Exhibit (h)(7)
PARTICIPATION AGREEMENT
BY AND AMONG
MARKET STREET FUND
AND
NATIONWIDE LIFE INSURANCE COMPANY OF AMERICA
(FORMERLY, "PROVIDENT MUTUAL LIFE INSURANCE COMPANY")
AND
1717 CAPITAL MANAGEMENT COMPANY
THIS AGREEMENT, made as of the close of business on
_______________, 2002, by and among NATIONWIDE LIFE INSURANCE COMPANY OF AMERICA
(formerly, "Provident Mutual Life Insurance Company"), a Pennsylvania stock
insurance company (hereinafter, the "Company"), on its own behalf and on behalf
of each separate account of the Company named in Exhibit A to this Agreement, as
may be amended from time to time (each, an "Account" and collectively, the
"Accounts"), the MARKET STREET FUND, an open-end diversified management
investment company organized as a business trust under the laws of the State of
Delaware (hereinafter, the "Fund") and 1717 CAPITAL MANAGEMENT COMPANY, a
Pennsylvania corporation (hereinafter, "1717" or the "Underwriter").
WHEREAS, the Fund engages in business as an open-end
diversified, management investment company, and the Fund's shares of beneficial
interests ("shares") are divided into several distinct series of shares, each
representing an interest in a particular managed portfolio of securities and
other assets named in Exhibit B to this Agreement, as may be amended from time
to time (each, a "Portfolio"), of which certain Portfolios (the "Dedicated
Portfolios") are available to act as an investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
offered by insurance companies that have entered into participation agreements
substantially identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission (the "SEC"), dated October 3, 1985 (File No. 812-6143),
granting Participating Insurance Companies and variable annuity and variable
life insurance separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended
(hereinafter, the "1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit the Fund's shares to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter, the
"Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act, and its shares are registered under the
Securities Act of 1933, as amended (hereinafter, the "1933 Act"); and
WHEREAS, the Company has registered or will register certain
variable life insurance policies and variable annuity contracts named in Exhibit
A to this Agreement, as it may be amended from time to time (collectively, the
"Policies") under the 1933 Act, unless exempt therefrom; and
WHEREAS, the Accounts are duly organized, validly existing
segregated asset accounts, established by resolution of the Company's Board of
Directors under Pennsylvania insurance law, to set aside and invest assets
attributable to the Policies; and
WHEREAS, the Company has registered each Account as a unit
investment trust under the 1940 Act, unless exempt therefrom; and
WHEREAS, the Underwriter is registered as a broker-dealer with
the SEC under the Securities Exchange Act of 1934, as amended (hereinafter, the
"1934 Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter, the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, Provident Mutual Life Insurance Company previously had
purchased shares in certain of the Portfolios that are dedicated to support
separate accounts established for variable life insurance policies and variable
annuity contracts offered by insurance companies (the aforementioned "Dedicated
Portfolios") on behalf of the Accounts to fund the Policies, which shares of the
Dedicated Portfolios the Underwriter was authorized to sell to unit investment
trusts such as the Accounts at net asset value, pursuant to an agreement by and
among Provident Mutual Life Insurance Company, the Fund, and the Distributor,
dated January 26, 2001 (hereinafter, the "Previous Agreement"); and
WHEREAS, the change in control over Provident Mutual Life
Insurance Company, as of ________, 2002, as a result of the ___________, 2002
"sponsored demutualization" and acquisition of Provident Mutual Life Insurance
Company by Nationwide Financial Services, Inc., pursuant to which acquisition
Provident Mutual Life Insurance Company was renamed "Nationwide Life Insurance
Company of America," accordingly, resulted in the "assignment" (as that term is
defined at Section 2(a)(4) of the 0000 Xxx) of the Previous Agreement, pursuant
to which assignment the Previous Agreement automatically and immediately
terminated; and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, Nationwide Life Insurance Company of America (formerly,
"Provident Mutual Life Insurance Company") (hereinafter, the aforementioned
"Company") intends to continue to purchase shares in certain of the Dedicated
Portfolios that are dedicated to support separate accounts established for
variable life insurance policies and variable annuity contracts offered by
insurance companies and named in Exhibit B to this Agreement, as this Exhibit B
may be amended from time to time, on behalf of the Accounts to fund the
Policies, and the Underwriter is and remains authorized to sell shares of the
Dedicated Portfolios to unit investment trusts such as the Accounts at net asset
value.
