TERMINATION MASTER AGREEMENT
THIS TERMINATION MASTER AGREEMENT effective as of July 26, 1999
(this "Agreement") is made by and among ARM Financial Group, Inc., a Delaware
corporation ("ARM"), Integrity Life Insurance Company, a stock insurance
company domiciled in Ohio and a wholly-owned indirect subsidiary of ARM
("Integrity"), and General American Life Insurance Company, a stock
insurance company domiciled in Missouri ("General American").
WHEREAS, ARM and General American entered into an Engagement
Agreement dated as of March 12, 1993, as amended (the "Engagement
Agreement"), relating to certain guaranteed investment contracts and funding
agreements (the "GICs") to be issued by General American; and
WHEREAS, effective June 1, 1999, the Engagement Agreement was
terminated by General American, however, certain rights and obligations of
the Parties under the Engagement Agreement continue to remain following such
termination; and
WHEREAS, Integrity and General American entered into a Reinsurance
Agreement dated as of March 28, 1996 (the "Reinsurance Agreement") concerning
the quota-share reinsurance by Integrity of certain of the GICs issued by
General American pursuant to the Engagement Agreement; and
WHEREAS, by letter dated May 24, 1999 Integrity gave notice of
termination of the Reinsurance Agreement as to new business; and
WHEREAS, the parties hereto (the "Parties") wish to terminate the
Reinsurance Agreement on a cut-off basis and all ongoing rights and
obligations under the Engagement Agreement effective as of July 26, 1999 (the
"Termination Date");
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and upon the terms and conditions set forth herein,
the Parties agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the respective meanings set forth
below throughout the Agreement:
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"AFFILIATE" means, with respect to any Person, at the time in
question, any other Person controlling, controlled by or under common control
with such Person.
"ANCILLARY AGREEMENT" means the Commutation Agreement, the
Termination Agreement and the Software License Agreement.
"AGREEMENT" means this Termination Master Agreement.
"ARM" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"BOOKS AND RECORDS" means the originals or copies of all contract
information, contract forms, disclosure and other documents and filings
required under applicable laws, client communications, prospecting records,
sales records, underwriting records, securities records and financial records
in the possession or control of ARM or Integrity and relating to the GICs,
including, without limitation, any database, magnetic or optical media (to
the extent not subject to licensing restrictions) and any other form of
recorded, computer generated or stored information or process. In addition,
Books and Records includes any information pertaining to any of the
foregoing not reduced to hardcopy or electronic form which ARM will make
available to General American in a manner and at a time or times which are
mutually convenient to the parties.
"CLOSING DATE" means a closing date mutually agreeable to the
parties, but in no event later than 30 days after the execution of this
Agreement, and if no formal agreement is recorded it shall be the date of
execution of the Termination Agreement.
"COMMUTATION AGREEMENT" means the Commutation Agreement to be
entered into by Integrity and General American in substantially the form as
Exhibit A attached hereto.
"EFFECTIVE TIME" means the close of business on July 26, 1999.
"ENGAGEMENT AGREEMENT" shall have the meaning set forth in the
first recital of this Agreement.
"GENERAL AMERICAN" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"GICs" shall have the meaning set forth in the first recital of
this Agreement.
"INTEGRITY" shall have the meaning set forth in the introductory
paragraph of this Agreement.
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"SOFTWARE LICENSE AGREEMENT" means the mutually acceptable
Software License Agreement to be entered into by ARM and General American.
"PARTIES" shall have the meaning set forth in the third recital of
this Agreement.
"PERSON" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, governmental, judicial or regulatory body, business unit,
division or other entity.
"TERMINATION AGREEMENT" means the Termination Agreement to be
entered into by ARM and General American in substantially the form as
Exhibit B attached hereto.
"TERMINATION DATE" shall have the meaning set forth in the fifth
recital of this Agreement.
"TRUST AGREEMENT" means the Trust Agreement entered into among
Integrity, General American and Fleet National Bank, predecessor in interest
to State Street Bank & Trust, as Trustee, dated as of April 1, 1996, pursuant
to the Reinsurance Agreement.
