<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934 (Amendment No. __ )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
SEPARATE ACCOUNT TEN OF INTEGRITY LIFE INSURANCE COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
<PAGE>
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SEPARATE ACCOUNT TEN OF INTEGRITY LIFE INSURANCE COMPANY
515 West Market Street
Louisville, Kentucky 40202
--------------------------------------------
Notice of Special Meeting of Contractholders
--------------------------------------------
Dear Contractholders:
A special meeting of contractholders (the "Meeting") participating in
the March, June, September and December Divisions (each a "Division" and
collectively, the "Divisions"), each a series of Separate Account Ten of
Integrity Life Insurance Company (the "Separate Account"), will be held at 515
West Market Street, Louisville, Kentucky 40202, on April 4, 2000, at 4:30 p.m.,
Eastern Time. The purpose of the Meeting is:
1. to approve or disapprove a new investment management agreement between
the Separate Account and Touchstone Advisors, Inc. (the "New Manager"),
separately with respect to each Division;
2. to approve or disapprove a new sub-advisory agreement between the New
Manager and National Asset Management Corporation, separately with
respect to each Division;
3. to elect a slate of five members to the Separate Account's Board of
Managers to hold office until their successors are duly elected and
qualified;
4. to ratify or reject the selection of Ernst & Young LLP as the Separate
Account's independent accountants for the fiscal year ending December
31, 2000; and
5. to transact such other matters as may properly come before the Meeting
or any adjournment thereof.
The Board of Managers of the Separate Account has fixed the close of
business on February 24, 2000 as the record date for determining the
contractholders entitled to receive this notice and to vote at the Meeting.
By Order of the Board of Managers,
Kevin L. Howard
Secretary
March 3, 2000
EACH CONTRACTHOLDER PARTICIPATING IN THE SEPARATE ACCOUNT AS OF THE RECORD DATE
IS URGED TO
<PAGE>
EXERCISE THE RIGHT TO GIVE VOTING INSTRUCTIONS FOR THE SPECIAL MEETING OF
CONTRACTHOLDERS BY FILLING IN, DATING AND SIGNING THE ENCLOSED VOTING
INSTRUCTIONS CARD AND RETURNING IT IN THE RETURN ENVELOPE PROVIDED.
SEPARATE ACCOUNT TEN OF INTEGRITY LIFE INSURANCE COMPANY
515 West Market Street
Louisville, Kentucky 40202
------------------------------------
PROXY STATEMENT
Special Meeting of Contractholders
April 4, 2000 at 4:30 p.m.
------------------------------------
THE BOARD OF MANAGERS OF SEPARATE ACCOUNT TEN OF INTEGRITY LIFE
INSURANCE COMPANY (THE "SEPARATE ACCOUNT") SOLICITS YOUR PROXY FOR USE AT A
SPECIAL MEETING OF CONTRACTHOLDERS (THE "MEETING"). The Meeting is scheduled to
be held at 515 West Market Street, Louisville, Kentucky 40202, on April 4, 2000
at 4:30 p.m. As described in more detail below, the Meeting is being called for
the following purposes:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SUMMARY OF PROPOSAL DIVISION(S) TO WHICH
PROPOSAL APPLIES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. To approve or disapprove a new investment management agreement (the "New Each Division, voting separately
Management Agreement") between the Separate Account and Touchstone
Advisors, Inc. (the "New Manager" or "Touchstone Advisors").
- -------------------------------------------------------------------------------------------------------------------------
2. To approve or disapprove a new sub-advisory agreement between the New Each Division, voting separately
Manager and National Asset Management Corporation (the "Sub-Adviser") as
sub-adviser.
- -------------------------------------------------------------------------------------------------------------------------
3. To elect a slate of five members to the Separate Account's Board of All Divisions, voting together as a
Managers to hold office until their successors are duly elected and single class
qualified.
- -------------------------------------------------------------------------------------------------------------------------
4. To ratify or reject the selection of Ernst & Young LLP as the Separate All Divisions, voting together as a
Account's independent accountants for the fiscal year ending December 31, single class
2000.
- -------------------------------------------------------------------------------------------------------------------------
5. To transact such other matters as may properly come before the Meeting or All Divisions
any adjournment thereof.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Separate Account was established in Ohio on February 4, 1998, and
is an open-end management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). It is a series-type investment
company currently consisting of four investment portfolios (each, a "Division"
and collectively the "Divisions"). The Separate Account invests directly in
securities and funds certain variable annuity contracts issued by Integrity Life
Insurance Company ("Integrity").
<PAGE>
This Proxy Statement is being furnished on or about March 1, 2000, on
behalf of the Board of Managers of the Separate Account (the "Board of
Managers," the "Board" or the "Managers") to the contractholders participating
in the Separate Account in order to obtain voting instructions from the
contractholders on the proposals to be considered at the Meeting. The Board of
Managers has fixed the close of business on February 24, 2000 as the record date
(the "Record Date") for determining the contractholders entitled to receive this
notice and to vote at the Meeting. Contractholders may cast a number of votes
and fractions of votes equal to the number of dollars and fractions of dollars
credited to each contractholder as of the Record Date. As of the Record Date,
the value in dollars credited to variable annuity contracts outstanding with
respect to each Division was as follows:
<TABLE>
<CAPTION>
Dollar Value of
Division Contracts Outstanding
-------- ---------------------
<S> <C>
March Division $ 4,898,275.33
June Division $ 4,461,571.78
September Division $ 8,139,155.46
December Division $ 8,204,102.32
</TABLE>
As of the Record Date, no person or "group" (as such term is defined in
the Securities Exchange Act of 1934, as amended, and the rules thereunder) was
known to the Separate Account to have allocated contributions under variable
annuity contracts such that the person or group would have the right to vote
with respect to more than 5% of the total interest in any Division. The Managers
and officers of the Separate Account, both individually and as a group,
beneficially own less than 1% of the total interest in each Division.
The Separate Account expects that the solicitation of voting
instructions from contractholders will be made by mail. All costs of the meeting
and of soliciting proxies will be borne by The Western and Southern Life
Insurance Company ("Western & Southern") or one of its affiliates.
The votes of contractholders represented by properly signed and
completed proxies will be voted in accordance with the instructions received.
Abstentions will have the effect of a negative vote on a proposal. Unmarked
voting instructions from contractholders will be voted in favor of the
proposals. Proxies executed by contractholders may be revoked by a written
instrument received by the Secretary of the Separate Account at any time before
the proxies are exercised, by the delivery of a later-dated proxy, or by
attendance at the meeting and voting in person.
Pursuant to the Separate Account's Rules and Regulations, the presence
in person or by proxy of contractholders entitled to cast one-quarter of the
votes entitled to be cast at a Meeting shall constitute a quorum for the
transaction of business at such meeting. If the vote of a
<PAGE>
majority of the outstanding voting securities (as defined in the 1940 Act) is
required for action to be taken on any matter at the meeting, the presence in
person or by proxy of contractholders entitled to cast at least one-half of the
total number of votes is required in order to constitute a quorum. If a quorum
is not present, contractholders present in person or by proxy who are entitled
to vote at the meeting, or, if no such contractholder is present, any person
entitled to act as secretary of the meeting, may adjourn the meeting for a
period of not more than 60 days if necessary to obtain additional voting
instructions from contractholders.
The contractholders participating in each of the Divisions vote
separately with respect to Proposal Nos. 1 and 2 and together as a single class
with respect to Proposal Nos. 3 and 4.
All information in the Proxy Statement about Integrity Capital
Advisors, Inc. (the "Current Manager") has been provided by the Current Manager.
All information about ARM Financial Group, Inc. ("ARM") and Integrity has been
provided by ARM. All information in the Proxy Statement about the New Manager
and Western & Southern has been provided by the New Manager and Western &
Southern, respectively. All information in the Proxy Statement about the
Sub-Adviser has been provided by the Sub-Adviser.
EACH CONTRACTHOLDER PARTICIPATING IN THE SEPARATE ACCOUNT AS OF THE RECORD DATE
IS URGED TO EXERCISE THE RIGHT TO GIVE VOTING INSTRUCTIONS FOR THE SPECIAL
MEETING OF CONTRACTHOLDERS BY FILLING IN, DATING AND SIGNING THE VOTING
INSTRUCTIONS CARD FOR THE PORTFOLIO AND RETURNING THE CARD IN THE RETURN
ENVELOPE PROVIDED.
<PAGE>
PROPOSAL NO. 1: APPROVAL OF THE NEW MANAGEMENT AGREEMENT
MARCH DIVISION
JUNE DIVISION
SEPTEMBER DIVISION
DECEMBER DIVISION
BACKGROUND
The Current Manager and Integrity are direct and indirect wholly-owned
subsidiaries of ARM, respectively. In May 1999, ARM announced that it was
exploring strategic alternatives, including the sale of ARM's subsidiaries or
its businesses. Effective August 20, 1999, Integrity consented to an Order of
Supervision issued by the Director of Insurance of the State of Ohio (the "Ohio
Insurance Department"). ARM sought protection for Integrity following ratings
downgrades with respect to Integrity's claims paying ability, which were
primarily attributed to the potential inability of ARM to meet certain
contractual covenants related to its institutional business. Integrity has
reported that these ratings have no bearing on or relationship to the
performance of the Separate Account. The regulatory action by the Ohio Insurance
Department was intended to ensure an orderly process for addressing the
financial obligations of Integrity and to protect the interests of its
individual contractholders.
Subsequent to the issuance of the Order of Supervision, ARM continued
to explore the possible sale of Integrity, among other strategic alternatives.
On December 17, 1999, ARM announced that it had signed a definitive agreement
whereby Western & Southern would acquire the insurance subsidiaries of ARM (the
"Transaction"). The Transaction is expected to close late in the first quarter
of 2000 (the "Closing Date"). The Transaction is being implemented pursuant to a
chapter 11 bankruptcy case filed by ARM on December 20, 1999. In addition to
approval by the bankruptcy court, the closing of the Transaction is subject to
the approval of various state departments of insurance and other customary
conditions to closing. The Current Manager is not being sold in the Transaction.
However, it is contemplated that upon consummation of the Transaction, the
Current Manager will cease operations as an investment adviser. Therefore, as
part of the Transaction, it is proposed that the investment advisory agreement
between the Current Manager and the Separate Account (the "Current Management
Agreement") be assigned to the New Manager, an advisory affiliate of Western &
Southern, subject to approval by the contractholders participating in each
Division. Specifically, it is proposed that the Separate Account enter into the
New Management Agreement with the New Manager and that the New Manager enter
into a new sub-advisory agreement (the "New Sub-Advisory Agreement") with the
Sub-Adviser, each to become effective upon the later of the Closing Date or the
date contractholder approval is received. The New Sub-Advisory Agreement and the
New Management Agreement are hereinafter collectively referred to as the "New
Advisory Agreements."
The New Management Agreement is identical to the Current Management
Agreement, with the exception of the identity of the investment manager and the
effective date. A copy of
<PAGE>
the New Management Agreement is annexed to this Proxy Statement as Exhibit A.
