FUND PARTICIPATION AGREEMENT
THIS AGREEMENT, made as of the 1st day of March, 2008, by and between the
Third Avenue Variable Series Trust ("TRUST") a Delaware business trust, X.X.
Xxxxxxx LLC ("DISTRIBUTOR"), a Delaware limited liability company, and PHL
VARIABLE INSURANCE COMPANY ("LIFE COMPANY"), a life insurance company organized
under the laws of the State of Connecticut.
WHEREAS, TRUST is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended ("40 Act") as an
open-end, diversified management investment company; and
WHEREAS, TRUST is organized as a series fund comprised of several portfolios
("Portfolios"), the currently available of which are listed on Appendix A
hereto; and
WHEREAS, TRUST was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable
Contracts") offered by life insurance companies through separate accounts of
such life insurance companies ("Participating Insurance Companies"); and
WHEREAS, TRUST has received an order from the SEC, dated February 8, 2000
(File No. 812-11768) granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the '40 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) there under,
to the extent necessary to permit shares of the Portfolios of the TRUST to be
sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies and
certain qualified pension and retirement plans (the "Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more separate
accounts ("Separate Accounts") to offer Variable Contracts and is desirous of
having TRUST as one of the underlying funding vehicles for such Variable
Contracts; and
WHEREAS, DISTRIBUTOR is registered with the SEC as a broker-dealer under the
Securities Exchange Act of 1934, as amended; and
WHEREAS, Third Avenue Management LLC is the investment advisor ("ADVISER")
of the Portfolios of the Trust; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of TRUST to fund the
aforementioned Variable Contracts and TRUST is authorized to sell such shares
to LIFE COMPANY at net asset value ("NAV");
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
TRUST, and DISTRIBUTOR agree as follows:
Article I. SALE OF TRUST SHARES
1.1 TRUST agrees to make available to the Separate Accounts of LIFE COMPANY
shares of the selected Portfolios as listed in Appendix B for investment of
proceeds from Variable Contracts allocated to the designated Separate Accounts,
such shares to be offered as provided in TRUST's Prospectus.
1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily
basis at the NAV next computed after receipt by TRUST or its designee of the
order for the shares of TRUST in accordance with the TRUST's then-current
prospectus. For purposes of this Section 1.2, LIFE COMPANY shall be the
designee of TRUST for receipt of such orders from LIFE COMPANY and receipt by
such designee shall constitute receipt by TRUST; provided that TRUST receives
notice of such order by 9:30 a.m. Eastern standard time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading.
1.3 TRUST agrees to redeem for cash, on LIFE COMPANY's request, any full or
fractional shares of TRUST held by LIFE COMPANY, executing such requests on a
daily basis at the NAV next computed after receipt by TRUST or its designee of
the request for redemption in accordance with the TRUST's then-current
prospectus. For purposes of this Section 1.3, LIFE COMPANY shall be the
designee of TRUST for receipt of requests for redemption from LIFE COMPANY and
receipt by such designee shall constitute receipt by TRUST; provided that TRUST
receives notice of such request for redemption by 8:30 a.m. Eastern standard
time on the next following Business Day.
1.4 TRUST shall furnish, on or before the ex-dividend date, notice to LIFE
COMPANY of any income dividends or capital gain distributions payable on the
shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. TRUST shall notify
LIFE COMPANY of the number of shares so issued as payment of such dividends and
distributions. LIFE COMPANY reserves the right to revoke this election by
written notice to the Trust.
1.5 TRUST shall make the NAV per share for the selected Portfolio(s)
available to LIFE COMPANY on a daily basis as soon as reasonably practicable
after the NAV per share is calculated but shall use its reasonable commercial
efforts to make such NAV available by 6:30 p.m. Eastern standard time. If TRUST
provides LIFE COMPANY with materially incorrect share NAV information through
no fault of LIFE COMPANY, LIFE COMPANY on behalf of the Separate Accounts,
shall be entitled to an adjustment to the number of shares purchased or
redeemed to reflect the correct share NAV. Any material error (determined in
accordance with SEC guidelines)
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in the calculation of NAV per share, dividend or capital gain information shall
be reported promptly upon discovery to LIFE COMPANY. In the event that such
material error is the result of the TRUST's (or its designated agents) gross
negligence, the TRUST shall also be responsible for any of LIFE COMPANY's
reasonable administrative or other costs or losses incurred in correcting
Variable Contract Owner accounts.
1.6 At the end of each Business Day, LIFE COMPANY shall use the information
described in Section 1.5 to calculate Separate Account unit values for the day.
