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