CUSTODY AGREEMENT
This is a CUSTODY AGREEMENT (this "Agreement") made and effective as of
November 25, 1997 by and among FIRST TRUST NATIONAL ASSOCIATION, a national
banking association organized under the laws of the United States ("Custodian"),
BRAVO Trust Series 1997-1, a trust organized as a business trust under the laws
of the State of Delaware (the "Trust"), INTEGRITY LIFE INSURANCE COMPANY, a life
insurance company organized under the laws of the State of Ohio, as an entity
and for the benefit of the Account referred to below ("Customer" and
"Integrity"), and BAYERISCHE LANDESBANK GIROZENTRALE, acting through its New
York Branch and in its capacity as Trust's Agent for the Trust (the "Trust's
Agent"). This Agreement is for the benefit of the Trust and will be administered
accordingly.
In consideration of the premises, undertaking and covenants herein, the
parties agree as follows:
1. APPOINTMENT AND ACCEPTANCE; DEFINITIONS; SECTION REFERENCES.
1.1. Appointment and Acceptance. Customer and the Trust hereby appoint Custodian
as their agent to provide custody and other services in connection with
securities, cash and other property delivered from time to time to Custodian
hereunder by, or at the direction of, Customer, and income, distributions and
payments received by Custodian with respect thereto (collectively "Assets");
Custodian hereby agrees to act in such capacity, and perform such services, and
hold the Assets in a custody account established in the name of Customer for the
benefit of the Trust (the "Account"), upon the terms and conditions set forth
below. The Assets to be held in the Account will be deposited in connection with
that certain Integrity Life Insurance Company Separate Account Group Annuity
Contract (Contract #IFA00141ST) issued to the Trust, which Group Annuity
Contract has an initial maturity date of October 15, 2002 (the "Funding
Agreement"). The Account shall be divided into two segregated sub-accounts,
consisting of (a) the Main Custodial Account and (b) the Supporting Custodial
Account (both as defined below). For purposes of this Agreement, all references
contained herein to actions, instructions and responsibilities (other than the
obligations set forth in Sections 12 and 14) of Customer shall include, apply to
and be binding upon Customer's agents, including any investment manager or
advisor, appointed and authorized by Customer to direct Custodian or otherwise
take actions on behalf of Customer in connection with Custodian's services and
responsibilities hereunder. Customer shall provide written notice to Custodian
of the identity of all such appointed agents and the scope of their authority to
act hereunder. Customer shall be
responsible for providing to each such agent a copy of this Agreement and all
written policies and procedures of Custodian governing its performance of
services hereunder that Customer shall receive from time to time.
Notwithstanding the foregoing, Customer shall not terminate any investment
sub-advisor hired by it to help manage the Assets without providing the Trust
and the Rating Agencies with at least 180 days' prior written notice of such
intended termination.
1.2. Definitions. "BUSINESS DAY" means any calendar day that is not (a) a
Saturday, (b) a Sunday, (c) a federally-declared national bank holiday, (d) a
federally-declared national holiday, or (e) an official holiday declared by and
recognized in either The Commonwealth of Kentucky or the State of Minnesota.
"COMBINED ASSETS" means the Assets in the Main Custodial Account
and the Assets in the Supporting Custodial Account.
"DEPOSIT FUND" means the liability account established by Customer on its books
and records in accordance with Section 2 of the Funding Agreement for the
purpose of providing payments pursuant to Sections 4 and 6 thereof.
"EARLY CERTIFICATE MATURITY EVENT" has the meaning set forth in
Section 2.7(a)(ii).
"EARLY FUNDING AGREEMENT TERMINATION EVENT" has the meaning set
forth in Section 2.7(a)(iii).
"ELIGIBLE INVESTMENTS" means one or more of the following:
(a) obligations of, or guaranteed as to both full and timely payment of
principal and interest by, the United States or any agency or instrumentality
thereof when such obligations are backed by the full faith and credit of the
United States; PROVIDED that such obligations shall not have the "r" symbol
attached to such rating by Standard & Poor's;
(b) federal funds, certificates of deposit, time deposits and bankers'
acceptances, each of which shall not have an original maturity of more than 90
days, of any depository institution or trust company incorporated under the laws
of the United States or any state; PROVIDED that the short-term obligations of
such depository institution or trust company shall be (i) rated at least
A-1+/P-1 by Standard & Poor's and Moody's, respectively (and shall not have the
"r" symbol attached to such rating by Standard & Poor's), and (ii) if Fitch is
a Rating Agency hereunder, rated at least F-l (for investments having an
original maturity of 30 days or less) or F-l+ (for investments having an
original maturity of more than 30 days) by Fitch;
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(c) commercial paper (having original maturities of not more than 180 days)
of any corporation incorporated under the laws of the United States or any state
thereof; PROVIDED that such commercial paper shall be (i) rated at least
A-1+/P-1 by Standard & Poor's and Moody's, respectively (and shall not have the
"r" symbol attached to such rating by Standard & Poor's), and (ii) if Fitch is a
Rating Agency hereunder, rated at least F-l (for investments having an original
maturity of 30 days or less) or F-l+ (for investments having an original
maturity of more than 30 days) by Fitch; and
(d) money market funds rated at least "AAA"/"Aaa" by Standard & Poor's and
Moody's, respectively;
PROVIDED, HOWEVER, that no instrument shall be an Eligible Investment if such
instrument (i) is issued by a real estate investment trust, (ii) evidences a
right to receive only interest or principal payments with respect to the
obligations underlying such instrument, (iii) is a collateralized mortgage
obligation or a similar derivative security which does not have a fixed amount
of principal or which is not outstanding for a fixed term, (iv) does not bear
interest at a fixed rate or at a floating rate based on LIBOR, the federal funds
rate, a prime or base rate, a treasury xxxx rate, a commercial paper rate or,
with prior notice to the Rating Agencies, any other rate or index or (v) has a
maturity date after the next Scheduled Income Payment Date or the Principal
Payment Date, as such terms are defined in the Trust Agreement; and PROVIDED
FURTHER, HOWEVER, that no overnight instrument shall be an Eligible Investment
unless it is an investment in overnight federal funds.
"FITCH" means Fitch Investors Service, L.P.
"FORCE MAJEURE EVENT" means any cause or condition beyond the control of a party
to this Agreement which wholly or partially prevents the performance of such
party's obligations hereunder, including a general strike, a war (declared or
not), a revolution or a natural disaster such as a fire, storm, flood or
earthquake.
"FUNDING AGREEMENT" has the meaning set forth in Section 1.1.
"INVESTMENT GUIDELINES" means the guidelines agreed upon by Integrity and the
Liquidity Provider (subject to any then-applicable Rating Agency parameters
necessary to maintain with respect to the Senior Securities the highest ratings
then granted to short-term securities by such Agency) which govern the asset
classes and amounts in which the Assets supporting the Deposit Fund and any
accumulations thereon may be invested, which guidelines (and all amendments
thereto) shall be attached hereto as Exhibit A and are hereby incorporated
herein by reference.
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"LIQUIDITY AGREEMENT" means the Standby Trust Certificate Purchase Agreement
dated as of the date hereof among the Trust, the Liquidity Provider, and
Integrity.
"LIQUIDITY PROVIDER" means Bayerische Landesbank Girozentrale, New York Branch
and any subsequent providers of liquidity to the Senior Securities program.
"MAIN CUSTODIAL ACCOUNT" means that certain segregated custodial sub-account to
the Account maintained with Custodian pursuant to the terms of this Agreement
which, in combination with the Supporting Custodial Account, contains the assets
supporting the Deposit Fund.
"MARGIN DEFICIT" has the meaning set forth in Section
2.7(a)(ii)(B).
"MARKET AGENT" means the Market Agent under the Market Agent Agreement between
the Trust and Bayerische Landesbank Girozentrale, New York Branch.
"MOODY'S" means Xxxxx'x Investors Service, Inc.
