PARTICIPATION AGREEMENT
Among
VANGUARD VARIABLE INSURANCE FUND
and
THE VANGUARD GROUP, INC.
and
VANGUARD MARKETING CORPORATION
and
PHL VARIABLE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 1/st/ day of March, 2008, by
and among VANGUARD VARIABLE INSURANCE FUND (hereinafter the "Fund"), a Delaware
business trust, THE VANGUARD GROUP, INC. (hereinafter the "Sponsor"), a
Pennsylvania corporation, VANGUARD MARKETING CORPORATION (hereinafter the
"Distributor"), a Pennsylvania corporation, and PHL VARIABLE INSURANCE COMPANY
(hereinafter the "Company"), a Connecticut corporation, on its own behalf and
on behalf of each segregated asset account of the Company named in Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account").
WHEREAS, the Fund was organized to act as the investment vehicle for
variable life insurance policies and variable annuity contracts to be offered
by separate accounts of insurance companies which have entered into
participation agreements with the Fund and the Sponsor (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio," and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act") and its
shares are registered under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the assets of each Portfolio of the Fund are managed by several
entities (the "Advisers"), each of which is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940 and any applicable
state securities laws; and
WHEREAS, the Company has established or will establish one or more Accounts
to fund certain variable annuity contracts (the "Variable Insurance Products"),
which Accounts and Variable Insurance Products are registered under the 1940
Act and the 1933 Act, respectively; and
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WHEREAS, each Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company, on
the date shown for each Account on Schedule A hereto, to set aside and invest
assets attributable to the Variable Insurance Products; and
WHEREAS, the Distributor is a wholly-owned subsidiary of the Sponsor, is
registered as a broker dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934, as amended (the "1934 Act")
and is a member in good standing of the Financial Industry Regulatory
Authority, Inc. ("FINRA"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Portfolios on behalf
of each Account to fund the Variable Insurance Products and the Sponsor is
authorized to sell such shares to the Accounts at net asset value;
WHEREAS, the Sponsor and Jefferson National Life Insurance Company, an
affiliate of the Company, have entered into a Defined Contribution Clearance &
Settlement Agreement of even date herewith (the "DCC&S Agreement") which sets
forth the operational provisions governing the purchase and redemption of
shares of the Fund on behalf of the Accounts and related matters;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Sponsor and the Distributor agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Sponsor and the Distributor agree to sell to the Company those
shares of the Portfolios of the Fund listed on Schedule B which each Account
orders, in accordance with the applicable provisions of the DCC&S Agreement.
1.2 The Fund, subject to the provisions of Article IX of this Agreement,
agrees to make its shares available indefinitely for purchase at the applicable
net asset value per share by the Company and its Accounts on those days on
which the Fund calculates its net asset value pursuant to the rules of the SEC
and the Fund shall use its best efforts to calculate such net asset value on
each day which the NYSE is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person including, but not limited to, the
Company, or suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board, acting in good faith and in light
of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Portfolio. Further,
it is acknowledged and agreed that the availability of shares of the Fund shall
be subject to the Fund's then current prospectus and statement of additional
information, federal and state securities laws and applicable rules and
regulations of the SEC and FINRA.
1.3 The Fund and the Sponsor agree that shares of the Fund will be sold only
to Participating Insurance Companies and their separate accounts. No shares of
any Portfolio will be sold to the general public.
1.4 The Fund and the Sponsor will not sell Fund shares to any Participating
Insurance Company or its separate account unless an agreement containing a
provision substantially the same as Section 2.4 of Article II of this Agreement
is in effect to govern such sales.
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1.5 The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by an Account, in accordance with the
applicable provisions of the DCC&S Agreement. The Fund reserves the right to
suspend redemption privileges or pay redemptions in kind, as disclosed in the
Fund's prospectus or statement of additional information. The Fund agrees to
treat the Company like any other shareholder in similar circumstances in making
these determinations.
1.6 The Company agrees to purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund and in accordance with the
provisions of such prospectus and the accompanying statement of additional
information.
1.7 Issuance and transfer of a Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account. The Fund shall furnish to the
Company the CUSIP number assigned to each Portfolio of the Fund identified in
Schedule B hereto.
