PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT (the "Agreement") made by and between XXXXXXX
VARIABLE LIFE INVESTMENT FUND (the "Fund"), a Massachusetts business trust
created under a Declaration of Trust dated March 15, 1985, as amended, with a
principal place of business in Boston, Massachusetts and Cova Financial Life
Insurance Company, a California corporation (the "Company"), with a principal
place of business in Oakbrook, Illinois on behalf of Cova Variable Annuity
Account Five, a separate account of the Company, and any other separate account
of the Company as designated by the Company from time to time, upon written
notice to the Fund in accordance with Section 9 herein (each, an "Account").
WHEREAS, the Fund acts as the investment vehicle for the separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively referred to herein as "Variable Insurance Products") to be offered
by insurance companies which have entered into participation agreements
substantially identical to this Agreement ("Participating Insurance Companies")
and their affiliated insurance companies; and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares of beneficial interest without par value ("Shares"), and additional
series of Shares may be established, each designated a "Portfolio" and
representing the interest in a particular managed portfolio of securities; and
WHEREAS, each Portfolio of the Fund, except the Money Market Portfolio, is
divided into two classes of Shares, and additional classes of Shares may be
established; and
WHEREAS, the Parties desire to evidence their agreement as to certain other
matters,
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereto agree as follows:
1. Duty of Fund to Sell.
The Fund shall make its Shares available for purchase at the applicable
net asset value per Share by Participating Insurance Companies and their
affiliates and separate accounts on those days on which the Fund calculates its
net asset value pursuant to rules of the Securities and Exchange Commission;
provided, however, that the Trustees of the Fund may refuse to sell Shares of
any Portfolio to any person, or suspend or terminate the offering of Shares of
any Portfolio, if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees, necessary in
the best interest of the shareholders of any Portfolio.
2. Fund Materials.
The Fund, at its expense, shall provide the Company or its designee with
camera-ready copy or computer diskette versions of all prospectuses, statements
of additional information, annual and semi-annual reports and proxy materials
(collectively, "Fund Materials") to be printed and distributed by the Company or
its broker/dealer to the Company's existing or prospective contract owners, as
appropriate. The Company agrees to bear the cost of printing and distributing
such Fund Materials.
3. Requirement to Execute Participation Agreement; Requests.
Each Participating Insurance Company shall, prior to purchasing Shares in
the Fund, execute and deliver a participation agreement in a form substantially
identical to this Agreement.
The Fund shall make available, upon written request from the Participating
Insurance Company given in accordance with Paragraph 9, to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 7 (i) a list of all other Participating
Insurance Companies, and (ii) a copy of the Agreement as executed by any other
Participating Insurance Company.
The Fund shall also make available upon request to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 7, the net asset value of any Portfolio of
the Fund as of any date upon which the Fund calculates the net asset value of
its Portfolios for the purpose of purchase and redemption of Shares.
4. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Fund and each of
its Trustees and officers and each person, if any, who controls the Fund within
the meaning of Section 15 of the Securities Act of 1933 (the "Act") against any
and all losses, claims, damages, liabilities or litigation (including legal and
other expenses), arising out of the acquisition of any Shares by any person, to
which the Fund or such Trustees, officers or controlling person may become
subject under the Act, under any other statute, at common law or otherwise,
which (i) may be based upon any wrongful act by the Company, any of its
employees or representatives, any affiliate of or any person acting on behalf of
the Company or a principal underwriter of its insurance products, or (ii) may be
based upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering Shares 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 a statement or omission was made
in reliance upon information furnished to the Fund by the Company, or (iii) may
be based on any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering insurance products
sold by the Company or any insurance company which is an affiliate thereof, or
any amendments 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, unless such statement or
omission was made in reliance upon information furnished to the Company or such
affiliate by or on behalf of the Fund; provided, however, that in no case (i) is
the Company's indemnity in favor of a Trustee or officer or any other person
deemed to protect such Trustee or officer or other person against any liability
to which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of obligations and duties under this
Agreement or (ii) is the Company to be liable under its indemnity agreement
contained in this Paragraph 4 with respect to any claim made against the Fund or
any person indemnified unless the Fund or such person, as the case may be, shall
have notified the Company in writing pursuant to Paragraph 9 within a reasonable
time after the summons or other first legal process giving information of the
nature of the claims shall have been served upon the Fund or upon such person
(or after the Fund or such person shall have received notice of such service on
any designated agent), but failure to notify the Company of any such claim shall
not relieve the Company from any liability which it has to the Fund or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this Paragraph 4. The Company shall be entitled
to participate, at its own expense, in the defense, or, if it so elects, to
assume the defense of any suit brought to enforce any such liability, but, if it
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Fund, to its officers and Trustees, or to any
controlling person or persons, defendant or defendants in the suit. In the event
that the Company elects to assume the defense of any such suit and retain such
counsel, the Fund, such officers and Trustees or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Company does not elect to
assume the defense of any such suit, the Company will reimburse the Fund, such
officers and Trustees or controlling person or persons, defendant or defendants
in such suit, for the reasonable fees and expenses of any counsel retained by
them. The Company agrees promptly to notify the Fund pursuant to Paragraph 9 of
the commencement of any litigation or proceedings against it in connection with
the issue and sale of any Shares.
