<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1997
REGISTRATION NO. 333-14693
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ARM FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 63 61-1244251
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer identification number)
incorporation or organization) classification code number)
</TABLE>
------------------------
ARM FINANCIAL GROUP, INC.
515 WEST MARKET STREET
LOUISVILLE, KENTUCKY 40202
(502) 582-7900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
ROBERT H. SCOTT
ARM FINANCIAL GROUP, INC.
515 WEST MARKET STREET
LOUISVILLE, KENTUCKY 40202
(502) 582-7900
(Name, address, including zip code, and telephone number, including area code,
of agent for service for the registrant)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
FAITH D. GROSSNICKLE PETER R. O'FLINN
SHEARMAN & STERLING LARS BANG-JENSEN
599 LEXINGTON AVENUE LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.
NEW YORK, NEW YORK 10022 125 WEST 55TH STREET
(212) 848-4000 NEW YORK, NEW YORK 10019-5389
(212) 424-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
The sole purpose of this Amendment is to file certain exhibits to the
Registration Statement. Accordingly, this Amendment consists only of the facing
page, this explanatory note and Part II of the Registration Statement. The
Prospectus and Financial Statement Schedules are unchanged and have been
omitted.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table shows the expenses payable by the Company, other than
underwriting discounts and commissions, to be incurred in connection with the
sale and distribution of the securities being registered. All amounts are
estimates (except for the Securities and Exchange Commission (the "SEC")
registration fee and the Nasdaq National Market listing fee).
<TABLE>
<S> <C>
SEC registration fee............................................ $34,848.48
National Association of Securities Dealers, Inc. filing fee..... 12,000.00
Nasdaq National Market listing fee.............................. *
Printing and engraving expenses................................. *
Legal fees and expenses......................................... *
Accountants' fees and expenses.................................. *
Blue Sky qualification fees and expenses........................ *
Transfer Agent and Registrar fees............................... *
Miscellaneous................................................... *
---------
Total................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be furnished by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides, in summary,
that directors and officers of Delaware corporations are entitled, under certain
circumstances, to be indemnified against all expenses and liabilities (including
attorneys' fees) incurred by them as a result of suits brought against them in
their capacity as a director or officer, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, if they
had no reasonable cause to believe their conduct was unlawful; PROVIDED that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, they
are fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper. Any such indemnification may be made by the corporation
only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct.
The Certificate of Incorporation of the Registrant (the "Certificate of
Incorporation") provides that no director of the Registrant shall be personally
liable to the Registrant or its stockholders for monetary damages for any breach
of fiduciary duty as a director, except for liability: (i) for any breach of the
director's duty of loyalty to the Registrant or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) in respect of certain unlawful dividend payments
or stock redemptions or purchases or (iv) for any transaction from which the
director derived an improper personal benefit.
The Certificate of Incorporation and the By-laws of the Registrant provide
for indemnification of its directors and officers to the fullest extent
permitted by Delaware law, as the same may be amended from
II-1
<PAGE>
time to time. In addition, MS Group indemnifies those directors of the
Registrant who are also officers of MS & Co.
The Underwriting Agreement (Exhibit 1.1 hereto) contains provisions for
certain indemnification rights to the directors and officers of the Registrant.
In addition, the Registrant and MS Group maintains directors' and officers'
liability insurance for their respective directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years, the Registrant has issued securities without
registration under the Act, as follows:
(a) Common Stock
(i) On June 14, 1995, in connection with the acquisition of
substantially all of the assets and business operations of SBM Company, the
Registrant issued 9,770 shares of its Class A Common Stock to the Morgan
Stanley Capital Partners III, L.P., Morgan Stanley Capital Investors, L.P.,
MSCP III 892 Investors, L.P., New Arm, LLC, Dudley J. Godfrey, Jr. and
Edward D. Powers for an aggregate offering price of $63,505,000.
(ii) On February 23, 1996, the Registrant issued 5 shares of its Class A
Common Stock to Patty Winter in connection with the exercise of options for
an aggregate offering price of $31,360.
(iii) On July 1, 1996, the Registrant issued 21 shares of its Class A
Common Stock to Warren M. Foss for an aggregate offering price of $152,880.
(b) Grants and Exercises of Stock Options
As of March , 1997, options to purchase 2,713.40 shares of Class A Common
Stock were outstanding and unexercised under the Registrant's Stock Option Plan.
On February 23, 1996, the Registrant issued 5 shares of Class A Common Stock
upon exercise of options granted under such plan for an aggregate consideration
of approximately $31,360. As of March , 1997, there were 3,445 shares of
Common Stock reserved for issuance under this plan.
The securities issued in the transactions described in paragraph (a) above
were issued in reliance on the exemption from registration under Section 4(2)
and/or Regulation D of the Securities Act as transactions not involving a public
offering. The recipients in each such case represented their intentions to
acquire the securities for investment purposes only and not with a view to
distribution thereof, and appropriate restrictive legends were affixed to the
securities issued in each transaction. All recipients were furnished or had
adequate access, through employment or other relationships, to information about
the Registrant.
The options granted under the Stock Option Plan and the shares issued upon
exercise of the options described in paragraph (b) above were issued in reliance
on the exemption from registration under Section 4(2) and/or Regulation D of the
Securities Act as transactions not involving a public offering. The recipients,
by virtue of their employment or other relationships with the Registrant, had
adequate access to information about the Registrant. Upon exercise of the
options, the recipients represented their intentions to acquire the shares for
investment purposes only and not with a view to distribution thereof, and
appropriate restrictive legends were affixed to the certificates evidencing such
shares.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1 *** --Form of Underwriting Agreement.
2.1 --Asset Purchase Agreement, dated as of January 5, 1995, among Kleinwort Benson Investment
Management Holdings Ltd., Kleinwort Benson Investment Management Americas Inc., ARM Financial
Group, Inc., and ARM Capital Advisors, Inc.++
2.2 --Amended and Restated Stock and Asset Purchase Agreement, dated as of April 7, 1995, by and
between SBM Company and ARM Financial Group, Inc.+++, amending the Stock and Asset Purchase
Agreement, dated as of February 16, 1995.++
2.3 --Subscription Agreement dated as of June 12, 1995, among ARM Financial Group, Inc. and Morgan
Stanley Capital Partners III, L.P., Morgan Stanley Capital Investors, L.P. and MSCP III 892
Investors, L.P.+++++
2.4 --Subscription Agreement dated as of June 12, 1995, among ARM Financial Group, Inc. and New ARM,
LLC, Dudley J. Godfrey, Jr. and Edward Powers.+++++
2.5 ** --Subscription Agreement dated as of July 1, 1996, between ARM Financial Group, Inc. and Warren M.
Foss.
3(i).1 --Certificate of Incorporation of ARM Financial Group, Inc.+
3(i).2 --Certificate of Amendment to the Certificate of Incorporation of ARM Financial Group, Inc., filed
with the Delaware Secretary of State on October 5, 1993.+
3(i).3 --Certificate of Amendment to the Certificate of Incorporation of ARM Financial Group, Inc., filed
with the Delaware Secretary of State on November 10, 1993.+++++
3(i).4 --Certificate of Designations of Cumulative Perpetual Preferred Stock of ARM Financial Group, Inc.,
filed with the Delaware Secretary of State on November 23, 1993.+
3(i).5 --Certificate of Amendment to the Certificate of Incorporation of ARM Financial Group, Inc., filed
with the Delaware Secretary of State on June 12, 1995.+++++
3(i).6 ** --Certificate of Amendment to the Certificate of Incorporation of ARM Financial Group, Inc., filed
with the Delaware Secretary of State on May 8, 1996.
3(i).7 *** --Form of Restated Certificate of Incorporation of ARM Financial Group, Inc. to be in effect upon
completion of the Offering.
3(ii).1 --By-laws of ARM Financial Group, Inc.+
3(ii).2 --Amendment to By-laws of ARM Financial Group, Inc., adopted by the Board of Directors on November
9, 1994.++
3(ii).3 *** --Form of Amended and Restated By-laws of ARM Financial Group, Inc. to be in effect upon completion
of the Offering.
4.1 --Amended and Restated Stockholders Agreement dated as of June 14, 1995, among ARM Financial Group,
Inc., The Morgan Stanley Leveraged Equity Fund II, L.P., John Franco, Martin H. Ruby, Oldarm
L.P., Morgan Stanley Capital Partners III, L.P., Morgan Stanley Capital Investors, L.P., MSCP III
892 Investors, L.P. and New ARM, LLC.+++++
4.2 *** --Form of Second Amended and Restated Stockholders Agreement dated as of , 1997, among ARM
Financial Group, Inc., The Morgan Stanley Leveraged Equity Fund II, L.P., John Franco, Martin H.
Ruby, Oldarm L.P., Morgan Stanley Capital Partners III, L.P., Morgan Stanley Capital Investors,
L.P., MSCP III 892 Investors, L.P. and New ARM, LLC.
5.1 *** --Opinion of Shearman & Sterling as to the validity of the Common Stock.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.1 --ARM Financial Group, Inc. Amended and Restated Stock Option Agreement dated as of June 14,
1995.+++++
10.2 --Amendment, Waiver and Consent dated as of March 27, 1995 to (a) the Credit Agreement dated as of
November 15, 1993 (as amended, the "Credit Agreement"), among ARM Financial Group, Inc.,
Integrity Holdings, Inc., the financial institutions listed on Schedule 2.01 to the Credit
Agreement (the "Lenders"), The Chase Manhattan Bank, N.A. ("Chase"), and Chemical Bank
("Chemical"), as managing agents for the Lenders, (b) the Security Agreement dated as of November
26, 1993 (as amended, the "Security Agreement"), between ARM Financial Group, Inc. and Chase, and
(c) the Pledge Agreement dated as of November 26, 1993 (as amended, the "Pledge Agreement"),
among ARM Financial Group, Inc., Integrity Holdings, Inc. and Chase.++++
10.3 --Second Amendment to the Credit Agreement, Security Agreement and Pledge Agreement dated as of
June 29, 1995.++++
10.4 --Third Amendment to the Credit Agreement, Security Agreement and Pledge Agreement dated as of
December 13, 1995.+++++
10.5 --Fourth Amendment to the Credit Agreement dated as of June 28, 1996.++++++
10.6 --Fifth Amendment to the Credit Agreement dated as of December 31, 1996.+++++++
10.7 --Guaranty dated as of December 13, 1995, made by ARM Financial Group, Inc. in favor of First Bank,
FSB, in connection with sale of certain SBM Certificate Company mortgage loans.+++++
10.8 --Guaranty dated as of December 13, 1995, made by ARM Financial Group, Inc. in favor of First Bank,
FSB, in connection with the sale of certain State Bond and Mortgage Life Insurance Company
mortgage loans.+++++
10.9 --Assignment and Assumption of Lease dated January 5, 1995, between Kleinwort Benson International
Investments, Ltd., and ARM Capital Advisors, Inc. (obligations of ARM Capital Advisors, Inc. have
been fully guaranteed by ARM Financial Group, Inc.)++
10.10** --Administrative Services Agreement dated as of September 28, 1994 between ARM Financial Group,
Inc. and National Integrity Life Insurance Company.
10.11** --Administrative Services Agreement dated as of January 1, 1995 between ARM Financial Group, Inc.
and ARM Capital Advisors, Inc.
10.12 --Administrative Services Agreement dated as of January 1, 1995, between ARM Financial Group, Inc.
and Integrity Life Insurance Company.+++++
10.13 --Administrative Services Agreement dated as of June 14, 1995, between ARM Financial Group, Inc.
and SBM Certificate Company.+++++
10.14 --Administrative Services Agreement dated as of June 14, 1995, between ARM Financial Group, Inc.
and ARM Financial Services, Inc.+++++
10.15** --Investment Advisory Agreement dated as of July 29, 1994 between ARM Financial Group, Inc. and
National Integrity Life Insurance Company.
10.16 --Investment Services Agreement dated as of January 1, 1995, between ARM Financial Group, Inc. and
Integrity Life Insurance Company.+++++
10.17 --Investment Services Agreement dated as of June 14, 1995, between ARM Financial Group, Inc. and
SBM Certificate Company.+++++
10.18 --Tax Allocation Agreement dated as of March 21, 1996 by and among ARM Financial Group, Inc. and
certain of its subsidiaries for taxable periods beginning January 1, 1995.+++++
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.19 --Lease made as of June 14, 1996 by and between Northwestern National Life Insurance Company and
ARM Financial Group, Inc.++++++
10.20** --Assignment and Assumption Agreement dated as of June 28, 1996 between Northwestern National Life
Insurance Company and ARM Financial Group, Inc.
10.21** --Employment Agreement dated as of July 1, 1996 between ARM Financial Group, Inc. and John Franco.
10.22** --Employment Agreement dated as of July 1, 1996 between ARM Financial Group, Inc. and Martin H.
Ruby.
10.23** --Employment Agreement dated as of July 1, 1996 between ARM Financial Group, Inc. and David E.
Ferguson.
10.24** --Employment Agreement dated as of July 1, 1996 between ARM Financial Group, Inc. and John R.
Lindholm.
10.25*** --[Amendment to Stock Option Plan].
10.26*** --[Equity Incentive Plan].
10.27*(c) --Engagement Agreement, dated March 12, 1993, between Analytical Risk Management, LTD and General
American Life Insurance Company--Group Pension.
10.28* --Consent to Assignment of Engagement Agreement, dated September 8, 1993, by General American Life
Insurance Company--Group Pension.
10.29* --Amendment #1 to Engagement Agreement, dated as of August 14, 1995, General American Life
Insurance Company and ARM Financial Group, Inc.
10.30* --Amendment #2 to Engagement Agreement, dated September 1, 1995, between General American Life
Insurance Company and ARM Financial Group, Inc.
10.31*(c) --Reinsurance Agreement between General American Life Insurance Company and Integrity Life
Insurance Company.
21.1 ** --Subsidiaries of the Registrant.
23.1 *** --Consent of Shearman & Sterling (included in its opinion delivered under Exhibit
No. 5)
23.2 ** --Consent of Ernst & Young LLP.
24.1 ** --Powers of Attorney.
</TABLE>
- ------------------------
* Filed herewith.
** Previously filed.
*** To be filed by amendment.
(c) Portions of the exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission
under Rule 406. The omitted material has been filed separately with the
SEC.
+ Incorporated by reference to the Registration Statement on Form S-1 of
the Registrant, File No. 33-67268.
++ Incorporated by reference to the Form 10-K filed by the Registrant on
March 30, 1995.
+++ Incorporated by reference to the Form 10-Q filed by the Registrant on
May 15, 1995.
++++ Incorporated by reference to the Form 10-Q filed by the Registrant on
August 14, 1995.
+++++ Incorporated by reference to the Form 10-K filed by the Registrant on
March 29, 1996.
II-5
<PAGE>
++++++ Incorporated by reference to the Form 10-Q filed by the Registrant on
August 13, 1996.
+++++++ Incorporated by reference to the Form 10-K filed by the Registrant on
March 27, 1997.
(b) Financial Statement Schedules
The following schedules are included in this Part II of the Registration
Statement:
Report of Independent Public Accountant on Financial Statement Schedules
Schedule I--Summary of Investments (Other than Investments in Related
Parties)
Schedule II--Condensed Financial Information of Registrant
Schedule III--Supplementary Insurance Information
Schedule IV--Reinsurance
Schedule V--Valuation and Qualifying Accounts
Any schedules otherwise required by Article 7 of Regulation S-X other than
those listed are omitted because they are not required or are inapplicable in
this case, or equivalent information has been included in the financial
statements and notes thereto, or elsewhere herein.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the provisions
described under Item 14 above or otherwise, the Registrant has been advised that
in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(i) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Louisville,
Commonwealth of Kentucky on the 7th day of May, 1997.