"PRIME-1 RATED BANK" means a bank the short-term debt of which is given the
highest ratings then granted to short-term securities by the Rating Agencies.
"RATING AGENCIES" means Standard & Poors and Moody's.
"REMARKETING AGENT" means Xxxxxx Brothers Inc. or any other entity
or entities chosen from time to time by the Liquidity Provider as
provided in Section 8.01 of the Funding Agreement to remarket the
Senior Securities subsequent to their original placement.
"SENIOR SECURITIES" means the Class A Trust Certificates issued by
the Trust (as defined below).
"SEPARATE ACCOUNT" means Separate Account IV established by Integrity pursuant
to the provisions of Section 3907.15 of the Ohio Revised Code as to which
Integrity will allocate the assets which, in combination with the assets
allocated by Integrity to the Supporting Separate Account, support Integrity's
payment obligations under the Funding Agreement.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services.
"SUPPORTING CUSTODIAL ACCOUNT" means that certain segregated custodial
sub-account maintained with Custodian pursuant to the terms of this Agreement
which holds any amounts contributed to such account in support of Integrity's
payment obligations under the Funding Agreement which are additional to any
amounts held in the Main Custodial Account.
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"SUPPORTING SEPARATE ACCOUNT" means Separate Account V established by Integrity
pursuant to the provisions of Section 3907.15 of the Ohio Revised Code to
support Integrity's payment obligations under the Funding Agreement, which
separate account shall be additional to, and established in support of, the
Separate Account.
"TRUST" means the BRAVO Trust Series 1997-1.
"TRUST AGREEMENT" means the Declaration of Trust and Trust Agreement by and
among the Trustee and the Owners of the Trust's Certificates, dated as of
November 25, 1997.
"TRUST CERTIFICATE PROCEEDS" means the $500 million received by Customer from
the Trust to purchase the Funding Agreement, which money constitutes the
proceeds received by the Trust from the sale of the Senior Securities and the
Trust's Class B Trust Certificates.
"TRUSTEE" means The Bank of New York, as Trustee of the BRAVO Trust
Series 1997-1.
"UNSUCCESSFUL REMARKETING" means any remarketing of the Senior Securities as to
which the Remarketing Agent is unable to remarket to third parties (that is,
parties other than the Liquidity Provider) at least 90% of such securities.
"WEEKLY VALUATION" means the valuation of the assets held in the Main Custodial
Account and the Supporting Custodial Account which is to be performed by
Custodian pursuant to this Agreement on a weekly basis and to be provided to
Integrity, the Trust, the Rating Agencies and the Liquidity Provider on the last
Business Day of each week during the term of this Agreement.
Capitalized terms not defined above shall have the meanings ascribed thereto in
the Trust Agreement.
1.3. Section References. Except as otherwise indicated herein, all
section references herein refer to sections hereof.
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2. ASSET DELIVERY, TRANSFER, CUSTODY AND SAFEKEEPING.
2.1. Except as provided otherwise herein, Customer will from time to time
deliver (or cause to be delivered) Assets to Custodian, which Assets Custodian
shall receive and accept for the Account upon appropriate instructions from the
Customer. All transactions involving Assets shall be recorded in the Account.
The Initial Contribution allocated to the Separate Account pursuant to Section
5.01 of the Funding Agreement and any Assets acquired with the Initial
Contribution or any proceeds therefrom shall be deposited in the Main Custodial
Account and shall be held separately from, and not commingled with, Assets in
the Supporting Custodial Account. The amount allocated to the Supporting
Separate Account pursuant to Section 5.01 of the Funding Agreement and any
Assets acquired with this amount, any proceeds therefrom or any transfers
thereto pursuant to Section 5.02 of the Funding Agreement shall be deposited in
the Supporting Custodial Account and shall be held separately from, and not
commingled with, Assets in the Main Custodial Account. Assets may not be
invested in securities issued by Customer or any affiliate of Customer. Assets
acquired from Customer or any affiliate of Customer shall be subject to Section
4.05 of the Funding Agreement. As a condition to any transfer to the Supporting
Custodial Account to be made pursuant to Section 5.02 of the Funding Agreement,
Customer shall provide to Custodian a transfer certificate complying with the
requirements of Section 4.05 of the Funding Agreement.
2.2. Upon receipt of appropriate instructions (as described in Section 11),
Custodian shall release Assets to Customer, Customer's Depository (as that term
is defined in Section 3.3) account or accounts, the Trust, or otherwise deliver
Assets to such location or third party, as such instructions may indicate,
provided that, in connection therewith, it is the sole responsibility of
Customer or the Trust, as the case may be, to provide any transfer documentation
as may be required by Customer's or Trust's (as the case may be) Depository or
third party recipient. Anything in the preceding sentence to the contrary
notwithstanding, under no circumstances shall Custodian release, assign,
hypothecate, pledge or otherwise dispose of any Assets, except as provided in
Sections 2.7, 2.8, and 2.9.
2.3. Custodian shall furnish Customer, the Liquidity Provider and the Rating
Agencies, as part of the services for which Custodian charges its basic fee
hereunder, with monthly Account statements reflecting all Asset transactions in
the Account during the reporting month and month-end Asset holdings.
2.4. Custodian shall forward to Customer all information Custodian receives with
respect to any of the Assets concerning redemption rights that are exercisable
at Customer's option, tender or exchange offers, class action lawsuits and other
special matters, shall follow Customer's written instructions with respect
thereto
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as consistent with Custodian's governing policies and procedures and, in the
absence of such instructions, shall take no action. Unless otherwise instructed
in writing by Customer, Custodian shall forward to Customer all proxy material
Custodian receives with respect to securities included among the Assets. Proxies
so forwarded shall be executed by the registered holder of the securities, if
registered in the name of Custodian or its nominee, but without indicating the
manner in which such proxies are to be voted.
2.5. Absent specific investment instructions to the contrary from Customer,
Custodian shall place all uninvested cash and all uninvested checks and
drafts (when collected funds are received) received from, as proceeds of or
with respect to, Assets in the Main Custodial Account or the Supporting
Account in investments described in clause (d) of the definition of "Eligible
Investments". Eligible Investments acquired with funds received from or with
respect to Assets in the Supporting Custodial Account shall be held
separately from, and not commingled with, Eligible Investments acquired with
funds received from or with respect to Assets in the Main Custodial Account.
Such uninvested deposit amounts shall also include, but not by way of
limitation, cash amounts received into the Account or pending distribution
from the Account. Anything in this Agreement to the contrary
notwithstanding, any liquidation of assets in the form of investments
described in such clause (d) shall begin at least one Business Day prior to
the relevant Distribution Date.
2.6. Customer hereby authorizes Custodian's performance of its services and
duties hereunder consistent with the terms and conditions of the Custodian's
duly adopted policies and procedures, as established and modified from time to
time, related to the subject matter hereof, provided that, to the extent that
there is any inconsistency between a provision of this Agreement and a provision
of such policies and provisions, the former provision shall prevail.