Using these unit values, LIFE COMPANY shall process each such business day's
Separate Account transactions based on requests and premiums received by it by
the time as of which the TRUST calculates its share price as disclosed in the
prospectus for the TRUST to determine the net dollar amount of TRUST shares
which shall be purchased or redeemed at that day's closing NAV per share. The
net share purchase or redemption orders so determined shall be transmitted to
TRUST by LIFE COMPANY by 8:30 a.m. Eastern standard time on the Business Day
next following LIFE COMPANY's receipt of such requests and premiums in
accordance with the terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the net purchase of TRUST shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to TRUST or its
designated custodial account on the day the order is actually transmitted by
LIFE COMPANY by 3:00 p.m. Eastern standard time. If LIFE COMPANY's order
requests a net redemption resulting in a payment of redemption proceeds to LIFE
COMPANY, TRUST shall wire the redemption proceeds to LIFE COMPANY on the day
the order is actually received by TRUST by 3:00 p.m. Eastern standard time
unless doing so would require TRUST to dispose of portfolio securities or
otherwise incur additional costs, but in such event, proceeds shall be wired to
LIFE COMPANY within seven business days and TRUST shall notify the person
designated in writing by LIFE COMPANY as the recipient for such notice of such
delay by 3:00 p.m. Eastern standard time the same business day that LIFE
COMPANY transmits the redemption order to TRUST. If LIFE COMPANY's order
requests the application of redemption proceeds from the redemption of shares
to the purchase of shares of another fund administered or distributed by
DISTRIBUTOR, TRUST shall so apply such proceeds on the same Business Day that
LIFE COMPANY transmits such order to TRUST.
1.8 Notwithstanding Section 1.7, TRUST reserves the right to suspend the
right of redemption or postpone the date of payment or satisfaction upon
redemption consistent with Section 22(e) of the 40 Act and any rules there
under.
1.9 TRUST agrees that all shares of the Portfolios of TRUST will be sold
only to Participating Insurance Companies which have agreed to participate in
TRUST to fund their Separate Accounts, the TRUST's investment advisor, the
insurance company depositor of a variable life insurance account and/or to
certain qualified pension and other retirement plans, all in accordance with
the requirements of Section 817(h) of the Internal Revenue Code of 1986, as
amended ("Code") and Treasury Regulation 1.817-5. Shares of the Portfolios of
TRUST will not be sold directly to the general public.
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1.10 TRUST may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of the 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 of Trustees of TRUST, acting in good faith and
in light of its fiduciary duties under federal and any applicable state laws,
deemed necessary and in the best interests of the shareholders of such
Portfolios.
1.11 The issuance and transfer of TRUST shares shall be by book entry only.
Share certificates will not be issued to LIFE COMPANY or the Separate Accounts.
1.12 The TRUST represents and warrants that each fund participating in the
Trust complies with the diversification requirements set forth in
Section 817(h) of the Internal Revenue Code and Section 1.817-5(b) of the
regulations under the Internal Revenue Code The TRUST further represents that
it will make every effort to maintain each Fund's compliance with the
diversification requirements. The TRUST will notify the Company immediately if
the TRUST has reason to believe that a Fund has ceased to comply with the
diversification requirements or may cease to comply in the future. In the event
of a breach of this Section, the TRUST will take all reasonable steps to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Section 1.817-5 of the regulations of the Internal Revenue
Code.
1.13 LIFE COMPANY shall be fully responsible as to TRUST and DISTRIBUTOR for
the underwriting, issuance, service, administration, sale and marketing of the
Variable Contracts. LIFE COMPANY shall provide Variable Contracts, the Variable
Contracts' and TRUST's Prospectuses, Variable Contracts' and TRUST's Statements
of Additional Information, and all amendments or supplements to any of the
foregoing to Contract Owners and prospective Variable Contract owners, all in
accordance with federal and state laws. LIFE COMPANY shall take reasonable
steps to ensure that (1) all persons offering or selling the Variable Contracts
are duly licensed and registered under applicable insurance and securities
laws; (2) all individuals offering or selling the Variable Contracts are duly
appointed agents of LIFE COMPANY and are registered representatives of a NASD
member broker-dealer; (3) the prospectus describes distribution and
compensation arrangements for the sale of the Variable Contracts adequately;
and (4) that all complaints from Variable Contract owners are promptly
addressed and that such complaints are settled consistent with high ethical
standards and principles of ethical conduct.