The New Management Agreement is being submitted for approval by contractholders
participating in each Division.
In addition, the New Sub-Advisory Agreement between the New Manager and
the Sub-Adviser on behalf of each Division is identical to the sub-advisory
agreement that is in effect (the "Current Sub-Advisory Agreement," and together
with the Current Management Agreement, the "Current Advisory Agreements"), with
the exception of the identity of the investment manager and the effective date.
The New Management Agreement was approved by the Board of Managers of
the Separate Account, including the Managers who are not "interested persons" of
the Separate Account ("Independent Managers") on February 18, 2000.
On February 18, 2000, in connection with the approval of the New
Advisory Agreements, the Board of Managers considered that the Transaction might
close and the Current Manager might cease operations prior to the date of this
Meeting and receipt of contractholder approval of the New Advisory Agreements.
Accordingly, the Board of Managers, including all the Independent Managers,
approved an interim management agreement ("Interim Management Agreement") with
the New Manager, which will take effect upon the Closing Date if contractholder
approval of the New Management Agreement has not yet been obtained, and may be
in effect for a period of up to 150 days. The Interim Management Agreement
contains substantially the same terms as the New Management Agreement. In
addition, the Board of Managers, including the Independent Managers, approved an
interim sub-advisory agreement ("Interim Sub-Advisory Agreement") with the
Sub-Adviser containing substantially the same terms as the Current Sub-Advisory
Agreement between the Current Manager and the Sub-Adviser. The Sub-Adviser will
serve pursuant to the Interim Sub-Advisory Agreement from the Closing Date (if
contractholder approval of the New Sub-Advisory Agreement has not yet been
obtained) for a period of up to 150 days. Both the Interim Management Agreement
and Interim Sub-Advisory Agreement require all management and sub-advisory fees
to be escrowed pending contractholder approval of the New Advisory Agreements.
THE CURRENT AND NEW MANAGEMENT AGREEMENTS
The Current Management Agreement was initially and most recently
submitted to and approved by contractholders on May 5, 1998. The following is a
summary of the material terms of the New Management Agreement, which are the
same as the material terms of the Current Management Agreement, except with
respect to the identity of the investment manager and the effective date:
SERVICES. Pursuant to the New Management Agreement between the Separate
Account and the New Manager, the New Manager will be responsible for the
management of the Separate Account and administration of its business affairs.
The New Manager will be authorized to enter into sub-advisory agreements with
registered investment advisers pursuant to which it may
<PAGE>
delegate its obligations for providing investment advisory and certain other
services in connection with the Divisions. Pursuant to such authority, the New
Manager will enter into the New Sub-Advisory Agreement with the Sub-Adviser. The
New Manager will be responsible, among other things, for general supervision of
the Sub-Adviser, subject to general oversight by the Board of Managers. In
addition, the New Manager will be obligated to keep certain books and records of
the Separate Account and administer the Separate Account's corporate affairs. In
connection therewith, the New Manager will furnish the Separate Account with
office facilities, together with those ordinary clerical and bookkeeping
services that will not be furnished by the Separate Account's custodian or
transfer and dividend disbursing agent.
COMPENSATION FOR SERVICES. Each Division will pay the New Manager a fee
(the "Management Fee") at the annual rate of .50%, accrued daily and calculated
as a percentage of the net assets of each Division. The New Manager will
compensate each Sub-Adviser out of the Management Fee received.
The aggregate fees paid to the Current Manager by the Divisions under
the Current Management Agreement for the fiscal year ended December 31, 1999
were $148,726, as follows:
<TABLE>
<S> <C> <C> <C>
March Division $25,247 September Division $45,860
June Division $19,238 December Division $58,381
</TABLE>
The Current Manager compensated the Sub-Adviser out of these fees in
the amounts discussed below under Proposal No. 2, "The Current and New
Sub-Advisory Agreements - Compensation for Services."
PAYMENT OF EXPENSES. Each Division will bear all expenses incurred in
its operation that are not specifically assumed by the New Manager. General
expenses of the Separate Account not readily identifiable as belonging to one of
the Divisions will be allocated among the Divisions by or under the direction of
the Board of Managers in such manner as the Board determines to be fair and
equitable.
The New Manager has agreed to voluntarily limit the expenses of the
Divisions, other than for brokerage commissions and the Management Fee, to .35%
of average net assets on an annualized basis. The reimbursement of Division
expenses results in an increase in each Division's yield and total return. There
is no intent to change the terms of this reimbursement plan at this time. For
the fiscal year ended December 31, 1999, the Current Manager reimbursed the
Divisions as follows:
<TABLE>
<S> <C>
March Division $12,658
June Division $29,414
September Division $31,735
December Division - 0 -
</TABLE>
LIMITATION OF LIABILITY. Under the New Management Agreement, except as
may
<PAGE>
otherwise be required under the 1940 Act, the New Manager and any of its
affiliates and each person who, within the meaning of Section 15 of the
Securities Act of 1933, as amended, controls the New Manager, will not be liable
for any error or judgment or mistake of law or for any loss suffered by the
Separate Account in connection with the performance of the New Management
Agreement, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the New Manager in the performance of its duties or
from reckless disregard of its duties and obligations thereunder.
TERM. The New Management Agreement provides that it will continue in
effect for two years and thereafter from year to year, subject to approval at
least annually in accordance with the requirements of the 1940 Act ("Annual
Approval").
TERMINATION; ASSIGNMENT. The New Management Agreement may be terminated
at any time without penalty upon 60 days written notice by the New Manager, the
Board of Managers, acting pursuant to a resolution adopted by a majority of the
Independent Managers, or by the affirmative vote of the holders of a "majority
of the outstanding voting securities" of a Division (as defined in the 1940
Act). The New Management Agreement also provides that it will terminate in the
event of its assignment (as defined in the 1940 Act).
BOARD CONSIDERATIONS
At a regular meeting of the Board of Managers of the Separate Account
held on August 17, 1999, ARM management discussed with the Board the various
strategic alternatives that ARM was exploring, including the possible sale of
ARM's subsidiaries or businesses. Management explained that such subsidiaries
could potentially include Integrity and/or the Current Manager. As part of this
presentation, ARM management provided the Board with information about the
financial condition of ARM and the Current Manager. ARM assured the Board that
while it was exploring strategic alternatives, the Current Manager would have
the financial resources and personnel necessary to continue to render services
to the Separate Account of the same nature and quality as had been rendered in
the past. The Board appointed one of the Independent Managers to serve as the
liaison with ARM management to monitor the situation and to report to the other
Independent Managers as to the status of ARM and the Current Manager and as to
the Current Manager's ability to continue to provide the Separate Account with
the necessary services.
The Board held a special telephonic meeting on August 24, 1999, at
which ARM management updated the Independent Managers as to the status of the
strategic alternatives being pursued by ARM. Management also reported that
Integrity had consented to an Order of Supervision issued by the Ohio Insurance
Department and discussed with the Board the potential implications of such
Order. ARM management assured the Board that the Order of Supervision would not
affect the day-to-day operations of the Current Manager and that the Separate
Account could continue to expect to receive the same level and quality of
services. In that regard, ARM management stated that employee retention was not
proving to be a problem and that the Current Manager had sufficient staff to
continue managing the Separate Account efficiently and
<PAGE>
effectively. At the request of the Board, management agreed to prepare and
present to the Board a contingency plan for the continued management of the
Separate Account if the Board were to determine that the Current Manager's
ability to continue to provide high quality services to the Separate Account had
become impaired. Management also committed to continue to keep the Board
informed as to the status of ARM's condition, financial and otherwise, and of
the strategic alternatives being considered insofar as they could potentially
affect management of the Separate Account.
At a special telephonic meeting on September 17, 1999, ARM management
further updated the Board as to ARM's pursuit of strategic alternatives and the
development of contingency plans for ensuring continued management services for
the Separate Account. Management also informed the Board that it was negotiating
with Western & Southern with respect to the purchase of Integrity. The Board
held another special telephonic meeting on November 1, 1999, and an in-person
meeting on November 17, 1999, during which the Board received further
information on the status of the proposed transaction with Western & Southern,
as well as other relevant matters relating to the condition of ARM and the
Current Manager.
At an in-person meeting of the Board held on February 18, 2000, ARM
management proposed that in connection with the Transaction the Board approve
the New Management Agreement with the New Manager and the New Sub-Advisory
Agreement between the New Manager and the Sub-Adviser. ARM management explained
that, following consummation of the Transaction, it was contemplated that the
Current Manager would cease operations, and that its key personnel would be
employed by the New Manager. A representative of Western & Southern and the New
Manager attended the meeting and made a detailed presentation to the Board about
the organization's resources, personnel, experience and commitment to the
Separate Account. Counsel to the Independent Managers was present at each of the
meetings described above.
Following the presentation by ARM management and Western & Southern,
the Board of Managers, including all of the Independent Managers, determined
that the terms of the New Management Agreement are fair and reasonable and that
the approval of the New Management Agreement on behalf of the Separate Account
and each Division is in the best interests of the Separate Account and of each
respective Division and its contractholders.
In determining to approve the New Management Agreement, the Managers
evaluated the factors they deemed relevant with respect to each Division. Among
other things, the Board considered that the Current Manager would be going out
of business in connection with the sale of Integrity and the bankruptcy of ARM.
The Board considered that the New Manager will employ key management personnel
of the Current Manager and that, although the identity of the investment manager
will change, senior officers of Western & Southern and the New Manager have
assured the Board that there will be no change in the nature or quality of
services currently and historically provided to the Separate Account. The
officers of Western & Southern also provided assurances that they do not foresee
any changes in the day-to-day operations of the Separate Account as a result of
the Transaction and that the New Manager has the financial
<PAGE>
ability and other resources to fulfill its commitment to the Separate Account
under the New Management Agreement. The Board also considered that ARM was
selling Integrity to Western & Southern and that it would be consistent with
contractholders' likely expectation to retain as investment manager for the
Separate Account an affiliate of Integrity following the Transaction.
The Board also considered that the New Management Agreement is the same
as the Current Management Agreement in all material respects, including the rate
of Management Fee, and any waivers or reimbursements. The Board also considered
that the compensation to be paid by the New Manager to the Sub-Adviser under the
New Sub-Advisory Agreement would result in the New Manager being compensated at
the same rates as under the Current Advisory Agreements. The Board determined
that it was necessary and in the best interests of each Division and its
contractholders to enter into the New Management Agreement to ensure continued
receipt of the same quality of services as is currently provided.
In addition, the Board of Managers, including all the Independent
Managers, determined that the terms of the Interim Management Agreement are fair
and reasonable. In determining to approve the Interim Management Agreement, the
Board of Managers considered, among other things, that the compensation earned
under the Interim Management Agreement will be held in an interest-bearing
escrow account with the Separate Account's custodian and if a majority of the
Separate Account's outstanding voting securities approve the New Management
Agreement by the end of the 150 day period, the amount in escrow (including
interest earned) will be paid to the New Manager. The Board also took into
account that if a majority of the Separate Account's outstanding voting
securities do not approve the New Management Agreement, the New Manager will be
paid, out of the escrow account, the lesser of: (a) any costs incurred while
preforming the Interim Management Agreement (plus interest earned on that amount
while in escrow); or (b) the total amount in the escrow account (plus interest
earned).