ARM FINANCIAL GROUP, INC.
*BY: /S/ MARTIN H. RUBY
-----------------------------------------
Martin H. Ruby
CO-CHAIRMAN OF THE BOARD OF DIRECTORS
AND CO-CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ May 7, 1997
John Franco Co-Chairman of the Board of
Directors and Co-Chief
Executive Officer
(Principal Executive
Officer)
/s/ MARTIN H. RUBY
- ------------------------------ May 7, 1997
Martin H. Ruby Co-Chairman of the Board of
Directors and Co-Chief
Executive Officer
(Principal Executive
Officer)
*
- ------------------------------ May 7, 1997
Edward L. Zeman Executive Vice
President--Chief
Financial Officer
(Principal Financial
Officer)
*
- ------------------------------ May 7, 1997
Barry G. Ward Controller (Principal
Accounting Officer)
*
- ------------------------------ Director May 7, 1997
James S. Cole
*
- ------------------------------ Director May 7, 1997
Warren M. Foss
*
- ------------------------------ Director May 7, 1997
Dudley J. Godfrey, Jr.
*
- ------------------------------ Director May 7, 1997
Edward D. Powers
*
- ------------------------------ Director May 7, 1997
Colin F. Raymond
*
- ------------------------------ Director May 7, 1997
Frank V. Sica
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ Director May 7, 1997
Irwin T. Vanderhoof
</TABLE>
/s/ MARTIN H. RUBY
------------------------------------------
Martin H. Ruby
*By: ATTORNEY-IN-FACT
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S>
1.1 *** --Form of Underwriting Agreement.
2.1 --Asset Purchase Agreement, dated as of January 5, 1995, among Kleinwort Benson Investment Management
Holdings Ltd., Kleinwort Benson Investment Management Americas Inc., ARM Financial Group, Inc., and
ARM Capital Advisors, Inc.++
2.2 --Amended and Restated Stock and Asset Purchase Agreement, dated as of April 7, 1995, by and between
SBM Company and ARM Financial Group, Inc.+++, amending the Stock and Asset Purchase Agreement,
dated as of February 16, 1995.++
2.3 --Subscription Agreement dated as of June 12, 1995, among ARM Financial Group, Inc. and Morgan
Stanley Capital Partners III, L.P., Morgan Stanley Capital Investors, L.P. and MSCP III 892
Investors, L.P.+++++
2.4 --Subscription Agreement dated as of June 12, 1995, among ARM Financial Group, Inc. and New ARM, LLC,
Dudley J. Godfrey, Jr. and Edward Powers.+++++
2.5 ** --Subscription Agreement dated as of July 1, 1996, between ARM Financial Group, Inc. and Warren M.
Foss.
3(i).1 --Certificate of Incorporation of ARM Financial Group, Inc.+
3(i).2 --Certificate of Amendment to the Certificate of Incorporation of ARM Financial Group, Inc., filed
with the Delaware Secretary of State on October 5, 1993.+
3(i).3 --Certificate of Amendment to the Certificate of Incorporation of ARM Financial Group, Inc., filed
with the Delaware Secretary of State on November 10, 1993.+++++
3(i).4 --Certificate of Designations of Cumulative Perpetual Preferred Stock of ARM Financial Group, Inc.,
filed with the Delaware Secretary of State on November 23, 1993.+
3(i).5 --Certificate of Amendment to the Certificate of Incorporation of ARM Financial Group, Inc., filed
with the Delaware Secretary of State on June 12, 1995.+++++
3(i).6 ** --Certificate of Amendment to the Certificate of Incorporation of ARM Financial Group, Inc., filed
with the Delaware Secretary of State on May 8, 1996.
3(i).7 *** --Form of Restated Certificate of Incorporation of ARM Financial Group, Inc. to be in effect upon
completion of the Offering.
3(ii).1 --By-laws of ARM Financial Group, Inc.+
3(ii).2 --Amendment to By-laws of ARM Financial Group, Inc., adopted by the Board of Directors on November 9,
1994.++
3(ii).3 *** --Form of Amended and Restated By-laws of ARM Financial Group, Inc. to be in effect upon completion
of the Offering.
4.1 --Amended and Restated Stockholders Agreement dated as of June 14, 1995, among ARM Financial Group,
Inc., The Morgan Stanley Leveraged Equity Fund II, L.P., John Franco, Martin H. Ruby, Oldarm L.P.,
Morgan Stanley Capital Partners III, L.P., Morgan Stanley Capital Investors, L.P., MSCP III 892
Investors, L.P. and New ARM, LLC.+++++
4.2 *** --Form of Second Amended and Restated Stockholders Agreement dated as of , 1997, among ARM
Financial Group, Inc., The Morgan Stanley Leveraged Equity Fund II, L.P., John Franco, Martin H.
Ruby, Oldarm L.P., Morgan Stanley Capital Partners III, L.P., Morgan Stanley Capital Investors,
L.P., MSCP III 892 Investors, L.P. and New ARM, LLC.
5.1 *** --Opinion of Shearman & Sterling as to the validity of the Common Stock.
10.1 --ARM Financial Group, Inc. Amended and Restated Stock Option Agreement dated as of June 14,
1995.+++++
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S>
10.2 --Amendment, Waiver and Consent dated as of March 27, 1995 to (a) the Credit Agreement dated as of
November 15, 1993 (as amended, the "Credit Agreement"), among ARM Financial Group, Inc., Integrity
Holdings, Inc., the financial institutions listed on Schedule 2.01 to the Credit Agreement (the
"Lenders"), The Chase Manhattan Bank, N.A. ("Chase"), and Chemical Bank ("Chemical"), as managing
agents for the Lenders, (b) the Security Agreement dated as of November 26, 1993 (as amended, the
"Security Agreement"), between ARM Financial Group, Inc. and Chase, and (c) the Pledge Agreement
dated as of November 26, 1993 (as amended, the "Pledge Agreement"), among ARM Financial Group,
Inc., Integrity Holdings, Inc. and Chase.++++
10.3 --Second Amendment to the Credit Agreement, Security Agreement and Pledge Agreement dated as of June
29, 1995.++++
10.4 --Third Amendment to the Credit Agreement, Security Agreement and Pledge Agreement dated as of
December 13, 1995.+++++
10.5 --Fourth Amendment to the Credit Agreement dated as of June 28, 1996.++++++
10.6 --Fifth Amendment to the Credit Agreement dated as of December 31, 1996.+++++++
10.7 --Guaranty dated as of December 13, 1995, made by ARM Financial Group, Inc. in favor of First Bank,
FSB, in connection with sale of certain SBM Certificate Company mortgage loans.+++++
10.8 --Guaranty dated as of December 13, 1995, made by ARM Financial Group, Inc. in favor of First Bank,
FSB, in connection with the sale of certain State Bond and Mortgage Life Insurance Company mortgage
loans.+++++
10.9 --Assignment and Assumption of Lease dated January 5, 1995, between Kleinwort Benson International
Investments, Ltd., and ARM Capital Advisors, Inc. (obligations of ARM Capital Advisors, Inc. have
been fully guaranteed by ARM Financial Group, Inc.)++
10.10** --Administrative Services Agreement dated as of September 28, 1994 between ARM Financial Group, Inc.
and National Integrity Life Insurance Company.
10.11** --Administrative Services Agreement dated as of January 1, 1995 between ARM Financial Group, Inc. and
ARM Capital Advisors, Inc.
10.12 --Administrative Services Agreement dated as of January 1, 1995, between ARM Financial Group, Inc.
and Integrity Life Insurance Company.+++++
10.13 --Administrative Services Agreement dated as of June 14, 1995, between ARM Financial Group, Inc. and
SBM Certificate Company.+++++
10.14 --Administrative Services Agreement dated as of June 14, 1995, between ARM Financial Group, Inc. and
ARM Financial Services, Inc.+++++
10.15** --Investment Advisory Agreement dated as of July 29, 1994 between ARM Financial Group, Inc. and
National Integrity Life Insurance Company.
10.16 --Investment Services Agreement dated as of January 1, 1995, between ARM Financial Group, Inc. and
Integrity Life Insurance Company.+++++
10.17 --Investment Services Agreement dated as of June 14, 1995, between ARM Financial Group, Inc. and SBM
Certificate Company.+++++
10.18 --Tax Allocation Agreement dated as of March 21, 1996 by and among ARM Financial Group, Inc. and
certain of its subsidiaries for taxable periods beginning January 1, 1995.+++++
10.19 --Lease made as of June 14, 1996 by and between Northwestern National Life Insurance Company and ARM
Financial Group, Inc.++++++
10.20** --Assignment and Assumption Agreement dated as of June 28, 1996 between Northwestern National Life
Insurance Company and ARM Financial Group, Inc.
10.21** --Employment Agreement dated as of July 1, 1996 between ARM Financial Group, Inc. and John Franco.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S>
10.22** --Employment Agreement dated as of July 1, 1996 between ARM Financial Group, Inc. and Martin H. Ruby.
10.23** --Employment Agreement dated as of July 1, 1996 between ARM Financial Group, Inc. and David E.
Ferguson.
10.24** --Employment Agreement dated as of July 1, 1996 between ARM Financial Group, Inc. and John R.
Lindholm.
10.25*** --[Amendment to Stock Option Plan].
10.26*** --[Equity Incentive Plan].
10.27*(c) --Engagement Agreement, dated March 12, 1993, between Analytical Risk Management, LTD and General
American Life Insurance Company--Group Pension.
10.28* --Consent to Assignment of Engagement Agreement, dated September 8, 1993, by General American Life
Insurance Company--Group Pension.
10.29* --Amendment #1 to Engagement Agreement, dated as of August 14, 1995, General American Life Insurance
Company and ARM Financial Group, Inc.
10.30* --Amendment #2 to Engagement Agreement, dated September 1, 1995, between General American Life
Insurance Company and ARM Financial Group, Inc.
10.31*(c) --Reinsurance Agreement between General American Life Insurance Company and Integrity Life Insurance
Company.
21.1 ** --Subsidiaries of the Registrant.
23.1 *** --Consent of Shearman & Sterling (included in its opinion delivered under Exhibit
No. 5)
23.2 ** --Consent of Ernst & Young LLP.
24.1 ** --Powers of Attorney.
</TABLE>
- ------------------------
* Filed herewith.
** Previously filed.
*** To be filed by amendment.
(c) Portions of the exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission
under Rule 406. The omitted material has been filed separately with the
SEC.
+ Incorporated by reference to the Registration Statement on Form S-1 of
the Registrant, File No. 33-67268.
++ Incorporated by reference to the Form 10-K filed by the Registrant on
March 30, 1995.
+++ Incorporated by reference to the Form 10-Q filed by the Registrant on
May 15, 1995.
++++ Incorporated by reference to the Form 10-Q filed by the Registrant on
August 14, 1995.
+++++ Incorporated by reference to the Form 10-K filed by the Registrant on
March 29, 1996.
++++++ Incorporated by reference to the Form 10-Q filed by the Registrant on
August 13, 1996.
+++++++ Incorporated by reference to the Form 10-K filed by the Registrant on
March 27, 1997.
<PAGE>
Exhibit 10.27
Note: Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment filed with the SEC under Rule 406. The omitted
material has been filed separately with the SEC. The location of the omitted
confidential information is indicated herein by "[****]."
ENGAGEMENT AGREEMENT
THIS ENGAGEMENT AGREEMENT ("Agreement") is made and entered into as of the
12th day of March, 1993, by and between:
(i) GENERAL AMERICAN LIFE INSURANCE COMPANY--GROUP PENSION, a mutual life
insurance company with its principal office at 700 Market Street, St.
Louis, Missouri 63101 (Mailing Address: P.O. Box 396, St. Louis,
Missouri 63166 ("Client"); and
(ii) ANALYTICAL RISK MANAGEMENT, LTD., a Kentucky limited partnership with
its principal office at 239 S. Fifth Street, Suite 614, Louisville,
Kentucky 40202 ("ARM").
RECITALS:
A. Client is a line of business of a mutual life insurance company
domiciled in Missouri and engaged in the life insurance business, either
directly or through one or more Affiliates (as defined in Section 15 hereof).
B. ARM is a limited partnership created primarily for the purpose of
providing various investment, integrated asset-liability management, and other
services to insurance companies and other institutions.
C. ARM desires to provide various services to Client, and Client desires to
obtain such services from ARM, all upon the terms and conditions set forth
herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties agree as follows:
1. Engagement and Term. In accordance with and subject to the terms and
conditions of this Agreement, Client hereby engages ARM to work with Client in
designing, developing, and marketing a floating rate guaranteed interest
contract product in accordance with the specifications and parameters set forth
in Section 2 hereof (the "GIC Product"), and to provide various portfolio
strategy, administrative, and asset-liability modeling services (but not any
securities trading or investment management or investment accounting services)
in connection with such GIC Product, and ARM hereby accepts such engagement, for
an initial term beginning on the date hereof and ending at 12:00 midnight on
December 31,1995 ("Initial
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<PAGE>
Term"), unless sooner terminated as hereinafter provided. This Agreement shall
be automatically renewed and extended for successive periods of one (1) calendar
year each ("Additional Terms") following the expiration of the Initial Term or
last Additional Term, as applicable, unless either party gives notice to the
other party not less than 60 days prior to the end of such Initial Term or
Additional Term that it desires to have the Agreement terminate at the end
thereof (subject to sooner termination as hereinafter provided) (the Initial
Term together with all Additional Terms, as applicable, are hereinafter
collectively referred to as the "Term").
2. Design, Development, and Implementation of GIC Product.
(a) Design and Development of GIC Product. ARM shall work with Client
to design and develop the GIC Product in accordance with the following general
specifications and parameters:
o Client guarantee of principal and interest.
o Interest rate reset monthly, based on 106% of 3-month LIBOR (London
Interbank Offered Rate).
o Minimum and maximum deposit levels established and stated in Contract.
o Book value withdrawals permitted and payable within 30 days.
o Contract terminable by Client upon 90 days notice or by contractholder
upon 30 days notice.
o Client to have right to change interest rate index after the first
year upon 90 days prior written notice to contractholders.
o Any other features or modifications mutually agreed upon by the
parties.
(b) Preparation and Filing of Contract. ARM and Client shall cooperate in
preparing, or causing to be prepared, a form of contract ("Contract") to be
issued by Client regarding the GIC Product and in complying with all applicable
filing requirements and other compliance matters. The GIC Product shall be
issued in the name of Client. Each party shall bear its own legal costs or other
expenses in connection with the preparation of the Contract, except that the
expenses associated with the printing of the Contract and state filing fees
shall be borne by Client.
