FUND PARTICIPATION AGREEMENT
This Fund Participation Agreement (the "Agreement"), dated as of the _____
day of _______________, 2001, is made by and among Integrity Life Insurance
Company ("Integrity Life"), on its own behalf and on behalf of each of its
separate accounts (each a "Separate Account" and together the "Separate
Accounts") and the various sub-accounts of each Separate Account (each a
"Sub-Account" or together the "Sub-Accounts") as set forth in Exhibit A attached
hereto as amended by the parties from time to time, 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 B 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 Integrity Life for inclusion in the
Post-Effective Amendments to the Registration Statements of the
Separate Accounts (the "Integrity Life Registration Statements") for
the Contracts (as defined in Section 1.2(a) below) to be issued by
the Separate Accounts. The information does not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(d) The Trust Registration Statement does not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading. This representation does not extend to
statements or omissions made in reliance upon and in conformity with
written information furnished by Integrity Life for inclusion in the
Trust Registration Statement.
(e) The Trust and each Fund complies with and qualifies under the
requirements applicable to regulated investment companies under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). The Trust will notify Integrity
Life immediately upon having a reasonable basis for believing that
the Trust or any Fund has ceased to comply with these requirements
or might not meet these requirements in the future.
(f) Each Fund complies with the diversification requirements set forth
in Section 5(b)(1) of the 1940 Act and Section 817(h) of the Code
and Section 1.817-5(b) of the regulations under the Code. The Trust
will notify Integrity Life immediately upon having a reasonable
basis for believing that any Fund has ceased to meet these
requirements or might not meet these requirements in the future.
(g) Except for shares or interests sold for organizational purposes
prior to the effective date of the initial Registration Statement of
the Trust, the Trust will not sell shares of the Funds to purchasers
other than the Separate Accounts or one or more other separate
accounts established by Integrity Life or other life insurance
companies.
1.2 Integrity Life makes the following representations and covenants:
(a) Integrity Life is an insurance company organized and is validly
existing and in good standing under applicable law and has legally
and validly established the Separate Accounts as separate accounts
under __________________ law. The Separate Accounts are registered
as unit investment trusts under the 1940 Act to serve as investment
vehicles for variable annuity contracts and flexible premium
variable universal life insurance contracts to be offered by the
Separate Accounts (the "Contracts").
(b) The offering of the Contracts has been registered under the 1933
Act. The Contracts are treated as annuity contracts or life
insurance contracts under the applicable provisions of the Code.
Integrity Life will notify the Trust immediately upon having a
reasonable basis for believing that the Contracts have ceased to be
so treated or might not be so treated in the future.
(c) Each Sub-Account is a "segregated asset account" for purposes of
diversification testing. Interests in each Sub-Account are offered
exclusively through the purchase of a "variable contract," within
the meaning of such term under Section 817(d) of the Code. Integrity
Life will notify the Trust immediately upon having a reasonable
basis for believing that these requirements are no longer being met
or might not be met in the future.
(d) The information regarding Integrity Life and the Separate Accounts
that Integrity Life has supplied to the Trust for inclusion in the
Trust Registration Statement does not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
1.3 The representations and covenants contained in Sections 1.1 and 1.2
are continuing representations and covenants of each party making them and must
be satisfied throughout the term of this Agreement. The Trust will provide
Integrity Life, within ten (10)
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business days (y) after the end of each year, a letter from the appropriate
officer of the Trust certifying to the continued accuracy of the representations
contained in Section 1.1 above, and (z) after the end of each calendar quarter,
a detailed listing of the individual securities and other assets, if any, held
by each Fund as of the end of such calendar quarter. Integrity Life will provide
the Trust, within ten (10) business days after the end of each year, a letter
from the appropriate officer of Integrity Life certifying to the continued
accuracy of the representations contained in Section 1.2 above.