1.8 The Company hereby elects to receive all income, dividends and capital
gain distributions as are payable on the Portfolio shares in additional shares
of that Portfolio. The Company reserves the right to revoke this election and
to receive all such income dividends and capital gain distributions in cash.
The Fund shall notify the Company of the number of shares so issued as payment
of dividends and distributions.
1.9 EXTRAORDINARY EVENTS. The Company is not authorized to accept as the
Fund's designee any individual purchase or redemption of shares in an amount
which equals or exceeds the "Large Transaction Amount" for a Portfolio (as
specified in Schedule C) where such order is the result of an "Extraordinary
Event" of which the Company is aware, unless the Company has notified the
Sponsor of such order as soon as practicable following the Company becoming
aware of the Extraordinary Event and, with respect to purchases or redemptions
of which the Company is aware as of 3:00 p.m. Eastern time on the trade date,
in no event later than 3:00 p.m. Eastern time on the trade date. For these
purposes, an "Extraordinary Event" shall mean an event outside normal
operations such as an entire Account moving into or out of a Portfolio or an
asset transfer arising from a merger, acquisition or divestiture. The Sponsor
reserves the right to refuse any purchase order, or to delay settlement of any
redemption order, which equals or exceeds the applicable Large Transaction
Amount and results from an Extraordinary Event, which the Sponsor, in its sole
discretion, deems disruptive or detrimental to the applicable Portfolio. The
Sponsor reserves the right to amend or revise Schedule C at any time and will
provide at least 24 hours' advance notice of such revision to the Company.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that it is an insurance company duly
organized and in good standing under applicable law; that it has legally and
validly established each Account prior to any issuance or sale thereof as a
segregated asset account under Section _______ of the Connecticut Insurance
Code; that it has and will maintain the capacity to issue all Variable
Insurance Products that may be sold; and that it is properly licensed,
qualified and in good standing to sell the Variable Insurance Products in all
fifty states and the District of Columbia, except the states of Maine and New
York.
2.2 The Company represents and warrants that the Variable Insurance Products
are registered under the 1933 Act.
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2.3 The Company represents and warrants it has registered each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to
serve as segregated investment accounts for the Variable Insurance Products.
2.4 The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sold in compliance with the laws of the State of New York and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 0000 Xxx. The Fund shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund, the
Distributor, or the Sponsor.
2.5 The Fund represents that it is qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and that it will make every effort to maintain qualification
(under Subchapter M or any successor or similar provision) and (ii) it will
notify the Company immediately upon having a reasonable basis for believing
that it ceased to so qualify or that it might not so qualify in the future. The
Fund acknowledges that any failure to qualify as a Regulated Investment Company
will eliminate the ability of the subaccounts to avail themselves of the "look
through" provisions of Section 817(h) of the Code, and that as a result the
Variable Insurance Products will almost certainly fail to qualify as endowment
or life insurance contracts under Section 817(h) of the Code.
2.6 The Company represents that the Variable Insurance Products will be
treated as endowment or life insurance contracts under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Sponsor immediately upon having a reasonable
basis for believing that the Variable Insurance Products have ceased to be so
treated or that they might not be so treated in the future.
2.7 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise.
2.8 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of New York and the Fund and the Sponsor represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of New York to the extent required to perform this Agreement.
2.9 The Distributor represents and warrants that it is a member in good
standing of FINRA and is registered as a broker-dealer with the SEC. The
Distributor further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of New York and all applicable state
and federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 0000 Xxx.
2.10 The Fund 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 and any applicable regulations thereunder.
2.11 The Sponsor represents and warrants that the Advisers to the Fund are,
and the Sponsor shall use its best effort to cause the Advisers to remain, duly
registered in all material respects under all applicable federal and state
securities laws and to perform their obligations for the Fund in compliance in
all material respects with the laws of the State of New York and any applicable
state and federal securities laws.