"TRUST FUND" means the trust fund established pursuant to the Trust
Agreement.
"TRUSTEE" shall have the meaning set forth in the definition of
Trust Agreement.
ARTICLE II
AGREEMENTS OF THE PARTIES
The Parties hereby agree to execute and implement the following
agreements and to take the additional steps set forth below in connection
with the termination of the Reinsurance Agreement and all rights and
obligations under the Engagement Agreement.
Section 2.01. COMMUTATION AGREEMENT. On or prior to the Closing
Date, Integrity and General American will give joint, irrevocable
instructions to the Trustee to transfer to General American ownership and
possession of each asset in the Trust Fund, free and clear of any claims of
Integrity, the Trustee or any other Person. On the Closing Date, Integrity
and General American will execute the Commutation Agreement.
Section 2.02. TERMINATION AGREEMENT. On the Closing Date, ARM
and General American will execute the Termination Agreement.
Section 2.03. SOFTWARE LICENSE AGREEMENT. Within 30 days of the
Closing Date, ARM and General American will execute the Software License
Agreement.
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Section 2.04. BOOKS AND RECORDS. Within 10 days of the Closing
Date, ARM and Integrity will transfer the Books and Records to General
American.
Section 2.05 SUBSEQUENT PAYMENT. If a binding agreement
pertaining to the sale of control of ARM to a third party is executed at any
time during the two calendar years commencing after the Closing Date, and is
subsequently closed, ARM shall pay General American the sum of five million
dollars ($5,000,000) concurrent with the closing of the sale.
ARTICLE III
TRUST FUND
Section 3.01 CONDUCT OF BUSINESS. From the date hereof until
the assets comprising the Trust Fund are transferred to General American, ARM
and Integrity agree that, except as set forth below, no assets in the Trust
Fund shall be sold or otherwise transferred from the Trust Fund, that all
interest and other income of the Trust Fund received during such period shall
be maintained in the Trust Fund and that any cash in the Trust Fund shall be
invested in the ordinary course. The parties agree, however, that sales or
other transactions involving assets of the Trust Fund, after the Effective
Time but prior to their transfer to General American, may be effected with
the written consent of both ARM and General American.
Section 3.02 TRUST FUND ASSETS. The Trust will include the
following assets:
a. As of the Effective Time, those assets included in the Trust Fund as of
June 30, 1999, including hedging vehicles and cash and cash
equivalents, as modified to reflect all trust activity including but
not limited to purchases and sales, customer deposits and withdrawals,
and interest earned and interest paid, during the period after June 30,
1999 through the Effective Time. It is agreed that Integrity will
remove from the Trust Fund securities with CUSIP numbers 21075WFM2 and
21075WEW1 and replace them with a security with CUSIP number 52518RAQ9
current par of $10,140,200.
b. As of the Closing Date, additional cash in the amount of $69,150,000.
From the date hereof until the Closing Date, General American shall
have full access to the Trustee and all trust records in the possession of
ARM or Integrity for the purpose of verifying that each such asset is held in
the Trust Fund as of the Effective Time.
Section 3.03 TRUE UP OF ASSETS. In the event that any
securities are not transferable from Integrity, or for any other reason
Integrity is not able to deliver to General American good and marketable
title within a reasonable period of time, then Integrity shall add to the
Trust Fund such additional securities, cash, or other assets of equivalent
market value as of the Effective Time, reasonably acceptable to General
American. Notwithstanding the foregoing, any swap that is determined not to
be transferable within a reasonable period of time shall be
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terminated at General American's discretion as to execution, and General
American shall receive all proceeds and bear all costs as fully as if General
American had owned the position itself. General American acknowledges that:
(i) neither ARM nor Integrity are making any representations or warranties
with respect to the valuation of the assets in the Trust Fund; (ii) it has
had sufficient opportunity to review and value the assets in the Trust Fund;
and (iii) it, or its affiliates, have sufficient expertise and knowledge to
review and value the assets in the Trust Fund in a reasonable manner.
