INTEGRITY LIFE INSURANCE COMPANY
515 WEST MARKET STREET
LOUISVILLE, KENTUCKY 40202
Swap Transaction
April 24,1998
312 Certificate Company
515 West Market Street, 8th Floor
Louisville. Kentucky 40202
Attn: Robert L. Maddox
Tel: (502) 582-7903
Re: SWAP TRANSACTION
Dear Sir or Madam:
The purpose of this Confirmation is to set forth the terms and
conditions of the Swap Transaction entered into between you and us on the Trade
Date specified below (the "Swap Transaction"). This Confirmation constitutes a
"Confirmation" as referred to in the Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA
Definitions (as published by the International Swaps and Derivatives
Association, Inc.) are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.
1. This Confirmation supplements, forms part of, and is subject to, the ISDA
Master Agreement dated as of April 24, 1998, as amended and supplemented
from time to time (the "Agreement") between Integrity Life Insurance
Company ("Part A") and 312 Certificate Company ("Part B"). All
provisions contained in the Agreement govern this Confirmation except as
expressly modified below.
2. The terms of the particular Swap Transaction to which this Confirmation
relates are as follows:
Notional Amount: the average daily "Invested Amount" under and as
defined in the Face Amount Certificate Agreement.
Trade Date: April 24, 1998
Effective Date: April 24, 1998
Termination Date: April 22, 1999, PROVIDED, that the Termination Date
shall be automatically extended for a period of 364
days on each Termination Date then in effect unless
Party B shall otherwise request that such extension
not occur, which request shall only be effective if
consented to in writing by the Agent.
Calculation Period: Each "Settlement Period" under and as defined in the
Face Amount Certificate Agreement.
Floating Amounts
A. Floating Rate Payer: Part A
Party A Payment Dates: Each "Settlement Date" under and as defined
in the Face Amount Certificate Agreement or
following notice from Party B or the Agent
that an "Amortization Event" or the first
anniversary of the commencement of the
"Amortization Period" (in each case as such
terms are defined in the Face Amount
Certificate Agreement) has occurred, then
upon the written request of the Agent, each
Business Day thereafter.
Party A Floating Amount: The amount equal to the greater of (a) the
product of (i) the average daily outstanding
"Invested Amount" under and as defined in
the Face Amount Certificate Agreement during
the most recently ended Settlement Period or
on such Business Day, as applicable, and
(ii) the sum of (x) the applicable One-Month
LIBOR under and as determined in accordance
with the terms of the Face Amount
Certificate Agreement for the Settlement
Period most recently ended or on each day
since the last Party A Payment Date (under
this clause A.), as applicable and (y) 0.25%
per annum, or (b) the aggregate amount
payable to or for the account of Party B,
the Portfolio Manager, the Custodian or the
Agent, for its benefit or the benefit of the
Certificateholders, for application to any
obligations of Party B described in clauses
(1) through (4), (6) and (8) of subsection
5(b) of the Investment Management
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Agreement on such Settlement Date or
Business Day, as applicable.
Provided however, that the Party A Floating
Payment Dates and the Party A Floating
Amount described above are subject to
Section 3 below.
B. Floating Rate Payer: Party A
Party A Payment Dates: The last Business Day of each calendar week.
Party A Floating Amount: (a) If the ratio, expressed as a percentage
and determined as of the last Business Day
of the preceding calendar week (such
percentage, the "Value Percentage"), of (i)
the sum of the aggregate Fair Market Value
of the Portfolio on such date plus any free
cash balances on deposit in the Custodial
Account on such date, to (ii) the
outstanding "Invested Amount" under and as
defined in the Face Amount Certificate
Agreement on such date, is less than 97.0%,
then an amount equal to the "Shortfall
Amount" under and as defined in the
Investment Management Agreement, or (b) if
the Value Percentage is greater than or
equal to 97.0%, then zero.
Provided, however, that the Party A Floating
Payment Dates and the Party A Floating
Amount described above are subject to
Section 3 below.
C. Floating, Rate Payer: Party B
Party B Payment Dates: Each "Settlement Date" under and as defined
in the Face Amount Certificate Agreement or
following notice from Party B or the Agent
that an "Amortization Event" or the first
anniversary of the commencement of the
"Amortization Period" (in each case as such
terms are defined in the Face Amount
Certificate Agreement) has occurred, then
upon the written request of the Agent, each
Business Day thereafter.
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Party B Floating Amount: The amount equal to the sum of (x) the amount
of Book Income for the Settlement Period
most recently ended or on each day since the
last Party B Payment Date. MINUS (y) the
aggregate amount payable to or for the
account of the Portfolio Manager for
application to any obligations of Party B
described in clause (9) of subsection 5(b)
of the Investment Management Agreement.
Provided, however, that the Party B Floating
Payment Dates and the Party B Floating
Amount described above are subject to
Section 3 below.