(c) Designated Affiliate of Client. Subject to the provisions hereof, at
any time during the Term, Client may grant or assign to any one or more of its
qualified Affiliates (as defined in Section 15 hereof) (a "Designated
Affiliate") all or any part of Client's rights, title, or interests under this
Agreement (subject, however, to Client's duties and obligations under this
Agreement with respect thereto), including, but not limited to, Client's right
to issue Contracts as to the GIC Product, which designations may be revoked or
revised by Client at any time on a prospective basis. Any such designation, or
revision thereof, shall be effective upon (i) receipt by ARM of a written
instrument (in form and substance reasonably acceptable to ARM) executed by
Client and the Designated Affiliate providing for such designation or revision
thereof, any limitations or restrictions by Client on the extent of such
designation, and the acceptance by such Affiliate of all applicable provisions
of this Agreement, and (ii) the consent of ARM to such designation or revision
thereof, which consent shall not be unreasonably withheld. Any revocation of a
designation shall be effective upon receipt of written notice of
Accordingly,
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<PAGE>
revocation by ARM. To the extent that any revocation or revision results in
any rights, title, or interests of Client under this Agreement no longer
being vested in a Designated Affiliate, such rights, tide, or interests shall
revest in or be retained by Client (and Client shall be subject to all duties
and obligations under this Agreement with respect thereto). All references to
"Client" in this Agreement shall be deemed to mean or include, as the case
may be, any one or more "Designated Affiliates" to the extent applicable.
3. Marketing and Distribution of the GIC Product.
(a) Marketing and Distribution Authority. During the Term, each of ARM
and Client may sell, market, and distribute the GIC Product through its
respective employees, agents, and representatives. Subject to the general
review, supervision, and final approval of Client, ARM shall have primary
responsibility for designing and developing marketing and presentation materials
for use by ARM or Client with respect to the GIC Product, which materials shall
be printed and produced by Client or by ARM at Client's expense. In connection
with the marketing and sale of the GIC Product, Client shall establish such
underwriting guidelines and perform such client or plan due diligence on
potential contractholders as Client may deem advisable.
(b) Maximum Deposit Levels. Each calendar year, Client shall
establish, by written notice to ARM, a maximum contractholder deposit level to
apply with respect to the GIC Product during such calendar year ("Maximum
Deposit Level"). The Maximum Deposit Level may be revised on a prospective basis
by Client at any time by delivery to ARM of written notice of such revision.
Without the prior consent of Client, ARM shall not sell on Client's behalf any
Contract as to the GIC Product if the sale of such Contract would increase the
total amount of contractholder deposits held by Client at such time with respect
to the GIC Product to an amount which is greater than the Maximum Deposit Level
then in effect. The establishment or revision of any Maximum Deposit Level with
respect to the GIC Product at any time shall not require a reduction of any
contractholder deposit balances existing at such time. ARM and Client shall
cooperate in all reasonable ways so as to facilitate their monitoring of
contractholder deposit levels and sales with respect to the GIC Product.
(c) Deposits. All deposits from contractholders with respect to the
GIC Product issued on behalf of Client shall be deposited by wire transfer from
the contractholders directly to such bank accounts in the name of Client as
Client may direct.
4. Contractholder Administration Services. During the Term, ARM shall
generally serve as the primary contact with contractholders and potential
contractholders with respect to deposits and withdrawals as to the GIC Product,
and, generally, communications from contractholders or potential contractholders
shall be directed or referred to ARM. Client shall have responsibility for all
contractholder administration services necessary or appropriate with respect to
the GIC Product, including, but not limited to, the maintenance of necessary
accounting or other records, the processing of benefit payments and withdrawals,
and the furnishing to contractholders of statements, reports, and notifications
of interest rate resets. ARM and Client shall mutually establish, and revise as
necessary from time to time, such protocols, procedures, and interfaces as may
be necessary or appropriate to facilitate each
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<PAGE>
party's performance of such party's services and duties under this Section 4.
Except as may be otherwise agreed in writing by ARM and Client, all underwriting
activities and sales shall be subject to Client's final approval and nothing in
this Section 4 shall be construed as limiting such final approval rights of
Client.
5. Portfolio and Asset-Liability Advisory Services. ARM shall provide
strategic and tactical advice to Client regarding the initial development, and
revision from time to time as necessary, of a model or benchmark asset portfolio
strategy for the GIC Product and regarding tactics designed to add value to such
benchmark portfolio. Client will give due consideration of any such advice in
structuring portfolio investment strategy for the GIC Product and Client may
implement such recommendations as determined appropriate by Client. In addition,
if requested by Client, ARM shall consult with Client as to the establishment of
target surplus or other matters regarding the GIC Product. ARM and Client shall
mutually establish, and revise as necessary from time to time, such protocols,
procedures, and interfaces as may be necessary or appropriate to facilitate
ARM's performance of ARM's services and duties under this Section 5.
6. Records, Reports, Audits, Examinations and Meetings.
(a) Records and Reports. ARM shall maintain separate records with
respect to matters handled by ARM as to Client and its Affiliates pursuant to
this Agreement. Client shall be entitled to receive such detailed management
reports from ARM as Client may reasonably request regarding any matters handled
by ARM regarding Client pursuant to this Agreement. ARM shall be entitled to
receive such detailed reports from Client as ARM may reasonably request
regarding investment activities as to the GIC Product and regarding the Product
Fund Balance (as hereinafter defined in Section 15(l)), and records with respect
thereto, maintained by Client or its Affiliates pursuant to this Agreement.
(b) Audits and Examinations. Client shall have the right and
authority at any time and from time to time to inspect, examine or audit, at
Client's expense, any contractholder records or other records and information
maintained by or under the control or management of ARM pursuant to this
Agreement in the name of, or with respect to, Client. ARM shall have the right
and authority at any time and from time to time to inspect, examine or audit, at
ARM's expense, any records and information maintained by or under the control or
management of Client or any Affiliate of Client with respect to the GIC Product,
and any investment activities and the Product Fund Balance with respect thereto.
(c) Meetings. During the Term, ARM and Client shall schedule periodic
meetings to discuss the activities of each pursuant to this Agreement, and each
party agrees to meet with the other at any time upon reasonable request to do so
by the other party.
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<PAGE>
7. Compensation to ARM.
(a) Quarterly, Base Management Fee. In addition to all other
compensation provided for under this Agreement with respect to each full or
partial calendar quarter, ARM shall be entitled to receive a quarterly base
management fee ("Base Management Fee") equal to the sum of:
(i) The product of:
(A) The excess, if any, of (1) the Average Quarterly
Contractholder Account Balance (as defined in Section 15 hereof)
with respect to such quarter regarding the GIC Product, over (2)
the Total Contractholder Account Balance regarding the GIC
Product as of the beginning of the calendar year in which such
quarter occurs,
Multiplied by
(B) [***]%,
plus
(ii) The product of:
(A) An amount equal to the lesser of (1) the Average Quarterly
Contractholder Account Balance with respect to such quarter
regarding the GIC Product, or (2) the Total Contractholder
Account Balance regarding the GIC Product as of the beginning of
the calendar year in which such quarter occurs,
Multiplied by
(B) [***]%.
As soon as reasonably practicable after the end of each quarter, Client shall
submit to ARM an accounting of such quarterly Base Management Fee and shall
distribute such amount to ARM.
[***] This material has been omitted pusuant to a request for confidential
treatment filed with the SEC under Rule 406. The omitted material has
been filed separately with the SEC.
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<PAGE>
================================================================================
Illustrations
The application of the foregoing rates and calculations may be illustrated by
the following examples:
First Year Assumptions and Results (1993): Assume that the first year
during which the GIC Product is issued is 1993, and that the GIC Product account
balances increase by $100 million on a ratable basis during such year.
Accordingly, the Average Quarterly Contractholder Account Balance during the
four quarters of such year would be $12.5 million, $37.5 million, $62.5 million,
and $87.5 million, respectively, and because this is the first year, the Total
Contractholder Account Balance regarding the GIC Product as of the beginning of
1993 would be zero. Under these assumptions, ARM's Base Management Fees for the
four quarters of 1993 would be $[***] [[***]% x $12.5 million], $[***] [[***]% x
$37.5 million], $[***] [[***]% x $62.5 million], and $[***] [[***]% x $87.5
million], respectively. All of such amounts would arise pursuant to Section
7(a)(i) because the calculation under Section 7(a)(ii) for each quarter would
equal [***].
Second Year Assumptions and Results (1994): Assume that the GIC Product
account balances increase by $150 million on a ratable basis during 1994, the
second year of sales. Accordingly, the Average Quarterly Contractholder
Account Balance during the four quarters of such year would be $118.75
million, $156.25 million, $193.75 million, and $231.25 million, respectively,
and the Total Contractholder Account Balance regarding the GIC Product as of
the beginning of 1994 would be $100 million. Under these assumptions, ARM's
Base Management Fees for the four quarters of 1994 would be equal to the
totals of (i) the amounts computed pursuant to Section 7(a)(i)--$[***]
[[***]% x ($118.75 million - $100 million) = $[***]], $[***]
[[***]% x ($156.25 million - $100 million) = $[***]], $[***]
[[***]% x ($193.75 million -$100 million) = $[***]], and $[***]
[[***]% x ($231.25 million - $100 million) = $[***]], respectively, and
(ii) the amounts computed pursuant to Section 7(a)(ii)--$[***]
in each case [[***]% x $100 million = $[***]].
Accordingly, ARM's Base Management Fees for the four quarters of 1994 would be
$[***], $[***], $[***], and
$[***], respectively.
[***] This material has been omitted pusuant to a request for confidential
treatment filed with the SEC under Rule 406. The omitted material has
been filed separately with the SEC.
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================================================================================
<PAGE>
(b) ARM Annual Profit Share. In addition to all other compensation
provided for under this Agreement, with respect to each full or partial calendar
year, ARM be entitled to receive an annual profit share ("ARM Annual Profit
Share") equal to:
The sum of:
(i) [***]% of (A) minus (B), where:
(A) equals the Total Annual Profit/Loss (as defined in Section 15
hereof) with respect to such year regarding the GIC Product; and
(B) equals the Client Floor (as defined in Section 15 hereof)
with respect to the GIC Product,
Plus
(ii) The ARM Annual Profit Share with respect to the year immediately
preceding the subject year if such ARM Annual Profit Share with
respect to such immediately preceding year is an amount less than zero
("Loss Carryover").
Except by way of the offset of a Loss Carryover as hereinabove provided, ARM
shall not be required to pay or otherwise bear the burden of any failure of the
Total Annual Profit/Loss or ARM Annual Profit Share in any year to exceed zero
or the failure of the Total Annual Profit/Loss in any year to exceed the Client
Floor in such year.
[***] This material has been omitted pusuant to a request for confidential
treatment filed with the SEC under Rule 406. The omitted material has
been filed separately with the SEC.
-7-
<PAGE>
================================================================================
Illustrations
The application of the foregoing rates and calculations may be illustrated by
the following examples:
Example 1 (No Loss Carryover Year):
Assume that (i) the first year during which the GIC Product is issued is
1993, (ii) the GIC Product account balances increase by $100 million on a
ratable basis during 1993, and (iii) the Total Annual Profit/Loss for 1993
equals $500,000 (assumed to be equal to 100 bps on average GIC Product account
balances throughout the year of $50 million). In such event, the Client Floor
for 1993 would be $[***] [[***]% x $50 million = $[***]] and
the excess of the Total Annual Profit/Loss for 1993 over the Client Floor would
be a profit of $[***] [$500,000 - $[***] = $[***]]. Accordingly, the ARM Profit
Share for 1993 would be $[***] [[***]% x $[***] = $[***]].
Similarly, assume that (i) the GIC Product account balances increase by
$150 million on a ratable basis during 1994, and (ii) the Total Annual
Profit/Loss for 1994 equals $1,750,000 (assumed to be equal to 100 bps on
average GIC Product account balances throughout the year of $175 million). In
such event, the Client Floor for 1994 would be $[***] [[***] x $175 million
= $[***]] and the excess of the Total Annual Profit/Loss for 1994 over the
Client Floor would be $[***] [$1,750,000 - $[***] = $[***]].
Accordingly, the ARM Profit Share for 1994 would be $[***] [[***]% x $[***] =
$[***]].
Finally, assume that (i) the GIC Product account balances increase by $200
million on a ratable basis during 1995, and (ii) the Total Annual Profit/Loss
for 1995 equals $3,500,000 (assumed to be equal to 100 bps on average GIC
Product account balances throughout the year of $350 million). In such event,
the Client Floor for 1995 would be $[***] [[***]% x $350 million =
$[***]] and the excess of the Total Annual Profit/Loss for 1995 over the
Client Floor would be $[***] [$3,500,000 - $[***] = $[***]].
Accordingly, the ARM Profit Share for 1995 would be $[***] [[***]% x $[***]].
Example 2 (One Loss Carryover Year): Although not expected by the parties,
assume that (i) the Total Annual Profit/Loss for 1994 were $1,050,000 (assumed
to be equal to 60 bps on average GIC Product account balances throughout the
year of $175 million) instead of the $1,750,000 assumed for purposes of Example
1, and (ii) the other assumptions of Example 1 continued to apply. In such
event, the ARM Profit Share for 1994 would be a negative < $[***] > [[***]% x
($1,050,000 - $[***]) = < $[***] >], and the ARM Profit Share for 1995
would be $[***] [$[***] + < $[***] > = $[***]], reflecting the absorption
of the Loss Carryover of < $[***] > from 1994. In this case, there would be no
Loss Carryover to be applied as to 1996.
[***] This material has been omitted pusuant to a request for confidential
treatment filed with the SEC under Rule 406. The omitted material has
been filed separately with the SEC.
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================================================================================
<PAGE>
The ARM Annual Profit Share with respect to each year shall be distributed by
Client to ARM out of the Product Fund Balance with respect to the GIC Product in
quarterly installments as soon as reasonably practicable after the end of each
calendar quarter during the year. In such regard, the installment for each
calendar quarter other than the fourth calendar quarter of a year shall be
determined by Client and ARM in the following manner: (i) first, the ARM Annual
Profit Share for the entire year shall be estimated by Client and ARM by a
linear extrapolation method based on applicable financial data available with
respect to the GIC Product for current and past calendar quarters of such year,
(ii) second, such estimated ARM Annual Profit Share shall be multiplied by a
fraction, the numerator of which is the number of elapsed calendar quarters of
such year through and including the current calendar quarter and the denominator
of which is the number four (4), and (iii) third, the total amount of
installments of the ARM Annual Profit Share for such year paid to ARM with
respect to prior calendar quarters (net of any repayments of such installments
by ARM) shall be subtracted from the product obtained pursuant to the
immediately preceding clause (ii), the result of which computation is
hereinafter referred to as the "Required Payment"). If the Required Payment is a
positive number, Client shall immediately pay such Required Amount to ARM as the
installment of the ARM Annual Profit Share with respect to the calendar quarter
in question. On the other hand, if the Required Payment is a negative number,
ARM shall pay as soon as reasonably practicable the absolute value of such
Required Payment to Client as a repayment of overpaid past installments. As soon
as reasonably practicable after the end of each year, the actual ARM Annual
Profit Share for such year shall be determined by ARM and Client. If the
difference between such finally determined amount and the total of all
installments of the ARM Annual Profit Share for such year paid to ARM with
respect to prior calendar quarters (net of any repayments of such installments
by ARM) is a positive number, Client shall pay as soon as reasonably practicable
such difference to ARM as the final installment of the ARM Annual Profit Share.
If such difference is a negative number, ARM shall as soon as reasonably
practicable pay to Client the lesser of (i) the absolute value of such
difference and (ii) the total of all installments of the ARM Annual Profit Share
for such year paid to ARM (net of any prior repayments of such installments by
ARM).
8. Client Annual Profit Share. The Client Annual Profit Share regarding the
GIC Product for each year shall be distributed to Client out of the Product Fund
Balance with respect to the GIC Product in quarterly installments as soon as
reasonably practicable after the end of each calendar quarter during the year.
In such regard, the installments for each calendar quarter shall be estimated or
determined, and appropriate payments made in or out of the Product Fund Balance
with respect to the GIC Product, in a manner similar to that set forth at the
end of Section 7 hereof with respect to installments of the ARM Annual Profit
Share for such year.