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NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund, and the Underwriter hereby agree as follows:
ARTICLE I. Sale of Dedicated Portfolio Shares
1.1. The Underwriter agrees to sell to the Company those
shares of the Fund's Dedicated Portfolios that the Company orders on behalf of
the Accounts, executing such orders on a daily basis at the net asset value next
computed after receipt and acceptance by the Fund, or its designee, of the order
for these shares. For purposes of this Section 1.1, the Company shall be the
designee of the Fund for receipt of such orders from each Account and receipt by
such designee shall constitute receipt by the Fund; provided that the Fund
receives notice of such order by 10:00 a.m. Eastern Time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the relevant Fund calculates its net
asset value.
1.2. The Fund agrees to make its Dedicated Portfolio shares
available indefinitely for purchase at the applicable net asset value per share
by Participating Insurance Companies and their separate accounts on those days
on which the Fund calculates the Portfolios' net asset values pursuant to SEC
rules; provided, however, that the Fund's Board of Trustees (the "Board") may
refuse to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Board, acting in good faith and in light of its fiduciary duties under federal
and any applicable state laws, necessary in the best interests of the
shareholders of any Portfolio.
1.3. The Fund and the Underwriter agree that Dedicated
Portfolio shares will be sold only to Participating Insurance Companies and
their separate accounts. No shares of any Dedicated Portfolio will be sold to
the general public.
1.4. The Fund and the Underwriter will not sell Dedicated
Portfolio shares to any insurance company or separate account unless an
agreement containing provisions substantially the same as Articles I, III, V,
and VII of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of a Dedicated Portfolio held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt and acceptance by the Fund, or its designee, of the
request for redemption. For purposes of this Section 1.5, the Company shall be
the designee of the Fund for receipt of requests for redemption from each
Separate Account and receipt by such designee shall constitute receipt by the
Fund; provided the Fund receives notice of request for redemption by 10:00 a.m.
Eastern Time on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of
each Dedicated Portfolio offered by the Fund's then current prospectus in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the Policies shall be invested in the Fund, or in
the Company's general account; provided that these amounts may also
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be invested in an investment company other than the Fund if: (a) the other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
all the Fund's Portfolios; (b) the Company gives the Fund and the Underwriter
forty-five (45) days written notice of the Company's intention to make that
other investment company available as a funding vehicle for the Policies; (c)
that other investment company was available as a funding vehicle for the
Policies prior to the date of this Agreement and the Company has informed the
Fund and Underwriter of that arrangement in writing prior to their signing this
Agreement; or (d) the Fund or Underwriter consents in writing prior to the use
of that other investment company.
1.7. The Company shall pay for Fund shares on the same day
that the Company places an order to purchase Fund shares. The Fund shall pay
redemption proceeds in accordance with the terms of the then-current prospectus
for the Fund. Payment shall be in federal funds transmitted by wire.
1.8. Issuance and transfer of the Funds' shares will be by
book entry only. Share certificates will not be issued to the Company or any of
the Accounts. Shares ordered from the Fund will be recorded in an appropriate
title for the applicable Account or the appropriate subaccount of the applicable
Account.
1.9. The Fund shall furnish same day notice (by wire or
telephone, followed by written confirmation) to the Company of any income
dividends or capital-gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such dividends and distributions as are
payable on the Dedicated Portfolio shares in additional shares of that Dedicated
Portfolio; provided, that the Company reserves the right to revoke this election
and to receive all such dividends and distributions in cash. The Fund shall
notify the Company of the number of each Dedicated Portfolio's shares so issued
as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for
each Dedicated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Policies are
or will be registered under the 1933 Act, unless exempt therefrom, and that the
Policies will be issued and sold in compliance with all applicable federal and
state laws. The Company further represents and warrants that the Company is an
insurance company duly organized and in good standing under applicable law and
that the Company has legally and validly established the Accounts as segregated
asset accounts under Section 00-00-000 of the Pennsylvania Insurance Code and
has registered each of the Accounts as a unit investment trust in accordance
with the provisions of the 1940 Act, unless exempt therefrom, to serve as
segregated investment accounts for the Policies, and that the Company will
maintain such registrations for so long as any Policies are outstanding. The
Company shall amend any registration statement under the 1933 Act for the
Policies and any registration statement under the 1940 Act for the Accounts from
time to time as
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required in order to effect the continuous offering of the Policies or as may
otherwise be required by applicable law. The Company shall register and qualify
the Policies for sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. Subject to Article VI hereof, the Company represents that
the Company believes, in good faith, that the Policies are currently and, at the
time of issuance, will be treated as life insurance contracts or annuity
contracts under applicable provisions of the Internal Revenue Code of 1986, that
the Company will make every effort to maintain such treatment and that the
Company will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Policies have ceased to be so treated or
that the Policies might not be so treated in the future.