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2.12 The Fund and the Sponsor represent and warrant that all of their
trustees, directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimum coverage required currently by Rule 17g-1 under the 1940 Act or other
applicable laws or regulations as may be promulgated from time to time. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.13 With respect to the Variable Insurance Products, which are registered
under the 1933 Act, the Company represents and warrants that:
(a) Phoenix Equity Planning Corporation is the principal underwriter for
each such Account and any subaccounts thereof and is a registered
broker-dealer with the SEC under the 1934 Act;
(b) the shares of the Portfolios of the Fund are and will continue to be
the only investment securities held by the corresponding subaccounts;
(c) the number of Portfolios of the Fund available for investment by the
Accounts will not constitute a majority of the total number of mutual funds
or portfolio selections available for investment by the Accounts in any
Variable Insurance Product; and
(d) with regard to each Portfolio, the Company, if permitted by law, on
behalf of the corresponding subaccount, will:
(i) vote such shares held by it in the same proportion as the vote of
all other holders of such shares; and
(ii) refrain from substituting shares of another security for such
shares unless the SEC has approved such substitution in the manner
provided in Section 26 of the 0000 Xxx.
2.14 The Fund represents that it will comply with all provisions of the 1940
Act requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees
and with whatever rules the SEC may promulgate with respect thereto.
ARTICLE III. Offering Documents and Reports
3.1 The Fund, the Sponsor or their designee shall provide the Company (at
the Sponsor's expense) with as many copies of the Fund's current prospectus as
the Company may reasonably request. The Company shall provide a copy of the
Fund's prospectus to each Variable Insurance Product owner. If requested by the
Company in lieu thereof, the Fund or the Sponsor shall provide such
documentation (including a final copy of the new prospectus as set in type at
the Fund's or the Sponsor's expense) and other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus for the Fund is amended) to have the prospectus for the Variable
Insurance Products and the Fund's prospectus printed together in one document
(such printing to be at the Company's expense).
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3.2 The Fund's prospectus shall state that the statement of additional
information for the Fund is available from the Sponsor (or in the Fund's
discretion, the prospectus shall state that the statement of additional
information is available from the Fund) and the Sponsor (or the Fund), at its
expense, shall print and provide such statement free of charge to the Company
and to any owner of a Variable Insurance Product or prospective owner who
requests such statement.
3.3 The Fund, at its own expense, shall provide the Company with copies of
its reports to shareholders, other communications to shareholders, and, if
required by applicable law, proxy material, in such quantity as the Company
shall reasonably require for distributing to Variable Insurance Product owners.
The Fund shall provide to the Company the prospectuses and annual reports
referenced in this Agreement within fifteen (15) days prior to the Company's
obligation to mail, and the Company agrees to provide the Fund with advance
notice of such date. If the documents are not delivered to the Company within
ten (10) days of the Company's obligation to mail, the Fund shall reimburse the
Company for any extraordinary out-of-pocket costs (including, but not limited
to, overtime for printing and mailing).
ARTICLE IV. Sales Material and Information
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material
in which the Fund, its Advisers or the Sponsor is named, at least ten Business
Days prior to its use. The Company may use such material in fewer than ten
Business Days if it receives the written consent of the Fund or its designee.
No such material shall be used if the Fund or its designee reasonably objects
to such use within ten Business Days after receipt of such material. In
connection with the identification of the Portfolios in any such material, the
use of the Sponsor's name or identification of the Portfolios shall be given no
greater prominence than any other mutual fund or portfolio selection offered in
a Variable Insurance Product.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Variable Insurance Products other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or
its designee or by the Sponsor, except with the permission of the Fund or the
Sponsor or the designee of either.