1.14 LIFE COMPANY has reasonable policies and procedures to comply with all
federal and state applicable laws and regulations addressing anti-money
laundering, including those adopted by the Federal Financial Crimes Enforcement
Network (FinCEN) and if required by such laws or regulations, to share with
TRUST information about individuals, entities, organizations and countries
suspected of possible terrorist or money "laundering" activities in accordance
with Section 314(b) of the USA Patriot Act. TRUST and DISTRIBUTOR shall comply
with all federal and state applicable laws and regulations addressing
anti-money laundering and if required by such laws or regulations, to share
with LIFE COMPANY information about individuals, entities,
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organizations and countries suspected of possible terrorist or money
"laundering" activities in accordance with Section 314(b) of the USA Patriot
Act.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and warrants that it is an insurance company
duly organized and in good standing under the laws of Connecticut and that it
has legally and validly established each Separate Account as a segregated asset
account under such laws.
2.2 LIFE COMPANY represents and warrants that it has registered or, prior to
any issuance or sale of the Variable Contracts, will register each Separate
Account as a unit investment trust ("UIT") in accordance with the provisions of
the '40 Act and cause each Separate Account to remain so registered to serve as
a segregated asset account for the Variable Contracts, unless an exemption from
registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts will be
registered under the Securities Act of 1933 (the "33 Act") unless an exemption
from registration is available prior to any issuance or sale of the Variable
Contracts and that the Variable Contracts will be issued and sold in compliance
in all material respects with all applicable federal and state laws and further
that the sale of the Variable Contracts shall comply in all material respects
with state insurance law suitability requirements. LIFE COMPANY shall be
responsible for filing as required Variable Contract forms, applications,
marketing materials, and other documents related to the Variable Contracts
and/or Separate Accounts with state insurance commissions.
2.4 LIFE COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code, that it
will maintain such treatment and that it will notify TRUST immediately upon
having a reasonable basis for believing that the Variable Contracts have ceased
to be so treated or that they might not be so treated in the future.
2.5 LIFE COMPANY represents and warrants that it shall deliver such
prospectuses, statements of additional information, proxy statements and
periodic reports of the Trust as required to be delivered under applicable
federal or state law and interpretations of federal and state securities
regulators there under in connection with the offer, sale or acquisition of the
Variable Contracts.
2.6 TRUST represents and warrants that the Portfolio shares offered and sold
pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal and state laws, and TRUST shall be
registered under the '40 Act prior to and at the time of any issuance or sale
of such shares. TRUST shall amend its registration statement under the '33 Act
and the '40 Act from time to time as required in order to effect the continuous
offering of its shares. TRUST shall register and qualify its shares for sale in
accordance with the laws of the various states to the extent necessary to
perform its obligations under this Agreement.
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2.7 TRUST represents and warrants that each Portfolio currently complies,
and will continue to comply with the diversification requirements set forth in
Section 817(h) of the Code, and the rules and regulations there under,
including without limitation Treasury Regulation 1.817-5 (or any successor or
similar provisions), and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately
diversify the Portfolio to achieve compliance within the grace period afforded
by Regulation 1.817-5.
2.8 The TRUST represents and warrants that each Portfolio invested in by the
Separate Account is currently qualified as a "regulated investment company"
under Subchapter M of the Code, that it will maintain such qualification under
Subchapter M (or any successor or similar provisions) and will notify LIFE
COMPANY immediately upon having a reasonable basis for believing any Portfolio
has ceased to so qualify or might not so qualify in the future.
2.9 The TRUST represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, it will have a
board of trustees, a majority of whom are not interested persons of the TRUST,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.10 The TRUST represents that the TRUST's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Delaware and the TRUST represents that its respective operations are
and shall at all times remain in material compliance with the laws of the State
of Delaware to the extent required to perform this Agreement.
2.11 The TRUST represents that it is lawfully organized and validly existing
under the laws of the State of Delaware and that it does and will comply in all
material respects with the 1940 Act.
2.12 The TRUST represents and warrants that its directors, officers,
employees dealing with the money and/or securities of the Trust are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the TRUST in an amount not less than the minimum
coverage as required by Rule 17g-(1) under the 1940 Act or related provisions
as may be promulgated from time to time. The aforesaid blanket fidelity bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.13 DISTRIBUTOR represents and warrants that it is a member in good
standing of the Financial Industry Regulatory Authority ("FINRA") and is
registered as a broker-dealer with the SEC. DISTRIBUTOR further represents that
it will sell and distribute the Trust's share in accordance with the applicable
laws of the State of Delaware and any applicable state and federal securities
law.
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2.14 Each party represents and warrants that the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein
have been duly authorized by all necessary corporate, partnership 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 its terms.