2.3. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law and that the Fund is
and shall remain registered under the 1940 Act for as long as the Fund shares
are sold. The Fund shall amend the registration statement for Fund shares under
the 1933 Act and the 1940 Act from time to time as required in order to effect
the continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund or the Underwriter.
2.4. The Fund represents that the Fund believes, in good
faith, that the Fund is currently qualified as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, that the Fund will make
every effort to maintain such qualification (under Subchapter M or any successor
or similar provision), and that the Fund will notify the Company immediately
upon having a reasonable basis for believing that the Fund has ceased to so
qualify or that it might not so qualify in the future.
2.5. The Fund represents that the Fund's investment
objectives, policies, and restrictions comply with the Pennsylvania Insurance
Code as this Code applies to the Fund. To the extent feasible and consistent
with market conditions, the Fund will adjust the Fund's investments to comply
with requirements of the Company's domiciliary state upon written notice from
the Company of such requirements and proposed adjustments, provided that in this
case the Fund shall be allowed a reasonable period of time under the
circumstances after receipt of such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments
to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although the Fund may make such payments in the future. To the extent
that the Fund decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund shall formulate and approve any plan pursuant to the requirements of
Rule 12b-1 to finance distribution expenses and shall notify the Company
immediately.
2.7. The Underwriter represents and warrants that it is a
member in good standing of the NASD and is registered as a broker-dealer with
the SEC. The Underwriter
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further represents that the Underwriter will sell and distribute the Fund shares
in accordance with the 1933 Act, the 1934 Act, and the 0000 Xxx.
2.8 The Fund represents and warrants that it and all of its
trustees, officers, employees and other individuals/entities having access to
the moneys and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-1 of the 1940 Act or related provisions as may be promulgated from time
to time. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company, at the
Company's expense, with as many copies of the Fund's current prospectus as the
Company may reasonably request for use with prospective Policy owners and
applicants. The Underwriter shall print and distribute, at the Fund's expense,
as many copies as necessary for distribution to existing Policy owners or
participants. If requested by the Company in lieu thereof, the Fund shall
provide this documentation and other assistance as is reasonably necessary in
order for the Company to have the new prospectus for the Policies and the Fund's
new prospectus for the Dedicated Portfolios printed together in one document, in
such case the Fund shall bear its proportional share of expenses as described
above.
3.2. The Fund's prospectus shall state that the Fund's
Statement of Additional Information is available from the Underwriter (or, in
the Fund's discretion, the prospectus shall state that this Statement is
available from the Fund), and the Underwriter (or the Fund) shall provide this
Statement, at the Underwriter's expense, to the Company and to any owner of or
participant under a Policy who requests this Statement or, at the Company's
expense, to any prospective Policy owner and applicant who requests this
Statement.
3.3. The Fund, at its expense, shall provide the Company with
copies of the Fund's proxy material, reports to shareholders, and other
communications to shareholders in such quantity as the Company shall reasonably
require and shall bear the costs of distributing these materials, reports, and
communications to existing Policy owners or participants.