4.3 The Fund, Sponsor, Distributor or their designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or an Account is
named at least ten Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.4 The Fund, the Distributor and the Sponsor shall not give any information
or make any representations on behalf of the Company or concerning the Company,
each Account, or the Variable Insurance Products other than the information or
representations contained in a prospectus for the Variable Insurance Products,
as such prospectus may be amended or supplemented from time to time, or in
published reports for each Account which are in the public domain or approved
by the Company for distribution to Variable Insurance Product owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all
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amendments to any of the above, that relate to the Fund or its shares, prior to
or contemporaneously with the filing of each document with the SEC or other
regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
prospectuses, reports, solicitations for voting instructions, sales literature
and other promotional materials, and all amendments to any of the above, that
relate to the Variable Insurance Products or each Account, prior to or
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.7 The Company and the Fund shall also each promptly inform the other of
the results of any examination by the SEC (or other regulatory authorities)
that relates to the Variable Insurance Products, the Fund or its shares, and
the party that was the subject of the examination shall provide the other party
with a copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.8 The Fund and the Sponsor will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Fund's registration statement, particularly any
change resulting in a change to the prospectus for any Account. The Fund and
the Sponsor will cooperate with the Company so as to enable the Company to
solicit voting instructions from owners of Variable Insurance Products, to the
extent a solicitation is required by applicable law, or to make changes to its
prospectus in an orderly manner.
4.9 For purposes of this Article IV, the phrase "sales literature and other
promotional material" includes, but is not limited to, sales literature (i.e.,
any written communication distributed or made generally available to customers,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published articles), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, and prospectuses, shareholder reports, and proxy materials.
4.10 Certain Transactions and Restrictions.
(a) The Company agrees that it will provide, not later than five Business
Days after receipt of a written request by the Sponsor on behalf of the
Fund, the Taxpayer Identification Number of any or all Variable Insurance
Product owner(s) and the amount, date, name of investment professional
associated with the Variable Insurance Product owner (if any), and
transaction type (purchase, redemption, transfer, or exchange) of every
purchase, redemption, transfer, or exchange transaction by such Variable
Insurance Product owner(s) in an Account investing in the Fund through an
account maintained by the Company during the specific period covered by the
request. Unless required by applicable law, rule or regulation, the Sponsor
and the Fund agree not to use the information received under this Section
for marketing or any other purpose not related to (i) limiting or reducing
abusive trading in shares issued by the Fund or (ii) collecting purchase or
redemption fees (if any).
(b) The Company agrees that it will execute written instructions from the
Sponsor on behalf of the Fund, including instructions to restrict or
prohibit purchases or exchanges of Fund shares in specific accounts or by or
on behalf of specific Variable Insurance Product owners identified by the
Fund as having engaged in transactions in Fund shares that violate policies
established by the Fund for the purpose of eliminating or reducing any
dilution of the value of the outstanding securities issued by the Fund. Any
such instructions by the Sponsor shall include the Taxpayer Identification
Number or equivalent identifying number of the Variable Insurance Product
owner(s) to which the instructions relate and the specific restriction(s) to
be executed. The Company agrees that it will execute any such instructions
as soon as reasonably practicable, but not later than five Business Days
after receipt of the instructions by the Company.
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ARTICLE V. Fees and Expenses
5.1 The Fund and Sponsor shall pay no fee or other compensation to the
Company under this Agreement. Nothing herein shall prevent the parties hereto
from otherwise agreeing to perform, and arranging for appropriate compensation
for, other services relating to the Fund and or to the Accounts.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the fees and
expenses for the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration statement,
proxy materials and reports, setting the prospectus in type, setting in type
and printing the proxy materials and reports to shareholders (including the
costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
5.3 The Fund shall bear the expenses of printing, and the Company shall bear
the expenses of distributing, the Fund's prospectus to owners of Variable
Insurance Products issued by the Company. The Company shall bear the expenses
of distributing the Fund's proxy materials (to the extent such proxy
solicitation is required by law) and reports to owners of Variable Insurance
Products.
ARTICLE VI. Diversification
6.1 The Fund will at all times invest money from the Variable Insurance
Products in such a manner as to ensure that the Variable Insurance Products
will be treated as variable contracts under the Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Fund and the
Sponsor represent and warrant that each Portfolio of the Fund will meet the
diversification requirements of Section 817(h) of the Code and Treasury
Regulation 1.817-5, relating to the diversification requirements for endowment
or life insurance contracts and any amendments or other modifications to such
Section or Regulations, as if those requirements applied directly to each such
Portfolio. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify, each Portfolio of the Fund so as to achieve compliance
within the grace period afforded by Regulation 817-5.
