FUND PARTICIPATION AGREEMENT
This Fund Participation Agreement (the "Agreement"), dated as of the
30th day of April, 2001, is made by and among National Integrity Life Insurance
Company ("National 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.
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 National Integrity Life for inclusion
in the Post-Effective Amendments to the Registration
Statements of the Separate Accounts (the "National 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
National 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 National 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 National 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
National Integrity Life or other life insurance companies.
1.2 National Integrity Life makes the following representations
and covenants:
(a) National 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 New York 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. National 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. National 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 National Integrity Life and the
Separate Accounts that National 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
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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.
2. MARKETING. National Integrity Life, through its distributor (the
"Distributor"), will make all reasonable efforts to market the Contracts. In
marketing the contracts, National Integrity Life and the Distributor will comply
with all applicable state or federal securities and insurance laws. National
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.
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 National 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 National Integrity Life Registration Statement)
to be used in determining values in each Sub-Account.
If the Trust provides National 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 National Integrity Life.
Notwithstanding the above, the Trust will not be held
responsible for providing National 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 National 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 National Integrity Life from owners of the Contracts in accordance
with the National Integrity Life Registration Statement. For purposes of this
Section 3.2, National 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 National 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.
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Orders received by National 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 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 National Integrity Life.
Promptly after executing the orders, the Trust will provide to National
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
National 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, National 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 National Integrity Life given
in accordance with Section 17.
6. ADMINISTRATIVE SERVICES TO CONTRACT OWNERS. Administrative services
to Contract owners will be the responsibility of National Integrity Life and
will not be the responsibility of the Trust. The Trust recognizes that National
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.
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7. INFORMATION TO BE PROVIDED BY TRUST.
(a) The Trust will provide National 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 National
Integrity Life to fulfill, on a timely basis, its 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 National 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
National 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 National
Integrity Life any information regarding the Trust or any Fund
that is reasonably required by National 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
National 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 National
Integrity Life, on a timely basis and at no cost to National Integrity Life,
with sufficient copies of all proxy material for distribution to the Contract
owners. National 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. National
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. National 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
National 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 National 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.
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10. TERMINATION.
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 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 National 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 National 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 National 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
National 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 National Integrity Life, if formal
proceedings against a Separate Account or National Integrity
Life have been instituted by the National Association of
Securities Dealers ("NASD"), the SEC or any other regulatory
body;
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(f) at the option of National 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 National 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
(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 National 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 National 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.
12.1 OF TRUST BY NATIONAL INTEGRITY LIFE.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c)
below, National 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,
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liabilities (including amounts paid in settlement with the
written consent of National 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 National 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 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 National Integrity Life or the
Distributor by or on behalf of the Trust for use in
such National 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
National Integrity Life, the Distributor or an
National Integrity Affiliate and on which such
persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of National Integrity
Life, the Distributor or the National 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 National Integrity
Life, the Distributor or the National Integrity
Affiliates for use in the Trust Registration
Statement or any
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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 National
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 National
Integrity Life in this Agreement or arise out of or
result from any other material breach of this
Agreement by National Integrity Life or the
Distributor; or
(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) National 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) National 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 National 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
National Integrity Life of any such action shall not relieve
National 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, National 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 National Integrity Life to such
Indemnified Party of National Integrity Life's election to
assume the defense thereof, the Indemnified Party will
cooperate fully with National Integrity Life and shall bear
the fees and expenses of any additional counsel retained by
it, and National 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 NATIONAL 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 National Integrity Life, the
National Integrity Affiliates, and each person, if any, who
controls National Integrity Life or an National 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:
(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 National
Integrity Life or the National 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 National 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 National 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
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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 National Integrity Life, the
Distributor or the National Integrity Affiliates by
or on behalf of the Trust or the Trust Affiliates
for use in any National 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.
(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
National 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 National
Integrity Life of shares of another investment company or
portfolio for those of any adversely affected Fund if National
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
National 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
11
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 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, National
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 National Integrity Life hereunder or by any
participating insurance company under an agreement containing
substantially similar representations, warranties and
covenants; (y) the failure by National 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 National 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 "National Integrity Affiliates" means Integrity Life Insurance
Company ("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
12
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.
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
National 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
National Integrity Life or the National Integrity Affiliates (the "National
Integrity Companies"), information maintained about customers of any of the
National Integrity Companies, and computer programs and procedures and other
information developed by the National Integrity Companies or any of their
respective employees or agents in connection with National Integrity Life's
performance of its duties under this Agreement are the valuable property of the
National 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 National Integrity Companies or any other information or
property of any of the National 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 National Integrity Companies who
also maintain accounts directly with the Trust) the Trust will hold such
information or property in confidence and refrain from using,
13
disclosing or distributing any such information or other property except (y)
with National Integrity Life's prior written consent, or (z) as required by law
or judicial process.
15.2 National 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. National 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
National Integrity Life from information supplied to it by the shareholders of
the Trust who also maintain accounts directly with National Integrity Life)
National Integrity Life will hold such information or property in confidence and
refrain from using, disclosing or distributing any such information or 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
National Integrity Life (the "Licensed Marks"), and is authorized to use and to
license other persons to use the Licensed Marks. Advisors hereby grants to
National Integrity Life and the National Integrity Affiliates a non-exclusive
license to use the Licensed Marks in connection with National 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 National Integrity Life and the National
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 National 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 National Integrity Life
shall have the right to continue to service outstanding Contracts bearing any of
the Licensed Marks.
16.3 National Integrity Life shall furnish to the Trust each piece of
sales literature or other promotional materials prepared by National 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
14
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.
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 National Integrity Life (for itself or on behalf of any
Separate Account or any Sub-Account):
National 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.
15
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.
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.
NATIONAL 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
17
EXHIBIT A
FUND PARTICIPATION AGREEMENT
NATIONAL 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
EXHIBIT B
FUND PARTICIPATION AGREEMENT
NATIONAL 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.
C-3