2.7. Permitted Transfers. (a) Except as provided otherwise herein,
Custodian shall transfer assets out of the Account only under the
following circumstances:
(i) Subject to the provisions of Section 2.7(b) (i), to the Trust in an
amount equal to the then-existing amount of the Deposit Fund upon the final
maturity of the Funding Agreement, no later than such final maturity;
(ii) In consultation with the Trust's Agent, to the Trust in an amount
equal to the then-existing amount of the Deposit Fund upon the occurrence of any
of the following (each such event, an "Early Certificate Maturity Event"):
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(A) If any material violation of the Investment Guidelines remains
uncured for 14 Business Days following Custodian's determination
that a violation of such Investment Guidelines has occurred
(which determination shall be based on the reports provided
under Section 10.3 (b)) and its written notice to Integrity, the
Trust and the Rating Agencies thereof; or if Integrity fails to
provide on a timely basis any of the reports required by Section
10.3(b);
(B) If the total market value of the Combined Assets (based upon the
then-applicable Weekly Valuation) falls below 102% of the
then-applicable value of the Deposit Fund by more than $1,000,000
as of any Weekly Valuation (a "Margin Deficit") and Integrity
does not transfer sufficient assets from its general account to
the Supporting Custodial Account to cure such shortfall within
one Business Day (I.E., prior to Custodian's close of business on
the next Business Day) after receiving written notification from
Custodian regarding the occurrence of the Margin Deficit,
provided that, if, under any such circumstances and in spite of
Integrity's good-faith efforts, it is unable to transfer any such
assets from its general account to the Supporting Custodial
Account within such one-Business Day period due to a Force
Majeure Event, Integrity's obligation to make such asset
transfer, and any withdrawal rights or transfer obligations which
the Trust and Custodian may have under this Agreement
(collectively, the "Parties' Respective Rights and Duties"),
shall be suspended until the shorter of such time as the Force
Majeure Event ceases to exist or one week has elapsed since the
occurrence of such Force Majeure Event; or if Integrity fails to
provide on a timely basis the reports required by Sections
10.3(b) and 10.4;
(C) If Integrity becomes subject to (1) seizure or receivership by
its domiciliary state insurance department or (2) rehabilitation
or liquidation proceedings or (3) conservatorship
or similar proceedings; or
(D) If Integrity fails to pay any principal or interest owed by it
under the Funding Agreement, by 3:00 P.M. ET on the Business Day
following receipt by Integrity of notice from the Trust of such
failure.
(iii) To the Trust in an amount equal to the then-existing amount of the
Deposit Fund upon the occurrence of any of the
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following (each such event, an "Early Funding Agreement Termination Event"):
(A) If, at any time following the initial issuance of Senior
Securities, the Liquidity Provider has owned, for at least 360
consecutive days, more than $45 million of Senior Securities as
the result of Unsuccessful Remarketings and has given at least 90
days' notice, on or after the 270th such day, to Custodian,
Customer, and the Rating Agencies of Liquidity Provider's desire
to terminate its obligations under the Liquidity Agreement;
(B) If, at any time within 30 days of the initial or any subsequent
maturity date of the Senior Securities, (1) there is not or on
such maturity date there will not be a Liquidity Provider in
place due to (x) the insolvency of the then-existing Liquidity
Provider, or (y) the resignation (including, without limitation,
any failure by the Liquidity Provider to honor its obligations
under the Liquidity Agreement) or termination of the
then-existing Liquidity Provider (other than under the
circumstances contemplated by clause (A) of this Section
2.7(a)(iii)) without the replacement thereof within a reasonable
period of time, but in no event beyond the next Interest Payment
Date (as defined in the Funding Agreement) by a Prime-l- Rated
Bank or (2) the Market Agent has not selected an extended
maturity date on which the principal amount of all outstanding
Senior Securities will be due and payable;
(C) If, following a change of control of Integrity or an assignment
by Integrity of any of its obligations under the Funding
Agreement or an amendment to the Funding Agreement required by
applicable state insurance regulatory authorities, one or both of
the Rating Agencies lowers or withdraws its then-current rating
of the Senior Securities; or
(D) If Custodian gives notice of resignation or is notified of its
termination as Custodian and the Customer and the Trust are not
able to agree upon a successor within 120 days after such notice
of resignation or termination is given.
(iv) Subject to the provisions of Section 2.7(b) (iv), to the Trust in an
amount equal to the periodic interest payments due on the amount of the Deposit
Fund;
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(v) To Integrity, upon the written request of Integrity accompanied by a
certificate of Integrity stating that the requirements of this section have been
met, within one Business Day after its receipt of the Weekly Valuation from
Custodian to the extent that the market value of the Combined Assets exceeds
102% of the then applicable value of the Deposit Fund by more than $1,000,000 as
of any Weekly Valuation (which amount(s) shall be withdrawn first from the
Supporting Custodial Account and, when no Assets remain in such account, then
from the Main Custodial Account), to the extent permitted by Section 3907.15(B)
of the Ohio Revised Code, provided that no such withdrawal from the Supporting
Custodial Account shall result in the market value of the Combined Assets
falling below 102% of the then-applicable value of the Deposit Fund and no such
withdrawal from the Main Custodial Account shall result in either the market
value or the book value (as determined in accordance with accounting principles
utilized by Integrity that are consistent with those required, or permitted, as
the case may be, by the insurance commissioner of Integrity's then-current
domiciliary state) of the assets in the Main Custodial Account falling below
102% of the then-applicable value of the Deposit Fund; and
(vi) To Integrity to the extent that any assets remain in the Account after
full payment to the Trust of the amount of the Deposit Fund.
(b) Liquidation of sufficient assets in the Account to permit the transfers
referred to herein shall occur as follows:
(i) With respect to amounts necessary to make transfers pursuant to
Section 2.7(a) (i), Customer shall direct the Custodian to start, beginning no
later than 30 Business Days prior to the final maturity referred to therein,
to liquidate the Combined Assets in an amount sufficient to pay the Deposit
Fund in cash. To the extent that by the fifth Business Day prior to such
maturity date Customer has not arranged sales transactions for the purpose of
such liquidation, Custodian shall, instead, carry out such liquidation. Any
such liquidation shall be conducted so as to comply with the requirements set
forth in Section 2.7(e).
(ii) With respect to amounts necessary to make transfers pursuant to
Section 2.7(a)(ii), the provisions of Section 2.8 (a) shall be followed.
(iii) With respect to amounts necessary to make transfers pursuant to
Section 2.7(a)(iii), the provisions of Section 2.8(b) shall be followed.
(iv) (A) With respect to amounts necessary to make transfers pursuant
to Section 2.7(a)(iv), to the extent that such amounts correspond to the
Scheduled Income Amount in respect of the Senior Securities, as certified to
Custodian by the Trust's Agent,
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Custodian shall pay such amounts to the Trust from cash held in, or proceeds of
the liquidation of Assets in, the Main Custodial Account. Custodian shall
indicate to the Trust the source of such payment and that such payment relates
to the Senior Securities.
(B) With respect to amounts necessary to make transfers pursuant
to Section 2.7(a) (iv), to the extent that such amounts correspond to the
Scheduled Income Amount in respect of the Class B Trust Certificates, as
certified to the Custodian by the Trust's Agent, Custodian shall pay such
amounts to the Trust (separately from amounts payable in respect of the Senior
Securities) from cash held in, or proceeds of the liquidation of Assets in, the
Main Custodial Account to the extent that, immediately following such payment,
neither the market value nor the book value of the assets in the Main Custodial
Account would fall below the value of the Deposit Fund, and then from cash held
in, or the proceeds of the liquidation of Assets in, the Supporting Custodial
Account. Custodian shall indicate to the Trust the source of such payment and
that such payment relates to the Class B Trust Certificates.
(v) With respect to amounts necessary to make transfers pursuant to
any other provision of Section 2.7(a), Customer shall direct Custodian to
liquidate the appropriate amount in the Account.
(c) Should the Trust so elect, payments from the Account may be in the form
of an annuity as described in Section 7 of the Funding Agreement.
(d) Integrity or the Trust shall have the right, acting in good faith,
to object to any price (or lack thereof) assigned to any of the Assets by
Custodian on any Weekly Valuation within one Business Day following receipt
thereof by notifying Custodian in writing of such objection, in which case
Custodian shall obtain bids from two independent dealers who make a market in
such security(ies) and use as the valuation of the questioned Assets the
average of such bids. In addition, Integrity or the Trustee shall have the
right, acting in good faith, to notify Custodian of any clerical errors in
any Weekly Valuation, as to which the Custodian shall promptly correct and
reissue the Weekly Valuation. Under such circumstances, the Parties'
Respective Rights and Duties shall be suspended until such time as such bids
have been obtained or clerical errors have been corrected, provided that the
maximum suspension of the Parties' Respective Rights and Duties shall not
exceed three Business Days following receipt of any Weekly Valuation.
