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EXHIBIT 9.i.(3)
PARTICIPATION AGREEMENT
BY AND AMONG
MARKET STREET FUND, INC.
AND
NATIONAL LIFE INSURANCE COMPANY
AND
PML SECURITIES COMPANY
THIS AGREEMENT, made and entered into this 30th day of January 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 PML SECURITIES COMPANY, a Delaware 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),
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,
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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 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
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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.
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
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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
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
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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 3855 of the Vermont
Insurance Law 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.
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
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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 Law 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
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 participants.
If requested by the Company in lieu thereof, the Fund shall
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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.
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.
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
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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 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
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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 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 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
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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 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
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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.
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
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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 6e-3(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.
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
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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 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 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.
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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
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,
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
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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 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
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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 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.
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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 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
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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
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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(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;
(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
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(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
Xxxxxxxxxxxx, XX 00000
IF TO THE COMPANY:
D. Xxxxxxx Xxxxxx, Esq.
National Life Insurance Company
Xxx Xxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
IF TO THE UNDERWRITER:
Xxxxx Xxxxxx, Esq.
PML Securities Company
000 Xxxxxxxxxx Xxxxx
Christiana Executive Campus
Xxxxxx, 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,
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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.
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.
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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: /s/ Xxxxx X. Xxxxx
---------------------------
Xxxxx X. Xxxxx
Date: 1/30/96
FUND:
MARKET STREET FUND, INC.
(SEAL) By: /s/ Xxxxx X. Xxxxxx
---------------------------
Xxxxx X. Xxxxxx
Date: 1/29/96
UNDERWRITER:
PML SECURITIES COMPANY
(SEAL) By: /s/ Xxxxx X. Xxxxxx
---------------------------
Xxxxx X. Xxxxxx
Date: 1/29/96
[/R]
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