa and the Federal laws of the United States of America.
This letter and the opinions rendered herein are rendered
solely for your benefit and may not be delivered to or relied upon in any manner
by any other person or entity without my express written consent.
Very truly yours,
Craig D. Vermie
Associate General Counsel
<PAGE> 53
EXHIBIT B-3
LLL&M DRAFT
[LLL&M LETTERHEAD]
December , 1993
The Mutual Life Insurance Company
of New York
1740 Broadway
New York, New York 10019
Re: AEGON USA, Inc. $150,000,000 in Aggregate Principal
Amount of Series A Notes due December 31, 2002 and
$50,000,000 in Aggregate Principal Amount of Series
B Notes due December 31, 2002
Gentlemen:
We have acted as special counsel to AEGON USA, Inc., an Iowa
corporation ("AEGON"), in connection with the issuance and sale by AEGON of
$150,000,000 in aggregate principal amount of AEGON's Series A Notes due
December 31, 2002 (the "Series A Notes") to The Mutual Life Insurance Company of
New York, a New York domiciled mutual insurance company ("MONY"), pursuant to
the Series A Note Purchase Agreement dated as of the date hereof between AEGON
and MONY (the "Series A Note Purchase Agreement"), and in connection with the
issuance and sale by AEGON of $50,000,000 in aggregate principal amount of
AEGON's Series B Notes due December 31, 2002 (the "Series B Notes") to MONY
pursuant to the Series B Note Purchase Agreement dated as of the date hereof
between AEGON and MONY (the "Series B Note Purchase Agreement").
This opinion is being delivered to you pursuant to each of the
Series A Note Purchase Agreement and the Series B Note Purchase Agreement.
Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Series A Note Purchase Agreement.
<PAGE> 54
The Mutual Life Insurance Company
of New York
December , 1993
Page 2
In connection therewith, we have examined copies of (i) the
Series A Note Purchase Agreement, (ii) the Series B Note Purchase Agreement,
(iii) the Series A Notes, (iv) the Series B Notes, (v) the Certificate of
Incorporation of AEGON, (vi) the By-Laws of AEGON and (vii) a record of the
corporate proceedings of AEGON relating to the authorization of the issuance and
sale of the Series A Notes and the Series B Notes, including the execution and
delivery of the Series A Note Purchase Agreement and the Series B Note Purchase
Agreement. In addition, we have examined the originals (or copies certified or
otherwise identified to our satisfaction) of such other agreements, instruments,
certificates, documents and records and have reviewed such questions of law as
we have deemed necessary or appropriate for the purposes of the opinions
rendered herein.
In rendering the opinions expressed herein, we have assumed
without independent verification the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such latter documents. In making our examination of documents executed by
parties other than AEGON, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such documents and the
validity and binding effect thereof. As to facts or questions of fact material
to the opinions expressed herein, we have also, when relevant facts were not
independently established or verified, been furnished with, and with your
consent have relied exclusively upon, the aforesaid documents, corporate
records, agreements, instruments and certificates.
Based upon the foregoing, and subject to the qualifications
stated herein, we are of the opinion that:
1. The Series A Note Purchase Agreement and the Series B Note
Purchase Agreement constitute legal, valid and binding obligations of AEGON,
enforceable against AEGON in accordance with their terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, rehabilitation,
reorganization, receivership, conservatorship, moratorium, fraudulent conveyance
or other laws relating to or affecting the enforcement of creditors' rights
generally or by general principles of equity, regardless of whether such
enforceability is considered in a proceeding at law or in equity.
2. The form of the Series A Notes is in the form contemplated
by the Series A Note Purchase Agreement. The form of the Series B Notes is in
the form contemplated by the Series B Note Purchase Agreement. The Series A
Notes and the Series B Notes have been duly authorized, executed and delivered
by AEGON and constitute legal, valid and binding obligations of AEGON,
enforceable against AEGON in accordance with their terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, rehabilitation,
reorganization, receivership, conservatorship,
<PAGE> 55
The Mutual Life Insurance Company
of New York
December , 1993
Page 3
moratorium, fraudulent conveyance or other laws relating to or affecting the
enforcement of creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
3. The execution, delivery and performance by AEGON of the
Series A Note Purchase Agreement and the Series B Note Purchase Agreement, the
consummation of the transactions contemplated thereby in accordance with the
terms thereof and the issuance and sale of the Series A Notes and the Series B
Notes do not require any consent, approval, filing, notice or other action under
any New York statute, rule or regulation applicable to AEGON, except for such
consents, approvals, filings, notices or actions as have been obtained or made
prior to the date hereof or which are not required to be made until after the
Closing Date.
The opinions rendered herein are limited to the laws of the
State of New York and the Federal laws of the United States. We do not express
any opinion as to the laws, or to matters governed by the laws, of any other
jurisdiction.
This letter and the opinions rendered herein are rendered
solely for your benefit and may not be delivered to or relied upon in any manner
by any other person or entity without our express written consent.
Very truly yours,
<PAGE> 56
SCHEDULE 1(a)
AEGON OFFICERS
Donald J. Shephard Chief Executive Officer
Chairman of the Board
President
Thomas E. Morgan Chief Information Officer
Vice President
Larry G. Brown General Counsel
Senior Vice President
Secretary
Jack R. Dykhouse Senior Vice President -
Health Group
Rex B. Eno Senior Vice President -
Agency Group
Patrick E. Falconio Chief Investment Officer
Executive Vice President
B. Larry Jenkins Senior Vice President -
Home Service Group
John R. Kenney Senior Vice President -
Asset Accumulation Group
Ronald F. Mosher Vice President
Robert J. McGraw Treasurer
Vice President
Lon Andersen Vice President
Charles M. Arrington Vice President
Patrick S. Baird Chief Financial Officer
Vice President
David L. Blankenship Vice President
William L. Busler Vice President
<PAGE> 57
Donald W. Chamberlain Vice President
Brenda K. Clancy Controller
Vice President
Constantine T. Costas Vice President
Joseph A. Dutcher Director of Internal Audit
Vice President
Sam Edmondson, Jr. Vice President
Donald E. Flynn Vice President
Bart Herbert, Jr. Vice President
Douglas C. Kolsrud Actuary
Vice President
Danny L. Kolsrud Vice President
Dir. of Corporate Taxes
Robert J. Kontz Dir. of Financial Reporting
Vice President
Ronald M. Nagler Deputy Chief Investment Officer
Vice President
Danny W. Rowland Vice President
Janet M. Soppe Vice President
Cor H. Verhagen Vice President
<PAGE> 58
SCHEDULE l(b)
SEE TAB 6
<PAGE> 59
SCHEDULE 3.1(b)
WEIGHTED AVERAGE RATING
At all times following the Closing, AUSA Life shall maintain
(a) a claims-paying ability rating by Standard & Poor's Corporation ("S&P") of
"AA-" or higher, or (b) if there is a Positive Rating Differential on the
Closing Date, a claims-paying ability rating by S&P such that the Weighted
Points of AUSA Life on any date other than the Closing Date exceeds the Industry
Weighted Point Average on such other date by an amount equal to or greater than
such Positive Differential, or (c) if there is a Negative Rating Differential on
the Closing Date, a claims-paying ability rating by S&P such that the Weighted
Points of AUSA Life on any date other than the Closing Date is not lower than
the Industry Weighted Point Average on such other date by an amount greater than
such Negative Rating Differential.
The Weighted Points of AUSA Life, the Industry Weighted Point
Average and such Rating Differentials shall be determined as follows:
1. For purposes of such determination, "Reference Insurers"
shall mean, at any time, the twenty (20) life insurers domiciled in the United
States with the greatest amount of pension assets (other than AEGON and its
Affiliates and MONY) that are rated by S&P, determined by adding the amounts
recorded on lines 10.2 and 10.3 on page 3 and line 23 on page 2 of the Annual
Convention Statements promulgated by the National Association of Insurance
Commissioners and filed by United States life insurers with the appropriate
insurance regulatory authority in their respective states of domicile for the
immediately preceding calendar year. The pension assets (determined as
aforesaid) of any life insurers which are Affiliates of one another shall be
aggregated for purposes of determining the Reference Insurers.
If the standard form of Annual Convention Statement is changed
after the Closing Date, the line items in the new form of Annual Convention
Statement on which the line items described above are presently recorded shall
be utilized for purposes of determining the Reference Insurers. If (a) such form
of the Annual Convention Statement is changed so that one or more line items
described above are no longer reported therein or (b) at any time following the
Closing Date, the line items described above are no longer appropriate or are
materially incomplete for purposes of determining the twenty largest pension
insurers, AEGON and MONY shall mutually agree on a new method of determining the
Reference Insurers. The parties agree to negotiate in good faith in developing
any such new method.
2. The following "Weighted Points" will be assigned to each of
the Reference Insurers and AUSA Life at the time of determination, based on the
claims-paying ability rating assigned by S&P to each such Reference Insurer and
AUSA Life which is then in effect:
<PAGE> 60
<TABLE>
<CAPTION>
S&P Rating Weighted Points
---------- ---------------
<S> <C>
AAA 4.0
AA+ 3.9
AA 3.8
AA- 3.7
A+ 3.6
A 3.5
A- 3.4
BBB+ 3.3
BBB 3.2
BBB- 3.1
Below BBB- Deduct 0.1 for each
successive lower rating grade
</TABLE>
If any Reference Insurer consists of Affiliate life insurers whose pension
assets have been aggregated under paragraph 1 above, the rating assigned by S&P
to the Affiliate life insurer with the greatest amount of pension assets
(determined in accordance with paragraph 1 above), on an individual basis, shall
be used for purposes of assigning Weighted Points.
3. The total Weighted Points for all Reference Insurers will
be divided by the number of Reference Insurers (e.g., 20), and rounded upwards
to the nearest one-tenth of a point, to determine the average of the Weighted
Points of the Reference Insurers (the "Industry Weighted Point Average").
4. The amount, if any, by which the Weighted Points of AUSA
Life on the Closing Date exceeds the Industry Weighted Point Average on the
Closing Date shall be the "Positive Rating Differential". The amount, if any, by
which the Weighted Points of AUSA Life on the Closing Date is lower than the
Industry Weighted Point Average on the Closing Date shall be the "Negative
Rating Differential".
2
<PAGE> 61
SCHEDULE 3.1 (c)
CAPITAL AND FINANCIAL SUPPORT COMMITMENTS
<PAGE> 62
TANGIBLE NET WORTH MAINTENANCE AGREEMENT
AGREEMENT, dated as of between AEGON USA, INC. ("USA") and
AUSA Life Insurance Company, Inc. ("INC").
WITNESSETH:
WHEREAS, USA owns all of the issued and outstanding common stock of First AUSA
Life Insurance Company and First AUSA Life Insurance Company owns all of the
issued and outstanding common stock of INC, and
WHEREAS, USA intends to continue to own and hold the entire legal title to and
the beneficial interest in all outstanding shares of common stock of INC, having
the power under ordinary circumstances to vote for the election of members of
the Board of Directors of INC and does not intend directly or indirectly to
pledge or otherwise dispose of any such shares of stock; and
WHEREAS, USA and INC have been asked to provide certain assurances to financial
rating organizations with respect to the stock ownership and financial condition
of INC, and
WHEREAS, The corporate interests of USA will be furthered and the value of its
investment in this subsidiary preserved and potentially enhanced by its entering
into this Agreement.
NOW, THEREFORE, The parties agree as follows:
1. Maintenance of Tangible Net Worth. USA will cause INC at all times to have a
Tangible Net Worth of at least $5 million "Tangible Net Worth" shall mean, as of
the time of any determination thereof, the sum of (i) the par value (or value
stated on the books of INC) of the common stock of all classes of INC Plus (or
minus in the case of a deficiency) (ii) the amount of the paid-in capital and
surplus of INC all determined in accordance with statutory accounting principles
as in effect on the date of determination.
2. Maintenance of Operating Leverage. USA will cause INC to have a maximum
operating leverage ratio of 20 times (20x). The "Operating Leverage" ratio shall
be defined as (1) total statutory liabilities less separate account liabilities
less the Asset Valuation Reserve (AVR), divided by (2) the sum of statutory
capital & surplus plus the AVR.
3. Liquidity. INC will hold liquid assets (publicly traded securities, cash, and
short-term investments) equal to or greater than 25% of (1) total statutory
liabilities less separate account liabilities less AVR. USA will assure that INC
has sufficient cash for its operating needs at all times while AUSA owns INC.
<PAGE> 63
4. No Guarantee. This Agreement is not, and nothing herein contained and nothing
done pursuant hereto by USA shall be deemed to constitute, a direct or indirect
guarantee by USA of the payment of any Debt or other obligation, indebtedness or
liability, of any kind or character whatsoever, of INC or subsidiaries, if any.
5. Waiver. INC hereby waives any rights regarding any failure or delay on the
part of USA in asserting or enforcing any of its rights or in making any claims
or demands hereunder.
6. Modification and Amendment. This Agreement may only be modified or amended in
ways not less favorable to INC and only upon the mutual consent of both parties.
7. Duration and Termination. This Agreement shall have an initial duration of
three years and thereafter shall continue indefinitely, but only so long as INC
is wholly-owned by USA. USA will only sell INC to buyers deemed by USA to be
reputable and responsible parties. This Agreement may be terminated by either
party upon one year's written notice to such other party. If after termination
of this Agreement, INC is still wholly-owned by USA, USA shall cause INC to
operate on a fiscally responsible basis.
8. Successors. The agreements herein set forth shall be mutually binding upon,
and inure to the mutual benefit of USA, INC, and their respective policyholders
and successors.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of state of Iowa.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the day and year first above written.
/s/ Tom Sohlanberg /s/ Donald J. Shephard
- ------------------------- ---------------------------
President, President,
AUSA Life Insurance Aegon USA, Inc.
Company, Inc.
<PAGE> 64
SCHEDULE 6.3
NO CONFLICT OR VIOLATION
AEGON USA, Inc.
(a) None.
(b) None.
(c) None.
(d) None.
(e) None.
AUSA Life Insurance Company, Inc.
(a) None.
(b) None.
(c) None.
(d) None.
(e) None.
<PAGE> 65
SCHEDULE 6.4
CONSENTS AND APPROVALS
AEGON USA, Inc.
None.
AUSA Life Insurance Company, Inc.
None.
<PAGE> 66
SCHEDULE 6.8
MATERIAL ADVERSE EFFECTS
No exceptions
<PAGE> 67
AEGON USA, INC.
Series A Notes due December 31, 2002
SERIES A NOTE PURCHASE AGREEMENT
Dated as of December 31, 1993
<PAGE> 68
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS
ARTICLE 2. ISSUANCE OF SERIES A NOTES
ARTICLE 3. PREPAYMENT OF SERIES A NOTES
ARTICLE 4. REGISTRATION, EXCHANGE AND REPLACEMENT OF SERIES A NOTES
ARTICLE 5. METHOD AND PLACE OF PAYMENT OF PRINCIPAL AND INTEREST
ARTICLE 6. GENERAL REPRESENTATIONS AND WARRANTIES
ARTICLE 7. REPRESENTATIONS AND WARRANTIES RELATING TO SECURITIES ACT; MONY
REPRESENTATIONS
ARTICLE 8. CLOSING CONDITIONS OF MONY
ARTICLE 9. CLOSING CONDITIONS OF AEGON
ARTICLE 10. AFFIRMATIVE COVENANTS
ARTICLE 11. EVENTS OF DEFAULT
ARTICLE 12. MISCELLANEOUS
EXHIBITS
Exhibit A - Form of Series A Note due December 31, 2002
Exhibit B - Forms of Opinion of Larry G. Brown, General Counsel
to AEGON and LeBoeuf, Lamb, Leiby & MacRae
SCHEDULES
Schedule 1 (a) - AEGON Officers
Schedule 1(b) - Threshold Formula
- i -
<PAGE> 69
Schedule 3.1(b) - Weighted Average Rating
Schedule 3.1(c) - Capital and Financial Support Commitments
Schedule 6.3 - No Conflict or Violation
Schedule 6.4 - Consents and Approvals
Schedule 6.8 - Material Adverse Effects
- ii -
<PAGE> 1
EXHIBIT 10.27
AEGON USA, INC.
6.24% Series B Notes due December 31, 2002
SERIES B NOTE PURCHASE AGREEMENT
Dated as of December 31, 1993
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE 1. DEFINITIONS .............................................................................1
ARTICLE 2. ISSUANCE OF SERIES B NOTES ..............................................................3
Section 2.1 Authorization of Series B Notes .............................................3
Section 2.2 Sale of Series B Notes; Closing..............................................4
ARTICLE 3. PAYMENT OR PREPAYMENT OF SERIES B NOTES..................................................4
Section 3.1 Special Prepayment Events....................................................4
Section 3.2 Surrender of Series B Notes on Payment
or Prepayment.......................................................................5
ARTICLE 4. REGISTRATION, EXCHANGE AND REPLACEMENT OF
SERIES B NOTES...........................................................................5
Section 4.1 Registration, Registration of Transfer and
Exchange............................................................................5
Section 4.2 Replacement..................................................................6
ARTICLE 5. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST...............................................6
Section 5.1 Method and Place of Payment of Principal,
Premium and Interest................................................................7
ARTICLE 6. GENERAL REPRESENTATIONS AND WARRANTIES...................................................7
Section 6.1 Organization and Authority...................................................7
Section 6.2 Authorization................................................................7
Section 6.3 No Conflict or Violation.....................................................7
Section 6.4 Consents and Approvals.......................................................8
Section 6.5 Issued and Outstanding Capital Stock.........................................8
Section 6.6 Actions and Proceedings......................................................8
Section 6.7 GAAP Financial Statements....................................................9
Section 6.8 No Material Adverse Effect...................................................9
Section 6.9 Use of Proceeds..............................................................9
ARTICLE 7. REPRESENTATIONS AND WARRANTIES RELATING TO SECURITIES ACT; MONY REPRESENTATIONS..........9
Section 7.1 MONY Representations........................................................10
ARTICLE 8. CLOSING CONDITIONS OF MONY..............................................................10
Section 8.1 Opinion of Counsel for AEGON................................................10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 8.2 Representations of AEGON True...............................................10
Section 8.3 No Event of Default.........................................................10
Section 8.4 Officers' Certificate of AEGON..............................................11
Section 8.5 Acquisition Consummation....................................................11
Section 8.6 Rating......................................................................11
Section 8.7 Admitted Asset..............................................................11
ARTICLE 9. CLOSING CONDITIONS OF AEGON.............................................................11
Section 9.1 Representations of AEGON True...............................................11
Section 9.2 Officers' Certificate of MONY...............................................11
Section 9.3 Acquisition Documentation...................................................12
ARTICLE 10. AFFIRMATIVE COVENANTS...................................................................12
Section 10.1 Information Covenants......................................................12
Section 10.2 Notice of Default and Litigation...........................................13
Section 10.3 Maintenance of Books and Records...........................................13
Section 10.4 Taxes......................................................................13
Section 10.5 Compliance with Law........................................................13
Section 10.6 Maintenance of Business....................................................14
ARTICLE 11. EVENTS OF DEFAULT.......................................................................14
Section 11.1 Nature of Events...........................................................14
Section 11.2 Default Remedies...........................................................15
ARTICLE 12. MISCELLANEOUS...........................................................................16
Section 12.1 Communications.............................................................16
Section 12.2 Amendment and Waiver.......................................................17
Section 12.3 Legal Holidays.............................................................18
Section 12.4 Governing Law..............................................................18
Section 12.5 Interpretation.............................................................18
Section 12.6 Table of Contents and Headings.............................................18
Section 12.7 Successors and Assigns.....................................................18
Section 12.8 Counterparts...............................................................19
</TABLE>
EXHIBITS
Exhibit A - Form of 6.24% Series B Note Due December 31, 2002
Exhibit B - Form of Opinion of Larry G. Brown, General Counsel to AEGON, and
LeBoeuf, Lamb, Leiby & MacRae
SCHEDULES
Schedule 1(a) - AEGON Officers
Schedule 3.1 - Weighted Average Rating
Schedule 6.3 - No Conflict or Violation
Schedule 6.4 - Consents and Approvals
<PAGE> 4
Schedule 6.8 - Material Adverse Effects
<PAGE> 5
[LETTERHEAD OF AEGON USA, INC.]
--------------------------------
SERIES B NOTE PURCHASE AGREEMENT
--------------------------------
Dated as of December 31, 1993
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
1740 Broadway New York, New York 10019 (together with its permitted or
registered successors and assigns,
being hereinafter called "MONY")
Dear Sirs:
AEGON USA, INC., an Iowa corporation (said corporation, together with
its successors and assigns, subject to Section 12.7 hereof, being hereinafter
called "AEGON"), upon the terms and subject to the conditions set forth herein,
hereby agrees with MONY as follows:
ARTICLE 1. DEFINITIONS
(a) For all purposes of this Agreement and the Series B Notes, the
following definitions shall apply:
"Acquisition Agreement" means the Asset Transfer and Acquisition
Agreement dated as of December 31, 1993 by and among MONY, AEGON and AUSA Life.
"AEGON" has the meaning set forth in the first paragraph of this
Agreement.
"AEGON Financial Statements" has the meaning set forth Section 6.7
hereof.
"AEGON's Auditor" has the meaning set forth in Section 6.7 hereof.
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"Agreement" means this Series B Note Purchase Agreement (including the
annexed Exhibits and Schedules), originally accepted by MONY, and as it may,
from time to time, hereafter be amended, supplemented or modified in accordance
with its terms.
"Applicable SAP" means with respect to any Person, the statutory
accounting principles and practices prescribed or permitted by the insurance
regulatory authority of the state of domicile of such Person.
"AUSA Life" means AUSA Life Insurance Company, Inc., a New York
insurance company and an indirect wholly owned subsidiary of AEGON.
"Change in Control" means any transaction pursuant to which (i) (a)
AUSA Life shall cease to be a direct or indirect subsidiary of AEGON NV or its
successors (through merger or otherwise), and (b) 50 percent or more of those
officers of AEGON listed on Schedule 1(a) hereto (or their successors in office
immediately prior to the public announcement of such transaction) shall cease to
be officers of AEGON within the period commencing with the public announcement
of such transaction and ending on that date which is six months after the
consummation of such transaction, or (ii) AUSA Life shall sell or otherwise
dispose of any material part of the Business or the Transferred Assets outside
the ordinary course of business (including, without limitation, by means of any
bulk or assumption reinsurance agreement) other than to a majority-owned
Subsidiary of AEGON.
"Default" means a condition or event which with notice or after lapse
of time would constitute an Event of Default.
"Event of Default" has the meaning set forth in Section 11.1 hereof.
"Holder", with respect to any Series B Note, means the person shown to
be the holder of such Series B Note by the books for the registration of Series
B Notes required to be maintained in accordance with Section 4.1(a) hereof.
"ILI" means International Life Investors Insurance Company, a New York
life insurance company and an indirect wholly owned Subsidiary of AEGON.
"Interim AEGON Financial Statements" has the meaning set forth in
Section 6.7 hereof.
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"Life Subsidiary" means any Subsidiary of AEGON which is engaged in
life, annuity, accident or health insurance business.
"Material Adverse Effect" means a material adverse effect on the
business, operations, condition (financial or other), results of operations,
properties, assets or prospects of a Person.
"Material Subsidiaries" mean AUSA Life, First AUSA Life Insurance
Company, a Maryland life insurance company, ILI, Life Investors Insurance
Company of America, an Iowa life insurance Company, Monumental Life Insurance
Company,a Maryland life insurance company, Bankers United Life Assurance Co., an
Iowa life insurance company, Western Reserve Life Assurance Co. of Ohio, an Ohio
life insurance company, and PFL Life Insurance Company, an Iowa life insurance
company.
"Maturity Date" has the meaning set forth in Section 2.1 hereof.
"S&P" means Standard & Poor's Corporation.
"Series B Note" and "Series B Notes" have the respective meanings set
forth in Section 2.1 hereof.
(b) Capitalized terms used and not otherwise defined herein shall have
the respective meanings set forth in the Acquisition Agreement.
ARTICLE 2. ISSUANCE OF SERIES B NOTES
Section 2.1 Authorization of Series B Notes. AEGON has duly authorized
the issuance and sale, on the terms hereinafter provided, of $50,000,000 in
aggregate principal amount of AEGON's 6.24% Series B Notes due on December 31,
2002 (the "Maturity Date") (each hereinafter called a "Series B Note" and
collectively the "Series B Notes"). Each Series B Note will be in
fully-registered form, will bear interest on the unpaid principal amount
thereof, payable quarterly on the last day of March, June, September, and
December in each year (each an "Interest Payment Date" and collectively, the
"Interest Payment Dates"), and at maturity, at the rate of 6.24% per annum, from
the date of issuance of such Series B Note until such Series B Note becomes due
and payable (whether at maturity, by acceleration or otherwise) and on any
overdue portion of such principal amount at the rate of 7.24% per annum until
paid and will bear interest, to the extent permitted by law, on any
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overdue installment of interest at the rate of 7.24% per annum from the date the
same becomes due and payable (whether on an Interest Payment Date, at maturity,
by acceleration or otherwise) until paid. The principal amount of each Series B
Note will be due and payable on the Maturity Date. The Series B Notes will be in
substantially the form of Exhibit A hereto.
Section 2.2 Sale of Series B Notes; Closing. (a) AEGON hereby agrees to
issue and sell to MONY and, upon the terms and subject to the conditions hereof,
MONY agrees to purchase from AEGON on the Closing Date $50,000,000 in aggregate
principal amount of Series B Notes, at an aggregate purchase price equal to 100%
of such principal amount. The closing with respect to the sale and purchase of
the Series B Notes shall be held on the Closing Date at 10:00 a.m., New York
City time, at the offices of LeBoeuf, Lamb, Leiby & MacRae, 125 West 55th
Street, New York, New York or such other time or place as the parties may
mutually agree upon.
(b) At the Closing, AEGON will deliver Series B Notes to MONY in the
form of a single printed Series B Note (or such greater number of Series B Notes
as MONY may reasonably designate to AEGON in writing) dated the Closing Date, in
the aggregate principal amount of $50,000,000 and duly registered in MONY's name
(or in the name of such nominee as MONY shall have designated to AEGON in
writing before the Closing Date), against payment therefor by wire transfer of
immediately available funds in the amount of the purchase price of such Series B
Note or Series B Notes to such account or accounts as AEGON shall designate in
writing to MONY.
ARTICLE 3. PAYMENT OR PREPAYMENT OF SERIES B NOTES
Section 3.1 Special Prepayment Events.
(a) In the event that, at any time, AUSA Life shall fail to maintain a
weighted average rating by S&P determined in the manner set forth in Schedule
3.1 hereto, AEGON shall notify the holders of the Series B Notes of such failure
as soon as practicable (but in no event later than two Business Days)
thereafter. Each holder of a Series B Note may, within ten days of receipt of
such notice, make a written demand to AEGON for prepayment of all of such
holder's Series B Notes. If a holder of a Series A Note makes such a demand,
AEGON shall prepay all of such holder's Series B Notes, and such holder's Series
B Notes shall mature and become due and payable at 100% of the principal amount
so to be prepaid, plus interest accrued thereon
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to the date fixed for such prepayment, in accordance with the payment procedures
set forth in Section 5.1 hereof.
(b) In the event that, at any time, AEGON and its operating
subsidiaries as a group are not assigned a rating by S&P of "A" or higher (or an
equivalent rating in the event that at any time hereafter S&P revises its rating
system), all of the Series B Notes shall mature and become due and payable, and
AEGON shall prepay all of the Notes at 100% of the principal amount, together
with interest accrued thereon.
(c) Not fewer than twenty days prior to the occurrence of a Change in
Control, AEGON shall give notice thereof to the holders of the Series B Notes.
Each holder of a Series B Note may, within ten days of receipt of such notice,
make a written demand to AEGON for prepayment of such holder's Series B Notes.
If a holder of a Series B Note makes such demand, AEGON shall prepay all of such
holder's Series B Notes, and such Series B Notes shall mature and become due and
payable, simultaneously with the occurrence of such Change in Control, at 100%
of the principal amount so to be prepaid, plus interest accrued thereon to the
date fixed for such prepayments, in accordance with the payment procedures set
forth in Section 5.1 hereof.
Section 3.2 Surrender of Series B Notes on Payment or Prepayment.
Concurrent with the payment of the entire principal amount of any Series B Note,
the holder of such Series B Note shall surrender such Series B Note to AEGON for
cancellation.
ARTICLE 4. REGISTRATION, EXCHANGE AND REPLACEMENT OF
SERIES B NOTES
Section 4.1 Registration, Registration of Transfer and Exchange. (a)
All Series B Notes issued from time to time under this Agreement shall be
registered as herein provided. AEGON will keep at its principal executive office
appropriate books for the initial registration and the registration of transfers
and exchanges of Series B Notes; and at such office AEGON, at its own expense
(except as provided below), will register Series B Notes and transfers and
exchanges thereof under the provisions of this Agreement.
(b) Whenever any Series B Note shall be presented by the holder thereof
or its nominee at said office for exchange or registration of transfer, AEGON
shall execute and, in exchange therefor, shall deliver a new Series B Note or
Series B Notes, registered in such name or names and in such denominations as
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may be requested by such holder or its nominee, but not less than $100,000 in
the case of each new Series B Note (unless the unpaid principal amount of the
Series B Note presented is less than or is not evenly divisible by $100,000, in
which case in a denomination equal to such unpaid principal amount or the
portion of the unpaid principal amount in excess of that which is evenly
divisible by $100,000), aggregating the unpaid principal amount thereon and
dated the date to which interest has been paid on the Series B Note so
presented, or, if no interest has yet been so paid thereon, then dated the date
of the Series B Note so presented; provided, however, that no transfer of any
Series B Note shall be registered unless the transfer is evidenced by a written
instrument of transfer, in form reasonably satisfactory to AEGON, executed by
the registered owner of such Series B Note or by his authorized attorney. The
principal amount on each such new Series B Note shall be due and payable on the
same dates as the corresponding principal amount remaining unpaid on the Series
B Note so presented. AEGON may require payment of a sum sufficient to cover any
stamp tax or other governmental charge imposed in respect of any transfer of a
Series B Note.
(c) AEGON may treat the Person in whose name any Series B Note is last
registered as the owner and holder of such Series B Note for all purposes of
this Agreement, and AEGON shall not be affected by any notice or knowledge to
the contrary.
Section 4.2 Replacement. Upon receipt by AEGON of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Series B
Note and (a) in the case of any loss, theft or destruction, upon receipt by
AEGON of indemnity or security reasonably satisfactory to it (it being
acknowledged and agreed that, if the registered holder of any such Series B Note
is MONY, MONY's certificate and agreement of indemnity shall be deemed to be
satisfactory) or (b) in the case of any mutilation, upon surrender of such
mutilated Series B Note for cancellation, AEGON at its expense will execute and
deliver in lieu thereof a new Series B Note of like tenor, registered in the
same manner and in the same unpaid principal amount as the Series B Note being
replaced and dated the date to which interest has been paid on such Series B
Note, or, if no interest has yet been so paid thereon, then dated the date of
such Series B Note.
ARTICLE 5. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST
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Section 5.1 Method and Place of Payment of Principal, Premium and
Interest. AEGON will pay punctually all amounts payable with respect to any
Series B Notes held by any holder or its nominee (without any presentment or
surrender thereof and without any notation of such payment being made thereon)
by wire transfer of immediately available funds to an account which is
designated in writing by each such holder. If MONY or any other holder sells or
transfers any Series B Note, MONY or such holder, as the case may be, will
notify AEGON of the name and address of the transferee, and will, prior to the
delivery of such Series B Note, make a notation on such Series B Note of the
date to which interest has been paid thereon.
ARTICLE 6. GENERAL REPRESENTATIONS AND WARRANTIES
AEGON hereby represents and warrants as follows:
Section 6.1 Organization and Authority. Each of AEGON and AUSA Life is
a corporation duly organized, validly existing and in good standing under the
laws of its state of domicile or incorporation. Each of AEGON and AUSA Life has
all requisite power and authority to own, lease and operate its assets,
properties and business and to carry on the operations of their businesses as
they are now being conducted.
Section 6.2 Authorization. AEGON has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement. The
execution and delivery by AEGON of this Agreement, and the performance by it of
its obligations under such agreement, have been duly authorized. This Agreement
has been duly executed and delivered by AEGON and, subject to the due execution
and delivery by MONY, this Agreement is a valid and binding obligation of AEGON,
enforceable against AEGON in accordance with its terms.
Section 6.3 No Conflict or Violation. Except as disclosed in Schedule
6.3 hereto, the execution, delivery and performance by AEGON of this Agreement
and the consummation of the transactions contemplated hereby in accordance with
the respective terms and conditions hereof will not (a) violate any provision of
the charter, Bylaws or other organizational document of AEGON, (b) to AEGON's
knowledge, violate, conflict with or result in the breach of any of the terms
of, result in any modification of the effect of, otherwise give any other
contracting party the right to terminate, or constitute (or with notice or lapse
of time, or both, constitute) a default under, any contract or other agreement
to which AEGON is a party or by or to which it or any
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of its assets or properties may be bound or subject, (c) to AEGON's knowledge,
violate any order, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding upon, or any
agreement with, or condition imposed by, any governmental or regulatory body,
foreign or domestic, binding upon AEGON, (d) to AEGON's knowledge, violate any
statute, law or regulation of any jurisdiction which violation would have a
Material Adverse Effect with respect to AEGON or materially and adversely affect
the ability of AEGON to consummate the transactions contemplated hereby or (e)
to AEGON's knowledge, result in the breach of any of the terms or conditions of,
constitute a default under, or otherwise cause an impairment of, any Permit
related to the business of AEGON.
Section 6.4 Consents and Approvals.
Except as set forth in Schedule 6.4 hereto, the execution, delivery and
performance by AEGON of this Agreement and the consummation of the transactions
contemplated hereby in accordance with the terms hereof do not require AEGON to
obtain any consent, approval or action of, or make any filing with or give any
notice to, any Person.
Section 6.5 Issued and Outstanding Capital Stock. To AEGON's knowledge,
all of the outstanding shares of capital stock of AUSA Life have been duly
authorized and validly issued, are fully paid, non-assessable and free of
preemptive rights and are owned by AEGON free and clear of any Liens or
Encumbrances.
Section 6.6 Actions and Proceedings. Except as previously disclosed to
MONY in writing, there are no outstanding orders, decrees or judgments by or
with any court, governmental agency, regulatory body or arbitration tribunal
that, individually or in the aggregate, have had or are likely to have a
Material Adverse Effect on AEGON, or materially and adversely affect the ability
of AEGON to consummate the transactions contemplated hereby. Except as
previously disclosed to MONY in writing, to AEGON's knowledge, there are no
actions, suits, arbitrations or legal, administrative or other proceedings
(other than those relating to insurance claims) pending or threatened against
AEGON, at law or in equity, or before or by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind which, if adversely determined, would,
individually or in the aggregate, have a Material Adverse Effect on AEGON, or
materially and
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adversely affect the ability of AEGON to consummate the transactions
contemplated hereby.
Section 6.7 GAAP Financial Statements. On or prior to the date hereof,
AEGON has delivered to MONY true, correct and complete copies of (a) the audited
consolidated balance sheet of AEGON and its Subsidiaries as of December 31,
1992, prepared in accordance with GAAP, together with the notes thereon and the
related report of Ernst & Young, the independent certified public accountant of
AEGON ("AEGON's Auditor") and (b) the audited consolidated statements of income,
stockholders' equity and cash flows of AEGON and its Subsidiaries for the year
ended December 31, 1992, prepared in accordance with GAAP, together with the
notes thereon and the related report of AEGON's Auditor (collectively, the
"AEGON Financial Statements"). AEGON has also delivered to MONY on or prior to
the date hereof, true, correct and complete copies of the consolidated balance
sheet, and the related consolidated statements of income, stockholders' equity
and cash flows, of AEGON and its Subsidiaries for the period ended September 30,
1993, together with the notes, if any, thereon (the "Interim AEGON Financial
Statements"). The AEGON Financial Statements and the Interim AEGON Financial
Statements are based on the books and records of AEGON and its Subsidiaries, and
the AEGON Financial Statements have been prepared in accordance with GAAP
consistently applied, audited by AEGON's Auditor, and fairly present in all
material respects the consolidated financial position and results of operations
of AEGON and its Subsidiaries as of the date and for the period indicated
therein.
Section 6.8 No Material Adverse Effect. Except as set forth in Schedule
6.8 hereto, or except as expressly contemplated by the Acquisition Agreement,
since January 1, 1993, there has not been any material adverse change in the
business, operations, condition (financial or otherwise), results of operations,
properties, assets or prospects of AEGON or in the ability of AEGON to
consummate the transactions contemplated herein.
Section 6.9 Use of Proceeds. The proceeds of the sale of the Series B
Notes shall be contributed by AEGON to AUSA Life in order to increase its
capital.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES RELATING TO
SECURITIES ACT; MONY REPRESENTATIONS
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Section 7.1 MONY Representations. By accepting this Agreement and by
purchasing Series B Notes on the Closing Date, MONY represents as follows:
(a) MONY has all requisite corporate power and authority to enter into
and perform its obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement, the
consummation of the transactions herein contemplated nor compliance with the
terms, conditions and provisions hereof by MONY will conflict with or result in
a breach of any term, condition or provision of any law, or of any rule,
regulation, order, writ, injunction-or decree of any court or other governmental
or public authority or agency, domestic or foreign (including any right,
license, franchise or other authorization granted by any such authority or
agency), or of any binding decision or ruling of any arbitrator, or of the
charter or by-laws of MONY or any contract or other agreement to which MONY is a
party, or by or to which it or any of its assets or property may be bound or
subject.
(c) MONY is purchasing Series B Notes for its own account for
investment and with no present intention of distributing such Series B Notes or
any part thereof, subject to the disposition of its property being within its
control.
ARTICLE 8. CLOSING CONDITIONS OF MONY
MONY's obligation to purchase and pay for the Series B Notes to be
purchased by MONY on the Closing Date shall be subject to the satisfaction or
waiver, on or prior to the Closing Date, of the following conditions precedent:
Section 8.1 Opinion of Counsel for AEGON. MONY shall have received from
Larry G. Brown, General Counsel to AEGON, and from LeBoeuf, Lamb, Leiby &
MacRae, special counsel to AEGON, opinions substantially in the form of Exhibit
B hereto.
Section 8.2 Representations of AEGON True. The representations,
warranties and statements by AEGON in Article 6 shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
such representations, warranties and statements had been made on and as of the
Closing Date.
Section 8.3 No Event of Default. Upon the delivery of the Series B
Notes, no Event of Default, or condition or event which with
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notice or after lapse of time would constitute an Event of Default, shall exist.
Section 8.4 Officers' Certificate of AEGON. AEGON shall have delivered
to MONY an Officers' Certificate of AEGON, dated the Closing Date and
satisfactory to MONY, confirming the fulfillment of the closing conditions
specified in Section 8.2 and 8.3 hereof.
Section 8.5 Acquisition Consummation. Each of the Acquisition Agreement
and the Ancillary Agreements shall have been executed and delivered by each of
the parties thereto, and shall be in full force and effect. The transactions
contemplated by the Acquisition Agreement and the Ancillary Agreements (other
than those contemplated by this Agreement) shall have been consummated in
compliance therewith and with applicable law.
Section 8.6 Rating. MONY shall have received confirmation, in form and
substance reasonably satisfactory to MONY, that the Series B Notes, upon
issuance, will be assigned a rating by Duff & Phelps, Inc. of at least AA.
Section 8.7 Admitted Asset. MONY shall have received confirmation, in
form and substance reasonably satisfactory to MONY, that it will initially be
permitted to record the Series B Notes on its books and records, and in all
regulatory filings to be made with the New York Insurance Department and other
applicable governmental and regulatory authorities, as admitted assets with an
aggregate value equal to the aggregate principal amount thereof.
ARTICLE 9. CLOSING CONDITIONS OF AEGON
AEGON's obligation to issue and sell the Series B Notes to MONY on the
Closing Date shall be subject to the satisfaction, on or prior to the Closing
Date, of the following conditions precedent:
Section 9.1 Representations of AEGON True. The representations,
warranties and statements by MONY in Article 7, shall be true in all material
respects on and as of the Closing Date with the same effect as though such
representations, warranties and statements had been made on and as of the
Closing Date.
Section 9.2 Officers' Certificate of MONY. MONY shall have delivered to
AEGON an Officer's Certificate of MONY, dated the
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Closing Date and satisfactory to AEGON, confirming the fulfillment of the
closing condition specified in Section 9.1 hereof.
Section 9.3 Acquisition Documentation. Each of the Acquisition
Agreement and the Ancillary Agreements shall have been executed and delivered by
each of the parties thereto, and shall be in full force and effect. The
transactions contemplated by the Acquisition Agreement and the Ancillary
Agreements (other than those contemplated by this Agreement) shall have been
consummated in compliance therewith and with applicable law.
ARTICLE 10. AFFIRMATIVE COVENANTS
AEGON covenants and agrees that on and after the date hereof and so
long as any Series B Note is outstanding, AEGON will, and will cause AUSA Life
to, comply with the following provisions:
Section 10.1 Information Covenants. AEGON will, and will cause AUSA
Life to, furnish to MONY:
(a) as soon as, and if, available after the end of each of the first
three quarterly accounting periods in each fiscal year of AEGON (i) all
quarterly consolidated financial statements of AEGON and its Subsidiaries which
AEGON prepares for its internal reporting purposes or otherwise;
(b) as soon as available after the end of each of the first three
quarterly accounting periods in each fiscal year of AUSA Life and each other
Life Subsidiary, the quarterly convention statement of AUSA Life and each other
Life Subsidiary as filed with the insurance regulatory authority of the
jurisdiction where it is domiciled for such fiscal periods;
(c) as soon as available after the end of each fiscal year of AEGON,
true, correct and complete copies of (i) the audited consolidated balance sheet
of AEGON and its Subsidiaries as of the end of such fiscal year, prepared in
accordance with GAAP, together with the notes thereon and (ii) the audited
consolidated statements of income, stockholders' equity and cash flows of AEGON
and its Subsidiaries for such fiscal year, prepared in accordance with GAAP,
together with the notes thereon, in each case together with the related reports
of AEGON's independent certified public accounting firm; and
(d) as soon as available after the end of each fiscal year of AUSA Life
and each other Life Subsidiary, the annual
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convention statement of each Life Subsidiary as filed with the insurance
regulatory authority of the jurisdiction where it is domiciled for such fiscal
year.
Section 10.2 Notice of Default and Litigation. AEGON will, and will
cause AUSA Life to, furnish to MONY promptly, and in any event within two (2)
Business Days after AEGON or any of its Subsidiaries obtains knowledge thereof,
notice of the occurrence of any event which constitutes a Default or Event of
Default, which notice shall specify the exact nature and extent thereof and what
action AEGON or AUSA Life has taken or proposes to take with respect thereto.
Section 10.3 Maintenance of Books and Records. AEGON will, and will
cause AUSA Life to, keep proper books of records and accounts in which full and
correct entries are made of all its financial and business transactions and its
assets, liabilities and results of operations in accordance with GAAP as
consistently applied and, as applicable, Applicable SAP as consistently applied.
In the event that MONY shall desire to sell any of the Series B Notes to a third
party, AEGON shall provide such third party with such access to the books of
records and accounts of AEGON which AEGON shall determine to be reasonable in
light of circumstances existing at such time and from time to time thereafter.
Section 10.4 Taxes. AEGON will, and will cause each of its subsidiaries
(including AUSA Life) to, pay and discharge when due all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any property belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a Lien or
Encumbrance upon the property of AEGON or AUSA Life, except for such taxes,
assessments, charges, levies or claims (i) with respect to which the failure to
pay or discharge would not have a Material Adverse Effect on AEGON and its
Subsidiaries taken as a whole or (ii) which are being diligently contested in
good faith by appropriate proceedings if adequate reserves have been established
in accordance with GAAP or Applicable SAP, as the case may be.
Section 10.5 Compliance with Law. AEGON will, and will cause each of
its Subsidiaries (including AUSA Life) to, comply with all laws, rules,
regulations, orders, licenses and permits relating to or otherwise applicable to
the conduct of its business or the ownership of its properties, except those the
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non-compliance with which would not have a Material Adverse Effect on AEGON and
its Subsidiaries taken as a whole.
Section 10.6 Maintenance of Business. AEGON will, and will cause each
of AUSA Life and Diversified to perform and observe the covenants required to be
performed and observed by it under Section 9.01 of the Acquisition Agreement.
ARTICLE 11. EVENTS OF DEFAULT
Section 11.1 Nature of Events. Each of the following conditions or
events shall constitute an "Event of Default" hereunder:
(a) any payment or prepayment of principal of or interest on, any
Series B Note is not made on or before the date such payment or prepayment is
due and such failure continues for three Business Days after the holder of any
Series B Note has given written notice of such failure to AEGON;
(b) AEGON or AUSA Life fails to perform or observe any material
covenant condition or obligation (including Section 6.9 hereof) contained herein
and such failure continues for twenty days after the holder of any Series B Note
has given written notice of such failure to AEGON;
(c) any representation, warranty or statement by or on behalf of AEGON
contained in this Agreement or any certificate, written statement or other
document furnished in connection with this Agreement shall be false or
misleading in any material respect such that it shall affect the ability of
AEGON to pay, when due, the principal of and interest on the Series B Notes in
accordance with the terms of the Series B Notes and this Agreement;
(d) a custodian, receiver, rehabilitator, conservator, liquidator or
trustee of AEGON or any Material Subsidiary, or of any of their respective
properties or assets, is appointed or takes possession and such appointment or
possession remains in effect for more than forty-five days; or AEGON or any
Material Subsidiary generally fails to pay its Indebtedness as it becomes due
other than as a result of a good faith dispute; or AEGON or any Material
Subsidiary is adjudicated bankrupt or insolvent; or an order for relief is
entered under the Federal Bankruptcy Code or under any other applicable law
against AEGON or any Material Subsidiary; or a petition is filed against AEGON
or any Material Subsidiary under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, rehabilitation,
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conservation or liquidation law of any jurisdiction, whether now or subsequently
in effect, and is not dismissed within forty-five days after filing; or
(e) AEGON or any Material Subsidiary files a petition in voluntary
bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution,
rehabilitation, conservation or liquidation law of any jurisdiction, whether now
or subsequently in effect; or consents to the filing of any petition against it
under any such law; or consents to the appointment of or taking possession by a
custodian, receiver, trustee, rehabilitator, conservator or liquidator of AEGON
or any Material Subsidiary, or of all or any part of its properties or assets,
or makes an assignment for the benefit of its creditors or policyholders.
Section 11.2 Default Remedies. If an Event of Default exists, (a) (i)
the holder of any Series B Note then outstanding, with respect to an Event of
Default under Section 11.1(a) hereof or (ii) the holder or holders of at least
25%- in aggregate unpaid principal amount of the Series B Notes then
outstanding, with respect to any Event of Default under Section 11.1(b) or (c)
hereof, may exercise any right, power or remedy permitted to it or any of them
by law (it being intended by the parties hereto that no remedy is to be
exclusive and that each remedy is to be cumulative), and shall have, in
particular, without limiting the generality of the foregoing, the right, by
notice to AEGON, to declare the entire principal of and all interest accrued on
such Series B Note to be, and such principal and accrued interest shall
thereupon become, forthwith due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
and (b) in the case of an Event of Default under Section 11.1(d) or (e) hereof,
the entire principal amount of and all accrued interest and premium on the
Series B Notes shall automatically become forthwith due and payable, without any
presentment, demand, protest, declaration or other notice of any kind
(including, without limitation, pursuant to clause (a) above), all of which are
hereby expressly waived. AEGON will forthwith pay to the holder of such Series B
Note the entire principal of and interest accrued on such Series B Note. No
course of dealing on the part of any holder of a Series B Note or any delay or
failure on the part of any holder of a Series B Note to exercise any right shall
operate as a waiver of such right or otherwise prejudice such holder's rights,
powers and remedies.
15
<PAGE> 20
At any time after the principal of and interest accrued on any Series B
Note is declared due and payable, and before a judgment or decree for payment of
the money due has been obtained, the holders of at least a majority in aggregate
unpaid principal amount of Series B Notes then outstanding, by written notice to
AEGON, may rescind and annul such declaration and its consequences if (i) all
sums payable under the Series B Notes (except any principal or interest on the
Series B Notes which has become payable solely by reason of such declaration)
shall have been duly paid and (ii) all Events of Default, other than nonpayment
of amounts which have become due solely by such declaration, have been cured or
waived as provided in Section 12.2 hereof. No such rescission and annulment
shall affect any subsequent Event of Default or declaration or any right, power
or remedy consequent thereon.
ARTICLE 12. MISCELLANEOUS
Section 12.1 Communications. Whether or not expressly so stated in any
provision of this Agreement, but subject to Section 5.1, all notices, demands or
other communications provided for under this Agreement or under the Series B
Notes shall be in writing and shall be delivered personally (by courier or
otherwise), telegraphed, telexed, sent by facsimile transmission or sent by
certified, registered or express mail, postage prepaid. Any such notice shall be
deemed given when so delivered personally (by courier or otherwise),
telegraphed, telexed or sent by facsimile transmission or, if mailed, three (3)
days after the date of deposit in the United States mails, as follows:
(a) If to AEGON to:
AEGON USA, Inc.
4333 Edgewood Road N.E.
Cedar Rapids, Iowa 52499
Attention: Patrick S. Baird
Telecopier No.: (319) 369-2218
With a concurrent copy to:
AEGON USA, Inc.
1111 North Charles Street
Baltimore, Maryland 21201
Attention: Larry G. Brown
Telecopier No.: (410) 347-8685
16
<PAGE> 21
(b) If to MONY to:
The Mutual Life Insurance Company of New York
1740 Broadway
New York, New York 10019
Attention: Chief Executive Officer
Telecopier No.: (212) 708-2900
With a concurrent copy to:
The Mutual Life Insurance Company of New York
1740 Broadway
New York, New York 10019
Attention: General Counsel
Telecopier No.: (212) 708-2977
(c) If to any holder of a Series B Note to the address of such holder
as it appears on the registration books maintained as provided in Section 4.1
hereof (which address, in the case of MONY, shall be initially MONY's address
shown above.
