SHAREHOLDER SERVICES AGREEMENT
SHAREHOLDER SERVICES AGREEMENT
NATIONAL LIFE INSURANCE COMPANY (the "Company"), and AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC. ("ACIM").
WHEREAS, the Company offers to the public certain group and individual variable annuity and variable
life insurance contracts (the "Contracts"); and
WHEREAS, the Company wishes to make available as investment options under the Contracts, VP Income
& Growth and VP Value (the "Funds"), each of which is a series of mutual fund shares registered under the
Investment Company Act of 1940, as amended, and issued by American Century Variable Portfolios, Inc. (the
"Issuer"); and
WHEREAS, on the terms and conditions hereinafter set forth, ACIM desires to make shares of the Funds
available as investment options under the Contracts and to retain the Company to perform certain administrative
services on behalf of the Funds, and the Company is willing and able to furnish such services;
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business (each, a "Business Day"), the Company may receive instructions from the Contract owners for the purchase
or redemption of shares of the Funds ("Orders"). Orders received and accepted by the Company prior to the close of
regular trading on the Exchange (the "Close of Trading") on any given Business Day (currently, 4:00 p.m. Eastern
time) and transmitted to the Funds' transfer agent by 9:00 a.m. Eastern time on the next Business Day will be
executed at the net asset value determined as of the Close of Trading on the prior Business Day. Any Orders
received by the Company on such day but after the Close of Trading, and all Orders that are transmitted to the Funds'
transfer agent after 9:00 a.m. Eastern time on the next Business Day, will
.. be executed at the net asset value determined as of the Close of Trading on the next Business Day following the day
of receipt of such Order. The day as of which an Order is executed by the Funds' transfer agent pursuant to the
provisions set forth above is referred to herein as the "Trade Date".
4: Processing of Transactions:
(a) If transactions in Fund shares are to be settled through the National Securities
Clearing Corporation's Mutual Fund Settlement, Entry, and Registration Verification (Fund/SERV) system, the
terms of the FUND/SERV AGREEMENT, between Company and American Century Services Corporation, shall
apply.
(b) If transactions in Fund shares are to be settled directly with the Funds' transfer
agent, the following provisions shall apply:
(1) By 6:30 p.m. Eastern time on each Business Day, ACIM (or one of its
affiliates) will provide to the Company via facsimile or other electronic transmission acceptable to the Company the
Funds' net asset value, dividend and capital gain information and, in the case of income funds, the daily accrual for
interest rate factor (mil rate), determined at the Close of Trading.
(2) By 9:00 a.m. Eastern time on each Business Day, the Company will provide
to ACIM via facsimile or other electronic transmission acceptable to ACIM a report stating whether the instructions
received by the Company from Contract owners by the Close of Trading on the prior Business Day resulted in the
Accounts being a net purchaser or net seller of shares of the Funds. As used in this Agreement, the phrase "other
electronic transmission acceptable to ACIM" includes the use of remote computer terminals located at the premises
of the Company, its agents or affiliates, which terminals may be linked electronically to the computer system of
ACIM, its agents or affiliates (hereinafter, "Remote Computer Terminals").
(3) Upon the timely receipt from the Company of the report described in (2)
above, the Funds' transfer agent will execute the purchase or redemption transactions (as the case may be) at the net
asset value computed as of the Close of Trading on the Trade Date. Payment for net purchase transactions shall be
made by wire transfer to the applicable Fund custodial account designated by the Funds on the Business Day next
following the Trade Date. Such wire transfers shall be initiated by the Company's bank prior to 4:00 p.m. Eastern
time and received by the Funds prior to 6:00 p.m. Eastern time on the Business Day next following the Trade Date
("T + 1 "). If payment for a purchase Order is not timely received, such Order will be executed at the net asset
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value next computed following receipt of payment. Payments for net redemption transactions shall be made by wire
transfer by the Issuer to the account( s) designated by the Company on T + 1; provided, however, the Issuer reserves
the right to settle redemption transactions within the time period set forth in the applicable Fund's then-current
prospectus. On any Business Day when the Federal Reserve Wire Transfer System is closed, all communication and
processing rules will be suspended for the settlement of Orders. Orders will be settled on the next Business Day on
which the Federal Reserve Wire Transfer System is open and the original Trade Date will apply.
