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EXHIBIT 1(A)(8)(a)
PARTICIPATION AGREEMENT
BY AND AMONG
MARKET STREET FUND, INC.
AND
NATIONAL LIFE INSURANCE COMPANY
AND
EQUITY SECURITIES, INC.
THIS AGREEMENT, made and entered into this ____ day of
_________ 1996 by and among NATIONAL LIFE INSURANCE COMPANY, a Vermont
insurance company (hereinafter the "Company"), on its own behalf and on behalf
of NATIONAL VARIABLE LIFE INSURANCE ACCOUNT (hereinafter, the "Account"), a
segregated asset account of the Company, the MARKET STREET FUND, INC., an
open-end diversified management investment company organized under the laws of
the State of Maryland (hereinafter the "Fund") and EQUITY SERVICES, INC., a
Vermont corporation (hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end
diversified, management investment company and is available to act as the
investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
WHEREAS, beneficial interests in the Fund are divided into
several series of shares, each representing the interest in a particular
managed portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission (the "SEC"), dated October 3, 1985 (File No. 812-6143),
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granting Participating Insurance Companies 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 shares of the Fund 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
flexible premium adjustable benefit variable life insurance policies (the
"Policies") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors
of the Company under the insurance laws of Vermont, to set aside and invest
assets attributable to the Policies; and
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a brokerdealer 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 "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios on
behalf of
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the Account to fund the Policies and the Underwriter is authorized to sell such
shares to unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those
shares of the Fund which the Company orders on behalf of the Account, executing
such orders on a daily basis at the net asset value next computed after receipt
and acceptance by the Fund or its agent of the order for the shares of the
Fund.
1.2. The Fund agrees to make its 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 its net asset value pursuant to rules of the SEC;
provided, however, that the Board of Directors of the Fund (hereinafter the
"Directors") 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 Directors, acting in good faith and in light of their
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 shares of the
Fund will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund 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.
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1.5. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund 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 agent of the request for
redemption.
1.6. The Company agrees to purchase and redeem the shares of
each Portfolio offered by the then current prospectus of the Fund 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 such amounts may also be invested in an
investment company other than the Fund if (a) such other investment company, or
series thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of all the Portfolios of
the Fund; or (b) the Company gives the Fund and the Underwriter 45 days written
notice of its intention to make such other investment company available as a
funding vehicle for the Policies; or (c) such other investment company was
available as a funding vehicle for the Policies prior to the date of this
Agreement and the Company so informs the Fund and Underwriter prior to their
signing this Agreement; or (d) the Fund or Underwriter consents to the use of
such other investment company.
1.7. The Company shall pay for Fund shares on the same day
that it places an order to purchase Fund shares. Payment shall be in federal
funds transmitted by wire.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock certificates will not be issued to the Company or the
Account. Shares ordered from the Fund will be recorded in an appropriate title
for the Account or the appropriate subaccount of the 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
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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
Portfolio shares in additional shares of that Portfolio. 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
shares so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for
each 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 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 it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established the Account as a segregated asset account under Section
[___________] of the Vermont Insurance Code and has registered the Account as a
unit investment trust in accordance with the provisions of the 1940 Act to
serve as segregated investment accounts for the Policies, and that it will
maintain such registration for so long as any Policies are outstanding. The
Company shall amend the registration statement under the 1933 Act for the
Policies and the registration statement under the 1940 Act for the Account from
time to time as 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.
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2.2. The Company represents that it believes, in good faith,
that the Policies are currently and at the time of issuance will be treated as
life insurance policies under applicable provisions of the Internal Revenue
Code of 1986, and that it will make every effort to maintain such treatment and
that it 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 they 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 its 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 it believes, in good faith,
that it is currently qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code of 1986, and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
2.5. The Fund represents that its investment objectives,
policies and restrictions comply with the [VERMONT] Insurance Code as it
applies to the Fund. To the extent feasible and consistent with market
conditions, the Fund will adjust its investments to comply with requirements of
the Company's domiciliary state upon written notice from the Company of such
requirements and proposed
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adjustments, it being agreed and understood that in any such 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 it may make such payments in the future. To the extent
that it decides to finance distribution expenses pursuant to Rule 12b-1, the
Fund undertakes to have a board of directors, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
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 further represents that it will sell and distribute
the Fund shares in accordance with the 1933 Act, the 1934 Act, and the 1940
Act.
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
partici pants. If requested by the Company in lieu thereof, the Fund shall
provide such 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 printed together in one document, in such case the Fund
shall bear its share of expenses as described above.
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3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter (or, in
the Fund's discretion, the Prospectus shall state that such Statement is
available from the Fund), and the Underwriter (or the Fund) shall provide such
Statement, at its expense, to the Company and to any owner of or participant
under a Policy who requests such Statement or, at the Company's expense, to any
prospective Policy owner and applicant who requests such statement.
3.3. The Fund, at its expense, shall provide the Company with
copies of its 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 them 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 Account in
accordance with instructions received from
Policy owners or participants; and
(iii) vote Fund shares held in the Account for which
no timely instructions have been received, and
any Fund shares held in the Company's general
account, in the same proportion as Fund
shares of such Portfolio 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 its 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.
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3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 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 directors
and with whatever rules the Commission 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
fifteen business days prior to its use. No such material shall be used if the
Fund or the Underwriter objects to such use within fifteen 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.
