PARTICIPATION AGREEMENT AMONG MFS VARIABLE INSURANCE TRUST, KANSAS CITY LIFE INSURANCE COMPANY AND MASSACHUSETTS FINANCIAL SERVICES COMPANY
AMONG
MFS
VARIABLE INSURANCE TRUST,
KANSAS
CITY LIFE INSURANCE COMPANY
AND
MASSACHUSETTS
FINANCIAL SERVICES COMPANY
THIS
AGREEMENT, made and entered into as of this 25th day of April 1995, by and among
MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the “Trust”),
KANSAS CITY LIFE INSURANCE COMPANY , a Missouri corporation (the “Company”) on
its own behalf and on behalf of each of the segregated asset accounts of the
Company set forth in Schedule A hereto, as may be amended from time to time (the
“Accounts”), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation (“MFS”).
WHEREAS,
the Trust 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 or will be registered under the Securities Act of 1933, as amended
(the “1933 Act”);
WHEREAS,
shares of beneficial interest of the Trust are divided into several series of
shares, each representing the interests in a particular managed pool of
securities and other assets;
WHEREAS,
the series of shares of the Trust offered by the Trust to the Company and the
Accounts are set forth on Schedule A attached hereto (each, a “Portfolio,” and,
collectively, the “Portfolios”);
WHEREAS,
MFS is duly registered as an investment adviser under the Investment Advisers
Act of 1940, as amended, and any applicable state securities law, and is the
Trust’s investment adviser;
WHEREAS,
the Company will issue certain variable annuity and/or variable life insurance
contracts (individually, the “Policy” or, collectively, the “Policies”) which,
if required by applicable law, will be registered under the 1933
Act;
WHEREAS,
the Accounts are duly organized, validly existing segregated asset accounts,
established by resolution of the Board of Directors of the Company, to set aside
and invest assets attributable to the aforesaid variable annuity and/or variable
life insurance contracts that are allocated to the Accounts (the Policies and
the Accounts covered by this Agreement, and each corresponding Portfolio covered
by this Agreement in which the Accounts invest, is specified in Schedule A
attached hereto as may be modified from time to time);
WHEREAS,
the Company has registered or will register the Accounts as unit investment
trusts under the 1940 Act (unless exempt therefrom);
WHEREAS,
MFS Fund Distributors, Inc. (the “Underwriter”) is registered as a broker-dealer
with the Securities and Exchange Commission (the “SEC”) under the Securities
Exchange Act of 1934, as amended (hereinafter the “1934 Act”), and is a member
in good standing of the National Association of Securities Dealers, Inc. (the
“NASD”);
WHEREAS,
Sunset Financial Services, Inc. the underwriter for the individual variable
annuity and the variable life policies, is registered as a broker-dealer with
the SEC under the 1934 Act and is a member in good standing of the NASD;
and
WHEREAS,
to the extent permitted by applicable insurance laws and regulations, the
Company intends to purchase shares in one or more of the Portfolios specified in
Schedule A attached hereto (the “Shares”) on behalf of the Accounts to fund the
Policies, and the Trust intends to sell such Shares to the Accounts at net asset
value;
NOW,
THEREFORE, in consideration of their mutual promises, the Trust, MFS, and the
Company agree as follows:
ARTICLE
I. SALE OF TRUST
SHARES
1.1 The Trust
agrees to sell to the Company those Shares which the Accounts order (based on
orders placed by Policy holders on that Business Day, as defined below) and
which are available for purchase by such Accounts, executing such orders on a
daily basis at the net asset value next computed after receipt by the Trust or
its designee of the order for the Shares. For purposes of this Section 1.1, the
Company shall be the designee of the Trust for receipt of such orders from
Policy owners and receipt by such designee shall constitute receipt by the
Trust; provided
that the Trust receives notice of such orders by 9:30 a.m. New York time on the
next following Business Day. “Business Day” shall mean any day on which the New
York Stock Exchange, Inc. (the “NYSE”) is open for trading and on which the
Trust calculates its net asset value pursuant to the rules of the
SEC.
