FUND PARTICIPATION AGREEMENT
This Fund Participation Agreement (the "Agreement"), dated as of the
30th day of April, 2001, is made by and among Integrity Life Insurance Company
("Integrity Life"), on its own behalf and on behalf of each of its separate
accounts (each a "Separate Account" and together the "Separate Accounts") and
Touchstone Variable Series Trust (the "Trust") and the various series of the
Trust (each a "Fund" or together the "Funds"), as set forth in Exhibit A
attached hereto as amended by the parties from time to time, all of which Funds
serve as underlying investment media for the Sub-Accounts.
The parties hereby agree as follows:
1. REPRESENTATIONS AND AGREEMENTS OF THE PARTIES.
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1.1 The Trust makes the following representations and covenants:
(a) The Trust has been established and is validly existing and in
good standing as a business trust under the laws of the
Commonwealth of Massachusetts and consists of separate series
described in the most recent Post-Effective Amendment to its
Registration Statement on Form N-1A (the "Trust Registration
Statement").
(b) The Trust is a no-load diversified, open-end, management
investment company and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The offering
of the securities of the Trust has been registered under the
Securities Act of 1933, as amended (the "1933 Act").
(c) The Trust has supplied written information regarding the Trust
and each of the Funds to Integrity Life for inclusion in the
Post-Effective Amendments to the Registration Statements of
the Separate Accounts (the "Integrity Life Registration
Statements") for the Contracts (as defined in Section 1.2(a)
below) to be issued by the Separate Accounts. The information
does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(d) The Trust Registration Statement does not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading. This representation does
not extend to statements or omissions made in reliance upon
and in conformity with written information furnished by
Integrity Life for inclusion in the Trust Registration
Statement.
(e) The Trust and each Fund complies with and qualifies under the
requirements applicable to regulated investment companies
under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). The Trust will notify Integrity Life
immediately upon having a reasonable basis for believing that
the Trust or any Fund has ceased to comply with these
requirements or might not meet these requirements in the
future.
(f) Each Fund complies with the diversification requirements set
forth in Section 5(b)(1) of the 1940 Act and Section 817(h) of
the Code and Section 1.817-5(b) of the regulations under the
Code and each Fund will at all times invest money from the
Contracts in such a manner to ensure the Contracts will be
treated as "variable contracts" under the Code and regulations
issued thereunder. The Trust will notify Integrity Life
immediately upon having a reasonable basis for believing that
any Fund has ceased to meet these requirements or might not
meet these requirements in the future.
(g) Except for shares or interests sold for organizational
purposes prior to the effective date of the initial
Registration Statement of the Trust, the Trust will not sell
shares of the Funds to purchasers other than the Separate
Accounts or one or more other separate accounts established by
Integrity Life or other life insurance companies.
1.2 Integrity Life makes the following representations and
covenants:
(a) Integrity Life is an insurance company organized and is
validly existing and in good standing under applicable law and
has legally and validly established the Separate Accounts as
separate accounts under Ohio law. The Separate Accounts are
registered as unit investment trusts under the 1940 Act to
serve as investment vehicles for variable annuity contracts
and flexible premium variable universal life insurance
contracts to be offered by the Separate Accounts (the
"Contracts").
(b) The offering of the Contracts has been registered under the
1933 Act. The Contracts are treated as annuity contracts or
life insurance contracts under the applicable provisions of
the Code. Integrity Life will notify the Trust immediately
upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or might not be so
treated in the future.
(c) Each Sub-Account is a "segregated asset account" for purposes
of diversification testing. Interests in each Sub-Account are
offered exclusively through the purchase of a "variable
contract," within the meaning of such term under Section
817(d) of the Code. Integrity Life will notify the Trust
immediately upon having a reasonable basis for believing that
these requirements are no longer being met or might not be met
in the future.
(d) The information regarding Integrity Life and the Separate
Accounts that Integrity Life has supplied to the Trust for
inclusion in the Trust Registration Statement does not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading.
1.3 The representations and covenants contained in Sections 1.1 and 1.2
are continuing representations and covenants of each party making them and must
be satisfied throughout the term of this Agreement. Each party will immediately
notify the other if any of the representations and covenants contained in these
Sections have not or will not be met.
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2. MARKETING. Integrity Life, through its distributor (the
"Distributor"), will make all reasonable efforts to market the Contracts. In
marketing the contracts, Integrity Life and the Distributor will comply with all
applicable state or federal securities and insurance laws. Integrity Life will
adopt and implement procedures reasonably designed to ensure that information
concerning the Trust and its affiliates (as defined in Section 12 below) that is
intended for use only by brokers or agents selling the Contracts ("broker only
materials") is so used and neither the Trust nor any of its affiliates shall be
liable for any losses, damages or expenses relating to the improper use of such
"broker only materials."
3. VALUATION AND PURCHASE AND REDEMPTION ORDERS.
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3.1 The Trust will use its best efforts to cause its administrative
services and fund accounting agent (the "Accounting Agent"), or any other person
acting in a similar role, to provide to Integrity Life, promptly following the
close of trading (the "Close") on each Business Day (as defined in 3.3 below),
(x) the net asset value per share for each Fund as of the Close on that Business
Day, (y) the per share amount of any dividend or capital gain distribution made
by a Fund in respect of the shares held by the corresponding Sub-Account, if the
"ex-dividend" date for such dividend or distribution has occurred since the
Close of the preceding Business Day, and (z) based on these net asset values and
dividends and distributions, the Accumulation Unit Value (as such term is
defined in the Integrity Life Registration Statement) to be used in determining
values in each Sub-Account.