(e) Any payments to be made by the Trust to holders of Senior Securities
shall come from the liquidation of Assets in the Main Custodial Account.
Custodian shall assist the Trust in accomplishing this requirement by never
commingling any proceeds
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from the liquidation of Assets in the Main Custodial Account with proceeds from
the liquidation of Assets in the Supporting Custodial Account, making payments
to the Trust that consist only of the former proceeds or the latter proceeds, as
the case may be, and indicating to the Trust the source of any payment made to
the Trust.
2.8. Transfer of Assets Upon Occurrence of an Early Certificate Maturity Event
or an Early Funding Agreement Termination Event.
(a) Upon the occurrence of an Early Certificate Maturity Event, the
Custodian shall not permit any transfer of the Combined Assets (including any
withdrawals thereof by Integrity) except to liquidate the Combined Assets as
follows: if the Early Certificate Maturity Event occurs as a result of an event
described in Section 2.7(a) (ii) (C), to the extent that the Custodian is not
prevented or stayed from doing so by reason of the order or action of any court
or regulator having authority over Integrity, the Custodian shall liquidate the
Combined Assets in an amount sufficient to pay the value of the Deposit Fund to
the Trust in cash as soon as possible (provided that such liquidation shall be
performed in a manner designed to maximize the amount of the Combined Assets to
the extent reasonably practicable). If the Early Certificate Maturity Event
occurs as a result of the occurrence of any other event described in Section
2.7(a)(ii), the Custodian shall liquidate the Combined Assets in an amount
sufficient to pay the value of the Deposit Fund to the Trust in cash in an
orderly and expedient manner over a reasonable time period (provided that such
liquidation shall be performed in a manner designed to maximize the amount of
the Combined Assets to the extent reasonably practicable) but no later than the
earlier of (i) the day that is 30 days after the occurrence of the Early
Certificate Maturity Event (or, if such day is not a Business Day, on the next
Business Day) and (ii) the then-current maturity date of the Senior Securities.
Any such liquidation shall be conducted so as to comply with the requirements
set forth below in Section 2.8(d). Subject to the provisions of Section 2.8(d),
Custodian shall pay the amount of the Deposit Fund to the Trust as follows: (a)
first from Assets in the Main Custodial Account, and, if such Assets are
insufficient to pay the full amount of the Deposit Fund or otherwise
unavailable, then (b) from the Assets in the Supporting Custodial Account. After
such payment to the Trust, the Custodian shall transfer the remaining Combined
Assets, if any, to Integrity. Nothing herein shall be construed so as to prevent
liquidation of the Supporting Custodial Account being effected simultaneously
with the liquidation of the Main Custodial Account.
(b) Upon the occurrence of an Early Funding Agreement Termination Event,
Custodian shall not permit any transfer of the Combined Assets (including any
withdrawal thereof by Integrity) except as follows: Integrity shall direct
Custodian to liquidate the Combined Assets in an amount sufficient to pay the
value of the
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Deposit Fund to the Trustee in cash in an orderly and expedient manner over a
reasonable time period (provided that such liquidation shall be performed in a
manner designed to maximize the value of the Combined Assets to the extent
reasonably practicable) but in no event later than the then-current maturity
date of the Senior Securities. If liquidation has not already commenced,
Integrity shall direct Custodian to start, beginning no later than 30 Business
Days prior to such maturity date, to liquidate the Combined Assets in an amount
sufficient to pay the Deposit Fund in cash. To the extent that by the fifth
Business Day prior to such maturity date Integrity has not arranged sales
transactions for the purpose of such liquidation, Custodian shall, instead,
carry out such liquidation. Any such liquidation shall be conducted so as to
comply with the requirements set forth in Section 2.8(d). Provided that prior
written approval is received from the Ohio Department of Insurance, Integrity
may transfer cash from its general account in lieu of all or part of any amount
to be paid to the Trustee and Custodian shall simultaneously transfer to
Integrity such of the Combined Assets as Integrity may designate in writing
equal in value (as determined by Custodian in accordance with Custodian's
then-current pricing procedures) to such amount (I.E., subject to the prior
written approval described above, Integrity may engage in a substitution of cash
for securities to be liquidated pursuant to a request for a full withdrawal by
the Trustee if Integrity so chooses). Subject to the provisions of Section
2.8(d), Custodian shall pay the amount of the Deposit Fund to the Trust as
follows: (i) first from Assets in the Main Custodial Account and, if such Assets
are insufficient to pay the full amount of the Deposit Fund, then (ii) from the
assets in the Supporting Custodial Account. After such payment to the Trust,
Custodian shall transfer the remaining Combined Assets, if any, to Integrity.
During any such liquidation period, compliance with the Investment Guidelines
will be computed by including the value of any cash transferred to the Trust
prior to final payment and Integrity shall instruct Custodian to make partial
payments (and Custodian shall make any such partial payments requested) of the
amount of the Deposit Fund via transfers of cash from time to time as the
Combined Assets are converted into cash . Anything in this Section 2.8(b) to
the contrary notwithstanding, if, at any time after an Early Funding Agreement
Termination Event occurs, an Early Certificate Maturity Event occurs, the
provisions of Section 2.8(a) shall thereafter take precedence over the
provisions of this Section 2.8(b).
(c) Any transfers of cash to the Trust pursuant to this Section 2.8 shall
reduce the amount of the Deposit Fund by the value of such cash on the date of
transfer.
(d) Any payments to be made by the Trust to holders of Senior Securities
shall come from the liquidation of Assets in the Main Custodial Account.
Custodian shall assist the Trust in accomplishing this requirement by never
commingling any proceeds from the liquidation of Assets in the Main Custodial
Account with
13
proceeds from the liquidation of Assets in the Supporting Custodial Account,
making payments to the Trust that consist only of the former proceeds or the
latter proceeds, as the case may be, and indicating to the Trust the source of
any payment made to the Trust.
2.9. Substitutions of Securities. The Trust hereby authorizes Custodian from
time to time to release to Customer securities held in the Account, provided,
however, that Customer shall simultaneously deliver to Custodian for transfer to
the Account cash or securities having a market value (as determined by
Custodian) equal to or greater than the then-aggregate market value (as
determined by Custodian) of the securities released hereunder, and provided,
further, that prior written approval of such transactions has been received from
the Ohio Department of Insurance. To effect a substitution hereunder, Customer
shall provide Custodian a description of the securities (and a CUSIP number, if
applicable) to be released and, if applicable, a description of the securities
(and CUSIP number, if applicable) to be substituted therefor.
3. POWERS OF CUSTODIAN. In the performance of its duties hereunder, Custodian
shall have the following powers:
3.1. To register any of the Assets in the name of the Customer or in the
Custodian's name or in the name of a nominee of Custodian or in the name of the
Custodian's agent bank or to hold any of the Assets in unregistered form or in
such form as will pass title by delivery, provided that such Assets shall at all
times be recorded in Customer's Account hereunder as one of the Assets and
provided further that any such designation shall make it clear that the Assets
are owned by Customer and held for the benefit of the Trust. In consideration of
Custodian's registration of any securities or other property in the name of
Custodian or its nominee or agent, Customer agrees to pay on demand to Custodian
or to Custodian's nominee or agent the amount of any loss or liability for
stockholders' assessments or otherwise, claimed or asserted against Custodian or
Custodian's nominee or agent by reason of such registration.
3.2. To make, execute, acknowledge and deliver any and all documents of transfer
and conveyance and any or all other instruments that may be necessary or
appropriate to carry out the duties described and powers granted herein.