1.2 The Trust
agrees to make the Shares available indefinitely for purchase at the applicable
net asset value per share by the Company and the Accounts on those days on which
the Trust calculates its net asset value pursuant to rules of the SEC and the
Trust shall calculate such net asset value on each day which the NYSE is open
for trading. Notwithstanding the foregoing, the Board of Trustees of the Trust
(the “Board”) may refuse to sell any Shares to the Company and the Accounts, or
suspend or terminate the offering of the Shares 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 its fiduciary duties under federal
and any applicable state laws, necessary in the best interest of the
Shareholders of such Portfolio.
1.3 The Trust
and MFS agree that the Shares will be sold only to insurance companies which
have entered into participation agreements with the Trust and MFS (the
“Participating Insurance Companies”) and their separate accounts, qualified
pension and retirement plans and MFS or its affiliates. The Trust and MFS will
not sell Trust shares to any insurance company or separate account unless and
agreement containing provisions substantially the same as Articles III and VII
of this Agreement is in effect to govern such sales. The Company will not resell
the Shares except to the Trust or its agents.
1.4 The Trust
agrees to redeem for cash, on the Company’s order, any full or fractional Shares
held by the Accounts (based on orders placed by Policy owners on that Business
Day), executing such requests on a daily basis at the net asset value next
computed after receipt by the Trust or its designee of the request for
redemption. For purposes of this Section 1.4, the Company shall be the designee
of the Trust for receipt of requests for redemption from Policy owners and
receipt by such designee shall constitute receipt by the Trust; provided that
the Trust receives notice of such request for redemption by 9:30 a.m. New York
time on the next following Business Day.
1.5 Each
purchase, redemption and exchange order placed by the Company shall be placed
separately for each Portfolio and shall not be netted with respect to any
Portfolio. However, with respect to payment of the purchase price by the Company
and of redemption proceeds by the Trust, the Company and the Trust
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shall net
purchase and redemption orders with respect to each Portfolio and shall transmit
one net payment for all of the Portfolios in accordance with Section
1.6.
1.6 In the
event of net purchases, the Company shall pay for the Shares by 2:00 p.m. New
York time on the next Business Day after an order to purchase the Shares is made
in accordance with the provisions of Section 1.1. hereof. In the event of net
redemptions, the Trust shall pay the redemption proceeds by 2:00 p.m. New York
time on the next Business Day after an order to redeem the shares is made in
accordance with the provisions of Section I.4. hereof. All such payments shall
be in federal funds transmitted by wire.
1.7 Issuance
and transfer of the Shares will be by book entry only. Stock certificates will
not be issued to the
Company or the Accounts. The Shares ordered from the Trust will be recorded in
an appropriate title for the Accounts or the appropriate subaccounts of the
Accounts.
1.8 The Trust
shall furnish same day notice (by wire or telephone followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Shares. The Company hereby elects to receive all such dividends
and distributions as are payable on a Portfolio’s Shares in
additional Shares of that Portfolio. The Trust shall notify the Company of the
number of Shares so issued as payment of such dividends and
distributions.
1.9 The Trust
or its custodian shall furnish the net asset value per share for each Portfolio
to the Company on each Business Day as soon as reasonably practical after the
net asset value per share is calculated and shall use its best efforts to make
such net asset value per share available by 6:30 p.m. New York time. In the
event that the Trust is unable to meet the 6:30 p.m. time stated herein, it
shall provide additional time for the Company to place orders for the purchase
and redemption of Shares. Such additional time shall be equal to the additional
time which the Trust takes to make the net asset value available to the Company.
If the Trust provides materially incorrect share net asset value information,
the Trust shall make an
adjustment to the number of shares purchased or redeemed for the Accounts to
reflect the correct net asset value per share. Any material error in the
calculation or reporting of net asset value per share, dividend or capital gains
information shall be reported promptly upon discovery to the
Company.