If the Trust provides Integrity Life with materially incorrect
share net asset value information, the Trust will make, or will cause the
Accounting Agent to make, an adjustment to the number of shares purchased or
redeemed for the Separate Accounts to reflect the correct net asset value per
share. Any material error in the calculation or reporting of net asset value per
share, dividend or capital gains information, or Accumulation Unit Values will
be reported promptly upon discovery to Integrity Life.
Notwithstanding the above, the Trust will not be held
responsible for providing Integrity Life with values on any day that is not a
Business Day, when an emergency exists making the valuation of a Fund's
portfolio securities not reasonably practicable, or during any period when the
Securities and Exchange Commission ("SEC") has by order permitted the suspension
of pricing of shares for the protection of shareholders.
3.2 The Trust will execute all orders from Integrity Life (whether net
purchases or net redemptions) at the net asset value per share, as determined as
of the Close on the Business Day on which the orders were duly received by
Integrity Life from owners of the Contracts in accordance with the Integrity
Life Registration Statement. For purposes of this Section 3.2, Integrity Life
will be the designee of the Trust for receipt of orders from owners of the
Contracts. Accordingly, receipt of an order for the purchase or the redemption
of shares of the Trust by Integrity Life will, for purposes of Section 3.1 above
and this Section 3.2, constitute receipt of an order by the Trust, provided that
the Trust receives notice of the order by 11:00 A.M. on the following Business
Day.
Orders received by Integrity Life will be sent directly to the Trust or
its specified agent, and payment for purchases, net of redemptions, will be
wired to a custodial account designated
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by the Trust. If redemptions for the Trusts for any period exceed purchases,
the Trust will wire the excess amount to an account designated by Integrity
Life.
Promptly after executing the orders, the Trust will provide to
Integrity Life a written confirmation, which will include (x) the number of
shares of the Trust in each Fund at the Close of the preceding Business Day, (y)
a detailed account, by dollars and by shares, of the purchases and redemptions
for the Trust (and the net result of the purchases and redemptions) by each
Sub-Account since the Close of the applicable Business Day, and (z) the number
of shares of each Fund of the Trust held by each Fund's corresponding
Sub-Account after all such transactions have been executed.
3.3 "Business Day" means any day on which the New York Stock Exchange
is open for trading and each other day, if any, on which the Trust is required
to calculate the net asset value of a Fund, as set forth in the Trust
Registration Statement.
4.1 EXPENSES. All expenses related to (y) the establishment and
operation of the Trust, including all costs of registration and other compliance
under state and federal laws and (z) the performance by the Trust of its
obligations under this Agreement, will be paid by the Trust.
4.2 DOCUMENTS TO BE PROVIDED BY TRUST. The Trust will provide to
Integrity Life, for use by the Separate Accounts and the Sub-Accounts, a
reasonable quantity of (w) all prospectuses of the Trust or any Fund required
for delivery to existing Contract owners and all related statements of
additional information, (x) all proxy material required for meetings of
shareholders of the Trust or any Fund thereof, (y) all periodic reports to
shareholders of the Trust required to be delivered to the Contract owners and
(z) any other material required by applicable laws, rules or regulations to be
distributed to the owners of the Contracts.
5. SALES REPRESENTATIONS. Except with the express written permission of
the Trust, Integrity Life and its agents will not make any representations
concerning the Funds other than those contained in (w) the then current
prospectuses and related statements of additional information of the Trust or
any Fund, (x) published reports or other materials of the Trust that are in
public domain and approved by the Trust for distribution, (y) any current
printed sales literature of the Trust or any Fund and (z) any current printed
sales literature related to the Contracts that is delivered to the Trust and as
to which the Trust has not objected by notice to Integrity Life given in
accordance with Section 17.
6. ADMINISTRATIVE SERVICES TO CONTRACT OWNERS. Administrative services
to Contract owners will be the responsibility of Integrity Life and will not be
the responsibility of the Trust. The Trust recognizes that Integrity Life,
through the Separate Accounts and the Sub-Accounts, will be a shareholder of the
Trust and the Funds for the benefit of owners of the Contracts.
7. INFORMATION TO BE PROVIDED BY TRUST.
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(a) The Trust will provide Integrity Life, after the end of each
fiscal year of the Trust, with such investment advisory
expense data and other expense data of each Fund for the
fiscal year, and with such other information related to the
Trust or the Funds as may be necessary to enable Integrity
Life to fulfill, on a timely basis, its
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prospectus disclosure obligations under federal securities
laws and its obligations under the Contracts to provide
information to the Contract owners.
(b) The Trust will provide Integrity Life, as soon as reasonably
practical after the end of each fiscal year of the Trust, with
all information regarding the Funds required by Integrity Life
to meet the requirements imposed on it, the Separate Accounts
or the Sub-Accounts pursuant to Rule 30e-2 under the 1940 Act.