9. Representations and Warranties of Client. Client represents and warrants
to ARM, as of the date hereof and as of each day throughout the Term, as
follows:
(a) Organization and Existence. Each of Client and any Designated
Affiliate of Client is either a mutual life insurance company or a corporation
duly organized and validly existing under the laws of the state or country of
its domicile or incorporation. Each of them
-9-
<PAGE>
has, and at all times has had, full power and authority to own its properties
and conduct its business.
(b) Authority. Each of Client and any Designated Affiliate of Client
has full power and authority, corporate and otherwise, to enter into, deliver
and perform this Agreement. Client's execution, delivery and performance of, and
the consummation of the transactions contemplated by, this Agreement have been
duly authorized. This Agreement has been duly executed and delivered by Client
and constitutes the legal, valid and binding obligation of Client, enforceable
in accordance with the terms and conditions hereof.
(c) Licensing. Each of Client and any Designated Affiliate of Client
is properly authorized and licensed to write guaranteed interest contracts or
other group annuity products in all states and the District of Columbia, except
New York, as well as any other jurisdictions in which it is currently issuing
policies.
10. Representations and Warranties of ARM. ARM represents and warrants to
Client, as of the date hereof and as of each day throughout the Term, as
follows:
(a) Organization and Existence. ARM is a limited partnership duly
organized and validly existing under the laws of the Commonwealth of Kentucky.
ARM has, and at all times has had, full power and authority to own its
properties and conduct its business.
(b) Authority. ARM has full power and authority to enter into, deliver
and perform this Agreement. ARM's execution, delivery and performance of, and
the consummation of the transactions contemplated by, this Agreement have been
duly authorized. This Agreement has been duly executed and delivered by ARM and
constitutes the legal, valid and binding obligation of ARM, enforceable in
accordance with the terms and conditions hereof.
(c) Change of Partners. ARM shall comply with all applicable
provisions of the Investment Advisers Act of 1940, as amended, including, but
not limited to, the requirement that ARM give notice to Client of any change in
the partners of ARM and the requirement that ARM not assign the Agreement
without the prior consent of Client.
11. Early Termination by Notice. At any time, either party hereto may, in
its sole discretion, terminate this Agreement prior to expiration of the Term by
delivering to the other party hereto at least 60 days' prior written notice of
termination, in which case this Agreement shall terminate 60 days after the date
such notice is received unless a later date of termination is specified therein.
12. Continuation of Services and/or Fees Under Certain Circumstances;
Restrictions on Marketing of Similar Products. Notwithstanding any other
provision hereof, upon termination of this Agreement by expiration of the Term
or otherwise, ARM shall continue to perform its contractholder administration
services and portfolio and asset-liability advisory services hereunder as to all
Contracts with respect to the GIC Product then in force, during a period of
eighteen (18) months following the expiration of the Term or the termination of
this Agreement prior to expiration of the Term pursuant to Section 11 hereof and
shall continue to
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<PAGE>
be entitled to receive all compensation provided for hereunder with respect
thereto as if the Term had not ended. Furthermore, during the Term and for a
period of eighteen (18) months following the expiration of the Term or the
termination of this Agreement prior to expiration of the Term pursuant to
Section 11 hereof, any sales by Client, any Affiliate of Client, or any other
party for the benefit of Client of the GIC Product or any product which is
identical to, or substantially similar to, the GIC Product shall be treated as
if the sales of such products were sales of the GIC Product by ARM during the
Term of this Agreement and ARM shall be entitled to a quarterly Base Management
Fee and an ARM Annual Profit Share with respect to such sales in the same manner
as that set forth in Section 7 hereof. If, at any time, the Client elects to put
back to any contractholder all or any part of such contractholder's account
balance with respect to the GIC Product (as opposed to a withdrawal by such
contractholder or a distribution of interest or other income in the ordinary
course of business with respect to the GIC Product), then Client shall pay as
soon as reasonably practicable a fee (the "Special Fee") to ARM equal to the
product of (i) the number three (3), multiplied by (ii) the amount put back to
the contractholder, and further multiplied by (iii) [***]%; provided, however,
that Client shall not be obligated to pay the aforesaid Special Fee to ARM if
the Total Annual Profit/Loss with respect to the GIC Product for the four
consecutive calendar quarters immediately preceding the calendar quarter in
which Client elects to put back the funds to such contractholder is less than
(x) the Average Annual Reserves with respect to such four-quarter period,
multiplied by (y) [***]%.
13. Remedies on Breach. Each party shall be entitled to all rights and
remedies available at law or equity for any breach or default by the other party
of its obligations under this Agreement, all such rights and remedies shall be
cumulative, and none shall exclude any other right or remedy allowed by law or
equity. Said rights and remedies may be exercised and enforced concurrently or
successively from time to time to the extent applicable.
14. No Guarantee of Results. Although ARM will exercise its reasonable best
efforts to propose Products which it believes in good faith will perform and
sell as contemplated, ARM in no way warrants or guarantees that the GIC Product
will sell, generate profits, or otherwise perform as set forth in any product
proposal or in any other manner whatsoever. Except for any loss or damage caused
by ARM's breach of any of its duties or obligations under this Agreement or by
ARM's gross negligence or wilful misconduct in the performance of its duties,
obligations, and services under this Agreement, ARM shall not be responsible or
liable in any way for any loss or damage whatsoever which may be caused to
Client or any of its Affiliates (i) by reason of any deviations or variations in
results, performance, profitability or any other aspect from those set forth in
any product proposal, (ii) by reason of the failure of the GIC Product or any
other product to sell, generate profits or otherwise perform in any particular
manner, or (iii) by reason of any changes in any applicable laws, regulations,
rules, or procedures, including, but not limited to, any loss or damage
whatsoever which may be caused by reason of any errors, deviations or variations
in or from any of the various assumptions, estimates, actuarial computations,
investment strategies or models used or adopted in connection with the design,
development, implementation, operation or continuation of the GIC Product or any
other product. Furthermore, ARM shall have no liability or responsibility for
any loss, damage or expense caused to Client or any of its Affiliates by reason
of any defects or
[***] This material has been omitted pusuant to a request for confidential
treatment filed with the SEC under Rule 406. The omitted material has
been filed separately with the SEC.
-11-
<PAGE>
deficiencies in the form or substance of the GIC Product or any other product,
regardless whether or not ARM coordinates or performs the drafting, registration
or other activities with respect to the preparation and issuance of such
product, unless due to ARM's gross negligence or wilful misconduct.
15. Definitions. For purposes of this Agreement, the following definitions
shall apply:
(a) Affiliate. For all purposes of this Agreement, the term
"Affiliate" with respect to any entity ("Subject Party") shall mean any
corporation, partnership, trust, mutual life insurance company, or other entity
Controlling, Controlled by, or under common Control with, such Subject Party.
For all purposes of this Agreement, the term "Control" (including, but not
limited to, the terms "Controlled by" and "Controlling," or any variations
thereof) shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a party, whether
through ownership of voting securities, position of authority, or otherwise.
(b) Average Annual Reserves. For all purposes of this Agreement, the
term "Average Annual Reserves" with respect to any period of four consecutive
calendar quarters regarding the GIC Product shall mean an amount equal to the
quotient of (i) the sum of the Average Quarterly Reserves with respect to each
quarter during such period regarding the GIC Product, divided by (ii) the number
four (4).
(c) Average Quarterly Reserves. For all purposes of this Agreement,
the term "Average Quarterly Reserves" regarding the GIC Product with respect to
any calendar quarter shall mean an amount equal to the simple average of the
Minimum Required Statutory Reserves regarding the GIC Product as of the
beginning and the end of such quarter.
(d) Average Annual Contractholder Account Balance. For all purposes of
this Agreement, the term "Average Annual Contractholder Account Balance"
regarding the GIC Product with respect to any period of four consecutive
calendar quarters shall mean an amount equal to the quotient of (i) the sum of
the Average Quarterly Contractholder Account Balances with respect to each
quarter during such period regarding the GIC Product, divided by (ii) the number
four (4).
(e) Average Quarterly Contractholder Account Balance. For all purposes
of this Agreement, the term "Average Quarterly Contractholder Account Balance"
regarding the GIC Product with respect to any calendar quarter shall mean an
amount equal to the simple average of the Total Contractholder Account Balances
regarding the GIC Product as of the beginning and the end of such quarter.
(f) Client Annual Profit Share. For all purposes hereof, the term
"Client Annual Profit Share" with respect to each full or partial calendar year
within the Term regarding the GIC Product shall mean the excess, any, of (i) the
Total Annual Profit/Loss (as hereinafter defined) with respect to such year or
partial year regarding the GIC Product, over
-12-
<PAGE>
(ii) the sum of (A) all Base Management Fees paid or due and accrued with
respect to such year or partial year based on the Average Quarterly
Contractholder Account Balance during such year or partial year regarding the
GIC Product, plus (B) the ARM Annual Profit Share, if any, with respect to such
year or partial year regarding the GIC Product, plus (C) the commissions, if
any, paid or due and accrued to The Laughlin Group with respect to such year or
partial year regarding the GIC Product, plus (D) investment expenses withdrawn
from the Product Fund Balance for such year or partial year.
(g) Client Floor. For all purposes of this Agreement, the term "Client
Floor" with respect to any calendar year during the Term regarding the GIC
Product shall mean an amount equal to the product of (i) the Average Annual
Reserves (as defined in Section 15(b) hereof) with respect to such year
regarding the GIC Product, multiplied by (ii) [***]%.
(h) Minimum Required Statutory Reserves. For all purposes of this
Agreement, the term "Minimum Required Statutory Reserves" shall mean an amount
which does not exceed the Total Contractholder Account Balance for the GIC
Product unless Client is legally required by the Department of Insurance of its
state of domicile or other regulatory authority to maintain reserves for the GIC
Product at an amount greater than such Total Contractholder Account Balance.
(i) Net Asset Change. For all purposes of this Agreement, the term
"Net Asset Change" with respect to any period of four consecutive calendar
quarters regarding the GIC Product shall mean an amount equal to the difference
(which difference may be a positive or negative number) between (i) the sum of
all cash and the amount of all other assets comprising the Product Fund Balance
with respect to the GIC Product as of the end of the subject period, all
investment expenses withdrawn from the Product Fund Balance during such period,
and the total amount of any Base Management Fees and ARM Annual Profit Share
payments paid to ARM, and Client Annual Profit Share payments paid to Client
during such period in connection with the GIC Product, and (ii) the sum of all
cash and the amount of all other assets comprising the Product Fund Balance with
respect to the GIC Product as of the end of the four-quarter period immediately
preceding the subject period after reduction for all investment expenses, ARM
Base Management Fees, ARM Annual Profit Share payments, and Client Annual Profit
Share payments due and accrued as of such date in connection with the GIC
Product, but paid during the subject period, all as determined in conformity
with statutory accounting practices prescribed, or otherwise permitted, by the
Department of Insurance of Client's state of domicile. For purposes of Section
(h)(i) above, all withdrawals and payments are determined on the basis of
amounts transferred from the Product Fund Balance during the subject period for
charges incurred during such period.
(j) Net Liability Change. For all purposes of this Agreement, the term
"Net Liability Change" with respect to any period of four consecutive calendar
quarters regarding the GIC Product shall mean an amount equal to the difference
(which may be a positive or negative number) between (i) the Minimum Required
Statutory Reserves with respect to the GIC Product as of the end of the subject
period, and (ii) the Minimum Required Statutory Reserves
[***] This material has been omitted pusuant to a request for confidential
treatment filed with the SEC under Rule 406. The omitted material has
been filed separately with the SEC.
-13-
<PAGE>
with respect to the GIC Product as of the end of the period immediately
preceding the subject period.
(k) Net Realized Capital Gain or Net Realized Capital Loss. For all
purposes of this Agreement, the term "Net Realized Capital Gain" with respect to
the Product Fund Balance for any period of four consecutive calendar quarters
shall mean an amount equal to the excess, if any, of (i) the sum of all realized
capital gains with respect to the Product Fund Balance during such period, over
(ii) the sum of all realized capital losses with respect to the Product Fund
Balance during such period, and, conversely, the term "Net Realized Capital
Loss" with respect to the Product Fund Balance in any period of four consecutive
calendar quarters shall mean an amount equal to the excess, if any, of (x) the
sum of all realized capital losses with respect to the Product Fund Balance
during such period, over (y) the sum of all realized capital gains with respect
to the Product Fund Balance during such period. The amount of any realized
capital gain or capital loss with respect to any period shall be as determined
in conformity with statutory accounting practices prescribed, or otherwise
permitted, by the Department of Insurance of Client's state of domicile.
(l) Product Fund Balance. A separate fund balance account shall be
maintained by Client for bookkeeping purposes with respect to the GIC Product
("Product Fund Balance"). The Product Fund Balance at any time as to the GIC
Product shall be an amount equal to the sum of (i) all deposits received through
such time from contractholders by reason of sales of the GIC Product, plus (ii)
the gross investment income through such time attributable to such Product Fund
Balance (determined in conformity with statutory accounting practices
prescribed, or otherwise permitted, by the Department of Insurance of Client's
state of domicile), plus or minus, as applicable, (iii) the Net Realized Capital
Gain or Net Realized Capital Loss (as defined in Section 15(k) hereof) through
such time attributable to such Product Fund Balance (exclusive of any otherwise
applicable capital gains tax), and minus (iv) the total of all withdrawals,
payments and distributions made out of the Product Fund Balance through such
time in accordance with the provisions of this Agreement, including, but not
limited to, withdrawals, payments and distributions made through such time in
order to satisfy obligations to contractholders or pay Base Management Fees, ARM
Annual Profit Shares, Special Fees, commission payments to The Laughlin Group in
connection with sales of the GIC Product, Client Annual Profit Shares, or
investment expenses. For all purposes of this Agreement, references to
"withdrawals," "payments," or "distributions" (or derivations thereof) out of
the Product Fund Balance shall mean withdrawals, payments or distributions out
of the cash and other assets accounted for under the Product Fund Balance.
(m) Total Annual Profit/Loss. For all purposes of this Agreement, the
term "Total Annual Profit/Less" with respect to the GIC Product for any period
of four consecutive calendar quarters shall mean an amount (which amount may be
a positive or negative number) equal to (a) the Net Asset Change (as defined in
Section 15(h), 15(i) hereof) for such period with respect to the GIC Product,
minus (b) the Net Liability Change (as defined in Section 15(j) hereof) for such
period with respect to the GIC Product, minus (c) an amount equal to two-thirds
(2/3) of the Net Realized Capital Gain (as defined in Section 15(k) hereof) for
such period with respect to the GIC Product, if any, plus (d) an amount equal to
two-thirds (2/3) of the Net
-14-
<PAGE>
Realized Capital Loss (as defined in Section 15(k) hereof) for such period with
respect to the GIC Product, if any, plus (e) an amount equal to one-third (1/3)
of the Net Realized Capital Gains, if any, with respect to the GIC Product for
each of the two four-quarter periods immediately preceding the subject period,
minus (f) an amount equal to one-third (1/3) of the Net Realized Capital Losses,
if any, with respect to the GIC Product for each of the two four-quarter periods
immediately preceding the subject period.
(n) Total Contractholder Account Balance. For all purposes of this
Agreement, the term "Total Contractholder Account Balance" with respect to the
GIC Product as of any date shall mean an amount equal to the balances as of such
date of all contracts under the GIC Product, based upon contractholder deposits,
interest credited, and contractholder withdrawals through such date.
