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EXHIBIT 23(h)(3)
PARTICIPATION AGREEMENT
By and Among
MARKET STREET FUND
and
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
and
1717 CAPITAL MANAGEMENT COMPANY
THIS AGREEMENT, made as of the close of business on January 26, 2001,
the date that Market Street Fund, Inc., a Maryland corporation, reorganizes and
redomesticates into Market Street Fund, a Delaware business trust, by and among
PROVIDENT MUTUAL LIFE INSURANCE COMPANY, a Pennsylvania Corporation (the
"Company"), on its own behalf and on behalf of each separate account of the
Company named in Exhibit A to this Agreement, as may be amended from time to
time (each, an "Account" and collectively, the "Accounts"), the MARKET STREET
FUND, an open-end diversified management investment company organized as a
business trust under the laws of the State of Delaware (the "Fund") and 1717
CAPITAL MANAGEMENT COMPANY, a Pennsylvania corporation ("1717" or the
"Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company, and the Fund's shares of beneficial interests
("shares") are divided into several distinct series of shares, each representing
an interest in a particular managed portfolio of securities and other assets
named in Exhibit B to this Agreement, as may be amended from time to time (each,
a "Portfolio"), of which certain Portfolios (the "Dedicated Portfolios") are
available to act as an investment vehicle for separate accounts established for
variable life insurance policies and variable annuity contracts offered by
insurance companies that have entered into participation agreements
substantially identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC"), dated October 3, 1985 (File No. 812-6143),
granting Participating Insurance Companies and variable annuity and variable
life insurance separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended
(hereinafter the "1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit the Fund's shares to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and
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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 (the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
life insurance policies and variable annuity contracts named in Exhibit A to
this Agreement, as it may be amended from time to time (collectively, the
"Policies") under the 1933 Act, unless exempt therefrom; and
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Company's Board of Directors
under Pennsylvania insurance law, to set aside and invest assets attributable to
the Policies; and
WHEREAS, the Company has registered each Account as a unit investment
trust under the 1940 Act, unless exempt therefrom; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD") ; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in certain of the Portfolios
that are dedicated to support separate accounts established for variable life
insurance policies and variable annuity contracts offered by insurance companies
and named in Exhibit B to this Agreement, as it may be amended from time to time
(the "Dedicated Portfolios") on behalf of the Accounts to fund the Policies, and
the Underwriter is authorized to sell shares of the Dedicated Portfolios to unit
investment trusts such as the Accounts 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 Dedicated Portfolio Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund's Dedicated Portfolios that the Company orders on behalf of the Accounts,
executing such orders on a daily basis at the net asset value next computed
after receipt and acceptance by the Fund, or its designee, of the order for
these shares. For purposes of this Section 1.1, the Company shall be the
designee of the Fund for receipt of such orders from each Account and receipt by
such designee shall constitute receipt by the Fund; provided that the Fund
receives notice of such order by 10:00 a.m. Eastern Time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the relevant Fund calculates its net
asset value.
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1.2. The Fund agrees to make its Dedicated Portfolio shares available
indefinitely for purchase at the applicable net asset value per share by
Participating Insurance Companies and their separate accounts on those days on
which the Fund calculates the Portfolios' net asset values pursuant to SEC
rules; provided, however, that the Fund's Board of Trustees (the "Board") may
refuse to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Board, acting in good faith and in light of its fiduciary duties under federal
and any applicable state laws, necessary in the best interests of the
shareholders of any Portfolio.
1.3. The Fund and the Underwriter agree that Dedicated Portfolio shares
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Dedicated Portfolio will be sold to the general
public.
1.4. The Fund and the Underwriter will not sell Dedicated Portfolio
shares to any insurance company or separate account unless an agreement
containing provisions substantially the same as Articles I, III, V, and VII of
this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of a Dedicated Portfolio held by the Company,
executing such requests on a daily basis at the net asset value next computed
after receipt and acceptance by the Fund, or its designee, of the request for
redemption. For purposes of this Section 1.5, the Company shall be the designee
of the Fund for receipt of requests for redemption from each Separate Account
and receipt by such designee shall constitute receipt by the Fund; provided the
Fund receives notice of request for redemption by 10:00 a.m. Eastern Time on the
next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Dedicated Portfolio offered by the Fund's then current prospectus in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the Policies shall be invested in the Fund, or in the Company's
general account; provided that these amounts may also be invested in an
investment company other than the Fund if: (a) the other investment company, or
series thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of all the Fund's
Portfolios; (b) the Company gives the Fund and the Underwriter forty-five (45)
days written notice of the Company's intention to make that other investment
company available as a funding vehicle for the Policies; (c) that other
investment company was available as a funding vehicle for the Policies prior to
the date of this Agreement and the Company has informed the Fund and Underwriter
of that arrangement in writing prior to their signing this Agreement; or (d) the
Fund or Underwriter consents in writing prior to the use of that other
investment company.