(c) The Trust will promptly disclose in writing to Integrity Life
any information regarding the Trust or any Fund that is
reasonably required by Integrity Life in order to cause the
information regarding the Trust and the Funds included in the
prospectuses, statements of additional information and other
disclosure documents then being used by Integrity Life in
connection with its offering of the Contracts to conform to
the representations and covenants made in Section 1.1.
8. VOTING. So long as, and to the extent that, the SEC continues to
interpret the 1940 Act to require (and so long as any state insurance department
or agency having jurisdiction requires) pass-through voting privileges for
variable contract owners, the Trust will provide Integrity Life, on a timely
basis and at no cost to Integrity Life, with sufficient copies of all proxy
material for distribution to the Contract owners. Integrity Life will distribute
all the material, will solicit voting instructions from Contract Owners and will
vote shares in the applicable Fund in accordance with instructions received from
the Contract owners. Integrity Life will vote those shares for which no
instructions have been received in the same proportion as the portion for which
instructions have been received from Contract owners. Integrity Life will not
recommend or oppose action in connection with any such vote or interfere with
any such solicitation of proxies.
9. INSURANCE. The Trust will maintain, without cost or expense to
Integrity Life, (y) fidelity bond coverage in an amount not less than the
minimum coverage required by Rule 17g-1 under the 1940 Act, and (z) errors and
omissions coverage in an amount and with companies determined by the Board of
Trustees of the Trust. The Trust and each Fund will be named insureds under each
such coverage. At the request of Integrity Life, which may be made not more
frequently than twice in any calendar year, the Trust will supply, or cause the
company issuing such policies to supply evidence in writing that the bonds and
other insurance policies called for by this Section 9 are then in force with
such companies and in such amounts as either comply with Rule 17g-1 or have been
approved by the Board of Trustees of the Trust.
10. TERMINATION.
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10.1 This Agreement will terminate:
(a) at the option of any party, upon not less than 60 days
advance written notice to the other parties;
(b) at the option of the Trust, with respect to any one or more
of the Funds, if the Board of Trustees of the Trust determines
that liquidation of the Fund or Funds is in the best interests
of each Fund and its beneficial owners; provided that any such
Fund will be continued in operation for a sufficient period
of time after the
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determination to permit the substitution of the shares of
another investment company for the shares of the Fund in
accordance with applicable laws, rules or regulations or
SEC staff positions and that the Trust shall bear all
reasonable costs to obtain and implement an order pursuant
to Section 26 (b) of the Investment Company Act of 1940
for such a substitution;
(c) at the option of Integrity Life, immediately upon delivery of
written notice to the Trust, if (w) any Fund ceases to qualify
as a regulated investment company under Subchapter M of the
Code or fails to comply with Section 817(h) or the Code,
provided that the termination will be effective only as to
those Funds that ceases to qualify or fails to comply (x)
shares in any Fund are not available for any reason to meet
the requirements of the Contracts, as determined by Integrity
Life, provided that the termination will be effective only as
to those Funds that are not reasonably available, (y) any one
or more of the representations set forth in Section 1.1 are,
individually or in the aggregate, materially untrue, or if the
Trust breaches any one or more of the terms of this Agreement
and such breaches are, individually or in the aggregate,
material, or (z) any combination of untrue representations
and breaches of agreement terms are, individually or in the
aggregate, material;
(d) at the option of the Trust, immediately upon delivery of
written notice to Integrity Life, if (x) any Contract ceases
to qualify as an annuity contract or life insurance contract
under the Code (other than by reason of a Fund's noncompliance
with Subchapter M or Section 817(h) of the Code), provided
that the termination will be effective only as to those
Contracts that cease to qualify, (y) any one or more of the
representations set forth in Section 1.2 are, individually or
in the aggregate, materially untrue, or if Integrity Life
breaches any one or more of the terms of this Agreement and
such breaches are, individually or in the aggregate, material,
or (z) any combination of untrue representations and breaches
of agreement terms are, individually or in the aggregate,
material;
(e) at the option of the Trust, immediately upon delivery of
written notice to Integrity Life, if formal proceedings
against a Separate Account or Integrity Life have been
instituted by the National Association of Securities Dealers
("NASD"), the SEC or any other regulatory body;
(f) at the option of Integrity Life, immediately upon delivery of
written notice to the Trust, if formal proceedings against the
Trust have been instituted by the NASD, the SEC or any other
regulatory body;
(g) at the option of the Trust or Integrity Life, immediately upon
notice to the other party, if shares of the Funds or the
Contracts are not issued or sold in conformance with federal
law or such law precludes the use of shares in the Fund as an
underlying investment medium for the corresponding Sub-Account
or indirectly for the Contracts issued or to be issued by the
Separate Accounts,. provided that the termination will be
effective only as to those Funds or those Contracts that are
adversely affected; or
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(h) with respect to any Fund, if either the requisite vote of the
Contract owners having an interest in the Fund is obtained
for, or the SEC gives requisite approval to, the substitution
of the shares or interests of another investment company for
the shares of the Fund as investments for any one or more of
the Sub-Accounts; provided that Integrity Life gives the Trust
not less than 60 days prior written notice of either (y) any
such proposed vote of Contract owners, or (z) any proposed
application for an order of substitution from the SEC.
10.2 Prompt notice of any triggering event described in Section 10(b) -
Section 10(g) above occur will be given by any party to the other parties.