4.3. The Fund or the Underwriter shall furnish, or shall cause to
be furnished, to the Company or its designee, each piece of sales literature or
other
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promotional material in which the Company or its separate account(s) is named,
at least fifteen business days prior to its use. No such material shall be
used if the Company objects to such use within fifteen business days after
receipt of such material.
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 Account, 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 Account 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 0000 Xxx.
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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 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. Currently, no such payments are contemplated.
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 will comply with Section 817(h) of the Internal
Revenue Code of 1986, and all regulations issued thereunder, relating to the
diversification requirements for variable annuity, endowment, and life
insurance policies.
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ARTICLE VII. Potential Conflicts
7.1. The Board of Directors of the Fund (the "Board") will
monitor the Fund for the existence of any material irreconcilable conflict
between the interests of the policy owners of all separate accounts investing
in the Fund. 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 it determines that an irreconcilable material conflict exists and
the implications thereof. A majority of the Board shall consist of persons who
are not "interested" persons of the Fund.
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 it is aware to the Board. The Company agrees to assist the
Board in carrying out its 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
its minutes or other
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appropriate records, all reports received by it and all action with regard to a
conflict.
7.3. If it is determined by a majority of the Board, or a
majority of its disinterested Directors, 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 Directors), take whatever steps are necessary to
remedy or eliminate the irreconcilable material conflict, up to and including:
(1) withdrawing the assets allocable to some or all of the separate accounts
from the Fund or any Portfolio and reinvesting such 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 contract owners or
variable life insurance contract 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 (2) 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 the 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 it is withdrawing the
Account's investment in the Fund pursuant to this Section 7.4.
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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 the 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 it is withdrawing
the 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.
7.7. If and to the extent that Rule 6e-2 and Rule 6e3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 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 such 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 such Sections are
contained in such Rule(s) as so amended or adopted.
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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 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 such statement or
omission or such alleged statement or omission
was made in reliance upon and in conformity with
information furnished to the Company by or on
behalf of the Fund for use in the 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 con-
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duct 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 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.
8.2. Indemnification By the Underwriter
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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 such statement or
omission or such 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,
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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 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 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 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
Account.
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 Account.
8.3. Indemnification by the Fund
8.3(a). The Fund 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 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
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19
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 out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in the registration
statement or prospectus for the Fund or sales
literature of the Fund (or any amendment or
supplement thereto), 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
if such statement or omission or alleged
statement or alleged omission was made in
reliance upon and in conformity with information
furnished to the Fund by or on behalf of the
Company for use in the registration statement or
prospectus for the Fund or sales literature for
the Fund (or any amendment or supplement thereto)
or otherwise for use in connection with the sale
or distribution 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 the
Policy or Fund registration statement or the
Policy or Fund prospectus or sales literature for
the Policy or the Fund not supplied by the Fund
or persons under its control) or wrongful conduct
of the Fund or the Fund's investment adviser or
persons under their 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 the
registration statement or prospectus or sales
literature covering the Policies (or any
amendment 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 statement or omission was made in
reliance upon and in conformity with information
furnished by or on behalf of the Fund to the
Company; or
(iv) 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
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20
in good faith or otherwise, to comply with the
diversification requirements specified in Article
VI of this Agreement); or
(v) 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 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 Account.
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 Fund.
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
such 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 such
indemnified party (or after such party shall have received notice of such
service on any designated agent), but failure to notify the
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21
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 such
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 such indemnifying party is damaged
solely as a result of failure to give such 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 such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel or (ii) 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 its written consent but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such 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
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22
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 State of Vermont.
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 such exemptions from those statutes, rules and regulations as the SEC
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
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 Vermont 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
Account, or the purchase of the Fund shares; or
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23
(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 the vote of the Policy owners
having an interest in the 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
Company will give 30 day's 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 Directors of the Fund, or a majority of its
disinterested Directors, that an irreconcilable material conflict exists among
the interests of (i) all contract 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 the 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 the 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;
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24
(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
(k) at the option of any party to this Agreement, upon
another party's material breach of any provision of this Agreement.
10.2. 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.
10.3. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance 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 the Account), and
the Company shall not prevent Policy owners from allocating payments to a
Portfolio that was otherwise available under the Policies, until 90 days after
the Company shall have notified the Fund or Underwriter of its 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:
Xx. Xxxxxxx X. Xxxxx
President
Market Street Fund, Inc.
0000 Xxxxxx Xxxxxx
- 00 -
00
Xxxxxxxxxxxx, XX 00000
If to the Company:
D. Xxxxxxx Xxxxxx, Esq.
Counsel
National Life Insurance Company
One National Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
If to the Underwriter:
Xx. Xxxxxxx Xxxxxx, Director of Compliance
Equity Services, Inc.
Xxx Xxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
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 Directors, 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 it 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 or
more counterparts, each of which taken together shall constitute one and the
same instrument.
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26
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 such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
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 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 its terms.
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:
NATIONAL LIFE INSURANCE COMPANY
SEAL By:
------------------------------
Date:
Fund:
MARKET STREET FUND, INC.
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27
SEAL By:
------------------------------
Date:
Underwriter:
EQUITY SERVICES, INC.
SEAL By:
------------------------------
Date:
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