6.2 The Fund and the Sponsor represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the Code and
they will maintain such qualification (under Subchapter M or any successor or
similar provision).
ARTICLE VII. Indemnification
7.1 Indemnification by the Company
(a) The Company agrees to indemnify and hold harmless the Fund and each
trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act, the Sponsor and the
Distributor (collectively, the "Indemnified Parties" for purposes of this
Section 7.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares or the Variable
Insurance Products and:
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(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Variable Insurance Products or contained
in the contract or policy or sales literature for the Variable Insurance
Products (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
the Company by or on behalf of the Fund for use in the registration
statement or prospectus for the Variable Insurance Products or in the
contract or policy sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable Insurance
Products or the Fund shares; or
(ii) 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 the Fund not supplied by
the Company, or persons under its control) or unlawful conduct of the
Company or persons under its control, with respect to the sale or
distribution of the Variable Insurance Products or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement, prospectus, or
sales literature of the Fund (or any amendment or supplement thereto),
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Fund by or on behalf of the
Company; or
(iv) result from any failure by the Company to provide the services
and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any material breach of this Agreement by the
Company;
as limited by and in accordance with the provisions of Section 7.1(b) and
7.1(c) hereof.
(b) The Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to
which an Indemnified Party would otherwise be subject by reason of 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 the Fund, whichever is applicable.
(c) The 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 the 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 a designated agent), but failure to notify the
Company of any such claim shall not relieve the 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 the Indemnified Parties, the Company
shall be entitled to participate, at its own expense, in the defense of such
action. The Company also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice
from the Company to such a party of the Company's election to assume the
defense thereof, the Indemnified Party
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shall bear the fees and expenses of any additional counsel retained by it,
and the 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.
(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Variable Insurance
Products or the operation of the Fund.
7.2 Indemnification by the Sponsor
(a) The Sponsor agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Sponsor) or litigation (including 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 expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or
the Variable Insurance Products and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
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 the Sponsor or Fund
by or on behalf of the Company for use in the registration statement or
prospectus for the Fund or in sales literature (or any amendment or
supplement thereto) or otherwise for use in connection with the sale of
the Variable Insurance Products or Fund shares; or
(ii) 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 Insurance
Products not supplied by the Sponsor or persons under its control) or
unlawful conduct of the Fund, the Advisers or persons under their
control, with respect to the sale or distribution of the Variable
Insurance Products or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement, prospectus or
sales literature covering the Variable Insurance Products (or any
amendment or supplement thereto), or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to
the Company by or on behalf of the Fund; or
(iv) result from any failure by the Sponsor or the Fund to provide
the services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Sponsor or the Fund in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Sponsor or the Fund;
as limited by and in accordance with the provisions of Sections 7.2(b)
and 7.2(c) hereof.
10
(b) The Sponsor 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 the Company or the Accounts, whichever is applicable.
(c) The Sponsor 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 the Sponsor 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 any such service on any designated agent), but failure to notify
the Sponsor of any such claim shall not relieve the Sponsor 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 any case any such action is brought against the Indemnified
Parties, the Sponsor will be entitled to participate, at its own expense, in
the defense thereof. The Sponsor also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Sponsor to such party of the Sponsor's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Sponsor will not
be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by each party independently in connection with the
defense thereof other than reasonable costs of investigation.
(d) The Company agrees promptly to notify the Sponsor of the commencement
of any litigation or proceedings against it or any of its officers or
directors in connection with the issuance or sale of the Variable Insurance
Products or the operation of each Account.
7.3 Indemnification by the Fund
(a) The Fund agrees to indemnify and hold harmless the Company, and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Fund) or litigation (including 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 expenses (or action in respect thereof) or
settlements resulting from the gross negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the operations
of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Fund;
as limited by and in accordance with the provisions of Sections 7.3(b) and
7.3(c) hereof.
11
(b) The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to
which an Indemnified Party would otherwise be subject by reason of 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 the Company, the Fund, the Sponsor or each Account,
whichever is applicable.
