Execution Copy PARTICIPATION AGREEMENT AMONG NATIONAL LIFE INSURANCE COMPANY EQUITY SERVICES, INC. ALLIANCEBERNSTEIN L.P. AND ALLIANCEBERNSTEIN INVESTMENTS, INC. DATED AS OF SEPTEMBER 2, 2008
Execution Copy
AMONG
NATIONAL LIFE INSURANCE COMPANY
EQUITY SERVICES, INC.
ALLIANCEBERNSTEIN L.P.
AND
ALLIANCEBERNSTEIN INVESTMENTS, INC.
DATED AS OF
SEPTEMBER 2, 2008
THIS AGREEMENT, made and entered into as of the September 2, 2008 (“Agreement”),
by and among National Life Insurance Company, a life insurance company organized as a
corporation under the laws of the State of Vermont (“Insurer”) (on behalf of itself and its “Separate
Account,” defined below); Equity Services, Inc., a Vermont corporation (“Contracts Distributor”
or “ESI”), the principal underwriter with respect to the Contracts referred to below;
AllianceBernstein L.P., a Delaware limited partnership (“Adviser”), the investment adviser of the
Fund referred to below; and AllianceBernstein Investments, Inc., a Delaware corporation
(“Distributor”), the Fund’s principal underwriter (collectively, the “Parties”),
WITNESSETH THAT:
WHEREAS Insurer, the Distributor, and AllianceBernstein Variable Products Series Fund,
Inc. (the “Fund”) desire that Class A shares (“shares”) of the Fund’s Portfolios listed on Schedule
A (the “Portfolios”; reference herein to the “Fund” includes reference to each Portfolio to the
extent the context requires) be made available by Distributor to serve as underlying investment
media for those variable annuity contracts and variable annuity contracts of Insurer that are the
subject of Insurer’s Form N-4 and Form N-6 registration statements filed with the Securities and
Exchange Commission (the “SEC”), File No. 811-08015 and 811-09044, respectively (the
“Contracts”), to be offered through Contracts Distributor and other registered broker-dealer firms
as agreed to by Insurer; and
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WHEREAS the Contracts provide for the allocation of net amounts received by Insurer to
separate series (the “Divisions”; reference herein to the “Separate Account” includes reference to
each Division to the extent the context requires) of the Separate Account for investment in the
shares of corresponding Portfolios of the Fund that are made available through the Separate
Account to act as underlying investment media,
NOW, THEREFORE, in consideration of the mutual benefits and promises contained
herein, the Fund and Distributor will make shares of the Portfolios available to Insurer for this
purpose at net asset value and with no sales charges, all subject to the following provisions:
Section 1. Additional Portfolios
The Fund has and may, from time to time, add additional Portfolios, which will become
subject to this Agreement, if, upon the written consent of each of the Parties hereto, they are made
available as investment media for the Contracts.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
The Adviser or its designated agent will provide closing net asset value, dividend and
capital gain information for each Portfolio to Insurer at the close of trading on each day (a
“Business Day”) on which (a) the New York Stock Exchange is open for regular trading, (b) the
Fund calculates the Portfolio’s net asset value and (c) Insurer is open for business. The Fund or its
designated agent will use its best efforts to provide this information by 6:00 p.m., Eastern time.
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Insurer will use these data to calculate unit values, which in turn will be used to process
transactions that receive that same Business Day’s Separate Account Division’s unit values. Such
Separate Account processing will be done the same evening, and corresponding orders with
respect to Fund shares will be placed the morning of the following Business Day. Insurer will use
its best efforts to place such orders with the Fund by 10:00 a.m., Eastern time.
2.2 Timely Payments.
Insurer will transmit orders for purchases and redemptions of Fund shares to Distributor, and
will wire payment for net purchases to a custodial account designated by the Fund on the day the
order for Fund shares is placed, to the extent practicable. Payment for net redemptions will be wired
by the Fund to an account designated by Insurer on the same day as the order is placed, to the extent
practicable, and in any event be made within six calendar days after the date the order is placed in
order to enable Insurer to pay redemption proceeds within the time specified in Section 22(e) of the
Investment Company Act of 1940, as amended (the “1940 Act”).
2.3 Redemption in Kind.
The Fund reserves the right to pay any portion of a redemption in kind of portfolio securities,
if the Fund’s board of directors (the “Board of Directors”) determines that it would be detrimental to
the best interests of shareholders to make a redemption wholly in cash.