ARTICLE
II. CERTAIN REPRESENTATIONS,
WARRANTIES AND COVENANTS
2.1 The
Company represents and warrants that the Policies are or will be registered
under the 1933 Act or are exempt from or not subject to registration thereunder,
and that the Policies will be issued, sold, and distributed in compliance in all
material respects with all applicable state and federal laws, including without
limitation the 1933 Act, the Securities Exchange Act of 1934, as amended (the
“1934 Act”), and the 1940 Act. The Company further represents and warrants that
it is an insurance company duly organized and in good standing under applicable
law and that it has legally and validly established the Account as a segregated
asset account under applicable law and has registered or, prior to any issuance
or sale of the Policies, will register the Accounts as unit investment trusts in
accordance with the provisions of the 1940 Act (unless exempt therefrom) to
serve as segregated investment accounts for the Policies, and that it will
maintain such registration for so long as any Policies are outstanding. The
Company shall amend the registration statements under the 1933 Act for the
Policies and the registration statements under the 1940 Act for the Accounts
from time to time as required in order to effect the continuous offering of the
Policies or as may otherwise be required by applicable law. The Company shall
register and qualify the Policies for sales accordance with the securities laws
of the various states only if and to the extent deemed necessary by the
Company.
2.2 Subject
to compliance by each Portfolio with Article VI hereof, the Company represents
and warrants that the Policies are currently and at the time of issuance will be
treated as life insurance, endowment or annuity contracts under applicable
provisions of the Internal Revenue Code of 1986, as
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amended
(the “Code”), that it will make every effort to maintain such treatment and that
it will notify the Trust or MFS immediately upon having a reasonable basis for
believing that the policies have ceased to be so treated or that they might not
be so treated in the future.
2.3 The
Company represents and warrants that Sunset Financial Services, Inc., the
underwriter for the individual variable annuity and the variable life policies,
is a member in good standing of the NASD and is a registered broker-dealer with
the SEC. The Company represents and warrants that the Company and Sunset
Financial Services. Inc. will sell and distribute such policies in accordance in
all material respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 0000
Xxx.
2.4 The Trust
and MFS represent and warrant that the 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 Commonwealth of Massachusetts and all applicable
federal and state securities laws and that the Trust is and shall remain
registered under the 1940 Act. The Trust 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 Trust shall
register and qualify the Shares for sale in accordance with the laws of the
various states only if and to the extent deemed necessary by the
Trust.
2.5 MFS
represents and warrants that the Underwriter is a member in good standing of the
NASD and is registered as a broker-dealer with the SEC. The Trust and MFS
represent that the Trust and the Underwriter will sell and distribute the Shares
in accordance in all material respects with all applicable state and federal
securities laws, including without limitation the 1933 Act, the 1934 Act, and
the 0000 Xxx.
2.6 The Trust
represents that it is lawfully organized and validly existing under the laws of
The Commonwealth of Massachusetts and that it does and will comply in all
material respects with the 1940 Act and any applicable regulations
thereunder.
2.7 MFS
represents and warrants that it is and shall remain duly registered under all
applicable federal securities laws and that it shall perform its obligations for
the Trust in compliance in all material respects with any applicable federal
securities laws and with the securities laws of The Commonwealth of
Massachusetts. MFS represents and warrants that it is not subject to state
securities laws other than the securities laws of The Commonwealth of
Massachusetts and that it is exempt from registration as an investment adviser
under the securities laws of The Commonwealth of Massachusetts.
2.8 No less
frequently than annually, the Company shall submit to the Board such reports,
material or data as the Board may reasonably request so that it may carry out
fully the obligations imposed upon it by the conditions contained in the
exemptive application pursuant to which the SEC has granted exemptive relief to
permit mixed and shared funding (the “Mixed and Shared Funding Exemptive
Order”).