16. Independent Contractor. It is the intention of the parties hereto that
the relationship of ARM created hereby be that of an independent contractor.
Neither ARM, nor any of ARM's employees, shall be deemed to be an employee of
Client or any Affiliate of Client, nor shall ARM or any of ARM's employees hold
themselves out to others as so acting. Neither the Client nor any of its
Affiliates shall control the specific manner in which ARM performs its duties.
17. Notices. All notices, requests, demands or other communications
required or permitted under this Agreement shall be in writing and transmitted
to the party to whom such notice, request, demand or other communication is
intended to be delivered (i) by personal delivery to such intended recipient,
which personal delivery shall be evidenced by a written receipt therefor signed
by such recipient, (ii) by United States registered, certified or express mail,
return receipt requested, postage prepaid, or by a reputable express delivery
service (such as Federal Express, Airborne, Purolator, DHL or United Parcel
Service), fees prepaid, addressed to the intended recipient thereof, at the
address set forth for such party at the beginning of this Agreement, or at such
other address as such party shall furnish in writing to the other party to this
Agreement, or (iii) by fax to such intended recipient, receipt of which
transmission shall be confirmed by such recipient. All notices, requests,
demands and other communications shall be effective upon being personally
delivered or delivered by fax and properly receipted or upon being properly
addressed and deposited in the United States mail or with a reputable express
delivery service in accordance with the foregoing.
18. Amendment. This Agreement may be modified or amended from time to time
with the written consent of both parties.
19. Waiver. No waiver by any party of any of the provisions of this
Agreement, nor any default by any party, shall affect the rights of the waiving
or any nondefaulting party thereafter to enforce such provision or to exercise
any right or remedy in the event of any other default, whether similar or
dissimilar. No waiver shall be binding unless executed in writing by the party
making the waiver, nor shall any waiver constitute a continuing waiver.
-15-
<PAGE>
20. Captions. Section or paragraph titles, captions, and illustrations or
examples contained in this Agreement are inserted only as a matter of
convenience and reference, and in no way define, limit, extend or describe the
scope of this Agreement, or the intent of any provision hereof.
21. Entire Agreement. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter contained in it and supersedes all
prior and contemporaneous agreements, representations, and understandings of the
parties, including, but not limited to, that certain Engagement Agreement dated
November 3, 1992. No supplements, variations, modifications, amendments or
changes hereof shall be binding upon any party unless set forth in a document
duly executed by such party.
22. Severability. If any nonmaterial provision of this Agreement, or the
application thereof to any individual, entity or circumstances, shall be invalid
or unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to other individuals, entities or circumstances,
shall not be affected thereby and shall be enforced to the greatest extent
permitted by law.
23. Assignment: Binding Agreement. Except as otherwise provided herein,
neither party may assign this Agreement, or any of such party's rights, duties,
or obligations under this Agreement, without the prior consent of the other
party. Except as otherwise provided herein, this Agreement shall be binding
upon, and inure to the benefit of, the parties hereto, their personal
representatives, heirs, successors, and permitted assigns.
24. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Kentucky.
25. Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document.
26. Further Assurances. Each of the parties hereby agrees to execute and
deliver all of the agreements, documents and instruments required to be executed
and delivered by it in this Agreement and to execute and deliver such additional
instruments and documents and to take such additional actions as may reasonably
be required from time to time in order to effectuate the transactions
contemplated by this Agreement throughout the Term.
27. Other Proposed Products. As Client and ARM may mutually agree from time
to time during the Term, ARM shall design and develop written proposals for
additional guaranteed interest contracts and other group annuity products or
other products to be issued by Client. In such event, during the Term (and
during a period of two years thereafter in the case of any such product proposal
developed during the last year of the Term), as among ARM, Client and Client's
Affiliates, only ARM may sell products which are the same or substantially the
same as those set forth in any such product proposal except as otherwise
provided pursuant to a specific written agreement between ARM and Client.
(Signature Page Alone Follows)
-16-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
CLIENT:
GENERAL AMERICAN LIFE INSURANCE
COMPANY-GROUP PENSION
By: /s/ E. Tom Hughes
-----------------------------------------
E. Tom Hughes
Executive Vice President - Group Pensions
ATTEST:
By: /s/ Debra J. Ferguson
---------------------------
Title: Administrative Assistant
ARM:
ANALYTICAL RISK MANAGEMENT, LTD.
By: /s/ Martin H. Ruby
-----------------------------------------
Martin H. Ruby
Co-Chief Executive Officer
ARM GP, Inc., General Partner
ATTEST:
By: /s/ David M. Roth
-----------------------------
David M. Roth, Secretary,
ARM GP, Inc., General Partner
-17-
<PAGE>
Exhibit 10.28
CONSENT
In accordance with the provisions of the Engagement Agreement (the
"Agreement") dated March 12,1993 between Analytical Risk Management, Ltd.
("ARM") and General American Life Insurance Company ("General American"),
General American hereby consent to the assignment of the Agreement by ARM to
A.R.M Financial Group, Inc., a Delaware corporation.
Executed this 8 day of September, 1993.
GENERAL AMERICAN LIFE INSURANCE
COMPANY--GROUP PENSION
By: /s/ E. Tom Hughes
-------------------------------
Title: Exec. V.P. - Group Pensions
<PAGE>
Exhibit 10.29
AMENDMENT #1
TO ENGAGEMENT AGREEMENT
This AMENDMENT #1 TO THE ENGAGEMENT AGREEMENT is made and entered into as
of August 14, 1995 by and between General American Life Insurance Company
("Client") and ARM Financial Group, Inc. ("ARM") for the purpose of amending
that certain Engagement Agreement made and entered into by Client and Analytical
Risk Management, Ltd. as of the 12th day of March, 1993, and subsequently
assigned by Analytical Risk Management, Ltd. to ARM, effective November 26,
1993, such assignment properly consented to by Client on September 8, 1993 (the
"Engagement Agreement").
Whereas Client and ARM entered into the Engagement Agreement under which
ARM provides various services to Client in connection with a floating rate
guaranteed interest contract product (the "GIC Product"); and
Whereas Client and ARM wish to enter into a joint venture to develop and
market guaranteed interest contracts and funding agreements as agreed upon by
the parties, and to share in the profits generated by the sales of such
products; and
Whereas Client and ARM intend to share in such profits on business placed
after the date of this Amendment #1 by means of reinsuring a 50% portion of the
business written by Client to Integrity Life Insurance Company, a subsidiary of
ARM ("Integrity"), and Client and ARM intend to share in such profits on
business placed prior to the date of this Amendment #1 and on business which is
not, for whatever reason, reinsured, by the payment of fees to ARM as outlined
in the Engagement Agreement; and
Whereas Client and ARM wish to amend the Engagement Agreement to include
certain services in connection with an indexed interest rate funding agreement
(the "Funding Agreement"); and
Whereas Client and ARM wish to agree that certain actions will be taken by
each of the parties in connection with the GIC Product and the Funding
Agreement;
Now, therefore, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties agree to amend the Engagement
Agreement as follows:
Section 2, Design, Development, and Implementation of GIC Product, is
amended by the addition of subsection (d) as follows:
(d) Funding Agreement. ARM shall work with Client to design and
develop the Funding Agreement in accordance with specifications agreed upon by
the parties. All services to be performed by ARM and all actions to be taken by
either Client or ARM as described in subsection (b) above shall be applicable to
both the GIC Product and the Funding Agreement.
<PAGE>
Subsection (a) of Section 3, Marketing and Distribution Authority, is
amended by the addition of the following new paragraph:
ARM shall provide to Client a written marketing plan for the Funding
Agreement. During the Term, each of ARM and Client may sell, market, and
distribute the Funding Agreement through its respective employees, agents, and
representatives. ARM will assist Client with the design and development of
material for use by Client with respect to the Funding Agreement for
presentation to rating agencies.
Subsection (c) of Section 3, Deposits, is deleted and replaced with the
following:
(c) Deposits. All deposits from contractholders with respect to the GIC
Product and the Funding Agreement issued on behalf of Client shall be deposited
by wire transfer from the contractholders directly to such bank accounts in the
name of Client as Client may direct.
Section 4, Contractholder Administration Services, is amended by the
addition of the following new paragraph:
The responsibilities of each party as described in this Section 4 shall be
applicable to both the GIC Product and the Funding Agreement.
Section 5, Portfolio and Asset-Liability Advisory Services, is amended by
the addition of the following new paragraph:
Each party will share with the other party on a monthly basis the asset
strategies and portfolio construction of the portfolios held in connection with
the GIC Product and the Funding Agreement.
Section 28, Additional Covenants, is added to the Engagement Agreement as
follows:
Section 28, Additional Covenants.
(a) Rating. Client will obtain short term contract or debt ratings
from two of the three following rating agencies: Standard & Poors; Moody's
Investor Service; and Duff & Phelps.
(b) Licenses. ARM shall cause Integrity to apply for accredited
reinsurer status in the State of New York.
(c) Expenses. The parties shall mutually agree upon the procurement of
any services which may enhance the sales of, or otherwise improve the
profitability of, the Funding Agreement and which may result in expenses which
the parties desire to share. The parties shall mutually agree upon the terms on
which such expenses will be shared. Neither party will be responsible for any
expense or portion thereof unless the parties mutually agreed to the expenditure
and the specific allocation of expenses prior thereto.
(d) Placement of Reinsurance. Client, ARM and National Integrity Life
Insurance Company, a New York domiciled subsidiary of ARM ("National Integrity")
agree that, from the effective date of this Amendment #1 until such time as
Integrity obtains accredited reinsurer status in the State of New York, but no
later than April 1, 1996, 50% of new contributions under the GIC Product and the
Funding Agreement shall be placed under a reinsurance agreement between Client
and National Integrity. Client and ARM further agree that, upon Integrity's
licensing as an accredited
2
<PAGE>
reinsurer in the State of New York, 50% of new contributions under the GIC
Product and the Funding Agreement shall be placed under a reinsurance agreement
between Client and Integrity.
(e) National Integrity Reinsurance. ARM and National Integrity agree
that, upon Integrity's licensing as an accredited reinsurer in the State of New
York, ARM and National Integrity will cooperate with Client, if Client so
desires, to transfer any business then reinsured with National Integrity to
Integrity, including pursuit of any necessary regulatory approvals for such
transfer.
(f) Recapture. In the event that the business reinsured with National
Integrity is not transferred to Integrity pursuant to item (e) above by July 1,
1996, for whatever reason, Client may recapture such business if Client so
desires. If Client recaptures such business reinsured with National Integrity,
Client shall "replace" such recaptured amount by placing 100% of new
contributions under the GIC Product and the Funding Agreement under the
reinsurance agreement between Client and Integrity until such time as the
reinsured percentage of the business written after the date of this amendment
again equals 50%. Any amount recaptured pursuant to this subsection (f) will not
be subject to the payment of fees to ARM under the Engagement Agreement, except
to the extent that such recaptured amount has not been "replaced" by the
reinsurance of new contributions. However, in the event that such recaptured
amount can not be "replaced" because Integrity is not licensed as an accredited
reinsurer in the State of New York by July 1, 1996, the recaptured amount will
be subject to the payment of fees to ARM under the Engagement Agreement.
3
<PAGE>
IN WITNESS WHEREOF the undersigned have executed this Amendment as of the
day and year first written above.
CLIENT
General American Life Insurance Company
By: /s/ Leonard M. Rubenstein
-----------------------------------------
Leonard M. Rubenstein
Title: Executive Vice President - Investments
ARM
ARM Financial Group, Inc.
By: /s/ John R. Lindholm
-----------------------------------------
John R. Lindholm
Title: Executive Vice President - Chief Marketing
Officer
NATIONAL INTEGRITY
National Integrity Life Insurance Company
By: /s/ John R. Lindholm
-----------------------------------------
John R. Lindholm
Title: Vice President - Chief Marketing Officer
4
<PAGE>
Exhibit 10.30
AMENDMENT #2
TO ENGAGEMENT AGREEMENT
THIS AMENDMENT #2 TO THE ENGAGEMENT AGREEMENT is made and entered into as
of September 1, 1995 by and between General American Life Insurance Company
("Client") and ARM Financial Group, Inc. ("ARM") for the purpose of amending
that certain Engagement Agreement made and entered into by Client and Analytical
Risk Management, Ltd. as of the 12th day of March, 1993, and subsequently
assigned by Analytical Risk Management, Ltd. to ARM, effective November 26,
1993, such assignment properly consented to by Client on September 8, 1993 (the
"Engagement Agreement").
Whereas Client and ARM entered into Amendment #1 to Engagement Agreement
as of August 14, 1995 for the purpose of entering into a joint venture to
develop and market guaranteed interest contracts and funding agreements as
agreed upon by the parties, and to share in the profits generated by the sales
of such products; and
Whereas it is stated in Amendment #1 that Client and ARM intend to share
in such profits on business placed after the date of Amendment #1 by means of
reinsuring a 50% portion of the business written by Client to Integrity Life
Insurance Company, a subsidiary of ARM ("Integrity"), and Client and ARM intend
to share in such profits on business placed prior to the date of Amendment #1
and on business which is not, for whatever reason, reinsured, by the payment of
fees to ARM as outlined in the Engagement Agreement; and
Whereas Client and ARM wish to clarify that fees are not payable to ARM as
outlined in the Engagement Agreement on any business written which is then
subject to a reinsurance agreement between the parties, regardless of whether
such portion is ceded or retained by Client; and
Whereas Client and ARM wish to clarify that the Engagement Agreement shall
be applicable to both the GIC Product and the Funding Agreement as defined in
the Engagement Agreement and in Amendment #1;
Now, therefore, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties agree to amend the Engagement
Agreement as follows:
Section 7, Compensation to ARM, is amended by the addition of subsection
(c) as follows:
(c) Reinsured Business. No fees are payable to ARM under this
Section 7 on either the ceded or retained portion of any GIC Product or Funding
Agreement written which is then subject to a reinsurance agreement between the
parties or any subsidiaries of the parties, and which is in fact reinsured.
<PAGE>
Section 29, GIC Product and Funding Agreement, is added to the Engagement
Agreement as follows:
Section 29, GIC Product and Funding Agreement.
The provisions of this Engagement Agreement and any amendments
thereto are applicable to the GIC Product as defined in the Engagement Agreement
and to the Funding Agreement as defined in Amendment #1 to this Engagement
Agreement, except as to provisions specifically excluded by the terms of this
Engagement Agreement or any amendment thereto.
2
<PAGE>
IN WITNESS WHEREOF the undersigned have executed this Amendment as of the
day and year first written above.
CLIENT
-------
General American Life Insurance Company
By: /s/ Leonard M. Rubenstein
---------------------------------------------------
Leonard M. Rubenstein
Title: Executive Vice President -- Investments
---------------------------------------------------
ARM
---
ARM Financial Group, Inc.
By: /s/ John R. Lindholm
---------------------------------------------------
John R. Lindholm
Title: Executive Vice President -- Chief Marketing Officer
---------------------------------------------------
3
<PAGE>
Exhibit 10.31
Note: Portions of this Exhibit have been omitted pursuant to a request
for confidential treatment filed with the SEC under Rule 406. The
omitted material has been fiiled separately with the SEC. The location
of the omitted confidential information is indicated herein by
"[***]."