Section 3.04 TRUE UP OF LIABILITIES. As of the Effective Time,
the total amount of the customer account values subject to the Reinsurance
Agreement, including interest accrued is $3,428,700,000. In the event that
the said total amount is determined to be incorrect in any respect, any cash
settlement must be mutually agreeable to both parties.
ARTICLE IV
DUTY OF COOPERATION
Each Party shall cooperate fully with the others in all reasonable
respects in order to accomplish the objectives of this Agreement.
ARTICLE V
Article V reserved.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ARM
ARM hereby represents and warrants to General American as follows:
Section 6.01 ORGANIZATION AND STANDING. ARM is duly
incorporated, validly existing, and in good standing under the laws of the
State of Delaware.
Section 6.02 CORPORATE AUTHORITY. The execution of this
Agreement and the consummation of the transactions contemplated hereby by ARM
have been approved by all necessary corporate action by ARM.
Section 6.03 VALIDITY. This Agreement is, and upon due
execution and delivery, each of the Termination Agreement and the License
Agreement shall be, a valid and binding obligation of ARM enforceable against
ARM in accordance with the terms hereof and thereof.
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Section 6.04 ACTIONS AND PROCEEDINGS. There are no pending
actions, suits or proceedings by or with any court, governmental agency,
regulatory body or arbitration tribunal before which ARM is a party which
would prevent the consummation of this Agreement. ARM does not have
knowledge of any state of facts or contemplated events that would give rise
to any such claim, action, suit, proceeding or investigation.
Section 6.05 NO VIOLATION. Except as set forth in Schedule 6.05
hereto, the execution, delivery and performance by ARM of this Agreement and
the consummation of the transactions contemplated hereby will not violate,
conflict with or result in the breach of any terms of, or constitute (or with
notice or lapse of time or both, constitute) a default under, any contract or
other agreement to which ARM is a party or by or to which any of its assets
may be bound.
Section 6.06 CONSENTS AND APPROVALS. Except as set forth in
Schedule 6.06, the execution, delivery and performance by ARM of this
Agreement and the consummation of the transactions contemplated hereby in
accordance with the terms hereof do not require ARM to obtain any consent,
approval or action of, make any filing with, or give any notice to, any
Person.
Section 6.07 REMOVAL OF ASSETS FROM THE TRUST FUND. From June
30, 1999 through the Closing Date, no assets have been transferred from the
Trust Fund to Integrity or its Affiliates which, in the aggregate, have
resulted in any difference in the value of the Trust Fund on the Closing Date
compared to June 30, 1999 provided that, to the extent of any such
difference, as to the sole and exclusive remedy available under law,
Integrity will transfer cash in such amount as appropriate.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF INTEGRITY
Integrity hereby represents and warrants to General American as
follows:
Section 7.01 ORGANIZATION AND STANDING. Integrity is an
Ohio-domiciled life insurance company duly incorporated, validly existing,
and in good standing under the corporate and insurance laws of the State of
Ohio.
Section 7.02 CORPORATE AUTHORITY. The execution of this
Agreement and the consummation of the transactions contemplated hereby by
Integrity have been approved by all necessary corporate action by Integrity.
Section 7.03 VALIDITY. This Agreement is, and upon due
execution and delivery of the Commutation Agreement shall be, a valid and
binding obligation of Integrity enforceable against Integrity in accordance
with the terms hereof and thereof.
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Section 7.04 ACTIONS AND PROCEEDINGS. There are no pending
actions, suits or proceedings by or with any court, governmental agency,
regulatory body or arbitration tribunal before which Integrity is a party
which would prevent the consummation of this Agreement. Integrity does not
have knowledge of any state of facts or contemplated events that would give
rise to any such claim, action, suit, proceeding or investigation.
Section 7.05 NO VIOLATION. The execution, delivery and
performance by Integrity of this Agreement and the consummation of the
transactions contemplated hereby will not violate, conflict with or result in
the breach of any terms of, or constitute (or with notice or lapse of time or
both, constitute) a default under, any contract or other agreement to which
Integrity is a party or by or to which any of its assets may be bound.
