EXHIBIT 1.2
PARTICIPATION AGREEMENT
AMONG
XXX XXXXXX FUNDS INC.,
AND
INTEGRITY LIFE INSURANCE COMPANY
DATED AS OF
JANUARY 10, 2001
TABLE OF CONTENTS
Page
ARTICLE I. Trust Units 4
ARTICLE II Representations and Warranties 5
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements; Voting 6
ARTICLE IV. Sales Material and Information 7
ARTICLE V Diversification 8
ARTICLE VI. Indemnification 8
ARTICLE VII. Applicable Law 8
ARTICLE VIII. Termination 11
ARTICLE IX. Notices 11
ARTICLE X. Miscellaneous 13
SCHEDULE A Separate Accounts and Contracts 16
SCHEDULE B Participating Xxx Xxxxxx UITs 17
SCHEDULE C Proxy Voting Procedures 18
PARTICIPATION AGREEMENT
Among
XXX XXXXXX FUNDS INC.,
and
INTEGRITY LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 10th day of January,
2001 by and among INTEGRITY LIFE INSURANCE COMPANY (hereinafter the "Company"),
organized under the laws of the state of Ohio, on its own behalf and on behalf
of each separate account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and XXX XXXXXX FUNDS INC. (hereinafter the "Underwriter"), a
Delaware corporation, as sponsor and principal underwriter of Xxx Xxxxxx Life
Portfolios and each successor Life Portfolio (each a "Trust, and collectively,
the "Trusts").
WHEREAS, the Trust has a registration statement effective with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended (the "1940 Act") by which it has registered as a unit
investment trust and the Trust will have a registration statement effective with
the SEC registering its units of fractional undivided interest ("Units") for
offer and sale under the Securities Act of 1933, as amended (the "1933 Act");
and
WHEREAS, the Underwriter desires the Trust to act as an investment
vehicle for the Accounts to be offered by the Company; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"), and serves as sponsor and principal underwriter for the Units of
the Trust; and
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable annuity contracts funded or to be funded through one or more of
the Accounts (the "Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid Contracts;
and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act, unless exempt from such registration;
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Units in the Trust on behalf of
each Account to fund certain of the aforesaid Contracts and the Underwriter is
authorized to sell such Units to each such Account at net asset value of such
Units, subject to any deferred fees as described in the Trust prospectus.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Trust, the Underwriter agree as follows:
ARTICLE I. Trust Units
1.1. The Underwriter shall cause the Trust to make Units available for
purchase by the Company and shall execute orders placed for each Account on a
daily basis at the net asset value next computed after receipt by the Trust or
its designee of such order. For purposes of this Section 1.1, the Company shall
be the designee of the Trust and Underwriter for receipt of such orders from
each Account and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such order by 9:00 a.m. CST time on
the next following Business Day. "Business Day" shall mean any day on which the
New York Stock Exchange is open for trading and on which the Trust calculates
its net asset value pursuant to the rules of the Securities and Exchange
Commission, as set forth in the Trust's prospectus. Notwithstanding the
foregoing, the Trust may refuse to sell Units to any person (including the
Company and the Accounts) or suspend or terminate the offering of Units if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Underwriter acting in good faith and in light
of its fiduciary duties under federal and any applicable state laws, necessary
in the best interest of the holders of Units.
1.2. The Trust and the Underwriter agree that Units will be sold only
to the Company, any affiliated insurance company and their separate accounts. No
Units will be sold directly to the general public. The Company agrees that the
Units will be used only for the purposes of funding the Contracts and Accounts
listed in Schedule A, as such schedule may be amended from time to time.
1.3. The Trust and the Underwriter agree to redeem for cash, on the
Company's request, any full or fractional Units, executing such requests on a
daily basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption (reflecting deduction of any accrued
but uncollected deferred fees). For purposes of this Section 1.3, the Company
shall be the designee of the Trust for receipt of requests for redemption from
each Account and receipt by such designee shall constitute receipt by the Trust;
provided that the Underwriter receives notice of such request for redemption on
the next following Business Day in accordance with the timing rules described in
Section 1.1.
1.4. The Company agrees that purchases and redemptions of Units offered
by the then-current prospectus of the Trust shall be made in accordance with the
provisions of such prospectus, consistent with the terms of the indenture
relating to the Trust. The Accounts of the Company, under which amounts may be
invested in the Trust are listed on Schedule A attached hereto and incorporated
herein by reference, as such Schedule A may be amended from time to time by
mutual written agreement of all of the parties hereto.