1732-0-1
REINSURANCE AGREEMENT
between
GENERAL AMERICAN LIFE INSURANCE COMPANY
of
St. Louis, Missouri
referred to in this Agreement as the Company and
INTEGRITY LIFE INSURANCE COMPANY
of
Worthington, Ohio
referred to in this Agreement as the Reinsurer
<PAGE>
TABLE OF CONTENTS
I. Scope of Reinsurance
II. Liability
III. General Provisions
IV. Reinsurance Premiums
V. Withdrawals and Interest Payments
VI. Accounting and Settlement
VII. Duration and Recapture
VIII. Terminal Accounting and Settlement
IX. Arbitration
X. Insolvency
XI. Execution
Schedule A - Products and Amounts Reinsured
Schedule B - Allowances
Schedule C - Accounting Report
Schedule D - Investment Policy
Schedule E - Trust Agreement
<PAGE>
The Company and the Reinsurer mutually agree to reinsure on the terms and
conditions set out below. This Agreement is an indemnity reinsurance agreement
solely between the Company and the Reinsurer, and performance of the obligations
of each party under this Agreement shall be rendered solely to the other party.
In no instance shall anyone other than the Company or Reinsurer have any rights
under this Agreement, and the Company shall be and remain solely liable to any
insured, Participating Group Retirement Plan Contract owner, Funding Agreement
owner or beneficiary under any Participating Group Retirement Plan or Funding
Agreement reinsured hereunder.
ARTICLE I
SCOPE OF REINSURANCE
1. Funding Agreements Reinsured. The Reinsurer agrees to indemnify the
Company and the Company agrees to reinsure with the Reinsurer according to
the terms and conditions of this Agreement, the risks under certain
Funding Agreements and Participating Group Retirement Plan Contracts
(hereinafter referred to as the "Product(s)") described in Schedule A.
2. Coverages and Exclusions.
a) Only risks under the Products referred to in Paragraph 1, to the
extent of the limits specified in Schedule A, are reinsured under
this Agreement.
b) The Reinsurer shall have no liability to the Company for
reimbursement of any Product loans made to Product owners with
respect to the portion of the Products reinsured under this
Agreement.
3. Plan of Reinsurance. This indemnity reinsurance will be on a coinsurance
basis.
1
<PAGE>
ARTICLE II
LIABILITY
1. Liability. The liability of the Reinsurer on any Products reinsured
hereunder shall begin upon the Reinsurer's receipt of applicable portion
of premiums, in accordance with Article IV, but not prior to the effective
date of this Agreement. The reinsurance under this Agreement with respect
to any Products reinsured hereunder shall be maintained in force without
reduction as long as the liability of the Company under such Products
remains in force without reduction, unless reinsurance is terminated or
reduced or as otherwise provided herein. The Reinsurer's liability on any
Products reinsured hereunder shall terminate with that of the Company, but
not extending beyond the termination date of this Agreement.
ARTICLE III
GENERAL PROVISIONS
1. Reinsurance Conditions. The reinsurance hereunder is subject to the same
limitations and conditions as the insurance under the Products written by
the Company which are reinsured hereunder, except as otherwise provided
herein.
2. Administration of Products Reinsured. The Company shall administer the
Products reinsured hereunder and shall perform all accounting for such
Products.
3. Allowance for Commissions and Expenses. The Reinsurer shall pay the
Company the allowance for commissions and expenses determined in
accordance with Schedule B.
4. Premium Taxes. The Reinsurer shall be required to reimburse the Company
for the percentage of premium taxes incurred, determined in accordance
with Schedule B.
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5. Product Chances. If a change is made in the terms and conditions of the
Products issued by the Company and reinsured hereunder, which increases or
reduces the liability of the Company on such Products, changes the plan of
insurance or makes any other Product change, the Company and the Reinsurer
shall share in such change in proportion to their respective liabilities
under this Agreement. Provided, further, any such changes in the Products
shall be previously agreed upon between the Company and the Reinsurer.
6. Oversights. If failure to pay any premiums due or to do any other act
required by this Agreement is unintentional and caused by misunderstanding
or oversight, the Company and the Reinsurer will adjust the situation to
what it would have been had the misunderstanding or oversight not
occurred.
7. Inspection. At any reasonable time, each party may inspect and audit the
original papers, and any and all other books or documents relating to or
affecting reinsurance under this Agreement.
8. Amendments. This Agreement may be amended by mutual agreement of the
parties. Any such amendments shall be in writing, signed by both parties.
9. Headings and Schedules. Article and paragraph headings are not a part of
this Agreement and shall not affect the terms hereof. The schedules
attached are a part of this Agreement.
10. Offset. The Company or the Reinsurer may offset any amounts due from one
party to the other under this Agreement.
11. Coinsurance Reserve. A reserve will be established for the portion
reinsured by the Reinsurer which shall be equal to or greater than the
minimum statutory reserve required by the Insurance Department of the
Company's state of domicile or the State of Ohio, whichever is
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greater, on the portion of the Products reinsured, hereinafter referred to
as the "Coinsurance Reserve."
12. Entire Agreement Clause. The terms expressed in this Agreement, which by
definition and reference, should include that certain Engagement Agreement
entered into as of March 12, 1993, as amended, between the Company and
Analytical Risk Management, Ltd., (now known as ARM Financial Group,
Inc.), the parent of the Reinsurer, and made a part of this Agreement by
reference, constitute the entire agreement between the parties with
respect to the business being reinsured hereunder and there are no
understandings between the parties other than as expressed in this
Agreement.
Any change or modification to this Agreement is null and void unless made
by wntten amendment to this Agreement and signed by both parties.
13. Trust Agreement. The Company and the Reinsurer have agreed to enter into
the "Trust Agreement" attached to this Agreement as Schedule E. Pursuant
to the terms of the Trust Agreement, the Company, on the effective date of
this Agreement, will place assets in a trust account having a book value,
plus accrued interest, no less than 100 percent of the Coinsurance
Reserve. The Reinsurer will be responsible for maintaining the trust
account during the duration of this Agreement so that the book value of
all assets deposited therein plus the accrued interest thereon will at all
times be no less than 100 percent of the Coinsurance Reserve. To this end,
the Reinsurer will deposit cash into the trust account at the end of each
month on which the Coinsurance Reserve exceeds the book value of the
assets in the trust account plus accrued interest thereon at the end of
that calendar month. If at the end of any calendar month the Coinsurance
Reserve is less than the book value of the assets in the trust account
plus accrued interest thereon, the Reinsurer may withdraw cash or
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<PAGE>
other assets with a book value in the amount of the excess from the trust
account at the end of that calendar month.
The Reinsurer will be responsible for maintaining the trust account during
the duration of this Agreement so that the market value of all assets
deposited therein plus the accrued interest thereon, will at the end of
each calendar month, be no less than 97% of the Coinsurance Reserve. The
trustee will report monthly, the market value of the portfolio assets to
the Company and to the Reinsurer. If the portfolio fails to comply with
either this minimum market value requirement or any other investment
guideline as agreed upon and set forth in Schedule D, the Reinsurer will
have 15 business days from the date of the trustee's report to bring the
portfolio of assets in the Trust back into compliance. If the Reinsurer
fails to comply with the terms of the Trust within the 15 business day
period, the Company will have the option, in its sole and absolute
discretion, to commence recapture, without penalty, of the Reinsurer's
share of the Products reinsured under this Agreement. If, at the time of
recapture, the value of the assets held in the Trust is insufficient to
cover 100% of the Coinsurance Reserve, the Reinsurer will have 15 business
days to reimburse the Company for the shortage.
14. Recapture. If, on any calendar quarter-end, the Reinsurer's "Total
Adjusted Capital" falls below 150% of the Reinsurer's "Company Action
Level", the Company will have the right to commence recapture, without
penalty, of the Reinsurer's share of the Products reinsured under this
Agreement. The amounts, Total Adjusted Capital and Company Action Level,
refer to the amounts as defined in the NAIC Life Risk-Based Capital Report
Including Overview and Instructions for Companies, published annually by
the National Association of Insurance Commissioners. The Reinsurer will
provide to the Company on a calendar quarterly basis, or upon reasonable
request of the Company, a report illustrating the
5
<PAGE>
calculation of the Reinsurer's Total Adjusted Capital and the Reinsurer's
Company Action Level. If any such report indicates that the Reinsurer's
Total Adjusted Capital has fallen below 150% of its Company Action Level,
the Company will have the right to commence recapture, without penalty, of
the Reinsurer's share of the Products reinsured under this Agreement. If,
at the time of recapture, the market value of the assets held in the Trust
is insufficient to cover 100% of the Coinsurance Reserve, the Reinsurer
will have 15 business days to reimburse the Company for the shortage.
ARTICLE IV
REINSURANCE PREMIUMS
Reinsurance Premiums. The Company shall pay to the Reinsurer as reinsurance
premiums each day the gross contributions the Company receives on such day on
Products reinsured hereunder in proportion to the amount reinsured hereunder.
ARTICLE V
WITHDRAWALS AND INTEREST PAYMENTS
1. Notice. The Company will maintain records to support withdrawals and
interest payments. The Reinsurer reserves the right to review these
benefit records and proofs will be furnished the Reinsurer upon request.
2. Withdrawals and Interest Payments. The Reinsurer will pay the Company each
day that portion of the withdrawals and interest payments paid by the
Company that day on Products reinsured hereunder which corresponds to the
portion of the Products reinsured hereunder.
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3. Liability and Payment. The Reinsurer will accept the decision of the
Company on withdrawals and interest payments on Products reinsured
hereunder. The Reinsurer will pay its share in a lump sum equal to its
percentage reinsured to the Company in the same form as the form of
withdrawals and interest payment settlement of the Company.
4. Contested Withdrawals and Interest Payments. The Company will advise the
Reinsurer of its intention to contest, compromise or litigate a withdrawal
or interest payment involving Products reinsured hereunder. The Reinsurer
will pay its share of the usual expense of the contest in addition to its
share of the withdrawal or interest payment itself, or it may choose not
to participate in the contest. If the Reinsurer chooses not to
participate, it will discharge its liability by payment of the full amount
of its liability on the Product reinsured to the Company. The Reinsurer
shall not be liable for any part of any damages, compensatory or punitive,
assessed against the Company based on its alleged misconduct in the
handling of withdrawals and interest payments or in other dealings with
its Product owners.
5. Assistance and Advice. On any claim on a Product reinsured hereunder, the
Reinsurer will, at the request of the Company, advise and assist the
Company in its determination of the liability and in the best procedure to
follow with respect to a claim of doubtful validity, provided that the
Reinsurer shall not be liable to the Company or to any third party for
claims arising out of such advice and assistance.
6. Annuitization. In the event of annuitization of any amounts reinsured
hereunder, the Reinsurer will pay the Company an amount equal to the
portion of the annuity purchase value of such amount reinsured hereunder.
No further obligation or liability will exist for the Reinsurer for such
annuitized amounts.
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ARTICLE VI
ACCOUNTING AND SETTLEMENT
1. Accounting Periods. The accounting shall be on a calendar month basis,
except that the initial accounting period shall run from the effective
date of this Agreement through the last day of the calendar month in which
the effective date of this Agreement falls. The final accounting period
shall run from the end of the preceding calendar month until the
termination date of this Agreement.
2. Accounting Reports. Accounting reports shall be submitted to the Reinsurer
by the Company not later than 15 days after the end of each accounting
period. Such reports shall be in the form of Schedule C and shall include
information on the amount of reinsurance premiums, allowances, withdrawal
and interest payments and Coinsurance Reserves on the Products reinsured
for the preceding accounting period.
Annual accounting reports necessary to the filing of the Reinsurer's
Annual Statement blank and its Federal Income tax return shall be
submitted to the Reinsurer by the Company within 30 days after the end of
a calendar year.
3. Settlements. Reinsurance premiums, withdrawals and interest payments will
be settled as described in Article IV and Article V.
4. Amounts Due. Except as otherwise specifically provided in this Agreement,
all amounts due to be paid to either the Reinsurer or the Company shall be
determined on a net basis as of the last day of each calendar month and
shall be due and payable as of such date.
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5. Delayed Payments and Recalculations. If there is a delayed settlement or a
recalculation of an amount due, there will be an interest charge computed
at an effective annual 8% interest rate for the period commencing with the
accounting period in which the charge applies.
ARTICLE VII
DURATION AND RECAPTURE
1. Duration. Except as otherwise provided herein, this Agreement shall be
unlimited in duration.
2. Termination by the Reinsurer. The Reinsurer may terminate this Agreement
on 90 days prior written notice to the Company with respect to reinsurance
not yet placed in force.
3. Termination by the Company. The Company may terminate this Agreement on 90
days prior written notice to the Reinsurer with respect to new business.
4. Chances of Ownership or Control. The Company may terminate this Agreement
and recapture, without penalty, the Reinsurer's share of the Products
reinsured under this Agreement upon any change of ownership or control of
the Reinsurer away from ARM Financial Group, Inc.
ARTICLE VIII
TERMINAL ACCOUNTING AND SETTLEMENT
1. Terminal Accounting. In the event that all reinsurance under this
Agreement is terminated in accordance with Article III, a terminal
accounting and settlement shall take place.
2. Date. The terminal accounting date shall be the effective date of
termination pursuant to any notice of termination given under this
Agreement or such other date as shall be mutually agreed to in writing.
3. Settlement. The terminal accounting and settlement shall consist of:
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a) the settlements as provided in Articles IV, V and VI, computed as of
the terminal accounting date; and
b) payment by the Reinsurer to the Company of the Coinsurance Reserves
on the portion of the Products reinsured hereunder as of the
terminal accounting date.
If the calculation of the terminal accounting and settlement produces an
amount owing to the Company, such amount shall be paid by the Reinsurer to
the Company. If the calculation of the terminal accounting and settlement
produces an amount owing to the Reinsurer, such amount shall be paid by
the Company to the Reinsurer.
ARTICLE IX
ARBITRATION
1. It is the intention of the Reinsurer and the Company that the customs and
practices of the insurance and reinsurance industry will be given full
effect in the operation and interpretation of this Agreement. The parties
agree to act in all things with the highest good faith. If the Reinsurer
or the Company cannot mutually resolve a dispute which arises out of or
relates to this Agreement, however, the dispute will be decided through
arbitration. The arbitrators will base their decision on the terms and
conditions of this Agreement plus, as necessary, on the customs and
practices of the insurance and reinsurance industry rather than solely on
a strict interpretation of the applicable law; there will be no appeal
from their decision, and any court having jurisdiction of the subject
matter and the parties may reduce that decision to judgment.
2. To initiate arbitration, either the Company or the Reinsurer will notify
the other party by Certified Mail of its desire to arbitrate, stating the
nature of its dispute and the remedy sought. The party to which the notice
is sent will respond to the notification in writing within 10 days of its
receipt.
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3. There will be three arbitrators who will be current or former officers of
life insurance companies other than the contracting companies. Each of the
contracting companies will appoint one of the arbitrators and these two
arbitrators will select the third. If either party refuses or neglects to
appoint an arbitrator within 60 days, the other party may appoint the
second arbitrator. If the two arbitrators do not agree on a third
arbitrator within 60 days of their appointment, each of the arbitrators
will nominate three individuals. Each arbitrator will then decline two of
the nominations presented by the other arbitrator. The third arbitrator
will then be chosen from the remaining two nominations by drawing lots.
4. It is agreed that each of the three arbitrators should be impartial
regarding the dispute and should resolve the dispute on the basis
described in Section 1 of this Article. Therefore, at no time will either
the Company or the Reinsurer contact or otherwise communicate with any
person who is to be or has been designated as a candidate to serve as an
arbitrator concerning the dispute, except upon the basis of jointly
drafted communications provided by both the Company and the Reinsurer to
inform the arbitrators of the nature and facts of the dispute. Likewise,
any written or oral arguments provided to the arbitrators concerning the
dispute will be coordinated with the other party and will be provided
simultaneously to the other party or will take place in the presence of
the other party. Further, at no time will any arbitrator be informed that
the arbitrator has been named or chosen by one party or the other.
