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Exhibit 2.1
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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
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TABLE OF CONTENTS
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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
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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
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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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"XXX" 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 XXX 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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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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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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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/ XXXXXXX X. XXXX
------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Chairman and Chief Executive
Officer
[Seal]
Attest:
By: /s/ XXXXXX X. XXXXXXX
----------------------------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President and Secretary
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