2. Marketing. Integrity Life, through its distributor (the "Distributor"),
will make all reasonable efforts to market the Contracts. In marketing the
contracts, Integrity Life and the Distributor will comply with all applicable
state or federal securities and insurance laws. Integrity Life will adopt and
implement procedures reasonably designed to ensure that information concerning
the Trust and its affiliates 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 Integrity Life, promptly following the
close of trading (the "Close") on each Business Day (as defined in 3.3 below),
(x) the net asset value per share for each Fund as of the Close on that Business
Day, (y) the per share amount of any dividend or capital gain distribution made
by a Fund in respect of the shares held by the corresponding Sub-Account, if the
"ex-dividend" date for such dividend or distribution has occurred since the
Close of the preceding Business Day, and (z) based on these net asset values and
dividends and distributions, the Accumulation Unit Value (as such term is
defined in the Integrity Life Registration Statement) to be used in determining
values in each Sub-Account.
If the Trust provides Integrity Life with materially incorrect share
net asset value information, the Trust will make, or will cause the Accounting
Agent to make, an adjustment to the number of shares purchased or redeemed for
the Separate Accounts to reflect the correct net asset value per share. Any
material error in the calculation or reporting of net asset value per share,
dividend or capital gains information, or Accumulation Unit Values will be
reported promptly upon discovery to Integrity Life.
Notwithstanding the above, the Trust will not be held responsible
for providing Integrity Life with values on any day that is not a Business Day,
when an emergency exists making the valuation of a Fund's portfolio securities
not reasonably practicable, or during any period when the Securities and
Exchange Commission ("SEC") has by order permitted the suspension of pricing of
shares for the protection of shareholders.
3.2 The Trust will execute all orders from Integrity Life (whether net
purchases or net redemptions) at the net asset value per share, as determined as
of the Close on the Business Day on which the orders were duly received by
Integrity Life from owners of the Contracts in accordance with the Integrity
Life Registration Statement. For purposes of this Section 3.2,
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Integrity Life will be the designee of the Trust for receipt of orders from
owners of the Contracts. Accordingly, receipt of an order for the purchase or
the redemption of shares of the Trust by Integrity Life will, for purposes of
Section 3.1 above and this Section 3.2, constitute receipt of an order by the
Trust, provided that the Trust receives notice of the order by 11:00 A.M. on the
following Business Day.
Orders received by Integrity Life will be sent directly to the Trust or
its specified agent, and payment for purchases, net of redemptions, will be
wired to a custodial account designated by the Trust. If redemptions for the
Trusts for any period exceed purchases, the Trust will wire the excess amount to
an account designated by Integrity Life.
Promptly after executing the orders, the Trust will provide to Integrity
Life a written confirmation, which will include (x) the number of shares of the
Trust in each Fund at the Close of the preceding Business Day, (y) a detailed
account, by dollars and by shares, of the purchases and redemptions for the
Trust (and the net result of the purchases and redemptions) by each Sub-Account
since the Close of the applicable Business Day, and (z) the number of shares of
each Fund of the Trust held by each Fund's corresponding Sub-Account after all
such transactions have been executed.
3.3 "Business Day" means any day on which the New York Stock Exchange is
open for trading and each other day, if any, on which the Trust is required to
calculate the net asset value of a Fund, as set forth in the Trust Registration
Statement.
4.1 Expenses. All expenses related to (y) the establishment and operation
of the Trust, including all costs of registration and other compliance under
state and federal laws and (z) the performance by the Trust of its obligations
under this Agreement, will be paid by the Trust.
4.2 Documents To Be Provided by Trust. The Trust will provide to Integrity
Life, for use by the Separate Accounts and the Sub-Accounts, a reasonable
quantity of (w) all prospectuses of the Trust or any Fund required for delivery
to existing Contract owners and all related statements of additional
information, (x) all proxy material required for meetings of shareholders of the
Trust or any Fund thereof, (y) all periodic reports to shareholders of the Trust
required to be delivered to the Contract owners and (z) any other material
required by applicable laws, rules or regulations to be distributed to the
owners of the Contracts.