1.5. The Company will place separate orders to purchase or redeem
Units. Each order shall describe the net amount of Units and dollar amount of
each Trust to be purchased or redeemed. In the event of net purchases, the
Company shall pay for Units on the next Business Day after an order to purchase
Units is made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire. In the event of net redemptions,
the Trust's custodian shall pay the redemption proceeds by federal funds
transmitted by wire on the next Business Day after an order to redeem Units is
made in accordance with the provisions of Section 1.3 hereof. Notwithstanding
the foregoing, if the payment of redemption proceeds on the next Business Day
would require the Trust to dispose of Trust securities or otherwise incur
substantial additional costs, and if the Trust has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds shall
be wired to the Company within the period permitted by the 1940 Act and the
Underwriter shall notify in writing the person designated by the Company as the
recipient for such notice of such delay by 3:00 p.m. (CST) on the same Business
Day that the Company transmits the redemption order to the Trust.
1.6. Issuance and transfer of the Units will be by book entry only.
Certificates will not be issued to the Company or any Account. Units ordered
from the Trust will be recorded in an appropriate title for each Account or the
appropriate subaccount of each Account.
1.7. The Underwriter shall cause the Trust's custodian to furnish
prompt notice (by wire or telephone, followed by written confirmation) to the
Company of any dividends or capital gain distributions payable on the Units. The
Company hereby elects to receive all such dividends and capital gain
distributions as are payable on the Units in additional units of the Trust. The
custodian shall notify the Company of the number of units so issued as payment
of such dividends and distributions.
1.8. The Underwriter shall cause the Trust custodian to make the net
asset value per Unit (reflecting deduction of any accrued but uncollected
deferred fees) available to the Company on a daily basis as soon as reasonably
practical after such net asset value is calculated and shall use its best
efforts to make such net asset value per Unit available by 6:00 p.m. (CST).
1.9. If the custodian provides materially incorrect Unit net asset
value information through no fault of the Company, the Company shall be entitled
to an adjustment with respect to the Trust Units purchased or redeemed to
reflect the correct net asset value per share. The determination of the
materiality of any net asset value pricing error shall be based on the SEC's
recommended guidelines regarding such errors. The correction of any such errors
shall be made at the Company level pursuant to the SEC's recommended guidelines.
Any material error in the calculation or reporting of net asset value per share,
dividend or capital gain information shall be reported promptly upon discovery
to the Company.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered and will maintain the registration under the 1933 Act and the
regulations thereunder to the extent required by the 1933 Act; that the
Contracts will be issued and sold in compliance with all applicable federal and
state laws and regulations; and that the sale of the Contracts shall comply in
all material respects with state insurance suitability requirements. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under the Ohio Insurance Code and the regulations thereunder and
has registered or, prior to any issuance or sale of the Contracts, will register
and will maintain the registration of each Account as a unit investment trust in
accordance with and to the extent required by the provisions of the 1940 Act and
the regulations thereunder to serve as a segregated investment account for the
Contracts. The Company shall amend its registration statement for its contracts
under the 1933 Act and the 1940 Act from time to time as required in order to
effect the continuous offering of its Contracts.
2.2. The Underwriter represents and warrants that Units sold pursuant
to this Agreement shall be registered under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for issuance
in accordance with the laws of the State of New York and sold in compliance with
all applicable federal and state securities laws and regulations and that the
Trust, prior to any issuance or sale of units, will be duly organized and
validly existing as a trust in accordance with the laws of the State of New York
and will be a part of a unit investment trust registered under the 1940 Act and
the regulations thereunder to the extent required by the 1940 Act. The
Underwriter shall use its best efforts to amend the Trust's registration
statement for its Units under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of Units of the Trust and
annual successor series. The Company shall consult with the Underwriter
concerning any requirements to register Units for sale to the Accounts in any
state.
2.3. The Underwriter represents that the Trust will be qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that the Underwriter will notify the Company immediately upon having a
reasonable basis for believing that the Trust has ceased to so qualify or that
the Trust might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to
be a "segregated account" under applicable provisions of the Code and that each
Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Trust immediately upon having a reasonable
basis for believing that the Account or Contract has ceased to be so treated or
that they might not be so treated in the future.
2.5. The Underwriter makes no representation as to whether any aspect
of the Trust's operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states.