ARTICLE
III. PROSPECTUS AND PROXY
STATEMENTS: VOTING
3.1 At least
annually, the Trust or its designee shall provide the Company, free of charge,
with as many copies of the current prospectus (describing only the Portfolios
listed in Schedule A hereto) for the Shares as the Company may reasonably
request for distribution to existing Policy owners whose Policies are funded by
such Shares. The Trust or its designee shall provide the Company, at the
Company’s expense, with as many copies of the current prospectus for the Shares
as the Company may reasonably request for distribution to prospective purchasers
of Policies. If requested by the Company in lieu thereof, the Trust or its
designee shall provide such documentation (including a “camera ready” copy of
the new prospectus as set in type or, at the request of the Company, as a
diskette in the form sent to the financial printer) and other assistance as
is
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reasonably
necessary in order for the parties hereto once each year (or more frequently if
the prospectus for the Shares is supplemented or amended) to have the prospectus
for the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a) the
Company and (b) the Trust or its designee in proportion to the number of pages
of the Policy and Shares’ prospectuses, taking account of other relevant factors
affecting the expense of printing, such as covers, columns, graphs and charts;
the Trust or its designee to bear the cost of printing the Shares’ prospectus
portion of such document for distribution to owners of existing Policies funded
by the Shares and the Company to bear the expenses of printing the portion of
such document relating to the Accounts; provided, however,
that the Company shall bear all printing expenses of such combined documents
where used for distribution to prospective purchasers or to owners of existing
Policies not funded by the Shares. In the event that the Company requests that
the Trust or its designee to provide the Trust’s prospectus in a “camera ready”
or diskette format, the Trust shall be responsible for providing the prospectus
in the format in which it or MFS is accustomed to formatting prospectuses and
shall bear the expense of providing the prospectus in such format (e.g., typesetting
expenses), and the Company shall bear the expense of adjusting or changing the
format to conform with any of its prospectuses.
3.2 The
prospectus for the Shares shall state that the statement of additional
information for the Shares is available from the Trust or its designee. The
Trust or its designee, at its expense, shall print and provide such statement of
additional information to the Company (or a master of such statement suitable
for duplication by the Company) for distribution to any owner of a Policy funded
by the Shares. The Trust or its designee, at the Company’s expense, shall print
and provide such statement to the Company (or a master of such statement
suitable for duplication by the Company) for distribution to a prospective
purchaser who requests such statement or to an owner of a Policy not funded by
the Shares.
3.3 The Trust
or its designee shall provide the Company free of charge copies, if and to the
extent applicable to the Shares, of the Trust’s proxy materials, reports to
Shareholders and other communications to Shareholders in such quantity as the
Company shall reasonably require for distribution to Policy owners.
3.4 Notwithstanding
the provisions of Sections 3.1, 3.2, and 3.3 above, or of Article V below, the
Company shall pay the expense of printing or providing documents to the extent
such cost is considered a distribution expense. Distribution expenses would
include by way of illustration, but are not limited to, the printing of the
Shares’ prospectus or prospectuses for distribution to prospective purchasers or
to owners of existing Policies not funded by such Shares.
3.5 The Trust
hereby notifies the Company that it may be appropriate to include in the
prospectus pursuant to which a Policy is offered disclosure regarding the
potential risks of mixed and shared funding.
3.6 If and to
the extent required by law, the Company shall:
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(a)
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solicit
voting instructions from Policy
owners;
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(b)
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vote
the Shares in accordance with instructions received from Policy owners;
and
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(c)
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vote
the Shares for which no instructions have been received in the same
proportion as the Shares of such Portfolio for which instructions have
been received from Policy owners;
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so long
as and to the extent that the SEC continues to interpret the 1940 Act to require
pass through voting privileges for variable contract owners. Subject to the
requirements of applicable law, the Company will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Policy owners. The Company reserves the right to vote
shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be
5
responsible
for assuring that each of their separate accounts holding Shares calculates
voting privileges in the manner required by the Mixed and Shared Funding
Exemptive Order. The Trust and MFS will notify the Company of any changes of
interpretations or amendments to the Mixed and Shared Funding Exemptive
Order.