5. Sales Representations. Except with the express written permission of
the Trust, Integrity Life and its agents will not make any representations
concerning the Funds other than those contained in (w) the then current
prospectuses and related statements of additional information of the Trust or
any Fund, (x) published reports or other materials of the Trust that are in
public domain and approved by the Trust for distribution, (y) any current
printed sales literature of the Trust or any Fund and (z) any current printed
sales literature related to the Contracts that is delivered to the Trust and as
to which the Trust has not objected by notice to Integrity Life given in
accordance with Section 17.
6. Administrative Services to Contract Owners. Administrative services to
Contract owners will be the responsibility of Integrity Life and will not be the
responsibility of the Trust.
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The Trust recognizes that Integrity Life, through the Separate Accounts and the
Sub-Accounts, will be a shareholder of the Trust and the Funds for the benefit
of owners of the Contracts.
7. Information To Be Provided by Trust.
(a) The Trust will provide Integrity Life, after the end of each fiscal
year of the Trust, with such investment advisory expense data and
other expense data of each Fund for the fiscal year, and with such
other information related to the Trust or the Funds as may be
necessary to enable Integrity Life to fulfill, on a timely basis,
its prospectus disclosure obligations under federal securities laws
and its obligations under the Contracts to provide information to
the Contract owners.
(b) The Trust will provide Integrity Life, as soon as reasonably
practical after the end of each fiscal year of the Trust, with all
information regarding the Funds required by Integrity Life to meet
the requirements imposed on it, the Separate Accounts or the
Sub-Accounts pursuant to Rule 30e-2 under the 1940 Act.
(c) The Trust will promptly disclose in writing to Integrity Life any
information regarding the Trust or any Fund that is reasonably
required by Integrity Life in order to cause the information
regarding the Trust and the Funds included in the prospectuses,
statements of additional information and other disclosure documents
then being used by Integrity Life in connection with its offering of
the Contracts to conform to the representations and covenants made
in Section 1.1.
8. Voting. So long as, and to the extent that, the SEC continues to
interpret the 1940 Act to require (and so long as any state insurance department
or agency having jurisdiction requires) pass-through voting privileges for
variable contract owners, the Trust will provide Integrity Life, on a timely
basis and at no cost to Integrity Life, with sufficient copies of all proxy
material for distribution to the Contract owners. Integrity Life will distribute
all the material, will solicit voting instructions from Contract Owners and will
vote shares in the applicable Fund in accordance with instructions received from
the Contract owners. Integrity Life will vote those shares for which no
instructions have been received in the same proportion as the portion for which
instructions have been received from Contract owners. Integrity Life will not
recommend or oppose action in connection with any such vote or interfere with
any such solicitation of proxies.
9. Insurance. The Trust will maintain, without cost or expense to
Integrity Life, (y) fidelity bond coverage in an amount not less than the
minimum coverage required by Rule 17g-1 under the 1940 Act, and (z) errors and
omissions coverage in an amount and with companies determined by the Board of
Trustees of the Trust. The Trust and each Fund will be named insureds under each
such coverage. At the request of Integrity Life, which may be made not more
frequently than twice in any calendar year, the Trust will supply, or cause the
company issuing such policies to supply evidence in writing that the bonds and
other insurance policies called for by this Section 9 are then in force with
such companies and in such amounts as either comply with Rule 17g-1 or have been
approved by the Board of Trustees of the Trust.