3.4. If and to the extent required by law, the Company shall:
(i) solicit voting instructions from Policy owners or
participants;
(ii) vote the Fund shares held in the Accounts in
accordance with instructions received from Policy
owners or participants; and
(iii) vote Fund shares held in the Accounts for which no
timely instructions have been received, and any Fund
shares held
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in the Company's general account, in the same
proportion as Fund shares for which instructions have
been received;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require passthrough voting privileges for variable policy owners. The Company
reserves the right to vote Fund shares held in any segregated asset account or
in the Company's general account in its own right, to the extent permitted by
law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with other Participating Insurance Companies
and as required by the Mixed and Shared Funding Exemptive Order.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will call a meeting
of shareholders at the written request of 25% of the outstanding shares of a
Portfolio or Portfolios and will comply with Section 16(a) of the 1940 Act and,
if and when applicable, Section 16(b). Further, the Fund will act in accordance
with the SEC interpretation of the requirements of Section 16 (a) with respect
to periodic elections of trustees and with whatever rules the SEC may promulgate
with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be
furnished, to the Fund or the Underwriter, each piece of sales literature or
other promotional material in which the Fund or the Underwriter is named, at
least ten (10) business days prior to the literature's or material's use. No
such material shall be used if the Fund or the Underwriter objects to such use
within ten (10) business days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Policies other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis. The parties agree that this Section 4.2 is not intended
to designate or otherwise imply that the Company is an underwriter or
distributor of the Fund's shares.
4.3. The Fund or the Underwriter shall furnish, or shall cause
to be furnished, to the Company or the Company's designee, each piece of sales
literature or other promotional material in which the Company, the Company's
separate account(s) or the Policies are named, at least ten (10) business days
prior to the literature's or material's use. No such material shall be used if
the Company objects to such use within ten (10) business days after receipt of
such material.
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4.4. The Fund and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, the Accounts, or the Policies other than the information or
representations contained in a registration statement or prospectus for the
Policies, as such registration statement and prospectus may be amended or
supplemented from time to time, or in published reports for the Accounts which
are in the public domain or approved by the Company for distribution to Policy
owners or participants, or in sales literature or other promotional material
approved by the Company, except with the permission of the Company. The Company
agrees to respond to any request for approval on a prompt and timely basis.
4.5. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media),
sales literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution expenses, then, subject to obtaining any required
exemptive orders or other regulatory approvals, the Underwriter may make
payments to the Company or to the underwriter for the Policies if and in amounts
agreed to by the Underwriter in writing.
5.2. All expenses incident to performance by the Fund of this
Agreement shall be paid by the Fund to the extent permitted by law. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares under federal law, and, if applicable, under any state securities
law, preparation and filing of the Fund's prospectus and registration statement,
proxy materials and reports, setting in type, printing and distributing the
prospectuses, the proxy materials and reports to existing shareholders and
Policy owners, the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Fund's
shares, and any expenses permitted to be paid or assumed by the Fund pursuant to
a plan, if any, under Rule 12b-1 under the 1940 Act.
ARTICLE VI. Diversification
6.1. The Fund, on behalf of each Dedicated Portfolio, shall at
all times be responsible to invest money from an Account in such a manner as to
ensure that the Policies will
8
be treated as variable contracts under the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations issued thereunder; provided that, the
Fund's investment responsibility shall be limited to compliance with Subchapter
M (Code Section 851 et seq.) as that section relates to regulated investment
companies and Code Section 817 (h) and the related U.S. Treasury Regulation
Section 1.817-5 issued thereunder, relating to the diversification requirements
for variable annuity, endowment, and life insurance contracts.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund and Portfolios for the
existence of any material irreconcilable conflict between the interests of the
policy owners of all separate accounts investing in the Fund and Portfolios. An
irreconcilable material conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory
authority;
(b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public
ruling, private letter ruling, no-action or
interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities;
(c) an administrative or judicial decision in any
relevant proceeding;
(d) the manner in which the investments of any Portfolio
are being managed;
(e) a difference in voting instructions given by
Participating Insurance Companies or by variable
annuity contract and variable life insurance policy
owners; or
(f) a decision by an insurer to disregard the voting
instructions of policy owners.
The Board shall promptly inform the Company if the Board determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company has reviewed a copy of the Mixed and Shared
Funding Exemptive Order, and in particular, has reviewed the conditions to the
requested relief set forth therein. As set forth in the Mixed and Shared Funding
Exemptive Order, the Company will report any potential or existing conflicts of
which the Company is aware to the Board. The Company agrees to assist the Board
in carrying out the Fund's responsibilities under the Mixed and Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever policy
owner voting instructions are disregarded. The Board shall record in the minutes
or other appropriate records of the Fund, all reports received by the Board and
all action with regard to a conflict.