2.15 LIFE COMPANY represents and warrants that all orders for the purchase
and sale of TRUST shares submitted to the TRUST (or counted by LIFE COMPANY in
submitting a net order under Section 1.6 of the Agreement) for execution at a
price based on the net asset value per share ("NAV") of the Trust's Portfolios
next computed after receipt by LIFE COMPANY on a particular Business day, will
have been received in good order by LIFE COMPANY prior to the time as of which
the TRUST calculates its NAV on that Business Day, as disclosed in the
prospectus for the pertinent Portfolio (the "trading deadline"), in accordance
with Rule 22c-1 under the 1940 Act (subject only to exceptions as permitted
under Rule 22c-1(c) under the 1940 Act, respecting initial purchase payments on
variable annuity contracts, and to the established administrative procedures of
LIFE COMPANY as described under Rule 6e-3(T), paragraph (b)(12)(iii) under the
1940 Act respecting premium processing for variable life insurance contracts).
The TRUST may refuse to sell Shares of any Series to any person, or
suspend or terminate the offering of the Shares of any Series if such action
is required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Board of Trustees of the TRUST (the "Board"),
deemed necessary, desirable or appropriate. Without limiting the foregoing,
it has been determined that there is a significant risk that the TRUST and
its shareholders may be adversely affected by short-term or excessive
trading activity, particularly activity used to try and take advantage of
short-term swings in the market. Accordingly, the TRUST reserves the right
to reject any purchase order, including those purchase orders with respect
to shareholders or accounts whose trading has been or may be disruptive to
the TRUST or that may otherwise adversely affect the Trust. The LIFE COMPANY
agrees to use its reasonable commercial efforts to render assistance to, and
to cooperate with, the TRUST to achieve compliance with the TRUST's policies
and restrictions on short-term or excessive trading activity as they may be
amended from time to time, or to the extent required by applicable
regulatory requirements.
Article III. PROSPECTUS AND PROXY STATEMENTS
3.1 TRUST shall prepare and be responsible for filing with the SEC and any
state regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of TRUST.
TRUST shall bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this Section 3.1.
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3.2 TRUST will bear the printing costs (or duplicating costs with respect to
the statement of additional information) and mailing costs associated with the
delivery of TRUST (or individual Portfolio) documents, and any supplements
thereto, to existing Variable Contract owners of LIFE COMPANY (regardless of
whether such documents are printed together with, or separate from, the
documents for other trusts in the Variable Contracts) or rather may provide the
LIFE COMPANY with a sufficient number of printed documents pertaining to the
following materials:
(i) prospectuses and statements of additional information;
(ii) annual and semi-annual reports; and
(iii) proxy materials (including, but not limited to, the proxy cards, notice
and statement, as well as the costs associated with tabulating votes).
LIFE COMPANY will submit any bills for printing, duplicating and/or mailing
costs, relating to the TRUST documents described above, to TRUST for
reimbursement by TRUST. LIFE COMPANY shall monitor such costs and shall use its
reasonable commercial efforts to control these costs. Upon submission of any
bills, LIFE COMPANY will provide TRUST with a current tabulation of the number
of existing Variable Contract owners of LIFE COMPANY whose Variable Contract
values are invested in TRUST. This tabulation will be sent to TRUST in the form
of a letter signed by a duly authorized officer of LIFE COMPANY attesting to
the accuracy of the information contained in the letter. If requested by LIFE
COMPANY, the TRUST shall provide such documentation (including a final copy of
the TRUST's prospectus in electronic PDF format) and other assistance as is
reasonably necessary in order for LIFE COMPANY to print together in one
document the current prospectus for the Variable Contracts issued by LIFE
COMPANY and the current prospectus for the TRUST.
3.3 TRUST will provide, the LIFE COMPANY, at the Trust's expense, with the
following TRUST (or individual Portfolio) documents, and any supplements
thereto, with respect to prospective Variable Contract owners of LIFE COMPANY:
(i) electronic PDF format of the current prospectus for printing by the LIFE
COMPANY;
(ii) a copy of the statement of additional information suitable for
duplication;
(iii) electronic PDF format of proxy material suitable for printing; and
(iv) electronic PDF format of the annual and semi-annual reports for printing
by the LIFE COMPANY.
3.4 TRUST will provide LIFE COMPANY with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy
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statements, exemptive applications and all amendments or supplements to any of
the above that relate to the Portfolios promptly after the filing of each such
document with the SEC or other regulatory authority. LIFE COMPANY will provide
TRUST with at least one complete copy of all prospectuses, statements of
additional information, annual and semi-annual reports, proxy statements,
exemptive applications and all amendments or supplements to any of the above
that relate to a Separate Account promptly after the filing of each such
document with the SEC or other regulatory authority.