RECOMMENDATION OF THE BOARD OF MANAGERS
At an in-person meeting held on February 18, 2000, the Board of
Managers, including all of the Independent Managers, voted unanimously to
approve the New Management Agreement and to recommend to contractholders that
they vote "FOR" Proposal No. 1.
VOTE REQUIRED FOR PROPOSAL NO. 1
Contractholders participating in each Division vote separately on
whether to approve Proposal No. 1 with respect to that Division. Approval of
Proposal No. 1 with respect to a Division requires the affirmative vote of a
majority of the outstanding voting securities of that Division. "Majority" for
this purpose under the 1940 Act means the lesser of (1) more than 50% of the
outstanding shares of the Division or (2) 67% or more of the shares of the
Division represented at the meeting if more than 50% of such shares are
represented.
IF PROPOSAL NO. 1 IS NOT APPROVED BY THE CONTRACTHOLDERS PARTICIPATING
IN ANY DIVISION, THE BOARD WILL CONSIDER WHAT ACTION, IF ANY, SHOULD BE TAKEN TO
OBTAIN THE
<PAGE>
NECESSARY INVESTMENT MANAGEMENT AND ADMINISTRATIVE SERVICES. FAILURE TO APPROVE
PROPOSAL NO. 1 BY THE CONTRACTHOLDERS PARTICIPATING IN A PARTICULAR DIVISION
WILL NOT AFFECT THE APPROVAL OF PROPOSAL NO. 1 WITH RESPECT TO ANY OTHER
DIVISION.
<PAGE>
PROPOSAL NO. 2: APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT
MARCH DIVISION
JUNE DIVISION
SEPTEMBER DIVISION
DECEMBER DIVISION
BACKGROUND
The Current Sub-Advisory Agreement is between the Current Manager and
the Sub-Adviser. Accordingly, in connection with the approval of the New
Management Agreement, the Board of Managers of the Separate Account approved the
New Sub-Advisory Agreement between the New Manager and the Sub-Adviser, on
behalf of each Division. The New Sub-Advisory Agreement is being submitted for
approval by contractholders participating in each Division. A form of the New
Sub-Advisory Agreement between the New Manager and the Sub-Adviser is annexed to
this Proxy Statement as Exhibit B. The New Sub-Advisory Agreement is identical
to the Current Sub-Advisory Agreement, with the exception of the identity of the
investment manager and the effective date. It is proposed that the New
Sub-Advisory Agreement will become effective upon the later of the Closing Date
or approval by contractholders.
THE CURRENT AND NEW SUB-ADVISORY AGREEMENTS
The Current Sub-Advisory Agreement between the Current Manager and the
Sub-Adviser was initially and most recently submitted to and approved by
contractholders on May 5, 1998. The following is a summary of the material terms
of the New Sub-Advisory Agreement, which are the same as the material terms of
the Current Sub-Advisory Agreement, with the exception of the identity of the
investment manager and the effective date:
ADVISORY SERVICES. The Sub-Adviser will provide a continuous investment
program for the Divisions and will determine the composition of each Division's
assets.
COMPENSATION FOR SERVICES. The New Manager (and not the Separate
Account) will pay the Sub-Adviser a sub-advisory fee based on an annual rate of
.10% of the Divisions' total average daily net assets up to $100 million and
.05% of total average daily net assets in excess of $100 million. The foregoing
rate is the same as the rate in effect under the Current Sub-Advisory Agreement.
For the fiscal year ended December 31, 1999, the Sub-Adviser received the
following fees:
<TABLE>
<S> <C>
March Division $ 6,311.65
June Division $ 4,809.47
September Division $11,465.11
December Division $14,594.85
</TABLE>
<PAGE>
PAYMENT OF EXPENSES. The Sub-Adviser agrees to assume and pay all of
the costs and expenses of performing its obligations thereunder.
LIMITATION OF LIABILITY. Under the New Sub-Advisory Agreement, except
as may otherwise be required under the 1940 Act, the Sub-Adviser and any of its
affiliated persons and each person who, within the meaning of Section 15 of the
Securities Act of 1933, as amended, controls the Sub-Adviser will not be liable
for, or subject to any damages, expenses, or losses in connection with, any act
or omission connected with or arising out of any services rendered thereunder,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Sub-Adviser's duties, or by reason of reckless disregard of
the Sub-Adviser's obligations and duties thereunder.
TERM. The New Sub-Advisory Agreement will continue for two years and
thereafter from year to year subject to Annual Approval.
TERMINATION; ASSIGNMENT. The New Sub-Advisory Agreement may be
terminated at any time without penalty upon 60 days written notice by the
Sub-Adviser, the New Manager, the Board of Managers, acting pursuant to a
resolution adopted by a majority of the Independent Managers, or by the
affirmative vote of the holders of a "majority of the outstanding voting
securities" of the Divisions (as defined in the 1940 Act). The New Sub-Advisory
Agreement also provides that it will automatically terminate in the event of its
assignment (as defined in the 1940 Act) or termination of the New Management
Agreement.
BOARD CONSIDERATIONS
The Board of Managers, including all the Independent Managers,
determined that the terms of the New Sub-Advisory Agreement are fair and
reasonable and that the approval of the New Sub-Advisory Agreement on behalf of
the Separate Account and each Division is in the best interests of the Separate
Account and of each respective Division and its contractholders. In determining
to approve the New Sub-Advisory Agreement, the Board of Managers evaluated the
factors they deemed relevant with respect to each Division, including factors
described above with respect to the New Management Agreement. In addition, the
Board considered that it is anticipated that the Transaction will have no effect
with respect to the operations of the Sub-Adviser, since it is independent of
both ARM and Western & Southern and their affiliates.
In addition, the Board of Managers, including all the Independent
Managers, determined that the terms of the Interim Sub-Advisory Agreement
relating to each of the Divisions are fair and reasonable. In determining to
approve the Interim Sub-Advisory Agreement, the Board of Managers considered,
among other things, that the compensation earned under the Interim Sub-Advisory
Agreement will be held in an interest-bearing escrow account with the Separate
Account's custodian and if a majority of the Separate Account's outstanding
voting securities approve the New Sub-Advisory Agreement by the end of the 150
day period, the amount in escrow (including interest earned) will be paid to the
Sub-Adviser. The Board also took into account that if a majority of the Separate
Account's outstanding voting securities do not approve
<PAGE>
the New Sub-Advisory Agreement, the Sub-Adviser will be paid, out of the escrow
account, the lesser of: (a) any costs incurred while performing the Interim
Sub-Advisory Agreement (plus interest earned on that amount while in escrow); or
(b) the total amount in the escrow account (plus interest earned).
RECOMMENDATION OF THE BOARD OF MANAGERS
At an in-person meeting held on February 18, 2000, the Board of
Managers, including all of the Independent Managers, voted unanimously to
approve the New Sub-Advisory Agreement for each Division and to recommend that
contractholders of each Division vote "FOR" the New Sub-Advisory Agreement.
VOTE REQUIRED FOR PROPOSAL NO. 2
Contractholders participating in each Division vote separately on
whether to approve Proposal No. 2 with respect to that Division. Approval of
Proposal No. 2 with respect to a Division requires the affirmative vote of a
majority of the outstanding voting securities of that Division. "Majority" for
this purpose under the 1940 Act means the lesser of (1) more than 50% of the
outstanding shares of the Division or (2) 67% or more of the shares of the
Division represented at the meeting if more than 50% of such shares are
represented.
IF PROPOSAL NO. 2 IS NOT APPROVED BY THE CONTRACTHOLDERS PARTICIPATING
IN ANY DIVISION, THE BOARD WILL CONSIDER WHAT OTHER ACTION, IF ANY, SHOULD BE
TAKEN TO OBTAIN SUB-ADVISORY SERVICES. FAILURE TO APPROVE PROPOSAL NO. 2 BY THE
CONTRACTHOLDERS PARTICIPATING IN A PARTICULAR DIVISION WILL NOT AFFECT THE
APPROVAL OF PROPOSAL NO. 2 WITH RESPECT TO ANY OTHER DIVISION.
PROPOSAL NO. 3: ELECTION OF MANAGERS
ALL DIVISIONS
At the Meeting, a slate of five nominees, including four who are not
interested persons of the Separate Account, will be elected to serve as Managers
of the Separate Account, to hold office until their successors are duly elected
and qualified. It is the intention of the persons named in the accompanying form
of proxy to vote for the election of each of the nominees named below, each of
whom has consented to be a nominee. The nominees consist of the four incumbent
Managers and one other individual, Irvin W. Quesenberry, Jr.
If any of the nominees become unavailable for election as a Manager
before the Meeting, proxies will be voted for the other persons that the
Managers recommend.
INFORMATION REGARDING NOMINEES - PRINCIPAL OCCUPATION AND OTHER INFORMATION
None of the following nominees owns any interests in any Division.
<PAGE>
<TABLE>
<CAPTION>
Name, Age and Address Other Business Activities in Past Five Years
- --------------------- --------------------------------------------
<S> <C>
*John R. Lindholm (51) President of Integrity since November 1993; President of National Integrity
515 West Market Street since September 1997; Executive Vice President - Chief Marketing Officer of
Louisville, KY 40202 ARM since 1993; Manager of the Separate Account since April 1998; Director of
The Legends Fund, Inc. since October 1993; Chairman and Director of the
mutual funds in the State Bond Group of mutual funds from June 1995 to
December 1996.
Chris LaVictoire Mahai (44) CEO AisleFive, interactive marketing firm; President, Clavm, Inc., a
244 North First Avenue consulting and project management firm; Fellow, the Poynter Institute for
Minneapolis, MN 55401 Media Studies; Board Member (Cowles Media) Star Tribune Foundation from
September 1992 to June 1998; Senior Vice President, Cowles Media
Company/Star Tribune from August 1993 to June 1998; Manager of Separate
Account since April 1998; Director of The Legends Fund, Inc. since
October 1997; Director of the mutual funds in the State Bond Group of
mutual funds from June 1984 to December 1996.
William B. Faulkner (72) President, William Faulkner & Associates (business and institutional adviser)
240 East Plato Blvd. since 1986; Manager of the Separate Account since April 1998; Director of The
St. Paul, MN 55107 Legends Fund, Inc. since November 1995; Director of the mutual funds in the
State Bond Group of mutual funds from June 1984 to December 1996.
John Katz (61) Investment banker since January 1991; Manager of the Separate Account since
10 Hemlock Road April 1998; Director of The Legends Fund, Inc. since November 1992; Director
Hartsdale, NY of the mutual funds in the State Bond Group of mutual funds from June 1995 to
December 1996.