3.3. To maintain qualifying Assets in such registered clearing agency or in a
Federal Reserve Bank (a "Depository"), as Custodian may select, and to permit
such deposited Assets to be registered in the name of Custodian or Custodian's
agent or nominee on the records of such Federal Reserve Bank or such registered
clearing agency or the nominee of either, and to employ and use securities
depositories, clearing agencies, clearance systems, sub-custodians
14
or agents located outside the United States in connection with transactions
involving foreign securities, provided that such Assets shall at all times be
recorded in Customer's Account herein as one of the Assets and provided further
that any such registration shall make it clear that the Assets are owned by
Customer and held for the benefit of the Trust.
3.4. To employ agents and to delegate duties to them as it sees fit and to
employ or consult with experts, advisors and legal counsel and to rely on
information and advice received from such agents, experts, advisors, and legal
counsel.
3.5. To perform any and other ministerial acts deemed by Custodian necessary or
appropriate to the proper discharge of its duties hereunder.
4. PURCHASES. Subject to the provisions of Section 2.1, upon availability of
sufficient funds and receipt of appropriate instructions from Customer,
Custodian shall pay for and receive Assets purchased for the Account by or for
Customer, payment for which is to be made in the amount specified in such
instructions and only upon receipt by Custodian of the Assets in satisfactory
form for transfer. Custodian shall have no obligation to confirm the adequacy or
fairness of the Assets' purchase price.
5. SALES. Subject to the provisions of Section 2.1, upon receipt of appropriate
instructions from Customer, Custodian will deliver Assets held by it as
Custodian hereunder and sold by or for Customer against payment to Custodian of
the amount specified in such instructions in accordance with the then-current
securities industry practices and in form satisfactory to Custodian. Customer
acknowledges that the current securities industry practice is delivery of
physical securities against later payment on delivery date. Custodian agrees to
use its best efforts to obtain payment therefor during the same business day,
but Customer confirms its sole assumption of all risks of payment for such
deliveries . Custodian may accept checks, whether certified or not, in payment
for securities delivered on Customer's instruction, and Customer assumes sole
responsibility for the risks of collectibility of such checks. Custodian shall
have no obligation to confirm the adequacy or fairness of the Assets' sales
price.
6. SETTLEMENTS.
6.1. Custodian shall provide Customer with settlement of all purchases and
sales of Assets in accordance with Custodian's then-prevailing settlement
policies, provided that (a) appropriate instructions for purchases and sales
are received by Custodian in accordance with Custodian's then-current
published instruction deadline schedule, and (b) Custodian has all other
information, funds and/or Assets necessary to complete the transaction.
15
6.2. The Custodian shall not be liable or responsible for or on account of any
act or omission of any broker or other agent designated by Customer to purchase
or sell securities for the Account of Customer.
7. CORPORATE ACTIONS. In connection with any mandatory conversion of
securities included in Assets pursuant to their terms, reorganization,
recapitalization, redemption in kind, consolidation, or other exchange
transaction that does not require or permit approval by the owner of the
affected Assets, Custodian will tender or exchange securities held for other
securities, for other securities and cash, or for cash alone.
8. COLLECTIONS. Custodian shall collect all income, principal and other
distributions due and payable on securities held either by Custodian or a
Depository but shall be under no obligation or duty to take action to effect
collection of any amount if the Assets upon which such payment is due are in
default, or if payment is refused after due demand and presentation. Custodian
shall have no responsibility to notify Customer in the event of such default
or refusal to pay, but, if Custodian receives notice of default or refusal to
pay from an issuer or transfer agent, Custodian shall so advise Customer
promptly. Collections of monies in foreign currency, to the extent possible,
are to be converted into United States dollars at customary rates through
customary banking channels, including, without limitation, Custodian's own
banking facilities, and in accordance with Custodian's prevailing policies for
foreign funds repatriation. All risk and expense incident to such foreign
collection and conversion is the responsibility of the Account, and Custodian
shall have no responsibility for fluctuations in exchange rates affecting such
collections or conversion.
9. NO DISCRETIONARY AUTHORITY; STANDARD OF CARE. Customer, Trust and Custodian
acknowledge that, except to the extent set forth in any separate instrument
signed by the parties with respect to this Agreement, Custodian's duties
hereunder do not include any discretionary authority, control or responsibility
with respect to the management or disposition of any Asset; that, except as may
be provided otherwise herein, Custodian has no authority or responsibility to
render investment advice with respect to any Asset; and that Custodian is not a
trustee with respect to Customer. In addition, it is agreed that:
9.1. Custodian shall have no duty to make any evaluation or to advise anyone of
the suitability or propriety of any action or proposed action of Customer in any
particular transaction involving an Asset or the suitability or propriety of
retaining any particular investment as an Asset. Custodian shall have no duty or
authority to review, question, approve or make inquiries as to any investment
instructions given pursuant hereto. Except as otherwise provided herein,
Custodian shall be under no duty or obligation to
16
review the securities or other property held in the Account with respect to
prudence or diversification.
9.2. Custodian shall not be liable for any loss or diminution of Assets by
reason of investment experience or for its actions taken in reliance upon an
instruction from Customer.
9.3. Except as specifically provided herein, Custodian shall have no duty or
responsibility to monitor or otherwise investigate the actions or omissions of
Customer or the Trust.
9.4. Except as otherwise provided herein, in the performance of its services
hereunder Custodian shall exercise care similar to that which is standard in its
industry and no less care than it would use for supervising its own accounts. In
no event shall Custodian be liable for indirect or consequential damages.
Custodian shall only be responsible or liable for any failure or delay in
performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by its own actions or omissions and within its
reasonable control. No such failure or delay shall give Customer the right to
terminate this Agreement, except as provided in Section 15.
10. BOOKS, RECORDS AND ACCOUNTS.
10.1. BOOKS AND RECORDS. Custodian will make and maintain proper books of
account and complete records of all Assets and transactions in the Account
maintained by Custodian hereunder on behalf of Customer. Custodian will preserve
for the periods prescribed by applicable federal or state statute or regulation
all records required to be maintained.
10.2. INSPECTIONS. On at least four Business Days' notice, Custodian will make
available to and permit inspection during Custodian's regular business hours
by Customer and its auditors of all books, records and accounts retained by
Custodian (or, to the extent practicable, its agents) in connection with its
duties hereunder on behalf of Customer.
10.3. VALUATION AND INVESTMENT GUIDELINE REPORTS.
(a) By 3:00 p.m. ET of the last Business Day of each week, and the first
Business Day of each month, Custodian will provide Integrity, the Trust, the
Rating Agencies and the Liquidity Provider with a written asset valuation report
setting forth the market valuation (including, without limitation, accrued
interest) of each Asset in the Account as of the close of business on the
penultimate Business Day of such week and the last Business Day of such month,
respectively.
17
(b) On the second Business Day of the week following receipt of each
Weekly Valuation, Integrity shall provide Custodian and the then-applicable
Liquidity Provider a weekly report certified by a duly authorized
representative of Integrity detailing, on a book value basis (in sufficient
detail to enable Custodian to verify independently the reasonableness of such
report), the compliance of the Combined Assets with the Investment Guidelines
as of the penultimate Business Day of the preceding week (other than duration,
which shall be provided monthly). In addition, Integrity shall provide
Custodian and the then-applicable Liquidity Provider with a monthly report
certified by a duly authorized representative of Integrity detailing such
compliance on a market value basis as of the last Business Day of the
preceding month (in sufficient detail to enable Custodian to verify
independently the reasonableness of such report), within 10 Business Days
following the end of each calendar month during the term of this Agreement.
Integrity shall promptly provide copies of the quarterly and annual financial
statements filed with the Ohio Department of Insurance to the Rating Agencies.
10.4. DEPOSIT FUND LIABILITY REPORTS. Integrity shall provide Custodian,
the Liquidity Provider, and the Rating Agencies with a report prospectively
setting forth the daily amounts of the Deposit Fund for each quarter the
Funding Agreement is in effect (in sufficient detail to allow independent
verification through recalculation) as soon as practicable following the
calculation of such quarter's Index Value (as such term is defined in the
Funding Agreement).