10.3 The parties hereto agree to cooperate and give reasonable
assistance to the other parties in taking all necessary and appropriate steps
for the purpose of ensuring that a Sub-Account or a Separate Account owns no
shares of a Fund as soon as reasonably practicable after the termination of the
Agreement.
11. TERMINATION DOES NOT RELIEVE CERTAIN OBLIGATIONS. Termination as
the result of any cause listed in Section 10, except as and in respect of any
Fund or Funds as to which this Agreement was terminated in accordance with
Section 10(b) or Section 10(f), will not affect the obligation of the Trust to
provide shares of the Funds for investment by the Sub-Accounts (and all related
information required by Integrity Life, the Separate Accounts and the
Sub-Accounts to meet the requirements of the 1940 Act and the Code as to such
investment) in connection with the Contracts then in force for which the shares
of the Funds are serving as underlying investment media, unless the further sale
of the shares is proscribed by law, by the SEC or by any other regulatory body.
12. INDEMNIFICATION.
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12.1 OF TRUST BY INTEGRITY LIFE.
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(a) Except to the extent provided in Sections 12.1(b) and 12.1(c)
below, Integrity Life agrees to indemnify and hold
harmless the Trust, the Trust Affiliates, and each
person, if any, who controls the Trust or a Trust
Affiliate within the meaning of Section 15 of the 1933
Act and each of their respective Trustees, directors and
officers, (collectively, the "Indemnified Parties" for
the purposes of this Section 12.1) against any and all
losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of Integrity
Life) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which
the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise;
provided, a Sub-Account owns shares of the corresponding
Fund and insofar as such losses, claims, damages,
liabilities or actions:
(1) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Integrity Life Registration
Statement or related prospectus, the Contracts, or
sales literature or advertising for the Contracts (or
any amendment or supplement to any of
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the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading; PROVIDED, that this agreement to
indemnify shall not apply as to any Indemnified
Party if such statement or omission or such
alleged statement or omission was made in
reliance upon and in conformity with information
furnished to Integrity Life or the Distributor by or
on behalf of the Trust for use in such Integrity Life
Registration Statement or related prospectus, the
Contracts, or sales literature or advertising for the
Contracts, or otherwise for use in connection with
the sale of the Contracts or shares of the Funds (or
any amendment or supplement to any of the foregoing);
or
(2) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in the Trust Registration
Statement or any related prospectus, or sales
literature or advertising of the Trust [or any
amendment or supplement to any of the foregoing] that
were not supplied for use therein by or on behalf of
Integrity Life, the Distributor or an Integrity
Affiliate and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent
conduct of Integrity Life, the Distributor or the
Integrity Affiliates or persons under their control
(including, without limitation, their employees and
"persons associated with a member" as that term is
defined in paragraph (q) of Article I of the NASD's
By-Laws) in connection with the sale or distribution
of the Contracts or shares of the Funds; or
(3) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the Trust Registration Statement or any
related prospectus or sales literature or advertising
of the Trust (or any amendment or supplement to any
of the foregoing) or the omission or alleged omission
to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading, if such a statement or
omission was made in reliance upon and in conformity
with information furnished to the Trust or the Trust
Affiliates by or on behalf of Integrity Life, the
Distributor or the Integrity Affiliates for use in
the Trust Registration Statement or any related
prospectus or sales literature or advertising of the
Trust (or any amendment or supplement to any of the
foregoing); or
(4) arise as a result of any failure by Integrity Life or
the Distributor to perform the obligations, provide
the services and furnish the materials required of
them under the terms of this Agreement, or any
material breach of any representation and/or warranty
made by Integrity Life in this Agreement or arise out
of or result from any other material breach of this
Agreement by Integrity Life or the Distributor; or
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(5) arise as a result of failure of the Contracts to
qualify as annuity contracts or life insurance
contracts under the Code, otherwise than by reason of
any Fund's failure to comply with Subchapter M or
Section 817(h) of the Code.
(b) Integrity Life shall not be liable under this Section 12.1
with respect to any losses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance by that Indemnified Party of its
duties or by reason of that Indemnified Party's reckless
disregard of obligations or duties (y) under this Agreement or
(z) to the Trust.
(c) Integrity Life shall not be liable under this Section 12.1
with respect to any action against an Indemnified Party
unless the Trust shall have notified Integrity Life in
writing within a reasonable time after the summons or
other first legal process giving information of the
nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated
agent), but failure to notify Integrity Life of any such
action shall not relieve Integrity Life from any
liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on
account of this Section 12.1. Except as otherwise
provided herein, in case any such action is brought
against an Indemnified Party, Integrity Life shall be
entitled to participate, at its own expense, in the
defense of such action and also shall be entitled to
assume the defense thereof, with counsel approved by the
Indemnified Party named in the action, which approval
shall not be unreasonably withheld. After notice from
Integrity Life to such Indemnified Party of Integrity
Life's election to assume the defense thereof, the
Indemnified Party will cooperate fully with Integrity
Life and shall bear the fees and expenses of any
additional counsel retained by it, and Integrity Life
will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently
incurred by such Indemnified Party independently in
connection with the defense thereof, other than
reasonable costs of investigation.