2.4 Applicable Price.
The Parties agree that Portfolio share purchase and redemption orders resulting from Contract
owner purchase payments, surrenders, partial withdrawals, routine withdrawals of charges, or other
transactions under Contracts will be executed at the net asset values as determined as of the close of
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regular trading on the New York Stock Exchange on the Business Day that Insurer receives such
orders in good order and processes such transactions, which, Insurer agrees shall occur not earlier
than the Business Day prior to Distributor’s receipt of the corresponding orders for purchases and
redemptions of Portfolio shares. For the purposes of this section, Insurer shall be deemed to be the
agent of the Fund for receipt of such orders from holders or applicants of contracts, and receipt by
Insurer shall constitute receipt by the Fund. All other purchases and redemptions of Portfolio shares
by Insurer, will be effected at the net asset values next computed after receipt by Distributor of the
order therefor, and such orders will be irrevocable. Insurer hereby elects to reinvest all dividends and
capital gains distributions in additional shares of the corresponding Portfolio at the record-date net
asset values until Insurer otherwise notifies the Fund in writing, it being agreed by the Parties that the
record date and the payment date with respect to any dividend or distribution will be the same
Business Day.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided herein, each Party will bear all expenses incident to
its performance under this Agreement.
3.2 Registration.
The Fund will bear the cost of its registering as a management investment company under the
1940 Act and registering its shares under the Securities Act of 1933, as amended (the “1933 Act”),
and keeping such registrations current and effective; including, without limitation, the preparation of
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and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices respecting the Fund and its shares
and payment of all applicable registration or filing fees with respect to any of the foregoing. Insurer
will bear the cost of registering the Separate Account as a unit investment trust under the 1940 Act
and registering units of interest under the Contracts under the 1933 Act and keeping such
registrations current and effective; including, without limitation, the preparation and filing with the
SEC of Forms N-SAR and Rule 24f-2 Notices respecting the Separate Account and its units of
interest and payment of all applicable registration or filing fees with respect to any of the foregoing.
3.3 Other (Non-Sales-Related) Expenses.
The Fund will bear the entire costs of preparing, filing with the SEC and setting for printing
the Fund’s prospectus, statement of additional information and any amendments or supplements
thereto (collectively, the “Fund Prospectus”), periodic reports to shareholders (including the Funds’
annual and semiannual reports), Fund proxy material and other shareholder communications and any
related requests for voting instructions from Participants (as defined below). The Fund shall bear all
Fund proxy related expenses.
Insurer will bear the entire cost of preparing, filing with the SEC and setting for printing, the
Separate Account’s prospectus, statement of additional information and any amendments or
supplements thereto (collectively, the “Separate Account Prospectus”), any of Insurer’s periodic
reports to owners, annuitants or participants under the Contracts (collectively, “Participants”), and
other Participant communications.
The Fund and Insurer each will bear the costs of printing in quantity and delivering to
existing Participants the documents as to which it bears the cost of preparation as set forth above in
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this Section 3.3, it being understood that reasonable cost allocations will be made in cases where any
such Fund and Insurer documents are printed or mailed on a combined or coordinated basis. If
requested by Insurer, the Fund will provide annual Prospectus text to Insurer electronically in a
portable document format, i.e. “.pdf” file, or other comparable format of the Insurer’s choosing for
printing and binding with the Separate Account Prospectus. If such a request is made, Fund agrees to
provide said text to Insurer approximately fifteen (15) days prior to the effective date of the annual
Prospectus.
The Fund agrees to provide annual and semi-annual shareholder reportsto the Insurer
electronically in a portable document format, i.e. “.pdf” file, upon written request, approximately
45 days after the close of the reporting period for which such report is being made.
3.4 Other Sales-Related Expenses.
Expenses of distributing the Portfolio’s shares and the Contracts will be paid by Contracts
Distributor and other parties, as they shall determine by separate agreement.
3.5 Parties to Cooperate.
The Adviser, Insurer, Contracts Distributor, and Distributor each agrees to cooperate with the
others, as applicable, in arranging to print, mail and/or deliver combined or coordinated prospectuses
or other materials of the Fund and Separate Account.
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Section 4. Legal Compliance
4.1 Tax Laws.
(a) The Adviser will use its best efforts to qualify and to maintain qualification of each
Portfolio as a regulated investment company (“RIC”) under Subchapter M of the Internal
Revenue Code of 1986, as amended (the “Code”), and the Adviser or Distributor will notify Insurer
immediately upon having a reasonable basis for believing that a Portfolio has ceased to so qualify or
that it might not so qualify in the future.
(b) Insurer represents that it believes, in good faith, that the Contracts will be treated as
life and/or annuity contracts, as applicable, under applicable provisions of the Code and that it will
make every effort to maintain such treatment. Insurer will notify the Fund and Distributor
immediately upon having a reasonable basis for believing that any of the Contracts have ceased to be
so treated or that they might not be so treated in the future.
(c) The Fund will use its best efforts to comply and to maintain each Portfolio’s
compliance with the diversification requirements set forth in Section 817(h) of the Code and Section
1.817 -5(b) of the regulations under the Code, and the Fund, Adviser or Distributor will notify Insurer
immediately upon having a reasonable basis for believing that a Portfolio has ceased to so comply or
that a Portfolio might not so comply in the future.
(d) Insurer represents that it believes, in good faith, that the Separate Account is a
“segregated asset account” and that interests in the Separate Account are offered exclusively through
the purchase of or transfer into a “variable contract,” within the meaning of such terms under Section
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817(h) of the Code and the regulations thereunder. Insurer will make every effort to continue to meet
such definitional requirements, and it will notify the Fund and Distributor immediately upon having a
reasonable basis for believing that such requirements have ceased to be met or that they might not be
met in the future.
