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EXHIBIT 1 A 8(c)
PARTICIPATION AGREEMENT
THIS AGREEMENT, is made as of ___________ __, 1998, by and
among National Life Insurance Company ("Company"), on its own behalf and on
behalf of ____________________________________ Separate Account ___, a
segregated asset account of the Company ("Account"), Strong Variable Insurance
Funds, Inc. ("Strong Variable") on behalf of the Portfolios of Strong Variable
listed on the attached Exhibit A as such Exhibit may be amended from time to
time (the "Designated Portfolios"), Strong Opportunity Fund II, Inc.
("Opportunity Fund II"), Strong Capital Management, Inc. (the "Adviser"), the
investment adviser and transfer agent for the Opportunity Fund II and Strong
Variable, and Strong Funds Distributors, Inc. ("Distributors"), the distributor
for Strong Variable and the Opportunity Fund II (each, a "Party" and
collectively, the "Parties").
PRELIMINARY STATEMENTS
A. Beneficial interests in Strong Variable are divided into
several series of shares, each representing the interest in a particular
managed portfolio of securities and other assets (each, a "Portfolio").
B. To the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of Opportunity Fund II and
the Designated Portfolios ("Fund" or "Funds" shall be deemed to refer to each
Designated Portfolio and to the Opportunity Fund II to the extent the context
requires), on behalf of the Account to fund the variable annuity contracts that
use the Funds as an underlying investment medium (the "Contracts").
C. The Company, Adviser and Distributors desire to facilitate the
purchase and redemption of shares of the Funds by the Company for the Account
through one account in each Fund (each an "Omnibus Account") to be maintained
of record by the Company, subject to the terms and conditions of this
Agreement.
D. The Company desires to provide administrative services and
functions (the "Services") for purchasers of Contracts ("Owners") who are
beneficial owners of shares of the Funds on the terms and conditions set forth
in this Agreement.
AGREEMENTS
The parties to this Agreement agree as follows:
1. Performance of Services. Company agrees to perform the administrative
functions and services specified in Exhibit B attached to this Agreement with
respect to the shares of the Funds beneficially owned by the Owners and
included in the Account.
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2. The Omnibus Accounts.
2.1 Each Omnibus Account will be opened based upon the information
contained in Exhibit C to this Agreement. In connection with each Omnibus
Account, Company represents and warrants that it is authorized to act on behalf
of each Owner effecting transactions in the Omnibus Account and that the
information specified on Exhibit C to this Agreement is correct.
2.2 Each Fund shall designate each Omnibus Account with an account
number. These account numbers will be the means of identification when the
Parties are transacting in the Omnibus Accounts. The assets in the Accounts
are segregated from the Company's own assets. The Adviser agrees to cause the
Omnibus Accounts to be kept open on each Fund's books, as applicable,
regardless of a lack of activity or small position size except to the extent
the Company takes specific action to close an Omnibus Account or to the extent
a Fund's prospectus reserves the right to close accounts which are inactive or
of a small position size. In the latter two cases, the Adviser will give prior
notice to the Company before closing an Omnibus Account.
2.3 The Company agrees to provide Adviser such information as
Adviser or Distributors may reasonably request concerning Owners as may be
necessary or advisable to enable Company and Distributors to comply with
applicable laws, including state "Blue Sky" laws relating to the sales of
shares of the Funds to the Accounts.
3. Fund Shares Transactions.
3.1 In General. Shares of the Funds shall be sold on behalf of
the Funds by Distributors and purchased by Company for the Account and,
indirectly for the appropriate subaccount thereof at the net asset value next
computed after receipt by Distributors of each order of the Company or its
designee, in accordance with the provisions of this Agreement, the then current
prospectuses of the Funds, and the Contracts. Company may purchase shares of
the Funds for its own account subject to (a) receipt of prior written approval
by Distributors; and (b) such purchases being in accordance with the then
current prospectuses of the Fund and the Contracts. The Board of Directors of
each Fund ("Directors") may refuse to sell shares of the applicable Fund to any
person, or suspend or terminate the offering of shares of the Fund if such
action is required by law or by regulatory authorities having jurisdiction.
Company agrees to purchase and redeem the shares of the Funds in accordance
with the provisions of this Agreement, of the Contracts and of the then current
prospectuses for the Contracts and Funds. Except as necessary to implement
transactions initiated by Owners, or as otherwise permitted by state or federal
laws or regulations, Company shall not redeem shares of Funds attributable to
the Contracts.
3.2 Purchase and Redemption Orders. On each day that a Fund is
open for business (a "Business Day"), the Company shall aggregate and calculate
the net purchase or redemption order it receives for the Account from the
Owners for shares of the Fund that it received prior to
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the close of trading on the New York Stock Exchange (the "NYSE") (i.e. 3:00
p.m., Central time, unless the NYSE closes at an earlier time in which case
such earlier time shall apply) and communicate to Distributors, by telephone or
facsimile (or by such other means as the Parties to this Agreement may agree to
in writing), the net aggregate purchase or redemption order (if any) for the
Omnibus Account for such Business Day (such Business Day is sometimes referred
to herein as the "Trade Date"). The Company will communicate such orders to
Distributors prior to 9:00 a.m., Central time, on the next Business Day
following the Trade Date. All trades communicated to Distributors by the
foregoing deadline shall be treated by Distributors as if they were received by
Distributors prior to the close of trading on the Trade Date.