2.6. The Underwriter represents and warrants that it is and shall
remain duly registered under all applicable federal and state laws and
regulations and that it will perform its obligations for the Trust and the
Company in compliance with the laws and regulations of its state of domicile and
any applicable state and federal laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Trust are covered by a blanket fidelity
bond or similar coverage, in an amount equal to the greater of $5 million or any
amount required by applicable federal or state law or regulation. The aforesaid
includes coverage for larceny and embezzlement is issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Trust and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting
--------------------------------------------------------------------------------
3.1 The Underwriter, acting through the Trust, shall prepare and be
responsible for filing with the SEC and any state securities regulators, all
prospectuses, notices and other documents of the Trust required to be filed with
said regulators. The Trust shall bear the costs of registration and
qualification of its Units, preparation and filing of the documents listed in
this Section 3.1 and all taxes to which the Trust, as an issuer, is subject on
the issuance and transfer of its securities.
3.2 At least annually, the Underwriter, acting through the Trust or its
designee, shall provide the Company, free of charge, with as many printed
current prospectus of the Trust as reasonable necessary to facilitate its
obligations under this Agreement..
3.3 The Underwriter, acting through the Trust or its designee, shall
provide the Company, if and to the extent applicable to the Units, free of
charge with copies of each Trust report to unitholders and other communications
to unitholders. The Underwriter or the Trust shall be solely responsible for
printing and distributing all reports or communications to unit holders.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Trust to Contract Owners to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Trust Units in accordance with instructions received
from Contract owners; and
(iii) vote Trust Units for which no instructions have been received in
the same proportion as Trust Units for which instructions have
been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Trust Units
held in any segregated asset account in its own right, to the extent permitted
by law. The Trust and the Company shall follow the procedures, and shall have
the corresponding responsibilities, for the handling of proxy and voting
instruction solicitations, as set forth in Schedule C attached hereto and
incorporated herein by reference. The Company shall be responsible for ensuring
that each of its separate accounts participating in the Trust calculates voting
privileges in a manner consistent with the standards set forth on Schedule C.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust, the Underwriter or their designee, each piece of sales literature or
other promotional material prepared by the Company or any person contracting
with the Company in which the Trust or the Underwriter is named, at least ten
Business Days prior to its use. No such material shall be used if the
Underwriter or their designee reasonably objects to such use within ten Business
Days after receipt of such material.
4.2. Neither the Company nor any person contracting with the Company
shall give any information or make any representations or statements on behalf
of the Trust or concerning the Trust in connection with the sale of the
Contracts other than the information or representations contained in the
registration statement or Trust prospectus, as such registration statement or
Trust prospectus may be amended or supplemented from time to time, or in reports
to shareholders or proxy statements for the Trust, or in sales literature or
other promotional material approved by the Trust or its designee, except with
the permission of the Underwriter or its designee.
4.3. The Underwriter shall furnish, or shall cause to be furnished, to
the Company or its designee, each piece of sales literature or other promotional
material prepared on behalf of the Trust in which the Company or its Accounts,
are named at least ten Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.4. The Underwriter shall not give any information or make any
representations on behalf of the Company or concerning the Company, each
Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement or prospectus may be amended or supplemented from time to
time, or in published reports or solicitations for voting instruction for each
Account which are in the public domain or approved by the Company for
distribution to Contract owners, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission of
the Company.
4.5. The Underwriter will provide to the Company at least one complete
copy of allprospectuses, statements of additional information, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no action letters, and all amendments to any of the above, that
relate to the Trust or its Units, contemporaneously with the filing of such
document with the Securities and Exchange Commission or other regulatory
authorities.
4.6. The Company will provide to the Trust at least one complete copy
of all prospectuses, statements of additional information, solicitations for
voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no action letters, and all amendments
to any of the above, that relate to the investment in an Account or Contract,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), prospectuses, statements of additional information, shareholder
reports, and proxy materials.
ARTICLE V. Diversification
5.1. The Fund will at all times, consistent with instructions from the
Company received initially and from time to time thereafter, invest money form
the Contracts in such a manner as to ensure the Contracts will be treated as
variable contracts under the Code and regulations issued thereunder. Without
limiting the scope of the foregoing, the Trust will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.717-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations.