5. The arbitration hearing will be held on the date and at the place fixed by
the arbitrators. In no event will this date be later than six months after
the appointment of the third arbitrator. As soon as possible, the
arbitrators will establish pre-arbitration procedures as warranted by
facts and issues of the particular case. At least 10 days prior to the
arbitration hearing, each party will provide the other party and the
arbitrators with a detailed statement of the facts and
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<PAGE>
arguments it will present at the arbitration hearing. The arbitrators may
consider any relevant evidence; they will give the evidence such weight as
they deem it entitled to after consideration of any objections raised
concerning it. The party initiating the arbitration will have the burden
of proving its case by a preponderance of the evidence. Each party may
examine any witnesses who testify at the arbitration hearing.
6. The cost of arbitration will be borne by the losing party unless the
arbitrators decide otherwise.
ARTICLE X
INSOLVENCY
If the Company becomes insolvent, reinsurance hereunder shall be payable by the
Reinsurer directly to the Company or its liquidator, receiver, or statutory
successor on the basis of the liability of the Company under the Products
reinsured, without diminution because of insolvency.
The Reinsurer shall be given, within a reasonable time after a claim is filed in
the insolvency proceedings, written notice of the pendency of each claim which
may involve the reinsurance afforded by this Agreement. The Reinsurer shall have
the right, at its sole discretion, to investigate the claim and interpose in the
proceedings where the claim is to be adjudicated, at its own expense, any
defense which it deems available to it or the Company. A proportionate share of
the expense thus incurred by the Reinsurer shall be chargeable, subject to court
approval, against the insolvent Company as part of the expense of liquidation to
the extent of the benefit accruing to the Company solely as a result of the
defense undertaken by the Reinsurer.
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ARTICLE XI
EXECUTION
In witness of the above, this Agreement is signed in duplicate at the dates and
places indicated; however, this Agreement shall take effect on the date of
execution of the Trust Agreement attached as Schedule E.
General American Life Insurance Company
Place: St. Louis, Missouri
By: /s/ Leonard M. Rubenstein
-------------------------------------
Leonard M. Rubenstein
Title: Executive Vice President--Investments
-------------------------------------
By: _____________________________________
Title: Assistant Secretary
-------------------------------------
Date: [Illegible]
-------------------------------------
Integrity Life Insurance Company
Place: Louisville, Kentucky
By: /s/ John R. Lindholm
-------------------------------------
John R. Lindholm
Title: President
-------------------------------------
By: /s/ Robert H. Scott
-------------------------------------
Robert H. Scott
Title: General Counsel and Secretary
-------------------------------------
Date: March 28, 1996
-------------------------------------
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SCHEDULE A
PRODUCTS AND AMOUNTS REINSURED
The proportion of the Products reinsured under this Agreement shall be a
quota-share of the Products issued on and after the effective date of this
Agreement, and gross contributions received on or after the effective date of
this Agreement on Products issued before the effective date of this Agreement on
the following forms:
Form Quota Share
---- -----------
FRFA-395 50%
FRGIC-293 50%
<PAGE>
SCHEDULE B
ALLOWANCES
1. The Reinsurer will pay the Company an expense allowance for each
accounting period equal to:
[***] percent times the Reinsurer's share of the Statutory Reserves in
force at the end of the accounting period, plus the Reinsurer's share of
commissions paid and premium taxes incurred on the Products.
2. The Company will pay the Reinsurer a marketing allowance for each
accounting period equal to:
[***] percent times the Company's share of the Statutory Reserves in
force at the end of the accounting period.
[***] This material has been omitted pusuant to a request for confidential
treatment filed with the SEC under Rule 406. The omitted material has
been filed separately with the SEC.
<PAGE>
SCHEDULE C
ACCOUNTING REPORT
MONTHLY REPORT TO: ____________________
FOR PERIOD ENDING: ____________________
Amounts Due Reinsurer
- ---------------------
Reinsurance Premiums $___________________
Allowances $___________________
TOTAL $___________________
Amounts Due Company
- -------------------
Withdrawals $___________________
Payments ____________________
Allowances ____________________
TOTAL $___________________
NET DUE Reinsurer (Company) $___________________
NUMBER OF PRODUCTS REINSURED ____________________
COINSURANCE RESERVE $___________________
<PAGE>
SCHEDULE D
INVESTMENT POLICY
The Investment Guidelines for the portfolio assets held in trust shall be as
follows:
1. The average effective duration of the portfolio in the trust cannot exceed
two years;
2. The average credit quality of the portfolio cannot be less than A;
3. The portfolio in trust cannot contain investment in real estate,
commercial mortgage loans, common stocks, NAIC "6" rated securities,
leveraged futures or leveraged derivatives;
4. Below investment grade securities, those defined by a NAIC rating of 3, 4
or 5 cannot exceed 10% of the portfolio; and
5. Options (caps, swaps, floors, etc.) may be used, but the purchase cost of
the options cannot exceed 5% of the portfolio.
<PAGE>
SCHEDULE E
TRUST AGREEMENT
<PAGE>
TRUST AGREEMENT
This Agreement, effective as of April 1, 1996, is made by and among
Integrity Life Insurance Company, a corporation organized and existing under the
laws of the State of Ohio (the "Grantor"), General American Life Insurance
Company, a corporation organized and existing under the laws of the State of
Missouri (the "Beneficiary"), and Fleet National Bank, a national banking
organization (the "Trustee").
Witnesseth
Whereas Grantor and Beneficiary have entered into a Reinsurance
Agreement which will take effect on the date of execution of this Trust
Agreement, and to which this Trust Agreement is attached, whereby Grantor, as
Reinsurer, has agreed to indemnify Beneficiary, as cedent Company, against loss
(the "Reinsurance Agreement"), and
Whereas Grantor and Beneficiary desire to create a trust account to hold
assets at all times as security for the performance by Grantor of its
obligations set forth in the Reinsurance Agreement.
Now, therefore, the parties agree as follows:
ARTICLE I
TRUST ACCOUNT
1.01 TRUST ACCOUNT ESTABLISHMENT. Grantor hereby establishes a trust account
with Trustee for the sole use and benefit of Beneficiary, upon the terms and
conditions herein (the "Trust Account). The Beneficiary shall deposit cash or
cash equivalents in the Trust Account equal to the reinsurance premiums due the
Grantor pursuant to the Reinsurance Agreement. Such deposits shall be made on
each day that reinsurance premiums are due. The Beneficiary shall notify the
Grantor and the Grantor will notify the Trustee in writing of each deposit
before such deposit is made. Such notifications may be provided by facsimile,
provided, however, that the sender shall confirm receipt of such notification.
1.02 TRUST ACCOUNT. Trustee and its lawfully appointed successors is and are
authorized and will have power to receive such cash and other property as
Grantor from time to time may transfer or
<PAGE>
remit to or vest in said Trustee or place in such Trustee's hands or under said
Trustee's control, and to hold, invest, reinvest and dispose of the same for the
uses and purposes and in the manner and according to the provisions herein. All
such trusteed assets at all times will be maintained as a trust account,
separate and distinct from all other assets on the books and records of Trustee.
1.03 INVESTMENT RESPONSIBILITY. The responsibility for investing and
reinvesting the assets, which includes the active management of such assets, in
the Trust Account, will be that of the Grantor. Trustee will not be required to
take any action with respect to the investment or reinvestment of the Trust
Account's assets unless and until it has received written confirmation of the
transaction from Grantor or its authorized investment advisor, ARM Capital
Advisors, Inc. Any written deposit or investment or reinvestment direction
received by the Trustee from the Grantor or its authorized investment advisor
shall constitute a certification by the Grantor to the Trustee that the assets
so deposited or to be purchased pursuant to such direction are Authorized
Investments. The Trustee shall not be liable for losses from investments of any
trusteed assets made in accordance with this Agreement.
1.04 AUTHORIZED INVESTMENTS. Assets deposited in the Trust Account and
investments and reinvestments thereof shall consist solely of assets of the
types specified in Schedule A (the "Authorized Investments"). In addition,
Grantor warrants that investments and reinvestments of assets in the Trust
Account will at all times meet all regulatory requirements imposed by the state
of Ohio. The Trustee shall not be liable for compliance with such Authorized
Investments requirements or state insurance law regulatory requirements. In the
event that a monthly Trustee report to Beneficiary and Grantor indicates
non-compliance with any Authorized Investment requirement, Grantor shall have a
period of 15 business days from the date of receipt of the report in which to
bring the assets in the Trust Account into compliance with the Authorized
Investment requirements.
1.05 MANDATORY TRUST ASSET LEVELS. The Grantor shall maintain assets in the
Trust Account in an amount equal to or greater than the Mandatory Trust Asset
Levels specified in Schedule B. The Trustee shall not be liable for compliance
with such Mandatory Trust Asset Levels. In the event that a monthly Trustee
report to Beneficiary and Grantor indicates that the value of assets in the
Trust Account is less than the Mandatory Trust Asset Levels at the end of any
calendar month, Grantor
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shall have a period of 15 business days from the date of receipt of the report
in which to deposit assets in the Trust Account to comply with the Mandatory
Trust Asset Levels.
1.06 BLANK ASSIGNMENTS AND ENDORSEMENTS. Grantor shall, upon execution of
this Agreement, and from time to time thereafter as required, execute
assignments or endorsements in blank for all securities or other property
standing in Grantor's name which are delivered to Trustee to form a part of the
Trust Account so that, whenever necessary pursuant to Sections 1.10 and 3.01
hereof, Trustee can assign any such asset to the Beneficiary without the consent
or signature of Grantor or any person or entity; any assets received by Trustee
which are not in such proper negotiable form will not be accepted by Trustee and
will be returned to Grantor as unacceptable.
1.07 ASSET SUBSTITUTION. Assets forming a part of the Trust Account may be
substituted with other Authorized Investments by the Grantor so long as the
then current market-value of the Authorized Investment so substituted will
not be less than the then current market value of the assets withdrawn. The
Trustee will be protected in relying upon any written statement of Grantor as
to the current market value of any assets so withdrawn or substituted.
1.08 DIVIDENDS, INTEREST AND OTHER INCOME. If Trustee has received no
written notice from Beneficiary of any violation of the requirements of the
Reinsurance Agreement or this Agreement concerning the amount of Authorized
Investments in the Trust Account, all dividends, interest and other income
resulting from the investment of the assets in the Trust Account, excluding
principal paydowns on investments, will be the property of Grantor. To the
extend that Trustee will collect and receive such income from the Trust Account,
Trustee shall pay over the amount of such income, no more frequently than
monthly, upon the written direction of Grantor; provided, however, that Trustee
will have no obligation with respect to the collection of such income. If a
written notice of violation has been received from the Beneficiary, Trust will
hold such dividends, interest and other income in the Trust Account and not pay
such funds to Grantor except with the written consent of Beneficiary or unless
such notice is rescinded by Beneficiary.
1.09 WITHDRAWALS BY GRANTOR. Grantor agrees and covenants that it will
withdraw the assets of the Trust Account for the following purposes only:
(a) to pay Beneficiary amounts owed pursuant to the Reinsurance
Agreement, such amounts to be wire transferred directly from the Trustee
to the Beneficiary pursuant to written
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<PAGE>
directions from the Grantor, which shall include a certification that
such withdrawal is required to satisfy Grantor's obligations under the
terms of the Reinsurance Agreement; and
(b) to withdraw any amounts held in the Trust Account that exceed the
amount of the Mandatory Trust Asset Levels at the end of any calendar
month.
1.10 WITHDRAWALS BY BENEFICIARY. Subject to the terms and conditions of
Section 1.12 herein, Beneficiary agrees and covenants that it will withdraw the
assets of the Trust Account for the following purposes only:
(a) to pay Beneficiary for Grantor's obligations under the Reinsurance
Agreement if not otherwise paid by Grantor pursuant to written
directions from the Beneficiary, which shall include a certification
that such withdrawal is required to satisfy Grantor's obligations under
the terms of the Reinsurance Agreement;
(b) in connection with termination of the Trust Agreement pursuant to
Section 3.01 hereof; and
(c) in connection with the recapture by the Beneficiary of the products
reinsured under the Reinsurance Agreement.
1.11 PROPRIETARY RIGHTS. Grantor will have the full unqualified right to
vote and execute consents and to exercise any and all proprietary rights not
inconsistent with this Trust Agreement with respect to any securities or other
property forming a part of the Trust Account.
1.12 TRANSFERS TO BENEFICIARY. No less than ten business days after receipt
by Trustee of a written demand from Beneficiary, which demand will satisfy the
requirements of this Agreement including Section 1.10, and provided that Grantor
has not disagreed with such demand in accordance with the procedure set forth
below, Trust will complete the assignment or endorsement of the blank assigned
or endorsed certificates or obligations as specified in Beneficiary's demand, so
as to transfer absolutely and unequivocally all right, title and interest
therein to Beneficiary and deliver the physical custody thereof to Beneficiary.
The demand must be delivered to Trustee by overnight mail service, and shall
include a certification from Beneficiary that notice of such demand has been
simultaneously furnished by Beneficiary to Grantor by overnight mail service.
The Trustee will be protected in relying upon such certification of Beneficiary.
Beneficiary and Grantor understand that with regard to certificates of deposit
or other assets that are delivered to Trustee, Trustee may not be able to
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<PAGE>
deliver such assets to Beneficiary in negotiable form but, in such instance,
will execute a form of assignment provided to it by Beneficiary assigning all of
Trustee's rights and interest in such assets to Beneficiary.
If Grantor disagrees with any demand by Beneficiary pursuant to this
Section. Grantor will within six business days after receipt of the notification
of demand notify Beneficiary and Trustee in writing of its disagreement.
Grantor shall be deemed to have received Beneficiary's notification of demand on
the day next succeeding the day on which such notification was received by the
Trustee. If Beneficiary and Grantor are unable to resolve the disagreement
within 15 business days of Grantor's receipt of the notification of demand,
Trustee will be so informed in writing and the resulting dispute will be settled
pursuant to Section 1.13 of this Agreement. The transfer of any assets to
Beneficiary by Trustee will be held in abeyance pending the decision of the
arbitrators as provided for in Section 1.13. Trustee will incur no liability
and will be fully protected for any delivery made by it pursuant to such written
demand of Beneficiary unless, as provided for above, Trustee has received timely
written notice of dispute between Beneficiary and Grantor.
Trustee will not permit withdrawals or other transactions by Grantor
which would reduce the amount of the Trust Account other than those described in
Section 1.09 except with the written consent of the Beneficiary, which consent
will not be unreasonably withheld.
1.13 ARBITRATION.
(a) It is the intention of the parties that the customs and practices of
the insurance and reinsurance industry will be given full effect in the
operation and interpretation of this agreement. The parties agree to act in all
things with the highest good faith. If the Grantor and the Beneficiary cannot
mutually resolve a dispute which arises out of or relates to this Agreement, the
dispute will be decided through arbitration. The arbitrators will base their
decision on the terms and conditions of this Agreement and, as necessary, on the
customs and practices of the insurance and reinsurance industry rather than
solely on a strict interpretation of the applicable law. There will be no
appeal from the decision of the arbitrators, and any court having jurisdiction
of the subject matter and the parties may reduce that decision to judgment.