12.2 OF INTEGRITY LIFE BY TRUST.
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(a) Except to the extent provided in Section 2 and Sections
12.2(c), 12.2(d) and 12.2(e) below, the Trust agrees to
indemnify and hold harmless Integrity Life, the Integrity
Affiliates, and each person, if any, who controls
Integrity Life or an Integrity Affiliate within the
meaning of Section 15 of the 1933 Act and each of their
respective directors and officers, (collectively, the
"Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written
consent of the Trust) or actions in respect thereof
(including, to the extent reasonable, legal and other
expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or
otherwise; PROVIDED, a Sub-Account owns shares of the
corresponding Fund and insofar as such losses, claims,
damages, liabilities or actions:
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(1) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the Trust Registration Statement or any
related prospectus, or sales literature or
advertising of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading; PROVIDED, that this agreement
to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the Trust
or the Trust Affiliates by or on behalf of Integrity
Life or the Integrity Affiliates for use in the Trust
Registration Statement or any related prospectus, or
sales literature or advertising of the Trust, or
otherwise for use in connection with the sale of the
Contracts or shares of the Funds (or any amendment or
supplement to any of the foregoing); or
(2) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in any Integrity Life
Registration Statement or related prospectus, or
sales literature or advertising for the Contracts [or
any amendment or supplement to any of the foregoing]
that are not supplied for use therein by or on behalf
of the Trust or the Trust Affiliates and on which
such persons have reasonably relied) or the
negligent, illegal or fraudulent conduct of the Trust
or a Trust Affiliate or persons under their control
(including, without limitation, their employees and
"persons associated with a member" as that term is
defined in Section (q) of Article I of the NASD
By-Laws) in connection with the sale or distribution
of shares of the Funds; or
(3) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Integrity Life Registration
Statement or related prospectus, or sales literature
or advertising for the Contracts (or any amendment or
supplement to any of the foregoing) or the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, if such
statement or omission was made in reliance upon and
in conformity with information furnished to Integrity
Life, the Distributor or the Integrity Affiliates by
or on behalf of the Trust or the Trust Affiliates for
use in any Integrity Life Registration Statement or
related prospectus, or sales literature or
advertising for the Contracts (or any amendment or
supplement to any of the foregoing); or
(4) arise as a result of any failure by the Trust to
perform the obligations, provide the services and
furnish the materials required of it under the terms
of this Agreement, or any material breach of any
representation and/or warranty made by the Trust in
this Agreement or arise out of or result from any
other material breach of this Agreement by the Trust.
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(b) Except to the extent provided in Sections 12.2(c), 12.2(d)
and 12.2(e) hereof, the Trust agrees to indemnify and
hold harmless the Indemnified Parties from and against
any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with the
written consent of the Trust), or actions in respect
thereof (including, to the extent reasonable, legal and
other expenses) to which the Indemnified Parties may
become subject directly or indirectly under any statute
or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the
failure of any Fund to operate as a regulated investment
company in compliance with (y) Subchapter M of the Code
and regulations thereunder, or (z) Section 817(h) of the
Code and regulations thereunder, including, without
limitation, any income taxes and related penalties,
rescission charges, liability under state law to Contract
owners asserting liability against Integrity Life
pursuant to the Contracts, the costs of any ruling and
closing agreement or other settlement with the IRS, and
the cost of any substitution by Integrity Life of shares
of another investment company or portfolio for those of
any adversely affected Fund if Integrity Life reasonably
deems such substitution to be necessary or appropriate as
a result of the noncompliance.
(c) The Trust shall not be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence
in the performance by that Indemnified Party of its duties or
by reason of such Indemnified Party's reckless disregard of
its obligations and duties (y) under this Agreement or (z) to
Integrity Life.
(d) The Trust shall not be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless
the Indemnified Party shall have notified the Trust in
writing within a reasonable time after the summons or
other first legal process giving information of the
nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated
agent), but failure to notify the Trust of any such
action shall not relieve the Trust from any liability
which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this
Section 12.2. Except as otherwise provided herein, in
case any such action is brought against an Indemnified
Party, the Trust will be entitled to participate, at its
own expense, in the defense of such action and also shall
be entitled to assume the defense thereof (which shall
include, without limitation, the conduct of any ruling
request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the
Indemnified Party named in the action, which approval
shall not be unreasonably withheld. After notice from
the Trust to such Indemnified Party of the Trust's
election to assume the defense thereof, the Indemnified
Party will cooperate fully with the Trust and shall bear
the fees and expenses of any additional counsel retained
by it, and the Trust will not be liable to such
Indemnified Party under this Agreement for any legal or
other expenses subsequently incurred by such Indemnified
Party
11
independently in connection with the defense thereof,
other than reasonable costs of investigation.
(e) In no event shall the Trust be liable under the
indemnification provisions contained in this Agreement to
any individual or entity, including, without limitation,
Integrity Life or any other participating insurance
company or any Contract owner, with respect to any
losses, claims, damages, liabilities or expenses that
arise out of or result from (x) a breach of any
representation, warranty, and/or covenant made by
Integrity Life hereunder or by any participating
insurance company under an agreement containing
substantially similar representations, warranties and
covenants; (y) the failure by Integrity Life or any
participating insurance company to maintain its
segregated asset account (which invests in any Fund) as a
legally and validly established segregated asset account
under applicable state law and as a duly registered unit
investment trust under the provisions of the 1940 Act
(unless exempt therefrom); or (z) the failure by
Integrity Life or any participating insurance company to
maintain its variable annuity or life insurance contracts
(with respect to which any Fund serves as an underlying
funding vehicle) as annuity contracts or life insurance
contracts under applicable provisions of the Code.