3.3 Settlement of Transactions.
(a) Purchases. Company will wire, or arrange for the
wire of, the purchase price of each purchase order to the custodian for the
Fund in accordance with written instructions provided by Distributors to the
Company so that either (1) such funds are received by the custodian for the
Fund prior to 10:30 a.m., Central time, on the next Business Day following the
Trade Date, or (2) Distributors is provided with a Federal Funds wire system
reference number prior to such 10:30 a.m. deadline evidencing the entry of the
wire transfer of the purchase price to the applicable custodian into the
Federal Funds wire system prior to such time. Company agrees that if it fails
to provide funds to the Fund's custodian by the close of business on the next
Business Day following the Trade Date, then, at the option of Distributors, (i)
the transaction may be canceled, or (ii) the transaction may be processed at
the next-determined net asset value for the applicable Fund after purchase
order funds are received. In such event, the Company shall indemnify and hold
harmless Distributors, Adviser and the Funds from any liabilities, costs and
damages either may suffer as a result of such failure.
(b) Redemptions. The Adviser will use its best efforts
to cause to be transmitted to such custodial account as Company shall direct in
writing, the proceeds of all redemption orders placed by Company by 9:00 a.m.,
Central time, on the Business Day immediately following the Trade Date, by wire
transfer on that Business Day. Should Adviser need to extend the settlement on
a trade, it will contact Company to discuss the extension. For purposes of
determining the length of settlement, Adviser agrees to treat the Account no
less favorably than other shareholders of the Funds. Each wire transfer of
redemption proceeds shall indicate, on the Federal Funds wire system, the
amount thereof attributable to each Fund; provided, however, that if the number
of entries would be too great to be transmitted through the Federal Funds wire
system, the Adviser shall, on the day the wire is sent, fax such entries to
Company or if possible, send via direct or indirect systems access until
otherwise directed by the Company in writing.
(c) Authorized Persons. The following persons are each
duly authorized to act on behalf of the Company under this Agreement. The
Funds, Adviser and Distributors are entitled to conclusively rely on verbal or
written instructions that Adviser or Distributors reasonably believes were
originated by any one of said persons. The Company shall inform
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Adviser and Distributors of additions to or subtractions from this list of
authorized persons pursuant to Section 13, hereof:
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3.4 Book Entry Only. Issuance and transfer of shares of a Fund
will be by book entry only. Stock certificates will not be issued to the
Company or the Account. Shares of the Funds ordered from Distributors will be
recorded in the appropriate book entry title for the Account.
3.5 Distribution Information. The Adviser or Distributors shall
provide the Company with all distribution announcement information as soon as
it is announced by the Funds. The distribution information shall set forth, as
applicable, ex-dates, record date, payable date, distribution rate per share,
record date share balances, cash and reinvested payment amounts and all other
information reasonably requested by the Company. Where possible, the Adviser
or Distributors shall provide the Company with direct or indirect systems
access to the Adviser's systems for obtaining such distribution information.
3.6 Reinvestment. All dividends and capital gains distributions
will be automatically reinvested on the payable date in additional shares of
the applicable Fund at net asset value in accordance with each Fund's then
current prospectus.
3.7 Pricing Information. Distributors shall use its best efforts
to furnish to the Company prior to 6:00 p.m., Central time, on each Business
Day each Fund's closing net asset value for that day, and for those Funds for
which such information is calculated, the daily accrual for interest rate
factor (mil rate). Such information shall be communicated via fax, or indirect
or direct systems access acceptable to the Company.
3.8 Price Errors.
(a) Notification. If an adjustment is required in
accordance with a Fund's then current policies on reimbursement ("Fund
Reimbursement Policies") to correct any error in the computation of the net
asset value of Fund shares ("Price Error"), Adviser or Distributors shall
notify Company as soon as practicable after discovering the Price Error.
Notice may be made via facsimile or via direct or indirect systems access and
shall state the incorrect price, the correct price and, to the extent
communicated to the Fund's shareholders, the reason for the price change.
(b) Underpayments. If a Price Error causes an Account to
receive less than the amount to which it otherwise would have been entitled,
Adviser shall make all necessary adjustments (subject to the Fund Reimbursement
Policies) so that the Account receives the amount to which it would have been
entitled
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(c) Overpayments. If a Price Error causes an Account
to receive more than the amount to which it otherwise would have been entitled,
Company, when requested by Adviser (in accordance with the Fund Reimbursement
Policies), will use its best efforts to collect such excess amounts from the
applicable Owners.
(d) Fund Reimbursement Policies. Adviser agrees to treat
Company's customers no less favorably than Adviser treats its retail
shareholders in applying the provisions of paragraphs 3.8(b) and 3.8(c).
(e) Expenses. Adviser shall reimburse Company for all
reasonable and necessary out-of-pocket expenses incurred by Company for payroll
overtime, stationery and postage in adjusting Owner accounts affected by a
Price Error described in paragraphs 3.8(b) and 3.8(c). Company shall use its
best efforts to mitigate all expenses which may be reimbursable under this
section 3.8(e) and agrees that payroll overtime shall not include any time
spent programming computers or otherwise customizing Company's recordkeeping
system. Upon requesting reimbursement, Company shall present an itemized bill
to Adviser detailing the costs for which it seeks reimbursement.
3.9 Agency. Distributors hereby appoints the Company as its agent
for the limited purpose of accepting purchase and redemption instructions from
the Owners for the purchase and redemption of shares of the Funds by the
Company on behalf of Account.
3.10 Quarterly Reports. Adviser agrees to provide Company a
statement of Fund assets as soon as practicable and in any event within 30 days
after the end of each fiscal quarter, and a statement certifying the compliance
by the Funds during that fiscal quarter with the diversification requirements
and qualification as a regulated investment company. In the event of a breach
of Section 6.4(a), Adviser will take all reasonable steps (a) to notify Company
of such breach and (b) to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Treasury Regulation 1.817-5.