Irvin W. Quesenberry, Jr. (51) Retired Founder and Managing Director of National Asset Management, an
2939 Rainbow Drive investment counseling firm from 1979 to 1995**; Board member of Louisville
Louisville, KY 40206 Water Company since 1986; Member, Louisville Community Foundation Investment
Committee.
</TABLE>
The Managers met six times during the fiscal year ended December 31,
1999. The incumbents attended 100% of the aggregate number of meetings of the
Managers. The Board has an audit committee consisting of Messrs. Katz and
Faulkner and Ms. Mahai. The Board's audit committee, which selects and oversees
the Separate Account's independent accountants, met once during the fiscal year
ended December 31, 1999 and all of the members attended. The Board has no
standing nominating or compensating committees.
- -------------------
*Mr. Lindholm is an interested person of the Fund and the Current
Manager as defined in the 1940 Act, by virtue of his positions with ARM.
**Mr. Quesenberry no longer has any interest in National Asset
Management.
<PAGE>
EXECUTIVE OFFICERS OF THE SEPARATE ACCOUNT
<TABLE>
<CAPTION>
Position with the
Name (Age) Separate Account Experience During the Past Five Years
- ---------- ------- -------------------------------------
<S> <C> <C>
Edward J. Haines (53) President Senior Vice President of Marketing for ARM
since December, 1993.
Kevin L. Howard (35) Secretary Senior Vice President and Counsel of ARM since
October 1998; Assistant General Counsel of ARM
from January 1994 until October 1998.
Don W. Cummings (36) Controller Chief Financial Officer, Retail Business
Division of ARM since November, 1996; Strategic
Initiatives Officer of ARM from April 1996
until November 1996; Controller of ARM from
November 1993 until April 1996.
Meredith Hettinger (28) Assistant Secretary Financial Manager-Corporate Controllers
department of ARM since April 1998; Financial
Analyst-Corporate Controllers department from
June 1995 until April 1998; Tax
Accountant-Ernst and Young, LLP from August
1993 until May 1995.
Kay Dieterlen (37) Assistant Secretary Legal Specialist of ARM since November 1993.
</TABLE>
All officers of the Separate Account have been elected to serve until
their successors are elected and qualified. Each officer's address is 515 West
Market Street, Louisville, KY.
<PAGE>
REMUNERATION OF MANAGERS AND OFFICERS
The Separate Account pays Managers who are not interested persons of
the Separate Account fees for serving as Managers. During the fiscal year ended
December 31, 1999, the Separate Account paid the Managers who are not interested
persons of the Separate Account a combined total of $14,500 exclusive of
expenses. Because the Current Manager and the Sub-Adviser perform substantially
all of the services necessary for the operation of the Separate Account, the
Separate Account requires no employees. No officer, director or employee of the
Current Manager, Integrity, or the Sub-Adviser receives any compensation from
the Separate Account for acting as a Manager or officer.
The following table sets forth for the fiscal year ended December 31,
1999, compensation paid by the Separate Account to the Independent Managers.
Managers who are interested persons, as defined in the 1940 Act, receive no
compensation from the Separate Account.
<TABLE>
<CAPTION>
Pension or
Retirement Estimated
Aggregate Benefits Accrued Annual Total
Compensation as Part of Benefits Compensation from
from Separate Separate Account Upon Separate Account
Name of Manager Account Expenses Retirement Paid to Managers
- --------------- ------- -------- ---------- ----------------
<S> <C> <C> <C> <C>
William B. Faulkner $5,000 None N/A $5,000
John Katz $5,000 None N/A $5,000
Chris L. Mahai $4,500 None N/A $4,500
</TABLE>
VOTE REQUIRED FOR PROPOSAL NO. 3
The nominees receiving the affirmative vote of a majority of the votes
cast for the election of Managers at the Meeting will be elected, provided a
quorum is present. The contractholders participating in the Divisions of the
Separate Account vote together as a single class for the Managers of the
Separate Account.
BOARD RECOMMENDATION
At an in-person meeting held on February 18, 2000, the Board of
Managers, including all of the Independent Managers, voted unanimously to
nominate the five individuals named in this Proxy Statement to serve as Managers
of the Separate Account and to recommend to contractholders that they vote in
favor of all of the nominees.
PROPOSAL NO. 4: RATIFICATION OF THE SELECTION OF
INDEPENDENT ACCOUNTANTS
ALL DIVISIONS
Under Proposal No. 4, contractholders participating in the Separate
Account are being
<PAGE>
asked to ratify the Board's selection of independent accountants for the
Separate Account for the fiscal year ending December 31, 2000. The firm of Ernst
& Young LLP has extensive experience in investment company accounting and
auditing and has served as independent accountants to the Separate Account since
April 1998. The financial statements to be included in the Separate Account's
Annual Report, dated December 31, 1999, will have been examined by Ernst & Young
LLP. It is not expected that a representative of Ernst & Young LLP will be
present at the Meeting.
RECOMMENDATION OF THE BOARD OF MANAGERS
At an in-person meeting held on February 18, 2000, the Board of
Managers, including all of the Independent Managers, voted unanimously to ratify
the Board's selection of independent accountants and to recommend to
contractholders that they vote "FOR" Proposal No. 4.
GENERAL INFORMATION
INFORMATION ABOUT THE NEW MANAGER
TOUCHSTONE ADVISORS, INC., 311 Pike Street, Cincinnati, Ohio 45202, and
its 111-year-old parent company, Western & Southern, 400 Broadway, Cincinnati,
Ohio 45202, are part of The Western-Southern Enterprise(R) (the "Enterprise"),
which is a family of companies that provides life insurance, annuities, mutual
funds, asset management and other related financial services for millions of
consumers nationwide. (Touchstone Advisors is 100% owned by IFS Financial
Services, Inc., 311 Pike Street, Cincinnati, Ohio 45202, which is 100% owned by
Western-Southern Life Assurance Company, 400 Broadway, Cincinnati, Ohio 45202, a
direct subsidiary of Western & Southern.) Through its seven companies, more than
4,800 associates, and more than 50,000 individuals who sell its products, the
Enterprise offers consumers a broad array of products and services to meet their
financial security needs. As of December 31, 1999, the Enterprise owned or
managed assets of approximately $20 billion and Touchstone Advisors managed
assets of approximately $440 million (on a consolidated basis).
The following chart lists the name, address and principal occupation of
the principal executive officers and each director of Touchstone Advisors. The
address of each, as it relates to his or her duties with respect to Touchstone
Advisors, is the same as that of Touchstone Advisors.
<TABLE>
<CAPTION>
Name Principal Occupation
- ---- --------------------
<S> <C>
Jill Tripp McGruder Director, President & Chief Executive Officer
Teresa Siegel Chief Financial Officer
Patricia Wilson Chief Compliance Officer
Donald J. Wuebbling Director, Secretary & Chief Legal Officer
William F. Ledwin Director
James N. Clark Director
Edwin S. Heenan Vice President & Comptroller
<PAGE>
<CAPTION>
Name Principal Occupation
- ---- --------------------
<S> <C>
Richard K. Taulbee Vice President
James J. Vance Vice President & Treasurer
Robert F. Morand Assistant Secretary
David E. Dennison Assistant Treasurer
Robert A. Dressman Assistant Treasurer
Timothy D. Speed Assistant Treasurer
</TABLE>
None of the principal executive officers or directors of the New
Manager is affiliated with the Separate Account.
INFORMATION ABOUT THE SUB-ADVISER
NATIONAL ASSET MANAGEMENT CORPORATION, 101 South Fifth Street,
Louisville, KY 40202, serves as the Sub-Adviser to the Divisions. The
Sub-Adviser was founded in 1979 and is owned by its principals. The firm
provides investment management services to institutions and high-net worth
individuals, and as of December 31, 1999, had assets under management of
approximately $4 billion.
The following chart lists the names, addresses and principal occupation
of the principal officers and directors of the Sub-Adviser. The address of each,
as it relates to his or her duties with respect to the Sub-Adviser is the same
as that of the Sub-Adviser.
<PAGE>
<TABLE>
<CAPTION>
Name Principal Occupation
- ---- --------------------
<S> <C>
William F. Chandler Founder and Principal
Carl W. Hafele Chief Executive Officer and Principal
Stephen G. Mullins Principal
David B. Hiller Principal
Michael C. Heyman Principal
Larry J. Walker Principal
John W. Ferreby Principal
Matthew G. Bevin Director of Marketing and Principal
David B. Chick Principal
Erik N. Evans Principal
Catherine R. Stodghill Principal
Brent A. Bell Principal
Randall T. Zipfel Chief Operating Officer and Principal
</TABLE>
TRANSFER AGENT, DIVIDEND AGENT, RECORDKEEPING AGENT AND CUSTODIAN
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, acts as the Separate Account's transfer agent, dividend
disbursing agent, recordkeeping agent and custodian.
DISTRIBUTOR
ARM Securities Corporation ("ARM Securities"), 100 North Minnesota
Street, P.O. Box 69, New Ulm, Minnesota 56073-0069 is the Separate Account's
distributor. It is contemplated that the Separate Account will terminate the
current distribution agreement with ARM Securities upon consummation of the
Transaction and enter into a new distribution agreement with Touchstone
Securities, Inc., 311 Pike Street, Cincinnati, Ohio 45202, effective upon the
Closing Date. The new distribution agreement was approved by the Board of
Managers of the Separate Account at a meeting held on February 18, 2000.
<PAGE>
OTHER MATTERS
The Board of Managers does not know of any other business to be brought
before the meeting. If any other matters properly come before the meeting,
proxies will vote on such matters in their discretion.
REPORTS TO CONTRACTHOLDERS AND FINANCIAL STATEMENTS
THE SEPARATE ACCOUNT WILL FURNISH TO CONTRACTHOLDERS, WITHOUT CHARGE, A
COPY OF THE MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS. COPIES OF THE ANNUAL AND
SEMI-ANNUAL REPORTS MAY BE OBTAINED FROM THE SEPARATE ACCOUNT, WITHOUT CHARGE,
BY CONTACTING THE SEPARATE ACCOUNT IN WRITING AT THE ADDRESS ON THE COVER OF
THIS PROXY STATEMENT, OR BY CALLING 1-800-325-8583.
CONTRACTHOLDER PROPOSALS
The Separate Account is not required to hold annual meetings of
contractholders and currently does not intend to hold such meetings unless
contractholder action is required in accordance with the 1940 Act or the
Separate Account's Rules and Regulations. A contractholder proposal to be
considered for inclusion in the proxy statement at any meeting of
contractholders hereafter called must be submitted a reasonable time before
the proxy statement relating thereto is mailed. Whether a proposal submitted
will be included in the proxy statement will be determined in accordance with
applicable federal and state laws.
Respectfully Submitted,
Kevin L. Howard
Secretary
Dated: March 3, 2000
CONTRACTHOLDERS ARE REQUESTED TO FILL IN, DATE AND SIGN THE VOTING INSTRUCTIONS
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED PREPAID ENVELOPE.