12.3 "Trust Affiliates" means Western-Southern Mutual Holding Company,
Western-Southern Financial Group, Inc., The Western and Southern Life Insurance
Company, Western-Southern Life Assurance Company ("WSLAC"), Columbus Life
Insurance Company ("CLIC"), Fort Washington Investment Advisors, Inc. ("FWIA")
and any subsidiary of WSLAC, CLIC or FWIA.
12.4 "Integrity Affiliates" means National Integrity Life
Insurance Company ("National Integrity) and any subsidiary of Integrity or
National Integrity.
12.5 EFFECT OF NOTICE. Any notice given by the indemnifying party to an
Indemnified Party referred to in Sections 12.1(c) or 12.2(d) above of
participation in or control of any action by the indemnifying party will in no
event be deemed to be an admission by the indemnifying party of liability,
culpability or responsibility, and the indemnifying party will remain free to
contest liability with respect to the response to the claim among the parties or
otherwise.
13. MIXED FUNDING PROCEDURES. The parties agree to comply with the
mixed funding procedures set forth in Exhibit B attached hereto. If, at any time
during which any Fund is serving as an investment medium for the Contracts,
Rules 6(e)-3(T) or 6e-2 promulgated under the 1940 Act are amended, a permanent
rule replacing Rule 6(e)-3(T) is adopted by the SEC, any other rule is adopted
by the SEC that provides exemptive relief with respect to mixed funding or
shared funding, or the Trust obtains an exemptive order related to mixed funding
or shared funding, the parties will comply with the applicable terms and
conditions thereof and Exhibit B shall be deemed modified if and only to the
extent required in order to comply with the applicable terms and conditions
thereof.
12
14. ADDITIONAL SEPARATE ACCOUNTS AND AVAILABLE FUNDS.
------------------------------------------------
14.1 The parties hereto may agree, from time to time, (y) to amend
Schedule A to permit additional sub-accounts or additional separate accounts of
Integrity Life ("Additional Accounts") to purchase shares of the Funds or
additional series of the Trust ("Additional Funds") or (z) to amend Schedule B
to make the Funds or Additional Funds available for purchase by the Separate
Accounts or Additional Accounts or to delete, combine or modify the series of
the Trust available for purchase by the Separate Accounts or Additional
Accounts. Upon such amendment to Schedule A or to Schedule B, any applicable
reference to a Sub-Account, a Separate Account or a Fund shall include a
reference to the Additional Accounts or the Additional Funds. Schedules A and B,
as amended from time to time, are incorporated herein by reference and are a
part of this Agreement.
14.2 The Board of Trustees of the Trust (the "Trustees") may refuse to
sell shares of any series of the Trust to any person. The Trustees may suspend
or terminate the offering of shares of any series of the Trust if (y) such
action is required by law or by regulatory authorities having jurisdiction or
(z) in the sole discretion of the Trustees acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, such action
is deemed in the best interests of the shareholders of such series.
15. CONFIDENTIALITY.
---------------
15.1 The Trust acknowledges that the identities of the customers of
Integrity Life or the Integrity Affiliates (the "Integrity Companies"),
information maintained about customers of any of the Integrity Companies, and
computer programs and procedures and other information developed by the
Integrity Companies or any of their respective employees or agents in connection
with Integrity Life's performance of its duties under this Agreement are the
valuable property of the Integrity Companies. The Trust agrees that, if it comes
into possession of any list or compilation of the identities of or other
information about the customers of any of the Integrity Companies or any other
information or property of any of the Integrity Companies (other than
information that may be independently developed or compiles by the Trust from
information supplied to it by the customers of any of the Integrity Companies
who also maintain accounts directly with the Trust) the Trust will hold such
information or property in confidence and refrain from using, disclosing or
distributing any such information or other property except (y) with Integrity
Life's prior written consent, or (z) as required by law or judicial process.
15.2 Integrity Life acknowledges that the identities of the
shareholders of the Trust, information maintained about shareholders of the
Trust, and computer programs and procedures and other information developed by
the Trust or any of its employees or agents in connection with the Trust's
performance of its duties under this Agreement are the valuable property of the
Trust. Integrity Life agrees that, if it comes into possession of any list or
compilation of the identities of or other information about the shareholders of
the Trust or any other information or property of the Trust (other than
information that may be independently developed or compiled by Integrity Life
from information supplied to it by the shareholders of the Trust who also
maintain accounts directly with Integrity Life) Integrity Life will hold such
information or property in confidence and refrain from using, disclosing or
distributing any such information or
13
other property except (y) with the Trust's prior written consent, or (z) as
required by law or judicial process.
15.3 Each party acknowledges that any breach of the agreements in this
Section 15 would result in immediate and irreparable harm to the other parities
for which there would be no adequate remedy at law and agree that in the event
of such a breach, the other parities will be entitled to equitable relief by way
of temporary and permanent injunctions, as well as such other relief as any
court of competent jurisdiction deems appropriate.
16. TRADEMARKS, FUND NAMES AND SALES LITERATURE OR PROMOTIONAL
----------------------------------------------------------
MATERIALS.