3. If an Early Termination Date occurs the provisions of Section 6(e)(i) and
6(e)(ii) of the Agreement will not apply to this Transaction. In addition
to the foregoing and without prejudice to either party's rights under the
succeeding sentence, neither party hereto shall have the right to terminate
this Agreement pursuant to Section 6(a) or 6(b) of the Agreement,
notwithstanding the fact that an Event of Default or Termination Event may
exist. Upon the occurrence of (i) a "Liquidation Event" of the type
described in clause (viii) of the definition of such term in the Face
Amount Certificate Agreement or (ii) the first anniversary of the
commencement of the "Amortization Period" under and as defined in the Face
Amount Certificate Agreement, then upon the Agent or Party B's delivery of
notice to Party A, the parties hereto shall make the following payments:
Party A Final Settlement
Payment Amount: The amount equal to the greater of (a) the
product of (i) the average daily outstanding
"Invested Amount" under and as defined in
the Face Amount Certificate Agreement during
the period from the later of the last Party
A Payment Date referred to in clause "A"
above or the last day of the most recently
ended Settlement Period (such period, the
"Final Settlement Period") and (ii) the sum
of (x) the applicable One-Month LIBOR under
and as determined in accordance with the
terms of the Face Amount Certificate
Agreement for the Final Settlement Period
and (y) 0.25% per annum, and (b) the
aggregate amount payable to or for the
account of Party B, the Portfolio Manager,
the Custodian or the Agent, for its benefit
or the benefit of the Certificateholders,
for application to any obligations of Party
B described in clauses (1) through (6) and
(8) of subsection 5(b) of the Investment
Management Agreement on such date.
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Party B Final Settlement
Payment Amount: An amount equal to the excess of (x) the sum
of the aggregate Fair Market Value of the
Portfolio on such date plus any free cash
balances on deposit in the Custodial Account
on such date, MINUS (y) the aggregate amount
payable to or for the account of the
Portfolio Manager for application to any
obligations of Party B described in clause
(9) of subsection 5(b) of the Investment
Management Agreement on such date.
Upon payment of the Party A Final Settlement Payment Amount in full, Party A
shall be discharged from all further and future obligations (except for
obligations which were due on or prior to the happening of the above event)
hereunder without affecting the obligations of Party B hereunder
4. Condition Precedent
Section 2(a)(iii) of the Agreement shall apply in respect of the obligations of
Party B but shall not apply in respect of the obligations of the Party A.
Instead, the following shall apply in respect of the obligations of Party A:
"Party A shall pay all Party A Floating Amounts and the Party A Final Settlement
Payment Amount, any unpaid amounts payable by it and any other amounts due in
respect of this Transaction to Party B promptly when due and, notwithstanding
the fact that at any time Party B fails to make any payment due to Party A in
respect of this Transaction."
5. Netting
Notwithstanding anything to the contrary set forth in the Agreement (including
Section 2(c) thereof). Party A shall not be permitted to net or offset the
amount of the Party B Final Settlement Amount against its obligations hereunder
in order to reduce the amount of the Party A Final Settlement Amount Payable on
any date.
6. Account Details
Payments to Party A:
Account for payments in USD: The Chase Manhattan Bank
ABA#: 021-000-021
A/C#: 037-2-406926
A/C Name: Integrity Life Concentration
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Payments to Part B:
Account for payments in USD: Bank One, Kentucky, N.A.
ABA#: 044-000-037
A/C#: 98-04-01787
A/C Name: Bank One Custody
For further credit to:
A/C#: 3402824200
A/C Name: 312 Certificate
7. Additional Definitions
"BOOK INCOME" means, with respect to any applicable period of time,
the sum of the following amounts (i) interest income received in cash during
such period with respect to the Portfolio, MINUS (ii) accrued interest on any
Security or Short-Term Investment paid in connection with the purchase of such
Security or Short-Term Investment by the Issuer during such period, PLUS (iii)
accrued income on the Portfolio as of the last day of such period, MINUS (iv)
accrued income on the Portfolio as of the day immediately preceding the first
day of such period, PLUS (v) correction of any discount on the Portfolio during
such period, MINUS (vi) amortization of any premium amounts accrued during such
period.
"BUSINESS DAY" means any day on which banks are not authorized or
required to close in New York, New York or Chicago, Illinois and The Depository
Trust Company of New York is open for business, and, if the applicable Business
Day relates to any computation or payment to be made with respect to the
One-Month LIBOR, any day on which dealings in U.S. Dollar deposits are carried
on in the London interbank market.
"CUSTODIAL ACCOUNT" shall have the meaning given to such term in the
Face Amount Certificate Agreement.
"FAIR MARKET VALUE" means, with respect to any Security or Short-Term
Investment, at any date, (i) if quotations are then available, the price of such
Security on the preceding Business Day, as appearing in, and calculated based
on, any regularly published reporting or quotation service price, or (ii) if
quotations are not then available, the market value of such Security or
Short-Term Investment, as determined by the Portfolio Manager, based on its
standard valuation procedures acceptable to the Agent in its reasonable
discretion but in the case of both (i) and (ii) excluding the portion of such
price or value attributable to the accrued interest or discount with respect to
such Security or Short-Term Investment as of such date.
"ONE-MONTH LIBOR" shall have the meaning given to such term in the
Face Amount Certificate.
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"PORTFOLIO" means the Securities and Short-Term Investments of the
Issuer held from time to time in the Custodial Account.
"SHORT-TERM INVESTMENTS" shall have the meaning given to such term
in the Investment Management Agreement.
"SECURITY" means indebtedness constituting a debenture, bond, note or
other instrument or evidence of indebtedness issued by an obligor or obligors,
other than a line of credit or a loan.
8. Calculations
All calculations of applicable amounts hereunder shall, to the extent
applicable, be calculated based on actual days over a year consisting of 360
days.
6A
Please confirm that the foregoing correctly sets forth the terms of
our agreement by executing a copy of this Confirmation and returning it to us.
Yours sincerely,
INTEGRITY LIFE INSURANCE COMPANY
By /s/ ILLEGIBLE
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Name: ILLEGIBLE
Title: ILLEGIBLE
Confirmed as of the date first written:
312 CERTIFICATE COMPANY
By: /s/ William D. Morris
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Name: William D. Morris
Title: CEO