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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;
(c) at the option of Integrity Life, immediately upon delivery of
written notice to the Trust, if (w) any Fund ceases to qualify as a
regulated investment company under Subchapter M of the Code or fails
to comply with Section 817(h) or the Code, provided that the
termination will be effective only as to those Funds that ceases to
qualify or fails to comply (x) shares in any Fund are not available
for any reason to meet the requirements of the Contracts, as
determined by Integrity Life, provided that the termination will be
effective only as to those Funds that are not reasonably available,
(y) any one or more of the representations set forth in Section 1.1
are, individually or in the aggregate, materially untrue, or if the
Trust breaches any one or more of the terms of this Agreement and
such breaches are, individually or in the aggregate, material, or
(z) any combination of untrue representations and breaches of
agreement terms are, individually or in the aggregate, material;
(d) at the option of the Trust, immediately upon delivery of written
notice to Integrity Life, if (x) any Contract ceases to qualify as
an annuity contract or life insurance contract under the Code (other
than by reason of a Fund's noncompliance with Subchapter M or
Section 817(h) of the Code), provided that the termination will be
effective only as to those Contracts that cease to qualify, (y) any
one or more of the representations set forth in Section 1.2 are,
individually or in the aggregate, materially untrue, or if Integrity
Life breaches any one or more of the terms of this Agreement and
such breaches are, individually or in the aggregate, material, or
(z) any combination of untrue representations and breaches of
agreement terms are, individually or in the aggregate, material;
(e) at the option of the Trust, immediately upon delivery of written
notice to Integrity Life, if formal proceedings against a Separate
Account or Integrity Life have been instituted by the National
Association of Securities Dealers ("NASD"), the SEC or any other
regulatory body;
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(f) at the option of Integrity Life, immediately upon delivery of
written notice to the Trust, if formal proceedings against the Trust
have been instituted by the NASD, the SEC or any other regulatory
body;
(g) at the option of the Trust or Integrity Life, immediately upon
notice to the other party, if shares of the Funds or the Contracts
are not issued or sold in conformance with federal law or such law
precludes the use of shares in the Fund as an underlying investment
medium for the corresponding Sub-Account or indirectly for the
Contracts issued or to be issued by the Separate Accounts,. provided
that the termination will be effective only as to those Funds or
those Contracts that are adversely affected; or
(h) with respect to any Fund, if either the requisite vote of the
Contract owners having an interest in the Fund is obtained for, or
the SEC gives requisite approval to, the substitution of the shares
or interests of another investment company for the shares of the
Fund as investments for any one or more of the Sub-Accounts;
provided that Integrity Life gives the Trust not less than 60 days
prior written notice of either (y) any such proposed vote of
Contract owners, or (z) any proposed application for an order of
substitution from the SEC.
10.2 Prompt notice of any triggering event described in Section 10(b) -
Section 10(g) above occur will be given by any party to the other parties.
10.3 The parties hereto agree to cooperate and give reasonable assistance
to the other parties in taking all necessary and appropriate steps for the
purpose of ensuring that a Sub-Account or a Separate Account owns no shares of a
Fund as soon as reasonably practicable after the termination of the Agreement.
11. Termination Does Not Relieve Certain Obligations. Termination as the
result of any cause listed in Section 10, except as and in respect of any Fund
or Funds as to which this Agreement was terminated in accordance with Section
10(b) or Section 10(f), will not affect the obligation of the Trust to provide
shares of the Funds for investment by the Sub-Accounts (and all related
information required by Integrity Life, the Separate Accounts and the
Sub-Accounts to meet the requirements of the 1940 Act and the Code as to such
investment) in connection with the Contracts then in force for which the shares
of the Funds are serving as underlying investment media, unless the further sale
of the shares is proscribed by law, by the SEC or by any other regulatory body.