Any party may, by notice given in accordance with this Section 12.1
hereof to the other parties, designate another address or Person for receipt of
notices hereunder.
Section 12.2 Amendment and Waiver. (a) No term, covenant, agreement or
condition of this Agreement may be amended, supplemented or modified, or
compliance therewith waived, except pursuant to one or more written instruments
signed by the holders of not less than two-thirds in aggregate unpaid principal
amount of the Series B Notes at the time outstanding and AEGON; provided,
however, that AEGON shall not be required to sign any such written instrument
pursuant to which the holders waive any term, covenant, agreement or condition
herein of AEGON and no such amendment, supplement, modification or waiver shall,
without the consent in writing of the holders of all of the Series B Notes at
the time outstanding, subordinate or change the amount of, or change the date of
final maturity of, the principal of any of the Series B Notes, or change the
amount of, or the time, method or place for the making of, any prepayment of
principal of any of the Series B Notes, or reduce the amount of, or change the
time of payment of, interest on any of the Series B Notes, or change the
provisions of this Section 12.2 as they affect the holders of the Series B Notes
or the provisions of Sections 11.1 and 11.2 hereof. Any amendment,
supplement, modification or waiver pursuant to this Section 12.2 shall apply
equally to all the holders of the Series B Notes affected and
17
<PAGE> 22
shall be binding upon them, upon each future holder of any Series B Note and
upon AEGON.
(b) AEGON will give prompt notice to all holders of the Series B Notes
of the effectiveness of any amendment, supplement, modification or waiver
entered into in accordance with the provisions of this Section 12.2. Such notice
shall state the terms of any such amendment, supplement, modification or waiver
and shall be accompanied by a conformed copy (which may be a composite conformed
copy) of each written instrument which embodies such amendment, supplement,
modification or waiver.
Section 12.3 Legal Holidays. Whenever any payment hereunder or under
any of the Series B Notes shall be due on a Saturday, Sunday or day upon which
banking institutions at the place for such payment are authorized or required by
law or executive order to be closed (a "legal holiday") , such payment shall
become due on the next succeeding day which is not a legal holiday.
Section 12.4 Governing Law. THIS AGREEMENT AND THE SERIES B NOTES
ISSUED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS
OF LAW THEREOF.
Section 12.5 Interpretation. For purposes of this Agreement, the words
"hereof", "herein", "hereby" and other words of similar import refer to this
Agreement as a whole unless otherwise indicated. Whenever therein the singular
is used, the same shall include the plural, and whenever herein the plural is
used, the same shall include the singular, where appropriate.
Section 12.6 Table of Contents and Headings. The table of contents and
the headings of the Articles and sections of this Agreement are intended for
convenience of reference only and not to constitute a part hereof, and shall not
affect the interpretation of this Agreement.
Section 12.7 Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of AEGON and inure to the benefit of MONY's
successors and assigns. All provisions of this Agreement are intended to be for
the benefit of all holders, from time to time, of the Series B Notes issued
pursuant hereto, and shall be enforceable by any such holder, whether or not an
express assignment to such holder of rights under this Agreement shall have been
made by MONY or any of MONY's successors or assigns.
18
<PAGE> 23
Section 12.8 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof signed by less than all, but together signed by all of the
parties hereto.
19
<PAGE> 24
If the foregoing is satisfactory, please sign the form of acceptance on
the enclosed counterparts of this instrument and forward the same to the
undersigned, whereupon this instrument will become a binding agreement between
AEGON and MONY.
Very truly yours,
AEGON USA, INC.
By /s/Patrick S. Baire
Name: Patrick S. Baire
Title: VP/CFO
The foregoing instrument is hereby accepted on December 31, 1993.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By /s/ Kenneth M. Levine
Name: Kenneth M. Levine
Title: EVP
20
<PAGE> 25
EXHIBIT A
THIS SERIES B NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER SUCH
REGISTRATION NOR SUCH AN EXEMPTION IS REQUIRED BY LAW.
AEGON USA, INC.
6.24% SERIES B NOTE DUE DECEMBER 31, 2002
Dated: December 31, 1993
AEGON USA, INC., an Iowa corporation ("AEGON"), for value received,
hereby promises to pay to THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK ("MONY")
or registered assigns the principal amount of fifty million dollars
($50,000,000), or so much thereof as shall not theretofore have been prepaid, on
the Maturity Date (as defined in the Series B Note Purchase Agreement referred
to below); and to pay interest on the unpaid principal amount hereof from the
date of this Series B Note at the rate of six and twenty-four hundredths percent
(6.24%) per annum, in quarterly installments on the last day of March, June,
September, and December in each year, and at maturity, until the principal
amount hereof shall become due and payable (whether at maturity, by acceleration
or otherwise). AEGON also promises to pay on demand interest on any overdue
principal at the rate of seven and twenty-four hundredths percent (7.24%) per
annum and (to the extent permitted by applicable law) on any overdue installment
of interest at the rate of seven and twenty-four hundredths percent (7.24%) per
annum.
Payments of principal, premium, if any, and interest shall be made by
wire transfer of immediately available funds to an account which is designated
in writing by the registered holder hereof.
This Series B Note is one of a duly authorized issue of the AEGON's
6.24% Series B Notes Due December 31, 2002 (the "Series B Notes") , issued in
the aggregate principal amount of $50,000,000 pursuant to a Series B Note
Purchase Agreement,
<PAGE> 26
dated as of December 31, 1993, between AEGON and MONY named therein (the "Series
B Note Purchase Agreement"). This Series B Note may be prepaid in whole or in
part in certain cases and the maturity hereof may be accelerated as specified in
the Series B Note Purchase Agreement. AEGON agrees to make required payments on
account of this Series B Note in accordance with the provisions of the Series B
Note Purchase Agreement. Reference is made to the Series B Note Purchase
Agreement for other terms and provisions thereof affecting AEGON and the holders
of the Series B Notes.
THIS SERIES B NOTE AND THE SERIES B NOTE PURCHASE AGREEMENT HAVE BEEN
DELIVERED IN THE STATE OF NEW YORK AND ARE TO BE GOVERNED BY AND TO BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
AEGON USA, INC.
By _____________________
President
<PAGE> 27
EXHIBIT B-1
DRAFT
[AEGON LETTERHEAD]
December 1993
The Mutual Life Insurance Company
of New York
1740 Broadway
New York, New York 10019
Re: AEGON USA, Inc. $150,000,000 in Aggregate Principal
Amount of Series A Notes due December 31, 2002 and
$50,000,000 in Aggregate Principal Amount of Series B
Notes due December 31, 2002
Gentlemen:
I am General Counsel of AEGON USA, Inc., an Iowa corporation ("AEGON").
This opinion is being delivered to you in connection with the issuance and sale
by AEGON of $150,000,000 in aggregate principal amount of AEGON's Series A Notes
due December 31, 2002 (the "Series A Notes") to The Mutual Life Insurance
Company of New York, a New York domiciled mutual insurance company ("MONY"),
pursuant to the Series A Note Purchase Agreement dated as of the date hereof
between AEGON and MONY (the "Series A Note Purchase Agreement"), and in
connection with the issuance and sale by AEGON of $50,000,000 in aggregate
principal amount of AEGON's Series B Notes due December 31, 2002 (the "Series B
Notes") to MONY pursuant to the Series B Note Purchase Agreement dated as of the
date hereof between AEGON and MONY (the "Series B Note Purchase Agreement").
<PAGE> 28
The Mutual Life Insurance Company
of New York
December __, 1993
Page 2
This opinion is being delivered to you pursuant to each Of the Series A
Note Purchase Agreement and the Series B Note Purchase Agreement. Capitalized
terms used and not otherwise defined herein shall have the respective meanings
ascribed to them in the Series A Note Purchase Agreement.
In connection therewith, I have examined copies of (i) the Series A
Note Purchase Agreement, (ii) the Series B Note Purchase Agreement, (iii) the
Series A Notes, (iv) the Series B Notes, (v) the Certificate of Incorporation of
AEGON, (vi) the By-Laws of AEGON and (vii) a record of the corporate proceedings
of AEGON relating to the authorization of the issuance and sale of the Series A
Notes and the Series B Notes, including the execution and delivery of the Series
A Note Purchase Agreement and the Series B Note Purchase Agreement. In addition,
I have examined the originals (or copies certified or otherwise identified to my
satisfaction) of such other agreements, instruments, certificates, documents and
records and have reviewed such questions of law as I have deemed necessary or
appropriate for the purposes of the opinions rendered herein.
In rendering the opinions expressed herein, I have assumed without
independent verification the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to me
as originals, the conformity to original documents of all documents submitted to
me as certified or photostatic copies and the authenticity of the originals of
such latter documents. In making my examination of documents executed by parties
other than AEGON, I have assumed that such parties had the power, corporate or
other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof. As to facts or questions of fact material to the
opinions expressed herein, I have also, when relevant facts were not
independently established or verified, been furnished with, and with your
consent have relied exclusively upon, the aforesaid documents, corporate
records, agreements, instruments and certificates.
<PAGE> 29
The Mutual Life Insurance Company
of New York
December __, 1993
Page 3
Based upon the foregoing, and subject to the qualifications stated
herein, I am of the opinion that:
1. AEGON is a corporation duly incorporated, validly existing and in
good standing under the laws of Iowa.
2. AEGON has all requisite power and authority to own, lease and
operate its assets, properties and business and to carry on the operations of
its business as it is now being conducted.
3. AEGON has all requisite power and authority to execute, deliver and
perform its obligations under the Series A Note Purchase Agreement and the
Series B Note Purchase Agreement, and to issue and sell the Series A Notes and
the Series B Notes. The execution and delivery by AEGON of the Series A Note
Purchase Agreement and the Series B Note Purchase Agreement, and the performance
by AEGON of its obligations thereunder, have been duly authorized by all
necessary corporate action. Each of the Series A Note Purchase Agreement and the
Series B Note Purchase Agreement has been duly executed and delivered by AEGON.
4. Each of the Series A Notes and the Series B Notes have been duly
authorized, executed and delivered by AEGON.
5. Except as set forth in Schedule 6.3 to the Series A Note Purchase
Agreement or Schedule 6.3 to the Series B Note purchase Agreement, the
execution, delivery and performance by AEGON of the Series A Note Purchase
Agreement and the Series B Note Purchase Agreement and the consummation of the
transactions contemplated thereby in accordance with the terms and conditions
thereof will not (i) violate any provision of the charter, Bylaws or other
organizational documents of AEGON, (ii) violate, conflict with, or result in a
breach of any of the terms of, result in any modification of the effect of,
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time, or both, constitute) a default under, any
contract or other agreement to which AEGON is a party or by or to which it or
any of its assets or properties may be
<PAGE> 30
The Mutual Life Insurance Company
of New York
December __, 1993
Page 4
bound or subject, (iii) violate any order, judgment, injunction, award or decree
of any court, arbitrator or governmental or regulatory body against, or binding
upon, or any agreement with, or condition imposed by, any governmental or
regulatory body, foreign or domestic, binding upon AEGON, (iv) violate any
statute, law or regulation of any jurisdiction or of any regulatory body, which
violation would have a Material Adverse Effect with respect to AEGON or
materially and adversely affect the ability of AEGON to consummate the
transactions contemplated by the Series A Note Purchase Agreement or the Series
B Note Purchase Agreement or the ability of AEGON to perform under the Series A
Notes or the Series B Notes, or (v) result in the breach of any of the terms or
conditions of, constitute a default under, or otherwise cause an impairment of,
any Permit related to the business of AEGON.
6. Except as set forth in Schedule 6.4 to the Series A Note Purchase
Agreement or Schedule 6.4 to the Series B Note Purchase Agreement, the
execution, delivery and performance by AEGON of the Series A Note Purchase
Agreement and the Series B Note Purchase Agreement, and the consummation of the
transactions contemplated thereby in accordance with the terms thereof and the
issuance and sale of the Series A Notes and the Series B Notes do not require
AEGON to obtain any consent, approval or action of, or make any filing with or
give any notice to, any Person.
7. There are no outstanding orders, decrees, judgments, awards or
injunctions by or with any court, governmental agency, regulatory body or
arbitration tribunal that, individually or in the aggregate, have had or are
likely to have a Material Adverse Effect on AEGON, or materially and adversely
affect the ability of AEGON to consummate the transactions contemplated by the
Series A Note Purchase Agreement or the Series B Note Purchase Agreement or the
ability of AEGON to perform under the Series A Notes or the Series B Notes. To
my knowledge after due inquiry, there are no actions, suits, arbitrations or
legal, administrative or other proceedings (other than those relating to
insurance claims) pending or threatened against AEGON, at law or in equity, or
before or by any governmental department,
<PAGE> 31
The Mutual Life Insurance Company
of New York
December __, 1993
Page 5
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind which, if adversely determined, would,
individually or in the aggregate, have a Material Adverse Effect on AEGON or
materially and adversely affect the ability of AEGON to consummate the
transactions contemplated by the Series A Note Purchase Agreement or the Series
B Note Purchase Agreement or the ability of AEGON to perform under the Series A
Notes or the Series B Notes.
In rendering the opinions expressed above, I have relied as to matters
of Iowa law on the opinion of even date herewith of Craig D. Vermie, Esq., the
Associate General Counsel of AEGON, a copy of which is attached hereto.
This letter and the opinions rendered herein are rendered solely for
your benefit and may not be delivered to or relied upon in any manner by any
other person or entity without my express written consent.
Very truly yours,
Larry G. Brown
Vice President and General Counsel
<PAGE> 32
EXHIBIT B-2
DRAFT
[LETTERHEAD OF CRAIG D. VERHIE]
December , 1993
Larry G. Brown, Esq.
Vice President and General Counsel
AEGON USA, Inc.
1111 North Charles Street
Baltimore, Maryland 21201
Re: AEGON USA, Inc. $150,000,000 in Aggregate Principal
Amount of Series A Notes due December 31, 2002 and
$50,000,000 in Aggregate Principal Amount of Series B
Notes due December 31, 2002
Dear Mr. Brown:
I am the Associate General Counsel of AEGON USA, Inc., an Iowa
corporation ("AEGON") . This opinion is being delivered to you in connection
with the issuance and sale by AEGON of $150,000,000 in aggregate principal
amount of AEGON's Series A Notes due December 31, 2002 (the "Series A Notes") to
The Mutual Life Insurance Company of New York, a New York domiciled mutual
insurance company ("MONY") , pursuant to the Series A Note Purchase Agreement
dated as of the date hereof between AEGON and MONY (the "Series A Note Purchase
Agreement") , and in connection with the issuance and sale by AEGON of
$50,000,000 in aggregate principal amount of AEGON's Series B Notes due December
31, 2002 (the "Series B Notes") to MONY pursuant to the Series B Note Purchase
Agreement dated as of the date hereof between AEGON and MONY (the "Series B Note
Purchase Agreement").
<PAGE> 33
Larry G. Brown, Esq.
Vice President and General Counsel
December __, 1993
Page 2
This opinion is being delivered to you pursuant to each of the Series A
Note Purchase Agreement and the Series B Note Purchase Agreement. Capitalized
terms used and not otherwise defined herein shall have the respective meanings
ascribed to them in the Series A Note Purchase Agreement.
In connection therewith, I have examined copies of (i) the Series A
Note Purchase Agreement, (ii) the Series B Note Purchase Agreement, (iii) the
Series A Notes, (iv) the Series B Notes, (v) the Certificate of Incorporation of
AEGON, (vi) the By-Laws of AEGON and (vii) a record of the corporate proceedings
of AEGON relating to the authorization of the issuance and sale of the Series A
Notes and the Series B Notes, including the execution and delivery of the Series
A Note Purchase Agreement and the Series B Note Purchase Agreement. In addition,
I have examined the originals (or copies certified or otherwise identified to my
satisfaction) of such other agreements, instruments, certificates, documents and
records and have reviewed such questions of law as I have deemed necessary or
appropriate for the purposes of the opinions rendered herein.
In rendering the opinions expressed herein, I have assumed without
independent verification the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to me
as originals, the conformity to original documents of all documents submitted to
me as certified or photostatic copies and the authenticity of the originals of
such latter documents. In making my examination of documents executed by parties
other than AEGON, I have assumed that such parties had the power, corporate or
other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity and
binding effect thereof. As to facts or questions of fact material to the
opinions expressed herein, I have also, when relevant facts were not
independently established or verified, been furnished with, and with your
consent have relied exclusively upon, the aforesaid documents, corporate
records, agreements, instruments and certificates.
<PAGE> 34
Larry G. Brown, Esq.
Vice President and General Counsel
December __, 1993
Page 3
Based upon the foregoing, and subject to the qualifications stated
herein, I am of the opinion that:
1. AEGON is a corporation duly organized, validly existing and in good
standing under the laws of the State of Iowa.
2. AEGON has all requisite power and authority to own, lease and
operate its assets, properties and business and to carry on the operations of
its business as it is now being conducted.
3. AEGON has all requisite power and authority to execute, deliver and
perform its obligations under the Series A Note Purchase Agreement and the
Series B Note Purchase Agreement, and to issue and sell the Series A Notes and
the Series B Notes. The execution and delivery by AEGON of the Series A Note
Purchase Agreement and the Series B Note Purchase Agreement, and the performance
by AEGON of its obligations thereunder, have been duly authorized by all
necessary corporate action. Each of the Series A Note Purchase Agreement and the
Series B Note Purchase Agreement has been duly executed and delivered by AEGON.
4. Each of the Series A Notes and the Series B Notes have been duly
authorized, executed and delivered by AEGON.
5. Except as set forth in Schedule 6.3 to the Series A Note Purchase
Agreement or Schedule 6.3 to the Series B Note Purchase Agreement, the
execution, delivery and performance by AEGON of the Series A Note Purchase
Agreement and the Series B Note Purchase Agreement and the consummation of the
transactions contemplated thereby in accordance with the terms and conditions
thereof will not (i) violate any provision of the charter, Bylaws or other
organizational documents of AEGON, (ii) violate, conflict with, or result in a
breach of any of the terms of, result in any modification of the effect of,
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time, or both, constitute a default under, any
contract or other agreement governed by and construed in accordance with the
laws of the State of Iowa to which AEGON is a party or by or to which it or any
of its assets or
<PAGE> 35
Larry G. Brown, Esq.
Vice President and General Counsel
December __, 1993
Page 4
properties may be bound or subject, (iii) violate any order, judgment,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body against, or binding upon, or any agreement with, or condition
imposed by, any governmental or regulatory body, foreign or domestic, binding
upon AEGON, (iv) violate any statute, law or regulation of the State of Iowa or
of any regulatory body thereof, which violation would have a Material Adverse
Effect with respect to AEGON or materially and adversely affect the ability of
AEGON to consummate the transactions contemplated by the Series A Note Purchase
Agreement or the Series B Note Purchase Agreement or the ability of AEGON to
perform under the Series A Notes or the Series B Notes, or (v) result in the
breach of any of the terms or conditions of, constitute a default under, or
otherwise cause an impairment of, any Permit related to the business of AEGON.
6. Except as set forth in Schedule 6.4 to the Series A Note Purchase
Agreement or Schedule 6.4 to the Series B Note Purchase Agreement, the
execution, delivery and performance by AEGON of the Series A Note Purchase
Agreement and the Series B Note Purchase Agreement, and the consummation of the
transactions contemplated thereby in accordance with the terms thereof and the
issuance and sale of the Series A Notes and the Series B Notes do not require
AEGON to obtain any consent, approval or action of, or make any filing with or
give any notice to, any Person in the state of Iowa.
7. There are no outstanding orders, decrees, judgments, awards or
injunctions by or with any court, governmental agency, regulatory body or
arbitration tribunal that, individually or in the aggregate, have had or are
likely to have a Material Adverse Effect on AEGON, or materially and adversely
affect the ability of AEGON to consummate the transactions contemplated by the
Series A Note Purchase Agreement or the Series B Note Purchase Agreement or the
ability of AEGON to perform under the Series A Notes or the Series B Notes. To
my knowledge after due inquiry, there are no actions, suits, arbitrations or
legal, administrative or other proceedings (other than those relating to
insurance claims) pending or threatened against AEGON, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
- -instrumentality, domestic
<PAGE> 36
Larry G. Brown, Esq.
Vice President and General Counsel
December __, 1993
Page 5
or foreign, or before any arbitrator of any kind which, if adversely determined,
would, individually or in the aggregate, have a Material Adverse Effect on AEGON
or materially and adversely affect the ability of AEGON to consummate the
transactions contemplated by the Series A Note Purchase Agreement or the Series
B Note Purchase Agreement or the ability of AEGON to perform under the Series A
Notes or the Series B Notes.
The opinions expressed herein are limited to the laws of the State of
Iowa and the Federal laws of the United States of America.
This letter and the opinions rendered herein are rendered solely for
your benefit and may not be delivered to or relied upon in any manner by any
other person or entity without my express written consent.
Very truly yours,
Craig D. Vermie
Associate General Counsel
<PAGE> 37
EXHIBIT B-3
LLL&M DRAFT
[LLL&M LETTERHEAD]
December 1, 1993
The Mutual Life Insurance Company
of New York
1740 Broadway
New York, New York 10019
Re: AEGON USA, Inc. $150,000,000 in Aggregate Principal
Amount of Series A Notes due December 31, 2002 and
$50,000,000 in Aggregate Principal Amount of Series B
Notes due December 31, 2002
Gentlemen:
We have acted as special counsel to AEGON USA, Inc., an Iowa
corporation ("AEGON") , in connection with the issuance and sale by AEGON of
$150,000,000 in aggregate principal amount of AEGON's Series A Notes due
December 31, 2002 (the "Series A Notes") to The Mutual Life Insurance Company of
New York, a New York domiciled mutual insurance company ("MONY") , pursuant to
the Series A Note Purchase Agreement dated as of the date hereof between AEGON
and MONY (the "Series A Note Purchase Agreement") and in connection with the
issuance and sale by AEGON of $50,000,000 in aggregate principal amount of
AEGON's Series B Notes due December 31, 2002 (the "Series B Notes") to MONY
pursuant to the Series B Note Purchase Agreement dated as of the date hereof
between AEGON and MONY (the "Series B Note Purchase Agreement").
This opinion is being delivered to you pursuant to each of the Series A
Note Purchase Agreement and the Series B Note Purchase Agreement. Capitalized
terms used and not otherwise
<PAGE> 38
The Mutual Life Insurance Company
of New York
December __, 1993
Page 2
defined herein shall have the respective meanings ascribed to them in the Series
A Note Purchase Agreement.
In connection therewith, we have examined copies of (i) the Series A
Note Purchase Agreement, (ii) the Series B Note Purchase Agreement, (iii) the
Series A Notes, (iv) the Series B Notes, (v) the Certificate of Incorporation of
AEGON, (vi) the By-Laws of AEGON and (vii) a record of the corporate proceedings
of AEGON relating to the authorization of the issuance and sale of the Series A
Notes and the Series B Notes, including the execution and delivery of the Series
A Note Purchase Agreement and the Series B Note Purchase Agreement. In addition,
we have examined the originals (or copies certified or otherwise identified to
our satisfaction) of such other agreements, instruments, certificates, documents
and records and have reviewed such questions of law as we have deemed necessary
or appropriate for the purposes of the opinions rendered herein.
In rendering the opinions expressed herein, we have assumed without
independent verification the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such latter documents. In making our examination of documents executed by
parties other than AEGON, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such documents and the
validity and binding effect thereof. As to facts or questions of fact material
to the opinions expressed herein, we have also, when relevant facts were not
independently established or verified, been furnished with, and with your
consent have relied exclusively upon, the aforesaid documents, corporate
records, agreements, instruments and certificates.
<PAGE> 39
The Mutual Life Insurance Company
of New York
December __, 1993
Page 2
Based upon the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:
1. The Series A Note Purchase Agreement and the Series B Note Purchase
Agreement constitute legal, valid and binding obligations of AEGON, enforceable
against AEGON in accordance with their terms, except as enforcement thereof may
be limited by bankruptcy, insolvency, rehabilitation, reorganization,
receivership, conservatorship, moratorium, fraudulent conveyance or other laws
relating to or affecting the enforcement of creditors' rights generally or by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding at law or in equity.
2. The form of the Series A Notes is in the form contemplated by the
Series A Note Purchase Agreement. The form of the Series B Notes is in the form
contemplated by the Series B Note Purchase Agreement. The Series A Notes and the
Series B Notes have been duly authorized, executed and delivered by AEGON and
constitute legal, valid and binding obligations of AEGON, enforceable against
AEGON in accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, rehabilitation, reorganization, receivership,
conservatorship, moratorium, fraudulent conveyance or other laws relating to or
affecting the enforcement of creditors' rights generally or by general
principles of equity, regardless of whether such enforceability is considered in
a proceeding at law or in equity.
3. The execution, delivery and performance by AEGON of the Series A
Note Purchase Agreement and the Series B Note Purchase Agreement, the
consummation of the transactions contemplated thereby in accordance with the
terms thereof and the issuance and sale of the Series A Notes and the Series B
Notes do not require any consent, approval, filing, notice or other action under
any New York statute, rule or regulation applicable to AEGON, except for such
consents, approvals, filings, notices or actions as have been obtained or made
prior to the date hereof or which are not required to be made until after the
Closing Date.
<PAGE> 40
The Mutual Life Insurance Company
of New York
December __, 1993
Page 2
The opinions rendered herein are limited to the laws of the State of
New York and the Federal laws of the United States. We do not express any
opinion as to the laws, or to matters governed by the laws, of any other
jurisdiction.
This letter and the opinions rendered herein are rendered solely for
your benefit and may not be delivered to or relied upon in any manner by any
other person or entity without our express written consent.
Very truly yours,
<PAGE> 41
SCHEDULE 1(A)
AEGON OFFICERS
Donald J. Shephard Chief Executive Officer
Chairman of the Board
President
Thomas E. Morgan Chief Information Officer
Vice President
Larry G. Brown General Counsel
Senior Vice President
Secretary
Jack R. Dykhouse Senior Vice President -
Health Group
Rex B. Eno Senior Vice President -
Agency Group
Patrick E. Falconio Chief Investment Officer
Executive Vice President
B. Larry Jenkins Senior Vice President -
Home Service Group
John R. Kenney Senior Vice President -
Asset Accumulation Group
Ronald F. Mosher Vice President
Robert J. McGraw Treasurer
Vice President
Lon Andersen Vice President
Charles M. Arrington Vice President
Patrick S. Baird Chief Financial Officer
Vice President
David L. Blankenship Vice President
William L. Busler Vice President
<PAGE> 42
Donald W. Chamberlain Vice President
Brenda K. Clancy Controller
Vice President
Constantine T. Costas Vice President
Joseph A. Dutcher Director of Internal Audit
Vice President
Sam Edmondson, Jr. Vice President
Donald E. Flynn Vice President
Bart Herbert, Jr. Vice President
Douglas C. Kolsrud Actuary
Vice President
Danny L. Kolsrud Vice President
Dir. of Corporate Taxes
Robert J. Kontz Dir. of Financial Reporting
Vice President
Ronald M. Nagler Deputy Chief Investment Officer
Vice President
Danny W. Rowland Vice President
Janet M. Soppe Vice President
Cor H. Verhagen Vice President
<PAGE> 43
SCHEDULE 3.1
WEIGHTED AVERAGE RATING
At all times following the Closing, AUSA Life shall maintain (a) a
claims-paying ability rating by Standard & Poor's Corporation ("S&P") of "AA-11
or higher, or (b) if there is a Positive Rating Differential on the Closing
Date, a claims-paying ability rating by S&P such that the Weighted Points of
AUSA Life on any date other than the Closing Date exceeds the Industry Weighted
Point Average on such other date by an amount equal to or greater than such
Positive Differential, or (c) if there is a Negative Rating Differential on the
Closing Date, a claims-paying ability rating by S&P such that the Weighted
Points of AUSA Life on any date other than the Closing Date is not lower than
the Industry Weighted Point Average on such other date by an amount greater than
such Negative Rating Differential.
The Weighted Points of AUSA Life, the Industry Weighted Point Average
and such Rating Differentials shall be determined as follows:
1. For purposes of such determination, "Reference Insurers" shall mean,
at any time, the twenty (20) life insurers domiciled in the United States with
the greatest amount of pension assets (other than AEGON and its Affiliates and
MONY) that are rated by S&P, determined by adding the amounts recorded on lines
10.2 and 10.3 on page 3 and line 23 on page 2 of the Annual Convention
Statements promulgated by the National Association of Insurance Commissioners
and filed by United States life insurers with the appropriate insurance
regulatory authority in their respective states of domicile for the immediately
preceding calendar year. The pension assets (determined as aforesaid) of any
life insurers which are Affiliates of one another shall be aggregated for
purposes of determining the Reference Insurers.
If the standard form of Annual Convention Statement is changed after
the Closing Date, the line items in the new form of Annual Convention Statement
on which the line items described above are presently recorded shall be utilized
for purposes of determining the Reference Insurers. If (a) such form of the
Annual Convention Statement is changed so that one or more line
<PAGE> 44
items described above are no longer reported therein or (b) at any time
following the Closing Date, the line items described above are no longer
appropriate or are materially incomplete for purposes of determining the twenty
largest pension insurers, AEGON and MONY shall mutually agree on a new method of
determining the Reference Insurers. The parties agree to negotiate in good faith
in developing any such new method.
2. The following "Weighted Points" will be assigned to each of the
Reference Insurers and AUSA Life at the time of determination, based on the
claims-paying ability rating assigned by S&P to each such Reference Insurer and
AUSA Life which is then in effect:
S&P Rating Weighted Points
AAA 4.0
AA+ 3.9
AA 3.8
AA- 3.7
A+ 3.6
A 3.5
A- 3.4
BBB+ 3.3
BBB 3.2
BBB- 3.1
Below BBB- Deduct 0.1 for each
successive lower
rating grade
If any Reference Insurer consists of Affiliate life insurers whose pension
assets have been aggregated under paragraph 1 above, the rating assigned by S&P
to the Affiliate life insurer with the greatest amount of pension assets
(determined in accordance with paragraph 1 above), on an individual basis, shall
be used for purposes of assigning Weighted Points.
3. The total Weighted Points for all Reference Insurers will be divided
by the number of Reference Insurers (e.g. 20), and rounded upwards to the
nearest one-tenth of a point, to determine the average of the Weighted Points of
the Reference Insurers (the "Industry Weighted Point Average").
4. The amount, if any, by which the Weighted Points of AUSA Life on the
Closing Date exceeds the Industry Weighted Point Average on the Closing Date
shall be the "Positive Ratio of Differential". The amount, if any, by which the
Weighted
<PAGE> 45
Points of AUSA Life on the Closing Date is lower than the Industry
Weighted Point Average on the Closing Date shall be the "Negative Rating
Differential".
<PAGE> 46
SCHEDULE 6.3
NO CONFLICT OR VIOLATION
AEGON USA, Inc.
(a) None.
(b) None.
(c) None.
(d) None.
(e) None.
AUSA Life Insurance Company, Inc.
(a) None.
(b) None.
(c) None.
(d) None.
(e) None.
<PAGE> 47
SCHEDULE 6.4
CONSENTS AND APPROVALS
AEGON USA, Inc.
None.
AUSA Life Insurance Company, Inc.
None.
<PAGE> 1
EXHIBIT 10.28
FISCAL AGENCY AGREEMENT
between
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK,
Issuer
and
THE CHASE MANHATTAN BANK, N.A.,
Fiscal Agent
Dated as of August 15, 1994
11 1/4% Surplus Notes scheduled to mature on August 15, 2024
<PAGE> 2
TABLE OF CONTENTS
Page
1. The Securities...........................................................1
(a) General............................................................1
(b) Forms of Securities................................................1
(c) Book-Entry Provisions..............................................2
(d) Denominations......................................................3
2. Fiscal Agent; Other Agents...............................................3
3. Authentication...........................................................4
4. Payment and Cancellation.................................................5
(a) Payment............................................................5
(b) Cancellation.......................................................6
5. Global Securities........................................................6
6. Registration, Transfer and
Exchange of Securities................................................7
(a) General............................................................7
(b) Transfer of Global Securities and
Interests Therein...............................................8
(c) Transfers of Restricted Definitive
Securities......................................................9
(d) Successive Registrations...........................................9
(e) Information........................................................9
(f) Suspension.........................................................9
(g) Legends............................................................9
(h) Repurchase........................................................10
(i) Redemption........................................................10
7. Delivery of Certain Information.........................................10
(a) Rule 144A Information.............................................10
(b) Periodic Reports..................................................11
8. Conditions of Fiscal Agent's Obligations................................11
(a) Compensation and Indemnity........................................11
(b) Agency............................................................11
(c) Advice of Counsel.................................................12
(d) Reliance..........................................................12
(e) Interest in Securities, etc.......................................12
i
<PAGE> 3
Page
(f) Non-Liability for Interest........................................12
(g) Certifications....................................................12
(h) No Implied Obligations............................................12
9. Resignation and Appointment of Successor................................13
(a) Fiscal Agent and Paying Agent.....................................13
(b) Resignation and Removal...........................................13
(c) Successors........................................................13
(d) Acknowledgement...................................................14
(e) Merger, Consolidation, etc. ......................................14
10. Meetings and Amendments.................................................14
(a) Calling of Meeting, Notice and Quorum.............................14
(b) Approval..........................................................15
(c) Binding Nature of Amendments,
Notices, Notations, etc........................................17
(d) "Outstanding" Defined.............................................18
11. Governing Law...........................................................18
12. Notices.................................................................18
13. Separability............................................................19
14. Headings................................................................19
15. Counterparts............................................................19
EXHIBIT A FORM OF DEFINITIVE SECURITY........................................A-1
EXHIBIT B FORM OF GLOBAL SECURITY............................................B-1
EXHIBIT C FORM OF TRANSFER CERTIFICATE FOR EXCHANGE
OR TRANSFER OF RESTRICTED DEFINITIVE SECURITY...........................C-1
ii
<PAGE> 4
FISCAL AGENCY AGREEMENT, dated as of August 15, 1994, between THE
MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a mutual life insurance corporation
organized under the laws of the State of New York (the "Issuer"), having its
principal office at 1740 Broadway, New York, New York, and THE CHASE MANHATTAN
BANK, N.A., a national banking association organized under the laws of the
United States of America, as Fiscal Agent (together with any successor as Fiscal
Agent hereunder, the "Fiscal Agent"). The Exhibits attached hereto shall be
deemed to be a part of this Agreement.
1 The Securities.
(a) General. This Agreement is made in respect of $125,000,000
aggregate principal amount of 11 1/4% Surplus Notes of the Issuer, scheduled to
mature on August 15, 2024 (the "Notes" or the "Securities"). Claims based upon
the Securities will rank below all Indebtedness, Policy Claims and Other
Creditor Claims (each as hereinafter defined), in accordance with Section 7435
of the New York Insurance Law (together with any successor provision, and as may
be hereafter amended from time to time, "Section 7435"). The payment by the
Issuer of principal and interest on the Securities shall be conditioned upon the
payment restrictions set forth in paragraphs 4 and 10 of the Securities (the
"Payment Restrictions"). The Notes are scheduled to mature on August 15, 2024
(the "Final Scheduled Maturity Date"). Any reference herein to the term
"principal" or the principal amount of the Notes shall include the amount of
premium, if any, payable upon redemption thereof in accordance with paragraph 15
thereof. Any reference herein to the term "Scheduled Maturity Date" or other
date for the payment of principal of the Notes shall include (i) the Final
Scheduled Maturity Date, (ii) the date, if any, fixed for redemption in
accordance with paragraph 15 thereof and (iii) the date upon which any state or
federal agency obtains an order or grants approval for the rehabilitation,
liquidation, conservation or dissolution of the Issuer.
(b) Forms of Securities. The Securities are being offered and sold
by the Issuer pursuant to a Purchase Agreement, dated August 8, 1994 (the
"Purchase Agreement") , between the Issuer and the Initial Purchasers named
therein (the "Initial Purchasers").
(i) Securities (other than global Securities, as hereinafter
defined) offered and sold pursuant to the Purchase Agreement to "accredited
investors", within the meaning of Rule 501(a) of the Securities Act of 1933, as
amended (the "Act") , shall be issued in definitive, fully registered form
without interest coupons, substantially in the form of Security attached as
Exhibit A hereto, with such applicable legends as are provided for in Exhibit A
("definitive Securities"). Upon transfer of any definitive Security,
registration of such transfer shall be effected in accordance with Section 6
hereof.
(ii) Securities offered and sold in reliance on Rule 144A ("Rule
144A") under the Act pursuant to the Purchase Agreement shall be issued in the
form of
<PAGE> 5
global Securities (the "Restricted Global Securities") in definitive, fully
registered form without interest coupons, substantially in the form of Security
attached as Exhibit B hereto, with such applicable legends as are provided for
in Exhibit B. Each such global Security shall be registered in the name of a
nominee of The Depository Trust Company (the "Depositary") and deposited with
the Fiscal Agent, at its New York office, as custodian for the Depositary, duly
executed by the Issuer and authenticated by the Fiscal Agent as hereinafter
provided. The aggregate principal amount of each Restricted Global Security may
from time to time be increased or decreased by adjustments made on the records
of the Fiscal Agent, as custodian for the Depositary, as hereinafter provided.
All Securities shall be issued substantially in the form of Security
attached hereto as either Exhibit A or B and shall be executed manually or in
facsimile on behalf of the Issuer by any two of its Chairman of the Board,
President, Chief Financial Officer, Executive Vice Presidents, Senior Vice
Presidents or Secretary (the "Authorized Officers"), notwithstanding that such
officers, or any of them, shall have ceased, for any reason, to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of any such Security. The Securities (i) may also
have such additional provisions, omissions, variations or substitutions as are
not inconsistent with the provisions of this Agreement, and (ii) may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with this Agreement,
any law or with any rules made pursuant thereto or with the rules of any
securities exchange, insurance regulatory or other governmental agency or
depositary therefor or as may, consistently herewith, be determined by the
Authorized Officers executing such Securities, in each case (i) and (ii) as
conclusively evidenced by their execution of such Securities. All Securities
shall be otherwise substantially identical except as to maturity, interest rate,
denomination and as otherwise provided herein.
(c) Book-Entry Provisions. This Section 1(c) shall apply to all
Securities evidencing all or part of the Securities that are registered in the
name of the Depositary or a nominee thereof ("global Securities").
The Issuer shall execute and the Fiscal Agent shall, in accordance
with this Section 1(c), authenticate and deliver one or more global Securities
as required to be issued pursuant to Section 1(b) hereof, which (A) shall be
registered in the name of the Depositary or its nominee, (B) shall be delivered
by the Fiscal Agent to the Depositary or pursuant to the Depositary's
instructions and (C) shall bear legends substantially to the following effect:
"Unless this Security is presented by an authorized representative
of [insert name of Depositary] to the Issuer or its agent for
registration of transfer, exchange or payment, and any Security
issued in exchange for this Security or any portion hereof is
registered in the name of [insert name of nominee of Depositary] or
in such other name as is requested by an authorized representative
of [insert name of Depositary] (and any
2
<PAGE> 6
payment is made to [insert name of nominee of Depositary] or to such
other entity as is requested by an authorized representative of
[insert name of Depositary]), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN [insert
name of Depositary] OR A NOMINEE THEREOF IS WRONGFUL inasmuch as the
registered owner hereof, [insert name of nominee of Depositary], has
an interest herein."
"This Security is a global Security within the meaning of the Fiscal
Agency Agreement referred to hereinafter. This global Security may
not be exchanged, in whole or in part, for a Security registered in
the name of any person other than [insert name of Depositary] or a
nominee thereof, except in the limited circumstances set forth in
Section 5 of the Fiscal Agency Agreement, and may not be
transferred, in whole or in part, except in accordance with the
restrictions set forth in Section 6(b) of the Fiscal Agency
Agreement. Beneficial interests in this global Security may not be
transferred except in accordance with Section 6(b) of the Fiscal
Agency Agreement."
Neither any members of, or participants in, the Depositary ("Agent
Members") nor any other persons on whose behalf Agent Members may act shall have
any rights under this Fiscal Agency Agreement with respect to any global
Security registered in the name of the Depositary or any nominee thereof, or
under any such global Security, and the Depositary or such nominee, as the case
may be, may be treated by the Issuer, the Fiscal Agent and any agent of the
Issuer or the Fiscal Agent as the absolute owner and holder of such global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Issuer, the Fiscal Agent or any agent of the Issuer or
the Fiscal Agent from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or such nominee, as the case may be,
or impair, as between the Depositary, its Agent Members and any other person on
whose behalf an Agent Member may act, the operation of customary practices of
such persons governing the exercise of the rights of a holder of any Security.
(d) Denominations. The Securities and beneficial interests in
global Securities shall be issuable in minimum denominations of $250,000 or, in
the case of Securities offered and sold to Accredited Investors, or subsequently
transferred in reliance on Regulation S or to Accredited Investors, $500,000,
and, in each case, any amount in excess thereof that is an integral multiple of
$1,000.
2. Fiscal Agent; Other Agents.
The Issuer hereby appoints The Chase Manhattan Bank, N.A., acting
through its corporate trust office at 4 Chase MetroTech Center, Brooklyn, New
York 11245 and payment office at 1 Chase Manhattan Plaza, Level 1B,
Institutional Trust Window, New York, New York 10081 (for payments, exchanges
and transfers) in the
3
<PAGE> 7
Borough of Manhattan, The City of New York (together, the "Corporate Trust
Office"), as fiscal agent of the Issuer in respect of the Securities upon the
terms and subject to the conditions herein set forth, and The Chase Manhattan
Bank, N.A. hereby accepts such appointment. The Chase Manhattan Bank, N.A., and
any successor or successors as such fiscal agent qualified and appointed in
accordance with Section 9 hereof, are herein called the "Fiscal Agent". The
Fiscal Agent shall have the powers and authority granted to and conferred upon
it in the Securities and hereby and such further powers and authority to act on
behalf of the Issuer as may be mutually agreed upon by the Issuer and the Fiscal
Agent. The Fiscal Agent shall keep a copy of this Agreement available for
inspection during normal business hours at its Corporate Trust Office. The
Fiscal Agent or any Paying Agent (as defined below) shall also act as Transfer
Agent (as defined below). All of the terms and provisions with respect to such
powers and authority contained in the Securities are subject to and governed by
the terms and provisions hereof.
The Issuer may, at its discretion, appoint one or more agents (a
"Paying Agent" or "Paying Agents") for the payment, to the extent permitted
under the Payment Restrictions, of the principal of and any interest on the
Securities, and one or more agents (a "Transfer Agent" or "Transfer Agents") for
the transfer and exchange of Securities, at such place or places as the Issuer
may determine; provided, however, that the Issuer shall at all times maintain a
Paying Agent and Transfer Agent in the Borough of Manhattan, The City of New
York (which Paying Agent and Transfer Agent may be the Fiscal Agent). The Issuer
hereby initially appoints the Fiscal Agent at its Corporate Trust Office as
principal Paying Agent, Transfer Agent, authenticating agent and securities
registrar, and the Fiscal Agent hereby accepts such appointment. Each Transfer
Agent shall act as a security registrar and there shall be kept at the office of
each Transfer Agent a register in which, subject to such reasonable regulations
as the Issuer may prescribe, the Issuer shall provide for the registration of
Securities and the registration of transfers of Securities. The Issuer shall
promptly notify the Fiscal Agent of the name and address of any other Paying
Agent or Transfer Agent appointed by it and will notify the Fiscal Agent of the
resignation or termination of any such Paying Agent or Transfer Agent. Subject
to the provisions of Section 9(c) hereof, the Issuer may vary or terminate the
appointment of any such Paying Agent or Transfer Agent at any time and from time
to time upon giving not less than 90 days' notice to such Paying Agent or
Transfer Agent, as the case may be, and to the Fiscal Agent. The Issuer shall
cause notice of any resignation, termination or appointment of the Fiscal Agent
or any Paying Agent or Transfer Agent and of any change in the office through
which any such Agent will act to be provided to holders of Securities.
3. Authentication.
The Fiscal Agent is authorized, upon receipt of Securities duly
executed on behalf of the Issuer for the purposes of the original issuance of
Securities, (i) to authenticate said Securities in an aggregate principal amount
not in excess of $125,000,000, and to deliver said Securities in accordance with
the written order or orders of the Issuer signed on its behalf by an Authorized
Officer and (ii) thereafter to
4
<PAGE> 8
authenticate and deliver Securities in accordance with the provisions therein
and hereinafter set forth.
The Fiscal Agent may, with the consent of the Issuer, appoint by an
instrument or instruments in writing one or more agents (which may include
itself) for the authentication of the Securities and, with such consent, vary or
terminate any such appointment upon written notice and approve any change in the
office through which any authenticating agent acts. The Issuer (by written
notice to the Fiscal Agent and the authenticating agent whose appointment is to
be terminated) may also terminate any such appointment at any time. The Fiscal
Agent hereby agrees to solicit written acceptances from the entities concerned
(in form and substance satisfactory to the Issuer) of such appointments. In its
acceptance of such appointment, each such authenticating agent shall agree to
act as an authenticating agent pursuant to the terms and conditions of this
Agreement.
4. Payment and Cancellation.
(a) Payment. For so long as the Fiscal Agent is acting as a Paying
Agent hereunder, the Issuer, subject to the Payment Restrictions, shall provide
to the Fiscal Agent, in immediately available funds on or prior to 10:00 a.m.,
New York time, on each date on which a payment of principal of or any interest
on the Securities shall be scheduled, as set forth in the text of the
Securities, such amount, in U.S. dollars, as is necessary to make such payment,
and the Issuer hereby authorizes and directs the Fiscal Agent from funds so
provided to it to make or cause to be made payment of the principal of and any
interest, as the case may be, on the Securities in the manner, at the times and
for the purposes set forth herein and in the text of said Securities; provided
that (1) any permitted payment of interest on the Securities may be made by
check mailed to the persons (the "registered owners") in whose names such
Securities are registered on the register maintained pursuant to Section 6
hereof at the close of business on the record dates designated in the text of
the Securities and (2) the Issuer will not provide any such funds to the Fiscal
Agent prior to such time as the relevant payment of principal or interest is
approved by the Superintendent of Insurance of the State of New York (the
"Superintendent"). Permitted payments of principal of or any interest on the
Securities may be made, in the case of a registered owner of at least $5,000,000
aggregate principal amount of Securities, by wire transfer to an account
maintained by the payee with a bank if such registered owner so elects by giving
notice to the Fiscal Agent, not less than 15 days (or such fewer days as the
Fiscal Agent may accept at its discretion) prior to the date on which such
payments are scheduled to be made, of such election and of the account to which
payment is to be made. Unless such designation is revoked, any such designation
made by such holder with respect to such Securities shall remain in effect with
respect to any future payments with respect to such Securities payable to such
holder. The Issuer shall pay any reasonable administrative costs in connection
with making any such payments. The Fiscal Agent shall arrange directly with any
other Paying Agent who may have been appointed by the Issuer pursuant to the
provisions of Section 2 hereof for the payment, subject to the Payment
Restrictions, from funds so paid by the Issuer of the
5
<PAGE> 9
principal of and any interest on the Securities in the manner, at the times and
for the purposes set forth herein and in the text of said Securities.
Notwithstanding the foregoing, the Issuer may provide directly to a Paying Agent
funds for the payment, subject to the Payment Restrictions, of the principal
thereof and interest payable thereon under an agreement with respect to such
funds containing substantially the same terms and conditions set forth in this
Section 4(a) and in Section 8(b) hereof; and the Fiscal Agent shall have no
responsibility with respect to any funds so provided by the Issuer to any such
Paying Agent.
Payments of principal of and interest on the securities shall be
made in the manner set forth in the Securities, including the Payment
Restrictions set forth therein.
(b) Cancellation. All Securities delivered to the Fiscal Agent (or
any other Agent appointed by the Issuer pursuant to Section 2 hereof) for
payment, redemption or registration of transfer or exchange as provided herein
or in the Securities shall be marked "cancelled" and, in the case of any other
such Agent, forwarded to the Fiscal Agent. All such Securities shall be
destroyed by the Fiscal Agent or such other person as may be jointly designated
by the Issuer and the Fiscal Agent, which shall thereupon furnish certificates
of such destruction to the Issuer.
5. Global Securities.
(a) Notwithstanding any other provisions of this Agreement or the
Securities, a global Security shall not be exchanged in whole or in part for a
Security registered in the name of any person other than the Depositary or one
or more nominees thereof, provided that a global Security may also be exchanged
for Securities registered in the names of any person designated by the
Depositary in the event that (i) the Depositary has notified the Issuer that it
is unwilling or unable to continue as Depositary for such global Security or
such Depositary has ceased to be a "clearing agency" registered under the
Securities Exchange Act of 1934 (as may be hereafter amended from time to time,
the "Exchange Act"), (ii) an event described in paragraph 16(a) or the first
sentence of paragraph 16(b) of the Securities has occurred and is continuing
with respect to the Securities, (iii) a request for certificates has been made
upon 60 days' prior written notice given to the Fiscal Agent in accordance with
the Depositary's customary procedures and a copy of such notice has been
received by the Issuer from the Fiscal Agent, or (iv) the holder of an interest
(other than the initial purchaser thereof) in such global Security has notified
the Fiscal Agent and registrar in writing that it is transferring such
beneficial interest to an Accredited Investor who is not a "qualified
institutional buyer" within the meaning of Rule 144A, who is required to hold
its beneficial interest in the Securities in the form of a definitive Security.
Any global Security exchanged pursuant to clause (i) above shall be so exchanged
in whole and not in part and any global Security exchanged pursuant to clause
(ii), (iii) or (iv) above may be exchanged in whole or from time to time in part
as directed by the Depositary. Any Security issued in exchange for a global
Security or any portion thereof shall be a global Security, unless such Security
is registered in the name of a person other than the Depositary or a nominee
thereof.