(b) 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 Act against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
it or such directors, officers or controlling person may become subject under
the Act, under any other statute, at common law or otherwise, arising out of the
acquisition of any Shares by any person which (i) may be based upon any wrongful
act by the Fund, any of its employees or representatives or a principal
underwriter of the Fund, or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement or prospectus covering Shares 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 unless such statement or omission was made in reliance upon
information furnished to the Fund by the Company or (iii) may be based on any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering insurance products sold by the
Company, 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; provided, however, that in no case (i) is
the Fund's indemnity in favor of a director or officer or any other person
deemed to protect such director or officer or other person against any liability
to which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of obligations and duties under this
Agreement or (ii) is the Fund to be liable under its indemnity agreement
contained in this Paragraph 4 with respect to any claims made against the
Company or any such director, officer or controlling person unless it or such
director, officer or controlling person, as the case may be, shall have notified
the Fund in writing pursuant to Paragraph 9 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 it or upon such director, officer or
controlling person (or after the Company or such director, officer or
controlling person shall have received notice of such service on any designated
agent), but failure to notify the Fund of any claim shall not relieve it from
any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
Paragraph. The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Company, its directors, officers or controlling person or persons, defendant or
defendants, in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Company, its directors, officers or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Company or such directors, officers or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Fund agrees promptly to notify the
Company pursuant to Paragraph 9 of the commencement of any litigation or
proceedings against it or any of its officers or Trustees in connection with the
issuance or sale of any Shares.
The provisions of this Section 4 shall survive the termination of the
Agreement.
5. Procedure for Resolving Irreconcilable Conflicts.
(a) The Trustees of the Fund will monitor the operations of the Fund for
the existence of any material irreconcilable conflict among the interests of all
the contract holders and policy owners of Variable Insurance Products (the
"Participants") of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise, among other things, from: (a) an
action by any state insurance regulatory authority; (b) a change in applicable
insurance laws or regulations; (c) a tax ruling or provision of the Internal
Revenue Code or the regulations thereunder; (d) any other development relating
to the tax treatment of insurers, contract holders or policy owners or
beneficiaries of Variable Insurance Products; (e) the manner in which the
investments of any Portfolio are being managed; (f) a difference in voting
instructions given by variable annuity contract holders, on the one hand, and
variable life insurance policy owners, on the other hand, or by the contract
holders or policy owners of different participating insurance companies; or (g)
a decision by an insurer to override the voting instructions of Participants.
(b) The Company will be responsible for reporting any potential or existing
conflicts to the Trustees of the Fund. The Company will be responsible for
assisting the Trustees in carrying out their responsibilities under this
Paragraph 5(b) and Paragraph 5(a), by providing the Trustees with all
information reasonably necessary for the Trustees to consider the issues raised.
The Fund will also request its investment adviser to report to the Trustees any
such conflict which comes to the attention of the adviser.
(c) If it is determined by a majority of the Trustees of the Fund, or a
majority of its disinterested Trustees, that a material irreconcilable conflict
exists involving the Company, the Company shall, at its expense, and to the
extent reasonably practicable (as determined by a majority of the disinterested
Trustees), take whatever steps are necessary to eliminate the irreconcilable
material conflict, including withdrawing the assets allocable to some or all of
the separate accounts from the Fund or any Portfolio or class thereof and
reinvesting such assets in a different investment medium, including another
Portfolio of the Fund or class thereof, offering to the affected Participants
the option of making such a change or establishing a new funding medium
including a registered investment company.
For purposes of this Paragraph 5(c), the Trustees, or the disinterested
Trustees, shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict. In the event of a determination of the
existence of an irreconcilable material conflict, the Trustees shall cause the
Fund to take such action, such as the establishment of one or more additional
Portfolios or classes, as they in their sole discretion determine to be in the
interest of all shareholders and Participants in view of all applicable factors,
such as cost, feasibility, tax, regulatory and other considerations. In no event
will the Fund be required by this Paragraph 5(c) to establish a new funding
medium for any variable contract or policy.