12. Indemnification.
12.1 Of Trust by Integrity Life.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c) below,
Integrity Life agrees to indemnify and hold harmless the Trust, its
affiliates, and each person, if any, who controls the Trust or its
affiliates within the meaning of Section 15 of the Securities Act of
1933 (the "1933 Act") and each of their respective Trustees,
directors and officers, (collectively, the "Indemnified Parties" for
the purposes of this Section 12.1) against any and all losses,
claims, damages, liabilities
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(including amounts paid in settlement with the written consent of
Integrity Life) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise; provided, a Sub-Account owns
shares of the corresponding Fund and insofar as such losses, claims,
damages, liabilities or actions:
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
Integrity Life Registration Statement or related prospectus,
the Contracts, or sales literature or advertising for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided, that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to Integrity Life or the Distributor by or on behalf
of the Trust for use in such Integrity Life Registration
Statement or related prospectus, the Contracts, or sales
literature or advertising for the Contracts, or otherwise for
use in connection with the sale of the Contracts or shares of
the Funds (or any amendment or supplement to any of the
foregoing); or
(2) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Trust Registration Statement or any related
prospectus, or sales literature or advertising of the Trust
[or any amendment or supplement to any of the foregoing] that
were not supplied for use therein by or on behalf of Integrity
Life, the Distributor or their respective affiliates and on
which such persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of Integrity Life, the
Distributor or their respective 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 its affiliates by or on behalf of Integrity Life,
the Distributor or their respective affiliates for use in the
Trust Registration Statement or any related prospectus or
sales
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literature or advertising of the Trust (or any amendment or
supplement to any of the foregoing); or
(4) arise as a result of any failure by Integrity Life or the
Distributor to perform the obligations, provide the services
and furnish the materials required of them under the terms of
this Agreement, or any material breach of any representation
and/or warranty made by Integrity Life in this Agreement or
arise out of or result from any other material breach of this
Agreement by Integrity Life or the Distributor; or
(5) arise as a result of failure of the Contracts to qualify as
annuity contracts or life insurance contracts under the Code,
otherwise than by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Integrity Life shall not be liable under this Section 12.1 with
respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the
performance by that Indemnified Party of its duties or by reason of
that Indemnified Party's reckless disregard of obligations or duties
(y) under this Agreement or (z) to the Trust.
(c) Integrity Life shall not be liable under this Section 12.1 with
respect to any action against an Indemnified Party unless the Trust
shall have notified Integrity Life in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the action shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but
failure to notify Integrity Life of any such action shall not
relieve Integrity Life from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than
on account of this Section 12.1. Except as otherwise provided
herein, in case any such action is brought against an Indemnified
Party, Integrity Life shall be entitled to participate, at its own
expense, in the defense of such action and also shall be entitled to
assume the defense thereof, with counsel approved by the Indemnified
Party named in the action, which approval shall not be unreasonably
withheld. After notice from Integrity Life to such Indemnified Party
of Integrity Life's election to assume the defense thereof, the
Indemnified Party will cooperate fully with Integrity Life and shall
bear the fees and expenses of any additional counsel retained by it,
and Integrity Life will not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently
incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
12.2 Of Integrity Life by Trust.
(a) Except to the extent provided in Section 2 and Sections 12.2(c),
12.2(d) and 12.2(e) below, the Trust agrees to indemnify and hold
harmless Integrity Life, its
9
affiliates, and each person, if any, who controls Integrity Life or
its affiliates 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 its
affiliates by or on behalf of Integrity Life or its affiliates
for use in the Trust Registration Statement or any related
prospectus, or sales literature or advertising of the Trust,
or otherwise for use in connection with the sale of the
Contracts or shares of the Funds (or any amendment or
supplement to any of the foregoing); or
(2) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Integrity Life Registration Statement or
related prospectus, or sales literature or advertising for the
Contracts [or any amendment or supplement to any of the
foregoing] that are not supplied for use therein by or on
behalf of the Trust or its affiliates and on which such
persons have reasonably relied) or the negligent, illegal or
fraudulent conduct of the Trust or its affiliates or persons
under their control (including, without limitation, their
employees and "persons associated with a member" as that term
is defined in Section (q) of Article I of the NASD By-Laws) in
connection with the sale or distribution of shares of the
Funds; or
(3) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
Integrity Life Registration Statement or related prospectus,
or sales literature or advertising for the Contracts (or any
amendment or supplement to any of the foregoing) or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with
information furnished to Integrity Life, the Distributor
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or their respective affiliates by or on behalf of the Trust or
its affiliates for use in any Integrity Life Registration
Statement or related prospectus, or sales literature or
advertising for the Contracts (or any amendment or supplement
to any of the foregoing); or
(4) arise as a result of any failure by the Trust to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any
material breach of any representation and/or warranty made by
the Trust in this Agreement or arise out of or result from any
other material breach of this Agreement by the Trust.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, the Trust agrees to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims,
damages, liabilities (including amounts paid in settlement thereof
with the written consent of the Trust), or actions in respect
thereof (including, to the extent reasonable, legal and other
expenses) to which the Indemnified Parties may become subject
directly or indirectly under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, damages,
liabilities or actions directly or indirectly result from or arise
out of the failure of any Fund to operate as a regulated investment
company in compliance with (y) Subchapter M of the Code and
regulations thereunder, or (z) Section 817(h) of the Code and
regulations thereunder, including, without limitation, any income
taxes and related penalties, rescission charges, liability under
state law to Contract owners asserting liability against Integrity
Life pursuant to the Contracts, the costs of any ruling and closing
agreement or other settlement with the IRS, and the cost of any
substitution by Integrity Life of shares of another investment
company or portfolio for those of any adversely affected Fund if
Integrity Life reasonably deems such substitution to be necessary or
appropriate as a result of the noncompliance.