(e) The Adviser will manage the Fund as a RIC in compliance with Subchapter M of the
Code and will use its best efforts to manage to be in compliance with Section 817(h) of the Code and
regulations thereunder. The Fund has adopted and will maintain procedures for ensuring that the
Fund is managed in compliance with Subchapter M and Section 817(h) and regulations thereunder.
(f) Should the Distributor or Adviser become aware of a failure of Fund, or any of its
Portfolios, to be in compliance with Subchapter M of the Code or Section 817(h) of the Code and
regulations thereunder, they represent and agree that they will immediately notify Insurer of such in
writing.
4.2 Insurance and Certain Other Laws.
(a) The Adviser will use its best efforts to cause the Fund to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in writing by Insurer. If it
cannot comply, it will so notify Insurer in writing.
(b) Insurer represents and warrants that (i) it is an insurance company duly organized,
validly existing and in good standing under the laws of the State of Vermont and has full corporate
power, authority and legal right to execute, deliver and perform its duties and comply with its
obligations under this Agreement, (ii) it has legally and validly established and maintains the
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Separate Account as a segregated asset account under Vermont law, and (iii) the Contracts comply in
all material respects with all other applicable federal and state laws and regulations.
(c) Insurer and Contracts Distributor represent and warrant that Contracts Distributor is a
business corporation duly organized, validly existing, and in good standing under the laws of the
State of Vermont and has full corporate power, authority and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
(d) Distributor represents and warrants that it is a business corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware and has full corporate
power, authority and legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(e) Distributor represents and warrants that the Fund is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland and has full power,
authority, and legal right to execute, deliver, and perform its duties and comply with its obligations
under this Agreement.
(f) Adviser represents and warrants that it is a limited partnership, duly organized,
validly existing and in good standing under the laws of the State of Delaware and has full power,
authority, and legal right to execute, deliver, and perform its duties and comply with its obligations
under this Agreement.
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4.3 Securities Laws.
(a) Insurer represents and warrants that (i) interests in the Separate Account pursuant to
the Contracts will be registered under the 1933 Act to the extent required by the 1933 Act and the
Contracts will be duly authorized for issuance and offered in compliance with applicable State law,
(ii) the Separate Account is and will remain registered under the 1940 Act to the extent required by
the 1940 Act, (iii) the Separate Account does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (iv) the Separate Account’s 1933 Act
registration statement relating to the Contracts, together with any amendments thereto, will, at all
times comply in all material respects with the requirements of the 1933 Act and the rules thereunder,
and (v) the Separate Account Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(b) The Adviser and Distributor represent and warrant that (i) Fund shares sold pursuant
to this Agreement will be registered under the 1933 Act to the extent required by the 1933 Act and
duly authorized for issuance and sold in compliance with Maryland law, (ii) the Fund is and will
remain registered under the 1940 Act to the extent required by the 1940 Act, (iii) the Fund will
amend the registration statement for its shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering of its shares, (iv) the Fund does and
will comply in all material respects with the requirements of the 1940 Act and the rules thereunder,
(v) the Fund’s 1933 Act registration statement, together with any amendments thereto, will at all
times comply in all material respects with the requirements of the 1933 Act and rules thereunder, and
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(vi) the Fund Prospectus will at all times comply in all material respects with the requirements of the
1933 Act and the rules thereunder.
(c) The Fund will register and qualify its shares for sale in accordance with the laws of any
state or other jurisdiction only if and to the extent reasonably deemed advisable by the Fund, Insurer
or any other life insurance company utilizing the Fund.
(d) Distributor and Contracts Distributor each represents and warrants that it is registered
as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended, and is a
member in good standing of the Financial Industry Regulatory Authority ( “FINRA”).
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) Distributor or the Fund shall immediately notify Insurer of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other similar order with respect
to the Fund’s registration statement under the 1933 Act or the Fund Prospectus, (ii) any request by
the SEC for any amendment to such registration statement or Fund Prospectus, (iii) the initiation of
any proceedings for that purpose or for any other purpose relating to the registration or offering of the
Fund’s shares, or (iv) any other action or legal proceeding that may prevent the lawful offer or sale of
Fund shares in any state or jurisdiction, including, without limitation, any circumstances in which (x)
the Fund’s shares are not registered and, in all material respects, issued and sold in accordance with
applicable state and federal law or (y) such law precludes the use of such shares as an underlying
investment medium of the Contracts issued or to be issued by Insurer. Distributor and the Fund will
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make every reasonable effort to prevent the issuance of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
(b) Insurer and Contracts Distributor shall immediately notify the Fund of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order or similar order with respect
to the Separate Account’s registration statement under the 1933 Act relating to the Contracts or the
Separate Account Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Separate Account Prospectus, (iii) the initiation of any proceedings for that purpose or
for any other purpose relating to the registration or offering of the Separate Account interests
pursuant to the Contracts, or (iv) any other action or legal proceeding that may prevent the lawful
offer or sale of said interests in any state or jurisdiction, including, without limitation, any
circumstances in which said interests are not registered and, in all material respects, issued and sold
in accordance with applicable state and federal law. Insurer and Contracts Distributor will make
every reasonable effort to prevent the issuance of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