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7.3. If it is determined by a majority of the members of the
Board or a majority of its disinterested Trustees that an irreconcilable
material conflict exists, the Company and other Participating Insurance
Companies shall, at their expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including:
(a) withdrawing the assets allocable to some or all of
the separate accounts from the Fund or any Portfolio
and reinvesting these assets in a different
investment medium, including (but not limited to)
another Portfolio of the Fund, or submitting the
question whether such segregation should be
implemented to a vote of all affected policy owners
and, as appropriate, segregating the assets of any
appropriate group (i.e., variable annuity policy
owners or variable life insurance policy owners, of
one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to
the affected policy owners the option of making such
a change; and
(b) establishing a new registered management investment
company or managed separate account.
7.4. If the Company's disregard of voting instructions could
conflict with the majority of Policy owner voting instructions, and the
Company's judgment represents a minority position or would preclude a majority
vote, the Company is permitted to withdraw each affected Portfolio's investment
in the Fund. The Underwriter and Fund shall continue to accept and implement
orders by the Company for the purchase (and redemption) of shares of the Fund
until the Company notifies the Underwriter and the Fund that the Company is
withdrawing each affected Account's investment in the Fund pursuant to this
Section 7.4.
7.5. If a particular state insurance regulator's decision
applicable to the Company conflicts with the majority of other state insurance
regulators, then the Company is permitted to withdraw each affected Account's
investment in the Fund. The Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund until the Company notifies the Underwriter and the Fund that the
Company is withdrawing each affected Account's investment in the Fund pursuant
to this Section 7.5.
7.6. For purposes of Section 7.3 of this Agreement, the Board
shall determine whether any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the Fund be required to
establish a new funding medium for the Policies. The Company shall not be
required by Section 7.3 to establish a new funding medium for the Policies if an
offer to do so has been declined by vote of a majority of Policy owners
materially adversely affected by the irreconcilable material conflict.
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7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T)
under the 1940 Act are amended, or Rule 6e-3 under the 1940 Act is adopted, to
provide exemptive relief from any provision of the 1940 Act or the rules
promulgated thereunder with respect to mixed or shared funding (as defined in
the Mixed and Shared Funding Exemptive Order) on terms and conditions materially
different from those contained in the Mixed and Shared Funding Exemptive Order,
then:
(a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as
may be necessary to comply with Rules 6e-2 and
6e-3(T), as amended, and Rule 6e-3, as adopted, to
the extent that these rules are applicable; and
(b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the
extent that terms and conditions substantially
identical to these Sections of the Agreement are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification by the Company
8.1(a). The Company agrees to indemnify and hold
harmless the Fund, the Underwriter, and each of the Fund's or the Underwriter's
trustees, directors, officers, employees, or agents and each person, if any, who
controls or is associated with the Fund or the Underwriter within the meaning of
such terms under the federal securities laws (collectively, the "indemnified
parties" for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company), or litigation (including legal and other expenses), to
which the indemnified parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages,
liabilities, or expenses (or actions in respect thereof), or settlements are
related to the sale or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of
any material fact contained in the
registration statement or prospectus for the
Policies or contained in the Policies or
sales literature for the Policies (or any
amendment or supplement to any of the
foregoing), or arise out of or are based
upon the omission or the alleged omission to
state therein a material fact required to be
stated therein or necessary to make the
statements therein not misleading in light
of the circumstances in which they were
made; provided that this agreement to
indemnify shall not apply as to any
indemnified party if this statement or
omission or this alleged statement or
omission was made in reliance upon and in
conformity with information furnished to the
Company by or on behalf of the Fund for use
in the
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registration statement or prospectus for the
Policies or in the Policies or sales
literature (or any amendment or supplement)
or otherwise for use in connection with the
sale of the Policies or Fund shares: or
(ii) arise out of or as a result of statements or
representations by or on behalf of the
Company (other than statements or
representations contained in the Policy or
Fund registration statement, the Policy or
Fund prospectus or sales literature for the
Policies or the Fund not supplied by the
Company or persons under its control) or
wrongful conduct of the Company or persons
under its control, with respect to the sale
or distribution of the Policies or Fund
shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact
contained in a registration statement,
prospectus, or sales literature of the Fund
or any amendment thereof or supplement
thereto or the omission or alleged omission
to state therein a material fact required to
be stated therein or necessary to make the
statements therein not misleading in light
of the circumstances in which they were
made, if such a statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the
Company to provide the services and furnish
the materials or to make any payments under
the terms of this Agreement; or
(v) arise out of any material breach by the
Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities, or litigation to which an indemnified party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence of the
party seeking indemnification in the performance of his or her duties or by
reason of his or her reckless disregard of obligations or duties under this
Agreement or to the Fund.