10.5. NOTIFICATION RESPONSIBILITIES.
(a) The Trust shall or shall cause an agent to notify Custodian, the
Trust's Agent, the Remarketing Agent and the Rating Agencies promptly after it
becomes aware that an event described in Section 2.7(a) (ii) (C) or (D) has
occurred.
(b) Integrity shall notify Custodian, the Remarketing Agent and the
Rating Agencies promptly after it becomes aware that an event described in
Section 207(a)(iii)(A), (a)(iii)(B) or (a)(iii)(C) has occurred.
(c) Promptly following the occurrence of an Early Certificate Maturity
Event, or an Early Funding Agreement Termination Event, Custodian shall notify
Integrity, the Trust, the Remarketing Agent and the Rating Agencies in writing
of such occurrence.
(d) Promptly following notification from the Trust of the existence of a
Margin Deficit, Custodian will notify Integrity, the Trust, the Liquidity
Provider, and the Rating Agencies in writing as to whether such Margin Deficit
has been cured by Integrity.
18
11. INSTRUCTIONS AND DIRECTIONS.
11.1. Custodian shall be deemed to have received appropriate "instructions" or
"directions" upon receipt of written instructions or directions or, in the case
of cash movement, written (or oral instructions confirmed in writing) or
directions, (a) signed or given by any person(s) whose name(s) and signature(s)
are listed on the most recent certificate delivered by Customer or the Trust or
the Trust's Agent to Custodian which lists those persons authorized to give
orders, corrections and instructions in the name of and on behalf of the
Customer or the Trust or the Trust's Agent, respectively, or (b) signed or given
by any other person(s) duly authorized by Customer or the Trust, respectively,
to give instructions or directions to Custodian hereunder or whom Custodian
reasonably believes to be so authorized.
11.2. Appropriate instructions or directions shall include instructions or
directions sent to Custodian or its agent by letter, memorandum, telegram,
cable, telex, telecopy, facsimile, video (CRT) terminal or other "on-line"
system, or similar means of communication, or, in the case of cash movement,
given orally over the telephone (and confirmed in writing) or in person.
11.3. In the event that Custodian is instructed to deliver Assets to any party
other than Customer or Customer's agent pursuant hereto, appropriate
instructions shall include, and Customer shall supply, customary transfer
documentation as required by such party, and, to the extent that such
documentation has not been supplied, Custodian shall not be deemed to have
received appropriate instructions.
12. COMPENSATION; SECURITY.
12.1. The Trust shall pay to Custodian fees for its services under this
Agreement and shall reimburse Custodian for costs incurred by it hereunder as
set forth in Exhibit B hereto.
12.2. If any advance of funds is made by Custodian on behalf of Customer to
purchase, or to make payment on or against delivery of securities or there
shall arise for whatever reason an overdraft in Customer's account, or if
Customer is for any other reason indebted to Custodian, including, but not
limited to, any advance of immediately available funds to Customer with
respect to payments to be received by Custodian in next-day funds (which
Customer acknowledges Customer is liable to repay if Custodian does not
receive final payment), Customer agrees to repay Custodian on demand the
amount of the advance, overdraft or other indebtedness, and accrued interest
at a rate per annum (based on a 360-day year for the actual number of days
involved) equal to the Federal Funds effective rate in effect from time to
time.
19
12.3. In the event of an advance of funds by Custodian, or if any overdraft is
created by Account transactions, Custodian may directly charge the relevant
sub-account of the Account and receive such payment therefrom. In the event that
a compensation payment due Custodian is past due by more than 30 days, such
amount may be charged to the Supporting Custodial Account and Custodian may
receive such payment therefrom and such amount shall be automatically deducted
from and reduce the amount of the Deposit Fund allocable to Class B Trust
Certificates.
13. CUSTOMER RESPONSIBILITY. Except as provided otherwise herein, Customer shall
be responsible for the review of all reports, accountings and other statements
provided thereto by the Custodian and shall within 90 days following receipt
thereof notify the Custodian of any mistakes, defects or irregularities
contained or identified therein, after which time all such matters shall be
presumed to be ratified, approved and correct and shall not provide any basis
for claim or liability against the Custodian.
14. INDEMNIFICATION. Customer as an entity hereby agrees to indemnify
Custodian and its controlling person, officers, directors, employees and
agents (each an "Indemnified Party") and hold each Indemnified Party harmless
from and against any costs, losses, claims, liabilities, fines, penalties,
damages and expenses (including reasonable attorneys' and accountants' fees)
(collectively, a "Claim") arising out of (i) Customer's actions or omissions
or (ii) Custodian's action taken or omitted hereunder in reliance upon
Customer's instructions or upon any information, order, indenture, stock
certificate, power of attorney, assignment, affidavit or other instrument
delivered hereunder to Custodian, reasonably believed by Custodian to be
genuine or bearing the signature of a person or persons authorized by Customer
to sign, countersign or execute the same; provided, that Customer shall not
indemnify an Indemnified Party for any Claim arising from the Indemnified
Party's willful misfeasance, bad faith or negligence in the performance of its
duties, or reckless disregard or breach of its duties under this Agreement.
15. TERMINATION.
15.1. This Agreement will remain in effect until terminated by Customer or
Custodian giving prior written notice to the other parties hereto and the
Rating Agencies at least 180 days in advance of the termination date. Customer
shall not terminate this Agreement without having first obtained a replacement
Custodian which is acceptable to the Trust in its reasonable discretion. In
addition, if Customer receives written notice from Custodian of its intent to
terminate this Agreement, then Customer and the Trust shall select a mutually
agreeable replacement Custodian as soon as reasonably practicable thereafter.
In any event, Custodian may not resign or be terminated until an appropriate
successor Custodian is selected and assumed its position as successor. No
replacement of
20
a Custodian shall be effective if such replacement would cause either of the
Rating Agencies to lower or withdraw its then-current rating of the Senior
Securities.
15.2. Upon termination of this Agreement, Custodian shall follow such
reasonable Customer instructions concerning the transfer of Assets' custody and
records; provided, that, unless this Agreement is terminated due to Custodian's
breach hereof, (a) Custodian shall have no liability for shipping and insurance
costs associated therewith; (b) Custodian shall not be required to make any such
delivery or payment until full payment shall have been made by Customer of all
liabilities constituting a charge on or against Custodian and until full payment
shall have been made to Custodian of all its compensation, costs, including
special termination costs, if any, and expenses hereunder; and (c) Custodian
shall have been reimbursed for any advances of monies or securities made
hereunder to Customer. If any Assets remain in the Account, Custodian may
designate Customer as successor Custodian hereunder and deliver the same
directly to Customer.
15.3. Upon termination of this Agreement, all obligations of the parties
hereunder shall cease, except that all rights and obligations that have accrued
to the time of such termination shall survive such termination.
16. BINDING OBLIGATIONS. Customer, Custodian, and the Trust each hereby
represents that this Agreement constitutes its legal, valid and binding
obligation enforceable in accordance with the terms hereof, subject, as to
enforcement of remedies, to applicable bankruptcy and insolvency laws, and to
general principles of equity.