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(b) Securities issued in exchange for a global Security or any
portion thereof shall be issued in definitive, fully registered form, without
interest coupons, shall have an aggregate principal amount equal to that of such
global Security or portion thereof to be so exchanged, shall be registered in
such names and be in such authorized denominations as the Depositary shall
designate and shall bear the applicable legends provided for herein. Any global
Security to be exchanged in whole shall be surrendered by the Depositary to the
Transfer Agent located in the Borough of Manhattan, The City of New York, to be
so exchanged. With regard to any global Security to be exchanged in part, either
such global Security shall be so surrendered for exchange or, if the Fiscal
Agent is acting as custodian for the Depositary or its nominee with respect to
such global Security, the principal amount thereof shall be reduced, by an
amount equal to the portion thereof to be so exchanged, by means of an
appropriate adjustment made on the records of the Fiscal Agent. Upon any such
surrender or adjustment, the Fiscal Agent shall authenticate and deliver the
Security issuable on such exchange to or upon the order of the Depositary or an
authorized representative thereof. Any Security delivered in exchange for the
Restricted Global Security or any portion thereof shall, except as otherwise
provided by Section 6(g), bear the legend regarding transfer restrictions
applicable to the Restricted Global Security set forth on the form of Security
attached as Exhibit B hereto.
(c) Subject to the provisions of Section 1(c) above, the
registered holder may grant proxies and otherwise authorize any person,
including Agent Members and persons that may hold interests through Agent
Members, to take any action which a holder is entitled to take under this Fiscal
Agency Agreement or the Securities.
(d) In the event of the occurrence of any of the events specified
in paragraph (a) of this Section 5, the Issuer will promptly make available to
the Fiscal Agent a reasonable supply of certificated Securities in definitive,
fully registered form without interest coupons.
6. Registration, Transfer and Exchange of Securities.
(a) General. The Fiscal Agent, as agent of the Issuer for this
purpose, shall maintain at its Corporate Trust Office in the Borough of
Manhattan, The City of New York, a register of Securities for the registration
of Securities and the transfers and exchanges thereof. Subject to the provisions
of this Section 6, upon presentation for transfer or exchange of any Security at
the office of any Transfer Agent accompanied by a written instrument of transfer
or exchange in the form approved by the Issuer (it being understood that, until
notice to the contrary is given to holders of Securities, the Issuer shall be
deemed to have approved the form of instrument of transfer or exchange, if any,
printed on any Security), executed by the registered holder, in person or by
such holder's attorney thereunto duly authorized in writing, such Security shall
be transferred upon the
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register for the Securities, and a new Security shall be authenticated and
issued in the name of the transferee.
(b) Transfer of Global Securities and Interests Therein. A global
Security may not be transferred, in whole or in part, to any person other than
the Depositary or a nominee thereof, and no such transfer to any such other
person may be registered; provided that this Section 6(b) shall not prohibit any
transfer of a Security that is issued in exchange for a global Security but is
not itself a global Security. No transfer of a Security to any person shall be
effective under this Agreement or the Securities unless and until such Security
has been registered in the name of such person.
(c) Transfers of Restricted Definitive Securities. If a holder of
definitive, certificated Securities that bear or are required to bear the
legends set forth in the form of Security attached as Exhibit A hereto
("Restricted Definitive Securities") wishes at any time to transfer such
Restricted Definitive Securities or to exchange such Restricted Definitive
Securities, such transfer or exchange may be effected only in accordance with
the provisions of this Section 6(c). Upon the receipt by the Fiscal Agent, as
Transfer Agent, at its office in The City of New York of (i) a Restricted
Definitive Security accompanied by a written and executed instrument of transfer
or exchange as provided in Section 6(a) and (ii) the following additional
information and documents, as applicable:
(1) if such Restricted Definitive Security is owned by the holder
thereof and is being exchanged, without transfer, or if such Restricted
Definitive Security is being transferred pursuant to an exemption from
registration in accordance with Rule 144A, Rule 144 or Regulation S under
the Act, a certification from such holder to that effect, substantially in
the form of Exhibit C hereto; or
(2) if the Restricted Definitive Security being transferred or
exchanged contains a restrictive legend, certification to the effect that
such transfer or exchange is in accordance with the restrictions contained
in such legend, substantially in the form of Exhibit C hereto, if required
by the Fiscal Agent,
the Fiscal Agent shall register the transfer of such Restricted Definitive
Security or exchange such Restricted Definitive Security for an equal principal
amount of Restricted Definitive Securities of other authorized denominations.
To permit registrations of transfers and exchanges, the Issuer shall
execute and the Fiscal Agent (or an authenticating agent appointed pursuant to
Section 2) shall authenticate and deliver definitive Securities at the Fiscal
Agent's or any Transfer Agent's request. No service charge shall be made for any
registration of transfer or exchange, but the Issuer may require payment of a
sum sufficient to cover any transfer tax or other governmental charge payable in
connection with any registration of transfer or exchange.
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All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Issuer, subject to the
Payment Restrictions, evidencing the same debt, and the applicable provisions of
this Fiscal Agency Agreement shall apply equally thereto, as the Securities
surrendered upon such registration of transfer or exchange.
(d) Successive Registrations. Successive registrations and
registrations of transfers and exchanges as aforesaid may be made from time to
time as desired, and each such registration shall be noted on the Security
register. No service charge shall be made for any registration of transfer or
exchange of the Securities, but the Fiscal Agent may require payment of a sum
sufficient to cover any transfer tax or other governmental charge payable in
connection therewith and any other amounts required to be paid by the provisions
of the Securities.
(e) Information. Any Transfer Agent appointed pursuant to Section
2 hereof shall provide to the Fiscal Agent such information as the Fiscal Agent
may reasonably require in connection with the delivery by such Transfer Agent of
Securities upon transfer or exchange of Securities.
(f) Suspension. No Transfer Agent shall be required to make
registrations of transfer or exchange of Securities during any periods
designated in the text of the Securities as periods during which such
registration of transfer and exchanges need not be made.
(g) Legends. If Securities are issued upon the transfer, exchange
or replacement of Securities not bearing the legends required, as applicable, by
the form of Security attached as Exhibit A or Exhibit B hereto (collectively,
the "Legend"), the Securities so issued shall not bear the Legend. If Securities
are issued upon the transfer, exchange or replacement of Securities bearing the
Legend, or if a request is made to remove the Legend on a Security, the
Securities so issued shall bear the Legend, or the Legend shall not be removed,
as the case may be, unless there is delivered to the Issuer such satisfactory
evidence, which may include an opinion of independent counsel licensed to
practice law in the State of New York, as may be reasonably required by the
Issuer that neither the Legend nor the restrictions on transfer set forth
therein are required to ensure that transfers thereof comply with the provisions
of Rule 144A, Rule 144 or Regulation S under the Act or that such Securities are
not "restricted securities" within the meaning of Rule 144 under the Act. Upon
provision of such satisfactory evidence, the Fiscal Agent, at the direction of
the Issuer, shall authenticate and deliver a Security that does not bear the
Legend. The Issuer agrees to indemnify the Fiscal Agent for, and to hold it
harmless against, any loss, liability or expense, including the fees and
expenses of counsel, reasonably incurred, arising out of or in connection with
actions taken or omitted by the Fiscal Agent in reliance upon such legal opinion
and the delivery of a Security that does not bear a Legend.
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(h) Repurchase. With the prior approval of the Superintendent, the
Issuer and any person that constitutes an affiliate of the Issuer within the
meaning of the Act may at any time purchase Securities in the open market or
otherwise at any price, for its own account or the account of others. Any
Security so purchased by the Issuer or any such affiliate for its own account
shall be promptly surrendered to the Fiscal Agent for cancellation and shall not
thereafter be re-issued or resold.
(i) Redemption. Subject to the Payment Restrictions and the prior
approval of the Superintendent, up to $31,250,000 in aggregate principal amount
of the Securities may be redeemed at the option of the Issuer, in each
twelve-month period commencing August 15, 2021, in accordance with and subject
to the provisions of paragraph 15 of the Securities, at any time upon not more
than 60 days' nor less than 30 days' notice, at the Redemption Prices and in the
amounts provided in paragraph 15 of the Securities. Not less than 60 days
(unless shorter notice is acceptable to the Fiscal Agent) before the date
designated for any such redemption, the Issuer shall give notice to the Fiscal
Agent of its election to redeem the Securities on the date specified in such
notice, specifying the aggregate principal amount of Securities to be redeemed
on such date. The Fiscal Agent shall cause notice of such redemption to be given
in the name of and at the expense of the Issuer in the manner provided in such
Securities. If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected, subject to the restrictions set
forth in Section 1(d) hereof, not less than 30 days prior to the date such
Securities are to be redeemed by the Fiscal Agent from the Outstanding
Securities not previously called for redemption, by such method as the Fiscal
Agent shall deem fair and appropriate, which may provide for the selection for
redemption of portions (equal to $1,000 or any integral multiple thereof) of the
principal amount of the Securities of a denomination larger than $250,000. Upon
any partial redemption, subject to the restrictions set forth in Section 1(d)
hereof, the Issuer will issue and the Fiscal Agent shall authenticate and
deliver in exchange therefor one or more Securities, of any authorized
denomination as requested by the holder, in aggregate principal amount equal to
the unredeemed portion of the principal of such Security. The Securities may not
be redeemed at the option of a holder of such Securities.
7. Delivery of Certain Information.
(a) Rule 144A Information. At any time when the Issuer is not
subject to Section 13 or 15(d) of the Exchange Act, upon the request of a holder
of a Security or beneficial interest in a global Security, the Issuer shall
promptly furnish or cause to be furnished "Rule 144A Information" (as defined
below) to such holder, or to a prospective purchaser of such Security or
interest designated by such holder, in order to permit compliance by such holder
with Rule 144A under the Act in connection with the resale of such Security by
such holder. "Rule 144A Information" shall be such information as is specified
pursuant to paragraph (d)(4) of Rule 144A (or any successor provision thereto) ,
as such provisions (or successor provision) may be amended from time to time.
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(b) Periodic Reports. The Issuer shall deliver (or shall cause the
Fiscal Agent to deliver) to each holder of a Security, promptly after such items
are available, one copy of each annual report to policyholders of the Issuer. In
addition, upon the written request of a holder of a Security or beneficial
interest in a global Security, the Issuer shall promptly furnish or cause to be
furnished to such holder one copy of the annual and quarterly statutory-basis
financial statements of the Issuer as filed by the Issuer with the New York
Department of Insurance.
8. Conditions of Fiscal Agent's Obligations.
The Fiscal Agent accepts its obligations herein set forth upon the
terms and conditions hereof, including the following, to all of which the Issuer
agrees and all of which are applicable to the Securities and the holders from
time to time thereof:
(a) Compensation and Indemnity. The Fiscal Agent shall be entitled
to reasonable compensation as agreed with the Issuer for all services rendered
by it, and the Issuer agrees promptly to pay such compensation and to reimburse
the Fiscal Agent for the reasonable out-of-pocket expenses (including reasonable
counsel fees and expenses) incurred by it in connection with or arising out of
its services hereunder, or the issuance of the Securities and their offering and
sale. The Issuer also agrees to indemnify the Fiscal Agent for, and to hold it
harmless against, any loss, damage, claim, liability or expense, incurred
without negligence or bad faith, arising out of or in connection with its acting
as Fiscal Agent hereunder, as well as the reasonable costs and expenses of
defending against any claim of liability in the premises. The obligations of the
Issuer under this Section 8(a) shall survive payment of all the Securities or
the resignation or removal of the Fiscal Agent.
(b) Agency. In acting under this Agreement and in connection with
the Securities, the Fiscal Agent is acting solely as agent of the Issuer and
does not assume any responsibility for the correctness of the recitals in the
Securities (except for the correctness of the statement in its certificate of
authentication thereon) or any obligation or relationship of agency or trust,
for or with any of the owners or holders of the Securities, except that all
funds held by the Fiscal Agent for the payment of principal of and any interest
on the Securities, to the extent permitted under the Payment Restrictions, shall
be held in trust for such owners or holders, as the case may be, as set forth
herein and in the Securities; provided, however, that monies held in respect of
the Securities remaining unclaimed at the end of two years after such principal
and such interest shall have become payable in accordance with the Payment
Restrictions (whether at the Scheduled Maturity Date or otherwise) and monies
sufficient therefor shall have been duly made available for payment shall,
together with any interest made available for payment thereon, be repaid to the
Issuer. Upon such repayment, the aforesaid trust with respect to the Securities
shall terminate and all liability of the Fiscal Agent and Paying Agents with
respect to such funds shall thereupon cease.
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(c) Advice of Counsel. The Fiscal Agent and any Paying Agent or
Transfer Agent appointed by the Issuer pursuant to Section 2 hereof may consult
with their respective counsel or other independent counsel satisfactory to them,
and the opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered by them hereunder in good
faith and without negligence and in accordance with such opinion.
(d) Reliance. The Fiscal Agent and any Paying Agent or Transfer
Agent appointed by the Issuer pursuant to Section 2 hereof each shall be
protected and shall incur no liability for or in respect of any action taken or
thing suffered by it in reliance upon any Security, notice, direction, consent,
certificate, affidavit, statement, or other paper or document believed by it, in
good faith and without negligence, to be genuine and to have been passed upon or
signed by the proper parties.
(e) Interest in Securities, etc. The Fiscal Agent, any Paying
Agent or Transfer Agent appointed by the Issuer pursuant to Section 2 hereof and
their respective officers, directors and employees may become the owners of, or
acquire any interest in, any Securities, with the same rights that they would
have if they were not the Fiscal Agent, such other Paying Agent or Transfer
Agent or such person, and may engage or be interested in any financial or other
transaction with the Issuer, and may act on, or as depositary, trustee or agent
for, any committee or body of holders of Securities or other obligations of the
Issuer, as freely as if they were not the Fiscal Agent, such other Paying Agent
or Transfer Agent or such person.
(f) Non-Liability for Interest. Subject to any agreement between
the Issuer and the Fiscal Agent to the contrary, absent bad faith or negligence,
the Fiscal Agent shall not be under any liability for interest on monies at any
time received by it pursuant to any of the provisions of this Agreement or the
Securities.
(g) Certifications. Whenever in the administration of this
Agreement the Fiscal Agent shall deem it desirable that a matter of fact be
proved or established prior to taking, suffering or omitting any action
hereunder, the Fiscal Agent (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith or negligence on its part, rely
upon a certificate signed by an Authorized Officer and delivered to the Fiscal
Agent as to such matter of fact.
(h) No Implied Obligations. The duties and obligations of the
Fiscal Agent and the Issuer with respect to matters governed by this Agreement
shall be determined solely by the express provisions hereof, and neither the
Fiscal Agent nor the Issuer shall be liable except for the performance of such
duties and obligations as are specifically set forth in this Agreement and the
Securities, as applicable, and no implied covenants or obligations shall be read
into this Agreement or the Securities against either the Fiscal Agent or the
Issuer. Nothing in this Agreement shall be construed to require the Fiscal Agent
to advance or expend its own funds.
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9. Resignation and Appointment of Successor.
(a) Fiscal Agent and Paying Agent. The Issuer agrees, for the
benefit of the holders from time to time of the Securities, that there shall at
all times be a Fiscal Agent hereunder which shall be a bank or trust company
organized and doing business under the laws of the United States of America or
the State of New York, in good standing and having an established place of
business in the Borough of Manhattan, The City of New York, and authorized under
such laws to exercise corporate trust powers, until all the Securities
authenticated and delivered hereunder (i) shall have been delivered to the
Fiscal Agent for cancellation or (ii) have become payable, with the approval of
the Superintendent, and monies sufficient to pay the full principal of and any
interest remaining unpaid on the Securities shall have been made available for
payment and either paid or returned to the Issuer as provided herein and in such
Securities.
(b) Resignation and Removal. The Fiscal Agent may at any time
resign by giving written notice to the Issuer of such intention on its part,
specifying the date on which its desired resignation shall become effective,
provided that such date shall not be less than 60 days from the date on which
such notice is given, unless the Issuer agrees to accept shorter notice. The
Fiscal Agent hereunder may be removed at any time by the filing with it of an
instrument in writing signed on behalf of the Issuer and specifying such removal
and the date when it shall become effective. Notwithstanding the dates of
effectiveness of resignation or removal, as the case may be, to be specified in
accordance with the preceding sentences, such resignation or removal shall take
effect only upon the appointment by the Issuer, as hereinafter provided, of a
successor Fiscal Agent (which, to qualify as such, shall for all purposes
hereunder be a bank or trust company organized and doing business under the laws
of the United States of America or of the State of New York, in good standing
and having or having an affiliate which has an established place of business in
the Borough of Manhattan, The City of New York, authorized under such laws to
exercise corporate trust powers and having a combined capital and surplus in
excess of $50,000,000) and the acceptance of such appointment by such successor
Fiscal Agent. Upon its resignation or removal, the Fiscal Agent shall be
entitled to payment by the Issuer pursuant to Section 8(a) hereof, to the date
of termination.
(c) Successors. In case at any time the Fiscal Agent (or any
Paying Agent if such Paying Agent is the only Paying Agent located in a place
where, by the terms of the Securities or this Agreement, the Issuer is required
to maintain a Paying Agent) shall resign, or shall be removed, or shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or shall file a
voluntary petition in bankruptcy or make an assignment for the benefit of its
creditors or consent to the appointment of a receiver of all or any substantial
part of its property, or shall admit in writing its inability to pay or meet its
debts as they severally mature, or if a receiver of it or of all or any
substantial part of its property shall be appointed, or if an order of any court
shall be entered approving any petition filed by or against it under the
provisions of applicable receivership, bankruptcy, insolvency or other similar
legislation, or if any public officer
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shall take charge or control of it or of its property or affairs, for the
purpose of rehabilitation, conservation or liquidation, a successor Fiscal Agent
or Paying Agent, as the case may be, qualified as aforesaid, shall be appointed
by the Issuer by an instrument in writing, filed with the successor Fiscal Agent
or Paying Agent, as the case may be, and the predecessor Fiscal Agent or Paying
Agent, as the case may be. Upon the appointment as aforesaid of a successor
Fiscal Agent or Paying Agent, as the case may be, and acceptance by such
successor of such appointment, the Fiscal Agent or Paying Agent, as the case may
be, so succeeded shall cease to be Fiscal Agent or Paying Agent, as the case may
be, hereunder. If no successor Fiscal Agent or other Paying Agent, as the case
may be, shall have been so appointed by the Issuer and shall have accepted
appointment as hereinafter provided, and, in the case of such other Paying
Agent, if such other Paying Agent is the only Paying Agent located in a place
where, by the terms of the Securities or this Agreement, the Issuer is required
to maintain a Paying Agent, then any holder of a Security who has been a bona
fide holder of a Security for at least six months (which Security, in the case
of such other Paying Agent, is referred to in this sentence), on behalf of
himself and all others similarly situated, or the Fiscal Agent, may petition any
court of competent jurisdiction for the appointment of a successor fiscal or
paying agent, as the case may be. The Issuer shall give prompt written notice to
each other Paying Agent of the appointment of a successor Fiscal Agent.
(d) Acknowledgement. Any successor Fiscal Agent appointed
hereunder shall execute, acknowledge and deliver to its predecessor and to the
Issuer an instrument accepting such appointment hereunder, and thereupon such
successor Fiscal Agent, without any further act, deed or conveyance, shall
become vested with all the authority, rights, powers, trusts, immunities, duties
and obligations of such predecessor with like effect as if originally named as
Fiscal Agent hereunder and all provisions hereof shall be binding on such
successor Fiscal Agent, and such predecessor, upon payment of its compensation
and reimbursement of its disbursements then unpaid, shall thereupon become
obligated to transfer, deliver and pay over, and such successor Fiscal Agent
shall be entitled to receive, all monies, securities, books, records or other
property on deposit with or held by such predecessor as Fiscal Agent hereunder.
(e) Merger, Consolidation, etc. Any bank or trust company into
which the Fiscal Agent hereunder may be merged, or resulting from any merger or
consolidation to which the Fiscal Agent shall be a party, or to which the Fiscal
Agent shall sell or otherwise transfer all or substantially all the assets and
business of the Fiscal Agent, provided that it shall be qualified as aforesaid,
shall be the successor Fiscal Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto.
10. Meetings and Amendments.
(a) Calling of Meeting, Notice and Quorum. A meeting of holders of
Securities may be called at any time and from time to time to make, give or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided
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by this Agreement or the Securities to be made, given or taken by holders of
Securities or to modify, amend or supplement the terms of the Securities or this
Agreement as hereinafter provided, and subject to the requirement hereinafter
set forth that the Issuer and the Fiscal Agent may, only with the prior approval
of the Superintendent, modify, amend or supplement this Fiscal Agency Agreement
or the terms of the Securities or give consents or waivers or take other actions
with respect thereto. The Fiscal Agent may at any time call a meeting of holders
of Securities for any such purpose to be held at such time and at such place in
the Borough of Manhattan, The City of New York as the Fiscal Agent shall
determine. Notice of every meeting of holders of Securities, setting forth the
time and the place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be given as provided in the terms of the
Securities, not less than 30 nor more than 60 days prior to the date fixed for
the meeting (provided that, in the case of any meeting to be reconvened after
adjournment for lack of a quorum, such notice shall be so given not less than 15
nor more than 60 days prior to the date fixed for such meeting). In case at any
time the Issuer or the holders of at least 10% in aggregate principal amount of
the Outstanding Securities (as defined in subsection (d) of this Section) shall
have requested the Fiscal Agent to call a meeting of the holders of Securities
for any such purpose, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, the Fiscal Agent shall call such
meeting for such purposes by giving notice thereof.
To be entitled to vote at any meeting of holders of Securities, a
person shall be a holder of Outstanding Securities or a person duly appointed by
an instrument in writing as proxy for such a holder. The persons entitled to
vote a majority in principal amount of the Outstanding Securities shall
constitute a quorum. At the reconvening of any meeting adjourned for a lack of a
quorum, the persons entitled to vote 25% in principal amount of the Outstanding
Securities shall constitute a quorum for the taking of any action set forth in
the notice of the original meeting. The Fiscal Agent may make such reasonable
and customary regulations consistent herewith as it shall deem advisable for any
meeting of holders of Securities with respect to the proof of the appointment of
proxies in respect of holders of Securities, the record date for determining the
registered owners of Securities who are entitled to vote at such meeting (which
date shall be designated by the Fiscal Agent and set forth in the notice calling
such meeting hereinabove referred to and which shall be not less than 15 nor
more than 60 days prior to such meeting, provided that nothing in this paragraph
shall be construed to render ineffective any action taken by holders of the
requisite principal amount of Outstanding Securities on the date such action is
taken), the adjournment and chairmanship of such meeting, the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem appropriate.
(b) Approval. (i) At any meeting of holders of Securities duly
called and held as specified above, upon the affirmative vote, in person or by
proxy thereunto duly authorized in writing, of the holders of not less than a
majority in aggregate principal amount of the Securities then Outstanding
represented at such meeting, or (ii)
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with the written consent of the holders of not less than a majority in aggregate
principal amount of the Securities then Outstanding, in each case (i) or (ii)
the Issuer and the Fiscal Agent may, with the prior approval of the
Superintendent, modify, amend or supplement the terms of the Securities or this
Agreement in any way, and the holders of Securities may make, take or give any
request, demand, authorization, direction, notice, consent, waiver (including
waiver of future compliance or past failure to perform) or other action provided
by this Agreement or the Securities to be made, given or taken by holders of
Securities; provided, however, that any such action, modification, amendment or
supplement to be effected pursuant to clause (i) of this subsection (b) shall be
approved by the holders of not less than 25% of the aggregate principal amount
of Securities then Outstanding; and provided, further, that no such action,
modification, amendment or supplement, however effected, may, without the
consent of the holder of each Security affected thereby, (A) change the
Scheduled Interest Payment Date or Scheduled Maturity Date (in each case, as
defined in the Securities) of the principal of or any installment of interest on
any Security, (B) reduce the principal amount of any Security or the interest
rate thereon, or, if applicable, the premium payable, if any, with respect to a
redemption thereof, (C) change the currency in which, or the required place at
which, payment with respect to interest or principal in respect of the
Securities is payable, (D) change the Issuer's obligations under Section 7(a)
hereof in any manner adverse to the interests of the holder of a Security, (E)
impair the right of a holder of a Security to institute suit for the enforcement
of any payment, if such payment is permitted under the Payment Restrictions, on
or with respect to any Security, (F) reduce the above-stated percentage of the
principal amount of Outstanding Securities the vote or consent of the holders of
which is necessary to modify, amend or supplement this Agreement or the terms
and conditions of the Securities or to make, take or give any request, demand,
authorization, direction, notice, consent, waiver (including waiver of any
future compliance or past failure to perform) or other action provided hereby or
thereby to be made, taken or given, (G) reduce the percentage in aggregate
principal amount of Outstanding Securities that constitutes the quorum required
at any meeting of holders of Securities at which a resolution is adopted, (H)
change the restrictions on payment set forth in the Securities in a manner
adverse to such holder, or (I) change the provisions of Paragraph 10 of the
Securities in a manner adverse to such holder.
The Issuer and the Fiscal Agent may, with the prior approval of the
Superintendent, without the vote or consent of any holder of Securities, amend
this Agreement or the Securities for the purpose of (a) adding to the covenants
of the Issuer for the benefit of the holders of Securities, or (b) surrendering
any right or power conferred upon the Issuer, or (c) securing the Securities or
(d) evidencing the succession of another corporation to the Issuer and the
assumption by such successor of the covenants and obligations of the Issuer
herein and in the Securities as permitted by this Agreement and the Securities,
or (e) modifying the restrictions on, and procedures for, resale and other
transfers of the Securities to the extent required or permitted by any change in
applicable law or regulation, or the interpretation thereof, or in practices
relating to the resale or transfer of restricted securities generally, or (f)
accommodating the issuance, if any, of Securities in book-entry or certificated
form and matters related
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thereto which do not adversely affect the interest of any Security holder in any
material respect, or (g) curing any ambiguity or correcting or supplementing any
defective provision contained herein or in the Securities in a manner which does
not adversely affect the interest of any Security holder in any material
respect, or (h) effecting any amendment which the Issuer and the Fiscal Agent
may determine is necessary or desirable and which shall not adversely affect the
interest of any Security holder.
It shall not be necessary for the vote or consent of the holders of
Securities to approve the particular form of any proposed modification,
amendment, supplement, request, demand, authorization, direction, notice,
consent, waiver or other action, but it shall be sufficient if such vote or
consent shall approve the substance thereof.
The Fiscal Agent may request an opinion of counsel in connection
with any amendment or supplement entered into hereunder.
(c) Binding Nature of Amendments, Notices, Notations, etc. Any
instrument given by or on behalf of any holder of a Security in connection with
any consent to or vote for any such modification, amendment, supplement,
request, demand, authorization, direction, notice, consent, waiver or other
action shall be irrevocable once given and shall be conclusive and binding on
all subsequent holders of such Security or any Security issued directly or
indirectly in exchange or substitution therefor or in lieu thereof. Any such
modification, amendment, supplement, request, demand, authorization, direction,
notice, consent, waiver or other action taken, made or given in accordance with
Section 10(b) hereof shall be conclusive and binding on all holders of
Securities, whether or not they have given such consent or cast such vote or
were present at any meeting, and whether or not notation of such modification,
amendment, supplement, request, demand, authorization, direction, notice,
consent, waiver or other action is made upon the Securities. Notice of any
modification or amendment of, supplement to, or request, demand, authorization,
direction, notice, consent, waiver or other action with respect to the
Securities or this Agreement (other than for purposes of curing any ambiguity or
of curing, correcting or supplementing any defective provision hereof or
thereof) shall be given to each holder of Securities affected thereby, in all
cases as provided in the Securities.
Securities authenticated and delivered after the effectiveness of
any such modification, amendment, supplement, request, demand, authorization,
direction, notice, consent, waiver or other action may bear a notation in the
form approved by the Fiscal Agent and the Issuer as to any matter provided for
in such modification, amendment, supplement, request, demand, authorization,
direction, notice, consent, waiver or other action. New Securities modified to
conform, in the opinion of the Fiscal Agent and the Issuer, to any such
modification, amendment, supplement, request, demand, authorization, direction,
notice, consent, waiver or other action taken, made or given in accordance with
Section 10(b) hereof may be prepared by the Issuer, authenticated by the Fiscal
Agent and delivered in exchange for Outstanding Securities.
17
<PAGE> 21
(d) "Outstanding" Defined. For purposes of the provisions of this
Agreement and the Securities, any Security authenticated and delivered pursuant
to this Agreement shall, as of any date of determination, be deemed to be
"Outstanding", except:
(i) Securities theretofore cancelled by the Fiscal Agent or
delivered to the Fiscal Agent for cancellation;
(ii) Securities which have been called for redemption in accordance
with their terms or which have become payable, to the extent permitted
under the Payment Restrictions, at the Scheduled Maturity Date or
otherwise, and with respect to which, in each case, monies sufficient to
pay the principal thereof and any interest thereon shall have been paid;
and
(iii) Securities in lieu of or in substitution for which other
Securities shall have been authenticated and delivered pursuant to this
Agreement;
provided, however, that in determining whether the holders of the requisite
principal amount of Outstanding Securities are present at a meeting of holders
of Securities for quorum purposes or have consented to or voted in favor of any
request, demand, authorization, direction, notice, consent, waiver, amendment,
modification or supplement hereunder, Securities owned directly or indirectly by
the Issuer, or any affiliate of the Issuer, shall be disregarded and deemed not
to be Outstanding.
11. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, WITHOUT
REFERENCE TO CONFLICTS OF LAWS PROVISIONS.
12. Notices.
All notices or communications hereunder, except as herein otherwise
specifically provided, shall be in writing, shall specify this Agreement by name
and date and shall identify the Securities, and if sent to the Fiscal Agent
shall be delivered, transmitted by facsimile or telegraphed to it at The Chase
Manhattan Bank, N.A., 4 Chase MetroTech Center, Brooklyn, New York 11245,
Attention: Vice President, Corporate Trust Department, telephone: (718)
242-7276, fax: (718) 242-5885, and if sent to the Issuer shall be delivered,
transmitted by facsimile or telegraphed to it at The Mutual Life Insurance
Company of New York, 1740 Broadway, New York, New York 10019, Attention: Kenneth
M. Levine, Executive Vice President and Chief Investment Officer, telephone:
(212) 708-2907, fax: (212) 708-2995. The foregoing addresses for notices or
communications may be changed by written notice given by the addressee to each
party hereto, and the addressee's address shall be deemed changed for all
purposes from and after the giving of such notice.
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<PAGE> 22
If the Fiscal Agent shall receive any notice or demand addressed to
the Issuer by the holder of a Security, the Fiscal Agent shall promptly forward
such notice or demand to the Issuer.
13. Separability.
In case any provision in this Agreement or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
14. Headings.
The section headings herein are for convenience of reference only
and shall not affect the construction hereof.
15. Counterparts.
This Agreement may be executed in one or more counterparts, and by
each party separately on a separate counterpart, and each such counterpart when
executed and delivered shall be deemed to be an original. Such counterparts
shall together constitute one and the same instrument.
19
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this Fiscal
Agency Agreement as of the date first above written.
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Kenneth M. Levine
-----------------------------------
Name: Kenneth M. Levine
Title: Executive Vice President &
Chief Investment Officer
THE CHASE MANHATTAN BANK, N.A.
By:
-----------------------------------
Name:
Title:
Attest:
-----------------------
20
<PAGE> 24
EXHIBIT A
FORM OF DEFINITIVE SECURITY
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM AND IN ACCORDANCE WITH THE FISCAL AGENCY AGREEMENT, COPIES
OF WHICH ARE AVAILABLE FOR INSPECTION AT THE CORPORATE TRUST OFFICE OF THE
FISCAL AGENT. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM SUCH REGISTRATION PROVIDED
BY RULE 144A UNDER THE ACT (TOGETHER WITH ANY SUCCESSOR PROVISION AND AS MAY BE
HEREAFTER AMENDED FROM TIME TO TIME, "RULE 144A").
[INCLUDE IF SECURITY IS A RESTRICTED DEFINITIVE SECURITY OR
SECURITY ISSUED IN EXCHANGE THEREFOR (UNLESS, PURSUANT TO SECTION 6(g) OF THE
FISCAL AGENCY AGREEMENT, THE ISSUER DETERMINES THAT THE LEGEND MAY BE REMOVED)]
- -- THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE MUTUAL LIFE
INSURANCE COMPANY OF NEW YORK ("MONY") THAT (A) THIS SECURITY MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) BY THE INITIAL
INVESTOR (I) IN A MINIMUM PRINCIPAL AMOUNT OF $250,000 TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN
RULE 144A (OR ANY SUCCESSOR PROVISION THERETO, AND AS MAY HEREAFTER BE AMENDED
FROM TIME TO TIME), UNDER THE ACT IN A TRANSACTION IN ACCORDANCE WITH RULE 144A,
(II) IN AN OFFSHORE TRANSACTION IN A MINIMUM PRINCIPAL AMOUNT OF $500,000 IN
ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S (TOGETHER WITH ANY
SUCCESSOR PROVISION, AND AS MAY HEREAFTER BE AMENDED FROM TIME TO TIME,
"REGULATION S") UNDER THE ACT OR (III) PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 (OR ANY SUCCESSOR PROVISION THERETO, AND AS
MAY HEREAFTER BE AMENDED FROM TIME TO TIME) UNDER THE ACT (IF AVAILABLE) OR (2)
BY SUBSEQUENT INVESTORS, AS SET FORTH IN (1) ABOVE AND, IN ADDITION, IN A
MINIMUM PRINCIPAL AMOUNT OF $500,000 TO AN INSTITUTIONAL INVESTOR WHO IS AN
"ACCREDITED INVESTOR," AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE
ACT, IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT, IN EACH CASE IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
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<PAGE> 25
STATES OF THE UNITED STATES, AND (B) THAT THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE
RESTRICTIONS REFERRED TO IN (A) ABOVE.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF MONY
THAT, IF THE HOLDER PROPOSES TO SELL OR TRANSFER THIS SECURITY TO ANY EMPLOYEE
BENEFIT PLAN (AS DEFINED IN SECTION 3 OF THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED), THE HOLDER WILL COMPLY WITH THE RESTRICTIONS SET FORTH
IN PARAGRAPH 10 HEREOF.
ALL PAYMENTS OF PRINCIPAL (INCLUDING ANY PREMIUM WITH RESPECT
TO ANY REDEMPTION) AND INTEREST ON THIS SECURITY MAY ONLY BE MADE OUT OF MONY'S
FREE AND DIVISIBLE SURPLUS AND WITH THE PRIOR APPROVAL OF THE SUPERINTENDENT OF
INSURANCE OF THE STATE OF NEW YORK (THE "SUPERINTENDENT"), IN ACCORDANCE WITH
SECTION 1307 OF THE NEW YORK INSURANCE LAW (TOGETHER WITH ANY SUCCESSOR
PROVISION, AND AS MAY BE HEREAFTER AMENDED FROM TIME TO TIME, "SECTION 1307").
THERE ARE NO GUIDELINES OR INTERPRETATIONS AS TO THE EXTENT OF THE
SUPERINTENDENT'S DISCRETION UNDER SECTION 1307 IN DETERMINING WHETHER THE
FINANCIAL CONDITION OF MONY WARRANTS THE MAKING OF SUCH PAYMENTS.
IF THE NOTES MATURE PRIOR TO THE FINAL SCHEDULED MATURITY DATE
SET FORTH HEREIN, THE CLAIM OF A HOLDER OF NOTES WITH RESPECT TO THE PRINCIPAL
AMOUNT THEREOF WILL BE LIMITED TO AN AMOUNT EQUAL TO THE "ACCRETED VALUE" OF THE
NOTES, AS DESCRIBED IN PARAGRAPH 7 HEREOF, WHICH AMOUNT WILL FOR ALL PERIODS
PRIOR TO AUGUST 15, 1999 BE LESS THAN 100% OF THE PRINCIPAL AMOUNT AT MATURITY
OF THE NOTES.
THE NOTES WILL BE ISSUED AT AN ISSUE PRICE OF $578.54 PER
$1,000 PRINCIPAL AMOUNT, WHICH REPRESENTS A DISCOUNT OF 42.146% FROM THE
PRINCIPAL AMOUNT PAYABLE AT MATURITY. CONSEQUENTLY, PURCHASERS OF THE NOTES
SHOULD BE AWARE THAT, ALTHOUGH CASH INTEREST WILL NOT ACCRUE ON THE NOTES PRIOR
TO AUGUST 15, 1999, AND CASH INTEREST IS NOT SCHEDULED TO BE PAID ON THE NOTES
PRIOR TO FEBRUARY 15, 2000, ORIGINAL ISSUE DISCOUNT WILL ACCRUE FROM THE ISSUE
DATE OF THE NOTES AND WILL BE INCLUDIBLE AS INTEREST INCOME PERIODICALLY
(INCLUDING FOR PERIODS ENDING PRIOR TO FEBRUARY 15, 2000) IN A HOLDER'S GROSS
INCOME FOR UNITED STATES FEDERAL INCOME TAX PURPOSES REGARDLESS OF WHETHER THE
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<PAGE> 26
HOLDER HAS RECEIVED THE CASH PAYMENTS TO WHICH THE INCOME IS ATTRIBUTABLE.
A-3
<PAGE> 27
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
11 1/4% Surplus Note scheduled to mature on August 15, 2024
No. R- _____ $________
Issue Date: August 15, 1994
Issue Price: $578.54
Original Issue Discount: $421.46
Yield to Maturity: 11 1/4%
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a mutual life
insurance company organized under the laws of the State of New York (herein
called the "Issuer"), for value received, hereby promises to pay, subject to the
approval of the Superintendent pursuant to Section 1307, to
______________________, or registered assigns, the principal sum of
_______________ United States dollars ($__________) on August 15, 2024 (the
"Final Scheduled Maturity Date"), and to pay interest thereon, subject to the
approval of the Superintendent pursuant to Section 1307, from August 15, 1999 or
from the most recent Scheduled Interest Payment Date to which interest has been
paid or duly provided for, semi-annually in arrears on February 15 and August 15
in each year, commencing February 15, 2000 (each a "Scheduled Interest Payment
Date", which term shall also include any other dates on which the payment of
interest herein may be due in accordance with paragraph 4(a) hereof), at the
rate of 11 1/4% per annum, until the principal hereof is paid or duly provided
for. Any reference herein to the term "principal" or the "principal amount" of
this Security shall include the amount of premium, if any, payable upon
redemption hereof in accordance with paragraph 15 hereof. Any reference herein
to the term "Scheduled Maturity Date" or other date for the payment of principal
of this Security shall include the Final Scheduled Maturity Date and the date,
if any, fixed for redemption hereof in accordance with paragraph 15 hereof. The
date upon which any state or federal agency obtains an order or grants approval
for the rehabilitation, liquidation, conservation or dissolution of the Issuer
shall also be deemed to be the Scheduled Maturity Date of this Security. As
specified on the reverse hereof, all payments of principal of or interest on
this Security may be made only out of the Issuer's free and divisible surplus
and only with the prior approval of the Superintendent. The interest so payable,
and punctually paid or duly provided for, on any Scheduled Interest Payment Date
shall be paid, in accordance with the terms of the Fiscal Agency Agreement
hereinafter referred to, to the person (the "registered holder") in whose name
this Security (or one or more predecessor Securities) is registered at the close
of business on the January 31 or July 31 (whether or not a business day), as the
case may be (each a "Regular Record Date"), next preceding such Scheduled
Interest Payment Date. Interest on the Securities shall be calculated on the
basis of a 360-day year of twelve 30-day months. Any such interest not so
punctually paid or duly provided for shall forthwith
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<PAGE> 28
cease to be payable to the registered holder on such Regular Record Date and
shall be paid to the person in whose name this Security (or one or more
predecessor Securities) is registered at the close of business on a special
record date for the payment of such interest to be fixed by the Issuer, notice
whereof shall be given to registered holders of the Securities not less than 15
days prior to such special record date.
Interest on this Security will not accrue until August 15,
1999, except in the event the Accreted Value (as defined in Section 7 hereof)
hereof shall become immediately due and payable prior to such date in accordance
with paragraph 16(a) hereof, in which case such Accreted Value (the amount of
which shall be calculated in accordance with paragraph 7 hereof) shall bear
interest at the rate of 11 1/4%-per annum from the date such amount is due
until paid or duly provided for; provided, however, that interest will not
accrue or be payable upon any such interest with respect to any such Accreted
Value amounts.
Principal of this Security shall be payable against surrender
hereof at the corporate trust office of the Fiscal Agent hereinafter referred to
and at the offices of such other Paying Agents as the Issuer shall have
appointed pursuant to the Fiscal Agency Agreement. Payments of principal of the
Securities shall be made only against surrender of the Securities. Payments of
interest on this Security may be made, in accordance with the foregoing and
subject to applicable laws and regulations, by check mailed on or before the
Scheduled Interest Payment Date of such payment to the person entitled thereto
at such person's address appearing on the aforementioned register. In the case
of a registered holder of at least $5,000,000 aggregate principal amount of
Securities, payments of principal or interest may be made by wire transfer to an
account maintained by the payee with a bank if such registered holder so elects
by giving notice to the Fiscal Agent, not less than 15 days (or such fewer days
as the Fiscal Agent may accept at its discretion) prior to the applicable
Scheduled Interest Payment Date or Scheduled Maturity Date hereof, of such
election and of the account to which payments are to be made. Unless such
designation is revoked, any such designation made by such holder with respect to
such Securities shall remain in effect with respect to any future payments with
respect to such Securities payable to such holder. The Issuer agrees that until
this Security has been delivered to the Fiscal Agent for cancellation, or monies
sufficient to pay the full principal of and interest remaining unpaid on this
Security have been made available for payment and either paid or returned to the
Issuer as provided herein, it will at all times maintain offices or agencies in
the Borough of Manhattan, The City of New York and for the payment of the
principal of and interest on the Securities as herein provided.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
This Security may be executed by the Issuer by manual or
facsimile signatures, and such signatures may be executed on separate
counterparts.
A-5
<PAGE> 29
Unless the certificate of authentication hereon has been
executed by the Fiscal Agent by manual signature, this Security shall not be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be duly executed.
Dated:
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
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<PAGE> 30
This is one of the Securities referred to in the
within-mentioned Fiscal Agency Agreement.
THE CHASE MANHATTAN BANK, N.A.,
as Fiscal Agent
By:
------------------------------------
Authorized Officer
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<PAGE> 31
FORM OF REVERSE
1. This Security is one of a duly authorized issue of 11 1/4%
Surplus Notes scheduled to mature on August 15, 2024 of the Issuer (herein
called the "Securities" or "Notes") , limited in aggregate principal amount to
$125,000,000. The Issuer and The Chase Manhattan Bank, N.A. (as "Fiscal Agent")
have entered into a Fiscal Agency Agreement, dated as of August 15, 1994 (such
instrument, as it may be duly amended from time to time, is herein called the
"Fiscal Agency Agreement") , which provides for the mechanism for issuing the
Securities and, inter alia, sets forth certain duties of the Fiscal Agent in
connection therewith. As used herein, the term "Fiscal Agent" includes any
successor fiscal agent under the Fiscal Agency Agreement. Copies of the Fiscal
Agency Agreement are on file and available for inspection at the corporate trust
office of the Fiscal Agent in the Borough of Manhattan, The City of New York.
Holders of Securities are referred to the Fiscal Agency Agreement for a
statement of the terms thereof, including those relating to transfer, payment,
exchanges and certain other matters. The Fiscal Agent or any Paying Agent shall
also act as Transfer Agent and Securities registrar. Terms used herein which are
defined in the Fiscal Agency Agreement but not otherwise defined herein shall
have the meanings assigned to such terms in the Fiscal Agency Agreement.
The Securities are direct and unsecured obligations of the
Issuer and, subject to the payment restrictions contained in paragraphs 4 and 11
hereof (the "Payment Restrictions"), are scheduled to mature on August 15, 2024.
Section 1307 provides that the Securities are not part of the legal liabilities
of the Issuer and are not a basis of any set-off against the Issuer.
2. The Securities are issuable only in fully registered form
without coupons. Securities are issuable in minimum denominations of $[250,000]
$[500,000] and integral multiples of $1,000 above that amount.
3. The Issuer shall maintain, in the Borough of Manhattan, The
City of New York, a Transfer Agent where Securities may be registered or
surrendered for registration of transfer or exchange. The Issuer has initially
appointed the Corporate Trust Office of the Fiscal Agent as its Transfer Agent
in the Borough of Manhattan, The City of New York. The Issuer shall cause each
Transfer Agent to act as a Securities registrar and shall cause to be kept at
the office of each Transfer Agent a register in which, subject to such
reasonable regulations as it may prescribe, the Issuer shall provide for the
registration of Securities and registration of transfers of Securities. The
Issuer reserves the right to vary or terminate the appointment of any Transfer
Agent or to appoint additional or other Transfer Agents or to approve any change
in the office through which any Transfer Agent acts, provided that there shall
at all times be a Transfer Agent in the Borough of Manhattan, The City of New
York. The Issuer shall cause notice of any resignation, termination or
appointment of the Fiscal Agent or any Paying
A-8
<PAGE> 32
Agent or Transfer Agent and of any change in the office through which any such
Agent shall act to be provided to holders of Securities.
Subject to the restrictions set forth herein and in the Fiscal
Agency Agreement, the transfer of a Security is registrable on the
aforementioned register upon surrender of such Security at any Transfer Agent
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer duly executed by, the registered holder thereof or
his attorney duly authorized in writing. Upon such surrender of this Security
for registration of transfer, the Issuer shall execute, and the Fiscal Agent
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities, dated the date of authentication
thereof, of any authorized denominations and of a like aggregate principal
amount.
Subject to the restrictions set forth herein and in the Fiscal
Agency Agreement, at the option of the registered holder upon request confirmed
in writing, Securities may be exchanged for Securities of any authorized
denominations and aggregate principal amount upon surrender of the Securities to
be exchanged at the office of any Transfer Agent. Whenever any Securities are so
surrendered for exchange, the Issuer shall execute, and the Fiscal Agent shall
authenticate and deliver, the Securities which the registered holder making the
exchange is entitled to receive. Any registration of transfer or exchange shall
be effected upon the Issuer being satisfied with the documents of title and
identity of the person making the request and subject to the restrictions set
forth in the immediately following paragraph and such reasonable regulations as
the Issuer may from time to time agree with the Fiscal Agent.
Securities may be redeemed by the Issuer, in whole or in part,
but only to the extent permitted by the Payment Restrictions, including the
prior approval of the Superintendent, in accordance with paragraph 15 hereof. In
the event of a partial redemption, the Issuer shall not be required (i) to
register the transfer of or exchange any Security during a period beginning at
the opening of business 15 days before the date notice is given identifying the
Securities to be redeemed, or (ii) to register the transfer or exchange of any
Security, or portion thereof, called for redemption.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Issuer, evidencing
the same debt, and entitled to the same benefits, as the Securities surrendered
upon such registration of transfer or exchange. No service charge shall be made
for any registration of transfer or exchange, but the Issuer may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Issuer, the Fiscal Agent and any agent of the Issuer or the Fiscal
Agent may treat the person in whose name this Security is registered as the
absolute owner hereof for all purposes, whether or not this Security be overdue,
and neither the Issuer nor the Fiscal Agent nor any such agent shall be affected
by notice to the contrary.
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<PAGE> 33
4. (a) Notwithstanding anything to the contrary set forth
herein or in the Fiscal Agency Agreement, any payment of principal of, interest
on or any monies owing with respect to this Security, whether at the Scheduled
Interest Payment Date or Scheduled Maturity Date specified herein or otherwise,
may be made only (i) out of the free and divisible surplus of the Issuer which
the Superintendent determines to be available for such payments under Section
1307 and (ii) with the prior approval of the Superintendent whenever, in his
judgment, the financial condition of the Issuer warrants such payment, in
accordance with Section 1307. If the Superintendent does not approve the making
of any payment of principal of or interest on this Security on the Scheduled
Interest Payment Date or Scheduled Maturity Date thereof, as specified herein,
the Scheduled Interest Payment Date or Scheduled Maturity Date, as the case may
be, shall be extended and such payment shall be made by the Issuer on the next
following Business Day on which the Issuer shall have the approval of the
Superintendent to make such payment. Interest will continue to accrue on any
such unpaid principal through the actual date of payment at the rate of interest
stated on the face hereof. Interest will not accrue on interest with respect to
which the Scheduled Interest Payment Date has been extended, during the period
of such extension. If the Superintendent approves a payment of principal of or
interest on the Securities in an amount that is less than the full amount of
principal of and interest on the Securities then scheduled to be paid in respect
of the Securities, payment of such partial amount shall be made pro rata among
Security holders as their interests may appear.
(b) Any payment of principal of or interest on any Security as
to which the approval of the Superintendent has been obtained and which is not
punctually paid or duly provided for on the Scheduled Interest Payment Date or
Scheduled Maturity Date thereof, as set forth herein (such payment being
referred to as an "Unpaid Amount"), will forthwith cease to be payable to the
registered owner of this Security on the relevant record date designated herein,
and such Unpaid Amount will instead be payable to the registered owner of this
Security on a subsequent special record date. The Issuer shall fix the special
record date and payment date for the payment of any Unpaid Amount. At least 15
days before the special record date, the Issuer shall mail to each holder of the
Securities and the Fiscal Agent a notice that states the special record date,
payment date and amount of interest or principal to be paid. On the payment date
set forth in such notice, the Paying Agent shall pay the amount of interest or
principal to be so paid to each holder of the Securities in the manner set forth
in Section 4(a) of the Fiscal Agency Agreement.