(c) The Fund 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 the Fund 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 the
Fund of any such claim shall not relieve the Fund 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, the Fund will be
entitled to participate, at its own expense, in the defense thereof. The
Fund also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Fund to
such party or the Fund's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund will not be liable to such party independently
in connection with the defense thereof other than reasonable costs of
litigation.
(d) The Company and the Sponsor agree promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the
issuance or sale of the Variable Insurance Products, with respect to the
operation of an Account, or the sale or acquisition of shares of the Fund.
7.4 Indemnification by the Distributor
(a) The Distributor agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.4) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Sponsor) or litigation (including 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 expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or
the Variable Insurance Products and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
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 the Distributor or
the Fund by or on behalf of the Company for use in the registration
statement or prospectus for the Fund or in sales literature (or any
amendment or supplement thereto) or otherwise for use in connection with
the sale of the Variable Insurance Products or Fund shares; or
(ii) 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 Insurance
Products not supplied by the Distributor or persons under its control)
or unlawful
12
conduct of the Fund, the Advisers or persons under their control, with
respect to the sale or distribution of the Variable Insurance Products
or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement, prospectus or
sales literature covering the Variable Insurance Products (or any
amendment or supplement thereto), or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to
the Company by or on behalf of the Fund; or
(iv) result from any failure by the Distributor or the Fund to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the Fund in
this Agreement or arise out of or result from any other material breach
of this Agreement by the Distributor of the Fund;
as limited by and in accordance with the provisions of Sections 7.4(b) and
7.4(c) hereof.
(b) The 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 the Company or the
Accounts, whichever is applicable.
(c) The 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 the 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 any such service on any designated agent),
but failure to notify the Distributor of any such claim shall not
relieve the 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 any case any such action
is brought against the Indemnified Parties, the Distributor will be
entitled to participate, at its own expense, in the defense thereof. The
Sponsor also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from
the Distributor to such party of the 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 the Distributor
will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by each party independently in
connection with the defense thereof other than reasonable costs of
investigation.
(d) The Company agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Variable Insurance Products or the operation of each account.
13
ARTICLE VIII. Applicable Law
8.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York.
8.2 This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant, and
the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. Termination
9.1 This Agreement shall continue in full force and effect until the first
to occur of:
(a) termination by any party for any reason by sixty (60) days' advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Sponsor with respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to meet the
requirements of the Variable Insurance Products; or
(c) termination by the Company by written notice to the Fund and the
Sponsor with respect to any Portfolio in the event any of the Portfolio's
shares are not registered, issued or sold in accordance with applicable
state and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Variable Insurance Products issued or to
be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Sponsor with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under Subchapter M of
the Code or under any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify (in the event of
such termination, the Company shall withdraw all assets allocable to the
separate accounts from the Portfolio and shall reinvest such assets in a
different investment medium, including, but not limited to, another
Portfolio of the Fund); or
(e) termination by the Company by written notice to the Fund and the
Sponsor with respect to any Portfolio in the event that such Portfolio fails
to meet the diversification requirements as specified in Article VI hereof
(in the event of such termination, the Company shall withdraw all assets
allocable to the separate accounts from the Portfolio and shall reinvest
such assets in a different investment medium, including, but not limited to,
another Portfolio of the Fund); or
(f) termination by the Fund, the Sponsor, or the Distributor by written
notice to the Company, if any of the Fund, the Sponsor, or the Distributor
shall determine, in its sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a material adverse
change in its business, operations, or financial condition since the date of
this Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Sponsor, if the Company shall determine, in its sole judgment exercised in
good faith, that either the Fund, the Sponsor, or the Distributor has
suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material
adverse publicity.
14
9.2 Notwithstanding any termination of this Agreement, the Fund and the
Sponsor shall, at the option of the Company, continue to make available shares
of the Fund pursuant to the terms and conditions of this Agreement, for all
Variable Insurance Products in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts.