8.1(c). The indemnified parties will promptly notify
the Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Policies or the
operation of the Fund.
12
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold
harmless the Company and each of its directors, officers, employees, or agents
and each person, if any, who controls or is associated with the Company within
the meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter), or litigation (including legal and
other expenses) to which the indemnified parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities, or expenses (or actions in respect thereof), or
settlements are related to the sale or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in the registration
statement or prospectus or sales literature
of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or
are based upon the omission or the alleged
omission to state therein a material fact
required to be stated therein or necessary
to make the statements therein not
misleading in light of the circumstances in
which they were made; provided that this
agreement to indemnify shall not apply as to
any indemnified party if this statement or
omission or this alleged statement or
omission was made in reliance upon and in
conformity with information furnished to the
Underwriter or Fund by or on behalf of the
Company for use in the registration
statement or prospectus for the Fund or in
sales literature for the Fund (or any
amendment or supplement thereto) or
otherwise for use in connection with the
sale of the Policies or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Policies or
in the Policy or Fund registration
statement, the Policy or Fund prospectus or
sales literature for the Policies or the
Fund not supplied by the Underwriter or
persons under its control) or wrongful
conduct of the Underwriter or persons under
its control, with respect to the sale or
distribution of the Policies or Fund shares;
or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact
contained in a registration statement,
prospectus, or sales literature covering the
Policies (or any amendment thereof or
supplement thereto), or the omission or
alleged omission to state therein a material
fact required to be stated therein or
necessary to
13
make the statement or statements therein not
misleading in light of the circumstances in
which they were made, if such statement or
omission was made in reliance upon and in
conformity with information furnished to the
Company by or on behalf of the Underwriter;
or
(iv) arise out of any material breach by the
Underwriter or the Fund of this Agreement;
or
(v) arise as a result of any failure by the
Underwriter to provide the services and
furnish the materials under the terms of
this Agreement (including a failure),
whether unintentional or is good faith or
otherwise, by the Fund to comply with the
diversification requirements and procedures
related thereto specified in Article VI of
this Agreement;
except to the extent provided in Sections 8.2 (b) and 8.4 hereof. This
Indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
8.2(b). The Underwriter shall not be liable under
this indemnification provision with respect to any losses, claims, damages,
liabilities, or litigation to which an indemnified party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence of the
party seeking indemnification in the performance of his or her duties or by
reason of his or her reckless disregard of obligations and duties under this
Agreement or to the Company or the Accounts.
8.2(c). The Company agrees promptly to notify the
Underwriter of the commencement of any litigation or proceedings against it or
any of its officers or directors in connection with the issuance or sale of the
Policies or the operation of the Accounts.
8.3. Indemnification by the Fund
8.3(a). The Fund agrees to indemnify and hold
harmless the Company and each of the Company's directors, officers, employees,
or agents and each person, if any, who controls or is associated with the
Company within the meaning of such terms under the federal securities laws
(collectively, the "indemnified parties" for the purpose of this Section 8.3)
against any and all losses, claims, damages, or liabilities (including amounts
paid in settlement with the written consent of the Fund), or litigation
(including legal and other expenses) to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares and:
(i) arise as a result of any failure by the Fund
to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional
or in good faith or otherwise, to comply
with the diversification requirements
specified in Article VI of this Agreement);
or
14
(ii) arise out of any material breach by the Fund
of this Agreement;
except to the extent provided in Section 8.3(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Fund may
otherwise have.
8.3 (b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities, or litigation to which an indemnified party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence of the
party seeking indemnification in the performance of his or her duties or by
reason of his or her reckless disregard of obligations or duties under this
Agreement or to the Company or the Accounts.
8.3(c). The indemnified parties will promptly notify
the Fund of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the Policies or the
operation of the Accounts.