5. (a) For so long as the Fiscal Agent is acting as a Paying
Agent hereunder, the Issuer shall provide, subject to the Payment Restrictions,
to the Fiscal Agent in immediately available funds on or prior to 10:00 a.m.,
New York time, of each date on which a payment of principal of or any interest
on this Security is payable, as set forth herein, such amounts as are necessary
(with any amounts then held by the Fiscal Agent and available for the purpose)
to make such payment, and the Issuer hereby authorizes and directs the Fiscal
Agent from funds so provided to it to make or cause to
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<PAGE> 34
be made payment of the principal of and any interest, as the case may be, on
this Security as set forth herein and in the Fiscal Agency Agreement. Payments
of principal of or any interest on the Securities may be made, in the case of a
registered holder of at least $5,000,000 principal amount of Securities, by wire
transfer to an account maintained by the payee with a bank if such registered
holder so elects by giving notice to the Fiscal Agent, not less than 15 days (or
such fewer days as the Fiscal Agent may accept at its discretion) prior to the
date on which such payments are scheduled to be made, of such election and of
the account to which payments are to be made. Unless such designation is
revoked, any such designation made by such holder with respect to such
Securities shall remain in effect with respect to any future payments with
respect to such Securities payable to such holder. The Issuer shall pay any
reasonable administrative costs in connection with making any such payments. The
Fiscal Agent shall arrange directly with any other Paying Agent who may have
been appointed by the Issuer pursuant to the provisions of Section 2 of the
Fiscal Agency Agreement for the payment from funds so paid by the Issuer of the
principal of and any interest on this Security. Any monies held in respect of
this Security remaining unclaimed at the end of two years after such principal
and such interest shall have become payable in accordance with the Payment
Restrictions (whether at the Scheduled Maturity Date or otherwise) and monies
sufficient therefor shall have been duly made available for payment shall,
together with any interest made available for payment thereon, be repaid to the
Issuer upon written request and upon such repayment all liability of the Fiscal
Agent with respect thereto shall cease, without, however, limiting in any way
any obligation the Issuer may have to pay the principal of and interest on this
Security, subject to the Payment Restrictions.
(b) In any case where the Scheduled Interest Payment Date or
Scheduled Maturity Date of any Security shall be at any place of payment a day
on which banking institutions are not carrying out transactions in U.S. dollars
or are authorized or obligated by law or executive order to close, then payment
of principal or interest need not be made on such date at such place but may be
made on the next succeeding day at such place which is not a day on which
banking institutions in the applicable jurisdiction are generally authorized or
obligated by law or executive order to close (a "Business Day"), with the same
force and effect as if made on the Scheduled Interest Payment Date or Scheduled
Maturity Date thereof, and no interest shall accrue for the period after such
date.
6. The Issuer shall pay all stamp and other duties, if any,
which may be imposed by the United States of America or any governmental entity
or any political subdivision thereof or taxing authority of or in the foregoing
with respect to the Fiscal Agency Agreement or the initial issuance of this
Security. Except as otherwise specifically provided in this Security, the Issuer
shall not be required to make any payment with respect to any tax, duty,
assessment or other governmental charge of whatever nature imposed or levied by
any government or any political subdivision or taxing authority thereof or
therein.
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<PAGE> 35
7. In the event that, pursuant to any provisions of this
Security or the Fiscal Agency Agreement, the principal in respect of this
Security shall mature prior to the Final Scheduled Maturity Date, the principal
amount so matured shall be equal to the Accreted Value hereof. The "Accreted
Value" shall be equal to the sum of (i) the issue price of this Security as
determined in accordance with Section 1273 of the Internal Revenue Code, as
amended from time to time (the "Code"), plus (ii) the aggregate of the portions
of the original issue discount (the excess of the amounts considered as part of
the "stated redemption price at maturity" within the meaning of Section
1273(a)(2) of the Code or any successor provisions, whether denominated as
principal or interest, over the issue price) that shall theretofore have accrued
pursuant to Section 1272 of the Code (without regard to Section 1272(a)(7) of
the Code) from the date of issue (a) for each six-month or shorter period ending
February 15 or August 15 prior to the date of determination and (b) for the
shorter period, if any, from the end of the immediately preceding six-month or
shorter period, as the case may be, to the date of determination, minus all
amounts theretofore paid in respect of this Security, which amounts are
considered as part of the "stated redemption price at maturity" of this Security
within the meaning of Section 1273(a)(2) of the Code or any successor provisions
(whether such amounts paid were denominated principal or interest).
8. For so long as any of the Securities remain Outstanding or
any amount remains unpaid on any of the Securities,
(a) Except with respect to transactions covered by paragraph 9
hereof, the Issuer will do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, material rights
(charter and statutory) and franchise; provided, however, that the Issuer shall
not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Issuer and that the Issuer has used its
best efforts to not disadvantage in any material respect the holders of the
Securities, or that not preserving such right or franchise is in the best
interest of the policyholders of the Issuer having considered the interests of
the holders of the Securities.
(b) The Issuer will not be or become an open-end investment
company, unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company Act of 1940,
as amended (the "Investment Company Act"), if such action would cause the Issuer
to be in violation of the Investment Company Act at any time prior to payment in
full of the Securities.
(c) The Issuer shall use its best efforts to obtain the
approval of the Superintendent in accordance with Section 1307 for the payment
by the Issuer of interest on and principal of the Securities on the Scheduled
Interest Payment Dates or Scheduled Maturity Dates thereof, and, in the event
any such approval has not been obtained for any such payment at or prior to the
Scheduled Interest Payment Date
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<PAGE> 36
or Scheduled Maturity Date thereof, as the case may be, to continue to use its
best efforts to obtain such approval promptly thereafter. Not less than 45 days
prior to the Scheduled Interest Payment Date or Scheduled Maturity Date thereof
(excluding any such Scheduled Maturity Date which arises as a result of the
obtaining of an order or the granting of approval for the rehabilitation,
liquidation, conservation or dissolution of the Issuer), the Issuer will seek
the approval of the Superintendent to make each payment of interest on and
principal of the Securities. In addition, the Issuer shall notify or cause to be
notified each holder and the Fiscal Agent no later than 5 Business Days (as
defined herein) prior to the Scheduled Interest Payment Date for interest on or
the Scheduled Maturity Date for principal of any Security (excluding any such
Scheduled Maturity Date which arises as a result of the obtaining of an order or
the granting of approval for the rehabilitation, liquidation, conservation or
dissolution of the Issuer) in the event that the Superintendent has not then
approved the making of any such payment on such Scheduled Interest Payment Date
or such Scheduled Maturity Date, and thereafter shall promptly notify each
holder and the Fiscal Agent in the event that the Issuer shall have failed to
make any such payment on any such Scheduled Interest Payment Date or such
Scheduled Maturity Date. Without limiting the Issuer's obligations set forth in
this paragraph, it is understood that, to the extent authorized by the Issuer's
Board of Directors, the Issuer may continue to declare policyowner dividends and
to make dividend payments on its participating policies even though payments on
the Securities may not have been approved by the Superintendent, regardless of
the effect any such declaration or payment may have on the Superintendent's
decision regarding payment of interest on or principal of the Securities.
9. For so long as any of the Securities remain Outstanding or
any amounts remain unpaid on any of the Securities, the Issuer may convert
itself from a mutual life insurance company into a stock life insurance company
(such conversion, a "demutualization"), merge or consolidate with or into any
other corporation or sell, convey, transfer or otherwise dispose of all or
substantially all of its assets to any person, firm or corporation, if (i) (A)
in the case of a merger or consolidation, the Issuer is the surviving
corporation or (B) in the case of a merger or consolidation where the Issuer is
not the surviving corporation and in the case of any such sale, conveyance,
transfer or other disposition, the successor corporation is a corporation
organized and existing under the laws of the United States or a State thereof
and such corporation expressly assumes by supplemental fiscal agency agreement
all the obligations of the Issuer under the Securities and the Fiscal Agency
Agreement, (ii) at the time of any such demutualization, merger or
consolidation, or such sale, conveyance, transfer or other disposition, the
Issuer shall not have failed to make payment of interest on or principal of the
Securities after having received the Superintendent's prior approval to make
such payment and (iii) the Issuer has delivered to the Fiscal Agent an Officer's
Certificate stating that such demutualization, merger, consolidation, sale,
conveyance, transfer or other disposition complies with this paragraph and that
all conditions precedent herein provided for relating to such transaction have
been complied with. In the event of the assumption by a successor corporation of
the obligations of the Issuer as provided in clause (i)(B) of the immediately
preceding sentence, such successor corporation shall succeed to and be
substituted for the Issuer hereunder and under the Fiscal Agency Agreement and
all such obligations of the Issuer shall terminate.
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<PAGE> 37
10. No employee benefit plan within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the prohibited transaction provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), as to which the Issuer is a party in interest
or a disqualified person (each a "Plan"), and no Person acting on behalf of a
Plan, may acquire this Security, unless the acquisition of the Security is
exempt under one or more of Prohibited Transaction exemptions 84-14, 90-1 or
91-38 (or any amendment thereof) or another applicable exemption from the
prohibitions under Section 406 of ERISA and Section 4975 of the Code. The
purchase by any Person of this Security shall constitute a representation by
such Person to the Issuer and the Fiscal Agent that such Person either (i) is
not a Plan or (ii) is a Plan, and may acquire this Security under an applicable
exemption from the prohibitions under Section 406 of ERISA and Section 4975 of
the Code. The restrictions on purchases of the Securities set forth in this
paragraph 10 are in addition to those otherwise set forth in Section 6 of the
Fiscal Agency Agreement and under applicable law.
11. (a) The Issuer agrees, and each Security holder by
accepting a Security agrees, that the indebtedness evidenced by the Securities
is subordinated in right of payment, to the extent and in the manner provided in
this paragraph, to the prior payment in full of all Indebtedness, Policy Claims
and Other Creditor Claims (each as hereinafter defined), in accordance with
Section 7435 of the New York Insurance Law (together with any successor
provision, and as may be hereafter amended from time to time, "Section 7435").
(b) Upon any distribution to creditors of the Issuer in any
rehabilitation, liquidation, conservation, dissolution or reorganization
proceeding relating to the Issuer or its property, the priority of claims of
Security holders shall be determined in accordance with Section 7435. In a
proceeding commenced under Article 74 of the New York Insurance Law, claims for
principal of or interest on the Securities constitute Class 7 claims under
Section 7435, as currently in effect. If the Superintendent approves a payment
of principal of or interest on the Securities in an amount that is less than the
full amount of principal of and interest on the Securities then scheduled to be
paid in respect of the Securities, payment of such partial amount shall be made
pro rata among Security holders as their interests may appear.
(c) If a distribution is made to Security holders that,
because of this paragraph, should not have been made to them, the Security
holders who receive the distribution shall hold it in trust for holders of
Policy Claims, Indebtedness and Other Creditor Claims and pay it over to them as
their interests may appear.
(d) The Issuer shall promptly notify the Fiscal Agent and the
Paying Agent of any facts known to the Issuer that would cause a payment of
principal of or interest on the Securities to violate this paragraph.
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<PAGE> 38
(e) This paragraph defines the relative rights of Security
holders, on the one hand, and holders of any other claims, in accordance with
Section 7435, on the other hand. Nothing in this Security or the Fiscal Agency
Agreement shall (i) impair, as between the Issuer and Security holders, the
obligation of the Issuer which is, subject to the Payment Restrictions, absolute
and unconditional to pay principal of and interest on the Securities in
accordance with their terms; (ii) affect the relative rights of Security holders
and creditors of the Issuer, other than holders of Policy Claims, Indebtedness
or Other Creditor Claims; or (iii) prevent the Fiscal Agent or any Security
holder from exercising any available remedies upon a breach by the Issuer of its
obligations hereunder, subject to the rights of holders of Policy Claims,
Indebtedness or Other Creditor Claims to receive distributions otherwise payable
to Security holders.
(f) No right of any holder of Policy Claims, Indebtedness or
Other Creditor Claims to enforce the subordination of the indebtedness evidenced
by the Securities shall be impaired by any act or failure to act by the Issuer
or by its failure to comply with the terms of this Fiscal Agency Agreement.
(g) Each holder of Securities, by acceptance thereof,
authorizes and directs the Fiscal Agent on its behalf to take such action as may
be necessary or appropriate to effectuate the subordination provided in this
paragraph and appoints the Fiscal Agent its attorney-in-fact for any and all
such purposes.
As used herein, "Indebtedness" of the Issuer shall mean (i)
all existing or future indebtedness of the Issuer for borrowed money, (ii) all
existing or future indebtedness for borrowed money of other persons, the payment
of which is guaranteed by the Issuer, (iii) all existing or future obligations
of the Issuer under any agreement obligating the Issuer to cause another person
to maintain a minimum level of net worth, or otherwise to ensure the solvency of
such person and (iv) any expense or any claim or amount, to the extent that
payment of principal of and interest on the Securities is required by law to be
subordinated to the prior payment thereof. Any obligation of the Issuer which by
its express terms is subordinated in right of payment to, or ranks equally with,
the Securities, or any indebtedness or other obligation of any separate account
of the Issuer, shall not constitute Indebtedness. However, under current law the
Issuer cannot incur any indebtedness which by its terms is subordinate to the
Securities. In addition, any other surplus notes or similar obligations of the
Issuer shall not constitute Indebtedness and will rank pari passu with the
Securities.
As used herein, "Policy Claims" shall mean all existing or
future claims of policyholders or beneficiaries, as the case may be, under any
and all existing or future policies, endorsements, riders and other contracts of
insurance, annuity contracts (including, without limitation, guaranteed
investment contracts) and funding agreements issued, assumed or renewed by the
Issuer on or prior to the date hereof or hereafter created, all claims arising
under separate account agreements to the extent such claims are not fully
discharged by the assets held by the Issuer in the applicable separate accounts
and all claims of The Life Insurance Company Guaranty Corporation of New York or
any
A-15
<PAGE> 39
other guaranty corporation or association of New York or any other jurisdiction,
other than claims described in clause (i) of the definition of "Other Creditor
Claims" below and claims for interest.
As used herein "Other Creditor Claims" shall mean all other
claims which, pursuant to Section 7435, have priority over claims with respect
to the Securities. Under Section 7435 as currently in effect, such other claims
include (i) claims with respect to the actual and necessary costs and expenses
of administration incurred by a liquidator, conservator, rehabilitator or
ancillary rehabilitator under Section 7435; (ii) claims with respect to the
actual and necessary costs and expenses of administration incurred by The Life
Insurance Guaranty Corporation or The Life Insurance Company Guaranty
Corporation of New York; (iii) claims of The Life Insurance Company Guaranty
Corporation for certain funds loaned to the Superintendent under Section 7713(d)
of the New York Insurance Law; (iv) debts up to $1,200 due to employees for
services performed within one year of the commencement of rehabilitation,
liquidation, conservation, dissolution or reorganization proceedings; (v) claims
for payment for goods furnished or services rendered in the ordinary course of
business within 90 days of the declaration of the impairment or insolvency of
the Issuer; (vi) claims of the federal or any state or local government (except
in the case of claims for a penalty or forfeiture which are included only to the
extent of pecuniary loss and reasonable costs occasioned by the act giving rise
to the forfeiture or penalty); and (vii) claims of general creditors and all
other claims having priority under Section 7435.
12. For so long as any of the Securities remain Outstanding or
any amount remains unpaid on any of the Securities, the Issuer shall, in
accordance with Rule 144A, comply with the terms of the agreements set forth in
Section 7 of the Fiscal Agency Agreement. The provisions of Sections 7 and 8 of
the Fiscal Agency Agreement are hereby incorporated mutatis mutandis herein.
13. In case this Security shall become mutilated, defaced,
destroyed, lost or stolen, the Issuer will execute and upon the Issuer's request
the Fiscal Agent shall authenticate and deliver a new Security, having a number
not contemporaneously outstanding, of like tenor (including the same date of
issuance) and equal principal amount, registered in the same manner, dated the
date of its authentication and bearing interest from the date to which interest
has been paid on this Security, in exchange and substitution for this Security
(upon surrender and cancellation thereof) or in lieu of and substitution for
this Security. In the case where this Security is destroyed, lost or stolen, the
applicant for a substituted Security shall furnish to the Issuer such security
or indemnity as may be required by the Issuer to save it and the Fiscal Agent
harmless, and, in every case of destruction, loss or theft of this Security, the
applicant shall also furnish to the Issuer satisfactory evidence of the
destruction, loss or theft of this Security and of the ownership thereof;
provided, however, that if the registered holder hereof is, in the judgment of
the Issuer, an institution of recognized responsibility, such holder's written
agreement of indemnity shall be deemed to be satisfactory for the issuance of a
new Security in lieu of and substitution for this Security. The Fiscal Agent
shall authenticate
A-16
<PAGE> 40
any such substituted Security and deliver the same only upon written request or
authorization of the Issuer. Upon the issuance of any substituted Security, the
Issuer may require the payment by the registered holder thereof of a sum
sufficient to cover fees and expenses connected therewith. In case this Security
has matured or is about to mature and shall become mutilated or defaced or be
destroyed, lost or stolen, the Issuer may, subject to the Payment Restrictions,
instead of issuing a substitute Security, pay or authorize the payment of the
same (without surrender thereof except if this Security is mutilated or defaced)
upon compliance by the registered holder with the provisions of this paragraph
13 as hereinabove set forth.
14. Section 10 of the Fiscal Agency Agreement, which Section
is hereby incorporated mutatis mutandis by reference herein, provides that, with
certain exceptions as therein provided and with the consent of the holders of a
majority of the principal amount of the Outstanding Securities present at a
meeting duly called pursuant thereto or by written consent of such percentage of
the principal amount of all Outstanding Securities, the Issuer and the Fiscal
Agent may, with the prior approval of the Superintendent, modify, amend or
supplement the Fiscal Agency Agreement or the terms of the Securities or may
give consents or waivers or take other actions with respect thereto. Any such
modification, amendment, supplement, consent, waiver or other action shall be
conclusive and binding on the holder of this Security and on all future holders
of this Security and of any Security issued upon the registration of transfer
hereof or in exchange heretofore or in lieu hereof, whether or not notation
thereof is made upon this Security. The Fiscal Agency Agreement and the terms of
the Securities may, with the prior approval of the Superintendent, be modified
or amended by the Issuer and the Fiscal Agent, without the consent of any
holders of Securities, for the purpose of (a) adding to the covenants of the
Issuer for the benefit of the holders of Securities, or (b) surrendering any
right or power conferred upon the Issuer, or (c) securing the Securities
pursuant to the requirements hereof, thereof or otherwise, or (d) evidencing the
succession of another corporation to the Issuer and the assumption by such
successor of the covenants and obligations of the Issuer herein and in the
Fiscal Agency Agreement as permitted by the Securities and the Fiscal Agency
Agreement, or (e) modifying the restrictions on, and procedures for, resale and
other transfers of the Securities to the extent required or permitted by any
change in applicable law or regulation (or the interpretation thereof) or in
practices relating to the resale or transfer of restricted securities generally,
or (f) accommodating the issuance, if any, of Securities in book-entry or
certificated form and matters related thereto which do not adversely affect the
interest of any Security holder in any material respect, or (g) curing any
ambiguity or correcting or supplementing any defective provision contained
herein or in the Fiscal Agency Agreement in a manner which does not adversely
affect the interest of any Security holder in any material respect, or (h)
effecting any amendment which the Issuer and the Fiscal Agent may determine is
necessary or desirable and which shall not adversely affect the interest of any
Security holder, to all of which each holder of any Security, by acceptance
thereof, consents.
15. (a) Subject to the Payment Restrictions and the prior
approval of the Superintendent, up to $31,250,000 of the aggregate principal
amount of the
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<PAGE> 41
Securities may be redeemed at the option of the Issuer, in each twelve-month
period commencing August 15, 2021, at any time upon not more than 60 days' nor
less than 30 days' notice as herein provided, at the following Redemption Prices
(expressed as percentages of the principal amount), in each case together with
accrued interest (except if the date of such redemption is a Scheduled Interest
Payment Date) to the date of redemption, during the twelve-month period
beginning August 15 of the years indicated:
Year Redemption Price
---- ----------------
2021 100%
2022 100%
2023 100%
Interest installments the payment of which have been approved by the
Superintendent and which are payable on or prior to such date of redemption will
be payable to the holders of such Securities of record at the close of business
on the relevant Record Dates set forth herein.
(b) In the case of any partial redemption of Securities, the
Securities to be redeemed shall be selected by the Fiscal Agent not less than 30
days prior to the date of such redemption, from the Outstanding Securities not
previously called for redemption, by such method as the Fiscal Agent shall deem
fair and appropriate and which may provide for the selection for redemption of
portions (equal to $1,000 or any integral multiple thereof) of the principal
amount of Securities of a denomination larger than $250,000.
(c) Notices to redeem Securities shall be given to holders of
Securities in writing mailed, first-class postage prepaid, to each holder of
Securities, or portions thereof, so to be redeemed, at his address as it appears
in the Security Register. Such notice will be given once not more than 60 days
nor less than 30 days prior to the date fixed for redemption, and shall be
deemed to have been given on the date of mailing. If by reason of the suspension
of regular mail service, or by reason of any other cause, it shall be
impracticable to give notice to the holders of Securities in the manner
prescribed herein, then such notification in lieu thereof as shall be made by
the Issuer or by the Fiscal Agent on behalf of and at the instruction of the
Issuer shall constitute sufficient provision of such notice, if such
notification shall, so far as may be practicable, approximate the terms and
conditions of the mailed notice in lieu of which it is given. Neither the
failure to give notice nor any defect in any notice given to any particular
holder of a Security shall affect the sufficiency of any notice with respect to
other Securities. Notices to redeem Securities shall specify the date fixed for
redemption, the redemption price, the place or places of payment, that payment
will be made upon presentation and surrender of the Securities to be redeemed
(or portion thereof in the case of a partial redemption), that interest accrued
to the date fixed for redemption (unless the date of redemption is a Scheduled
Interest Payment Date) will be paid as specified in said notice, and that on and
after said date interest thereon will cease to accrue if the Securities
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<PAGE> 42
are so redeemed. In addition, in the case of a partial redemption, the
Redemption Notice shall specify the Securities called for redemption and the
aggregate principal amount of the Securities to remain Outstanding after the
redemption.
(d) If notice of redemption has been given in the manner set
forth in paragraph 15(c) hereof, the Securities so to be redeemed shall, subject
to the Payment Restrictions, be payable in full on the date specified in such
notice and upon presentation and surrender of the Securities at the place or
places specified in such notice, the Securities shall be paid and redeemed by
the Issuer at the places and in the manner and currency herein specified and at
the redemption price together with accrued interest (unless the redemption date
is a Scheduled Interest Payment Date) to the redemption date. From and after the
redemption date, if monies for the redemption of Securities called for
redemption shall have been made available at the Principal Office of the Fiscal
Agent for redemption on the redemption date, the Securities called for
redemption shall cease to bear interest, and the only right of the holders with
respect to such Securities or portion thereof being redeemed shall be to receive
payment of the redemption price together with accrued interest (unless the
redemption date is an Interest Payment Date) to the redemption date as
aforesaid. If monies for the redemption of the Securities are not made available
for payment until after the redemption date, the Securities called for
redemption shall not cease to bear interest until such monies have been so made
available.
(e) Any Security which is to be redeemed only in part shall be
surrendered with, if the Issuer or the Fiscal Agent so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Issuer and
the Fiscal Agent duly executed by, the holder thereof or his attorney duly
authorized in writing, and the Issuer shall execute, and the Fiscal Agent shall
authenticate and deliver to the holder of such Security without service charge,
a new Security or Securities, of any authorized denomination as requested by
such holder, and as permitted by Section 1(d) of the Agreement, in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
16. Holders of Securities may enforce the Fiscal Agency
Agreement or the Securities only in the manner set forth below.
(a) In the event that any state or federal agency shall obtain
an order or grant approval for the rehabilitation, liquidation, conservation or
dissolution of the Issuer, the Securities will upon the obtaining of such an
order or the granting of such approval immediately mature in full (subject to
the provisions of the next sentence) without any action on the part of the
Fiscal Agent or any holder of the Securities, with payment thereon being subject
to the Payment Restrictions, and any restrictions imposed as a consequence of,
or pursuant to, such proceedings. In the event the Securities shall mature prior
to August 15, 1999 in accordance with the preceding sentence, the principal
amount due in respect thereof shall equal the Accreted Value of the Security as
of such date, calculated in accordance with paragraph 7 hereof. Notwithstanding
any other provision of this Security or the Fiscal Agency Agreement, in no event
shall the Fiscal Agent or any
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<PAGE> 43
holder of the Securities be entitled to declare the Securities to immediately
mature or otherwise be immediately payable.
(b) In the event that the Superintendent approves in whole or
in part a payment of any interest on or principal of any Securities and the
Issuer fails to pay the full amount of such approved payment on the date such
amount is scheduled to be paid, such approved amount will be immediately payable
on such date without any action on the part of the Fiscal Agent or any holder of
Securities. In the event that the Issuer fails to perform any of its other
obligations hereunder or under the Fiscal Agency Agreement, each holder of the
Securities may pursue any available remedy to enforce the performance of any
provision of such Securities or the Fiscal Agency Agreement, provided, however,
that such remedy shall in no event include the right to declare the Securities
immediately payable, and shall in no circumstances be inconsistent with the
provisions of Section 1307. A delay or omission by any Security holder in
exercising any right or remedy accruing as a result of the Issuer's failure to
perform its obligations hereunder or under the Fiscal Agency Agreement and the
continuation thereof shall not impair such right or remedy or constitute a
waiver of or acquiescence in such non-performance by the Issuer. To the extent
permitted by law, no remedy is exclusive of any other remedy and all remedies
are cumulative.
(c) Notwithstanding any other provision of this Security or
the Fiscal Agency Agreement, the right of any holder of Securities to receive
payment of the principal of and interest on such holder's Securities on or after
the respective Scheduled Interest Payment Dates or Scheduled Maturity Date
expressed in such Securities, or to bring suit for the enforcement of any such
payment on or after such respective Scheduled Interest Payment Dates or
Scheduled Maturity Date, in each case subject to such payment on such dates
having received the approval of the Superintendent pursuant to the Payment
Restrictions, including the approval of the Superintendent pursuant to Section
1307, is absolute and unconditional and shall not be impaired or affected
without the consent of the holder.
17. No reference herein to the Fiscal Agency Agreement and no
provision of this Security or of the Fiscal Agency Agreement shall alter or
impair the obligation of the Issuer, subject to the Payment Restrictions, to pay
the principal of and interest on this Security at the times, place and rate, and
in the coin or currency, herein prescribed.
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have executed this
Fiscal Agency Agreement as of the date first above written.
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By:
------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, N.A.
By:/s/ J.D. Hearns
------------------------------------
Name: J.D. Hearns
Title: Vice President
Attest:/s/ Kathleen Perry
--------------------------------
<PAGE> 45
EXHIBIT B
FORM OF GLOBAL SECURITY
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM AND IN ACCORDANCE WITH THE FISCAL AGENCY AGREEMENT, COPIES
OF WHICH ARE AVAILABLE FOR INSPECTION AT THE CORPORATE TRUST OFFICE OF THE
FISCAL AGENT. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM SUCH REGISTRATION PROVIDED
BY RULE 144A UNDER THE ACT (TOGETHER WITH ANY SUCCESSOR PROVISION, AND AS SUCH
MAY HEREAFTER BE AMENDED FROM TIME TO TIME, "RULE 144A").
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
[INSERT NAME OF DEPOSITARY] TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IN EXCHANGE FOR THIS
SECURITY OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF [INSERT NAME OF
NOMINEE OF DEPOSITARY] OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF [INSERT NAME OF DEPOSITARY] (AND ANY PAYMENT IS MADE TO
(INSERT NAME OF NOMINEE OF DEPOSITARY] OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF [INSERT NAME OF DEPOSITARY]), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN
[INSERT NAME OF DEPOSITARY] OR A NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, [INSERT NAME OF NOMINEE OF DEPOSITARY], HAS AN
INTEREST HEREIN.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE FISCAL
AGENCY AGREEMENT REFERRED TO HEREINAFTER. THIS GLOBAL SECURITY MAY NOT BE
EXCHANGED, IN WHOLE OR IN PART, FOR A SECURITY REGISTERED IN THE NAME OF ANY
PERSON OTHER THAN [INSERT NAME OF DEPOSITARY] OR A NOMINEE THEREOF, EXCEPT IN
THE LIMITED CIRCUMSTANCES SET FORTH IN SECTION 5 OF THE FISCAL AGENCY AGREEMENT,
AND MAY NOT BE TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 6(B) OF THE FISCAL AGENCY AGREEMENT.
BENEFICIAL INTERESTS IN THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED
<PAGE> 46
EXCEPT IN ACCORDANCE WITH SECTION 6(B) OF THE FISCAL AGENCY AGREEMENT.
[INCLUDE IF SECURITY IS A RESTRICTED GLOBAL SECURITY OR SECURITY
ISSUED IN EXCHANGE THEREFOR (UNLESS, PURSUANT TO SECTION 6(G) OF THE FISCAL
AGENCY AGREEMENT, THE ISSUER DETERMINES THAT THE LEGEND MAY BE REMOVED)] -- THE
HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK ("MONY") THAT (A) THIS SECURITY MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) BY THE INITIAL INVESTOR (I) IN A
MINIMUM PRINCIPAL AMOUNT OF $250,000 TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A (OR ANY
SUCCESSOR PROVISION THERETO, AND AS MAY HEREAFTER BE AMENDED FROM TIME TO TIME)
UNDER THE ACT, IN A TRANSACTION IN ACCORDANCE WITH RULE 144A, (II) IN AN
OFFSHORE TRANSACTION IN A MINIMUM PRINCIPAL AMOUNT OF $500,000 IN ACCORDANCE
WITH RULE 903 OR 904 OF REGULATION S (TOGETHER WITH ANY SUCCESSOR PROVISION, AND
AS MAY HEREAFTER BE AMENDED FROM TIME TO TIME, "REGULATION S") UNDER THE ACT OR
(III) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 (OR ANY
SUCCESSOR PROVISION THERETO, AND AS MAY HEREAFTER BE AMENDED FROM TIME TO TIME)
UNDER THE ACT (IF AVAILABLE) OR (2) BY SUBSEQUENT INVESTORS, AS SET FORTH IN (1)
ABOVE AND, IN ADDITION, IN A MINIMUM PRINCIPAL AMOUNT OF $500,000 TO AN
INSTITUTIONAL INVESTOR WHO IS AN "ACCREDITED INVESTOR," AS DEFINED IN RULE
501(a) (1), (2), (3) OR (7) UNDER THE ACT, IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES, AND (B) THAT THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESTRICTIONS REFERRED TO IN (A) ABOVE.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF MONY THAT, IF
THE HOLDER PROPOSES TO SELL OR TRANSFER THIS SECURITY TO ANY EMPLOYEE BENEFIT
PLAN (AS DEFINED IN SECTION 3 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED), THE HOLDER WILL COMPLY WITH THE RESTRICTIONS SET FORTH IN
PARAGRAPH 10 HEREOF.
ALL PAYMENTS OF PRINCIPAL (INCLUDING ANY PREMIUM WITH RESPECT TO ANY
REDEMPTION) AND INTEREST ON THIS SECURITY MAY ONLY BE MADE OUT OF THE FREE AND
DIVISIBLE SURPLUS OF MONY AND WITH THE PRIOR APPROVAL OF THE SUPERINTENDENT OF
INSURANCE OF THE STATE OF NEW YORK (THE "SUPERINTENDENT"), IN
<PAGE> 47
ACCORDANCE WITH SECTION 1307 OF THE NEW YORK INSURANCE LAW (TOGETHER WITH ANY
SUCCESSOR PROVISION, AND AS MAY BE HEREAFTER AMENDED FROM TIME TO TIME, "SECTION
1307"). THERE ARE NO GUIDELINES OR INTERPRETATIONS AS TO THE EXTENT OF THE
SUPERINTENDENT'S DISCRETION UNDER SECTION 1307 IN DETERMINING WHETHER THE
FINANCIAL CONDITION OF MONY WARRANTS THE MAKING OF SUCH PAYMENTS.
IF THE NOTES MATURE PRIOR TO THE FINAL SCHEDULED MATURITY DATE SET
FORTH HEREIN, THE CLAIM OF A HOLDER OF NOTES WITH RESPECT TO THE PRINCIPAL
AMOUNT THEREOF WILL BE LIMITED TO AN AMOUNT EQUAL TO THE "ACCRETED VALUE" OF THE
NOTES, AS DESCRIBED IN PARAGRAPH 7 HEREOF, WHICH AMOUNT WILL FOR ALL PERIODS
PRIOR TO AUGUST 15, 1999 BE LESS THAN 100% OF THE PRINCIPAL AMOUNT AT MATURITY
OF THE NOTES.
THE NOTES WILL BE ISSUED AT AN ISSUE PRICE OF $578.54 PER $1,000
PRINCIPAL AMOUNT, WHICH REPRESENTS A DISCOUNT OF 42.146% FROM THE PRINCIPAL
AMOUNT PAYABLE AT MATURITY. CONSEQUENTLY, PURCHASERS OF THE NOTES SHOULD BE
AWARE THAT, ALTHOUGH CASH INTEREST WILL NOT ACCRUE ON THE NOTES PRIOR TO AUGUST
15, 1999, AND CASH INTEREST IS NOT SCHEDULED TO BE PAID ON THE NOTES PRIOR TO
FEBRUARY 15, 2000, ORIGINAL ISSUE DISCOUNT WILL ACCRUE FROM THE ISSUE DATE OF
THE NOTES AND WILL BE INCLUDIBLE AS INTEREST INCOME PERIODICALLY (INCLUDING FOR
PERIODS ENDING PRIOR TO FEBRUARY 15, 2000) IN A HOLDER'S GROSS INCOME FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES REGARDLESS OF WHETHER THE HOLDER HAS RECEIVED
THE CASH PAYMENTS TO WHICH THE INCOME IS ATTRIBUTABLE.
<PAGE> 48
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
11 1/4% Surplus Note scheduled to mature on August 15, 2024
CUSIP NO.: ________
No. R- _____ $125,000,000
Issue Date: August 15, 1994
Issue Price: $578.54
Original Issue Discount: $421.46
Yield to Maturity: 11 1/4%
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a mutual life
insurance company organized under the laws of the State of New York (herein
called the "Issuer"), for value received, hereby promises to pay, subject to the
approval of the Superintendent pursuant to Section 1307, to __________, or
registered assigns, the principal sum of ____________United States dollars ($
________ ), or such other amount (not to exceed one hundred and twenty five
million dollars ($125,000,000) when taken together with all of the Issuer's 11
1/4% Surplus Notes scheduled to mature on August 15, 2024 issued and outstanding
in definitive certificated form or in the form of another Global Security) as
may from time to time represent the principal amount of the Issuer's 11 1/4%
Surplus Notes scheduled to mature on August 15, 2024 in respect of which
beneficial interests are held through the Depositary in the form of a Restricted
Global Security, on August 15, 2024 (the "Final Scheduled Maturity Date"), and
to pay interest thereon, subject to the approval of the Superintendent pursuant
to Section 1307, from August 15, 1999 or from the most recent Scheduled Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on February 15 and August 15 in each year, commencing February 15,
2000 (each a "Scheduled Interest Payment Date", which term shall also include
any other dates on which the payment of interest herein may be due in accordance
with paragraph 4(a) hereof), at the rate of 11 1/4% per annum, until the
principal hereof is paid or duly provided for. Any reference herein to the term
"principal" or the "principal amount" of this Security shall include the amount
of premium, if any, payable upon redemption hereof in accordance with paragraph
15 hereof. Any reference herein to the term "Scheduled Maturity Date" or other
date for the payment of principal of this Security shall include the Final
Scheduled Maturity Date and the date, if any, fixed for redemption hereof in
accordance with paragraph 15 hereof. The date upon which any state or federal
agency obtains an order or grants approval for the rehabilitation, liquidation,
conservation or dissolution of the Issuer shall also be deemed to be the
Scheduled Maturity Date of this Security. As specified on the reverse hereof,
all payments of principal of (and premium, if any, on) or interest on this
Security may be made only out of the Issuer's free and divisible surplus and
only with the prior approval of the Superintendent. The interest so payable, and
punctually paid or duly provided for,
B-4
<PAGE> 49
on any Scheduled Interest Payment Date shall be paid, in accordance with the
terms of the Fiscal Agency Agreement hereinafter referred to, to the person (the
"registered holder") in whose name this Security (or one or more predecessor
Securities) is registered at the close of business on the January 31 or July 31
(whether or not a business day), as the case may be (each a "Regular Record
Date"), next preceding such Scheduled Interest Payment Date. Interest on the
Securities shall be calculated on the basis of a 360-day year of twelve 30-day
months. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the registered holder on such Regular Record
Date and shall be paid to the person in whose name this Security (or one or more
predecessor Securities) is registered at the close of business on a special
record date for the payment of such interest to be fixed by the Issuer, notice
whereof shall be given to registered holders of the Securities not less than 15
days prior to such special record date.
Interest on this Security will not accrue until August 15,
1999, except in the event the Accreted Value (as defined in Section 7 hereof)
hereof shall become immediately due and payable prior to such date in accordance
with paragraph 16(a) hereof, in which case such Accreted Value (the amount of
which shall be calculated in accordance with paragraph 7 hereof) shall bear
interest at the rate of 11 1/4% per annum from the date such amount is due until
paid or duly provided for; provided, however, that interest will not accrue or
be payable upon any such interest with respect to any such Accreted Value
amounts.
Principal of this Security shall be payable against surrender
hereof at the corporate trust office of the Fiscal Agent hereinafter referred to
and at the offices of such other Paying Agents as the Issuer shall have
appointed pursuant to the Fiscal Agency Agreement. Payments of principal of the
Securities shall be made only against surrender of the Securities. Payments of
interest on this Security may be made, in accordance with the foregoing and
subject to applicable laws and regulations, by check mailed on or before the
Scheduled Interest Payment Date of such payment to the person entitled thereto
at such person's address appearing on the aforementioned register. In the case
of a registered holder of at least $5,000,000 aggregate principal amount of
Securities, payments of principal or interest may be made by wire transfer to an
account maintained by the payee with a bank if such registered holder so elects
by giving notice to the Fiscal Agent, not less than 15 days (or such fewer days
as the Fiscal Agent may accept at its discretion) prior to the applicable
Scheduled Interest Payment Date or Scheduled Maturity Date hereof, of such
election and of the account to which payments are to be made. Unless such
designation is revoked, any such designation made by such holder with respect to
such Securities shall remain in effect with respect to any future payments with
respect to such Securities payable to such holder. The Issuer agrees that until
this Security has been delivered to the Fiscal Agent for cancellation, or monies
sufficient to pay the full principal of and interest remaining unpaid on this
Security have been made available for payment and either paid or returned to the
Issuer as provided herein, it will at all times maintain offices or agencies in
the Borough of Manhattan, The City of New York for the payment of the principal
of and interest on the Securities as herein provided.
B-5
<PAGE> 50
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
This Security may be executed by the Issuer by manual or
facsimile signatures, and such signatures may be executed on separate
counterparts.
Unless the certificate of authentication hereon has been
executed by the Fiscal Agent by manual signature, this Security shall not be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be duly executed.
Dated:
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
This is one of the Securities referred to in the
within-mentioned Fiscal Agency Agreement.
THE CHASE MANHATTAN BANK, N.A.,
as Fiscal Agent
By:
-----------------------------------
Authorized Officer
B-6
<PAGE> 51
FORM OF REVERSE
1. This Security is one of a duly authorized issue of 11 1/4%
Surplus Notes scheduled to mature on August 15, 2024 of the Issuer (herein
called the "Securities" or "Notes"), limited in aggregate principal amount to
$125,000,000. The Issuer and The Chase Manhattan Bank, N.A. (as "Fiscal Agent")
have entered into a Fiscal Agency Agreement, dated as of August 15, 1994 (such
instrument, as it may be duly amended from time to time, is herein called the
"Fiscal Agency Agreement"), which provides for the mechanism for issuing the
Securities and, inter alia, sets forth certain duties of the Fiscal Agent in
connection therewith. As used herein, the term "Fiscal Agent" includes any
successor fiscal agent under the Fiscal Agency Agreement. Copies of the Fiscal
Agency Agreement are on file and available for inspection at the corporate trust
office of the Fiscal Agent in the Borough of Manhattan, The City of New York.
Holders of Securities are referred to the Fiscal Agency Agreement for a
statement of the terms thereof, including those relating to transfer, payment,
exchanges and certain other matters. The Fiscal Agent or any Paying Agent shall
also act as Transfer Agent and Securities registrar. Terms used herein which are
defined in the Fiscal Agency Agreement but not otherwise defined herein shall
have the meanings assigned to such terms in the Fiscal Agency Agreement.
The Securities are direct and unsecured obligations of the
Issuer and, subject to the payment restrictions contained in paragraphs 4 and 11
hereof (the "Payment Restrictions"), are scheduled to mature on August 15, 2024.
Section 1307 provides that the Securities are not part of the legal liabilities
of the Issuer and are not a basis of any set-off against the Issuer.
2. The Securities are issuable only in fully registered form
without coupons. Securities are issuable in minimum denominations of $[250,000]
$[500,000] and integral multiples of $1,000 above that amount.
3. The Issuer shall maintain, in the Borough of Manhattan, The
City of New York, a Transfer Agent where Securities may be registered or
surrendered for registration of transfer or exchange. The Issuer has initially
appointed the Corporate Trust Office of the Fiscal Agent as its Transfer Agent
in the Borough of Manhattan, The City of New York. The Issuer shall cause each
Transfer Agent to act as a Securities registrar and shall cause to be kept at
the office of each Transfer Agent a register in which, subject to such
reasonable regulations as it may prescribe, the Issuer shall provide for the
registration of Securities and registration of transfers of Securities. The
Issuer reserves the right to vary or terminate the appointment of any Transfer
Agent or to appoint additional or other Transfer Agents or to approve any change
in the office through which any Transfer Agent acts, provided that there shall
at all times be a Transfer Agent in the Borough of Manhattan, The City of New
York. The Issuer shall cause notice of any resignation, termination or
appointment of the Fiscal Agent or any Paying
B-7
<PAGE> 52
Agent or Transfer Agent and of any change in the office through which any such
Agent shall act to be provided to holders of Securities.
Subject to the restrictions set forth herein and in the Fiscal
Agency Agreement, the transfer of a Security is registrable on the
aforementioned register upon surrender of such Security at any Transfer Agent
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Issuer duly executed by, the registered holder thereof or
his attorney duly authorized in writing. Upon such surrender of this Security
for registration of transfer, the Issuer shall execute, and the Fiscal Agent
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities, dated the date of authentication
thereof, of any authorized denominations and of a like aggregate principal
amount.
Subject to the restrictions set forth herein and in the Fiscal
Agency Agreement, at the option of the registered holder upon request confirmed
in writing, Securities may be exchanged for Securities of any authorized
denominations and aggregate principal amount upon surrender of the Securities to
be exchanged at the office of any Transfer Agent. Whenever any Securities are so
surrendered for exchange, the Issuer shall execute, and the Fiscal Agent shall
authenticate and deliver, the Securities which the registered holder making the
exchange is entitled to receive. Any registration of transfer or exchange shall
be effected upon the Issuer being satisfied with the documents of title and
identity of the person making the request and subject to the restrictions set
forth in the immediately following paragraph and such reasonable regulations as
the Issuer may from time to time agree with the Fiscal Agent.
Securities may be redeemed by the Issuer, in whole or in part,
but only to the extent permitted by the Payment Restrictions, including the
prior approval of the Superintendent, in accordance with paragraph 15 hereof. In
the event of a partial redemption, the Issuer shall not be required (i) to
register the transfer of or exchange any Security during a period beginning at
the opening of business 15 days before the date notice is given identifying the
Securities to be redeemed, or (ii) to register the transfer or exchange of any
Security, or portion thereof, called for redemption.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Issuer, evidencing
the same debt, and entitled to the same benefits, as the Securities surrendered
upon such registration of transfer or exchange. No service charge shall be made
for any registration of transfer or exchange, but the Issuer may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Issuer, the Fiscal Agent and any agent of the Issuer or the Fiscal
Agent may treat the person in whose name this Security is registered as the
absolute owner hereof for all purposes, whether or not this Security be overdue,
and neither the Issuer nor the Fiscal Agent nor any such agent shall be affected
by notice to the contrary.
B-8
<PAGE> 53
4. (a) Notwithstanding anything to the contrary set forth
herein or in the Fiscal Agency Agreement, any payment of principal of, interest
on or any monies owing with respect to this Security, whether at the Scheduled
Interest Payment Date or Scheduled Maturity Date specified herein or otherwise,
may be made only (i) out of the free and divisible surplus of the Issuer which
the Superintendent determines to be available for such payments under Section
1307 and (ii) with the prior approval of the Superintendent whenever, in his
judgment, the financial condition of the Issuer warrants such payment, in
accordance with Section 1307. If the Superintendent does not approve the making
of any payment of principal of or interest on this Security on the Scheduled
Interest Payment Date or Scheduled Maturity Date thereof, as specified herein,
the Scheduled Interest Payment Date or Scheduled Maturity Date, as the case may
be, shall be extended and such payment shall be made by the Issuer on the next
following Business Day on which the Issuer shall have the approval of the
Superintendent to make such payment. Interest will continue to accrue on any
such unpaid principal through the actual date of payment at the rate of interest
stated on the face hereof. Interest will not accrue on interest with respect to
which the Scheduled Interest Payment Date has been extended, during the period
of such extension. If the Superintendent approves a payment of principal of or
interest on the Securities in an amount that is less than the full amount of
principal of and interest on the Securities then scheduled to be paid in respect
of the Securities, payment of such partial amount shall be made pro rata among
Security holders as their interests may appear.
(b) Any payment of principal of or interest on any Security as
to which the approval of the Superintendent has been obtained and which is not
punctually paid or duly provided for on the Scheduled Interest Payment Date or
Scheduled Maturity Date thereof, as set forth herein (such payment being
referred to as an "Unpaid Amount"), will forthwith cease to be payable to the
registered owner of this Security on the relevant record date designated herein,
and such Unpaid Amount will instead be payable to the registered owner of this
Security on a subsequent special record date. The Issuer shall fix the special
record date and payment date for the payment of any Unpaid Amount. At least 15
days before the special record date, the Issuer shall mail to each holder of the
Securities and the Fiscal Agent a notice that states the special record date,
payment date and amount of interest or principal to be paid. On the payment date
set forth in such notice, the Paying Agent shall pay the amount of interest or
principal to be so paid to each holder of the Securities in the manner set forth
in Section 4(a) of the Fiscal Agency Agreement.
5. (a) For so long as the Fiscal Agent is acting as a Paying
Agent hereunder, the Issuer shall provide, subject to the Payment Restrictions,
to the Fiscal Agent in immediately available funds on or prior to 10:00 a.m.,
New York time, of each date on which a payment of principal of or any interest
on this Security is payable, as set forth herein, such amounts as are necessary
(with any amounts then held by the Fiscal Agent and available for the purpose)
to make such payment, and the Issuer hereby authorizes and directs the Fiscal
Agent from funds so provided to it to make or cause to
B-9
<PAGE> 54
be made payment of the principal of and any interest, as the case may be, on
this Security as set forth herein and in the Fiscal Agency Agreement. Payments
of principal of or any interest on the Securities may be made, in the case of a
registered holder of at least $5,000,000 principal amount of Securities, by wire
transfer to an account maintained by the payee with a bank if such registered
holder so elects by giving notice to the Fiscal Agent, not less than 15 days (or
such fewer days as the Fiscal Agent may accept at its discretion) prior to the
date on which such payments are scheduled to be made, of such election and of
the account to which payments are to be made. Unless such designation is
revoked, any such designation made by such holder with respect to such
Securities shall remain in effect with respect to any future payments with
respect to such Securities payable to such holder. The Issuer shall pay any
reasonable administrative costs in connection with making any such payments. The
Fiscal Agent shall arrange directly with any other Paying Agent who may have
been appointed by the Issuer pursuant to the provisions of Section 2 of the
Fiscal Agency Agreement for the payment from funds so paid by the Issuer of the
principal of and any interest on this Security. Any monies held in respect of
this Security remaining unclaimed at the end of two years after such principal
and such interest shall have become payable in accordance with the Payment
Restrictions (whether at the Scheduled Maturity Date or otherwise) and monies
sufficient therefor shall have been duly made available for payment shall,
together with any interest made available for payment thereon, be repaid to the
Issuer upon written request and upon such repayment all liability of the Fiscal
Agent with respect thereto shall cease, without, however, limiting in any way
any obligation the Issuer may have to pay the principal of and interest on this
Security, subject to the Payment Restrictions.
(b) In any case where the Scheduled Interest Payment Date or
Scheduled Maturity Date of any Security shall be at any place of payment a day
on which banking institutions are not carrying out transactions in U.S. dollars
or are authorized or obligated by law or executive order to close, then payment
of principal or interest need not be made on such date at such place but may be
made on the next succeeding day at such place which is not a day on which
banking institutions in the applicable jurisdiction are generally authorized or
obligated by law or executive order to close (a "Business Day"), with the same
force and effect as if made on the Scheduled Interest Payment Date or Scheduled
Maturity Date thereof, and no interest shall accrue for the period after such
date.
6. The Issuer shall pay all stamp and other duties, if any,
which may be imposed by the United States of America or any governmental entity
or any political subdivision thereof or taxing authority of or in the foregoing
with respect to the Fiscal Agency Agreement or the initial issuance of this
Security. Except as otherwise specifically provided in this Security, the Issuer
shall not be required to make any payment with respect to any tax, duty,
assessment or other governmental charge of whatever nature imposed or levied by
any government or any political subdivision or taxing authority thereof or
therein.