Section 7.05 CONSENTS AND APPROVALS. The execution, delivery
and performance by Integrity of this Agreement and the consummation of the
transactions contemplated hereby in accordance with the terms hereof do not
require Integrity to obtain any consent, approval or action of, make
any filing with, or give any notice to, any Person.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF GENERAL AMERICAN
General American hereby represents and warrants to each of ARM and
Integrity as follows:
Section 8.01 ORGANIZATION AND STANDING. General American is a
Missouri-domiciled life insurance company duly incorporated, validly existing,
and in good standing under the corporate and insurance laws of the State of
Missouri.
Section 8.02 CORPORATE AUTHORITY. The execution of this Agreement
and the consummation of the transactions contemplated hereby by General
American have been approved by all necessary corporate action by General
American.
Section 8.03 VALIDITY. This Agreement is, and upon due
execution and delivery, each of the Commutation Agreement, the Termination
Agreement and the License Agreement shall be, a valid and binding obligation
of General American enforceable against General American in accordance with
the terms hereof and thereof.
Section 8.04 ACTIONS AND PROCEEDINGS. There are no pending
actions, suits or proceedings by or with any court, governmental agency,
regulatory body or arbitration tribunal before which General American is a
party which would prevent the consummation of this
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Agreement. General American does not have knowledge of any state of facts or
contemplated events that would give rise to any such claim, action, suit,
proceeding or investigation.
Section 8.05 NO VIOLATION. The execution, delivery and
performance by General American of this Agreement and the consummation of the
transactions contemplated hereby will not violate, conflict with or result in
the breach of any terms of, or constitute (or with notice or lapse of time or
both, constitute) a default under, any contract or other agreement to which
General American is a party or by or to which any of its assets may be bound.
Section 8.06 CONSENTS AND APPROVALS. The execution, delivery
and performance by General American of this Agreement and the consummation of
the transactions contemplated hereby in accordance with the terms hereof do
not require General American to obtain any consent, approval or action of,
make any filing with, or give any notice to, any Person.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties of the Parties contained in this
Agreement shall survive the execution and delivery hereof and the
implementation of the terms and conditions of this Agreement.
ARTICLE X
FURTHER AGREEMENTS
Section 10.01 PUBLIC ANNOUNCEMENTS. ARM acknowledges that, since
General American will continue offering the GICs as a significant part of its
business, it is important that all communications to third parties relating
to the GICs, the proposed changes in terms of the GICs and the changes in the
relationship among General American, ARM and Integrity be handled in such a
way as to avoid damaging the relationships with the customers of the GICs or
the business reputation of the Parties. ARM will not issue any press
releases, make any public filings, or make any presentations to any rating
agencies which include references to the transactions contemplated hereby
without consulting with General American and receiving the prior approval of
General American. General American will not unreasonably withhold such
consent as long as ARM takes into account the reasonable requests of General
American relating to the language of the communication. If ARM determines,
on the advice of counsel, that it is required to make a public filing
relating to these matters, it will provide a copy of the proposed filing to
General American as far in advance as possible under the circumstances and
will consult
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with General American and take into account General American's requests for
changes prior to such filing.
Section 10.02 RESTRUCTURING OF PRODUCTS. General American
intends to make certain changes to the terms of the GICs of some of the
customers, on account of the termination of the Reinsurance Agreement and for
other reasons. These changes may include changes to the economic terms of
the GIC. ARM agrees for the period following the execution of this
Agreement until June 30, 2000, ARM will assist General American and cooperate
with General American in effecting such changes and, in particular, in
dealing with customers in explaining and implementing the changes in a manner
that will preserve the goodwill of General American with customers and the
market for GICs. All such discussions and other contacts would be under the
supervision of General American and under such guidelines as General American
may establish. These changes may be made by General American in its
discretion and without the need for any approval by ARM.