<PAGE>
EXHIBIT A
SEPARATE ACCOUNT TEN
of
INTEGRITY LIFE INSURANCE COMPANY
MANAGEMENT AGREEMENT
Agreement, made this ___ day of _________, 2000 between Separate
Account Ten (the SEPARATE ACCOUNT) of Integrity Life Insurance Company, an Ohio
corporation, and Touchstone Advisors, Inc., an Ohio corporation (the ADVISER).
W I T N E S S E T H
WHEREAS, the Separate Account is a managed separate account registered
under the Investment Company Act of 1940, as amended (the 1940 ACT); and
WHEREAS, the units of beneficial interest of the Separate Account are
divided into separate divisions or portfolios (each, a DIVISION), each of which
is established pursuant to a resolution of the Board of Managers of the Separate
Account, and the Board of Managers may from time to time terminate such
Divisions or establish and terminate additional Divisions; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the ADVISERS ACT); and
WHEREAS, the Separate Account desires to retain the Adviser to render
or contract to obtain as hereinafter provided investment advisory and
supervisory services to the Separate Account and the Separate Account also
desires to avail itself of the facilities available from the Adviser with
respect to the administration of the Separate Account's day to day business
affairs, and the Adviser is willing to render or contract for such investment
advisory, supervisory and administrative services;
NOW, THEREFORE, the parties agree as follows:
1. APPOINTMENT OF ADVISER. The Separate Account hereby appoints the
Adviser to act as manager of the Separate Account and administrator of
its business affairs for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to render
the services herein described, for the compensation herein provided.
The Adviser is authorized to enter into one or more sub-advisory
agreements (each, a SUB-ADVISORY AGREEMENT) with a registered
investment adviser (each, a SUB-ADVISER) pursuant to which the Adviser
delegates to the Sub-Adviser its obligations for providing investment
advisory and certain other services in connection with one or more of
the Divisions; provided, that the Adviser, and not the Separate
Account, shall be responsible for any compensation payable under any
Sub-Advisory Agreement. Any such Sub-Advisory Agreement may be entered
into by the Adviser on such terms and in such manner as may be
permitted by the 1940 Act
<PAGE>
and the rules thereunder. For each Division for which the Adviser has
entered into a Sub-Advisory Agreement, the Sub-Adviser shall have the
primary responsibility for providing investment advisory services as
set forth in Section 2 and shall be responsible for broker-dealer
selection as set forth in Section 3 and maintaining books and records
as set forth in Section 4, and the Adviser will have supervisory
responsibility for investment advisory services furnished by the
Sub-Adviser pursuant to the Sub-Advisory Agreement. The Adviser will
review the performance of the Sub-Adviser and make recommendations to
the Board of Managers of the Separate Account with respect to the
retention and renewal of the Sub-Advisory Agreement.
2. INVESTMENT ADVISORY SERVICES. Subject to the supervision of the
Separate Account's Board of Managers, and in compliance with each
Division's investment objectives and policies, the Adviser will provide
an investment program for each Division and determine the composition
of the assets of each Division, including determination of the
purchase, retention or sale of the securities, cash, and other
investments contained in such Division's holdings. The Adviser is
hereby authorized to execute and perform such services, or to arrange
for execution and performance of such services, on behalf of each
Division. To the extent, if any, permitted by the investment policies
of a Division, the Adviser shall make determinations as to and execute
and perform futures contracts and options on behalf of such Division.
The Adviser will provide the services under this Agreement in
accordance with each Division's investment objective or objectives,
policies, procedures and restrictions as stated in the Separate
Account's Registration Statement, as amended from time to time (the
REGISTRATION STATEMENT), filed with the Securities and Exchange
Commission (the SEC) and any other documents that set forth investment
policies, procedures or restrictions governing the Division.
The Adviser further agrees as follows:
(a) The Adviser will manage each Division so as to ensure
compliance by such Division with the diversification
requirements of Section 817(h) of the Internal
Revenue Code of 1986 and regulations issued
thereunder. In managing the Division in accordance
with these requirements, the Adviser shall be
entitled to receive and act upon advice of counsel.
(b) In undertaking its duties under this Agreement, the
Adviser will comply with the 1940 Act and all rules
and regulations thereunder, all other applicable
federal and state laws and regulations, with any
applicable procedures adopted by the Separate
Account's Board of Managers of which it has notice
and the provisions of the Registration Statement.
(c) On occasions when the Adviser deems the purchase or
sale of a security to be in the best interest of a
Division as well as of the Adviser's or the Adviser's
affiliates' other investment advisory clients, the
Adviser may, to the extent
2
<PAGE>
permitted by applicable laws and regulations, but
shall not be obligated to, aggregate the securities
to be so sold or purchased with those of its other
clients where such aggregation is not inconsistent
with the policies set forth in the Registration
Statement. In such event, the Adviser will allocate
the securities so purchased or sold, as well as the
expenses incurred in the transaction, in a manner
that is fair and equitable in the Adviser's judgment
in the exercise of the Adviser's fiduciary
obligations to the Separate Account and to such other
clients.
(d) In connection with the purchase and sale of
securities for each Division, the Adviser will
arrange for the transmission to the custodian,
transfer agent, dividend disbursing agent and
recordkeeping agent for the Separate Account (such
custodian and agent or agents hereinafter
collectively referred to as the AGENT), on a daily
basis, such confirmations, trade tickets (which shall
state industry classifications unless the Adviser has
previously furnished a list of classifications for
portfolio securities), and other documents and
information, including, but not limited to, Cusip or
other numbers that identify securities to be
purchased or sold on behalf of each Division as may
be reasonably necessary to enable the Agent to
perform their administrative and recordkeeping
responsibilities with respect to such Division. With
respect to portfolio securities to be purchased or
sold through the Depository Trust Company, the
Adviser will arrange for the automatic transmission
of the confirmation of such trades to the Separate
Account's Agent.
(e) The Adviser will monitor on a daily basis, by review
of daily pricing reports provided by the Agent to the
Adviser, the determination by the Agent for the
Separate Account of the valuation of portfolio
securities and other investments of each Division.
The Adviser shall not be obligated to independently
verify the Agent's pricing determinations, and the
Agent's responsibility for accurate pricing
determinations of the value of the Division's
securities shall not be reduced by the Adviser's duty
to monitor such determinations. The Adviser will
assist the Agent in determining or confirming,
consistent with the procedures and policies stated in
the Registration Statement, the value of any
portfolio securities or other assets of each Division
for which the Agent seeks assistance from or
identifies for review by the Adviser.
(f) The Adviser will make available to the Separate
Account, promptly upon request, all of each
Division's investment records and ledgers maintained
by the Adviser as are necessary to assist the
Separate Account to comply with requirements of the
1940 Act and the Advisers Act, as well as other
applicable laws. The Adviser will furnish to
regulatory authorities having the requisite authority
any information or reports in connection with its
services
3
<PAGE>
which may be requested in order to ascertain whether
the operations of the Separate Account are being
conducted in a manner consistent with applicable laws
and regulations.
(g) The Adviser will provide reports, which may be
prepared by the Agent, to the Separate Account's
Board of Managers for consideration at meetings of
the Board on the investment program for each Division
and the issuers and securities represented in each
Division's securities holdings, including a schedule
of the investments and other assets held in such
Division and a statement of all purchases and sales
for each Division since the last such statement, and
will furnish the Separate Account's Board of Managers
with periodic and special reports with respect to
each Division as the Managers may reasonably request,
including statistical information with respect to the
Division's securities.
3. BROKER-DEALER SELECTION. The Adviser is responsible for decisions to
buy or sell securities and other investments for each Division,
broker-dealer and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants'
rates. As a general matter, in executing portfolio transactions, the
Adviser may employ or deal with such broker-dealers or futures
commission merchants as may, in the Adviser's best judgment, provide
prompt and reliable execution of the transactions at favorable prices
and reasonable commission rates. In selecting such broker-dealers or
futures commission merchants, the Adviser shall consider all relevant
factors, including price (including the applicable brokerage
commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience
and financial stability of the broker-dealer or futures commission
merchant involved, the quality of the service, the difficulty of
execution, and the execution capabilities and operational facilities of
the firm involved, and, in the case of securities, the firm's risk in
positioning a block of securities. Subject to such policies as the
Board of Managers may determine and consistent with Section 28(e) of
the Securities Exchange Act of 1934, as amended (the 1934 ACT), the
Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by
reason of the Adviser's having caused a Division to pay a member of an
exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another
member of an exchange, broker or dealer would have charged for
effecting that transaction, if the Adviser determines in good faith
that such amount of commission was reasonable in relation to the value
of the brokerage and research services provided by such member of an
exchange, broker or dealer viewed in terms of either that particular
transaction or the Adviser's overall responsibilities with respect to
such Division and to the other clients as to which the Adviser
exercises investment discretion. In accordance with Section 11(a) of
the 1934 Act and Rule lla2-2('I') thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the 1940 Act
and Rule 17e-1 thereunder, the Adviser may engage its affiliates, or
any Sub-Adviser to the
4
<PAGE>
Separate Account and its respective affiliates, as broker-dealers or
futures commission merchants to effect portfolio transactions in
securities and other investments for a Division.
4. BOOKS AND RECORDS. The Adviser shall keep the Separate Account's books
and records required to be maintained by it pursuant to this Agreement,
the 1940 Act or otherwise. The Adviser agrees that all records which it
maintains for the Separate Account are the property of the Separate
Account and it will surrender promptly to the Separate Account any such
records upon the Separate Account's request, provided however that the
Adviser may retain a copy of such records. The Adviser further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any such records as are required to be maintained by the Adviser
hereunder.
5. ADMINISTRATIVE AND SUPERVISORY SERVICES.
(a) The Adviser will coordinate all matters relating to the
functions of the Divisions' Sub-Adviser, if any, Agent,
accountants, attorneys, and other parties performing services
or operational functions for the Divisions.
(b) The Adviser will furnish without cost to the Separate Account,
or pay the cost of, such office space, office equipment and
office facilities as are adequate for the Separate Account's
needs.
(c) The Adviser will provide, without remuneration from or other
cost to the Separate Account, the services of a sufficient
number of individuals competent to perform all of the Separate
Account's executive, administrative and clerical functions as
are necessary to ensure compliance with federal securities
laws as well as other applicable laws and to provide effective
supervision and administration of the Divisions and which are
not performed by employees or other agents engaged by the
Separate Account or by the Adviser acting in some other
capacity pursuant to a separate agreement or arrangement with
the Separate Account. The Adviser shall authorize and permit
any of its directors, officers and employees who may be
elected as a member of the Board of Managers or officers of
the Separate Account to serve in the capacities in which they
are elected without any remuneration from the Separate
Account.
(d) The Adviser will assist in the preparation of all periodic
reports to the unitholders of the Separate Account and all
reports and filings required to maintain the registration and
qualification of the Separate Account's units, or to meet
other regulatory or tax requirements applicable to the
Separate Account, under federal and state securities and tax
laws.
5
<PAGE>
(e) The Adviser shall assist in the preparation of and, after
approval by the Separate Account, file and arrange for the
distribution of proxy materials to Separate Account
unitholders as required by applicable law.