B-10
<PAGE> 55
7. In the event that, pursuant to any provisions of this
Security or the Fiscal Agency Agreement, the principal in respect of this
Security shall mature prior to the Final Scheduled Maturity Date, the principal
amount so matured shall be equal to the Accreted Value hereof. The "Accreted
Value" shall be equal to the sum of (i) the issue price of this Security as
determined in accordance with Section 1273 of the Internal Revenue Code, as
amended from time to time (the "Code"), plus (ii) the aggregate of the portions
of the original issue discount (the excess of the amounts considered as part of
the "stated redemption price at maturity" within the meaning of Section 1273(a)
(2) of the Code or any successor provisions, whether denominated as principal or
interest, over the issue price) that shall theretofore have accrued pursuant to
Section 1272 of the Code (without regard to Section 1272(a)(7) of the Code)
from the date of issue (a) for each six-month or shorter period ending February
15 or August 15 prior to the date of determination and (b) for the shorter
period, if any, from the end of the immediately preceding six-month or shorter
period, as the case may be, to the date of determination, minus all amounts
theretofore paid in respect of this Security, which amounts are considered as
part of the "stated redemption price at maturity" of this Security within the
meaning of Section 1273(a)(2) of the Code or any successor provisions (whether
such amounts paid were denominated principal or interest).
8. For so long as any of the Securities remain Outstanding or
any amount remains unpaid on any of the Securities,
(a) Except with respect to transactions covered by paragraph 9
hereof, the Issuer will do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, material rights
(charter and statutory) and franchise; provided, however, that the Issuer shall
not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Issuer and that the Issuer has used its
best efforts to not disadvantage in any material respect the holders of the
Securities, or that not preserving such right or franchise is in the best
interest of the policyholders of the Issuer having considered the interests of
the holders of the Securities.
(b) The Issuer will not be or become an open-end investment
company, unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company Act of 1940,
as amended (the "Investment Company Act"), if such action would cause the
Issuer to be in violation of the Investment Company Act at any time prior to
payment in full of the Securities.
(c) The Issuer shall use its best efforts to obtain the
approval of the Superintendent in accordance with Section 1307 for the payment
by the Issuer of interest on and principal of the Securities on the Scheduled
Interest Payment Dates or Scheduled Maturity Dates thereof, and, in the event
any such approval has not been obtained for any such payment at or prior to the
Scheduled Interest Payment Date
B-11
<PAGE> 56
or Scheduled Maturity Date thereof, as the case may be, to continue to use its
best efforts to obtain such approval promptly thereafter. Not less than 45 days
prior to the Scheduled Interest Payment Date or Scheduled Maturity Date thereof
(excluding any such Scheduled Maturity Date which arises as a result of the
obtaining of an order or the granting of approval for the rehabilitation,
liquidation, conservation or dissolution of the Issuer), the Issuer will seek
the approval of the Superintendent to make each payment of interest on and
principal of the Securities. In addition, the Issuer shall notify or cause to be
notified each holder and the Fiscal Agent no later than 5 Business Days (as
defined herein) prior to the Scheduled Interest Payment Date for interest on or
the Scheduled Maturity Date for principal of any Security (excluding any such
Scheduled Maturity Date which arises as a result of the obtaining of an order or
the granting of approval for the rehabilitation, liquidation, conservation or
dissolution of the Issuer) in the event that the Superintendent has not then
approved the making of any such payment on such Scheduled Interest Payment Date
or such Scheduled Maturity Date, and thereafter shall promptly notify each
holder and the Fiscal Agent in the event that the Issuer shall have failed to
make any such payment on any such Scheduled Interest Payment Date or such
Scheduled Maturity Date. Without limiting the Issuer's obligations set forth in
this paragraph, it is understood that, to the extent authorized by the Issuer's
Board of Directors, the Issuer may continue to declare policyowner dividends and
to make dividend payments on its participating policies even though payments on
the Securities may not have been approved by the Superintendent, regardless of
the effect any such declaration or payment may have on the Superintendent's
decision regarding payment of interest on or principal of the Securities.
9. For so long as any of the Securities remain Outstanding or
any amounts remain unpaid on any of the Securities, the Issuer may convert
itself from a mutual life insurance company into a stock life insurance company
(such conversion, a "demutualization"), merge or consolidate with or into any
other corporation or sell, convey, transfer or otherwise dispose of all or
substantially all of its assets to any person, firm or corporation, if (i)(A)
in the case of a merger or consolidation, the Issuer is the surviving
corporation or (B) in the case of a merger or consolidation where the Issuer is
not the surviving corporation and in the case of any such sale, conveyance,
transfer or other disposition, the successor corporation is a corporation
organized and existing under the laws of the United States or a State thereof
and such corporation expressly assumes by supplemental fiscal agency agreement
all the obligations of the Issuer under the Securities and the Fiscal Agency
Agreement, (ii) at the time of any such demutualization, merger or
consolidation, or such sale, conveyance, transfer or other disposition, the
Issuer shall not have failed to make payment of interest on or principal of the
Securities after having received the Superintendent's prior approval to make
such payment and (iii) the Issuer has delivered to the Fiscal Agent an Officer's
Certificate stating that such demutualization, merger, consolidation, sale,
conveyance, transfer or other disposition complies with this paragraph and that
all conditions precedent herein provided for relating to such transaction have
been complied with. In the event of the assumption by a successor corporation of
the obligations of the Issuer as provided in clause (i)(B) of the immediately
preceding sentence, such successor corporation shall succeed to and be
substituted for the Issuer hereunder and under the Fiscal Agency Agreement and
all such obligations of the Issuer shall terminate.
B-12
<PAGE> 57
10. No employee benefit plan within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the prohibited transaction provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), as to which the Issuer is a party in interest
or a disqualified person (each a "Plan"), and no Person acting on behalf of a
Plan, may acquire this Security, unless the acquisition of the Security is
exempt under one or more of Prohibited Transaction exemptions 84-14, 90-1 or
91-38 (or any amendment thereof) or another applicable exemption from the
prohibitions under Section 406 of ERISA and Section 4975 of the Code. The
purchase by any Person of this Security shall constitute a representation by
such Person to the Issuer and the Fiscal Agent that such Person either (i) is
not a Plan or (ii) is a Plan, and may acquire this Security under an applicable
exemption from the prohibitions under Section 406 of ERISA and Section 4975 of
the Code. The restrictions on purchases of the Securities set forth in this
paragraph 10 are in addition to those other-wise set forth in Section 6 of the
Fiscal Agency Agreement and under applicable law.
11. (a) The Issuer agrees, and each Security holder by
accepting a Security agrees, that the indebtedness evidenced by the Securities
is subordinated in right of payment, to the extent and in the manner provided in
this paragraph, to the prior payment in full of all Indebtedness, Policy Claims
and Other Creditor Claims (each as hereinafter defined), in accordance with
Section 7435 of the New York Insurance Law (together with any successor
provision, and as may be hereafter amended from time to time, "Section 7435").
(b) Upon any distribution to creditors of the Issuer in any
rehabilitation, liquidation, conservation, dissolution or reorganization
proceeding relating to the Issuer or its property, the priority of claims of
Security holders shall be determined in accordance with Section 7435. In a
proceeding commenced under Article 74 of the New York Insurance Law, claims for
principal of or interest on the Securities constitute Class 7 claims under
Section 7435, as currently in effect. If the Superintendent approves a payment
of principal of or interest on the Securities in an amount that is less than the
full amount of principal of and interest on the Securities then scheduled to be
paid in respect of the Securities, payment of such partial amount shall be made
pro rata among Security holders as their interests may appear.
(c) If a distribution is made to Security holders that,
because of this paragraph, should not have been made to them, the Security
holders who receive the distribution shall hold it in trust for holders of
Policy Claims, Indebtedness and Other Creditor Claims and pay it over to them as
their interests may appear.
(d) The Issuer shall promptly notify the Fiscal Agent and the
Paying Agent of any facts known to the Issuer that would cause a payment of
principal of or interest on the Securities to violate this paragraph.
(e) This paragraph defines the relative rights of Security
holders, on the one hand, and holders of any other claims, in accordance with
Section 7435, on the
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<PAGE> 58
other hand. Nothing in this Security or the Fiscal Agency Agreement shall (i)
impair, as between the Issuer and Security holders, the obligation of the Issuer
which is, subject to the Payment Restrictions, absolute and unconditional to pay
principal of and interest on the Securities in accordance with their terms; (ii)
affect the relative rights of Security holders and creditors of the Issuer,
other than holders of Policy Claims, Indebtedness or Other Creditor Claims; or
(iii) prevent the Fiscal Agent or any Security holder from exercising any
available remedies upon a breach by the Issuer of its obligations hereunder,
subject to the rights of holders of Policy Claims, Indebtedness or Other
Creditor Claims to receive distributions otherwise payable to Security holders.
(f) No right of any holder of Policy Claims, Indebtedness or
Other Creditor Claims to enforce the subordination of the indebtedness evidenced
by the Securities shall be impaired by any act or failure to act by the Issuer
or by its failure to comply with the terms of this Fiscal Agency Agreement.
(g) Each holder of Securities, by acceptance thereof,
authorizes and directs the Fiscal Agent on its behalf to take such action as may
be necessary or appropriate to effectuate the subordination provided in this
paragraph and appoints the Fiscal Agent its attorney-in-fact for any and all
such purposes.
As used herein, "Indebtedness" of the Issuer shall mean (i)
all existing or future indebtedness of the Issuer for borrowed money, (ii) all
existing or future indebtedness for borrowed money of other persons, the payment
of which is guaranteed by the Issuer, (iii) all existing or future obligations
of the Issuer under any agreement obligating the Issuer to cause another person
to maintain a minimum level of net worth, or otherwise to ensure the solvency of
such person and (iv) any expense or any claim or amount, to the extent that
payment of principal of and interest on the Securities is required by law to be
subordinated to the prior payment thereof. Any obligation of the Issuer which by
its express terms is subordinated in right of payment to, or ranks equally with,
the Securities, or any indebtedness or other obligation of any separate account
of the Issuer, shall not constitute Indebtedness. However, under current law the
Issuer cannot incur any indebtedness which by its terms is subordinate to the
Securities. In addition, any other surplus notes or similar obligations of the
Issuer shall not constitute Indebtedness and will rank pari passu with the
Securities.
As used herein, "Policy Claims" shall mean all existing or
future claims of policyholders or beneficiaries, as the case may be, under any
and all existing or future policies, endorsements, riders and other contracts of
insurance, annuity contracts (including, without limitation, guaranteed
investment contracts) and funding agreements issued, assumed or renewed by the
Issuer on or prior to the date hereof or hereafter created, all claims arising
under separate account agreements to the extent such claims are not fully
discharged by the assets held by the Issuer in the applicable separate accounts
and all claims of The Life Insurance Company Guaranty Corporation of New York or
any other guaranty corporation or association of New York or any other
jurisdiction, other
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<PAGE> 59
than claims described in clause (i) of the definition of "Other Creditor Claims"
below and claims for interest.
As used herein, "Other Creditor Claims" shall mean all other
claims which, pursuant to Section 7435, have priority over claims with respect
to the Securities. Under Section 7435 as currently in effect, such other claims
include (i) claims with respect to the actual and necessary costs and expenses
of administration incurred by a liquidator, conservator, rehabilitator or
ancillary rehabilitator under Section 7435; (ii) claims with respect to the
actual and necessary costs and expenses of administration incurred by The Life
Insurance Guaranty Corporation or The Life Insurance Company Guaranty
Corporation of New York; (iii) claims of The Life Insurance Company Guaranty
Corporation for certain funds loaned to the Superintendent under Section 7713(d)
of the New York Insurance Law; (iv) debts up to $1,200 due to employees for
services performed within one year of the commencement of rehabilitation,
liquidation, conservation, dissolution or reorganization proceedings; (v) claims
for payment for goods furnished or services rendered in the ordinary course of
business within 90 days of the declaration of the impairment or insolvency of
the Issuer; (vi) claims of the federal or any state or local government (except
in the case of claims for a penalty or forfeiture which are included only to the
extent of pecuniary loss and reasonable costs occasioned by the act giving rise
to the forfeiture or penalty); and (vii) claims of general creditors and all
other claims having priority under Section 7435.
12. For so long as any of the Securities remain Outstanding or
any amount remains unpaid on any of the Securities, the Issuer shall, in
accordance with Rule 144A, comply with the terms of the agreements set forth in
Section 7 of the Fiscal Agency Agreement. The provisions of Sections 7 and 8 of
the Fiscal Agency Agreement are hereby incorporated mutatis mutandis herein.
13. In case this Security shall become mutilated, defaced,
destroyed, lost or stolen, the Issuer will execute and upon the Issuer's request
the Fiscal Agent shall authenticate and deliver a new Security, having a number
not contemporaneously outstanding, of like tenor (including the same date of
issuance) and equal principal amount, registered in the same manner, dated the
date of its authentication and bearing interest from the date to which interest
has been paid on this Security, in exchange and substitution for this Security
(upon surrender and cancellation thereof) or in lieu of and substitution for
this Security. In the case where this Security is destroyed, lost or stolen, the
applicant for a substituted Security shall furnish to the Issuer such security
or indemnity as may be required by the Issuer to save it and the Fiscal Agent
harmless, and, in every case of destruction, loss or theft of this Security, the
applicant shall also furnish to the Issuer satisfactory evidence of the
destruction, loss or theft of this Security and of the ownership thereof;
provided, however, that if the registered holder hereof is, in the judgment of
the Issuer, an institution of recognized responsibility, such holder's written
agreement of indemnity shall be deemed to be satisfactory for the issuance of a
new Security in lieu of and substitution for this Security. The Fiscal Agent
shall authenticate any such substituted Security and deliver the same only upon
written request or
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<PAGE> 60
authorization of the Issuer. Upon the issuance of any substituted Security, the
Issuer may require the payment by the registered holder thereof of a sum
sufficient to cover fees and expenses connected therewith. In case this Security
has matured or is about to mature and shall become mutilated or defaced or be
destroyed, lost or stolen, the Issuer may, subject to the Payment Restrictions,
instead of issuing a substitute Security, pay or authorize the payment of the
same (without surrender thereof except if this Security is mutilated or defaced)
upon compliance by the registered holder with the provisions of this paragraph
13 as hereinabove set forth.
14. Section 10 of the Fiscal Agency Agreement, which Section
is hereby incorporated mutatis mutandis by reference herein, provides that, with
certain exceptions as therein provided and with the consent of the holders of a
majority of the principal amount of the Outstanding Securities present at a
meeting duly called pursuant thereto or by written consent of such percentage of
the principal amount of all Outstanding Securities, the Issuer and the Fiscal
Agent may, with the prior approval of the Superintendent, modify, amend or
supplement the Fiscal Agency Agreement or the terms of the Securities or may
give consents or waivers or take other actions with respect thereto. Any such
modification, amendment, supplement, consent, waiver or other action shall be
conclusive and binding on the holder of this Security and on all future holders
of this Security and of any Security issued upon the registration of transfer
hereof or in exchange heretofore or in lieu hereof, whether or not notation
thereof is made upon this Security. The Fiscal Agency Agreement and the terms of
the Securities may, with the prior approval of the Superintendent, be modified
or amended by the Issuer and the Fiscal Agent, without the consent of any
holders of Securities, for the purpose of (a) adding to the covenants of the
Issuer for the benefit of the holders of Securities, or (b) surrendering any
right or power conferred upon the Issuer, or (c) securing the Securities
pursuant to the requirements hereof, thereof or otherwise, or (d) evidencing the
succession of another corporation to the Issuer and the assumption by such
successor of the covenants and obligations of the Issuer herein and in the
Fiscal Agency Agreement as permitted by the Securities and the Fiscal Agency
Agreement, or (e) modifying the restrictions on, and procedures for, resale and
other transfers of the Securities to the extent required or permitted by any
change in applicable law or regulation (or the interpretation thereof) or in
practices relating to the resale or transfer of restricted securities generally,
or (f) accommodating the issuance, if any, of Securities in book-entry or
certificated form and matters related thereto which do not adversely affect the
interest of any Security holder in any material respect, or (g) curing any
ambiguity or correcting or supplementing any defective provision contained
herein or in the Fiscal Agency Agreement in a manner which does not adversely
affect the interest of any Security holder in any material respect, or (h)
effecting any amendment which the Issuer and the Fiscal Agent may determine is
necessary or desirable and which shall not adversely affect the interest of any
Security holder, to all of which each holder of any Security, by acceptance
thereof, consents.
15. (a) Subject to the Payment Restrictions and the prior
approval of the Superintendent, up to $31,250,000 of the aggregate principal
amount of the Securities may be redeemed at the option of the Issuer, in each
twelve-month period
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<PAGE> 61
commencing August 15, 2021, at any time upon not more than 60 days' nor less
than 30 days' notice as herein provided, at the following Redemption Prices
(expressed as percentages of the principal amount), in each case together with
accrued interest (except if the date of such redemption is a Scheduled Interest
Payment Date) to the date of redemption, during the twelve-month period
beginning August 15 of the years indicated:
Year Redemption Price
2021 100%
2022 100%
2023 100%
Interest installments the payment of which have been approved by the
Superintendent and which are payable on or prior to such date of redemption will
be payable to the holders of such Securities of record at the close of business
on the relevant Record Dates set forth herein.
(b) In the case of any partial redemption of Securities, the
Securities to be redeemed shall be selected by the Fiscal Agent not less than 30
days prior to the date of such redemption, from the Outstanding Securities not
previously called for redemption, by such method as the Fiscal Agent shall deem
fair and appropriate and which may provide for the selection for redemption of
portions (equal to $1,000 or any integral multiple thereof) of the principal
amount of Securities of a denomination larger than $250,000.
(c) Notices to redeem Securities shall be given to holders of
Securities in writing mailed, first-class postage prepaid, to each holder of
Securities, or portions thereof, so to be redeemed, at his address as it appears
in the Security Register. Such notice will be given once not more than 60 days
nor less than 30 days prior to the date fixed for redemption, and shall be
deemed to have been given on the date of mailing. If by reason of the suspension
of regular mail service, or by reason of any other cause, it shall be
impracticable to give notice to the holders of Securities in the manner
prescribed herein, then such notification in lieu thereof as shall be made by
the Issuer or by the Fiscal Agent on behalf of and at the instruction of the
Issuer shall constitute sufficient provision of such notice, if such
notification shall, so far as may be practicable, approximate the terms and
conditions of the mailed notice in lieu of which it is given. Neither the
failure to give notice nor any defect in any notice given to any particular
holder of a Security shall affect the sufficiency of any notice with respect to
other Securities. Notices to redeem Securities shall specify the date fixed for
redemption, the redemption price, the place or places of payment, that payment
will be made upon presentation and surrender of the Securities to be redeemed
(or portion thereof in the case of a partial redemption), that interest accrued
to the date fixed for redemption (unless the date of redemption is a Scheduled
Interest Payment Date) will be paid as specified in said notice, and that on and
after said date interest thereon will cease to accrue if the Securities are so
redeemed. In addition, in the case of a partial redemption, the Redemption
Notice
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<PAGE> 62
shall specify the Securities called for redemption and the aggregate principal
amount of the Securities to remain Outstanding after the redemption.
(d) If notice of redemption has been given in the manner set
forth in paragraph 15(c) hereof, the Securities so to be redeemed shall, subject
to the Payment Restrictions, be payable in full on the date specified in such
notice and upon presentation and surrender of the Securities at the place or
places specified in such notice, the Securities shall be paid and redeemed by
the Issuer at the places and in the manner and currency herein specified and at
the redemption price together with accrued interest (unless the redemption date
is a Scheduled Interest Payment Date) to the redemption date. From and after the
redemption date, if monies for the redemption of Securities called for
redemption shall have been made available at the Principal Office of the Fiscal
Agent for redemption on the redemption date, the Securities called for
redemption shall cease to bear interest, and the only right of the holders with
respect to such Securities or portion thereof being redeemed shall be to receive
payment of the redemption price together with accrued interest (unless the
redemption date is an Interest Payment Date) to the redemption date as
aforesaid. If monies for the redemption of the Securities are not made available
for payment until after the redemption date, the Securities called for
redemption shall not cease to bear interest until such monies have been so made
available.
(e) Any Security which is to be redeemed only in part shall be
surrendered with, if the Issuer or the Fiscal Agent so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Issuer and
the Fiscal Agent duly executed by, the holder thereof or his attorney duly
authorized in writing, and the Issuer shall execute, and the Fiscal Agent shall
authenticate and deliver to the holder of such Security without service charge,
a new Security or Securities, of any authorized denomination as requested by
such holder, and as permitted by Section 1(d) of the Agreement, in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
16. Holders of Securities may enforce the Fiscal Agency
Agreement or the Securities only in the manner set forth below.
(a) In the event that any state or federal agency shall obtain
an order or grant approval for the rehabilitation, liquidation, conservation or
dissolution of the Issuer, the Securities will upon the obtaining of such an
order or the granting of such approval immediately mature in full (subject to
the provisions of the next sentence) without any action on the part of the
Fiscal Agent or any holder of the Securities, with payment thereon being subject
to the Payment Restrictions, and any restrictions imposed as a consequence of,
or pursuant to, such proceedings. In the event the Securities shall mature prior
to August 15, 1999 in accordance with the preceding sentence, the principal
amount due in respect thereof shall equal the Accreted Value of the Security as
of such date, calculated in accordance with paragraph 7 hereof. Notwithstanding
any other provision of this Security or the Fiscal Agency Agreement, in no event
shall the Fiscal Agent or any
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<PAGE> 63
holder of the Securities be entitled to declare the Securities to immediately
mature or otherwise be immediately payable.
(b) In the event that the Superintendent approves in whole or
in part a payment of any interest on or principal of any Securities and the
Issuer fails to pay the full amount of such approved payment on the date such
amount is scheduled to be paid, such approved amount will be immediately payable
on such date without any action on the part of the Fiscal Agent or any holder of
Securities. In the event that the Issuer fails to perform any of its other
obligations hereunder or under the Fiscal Agency Agreement, each holder of the
Securities may pursue any available remedy to enforce the performance of any
provision of such Securities or the Fiscal Agency Agreement; provided, however,
that such remedy shall in no event include the right to declare the Securities
immediately payable, and shall in no circumstances be inconsistent with the
provisions of Section 1307. A delay or omission by any Security holder in
exercising any right or remedy accruing as a result of the Issuer's failure to
perform its obligations hereunder or under the Fiscal Agency Agreement and the
continuation thereof shall not impair such right or remedy or constitute a
waiver of or acquiescence in such non-performance by the Issuer. To the extent
permitted by law, no remedy is exclusive of any other remedy and all remedies
are cumulative.
(c) Notwithstanding any other provision of this Security or
the Fiscal Agency Agreement, the right of any holder of Securities to receive
payment of the principal of and interest on such holder's Securities on or after
the respective Scheduled Interest Payment Dates or Scheduled Maturity Date
expressed in such Securities, or to bring suit for the enforcement of any such
payment on or after such respective Scheduled Interest Payment Dates or
Scheduled Maturity Date, in each case subject to such payment on such dates
having received the approval of the Superintendent pursuant to the Payment
Restrictions, including the approval of the Superintendent pursuant to Section
1307, is absolute and unconditional and shall not be impaired or affected
without the consent of the holder.
17. No reference herein to the Fiscal Agency Agreement and no
provision of this Security or of the Fiscal Agency Agreement shall alter or
impair the obligation of the Issuer, subject to the Payment Restrictions, to pay
the principal of and interest on this Security at the times, place and rate, and
in the coin or currency, herein prescribed.
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<PAGE> 64
EXHIBIT C
FORM OF TRANSFER CERTIFICATE
FOR EXCHANGE OR TRANSFER OF
RESTRICTED DEFINITIVE SECURITY
The Chase Manhattan Bank, N.A.,
as Fiscal Agent
1 Chase Manhattan Plaza
Level 1B
Institutional Trust Window
New York, New York 10081
Re: The Mutual Life Insurance Company of New
York, 11 1/4% Surplus Notes scheduled to
mature on August 15, 2024 (the "Securities")
Reference is hereby made to the Fiscal Agency Agreement, dated
as of August 15, 1994 (the "Fiscal Agency Agreement"), between The Mutual Life
Insurance Company of New York, as Issuer, and The Chase Manhattan Bank, N.A., as
Fiscal Agent. Capitalized terms used but not defined herein shall have the
meanings given to them in the Fiscal Agency Agreement.
This letter relates to $________________ principal amount of
Restricted Definitive Securities held in definitive form by [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of such Securities.
In connection with such request and in respect of such
Securities, the Transferor does hereby certify that (i) such Securities are
owned by the Transferor and are being exchanged without transfer or (ii) such
transfer has been effected pursuant to and in accordance with Rule 144A, Rule
144 or Rule 903 or Rule 904 under the United States Securities Act of 1933, as
amended (the "Act"), and accordingly the Transferor does hereby further certify
that:
I. if the transfer is being effected pursuant to and in
accordance with Rule 144A under the Act, that the Securities are being
transferred to a person that the Transferor reasonably believes is
purchasing the Securities for its own account, or for one or more
accounts with respect to which such person exercises sole investment
discretion, and such person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A, in each case in a
transaction meeting the requirements of Rule 144A and in accordance
with any applicable securities laws of any state of the United States
or any other jurisdiction; or
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<PAGE> 65
II. if the transfer has been effected pursuant to Rule 144,
the Securities have been transferred in a transaction permitted by Rule
144; or
III. if the transfer has been effected pursuant to Rule 903 or
904:
(1) the offer of the Securities was not made to a
person in the United States;
(2) either:
(A) at the time the buy order was
originated, the transferee was outside the United
States or the Transferor and any person acting on its
behalf reasonably believed that the transferee was
outside the United States, or
(B) the transaction was executed in, on or
through the facilities of a designated offshore
securities market and neither the Transferor nor any
person acting on its behalf knows that the
transaction was prearranged with a buyer in the
United States;
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme
to evade the registration requirements of the Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Issuer and the Initial Purchasers. Terms
used in this certificate and not otherwise defined in the Fiscal Agency
Agreement have the meanings set forth in Regulation S under the Act.
[Insert Name of Transferor]
By:
--------------------------------------
Name:
Title:
Dated:
cc: The Mutual Life Insurance Company of New York
C-2
<PAGE> 1
Exhibit 10.29
EXCESS BENEFIT PLAN FOR MONY EMPLOYEES
Effective January 1, 1982
Amended to January 1, 1987
Restated as of January 1, 1997
<PAGE> 2
EXCESS BENEFIT PLAN FOR MONY EMPLOYEES
1. Purpose
1.1 The purpose of this Plan is to provide to a select group of highly
compensated and management employees of The Mutual Life Insurance Company of New
York "MONY" with benefits to replace those benefits which may not be accrued
under the Retirement Income Security Plan Employees ("RISPE") and/or the
Investment Plan Supplement for Employees of MONY ("MIP") because of limitations
imposed by Section 401(a)(17), 401(m), 402(g) 410(b) or other similar sections
of the Internal Revenue Code of 1986 (the "Code") and the regulations
thereunder. A separate part of this Plan provides, pursuant to Section 3(36) of
the Employee Retirement Income Security Act of 1974, benefits for employees to
replace those benefits which may not be accrued under RISPE and/or MIP because
of limitations imposed by Section 415 of the Code (the "Excess Benefit Plan"
portion of the Plan).
1.2 The substantive portion of RISPE and MIP are incorporated by reference into
and are a part of this Plan as if set forth here. Any amendments made to the
substantive provision shall also be incorporated by reference into the Plan
effective as of the effective date of the amendments.
Article II Definitions
2.1 All terms with initial capital letters which are used in RISPE and/or MIP
shall have the same definitions as under
2
<PAGE> 3
RISPE and/or MIP as the case may be unless specified here or the context
otherwise requires.
2.2 Employee means any person engaged in rendering personal services under the
direction or control of the Employer or any person receiving disability benefits
under the Security Plan for Employees of MONY and shall include leased employees
within the meaning of Code Section 414(n)(2), but shall not include Field
Underwriters in their capacity as such. Notwithstanding the foregoing, if a plan
is maintained for leased employees of the Employer which meets the requirements
of Code Section 414(n)(5), the term "Employee" shall not include such leased
employees.
1. DEFINITIONS
1.5 Administrative Committee means the Benefits Committee of the Board of
Trustees as provided in Section 11. For purposes of ERISA, the members of the
Administrative Committee shall be the named fiduciaries (with respect to the
matters for which they are made responsible under the Plan) of the Plan.
A. MONY means The Mutual Life Insurance Company of New York.
B. Excess Benefit Plan for MONY Employees means this Excess Benefit
Plan for MONY Employees (the "Plan") maintained by MONY.
2.3 Excess Investment Plan Credit means a credit equal to the sum of the dollar
amount, if any, of matching Company or
3
<PAGE> 4
Employer, Profit Sharing, or Defined Contributions and the dollar amount, if
any, of Employee contributions which would have been allocated or contributed
under the RISPE or MIP, as the case may be, for a Plan Year, but for (I) the
limitations of Code Section 415 the provisions of the paragraph entitled
"Overall Limitations on Contributions to this Plan" contained in the Investment
Plan, and/or (ii) the limitation of 401(a)(17), 402(g), 401(m), or 410(b) of the
Internal Revenue Code, as amended, applicable to the amount of elective
deferrals of any Employee for any taxable year; which exceed such contributions
which are actually made to the Investment Plan, or allocated under RISPE, as the
case may be. In no event, however, will an Employee receive credits under both
clause (I) and clause (ii) of this Section 2.3 with respect to contributions
that exceed both of said limitations.
An Employee shall only be entitled to have an Excess Investment Plan Credit
attributable to Elective 401(k) Deferral Contributions credited to his account
under Section 3 hereunder to the extent that he has previously authorized MONY,
in a signed writing, to reduce his compensation. The percentage of such
authorized reduction in compensation shall not be greater than the maximum
aggregated percentage of Elective 401(k) Deferral Contributions then in effect
with respect to the Employee under the Investment Plan. [The percentage of such
authorized reduction in compensation must correspond to an amendment by the
Employee in the amount of Elective 401(k) Deferral Contributions and (expressed
as a percentage of compensation) authorized to be contributed with respect to
the Employee under the Investment Plan.]
4
<PAGE> 5
An Employee shall only be entitled to have an Excess Investment Plan Credit
attributable to matching Company Contributions credited to his account under
Section 3 hereunder to the extent that he has previously authorized MONY to
reduce his compensation to preserve the unfunded status of this Plan, in no
event will any contributions to this Plan actually be made by an Employee or by
MONY.
2.4 Excess Retirement Plan Benefit means a benefit equal to the sum of : (I) the
dollar amount, if any, of the benefits (including the preretirement annuity
death benefit, if applicable) in excess of the benefits payable under the
Retirement Plan, and which would have been payable under the Retirement Plan but
for the provisions of the section entitled "Code Section 415 Limitations on
Benefits" contained in the Retirement Plan, (ii) the dollar amount, if any,
which would have been payable under the Retirement Plan, but for the Employee's
authorized reduction in compensation pursuant to Subsection H above, and (iii)
the dollar amount, if any, of the benefits in excess of the benefits payable
under the Non-Qualified Retirement Plan and which would have been payable under
the Non-Qualified Retirement Plan (respecting amounts of compensation deferred
by an Employee pursuant to the Deferred Compensation Plan), but for the
application of the provisions of the section entitled "Limitations of Benefits"
contained in the Retirement Plan to the Non-Qualified Retirement Plan.
2.5 OTHER TERMS
Unless the context otherwise indicates, terms used in this Plan shall
have the meaning assigned to them by MONY's Investment Plan and Retirement Plan.
5
<PAGE> 6
3. ELIGIBILITY AND PARTICIPATION
An Employee shall become a Participant in this Plan only as provided in
this Section 3. An Employee eligible to participate in this Plan and who is
selected by the Administrative Committee to participate in the Plan shall become
a Participant in the Plan at the earlier of:
(a) his or her election to defer portion of his or her Compensation;
(b) the first day of the Plan Year in which his or her benefit under
the Investment Plan is affected either by the Compensation Limitation or the
Contribution Limitation; or
(c) at such time any of the discretionary payments or matching
allocations to be made by the Company or Participating Employer cannot be made
to he Investment or Retirement Plan.
4. BOOKKEEPING ACCOUNT
4.1 Excess Investment Plan Credits shall be credited hereunder to a bookkeeping
account established for each eligible Employee as of the same day or days during
the Plan Year in which MONY would have made a matching Employer Contributions on
behalf of the Employee and/or in which Elective 401(k) Deferral Contributions
would have been made with respect to an Employee to the Investment Plan.
6
<PAGE> 7
4.2 The Participant may defer any portion of his or her Compensation. Deferral
is not limited to amounts that cannot be deferred under the Investment Plan.
4.3 Compensation deferred under the Plan, but will not duplicate contributions
made under the Investment and/or Retirement Plan.
4.4 The Company or Participating Employer shall contribute any of the Elective
401(k) deferral contributions that a Participant is eligible to receive but
which cannot be made to the Investment or Retirement Plan because of the
application of Code Section 401(a)(17) or 401(m) or 410(b).
4.5 Notwithstanding any provision of the Plan to the contrary, the annual Plan
Benefits set forth under Article IV shall be determined and coordinated by the
Committee so as to prevent any duplication of Plan and Savings Plan benefits.
5. INVESTMENT RETURN ON EXCESS INVESTMENT PLAN CREDITS
Prior to and after the commencement of benefits hereunder, MONY shall
credit or debit each Employee's Excess Investment Plan Credits in his
bookkeeping account with the gains, losses and expenses, if any, which would
have accrued had the dollar amount of such credits been invested in the funds
then available under the Investment Plan in accordance with the Employee's
effective election as to those funds at the time such debit or credit is made.
The Employee may elect in writing that MONY shall credit each Excess Investment
Plan Credit in his bookkeeping account with the generation interest rate
applicable to group annuity
7
<PAGE> 8
contracts issued by MONY to fund non-tax-qualified pension plans for the
calendar year. The election of generation interest must be made in writing on
the appropriate forms and may be made once for each calendar year for all Excess
Investment Plan Credits in the Employee's Account during that calendar year
(regardless of the year in which they were credited). The foregoing election
shall be irrevocable during the calendar year for which it was made. The
election of generation interest for any calendar year shall be completely
irrevocable and shall effectively cause all future interest on this increment to
be generation basis. In the absence of any election, a return paralleling the
investment experience of the funds under the Investment Plan shall be credited,
as described above. MONY reserves the right to change the manner of crediting
interest or any other returns for all future Excess Investment Plan Credits.
MONY has the right to limit the Excess Investment Plan Credits that can be
subject to this election.
6. VESTING
Each Employee shall be vested in Excess Investment Plan Credits made by
the Company to his account under this Plan, to the same extent and in the same
manner as set forth in the applicable provisions of the Investment Plan. Each
Employee shall be vested in Excess Retirement Plan Benefits under this Plan to
the same extent and in the same manner as set forth in the applicable provisions
of the Retirement Plan.
7. PAYMENT OF BENEFITS
A. Excess Retirement Plan Benefits
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Excess Retirement Plan Benefits shall be paid to each such Employee or
other applicable payee validly designated by or for such Employee under the
Retirement Plan, in accordance with an automatic payout provision of the
Retirement Plan, or where applicable, in accordance with any effective election
made by the Employee or other applicable payee under the Retirement Plan with
respect to benefits under the Retirement Plan. Excess Retirement Plan Benefits
can only be paid on account of events permitting payment from the Retirement
Plan, that is, on account of death, retirement, or termination of service.
Excess Retirement Plan Benefits shall commence on the same date and shall be in
the same form as the benefits under the Retirement Plan, unless a different
payout option is elected by such Employee or other applicable payee; however,
the different payout option must be one that is available under the Retirement
Plan.
B. Excess Investment Plan Credits
Excess Investment Plan Credits accumulated hereunder shall be paid to
each Employee or other applicable beneficiary or payee validly designated by or
for such Employee under the Investment Plan, only on account of total and
permanent disability, death, termination of service, or retirement in accordance
with the automatic payout provision (i.e. a lump sum cash distribution) of the
Investment Plan or where applicable, in accordance with any effective election
under the Investment Plan with respect to benefits under the Investment Plan.
Loans and active service withdrawals of Excess Investment Plan credits are not
permitted. Benefits hereunder attributable to Excess
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Investment Plan Credits shall commence on the same date and shall be in the same
form as the benefits under the Investment Plan unless a different payout option
is elected by such Employee or other applicable payee; however, the different
payout option must be one that is available under the Investment Plan.
C. Notwithstanding any Plan provision to the contrary, no Company or
Participating Employer contributions made under this Plan and interest earnings
credited on Participant accounts shall be paid with respect to a Participant (or
beneficiary) who is terminated for "Cause". For purposes of the Plan, Cause
means (a) action by the Participant involving willful and wanton malfeasance and
including any wrongful and unlawful act, or (b) the Participant being convicted
of a felony directly or indirectly involving the Company. Nothing contained here
shall prevent the payment of benefits to a vested Participant who is
involuntarily terminated for reasons other than Cause.
8. ADMINISTRATION
No provision contained in this Plan shall be deemed to create more than
an unfunded and unsecured promise to pay benefits under the Plan from the
general funds of MONY. Any amount credited to the account of any Employee will
be for bookkeeping purposes only and shall not be considered held in trust or in
escrow. To the extent that any person acquires a right to receive payments from
MONY under the Plan, such right shall be no greater than the right of any
unsecured general creditor or MONY. No trust or fiduciary
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relationship shall be deemed to have been created hereunder for the Employee or
his beneficiary.
9. MISCELLANEOUS
A. No Assignment
No credit or benefit payable under this Plan shall be assignable,
transferable or subject to alienation, surrender or anticipation, or to the
debts of any person or to legal process, except as may be otherwise provided in
the Plan or by law. Notwithstanding the above, however, where the Administrative
Committee has received an order, analogous to a qualified domestic relations
order, benefits will be payable in a lump sum only for Investment Plan credits
or Retirement Plan allocations, or in an annuity form for Retirement Plan
defined benefit payments.
B. No Employee Rights
Nothing contained herein shall in any way obligate MONY to retain any
Employee in its employment for any period of time, nor in any way affect MONY's
right to change at any time any Employee's rate of salary, the method or
conditions for payment thereof, or any other aspect of any Employee's
employment.
C. No Additional Tax Liability to MONY
If, as a result of receiving benefits from this Plan, any person is
subject to a higher rate or different form of taxation than would have been the
case had benefits been paid from the Retirement Plan or the Investment Plan
without
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regard to any limitations imposed by ERISA, MONY shall in no way be liable for
any portion of the additional tax burden, and such person shall have no recourse
whatsoever against MONY.
D. Interpretation of Plan
MONY shall have the exclusive right to interpret this Plan and to
decide any matters arising hereunder in the administration of the Plan.
E. Governing Law
This Plan shall be construed, enforced and administered according to
the laws of the State of New York and any federal law or regulation governing
the provisions or administration of this Plan. In case any provision of the Plan
shall be held illegal or invalid for any reason, it shall not affect the
remaining provisions of the Plan, but the Plan shall be construed and enforced
as if such illegal or invalid provision had not been included therein.
F. Amendment and Termination
MONY reserves the right, at any time and from time to time, to amend or
terminate this Plan in whole or in part subject to the approval of the
Superintendent of Insurance of the State of New York, if required. No such
amendment or termination will reduce any benefits or credits under this Plan as
in effect on the day before the effective date of such Plan amendment or
termination.
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Any amendment or termination of the Plan shall be effected by the
Chairman of the Board of MONY by preparing a written instrument setting forth
the provisions of the Plan as revised by the amendment and specifying the
effective date(s) of the amendment or setting forth the provisions effectuating
the termination of the Plan and specifying the effective date of termination.
10. PARTICIPATION IN THE PLAN BY AN AFFILIATE
10.1 Notwithstanding anything herein to the contrary, with the consent of the
Company, an Affiliate may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Affiliate, by a properly
executed document evidencing said intent and will of such Participating
Affiliate.
10.2 (a) Each such Participating Affiliate shall be required to use the same
Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle, hold
and invest as one Trust Fund all contributions made by Participating Affiliates,
as well as all increments thereof. However, all assets of the Plan shall, on an
ongoing basis, be available to pay benefits to all Participants and
Beneficiaries under the Plan without regard to the Employer who contributed such
assets.
(c) The transfer of any Participant from or to an Affiliate
participating in this Plan, whether he or she be an Employee of the Company or a
Participating Affiliate, shall not affect such Participant's vesting Service
under the Plan, and all amounts credited to such Participant's Account Balance
as well as his or her accumulated service time with the transferor or
predecessor, and his or her length of participation in the Plan, shall continue
to his or her credit.
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(d) All rights and values forfeited by a Separation from Service
shall inure only to the benefit of the Company or Participating Affiliate by
which the forfeiting Participant was employed at time of Separation from
Service.
(e) Any expenses of the Plan which are to be paid by the Company or
borne by the Trust Fund may be paid by each Participating Affiliate in the same
proportion that the total amount standing to the credit of all Participants
employed by such Participating Affiliate bears to the total standing to the
credit of all Participants.
10.3 Each Participating Affiliate shall be deemed to be a party to this Plan;
provided, however, that with respect to all of its relations with the Trustee
and Administrator for the purpose of this Plan, each Participating Affiliate
shall be deemed to have designated irrevocably the Company as its agent.
10.4 If an Employee is transferred between Participating Affiliates including
the Company and in the event of any such transfer, the Employee involved shall
be credited with his or her accumulated Service. No such transfer shall effect a
termination of employment hereunder, and the Participating Affiliate to which
the Employee is transferred shall thereunder become obligated hereunder with
respect to such Employee in the same manner as was the Participating Affiliate
from whom the Employee was transferred.
10.5 All contributions made by a Company or Participating Affiliate, as provided
for in this Plan, shall be determined separately by each Participating
Affiliate, and shall be allocated only among the Participants eligible to the
share in the Company or Participating Affiliate making the contribution. The
Administrator shall keep separate books and records concerning the affairs of
the Company and each Participating Affiliate hereunder and as to the accounts
and credits of the Employees of each Participating Affiliate.
10.6 Any Participating Affiliate shall be permitted to discontinue or revoke its
participation in the Plan upon 60
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days notice. At the time of any such discontinuance or revocation, satisfactory
evidence thereof and of any conditions imposed shall be delivered to the
Administrative Committee. The Administrative Committee shall thereafter
transfer, deliver and assign Fund assets allocable to the Participants of such
Participating Affiliate to such new trustee or insurer as shall have been
designated by such Participating Affiliate in the event that it has established
a separate pension benefit plan for its Employees. If no successor is
designated, the Trust shall retain such assets for the Employees of said
Participating Affiliate pursuant to the provisions of the Plan. In no such event
shall any part of the corpus or income of the Plan as it relates to such
Participating Affiliate be used for or diverted to purposes other than for the
exclusive benefit of the Employees of such Participating Affiliate, except as
may be permitted by law.
10.7 The Administrative Committee shall have authority to make any and all
necessary rules or regulations, binding upon all Participating Affiliates and
all Participants, to effectuate the purpose of this Section.
10.8 If any Participating Affiliate is prevented in whole or in part
from making a contribution to the Trust Fund which it would otherwise have made
under the Plan by reason of having no current or accumulated earnings or
profits, or because such earnings or profits are less than the contribution
which it would otherwise have made, then, pursuant to Code Section 404(a)(3)(B),
so much of the contribution which such Participating Affiliate was so prevented
from making, may be made, for the benefit of the participating Employees of such
Participating Affiliate, by the other Participating Affiliates who are members
of the same affiliated group within the meaning of Code Section 1504 to the
extent of their current or accumulated earnings or profits, except that such
contribution by each such other Participating Affiliate shall be limited to the
proportion
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of its total current and accumulated earnings or profits remaining after
adjustment for its contribution to the Plan made without regard to this
paragraph which the total prevented contribution bears to the total current and
accumulated earnings or profits of all the Participating Affiliates remaining
after adjustment for all contributions made to the Plan without regard to this
paragraph.
11. PLAN ADMINISTRATION
11.1 Named Fiduciaries
MONY's Board of Trustees has the exclusive responsibility and
authority to select, retain and remove Named Fiduciaries for this Plan. The
Named Fiduciaries of this Plan shall be selected and appointed by MONY's Board
of Trustees by action taken by it from time to time. MONY's Board of Trustees
shall select and appoint one or more Named Fiduciaries for this Plan each of
whom shall jointly have the exclusive responsibility and authority,
respectively: (1) to establish the level of benefits with respect to this Plan,
(2) to control and manage the operation of this Plan, (3) to control and manage
the administration of this Plan (including the performance of the function of
the Plan Administrator of this Plan, and the administration of the claims
procedures as described in Section 11.9 below), and (4) to control and manage
the disposition of the assets of this Plan which are invested in the Trust in
accordance with the terms of the Plan and of the Trust.
Any person appointed by MONY's Board of Trustees as a Named
Fiduciary of this Plan shall indicate, in writing, acceptance of the
responsibilities thereby appointed to him or her. Any person so appointed shall
agree to perform the duties required of him or her in accordance with the terms
of the Plan and, if applicable, of the Trust.
11.2 Administrative Committee
The Benefits Committee of MONY's Board of Trustees (the
"Administrative Committee") shall be the Named
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Fiduciary for the Plan with all fiduciary responsibility concerning the
operation of this Plan as well as the exclusive responsibility and authority to
control and manage the operation of this Plan in accordance with the terms of
the Plan and of the Trust, which authority includes the power to delegate all or
a portion of his or her fiduciary duties to one or more officers of MONY, and
includes the power: (1) to determine the level of Employer contributions and
Employee contributions, if any, the level of benefit accrual and vesting, if
any, for Participants, and any other factor affecting the cost or the level of
benefits for Participants and others under this Plan, (2) to amend (and
authorize Employer funding thereof) or, with the approval of MONY's Board of
Trustees, terminate this Plan on behalf of MONY and (3) to determine the
long-term investment policy of the Plan and the overall manner in which the Plan
should be funded in order to carry out that investment policy.
11.2.1 Administrative Committee Powers and Duties
The Administrative Committee is allocated such duties and powers as
may be necessary to discharge its duties hereunder including, without
limitation, the exclusive authority to perform the following functions:
(a) To make such rules and regulations as it shall deem
necessary or proper for the efficient administration of the Plan;
(b) To interpret and construe the Plan and to decide any and
all matters arising thereunder including, without limitation, the
right to remedy possible ambiguities, inconsistencies or omissions;
provided, however, that all such interpretations and decisions
shall be applied in a uniform and nondiscriminatory manner to all
similarly situated persons and that any such interpretation shall
be conclusively binding upon all persons interested in the Plan;
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(c) To decide all questions of eligibility to participate in
the Plan, to determine all questions regarding entitlement to
benefits and to determine the amount, manner and timing of any
benefits under the Plan;
(d) To determine the competence of a Participant or
Beneficiary to receive benefits;
(e) To monitor the Average Deferral and Contribution
Percentage Tests under Sections 3.7 and 3.8 each Plan Year and to
take action to assure that such tests are satisfied for each Plan
Year;
(f) To transmit contributions to the Trustee and provide
information to the Trustee concerning the allocation of such
amounts;
(g) To authorize disbursements from the Trust provided that
any instruction of the Administrative Committee to the Trustee
shall be evidenced in writing and signed by any member of the
Administrative Committee who has been duly delegated the authority
to sign documents on behalf of the Administrative Committee;
(h) To prescribe procedures to be followed by Participants or
Beneficiaries who file applications for benefits;
(i) To approve the design of enrollment forms, Beneficiary
designation forms and any other forms utilized in the
administration of the Plan;
(j) To review claims of any person to benefits under the Plan;
(k) To prepare and distribute information concerning the Plan;
(l) To receive from the Employer and from Participants such
information as shall be necessary for the proper administration of
the Plan;
(m) To establish such written procedures as it shall deem
necessary or proper to determine the
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qualified status, pursuant to Code Section 414(p) of any domestic
relations order received by the Administrative Committee which
affects the right of a Participant and any alternate payee to
payment of benefits under the Plan and to administer distributions
pursuant to any domestic relations order which the Administrative
Committee determines to be a qualified domestic relations order
within the meaning of Code Section 414(p);
(n) To delegate by written instrument to one or more
administrative subcommittees with respect to each Employer such of
the powers and duties allocated herein to the Administrative
Committee, as it deems advisable; any such subcommittee shall
consist of persons appointed by the Administrative Committee,
taking into consideration designations recommended by the principal
executive officer of any Employer; and
(o) To make recommendations to the Board of Trustees
concerning amendments to the Plan. The Administrative Committee
shall have the full power and authority necessary or appropriate to
carry out its responsibilities hereunder, and shall have full
discretion in interpreting the Plan and deciding all questions of
fact within the scope of its authority.
No rule or other determination of the Administrative Committee
shall be discriminatory in favor of Employees who are officers or Highly
Compensated Employees.
11.3 Authorization
The Administrative Committee shall act by a vote at a meeting or in
writing without a meeting pursuant to its procedures. The Administrative
Committee may authorize any person to execute any document or documents on its
behalf, and any interested person, upon receipt of notice of such authorization
directed to it, may thereafter accept any reply upon any document executed by
such authorized person until the Administrative Committee shall deliver to such
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interested person a written revocation of such authorization.
11.4 Plan Administrator
The Plan Administrator of this Plan is the Benefit Plans
Administration Committee which has the exclusive responsibility and authority to
control and manage the administration of this Plan (including the administration
of the claims appeal procedure described in Section 11.9 below) in accordance
with the terms of the Plan and of the Trust, including the power and
responsibility: to file all requisite reporting and disclosure forms with
governmental agencies, to provide all requisite disclosure forms to Employees,
Participants, former Participants and Beneficiaries, to maintain requisite
employment, payroll, and other records for this Plan, and to determine all
questions involving eligibility, participation, coverage, employment status,
compensation, vesting, length of service, benefit accrual, rights and
obligations of Employees and others under this Plan, and all other questions
arising in the interpretation and administration of this Plan.
The members of the Benefit Plans Administration Committee (the
"BPAC") shall be appointed by the Administrative Committee and may be removed by
the Administrative Committee at its discretion. Members of the BPAC may, but
need not be, trustees, officers, or Employees of the Employer. Unless the
Employer otherwise provides, any member of the BPAC who is an Employee of the
Employer at the time of his or her appointment will be considered to have
resigned from the BPAC when no longer an Employee.
11.5 Dual Capacity Fiduciaries
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan (including, but not limited to, service on the
Administrative Committee, as a member of the Benefit Plans Administration
Committee and as a Trustee of the Trust).
