EXHIBIT 10.6
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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
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TABLE OF CONTENTS
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Page
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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
▇▇▇▇ 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
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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 ............................................. ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ 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
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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
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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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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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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 ▇▇▇▇ 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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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 ▇▇▇▇ 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Exhibit Y - Form of Opinion of General Counsel of AEGON and AUSA Life
Exhibit Z - Form of Opinion of LeBoeuf, Lamb, ▇▇▇▇▇ & ▇▇▇▇▇▇
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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 1.01 W - 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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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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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) 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 management services to AUSA
Life with respect to the Investment Assets (as defined
2
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 ▇▇▇▇ 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), providing, among other things, for the sublease by MONY to AUSA
Life of certain furniture for use in connection with the Business.
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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).
"Administrative Services Agreement" means the Administrative Services
Agreement which is substantially in the form of Exhibit F hereto.
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"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.
"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.
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"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 ▇▇▇▇ 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 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
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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.
"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.
7
"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.
"▇▇▇▇ of Sale and General Assignment" means the ▇▇▇▇ 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) 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
8
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.
"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.
9
"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.
"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.
10
"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, 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
11
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 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.
12
"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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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.
"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.
13
"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 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.
14
"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 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.
15
"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 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.
16
"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.
"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.
17
"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.
"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
18
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.
"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.
19
"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 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
20
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.
"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.
21
"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
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.
22
"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 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.
23
"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 ▇▇▇▇ 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.
"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.
24
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 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.
25
(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 ▇▇▇▇ 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 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, ▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, 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.
26
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 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
27
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 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,
28
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 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
29
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 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
30
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 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
31
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.
(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
32
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.
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
33
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.
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
34
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 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
35
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 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
36
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.
(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.
37
(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, 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.
38
(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 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.(S) 9601, et seq.; the Emergency Planning and Community Right-To-Know Act,
42 U.S.C.(S)(S)11001-11050; the Hazardous Materials Transportation Act, 49
U.S.C.(S)1801, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
(S) 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)
39
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.
(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
40
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,
(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,
41
(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,
(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
42
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,
(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,
43
(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 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
44
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.
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,
45
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 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.
46
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 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
47
from, MONY in connection with this Agreement or the transactions contemplated
hereby, except ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. and ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. whose
fees for services in connection with such transactions will be paid by MONY.
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
48
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 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
49
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 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
50
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 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 & ▇▇▇▇▇▇▇, 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 & ▇▇▇▇▇▇▇ (collectively, the "Audited Financial Statements"). The
Audited Financial Statements are based on the books and records of
51
MONY and its Subsidiaries, and the Audited Financial Statements have been
audited by Coopers & ▇▇▇▇▇▇▇ and fairly present in all material respects the
consolidated financial 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
52
Business during 1992 ("Significant Brokers") MONY believes it enjoys good
relations 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 ▇▇▇▇▇▇ 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
53
31, 1992 has terminated or, to the knowledge of MONY, has given written notice
of termination of its relationship with MONY.
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.
54
(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 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;
55
(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;
(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.
56
(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, 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).
57
(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.
58
(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.
59
(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.
60
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) any
61
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).
62
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.
(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
63
(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 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
64
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.
(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
65
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 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
66
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 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
67
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.
(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
68
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.
(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
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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.
(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.
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(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 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.
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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
(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
72
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, 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
73
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 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.
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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. 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.
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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 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
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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 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.
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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
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
78
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 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.
79
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 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
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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 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
81
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.
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
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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,
(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
83
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 or 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 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,
84
(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 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,
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(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.
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
86
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 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.
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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) 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
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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 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).
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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 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.
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(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 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
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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 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
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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
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.
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(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) 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).
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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 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
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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, 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
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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
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
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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 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
98
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
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
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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 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
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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 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
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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 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.
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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 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
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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").
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
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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.
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. ▇▇▇▇ of Sale and General Assignment and Trademark
Assignment. At the Closing, MONY shall execute and deliver to AUSA Life the ▇▇▇▇
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.
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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.
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
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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.
(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
107
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 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. ss. 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
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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 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
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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 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.
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(iv) AUSA Life shall also take into account a Continuing Employee's
employment by MONY prior to the Closing Date for purposes of
determining 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.
(1) 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 the Closing, subject to AUSA Life's right to amend or
modify its terms on an annual basis.
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(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), (1) 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 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
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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.
(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.
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(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 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
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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 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.
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(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.
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.
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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 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
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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, 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.
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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 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
121
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
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
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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.
(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
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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.
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.
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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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, 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) 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
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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 & ▇▇▇▇▇▇ 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.
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.
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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 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
127
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.
(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
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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 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
129
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, ▇▇▇▇▇ & ▇▇▇▇▇▇,
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.
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.
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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 & ▇▇▇▇▇▇ 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 & ▇▇▇▇▇▇ 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 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
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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 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
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(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 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.
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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 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.
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(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.
(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
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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 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.
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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 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
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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).
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
138
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 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.
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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 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
140
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 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
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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.
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
142
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 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
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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 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.
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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
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
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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 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.
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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. 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.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇.▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
147
Attention: Chief Financial Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a concurrent copy to:
AEGON USA, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to MONY or the Manager to:
The Mutual Life Insurance Company
of New York
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a concurrent copy to:
The Mutual Life Insurance Company
of New York
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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.
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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. 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.
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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 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
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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.
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
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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 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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman & CEO
AEGON USA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: VP/CFO
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AUSA LIFE INSURANCE COMPANY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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
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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
(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
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(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
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(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.
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
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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 Mortage 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
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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 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
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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
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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.
(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 tem (10) days following the ninth
anniversary of the Closing Date, the
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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
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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 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
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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
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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).
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