3.5 LIFE COMPANY will bear all costs associated with providing copies of
prospectuses, statements of additional information, annual and semi-annual
reports and other TRUST-related materials to prospective Variable Contract
owners.
Article IV. SALES MATERIALS; PRIVACY
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST and
DISTRIBUTOR, each piece of sales literature or other promotional material in
which TRUST or DISTRIBUTOR is named, at least ten (10) Business Days prior to
its intended use. No such material will be used if TRUST or DISTRIBUTOR objects
to its use in writing within five (5) Business Days after receipt of such
material. For the purposes of this Agreement, "in writing" means facsimile
transmissions and electronic mail.
4.2 TRUST and DISTRIBUTOR will furnish, or will cause to be furnished, to
LIFE COMPANY, each piece of sales literature or other promotional material in
which LIFE COMPANY or its Separate Accounts are named, at least ten
(10) Business Days prior to its intended use. No such material will be used if
LIFE COMPANY objects to its use in writing within five (5) Business Days after
receipt of such material.
4.3 TRUST and its affiliates and agents shall not give any information or
make any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY,
the Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other
than the information or representations contained in a registration statement
or prospectus for such Variable Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in reports of
the Separate Accounts or reports prepared for distribution to owners of such
Variable Contracts, or in sales literature or other promotional material
approved by LIFE COMPANY or its designee, except with the written permission of
LIFE COMPANY.
4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of TRUST or concerning TRUST
other than the information or representations contained in a registration
statement or prospectus for TRUST, as such registration statement and
prospectus may be amended or supplemented from time to time, or in sales
literature or other promotional material approved by TRUST or its designee,
except with the written permission of TRUST.
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4.5 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
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 (such as any written communication distributed
or made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts, or
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 FINRA rules, the '40 Act or the '33 Act.
4.6 Subject to law and regulatory authority, each party hereto shall treat
as confidential all information pertaining to the owners of the Variable
Contracts and all information reasonably identified as confidential in writing
by any other party hereto and, except as permitted by this Agreement, shall not
disclose, disseminate or utilize such names and addresses and other
confidential information until such time as it may come into the public domain
without the express written consent of the affected party. Each party hereto
shall be solely responsible for the compliance of their officers, directors,
employees, agents, independent contractors, and any affiliated and
non-affiliated third parties with all applicable privacy-related laws and
regulations including but not limited to the Xxxxx-Xxxxx-Xxxxxx Act and
Regulation S-P. The provisions of this Section 4.6 shall survive the
termination of this Agreement.
Article V. POTENTIAL CONFLICTS
5.1 The Board of Trustees of TRUST (the "Board") will monitor TRUST for the
existence of any material irreconcilable conflict between the interests of the
Variable Contract owners of Participating Insurance Company Separate Accounts
investing in the TRUST. A material irreconcilable conflict may arise for a
variety of reasons, including: (a) state insurance regulatory authority action;
(b) a change in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private letter ruling, or any similar
action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of the TRUST are being managed; (e) a difference in
voting instructions given by variable annuity and variable life insurance
contract owners or by contract owners of different Participating Insurance
Companies; or (f) a decision by a Participating Insurance Company to disregard
voting instructions of Variable Contract owners.
5.2 LIFE COMPANY will report any potential or existing conflicts to the
Board. LIFE COMPANY will be responsible for assisting the Board in carrying out
its responsibilities under the Conditions set forth in the notice issued by the
SEC for the TRUST by providing the Board with all information reasonably
necessary for it to consider any issues raised. This responsibility includes,
but is not limited to, an obligation by LIFE COMPANY to inform the Board
whenever Variable
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Contract owner voting instructions are disregarded by LIFE COMPANY. These
responsibilities will be carried out with a view only to the interests of the
Variable Contract owners.
5.3 If a majority of the Board or a majority of its disinterested trustees
determines that a material irreconcilable conflict exists, affecting the LIFE
COMPANY, LIFE COMPANY, at its expense and to the extent reasonably practicable
(as determined by a majority of disinterested trustees), will take any steps
necessary to remedy or eliminate the irreconcilable material conflict,
including: (a) withdrawing the assets allocable to some or all of the Separate
Accounts from the TRUST or any Portfolio thereof and reinvesting those assets
in a different investment medium, which may include another Portfolio of TRUST
or another investment company or submitting the question as to whether such
segregation should be implemented to a vote of all affected Variable Contract
owners and, as appropriate, segregating the assets of any appropriate group
(i.e., Variable Contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
Variable Contract owners the option of making such a change; and
(b) establishing a new registered management investment company or managed
separate account. If a material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Variable Contract owner voting instructions,
and that decision represents a minority position or would preclude a majority
vote, LIFE COMPANY may be required, at the election of the TRUST, to withdraw
its Separate Account's investment in the TRUST, and no charge or penalty will
be imposed as a result of such withdrawal. The responsibility to take such
remedial action shall be carried out with a view only to the interests of the
Variable Contract owners.