4.5 Insurer to Provide Documents.
Upon request, Insurer will provide the Fund and the Distributor one complete copy of SEC
registration statements, Separate Account Prospectuses, reports, any preliminary and final voting
instruction solicitation material, applications for exemptions, requests for no-action letters, and
amendments to any of the above, that relate to the Separate Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other regulatory authorities.
4.6 Fund to Provide Documents.
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Upon request, the Fund will provide to Insurer one complete copy of SEC registration
statements, Fund Prospectuses, reports, any preliminary and final proxy material, applications for
exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the
Fund or its shares, contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.7 Shareholder Information
(a) Agreement to Provide Information. The Insurer agrees to provide the Distributor
upon written request, the taxpayer identification number (“TIN”), or in the case of non-U.S.
shareholders, if the TIN is unavailable, the international taxpayer identification number or other
government issued identifier, if known, of any or all Shareholder(s) of the account and the amount,
date, name or other identifier of any investment professional(s) associated with the Shareholder(s)
or account (if known), and transaction type (purchase, redemption, transfer, or exchange) of every
purchase, redemption, transfer, or exchange of Shares held through an account maintained by the
Insurer during the period covered by the request.
(1) Period Covered by Request. Requests must set forth a specific period, not to
exceed 120 days from the date of the request, for which transaction information is sought. The
Distributor may request transaction information older than 120 days from the date of the request as
it deems necessary to investigate compliance with policies established by the Fund for purpose of
eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund.
(2) Form and Timing of Response. The Insurer agrees to transmit the requested
information that is on its books and records to the Distributor or their designee promptly, but in
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any event not later than 10 business days, after receipt of a request. If the requested information is
not on the Insurer’s books and records, the Insurer agrees to use reasonable efforts to: (i) provide
or arrange to provide to the Distributor the requested information regarding Shareholders who hold
an account with an indirect intermediary; or (ii) if directed by the Distributor, block further
purchase of Fund Shares from such indirect intermediary.
In such instance, the Insurer agrees to inform the Distributor whether it plans to perform (i) or (ii).
Responses required by this paragraph must be communicated in writing and in a format mutually
agreed upon by the parties. To the extent practicable, the format for any transaction information
provided to the Distributor should be consistent with the NSCC Standardized Data Reporting
Format. For purposes of this provision “indirect intermediary” has the same meaning as in SEC
Rule 22c-2 under the Investment Company Act of 1940.
(3) Limitations on Use of Information. The Distributor agrees not to use the
information received for marketing or any other similar purpose without prior written consent of
the Insurer.
(b) Agreement to Restrict Trading. The Insurer agrees to execute written instructions
from the Distributor to restrict or prohibit further purchase or exchanges of Shares by a
Shareholder that has been identified by the Distributor as having engaged in transactions of the
Fund’s Shares (directly or indirectly through the Insurer’s account) that violate policies established
by the Distributor for the purpose of eliminating or reducing any dilution of the value of the
outstanding Shares issued by the Fund.
(1) Form of Instructions. Instructions must include the TIN, if known, and the specific
restriction(s) to be executed. If the TIN is not known, the instructions must include an equivalent
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identifying number of the Shareholder(s) or account(s) or other agreed upon information to which
the instruction relates.
(2) Timing of Response. The Insurer agrees to execute instructions as soon as
reasonably practicable, but not later than five business days after receipt of the instructions by the
Insurer.
(3) Confirmation by the Insurer. The Insurer must provide written confirmation to the
Distributor that instructions have been executed. The Insurer agrees to provide confirmation as
soon as reasonably practicable, but no later than ten business days after the instructions have been
executed.
(c) Definitions. For purposes of paragraph 4.7:
(1) The term “Shares” means the interests of the Shareholders corresponding to the
redeemable securities of record issued by the Fund under the Investment Company Act of 1940
that are held by the Insurer.
(2) The term “Shareholder” means the holder of interests in a variable annuity or a
variable life insurance contract issued by the Insurer.
(3) The term “written” includes electronic writings and facsimile transmissions.
Section 5. Mixed and Shared Funding
5.1 General.
The Fund has obtained an order exempting it from certain provisions of the 1940 Act and
rules thereunder so that the Fund is available for investment by certain other entities, including,
without limitation, separate accounts funding variable life insurance policies and separate accounts of
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insurance companies unaffiliated with Insurer (“Mixed and Shared Funding Order”). The Parties
recognize that the SEC has imposed terms and conditions for such orders that are substantially
identical to many of the provisions of this Section 5.