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recordkeeping, by virtue of having a single shareholder account per Fund for the Accounts rather than having each
Contract owner as a shareholder. In consideration of the Administrative Services and performance of all other
obligations under this Agreement by the Company, ACIM will pay the Company a fee (the "Administrative Services
Fee") equal to 20 basis points (0.20%) per annum of the average aggregate amount invested by the Company under
this Agreement up to $50,000,000. Once the average aggregate amount invested in the Funds is over $50,000,000,
ACIM will pay the Company 25 basis points (0.25%) per annum of the average aggregate amount over $50,000,000
invested by the Company pursuant to this Agreement, and 20 basis points (0.20%) per annum ofthe average
aggregate amount under $50,000,000 invested by the Company pursuant to this Agreement.
(c) The payments received by the Company under this Agreement are for
administrative and shareholder services only and do not constitute payment in any manner for investment advisory
services or for costs of distribution.
(d) For the purposes of computing the payment to the Company contemplated by this
Section 6, the average aggregate amount invested by the Company on behalf of the Accounts in the Funds over a
one month period shall be computed by totaling the Company's aggregate investment (share net asset value
multiplied by total number of shares of the Funds held by the Company) on each Business Day during the month
and dividing by the total number of Business Days during such month.
( e) ACIM will calculate the amount of the payment to be made pursuant to this Section 6 at the end of
each calendar quarter and will make such payment to the Company within 30 days thereafter. The check for such
payment will be accompanied by a statement showing the calculation of the amounts being paid by ACIM for the
relevant months and such other supporting data as may be reasonably requested by the Company and shall be mailed
to:
National Life Insurance Company
National Life Drive
Montpelier, VT 05604
Attention: Treasurer
Phone No.: (000) 000-0000 Fax
No.: (000) 000-0000
(a) The Company represents and warrants that (i) this Agreement has been duly
authorized by all necessary corporate action and, when executed and delivered, shall constitute the legal, valid and
binding obligation of the Company, enforceable in accordance with its terms; (ii) it has established the National
Variable Life Insurance Account and the National Variable Annuity Account II (the "Accounts"), each of which is a
duly authorized and established separate account under Vermont Insurance law, and has registered each Account as
a unit investment trust under the Investment Company Act of 1940 (the "1940 Act") to serve as an investment
vehicle for the Contracts; (iii) each Contract provides for the allocation of net amounts received by the Company
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paid in settlement thereof) or litigation expenses (including legal and other expenses) (collectively, "Losses"), to
which the Indemnified Parties may become subject, insofar as such Losses result from (i) a breach by ACIM of a
material provision of this Agreement, or (ii) any untrue statement of any material fact contained in any registration
statement, prospectus or statement of additional information of a Fund, or the omission to state therein a material
fact required to be stated therein or necessary to make the statements therein not misleading. ACIM will reimburse
any legal or other expenses reasonably incurred by the Indemnified Parties in connection with investigating or
defending any such Losses. ACIM shall not be liable for indemnification hereunder if such Losses are attributable to
the negligence or misconduct of the Company in performing its obligations under this Agreement.
(b) The Company agrees to indemnify and hold harmless ACIM and the Issuer, and
their respective officers, directors, employees, agents, affiliates and each person, if any, who controls Issuer or
ACIM within the meaning of the Securities Act of 1933 (collectively, the "Indemnified Parties" for purposes of this
Section 11(b» against any Losses to which the Indemnified Parties may become subject, insofar as such Losses
result from (i) a breach by the Company of a material provision of this Agreement or the use by any person of the
Remote Computer Terminals, or (ii) any untrue statement of any material f~ct contained in any registration
statement, prospectus or statement of additional information of a Contract, or the omission to state therein a material
fact required to be stated therein or necessary to make the statements therein not misleading. The Company will
reimburse any legal or other expenses reasonably incurred by the Indemnified Parties in connection with
investigating or defending any such Losses. The Company shall not be liable for indemnification hereunder if such
Losses are attributable to the negligence or misconduct of ACIM or the Issuer in performing their obligations under
this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of notice of the
commencement of action, such indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 11. In case any such action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein
and, to the extent that it may wish to, assume the defense thereof, with counsel satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of its election to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party under this Section 11 for any legal or
other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation.