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Nothing herein shall prohibit a Named Fiduciary or any other
fiduciary of this Plan from:
(1) receiving any benefit to which he may be entitled as a Participant,
former Participant or Beneficiary of this Plan, so long as his or her benefit is
computed and paid on a basis which is consistent with the terms of this Plan as
applied to all other Participants, former Participants and Beneficiaries,
(2) serving as such in addition to being a Trustee, officer, Employee,
agent or other representative of the Employer, or
(3) receiving any reasonable compensation for services rendered, or for
the reimbursement of expenses properly and actually incurred, in the performance
of his or her duties with respect to the Plan, except that no one may receive
any additional compensation for services rendered as a Named Fiduciary or other
fiduciary of this Plan, if and while an officer or Employee of the Employer.
11.6 Removal or Resignation of Named Fiduciaries
Any Named Fiduciary may be removed by MONY's Board of Trustees at any
time upon written notice to such Named Fiduciary, the Administrative Committee,
the Benefit Plans Administration Committee and the Trustees of the Trust. Any
Named Fiduciary may resign at any time upon written notice to MONY, to the other
members of the Administrative Committee or the Benefit Plans Administration
Committee and to the other Trustees of the Trust.
In the event of a vacancy in the office of a Named Fiduciary arising by
reason of the death, removal, resignation, refusal to act, or inability to act,
of any Named Fiduciary, MONY's Board of Trustees shall appoint a successor Named
Fiduciary who upon acceptance of such appointment shall have the same powers and
duties as those conferred upon his or her predecessor Named Fiduciary. Pending
the appointment of a successor Named Fiduciary and the acceptance of such
appointment, the appropriate
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remaining Named Fiduciaries of this Plan shall have the full power to take any
action hereunder.
11.7 Domestic Relations Orders
Any other provision of the Plan to the contrary notwithstanding,
the Administrative Committee shall have all powers necessary with respect to the
Plan for the proper operation of Code Section 414(p) with respect to qualified
domestic relations orders, including, but not limited to, the power to establish
all necessary or appropriate procedures, to authorize the establishment of new
accounts with such assets and subject to such investment control by the
Administrative Committee as the Administrative Committee may deem appropriate,
and the Administrative Committee may decide upon and make direct appropriate
distributions therefrom. Anything in the preceding paragraph to the contrary
notwithstanding, in the case of a domestic relations order entered before
January 1, 1985, the Administrative Committee -
(1) shall treat such order as a qualified domestic relations order if the
Administrative Committee is paying benefits pursuant to such order on such date,
and
(2) may treat any other such order entered before such date as a qualified
domestic relations order even if such order does not meet the requirements of
the amendments made by section 104 and 204 of the Retirement Equity Act of 1984.
The QDRO procedures as of the date of this restatement are as
follows:
1) Upon receipt of a domestic relations order, the Plan Administrator will
determine whether the order is a qualified domestic relations order under the
Code and ERISA.
2) The Plan Administrator, upon receipt of a domestic relations order, shall
notify the Participant and any existing alternate payees of such receipt. The
Plan Administrator shall furnish to the Participant and prospective alternate
payee(s) a copy of these procedures.
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3) During any time for which the determination of the qualified status of a
domestic relations order is being made, the Plan Administrator must defer the
payment of any benefits in dispute. These benefits shall be separately accounted
for. The Plan Administrator may also limit Participant directed transactions
such as withdrawals if required to preserve the amount which would be payable to
the alternate payee. This transaction deferral, or segregation of benefits shall
continue if after the domestic relations order has been found not to be a QDRO,
the Plan Administrator has notice that any deficiencies in the order are being
rectified.
4) If, within the 18 month period of the segregation of funds or accounts, the
domestic relations order is not determined to be qualified, the amounts held for
the alternate payee shall revert back to the persons who would have been
entitled to them had there been no domestic relations order, and/or any accounts
which were segregated shall no longer be segregated.
5) If, after the 18 month period beginning on the date payments under the
domestic relations order would have to begin the order is not found to be
qualified, the order is to be applied prospectively only. Under these
circumstances the Plan is not liable for payments to an alternate payee for the
period before the order is determined to be qualified.
6) Once it is determined whether or not the order is a QDRO, the Plan
Administrator shall so notify the Participant and alternate payee(s).
11.8 Payment of Expenses
The Administrative Committee may engage or employ such suitable
actuaries, agents, attorneys, clerks, or other advisors or assistants (who may
also be trustees, officers or Employees of the Company or an Affiliate), and pay
their reasonable expenses and compensation, as it may determine is necessary for
the expeditious and effective performance of
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its duties under this Plan or they may be paid by the Employer. However, any one
so engaged or employed, and any member of the Administrative Committee shall not
receive any additional compensation from the Trust for services rendered as a
member of the Administrative Committee (or on behalf of the Administrative
Committee), if and while a trustee, officer or Employee of the Company or an
Affiliate. Any determination by the Employer to pay all or part of any expense
shall not in any way limit the Employer's right to determine to have similar or
other expenses paid out of the Trust assets at any other time.
11.9 Claims Procedure
The claims procedure of this Plan shall be administered by the
Administrative Committee and shall include:
11.9.1 Claims Denial Procedure
If a benefit request is wholly or partially denied, the written
notice of such decision shall be furnished to the claimant within 31 days after
the receipt of the claimant's benefit request by the Administrative Committee,
unless special circumstances require an extension of time to process the benefit
request. (If such an extension of time for processing the benefit request
exceeds 90 days following receipt of the claimant's benefit request by the
Administrative Committee, then written notice of the extension shall be
furnished to the claimant prior to the expiration of such 90-day period, but in
no event may such extension exceed 180 days following receipt of the claimant's
benefit request by the Administrative Committee. The extension notice shall
indicate the special circumstances requiring an extension of time to process the
claimant's benefit request, and the date by which the Administrative Committee
expects to render a final decision as to whether or not that benefit request
should be wholly or partially denied.) Any written notice to the claimant
denying such benefit request shall:
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(1) set forth the specific reason or reasons for denial of the
claimant's request for benefit;
(2) make specific reference to pertinent provisions set forth in
the Plan and/or Trust on which the denial is based;
(3) provide a description of any additional material or information
necessary for the claimant to perfect the benefit request;
(4) provide an explanation of why such material or information is
necessary; and
(5) provide appropriate information as to the steps to be taken if
the claimant wishes to submit his or her benefit request for further review
under the Plan's claims appeal procedure described in Section 11.9.2 below.
11.9.2 Claims Appeal Procedure
The claimant or duly authorized representative shall have the right
to request a review by the Administrative Committee of the decision to deny such
benefit request as described in subsection 11.9.1 above. A written request for a
review must be sent by the claimant or duly authorized representative to the
Administrative Committee within 60 days after receipt by the claimant of the
written notice of the denial of the claimant's benefit request. Along with a
request for review, the claimant or duly authorized representative may submit
issues and comments in writing to the Administrative Committee for review.
Should the claimant or duly authorized representative deem it necessary to
review pertinent documents in order to prepare the issues and comments for
review, the claimant or representative may make a request to the Administrative
Committee to review such pertinent documents within the 60-day period after
receipt by the claimant of the written notice of denial of the claimant's
benefit request. Such a request for documents shall be honored by the
Administrative Committee, and a mutually agreeable time during normal business
hours of MONY for review of such documents shall be established.
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Should the 60-day period mentioned above be an insufficient amount
of time for the claimant or his or her representative to prepare the issues and
comments for review, the claimant or his or her representative may request a
30-day extension by making a written request therefore to the Administrative
Committee. The Administrative Committee shall allow such an extension should the
complexities of the case warrant same. Such decision shall be made in a uniform
and nondiscriminatory manner with respect to all claimants similarly situated.
The decision of the Administrative Committee shall be final in
determining the outcome of any claims appeal procedure described in this
Section. Following a full and fair review by the Administrative Committee, it
shall promptly provide a copy of its decision in writing to the claimant not
later than 60 days after its receipt of the written request from the claimant
(or duly authorized representative) to the Administrative Committee for a review
of the claimant's claim under such appeal procedure. However, in the event of
special circumstances (such as the need to hold a hearing, if the Administrative
Committee decides that such is necessary under the claims appeal procedure), the
Administrative Committee may require an extension of time for so furnishing a
copy of its decision to a date not later than 120 days after its receipt of the
written request from the claimant (or duly authorized representative) to the
Administrative Committee for a review of the claimant's claim under such appeal
procedure. If such an extension of time for the Administrative Committee to
furnish a copy of its decision is required because of special circumstances,
then the Administrative Committee shall furnish a written notice of such
extension to the claimant prior to the commencement of the extension.
The Administrative Committee's decision shall be in writing and
shall include specific reasons for the decision, written in a manner calculated
to be understood by the
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claimant, as well as specific references to the pertinent provisions set forth
in the Plan and/or Trust on which the decision is based.
The Administrative Committee shall have such powers as may be
necessary to discharge its duties under the Plan's claims appeal procedure as
described in this Section. It may adopt such rules, not inconsistent with the
provisions of this Plan, as it may deem necessary to efficiently administer such
claims appeal procedure. No rule or decision made by the Administrative
Committee in administering the Plan's claims appeal procedure shall be
discriminatory in favor of Employees who are officers or Highly Compensated
Employees.
11.10 Beneficiaries
11.10.1 Subject to Section 10.3, a Participant may designate one or more persons
as his or her Beneficiary by filing a Beneficiary designation with the
Administrator. Such designation shall be made on the form prescribed for such
purpose by the Administrator and in accordance with rules established by the
Administrative Committee. In the event a Participant fails to make such a
designation, or in the event that no designated Beneficiary survives the
Participant, any amount due after the Participant's death shall be paid to the
Participant's Surviving Spouse, or if there is no Surviving Spouse, to the
Participant's estate. No Beneficiary shall have any right to benefits under the
Plan unless he or she shall survive the Participant. If a Participant and his or
her Beneficiary die under such circumstances that it is not possible to
determine who died first, it shall be presumed that the Participant survived the
Beneficiary.
11.10.2 If a Participant has a Surviving Spouse, the Surviving Spouse shall be
the Participant's Beneficiary unless the Participant has obtained Spousal
Consent to the Participant's designation of another person as Beneficiary.
11.11 Scope of Authority
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The Administrative Committee shall have the full power and
authority necessary or appropriate to carry out its responsibilities hereunder,
and shall have full discretion in interpreting the Plan and deciding all
questions of fact within the scope of its authority.
A. Incapacity of Recipient
In the event a Participant, surviving spouse or beneficiary is declared
incompetent and a guardian, conservator or other person legally charged with the
care of his or her person or of his or her estate is appointed, any benefits
under the Plan to which such Participant, spouse or beneficiary is entitled
shall be paid to such guardian, conservator or other person legally charged with
the care of his or her person or his or her estate. Except as provided here,
when the Committee, in its sole discretion, determines that a Participant,
surviving spouse or beneficiary is unable to manage his or her financial
affairs, the committee may direct the Company to make distributions to any
person for the benefit of such Participant, spouse or beneficiary.
B. Unclaimed Benefit
Each Participant shall keep the Committee informed of his or her
current address. The committee shall not be obligated to search for the
whereabouts of any person. If the location of a Participant is not made know to
the Committee within three years after the date of which any payment of the
Participant's benefit under this agreement may be made, payment may be made as
though the Participant had died at the end of the three year period. If, within
one additional year after such three year period has elapsed, or, within three
years after the actual death of a
28
<PAGE> 29
Participant, whichever occurs first, the Committee is unable to locate the
spouse or any beneficiary of the Participant, any Plan Benefits held for a
Participant, surviving spouse or beneficiary shall be forfeited.
C. Elections, Application. Notices.
Every direction, revocation or notice authorized or required under this
agreement shall be deemed delivered to the Company or the committee as the case
may be: (a) on the date it is personally delivered to the Secretary of the
Committee at the Company's executive offices at or (b) three business days after
it is sent by registered or certified mail, postage prepaid, addressed to the
Secretary of the Committee at the offices indicated above, and shall be deemed
delivered to a Participant, surviving spouse or beneficiary: (a) on the date it
is personally delivered to such individual, or (b) three business days after it
is sent by registered or certified mail, postage prepaid, addressed to such
individual at the last address shown for him or her on the records of the
Company. Any notice required under this agreement may be waived by the person
entitled to it.
D. Counterparts
This Plan may be executed in any number of counterparts, each of which
shall be considered as an original, and no other counterparts need be produced.
E. Severability
In the event any provision of this Plan shall be held illegal or
invalid for any reason, such illegality or
29
<PAGE> 30
invalidity shall not affect the remaining provisions of the Plan. This Plan
shall be construed and enforced as if such illegal or invalid provision had
never been contained here.
F. Headings
The headings of Sections of this Plan are for convenience of reference
only and shall have no substantive effect on the provisions of this Plan.
G. Benefits in case of Death
Designation of Beneficiary
Each Participant shall specifically designate, by name, on forms
provided by the Company, the Beneficiary(ies) who shall receive any benefits
which might be payable after death. The designation may be made at any time
satisfactory to the Company. If a Participant has not designated a Beneficiary
in the manner provided above, the Participant's estate shall be the Beneficiary.
A designation of a Beneficiary may be changed or revoked without the consent of
the Beneficiary at any time or from time to time in a manner as may be provided
by the Company, and the Company shall have no duty to notify any person
designated as a Beneficiary of any change in any designation which might affect
the person's present or future rights here. If the designated Beneficiary does
not survive the Participant, all amounts which would have been paid to the
deceased Beneficiary shall be paid to any remaining Beneficiary in that class of
Beneficiaries, unless the Participant has designated that the amounts go to the
lineal descendants of the deceased Beneficiary. If none of the primary
30
<PAGE> 31
Beneficiaries survive the Participant, and the Participant did not designate the
payments should go to the Beneficiaries' lineal descendants, amounts otherwise
payable to the Beneficiaries shall be paid to any successor Beneficiaries
designated by the Participant, or if none, to the Participant's estate. Not more
than ____ persons, or if a greater number, that number of persons as shall be
necessary to permit the Participant to designate as simultaneous Beneficiaries
any or all of the Participant's surviving children and spouse, may be named as
simultaneous Beneficiaries of any Participant at any one time, and if two or
more persons are to be simultaneous beneficiaries, or if the Participant wishes
to designate alternative, successor, or contingent Beneficiaries, the
Participant shall specify the shares, terms and conditions upon which amounts
shall be paid to the multiple, alternative, successor or contingent
Beneficiaries, all of which must be satisfactory to the Company. Any payment
under this Plan which may be made to a Beneficiary after the death of a
Participant shall be made only to the person(s) or trust(s) designated pursuant
to this section by the Participant.
31
<PAGE> 1
EXHIBIT 10.30
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
DEFERRED COMPENSATION PLAN ("PLAN") AGREEMENT
WITH ________________
THIS AGREEMENT made this ____ day of _________, 19 _____ by and between The
Mutual Life Insurance Company of New York ("MONY" or "Company") and
_______________ (the "Employee"):
WITNESSETH:
WHEREAS, the Employee occupies a position of key significance with MONY
and MONY desires to encourage the Employee to remain with the Company, to make
and to continue to make contributions to MONY's growth; and
WHEREAS, MONY's Board of Trustees adopted a "Deferred Compensation Plan
for Key Employees of The Mutual Life Insurance Company of New York", permitting
Key Employees to defer receipt of a portion of their "Compensation" (as defined
in the Retirement Income Security Plan for Employees ("RISPE") of The Mutual
Life Insurance Company of New York and as modified in Section 1 of this
Agreement), to be paid in the future in accordance with the terms and conditions
herein set forth;
THEREFORE, the parties hereto do agree as follows:
<PAGE> 2
1. Payment of Compensation
Beginning _______, 19 ____ and thereafter for all future calendar years
until the Employee provides MONY with written notice in advance of a calendar
year to discontinue the deferral of future Compensation hereunder, ____% of
$_____ annually and ___% of any Compensation in excess of that amount shall be
deferred and credited in accordance with paragraph 2 below. The beginning date
in the preceding sentence shall be the first day of a future calendar year,
unless the Employee executes this Agreement within thirty days of becoming
eligible for the Plan. In this case, the beginning date may be the first day of
any future month within the calendar year that the employee becomes eligible. In
no event shall the total amount deferred exceed 33-1/3% of total annual
Compensation. Any election to defer more than 33-1/3% shall be reduced in such
manner as MONY shall deem necessary. "Compensation" means Compensation as
defined under RISPE less any payments in order to satisfy tax levies, child
support orders, garnishments, debts owed MONY or any other income execution or
assignment. Compensation also includes any disability benefits payable under
MONY's Security Plan for Employees which would be paid at a rate equal to 100%
of Compensation. The remaining portion of the Employee's Compensation shall be
paid currently in accordance with MONY's normal payroll procedures. The
Employee's regular stipulated rate of pay from MONY for full-time service shall
not be affected by the deferral provided for herein and, therefore, none of
MONY's non-qualified welfare plans, the benefits of which are a function of the
regular stipulate rate of pay, shall be affected by such deferral.
The Employee can not elect to change the amount they wish to have
deferred any time during the calendar year. Any notice to discontinue deferral
shall not be effective
<PAGE> 3
unless given on forms provided by MONY. Deferrals can only be discontinued at
the end of the calendar year, with regard to Compensation for the next calendar
year.
2. Employee's Account: Credits and Interest
(a) An unfunded deferred compensation account (the "Account") will be
established by MONY for the Employee. This is a bookkeeping account only. The
only obligation of MONY with respect to the Account will be to make the payments
provided for under this Agreement when and as they become payable pursuant to
the terms hereof, and that any amount credited to such Account will be solely
for record-keeping purposes and shall not be considered to be held in trust or
escrow.
(b) MONY will credit to the Account each pay period any amount equal to
the percent of Compensation that is deferred as specified in paragraph 1.
(c) MONY presently maintains RISPE under which MONY matches up to 3% of
an Employee's contribution under MONY's Investment Plan and an additional 2% of
Compensation. MONY also maintains a Non-Qualified Benefit Plan for Employees for
the purpose of providing benefits which exceed certain limitations on qualified
plan contributions/benefits imposed by the Internal Revenue Code. While the
Employee's Compensation is being deferred under this plan, MONY will credit to
the Account an amount equal to the percentage of the amount deferred as it
otherwise would have contributed or credited to RISPE and/or the Non-Qualified
Benefit Plan for Employees as if no compensation had been deferred under this
Agreement.
(d) MONY shall credit or debit each Employee's Account with an interest
rate equivalent to the gains/losses, expenses, if any, which would have accrued
had the dollar
<PAGE> 4
amount of such credits been invested in the Investment funds then available
under the Investment Plan in accordance with the Employee's credit allocation
election at the time such debit or credit is made. This mirroring of funds
represents a hypothetical investment only, in order to determine the amount to
be paid at the payment date. The Employee does not have any rights in any
investments MONY might make in order to provide funds from which MONY may make
deferred compensation payments. MONY is not required to make any investments on
the Employee's behalf to provide funds from which MONY may make plan payments.
The Employee has the right to request both transfers of credits or
credit allocation changes up to 12 times each calendar year. MONY reserves the
right to change the manner of crediting interest or any further returns for all
future credits. MONY also has the right to limit the credits that can be subject
to this election.
3. Payments from Deferred Compensation Account
(a) The amount in the Employee's account will be paid out
as indicated below an in the manner prescribed
herein.
(i) In the event of the Employees death, payment
to the beneficiary will commence as soon as
administratively possible after the
Employee's death, provided that MONY has
received all of the necessary documents.
(ii) In the event of the Employee's becoming
eligible for Long-Term Disability benefits
under the Security Plan for Employees of The
Mutual Life Insurance Company of New York,
payment will commence on the first day of
the calendar month following the 30th day
after the Employee's eligibility date,
provided that MONY has received all of the
necessary documents.
(iii) In the event of the Employee's retirement,
payment will commence on the retirement date
as soon as administratively possible after
the Employee's retirement
<PAGE> 5
date, provided that MONY has received all of
the necessary documents.
(iv) In the event of the Employee's termination
of employment, other than by death,
disability or retirement, payment will
commence (initial one):
-- on the first day of the calendar
month following the 30th day after
the Employee's termination of
employment.
-- on the first day of the calendar
month following the month in which
the Employee attains age 65.
Election of form of payment (initial one):
-- Single Sum.
-- Monthly installments over a period
of ______ (cannot exceed 240
months) months.
-- Annual installments over a period
of ______ (cannot exceed 20 years)
years.
-- Installments based on an annual
redetermination of the Employee's
(and his/her spouse's, if
applicable) life expectancy(ies).
-- Settlement Option 2 (Fixed Period
Option) as contained in policies of
life insurance currently issued by
MONY.
-- Settlement Option 4 (Fixed Amount
Option) as contained in policies of
life insurance currently issued by
MONY.
(v) Credits can be withdrawn on a hardship basis
as prescribed in the IRS Regulations
pertaining to Section 457 of the Internal
Revenue Code. To qualify, the Employee (or
his/her eligible dependent[s]) must be faced
with an unforeseeable emergency, such as a
severe financial hardship caused by a sudden
and unexpected illness or accident; a loss
of the Employee's property due to casualty;
or other similar extraordinary and
unforeseeable circumstances caused by events
beyond the control of the Employee. In any
case, payment may not be made in the event
that such hardship is or may be relieved
through reimbursement or compensation by
insurance or otherwise;
<PAGE> 6
or by liquidation of the employee's assets,
to the extent that liquidation of such
assets would not itself cause severe
financial hardship.
The withdrawal request cannot exceed the
amount needed to satisfy the hardship
(including any applicable taxes on the
withdrawal) and the hardship must not be
able to be satisfied from any other
reasonably available sources. The Employee
must provide MONY, in care of Corporate
Compensation, with acceptable documentation
of the financial hardship.
(b) Credits accumulated hereunder shall be paid
to each Employee or validly designated
beneficiary by or for such Employee only on
account of death, termination of service,
long-term disability or retirement in
accordance with any settlement option
available under the Investment Plan. Any
payment due during the Employee's life time
shall be made payable to the Employee. Any
right to receive payments from MONY under
the Plan shall be no greater than the right
of any unsecured general creditor of MONY.
No trust or fiduciary relationship shall be
deemed to have been created hereunder for
the Employee or his/her beneficiary(ies).
(c) The beneficiary may be designated or changed
by the Employee, without the consent of any
former beneficiary, on the form provided by
the Company and received by Corporate
Compensation before his or her death. If no
such designation is in effect at the time
any benefit is payable, the benefit shall be
paid to the Employee's estate. Such
designation and any subsequent change(s)
shall effect as of the date the completed
form is received and accepted by Corporate
Compensation, and shall be subject to any
payment made by MONY or action taken by MONY
before receipt of the form.
4. Benefits May Not be Assigned or Attached
No credit or benefit hereunder may be assigned, transferred or subject
to alienation, surrender or anticipation, or subject to the debts of any person
or to legal process, except as may otherwise be provided by law.
<PAGE> 7
5. No Obligations to Continue Employment
It is understood and agreed that nothing contained in this Agreement
shall in any way obligate MONY to retain the Employee's employment for any
period of time, nor in any way affect MONY's right to change at any time the
Employee's compensation, the method or conditions for payment thereof, or any
other aspect of the Employee's contractual relationship with MONY.
6. Duration of Agreement
This Agreement shall remain effective and continue in force until such
time as the Agreement is amended or terminated by the parties hereto.
7. Relation to Other Plans
This agreement shall not be deemed to supersede the terms or provisions
of any other plan or agreement relating to deferred compensation in effect on or
before the date of this Agreement.
8. No Additional Tax Liability to MONY
If, as a result of receiving benefits from this Plan, any person is
subject to a higher rate or different form of taxation than would have been the
case had the Employee elected not to participate, MONY shall in no way be liable
for any portion of the additional tax burden, and such person shall have no
recourse whatsoever against MONY.
9. Interpretation of Plan
MONY has have the exclusive right to interpret the Plan and to decide
any matters arising hereunder in the administration of the Plan.
<PAGE> 8
10. Governing Law
This Agreement and the Plan shall be construed, enforced and
administered according to the laws of the State of New York and any federal law
or regulation governing the provisions or administration of this Plan. In case
any provision of this Agreement or the Plan shall be held illegal, this
Agreement and the Plan shall be construed and enforced as if such illegal or
invalid provision had not been included therein.
11. Amendment and Termination
MONY reserves the right, at any time and from time to time, to amend or
terminate this Plan in whole or in part subject to the approval of the
Superintendent of Insurance of the State of New York, if required. No such
amendment or termination will reduce any benefits or credits under this Plan as
in effect on the day before the effective date of such Plan amendment or
termination.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
--------------------------
(RECEIVED AND RECORDED BY)
--------------------------
(EMPLOYEE)
NOVEMBER 1996
<PAGE> 1
EXHIBIT 10.31
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
DEFERRED COMPENSATION PLAN WITH
____________________________
TRUSTEE
THIS AGREEMENT made this ____ day of _________, 19 _____ by and between The
Mutual Life Insurance Company of New York (hereinafter referred to as "MONY" or
the "Company") and ____________________________________ (hereinafter referred to
as the "Trustee"):
WITNESSETH:
WHEREAS, MONY's Board of Trustees has authorized the Company to enter into a
written agreement with any member of MONY's Board of Trustees, permitting the
Trustee to defer receipt of all or a portion of the Trustee's retainer and
meeting fees (hereinafter collectively referred to as "Compensation"), to be
paid in the future in accordance with the terms and conditions set forth in such
agreement:
NOW, THEREFORE, the parties hereto do agree as follows:
1. Payment of Compensation
Beginning ______, 19__, and thereafter for all future calendar
years, until the Trustee provides MONY's Secretary on forms
provided by MONY, with notice in advance of a calendar year to
discontinue or amend the deferral of future compensation
hereunder, ___% of the Trustee's compensation shall be
deferred and credited in accordance with paragraph 2 below.
The Trustee may choose from the following deferral options:
25%, 50%, 75%, or 100% of the Trustee's Compensation may be
deferred.
2. Trustee's Account: Credit and Interest
(a) An unfunded deferred compensation account or accounts
(hereinafter referred to as the "Account") will be
established by MONY for the Trustee. This is a
bookkeeping account only. The only obligation of MONY
with respect to the account will be to make the
payment provided for under this Agreement when and as
they become payable pursuant to the terms hereof, and
that any amount credited to such account will be
solely for recordkeeping purposes and shall not be
considered to be held in trust or in escrow or in any
way vested in the Trustee.
<PAGE> 2
(b) At the end of each month in the case of meeting fees,
and at the end of each quarter in the case of
retainers, MONY will credit to the Account any amount
equal to the amount of such Compensation to be
deferred as specified in paragraph 1.
(c) MONY shall credit or debit Trustee's credits in
his/her Account with an interest rate equivalent to
the gains/losses, and expenses, if any, which would
have accrued had the dollar amount of such credits
been invested in the funds then available under the
MONY Investment Plan for MONY Employees in accordance
with the Trustee's credit allocation election at the
time such debit or credit is made. This mirroring of
funds represents a hypothetical investment only in
order to determine the amount to be paid at the
payment date. The Trustee does not have any rights in
any investments MONY might make in order to provide
funds from which MONY may make deferred compensation
payment. MONY is not required too make any
investments on the Trustee's behalf to provide funds
from which MONY may make Plan payments.
The Trustee has the right to request transfers of
credits or credit allocation changes up to 12 times
each calendar year. MONY reserves the right to change
the manner of crediting interest or any other returns
for all future credits. MONY has the right to limit
the credits that can be subject to this election.
3) Payment from Deferred Compensation Account
(a) Payment shall be made under Option (a) or Option (b)
as indicated by Trustee's initial below.
OPTION (a): ELECTION OF SINGLE SUM PAYMENT
The Trustee by initialing _____ this Paragraph hereby
elects that any balance due to the Trustee under this
agreement shall be paid in one sum on ______________,
19 _____.
OPTION (b): ELECTION OF MONTHLY INSTALLMENTS
The Trustee, by initialing ____ this Paragraph hereby
elects that payment of the amount in the account will
begin during the calendar month following the month
in which the Trustee has retired, resigned or, if
earlier, during the calendar month following the
Trustee's death. Such payments shall be in the form
of monthly installments, as nearly equal as may be
practicable, but with appropriate annual adjustment
for change in interest rates, over a ____ year
period.
<PAGE> 3
(b) Any payments due at or after the Trustee's death
shall be paid when due to the beneficiary designated
by the Trustee as hereinafter provided. The
beneficiary designated by the Trustee must be his or
her spouse, child, or children, grandchild or
grandchildren, the Trustee's executors or
administrators, or a trust established by the
Trustee. If no such designation is in effect at the
time any payment becomes due it shall be paid to the
Trustee's estate. Beneficiary designations and
changes thereof may be made by the Trustee by written
notice filed with MONY's Secretary. Such designation,
and any subsequent change, shall take effect as of
the date the notice was signed, upon recording and
acceptance by the Secretary, subject to any payment
made by the Company or action taken by it before
receipt of the notice by the Secretary.
4) Benefits May Not Be Assigned or Attached
No benefit hereunder may be assigned, anticipated, or
hypothecated and, to the extent permitted by law, no sum
payable under this Agreement shall be subject to legal process
or attachment for payment of any claim against any payee
hereunder.
5) Duration of Agreement
This Agreement shall remain effective and continue in force
until such time as it may be amended by the parties hereto,
but any such amendment will be effective only as to
compensation to be earned in calendar years subsequent to the
date such amendment is made.
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement as of the day and year above written.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
--------------------------
(RECEIVED AND RECORDED BY)
--------------------------
(TRUSTEE)
November 1996
<PAGE> 1
Exhibit 10.32
MONY FINANCIAL SERVICES
Amended 1988 Equity Share Plan
SECTION 1. Purpose of Plan.
The name of this plan is the "MONY Financial Services 1988 Equity Share
Plan," as amended in 1989 (the "Plan"). The purpose of the Plan is to enable
MONY Financial Services to foster and promote the interests of the Enterprise by
attracting, motivating and retaining senior and corporate officers and other key
officers, who are compensated by the Mutual Life Insurance Company of New York
("Company"). It will not only reward those who contribute to the success of the
Enterprise or its Affiliates by their ability, ingenuity and industry, but can
also reward those with unusual potential. It will also incentives such
individuals to achieve common, corporate results and to enable such individuals
to participate in the long term success and growth of the Enterprise.
SECTION 2. Administration.
The Plan shall be monitored by the Human Resources Committee of the
Board of Trustees; and administered by the Chairman and his Cabinet. Under their
direction, Corporate Human Resources will coordinate the activities of the Plan.
The Chairman has the authority, as vested in him by the Human Resources
Committee of the Board, to determine:
(i) the officers who are to be Participants and to whom Equity
Shares are to be granted;
(ii) the number of Equity Shares to be awarded to any Participant
and the schedule of Cumulative Earnings results and Earned
Values used in determining the value of the amounts payable
with respect to such Equity Shares;
(iii) the terms, conditions and limitations, if any, to be applied
to Equity Share grants, in addition to (but not inconsistent
with) those otherwise set forth in this Plan; and
(iv) the terms of agreements evidencing the grants of Equity
Shares.
The Human Resources Committee of the Board of Trustees shall have the
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the operation of the Plan as it shall, from time to time,
deem advisable and to interpret the terms and provisions of the Plan, and any
award hereunder, and to otherwise monitor the administration of the Plan.
<PAGE> 2
SECTION 3. Eligibility.
All senior and corporate officers and selected officers of the Company
or of an Affiliate who, as determined by the Chairman, have demonstrated
significant management potential or have principal responsibility for, or
contribute substantially to, the management or financial performance of the
Company or of an Affiliate, are eligible to be Participants in the Plan. It
should be clear, the intent of this plan is to reward high performance and high
potential officers.
SECTION 4. Performance Cycles.
Performance Cycles shall cover a three year period. The first Cycle
shall commence effective January 1, 1989 and end December 31, 1991. Subsequent
Performance Cycles shall begin January 1 of each successive year (e.g. January
1, 1990, 1991, etc.).
SECTION 5. Equity Share Awards and Payments.
a. Awards of Equity Shares. At the beginning of each Performance
Cycle, the Chairman is authorized to award Equity Shares to
Participants in accordance with the powers vested in him by
the Human Resources Committee of the Board.
As a general guideline, unless otherwise specified by the
Chairman, the number of Equity Shares to be granted to each
participant shall fall within the guidelines defined in
Appendix A.
Equity Share awards shall be prorated for newly hired senior
and corporate officers and for departmental officers promoted
to the corporate officer level.
b. Valuation. In connection with each award of Equity Shares, the
Chairman shall establish a schedule of the values ("Earned
Values") to be paid on completion of the Performance Cycle
based on the Cumulative Earnings performance criteria set
forth in such schedule. (Attached Appendix B sets forth the
schedule of Earned Values for the initial Equity Shares awards
for the first Performance Cycle specified in Section 4 and
based on the three-year Cumulative Earnings). The Chairman is
authorized to establish different schedules, from time to
time, for subsequent awards of Equity Shares subject to the
prior approval by the Human Resources Committee of the Board.
c. Payments.
(i) Normal Payments. Subject to Section 5c(ii), within
(90) days after the end of each Performance Cycle, or
as soon as practical thereafter, each Participant
shall be paid his total award in equal annual
installments over a three year period. The second and
third installments will be credited with an interest
equivalent at such rate(s) as the Company may
establish from time to time. Awards not currently
paid shall be fully vested. The total award will
equal the product of the total number of Equity
Shares
2
<PAGE> 3
allocated to such Participant times the Earned Value
of each such Equity Share.
(ii) Deferral of Payments. Subject to the terms and
provisions of applicable insurance and other laws, a
Participant may elect in writing at any time prior to
December 31 defer up to 33-1/3% of each years
payments. Amounts deferred shall be credited with an
interest equivalent at such rate(s) as the Company
may establish from time to time.
(iii) Payments Upon Death of Participant. Upon the
Participant's death, the Participant's Beneficiary
shall be paid, in one lump sum, the remainder of any
vested payments plus the value of any outstanding
Equity Shares held by such Participant at the time of
death. As of the end of such Plan Year in which the
Participant died, all such outstanding Equity Shares
held by such Beneficiary shall be valued as on the
basis of results for the portion of the applicable
Performance Cycle completed as of the end of such
Plan Year. Awards will be calculated on a pro-rata
basis.
d. Expiration of Equity Shares.
(i) Performance Cycle. Following the completion of each
Performance Cycle and the payment of any amounts
payable under the applicable Cumulative Earnings
Result/Earned Value schedule (as set forth in
Appendix B), the Equity Shares for such Performance
Cycles shall expire.
(ii) Death of Participant. Upon the Participant's death,
the Participant's Beneficiary or, in the absence of
an effective beneficiary designation or if such
designated person shall have died, the director(s) or
administrator(s) of the Participant's estate will be
paid in accordance with Sections 5c(iii) and after
such payment is made, such Equity Shares shall be
cancelled.
(iii) Separation of Service (Other than Death). The
Chairman has the authority in accordance with the
powers vested in him by the Human Resources Committee
of the Board to modify the terms, conditions and
limitations, if any, to be applied to Equity Share
grants. At the discretion of the Chairman, he may
determine the status of outstanding Equity Shares
held by employees who have separated their employment
with MONY or an Affiliate. Provided, however, that
the Chairman shall have no authority to permit any
such Equity Shares to remain outstanding if the
Participant's employment was terminated by the
Company or an Affiliate for Cause.
Cause mean a felony conviction of a Participant (or
the failure of a Participant to contests prosecution
for a felony), or a Participant's willful and
continued failure substantially to perform his
employment-related duties (other than as a result of
Disability) or a Participant's willful or gross
misconduct or dishonesty, which misconduct or
dishonesty is
3
<PAGE> 4
materially harmful to the business or reputation of
the Company or an Affiliate.
If a Participant's employment terminates for cause
and vested payments are not made, then any payments
outstanding pursuant to section 5c(i) and any
payments which had already been deferred under
Section 5c(ii) of the Plan shall be paid as set forth
in Section 5c(i) and 5c(ii), subject to offset by the
Company for any claims that the Company or an
Affiliate may have against such Participant.
If any Participant or other person entitled to benefits
hereunder attempts to sell, transfer, give, devise, bequeath,
alienate, assign (by operation of law or otherwise), grant a
security interest in, pledge, mortgage, encumber, charge or
otherwise hypothecate or dispose of any Equity share, then
such Equity Share shall be cancelled and be null and void,
unless the Chairman in his sole discretion determines
otherwise.
SECTION 6. General Conditions.
a. The Human Resources Committee of the Board may, from time to
time, amend, suspend or terminate any or all of the provisions
of the Plan, but no such amendment, suspension or termination
shall adversely affect the rights of any Participant with
respect to awards then outstanding, without such Participant's
consent.
b. Nothing contained in the Plan shall prohibit the Company or an
Affiliate from establishing other additional incentive
compensation arrangements for one or more employees of the
Company or such Affiliate. However, Equity Shares may be
adjusted if similar plans are provided an officer.
c. Nothing in the Plan shall be deemed to give any Participant
the right to remain employed by the Company or any Affiliate
or to limit, in any way, the right of the Company or of an
Affiliate to terminate, or to change the terms of, a
Participant's employment with the Company (or such Affiliate)
at any time.
d. Any decision or action taken by the Human Resources Committee
of the Board or the Chairman arising out of or in connection
with the construction, administration, interpretation or
effect of the Plan shall be conclusive and binding upon all
Participants and any person claiming under or through any
Participant.
e. In the administration of the Plan, no member of the Human
Resources Committee of the Board of the Chairman shall be
liable for any act or action, whether of commission or
omission, (i) by such member except in circumstances involving
actual bad faith, or (ii) by any other member or by any
officer, agent or employee.
f. The Plan shall be unfunded and the obligations under the Plan
shall not be secured by any security interest, pledge or
encumbrance on any property of the Company or of its
Affiliates.
4
<PAGE> 5
g. No payment obligation under the Plan shall bear any interest,
other than with respect to payments that are deferred pursuant
to Sections 5c(i).
h. The Plan shall be governed by and construed in accordance with
the laws of New York.
i. Entitlement to Equity Shares shall not be deemed automatic for
any officer.
SECTION 7. Agreements.
In connection with any Equity Shares granted to a Participant
under the Plan, each such Participant shall enter into an agreement with the
Company containing, consistent with the Plan, such terms as the Chairman may
deem advisable. Subject to the terms of the Plan, the Chairman is authorized to
enter into such agreements.
SECTION 8. Effective Date of Plan.
The Amended Plan shall be effective as of January 1, 1989.
5
<PAGE> 6
APPENDIX A
GUIDELINES FOR DETERMINING EQUITY SHARES
ANNUAL EQUITY
TITLE SHARE AWARD GUIDELINES*
- -------------------------- -----------------------
Senior Officers 0 - 5,000
Vice Presidents 0 - 2,000
Functional Vice Presidents 0 - 500
- ----------
* Exceptions to the guidelines should be approved by the Human Resources
Committee.
6
<PAGE> 7
APPENDIX B
(1989-1991
Performance Cycle)
SCHEDULE OF CUMULATIVE EARNINGS AND EARNED VALUES
CUMULATIVE EARNINGS EARNED VALUE
1989 - 1991 PER EQUITY SHARE*2
------------------- ------------------
($000) ($)
UNDER $225 $50
225 30
250 65
275 100
300 150
325 200
350 OR MORE 250
- ----------
* Intermediate Earned Values to be determined through straight-line
interpolation. For example, Cumulative Earnings of $312.5 would result in
Earned Value per Equity Share of $175.
7
<PAGE> 8
MONY FINANCIAL SERVICES
- --------------------------------------------------------------------------------
1988 Equity Share Plan
- --------------------------------------------------------------------------------
As Amended January 1, 1989
<PAGE> 1
EXHIBIT 10.33
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
EQUITY SHARE PLAN DEFERRED COMPENSATION AGREEMENT
This agreement made this _____ day of ____, 19___, by and between The Mutual
Life Insurance Company of New York ("MONY") and _______________________ (the
"Employee").
The parties hereto, do agree as follows:
1 Deferral of Payment
MONY has established a Deferred Compensation Plan for payments made
under the Mutual of New York 1988 Equity Share Plan, as amended January 1, 1989,
hereinafter referred to as the "Plan."
Beginning ________, 19___, and thereafter for all future payments under the Plan
until the Employee provides MONY with written notice in advance of the calendar
year in which a payment is to be made to discontinue the deferral of future
compensation hereunder, ___% of any payment amount shall be deferred and
credited in accordance with paragraph 2 below. In no event shall the total
amount deferred exceed 33-1/3% of total payment.
The Employee cannot elect to change the amount they wish to have deferred
anytime during the calendar year. Any notice of discontinuance shall not be
effective unless given on forms provided by MONY.
<PAGE> 2
2. Employee's Account: Credits and Interest
(a) An unfunded Deferred Compensation account or accounts (hereinafter
referred to as the "Account") will be established by MONY for the Employee. This
is a bookkeeping account only. The only obligation of MONY with respect to the
account will be to make the payment provided for under this Agreement when and
as they become payable pursuant to the terms hereof, and that any amount
credited to such an account will be solely for record-keeping purposes and shall
not be considered to be held in trust or in escrow.
(b) MONY will credit to the Account an amount equal to the percent of
payments that is deferred as specified in paragraph 1.
(c) MONY shall credit or debit each Employee's Account with an interest
rate equivalent to the gains/losses, and expenses, if any, which would have
accrued had the dollar amount of such credits been invested in the funds then
available under the Investment Plan for Employees in accordance with the
Employee's credit allocation election at the time such debit or credit is made.
This mirroring of funds represents a hypothetical investment only in order to
determine the amount to be paid at the payment date. The Employee does not have
any rights in any investments MONY might make in order to provide funds from
which MONY may make deferred compensation payments.
MONY is not required to make any investments on the Employees behalf to provide
funds from which MONY may make Plan payments.
The Employee has the right to request both transfers of credits or credit
allocation changes up to 12 times each calendar year. MONY reserves the right to
change the
<PAGE> 3
manner of crediting interest or any other returns for all future credits. MONY
also has the right to limit the credits that can be subject to this election.
3. Payments from the Account
(a) The Company will pay the amounts payable under the Plan commencing
on the first day of the month following the occurrence of one of the events
indicated below and in the manner prescribed therein (initial one) or the
Employee becoming eligible for Long-Term Disability Benefits under MONY's
Security Plan for Employees.
_______ (i) to Employee in ______ approximately equal monthly installments
beginning within 30 days after the earlier of (i) retirement or other
termination of employment, or (ii) attainment of age 65.
_______ (b) to Employee in ______ approximately equal monthly installments
beginning within 30 days after the later of (i) retirement or other termination
of employment, or (ii) attainment of age 65.
_______ (c) to Employee in ______ approximately equal monthly installments
beginning (month/year) __________.
_______ (d) to Employee in a lump sum (month/year) __________.
(b) Credits can be withdrawn on a hardship basis as prescribed in the
IRS Regulations pertaining to Section 457 of the Internal Revenue Code. To
qualify, the Employee (or his/her eligible dependent[s]) must be faced with an
unforeseeable emergency, such as a severe financial hardship caused by a sudden
and unexpected illness or accident; a loss of the Employee's property due to
casualty; or other similar
<PAGE> 4
extraordinary and unforeseeable circumstances caused by events beyond the
control of the Employee. In any case, payment may not be made in the event that
such hardship is or may be relieved through reimbursement or compensation by
insurance or otherwise; or by liquidation of the Employee's assets, to the
extent that liquidation of such assets would not itself cause severe financial
hardship.
The withdrawal request cannot exceed the amount needed to satisfy the hardship
(including any applicable taxes on the withdrawal) and the hardship must not be
able to be satisfied from any other reasonably available sources. The Employee
must provide MONY, in care of Corporate Compensation, with acceptable
documentation of the financial hardship.
4. Designation of Beneficiary
The beneficiary may be designated or changed by the Employee, without
the consent of any former beneficiary, on the form provided by the Company and
received by Corporate Compensation before his or her death. If no such
designation is in effect at the time any benefit is payable, the benefit shall
be paid to the Employee's estate. Such designation and any subsequent change(s)
shall take effect as of the date the completed form is received and accepted by
Corporate Compensation, and shall be subject to any payment made by MONY or
action taken by MONY before receipt of the form.
Employee hereby designates as his/her beneficiary the following:
Name:________________________________________________
________________________________________________
________________________________________________
<PAGE> 5
Address:_____________________________________________
________________________________________________
________________________________________________
The designation is:
_______ a) revocable
_______ b) irrevocable
(i) If, when the Employee dies, installment payments have already begun, the
remaining account balance should:
_______ (a) continue to be paid in monthly installments to the beneficiary, or
_______ (b) be paid as a lump sum to the beneficiary.
(ii) If, when the Employee dies, payments have not yet begun, payments should
be:
_______ (a) paid in monthly installments to the beneficiary, or
_______ (b) paid as a lump sum tot he beneficiary.
5. Benefits May Not be Assigned or Attached
No credit or benefit hereunder may be assigned, transferred or subject
to alienation, surrender or anticipation, or subject to the debts of any person
or to legal process, except as may otherwise be provided by law.
<PAGE> 6
6. No Obligations to Continue Employment
It is understood and agreed that nothing contained in this Agreement
shall in any way obligate MONY to retain the Employee's employment for any
period of time, nor in any way affect MONY's rights to change at any time the
Employee's compensation, the method or conditions for payment thereof, or any
other aspect of the Employee's contractual relationship with MONY.
7. Duration of Agreement
This Agreement shall remain effective and continue in force until such
time as the Agreement is amended or terminated by the parties hereto.
8. Relation to Other Plans
This Agreement shall not be deemed to supersede the terms or provisions
of any other plan or agreement relating to deferred compensation in effect on or
before the date of this Agreement.
9. No Additional Tax Liability to MONY
If, as result of receiving benefits from this Plan, any person is
subject to a higher rate or different form of taxation than would have been the
case had the Employee elected not to participate, MONY shall in no way be liable
for any portion of the additional tax burden, and such person shall have no
recourse whatsoever against MONY.
10. Interpretation of Plan
MONY shall have the exclusive right to interpret the Plan and to decide
any matters arising hereunder in the administration of the Plan.
<PAGE> 7
11. Governing Law
This Agreement and the Plan shall be construed, enforced and
administered according to the laws of the State of New York and any federal law
or regulation governing the provision or administration of this Plan. In case
any provision of this Agreement or the Plan shall be held illegal, this
Agreement and the Plan shall be construed and enforced as if such illegal or
invalid provision had not been included therein.
12. Amendment and Termination
MONY reserves the right, at any time and from time to time, to amend or
terminate this Plan in whole or in part subject to the approval of the
Superintendent of Insurance of the State of New York, if required. No such
amendment or termination will reduce any benefits or credits under this Plan as
in effect on the date before the effective date of such Plan amendment or
termination.
In witness whereof the parties hereto have duly executed this Agreement
as of the day and year first above written.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
--------------------------
(RECEIVED AND RECORDED BY)
--------------------------
(EMPLOYEE)
<PAGE> 1
EXHIBIT 10.34
MONY
SPLIT DOLLAR LIFE INSURANCE PLAN
SECTION 1 -- PURPOSE
The purpose of this Split Dollar Life Insurance Plan (the "Plan") is to
provide life insurance coverage for key employees of The Mutual Life Insurance
Company of New York ("MONY" or the "Company") and its Subsidiaries. The Company
intends to provide benefits under the Plan to present and future Eligible
Employees employed by the Company, or such Subsidiary, as it shall designate.
The Plan is effective December 31, 1987.
SECTION 2 -- DEFINITIONS
2.1 BENEFICIARY. "Beneficiary" means the person or persons designated as such in
accordance with Section 3.3, below.
2.2 EARLY RETIREMENT. "Early Retirement" means a Termination of Employment by a
Participant, other than by reason of death, on or after the date on which a
Participant both attains age 55 and is deemed to be an early retiree under the
Retirement Income Security Plan for MONY Employees, or, in the case of a
Subsidiary, under such pension plan maintained by such Subsidiary as MONY shall
designate as a substitute for the Retirement Income Security Plan for MONY
Employees (the MONY pension plan and all other such plans as MONY shall
designate as substitutes are collectively referred to herein as "RISPE").
2.3 ECONOMIC BENEFIT. "Economic Benefit" means the value of the Economic Benefit
of life insurance coverage for the Participant under this Plan for income tax
purposes determined based on revenue ruling issued by the Internal Revenue
Service and other applicable authorities.
2.4 ELIGIBLE EMPLOYEES. "Eligible Employees" means an Employee of the Employer
who a) is in active service on the date which he is to become a Participant in
the Plan; b) is then a key executive with the Company or its Subsidiary; c) is
approved for participation in the Plan by MONY's Chairman; d) makes and
continues to make all payments required by Section 5.2, below; and e)
continuously maintains the employment status upon which such approval was based,
except that an Employee who does not maintain the employment status upon which
such approval was based shall nevertheless continue to be considered an Eligible
Employee for so long as MONY's Chairman shall, in his sole judgment, deem
advisable. A Termination of Employment by Early or Normal Retirement shall not
constitute a failure of continuance to be an Eligible Employee.
2.5 EMPLOYEE. "Employee" means any person employed by the Employer on a regular
salaried basis.
2.6 EMPLOYER. "Employer" means The Mutual Life Insurance Company of New York, or
any of its Subsidiaries designated by MONY.
<PAGE> 2
2.7 NORMAL RETIREMENT. "Normal Retirement" means a Termination of Employment
other than by reason of death on and after the date on which a Participant both
attains age 65 and is deemed to be a normal or postponed retiree under RISPE.
2.8 PARTICIPANT. "Participant" means an Eligible Employee who is insured under a
life insurance policy issued under the Plan.
2.9 POLICY. "Policy" means the policy or policies on the life of a Participant
providing the life insurance coverage under the Plan.
2.10 SUBSIDIARY. A " Subsidiary" of the Company is any corporation, partnership,
venture or other entity in which the Company has at least a 50% ownership
interest.