9.3 The Company shall not redeem Fund shares attributable to the Variable
Insurance Products (as opposed to Fund shares attributable to the Company's
assets held in the Accounts) except (a) as necessary to implement Variable
Insurance Products owner initiated or approved transactions, or (b) as required
by state and/or federal laws or regulations or judicial or other legal
precedent of general application (hereinafter referred to as a "Legally
Required Redemption"). Upon request, the Company will promptly furnish to the
Fund and the Sponsor the opinion of counsel for the Company (which counsel
shall be reasonably satisfactory to the Fund and the Sponsor) to the effect
that any redemption pursuant to clause (b) above is a Legally Required
Redemption. Furthermore, except in cases where permitted under the terms of the
Variable Insurance Products, the Company shall not prevent owners of Variable
Insurance Products from allocating payments to a Portfolio that was otherwise
available under the Variable Insurance Products without first giving the Fund
or the Sponsor 90 days' notice of its intention to do so.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile to the other party at the address of such
party set forth below or at such other address as such party may from time to
time specify in writing to the other party.
If to the Fund: Vanguard Variable Insurance Fund
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxx
If to the Sponsor: The Vanguard Group, Inc.
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxx
If to the Distributor: Vanguard Marketing Corporation
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxx
If to the Company: PHL Variable Insurance Company
Xxx Xxxxxxxx Xxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx, Vice President
ARTICLE XI. Miscellaneous
11.1 It is understood and stipulated that neither the shareholders of any
Portfolio nor the officers or trustees of the Fund shall be personally liable
hereunder.
15
11.2 Subject to the requirements of the legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Variable Insurance Products and all information
reasonably identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement, shall not (unless it has obtained the
express written consent of the affected party) disclose, disseminate or utilize
such names and addresses and other confidential information until such time as
it may come into the public domain.
11.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
11.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
11.6 Each party hereto shall cooperate with each party and all appropriate
governmental authorities (including without limitation the SEC, FINRA and state
insurance regulators) and shall permit such authorities reasonable access to
its books and records in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby.
11.7 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.
11.8 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
11.9 The Company shall furnish, or cause to be furnished, to the Fund or its
designee upon request copies of the following reports:
(a) the Company's Annual Financial Statement on Statutory Basis; and
(b) any registration statement, prospectus or other materials distributed
in connection with the sale of the Variable Insurance Products to the extent
such registration statement, prospectus or other materials reference the
Fund.
11.10 This Agreement, including any Schedule hereto, may be amended or
modified only by written instrument, executed by duly authorized officers of
the parties.
16
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
as of the date specified above.
VANGUARD VARIABLE INSURANCE FUND
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
THE VANGUARD GROUP, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
VANGUARD MARKETING CORPORATION
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
PHL VARIABLE INSURANCE COMPANY
By:
--------------------------
Name: Xxxx Xxxxxxx X'Xxxxxxx
Title: Senior Vice President
17
SCHEDULE A
SEPARATE ACCOUNTS
Name of Separate Account
PHLVariable Accumulation Account II
18
SCHEDULE B
PORTFOLIOS
The following Portfolios of the Vanguard Variable Insurance Funds shall be
made available as investments underlying the Variable Insurance Products,
subject to the limitations set forth in Section 2.13(c) hereof:
Total Bond Market Index Portfolio
High-Yield Bond Portfolio
Short-Term Investment Grade Portfolio
Balanced Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
Mid-Cap Index Portfolio
REIT Index Portfolio
Small Company Growth Portfolio
International Portfolio
Total Stock Market Index Portfolio
Capital Growth Portfolio
19
SCHEDULE C
LARGE TRANSACTION AMOUNTS
Large
Transaction
Portfolio Amount
--------- -----------
Total Bond Market Index Portfolio.................................. $300,000
High-Yield Bond Portfolio.......................................... 500,000
Short-Term Investment-Grade Portfolio.............................. 750,000
Balanced Portfolio................................................. 1,000,000
Diversified Value Portfolio........................................ 1,000,000
Equity Income Portfolio............................................ 500,000
Equity Index Portfolio............................................. 500,000
Growth Portfolio................................................... 500,000
Mid-Cap Index Portfolio............................................ 100,000
REIT Index Portfolio............................................... 100,000
Small Company Growth Portfolio..................................... 1,000,000
International Portfolio............................................ 1,000,000
Total Stock Market Index Portfolio................................. 500,000
Capital Growth Portfolio........................................... 250,000
20