1.7. The Company shall pay for Fund shares on the same day that the
Company places an order to purchase Fund shares. The Fund shall pay redemption
proceeds in accordance with the terms of the then-current prospectus for the
Fund. Payment shall be in federal funds transmitted by wire.
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1.8. Issuance and transfer of the Funds' shares will be by book entry
only. Share certificates will not be issued to the Company or any of the
Accounts. Shares ordered from the Fund will be recorded in an appropriate title
for the applicable Account or the appropriate subaccount of the applicable
Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital-gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such dividends and distributions as are payable on the
Dedicated Portfolio shares in additional shares of that Dedicated Portfolio;
provided, that the Company reserves the right to revoke this election and to
receive all such dividends and distributions in cash. The Fund shall notify the
Company of the number of each Dedicated Portfolio's shares so issued as payment
of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Dedicated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act, unless exempt therefrom, and that the Policies
will be issued and sold in compliance with all applicable federal and state
laws. The Company further represents and warrants that the Company is an
insurance company duly organized and in good standing under applicable law and
that the Company has legally and validly established the Accounts as segregated
asset accounts under Section ▇▇-▇▇-▇▇▇ of the Pennsylvania Insurance Code and
has registered each of the Accounts as a unit investment trust in accordance
with the provisions of the 1940 Act, unless exempt therefrom, to serve as
segregated investment accounts for the Policies, and that the Company will
maintain such registrations for so long as any Policies are outstanding. The
Company shall amend any registration statement under the 1933 Act for the
Policies and any registration statement under the 1940 Act for the Accounts from
time to time as required in order to effect the continuous offering of the
Policies or as may otherwise be required by applicable law. The Company shall
register and qualify the Policies for sale in accordance with the securities
laws of the various states only if and to the extent deemed necessary by the
Company.
2.2. Subject to Article VI hereof, the Company represents that the
Company believes, in good faith, that the Policies are currently and, at the
time of issuance, will be treated as life insurance contracts or annuity
contracts under applicable provisions of the Internal Revenue Code of 1986, that
the Company will make every effort to maintain such treatment and that the
Company will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Policies have ceased to be so treated or
that the Policies might not be so treated in the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance
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with applicable law and that the Fund is and shall remain registered under the
1940 Act for as long as the Fund shares are sold. The Fund shall amend the
registration statement for Fund shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.
2.4. The Fund represents that the Fund believes, in good faith, that
the Fund is currently qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, that the Fund will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision), and that the Fund will notify the Company immediately upon
having a reasonable basis for believing that the Fund has ceased to so qualify
or that it might not so qualify in the future.
2.5. The Fund represents that the Fund's investment objectives,
policies, and restrictions comply with the Pennsylvania Insurance Code as this
Code applies to the Fund. To the extent feasible and consistent with market
conditions, the Fund will adjust the Fund's investments to comply with
requirements of the Company's domiciliary state upon written notice from the
Company of such requirements and proposed adjustments, provided that in this
case the Fund shall be allowed a reasonable period of time under the
circumstances after receipt of such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although the Fund may make such payments in the future. To the extent that the
Fund decides to finance distribution expenses pursuant to Rule 12b-1, the Fund
shall formulate and approve any plan pursuant to the requirements of Rule 12b-1
to finance distribution expenses and shall notify the Company immediately.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that the Underwriter will sell and distribute the
Fund shares in accordance with the 1933 Act, the 1934 Act, and the ▇▇▇▇ ▇▇▇.
2.8 The Fund represents and warrants that it and all of its trustees,
officers, employees and other individuals/entities having access to the moneys
and/or securities of the Fund are and continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-1 of
the 1940 Act or related provisions as may be promulgated from time to time. The
aforesaid bond includes coverage for larceny and embezzlement and is issued by a
reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company, at the Company's
expense, with as many copies of the Fund's current prospectus as the Company may
reasonably request
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for use with prospective Policy owners and applicants. The Underwriter shall
print and distribute, at the Fund's expense, as many copies as necessary for
distribution to existing Policy owners or participants. If requested by the
Company in lieu thereof, the Fund shall provide this documentation and other
assistance as is reasonably necessary in order for the Company to have the new
prospectus for the Policies and the Fund's new prospectus for the Dedicated
Portfolios printed together in one document, in such case the Fund shall bear
its proportional share of expenses as described above.