ARTICLE VI. Indemnification
6.1. Indemnification By The Company
6.1(a). The Company agrees to indemnify and hold harmless the Trust and
the Underwriter and each of its directors, officers, employees and agents and
each person, if any, who controls the Underwriter within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 6.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Trust's Units or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Contracts or contained in the Contracts or
sales literature 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 the Company by or on behalf of the Trust
for use in the registration statement, prospectus or statement of
additional information for the Contracts or in the Contracts or
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Trust
Units; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature of the Trust not supplied by the
Company, or persons under its control and other than statements
or representations authorized by the Underwriter) or unlawful
conduct of the Company or persons under its control, with respect
to the sale or distribution of the Contracts or Trust Units; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, statement of additional information or
sales literature of the Trust or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such a statement or omission was made in reliance
upon and in conformity with information furnished to the
Underwriter by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
6.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
6.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim 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 Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense thereof. The Company also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
6.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
this Agreement, the issuance or sale of the Trust Units or the Contracts, or the
operation of the Trust.
6.2. Indemnification by Underwriter
6.2(a). The Underwriter agrees, with respect to each Trust that it
distributes, to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 6.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Underwriter) or litigation (including legal and other expenses),
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Trust's Units that it distributes or
the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature 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
Underwriter by or on behalf of the Company for use in the
registration statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Trust Units; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control and other than statements or representations authorized
by the Company) or unlawful conduct of the Trust or Underwriter
or persons under their control, with respect to the sale or
distribution of the Contracts or Trust Units; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
or statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Trust
or the Underwriter; or
(iv) arise as a result of any failure by the Underwriter to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by and in
accordance with the provisions of Section 6.2(b) and 6.2(c)
hereof.
6.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
6.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim 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 Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
6.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with this Agreement, the issuance or sale of the
Contracts or the operation of each Account.
6.3 Substitution Orders for Contracts
6.3(a) Upon the expiration of a Portfolio outlined in Schedule B, if
Company is required to file an application for an order pursuant to Section
26(b) of the Investment Company Act of 1940 to allow a substitution of another
portfolio for those listed in Schedule B, Underwriter shall bear up to
$10,000.00 of reasonable costs to obtain and implement such an order. Company
shall bear any additional costs of obtaining and implementing such an order.
ARTICLE VII. Applicable Law
7.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Illinois.
7.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE VIII. Termination
8.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Underwriter
with respect to any Trust based upon the Company's determination
that Units of such Trust are not reasonably available to meet the
requirements of the Contracts. Reasonable advance notice of
election to terminate shall be furnished by the Company, said
termination to be effective ten (10) days after receipt of notice
unless the Underwriter makes available a sufficient number of
Units of the Trust to reasonably meet the requirements of the
Account within said ten (10) day period; or
(c) termination by the Company by written notice to the Underwriter
with respect to any Trust in the event any of the Trust's Units
are not registered, issued or sold in accordance with applicable
state and/or federal law or such law precludes the use of such
Units as the underlying investment medium of the Contracts issued
or to be issued by the Company. The terminating party shall give
prompt notice to the other parties of its decision to terminate;
or
(d) termination by the Company by written notice to the Underwriter
with respect to any Trust in the event that such Trust ceases to
qualify as a Regulated Investment Company under Subchapter M of
the Code or under any successor or similar provision; or
(e) termination by the Company by written notice to the Underwriter
with respect to any Trust in the event that such Trust fails to
meet the diversification requirements specified in Article V
hereof; or
(f) termination by the Underwriter by written notice to the Company,
if the Underwriter, shall determine, in its sole judgment
exercised in good faith, that the Company and/or their affiliated
companies has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity,
provided that the Underwriter will give the Company sixty (60)
days' advance written notice of such determination of its intent
to terminate this Agreement, and provided further that after
consideration of the actions taken by the Company and any other
changes in circumstances since the giving of such notice, the
determination of the Underwriter shall continue to apply on the
60th day since giving of such notice, then such 60th day shall be
the effective date of termination; or
(g) termination by the Company by written notice to the Underwriter,
if the Company shall determine, in its sole judgment exercised in
good faith, that either the Trust or the Underwriter has suffered
a material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity, provided that the Company
will give the Underwriter sixty (60) days' advance written notice
of such determination of its intent to terminate this Agreement,
and provided further that after consideration of the actions
taken by the Underwriter and any other changes in circumstances
since the giving of such notice, the determination of the Company
shall continue to apply on the 60th day since giving of such
notice, then such 60th day shall be the effective date of
termination; or
(h) termination by any party upon the other party's breach of any
representation in Section 2 or any material provision of this
Agreement, which breach has not been cured to the satisfaction of
the terminating party within ten (10) days after written notice
of such breach is delivered to the Underwriter or the Company, as
the case may be; or
(i) termination by the Underwriter by written notice to the Company
in the event an Account or Contract is not registered or sold in
accordance with applicable federal or state law or regulation, or
the Company fails to provide pass-through voting privileges as
specified in Section 3.4.