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(b) To initiate arbitration, either the Grantor or the Beneficiary will
notify the other party of its desire to arbitrate, stating the nature of its
dispute and the remedy sought. The party to which the notice is sent will
respond to the notification in writing within ten days of its receipt.
(c) There will be three arbitrators who will be current or former
officers of life insurance companies not affiliated with any party to this
Agreement. The Grantor and the Beneficiary will each appoint one arbitrator,
and these two arbitrators will select the third arbitrator. If either party
refuses or neglects to appoint an arbitrator within 60 days, the other party may
appoint the second arbitrator. If the two arbitrators do not agree on a third
arbitrator within 60 days of their appointment, each of the arbitrators will
nominate three individuals. Each arbitrator will then decline two of the
nominations presented by the other arbitrator. The third arbitrator will then
be chosen from the remaining two nominations by drawing lots.
(d) It is agreed that each of the three arbitrators should be impartial
regarding the dispute and should resolve the dispute on the basis described in
Section (a) above. Therefore, at no time will either the Grantor or the
Beneficiary contact or otherwise communicate with any person who is to be or has
been designated as a candidate to serve as an arbitrator concerning the dispute,
except upon the basis of jointly drafted communications provided by both the
Grantor and the Beneficiary to inform the arbitrators of the nature and facts of
the dispute. Likewise, any written or oral arguments provided to the
arbitrators concerning the dispute will be coordinated with the other party and
will be proved simultaneously to the other party or will take place in the
presence of the other party. Further, at no time will any arbitrator be
informed that the arbitrator has been named or chose by one party or the other.
(e) The arbitration hearing will be held on the date and at the place
fixed by the arbitrators. In no event will this date be later than six months
after the appointment of the third arbitrator. As soon as possible, the
arbitrators will establish pre-arbitration procedures as warranted by facts and
issues of the particular case. At least ten days prior to the arbitration
hearing, each party will provide the other with a detailed statement of the
facts and arguments it will present at the arbitration hearing. The arbitrators
may consider any relevant evidence; they will give the evidence such weight as
they deem it entitled to after consideration of any objections raised concerning
it. The party initiating the arbitration will have the burden of proving its
case by a
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preponderance of the evidence. Each party may examine any witnesses who testify
at the arbitration hearing. The final decision of the arbitrators will be
rendered in writing and provided to the parties to this Agreement.
(f) The cost of arbitration will be borne by the losing party unless the
arbitrators decide otherwise.
(g) In the event of a dispute among the parties hereto as to the
distribution of trust assets, the Trustee may continue to hold such disputed
assets until, as set forth herein, receipt of joint written instructions from
the other parties hereto or a final decision of the arbitrators as subscribed in
this Section directs disposition of the assets; or the Trustee may, at the
expense of the other parties hereto, deposit by the appropriate procedure the
assets into court.
ARTICLE II
TRUSTEE
2.01 TRUSTEE QUALIFICATIONS. The Trustee must be a bank or trust company and
must be a member of the Federal Reserve System of the United States of America.
The Trustee may not be a parent, subsidiary or affiliate of either the Grantor
or Beneficiary.
2.02 TRUSTEE COMPENSATION. The Trustee will be entitled to receive as
compensation for its services thereunder, an annual fee, computed and payable
quarterly, at such rate as may be mutually agreed upon from time to time in
writing by the Trustee, Grantor, and Beneficiary. Grantor and Beneficiary will
share equally the annual fee of the Trustee and all reasonable expenses of the
Trustee, including reasonable fees of counsel. Grantor shall be responsible for
physical payment of all such fees and Beneficiary shall reimburse Grantor for
its share of such fees.
2.03 DUTIES OF TRUSTEE.
(a) The Trustee will be liable for the safekeeping and administration of
the Trust Account in accordance with provisions of this Trust Agreement. The
Trustee will not be liable for losses of or damage to the assets in the Trust
Account which are under its care, custody, possession or control, or under the
care, custody, possession or control of its nominee, including but not limited
to losses due to fire, burglary, robbery, theft or mysterious disappearance
except as caused by the Trustee's
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own bad faith, wilful misconduct or negligence. In the event of loss of or
damage to such assets, the Trustee will promptly replace such assets with like
kind and quality together with all rights and privileges pertaining to such
assets or, if such replacement is not feasible, deposit in the Trust Account
cash equal to the fair market value of such assets determined as of the date of
the discovery of the loss. Under no circumstances, however, will the Trustee be
liable for consequential damage. The Trustee shall make no distributions of
cash or cash equivalents except according to the terms of this Agreement.
Furthermore, the obligation and liability of the Trustee to make such
distributions shall be limited to the cash or cash equivalents on deposit with
it pursuant to this Agreement.
(b) The Trustee is directed to transfer into the name of nominees
selected by it all registered securities from time to time held under this
Agreement. The Trustee will be responsible for acts of its nominees with
respect to such securities. Securities will be held in a nominee name of the
Trustee, by authorized officers of the Trustee to facilitate the holding
transfer of the title on behalf of the Trustee. To effect the transfer of
registered securities into the name of the Trustee's nominee, to facilitate the
collection of any payment thereon and to effect any other action in relation
thereto or in order to meet any requirement thereof, Grantor authorizes the
Trustee to execute in Grantor's name, and to deliver any instrument determined
by the Trustee to be appropriate in furtherance of the purposes hereof, and to
guarantee in the Trustee's name as the signature of Grantor any signature so
placed on such instrument.
(c) The Trustee may utilize the services of any Federal Reserve Bank or
Depository Trust Company for the purpose of book-entry deposits. All other
assets which are not in Federal Reserve book-entry form will be held by the
Trustee in bearer form or in Trustee's nominee name for reinsurance trusts. The
Trustee shall have no liability or responsibility for any action or omission of
any Federal Reserve Bank or the Depository Trust Company, including any error or
delay by such Bank or Depository to remit any payment or deliver any notice,
report or other communication in respect of any assets, or any error or
inaccuracy in such Bank's or Depository's books and records.
(d) The Trustee shall perform such duties in the administration of this
Agreement, and only such duties, as are specifically set forth in this
Agreement. The Trust shall not be charged with any duty or obligation arising
under or be bound by the provisions of any other agreement between the Grantor
and Beneficiary.
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2.04 RELIANCE BY TRUSTEE. Subject to Section 2.05, Trustee will be protected
in acting upon any statement, notice, resolution, request, demand, consent,
order, certificate, report, appraisal, opinion, telegram, cablegram, radiogram,
letter or other paper or document believed by Trustee to be genuine and to have
been signed, sent or presented by the proper party or parties. All notices to
Trustee will be deemed to be effective when received by the Trustee unless
otherwise noted therein.
2.05 VERIFICATIONS. Whenever in the administration of the Trust Account
created by this Trust Agreement Trustee deems it necessary or desirable that a
matter be proved or established prior to taking, suffering or omitting any
action thereunder, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a statement or certificate signed by or on behalf of Grantor or
Beneficiary, as applicable, and delivered to Trustee and said certificate will
be full warrant to Trustee for any action taken, suffered or omitted by it on
the faith thereof, but in its discretion, Trustee may require such other or
additional evidence as it may deem reasonable.
2.06 AUTHORIZED SIGNATURES. Except when otherwise expressly provided in this
Agreement, any statement, certificate, notice, request, consent, approval, or
other instrument to be delivered or furnished by Grantor or Beneficiary will be
sufficiently executed if executed in the name of Grantor or Beneficiary as
applicable by such officer or officers of Grantor or Beneficiary or by such
other agent or agents of Grantor or Beneficiary as may be designated in a
resolution or letter of advice by Grantor or Beneficiary. Written notice of
such designation by Grantor and Beneficiary shall be filed with Trustee.
Trustee will be protected in acting upon any written statement or other
instrument made by such officer or agent of Grantor or Beneficiary with respect
to the Authority conferred on him.
2.07 OPINION OF COUNSEL. Trustee may consult with counsel of its choice or
counsel for Grantor or Beneficiary. The opinion of said counsel will be full
and complete authority and protection for Trustee with respect to any action
taken, suffered or omitted by it in good faith and in accordance with the
opinion of said counsel other than with respect to the withdrawal of trust
assets by Grantor or Beneficiary.
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2.08 RECORDS AND REPORTS.
(a) Trustee will keep full and complete records of the administration of
the Trust Account. Grantor and Beneficiary may examine such records at any time
during business hours by any person or persons duly authorized in writing by
Grantor or Beneficiary.
(b) Trustee will furnish to Grantor and Beneficiary an accounting of all
assets in the Trust Account upon its inception and thereafter as of the end
calendar month. Trustee agrees it will have the responsibility to use its best
efforts to determine the market value of all assets in the Trust Account on a
monthly basis and to inform Grantor and Beneficiary of such market value in
writing within ten business days after the end of each month. Trustee will
furnish to Grantor and Beneficiary a transaction report detailing any deposits
to, substitutions of, or withdrawals from the Trust Account within ten business
days after the end of each month.
(c) Trustee agrees to immediately inform Grantor telephonically,
confirmed in writing within two business days, if any interest or principal
payment on any of the assets held in the Trust is not received by Trustee within
five days of its due date.
2.09 ACCEPTANCE OF TRUST. Trustee hereby accepts the trust herein created
and declared upon the terms herein expressed. Trustee may resign by written
resignation effective not less than 90 days after receipt thereof by Grantor and
Beneficiary. Grantor may remove Trustee at any time, without assigning any
cause therefore. No such resignation or removal will be effective until a
successor trustee has been appointed by Grantor and approved by Beneficiary and
the successor trustee has accepted such appointment and all assets in the Trust
have been duly transferred to such successor trustee pursuant to written
instructions from Grantor to Trustee regarding delivery of the Trust assets. In
case of the appointment of a successor trustee, all of the powers, rights and
duties of the Trustee named herein, and every successor trustee will succeed to
take and have all the estate, powers, rights and duties which belonged to or
were held by its predecessor. Any trustee who resigns or is removed will have
the right to a final accounting with respect to the Trust Account.
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ARTICLE III
MISCELLANEOUS PROVISIONS
3.01 Termination. Termination of this Trust Agreement shall occur upon the
termination of the Reinsurance Agreement, or:
(a) if Beneficiary recaptures the products reinsured under the
Reinsurance Agreement pursuant to Article III, Section 14 or Article
VII, Section 4 of the Reinsurance Agreement; or
(b) if Grantor commences or becomes subject to any proceeding due to
inability to meet its financial obligations, including rehabilitation,
liquidation, dissolution, or conservation, commenced under any
applicable Federal or State law or regulation; or
(c) if Grantor fails to make a deposit of cash or cash equivalents in
the Trust Account to comply with the Mandatory Trust Asset Levels as
required by Section 1.05 of this Agreement; or
(d) if Grantor fails to timely submit any report or certification or
notice as required under this Agreement; or
(e) if Grantor knowingly makes any material representation or warranty
in connection with this Agreement or knowingly submits any report or
certification that proves to be untrue or inaccurate in any material
respect;
provided that in each such instance the Beneficiary shall provide written notice
to the Grantor and the Trustee of the occurrence of any such termination event
and the Grantor shall not have remedied or cured such termination event within
15 business days after actual receipt of such notice. The Beneficiary shall
provide written notice to the Trustee stating that the termination event has or
has not been remedied or cured, and shall include a certification from
Beneficiary that a copy of such notice has been simultaneously furnished by
Beneficiary to Grantor by overnight mail service.
In the event that the Beneficiary has provided the required written
notice and certification to the Trustee stating that the termination event has
not been remedied or cured and this Trust Agreement is terminated, then
Beneficiary has the right to request Trustee to transfer, pay over, and deliver
to the Beneficiary, on the first business day following Trustee's actual receipt
of such written
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notice and certification, all of the assets held in the Trust Account so as to
transfer absolutely and unequivocally all right, title and interest to such
assets. Such transfer, payment, and delivery shall constitute a full and
sufficient discharge and acquaintance of the Trustee in respect thereof.
3.02 GOVERNING LAW. The provision of and validity and construction of this
Trust Agreement and any amendments thereto will be governed by and construed in
accordance with the laws of the State of Ohio and the Trust Account created
hereunder will be administered in accordance with the laws of the State of Ohio.
3.03 AMENDMENTS. This Trust Agreement may be amended at any time by written
agreement signed by Grantor and Beneficiary and delivered to Trustee; provided,
however, that no such amendment will be effective to increase the powers, rights
or duties of Trustee without Trustee's written consent.
3.04 NOTICES. Except as may otherwise be provided herein, all notices,
requests, demands or instructions to the Beneficiary, the Grantor or to the
Trustee which are given hereunder shall be in writing and shall be deemed
sufficiently given if sent by certified mail, postage prepaid, or reputable
overnight mail delivery such as Federal Express, Airborne, Purolator, DHL or
United Parcel Service, fees prepaid, addressed as follows:
If to the Beneficiary, General American Life Insurance Company, 700
Market Street, St. Louis, Missouri 63101, attention of Mark A. Blassie;
If to the Grantor, 239 South Fifth Street, 12th Floor, Louisville,
Kentucky 40202, attention of Madison C. McCarty;
If to the Trustee, Fleet National Bank, One Federal Street, Boston,
Massachusetts 02211, attention of the Corporate Trust Department.
3.05 ENFORCEABILITY. In the event any provision of this Trust Agreement will
be held invalid or unenforceable for any reason, such invalidity or
unenforceability will not affect the remaining parts of this Trust Agreement.
3.06 COUNTERPARTS. This Trust Agreement may be executed in any number of
counterparts, each of which will be deemed an original, and the counterparts
will constitute but one and the same instrument, which will be sufficiently
evidenced by any one counterpart.
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3.07 SUCCESSORS AND ASSIGNS. This Trust Agreement shall be binding upon the
successors and assigns of the parties hereto. Except as stated herein, this
Trust Agreement is not subject to any conditions or qualifications.
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ARTICLE IV
EXECUTION
In witness whereof, the parties hereto have executed this Trust
Agreement on the date indicated above.
GRANTOR
Integrity Life Insurance Company
By: /s/ John R. Lindholm
-----------------------------------------
John R. Lindholm
Title: President
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BENEFICIARY
General American Life Insurance Company
By: /s/ Leonard M. Rubenstein
-----------------------------------------
Leonard M. Rubenstein
Title: Executive Vice President-Investments
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TRUSTEE
-------
Fleet National Bank
By: /s/ Susan Freedman
-----------------------------------------
Susan Freedman
Title: Vice President
--------------------------------------
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SCHEDULE A
Authorized Investments:
(a) The average effective duration of the portfolio in the Trust cannot
exceed two years.
(b) The average credit quality of the portfolio in the Trust cannot be less
than A.
(c) The portfolio in the Trust cannot contain any investments in real
estate, commercial mortgage loans, common stocks, NAIC "6" rated
securities, leveraged futures, or leveraged derivatives.
(d) Below investment grade securities, those defined by a NAIC rating of 3,
4 or 5 cannot exceed 10% of the portfolio.
(e) Options (caps, swaps, floors, etc.) may be used, but the purchase cost
of the options cannot exceed 5% of the portfolio.
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SCHEDULE B
Mandatory Trust Asset Levels:
(a) Grantor will maintain the book value of assets held in the Trust Account
plus accrued interest thereon at a minimum of 100% of the amount of the
Coinsurance Reserve. Coinsurance Reserve shall have the same meaning
given to it in the Reinsurance Agreement.
(b) Grantor will maintain the market value of assets held in the Trust
Account plus accrued interest thereon at a minimum of 97% of the
Coinsurance reserve.