3.2. The Fund's prospectus shall state that the Fund's Statement of
Additional Information is available from the Underwriter (or, in the Fund's
discretion, the prospectus shall state that this Statement is available from the
Fund), and the Underwriter (or the Fund) shall provide this Statement, at the
Underwriter's expense, to the Company and to any owner of or participant under a
Policy who requests this Statement or, at the Company's expense, to any
prospective Policy owner and applicant who requests this Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
the Fund's proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require and shall
bear the costs of distributing these materials, reports, and communications to
existing Policy owners or participants.
3.4. If and to the extent required by law, the Company shall:
(i) solicit voting instructions from Policy owners or
participants;
(ii) vote the Fund shares held in the Accounts in accordance with
instructions received from Policy owners or participants; and
(iii) vote Fund shares held in the Accounts for which no timely
instructions have been received, and any Fund shares held in
the Company's general account, in the same proportion as Fund
shares for which instructions have been received;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require passthrough voting privileges for variable policy owners. The Company
reserves the right to vote Fund shares held in any segregated asset account or
in the Company's general account in its own right, to the extent permitted by
law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with other Participating Insurance Companies
and as required by the Mixed and Shared Funding Exemptive Order.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will call a meeting of
shareholders at the written request of 25% of the outstanding shares of a
Portfolio or Portfolios and will comply with Section 16(a) of the 1940 Act and,
if and when applicable, Section 16(b). Further, the Fund will
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act in accordance with the SEC interpretation of the requirements of Section 16
(a) with respect to periodic elections of trustees and with whatever rules the
SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or the Underwriter, each piece of sales literature or other promotional
material in which the Fund or the Underwriter is named, at least ten (10)
business days prior to the literature's or material's use. No such material
shall be used if the Fund or the Underwriter objects to such use within ten (10)
business days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Policies other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis. The parties agree that this Section 4.2 is not intended
to designate or otherwise imply that the Company is an underwriter or
distributor of the Fund's shares.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or the Company's designee, each piece of sales
literature or other promotional material in which the Company, the Company's
separate account(s) or the Policies are named, at least ten (10) business days
prior to the literature's or material's use. No such material shall be used if
the Company objects to such use within ten (10) business days after receipt of
such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company, the
Accounts, or the Policies other than the information or representations
contained in a registration statement or prospectus for the Policies, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Accounts which are in the public domain
or approved by the Company for distribution to Policy owners or participants, or
in sales literature or other promotional material approved by the Company,
except with the permission of the Company. The Company agrees to respond to any
request for approval on a prompt and timely basis.
4.5. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form
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letters, seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, Statements of Additional
Information, shareholder reports, and proxy materials and any other material
constituting sales literature or advertising under NASD rules, the 1940 Act or
the 1933 Act.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution expenses, then, subject to obtaining any required exemptive
orders or other regulatory approvals, the Underwriter may make payments to the
Company or to the underwriter for the Policies if and in amounts agreed to by
the Underwriter in writing.
5.2. All expenses incident to performance by the Fund of this Agreement
shall be paid by the Fund to the extent permitted by law. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's shares
under federal law, and, if applicable, under any state securities law,
preparation and filing of the Fund's prospectus and registration statement,
proxy materials and reports, setting in type, printing and distributing the
prospectuses, the proxy materials and reports to existing shareholders and
Policy owners, the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Fund's
shares, and any expenses permitted to be paid or assumed by the Fund pursuant to
a plan, if any, under Rule 12b-1 under the 1940 Act.
ARTICLE VI. Diversification
6.1. The Fund, on behalf of each Dedicated Portfolio, shall at all
times be responsible to invest money from an Account in such a manner as to
ensure that the Policies will be treated as variable contracts under the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
issued thereunder; provided that, the Fund's investment responsibility shall be
limited to compliance with Subchapter M (Code Section 851 et seq.) as that
section relates to regulated investment companies and Code Section 817 (h) and
the related U.S. Treasury Regulation Section 1.817-5 issued thereunder, relating
to the diversification requirements for variable annuity, endowment, and life
insurance contracts.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund and Portfolios for the existence
of any material irreconcilable conflict between the interests of the policy
owners of all separate accounts investing in the Fund and Portfolios. An
irreconcilable material conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority;
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(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) difference in voting instructions given by Participating Insurance
Companies or by variable annuity contract and variable life
insurance policy owners; or
(f) a decision by an insurer to disregard the voting instructions of
policy owners.