5.2 Disinterested Directors.
The Fund agrees that its Board of Directors shall at all times consist of directors a majority of
whom (the “Disinterested Directors”) are not interested persons of Adviser or Distributor within the
meaning of Section 2(a)(19) of the 1940 Act.
5.3 Monitoring for Material Irreconcilable Conflicts.
The Fund agrees that its Board of Directors will monitor for the existence of any material
irreconcilable conflict between the interests of the participants in all separate accounts of life
insurance companies utilizing the Fund, including the Separate Account. Insurer agrees to inform the
Board of Directors of the Fund of the existence of or any potential for any such material
irreconcilable conflict of which it is aware. The concept of a “material irreconcilable conflict” is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that such a conflict may
arise for a variety of reasons, including, without limitation:
| (a) | an action by any state insurance or other regulatory authority; |
| (b) | a change in applicable federal or state insurance, tax or securities laws or |
regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar
action by insurance, tax or securities regulatory authorities;
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| (c) | an administrative or judicial decision in any relevant proceeding; |
| (d) | the manner in which the investments of any Portfolio are being managed; |
| (e) | a difference in voting instructions given by variable annuity contract and variable |
life insurance contract participants or by participants of different life insurance companies utilizing
the Fund; or
(f) a decision by a life insurance company utilizing the Fund to disregard the voting
instructions of participants.
Insurer will assist the Board of Directors in carrying out its responsibilities by providing
the Board of Directors with all information reasonably necessary for the Board of Directors to
consider any issue raised, including information as to a decision by Insurer to disregard voting
instructions of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members of the Board of
Directors or a majority of the Disinterested Directors that a material irreconcilable conflict exists,
Insurer and the other life insurance companies utilizing the Fund will, at their own expense and to the
extent reasonably practicable (as determined by a majority of the Disinterested Directors), take
whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps
may include, but are not limited to:
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| (i) | withdrawing the assets allocable to some or all of the separate accounts from the Fund or any Portfolio and reinvesting such assets in a different investment medium, including another Portfolio of the Fund, or submitting the question whether such segregation should be implemented to a vote of all affected participants and, as appropriate, segregating the assets of any particular group (e.g., annuity contract owners or participants, life insurance contract owners or all contract owners and participants of one or more life insurance companies utilizing the Fund) that votes in favor of such segregation, or offering to the affected contract owners or participants the option of making such a change; and |
| (ii) | establishing a new registered investment company of the type defined as a “Management Company” in Section 4(3) of the 1940 Act or a new separate account that is operated as a Management Company. |
| (b) | If the material irreconcilable conflict arises because of Insurer’s decision to disregard |
Participant voting instructions and that decision represents a minority position or would preclude a
majority vote, Insurer may be required, at the Fund’s election, to withdraw the Separate Account’s
investment in the Fund. No charge or penalty will be imposed as a result of such withdrawal. Any
such withdrawal must take place within six months after the Fund gives notice to Insurer that this
provision is being implemented, and until such withdrawal Distributor and the Fund shall continue to
accept and implement orders by Insurer for the purchase and redemption of shares of the Fund.
(c) If a material irreconcilable conflict arises because a particular state insurance
regulator’s decision applicable to Insurer conflicts with the majority of other state regulators, then
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Insurer will withdraw the Separate Account’s investment in the Fund within six months after the
Fund’s Board of Directors informs Insurer that it has determined that such decision has created a
material irreconcilable conflict, and until such withdrawal Distributor and Fund shall continue to
accept and implement orders by Insurer for the purchase and redemption of shares of the Fund.
(d) Insurer agrees that any remedial action taken by it in resolving any material
irreconcilable conflict will be carried out at its expense and with a view only to the interests of
Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will determine whether
or not any proposed action adequately remedies any material irreconcilable conflict. In no event,
however, will the Fund or Distributor be required to establish a new funding medium for any
Contracts. Insurer will not be required by the terms hereof to establish a new funding medium for
any Contracts if an offer to do so has been declined by vote of a majority of Participants materially
adversely affected by the material irreconcilable conflict.
5.5 Notice to Insurer.
The Fund will promptly make known in writing to Insurer the Board of Directors’
determination of the existence of a material irreconcilable conflict, a description of the facts that give
rise to such conflict and the implications of such conflict.
5.6 Information Requested by Board of Directors.
Insurer and the Fund will at least annually submit to the Board of Directors of the Fund such
reports, materials or data as the Board of Directors may reasonably request so that the Board of
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Directors may fully carry out the obligations imposed upon it by the provisions hereof, and said
reports, materials and data will be submitted at any reasonable time deemed appropriate by the Board
of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all
Board of Directors actions with regard to determining the existence of a conflict, notifying life
insurance companies utilizing the Fund of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the Board of Directors or
other appropriate records, and such minutes or other records will be made available to the SEC upon
request.