17. GENERAL PROVISIONS.
17.1. NOTICES. Except as provided in Section 11, any notice or other
communication under this Agreement shall be in writing and shall be considered
effective upon receipt if by mail, or on the date of personal delivery (by
private messenger, courier service or otherwise) or telex or facsimile,
whichever occurs first, to the addresses indicated below. The below addresses
and individuals may be changed at any time by an instrument in writing executed
by the party giving same and given to the other parties hereto and to the Rating
Agencies, in accordance with the procedure set forth above. Notices to any party
hereto shall be given to such party at its respective address set forth on
the signature pages hereof. Notices to the Rating Agencies shall be given as
follows:
21
If to Moody's, to:
Xxxxx'x Investors Service, Inc,
00 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxx Xxxxx Holtwick
Phone No.: (000) 000-0000
Fax No.: (000) 000-0000
If to Standard & Poor's, to:
Standard & Poor's Ratings Services
00 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Phone No.: (000) 000-0000
Fax No.: (000) 000-0000
17.2. NO TAX RESPONSIBILITY. Notwithstanding any other terms or conditions
contained herein, Custodian shall not be responsible for, and Customer does
hereby waive all duties or functions of Custodian (imposed by law or otherwise)
relating to, the withholding and government deposit of any and all taxes, or
amounts with respect thereto, that may be incurred or payable in connection with
the Account established hereunder, income or gain realized on Assets held
therein or transactions undertaken with respect thereto. Except as required by
law in such manner that cannot be delegated to or assumed by Customer, Custodian
shall have no re sponsibility to undertake any federal, state, or local tax
reporting in connection with Assets, the Account or transactions therein,
17.3. COMPLETE AGREEMENT; MODIFICATION. This Agreement contains a complete
statement of all the arrangements among the parties hereto with respect to its
subject matter, supersedes all existing agreement(s) among them concerning such
subject matter, and cannot be amended or modified in any manner except by a
written agreement executed by the parties hereto; provided, however, that
subsequent to the initial placement of the Senior Securities, the Investment
Guidelines may be amended only at the time of any subsequent remarketing of such
Senior Securities upon the mutual agreement of Customer and the then-applicable
Liquidity Provider following prior written notice to each of the Rating Agencies
disclosing the extent and nature of any such proposed changes to the Investment
Guidelines. Notwithstanding the foregoing, if, at any time, Custodian is
holding assets or property of Customer pursuant to any other custodial, pledge
or agency agreement with Customer (or which Customer has acknowledged in
instructions to Custodian) and one or more third parties that involves
Custodian's duties or obligations to a third party (which may be affiliates of
Custodian) with respect to Assets, the terms and requirements of the other
agreement(s) concerning such Assets shall supersede and control the
22
provisions and duties set forth herein. Further notwithstanding the foregoing,
any amendments to this Agreement which may affect the rights of the holders of
the Senior Securities shall only take effect at the time of a remarketing of
such Senior Securities and no amendment shall become effective that would cause
either of the Rating Agencies to lower or withdraw its then-current rating of
the Senior Securities.
17.4. GOVERNING LAW. This Agreement shall be interpreted, construed, enforced
and administered in accordance with the internal substantive laws (and not the
choice of law rules) of the State of New York.
17.5. ASSIGNMENT. No party may assign any of its rights hereunder without the
consent of the other, which consent shall not be unreasonably withheld. The
foregoing consent requirement does not apply if either party shall merge or
consolidate with or sell substantially all of its assets to another corporation,
provided that such other corporation shall assume without qualification or
limitation all obligations of that party hereunder either by operation of law
or by contract.
17.6. SEPARABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and, if any
provision is inapplicable to any person or circumstances, it shall nevertheless
remain applicable to all other persons and circumstances.
17.7. NO THIRD PARTY RIGHTS. In performing its services hereunder, Custodian is
acting solely on behalf of Customer and the Trust. No agency, contractual or
service relationship shall be deemed to be established hereby between Custodian
and any other persons.
17.8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts , each of which shall be considered an original, but all of
which together shall constitute the same instrument.
17.9. CONFIDENTIALITY. Each party hereto shall hold confidential and not divulge
to third parties without the prior written consent of the other parties hereto
any information obtained by such party in connection with such party's
performance of its duties or obligations under this Agreement, unless either (a)
the information was at the time of disclosure to such party or thereafter
becomes part of the public domain (but not as a result of acts by such party);
or (b) the information was obtained by such party from a third party which did
not receive the same, directly or indirectly, from a party hereto and which
third party had, to such party's best knowledge and belief, the right to
disclose the same. Upon termination of this Agreement, each party shall return
to the other parties to this Agreement any and all materials or
23
information of any type supplied to such party by such other parties in respect
of this Agreement. Notwithstanding the provisions of this Section 17.9, no party
shall be prohibited from producing Account documents or providing Account
information as required pursuant to any duly issued summons, subpoena, or court
order, or as required by a regulator supervising such party.
17.10. NO PETITION COVENANT. Notwithstanding any prior termination of this
Agreement, neither the Custodian nor Integrity nor the Trust's Agent shall,
prior to the date which is one year and one day after the payment in full of the
Senior Securities and the termination of this Agreement, acquiesce, petition or
otherwise invoke or cause the Trust to invoke the process of any court or
governmental authority for the purpose of commencing or sustaining a case
against the Trust under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Trust or any substantial part of
its property, or making a general assignment for the benefit of creditors,
or ordering the winding up or liquidation of the affairs of the Trust.
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representative as of the date and year first
above written.
INTEGRITY LIFE INSURANCE COMPANY
AS AN ENTITY AND FOR THE BENEFIT
OF THE ACCOUNT REFERRED TO ABOVE FIRST TRUST NATIONAL ASSOCIATION
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxx
----------------------------- -----------------------------
Xxxxxx X. Xxxxxx
Name: /s/ Xxxxxx X. Xxxxxx Vice President
--------------------------
Title: Executive Vice President
-------------------------
Customer Address: Custodian Address:
000 Xxxx Xxxxxx Xx., First Trust National Association
8th Floor 000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000 Xx. Xxxx, XX 00000
Attention: Madison X. XxXxxxx Attention: Xxxxxx X. Xxxxxx
Phone No.: (000) 000-0000 Phone No.: (000) 000-0000
Fax No.: (000) 000-0000 Fax No.: (000) 000-0000
BAYERISCHE LANDESBANK
BRAVO TRUST SERIES 1997-1 GIROZENTRALE, ACTING
By: The Bank of New York, THROUGH ITS NEW YORK
Not in its Individual BRANCH AND AS TRUST'S
Capacity but as Trustee AGENT FOR THE TRUST
By: /s/ Xxxxxx X. Laser By: /s/ Xxxx xxx Xxxxxxxxxxx
----------------------------- ------------------------------
Xxxx xxx Xxxxxxxxxxx
Name: XXXXXX X. LASER Executive Vice President
--------------------------- and Manager
Title: Assistant Vice President
--------------------------
By: /s/ Xxx Xxxxxxxxx
-----------------------------
Trust's Address: Xxx Xxxxxxxxx
First Vice President and
000 Xxxxxxx Xxxxxx Treasury Manager
Floor 00 Xxxx
Xxx Xxxx, Xxx Xxxx 00000 Trust Agent's Address:
Phone No.: (000) 000-0000 000 Xxxxxxxxx Xxxxxx
Fax No.: (000) 000-0000 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Phone No.: (000) 000-0000
Fax No.: (000) 000-0000
EXHIBIT A
SHORT-TERM PORTFOLIO GUIDELINES
Trust/Integrity Separate Account Portfolio
MIN/MAX. MAX. PER MAX. PER
ASSET CLASS EXP. ISSUE ISSUER
------------------------------------- ------- -------- --------
U.S. Gov't & Agencies 0/100% unlimited unlimited
Mortgage-backed Securities
Agency CMOs 0/50% 5% 15%
Non-agency CMOs 0/50% 5% 10%
Agency Pass Throughs 0/50% 5% 15%
Support Tranches 0/10% 5% 10%
Asset-backed Securities 0/30% 2.5% 10%
Auto Loans
Credit Card Receivables
Home Equity
Manufactured Housing
Corporate Debt 0/60% 5% 5%
Public Utilities
Corporate Bonds
144A/Private Placements 0/30% 2.5% 2.5%
Foreign Debt 0/20% 2.5% 2.5%
(U.S. Dollar Denominated only)
Non-Investment Grade Securities 0/3% 1% 1%
(No lower than BB/NAIC "3"
rated)
Cash and Cash Equivalents 0/100% 5% 5%
Non-Speculative Hedging Instruments 0/3% 1% 1%
(Caps, floors, swaps only)
(Counterparties must be AA
rated)
(Caps & Floors: the lesser of
purchase cost or market value)
(Swaps: Absolute Value of the
Market Value)
A-1
SHORT TERM PORTFOLIO GUIDELINES
PAGE TWO
GENERAL
1. The average effective duration of the portfolio cannot exceed 1.75 years.
2. The average credit quality of the portfolio cannot be less than AA/NAIC "1"
3. The portfolio cannot contain investments in real estate, direct
commercial mortgages, common stocks, leveraged futures or other
leveraged/speculative derivatives.