8.4. Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("indemnifying party" for the purpose of this Section 8.4) shall
not be liable under the indemnification provisions of this Article VIII with
respect to any claim made against a party entitled to indemnification under this
Article VIII ("indemnified party" for the purpose of this Section 8.4) unless
this indemnified party shall have notified the indemnifying party in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon this
indemnified party (or after this party shall have received notice of this
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom this action is brought
under the indemnification provision of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and this indemnifying party is damaged solely as a result of
failure to give this notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the indemnifying party to the indemnified
party of the indemnifying party's election to assume the defense thereof, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by it, and the indemnifying party will not be liable to this party
under this Agreement for any legal or other expenses subsequently incurred by
this party independently in connection with the defense thereof other than
reasonable costs of investigation, unless (a) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of this counsel,
or (b) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. The indemnifying party
shall not be liable for any settlement of any proceeding effected without the
indemnifying party's written consent but if settled with this consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the
15
indemnified party from and against any loss or liability by reason of this
settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law.
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the Commonwealth of
Pennsylvania.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including any exemptions from those statutes, rules, and regulations as the SEC
may grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance
written notice to the other parties; or
(b) at the option of the Company if shares of all
Dedicated Portfolios are not reasonably available to meet the requirements of
the Policies as determined by the Company; prompt notice of the election to
terminate for such cause shall be furnished by the Company; or
(c) at the option of the Fund upon institution of
formal proceedings against the Company by the NASD, the SEC, the Insurance
Commissioner or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Policies, the operation of the
Accounts, or the purchase of the Fund shares and which would have a material
adverse effect on the Company's ability to perform its obligations under this
Agreement; or
(d) at the option of the Company upon institution of
formal proceedings against the Fund by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body; or
(e) at the option of the Company or the Fund upon
receipt of any necessary regulatory approvals and/or any necessary vote of the
Policy owners having an interest in an Account (or any subaccount) to substitute
the shares of another investment company for the corresponding Portfolio shares
of the Fund in accordance with the terms of the Policies for which those
Portfolio shares had been selected to serve as the underlying investment media.
The
16
Company will give thirty (30) days prior written notice to the Fund of the date
of any proposed vote or other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a
determination by a majority of the Board members of the Fund that an
irreconcilable material conflict exists among the interests of (i) all policy
owners of variable insurance products of all separate accounts or (ii) the
interests of the Participating Insurance Companies investing in the Fund; or
(g) at the option of the Company, if the Company has
withdrawn an Account's investment in the Fund because the Company's disregard of
voting instructions could conflict with the majority of policy owner voting
instructions, and if the Company's judgment represents a minority position or
would preclude a majority vote; or
(h) at the option of the Company, if the Company has
withdrawn an Account's investment in the Fund because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state insurance regulators;
(i) at the option of the Company, if the Fund ceases
to qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, or under any successor or similar provision, or if the
Company reasonably believes that the Fund may fail to so qualify; or
(j) at the option of the Company, if the Fund fails
to meet the diversification requirements specified in Article VI hereof or if
the Company reasonably believes that the Fund will fail to meet such
requirements; or
(k) at the option of any party to this Agreement,
upon another party's material breach of any provision of this Agreement.
10.2. Notice Requirement
(a) In the event that any termination of this
Agreement is based upon the provisions of Article VII, such prior written notice
shall be given in advance of the effective date of termination as required by
such provisions.
(b) In the event that any termination of this
Agreement is based upon the provisions of Sections 10.l (b) - (d) or 10.1(g) -
(k), prompt written notice of the election to terminate this Agreement for cause
shall be furnished by the party terminating the Agreement to the non-terminating
parties, with said termination to be effective upon receipt of such notice by
the non-terminating parties.
10.3. It is understood and agreed that the right to terminate
this Agreement pursuant to Section 10.1(a) may be exercised for any reason or
for no reason.