5.7 Compliance with SEC Rules.
If, at any time during which the Fund is serving an investment medium for variable life
insurance policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2 are amended or Rule 6e-3 is
adopted to provide exemptive relief with respect to mixed and shared funding, the Parties agree that
they will comply with the terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that are applicable.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a Portfolio:
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(a) at the option of Insurer or Distributor upon at least six months advance written notice
to the other Parties, or such longer period required for the Insurer to obtain any necessary exemptive
relief, or
(b) at the option of the Fund upon (i) at least sixty days advance written notice to the
other parties, and (ii) approval by (x) a majority of the disinterested Directors upon a finding that a
continuation of this Contract is contrary to the best interests of the Fund, or (y) a majority vote of the
shares of the affected Portfolio in the corresponding Division of the Separate Account (pursuant to
the procedures set forth in Section 10 of this Agreement for voting Trust shares in accordance with
Participant instructions).
(c) at the option of the Fund upon institution of formal proceedings against Insurer or
Contracts Distributor by FINRA, the SEC, any state insurance regulator or any other regulatory body
, if such formal proceeding involves Insurer’s obligations under this Agreement or related to the sale
of the Contracts, the operation of the Separate Account, or the purchase of the Fund shares, and only
if, in each case, the Fund reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material adverse consequences
on the Portfolio to be terminated; or
(d) at the option of Insurer upon institution of formal proceedings against the Fund,
Adviser, or Distributor by the FINRA, the SEC, or any state insurance regulator or any other
regulatory body . if such formal proceeding involves the Fund’s, Adviser’s or Distributor’s
obligations under this Agreement or related to the operation or management of the Fund or the
purchase of Fund shares, and only if, in each case, Insurer reasonably determines that such
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proceedings, or the facts on which such proceedings would be based, have a material likelihood of
imposing material adverse consequences on Insurer, Contracts Distributor or the Division
corresponding to the Portfolio to be terminated; or
(e) at the option of any Party in the event that (i) the Portfolio’s shares are not registered
and, in all material respects, issued and sold in accordance with any applicable state and federal law
or (ii) such law precludes the use of such shares as an underlying investment medium of the
Contracts issued or to be issued by Insurer; or
(f) upon termination of the corresponding Division’s investment in the Portfolio pursuant
to Section 5 hereof; or
(g) at the option of Insurer if the Portfolio ceases to qualify as a RIC under Subchapter M
of the Code or under successor or similar provisions; or
(h) at the option of Insurer if the Portfolio fails to comply with Section 817(h) of the
Code or with successor or similar provisions; or
(i) at the option of Insurer if Insurer reasonably believes that any change in a Fund’s
investment adviser or investment practices will materially increase the risks incurred by Insurer.
6.2 Funds to Remain Available.
Except (i) as necessary to implement Participant-initiated transactions, (ii) as required by state
insurance laws or regulations, (iii) as required pursuant to Sections 5, 6 or 4.7 of this Agreement, or
(iv) with respect to any Portfolio as to which this Agreement has terminated, Insurer shall not (x)
22
redeem Fund shares attributable to the Contracts, or (y) prevent Participants from allocating
payments to or transferring amounts from a Portfolio that was otherwise available under the
Contracts, until, in either case, 90 calendar days after Insurer shall have notified the Fund or
Distributor of its intention to do so.
6.3 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of this Agreement.
6.4 Continuance of Agreement for Certain Purposes.
Notwithstanding any termination of this Agreement, the Funds shall, at the option of the
Insurer, continue to make available additional shares of any of the Portfolios and redeem shares of
any of the Portfolios pursuant to the terms and conditions of this Agreement for all Contracts in
effect on the effective date of termination of this Agreement.
Section 7. Parties to Cooperate Respecting Termination
The other Parties hereto agree to cooperate with and give reasonable assistance to Insurer in
taking all necessary and appropriate steps for the purpose of ensuring that the Separate Account owns
no shares of a Portfolio after the Final Termination Date with respect thereto.
23
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the written consent of
each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 2 hereof will be given by
means mutually acceptable to the Parties concerned. Each other notice or communication required
or permitted by this Agreement will be given to the following persons at the following addresses
and facsimile numbers, or such other persons, addresses or facsimile numbers as the Party
receiving such notices or communications may subsequently direct in writing:
National Life Insurance Company
Attn: D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
One National Life Drive
Montpelier, Vermont, 05604
Equity Services, Inc.
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
AllianceBernstein Investments, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
AllianceBernstein L.P.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
24
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3 hereof, Insurer will distribute
all proxy material furnished by the Fund to Participants and will vote Fund shares in accordance with
instructions received from Participants. Insurer will vote Fund shares that are (a) not attributable to
Participants or (b) attributable to Participants, but for which no instructions have been received, in
the same proportion as Fund shares for which said instructions have been received from Participants.
Insurer agrees that it will disregard Participant voting instructions only to the extent it would be
permitted to do so pursuant to Rule 6e-3 (T)(b)(15)(iii) under the 1940 Act if the Contracts were
variable life insurance policies subject to that rule. Other participating life insurance companies
utilizing the Fund will be responsible for calculating voting privileges in a manner consistent with
that of Insurer, as prescribed by this Section 10.