(f) The Adviser shall prepare, or cause the preparation of, and,
after approval by the Separate Account, arrange for the filing
of such registration statements and other documents with the
SEC and other federal and state regulatory authorities as may
be required by applicable law.
(g) The Adviser shall take such other action with respect to the
Divisions, after approval by the Separate Account, as may bc
required by applicable law, including without limitation the
rules and regulations of the SEC and of state securities or
insurance commissions and other regulatory agencies.
(h) The Adviser shall make its officers and employees available to
the Board of Managers and officers of the Separate Account and
Sub-Adviser for consultation and discussions regarding the
supervision and administration of the Divisions.
6. EXPENSES.
(a) During the term of this Agreement, the Adviser shall pay, or
cause a Sub-Adviser to pay, the following expenses:
(i) The salaries and expenses of all personnel of the
Separate Account and the Adviser except the fees and
expenses of members of the Board of Managers who are
not "interested persons" (within the meaning of the
1940 Act) of the Separate Account, the Adviser,
National Integrity Life Insurance Company ("National
Integrity"), or any Sub-Adviser;
(ii) All expenses reasonably incurred by the Adviser in
connection with providing the services described
above, including the provision of office space,
office equipment, office facilities, and executive,
administrative and clerical personnel in accordance
with paragraph 2(i) hereof, but excluding the
expenses described below to be assumed by the
Separate Account;
(iii) The fees of any Sub-Adviser pursuant to a
Sub-Advisory Agreement; and
(iv) The costs and expenses payable by any Sub-Adviser
pursuant to a Sub-Advisory Agreement.
(b) Each Division is responsible for and bears all expenses
incurred in its operation that are not specifically assumed by
the Adviser or ARM Securities Corp., the Separate Account's
distributor, pursuant to the Distribution Agreement with the
Separate
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Account. General expenses of the Separate Account not readily
identifiable as belonging to one of the Divisions will be
allocated among the Divisions by or under the direction of the
Separate Account's Board of Managers in such manner as the
Board shall determine to be fair and equitable. Expenses borne
by each Division include, but are not limited to, the
following (or the Division's allocated share of the
following):
(i) The cost (including brokerage commissions, if any) of
securities purchased or sold by the Division and any
losses incurred in connection therewith;
(ii) Investment management fees due hereunder (but not
sub-advisory fees, which are payable by the Adviser);
(iii) Organizational expenses;
(iv) Filing fees and expenses relating to the registration
and qualification of the Separate Account or the
units of a Division under federal or state securities
laws and maintenance of such registrations and
qualifications;
(v) Fees and expenses payable to the members of the Board
of Managers who are not "interested persons" of the
Separate Account or the Adviser, National Integrity
or any Sub-Adviser;
(vi) Taxes (including any income or franchise taxes) and
governmental fees;
(vii) Costs of any liability, directors' and officers',
uncollectible items of deposit and other insurance
and fidelity bonds;
(viii) Legal, accounting and auditing expense;
(ix) Charges of custodians, transfer agents and other
agents;
(x) Expenses of setting in type and providing a
camera-ready copy of prospectuses and supplements
thereto, expenses of setting in type and printing or
otherwise reproducing statements of additional
information and supplements thereto and reports and
proxy materials for existing unitholders;
(xi) Any extraordinary expenses (including fees and
disbursements of counsel) incurred by the Separate
Account or Division;
(xii) Fees, voluntary assessments and other expenses
incurred in connection with membership in investment
company organizations; and
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(xiii) Costs of meetings of unitholders.
7. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, each Division will pay to the Adviser as
full compensation therefor a fee at an annual rate of .50% of the
average daily net assets of each Division. This fee will be deducted
from the assets of each respective Division and paid to the Adviser
monthly, but will be accrued daily for purposes of determining the
value of each Division on each day the New York Stock Exchange is open
for trading.
8. LIABILITY. Except as may otherwise be required by the 1940 Act and the
rules and regulations thereunder, the Adviser, any of its affiliated
persons and each person, if any, who, within the meaning of Section 15
of the Securities Act of 1933, as amended, controls the Adviser, shall
not be liable for, or subject to any damages, expenses, or losses in
connection with, any act or omission connected with or arising out of
any services rendered under this Agreement, except by reason of willful
misfeasance, bad faith or gross negligence on the part of the Adviser
in the performance of its duties or from reckless disregard of its
duties and obligations under this Agreement.
9. TERM. Unless sooner terminated, this Agreement shall continue in effect
for two years and thereafter for successive one year periods, provided
that such continuance is specifically approved at least annually in
conformity with the requirements of the 1940 Act; provided, however,
that this Agreement may be terminated by the Separate Account or any
Division thereof (with respect to such Division) at any time, without
the payment of any penalty, by the Board of Managers of the Separate
Account or by vote of a majority of the outstanding voting securities
(as defined in the 1940 Act) of a Division, or by the Adviser at any
time, without the payment of any penalty, upon not less than 60 days'
prior written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940
Act).
10. NON-EXCLUSIVITY. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of the Adviser who may also
be a member of the Board of Managers, officer or employee of the
Separate Account to engage in any other business or to devote his or
her time and attention in part to the management or other aspects of
any business, whether of a similar or dissimilar nature, nor limit or
restrict the right of the Adviser to engage in any other business or to
render services of any kind to any other corporation, firm, individual
or association.
11. AMENDMENTS. This Agreement may be amended by mutual consent in writing,
but the consent of the Separate Account must be obtained in conformity
with the requirements of the 1940 Act.
12. NOTICES. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or
mailed by registered mail, postage prepaid, (1) to
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the Adviser at 515 West Market Street, 8th Floor, Louisville, Kentucky
40202, Attention: President; or (2) to the Separate Account at 515 West
Market Street, 8th Floor, Louisville, Kentucky 40202, Attention:
President.
13. CHOICE OF LAW. Except insofar as the 1940 Act or other federal laws and
regulations may be controlling, this Agreement shall be governed by,
and construed and enforced in accordance with, the internal laws of the
State of Ohio.
14. SEPARATE ACCOUNT. The Separate Account was established under Section
1701.54 of the Ohio General Corporation Law as of February 4, 1998. The
Separate Account may establish separate Divisions, and all debts,
liabilities, obligations and expenses of a particular Division shall be
enforceable only against the assets of that Division and not against
the assets of any other Division or of the Separate Account as a whole.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
16. COUNTERPARTS. This Agreement may be executed in counterparts, and each
counterpart shall for all purposes be deemed an original, and all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
SEPARATE ACCOUNT TEN OF
INTEGRITY LIFE INSURANCE
COMPANY
By________________________
TOUCHSTONE ADVISORS, INC.
By________________________
<PAGE>
EXHIBIT B
FORM OF
SUB-ADVISORY AGREEMENT
AGREEMENT, made this ___ day of __________, 2000, between Touchstone Advisors,
Inc. (MANAGER), an Ohio corporation, and National Asset Management Corporation,
a Kentucky corporation (SUB-ADVISER).
WHEREAS, Manager, an indirect wholly-owned subsidiary of The Western and
Southern Life Insurance Company, is an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the ADVISERS ACT);
WHEREAS, the Sub-Adviser is an investment adviser registered under the Advisers
Act;
WHEREAS, pursuant to a Management Agreement dated __________, 2000 (the
MANAGEMENT AGREEMENT), Manager acts as Investment Manager to Separate Account
Ten of Integrity Life Insurance Company (the SEPARATE ACCOUNT), which is a
managed separate account registered under the Investment Company Act of 1940, as
amended (the 1940 ACT);
WHEREAS, the Separate Account is authorized to subdivide into portfolios, each
such portfolio representing a separate division (collectively, the DIVISIONS) of
securities and investments; and
WHEREAS, Manager desires to retain the Sub-Adviser to furnish investment
advisory services to the Separate Account, and the Sub-Adviser is willing to
accept such appointment on the terms and conditions set forth herein.
NOW, THEREFORE, based on the premises and the consideration set forth herein,
Manager and the Sub-Adviser agree as follows:
SECTION 1. INVESTMENT ADVISORY SERVICES.
Subject to the supervision of the Separate Account's Board of Managers and the
Manager, and in compliance with each Division's investment objectives and
policies, the Sub-Adviser will provide an investment program for the Divisions
and determine the composition of the assets of the Divisions, including
determination of the purchase, retention or sale of the securities, cash, and
other investments contained in the Divisions's holdings. The Sub-Adviser is
hereby authorized to execute and perform such services on behalf of the
Divisions. To the extent, if any, permitted by the investment policies of the
Divisions, the Sub-Adviser shall make determinations as to and execute and
perform futures contracts and options on behalf of the Divisions. The
Sub-Adviser will provide the services under this Agreement in accordance with
each Division's investment objective or objectives, policies, and restrictions
as stated in the Separate Account's Registration Statement filed with the
Securities and Exchange Commission (SEC). Manager agrees to supply the
Sub-Adviser with a copy of the Registration Statement and each amendment thereto
(the Registration Statement as amended from time to time hereinafter referred to
as the REGISTRATION STATEMENT) and any other documents that set forth investment
policies, procedures or restrictions governing the Divisions and to notify the
Sub-Adviser in writing of any changes in the investment objectives, policies,
procedures and restrictions governing the Divisions.
The Sub-Adviser further agrees as follows:
(a) The Sub-Adviser will manage the Divisions so as to ensure compliance by the
Divisions with the diversification requirements of Section 817(h) of the
Internal Revenue Code of 1986, as amended (the CODE) and regulations issued
thereunder. In managing the Divisions in accordance with these requirements, the
<PAGE>
Sub-Adviser shall be entitled to receive and act upon advice of counsel to the
Separate Account, counsel to Manager or counsel to the Sub-Adviser, provided the
Sub-Adviser's counsel is acceptable to Manager.
(b) In undertaking its duties under this Agreement, the Sub-Adviser will comply
with the 1940 Act and all rules and regulations thereunder, all other applicable
federal and state laws and regulations, with any applicable procedures adopted
by the Separate Account's Board of Managers of which it has notice and the
provisions of the Registration Statement.
(c) On occasions when the Sub-Adviser is required pursuant to the Divisions'
investment objectives to enter into the purchase or sale of a security and such
purchase or sale is also in the best interest of the Sub-Adviser's or the
Sub-Adviser's affiliates' other investment advisory clients, the Sub-Adviser
may, to the extent permitted by applicable laws and regulations, but shall not
be obligated to, aggregate the securities to be so sold or purchased with those
of its other clients where such aggregation is not inconsistent with the
policies set forth in the Registration Statement. In such event, the Sub-Adviser
will allocate the securities so purchased or sold, as well as the expenses
incurred in the transaction, in a manner that is fair and equitable in the
Sub-Adviser's judgment in the exercise of the Sub-Adviser's fiduciary
obligations to the Separate Account and to such other clients.