17
10.4. Effect of Termination
(a) Notwithstanding any termination of this Agreement
pursuant to Section 10.1 of this Agreement and subject to Section 1.3 of this
Agreement, the Company may require the Fund and the Underwriter to continue to
make available additional shares of the Fund for so long after the termination
of this Agreement as the Company desires pursuant to the terms and conditions of
this Agreement as provided in paragraph (b) below, for all Policies in effect on
the effective date of termination of this Agreement (hereinafter referred to as
"Existing Policies"). Specifically, without limitation, the owners of the
Existing Policies shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund, and/or invest in the Fund upon the making of
additional purchase payments under the Existing Policies. The parties agree that
this Section 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
(b) If shares of the Fund continue to be made
available after termination of this Agreement pursuant to this Section 10.4, the
provisions of this Agreement shall remain in effect except for Section 10.l(a).
10.5. Except as necessary to implement Policy owner initiated
transactions, or as required by state or federal laws or regulations, the
Company shall not redeem Fund shares attributable to the Policies (as opposed to
Fund shares attributable to the Company's assets held in any of the Accounts),
and the Company shall not prevent Policy owners from allocating payments to a
Portfolio that was otherwise available under the Policies, until ninety (90)
days after the Company shall have notified the Fund or Underwriter of the
Company's intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
Market Street Fund
0000 Xxxxxxxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000-0000
Attn: President
If to the Company:
Nationwide Life Insurance Company of America
0000 Xxxxxxxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000-0000
Attn: President
18
If to the Underwriter:
1717 Capital Management Company
0000 Xxxxxxxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000-0000
Attn: President
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to
the property of the Fund for the enforcement of any claims against the Fund as
neither the trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party
hereto shall treat as confidential all information reasonably identified as such
in writing by any other party hereto (including without limitation the names and
addresses of the owners of the policies) and, except as contemplated by this
Agreement, shall not disclose, disseminate or utilize such confidential
information until such time as this information may come into the public domain
without the express prior written consent of the affected party.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which taken together shall constitute one and the
same instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule, or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD, and state insurance regulators) and shall permit each other and
these authorities reasonable access to that party's books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
12.8. Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein have
been duly authorized by all necessary corporate or trust action, as applicable,
by such party and when so executed and delivered this Agreement will be the
valid and binding obligation of such party enforceable in accordance with the
Agreement's terms.
19
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
ATTEST: NATIONWIDE LIFE INSURANCE COMPANY
OF AMERICA
By: By:
----------------------------- --------------------------------
Name: Name:
Title: Title:
Date:
--------------------------------
Fund:
ATTEST: MARKET STREET FUND
By: By:
----------------------------- --------------------------------
Name: Name:
Title: Title:
Date:
--------------------------------
Underwriter:
ATTEST: 1717 CAPITAL MANAGEMENT COMPANY
By: By:
----------------------------- --------------------------------
Name: Name:
Title: Title:
Date:
--------------------------------
20
EXHIBIT A
ACCOUNTS AND POLICIES
SUBJECT TO THE PARTICIPATION AGREEMENT
NATIONWIDE PROVIDENT VLI SEPARATE ACCOUNT 1:
- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY-SPECIAL
PRODUCT
- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE-OPTIONS PREMIER
- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE-OPTIONS PLUS
- FLEXIBLE PREMIUM ADJUSTABLE SURVIVORSHIP VARIABLE LIFE
INSURANCE-SURVIVOR OPTIONS PREMIER
- FLEXIBLE PREMIUM ADJUSTABLE SURVIVORSHIP VARIABLE LIFE
INSURANCE-SURVIVOR OPTIONS ELITE
- FLEXIBLE PREMIUM ADJUSTABLE SURVIVORSHIP VARIABLE LIFE
INSURANCE-SURVIVOR OPTIONS PLUS
- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY-OPTIONS
- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE-OPTIONS ELITE
NATIONWIDE PROVIDENT VA SEPARATE ACCOUNT 1:
- INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT-MARKET
STREET VIP/2
EXHIBIT B
PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT
- ALL PRO BROAD EQUITY PORTFOLIO
- ALL PRO LARGE CAP GROWTH PORTFOLIO
- ALL PRO LARGE CAP VALUE PORTFOLIO
- ALL PRO SMALL CAP GROWTH PORTFOLIO
- ALL PRO SMALL CAP VALUE PORTFOLIO
- EQUITY 500 INDEX PORTFOLIO
- INTERNATIONAL PORTFOLIO
- BALANCED PORTFOLIO
- MID CAP GROWTH PORTFOLIO
- BOND PORTFOLIO
- MONEY MARKET PORTFOLIO