Section 11. Foreign Tax Credits
The Adviser agrees to consult in advance with Insurer concerning any decision to elect or not
to elect pursuant to Section 853 of the Code to pass through the benefit of any foreign tax credits to
the Fund’s shareholders.
25
Section 12. Indemnification
12.1 Of Fund, Distributor and Adviser by Insurer.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, Insurer and
Contracts Distributor agree to indemnify and hold harmless the Fund, Distributor and Adviser, each
of their directors and officers, and each person, if any, who controls the Fund, Distributor or Adviser
within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” for
purposes of this Section 12. 1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of Insurer) or actions in respect thereof
(including, to the extent reasonable, 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 actions are related to the sale, acquisition, or holding 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 Separate Account’s 1933 Act registration statement, the Separate Account Prospectus, the Contracts or, to the extent prepared by Insurer or Contracts Distributor, sales literature or advertising for 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 agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or |
26
| omission was made in reliance upon and in conformity with information furnished to Insurer or Contracts Distributor by or on behalf of the Fund, Distributor or Adviser, including without limitation, information intended to be used in the Separate Account’s 1933 Act registration statement, the Separate Account Prospectus, the Contracts, or sales literature or advertising (or any amendment or supplement to any of the foregoing); or | |
| (ii) | arise out of or as a result of any other statements or representations (other than statements or representations contained in the Fund’s 1933 Act registration statement, Fund Prospectus, sales literature or advertising of the Fund, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of Insurer or Contracts Distributor) or the negligent, illegal or fraudulent conduct of Insurer or Contracts Distributor or persons under their control (including, without limitation, their employees and “Associated Persons,” as that term is defined in paragraph (m) of Article I of FINRA’s By-Laws), in connection with the sale or distribution of the Contracts or Fund shares; or |
| (iii) | arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Fund’s 1933 Act registration statement, Fund Prospectus, sales literature or advertising of the Fund, or any amendment or supplement to any of the foregoing, 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 |
27
| reliance upon and in conformity with information furnished to the Fund, Adviser or Distributor by or on behalf of Insurer or Contracts Distributor, including without limitation information intended for use in the Fund’s 1933 Act registration statement, Fund Prospectus, sales literature or advertising of the Fund, or any amendment or supplement to any of the foregoing; or | |
| (iv) | arise as a result of any failure by Insurer or Contracts Distributor to perform the obligations, provide the services and furnish the materials required of them under the terms of this Agreement. |
(b) Insurer and Contracts Distributor shall not be liable under this Section 12.1 with
respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would
otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance by that Indemnified Party of its duties or by reason of that Indemnified Party’s reckless
disregard of obligations or duties under this Agreement or to Distributor or to the Fund.
(c) Insurer and Contracts Distributor shall not be liable under this Section 12.1 with
respect to any action against an Indemnified Party unless the Fund, Distributor or Adviser shall have
notified Insurer in writing within a reasonable time after the summons or other first legal process
giving information of the nature of the action 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 Insurer of any such action shall not relieve Insurer from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than on account of this
Section 12. 1, unless the failure to notify results in the inability of Insurer and/or Contracts
28
Distributor to participate in the defense of such action, as described below. In case any such action is
brought against an Indemnified Party, Insurer and Contracts Distributor shall be entitled to
participate, at its own expense, in the defense of such action. Insurer and Contracts Distributor also
shall be entitled to assume the defense thereof, with counsel approved by the Indemnified Party
named in the action, which approval shall not be unreasonably withheld. After notice from Insurer to
such Indemnified Party of Insurer’s or Contract Distributor’s election to assume the defense thereof,
the Indemnified Party will cooperate fully with Insurer of Contract Distributor and shall bear the fees
and expenses of any additional counsel retained by it, and neither Insurer or Contracts distributor will
be liable to such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with the defense
thereof, other than reasonable costs of investigation.