For the purposes of this Section 5.3, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any material irreconcilable conflict, but in no event will
the TRUST (or any other investment adviser of the TRUST) be required to
establish a new funding medium for any Variable Contract. Further, LIFE COMPANY
shall not be required by this Section 5.3 to establish a new funding medium for
any Variable Contract if any offer to do so has been declined by a vote of a
majority of Variable Contract owners materially affected by the irreconcilable
material conflict.
5.4 The Board's determination of the existence of a material irreconcilable
conflict and its implications shall be made known promptly and in writing to
LIFE COMPANY.
5.5 No less than annually, the TRUST will request from the LIFE COMPANY such
reports, materials or data as the Board may reasonably request so that the
Board may fully carry out the obligations imposed upon it by these Conditions.
Such reports, materials, and data shall be requested more frequently if deemed
appropriate by the Board.
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Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all Variable
Contract owners so long as the SEC continues to interpret the '40 Act as
requiring pass-through voting privileges for Variable Contract owners.
Accordingly, LIFE COMPANY, where applicable, will vote shares of TRUST held by
its Separate Accounts in a manner consistent with voting instructions timely
received from its Variable Contract owners. LIFE COMPANY shall vote shares for
which it has not received timely voting instructions, as well as shares it
owns, in the same proportion as it votes those shares for which it has received
voting instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the '40 Act
or the rules there under with respect to mixed and shared funding on terms and
conditions materially different from any exemptions granted in the Order, then
TRUST and/or LIFE COMPANY, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-2 and Rule 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such Rules are applicable.
Article VII. INDEMNIFICATION
7.1 Indemnification by LIFE COMPANY. LIFE COMPANY agrees to indemnify and
hold harmless TRUST and DISTRIBUTOR and each of their trustees, directors,
officers, employees and agents (including the ADVISER) and each person, if any,
who controls or is affiliated with TRUST or DISTRIBUTOR within the meaning of
Section 15 of the '33 Act (collectively, the "Indemnified Parties" for purposes
of this Article VII) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of LIFE COMPANY,
which consent shall not be unreasonably withheld) or litigation (including
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 expenses (or actions in
respect thereof) or settlements:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement,
prospectus, or sales literature for the Variable Contracts or contained
in the Variable 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 LIFE COMPANY by or on behalf of TRUST or
DISTRIBUTOR for use in the registration statement, prospectus or sales
literature for the Variable Contracts or in the Variable Contracts (or
any amendment or supplement) or otherwise for use in connection with the
sale of the Variable Contracts or TRUST shares; or
12
(b) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus or sales literature of TRUST not supplied by LIFE COMPANY, or
persons under its control) or wrongful conduct of LIFE COMPANY or any of
its directors, officers, employees or agents, with respect to the sale
or distribution of the Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or
sales literature of TRUST or any amendment thereof or supplement thereto
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to TRUST for inclusion therein by or on behalf of
LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to substantially
provide the services and furnish the materials under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by LIFE COMPANY in this Agreement or arise out of
or result from any other material breach of this Agreement by LIFE
COMPANY.
7.2 LIFE COMPANY shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
TRUST, whichever is applicable.
7.3 LIFE COMPANY shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify LIFE COMPANY of
any such claim shall not relieve LIFE COMPANY from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against an Indemnified Party, LIFE COMPANY shall be entitled to
participate at its own expense in the defense of such action. LIFE COMPANY also
shall be entitled to assume the defense thereof, with counsel reasonably
satisfactory to the party named in the action. After notice from LIFE
13
COMPANY to such party of LIFE COMPANY's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and LIFE COMPANY will not be liable to such party under
this Agreement for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other than
reasonable costs of investigation.