2.11 TERMINATION EMPLOYMENT. "Termination of Employment" means the cessation of
the Participant's employment with the Employer for any reason whatsoever,
whether voluntary or involuntary, prior to the time when the Participant has a
Vested benefit under this Plan.
2.12 VANISH. As used in this Plan, "Vanish" refers to the point in time at which
the cash value of such additional amount as the Employer shall purchase by rider
and the current and accumulated dividends on the Participant's Policy are
expected to be sufficient to pay the premiums on the Policy without other source
payments, as illustrated by the insurer's dividend scale for the policy at its
time of issue.
2.13 VESTED. As used in this Plan, "Vested" means non-forfeitable. A Participant
has a Vested benefit under this Plan at the point in time at which he becomes
eligible for early retirement under RISPE. A Beneficiary has Vested interest in
a Policy upon the death of the Participant who designated him as Beneficiary.
SECTION 3 -- PARTICIPATION
3.1 ELECTION TO PARTICIPATE. An Employee who has been notified by MONY that he
is an Eligible Employee may enroll in the Plan by completing an application for
a Policy.
An Eligible Employee shall become a Participant when 1) he is notified
in writing that his participation is approved by the Employer, and 2) as of the
effective date that MONY has purchased a policy on his life.
3.2 ADDITION OF ELIGIBLE EMPLOYEES. The Employer may, at its discretion and at
any time, designate additional Employees to participate in the Plan.
3.3 THE INSURANCE CONTRACT. To provide the insurance benefits under this Plan,
the Company shall acquire a Policy on the life of each Eligible Employee who
satisfies the insurer's requirements for insurability, if any. Prior to the time
that premiums on such Policy are expected to Vanish, such Policy shall provide
that all rights of ownership therein shall belong to the Company, except that
the Participant shall have the right to designate a Beneficiary for the excess
of the policy proceeds over the Company's interest under the terms of this Plan
and, except that the rights to borrow, to assign the policy and
2
<PAGE> 3
to change the designation of rights shall belong to the Participant and the
Company, jointly. The designated Beneficiary of such Policy shall be the
Company, as its interest may appear under this Plan, with the excess over the
Company's interest to a Beneficiary designated by the Participant.
3.4 RELATION TO OTHER PLANS. The Plan replaces the prior one and one-half times
or two times salary group life insurance for Eligible Employees which would
otherwise be provided under the Company's Security Plan for Employees, but only
while the Plan is in effect with respect to the Employee. It does not affect any
other death benefit in any manner provided by the Company.
SECTION 4 -- AMOUNT OF PARTICIPANT LIFE INSURANCE COVERAGE
4.1 AMOUNT OF INSURANCE. Each Participant will have at least the following
minimum coverage under this Plan.
<TABLE>
<S> <C>
Chairman and President $1,000,000
Vice Chairman and Executive Vice President $ 750,000
Senior Vice President and Cabinet Member*
below the rank of senior Vice President $ 500,000
Vice President or Functional Vice President $ 350,000
* Cabinet Members are designated by the Chairman
</TABLE>
plus such additional amount as the Employer shall purchase by rider to enable
the premium thereon to Vanish. (The minimum coverage shown above plus such
additional amount purchased by rider constitutes the "total Coverage Amount" for
the purposes of Section 5.2 below.)
SECTION 5 -- LIFE INSURANCE COVERAGE DURING EMPLOYMENT
5.1 AMOUNT OF INSURANCE. Upon the death of a Participant before Early or Normal
Retirement, all of the death proceeds of the Policy shall be payable to the
Participant's Beneficiary, except that an amount equal to the cumulative
premiums paid by the Employer on the policy (other than a) from the cash value
of such additional amount as the Employer shall purchase by rider; b) for
special term coverage; c) from current and accumulated dividends in the Policy,
and d) from the Participant's contributions) shall be payable to the Employer.
5.2 PAYMENT OF PREMIUMS AND CONTRIBUTIONS. Provided that the participant shall
make the payment to the Employer required by this Section 5.2, all premiums for
a Participant's life insurance coverage under the Plan will be paid by the
Employer. If an Employee becomes a Participant prior to December 31 in the year
in which he becomes an Eligible Employee, the Participant will be covered by a
special term rider for the Total Coverage Amount specified in Section 4.1,
above, until such December 31st. MONY will pay the full premium for the special
term coverage. Thereafter, until the premiums
3
<PAGE> 4
on the Policy are expected to Vanish, the Participant shall pay to the Employer,
as his contribution to the premium, amount determined from a schedule published
by the Company which may be revised by the Company from time to time, based upon
the Employee's insurance age, smoking habits and the amount of his coverage
under Section 4.1, above. After the premiums are expected to Vanish, all
premiums will be paid from the cash value of such additional amount referred to
in Section 4.1, above, and from current and accumulated dividends in the Policy,
or, if insufficient, by the Employer, and the Participant will not be required
to make any further contributions to premium payments.
The Employer will be required to include in the Employee's income, for
income tax purposes, an amount equivalent to the Economic Benefit of the
Participant's coverage.
5.3 INTERESTS IN CASH VALUE. The respective interests of the Employee and
Employer in the cash value of the Policy shall be as follows:
(a) Employer's Interest. Before the premiums on the Policy are expected
to vanish, the Participant shall have no interest in the cash value of
the Policy. Thereafter, the Employer's interest in the cash value of
the policy shall be limited to that portion of the cash value on the
Policy which is equal to the cumulative premiums on the Policy paid by
the Employer (other than a) from the cash value of such additional
amount as the Employer shall purchase by rider; b) for special term
coverage; c) from current and accumulated dividends in the Policy, and
d) from the Participant's contributions.
(b) Participant's Interest. The Participant's interest in the cash
value of the policy shall be the balance of the cash value of the
policy in excess of the Employer's interest, pursuant to Section
5.3(a), above.
5.4 POLICY LOANS AND WITHDRAWALS. The Employee and the Employer shall have no
right to obtain loans or make withdrawals from the Policy while the Employee is
employed by the Employer, except as provided in Section 5.2, above.
5.5 SURRENDER OR CANCELLATION. In the event of the surrender or cancellation of
the Policy, the Participant and the Employer shall be entitled to receive a
portion of the cash surrender value thereof, equal to their respective interests
under Section 5.3 (a) and (b), above.
5.6 DISABILITY. A Termination of Employment shall not be deemed to have occurred
while a Participant is entitled to benefits under the Long Term Disability
portion of MONY's Security Plan for Employees, provided Participant continues to
make any required contribution.
SECTION 6 -- LIFE INSURANCE COVERAGE AFTER RETIREMENT
6.1 AMOUNT OF INSURANCE. Following Normal or Early Retirement, all of the death
proceeds of the policy shall be payable to the Participant's Beneficiary except
that amount equal to the cumulative premiums paid by the Employer on the Policy
(other than a) from
4
<PAGE> 5
the cash value of such additional amount as the Employer shall purchase by
rider; b) for special term coverage; c) from current and accumulated dividends
in the Policy, and d) from the Participant's contributions) shall be payable to
the Employer.
6.2 PAYMENT OF PREMIUMS. Following Normal or Early Retirement, after premiums on
the Policy are expected to Vanish, all premiums on tile Policy shall be paid as
provided in the last sentence of the first paragraph of Section 5.2, above.
6.3 TRANSFER OF THE POLICY. Following Normal or Early Retirement, after premiums
on the Policy are expected to Vanish, the Company shall grant ownership of the
policy to the Participant, subject to Sections 6.4, 6.5 and 6.6, below. The
Beneficiary shall be as required in Section 3.3, above.
6.4 INTEREST IN CASH VALUE. Following Normal or Early Retirement, after premiums
on the Policy are expected to Vanish, the entire cash value of the Policy shall
belong as provided in Section 5.3, above.
6.5 POLICY LOANS. Following Normal or Early Retirement, after premiums on the
Policy are expected to Vanish, the participant shall be entitled to obtain loans
from the cash value of the Policy, subject to the provisions of the Policy,
provided, however, that the participant shall not make any loan, which together
with interest thereon, shall reduce the interest of the Employer pursuant to
Section 5.3, above.
6.6 SURRENDER OF THE POLICY. Following Normal or Early Retirement, after
premiums on the Policy are expected to Vanish, in the event of surrender of the
Policy, the Employer shall be entitled to receive a portion of the cash
surrender value equal to its interest in the cash surrender value of the Policy
under Section 5.3, above, and the balance, if any, shall belong to the Employee.
Should the Participant allow the Employer's interest in such cash value to be
reduced by non-payment of interest upon a loan allowed by Section 6.5, above,
the Employer may require the Participant to immediately surrender such Policy
and cause the insurance company to pay over to the Employer an amount equal to
the Employer's interest under Section 5.3, above, with any short fall between
the Employer's interest under Section 5.3, above, and the surrender value
actually received by the Participant to be a debt immediately owing and payable
from the Participant to the Employer.
6.7 RETIREMENT BEFORE PREMIUMS ARE EXPECTED TO VANISH. If the participant
retires at Normal or Early Retirement, before the premiums on the Policy are
expected to Vanish, the Participant will be required to continue to make
contributions to premium payment in accordance with Section 5.2, above, until
the premiums are expected to Vanish, including the period before and after
retirement and the Employer will continue to make the balance of premium
payments until the premiums are expected to Vanish. The provisions of Sections
6.1 through 6.6, above, shall apply after the premiums are expected to Vanish.
If the Participant fails to make such contributions until the premiums are
expected to Vanish, his participation in this Plan shall terminate, and he shall
be subject to the provisions of Section 7, below, which normally apply upon
Termination of Employment or failure of continuance to be an Eligible Employee.
5
<PAGE> 6
SECTION 7 -- LIFE INSURANCE COVERAGE AFTER TERMINATION OF EMPLOYMENT OR
FAILURE OF CONTINUANCE TO BE AN ELIGIBLE EMPLOYEE
7.1 OPTION TO PURCHASE POLICY FROM EMPLOYER. If a Participant has a Termination
of Employment or fails to continue to be an Eligible Employee prior to being
Vested, other than due to death, the Participant may elect in writing within
thirty days following such event to purchase the Employer's interest in the
Policy. Such purchase price shall be equal to the Employer's interest as
determined under Section 5.3(a). Upon payment of such purchase price the
Employer shall release all of its interest in the Policy to the Participant.
7.2 TRANSFER OF POLICY TO EMPLOYER. If a Participant has a Termination of
Employment or failure of continuance to be an Eligible Employee prior to being
Vested, other than due to death, and does not elect to purchase the Employer's
interest in the Policy pursuant to Section 7.1, above, the Participant shall no
longer have any interest in such life insurance Policy and the Employer may
maintain such Policy for its sole and separate benefit, or surrender it, keeping
all of the cash surrender value for itself.
SECTION 8 -- AMENDMENT AND TERMINATION OF PLAN
8.1 RIGHTS OF VESTED PARTICIPANTS AND BENEFICIARIES. The Company may at any time
amend or terminate the Plan, in whole or in part, provided, however, that no
such action shall diminish the rights of any Vested Participant or Beneficiary
to the extent that such right has accrued before such action. Written notice of
termination or any amendment of the Plan shall be given to each Participant.
SECTION 9 -- MISCELLANEOUS
9.1 TAX LIABILITY AND WITHHOLDING. A Participant may have income for Federal,
State or Local income tax purposes by reason of his Economic Benefit. The
Participant and any Beneficiary shall make appropriate arrangements with the
Employer for the satisfaction of any tax withholding requirements and Social
Security or other Employee tax requirements applicable to benefits provided
under this Plan. Upon the Participant's failure to make such arrangements, the
Employer may provide, at its discretion, for such withholding and tax payments
as may be required.
9.2 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan nor any action
taken hereunder shall be construed as a contract of employment or as giving any
Employee any right to be retained in the employment with the Employer.
9.3 GENDER. As the context may require, the singular may read as the plural and
vice versa, and all pronouns shall be deemed to refer to the masculine, feminine
or neuter.
9.4 CAPTIONS. Section captions herein are not part of this Plan.
9.5 APPLICABLE LAW. This Plan shall be governed and construed in accordance with
the laws of the State of New York.
6
<PAGE> 7
9.6 WAIVER OF BREACH. The waiver by the Employer of any breach of any provision
herein shall not operate as a waiver of any subsequent breach by the
Participant.
7
<PAGE> 1
EXHIBIT 10.35
Date
Dear :
This letter is to confirm our discussions. Pursuant to Section
14 (D) of the Employment Agreement between The Mutual Life Insurance Company of
New York and you dated , this letter will serve to amend the terms of that
Agreement.
Section 8 (A) (4) currently reads as follows:
"8(A)(4) Employee Benefits. All cash payments made pursuant to
this Section 8(A) shall be benefit-bearing."
We agree that this section is hereby deleted from the
Agreement and that Sections 8 (A) (5) and 8 (A) (6) are now new Sections 8 (A)
(4) and 8 (A) (5) , respectively.
Please sign and date the two original copies of this letter.
One copy should be retained for your files. The other should be returned to me
at your earliest convenience.
[Seal] The Mutual Life Insurance
Attest: Company of New York
By:
Read and Accepted by:
<PAGE> 2
EMPLOYMENT AGREEMENT
AGREEMENT between THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, a mutual
company organized under the laws of the State of New York (the "Company") , and
(the "Executive") dated as of (the "Agreement Date").
To insure continuity of the Company's senior management team, the parties wish
to record in this Agreement terms which provide the Executive with contractual
rights to compensation and benefits currently being provided on an informal
basis.
The Company and the Executive agree as follows:
1. OPERATION AND TERM OF AGREEMENT
This Agreement shall be effective as of the Agreement Date and
shall continue until the Expiration Date. The Expiration Date shall initially be
, but commencing on that date, and each thereafter, the
Expiration Date shall automatically be extended by additional year unless, not
later than ,the Company gives notice to the Executive that it will
not extend the Expiration Date.
2. CERTAIN DEFINITIONS
(A) Period of Employment. Commences on the Agreement Date and ends on
the Expiration Date or the Termination Date, whichever is earlier.
(B) Contract Term. Commences on the Agreement Date and ends on the
Expiration Date.
(C) Termination Date. The date when the Executive's employment with the
Company ceases.
3. EXECUTIVE'S RESPONSIBILITIES
(A) Position, Duties, Responsibilities. The Executive shall serve in
the position of .
(B) Best Efforts. The Executive shall devote his full time, best
efforts, and undivided attention to the Company's affairs, except for reasonable
vacations or illness or incapacity. Performance objectives have been established
by the Chief Executive Officer for the Company and for the Executive. The
Executive agrees to work diligently to achieve such performance objectives. The
Executive shall perform his duties with that degree of care and skill expected
of executives of similar rank at companies of comparable size and complexity.
4. RESTRICTIVE COVENANTS
(A) Noncompetition. During the Period of Employment and for the
six-month period immediately following, the Executive shall not, directly or
indirectly, in any capacity,
2
<PAGE> 3
engage in any business which is substantially competitive with any business then
actively conducted by the Company, and the Executive shall not consult with or
advise any such competitive business or otherwise, directly or indirectly,
engage in any activity which is substantially competitive with or in any way
adversely affects any activity of the Company.
(B) Nondisclosure. The Executive shall not make use of, disclose,
divulge, or make accessible to any third party any information of a confidential
nature about the Company known to the Executive in the course of his employment
until such information has come into the public domain.
(C) Specific Performance and Injunctive Relief. The Executive agrees
that the Company will suffer irreparable injury if the provisions of this
Section 4 are not honored, that damages resulting from such injury will be
incapable of being precisely measured, and. that the Company will not have an
adequate remedy at law to redress the harm which such violation shall cause.
Accordingly, the Executive agrees that the Company shall have the rights and
remedies of specific performance and injunctive relief, in addition to any other
rights or remedies that may be available at law or in equity, in respect of any
failure, or threatened failure, on the part of the Executive to comply with the
provisions of this Section 4, including, but not limited to, temporary
restraining orders and temporary injunctions to restrain any violation or
threatened violation of this Agreement by the Executive.
5. COMPENSATION, PERQUISITES AND EMPLOYEE BENEFITS
(A) Base Compensation. The Executive shall receive annual base
compensation at a rate not less than the rate in effect on the Agreement Date,
which shall be adjusted thereafter in accordance with the Company's regular
administrative practices generally applicable to its senior executives.
(B) Incentive Compensation. The Executive shall be a participant in the
Company's Annual Incentive Compensation Plan and Equity Share Plan (the
"Incentive Plans"), as in effect on the Agreement Date and with such changes or
other incentive compensation plans as may from time to time be adopted in
accordance with the Company's practices. The Executive shall be entitled to
participate in other incentive compensation plans generally available to senior
executives of the Company.
(C) Perquisites. During the Period of Employment, the Executive shall
be entitled to perquisites and fringe benefits generally available to officers
of his rank at the Company.
(D) Employee Benefits. The Executive shall be entitled to all employee
benefit plans and programs in effect for senior executives of the Company on the
Agreement Date ("Benefit Plans"), with such changes as may from time to time be
made accordance with the Company's practices. The Executive shall be entitled to
participate in any employee benefit plans and programs general available to
senior executives of the Company.
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6. DEATH
If the Executive should die during the Period of Employment, his
employment shall be deemed to have ceased on the last day of the month in which
death shall have occurred.
7. TERMINATION
(A) Cause. The Company shall have the right at any time to terminate
the Executive's employment with the Company. The termination shall be deemed to
be for "Cause" only if such termination shall be the result of:
(i) the conviction of the Executive upon a charge of any crime
involving moral turpitude;
(ii) the commission by the Executive of any act of fraud,
misrepresentation, or dishonesty;
(iii) a failure by the Executive during the Period of
Employment (except by reason of incapacity due to illness or accident) to comply
with the provisions of this Agreement relating to the time and best efforts to
be devoted by the Executive to the affairs of the Company, or to materially meet
the performance objectives and expectations referred to in Section 3(B) above;
(iv) the Executive's misconduct or negligence in performing
his duties at the Company; or
(v) the Executive's engaging in activities which place the
Executive in direct or indirect conflict with the Company;
(B) Good Reason. The Executive shall have the right at any time to
terminate the Executive's employment with the Company. The termination shall be
deemed to be for "Good Reason" only if such termination shall be the result of:
(i) a material reduction in the level of the Executive's
annual base compensation in effect on the Agreement Date or as such
level may be increased from time to time; the failure by the Company to
continue the Executive's participation in the Incentive Plans and
Benefit Plans as provided in Section 5; provided that Good Reason shall
not include a reduction in annual base compensation or in the benefits
under the Incentive Plans or the Benefit Plans that is the result of
(a) a program of reduction that is generally applicable to officers of
the Company or to participants in such plans or (b) any discretionary
determination permitted under the terms of the Incentive Plans or the
Benefit Plans; or
(ii) a material adverse alteration in the Executive's
position, powers, authority, duties, or responsibilities; removal,
during the Period of Employment, of the Executive from the office he
held as of the Agreement Date; provided that Good Reason shall not
include any such alteration or removal resulting solely from the
consummation
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of a proposal that is under consideration on the Agreement Date to
dispose of the Company's pension business.
(C) Termination Procedure; Arbitration.
(1) Notice. (a) Notice of termination shall be
provided in writing by the Company or the Executive, as applicable, and
shall specify the date as of which the Executive's employment shall be
deemed to have ceased, which date shall in no event be earlier than 60
days or later than 90 days if from the date of such notice.
(b) In the event that the Company elects to terminate
employment for Cause, the notice shall also state that the Executive
was guilty of conduct set forth in Section 7 (a), with the particulars
thereof specified in reasonable detail.
(c) In the event that the Executive elects to terminate
employment for Good Reason, the notice shall also specify the reason
for such termination, as set forth in Section 7(b), with the
particulars thereof specified in reasonable detail, and shall be given,
except in the case of a continuing breach, within 10 days after the
most recent event giving rise to Good Reason.
(2) Cure. In the case of the Executive's allegation
of Good Reason, the Company shall be given the opportunity to cure
within 30 days from its receipt of the notice, or take all reasonable
steps to that end during such 30-day period and thereafter.
(3) Arbitration. The Company and the Executive will
submit to arbitration in accordance with the rules of the American
Arbitration Association before a tribunal located in New York City,
within three months of the time it arises, any controversy, claim or
disagreement arising out of or concerning the interpretation,
application, or enforcement of this Agreement.
The decision and award of the arbitrator is intended to be final and
binding between the parties and shall be enforceable in any court of competent
jurisdiction. The parties agree that, upon the issuance of an arbitrator's
decision and award, judgment in any court of competent jurisdiction shall be
rendered on the award and entered so as to enforce its provision.
8. CONSEQUENCES OF TERMINATION
(A) Termination by the Company Other Than for Cause or by the Executive
for Good Reason. In the event of a termination by the Company of the Executive's
employment other than for Cause or by the Executive for Good Reason, the Company
shall, as liquidated damages, pay to the Executive and provide him, in lieu of
all other rights, remedies, damages and relief to which he might otherwise be
entitled, with the benefits described below:
(1) Severance. A lump-sum payment in an amount equal to annual
base compensation in effect on the Termination Date, multiplied by two.
This amount shall be reduced by any severance payments made to the
Executive under any other employment contract or severance arrangement
with the Company.
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(2) Incentive Compensation. The Executive shall receive as
additional severance: (a) any incentive compensation earned with
respect to the calendar year immediately preceding the Termination Date
but not yet paid; and (b) incentive compensation with respect to the
calendar year in which the Termination Date shall occur, in both cases
in an amount determined by the Chief Executive (which shall not be less
than 50% of Executive's base compensation in each case).
(3) Perquisites. At the discretion of the Chief Executive
Officer, the Executive may receive as additional severance the value of
the perquisites to which the Executive is entitled under 5(C) above
immediately before the Termination Date and such other items (such as
personal computers) as the Chief Executive Officer shall determine. The
Company shall provide the reasonable cost of shipping personal files
and other personal property of the Executive to the location designated
by the Executive.
(4) Employee Benefits. All cash payments made pursuant to this
Section 8(A) shall be benefit-bearing.
(5) Split Dollar Policy. The Company shall keep in effect, for
the life of the Executive, the split-dollar life insurance policy
maintained for the Executive immediately prior to the Termination Date.
The Company and the Executive shall retain their respective obligations
to pay premiums in accordance with the terms of the policy.
(6) Automobile. If the Executive has a Company- furnished
automobile, the Company shall deliver title to such automobile to the
Executive at no additional cost to the Executive. At the Company's
election, the company may elect to continue lease payments to the end
of the lease term on the automobile before delivering title to the
Executive.
(B) Termination by the Company for Cause or by the Executive Other Than
for Good Reason. In the event of a termination by the Company of the Executive's
employment for Cause or by the Executive other than for Good Reason, the
Executive shall be entitled only to the compensation and benefits required by
law upon termination of employment.
(C) Time of Payment. All lump-sum payments to be made by the Company
under this Section 8 shall be made within five days after the Termination Date.
9. WITHHOLDING
All payments shall be subject to the withholding of such amounts, if
any, relating to tax, excise tax, and other payroll deductions as the Company
may determine it should withhold.
10. INDEMNIFICATION AND INSURANCE; LEGAL EXPENSES
(A) Indemnification and Insurance. The Company will indemnify the
Executive (including payment of expenses in advance of final disposition of the
proceeding) to
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the fullest extent permitted by the laws of the State of New York and the
Charter and By-Laws of the Company; and the Executive shall be entitled to the
protection of any insurance policies the Company may elect to maintain for the
benefit of its directors and officers, against all costs, charges, and expenses
whatsoever incurred by him in connection with any action, suit, or proceeding to
which he may be made a party by reason of his being or having been a director,
officer or employee of the Company or any of its subsidiaries or affiliates or
his serving or having served any other enterprise as a director, officer or
employee at the request of the Company.
(B) Legal Expenses. In the event of any arbitration between the Company
and the Executive with respect to the subject matter of this Agreement, the
Company shall reimburse the Executive, should the Executive prevail, for all of
his reasonable costs and expenses relating to such arbitration, including,
without limitation, reasonable attorneys' fees and expenses. In no event shall
the Executive be required to reimburse the Company for any of the costs or
expenses relating to such arbitration.
11. NOTICES
All notices and other communications shall be in writing and shall be
sufficiently given when mailed in the continental United States by registered or
certified mail or personally delivered to the party entitled thereto at the
address stated below or to such changed address as the addressee may have given
by a similar notice:
To the Company: To the Executive:
MONY MONY
1740 Broadway 1740 Broadway
New York, NY 10019 New York, NY 10019
Attention: General Counsel
with an additional copy to the Executive at the home address listed on the
signature page hereto (or to such changed address as the Executive may have
given by a similar notice).
12. NON-SOLICITATION, NON-HIRE
For one year following the Termination Date, the Executive will not
directly or indirectly solicit or otherwise induce any person employed by the
Company (or affiliated with the Company as a field underwriter) to terminate his
or her employment with the Company, nor will he hire a current Company employee
or field underwriter.
13. BUSINESS GOODWILL
For one year following the Termination Date, the parties shall make no
comments which are adverse to the other party's interests or which reflect
negatively on the other party.
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<PAGE> 8
14. GENERAL PROVISIONS
(A) Other Existing Rights. Except as specifically set forth in this
Agreement, this Agreement shall not supersede any right of the Executive to
compensation or benefits under any other agreement relating to terms of
employment or under any other plan, program, or practice of the Company existing
as of the Termination Date. Any compensation or benefits thereunder shall be
paid to the Executive in accordance with the terms thereof without limitation by
this Agreement.
(B) Limitation. This Agreement shall not confer any right or impose any
obligation on the Executive to continue in the employ of the Company, or limit
the right of the Company or the Executive to terminate his employment.
(C) Assignment of Interest. No right to or interest in any payments
shall be assignable by the Executive.
(D) Amendment, Modification and Waiver. This Agreement may not be
amended, modified, or waived unless such amendment, modification, or waiver is
agreed to in writing signed by the Executive and by a duly authorized Company
officer.
(E) Enforceability. If any provision of this Agreement shall be
determined to be invalid or unenforceable by a court of competent jurisdiction,
the remaining provisions of this Agreement shall remain in full force and effect
to the fullest extent permitted by law.
(F) Entirety of Agreement. This Agreement constitutes the entire
agreement between the Company and the Executive relating to the subject matter
hereof. Any compensation or benefits to which the Executive is entitled under
this Agreement shall be provided based solely upon its terms, without regard to
any materials used in the preparation or consideration of this Agreement,
including any summary of terms or estimate of amounts relating to this
Agreement.
(G) Conflict of Law. The validity, interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the State of New
York, without giving effect to the principles of conflict of laws thereof.
(H) Confidentiality. The parties will treat the terms of this Agreement
as confidential.
(I) Availability. The Executive will make himself available, upon
request by the Company, in connection with any proceeding, legal or regulatory,
as a witness on behalf of the Company. The Company will pay all reasonable
expenses in connection with this provision.
(J) Non-Waiver of Breach. No action or inaction by the Company shall be
deemed, in law or equity, to be a waiver of any breach of this Agreement by the
Executive.
(K) Rehabilitation. This Agreement shall be null and void in the event
that the New York State Superintendent of Insurance is named rehabilitator under
Article 74 of the New York State Insurance Law.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
[SEAL] THE MUTUAL LIFE INSURANCE
Attest: COMPANY OF NEW YORK
By:
9
<PAGE> 1
EXHIBIT 10.36
Date
Dear :
This letter is to confirm our discussions. Pursuant to Section 14(D) of
the Employment Agreement between The Mutual Life Insurance Company of New York
and you dated , this letter will serve to amend the terms of that Agreement.
Section 8(A)(4) currently reads as follows:
"8(A)(4) Employee Benefits. All cash payments made pursuant to this
Section 8(A) shall be benefit-bearing."
We agree that this section is hereby deleted from the Agreement and
that Sections 8(A)(5) and 8(A)(6) are now new Sections 8(A)(4) and B(A)(5),
respectively.
Please sign and date the two original copies of this letter. One copy
should be retained for your files. The other should be returned to me at your
earliest convenience.
[SEAL] The Mutual Life Insurance
Attest: Company of New York
By:
Read and Accepted by:
<PAGE> 2
EMPLOYMENT AGREEMENT
AGREEMENT between THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK a mutual company
organized under the laws of the State of New York (the "Company"), and
(the "Executive"), dated as of (the "Agreement Date").
To insure continuity of the Company's senior management team the parties wish to
record in this Agreement terms which provide the Executive with contractual
rights to compensation and benefits currently being provided on an informal
basis.
The Company and the Executive agree as follows:
1. OPERATION AND TERM OF AGREEMENT
This Agreement shall be effective as of the Agreement Date and shall
continue until the Expiration Date. The Expiration Date shall initially be , but
commencing on that date, and each thereafter, the Expiration Date shall
automatically be extended by one additional year unless, not later than , the
Company gives notice to the Executive that it will not extend the Expiration
Date.
2. CERTAIN DEFINITIONS
(A) Period of Employment. Commences on the Agreement Date and ends on
the Expiration Date or the Termination Date, whichever is earlier.
(B) Contract Term. Commences on the Agreement Date and ends on the
Expiration Date.
(C) Termination Date. The date when the Executive's employment with the
Company ceases.
3. EXECUTIVE'S RESPONSIBILITIES
(A) Position, Duties, Responsibilities. The Executive shall serve in
the position of .
(B) Best Efforts. The Executive shall devote his full time, best
efforts, and undivided attention to the Company's affairs, except for reasonable
vacations or illness or incapacity. Performance objectives have been established
by the Chief Executive Officer for the Company and for the Executive. The
Executive agrees to work diligently to achieve such performance objectives. The
Executive shall perform his duties with that degree of care and skill expected
of executives of similar rank at companies of comparable size and complexity.
4. RESTRICTIVE COVENANTS
(A) Noncompetition. During the Period of Employment and for the
six-month period immediately following, the Executive shall not, directly or
indirectly, in
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<PAGE> 3
any capacity, engage in any business which is substantially competitive with any
business then actively conducted by the Company, and the Executive shall not
consult with or advise any such competitive business or otherwise, directly or
indirectly, engage in any activity which is substantially competitive with or in
any way adversely affects any activity of the Company.
(B) Nondisclosure. The Executive shall not make use of, disclose,
divulge, or make accessible to any third party any information of a confidential
nature about the Company known to the Executive in the course of his employment
until such information has come into the public domain.
(C) Specific Performance and Injunctive Relief. The Executive agrees
that the Company will suffer irreparable injury if the provisions of this
Section 4 are not honored, that damages resulting from such injury will be
incapable of being precisely measured, and that the Company will not have an
adequate remedy at law to redress the harm which such violation shall cause.
Accordingly, the Executive agrees that the Company shall have the rights and
remedies of specific performance and injunctive relief, in addition to any other
rights or remedies that may be available at law or in equity, in respect of any
failure, or threatened failure, on the part of the Executive to comply with the
provisions of this Section 4, including, but not limited to, temporary
restraining orders and temporary injunctions to restrain any violation or
threatened violation of this Agreement by the Executive.
5. COMPENSATION, PERQUISITES AND EMPLOYEE BENEFITS
(A) Base Compensation. The Executive shall receive annual base
compensation at a rate not less than the rate in effect on the Agreement Date,
which shall be adjusted thereafter in accordance with the Company's regular
administrative practices generally applicable to its senior executives.
(B) Incentive Compensation. The Executive shall be a participant in the
Company's Annual Incentive Compensation Plan and Equity Share Plan (the
"Incentive Plans"), as in effect on the Agreement Date and with such changes or
other incentive compensation plans as may from time to time be adopted in
accordance with the Company's practices. The Executive shall be entitled to
participate in other incentive compensation plans generally available to senior
executives of the Company.
(C) Perquisites. During the Period of Employment, the Executive shall
be entitled to perquisites and fringe benefits generally available to officers
of his rank at the Company.
(D) Employee Benefits. The Executive shall be entitled to all employee
benefit plans and programs in effect for senior executives of the Company on the
Agreement Date ("Benefit Plans"), with such changes as may from time to time be
made in accordance with the Company's practices. The Executive shall be entitled
to participate in any employee benefit plans and programs generally available to
senior executives of the Company.
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6. DEATH
If the Executive should die during the Period of Employment, his
employment shall be deemed to have ceased on the last day of the month in which
death shall have occurred.
7. TERMINATION
(A) Cause. The Company shall have the right at any time to terminate
the Executive's employment with the Company. The termination shall be deemed to
be for "Cause" only if such termination shall be the result of:
(i) the conviction of the Executive upon a charge of any crime
involving moral turpitude;
(ii) the commission by the Executive of any act of fraud,
misrepresentation, or dishonesty;
(iii) a failure by the Executive during the Period of
Employment (except by reason of incapacity due to illness or accident)
to comply with the provisions of this Agreement relating to the time
and best efforts to be devoted by the Executive to the affairs of the
Company, or to materially meet the performance objectives and
expectations referred to in Section 3(B) above;
(iv) the Executive's misconduct or negligence in performing
his duties at the Company; or
(v) the Executive's engaging in activities which place the
Executive in direct or indirect conflict with the Company;
(B) Good Reason. The Executive shall have the right at any time to
terminate the Executive's employment with the Company. The termination shall be
deemed to be for "Good Reason" only if such termination shall be the result of:
(i) a material reduction in the level of the Executive's
annual base compensation in effect on the Agreement Date or as such
level may be increased from time to time; the failure by the Company to
continue the Executive's participation in the Incentive Plans and
Benefit Plans as provided in Section 5; provided that Good Reason shall
not include a reduction in annual base compensation or in the benefits
under the Incentive Plans or the Benefit Plans that is the result of
(a) a program of reduction that is generally applicable to officers of
the Company or to participants in such plans or (b) any discretionary
determination permitted under the terms of the Incentive Plans or the
Benefit Plans; or
(ii) a material adverse alteration in the Executive's
position, powers, authority, duties, responsibilities; removal, during
the Period of Employment, of the Executive from the office he held as
of the Agreement Date;
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<PAGE> 5
provided that Good Reason shall not include any such alteration or
removal resulting solely from the consummation of a proposal that is
under consideration on the Agreement Date to dispose of the Company's
pension business.
(C) Termination Procedure; Arbitration.
(1) Notice. (a) Notice of termination shall be provided in writing by
the Company or the Executive, as applicable, and shall specify the date as of
which the Executive's employment shall be deemed to have ceased, which date
shall in no event be earlier than 60 days or later than 90 days from the date of
such notice.
(b) In the event that the Company elects to terminate employment for
Cause, the notice shall also state that the Executive was guilty of conduct set
forth in Section 7(a), with the particulars thereof specified in reasonable
detail.
(c) In the event that the Executive elects to terminate employment for
Good Reason, the notice shall also specify the reason for such termination, as
set forth in Section 7(b), with the particulars thereof specified in reasonable
detail, and shall be given, except in the case of a continuing breach, within 10
days after the most recent event giving rise to Good Reason.
(2) Cure. In the case of the Executive's allegation of Good Reason, the
Company shall be given the opportunity to cure within 30 days from its receipt
of the notice, or take all reasonable steps to that end during such 30-day
period and thereafter.
(3) Arbitration. The Company and the Executive will submit to
arbitration in accordance with the rules of the American Arbitration Association
before a tribunal located in New York City, within three months of the time it
arises, any controversy, claim or disagreement arising out of or concerning the
interpretation, application, or enforcement of this Agreement.
The decision and award of the arbitrator is intended to be final and
binding between the parties and shall be enforceable in any court of competent
jurisdiction. The parties agree that, upon the issuance of an arbitrator's
decision and award, judgment in any court of competent jurisdiction shall be
rendered on the award and entered so as to enforce its provision.
8. CONSEQUENCES OF TERMINATION
(A) Termination by the Company Other Than for Cause or by the Executive
for Good Reason. In the event of a termination by the Company of the Executive's
employment other than for Cause or by the Executive for Good Reason, the Company
shall, as liquidated damages, pay to the Executive and provide him, in lieu of
all other rights, remedies, damages and relief to which he might otherwise be
entitled, with the benefits described below:
(1) Severance. A lump-sum payment in an amount equal to annual base
compensation in effect on the Termination Date, multiplied by one. This amount
shall be
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<PAGE> 6
reduced by any severance payments made to the Executive under any other
employment contract or severance arrangement with the Company.
(2) Incentive Compensation. The Executive shall receive as additional
severance: (a) any incentive compensation earned with respect to the calendar
year immediately preceding the Termination Date but not yet paid; and (b)
incentive compensation with respect to the calendar year in which the
Termination Date shall occur, in both cases in an amount determined by the Chief
Executive (which shall not be less than 50% of Executive's base compensation in
each case).
(3) Perquisites. At the discretion of the Chief Executive Officer, the
Executive may receive as additional severance the value of the perquisites to
which the Executive is entitled under 5(C) above immediately before the
Termination Date and such other items (such as personal computers) as the Chief
Executive Officer shall determine. The Company shall provide the reasonable cost
of shipping personal files and other personal property of the Executive to the
location designated by the Executive.
(4) Employee Benefits. All cash payments made pursuant to this Section
8(A) shall be benefit-bearing
(5) Split Dollar Policy. The Company shall keep-in effect, for the life
of the Executive, the split-dollar life insurance policy maintained for the
Executive immediately prior to the Termination Date. The Company and the
Executive shall retain their respective obligations to pay premiums in
accordance with the terms of the policy.
(6) Automobile. If the Executive has a Company-furnished automobile,
the Company shall deliver title to such automobile to the Executive at no
additional cost to the Executive. At the Company's election, the Company may
elect to continue lease payments to the end of the lease term on the automobile
before delivering title to the Executive.
(B) Termination by the Company for Cause or by the Executive Other Than
for Good Reason. In the event of a termination by the Company of the Executive's
employment for Cause or by the Executive other than for Good Reason, the
Executive shall be entitled only to the compensation and benefits required by
law upon termination of employment.
(C) Time of Payment. All lump-sum payments to be made by the Company
under this Section 8 shall be made within five days after the Termination Date.
9. WITHHOLDING
All payments shall be subject to the withholding of such amounts, if
any, relating to tax, excise tax, and other payroll deductions as the Company
may determine it should withhold.
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<PAGE> 7
10. INDEMNIFICATION AND INSURANCE; LEGAL EXPENSES
(A) Indemnification and Insurance. The Company will indemnify the
Executive (including payment of expenses in advance of final disposition of the
proceeding) to the fullest extent permitted by the laws of the State of New York
and the Charter and By-Laws of the Company; and the Executive shall be entitled
to the protection of any insurance policies the Company may elect to maintain
for the benefit of its directors and officers, against all costs, charges, and
expenses whatsoever incurred by him in connection with any action, suit, or
proceeding to which he may be made a party by reason of his being or having been
a director, officer or employee of the Company or any of its subsidiaries or
affiliates or his serving or having served any other enterprise as a director,
officer or employee at the request of the Company.
(B) Legal Expenses. In the event of any arbitration between the Company
and the Executive with respect to the subject matter of this Agreement, the
Company shall reimburse the Executive, should the Executive prevail, for all of
his reasonable costs and expenses relating to such arbitration, including,
without limitation, reasonable attorneys' fees and expenses. In no event shall
the Executive be required to reimburse the Company for any of the costs or
expenses relating to such arbitration.
11. NOTICES
All notices and other communications shall be in writing and shall be
sufficiently given when mailed in the continental United States by registered or
certified mail or personally delivered to the party entitled thereto at the
address stated below or to such changed address as the addressee may have given
by a similar notice:
To the Company: To the Executive:
MONY MONY
1740 Broadway 1740 Broadway
New York, NY 10019 New York, NY 10019
Attention: General Counsel
with an additional copy to the Executive at the home address listed on the
signature page hereto (or to such changed address as the Executive may have
given by a similar notice) .
12. NON-SOLICITATION, NON-HIRE
For one year following the Termination Date, the Executive will not
directly or indirectly solicit or otherwise induce any person employed by the
Company (or affiliated with the Company as a field underwriter) to terminate his
or her employment with the Company, nor will he hire a current Company employee
or field underwriter.
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<PAGE> 8
13. BUSINESS GOODWILL
For one year following the Termination Date, the parties shall make no
comments which are adverse to the other party's interests or which reflect
negatively on the other party.
14. GENERAL PROVISIONS
(A) Other Existing Rights. Except as specifically set forth in this
Agreement, this Agreement shall not supersede any right of the Executive to
compensation or benefits under any other agreement relating to terms of
employment or under any other plan, program, or practice of the Company existing
as of the Termination Date. Any compensation or benefits thereunder shall be
paid to the Executive in accordance with the terms thereof without limitation by
this Agreement.
(B) Limitation. This Agreement shall not confer any right or impose any
obligation on the Executive to continue in the employ of the Company, or limit
the right of the Company or the Executive to terminate his employment.
(C) Assignment of Interest. No right to or interest in any payments
shall be assignable by the Executive.
(D) Amendment, Modification and Waiver. This Agreement may not be
amended, modified, or waived unless such amendment, modification, or waiver is
agreed to in writing signed by the Executive and by a duly authorized Company
officer.
(E) Enforceability. If any provision of this Agreement shall be
determined to be invalid or unenforceable by a court of competent jurisdiction,
the remaining provisions of this Agreement shall remain in full force and effect
to the fullest extent permitted by law.
(F) Entirety of Agreement. This Agreement constitutes the entire
agreement between the Company and the Executive relating to the subject matter
hereof. Any compensation or benefits to which the Executive is entitled under
this Agreement shall be provided based solely upon its terms, without regard to
any materials used in the preparation or consideration of this Agreement,
including any summary of terms or estimate of amounts relating to this
Agreement.
(G) Conflict of Law. The validity, interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the State of New
York, without giving effect to the principles of conflict of laws thereof.
(H) Confidentiality. The parties will treat the terms of this Agreement
as confidential.
(I) Availability. The Executive will make himself available, upon
request by the Company, in connection with any proceeding, legal or regulatory,
as a
8
<PAGE> 9
witness on behalf of the Company. The Company will pay all reasonable
expenses in connection with this provision.
(J) Non-Waiver of Breach. No action or inaction by the Company shall be
deemed, in law or equity, to be a waiver of any breach of this Agreement by the
Executive.
(K) Rehabilitation. This Agreement shall be null and void in the event
that the New York State Superintendent of Insurance is named rehabilitator under
Article 74 of the New York State Insurance Law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
[SEAL] THE MUTUAL LIFE INSURANCE
Attest: COMPANY OF NEW YORK
By:
9
<PAGE> 1
EXHIBIT 10.38
[Chase Logo]
THE CHASE MANHATTAN BANK
Global Insurance
One Chase Manhattan Plaza, 4th Floor
New York, NY 10081
June 25, 1997
Mr. David V. Weigel, CCM
Vice President and Treasurer
The Mutual Life Insurance Company of New York
Glenpointe Center West
500 Frank W. Burr Boulevard
Teaneck, NJ 07666-6888
VIA COURIER
Dear Dave:
We are pleased to inform you that The Chase Manhattan Bank (the "Bank") has
approved the renewal of a $40,000,000 line of credit for commercial paper backup
in favor of The Mutual Life Insurance Company of New York (the "Borrower"),
subject to the following terms and conditions:
1. Under the line of credit, upon the request of the Borrower and subject to
the terms of this letter, the Bank will make advances to the Borrower from
time to time from June 30, 1997 (the "Effective Date"), to, but not
including June 30, 1998 (the "Termination Date"), in an aggregate principal
amount at any one time outstanding not to exceed the amount set forth in
the first paragraph of this letter.
2. The Bank's commitment to lend to the Borrower hereunder shall expire on the
date immediately preceding the Termination Date and, if not paid sooner,
all outstanding advances under the line of credit shall be repaid on the
Termination Date.
3. Each advance under the line of credit shall bear interest at such rate as
the Bank and the Borrower may agree to at the time such advance is made.
4. The line of credit will carry a commitment fee of 9 basis points per annum
on the unused portion of the commitment, payable quarterly on the last day
of each calendar quarter, commencing on the first of such dates next
succeeding the Effective Date.
<PAGE> 2
Mr. David V. Weigel, CCM
June 19, 1997
Page Two
5. The initial advance under the line of credit is subject to (a) the
execution and delivery to the Bank of a promissory note (the "Note") by a
duly authorized officer of the Borrower and (b) receipt by the Bank of such
resolutions, certificates or other evidence of the Borrower's authority to
borrow hereunder as may reasonably be required by the Bank. The initial
advance and each subsequent advance under the line of credit are subject to
(i) the absence of any material adverse change in the financial condition,
business or results of operation of the Borrower since the date of the
latest financial statement delivered to the Bank prior to the date hereof
(ii) the absence of any event of default, or any event which, with the
giving of notice or lapse of time or both, would constitute an event of
default, under the Note and (iii) the terms and conditions contained in the
Note and any document, instrument or agreement evidencing, governing or
securing the Note.
6. The Borrower may request advances by telephone or in writing and the Bank
may treat all requests purported to be made on behalf of the Borrower to be
duly authorized.
If the terms of this letter are acceptable to you please so indicate by having
the enclosed counterpart of this letter executed by a duly authorized officer of
the Borrower and returning them to the Bank by June 30, 1997. Unless we receive
a duly executed copy of this letter by that date, our offer expressed herein
shall terminate and be of no further force or effect. The Bank may treat all
signatures on this letter as genuine.
Very truly yours,
/s/ Heather Lindstrom
Heather A. Lindstrom
Vice President
AGREED TO AND ACCEPTED
The Mutual Life Insurance Company of New York
By: D. V. Weigel
Name:
Title:
<PAGE> 1
EXHIBIT 10.39
Michael M. Sinisgalli, CCM
Vice President
Financial Institutions
[FLEET LOGO] FLEET BANK
Mail Stop CT MO 0250
777 Main Street
June 19, 1997 Hartford, CT 06115
860-986-2645
Fax: 860-986-1264
Mr. David V. Weigel, CCM
Vice President and Treasurer
The Mutual Life Insurance Company
of New York
Glenpoint Center West
500 Frank W. Burr Blvd.
Teaneck, NJ 07666-6888
Dear Dave:
We are pleased to inform you that Fleet National Bank (the "Bank") has approved
the extension of a $25,000,000 line of credit for commercial paper backup in
favor of The Mutual Life Insurance Company of New York (the "Borrower"), subject
to the following terms and conditions:
1. Under the line of credit, upon the request of the Borrower and subject to
the terms of this letter, the Bank will make advances to the Borrower from
time to time from June 29, 1997 (the "Effective Date") to but not including
June 29, 1998 (the "Termination Date") in an aggregate principal amount at
any one time outstanding not to exceed the amount set forth in the first
paragraph of this letter.
2. The Bank's commitment to lend to the Borrower hereunder shall expire on the
date immediately preceding the Termination Date and, if not paid sooner,
all outstanding advances under the line of credit shall be repaid on the
Termination Date.
3. Each advance under the line of credit shall bear interest at such rate as
the Bank and the Borrower may agree to at the time such advance is made.
4. The line of credit will carry a commitment fee of 9.0 basis points per
annum on the unused portion of the commitment, payable quarterly on the
last day of each calendar quarter, commencing on the first of such dates
next succeeding the Effective Date.
5. The initial advance under the line of credit is subject to (a) execution
and delivery to the Bank of a promissory note (the "Note") by a duly
authorized officer of the Borrower and (b) receipt by the Bank of such
resolutions, certificates or other evidence of the Borrower's authority to
borrow hereunder as may reasonably be
<PAGE> 2
required by the Bank. The initial advance and each subsequent advance under
the line of credit are subject to (i) the absence of any material adverse
change in the financial condition, business or results of operation of the
Borrower since the date of the latest financial condition, business or
results of operation of the Borrower since the date of the latest financial
statement delivered to the Bank prior to the date hereof, (ii) the absence
of any event of default, or any event which, with the giving of notice or
lapse of time or both, would constitute the event of default, under the
Note and (iii) the terms and conditions contained in the Note and any
document, instrument of agreement evidencing, governing or securing the
Note.
6. The Borrower may request advances by telephone or in writing and the Bank
may treat all requests purported to be made on behalf of the Borrower to be
duly authorized.
If the terms of this letter are acceptable to you please so indicate by having
the enclosed counterpart of this letter executed by a duly authorized officer of
the Borrower and returning them to the Bank by July 31, 1997. Unless we receive
a duly executed copy of this letter by that date, our offer expressed herein
shall terminate and be of no further force or effect, The Bank may treat all
signatures on this letter as genuine.
Very truly yours,
FLEET NATIONAL BANK
By: /s/ Michael M. Sinisgalli
Name: Michael M. Sinisgalli
Title: Vice President
AGREED TO AND ACCEPTED
The Mutual Life Insurance Company of New York
By: /s/ D.V. Weigel
Name: David V. Weigel
Title: VP & Treasurer
<PAGE> 1
EXHIBIT 10.40
[CITIBANK LOGO]
June 30, 1997
Mr. David V. Weigel
Vice President - Treasurer
Mutual of New York
Glenpointe Centre West
500 Frank W. Burr Boulevard
Teaneck, NY 07666-6888
Dear Dave:
I am pleased to inform you that Citibank, N.A. has renewed credit facilities for
Mutual of New York with the following key items. You should note that complete
terms, conditions and pricing of actual borrowing, together with an acceptable
note, would be negotiated at the time of a borrowing request.
Amount: $25,000,000
Available: 364 Days from June 30th 1997
Facility Fee: 9 basis points p.a.
We value the relationship with Mutual of New York and look forward to continuing
and expanding our business together. Should you have any questions, do not
hesitate to call me on 212-559-3639.
Sincerely yours,
/s/ S.F. Engle
Scott F. Engle
Attorney-in-Fact
Citibank, N.A.