12.2 Indemnification of Insurer and Contracts Distributor by Adviser and Distributor.
(a) Except to the extent provided in Sections 12.2(d) and 12.2(e), below, Adviser and
Distributor agree to indemnify and hold harmless Insurer and Contracts Distributor, each of their
directors and officers, and each person, if any, who controls Insurer or Contracts Distributor within
the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” for purposes of
this Section 12.2) against any and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of Adviser and/or Distributor) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or actions are related to the sale, acquisition, or holding of the Fund’s shares and:
29
| (i) | arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Fund’s 1933 Act registration statement, Fund Prospectus, sales literature or advertising of the Fund or, to the extent not prepared by Insurer or Contracts Distributor, sales literature or advertising for 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 agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to Distributor, Adviser or the Fund by or on behalf of Insurer or Contracts Distributor, including without limitation information intended to be used in the Fund’s 1933 Act registration statement, Fund Prospectus, or in sales literature or advertising (or any amendment or supplement to any of the foregoing); or |
| (ii) | arise out of or as a result of any other statements or representations (other than statements or representations contained in the Separate Account’s 1933 Act registration statement, Separate Account Prospectus, sales literature or advertising for the Contracts, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of Distributor, Adviser, or the Fund) or the negligent, illegal or fraudulent conduct of the Fund, Distributor, Adviser or persons under their |
30
| control (including, without limitation, their employees and Associated Persons), in connection with the sale or distribution of the Contracts or Fund shares; or | |
| (iii) | arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Separate Account’s 1933 Act registration statement, Separate Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing, 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 and in conformity with information furnished to Insurer or Contracts Distributor by or on behalf of the Fund, Distributor or Adviser, including without limitation information intended for use in the Separate Account’s 1933 Act registration statement, Separate Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing; or |
| (iv) | arise as a result of any failure by the Fund, Adviser or Distributor to perform the obligations, provide the services and furnish the materials required of them under the terms of this Agreement; |
| (b) | Except to the extent provided in Sections 12.2(d) and 12.2(e) hereof, Adviser agrees |
to indemnify and hold harmless the Indemnified Parties from and against any and all losses, claims,
damages, liabilities (including amounts paid in settlement thereof with, except as set forth in Section
12.2(c) below, the written consent of Adviser) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses) to which the Indemnified Parties may become subject directly
31
or indirectly under any statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or actions directly or indirectly result from or arise out of the failure of any Portfolio to
operate as a regulated investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder and (ii) Section 817(h) of the Code and regulations thereunder (except to the
extent that such failure is caused by Insurer), including, without limitation, any income taxes and
related penalties, rescission charges, liability under state law to Contract owners or Participants
asserting liability against Insurer or Contracts Distributor pursuant to the Contracts, the costs of any
ruling and closing agreement or other settlement with the Internal Revenue Service, and the cost of
any substitution by Insurer of shares of another investment company or portfolio for those of any
adversely affected Portfolio as a funding medium for the Separate Account that Insurer deems
necessary or appropriate as a result of the noncompliance.
(c) The written consent of Adviser referred to in Section 12.2(b) above shall not be
required with respect to amounts paid in connection with any ruling and closing agreement or other
settlement with the Internal Revenue Service.
(d) Adviser shall not be liable under this Section 12.2 with respect to any losses, claims;
damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its
duties or by reason of such Indemnified Party’s reckless disregard of its obligations and duties under
this Agreement or to Insurer, Contracts Distributor or the Separate Account.
(e) Adviser shall not be liable under this Section 12.2 with respect to any action against
an Indemnified Party unless Insurer or Contracts Distributor shall have notified Adviser in writing
32
within a reasonable time after the summons or other first legal process giving information of the
nature of the action 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 of any such action shall not relieve Adviser from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account of this Section
12.2 , unless the failure to notify results in the inability of Adviser and/or Distributor to participate in
the defense of such action, as described below. In case any such action is brought against an
Indemnified Party, Adviser and Distributor will be entitled to participate, at its own expense, in the
defense of such action. Adviser and Distributor also shall be entitled to assume the defense thereof
(which shall include, without limitation, the conduct of any ruling request and closing agreement or
other settlement proceeding with the Internal Revenue Service), with counsel approved by the
Indemnified Party named in the action, which approval shall not be unreasonably withheld. After
notice from Adviser or Distributor to such Indemnified Party of Adviser’s or Distributor’s election to
assume the defense thereof, the Indemnified Party will cooperate fully with Adviser or Distributor
and shall bear the fees and expenses of any additional counsel retained by it, and neither Adviser or
Distributor will not be liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in connection with the
defense thereof, other than reasonable costs of investigation.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party referred to in
Section 12.1(c) or 12.2(e) above of participation in or control of any action by the indemnifying Party
33
will in no event be deemed to be an admission by the indemnifying Party of liability, culpability or
responsibility, and the indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted under and in
accordance with New York law, without regard for that state’s principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more counterparts, each of
which taken together will constitute one and the same instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement will not be affected thereby.
Section 16. Rights Cumulative
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, that the Parties are
entitled to under federal and state laws.
34
Section 17. Restrictions on Sales of Fund Shares
Insurer agrees that the Fund will be permitted (subject to the other terms of this
Agreement) to make its shares available to separate accounts of other life insurance companies.
Section 18. Headings
The Table of Contents and headings used in this Agreement are for purposes of reference
only and shall not limit or define the meaning of the provisions of this Agreement.
35
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their
names and on their behalf by and through their duly authorized officers signing below.
NATIONAL LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
____________________________________
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
EQUITY SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
____________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President
ALLIANCEBERNSTEIN LP
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
____________________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Deputy Corporate Secretary
ALLIANCEBERNSTEIN INVESTMENTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
____________________________________
Name:▇▇▇▇▇▇ ▇▇▇▇▇
Title: Assistant Secretary
36
SCHEDULE A
AllianceBernstein VPS International Growth Portfolio
AllianceBernstein VPS International Value Portfolio
AllianceBernstein VPS Small/Mid Cap Value Portfolio
AllianceBernstein VPS Value Portfolio
37