(d) In connection with the purchase and sale of securities for the Divisions,
the Sub-Adviser, together with Manager, will arrange for the transmission to the
custodian, transfer agent, dividend disbursing agent and recordkeeping agent for
the Separate Account (such custodian and agent or agents hereinafter referred to
as the AGENT), on a daily basis, such confirmation, trade tickets (which shall
state industry classifications unless the Sub-Adviser has previously furnished a
list of classifications for portfolio securities), and other documents and
information, including (but not limited to) Cusip or other numbers that identify
securities to be purchased or sold on behalf of the Divisions as may be
reasonably necessary to enable the Agent to perform its administrative and
recordkeeping responsibilities with respect to the Divisions. With respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, the Sub-Adviser will arrange for the automatic transmission of the
confirmation of such trades to the Separate Account's Agent, and if requested,
Manager.
(e) The Sub-Adviser will monitor on a daily basis, by review of daily pricing
reports provided by the Agent to the Sub-Adviser, the determination by the Agent
for the Separate Account of the valuation of portfolio securities and other
investments of the Divisions. The Sub-Adviser shall not be obligated to
independently verify the Agent's pricing determinations, and the Agent's
responsibility for accurate pricing determinations of the value of the
Divisions' securities shall not be reduced by the Sub-Adviser's duty to monitor
such determinations. The Sub-Adviser will assist the Agent in determining or
confirming, consistent with the procedures and policies stated in the
Registration Statement, the value of any portfolio securities or other assets of
the Divisions for which the Agent seeks assistance from or identifies for review
by the Sub-Adviser.
(f) The Sub-Adviser will make available to the Separate Account and Manager,
promptly upon request, all of the Divisions' investment records and ledgers
maintained by the Sub-Adviser as are necessary to assist the Separate Account
and Manager to comply with requirements of the 1940 Act and the Advisers Act, as
well as other applicable laws. The Sub-Adviser will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services which may be requested in order to ascertain
whether the operations of the Separate Account are being conducted in a manner
consistent with applicable laws and regulations.
(g) The Sub-Adviser will provide reports, which may be prepared by the Agent, to
the Separate Account's Board of Managers for consideration at meetings of the
Board on the investment program for the Divisions
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and the issuers and securities represented in the Divisions' securities
holdings, including a schedule of the investments and other assets held in the
Divisions and a statement of all purchases and sales for the Divisions since the
last such statement, and will furnish the Separate Account's Board of Managers
with periodic and special reports with respect to the Divisions as the Board of
Managers and Manager may reasonably request, including statistical information
with respect to the Divisions' securities. In addition, the Sub-Adviser will
make available at each meeting of the Board of Managers, either in person or by
telephone conference call as instructed by Manager on behalf of the Board of
Managers of the Separate Account, an appropriate person to discuss the
investment performance of the Divisions.
(h) The Sub-Adviser will provide information and reports to Manager as Manager
shall reasonably request to enable it to review the performance of the
Sub-Adviser under this Agreement.
SECTION 2. BROKER-DEALER SELECTION.
The Sub-Adviser is responsible for decisions to buy and sell securities and
other investments for the Divisions, broker-dealer and futures commission
merchant selection, and negotiation of brokerage commission and futures
commission merchants' rates. As a general matter, in executing portfolio
transactions the Sub-Adviser may employ or deal with such broker-dealers or
futures commission merchants as may, in the Sub-Adviser's best judgment, provide
prompt and reliable execution of the transactions at favorable prices and
reasonable commission rates. In selecting such broker-dealers or futures
commission merchants, the Sub-Adviser shall consider all relevant factors,
including price (including the applicable brokerage commission, dealer spread or
futures commission merchant rate), the size of the order, the nature of the
market for the security or other investment, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer or futures
commission merchant involved, the quality of the service, the difficulty of
execution, and the execution capabilities and operational facilities of the firm
involved, and, in the case of securities, the firm's risk in positioning a block
of securities. Subject to such policies as the Board of Managers may determine
and consistent with Section 28(e) of the Securities Exchange Act of 1934, as
amended (the 1934 ACT), the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of the Sub-Adviser's having caused the Divisions to pay a
member of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
if the Sub-Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member of an exchange, broker or dealer, viewed in terms of
either that particular transaction or the Sub-Adviser's overall responsibilities
with respect to the Divisions and to the Sub-Adviser's other clients as to which
the Sub-Adviser exercises investment discretion. In accordance with Section
11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the 1940 Act and Rule
17e-1 thereunder, the Sub-Adviser may engage its affiliates, Manager and its
affiliates or any other sub-adviser to the Separate Account and its respective
affiliates as broker-dealers or futures commission merchants to effect portfolio
transactions in securities and other investments for the Divisions.
SECTION 3. RECORDS, REPORTS, ETC.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which the Sub-Adviser maintains for
the Divisions are the property of the Separate Account and further agrees to
surrender promptly to the Separate Account any of such records upon the Separate
Account's or Manager's request or upon termination of this Agreement, although
the Sub-Adviser may, at the Sub-Adviser's own expense, make and retain a copy of
such records. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by
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Rule 31a-1 under the 1940 Act and to preserve the records required by the Rule
204-2 under the Advisers Act for the period specified in the Rule.
SECTION 4. PAYMENT OF EXPENSES.
The Sub-Adviser shall assume and pay all of the costs and expenses of performing
its obligations under this Agreement.
SECTION 5. COMPENSATION FOR SERVICES.
Manager will pay to the Sub-Adviser a monthly sub-advisory fee (adjusted pro
rata for any shorter applicable period) at an annual rate of .10% of the first
$100 million of average daily net assets of the Divisions from the management
fee actually received by Manager from the Separate Account and its affiliated
separate account offered by National Integrity Life Insurance Company; and at an
annual rate of .05% of average daily net assets above $100 million of the
Divisions from the management fee actually received by Manager from the Separate
Account and its affiliated separate account offered by National Integrity Life
Insurance Company; provided, however, the Sub-Adviser is guaranteed a minimum
sub-advisory fee of $50,000 annually; and provided further, that the
sub-advisory fee shall be reduced proportionately if the management fee actually
paid to Manager by the Divisions shall have been reduced as a result of
applicable state expense limitations or fee waivers agreed to in writing by the
Sub-Adviser. The sub-advisory fee shall be computed, accrue and be payable in
the same manner as the management fee which is payable by the Separate Account
to Manager pursuant to the Management Agreement and as specified in the Separate
Account's Registration Statement.
SECTION 6. LIABILITY FOR SERVICES.
Except as may otherwise be required by the 1940 Act or the rules thereunder or
other applicable law, and except as set forth in the next paragraph, the
Separate Account and Manager agree that the Sub-Adviser, any of its affiliated
persons, and each person, if any, who, within the meaning of Section 15 of the
Securities Act of 1933, as amended, controls the Sub-Adviser, shall not be
liable for, or subject to any damages, expenses, or losses in connection with,
any act or omission connected with or arising out of any services rendered under
this Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Sub-Adviser's duties, or by reason of
reckless disregard of the Sub-Adviser's obligations and duties under this
Agreement.
SECTION 7. INDEMNIFICATION BY SUB-ADVISER.
The Sub-Adviser agrees to indemnify and hold harmless Manager against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which Manager may become subject arising out of or based on
the breach or alleged breach by the Sub-Adviser of any provisions of this
Agreement; provided, however, that the Sub-Adviser shall not be liable under
this paragraph in respect of any loss, expense, claim, damage or liability to
the extent that a court having jurisdiction shall have determined by a final
judgment, or independent counsel agreed upon by Manager and the Sub-Adviser
shall have concluded in a written opinion, that such loss, expense, claim,
damage or liability resulted primarily from Manager's willful misfeasance, bad
faith or gross negligence or by reason of the reckless disregard by Manager of
its duties. The foregoing indemnification shall be in addition to any rights
that Manager may have at common law or otherwise. The Sub-Adviser's agreements
in this paragraph shall, upon the same terms and conditions, extend to and inure
to the benefit of each person who may be deemed to control Manager, be
controlled by Manager or be under common control with Manager and its
affiliates, directors, officers, employees and
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agents. The Sub-Adviser's agreements in this paragraph shall also extend to any
of Manager's successors or the successors of the aforementioned affiliates,
directors, officers, employees or agents.
SECTION 8. INDEMNIFICATION BY MANAGER.
Manager agrees to indemnify and hold harmless the Sub-Adviser against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which the Sub-Adviser may become subject arising out of or
based on the breach or alleged breach by Manager of any provisions of this
Agreement or the Management Agreement, or any wrongful action or alleged
wrongful action by Manager or its affiliates in the distribution of the Separate
Account's units, or any wrongful action or alleged wrongful action by the
Separate Account other than wrongful action or alleged wrongful action that was
caused by the breach by the Sub-Adviser of the provisions of this Agreement;
provided, however, that Manager shall not be liable under this paragraph in
respect of any loss, expense, claim, damage or liability to the extent that a
court having jurisdiction shall have determined by a final judgment, or
independent counsel agreed upon by Manager and the Sub-Adviser shall have
concluded in a written opinion, that such loss, expense, claim, damage or
liability resulted primarily from the Sub-Adviser's willful misfeasance, bad
faith or gross negligence or by reason of the reckless disregard by the
Sub-Adviser of its duties. The foregoing indemnification shall be in addition to
any rights that the Sub-Adviser may have at common law or otherwise. Manager's
agreements in this paragraph shall, upon the same terms and conditions, extend
to and inure to the benefit of each person who may be deemed to control the
Sub-Adviser, be controlled by the Sub-Adviser or be under common control with
the Sub-Adviser and to each of the Sub-Adviser's and each such person's
respective affiliates, directors, officers, employees and agents. Manager's
agreements in this paragraph shall also extend to any of the Sub-Adviser's
successors or the successors of the aforementioned affiliates, directors,
officers, employees or agents.
SECTION 9. NOTICE AND DEFENSE OR PROCEEDINGS, ETC.
Promptly after receipt by a party indemnified under paragraph 7 or 8 above of
notice of the commencement of any action, proceeding or investigation for which
indemnification will be sought, such indemnified party shall promptly notify the
indemnifying party in writing; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may otherwise have to any
indemnified party unless such omission results in actual material prejudice to
the indemnifying party. In case any action or proceeding shall be brought
against any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, individually or jointly with any other indemnifying party, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of any action or proceeding, the indemnifying
party shall not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation. If the
indemnifying party does not elect to assume the defense of any action or
proceeding, the indemnifying party on a monthly basis shall reimburse the
indemnified party for the legal fees and expenses incurred by the indemnified
party for continuing its defense thereof. Regardless of whether or not the
indemnifying party shall have assumed the defense of any action or proceeding,
the indemnified party shall not settle or compromise the action or proceeding
without the prior written consent of the indemnifying party.
SECTION 10. REPRESENTATIONS AND WARRANTIES; COVENANTS.