4. Proxy Solicitations and Voting. The Company shall, at its expense,
distribute or arrange for the distribution of all proxy materials furnished by
the Funds to the Account and shall: (a) solicit voting instructions from
Owners; (b) vote the Fund shares in accordance with instructions received from
Owners; and (c) vote the Fund shares for which no instructions have been
received, as well as shares attributable to it, in the same proportion as Fund
shares for which instructions have been received from Owners, so long as and to
the extent that the Securities and Exchange Commission (the "SEC") continues to
interpret the Investment Company Act of 1940, as amended (the "1940 Act"), to
require pass-through voting privileges for various contract owners. The
Company and its agents will not recommend action in connection with, or oppose
or interfere with, the solicitation of proxies for the Fund shares held for
Owners.
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5. Customer Communications.
5.1 Prospectuses. The Adviser or Distributors, at its expense,
will provide the Company with as many copies of the current prospectus for the
Funds as the Company may reasonably request for distribution, at the Company's
expense, to existing or prospective Owners.
5.2 Shareholder Materials. The Adviser and Distributors shall,
as applicable, provide in bulk to the Company or its authorized representative,
at a single address and at no expense to the Company, the following shareholder
communications materials prepared for circulation to Owners in quantities
requested by the Company which are sufficient to allow mailing thereof by the
Company and, to the extent required by applicable law, to all Owners: proxy or
information statements, annual reports, semi-annual reports, and all initial
and updated prospectuses, supplements and amendments thereof. None of the
Funds, the Adviser or Distributors shall be responsible for the cost of
distributing such materials to Owners.
6. Representations and Warranties.
6.1 The Company represents and warrants that:
(a) It is an insurance company duly organized and in good
standing under the laws of the State of Vermont and that it has legally and
validly established the Account prior to any issuance or sale thereof as a
segregated asset account and that the Company has and will maintain the
capacity to issue all Contracts that may be sold; and that it is and will
remain duly registered, licensed, qualified and in good standing to sell the
Contracts in all the jurisdictions in which such Contracts are to be offered or
sold;
(b) It is and will remain duly registered and licensed in
all material respects under all applicable federal and state securities and
insurance laws and shall perform its obligations under this Agreement in
compliance in all material respects with any applicable state and federal laws;
(c) The Contracts are and will be registered under the
Securities Act of 1933, as amended (the "1933 Act"), and are and will be
registered and qualified for sale in the states where so required; and the
Account is and will be registered as a unit investment trust in accordance with
the 1940 Act and shall be a segregated investment account for the Contracts;
(d) The Contracts are currently treated as annuity
contracts, under applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and the Company will maintain such treatment and will
notify Adviser, Distributors and Funds promptly upon having a reasonable basis
for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future;
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(e) It is registered as a transfer agent pursuant to
Section 17A of the Securities Exchange Act of 1934, as amended (the "1934
Act"), or is not required to be registered as such;
(f) The arrangements provided for in this Agreement will
be disclosed to the Owners; and
(g) It is registered as a broker-dealer under the 1934
Act and any applicable state securities laws, including as a result of entering
into and performing the Services set forth in this Agreement, or is not
required to be registered as such.
6.2 The Funds each represent and warrant that Fund shares sold
pursuant to this Agreement are and will be registered under the 1933 Act and
the Fund is and will be registered as a registered investment company under the
Investment Company Act of 1940, in each case, except to the extent the Company
is so notified in writing;
6.3 Distributors represents and warrants that:
(a) It is and will be a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD") and is and will be
registered as a broker-dealer with the SEC; and
(b) It will sell and distribute Fund shares in accordance
with all applicable state and federal laws and regulations.
6.4 Adviser represents and warrants that:
(a) It will cause each Fund to invest money from the
Contracts in such a manner as to ensure that the Contracts will be treated as
variable annuity contracts under the Code and the regulations issued
thereunder, and that each Fund will comply with Section 817(h) of the Code as
amended from time to time and with all applicable regulations promulgated
thereunder; and
(b) It is and will remain duly registered and licensed in
all material respects under all applicable federal and state securities and
insurance laws and shall perform its obligations under this Agreement in
compliance in all material respects with any applicable state and federal laws.
6.5 Each of the Parties to this Agreement represents and warrants
to the others that:
(a) It has full power and authority under applicable law,
and has taken all action necessary, to enter into and perform this Agreement
and the person executing this Agreement on its behalf is duly authorized and
empowered to execute and deliver this Agreement;
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(b) This Agreement constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms and it
shall comply in all material respects with all laws, rules and regulations
applicable to it by virtue of entering into this Agreement;
(c) No consent or authorization of, filing with, or other
act by or in respect of any governmental authority, is required in connection
with the execution, delivery, performance, validity or enforceability of this
Agreement;
(d) The execution, performance and delivery of this
Agreement will not result in it violating any applicable law or breaching or
otherwise impairing any of its contractual obligations;
(e) Each Party to this Agreement is entitled to rely on
any written records or instructions provided to it by another Party; and
(f) Its directors, officers, employees, and investment
advisers, and other individuals/entities dealing with the money or securities
of a Fund are and shall continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of the Fund in an amount not
less than the amount required by the applicable rules of the NASD and the
federal securities laws, which bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
7. Sales Material and Information
7.1 NASD Filings. The Company shall promptly inform Distributors
as to the status of all sales literature filings pertaining to the Funds and
shall promptly notify Distributors of all approvals or disapprovals of sales
literature filings with the NASD. For purposes of this Section 7, the phrase
"sales literature or other promotional material" shall be construed in
accordance with all applicable securities laws and regulations.