7.4 Indemnification by DISTRIBUTOR. DISTRIBUTOR agrees to indemnify and hold
harmless LIFE COMPANY and each of its directors, officers, employees, and
agents and each person, if any, who controls LIFE COMPANY within the meaning of
Section 15 of the '33 Act (collectively, the "Indemnified Parties" for the
purposes of this Article VII) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
DISTRIBUTOR which consent shall not be unreasonably withheld) or litigation
(including reasonable legal and other expenses) to which the Indemnified
Parties 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:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
prospectus or sales literature of TRUST (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 or TRUST by or on behalf of LIFE
COMPANY for use in the registration statement or prospectus for TRUST or
in sales literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Variable Contracts or TRUST
shares; or
(b) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Contracts not supplied
by DISTRIBUTOR or persons under its control) or wrongful conduct of
TRUST or DISTRIBUTOR or persons under their control, with respect to the
sale or distribution of the Variable Contracts or TRUST shares; or
(c) 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 Variable Contracts, or any amendment
thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, if such statement or
omission or such alleged statement or
14
omission was made in reliance upon and in conformity with information
furnished to LIFE COMPANY for inclusion therein by or on behalf of
TRUST; or
(d) arise as a result of (i) a failure by TRUST to substantially provide the
services and furnish the materials under the terms of this Agreement; or
(ii) a failure by a Portfolio(s) invested in by the Separate Account to
comply with the diversification requirements of Section 817(h) of the
Code; or (iii) a failure by a Portfolio(s) invested in by the Separate
Account to qualify as a "regulated investment company" under Subchapter
M of the Code; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by DISTRIBUTOR or TRUST in this Agreement or arise
out of or result from any other material breach of this Agreement by
DISTRIBUTOR or TRUST.
7.5 DISTRIBUTOR 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 such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to LIFE
COMPANY.
7.6 DISTRIBUTOR shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified DISTRIBUTOR in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify DISTRIBUTOR of
any such claim shall not relieve DISTRIBUTOR from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, DISTRIBUTOR shall be entitled to
participate at its own expense in the defense thereof. DISTRIBUTOR also shall
be entitled to assume the defense thereof, with counsel reasonably satisfactory
to the party named in the action. After notice from DISTRIBUTOR to such party
of DISTRIBUTOR'S election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
DISTRIBUTOR will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.7 The provision of this Article VII shall survive the termination of this
Agreement.
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Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
(a) At the option of LIFE COMPANY or TRUST at any time from the date hereof
upon 60 days' notice, unless a shorter time is agreed to by the parties;
(b) At the option of LIFE COMPANY, if TRUST shares are not reasonably
available to meet the requirements of the Variable Contracts as
determined by LIFE COMPANY. Prompt notice of election to terminate shall
be furnished by LIFE COMPANY, said termination to be effective ten
(10) days after receipt of notice unless TRUST makes available a
sufficient number of shares to reasonably meet the requirements of the
Variable Contracts within said ten (10) day period;
(c) At the option of LIFE COMPANY, upon the institution of formal
proceedings against TRUST or DISTRIBUTOR by the SEC, the FINRA, or any
other regulatory body, the expected or anticipated ruling, judgment or
outcome of which would, in LIFE COMPANY's reasonable judgment,
materially impair TRUST's or DISTRIBUTOR ability to meet and perform
their respective obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by LIFE COMPANY with said
termination to be effective ten (10) days after receipt of notice;
(d) At the option of TRUST, upon the institution of formal proceedings
against LIFE COMPANY by the SEC, the FINRA, or any other regulatory
body, the expected or anticipated ruling, judgment or outcome of which
would, in TRUST's reasonable judgment, materially impair LIFE COMPANY's
ability to meet and perform its obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by TRUST with said
termination to be effective ten (10) days after receipt of notice;
(e) At the option of LIFE COMPANY, in the event TRUST's shares are not
registered, issued or sold in accordance with applicable state or
federal law, or such law precludes the use of such shares as the
underlying investment medium of Variable Contracts issued or to be
issued by LIFE COMPANY. Termination shall be effective ten (10) days
after notice to TRUST;
(f) At the option of TRUST, if the Variable Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under the
Code, or if TRUST reasonably believes that the Variable Contracts may
fail to so qualify. Termination shall be effective ten (10) days after
receipt of notice by LIFE COMPANY;
16
(g) At the option of LIFE COMPANY, upon TRUST's breach of any material
provision of this Agreement, which breach has not been cured to the
satisfaction of LIFE COMPANY within ten (10) days after written notice
of such breach is delivered to TRUST;
(h) At the option of TRUST, upon LIFE COMPANY's breach of any material
provision of this Agreement, which breach has not been cured to the
satisfaction of TRUST within ten (10) days after written notice of such
breach is delivered to LIFE COMPANY;
(i) At the option of TRUST, if the Variable Contracts are not registered,
issued or sold in accordance with applicable federal and/or state law.
Termination shall be effective ten (10) days after notice to LIFE
COMPANY;
(j) At the option of LIFE COMPANY, in the event that any Portfolio ceases to
qualify as a Regulated Investment Company under Subchapter M of the Code
or under any successor or similar provision, or if LIFE COMPANY
reasonably believes that any Portfolio may fail to so qualify.