(a) The Sub-Adviser hereby represents and warrants as follows:
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(i) The Sub-Adviser is registered with the SEC as an investment adviser under
the Advisers Act, and such registration is current, complete and in full
compliance with all material applicable provisions of the Advisers Act and the
rules and regulations thereunder;
(ii) The Sub-Adviser has all requisite authority to enter into, execute, deliver
and perform the Sub-Adviser's obligations under this Agreement;
(iii) The Sub-Adviser's performance of its obligations under this Agreement does
not conflict with any law, regulation or order to which the Sub-Adviser is
subject; and
(iv) The Sub-Adviser has reviewed the Registration Statement for the Separate
Account filed with the SEC, and with respect to the disclosure about the
Sub-Adviser and the Divisions or information relating, directly or indirectly,
to the Sub-Adviser or the Divisions which was made in reliance upon and in
conformity with written information provided by the Sub-Adviser to the Separate
Account specifically for use therein or, if written information was not
provided, which the Sub-Adviser had the opportunity to review prior to filing
with the SEC, such Registration Statement contains, as of its date, no untrue
statement of any material fact and does not omit any statement of a material
fact which was required to be stated therein or necessary to make the statements
contained therein not misleading.
(b) The Sub-Adviser hereby covenants and agrees that, so long as this Agreement
shall remain in effect:
(i) The Sub-Adviser shall maintain the Sub-Adviser's registration as an
investment adviser under the Advisers Act, and such registration shall at all
times remain current, complete and in full compliance with all material
applicable provisions of the Advisers Act and the rules and regulations
thereunder;
(ii) The Sub-Adviser's performance of its obligations under this Agreement shall
not conflict with any law, regulation or order to which the Sub-Adviser is then
subject;
(iii) The Sub-Adviser shall at all times fully comply with the Advisers Act, the
1940 Act, all applicable rules and regulations under such Acts and all other
applicable law;
(iv) The Sub-Adviser shall promptly notify Manager and the Separate Account upon
the occurrence of any event that might disqualify or prevent the Sub-Adviser
from performing its duties under this Agreement. The Sub-Adviser further agrees
to notify Manager and the Separate Account promptly with respect to written
material that has been provided to the Separate Account or Manager by the
Sub-Adviser for inclusion in the Registration Statement or prospectus for the
Separate Account or any supplement or amendment thereto, or, if written material
has not been provided, with respect to the information in the Registration
Statement or Prospectus, or any amendment or supplement thereto, reviewed by the
Sub-Adviser, in either case of any untrue statement of a material fact or of any
omission of any statement of a material fact which is required to be stated
therein or is necessary to make the statements contained therein not misleading;
and
SECTION 11. EXCLUSIVITY OF USE OF NAMES.
The Sub-Adviser acknowledges and agrees that the name PINNACLE and SELECT TEN
PLUS, and abbreviations or logos associated with those names, are the valuable
property of Manager and its affiliates; that the Separate Account, Manager and
its affiliates have the sole right to use such names, abbreviations and logos;
and that the Sub-Adviser shall use the names PINNACLE and SELECT TEN PLUS, and
associated abbreviations and logos, only in connection with the Sub-Adviser's
performance of its duties hereunder.
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Manager acknowledges that "National Asset Management Corporation" (the
SUB-ADVISER'S NAME) is distinctive in connection with investment advisory and
related services provided by the Sub-Adviser, the Sub-Adviser's name is a
property right of the Sub-Adviser, and the Sub-Adviser's name in connection with
the Divisions is understood to be used by the Separate Account with the
Sub-Adviser's consent. The Sub-Adviser hereby grants to the Separate Account a
non-exclusive license to use the Sub-Adviser's name in the name of the Divisions
upon the conditions hereinafter set forth; provided that the Separate Account
may use such name only so long as the Sub-Adviser shall be retained as the
investment sub-adviser of the Divisions pursuant to the terms of this Agreement.
Any such use by the Separate Account shall in no way prevent the Sub-Adviser or
any of its successors or assigns from using or permitting the use of the
Sub-Adviser's name along with any other word or words, for, by or in connection
with any other entity or business, other than the Separate Account or its
business, whether or not the same directly competes or conflicts with the
Separate Account or its business in any manner.
Manager acknowledges that the Separate Account shall use the Sub-Adviser's name
in connection with the Divisions for the period set forth herein in a manner not
inconsistent with the interests of the Sub-Adviser and that the Separate
Account's rights in the Sub-Adviser's name are limited to its use as a component
of the Divisions's name and in connection with accurately describing the
activities of the Divisions. In the event that the Sub-Adviser shall cease to be
the investment sub-adviser of the Divisions, then the Separate Account at their
own expense, upon the Sub-Adviser's written request:
(i) shall cease to use the Sub-Adviser's name, or any combination thereof for
any other commercial purpose (other than the right to refer to the Divisions'
former Sub-Adviser's name in the Separate Account's Registration Statement,
proxy materials and other Separate Account documents to the extent required
under the 1940 Act);
(ii) shall use its best efforts to cause the Separate Account's officers and
Board of Managers to take any all actions which may be necessary or desirable to
effect the foregoing and to reconvey to the Sub-Adviser all rights which the
Separate Account may have to such name. Manager agrees to take any all actions
as may be necessary or desirable to effect the foregoing.
The Sub-Adviser hereby agrees and consents to the use of the Sub-Adviser's name
upon the foregoing terms and conditions.
SECTION 12. ENTIRE AGREEMENT; AMENDMENT, WAIVER.
This Agreement supersedes all prior agreements between the parties and
constitutes the entire agreement by the parties. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment of this
Agreement shall be effective with respect to the Divisions until approved as
required by the 1940 Act.
SECTION 13. EFFECTIVENESS AND DURATION OF AGREEMENT.
Unless sooner terminated, this Agreement shall continue in effect for two years
and thereafter for successive one year periods, provided that continuation of
this Agreement and the terms thereof are specifically approved annually in
accordance with the requirements of the 1940 Act by a majority of the Managers
of the Separate Account, including a majority of the Managers who are not
interested persons of the Sub-Adviser, Manager or the Separate Account, cast in
person at a meeting called for the purpose of voting on such approval.
7
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SECTION 14. TERMINATION OF AGREEMENT, ASSIGNMENT.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Sub-Adviser or by Manager, upon sixty (60) days' written notice
from the terminating party to the other party and to the Separate Account, or by
the Separate Account, upon sixty (60) days written notice to the Sub-Adviser and
Manager, acting pursuant to a resolution adopted by a majority of the members of
the Board of Managers who are not interested persons or by a vote of the holders
of the lesser of (1) 67% of the Divisions' voting shares present if the holders
of more than 50% of the outstanding shares are present in person or by proxy, or
(2) more than 50% of the outstanding shares of the Divisions.
This Agreement shall automatically terminate in the event of its assignment or
the termination of the Management Agreement pertaining to the Divisions.
Termination of this Agreement shall not affect rights of the parties which have
accrued prior thereto.
The provisions of paragraphs 6, 7, 8, 9 and 11 shall survive the termination of
this Agreement, except that if Manager or the Separate Account terminates the
Agreement, the first paragraph of Section 11 shall not survive termination.
SECTION 15. DEFINITIONS.
The terms ASSIGNMENT and INTERESTED PERSON when used in this Agreement shall
have the meanings given such terms in the 1940 Act and the rules and regulations
thereunder.
SECTION 16. CONCERNING APPLICABLE PROVISIONS OF LAW.
This Agreement shall be subject to all applicable provisions of law, including,
without limitation, the applicable provisions of the 1940 Act, and to the extent
that any provisions herein contained conflict with any such applicable
provisions of law, the latter shall control. This Agreement shall be governed by
the laws of the State of Kentucky, without reference to principles of conflicts
of law.
SECTION 17. COUNTERPARTS.
This Agreement may be executed in counterparts, and each counterpart shall for
all purposes be deemed an original and all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, authorized officers of Manager and the Sub-Adviser have
executed this Agreement as of the day and year first written above.
TOUCHSTONE ADVISORS, INC. NATIONAL ASSET MANAGEMENT
CORPORATION
By:__________________________ By:_________________________________
Attest:______________________ Attest:_____________________________
8
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<S><C>
--PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.--
PORTFOLIO NAME PRINTS HERE VOTING INSTRUCTION CARD
PLEASE MARK YOUR VOTING INSTRUCTION CARD, DATE AND SIGN IT WHERE INDICATED, AND RETURN IT PROMPTLY IN THE ACCOMPANYING
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
THESE VOTING INSTRUCTIONS ARE SOLICITED BY INTEGRITY LIFE INSURANCE COMPANY IN CONNECTION WITH A SOLICITATION OF PROXIES
BY THE MANAGERS OF SEPARATE ACCOUNT TEN. A VOTING INSTRUCTION CARD IS PROVIDED FOR THE DIVISIONS IN WHICH YOUR CONTRACT
VALUES WERE INVESTED AS OF FEBRUARY 24, 2000.
The undersigned hereby instructs Integrity Life Insurance Company to vote the shares of Separate Account Ten (the "Separate
Account") attributable to his or her variable annuity contract at the Special Meeting of Shareholders to be held at Integrity
Life's offices, 515 West Market Street, Louisville, Kentucky 40202 at 4:30 p.m., Eastern Time, April 4, 2000, and any
adjournments thereof, as indicated on the reverse side.
Dated:
---------------------------------
PLEASE SIGN IN BOX BELOW
If a contract is held jointly, each contract owner should sign.
If only one signs, his or her signature will be binding. If
the contract owner is a corporation, the President or a Vice
President should sign in his or her own name, indicating title.
If the contract owner is a partnership, a partner should sign
in his or her own name, indicating that he or she is a partner.
--------------------------------------------------------------
--------------------------------------------------------------
SIGNATURE(S)
TITLE(S), IF APPLICABLE
<PAGE>
-- PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING --
INDICATE YOUR VOTE BY FILLING IN THE APPROPRIATE BOXES IN THIS MANNER /X/ USING
BLUE OR BLACK INK OR DARK PENCIL.
PLEASE DO NOT USE RED INK
THIS VOTING INSTRUCTION, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE CONTRACT HOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL PROPOSALS. PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF
THE PROPOSALS.
FOR AGAINST ABSTAIN
1. To approve a new investment management agreement between the Separate Account / / / / / /
and Touchstone Advisors, Inc. (the "New Manager").
2. To approve a new sub-advisory agreement between the New Manager and National / / / / / /
Asset Management Corporation.
FOR WITHHOLD
3. To elect a slate of five members to the Separate Account's Board of Managers ALL NOMINEES LISTED AUTHORITY TO VOTE
to hold office until their successors are duly elected and qualified: (EXCEPT AS NOTED FOR ALL NOMINEES
IN SPACE PROVIDED) LISTED
[A] John R. Lindholm [D] John Katz / / / /
[B] Chris LaVictoire Mahai [E] Irvin W. Quesenberry, Jr.
[C] William B. Faulkner
|_ |_ |_
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE BY WRITING THAT NOMINEE(S) NAME(S)
IN THE SPACE PROVIDED BELOW.
- ------------------------------------------------------------------------------
4. To ratify the selection of Ernst & Young LLP as the Fund's independent accountants FOR AGAINST ABSTAIN
for the fiscal year ending December 31, 2000. / / / / / /
5. To transact such other matters as may properly come before the Meeting or any
adjournment thereof. SEPARATE TEN
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