7.2 Company Representations. The Company shall not make any
material representations concerning the Adviser, the Distributors, or a Fund
other than the information or representations contained in: (a) a registration
statement of the Fund or prospectus of a Fund, as amended or supplemented from
time to time; (b) published reports or statements of the Funds which are in the
public domain or are approved by Distributors or the Funds; or (c) sales
literature or other promotional material of the Funds.
7.3 Adviser, Distributors and Fund Representations. None of
Adviser, Distributors or any Fund shall make any material representations
concerning the Company other than the information or representations contained
in: (a) a registration statement or prospectus for the Contracts, as amended or
supplemented from time to time; (b) published reports or statements of
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the Contracts or the Account which are in the public domain or are approved by
the Company; or (c) sales literature or other promotional material of the
Company.
7.4 Trademarks, etc. Except to the extent required by applicable
law, no Party shall use any other Party's names, logos, trademarks or service
marks, whether registered or unregistered, without the prior consent of such
Party.
7.5 Information From Distributors and Adviser. Upon request,
Distributors or Adviser will provide to Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, solicitations for voting instructions,
applications for exemptions, requests for no action letters, and all amendments
to any of the above, that relate to the Funds, in final form as filed with the
SEC, NASD and other regulatory authorities.
7.6 Information From Company. Company will provide to
Distributors at least one complete copy of all registration statements,
prospectuses, Statements of Additional Information, reports, solicitations for
voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no action letters and all amendments
to any of the above, that relate to a Fund and the Contracts, in final form as
filed with the SEC, NASD and other regulatory authorities.
7.7 Review of Marketing Materials. If so requested by Company,
the Adviser or Distributors will use its best efforts to review sales
literature and other marketing materials prepared by Company which relate to
the Funds, the Adviser or Distributors for factual accuracy as to such
entities, provided that the Adviser or Distributors is provided at least five
(5) Business Days to review such materials. Neither the Adviser nor
Distributors will review such materials for compliance with applicable laws.
Company shall provide the Adviser with copies of all sales literature and other
marketing materials which refer to the Funds, the Adviser or Distributors
within five (5) Business Days after their first use, regardless of whether the
Adviser or Distributors has previously reviewed such materials. If so
requested by the Adviser or Distributors, Company shall cease to use any sales
literature or marketing materials which refer to the Funds, the Adviser or
Distributors that the Adviser or Distributors determines to be inaccurate,
misleading or otherwise unacceptable.
8. Fees and Expenses.
8.1 Fund Registration Expenses. Fund or Distributors shall bear
the cost of registration and qualification of Fund shares; preparation and
filing of Fund prospectuses and registration statements, proxy materials and
reports; preparation of all other statements and notices relating to the Fund
or Distributors required by any federal or state law; payment of all applicable
fees, including, without limitation, any fees due under Rule 24f-2 of the 1940
Act, relating to a Fund; and all taxes on the issuance or transfer of Fund
shares on the Fund's records.
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8.2 Contract Registration Expenses. The Company shall bear the
expenses for the costs of preparation and filing of the Company's prospectus
and registration statement with respect to the Contracts; preparation of all
other statements and notices relating to the Account or the Contracts required
by any federal or state law; expenses for the solicitation and sale of the
Contracts including all costs of printing and distributing all copies of
advertisements, prospectuses, Statements of Additional Information, proxy
materials, and reports to Owners or potential purchasers of the Contracts as
required by applicable state and federal law; payment of all applicable fees
relating to the Contracts; all costs of drafting, filing and obtaining
approvals of the Contracts in the various states under applicable insurance
laws; filing of annual reports on form N-SAR, and all other costs associated
with ongoing compliance with all such laws and its obligations under this
Agreement.
9. Indemnification.
9.1 Indemnification By Company.
(a) Company agrees to indemnify and hold harmless the
Funds, Adviser and Distributors and each of their directors, officers,
employees and agents, and each person, if any, who controls any of them within
the meaning of Section 15 of the 1933 Act (each, an "Indemnified Party" and
collectively, the "Indemnified Parties" for purposes of this Section 9.1) from
and against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of Company), and expenses including
reasonable legal fees and expenses, (collectively, hereinafter "Losses"), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise insofar as such Losses:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact contained in the
registration statement, prospectus or sales literature for the Contracts or
contained in the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
paragraph 9.1(a) 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 written information furnished to Company by or on behalf of
a Fund, Distributors or Adviser for use in the registration statement or
prospectus for the Contracts or in the Contracts (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts
or Fund shares; or
(ii) arise out of, or as a result of, statements
or representations or wrongful conduct of Company or its agents, with respect
to the sale or distribution of the Contracts 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 a Fund
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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, if such a statement or
omission was made in reliance upon written information furnished to a Fund,
Adviser or Distributors by or on behalf of Company; or
(iv) arise out of, or as a result of, any failure
by Company or persons under its control to provide the Services and furnish the
materials contemplated under the terms of this Agreement; or
(v) arise out of, or result from, any material
breach of any representation or warranty made by Company or persons under its
control in this Agreement or arise out of or result from any other material
breach of this Agreement by Company or persons under its control; as limited by
and in accordance with the provisions of Sections 9.1(b) and 9.1(c) hereof; or
(vi) arise out of, or as a result of, adherence by
Adviser or Distributors to instructions that it reasonably believes were
originated by persons specified in Section 3.3(c), hereof.
This indemnification provision is in addition to any liability
which the Company may otherwise have.