ARTICLE
IV. SALES MATERIAL AND
INFORMATION
4.1 The
Company shall furnish, or shall cause to be furnished, to the Trust or its
designee, each piece of sales literature or other promotional material in which
the Trust, MFS, any other investment adviser to the Trust, or any affiliate of
MFS are named, at least five (5) Business Days prior to its use. No such
material shall be used if the Trust, MFS, or their respective designees
reasonably objects to such use within five (5) Business Days after receipt of
such material.
4.2 The
Company shall not give any information or make any representations or statement
on behalf of the Trust, MFS, any other investment adviser to the Trust, or any
affiliate of MFS or concerning the Trust or any other such entity in connection
with the sale of the Policies other than the information or representations
contained in the registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus and
statement of additional information may be amended or supplemented from time to
time, or in reports or proxy statements for the Trust, or in sales literature or
other promotional material approved by the Trust, MFS or their respective
designees, except with the permission of the Trust, MFS or their respective
designees. The Trust, MFS or their respective designees each agrees to respond
to any request for approval on a prompt and timely basis. The Company shall
adopt and implement procedures reasonably designed to ensure that information
concerning the Trust, MFS or any of their affiliates which is intended for use
only by brokers or agents selling the Policies information that is not intended
for distribution to Policy holders or prospective Policy holders) is so used,
and neither the Trust, MFS nor any of their affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
4.3 The Trust
or its 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 and/or the Accounts is named, at least five (5) Business Days
prior to its use. No such material shall be used if the Company or its designee
reasonably objects to such use within five (5) Business Days after receipt of
such material.
4.4 The Trust
and MFS shall not give, and agree that the Underwriter shall not give, any
information or make any representations on behalf of the Company or concerning
the Company, the Accounts, or the Policies in connection with the sale of the
Policies other than the information or representations contained in a
registration statement, prospectus, or statement of additional information for
the Policies, as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional material
approved by the Company or its designee, except with the permission of the
Company. The Company or its designee agrees to respond to any request for
approval on a prompt and timely basis. The parties hereto agree that this
Section 4.4. is neither intended to designate nor otherwise imply that MFS is an
underwriter or distributor of the Policies.
4.5 The
Company and the Trust (or its designee in lieu of the Company or the Trust, as
appropriate) will each provide to the other 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 amendments
to any of the above, that relate to the Policies, or to the Trust or its Shares,
prior to or contemporaneously with the filing of such document
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with the
SEC or other regulatory authorities. The Company and the Trust shall also each
promptly inform the other or the results of any examination by the SEC (or other
regulatory authorities) that relates to the Policies, the Trust 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.
4.6 The Trust
and MFS 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 Trust’s registration statement, particularly any change resulting
in change to the registration statement or prospectus or statement of additional
information for any Account. The Trust and MFS will cooperate with the Company
so as to enable the Company to solicit proxies from Policy owners or to make
changes to its prospectus, statement of additional information or registration
statement, in an orderly manner. The Trust and MFS will make reasonable efforts
to attempt to have changes affecting Policy prospectuses become effective
simultaneously with the annual updates for such prospectuses.
4.7 For
purpose of this Article IV and Article VIII, the phrase “sales literature or
other promotional material” includes but is not limited to 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), and sales
literature (such as brochures, circulars, reprints or excerpts or any other
advertisement, sales literature, or published articles), distributed or made
generally available to customers or the public, educational or training
materials or communications distributed or made generally available to some or
all agents or employees.
ARTICLE
V. FEES AND
EXPENSES
5.1 The Trust
shall pay no fee or other compensation to the Company under this Agreement, and
the Company shall pay no fee or other compensation to the Trust, except that if
the Trust or any
Portfolio adopts and implements a plan pursuant to Rule 12b-l under the 1940 Act
to finance distribution and shareholder servicing expenses, then, subject to
obtaining any required exemptive orders or regulatory approvals, the Trust may
make payments to the Company or to the underwriter for the Policies if and in
amounts agreed to by the Trust in writing. Each party, however, shall, in
accordance with the allocation of expenses specified in Articles III and V
hereof, reimburse other parties for expense initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for appropriate
compensation for, other services relating to the Trust and/or to the
Accounts.