The Board shall promptly inform the Company if the Board determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. As set forth in the Mixed and Shared Funding Exemptive
Order, the Company will report any potential or existing conflicts of which the
Company is aware to the Board. The Company agrees to assist the Board in
carrying out the Fund's responsibilities under the Mixed and Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever policy
owner voting instructions are disregarded. The Board shall record in the minutes
or other appropriate records of the Fund, all reports received by the Board and
all action with regard to a conflict.
7.3. If it is determined by a majority of the members of the Board or a
majority of its disinterested Trustees that an irreconcilable material conflict
exists, the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority of
the disinterested Trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including:
(a) withdrawing the assets allocable to some or all of the separate
accounts from the Fund or any Portfolio and reinvesting these
assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a vote
of all affected policy owners and, as appropriate, segregating the
assets of any appropriate group (i.e., variable annuity policy
owners or variable life insurance policy owners, of one or more
Participating
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Insurance Companies) that votes in favor of such segregation, or
offering to the affected policy owners the option of making such a
change; and
(b) establishing a new registered management investment company or
managed separate account.
7.4. If the Company's disregard of voting instructions could conflict
with the majority of Policy owner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company is permitted to withdraw each affected Portfolio's investment in the
Fund. The Underwriter and Fund shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund until the
Company notifies the Underwriter and the Fund that the Company is withdrawing
each affected Account's investment in the Fund pursuant to this Section 7.4.
7.5. If a particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state insurance regulators,
then the Company is permitted to withdraw each affected Account's investment in
the Fund. The Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund until the
Company notifies the Underwriter and the Fund that the Company is withdrawing
each affected Account's investment in the Fund pursuant to this Section 7.5.
7.6. For purposes of Section 7.3 of this Agreement, the Board shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Fund be required to establish a new
funding medium for the Policies. The Company shall not be required by Section
7.3 to establish a new funding medium for the Policies if an offer to do so has
been declined by vote of a majority of Policy owners materially adversely
affected by the irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) under the
1940 Act are amended, or Rule 6e-3 under the 1940 Act is adopted, to provide
exemptive relief from any provision of the 1940 Act or the rules promulgated
thereunder with respect to mixed or shared funding (as defined in the Mixed and
Shared Funding Exemptive Order) on terms and conditions materially different
from those contained in the Mixed and Shared Funding Exemptive Order, then:
(a) the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as
adopted, to the extent that these rules are applicable; and
(b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement
shall continue in effect only to the extent that terms and
conditions substantially identical to these Sections of the
Agreement are contained in such Rule(s) as so amended or adopted.
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ARTICLE VIII. Indemnification
8 1. Indemnification by the Company
8.1(a). The Company agrees to indemnify and hold harmless the
Fund, the Underwriter, and each of the Fund's or the Underwriter's trustees,
directors, officers, employees, or agents and each person, if any, who controls
or is associated with the Fund or the Underwriter within the meaning of such
terms under the federal securities laws (collectively, the "indemnified parties"
for purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company), or litigation (including legal and other expenses), to which the
indemnified parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities, or
expenses (or actions in respect thereof), or settlements are related to the sale
or acquisition of the Fund's shares and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the registration statement or prospectus for the
Policies or contained in the Policies or sales
literature for the Policies (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances in which they
were made; provided that this agreement to indemnify
shall not apply as to any indemnified party if this
statement or omission or this alleged statement or
omission was made in reliance upon and in conformity
with information furnished to the Company by or on
behalf of the Fund for use in the 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
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statement, prospectus, or sales literature of the Fund
or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make
the statements therein not misleading in light of the
circumstances in which they were made, if such a
statement or omission was made in reliance upon and in
conformity with information furnished to the Fund by or
on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials or to
make any payments under the terms of this Agreement; or
(v) arise out of any material breach by the Company of this
Agreement;
except to the extent provided in Sections 8.1(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities, or
litigation to which an indemnified party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence of the party seeking
indemnification in the performance of his or her duties or by reason of his or
her reckless disregard of obligations or duties under this Agreement or to the
Fund.
8.1(c). The indemnified parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Policies or the operation of
the Fund.