(c) The Trust shall not be liable under this Section 12.2 with respect
to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by
that Indemnified Party of its duties or by reason of such
Indemnified Party's reckless disregard of its obligations and duties
(y) under this Agreement or (z) to Integrity Life.
(d) The Trust shall not be liable under this Section 12.2 with respect
to any action against an Indemnified Party unless the Indemnified
Party shall have notified the Trust in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the action shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but
failure to notify the Trust of any such action shall not relieve the
Trust from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of
this Section 12.2. Except as otherwise provided herein, in case any
such action is brought against an Indemnified Party, the Trust will
be entitled to
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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, Integrity Life or any other
participating insurance company or any Contract owner, with respect
to any losses, claims, damages, liabilities or expenses that arise
out of or result from (x) a breach of any representation, warranty,
and/or covenant made by Integrity Life hereunder or by any
participating insurance company under an agreement containing
substantially similar representations, warranties and covenants; (y)
the failure by Integrity Life or any participating insurance company
to maintain its segregated asset account (which invests in any Fund)
as a legally and validly established segregated asset account under
applicable state law and as a duly registered unit investment trust
under the provisions of the 1940 Act (unless exempt therefrom); or
(z) the failure by Integrity Life or any participating insurance
company to maintain its variable annuity or life insurance contracts
(with respect to which any Fund serves as an underlying funding
vehicle) as annuity contracts or life insurance contracts under
applicable provisions of the Code.
12.3 Effect of Notice. Any notice given by the indemnifying party to an
Indemnified Party referred to in Sections 12.1(c) or 12.2(d) above of
participation in or control of any action by the indemnifying party will in no
event be deemed to be an admission by the indemnifying party of liability,
culpability or responsibility, and the indemnifying party will remain free to
contest liability with respect to the response to the claim among the parties or
otherwise.
13. Mixed Funding Procedures. The parties agree to comply with the mixed
funding procedures set forth in Exhibit C 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 C shall be deemed modified if and only to the
extent required in order to comply with the applicable terms and conditions
thereof.
12
14. Additional Separate Accounts and Available Funds.
14.1 The parties hereto may agree, from time to time, (y) to amend
Schedule A to permit additional sub-accounts or additional separate accounts of
Integrity Life ("Additional Accounts") to purchase shares of the Funds or
additional series of the Trust ("Additional Funds") or (z) to amend Schedule B
to make the Funds or Additional Funds available for purchase by the Separate
Accounts or Additional Accounts or to delete, combine or modify the series of
the Trust available for purchase by the Separate Accounts or Additional
Accounts. Upon such amendment to Schedule A or to Schedule B, any applicable
reference to a Sub-Account, a Separate Account or a Fund shall include a
reference to the Additional Accounts or the Additional Funds. Schedules A and B,
as amended from time to time, are incorporated herein by reference and are a
part of this Agreement.