----------
16.1 Touchstone Advisors, Inc. ("Advisors") owns all right, title and
interest in and to the name, trademark and service xxxx "Xxxxxxxxxx" and such
other trade names, trademarks and services marks as may be listed on Exhibit D
hereto, as amended from time to time by written notice from the Trust to
Integrity Life (the "Licensed Marks"), and is authorized to use and to license
other persons to use the Licensed Marks. Advisors hereby grants to Integrity
Life and the Integrity Affiliates a non-exclusive license to use the Licensed
Marks in connection with Integrity Life's performance of the services
contemplated under this Agreement, subject to the terms and conditions set forth
in this Section 16.
16.2 The grant of license to Integrity Life and the Integrity
Affiliates (the "Licensees") shall terminate automatically upon termination of
this Agreement. Upon automatic termination of the license, the Licensees shall
cease to use the Licensed Marks, except that Integrity Life shall have the right
to continue to service any outstanding Contracts bearing any of the Licensed
Marks. Upon Advisors's elective termination of this license, the Licensees shall
immediately cease to issue any new annuity or life insurance contracts bearing
any of the Licensed Marks and shall likewise cease any activity that suggests it
has any right under any of the Licensed Marks or that it has any association
with Advisors, except that Integrity Life shall have the right to continue to
service outstanding Contracts bearing any of the Licensed Marks.
16.3 Integrity Life shall furnish to the Trust each piece of sales
literature or other promotional materials prepared by Integrity Life in which
the Trust or any of its Funds is names, at least ten (10) business days prior to
use. No such material shall be used if the Trust or its designee reasonably
objects to such use within ten (10) business days of receipt of such material.
Sales literature and other promotional items includes, but is not limited to,
advertisements, sales literature (i.e., any written communication distributed or
made generally available to customers or the public such as brochures, research
reports or form letters), prospectuses, statements of additional information,
shareholder reports and proxy material.
16.4 Each of the Licensees acknowledges and stipulates that it does not
own the Licensed Marks and claims no rights therein other than as a licensee
under this Agreement.
14
17. NOTICES. Any notice, claim, request or demand required by this
Agreement will be in writing and will be deemed to have been duly given on the
day delivered or transmitted by fax or on the third business day after mailing
(first class, postage prepaid) to the fax numbers or addresses set forth below:
(a) If to Integrity Life (for itself or on behalf of any
Separate Account or any Sub-Account):
Integrity Life Insurance Company
000 Xxxx Xxxxxx
Xxxxxxxxxx XX
Fax: (000) 000-0000
Attn: Xxxxx X. Xxxxxx
(b) If to the Trust (for itself or on behalf of any of its Funds):
Touchstone Variable Series Trust
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxx 00000
Fax: (513) 362-
Attn: Xxxx X. XxXxxxxx
with a copy to:
Xxxxx X. XxXxxxxxxx
Xxxxx Xxxxx Xxxx LLC
0000 XXX Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Fax: (000) 000-0000
18. NO WAIVER. The forbearance or neglect of any party to insist upon
strict compliance by any other party, with any of the provisions of this
Agreement, whether continuing or not, or to declare a termination against the
other party, will not be construed as a waiver of any of the rights or
privileges of any party hereunder. No waiver of any right or privilege of any
party arising from any default or failure of performance by any other party will
affect the rights or privileges of any party in the event of a further default
or failure of performance.
19. ASSIGNMENT. No party to this Agreement may assign this
Agreement or any interest in the Agreement, by operation of law or otherwise,
without the prior written consent of all other parties to this Agreement.
20. GOVERNING LAW. This Agreement will be construed and the provisions
of this Agreement interpreted under and in accordance with the laws of Ohio.
This Agreement will be subject to the provisions of the federal securities
statutes, rules and regulations, including such exemptions from those statutes,
rules and regulations as the SEC may grant, and the terms of this Agreement will
be interpreted and construed in accordance therewith.
15
21. TRUST LIABILITY. All persons dealing with the Trust must
look solely to the property of the Trust for the enforcement of any claims
against the Trust. None of the Trustees, officers, agents or shareholders of
the Trust will be personally liable for obligations entered into on behalf of
the Trust.
22. SEVERABILITY. If any provision of this Agreement is held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement will not be affected thereby.
23. RIGHTS CUMULATIVE. The rights, remedies and obligations
contained in this Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or equity, that the parties are
entitled to under federal and state laws.
24. SURVIVAL OF SPECIFIED PROVISIONS. The indemnification provisions
set forth in Section 12 hereof shall survive the termination of this Agreement.
The provisions set forth in Section 7 and Section 13 hereof shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contact owners in accordance with Section 11.
25. COOPERATION. Each party to this Agreement will cooperate with each
other party and all appropriate regulatory authorities and will permit each
other party and such authorities reasonable access to its books and records
(including copies thereof) in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
26. HEADINGS. The headings used in the Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
27. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which taken together will constitute one and the
same instrument.
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
30th day of April, 2001.
INTEGRITY LIFE INSURANCE COMPANY
By:
---------------------------------------------------------
Name
Title
TOUCHSTONE VARIABLE SERIES TRUST
By:
--------------------------------------------------------
Xxxx X. XxXxxxxx, President
Solely for the Purpose of Section 16:
TOUCHSTONE ADVISORS, INC.