5.2 The Trust
or its designee shall bear the expenses for the cost of registration and
qualification of the Shares under all applicable federal and state laws,
including preparation and filing of the Trust’s registration statement, and
payment of filing fees and registration fees; preparation and filing of the
Trust’s proxy materials and reports to Shareholders; setting in type and
printing its prospectus and statement of additional information (to the extent
provided by and as determined in accordance with Article III above); setting in
type and printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above); the
preparation of all statements and notices required of the Trust by any federal
or state law with respect to its Shares; all taxes on the issuance or transfer
of the Shares; and the costs of distributing the Trust’s prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses permitted
to be paid or assumed by the Trust pursuant to a plan, if any, under Rule 12b- I
under the 0000 Xxx. The Trust shall not bear any expenses of marketing the
Policies.
5.3 The
Company shall bear the expenses of distributing the Shares’ prospectus or
prospectuses in connection with new sales of the Policies and of distributing
the Trust’s Shareholder reports and proxy materials to Policy owners. The
Company shall bear all expenses associated with the registration,
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qualification,
and filing of the Policies under applicable federal securities and state
insurance laws; the cost of preparing, printing and distributing the Policy
prospectus and statement of additional information; and the cost of preparing,
printing and distributing annual individual account statements for Policy owners
as required by state insurance laws.
ARTICLE
VI. DIVERSIFICATION AND RELATED
LIMITATIONS
6.1 The Trust
and MFS represent and warrant that each Portfolio of the Trust will meet the
diversification requirements of Section 817(h)(1) of the Code and Treas. Reg.
L817-5, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, as they may be amended from time to time
(and any revenue rulings, revenue procedures, notices, and other published
announcements of the Internal Revenue Service interpreting these sections). In
the event that any Portfolio is not so diversified at the end of any applicable
quarter, the Trust and MFS will make every effort to (a) adequately diversify
the Portfolio so as to achieve compliance within the grace period afforded by
Treas. Reg. 1.817.5 and (b) notify the Company.
ARTICLE
VII. POTENTIAL MATERIAL
CONFLICTS
7.1 The Trust
agrees that the Board, constituted with a majority of disinterested trustees,
will monitor each Portfolio of the Trust for the existence of any material
irreconcilable conflict between the interests of the variable annuity contract
owners and the variable life insurance policy owners of the Company and/or
affiliated companies (“contract owners”) investing in the Trust. The Board shall
have the sole authority to determine if a material irreconcilable conflict
exists, and such determination shall be binding on the Company only if approved
in the form of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of any
such determination to the Company.
7.2 The
Company agrees that it will be responsible for assisting the Board in carrying
out its responsibilities under the conditions set forth in the Trust’s exemptive
application pursuant to which the SEC has granted the Mixed and Shared Funding
Exemptive Order by providing the Board, as it may reasonably request, with all
information necessary for the Board to consider any issues raised and agrees
that it will be responsible for promptly reporting any potential or existing
conflicts of which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner voting
instructions are disregarded. The Company also agrees that, if a material
irreconcilable conflict arises, it will at is own cost remedy such conflict up
to an including (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio of
the Trust, or submitting to a vote of all affected contract owners whether to
withdraw assets from the Trust or any Portfolio and reinvesting such assets in a
different investment medium and, as appropriate, segregating the assets
attributable to any appropriate group of contract owners that votes in favor of
such segregation, or offering to any of the affected contract owners the option
of segregating the assets attributable to their contracts or policies, and (b)
establishing a new registered management investment company and segregating the
assets underlying the Policies, unless a majority of Policy owners materially
adversely affected by the conflict have voted to decline the offer to establish
a new registered management investment company.