(b) Company shall not be liable under this
indemnification provision with respect to any Losses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement.
(c) Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified Company 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 Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify Company of any
such claim shall not relieve Company from any liability which it may have to
the Indemnified Party otherwise than on account of this indemnification
provision. In case any such action is brought against any Indemnified Party,
and it notified the indemnifying Party of the commencement thereof, the
indemnifying Party will be entitled to participate therein and, to the extent
that it may wish, assume the defense thereof, with counsel satisfactory to such
Indemnified Party. After notice from the indemnifying Party of its intention
to assume the defense of an action, the Indemnified Party shall bear the
expenses of any additional counsel obtained by it, and the indemnifying Party
shall not be liable to such Indemnified Party under this Section for any legal
or other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof
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other than reasonable costs of investigation. The Indemnified Party may not
settle any action without the written consent of the indemnifying Party. The
indemnifying Party may not settle any action without the written consent of the
Indemnified Party unless such settlement completely and finally releases the
Indemnified Party from any and all liability. In either event, consent shall
not be unreasonably withheld.
(d) The Indemnified Parties will promptly notify Company
of the commencement of any litigation or proceedings against the Indemnified
Parties in connection with the issuance or sale of Fund shares or the Contracts
or the operation of a Fund.
9.2 Indemnification by Adviser and Distributors.
(a) Adviser and Distributors agrees to indemnify and hold
harmless Company and each of its directors, officers, employees and agents and
each person, if any, who controls Company within the meaning of Section 15 of
the 1933 Act (each, an "Indemnified Party" and collectively, the "Indemnified
Parties" for purposes of this Section 9.2) from and against any and all Losses
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such Losses:
(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 a 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, provided that this Section 9.2(a) 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 written information
furnished to a Fund, Adviser or Distributors by or on behalf of Company for use
in the registration statement or prospectus for a Fund or in sales literature
(or any amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of, or as a result of, statements
or representations or wrongful conduct of Adviser or Distributors or persons
under its control, with respect to the sale or distribution of 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 Contracts, 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, if such statement or omission was made in
reliance upon written information furnished to Company by or on behalf of
Adviser or Distributors; or
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(iv) arise out of, or as a result of, any failure
by Adviser or Distributors or persons under its control to provide the services
and furnish the materials contemplated under the terms of this Agreement; or
(v) arise out of or result from any material
breach of any representation or warranty made by Adviser or Distributors or
persons under its control in this Agreement or arise out of or result from any
other material breach of this Agreement by Adviser or Distributors or persons
under its control; as limited by and in accordance with the provisions of
Sections 9.2(b) and 9.2(c) hereof.
This indemnification provision is in addition to any liability
which Adviser and Distributors may otherwise have.
(b) Adviser and Distributors shall not be liable under
this indemnification provision with respect to any Losses to which an
Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
(c) Adviser and Distributors shall not be liable under
this indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified Adviser and
Distributors 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 Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify Adviser and Distributors of any such claim shall not relieve Adviser and
Distributors from any liability which it may have to the Indemnified Party
otherwise than on account of this indemnification provision. In case any such
action is brought against any Indemnified Party, and it notified the
indemnifying Party of the commencement thereof, the indemnifying Party will be
entitled to participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified Party. After
notice from the indemnifying Party of its intention to assume the defense of an
action, the Indemnified Party shall bear the expenses of any additional counsel
obtained by it, and the indemnifying Party shall not be liable to such
Indemnified Party under this Section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation. The Indemnified Party
may not settle any action without the written consent of the indemnifying
Party. The indemnifying Party may not settle any action without the written
consent of the Indemnified Party unless such settlement completely and finally
releases the Indemnified Party from any and all liability. In either event,
consent shall not be unreasonably withheld.
(d) The Indemnified Parties will promptly notify Adviser
and Distributors of the commencement of any litigation or proceedings against
the Indemnified Parties in connection with the issuance or sale of the
Contracts or the operation of the Account.
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10. Potential Conflicts.
10.1 Monitoring by Directors for Conflicts of Interest. The
Directors of each Fund will monitor the Fund for any potential or existing
material irreconcilable conflict of interest between the interests of the
contract owners of all separate accounts investing in the Fund, including such
conflict of interest with any other separate account of any other insurance
company 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 interpretive 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
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity contract owners and variable life insurance contract owners or
by contract owners of different life insurance companies utilizing the Fund; or
(f) a decision by Company to disregard the voting instructions of Owners. The
Directors shall promptly inform the Company, in writing, if they determine that
an irreconcilable material conflict exists and the implications thereof.
10.2 Monitoring by the Company for Conflicts of Interest. The
Company will promptly notify the Directors, in writing, of any potential or
existing material irreconcilable conflicts of interest, as described in Section
10.1 above, of which it is aware. The Company will assist the Directors in
carrying out their responsibilities under any applicable provisions of the
federal securities laws and any exemptive orders granted by the SEC ("Exemptive
Order"), by providing the Directors, in a timely manner, with all information
reasonably necessary for the Directors to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform the
Directors whenever Owner voting instructions are disregarded.
10.3 Remedies. If it is determined by a majority of the Directors,
or a majority of disinterested Directors, that a material irreconcilable
conflict exists, as described in Section 10.1 above, the Company shall, at its
own expense take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including, but not limited to: (a)
withdrawing the assets allocable to some or all of the separate accounts from
the applicable Fund and reinvesting such assets in a different investment
medium, including (but not limited to) another fund managed by the Adviser, or
submitting the question whether such segregation should be implemented to a
vote of all affected Owners and, as appropriate, segregating the assets of any
particular group that votes in favor of such segregation, or offering to the
affected owners the option of making such a change; and (b) establishing a new
registered management investment company or managed separate account.