(d) If the indemnifying party assumes the defense of any such action, the indemnifying
party shall not, without the prior written consent of the indemnified parties in such action, settle or compromise the
liability of the indemnified parties in such action, or permit a default or consent to the entry of any judgment in
respect thereof, unless in connection with such settlement, compromise or consent, each indemnified party receives
from such claimant an unconditional release from all liability in respect of such claim.
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12. Potential Conflicts
(a) The Company has received a copy of an application for exemptive relief, as
amended, filed by the Issuer on December 21, 1987, with the SEC and the order issued by the SEC in response
thereto (the "Shared Funding Exemptive Order"). The Company has reviewed the conditions to the requested relief
set forth in such application for exemptive relief As set forth in such application, the Board of Directors of the Issuer
(the "Board") will monitor the Issuer for the existence of any material irreconcilable conflict between the interests of
the contract owners of all separate accounts ("Participating Companies") investing in funds of the Issuer. An
irreconcilable material conflict may arise for a variety of reasons, including: (i) an action by any state insurance
regulatory authority; (ii) 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 actions by insurance, tax or
securities regulatory authorities; (iii) an administrative or judicial decision in any relevant proceeding; (iv) the
manner in which the investments of any portfolio are being managed; (v) a difference in voting instructions given by
variable annuity contract owners and variable life insurance contract owners; or (vi) a decision by an insurer to
disregard the voting instructions of contract owners. The Board shall promptly inform the Company if it determines
that an irreconcilable material conflict exists and the implications thereof.
(b) The Company will report any potential or existing conflicts of which it is aware to
the Board. The Company will assist the Board in carrying out its responsibilities under the 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
contract owner voting instructions are disregarded.
( c) If a majority of the Board, or a majority of its disinterested Board members,
determines that a material irreconcilable conflict exists with regard to contract owner investments in a Fund, the
Board shall give prompt notice to all Participating Companies. If the Board determines that the Company is
responsible for causing or creating said conflict, the Company shall at its sole cost and expense, and to the extent
reasonably practicable (as determined by a majority of the disinterested Board members), take such action as is
necessary to remedy or eliminate the irreconcilable material conflict. Such necessary action may include but shall
not be limited to:
(i) withdrawing the assets allocable to the Accounts from the Fund and
reinvesting such assets in a different investment medium or submitting the question of
whether such segregation should be implemented to a vote of all affected contract owners
and as appropriate, segregating the assets of any appropriate group (i.e., annuity contract
owners, life insurance contract owners, or variable contract owners of one or more
Participating Companies) that votes in favor of such segregation, or offering to the
affected contract owners the option of making such a change; and/or
(ii) establishing a new registered management investment company or managed
separate account.
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(d) If a material irreconcilable conflict arises as a result of a decision by the Company
to disregard its contract owner voting instructions and said decision represents a minority position or would preclude
a majority vote by all of its contract owners having an interest in the Issuer, the Company at its sole cost, may be
required, at the Board's election, to withdraw an Account's investment in the Issuer and terminate this Agreement;
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 members of the Board.
(e) For the purpose of this Section 12, a majority of the disinterested Board members
shall determine whether or not 'any proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Issuer be required to establish a new funding medium for any Contract. The Company shall not be
required by this Section 12 to establish a new funding medium for any Contract if an offer to do so has been
declined by vote of a majority of the Contract owners materially adversely affected by the irreconcilable material
conflict.