7.3 A
majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable conflict,
the Company will withdraw from investment in the Trust each of the Accounts
designated by the disinterested trustees and terminate this Agreement within six
(6) months after the Board informs the Company in writing of the
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foregoing
determination; provided, however, that such
withdrawal and termination shall be limited to the extent required to remedy any
such material irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
7.4 If and to
the extent that 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 1940 Act or the rules
promulgated thereunder with respect to mixed or shares funding (as defined in
the Mixed and Shared Funding Exemptive Order) on terms and conditions materially
different from those contained in the Mixed Shared Funding Exemptive Order, then
(a) the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE
VIII. INDEMNIFICATION
8.1 Indemnification
by the Company
The
Company agrees to indemnify and hold harmless the Trust, MFS, any affiliates of
MFS, and each of their respective directors/trustees, officers and each person,
if any, who controls the Trust or MFS within the meaning of Section 15 of the
1933 Act, and any agents or employees of the foregoing (each an “Indemnified
Party,” or collectively, the “Indemnified Parties” for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or expenses
(including reasonable counsel fees) to which an Indemnified Party 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 Shares or
the Policies and:
|
(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 statement of additional information for the Policies or contained in
the Policies or sales literature or other promotional material for the
Policies (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 reasonable reliance upon and in conformity with information furnished
to the Company or its designee by or on behalf of the Trust or MFS for use
in the registration statement, prospectus or statement of additional
information for the Policies or in the Policies or sales
literature or other promotional material (or any amendment or supplement)
or otherwise for use in connection with the sale of the Policies or
Shares; or
|
|
(b)
|
arise
out of or as a result of material statements or representations (other
than statements or representations contained in the registration
statement, prospectus, statement of additional information or sales
literature or other promotional material of the Trust not supplied by the
Company or this designee, or persons under its control and on which the
Company has reasonably relied) or wrongful conduct of the Company or
persons under its control, with respect to the sale or distribution of the
Policies or Shares; or
|
9
|
(c)
|
arise
out of any untrue statement or alleged untrue statement of a material fact
contained in the registration statement, prospectus, statement of
additional information, or sales literature or other promotional
literature of the 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 statement or
statements therein not misleading, if such statement or omission was made
in reliance upon information furnished to the Trust by or on behalf of the
Company; or
|
|
(d)
|
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 other material breach of this Agreement by the Company;
or
|
|
(e)
|
arise
as a result of any material failure by the Company to provide the services
and furnish the materials under the terms of this
Agreement;
|
as
limited by and in accordance with the provisions of this Article
VIII.
8.2 Indemnification
by the Trust
The Trust
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 and the Company’s affiliated principal underwriter of
the Policies, and any agents or employees of the foregoing (each an “Indemnified
Party,” or collectively, the “Indemnified Parties” for purposes of this Section
8.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Trust) or expenses (including
reasonable counsel fees) to which any Indemnified Party 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 Shares or the Policies
and:
|
(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,
statement of additional information or sales literature or other
promotional material of the 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 statement 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 reasonable reliance upon and in conformity with information furnished
to the Trust, MFS, the Underwriter or their respective designees by or on
behalf of the Company for use in the registration statement, prospectus or
statement of additional information for the Trust or in sales literature
or other promotional material for the Trust (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Policies or Shares; or
|
|
(b)
|
arise
out of or as a result of material statements or representations (other
than statement or representations contained in the registration statement,
prospectus, statement of additional information or sales literature or
other promotional material for the Policies not supplied by the Trust, MFS
the Underwriter or any of their respective designees or persons under
their respective control and on which any such entity has reasonably
relied) or wrongful conduct of the Trust or persons under its control,
with respect to the sale or distribution of the Policies or Shares;
or
|
10
|
(c)
|
arise
out of or result from any material breach of any representation and/or
warranty made by the Trust in this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with the
diversification requirements specified in Article VI of this Agreement) or
arise out of or result from any other material breach of this Agreement by
the Trust; or
|
|
(d)
|
arise
out of or result from the materially incorrect or untimely calculation or
reporting of the daily net asset value per share or dividend or capital
gain distribution rate; or
|
|
(e)
|
arise
as a result of any material failure by the Trust to provide the services
and furnish the materials under the terms of the
Agreement;
|
as
limited by and in accordance with the provisions of this Article
VIII.