10.4 Causes of Conflicts of Interest.
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(a) State Insurance Regulators. If a material
irreconcilable conflict arises because a particular state insurance regulator's
decision applicable to the Company conflicts with the majority of other state
regulators, then the Company will withdraw the affected Account's investment in
the applicable Fund and terminate this Agreement with respect to such Account
within the period of time permitted by such decision, but in no event later
than six months after the Directors inform the Company in writing that it has
determined that such decision has created an irreconcilable material conflict;
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested Directors. Until the end of the foregoing
period, the Distributors and Funds shall continue to accept and implement
orders by the Company for the purchase (and redemption) of shares of the Fund
to the extent such actions do not violate applicable law.
(b) Disregard of Owner Voting. If a material
irreconcilable conflict arises because of Company's decision to disregard Owner
voting instructions and that decision represents a minority position or would
preclude a majority vote, Company may be required, at the applicable Fund's
election, to withdraw the Account's investment in said Fund. No charge or
penalty will be imposed against the Account as a result of such withdrawal.
10.5 Limitations on Consequences. For purposes of Sections 10.3
through 10.5 of this Agreement, a majority of the disinterested Directors shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict. In no event will a Fund, the Adviser or the Distributors be
required to establish a new funding medium for any of the Contracts. The
Company shall not be required by Section 10.3 to establish a new funding medium
for the Contracts if an offer to do so has been declined by vote of a majority
of Owners affected by the irreconcilable material conflict. In the event that
the Directors determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Company will withdraw the Account's
investment in the applicable Fund and terminate this Agreement as quickly as
may be required to comply with applicable law, but in no event later than six
(6) months after the Directors inform the Company in writing of the foregoing
determination, provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict.
10.6 Changes in Laws. 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 Funds' Exemptive Order) on terms and
conditions materially different from those contained in the Funds' Exemptive
Order, then (a) the Funds and/or the Company, 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 10.1, 10.2, 10.3 and 10.4 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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11. Maintenance of Records.
(a) Recordkeeping and other administrative services to
Owners shall be the responsibility of the Company and shall not be the
responsibility of the Funds, Adviser or Distributors. None of the Funds, the
Adviser or Distributors shall maintain separate accounts or records for Owners.
Company shall maintain and preserve all records as required by law to be
maintained and preserved in connection with providing the Services and in
making shares of the Funds available to the Account.
(b) Upon the request of the Adviser or Distributors, the
Company shall provide copies of all the historical records relating to
transactions between the Funds and the Account, written communications
regarding the Funds to or from the Account and other materials, in each case
(1) as are maintained by the Company in the ordinary course of its business and
in compliance with applicable law, and (2) as may reasonably be requested to
enable the Adviser and Distributors, or its representatives, including without
limitation its auditors or legal counsel, to (A) monitor and review the
Services, (B) comply with any request of a governmental body or self-regulatory
organization or the Owners, (C) verify compliance by the Company with the terms
of this Agreement, (D) make required regulatory reports, (E) verify to
Advisor's reasonable satisfaction that all purchase and redemption orders
aggregated for each Trade Date were received by Company prior to the close of
trading on the NYSE on such Trade Date, or (F) perform general customer
supervision. The Company agrees that it will permit the Adviser and
Distributors or such representatives of either to have reasonable access to its
personnel and records in order to facilitate the monitoring of the quality of
the Services.
(c) Upon the request of the Company, the Adviser and
Distributors shall provide copies of all the historical records relating to
transactions between the Funds and the Account, written communications
regarding the Funds to or from the Account and other materials, in each case
(1) as are maintained by the Adviser and Distributors, as the case may be, in
the ordinary course of its business and in compliance with applicable law, and
(2) as may reasonably be requested to enable the Company, or its
representatives, including without limitation its auditors or legal counsel, to
(A) comply with any request of a governmental body or self-regulatory
organization or the Owners, (B) verify compliance by the Adviser and
Distributors with the terms of this Agreement, (C) make required regulatory
reports, or (D) perform general customer supervision.
(d) The Parties agree to cooperate in good faith in
providing records to one another pursuant to this Section 11.
12. Term and Termination.
12.1 Term and Termination Without Cause. The initial term of this
Agreement shall be for a period of one year from the date hereof. Unless
terminated as to any Fund upon not less than thirty (30) days prior written
notice to the other Parties, this Agreement shall thereafter
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automatically renew for the remaining Funds from year to year, subject to
termination at the next applicable renewal date upon not less than 30 days
prior written notice. Any Party may terminate this Agreement as to any Fund
following the initial term upon six (6) months advance written notice to the
other Parties.
12.2 Termination by Fund, Distributors or Adviser for Cause.
Adviser, Fund or Distributors may terminate this Agreement by written notice to
the Company, if any of them shall determine, in its sole judgment exercised in
good faith, that (a) the Company has suffered a material adverse change in its
business, operations, financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity; or (b) any of the
Contracts are not registered, issued or sold in accordance with applicable
state and federal law or such law precludes the use of Fund shares as the
underlying investment media of the Contracts issued or to be issued by the
Company.
12.3 Termination by Company for Cause. Company may terminate this
Agreement by written notice to the Adviser, Funds and Distributors in the event
that (a) any of the Fund shares are not registered, issued or sold in
accordance with applicable state or federal law or such law precludes the use
of such shares as the underlying investment media of the Contracts issued or to
be issued by the Company; (b) the Funds cease to qualify as Regulated
Investment Companies under Subchapter M of the Code or under any successor or
similar provision, or if the Company reasonably believes that the Funds may
fail to so qualify; or (c) a Fund fails to meet the diversification
requirements specified in Section 6.4(a).