<PAGE> 1
EXHIBIT 10.41
[MELLON BANK LOGO] One Mellon Bank Center
Pittsburgh, PA 15258-0001
Robert E. Brandenstein
Vice President
June 30, 1997
Mr. David V. Weigel, CCM
Vice President and Treasurer
The Mutual Life Insurance Company of New York
Glenpointe Center West
500 Frank W. Burr Boulevard
Teaneck, NJ 07666-6888
Dear Dave:
We are pleased to inform you that Mellon Bank, N.A. (the "Bank") has approved
the extension of a $5,000,000 line of credit for commercial paper backup in
favor or The Mutual Life Insurance Company of New York (the "Borrower"), subject
to the following terms and conditions:
Under the line of credit, upon the request of the Borrower and subject
to the term of this letter, the Bank will make advances to the Borrower
from time to time from July 1, 1997 (the "Effective Date") to but not
including June 30, 1998 (the "Termination Date") in an aggregate
principal amount at any one time outstanding not to exceed the amount
set forth in the first paragraph of this letter.
The Bank's commitment to lend to the Borrower hereunder shall expire on
the date immediately preceding the Termination Date and, if not paid
sooner, all outstanding advances under the line of credit shall be
repaid on the Termination Date.
Each advance under the line of credit shall bear interest at such rate
as the Bank and the Borrower may agree to at the time such advance is
made.
The line of credit will carry a commitment fee of 9 basis points per
annum on the unused portion of the commitment, payable quarterly on the
last day of each calendar quarter, commencing on the first of such
dates next succeeding the Effective Date.
The initial advance under the line of credit is subject to (a) the
execution and delivery to the Bank of a promissory note (the "Note") by
a duly authorized officer of the Borrower and (b) receipt by the Bank
of such resolutions, certificates or other evidence of the Borrower's
authority to borrower hereunder as may
<PAGE> 2
Mr. David V. Weigel, CCM
June 30, 1997
Page 2
reasonably be required to the Bank. The initial advance and each
subsequent advance under the line of credit are subject to (i) the
absence of any material adverse change in the financial condition,
business or result of operation of the Borrower since the date of the
latest financial statement delivered to the Bank prior to the date
hereof, (ii) the absence of any event of default, or any event which,
with the giving notice or lapse of time or both, would constitute an
event of default, under the Note and (iii) the terms and conditions
contained in the Note and any document, instrument of agreement
evidencing, governing or securing the Note.
The Borrower may request advances by telephone or in writing and the
Bank may treat all requests purported to be made on behalf of the
Borrower to be duly authorized.
If the terms of this letter are acceptable to you, please so indicate by having
the enclosed counterpart of this letter executed by a duly authorized officer of
the Borrower and returning them to the Bank by July 30, 1997. Unless we receive
a duly executed copy of this letter by that date, our offer expressed herein
shall terminate and be of no further force or effect. The Bank may treat all
signatures on this letter as genuine.
Very truly yours
Mellon Bank, N.A.
/s/ Robert E. Brandenstein
Robert E. Brandenstein
Vice President
AGREED TO AND ACCEPTED:
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By: ________________________
Name: ________________________
Title: ________________________
<PAGE> 1
EXHIBIT 10.42
[STATE STREET LOGO] Edward M. Anderson
Vice President
State Street Bank and Trust Company
Insurance Services
P.O. Box 9111
Boston, MA 02200-9111
Telephone: (617) 956-5301
Facsimile: (617) 537-2580
August 6, 1997
Mr. David V. Weigel, CCM
Vice President and Treasurer
The Mutual Life Insurance Company of New York
Glenpointe Center West
500 Frank W. Burr Boulevard
Teaneck, NJ 07666-6888
Dear Dave:
I am pleased to inform you that State Street Bank and Trust Company (the "Bank")
has renewed a $5,000,000 line of credit for commercial paper backup in favor of
the Mutual Life Insurance Company of New York (the "Borrower"), subject to the
following terms and conditions;
1. Under the line of credit, upon the request of the Borrower and subject to
the terms of this letter, the Bank will make advances to the Borrower from
time to time from July 1, 1997, (the "Effective Date") to but not including
June 30, 1998 (the "Termination Date") in an aggregate principal amount of
any one time outstanding not to exceed the amount set forth in the first
paragraph of this letter.
2. The Bank's commitment to lend to the Borrower hereunder shall expire on the
date immediately preceding the Termination Date and, if not paid sooner,
all outstanding advances under the line of credit shall be repaid on the
Termination Date.
3. Each advance under the line of credit shall bear interest at such rate as
the Bank and the Borrower may agree to at the time such advance is made.
4. The line of credit will carry a commitment fee of 9.0 basis points per
annum on the unused portion of the commitment, payable quarterly on the
last day of each calendar quarter, commencing on the first of such dares
next succeeding the Effective Date.
5. The initial advance under the line of credit is subject to (a) the
execution and the delivery to the Bank of a promissory note (the "Note") by
a duly authorized
<PAGE> 2
The Mutual Life Insurance Company of New York
August 6, 1997
Page 2
officer of the Borrower and (b) receipt by the Bank of such resolutions,
certificates, or other evidence of the Borrower's authority to borrow
hereunder as may reasonably be required by the Bank. The initial advance
and each subsequent advance under the line of credit are subject to (i) the
absence of any material adverse change in the financial condition, business
or results of operation of the Borrower since the date of the latest
financial statement delivered to the Bank prior to the date hereof, (ii)
the absence of any event of default, or any event which, with the giving of
notice of lapse of time or both, would constitute an event of default,
under the Note, and (iii) the terms and conditions contained in the Note
and any document, instrument of agreement evidencing, governing, or
securing the Note.
6. The Borrower may request advances by telephone or in writing, and the Bank
may treat all requests purported to be made on behalf of the Borrower to be
duly authorized.
If the terms of this letter are acceptable to you, please so indicate by having
the enclosed counterpart of this letter executed by a duly authorized officer of
the Borrower and returning them to the Bank by August 31, 1997. Unless we
receive a duly executed copy of this letter by that date, our offer expressed
herein shall terminate and be of no further force or effect. The Bank may treat
all signatures of this letter as genuine.
Very truly yours,
By: /s/ Edward M. Anderson
Name: Edward Anderson
Title: Vice President
AGREED TO AND ACCEPTED
The Mutual Life Insurance Company of New York
By: /s/ David V. Weigel
Name: David V. Weigel
Title: Vice President and Treasurer
<PAGE> 1
Exhibit 10.43
MONY FINANCIAL SERVICES
ANNUAL INCENTIVE COMPENSATION PLAN
I. PURPOSE OF PLAN
MONY's "Annual Incentive Compensation Plan" (the Plan) has been
designed to compensate key officers for their contribution to the
overall performance of the company. The purpose of the Plan is to
attract, retain and motivate key executive officers to achieve specific
performance objectives set for themselves, their Sectors and MONY.
II. PLAN ADMINISTRATION
The Plan will be monitored by the Human Resources Committee of the
Board of Trustees; and administered by the Chairman and his Cabinet.
The Corporate Human Resources function will coordinate the Plan under
the following guidelines.
A. Eligibility
All Senior and Corporate officers and selected key officers
are eligible to participate in the Plan.
B. Performance Cycle
The performance cycle is the calendar year during which
predetermined Corporate/Sector and individual objectives are
assessed versus actual results.
C. Corporate and Sector Objectives
Corporate and Sector objectives for the purpose of the Plan
will be those established and agreed upon at the beginning of
the calendar year. These will be approved by the Human
Resources Committee of the Board and communicated to
participating officers. Corporate and Sector objectives for
1989 are defined in Appendix A.
D. Individual Objectives
Prior to the beginning of each year or within a month of
eligibility, each participating executive is required to
establish a set of individual objectives approved by the
appropriate Sector/Area head. The objectives will he submitted
to senior management for review and approval.
E. Sector/Area Bonus Pools
At the end of a performance year, actual financial results
will be compared to previously established objectives to
generate the bonus pool for each Sector and
<PAGE> 2
Area. Bonus pool size will be determined by a Sector's actual financial
performance (i.e., Minimum, Target or Maximum), and the aggregate
salaries of its officers. A weighted performance level for objectives
will be calculated using straight-line interpolation for intermediate
results. The following table shows the pool as a percentage of
aggregate salaries at each performance level.
Pool as Percent of
Aggregate Salaries
------------------------------------------------
Performance Full Vice President & Functional
Level Above Vice President
-------------------------------------------------------------------
Minimum 25% plus 20%
Target 50% plus 35%
Maximum 100% plus 60%
For example, assuming a particular Sector reaches target performance on
all their established objectives and the Full Vice Presidents and above
base salaries were an aggregate of $550,000 and Functional Vice
Presidents base salaries were an aggregate of $700,000, the Sector pool
would be 50% of $550,000 plus 35% percent of $700,000 for a total pool
of $520,000.
F. Individual Awards
Each executive's individual performance will be rated by the
appropriate Sector/ Area head and awards from the bonus pool will be
determined by performance rankings. These awards will be submitted to
senior management for final review and approval. Awards for certain
Senior Officers will be submitted to the Human Resources Committee of
the Board in accordance with established policy.
Individual awards determined by performance ranking of each
participating officer may range from 0% to 125% of base salary for Full
Vice Presidents and above. For Functional Vice Presidents, the range is
0% to 75% of base salary. In all cases, the Sector bonus pool earned
for that year... cannot be exceeded... it could total less than the
earned amount. Sector pool amounts cannot be carried forward from one
year to another year.
G. Form of Payment
Payments will be made in cash, as soon as practical, after the
performance results and individual performance ratings have been
determined and payment amounts approved by the Human Resources
Committee of the Board. Incentive compensation awards are considered a
part of an individual's Stipulated Rate of Pay, and are therefore,
benefits bearing. Officers who participate in MONY's Deferred
Compensation Plan for Key Employees will defer payments based on their
agreements.
2
<PAGE> 3
III. SPECIAL CONDITIONS
A. Plan Changes
The Human Resources Committee of the Board, at its discretion, has the
authority to amend, suspend or terminate any or all of the provisions
of this Plan.
B. Discretionary Fund
In addition to the bonus pools, a discretionary fund of 10% of all
participants' base salary will be established. The chairman, at his
discretion, will administer this fund when the normal process does not
provide appropriate recognition.
C. Terminations, Retirements and Deaths
If an officer terminates voluntarily or involuntarily, chooses early or
normal retirement or dies while a participant in the plan, the officer
will not be eligible for an award. Exceptions, where appropriate, may
be made by the Chairman. In addition, the appropriate Sector/Area bonus
pool will be decreased by the amount of the officer's previous
contribution to the pool.
3
<PAGE> 4
APPENDIX A
1989 OBJECTIVES
<TABLE>
<CAPTION>
CORPORATE WEIGHT MINIMUM TARGET MAXIMUM
<S> <C> <C> <C> <C>
1. GAAP Earnings, excluding Certain 50% $55 $70 $90
Non-operating costs (Millions)
2. Ending Statutory Surplus Balance 50% 527 540 550
1. INDIVIDUAL FINANCIAL SERVICES
1. IFS MONY GAAP Earnings (Millions) 30% $34.2 $39.2 $49.2
2. Statutory Operating Income 30% (40.6) (37.6) (34.6)
(Millions)
3. Ratio of Actual to Budgeted 40% 100% 97% 92.%
Expenses
GROUP & PENSION OPERATIONS
1. Pension MONY GAAP Earnings 25% $27.3 $33.3 $40.3
(Millions)
2. Statutory Operating Income 25% 4.2 7.2 12.2
(Millions)
3. Expense Ratio 25% 8.2% 7.3% 6.4%
4. Revenue Goals (Billions) 25% 2.2 2.5 2.8
PENSION OPERATIONS
1. Pension MONY GAAP Earnings 40% $23.3 $28.4 $34.3
(Millions)
2. Statutory Operating Income 20% 1.4 2.8 5.2
(Millions)
3. Expense Ratio 20% 9.0% 8.0% 7.0%
4. Revenue Goals (Billions) 20% 1.025 1.150 1.305
INVESTMENT MANAGEMENT OPERATIONS
1. Statutory Capital Gains 35% $75 $125 $150
(Millions)
2. Yield on New Investments 30% 116 142 167
Relative to Treasury Bill Spreads
(Basis Points)
3. MONY GAAP Capital Gains 20% $40 $ 60 $ 75
(Millions)
4. Funding GIC Sales (Millions) 5% 450 500 550
5. Funding IFS Interest Sensitive 10% 235 275 315
Products
</TABLE>
<PAGE> 1
Exhibit 10.44
EMPLOYMENT AGREEMENT
AGREEMENT between THE MUTUAL LIFE INSURANCE COMPANY OF NEW
YORK, a New York corporation (the "Company"), and (the "Executive"), dated as of
(the "Agreement Date").
WHEREAS, the Executive is currently employed as a senior
officer of the Company.
WHEREAS, the Company wishes to assure itself and the Executive
of continuity of management in the event of a Change in Control of the Company,
as hereinafter defined, and to provide the Executive with the termination and
other benefits set forth in this Agreement in the event the Executive's
employment with the Company terminates following such a Change in Control under
the circumstances described below.
WHEREAS, the Executive previously entered into a Change in
Control employment agreement dated as of (the "Prior Agreement"), which
agreement is hereby amended and restated in its entirety.
NOW, THEREFORE, the Company and the Executive hereby agree as
follows:
1. OPERATION AND TERM OF AGREEMENT; CHANGE IN CONTROL
(A) Term. This Agreement shall be effective as of the Agreement Date and
shall continue in effect until the Expiration Date. The Expiration Date shall
initially be , but commencing on and each thereafter, the
Expiration Date shall automatically be extended by one additional year unless,
not later than of the
<PAGE> 2
preceding year, the Company shall have given notice to the Executive that it
does not wish to extend the Expiration Date; provided, however, that if a Change
in Control shall have occurred prior to the original or extended Expiration
Date, the Expiration Date shall automatically be extended to the third
anniversary of the last day of the month in which the Change in Control
occurred.
(B) Change In Control. The benefits to be provided to the
Executive pursuant to this Agreement shall only become available upon a Change
in Control. Prior to a Change in Control, the employment of the Executive by the
Company shall constitute an employment-at-will, with respect to which the
Executive shall be entitled to those rights upon which the Executive and the
Company shall from time to time agree.
For purposes of this Agreement, a Change in Control shall mean
a change in control of the Company which shall be deemed to have occurred:
(1) during the period that the Company is a mutual
insurance company, upon
(i) a merger or consolidation with another corporation
in a transaction in which the Company is not the surviving corporation;
or
(ii) the sale by the Company of substantially all of
its assets to another corporation;
(2) during the period that the Company is no longer a
mutual insurance company, upon
(i) an acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of shares of outstanding voting securities of
MONY Financial Services Corporation (the "Holding Company") entitled to
vote generally in the election of directors (the "Outstanding Voting
Securities") which, when combined with any other securities owned
beneficially by the
2
<PAGE> 3
acquiror, would result in such acquiror beneficially owning twenty
percent (20%) or more of either (A) the then outstanding shares of
common stock of the Holding Company or (B) the combined voting power of
the then Outstanding Voting Securities; excluding, however, the
following: (1) any acquisition directly from the Holding Company, other
than an acquisition by virtue of the exercise of a conversion privilege
unless the security being so converted was itself acquired directly
from the Holding Company, (2) any acquisition by the Holding Company
and (3) any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Holding Company or any subsidiary of the
Holding Company;
(ii) at any time following the date hereof, individuals who as
of the date hereof constitute the Board of Directors of the Holding
Company (or the Board of Trustees of the Company, with respect to
periods during which the Company is a mutual life insurance company)
(as applicable, the "Board") (and any new directors whose election by
the Board or nomination for election by the Holding Company's
shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors as of the date
hereof or whose election or nomination for election was so approved)
cease for any reason (except for death, disability or voluntary
retirement) to constitute a majority thereof;
(iii) the consummation of a transaction approved by the
shareholders of the Holding Company that is a merger, consolidation,
reorganization or similar corporate transaction, whether or not the
Holding Company is the surviving corporation in such transaction, other
than a merger, consolidation, or reorganization that results in the
Outstanding Voting Securities immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least eighty percent
(80%) of the combined voting power of the voting securities of the
Holding Company (or such surviving entity) outstanding immediately
after such merger, consolidation, reorganization or transaction;
(iv) the consummation of a transaction approved by the
shareholders of the Holding Company that is (A) the sale or other
disposition of all or substantially all of the assets (by way of
reinsurance or otherwise) of the Holding Company or the Company or (B)
a complete liquidation or dissolution of the Holding Company or the
Company; or
(v) adoption by the Board of a resolution to the effect that
any Person has taken actions which, if consummated, would result in
such Person acquiring effective control of the business and affairs of
the Holding Company or the Company, subject to the consummation of the
transactions contemplated by such actions.
3
<PAGE> 4
2. CERTAIN DEFINITIONS
(A) Period of Employment. The Period of Employment shall mean
the period of time commencing on the date of a Change in Control and ending on
the earlier of the Expiration Date or the Termination Date.
(B) Contract Term. The Contract Term shall mean the period of
time commencing on the date of a Change in Control and ending on the Expiration
Date.
(C) Termination Date. The Termination Date shall mean the date
as of which the Executive's employment with the Company shall cease or be deemed
to have ceased in the manner specified in Section 6 or Section 7.
3. EXECUTIVE'S RESPONSIBILITIES; LOCATION
(A) Position, Duties, Responsibilities. Commencing on the date
of the Change in Control, the Executive shall serve in the position and have the
duties and responsibilities as in effect immediately prior to the date of the
Change in Control and as they may be expanded thereafter.
(B) Best Efforts. During the Period of Employment, the
Executive shall devote his full time, best efforts and undivided attention
during normal business hours to the business and affairs of the Company, except
reasonable vacations, illness or incapacity. The Executive is aware that
performance objectives have historically been established by the Company's
Chairman and Chief Executive Officer, in consultation with the Company's Board,
for Company-wide performance and for performance by the Executive. The Executive
agrees to work diligently throughout the Period of Employment to achieve any
such performance objectives that shall then exist.
4
<PAGE> 5
(C) Principal Business Office. During the Period of
Employment, the Executive' principal business office shall be located in the New
York City metropolitan area.
4. RESTRICTIVE COVENANTS
(A) Noncompetition. The Executive agrees that during the
Period of Employment and for the twelve-month period immediately following the
Period of Employment, the Executive shall not, directly or indirectly, in any
capacity, engage in any business which is substantially competitive with any
business then actively conducted by Company or any of its affiliates or
subsidiaries, and the Executive shall not undertake to consult with or advise
any such competitive business or otherwise, directly or indirectly, engage in
any activity which is substantially competitive with or in any way adversely and
substantially affects any activity of the Company or any of its affiliates or
subsidiaries.
(B) Nondisclosure. Except as expressly provided herein, the
Executive agrees that during the Period of Employment and thereafter, the
Executive shall not make use of, disclose, divulge, or make accessible, to any
third party, any information of a secret or confidential nature known to the
Executive in the course of his employment with the Company or any of its
affiliates or subsidiaries until such information has come into the public
domain or has otherwise ceased to be secret or confidential.
(C) Specific Performance and Injunctive Relief. The Executive
acknowledges and agrees that the Company and/or its affiliates and subsidiaries
will suffer irreparable injury if the provisions of this Section 4 are not
honored, that damages resulting from such injury will be incapable of being
precisely measured, and that the
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Company and its subsidiaries and affiliates will not have an adequate remedy at
law to redress the harm which such violation shall cause. Accordingly, the
Executive agrees that the Company shall have the rights and remedies of specific
performance and injunctive relief, in addition to any other rights or remedies
that may be available at law or in equity, in respect of any failure, or
threatened failure, on the part of the Executive to comply with the provisions
of this Section 4, including, but not limited to, temporary restraining orders
and temporary injunctions to restrain any violation or threatened violation of
this Agreement by the Executive.
5. COMPENSATION, PERQUISITES AND EMPLOYEE BENEFITS
(A) Base Compensation. For all services rendered during the
Period of Employment, the Executive shall receive annual base compensation at a
rate not less than the rate in effect immediately prior to the date of the
Change in Control, which shall be increased thereafter in accordance with the
Company's regular administrative practices generally applicable to its senior
executives as in effect immediately prior to the date of the Change in Control.
(B) Incentive Compensation. During the Period of Employment,
the Executive shall be and continue to be a full participant in the Company's
Annual Incentive Compensation Plan and Equity Share Plan or any comparable
successor plan (the "Incentive Plans"), as the Incentive Plans are in effect
immediately prior to the date of the Change in Control and with such
improvements in the Incentive Plans or other incentive compensation plans as may
from time to time be made in accordance with the practices of the Company. The
Executive shall be entitled to participate in other incentive compensation plans
generally available to senior executives of the Company. If
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any of the Incentive Plans are terminated or discontinued, the Executive shall
be entitled to participate in other incentive compensation plans with terms at
least as favorable to the Executive as the Incentive Plans in effect prior to
the termination or discontinuance of the Incentive Plans.
(C) Perquisites. During the Period of Employment, the
Executive shall be entitled to perquisites and fringe benefits, in each case at
least equal to those attached to his position immediately prior to the date of
the Change in Control.
(D) Employee Benefits. During the Period of Employment,
the Executive shall be entitled to participate in all employee benefit plans and
programs as in effect for senior executives of the Company immediately prior to
the date of the Change in Control ("Plans") under the terms of the Plans, with
such improvements in the Plans as may from time to time be made in accordance
with the practices of the Company. The Executive shall be entitled to
participate in any employee benefit plans and programs generally available to
senior executives of the Company. If any of the Plans are terminated or
discontinued, the Executive shall be entitled to participate in other employee
benefit plans with terms at least as favorable to the Executive as the Plans as
in effect prior to the termination or discontinuance of the Plans.
(E) Other Obligations of the Company. Any increases in base
and incentive compensation, perquisites or employee benefits under this
Agreement or otherwise shall not diminish any other obligation of the Company
hereunder.
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6. DEATH OR DISABILITY
(A) Death. If the Executive should die during the Period of
Employment, his employment shall be deemed to have ceased on the last day of the
month in which death shall have occurred.
(B) Disability. "Disability" shall mean an illness or accident
which the Board determines in its discretion will or has prevented the Executive
from performing his duties under this Agreement for a period of six consecutive
months. In the event that the Executive incurs a Disability during the Period of
Employment, his employment shall be deemed to have ceased on the last day of
such six-month period.
7. TERMINATION
(A) Cause. The Company shall have the right at any time to
terminate the Executive's employment with the Company. The termination of the
Executive's employment by the Company during the Contract Term shall be deemed
to be for "Cause" only if such termination shall be the result of:
(i) an act or acts of dishonesty by the Executive resulting in
conviction for a felony;
(ii) a deliberate and intentional failure by the Executive
during the Period of Employment (except by reason of incapacity due to
illness or accident) to comply with the provisions of this Agreement
relating to the time and best efforts to be devoted by the Executive to
the affairs of the Company, if such failure results in demonstrably
material injury to the Company; or
(iii) the Executive's gross misconduct, if such misconduct
results in demonstrably material injury to the Company;
provided that notice of such termination is given in accordance with Section
7(C) below.
(B) Good Reason. The Executive shall have the right at any
time to terminate the Executive's employment with the Company. The termination
of the
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Executive's employment by the Executive during the Contract Term shall be deemed
to be for "Good Reason" only if such termination shall be the result of:
(i) a reduction during the Period of Employment in the current
level of the Executive's aggregate compensation, including his annual
base compensation, Incentive Plan awards, employee benefit plan
coverages and perquisites (other than a reduction in awards or benefits
that is generally applicable to participants in a plan in accordance
with the terms of the plan in effect immediately prior to the date of
the Change in Control);
(ii) a diminishment during the Period of Employment in the
Executive's position, powers, authority, duties or responsibilities, or
the business to which those powers, authority, duties or
responsibilities apply; removal during the Period of Employment of the
Executive from the office he held as of the date of the Change in
Control; or change during the Period of Employment in the Executive's
chain of supervision as it existed as of the date of the Change in
Control; or
(iii) a material breach of this Agreement by the Company;
provided that notice of the Executive's election to terminate his
employment under this Agreement is given in accordance with Section
7(C) below. Failure to elect to terminate with respect to one event
giving rise to Good Reason does not preclude the Executive from making
the election with respect to a subsequent event.
(C) Termination Procedure.
(1) Notice. (a)Notice of termination of employment under this
Agreement shall be provided in writing by the Company or the Executive, as
applicable, and shall specify the date as of which the Executive's employment
shall be deemed to have ceased, which date shall in no event be earlier than 60
days from the date of such notice.
(b) In the event that the Company elects to terminate
employment, the Company shall provide to the Executive the notice described in
Section 7(C)(1)(a) above. If termination is alleged to be for Cause, such notice
shall also state that the Executive
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was guilty of conduct set forth in Section 7(A), with the particulars thereof
specified in detail.
(c) In the event that the Executive elects to terminate
employment, the Executive shall provide to the Company the notice described in
Section 7(C)(1)(a) above. If termination is alleged to be for Good Reason, such
notice shall also specify the reason for such termination, as set forth in
Section 7(B), with the particulars thereof specified in detail, and shall be
given, except in the case of a continuing breach, within three calendar months
after the most recent event giving rise to Good Reason.
(2) Cure. (a)In the case of the Executive's alleged breach or
gross misconduct set forth in Sections 7(A)(ii) or (iii), the Executive shall be
given the opportunity to remedy such alleged breach or gross misconduct within
30 days from his receipt of the notice referred to above, or take all reasonable
steps to that end during such 30-day period and thereafter.
(b) In the case of the Executive's allegation of Good Reason,
the Company shall be given the opportunity to remedy the alleged Good Reason
within 30 days from its receipt of the notice referred to above, or take all
reasonable steps to that end during such 30-day period and thereafter.
(3) Arbitration. In the event that the Executive's employment
shall be terminated by the Company and such termination is alleged to be for
Cause, the Executive shall have the right, in addition to all other rights and
remedies provided by law or equity, to seek arbitration as described below. In
the event that the Executive's employment shall be terminated by the Executive
and such termination is alleged to be for Good Reason, the Company shall have
the right, in addition to all other rights and
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remedies provided by law or equity, to seek arbitration as described below. Such
arbitration shall be sought in the County of New York, State of New York, under
the rules of the American Arbitration Association, by serving notice to
arbitrate upon the other party no more than 60 days after such party received
the notice of termination referred to above.
8. CONSEQUENCES OF TERMINATION, DEATH OR DISABILITY
(A) Termination by the Company Other Than for Cause or by the
Executive for Good Reason. In the event of a termination by the Company of the
Executive's employment during the Contract Term other than for Cause or by the
Executive for Good Reason, the Company shall, as liquidated damages, pay to the
Executive and provide him, in lieu of all other rights, remedies, damages and
relief to which he might otherwise be entitled under this Agreement, with the
benefits described below in this Section 8(A):
(1) Severance. A lump-sum payment in an amount equal to three
times the sum of (i) the Executive's annual base compensation in effect on the
Termination Date, plus (ii) the Executive's "average annual bonus" in effect on
the Termination Date. For purposes hereof, "average annual bonus" shall mean the
average of the Executive's bonuses earned under the Company's Annual Incentive
Compensation Plan (or any successor plan) for the three completed fiscal years
immediately preceding his Termination Date. This amount shall be reduced by any
severance payments made to the Executive under any other employment contract or
severance arrangement with the Company.
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(2) Annual Incentive Compensation. A payment in respect of the
annual incentive compensation of the Executive of the following amounts:
(a) any annual incentive compensation payments awarded for a
year prior to the year in which the Termination Date occurs but not paid as of
the Termination Date, which amount shall not be less than the Executive's annual
base compensation for such year multiplied by item (ii) of Section 8(A)(2)(b);
and
(b) an amount in respect of the annual incentive compensation
that would have been earned in respect of the partial year of service in which
such Termination Date occurs, in an amount calculated by multiplying (i) the
rate of annual base compensation in effect for the Executive immediately prior
to the Termination Date by (ii) the average of the annual awards under the
Annual Incentive Compensation Plan payable in respect of the two calendar years
immediately preceding the year for which payment is made, with each such award
expressed as a percentage of the annual base compensation paid to the Executive
for the respective calendar years, with the result multiplied by (iii) a
fraction, the numerator of which is the number of days in the calendar year
through the Termination Date, and the denominator of which is 365.
(3) Equity Share Plan. With respect to awards under the
Company's Equity Share Plan which are outstanding on the Termination Date, the
following payments:
(a) All amounts payable as of the Termination Date in
accordance with the terms of the Equity Share Plan. Nothing in this Agreement
shall affect the right of the Executive to payment of awards under the Equity
Share Plan in accordance with its terms for all three-year Plan cycles completed
prior to the Termination Date.
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(b) In respect of any such awards under any three-year cycles
of the Equity Share Plan not completed prior to the Termination Date, a lump sum
payment in an amount equal to the value of the total award amounts made with
respect to all of such uncompleted Plan cycles, with the award amount for each
such cycle to be determined under the terms of the Equity Share Plan as if the
Company had achieved the "Cumulative Earnings" targeted for each respective
cycle (i.e., such that the "Earned Value" equals $100 per awarded "Equity
Share") (as such terms are used in the Equity Share Plan).
If the Company shall terminate the Equity Share Plan and
establish a successor plan, the Executive shall receive payments under such
successor plan in a manner comparable to the foregoing.
(4) Retirement Benefits. The Executive shall receive the
payments specified in this Section 8(A)(4) with respect to retirement benefits,
in addition to payments of benefits to which he is entitled under the Retirement
Income Security Plan and the Investment Plan Supplement (or their successor) as
of the Termination Date, and in lieu of all payments under the Excess Benefit
Plan.
(a) The benefits described in Section 8(A)(4)(b) below shall
be calculated assuming:
(i) the Company's Excess Benefit Plan, Retirement Income
Security Plan and Investment Plan Supplement (collectively, the
"Retirement Plans") had continued during the remainder of the Contract
Term without change from the date of the Change in Control;
(ii) the Executive had continued to be employed for the
remainder of the Contract Term;
(iii) subject to generally applicable Plan limitations, the
Company's contributions for the Executive for the remainder of the
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Contract Term under the Investment Plan Supplement were to be (1) as
Company Retirement Contributions, at an annual rate of 2% of
Compensation, and (2) as Company Matching Contributions, at an annual
percentage rate of compensation equal to the average percentage
contribution for the Executive for the three full calendar years
preceding the Termination Date, but with no other contributions on
behalf of the Executive;
(iv) the Executive was fully vested in all benefits under the
Retirement Plans on the Termination Date; and
(v) the Executive's Compensation taken into account under the
Retirement Plans included (1) the Executive's annual base compensation
in effect immediately prior to the Termination Date over the remainder
of the Contract Term and (2) any amounts paid to the Executive under
this Agreement in lieu of a form of compensation (other than annual
base compensation) that would ordinarily be taken into account as
Compensation for purposes of the Retirement Plans.
(b) The payment shall equal the aggregate present value
(calculated using the discount rate described in Section 10) of the benefits
described in (i), (ii), (iii) and (iv) below minus the aggregate present value
(calculated using the discount rate described in Section 10) of the benefits
actually payable to the Executive under the Retirement Income Security Plan and
Investment Plan Supplement:
(i) the benefit that would have been paid to the Executive
under the Retirement Income Security Plan, if he had elected to
commence such benefit on the earliest date possible under such Plan
subsequent to the Expiration Date; plus
(ii) the benefit that would have been payable to the Executive
under the Investment Plan Supplement; plus
(iii) the benefit that would have been paid to the Executive
under the "Excess Retirement Plan" provisions of the Excess Benefit
Plan if he had elected to commence such benefit on the earliest date
possible under the Excess Benefit Plan subsequent to the Expiration
Date; plus
(iv) the benefit that would have been paid to the Executive
under the "Excess Investment Plan" provisions of the Excess Benefit
Plan. The hypothetical earnings that would have been credited on the
Executive's Investment Plan Benefit shall be determined on the basis of
the discount rate described in Section 10.
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(c) Election. In lieu of the lump-sum payment provided by this
Section 8(A)(4), the Executive may elect payment as of the Termination Date of
any amounts payable under this Section in any of the forms available under the
Excess Benefit Plan provided such election is irrevocably made as of the
Agreement Date. The Executive's election is set forth on Exhibit I hereto.
(5) Welfare Benefits. The Executive shall receive the amounts
and arrangements specified in this Section 8(A)(5) with respect to welfare
benefits.
(a) A payment equal to the aggregate present value (calculated
in using the discount rate described in Section 10) of the following amounts:
(i) Medical and Dental Benefits -- an amount equal to the
portions of the costs that would have been incurred by the Company for
the remainder of the Contract Term for the level of medical and dental
benefits (in effect for the Executive immediately prior to the
Termination Date), with such costs for the calendar year in which the
Termination Date occurs to be determined pursuant to the provisions of
section 4980B of the Internal Revenue Code of 1986 or any successor
provisions ("COBRA"), and with such costs to be assumed to increase
thereafter at an annual rate 200 basis points over the discount rate
described in Section 10;
(ii) Retiree Medical Benefits -- If the Executive would have
become eligible for retiree medical coverage during the Contract Term
(but is not eligible for such coverage on his Termination Date), an
amount equal to the costs that would have been incurred by the Company
for retiree medical benefit coverage for the life of the Executive,
determined as if he retired at the end of the Contract Term and based
on the level of retiree medical benefits that would have been available
to the Executive had he been eligible for such coverage immediately
prior to the Termination Date with the Company's assumed costs for such
coverage to be determined in the manner specified in (i) above using
the mortality assumption described in Section 10;
(iii) Spouse's/Survivors' Income Benefits -- an amount equal
to the costs that would have been paid by the Company for the remainder
of the Contract Term for the level of the life insurance coverages in
effect for the Executive immediately prior to the Termination Date,
calculated pursuant to the uniform premium table included in Income Tax
Regulation section 1.79-3T (or any successor table).
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(b) Continued coverage under certain welfare benefit plans of
the Company for the remainder of the Contract Term:
(i) Disability Benefits -- the Executive shall continue to be
covered under the short-term and long-term disability coverage under
the Company's Disability Benefit Plan as in effect for the Executive
immediately prior to the Termination Date, or a comparable plan or
plans, with the benefits under such plan to be determined on the basis
of the annual base compensation in effect immediately prior to the
Termination Date.
(ii) Voluntary Group Life Insurance and Optional Survivors'
Insurance -- the Executive shall continue to be eligible to participate
in these plans as in effect for the Executive immediately prior to the
Termination Date, or a comparable plan or plans, by making voluntary
contributions at the levels applicable under the terms of such plans.
(iii) Split-Dollar Life Insurance -- the Company shall keep in
effect, for the life of the Executive, the split-dollar life insurance
policy maintained for the Executive immediately prior to the
Termination Date; the Company and the Executive shall retain their
respective obligations to pay premiums in accordance with the terms of
the policy.
(c) Payments under this Section 8(A)(5) shall be in addition
to amounts due to the Executive under the welfare plans for periods ending on
the Termination Date. The Executive's rights to receive payments under this
Section 8(A)(5) shall not diminish, or be in substitution for, any rights he may
otherwise have to participate in the Company's welfare plans after the
Termination Date, provided that the Executive shall in no event (i) receive
payments under this Section 8(A)(5) in respect of benefits under a welfare plan
for any period and (ii) actually be covered for the same period under such
welfare plan at the Company's expense.
(B) Disability or Death.
(1) Disability. In the event of the Executive's Disability
during the Period of Employment, the Executive shall be entitled to the
compensation and benefits provided for in Sections 5(A), (C) and (D) of this
Agreement for the Period of
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Employment. Payment shall be without prejudice to any other payments due in
respect of the Executive's death or Disability.
(2) Death. In the event of the death of the Executive during
the Period of Employment, the Executive's representative shall be entitled to
the compensation provided in Section 5(A) of this Agreement through the Period
of Employment. Payment shall be without prejudice to any other payment due in
respect of the Executive's death or Disability.
(3) Incentive Compensation. In the event of the Executive's
Disability or death during the Period of Employment, the Company shall pay the
Executive or his legal representative, in addition to the payments required by
this Section 8(B):
(a) an award under the Annual Incentive Plan (or any successor
plan), determined in accordance with Section 8(A)(2) on a pro rata
basis, for the portion of the calendar year prior to the Termination
Date (or, in the case of Disability, the earlier of the Termination
Date and the Expiration Date); and
(b) an award under each incomplete cycle of the Equity Share
Plan (or any successor plan), determined in accordance with Section
8(A)(3) but on a pro rata basis, for the portion of any three-year Plan
cycle completed by the Executive prior to the Termination Date (or, in
the case of Disability, the earlier of the Termination Date and the
Expiration Date).
(4) Reduction of Payments. The amount of any payments due
under this Section 8(B) shall be reduced by any payments to which the Executive
is entitled for the same period because of disability under any disability
benefit plan of the Company providing salary continuation.
(C) Termination by the Company for Cause or by the Executive
Other Than for Good Reason. In the event of a termination by the Company of the
Executive's employment during the Contract Term for Cause or by the Executive
other than for Good Reason, the Executive shall be entitled to the compensation
and benefits ordinarily
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provided to senior executives of the Company upon termination of employment in
accordance with the plans, programs and practices of the Company applicable to
senior executives as in effect on the date of the Change in Control.
(D) Time of Payment. All lump-sum payments to be made by the
Company under this Section 8 shall be made within five days after the
Termination Date. Annuity payments shall commence on the last day of the
calendar month in which the Termination Date occurs.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
(A) Gross-Up Payment. Anything in this Agreement to the contrary
notwithstanding and except as set forth below, if it shall be determined that
any amount paid, distributed or treated as paid or distributed by the Company to
or for Executive's benefit (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code") or any interest or
penalties are incurred by Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment,
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Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
All determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized accounting firm as may
be designated by Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive within 15 business
days of the receipt of notice from Executive that there has been a Payment, or
such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne by
the Company. Any Gross-Up Payment, as determined pursuant to this Section 9,
shall be paid by the Company to Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(B) and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting
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Firm shall determine the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by the Company to or for Executive's
benefit.
(B) Notification of Claims. Executive shall notify the Company
in writing of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later then ten
business days after Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies Executive in
writing prior to the expiration of such period that it desires to contest such
claim, Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceeding
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
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foregoing provisions of this Section 9, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to Executive, on an interest-free basis, and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for Executive's taxable year with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
(C) Refund of Claims. If, after Executive's receipt of an
amount advanced by the Company pursuant to Section 9(B), Executive becomes
entitled to receive any refund with respect to such claim, Executive shall
(subject to the Company's complying with the requirements of Section 9(B))
promptly pay to the Company the
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amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after Executive's receipt of an amount advanced
by the Company pursuant to Section 9(B), a determination is made that Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
10. INTEREST AND MORTALITY ASSUMPTIONS
(A) Interest Assumptions. Determinations of any present values
under this Agreement and of any present values relating to this Agreement shall
be based upon a discount rate equal to 120 percent of the applicable Federal
rate (determined under section 1274(d) of the Code), compounded semiannually.
Unless otherwise elected by the Executive on Exhibit I hereto, the Executive
shall be deemed to have elected that such discount rate be determined based on
such applicable Federal rate as in effect on the Agreement Date. The Company
hereby agrees to use of the discount rate that is elected or deemed to be
elected by the Executive.
(B) Mortality Assumptions. For purposes of this Agreement,
assumptions relating to mortality are determined using the mortality tables and
assumptions in effect under the Company's Retirement Income Security Plan on the
date as of which any such mortality assumption is made.
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11. WITHHOLDING
All payments required to be made by the Company hereunder to
the Executive shall be subject to the withholding of such amounts, if any,
relating to tax, excise tax and other payroll deductions as the Company may
reasonably determine it should withhold pursuant to any applicable law or
regulation.
12. INDEMNIFICATION AND INSURANCE; LEGAL EXPENSES
The Executive shall be entitled to the following additional
benefits in the event of a Change in Control:
(A) Indemnification and Insurance. The Company will indemnify
the Executive (including payment of expenses in advance of final disposition of
the proceeding) to the fullest extent permitted by the laws of the State of New
York and the Charter and By-Laws of the Company, in each case as in effect on
the date of the Change in Control or on the Termination Date, whichever affords
greater protection to the Executive; and the Executive shall be entitled to the
protection of any insurance policies the Company may elect to maintain generally
for the benefit of its directors and officers, against all costs, charges and
expenses whatsoever incurred or sustained by him in connection with any action,
suit or proceeding to which he may be made a party by reason of his being or
having been a director, officer or employee of the Company or any of its
subsidiaries or affiliates or his serving or having served any other enterprise
as a director, officer or employee at the request of the Company. The Company
shall cause to be maintained in effect for not less than six years from the
Termination Date policies of directors' and officers' liability insurance of at
least the same coverage as those policies, if any, maintained by the Company on
the date of the Change in Control and containing
23
<PAGE> 24
terms and conditions which are no less advantageous than such policies, or if
such coverage is not available, the best available coverage for equal cost to
the Company.
(B) Legal Expenses. In the event of any litigation,
arbitration or other proceeding between the Company and the Executive with
respect to the subject matter of this Agreement or the enforcement of the
Executive's rights hereunder, the Company shall reimburse the Executive,
regardless of the outcome, for all of his reasonable costs and expenses relating
to such litigation, arbitration or other proceeding, including, without
limitation, reasonable attorneys' fees and expenses. In no event shall the
Executive be required to reimburse the Company for any of the costs or expenses
relating to such litigation, arbitration or other proceeding.
13. NOTICES
All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be sufficiently
given if and when mailed in the continental United States by registered or
certified mail or personally delivered to the party entitled thereto at the
address stated below or to such changed address as the addressee may have given
by a similar notice:
To the Company: The Mutual Life Insurance
Company of New York
1740 Broadway
New York, New York 10019
Attention: General Counsel
To the Executive: The Mutual Life Insurance
Company of New York
1740 Broadway
New York, New York 10019
With an additional copy to the Executive at the home address listed on Exhibit I
hereto (or to such changed address as the Executive may have given by a similar
notice).
24
<PAGE> 25
14. GENERAL PROVISIONS
(A) Determinations of Value. Whenever, under this Agreement,
it is necessary to determine whether one benefit is less than, equal to, or
larger than another in value (whether or not such benefits are provided under
this Agreement), such determination shall be made using the assumptions
described in Section 10.
(B) Other Existing Agreements. Except as specifically set
forth in this Agreement (including, without limitation, Section 14(G) and
Exhibit I hereto), this Agreement shall supersede any right under any other
agreement relating to terms of employment between the Company and the Executive
existing as of the Agreement Date (including, without limitation, the Prior
Agreement).
(C) Limitation. This Agreement shall not confer any right or
impose any obligation on the Executive to continue in the employ of the Company,
or limit the right of the Company or the Executive to terminate his employment.
(D) Company Set-Off and Counterclaim. The Company shall have
no right of set-off or counterclaim in respect of any claim, debt or obligation
against any payments provided for in this Agreement.
(E) Assignment of Interest. No right to or interest in any
payments shall be assignable by the Executive; provided, however, that this
provision shall not preclude him from designating one or more beneficiaries to
receive any amount that may be payable after his death and shall not preclude
his executor or administrator from assigning any right hereunder to the person
or persons entitled thereto.
(F) Amendment, Modification and Waiver. No provision of this
Agreement may be amended, modified
25
<PAGE> 26
or waived unless such amendment, modification or waiver shall be agreed to in
writing signed by the Executive and by a duly authorized Company officer.
(G) Enforceability. If this Agreement or any provision hereof
shall be determined to be invalid or unenforceable by a court of competent
jurisdiction, the corresponding provision or provisions of the Prior Agreement
shall be in full force and effect with respect to the matters described in such
invalid or unenforceable provision of this Agreement and the remaining
provisions of this Agreement shall remain in full force and effect to the
fullest extent permitted by law.
(H) Entirety of Agreement. This Agreement constitutes the
entire agreement between the Company and the Executive relating to the subject
matter hereof. Any compensation or benefits to which the Executive is entitled
under this Agreement shall be provided based solely upon its terms, without
regard to any materials used in the preparation or consideration of this
Agreement, including any summary of terms or estimate of amounts relating to
this Agreement.
(I) Company and Successors. This Agreement shall be binding
upon and inure to the benefit of the Company and any successor of the Company
including, without limitation, any corporation acquiring directly or indirectly
all or substantially all of the assets of the Company, whether by merger,
consolidation, reinsurance, sale or otherwise (and such successor shall
thereafter be deemed "the Company" for the purposes of this Agreement), but
shall not otherwise be assignable by the Company. For purposes of clarification,
the "Company" shall include MONY Life Insurance Company following the
demutualization of the Company.
26
<PAGE> 27
(J) Definition of Executive. The word "Executive" shall,
wherever appropriate, include his dependents, beneficiaries and legal
representatives.
(K) Conflict of Law. The validity, interpretation, performance
and enforcement of this Agreement shall be governed by the laws of the State of
New York, without giving effect to the principles of conflict of laws thereof.
(L) Exhibits. The provisions of Exhibit I hereto are hereby
incorporated by reference in this Agreement with the same force and effect as if
fully set forth herein.
(M) Rehabilitation. This Agreement shall be null and void and
unenforceable in the event that the New York State Superintendent of Insurance
is named rehabilitator under Article 74 of the New York State Insurance Law.
27
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
By_____________________________
Name:
Title:
ATTEST:
______________________________
EXECUTIVE
______________________________
Name:
28
<PAGE> 29
Exhibit I to Employment Agreement
I. Name of Executive:
Home Address of Executive
II. Election made pursuant to Section 8(A) (4):
The Executive elects payment of the excess retirement benefits under
Section 8(A) (4) of the Agreement in one of the following forms:
Excess Retirement Plan Benefit
_______ Lump sum at Termination Date
_______ Annuity commencing at Termination Date -
_______ Life
_______ 50% Joint and Survivor
- Beneficiary:
_______ 100% Joint and Survivor
- Beneficiary:
_______ Other; Please specify: ______________________
Excess Investment Plan Benefit
_______ Lump sum at Termination Date
_______ Installment commencing at Termination Date,
Payable _________Annually
_________Monthly
_______ Installments over ______ years (not greater
than 20)
_______ Installments over life expectancy of Executive
(amount redetermined annually)
_______ Installment over life expectancy of Executive
and beneficiary (amount redetermined annually)
- Beneficiary: ______________________________
_______ Payment in accordance with income settlement option
contained in policies of life insurance being issued by the
Company as of the Agreement Date; Please
specify:________________________________
III. Election made pursuant to Section 10(A):
For purposes of the calculations contemplated by Section 10 (A), the
Executive elects to utilize the applicable discount rate in effect on:
_______ the Agreement Date; or
<PAGE> 30
_______ the Termination Date.
If no election is made, the Executive will be deemed to have elected the
applicable discount rate in effect on the Agreement Date.
IV. Other agreements between Executive and Company that are not to be
superseded by the Agreement as contemplated in Section 14 (B) (in
addition to rights specifically set forth in the Agreement ):
1. Rights pursuant to the Company's Deferred Compensation Plan
2. Employment agreement dated as of September 19, 1991 (for periods
prior to a Change in Control)
3. In accordance with Section 8(B)(1) of the Agreement, rights upon
Disability under this Agreement do not supersede the rights of the
Executive in the event of his eligible disability under the
Company's Disability Benefit Plan, Retirement Income Security Plan,
Investment Plan Supplement, Comprehensive Medical Benefit Program
and Life Insurance Program for Selected MONY Officers (or any
successor plans) ("Disability Benefits"). Any Disability Benefits
for which the Executive becomes eligible shall be paid to the
Executive in accordance with the terms of such plans without
limitation by this Agreement. Any determination made pursuant to
Section 6(B) of this Agreement as to the existence of a Disability
or as to the date as of which the Executive's employment is deemed
to have ceased shall have no effect in determining the Executive's
eligibility for Disability Benefits or other benefits receivable
during a period of disability.
30
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report dated July 27, 1998, except for Note 2 to the consolidated financial
statements and Note 1 to the consolidated financial statement supplemental
schedule as to which the date is August 14, 1998, on our audits of the
consolidated financial statements and consolidated financial statement
supplemental schedule of The Mutual Life Insurance Company of New York. We also
consent to the references to our firm under the captions "Experts", "Summary
Financial Information" and "Selected Consolidated Financial Information."
PricewaterhouseCoopers LLP
New York, New York
September 18, 1998
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 JUN-30-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 JUN-30-1998
<EXCHANGE-RATE> 1 1
<DEBT-HELD-FOR-SALE> 5,950,100 6,282,400
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 337,800 378,100
<MORTGAGE> 1,430,100 1,478,800
<REAL-ESTATE> 1,117,100 791,600
<TOTAL-INVEST> 10,150,900 10,240,500
<CASH> 313,400 492,400
<RECOVER-REINSURE> 574,500<F1> 579,800<F1>
<DEFERRED-ACQUISITION> 1,007,100 990,000
<TOTAL-ASSETS> 23,611,300 24,601,600
<POLICY-LOSSES> 7,469,400 7,543,000
<UNEARNED-PREMIUMS> 0 0
<POLICY-OTHER> 2,352,800 2,249,100
<POLICY-HOLDER-FUNDS> 238,500 250,100
<NOTES-PAYABLE> 423,600 418,900
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 1,320,600 1,448,900
<TOTAL-LIABILITY-AND-EQUITY> 23,611,300 24,601,600
965,900 428,100
<INVESTMENT-INCOME> 733,000 357,700
<INVESTMENT-GAINS> 72,100 157,600
<OTHER-INCOME> 205,400 101,100
<BENEFITS> 840,100 379,700
<UNDERWRITING-AMORTIZATION> 181,200 70,800
<UNDERWRITING-OTHER> 403,700<F2> 224,500<F2>
<INCOME-PRETAX> 187,700 199,900
<INCOME-TAX> 57,300 71,800
<INCOME-CONTINUING> 130,400 128,100
<DISCONTINUED> 0 0
<EXTRAORDINARY> 13,300 9,700
<CHANGES> 0 0
<NET-INCOME> 117,100 118,400
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0 0
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 0 0
<PAYMENTS-PRIOR> 0 0
<RESERVE-CLOSE> 0 0
<CUMULATIVE-DEFICIENCY> 0 0
<FN>
<F1>CONSISTS OF "AMOUNTS DUE FROM REINSURERS".
<F2>CONSISTS OF "OTHER OPERATING COSTS AND EXPENSES".
</FN>
</TABLE>