The Company shall not be required by this Paragraph 5(c) to establish a new
funding medium for any variable contract or policy if an offer to do so has been
declined by a vote of a majority of the Participants materially adversely
affected by the material irreconcilable conflict. The Company will recommend to
its Participants that they decline an offer to establish a new funding medium
only if the Company believes it is in the best interest of the Participants.
(d) The Trustees' determination of the existence of an irreconcilable
material conflict and its implications promptly shall be communicated to all
Participating Insurance Companies by written notice thereof delivered or mailed,
first class postage prepaid.
6. Voting Privileges.
The Company shall be responsible for assuring that its separate account or
accounts participating in the Fund shall use a calculation method of voting
procedures substantially the same as the following: those Participants permitted
to give instructions and the number of Shares for which instructions may be
given will be determined as of the record date for the Fund shareholders'
meeting, which shall not be more than 60 days before the date of the meeting.
Whether or not voting instructions are actually given by a particular
Participant, all Fund shares held in any separate account or sub-account thereof
and attributable to policies will be voted for, against, or withheld from voting
on any proposition in the same proportion as (i) the aggregate record date cash
value held in such sub-account for policies giving instructions, respectively,
to vote for, against, or withhold votes on such proposition, bears to (ii) the
aggregate record date cash value held in the sub-account for all policies for
which voting instructions are received. Participants continued in effect under
lapse options will not be permitted to give voting instructions. Shares held in
any other insurance company general or separate account or sub-account thereof
will be voted in the proportion specified in the second preceding sentence for
shares attributable to policies.
7. Duration and Termination.
This Agreement shall continue in effect as set forth below. This Agreement
may be terminated at any time, at the option of either of the Company or the
Fund, when neither the Company, any insurance company nor the separate account
or accounts of such insurance company which is an affiliate thereof which is not
a Participating Insurance Company own any Shares of the Fund or may be
terminated by either party to the Agreement upon a determination by a majority
of the Trustees of the Fund, or a majority of its disinterested Trustees,
following certification thereof by a Participating Insurance Company given in
accordance with Paragraph 9 that an irreconcilable conflict exists among the
interests of (i) all contract holders and policy holders of Variable Insurance
Products of all separate accounts or (ii) the interests of the Participating
Insurance Companies investing in the Fund. If this Agreement is so terminated,
the Fund may, at any time thereafter, automatically redeem the Shares of any
Portfolio held by a Participating Shareholder.
8. Compliance.
The Fund will comply with the provisions of Section 4240(a) of the New York
Insurance Law. Each Portfolio of the Fund will comply with the provisions of
Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code"),
relating to diversification requirements for variable annuity, endowment and
life insurance contracts. Specifically, each Portfolio will comply with either
(i) the requirement of Section 817(h)(1) of the Code that its assets be
adequately diversified, or (ii) the "Safe Harbor for Diversification" specified
in Section 817(h)(2) of the Code. The Fund will notify the Company immediately
upon having a reasonable basis for believing that a Portfolio has ceased to
comply with the requirements of Section 817(h) of the Code or that the Portfolio
might not so comply in the future.
The provisions of Paragraphs 5 and 6 of this Agreement shall be interpreted
in a manner consistent with any Rule or order of the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, applicable to
the parties hereto.
No Shares of any Portfolio of the Fund may be sold to the general public.
9. Notices.
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
Xxxxxxx Variable Life Investment Fund
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
(000) 000-0000
Attn: Xxxxxxx X. Xxxxxx
If to the Company:
Cova Financial Services Life Insurance Company
Xxx Xxxxx Xxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
10. Massachusetts Law to Apply.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
11. Miscellaneous.
The name "Xxxxxxx Variable Life Investment Fund" is the designation of the
Trustees for the time being under a Declaration of Trust dated March 15, 1985,
as amended, and all persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund. No Portfolio shall
be liable for any obligations properly attributable to any other Portfolio.
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. This Agreement may be executed
simultaneously in two or more counterparts, each of which taken together shall
constitute one and the same instrument.
12. 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.
12. Entire Agreement.
This Agreement incorporates the entire understanding and agreement among
the parties hereto, and supersedes any and all prior understandings and
agreements between the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the ____ day of __________, 1999.
SEAL XXXXXXX VARIABLE LIFE
INVESTMENT FUND
By:________________________________
Xxxxxxx X. Xxxxxx
President
SEAL COVA FINANCIAL LIFE
INSURANCE COMPANY
By:______________________________
Its:_____________________________