Section 10.03 NON-DISPARAGEMENT. Each of the Parties agree that
they will not disparage each other or the contracts sold by each Party.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 NOTICES. Any notice required or permitted
hereunder shall be in writing and shall be delivered personally (by courier
or otherwise), telegraphed, telexed, sent by facsimile transmission or sent
by certified, registered or express mail, postage prepaid. Any such notice
shall be deemed given when so delivered personally, telegraphed, telexed or
sent by facsimile transmission or, if mailed, three days after the date of
deposit in the United States mails, as follows:
(1) If to ARM or Integrity to:
515 W. Market Street
Louisville, KY 40202
Attention: General Counsel
Telecopier No.: (502) 540-2830
(2) If to General American to:
700 Market Street
St. Louis, MO 63101
Attention: Matthew P. McCauley
Telecopier No.: (314) 444-0510
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Any Party may, by notice given in accordance with this Agreement to
the other party, designate another address or person for receipt of notices
hereunder.
Section 11.02 AMENDMENT. This Agreement may not be amended,
modified, changed, discharged or terminated, except by an instrument in
writing signed by an authorized officer of each of the Parties.
Section 11.03 COUNTERPARTS. This Agreement may be executed by
the Parties in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
Section 11.04 NO THIRD PARTY BENEFICIARIES. Except as otherwise
specifically provided for herein, nothing in this Agreement is intended or
shall be construed to give any Person, other than the Parties, their
successors and permitted assigns, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
Section 11.05 ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors,
permitted assigns and legal representatives. Neither this Agreement, nor any
right hereunder, may be assigned by any Party (in whole or in part) without
the prior written consent of the other Parties.
Section 11.06 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Missouri, without
giving effect to the principles of conflicts of laws thereof.
Section 11.07 ENTIRE AGREEMENT. This Agreement (including the
Ancillary Agreements) constitutes the entire agreement among the Parties
relating to the matters set forth herein and there are no other agreements
between the Parties hereto, either existing or contemplated, written or oral,
with respect thereto.
Section 11.08. WAIVERS AND AMENDMENTS; NON-CONTRACTUAL REMEDIES;
PRESERVATION OF REMEDIES. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by each of the Parties or, in the case of a waiver,
by the Party waiving compliance. No delay on the part of any Party on
exercising any right, power or privilege hereunder shall operate as a waiver
thereof. Nor shall any waiver on the part of any Party of any right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any Party may
otherwise have at law or in equity.
Section 11.09 EXHIBITS AND SCHEDULES. The Exhibits and the
Schedules to this Agreement are a part of this Agreement as if fully set
forth herein. All references herein to
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Articles, Sections, subsections, paragraphs, subparagraphs, clauses, Exhibits
and Schedules shall be deemed references to such parts of this Agreement,
unless the context shall otherwise require.
Section 11.10 HEADINGS. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
Section 11.11 SEVERABILITY. If any provisions hereof shall be
held invalid or unenforceable by any court of competent jurisdiction or as a
result of future legislative action, such holding or action shall be strictly
construed and shall not affect the validity or effect of any other provision
hereof; PROVIDED, HOWEVER, that the Parties shall use reasonable efforts,
including, but not limited to, the amendment of this Agreement, to ensure
that this Agreement shall reflect as closely as practicable the intent of the
Parties.
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IN WITNESS WHEREOF, ARM, Integrity, and General American have
executed this Agreement as of the date first above written.
ARM FINANCIAL GROUP, INC.
By /s/ John R. Lindholm
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Name: John R. Lindholm
Title: President, Retail Business Division
INTEGRITY LIFE INSURANCE COMPANY
By /s/ John R. Lindholm
-------------------------------------------
Name: John R. Lindholm
Title: President
GENERAL AMERICAN LIFE INSURANCE COMPANY
By /s/ David L. Herzog
-------------------------------------------
Name: David L. Herzog
Title: Vice President
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SCHEDULE 6.05
Credit agreement dated as of June 24, 1997, among ARM, the financial
institutions from time to time party thereto, and the Chase Manhattan Bank,
as agent for the Lenders, as amended.
SCHEDULE 6.06
Consent of the lenders under the Credit Agreement described in Schedule 6.05.
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