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
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statements therein not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify shall not apply as to any
indemnified party if this statement or omission or this
alleged statement or omission was made in reliance upon
and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for
use in the registration statement or prospectus for the
Fund or in sales literature for the Fund (or any
amendment or supplement thereto) or otherwise for use in
connection with the sale of the Policies or Fund shares;
or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Policies or in the
Policy or Fund registration statement, the Policy or
Fund prospectus or sales literature for the Policies or
the Fund not supplied by the Underwriter or persons
under its control) or wrongful conduct of the
Underwriter or persons under its control, with respect
to the sale or distribution of the Policies or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Policies (or any amendment thereof or supplement
thereto), or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein
not misleading in light of the circumstances in which
they were made, if such statement or omission was made
in reliance upon and in conformity with information
furnished to the Company by or on behalf of the
Underwriter; or
(iv) arise out of any material breach by the Underwriter or
the Fund of this Agreement; or
(v) arise as a result of any failure by the Underwriter to
provide the services and furnish the materials under the
terms of this Agreement (including a failure), whether
unintentional or is good faith or otherwise, by the Fund
to comply with the diversification requirements and
procedures related thereto specified in Article VI of
this Agreement;
except to the extent provided in Sections 8.2 (b) and 8.4 hereof. This
Indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
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8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities, or litigation to which an indemnified party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence of the
party seeking indemnification in the performance of his or her duties or by
reason of his or her reckless disregard of obligations and duties under this
Agreement or to the Company or the Accounts.
8.2(c). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Policies or
the operation of the Accounts.
8.3. Indemnification by the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company
and each of the Company's directors, officers, employees, or agents and each
person, if any, who controls or is associated with the Company within the
meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for the purpose of this Section 8.3) against any and all
losses, claims, damages, or liabilities (including amounts paid in settlement
with the written consent of the Fund), or litigation (including legal and other
expenses) to which they or any of them may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms
of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in
Article VI of this Agreement); or
(ii) arise out of any material breach by the Fund of this
Agreement;
except to the extent provided in Section 8.3(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Fund may
otherwise have.
8.3 (b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities, or
litigation to which an indemnified party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence of the party seeking
indemnification in the performance of his or her duties or by reason of his or
her reckless disregard of obligations or duties under this Agreement or to the
Company or the Accounts.
8.3(c). The indemnified parties will promptly notify the Fund of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Policies or the operation of
the Accounts.
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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 this
indemnified party shall have notified the indemnifying party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon this
indemnified party (or after this party shall have received notice of this
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom this action is brought
under the indemnification provision of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and this indemnifying party is damaged solely as a result of
failure to give this notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the indemnifying party to the indemnified
party of the indemnifying party's election to assume the defense thereof, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by it, and the indemnifying party will not be liable to this party
under this Agreement for any legal or other expenses subsequently incurred by
this party independently in connection with the defense thereof other than
reasonable costs of investigation, unless (a) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of this counsel,
or (b) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. The indemnifying party
shall not be liable for any settlement of any proceeding effected without the
indemnifying party's written consent but if settled with this consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of this settlement or judgment.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law.
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Pennsylvania.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including any exemptions from those statutes, rules, and regulations as the SEC
may grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
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ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance written
notice to the other parties; or
(b) at the option of the Company if shares of all Dedicated
Portfolios are not reasonably available to meet the requirements of the Policies
as determined by the Company; prompt notice of the election to terminate for
such cause shall be furnished by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the Insurance Commissioner
or any other regulatory body regarding the Company's duties under this Agreement
or related to the sale of the Policies, the operation of the Accounts, or the
purchase of the Fund shares and which would have a material adverse effect on
the Company's ability to perform its obligations under this Agreement; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or any necessary vote of the Policy owners
having an interest in an Account (or any subaccount) to substitute the shares of
another investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Policies for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will give
thirty (30) days prior written notice to the Fund of the date of any proposed
vote or other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination
by a majority of the Board members of the Fund that an irreconcilable material
conflict exists among the interests of (i) all policy owners of variable
insurance products of all separate accounts or (ii) the interests of the
Participating Insurance Companies investing in the Fund; or
(g) at the option of the Company, if the Company has withdrawn an
Account's investment in the Fund because the Company's disregard of voting
instructions could conflict with the majority of policy owner voting
instructions, and if the Company's judgment represents a minority position or
would preclude a majority vote; or
(h) at the option of the Company, if the Company has withdrawn an
Account's investment in the Fund because a particular state insurance
regulator's decision applicable to the Company conflicts with the majority of
other state insurance regulators;
(i) at the option of the Company, if the Fund ceases to qualify
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, or under any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify; or
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(j) at the option of the Company, if the Fund fails to meet the
diversification requirements specified in Article VI hereof or if the Company
reasonably believes that the Fund will fail to meet such requirements; or
(k) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement.