12.4 Termination by any Party. This Agreement may be terminated as
to any Fund by any Party at any time (a) by giving 30 days' written notice to
the other Parties in the event of a material breach of this Agreement by the
other Party or Parties that is not cured during such 30-day period, and (b) (i)
upon institution of formal proceedings relating to the legality of the terms
and conditions of this Agreement against the Account, Company, Funds, Adviser
or Distributors by the NASD, the SEC or any other regulatory body provided that
the terminating Party has a reasonable belief that the institution of formal
proceedings is not without foundation and will have a material adverse impact
on the terminating Party, (ii) by the non-assigning Party upon the assignment
of this Agreement in contravention of the terms hereof, or (iii) as is required
by law, order or instruction by a court of competent jurisdiction or a
regulatory body or self-regulatory organization with jurisdiction over the
terminating Party.
12.5 Limit on Termination. Notwithstanding the termination of this
Agreement with respect to any or all Funds, for so long as any Contracts remain
outstanding and invested in a Fund each Party to this Agreement shall continue
to perform such of its duties under this Agreement as are necessary to ensure
the continued tax deferred status thereof and the payment of benefits
thereunder, except to the extent proscribed by law, the SEC or other regulatory
body. Notwithstanding the foregoing, nothing in this Section 12.5 obligates a
Fund to continue in existence. In the event that any Fund elects to terminate
its operations, the Company shall, as
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soon as practicable, obtain an exemptive order or order of substitution from
the SEC to remove all Owners from the applicable Fund.
13. Notices.
All notices under this Agreement shall be given in writing (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
facsimile, by registered or certified mail
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or by overnight delivery (postage prepaid, return receipt requested) to the
respective Parties as follows:
If to Strong Variable:
Strong Variable Insurance Funds, Inc.
100 Heritage Reserve
Milwaukee, WI 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Opportunity Fund II:
Strong Opportunity Fund II, Inc.
100 Heritage Reserve
Milwaukee, WI 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Adviser:
Strong Capital Management, Inc.
100 Heritage Reserve
Milwaukee, WI 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Distributors:
Strong Funds Distributors, Inc.
100 Heritage Reserve
Milwaukee, WI 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Company:
National Life Insurance Company
One National Life Drive
Montpelier, VT 05604
Attention: Russell Morgan
Facsimile No.: (802) 229-3743
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14. Miscellaneous.
14.1. Captions. The captions in this Agreement are included for
convenience of reference only and in no way affect the construction or effect
of any provisions hereof.
14.2. Enforceability. If any portion 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.
14.3. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which taken together shall constitute one
and the same instrument.
14.4. Remedies not Exclusive. The rights, remedies and obligations
contained in this Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which the Parties to
this Agreement are entitled to under state and federal laws.
14.5. Confidentiality. Subject to the requirements of legal process
and regulatory authority, the Funds and Distributors shall treat as
confidential the names and addresses of the owners of the Contracts and all
information reasonably identified as confidential in writing by the Company to
this Agreement and, except as permitted by this Agreement, shall not disclose,
disseminate or utilize such names and addresses and other confidential
information without the express written consent of the Company until such time
as it may come into the public domain.
14.6. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of Wisconsin
applicable to agreements fully executed and to be performed therein; exclusive
of conflicts of laws.
14.7. Survivability. Sections 6, 7.2, 7.3, 7.4, 9, 11 and 12.5
hereof shall survive termination of this Agreement. In addition, all
provisions of this Agreement shall survive termination of this Agreement in the
event that any Contracts are invested in a Fund at the time the termination
becomes effective and shall survive for so long as such Contracts remain so
invested.
14.8. Amendment and Waiver. No modification of any provision of
this Agreement will be binding unless in writing and executed by the Party to
be bound thereby. No waiver of any provision of this Agreement will be binding
unless in writing and executed by the Party granting such waiver.
Notwithstanding anything in this Agreement to the contrary, the Adviser may
unilaterally amend Exhibit A to this Agreement to add additional series of
Strong Variable Funds ("New Funds") as Funds by sending to the Company a
written notice of the New Funds. Any valid waiver of a provision set forth
herein shall not constitute a waiver of any other provision of this Agreement.
In addition, any such waiver shall constitute a present waiver of such
provision and shall not constitute a permanent future waiver of such provision.
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14.9. Assignment. This Agreement shall be binding upon and shall
inure to the benefit of the Parties and their respective successors and
assigns; provided, however, that neither this Agreement nor any rights,
privileges, duties or obligations of the Parties may be assigned by any Party
without the written consent of the other Parties or as expressly contemplated
by this Agreement.
14.10. Entire Agreement. This Agreement contains the full and
complete understanding between the Parties with respect to the transactions
covered and contemplated under this Agreement, and supersedes all prior
agreements and understandings between the Parties relating to the subject
matter hereof, whether oral or written, express or implied.
14.11. Relationship of Parties; No Joint Venture, Etc. Except for
the limited purpose provided in Section 3.8, it is understood and agreed that
the Company shall be acting as an independent contractor and not as an employee
or agent of the Adviser, Distributors or the Funds, and none of the Parties
shall hold itself out as an agent of any other Party with the authority to bind
such Party. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and among any of the
Company, Funds, Adviser, or Distributors.
14.12. Expenses. All expenses incident to the performance by each
Party of its respective duties under this Agreement shall be paid by that
Party.
14.13. Time of Essence. Time shall be of the essence in this
Agreement.