14.2 The Board of Trustees of the Trust (the "Trustees") may refuse to
sell shares of any series of the Trust to any person. The Trustees may suspend
or terminate the offering of shares of any series of the Trust if (y) such
action is required by law or by regulatory authorities having jurisdiction or
(z) in the sole discretion of the Trustees acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, such action
is deemed in the best interests of the shareholders of such series.
15. Confidentiality. [TEXT TO BE INSERTED]
16. Trademarks and Fund Names. [TEXT TO BE INSERTED]
17. Notices. Any notice, claim, request or demand required by this
Agreement will be in writing and will be deemed to have been duly given on the
day delivered or transmitted by fax or on the third business day after mailing
(first class, postage prepaid) to the fax numbers or addresses set forth below:
(a) If to Integrity Life (for itself or on behalf of any Separate
Account or any Sub-Account):
Integrity Life Insurance Company
Louisville KY
Fax: (502) _____-__________
Attn: ___________________________
with a copy to:
Fax: ( ) _____-___________
13
(b) If to the Trust (for itself or on behalf of any of its Funds):
Touchstone Variable Series Trust
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxx 00000
Fax: (513) 362-
Attn: Xxxx X. XxXxxxxx
with a copy to:
Xxxxx X. XxXxxxxxxx
Xxxxx Xxxxx Xxxx LLC
0000 XXX Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Fax: (000) 000-0000
18. No Waiver. The forbearance or neglect of any party to insist upon
strict compliance by any other party, with any of the provisions of this
Agreement, whether continuing or not, or to declare a termination against the
other party, will not be construed as a waiver of any of the rights or
privileges of any party hereunder. No waiver of any right or privilege of any
party arising from any default or failure of performance by any other party will
affect the rights or privileges of any party in the event of a further default
or failure of performance.
19. Assignment. No party to this Agreement may assign this Agreement or
any interest in the Agreement, by operation of law or otherwise, without the
prior written consent of all other parties to this Agreement.
20. Governing Law. This Agreement will be construed and the provisions of
this Agreement interpreted under and in accordance with the laws of Ohio. This
Agreement will be subject to the provisions of the federal securities statutes,
rules and regulations, including such exemptions from those statutes, rules and
regulations as the SEC may grant, and the terms of this Agreement will be
interpreted and construed in accordance therewith.
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. [TEXT TO BE INSERTED]
14
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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
_____ day of ___________________, 2001.
INTEGRITY LIFE INSURANCE COMPANY
By: ____________________________________
____________________________________
Name
____________________________________
Title
TOUCHSTONE VARIABLE SERIES TRUST
By: ____________________________________
Xxxx X. XxXxxxxx, President
15
EXHIBIT A
Fund Participation Agreement
Integrity Life Insurance Company and Touchstone Variable Series Trust
Small Cap Value Sub-Account
Emerging Growth Sub-Account
International Equity Sub-Account
High Yield Sub-Account
Value Plus Sub-Account
Growth & Income Sub-Account
Enhanced 30 Sub-Account
Balanced Sub-Account
Bond Sub-Account
Standby Income Sub-Account
Growth/Value Sub-Account
Equity Sub-Account
Money Market Sub-Account
EXHIBIT B
Fund Participation Agreement
Integrity Life Insurance Company and Touchstone Variable Series Trust
Touchstone Small Cap Value Fund
Touchstone Emerging Growth Fund
Touchstone International Equity Fund
Touchstone High Yield Fund
Touchstone Value Plus Fund
Touchstone Growth & Income Fund
Touchstone Enhanced 30 Fund
Touchstone Balanced Fund
Touchstone Bond Fund
Touchstone Standby Income Fund
Touchstone Growth/Value Fund
Touchstone Equity Fund
Touchstone Money Market Fund
EXHIBIT C
Fund Participation Agreement
Integrity Life Insurance Company and Touchstone Variable Series Trust
Mixed Funding Procedures
A. Background
Touchstone Variable Series Trust ("TVST") currently offers its shares to
variable annuity separate accounts ("VA Separate Accounts") and variable life
insurance separate accounts ("VLI Separate Accounts") of the same insurance
company or affiliated insurance companies. This type of structure is referred to
as a "mixed funding" arrangement.