By:
-----------------------------------------
Xxxx X. XxXxxxxx, President
CINlibrary/1042853.6
(original 666704.01)
17
EXHIBIT A
FUND PARTICIPATION AGREEMENT
INTEGRITY LIFE INSURANCE COMPANY AND TOUCHSTONE VARIABLE SERIES TRUST
Touchstone Small Cap Value Fund
Touchstone Emerging Growth Fund
Touchstone International Equity Fund
Touchstone High Yield Fund
Touchstone Value Plus Fund
Touchstone Growth & Income Fund
Touchstone Enhanced 30 Fund
Touchstone Balanced Fund
Touchstone Bond Fund
Touchstone Standby Income Fund
Touchstone Growth/Value Fund
Touchstone Equity Fund
Touchstone Money Market Fund
CINlibrary/1042853.6
(original 666704.01)
EXHIBIT B
FUND PARTICIPATION AGREEMENT
INTEGRITY LIFE INSURANCE COMPANY AND TOUCHSTONE VARIABLE SERIES TRUST
MIXED FUNDING PROCEDURES
A. BACKGROUND
Touchstone Variable Series Trust ("TVST") currently offers its shares
to variable annuity separate accounts ("VA Separate Accounts") and variable life
insurance separate accounts ("VLI Separate Accounts") of the same insurance
company or affiliated insurance companies. This type of structure is referred to
as a "mixed funding" arrangement.
CONDITIONS IMPOSED BY RULE 6E-3(T)(B)(15)
Rule 6e-3(T)(b)(15) under the Investment Company Act of 1940 provides
an exemption from many of the provisions of the 1940 Act to flexible premium VLI
Separate Accounts. It also imposes numerous conditions upon flexible premium VLI
Separate Accounts, including specific conditions that govern the manner in which
a mixed funding arrangement may be implemented. These conditions are listed
below.
1. The underlying fund's board of trustees must consist of a majority
of disinterested trustees (the "Independent Trustees").
2. The fund's board of trustees must monitor for the existence of any
material irreconcilable conflicts between the interests of
variable annuity contract owners and scheduled or flexible premium
variable life insurance policyholders investing in the underlying
fund.
3. The insurance company or companies must agree that it (they) will
be responsible for reporting any potential or existing conflicts
to the fund's board of trustees.
4. If a conflict arises, the insurance company (companies) must, at
its (their) own cost, remedy such conflict up to and including
establishing a new registered management investment company and
segregating the assets underlying the variable annuity contracts
and the scheduled or flexible policies.
POSSIBLE CONFLICTS
A material irreconcilable conflict could arise for a variety of
reasons, including:
1. an action by state insurance or other regulatory authority
2. a change in applicable federal or state insurance, tax or
securities law or regulation, the issuance of a public ruling,
private letter ruling, no-action letter or interpretative letter,
or any similar action by insurance, tax, or securities regulatory
authorities
3. an administrative or judicial decision in any relevant proceeding
4. the manner in which the investments of the underlying fund are
being managed
5. a difference in voting instructions given by variable annuity
contract owners and scheduled or flexible premium variable life
insurance policyholders
6. a decision by a participating insurance company to disregard the
voting instructions of contract owners or policyholders or
7. loss of tax-deferred status by a participating insurance company
separate account
B. REQUEST FOR REPORTS
In order for the Board of Trustees of TVST to monitor for potential
conflicts, it will request such reports, materials and data as it deems
necessary from life insurance companies whose VA Separate Accounts and VLI
Separate Accounts invest in any Fund of TVST.
The Board of Trustees of TVST will request that each participating life
insurance company submit an annual report describing any potential or existing
conflict among the interests of the variable annuity contract owners and the
scheduled or flexible premium life insurance policyholders that invest in any
Fund in TVST. In addition, the Board will request that each participating
insurance company submit a similar report if, at any time during the year, the
insurance company perceives any potential or existing conflict among the
contract owners and policyholders that invest in any Fund in TVST.
The Board of Trustees of TVST will request that each participating
insurance company report on any potential or existing conflict based on (1) the
reasons list above or (2) any other reason discovered by the insurance company
that creates or could potentially create a conflict.
C. BOARD ACTIONS TO REMEDY CONFLICTS
If the Board of Trustees of TVST determines that there is a material
irreconcilable conflict, it will give the applicable insurance company
(companies) written notice of the conflict.
Each participating insurance company will be required to take whatever
steps are deemed necessary, as determined by a majority of Independent Trustees
of TVST, to remedy or eliminate the conflict. Each participating insurance
company will be required to bear the expenses of remedying or eliminating the
conflict.
The steps that the Board of Trustees of TVST might require a
participating insurance company to take could include the actions described
below.
1. The Board of Trustees might require the insurance company to
withdraw the assets allocable to some or all of its separate
accounts from the Funds in TVST and reinvest such assets in a
different investment medium, which may include another fund.
2. The Board of Trustees might require the insurance company to
submit the question of whether such segregation should be
implemented to a vote of all affected contract
C-2
owners and policyholders and, as appropriate, segregating the
assets of any appropriate group that votes in favor of
segregation.
3. The Board of Trustees might require the insurance company to offer
the option of making such a change to the affected contract owners
and policyholders.
4. The Board of Trustees might require the insurance company to
establish a new registered management investment company or
managed separate account.
CINlibrary1042853.6
(Exhibit C: original 1031963.2)
C-3