14.14. Non-Exclusivity. Each of the Parties acknowledges and agrees
that this Agreement and the arrangements described herein are intended to be
non-exclusive and that each of the Parties is free to enter into similar
agreements and arrangements with other entities.
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14.15. Operations of Funds. In no way shall the provisions of this
Agreement limit the authority of the Funds, the Adviser or Distributors to take
such action as it may deem appropriate or advisable in connection with all
matters relating to the operation of such Fund and the sale of its shares. In
no way shall the provisions of this Agreement limit the authority of the
Company to take such action as it may deem appropriate or advisable in
connection with all matters relating to the provision of Services or the shares
of funds other than the Funds offered to the Account.
NATIONAL LIFE INSURANCE COMPANY
------------------------------------------------------
By:
Name:
Title:
STRONG CAPITAL MANAGEMENT, INC.
------------------------------------------------------
Donald G. Tyler, Senior Vice President
Strong Intermediary Services
STRONG FUNDS DISTRIBUTORS, INC.
------------------------------------------------------
Stephen J. Shenkenberg, Vice President
STRONG VARIABLE INSURANCE FUNDS, INC.
on behalf of the Designated Portfolios
------------------------------------------------------
Stephen J. Shenkenberg, Vice President
STRONG OPPORTUNITY FUND II, INC.
------------------------------------------------------
Stephen J. Shenkenberg, Vice President
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EXHIBIT A
The following is a list of Designated Portfolios under this Agreement:
Strong Growth Fund II
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EXHIBIT B
THE SERVICES
Company shall perform the following services. Such services
shall be the responsibility of the Company and shall not be the responsibility
of the Funds, Adviser or Distributors.
1. Maintain separate records for each Account, which records
shall reflect Fund shares ("Shares") purchased and redeemed, including the date
and price for all transactions, Share balances, and the name and address of
each Owner, including zip codes and tax identification numbers.
2. Credit contributions to individual Owner accounts and invest
such contributions in shares of the Funds to the extent so designated by the
Owner.
3. Disburse or credit to the Owners, and maintain records of, all
proceeds of redemptions of Fund shares and all other distributions not
reinvested in shares.
4. Prepare and transmit to the Owners, periodic account
statements showing, among other things, the total number of Fund shares owned
as of the statement closing date, purchases and redemptions of shares during
the period covered by the statement, the net asset value of the Funds as of a
recent date, and the dividends and other distributions paid during the
statement period (whether paid in cash or reinvested in shares).
5. Transmit to the Owners, as required by applicable law,
prospectuses, proxy materials, shareholder reports, and other information
provided by the Adviser, Distributors or Funds and required to be sent to
shareholders under the Federal securities laws.
6. Transmit to Distributors purchase orders and redemption
requests placed by the Account and arrange for the transmission of funds to and
from the Funds.
7. Transmit to Distributors such periodic reports as Distributors
shall reasonably conclude is necessary to enable the Funds to comply with
applicable Federal securities and state Blue Sky requirements.
8. Transmit to each Account confirmations of purchase orders and
redemption requests placed by each Account.
9. Maintain all account balance information for the Account and
daily and monthly purchase summaries expressed in shares and dollar amounts.
10. Prepare, transmit and file any Federal, state and local
government reports and returns as required by law with respect to each account
maintained on behalf of the Account.
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11. Respond to Owners' inquiries regarding, among other things,
share prices, account balances, dividend options, dividend amounts, and
dividend payment dates.
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EXHIBIT C
ACCOUNT INFORMATION
1. Entity in whose name each Account will be opened: ----------------------------------------
Mailing address: ----------------------------------------
----------------------------------------
----------------------------------------
2. Employer ID number (For internal usage only): ----------------------------------------
3. Authorized contact persons: The following persons are authorized on behalf
of the Company to effect transactions in each Account:
Name: Name:
----------------------------- ------------------------------
Phone: Phone:
----------------------------- ------------------------------
4. Will the Accounts have telephone exchange? Yes No
---- ----
(This option lets Company redeem shares by telephone and apply the proceeds
for purchase in another identically registered Strong Funds account.)
5. Will the Accounts have telephone redemption? Yes No
---- ----
(This option lets Company sell shares by telephone. The proceeds will be
wired to the bank account specified below.)
6. All dividends and capital gains will be reinvested automatically.
7. Instructions for all outgoing wire transfers: ------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
8. If this Account Information Form contains changed information, the
undersigned authorized officer has executed this amended Account Information
Form as of the date set forth below and acknowledges the agreements and
representations set forth in the Participation Agreement between the Company,
the Funds, Adviser and Distributors:
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9. Company represents under penalty of perjury that:
(a) The employer ID number on this form is correct; and
(b) Company is not subject to backup withholding because (i)
Company is exempt from backup withholding, (ii) Company has not been notified
by the IRS that it is subject to backup withholding as a result of failure to
report all interest or dividends, or (iii) the IRS has notified the Company
that it is no longer subject to backup withholding. (Cross out (b) if Company
has been notified by the IRS that it is subject to backup withholding because
of underreporting interest or dividends on its tax return.)
-------------------------------------- ----------------------------
(Signature of Authorized Officer) (Date)
Please Note: Distributors employs reasonable procedures to confirm that
instructions communicated by telephone are genuine and may not be liable for
losses due to unauthorized or fraudulent instructions. Please see the
prospectus for the applicable Fund for more information on the telephone
exchange and redemption privileges.
For Strong Internal Use: This Account Information Form may be a copy. The
original Account Information Form is attached to the Participation Agreement
with the Adviser and retained in the legal department.
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