13. Termination; Withdrawal of Offering. This Agreement may be terminated by
either party upon 180 days' prior written notice to the other parties. ~Notwithstanding the above, the Issuer reserves
the right, without prior notice, to suspend sales of shares of any Fund, in whole or in part, or to make a limited
offering of shares of any of the Funds in the event that (A) any regulatory body commences formal proceedings
against the Company, ACIM, affiliates of ACIM, or the Issuer, which proceedings ACIM reasonably believes may
have a material adverse impact on the ability of ACIM, the Issuer or the Company to perform its obligations under
this Agreement or (B) in the judgment of ACIM, declining to accept any additional instructions for the purchase or
sale of shares of any such Fund is warranted by market, economic or political conditions. Notwithstanding the
foregoing, this Agreement may be terminated immediately (i) by any party as a result of any other breach of this
Agreement by another party, which breach is not cured within 30 days after receipt of notice from the other party, or
(ii) by any party upon a determination that continuing to perform under this Agreement would, in the reasonable
opinion of the terminating party's counsel, violate any applicable federal or state law, rule, regulation or judicial
order. Termination of this Agreement shall not affect the obligations of the parties to make payments under Section
4 for Orders received by the Company prior to such termination and shall not affect the Issuer's obligation to
maintain the Accounts as set forth by this Agreement. Following termination, ACIM shall not have any
Administrative Services payment obligation to the Company (except for payment obligations accrued but not yet
paid as of the termination date).
14. Non-Exclusivity. Each of the parties acknowledges and agrees that this Agreement
and the arrangement 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.
15. Survival The provisions of Section 9 (use of names) and Section 11 (indemnity) of
this Agreement shall survive termination of this Agreement.
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National Life Insurance Company
National Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: D. Xxxxxxx Xxxxxx, Esq. (802)
229-3113 (office number)
(000) 000-0000 (telecopy number) ~
To the Issuer or ACIM:
American Century Investment Management, Inc. 0000
Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxx, Esq. (816)
340-4051 (office number)
(000) 000-0000 (telecopynumber)
have been delivered on receipt.
18. Successors and Assigns. This Agreement may not be assigned without the written
consent of all parties to the Agreement at the time of such assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted successors and assigns.
19. Counterparts. This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one agreement, and any party hereto may execute this Agreement by signing
any such counterpart.
20. Severability. In case anyone or more of the provisions contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby.
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21. Entire Agreement. This Agreement, including the attachments hereto, constitutes
the entire agreement between the parties with respect to the matters dealt with herein, and supersedes all previous
agreements, written or oral, with respect to such matters.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth above.
NATIONAL LIFE INSURANCE COMPANY | AMERICAN CENTURY INVESTMENT | |||
MANAGENT, INC. | ||||
By: /s/ Xxxxxx Von Gal | ||||
Name: Xxxxxx Von Gal | By: | /s/ Xxxxxxx X. Xxxxx | ||
Title: Treasurer | ||||
Xxxxxxx X. Xxxxx | ||||
Executive Vice President |
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EXHIBIT A
ADMINISTRATIVE SERVICES
Pursuant to the Agreement to which this is attached, the Company shall perform all administrative and shareholder
services required or requested under the Contracts with respect to the Contract owners, including, but not limited to,
the following:
1. Maintain separate records for each Contract owner, which records shall reflect the
shares purchased and redeemed and share balances of such Contract owners. The Company will maintain a single
master account with each Fund on behalf of the Contract owners of each Contract and such account shall be in the
name of the Company (or its nominee) as the record owner of shares owned by the Contract owners.
2. Disburse or credit to the Contract owners all proceeds of redemptions of shares of
the Funds and all dividends and other distributions not reinvested in shares of the Funds.
3. Prepare and transmit to the Contract owners, as required by law or the Contracts,
periodic statements showing the total number of shares owned by the Contract owners as of the statement closing
date, purchases and redemptions of Fund shares by the Contract owners during the period covered by the statement
and the dividends and other distributions paid. during the statement period (whether paid in cash or reinvested in
Fund shares), and such other information as may be required, from time to time, by the Contracts.
4. Transmit purchase and redemption orders to the Funds on behalf of the Contract
owners in accordance with the procedures set forth in Section 4 to the Agreement.
5. Distribute to the Contract owners copies of the Funds' prospectus, proxy materials,
periodic fund reports to shareholders and other materials that the Funds are required by law or otherwise to provide
to their shareholders or prospective shareholders.
6. Maintain and preserve all records as required by law to be maintained and preserved
in connection with providing the Administrative Services for the Contracts.
A-I