8.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Underwriter shall at the option of the Company, continue to make
additional Trust Units available pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts") unless such
further sale of Trust Units is proscribed by law, regulation or applicable
regulatory body. Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to direct reallocation of investments in the Trust,
redemption of investments in the Trust and/or investment in the Trust upon the
making of additional purchase payments under the Existing Contracts.
8.3. The Company shall not redeem Trust Units attributable to the
Contracts (as distinct from Trust Units attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Trust that was
otherwise available under the Contracts without first giving the Underwriter 90
days notice of its intention to do so.
ARTICLE IX. Notices
9.1 Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to Underwriter:
Xxx Xxxxxx Funds Inc.
0 Xxxxxxxx Xxxxx, X.X. Xxx 0000
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
If to the Company:
Integrity Life Insurance Company
000 Xxxx Xxxxxx Xx.
Xxxxxxxxxx, XX 00000
ATTN: General Counsel
ARTICLE X. Miscellaneous
10.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
10.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
10.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
10.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
10.6. 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 in equity, which the parties hereto are entitled to under
state and federal laws.
10.7. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.
10.8. The Company shall furnish, or shall cause to be furnished, to the
Underwriter or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any), as
soon as practical and in any event within 90 days after the end
of each fiscal year;
(b) the Company's June 30th quarterly statements (statutory), as soon
as reasonably practicable;
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any other public report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative as of the date specified above.
INTEGRITY LIFE INSURANCE COMPANY
on behalf of itself and each of its Accounts named in
Schedule A hereto, as amended from time to time
By: ________________________________________________
XXX XXXXXX FUNDS INC.
By: ________________________________________________
Xxxxxx Xxxxxxx
Executive Vice President
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Numbers and Names of Contracts
Date Established by Board of Directors Funded by Separate Account
--------------------------------------------------------------------------------
SCHEDULE B
PARTICIPATING UNIT INVESTMENT TRUST PORTFOLIOS
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Trust. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Underwriter as
early as possible before the date set by the custodian for the meeting
of unitholders of the Trust to enable the Company to consider and
prepare for the solicitation of voting instructions from owners of the
Contracts and to facilitate the establishment of tabulation
procedures. At this time the custodian of the Trust will inform the
Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run,"
or other activity, which will generate the names, address and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status
of the Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to the Trust, as soon as possible, but no later than two
weeks after the Record Date.
3. The Trust's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting
instruction solicitation material. The Underwriter shall cause the
custodian of the Trust to provide the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the custodian of the Trust. The
Company, at its expense, shall produce and personalize the Voting
Instruction Cards. The Trust or its affiliate must approve the Card
before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the
Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units (or equivalent Units)
e. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Trust).
(This and related steps may occur later in the chronological process
due to possible uncertainties relating to the proposals.)
5. During this time, the custodian of the Trust will develop, produce,
and the Trust will pay for the Notice of Proxy and the Proxy Statement
(one document). Printed and folded notices and statements will be sent
to Company for insertion into envelopes (envelopes and return
envelopes are provided and paid for by the Company). Contents of
envelope sent to Customers by the Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to
the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote
as quickly as possible and that their vote is important. One
copy will be supplied by the custodian of the Trust.)
e. cover letter - optional, supplied by Company and reviewed
and approved in advance by the custodian of the Trust.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to the
custodian of the Trust.
7. Package mailed by the Company.
* The Trust must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure and has
not been required by the Trust in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "Xxxx X. Xxxxx,
Trustee," then that is the exact legal name to be printed on the Card and is the
signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g.,
mutilated, illegible) of the procedure are "hand verified," (i.e.,
examined as to why they did not complete the system). Any questions on
those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to
sort the Cards as they first arrive into categories depending upon
their vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
12. The actual tabulation of votes is done in units. (It is very important
that the Trust receives the tabulations stated in terms of a
percentage and the number of units). The Trust must review and approve
tabulation format.
13. Final tabulation in Units is verbally given by the Company to the
custodian of the Trust on the morning of the meeting not later than
10:00 A.M. (CST) time. The custodian of the Trust may request an
earlier deadline if reasonable and if required to calculate the vote
in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Units will be
required from the Company as well as an original copy of the final
vote. The custodian of the Trust will provide a standard form for each
Certification.
15. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes, the
Trust will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