4. Any derivative position must be used for hedging only and must result in
the portfolio still being in compliance with all other investment
guidelines.
A-2
PORTFOLIO OBJECTIVE
Maintain a high quality, liquid, short duration portfolio which generates a
consistent and stable return in excess of the liability cost of funds.
AGGREGATE PORTFOLIO RISK PARAMETERS
The average effective duration of the portfolio cannot exceed 1.75 years. The
average effective duration is calculated as the weighted average of the
effective duration of the individual securities within the portfolio weighted by
their respective market values. Effective duration measures the price
sensitivity of a security for a given change in interest rates, incorporating
any projected variability in the security's cashflows for the stated change in
interest rates.
The average credit quality of the portfolio cannot be less than AA/NAIC "1".
The average credit quality is calculated as the weighted average of the credit
quality of the individual securities within the portfolio weighted by either
their respective book values, or market values as appropriate per the
custodial arrangement. The individual security credit quality will be as
currently evaluated by either Xxxxx'x or Standard & Poor's.
The average credit quality is calculated by assigning a numeric value for
each rating. For example, the highest quality category of Governments is
assigned a value of 2, Agency securities receive a value of 3, Aaa/AAA 4,
Xx0/XXx0, Xx0/XX 0, Xx0/XX-0 and so on. If an individual security is
evaluated by both Xxxxx'x and Standard & Poor's, the lower rating will be
used in computing the average. The weighted average numerical value is
rounded and translated back to an average credit quality rating, i.e. an
average rating of 6.4 would translate to a AA rating, and an average rating
of 6.6 would equate to AA-. Based on the above, the average numerical value
must be less than or equal to 6.5 to be in compliance with the stated
investment guidelines.
PERMITTED ASSET CLASSES
U.S. GOVERNMENT AND AGENCY SECURITIES
A debt security issued by the United States Treasury Department or an agency
created and sponsored by the United States government.
MORTGAGE-BACKED SECURITIES
Ownership claim in a pool of mortgages or an obligation that is secured by such
a pool.
A-3
AGENCY CMOs
Securitization of a pool of first liens on residential properties backed by
GNMA, FNMA or FHLMC into at least two classes or tranches.
NON-AGENCY CMOs
Securitization of a pool of first liens on residential mortgages which do
not conform to agency (GNMA, FNMA or FHLMC) underwriting guidelines, or a
pool of commercial loans into at least two classes or tranches.
AGENCY PASS THROUGHS
Securitization of a pool of first liens on residential properties backed by
GNMA, FNMA or FHLMC into one class, which pays monthly interest and
principal passed directly from the debtor to the investor through an
intermediary.
SUPPORT TRANCHES
CMO classes that receive principal payments only after scheduled payments
have been made on specified PAC, TAC and/or Scheduled bonds for each
payment date.
ASSET-BACKED SECURITIES
Securitization of a pool of collateral into at least two classes or tranches.
Acceptable collateral includes auto loans, credit card receivables, home-equity
loans or manufactured housing loans.
CORPORATE DEBT
Debt which is registered with the SEC and issued by either a corporation or a
public utility.
144A
Private unregistered security issued under SEC Rule 144A.
PRIVATE PLACEMENTS
Privately negotiated debt transactions between an issuer and buyer.
FOREIGN DEBT
Debt issued by a legal entity incorporated outside of the United
States. Only U.S. dollar denominated securities are permitted.
NON-INVESTMENT GRADE SECURITIES
A security with a credit quality rating of BB or lower. Only securities
currently rated at least BB/NAIC "3" are permitted.
CASH AND CASH EQUIVALENTS
Short-term debt such as listed below, with a stated maturity within 270 days
from date of purchase:
- U.S. Government or agency securities
- Certificates of deposit
- Commercial paper
A-4
- Bankers acceptances
- Repurchase agreements
- Corporate debt rated AA or better
- Money market funds
- Loan participation notes
NON-SPECULATIVE HEDGING INSTRUMENTS
Caps, floors or swaps may only be used as part of a hedging program to
explicitly manage the risk profile of the portfolio, and will only be written
against specified securities (i.e. caps/floors at lifetime maximums/minimums for
ARMs). They may not be used for speculative purposes. This does not imply that
all such security structures in the portfolio will be hedged at all times.
Credit quality of acceptable counterparties will be AA or better. Caps and
floors exposure will be calculated as the lesser of cost or market value. Swap
exposure for determining compliance with investment guideline limitations will
be calculated as the absolute value of the swap market value. Any such
derivative position will be included in the portfolio when determining
compliance with all other investment guidelines.
ADDITIONAL DEFINITIONS
Newly issued and TBA securities as well as extended settlements on purchases of
permitted securities are explicitly allowed as long as the securities involved
otherwise comply with these stated investment guidelines. Such transactions are
not considered to be forward contacts.
PROHIBITED ASSET CLASSES
The following asset classes are prohibited investments:
Interest only CMO class
Principal only CMO class
Inverse floater CMO class
Forwards*
Futures*
Options*
* Except as explicitly discussed under Permitted Asset Classes.
A-5
EXHIBIT B
CUSTODIAN FEES AND COSTS
FIRST TRUST NATIONAL ASSOCIATION
Proposed Fee Schedule For Acting As
Custodian
ARM FINANCIAL, INC.
I. INITIAL FEE: $5,000
This fee covers the examination of the Custody Agreement and supporting
documents, acceptance, execution and delivery of the Custody Agreement,
and establishment of necessary records. It does not include Counsel Fees,
if necessary, or any out-of-pocket expenses incurred as a result of the
closing.
II. ANNUAL ADMINISTRATION FEE:
FIRST $250,000,000 1.50 BASIS POINTS
$250,000,000 TO $400,000,000 1.00 BASIS POINTS
OVER 400,000,000 .50 BASIS POINTS
LESS 30% DISCOUNT
Covers ordinary services of the Custodian for maintaining records, and
performing one (1) valuation per week. If daily valuations are required,
they will be charged at $5 each.
III. OTHER FEES:
* Other fees may be charged for additional services depending upon the work
involved. Our fee does not include extraordinary services, default
administration, secondary disclosure, investment services outside of the CT
Treasury and CT Government Money Market Funds, tax reporting, or other
duties that maybe mandated by future laws or regulatory agencies. First
Trust also reserves the right to charge a fee relating to the termination
of the Trust and the final distribution of the property held by the Trust,
such fee to be determined at the time of termination.
* For investments in First American CT Treasury or CT Government money market
funds, fund expenses will not exceed 60 Basis Points on average daily balances,
netted from investment earnings. See enclosed prospectus. Settlement of trades
in open market at direction of Obligor per transaction (buy or sell)- $10.00.
Free delivery or free receipt of book-entry securities, per transaction - $10.00
* In addition to any other fees described in this schedule and reimbursement for
miscellaneous postage, insurance, and other out-of-pocket expenses exclusive of
large mailings and as reimbursement for all direct and indirect overhead and
cost of operation, an additional charge not to exceed $225 per year.
* All fees are billed quarterly in advance based on the amount outstanding at
the beginning of each quarterly billing period. All fees are nonrefundable and
will not be prorated in the event of an early termination of the Trust.
* The above fees are subject to document review and periodic review and
adjustment (annual increases may be based on the annual CPI).
* 1-1/2% fee charged on amounts over 30 days past due.
Dated: October 1, 1997