Conditions Imposed by Rule 6e-3(T)(b)(15)
Rule 6e-3(T)(b)(15) under the Investment Company Act of 1940 provides an
exemption from many of the provisions of the 1940 Act to flexible premium VLI
Separate Accounts. It also imposes numerous conditions upon flexible premium VLI
Separate Accounts, including specific conditions that govern the manner in which
a mixed funding arrangement may be implemented. These conditions are listed
below.
1. The underlying fund's board of trustees must consist of a majority
of disinterested trustees (the "Independent Trustees").
2. The fund's board of trustees must monitor for the existence of any
material irreconcilable conflicts between the interests of variable
annuity contract owners and scheduled or flexible premium variable
life insurance policyholders investing in the underlying fund.
3. The insurance company or companies must agree that it (they) will be
responsible for reporting any potential or existing conflicts to the
fund's board of trustees.
4. If a conflict arises, the insurance company (companies) must, at its
(their) own cost, remedy such conflict up to and including
establishing a new registered management investment company and
segregating the assets underlying the variable annuity contracts and
the scheduled or flexible policies.
Possible Conflicts
A material irreconcilable conflict could arise for a variety of reasons,
including:
1. an action by state insurance or other regulatory authority
2. a change in applicable federal or state insurance, tax or securities
law or regulation, the issuance of a public ruling, private letter
ruling, no-action letter or interpretative letter, or any similar
action by insurance, tax, or securities regulatory authorities
3. an administrative or judicial decision in any relevant proceeding
4. the manner in which the investments of the underlying fund are being
managed
5. a difference in voting instructions given by variable annuity
contract owners and scheduled or flexible premium variable life
insurance policyholders
6. a decision by a participating insurance company to disregard the
voting instructions of contract owners or policyholders or
7. loss of tax-deferred status by a participating insurance company
separate account
B. Request for Reports
In order for the Board of Trustees of TVST to monitor for potential
conflicts, it will request such reports, materials and data as it deems
necessary from life insurance companies whose VA Separate Accounts and VLI
Separate Accounts invest in any Fund of TVST.
The Board of Trustees of TVST will request that each participating life
insurance company submit an annual report describing any potential or existing
conflict among the interests of the variable annuity contract owners and the
scheduled or flexible premium life insurance policyholders that invest in any
Fund in TVST. In addition, the Board will request that each participating
insurance company submit a similar report if, at any time during the year, the
insurance company perceives any potential or existing conflict among the
contract owners and policyholders that invest in any Fund in TVST.
The Board of Trustees of TVST will request that each participating
insurance company report on any potential or existing conflict based on (1) the
reasons list above or (2) any other reason discovered by the insurance company
that creates or could potentially create a conflict.
C. Board Actions To Remedy Conflicts
If the Board of Trustees of TVST determines that there is a material
irreconcilable conflict, it will give the applicable insurance company
(companies) written notice of the conflict.
Each participating insurance company will be required to take whatever
steps are deemed necessary, as determined by a majority of Independent Trustees
of TVST, to remedy or eliminate the conflict. Each participating insurance
company will be required to bear the expenses of remedying or eliminating the
conflict.
The steps that the Board of Trustees of TVST might require a participating
insurance company to take could include the actions described below.
1. The Board of Trustees might require the insurance company to
withdraw the assets allocable to some or all of its separate
accounts from the Funds in TVST and reinvest such assets in a
different investment medium, which may include another fund.
2. The Board of Trustees might require the insurance company to submit
the question of whether such segregation should be implemented to a
vote of all affected contract
C-2
owners and policyholders and, as appropriate, segregating the assets
of any appropriate group that votes in favor of segregation. 3. The
Board of Trustees might require the insurance company to offer the
option of making such a change to the affected contract owners and
policyholders.
4. The Board of Trustees might require the insurance company to
establish a new registered management investment company or managed
separate account.
C-3