10.2. Notice Requirement
(a) In the event that any termination of this Agreement is based upon
the provisions of Article VII, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions.
(b) In the event that any termination of this Agreement is based upon
the provisions of Sections 10.l (b) - (d) or 10.1(g) - (k), prompt written
notice of the election to terminate this Agreement for cause shall be furnished
by the party terminating the Agreement to the non-terminating parties, with said
termination to be effective upon receipt of such notice by the non-terminating
parties.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. Effect of Termination
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement and subject to Section 1.3 of this Agreement, the
Company may require the Fund and the Underwriter to continue to make available
additional shares of the Fund for so long after the termination of this
Agreement as the Company desires pursuant to the terms and conditions of this
Agreement as provided in paragraph (b) below, for all Policies in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Policies"). Specifically, without limitation, the owners of the
Existing Policies shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund, and/or invest in the Fund upon the making of
additional purchase payments under the Existing Policies. The parties agree that
this Section 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
(b) If shares of the Fund continue to be made available after
termination of this Agreement pursuant to this Section 10.4, the provisions of
this Agreement shall remain in effect except for Section 10.l(a).
10.5. Except as necessary to implement Policy owner initiated
transactions, or as required by state or federal laws or regulations, the
Company shall not redeem Fund shares attributable to the Policies (as opposed to
Fund shares attributable to the Company's assets held in any of the Accounts),
and the Company shall not prevent Policy owners from allocating payments to a
Portfolio that was otherwise available under the Policies, until ninety (90)
days
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after the Company shall have notified the Fund or Underwriter of the
Company's intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Market Street Fund
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
If to the Company:
Provident Mutual Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
If to the Underwriter:
1717 Capital Management Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto shall
treat as confidential all information reasonably identified as such in writing
by any other party hereto (including without limitation the names and addresses
of the owners of the policies) and, except as contemplated by this Agreement,
shall not disclose, disseminate or utilize such confidential information until
such time as this information may come into the public domain without the
express prior written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
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12.4. This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule, or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto without
the prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit each other and these
authorities reasonable access to that party's books and records in connection
with any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with the
Agreement's terms.
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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:
ATTEST: PROVIDENT MUTUAL LIFE INSURANCE
COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------ --------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President Title: Assistant General Counsel
Fund:
ATTEST: MARKET STREET FUND
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------ --------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President Title: Secretary
Compliance Officer
Underwriter:
ATTEST: 1717 CAPITAL MANAGEMENT COMPANY
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------ --------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Assistant Secretary Title: President
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EXHIBIT A
Accounts and Policies
SUBJECT TO THE PARTICIPATION AGREEMENT
PROVIDENT MUTUAL VARIABLE LIFE SEPARATE ACCOUNT
- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY-SPECIAL PRODUCT
- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE-OPTIONS PREMIER
- FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE-OPTIONS PLUS
- FLEXIBLE PREMIUM ADJUSTABLE SURVIVORSHIP VARIABLE LIFE INSURANCE-SURVIVOR
OPTIONS PREMIER
- FLEXIBLE PREMIUM ADJUSTABLE SURVIVORSHIP VARIABLE LIFE INSURANCE-SURVIVOR
OPTIONS ELITE
- FLEXIBLE PREMIUM ADJUSTABLE SURVIVORSHIP VARIABLE LIFE INSURANCE-SURVIVOR
OPTIONS PLUS
- MODIFIED PREMIUM VARIABLE LIFE INSURANCE POLICY-OPTIONS
PROVIDENT MUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT
- Individual Flexible Premium Deferred Variable Annuity Contract-Market
Street VIP/2
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EXHIBIT B
PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT
- ALL PRO BROAD EQUITY PORTFOLIO
- ALL PRO LARGE CAP GROWTH PORTFOLIO
- ALL PRO LARGE CAP VALUE PORTFOLIO
- ALL PRO SMALL CAP GROWTH PORTFOLIO
- ALL PRO SMALL CAP VALUE PORTFOLIO
- EQUITY 500 INDEX PORTFOLIO
- INTERNATIONAL PORTFOLIO
- BALANCED PORTFOLIO
- MID CAP GROWTH PORTFOLIO
- BOND PORTFOLIO
- MONEY MARKET PORTFOLIO
22