Termination shall be effective ten (10) days after notice to the TRUST;
(k) At the option of LIFE COMPANY, in the event that any Portfolio fails to
meet the diversification requirements specified in Article II hereof or
if LIFE COMPANY reasonably believes that any Portfolio may fail to meet
such diversification requirements. Termination shall be effective ten
(10) days after notice to the TRUST;
(l) In the event this Agreement is assigned without the prior written
consent of LIFE COMPANY, TRUST and DISTRIBUTOR, termination shall be
effective ten (10) days after such occurrence without notice; and
(m) At the option of the LIFE COMPANY, it may substitute shares of another
investment company or series thereof for shares of the TRUST in
accordance with the terms of the Variable Contracts, provided that the
LIFE COMPANY has given at least forty-five days prior written notice to
the TRUST of the date of substitution.
8.3 Notwithstanding any termination of this Agreement pursuant to
Section 8.2 hereof, TRUST shall, at the option of the LIFE COMPANY, continue to
make available additional TRUST shares, as provided below, for so long as LIFE
COMPANY desires pursuant to the terms and conditions of this Agreement, for all
Variable Contracts in effect on the effective date of
17
termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, if LIFE COMPANY so elects to
make additional TRUST shares available, the owners of the Existing Contracts or
LIFE COMPANY, whichever shall have legal authority to do so, shall be permitted
to reallocate investments in TRUST, redeem investments in TRUST and/or invest
in TRUST upon the payment of additional premiums under the Existing Contracts.
In the event of a termination of this Agreement pursuant to Section 8.2 hereof,
LIFE COMPANY, as promptly as is practicable under the circumstances, shall
notify TRUST and DISTRIBUTOR whether LIFE COMPANY elects to continue to make
TRUST shares available after such termination. If TRUST shares continue to be
made available after such termination, the provisions of this Agreement shall
remain in effect.
8.4 Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable to the Variable Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the
Separate Accounts or invested directly), and LIFE COMPANY shall not prevent
Variable Contract owners from allocating payments to a Portfolio that was
otherwise available under the Variable Contracts, until thirty (30) days after
the LIFE COMPANY shall have notified TRUST of its intention to do so.
Article IX. NOTICES
Any notice hereunder shall be given by registered or certified mail return
receipt requested 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 TRUST or DISTRIBUTOR:
Third Avenue Variable Series Trust
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone:(000) 000-0000
Facsimile: (000) 000-0000
Email: xxxxx@xxxxxxxx.xxx
18
If to LIFE COMPANY:
Phoenix Life Insurance Company
Xxx Xxxxxxxx Xxx
Xxxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxx, Vice President and Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: Xxxx.Xxxxx@xxxxxxxxx.xxx
With a Copy to:
Xxxxxx X. Xxxxxx, Second Vice President
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxx.xxxxxx@xxxxxxxxx.xxx
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
10.1 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.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.3 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.
10.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York. It shall also
be subject to the provisions of the federal securities laws and the rules and
regulations there under and to any orders of the SEC granting exemptive relief
there from and the conditions of such orders.
10.5 The parties agree that the assets and liabilities of each Portfolio are
separate and distinct from the assets and liabilities of each other Portfolio.
No Portfolio shall be liable or shall be charged for any debt, obligation or
liability of any other Portfolio. No Trustee, officer or agent shall be
personally liable for such debt, obligation or liability of any Portfolio.
10.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the FINRA. and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any
19
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby. However, such access shall not extend to attorney-client
privileged information.
10.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
10.8 No provision of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by TRUST,
DISTRIBUTOR and the LIFE COMPANY.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Fund Participation Agreement as of the date and year first
above written.
THIRD AVENUE VARIABLE SERIES TRUST X.X. XXXXXXX LLC
By: /s/ Xxxxx Xxxxx By: /s/ Xxxxx Xxxxx
---------------------------------- -----------------------------
Name: Xxxxx Xxxxx Name: Xxxxx Xxxxx
Title: CEO and President Title: CEO and President
PHL VARIABLE INSURANCE COMPANY
By: /s/ Xxxx Xxxxxxx X'Xxxxxxx
----------------------------------
Name: Xxxx Xxxxxxx X'Xxxxxxx
Title: Senior Vice President
20
Appendix A
The currently available Portfolios of the TRUST are:
Third Avenue Value Portfolio
21
Appendix B
PHL Variable Insurance Company
Name of Separate Accounts and date established by Board of Directors:
PHL Variable Accumulation Account II was established by the Board of Directors
October 25, 2007.
and all underlying registered contracts in which they invest.*
--------
* LIFE Company shall promptly provide a complete list of all underlying
registered contracts upon request by the Fund or the Adviser
22