8.3 In no
event shall the Trust be liable under the indemnification provisions contained
in this Agreement to any individual or entity, including without limitation, the
Company, or any Participating Insurance Company or any Policy owner, with
respect to any losses, claims, damages, liabilities or expenses that arise out
of or result from (i) a breach of any representation, warranty, and/or covenant
made by the Company hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by the Company or any Participating Insurance
Company to maintain its segregated asset account (which invests in any
Portfolio) as a legally and validly established segregated asset account under
applicable state law and as a duly registered unit investment trust under the
provisions of the 1940 Act (unless exempt therefrom); or (iii) subject to the
Trust’s
compliance with the diversification requirements specified in Article VI of this
Agreement, the failure by the Company or any Participating Insurance Company to
maintain its variable annuity and/or variable life insurance contracts (with
respect to which any Portfolio serves as an underlying funding vehicle) as life
insurance, endowment or annuity contracts under applicable provisions of the
Code.
8.4 Neither
the. Company nor the Trust shall be liable under the indemnification provisions
contained in this Agreement with respect to any losses, claims, damages,
liabilities or expenses to which an Indemnified Party would otherwise be subject
by reason of such Indemnified Party’s willful misfeasance, willful misconduct,
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.
8.5 Promptly
after receipt by an Indemnified Party under this Section 8.5. of commencement of
action, such Indemnified Party will, if a claim in respect thereof is to be made
against the indemnifying party under this section, notify the indemnifying party
of the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
Indemnified Party otherwise than under this section. In case any such action is
brought against any Indemnified Party, and it notified the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, assume the defense thereof, with
counsel satisfactory to such Indemnified Party. After notice from the
indemnifying party of its intention to assume the defense of an action, the
Indemnified Party shall bear the expenses of any additional counsel obtained by
it, and the indemnifying party shall not be liable to such Indemnified Party
under this section for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation.
8.6 Each of
the parties agrees promptly to notify the other parties of the commencement of
any litigation or proceeding against it or any of its respective officers,
directors, trustees, employees or 1933 Act control
11
persons
in connection with the Agreement, the issuance or sale of the Policies, the
operation of the Accounts, or the sale or acquisition of Shares.
8.7 A
successor by law of the parties to this Agreement shall be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE
IX. APPLICABLE
LAW
9.1 This
Agreement shall be construed and the provisions hereof interpreted under and in
accordance with the laws of The Commonwealth of Massachusetts.
9.2 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
X. NOTICE OF FORMAL
PROCEEDINGS
The
Trust, MFS, and the Company agree that each such party shall promptly notify the
other parties to this Agreement, in writing, of the institution of any formal
proceedings brought against such party or
its designees by the NASD, the SEC, or any insurance department or any other
regulatory body regarding such party’s duties under this Agreement or related to
the sale of the Policies, the operation of the Accounts, or the purchase of the
Shares.
ARTICLE
XI. TERMINATION
11.1 This
Agreement shall terminate with respect to the Accounts, or one, some, or all
Portfolios:
|
(a)
|
at
the option of any party upon six (6) months’ advance written notice to the
other parties; or
|
|
(b)
|
at
the option of the Company to the extent that the Shares of Portfolios are
not reasonably available to meet the requirements of the Policies or are
not “appropriate funding vehicles” for the Policies, as reasonably
determined by the Company. Without limiting the generality of the
foregoing, the Shares of a Portfolio would not be “appropriate funding
vehicles” if, for example, such Shares did not meet the diversification or
other requirements referred to in Article VI hereof; or if the Company
would be permitted to disregard Policy owner voting instructions pursuant
to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt notice of the election
to terminate for such cause and an explanation of such cause shall be
furnished to the Trust by the Company;
or
|
|
(c)
|
at
the option of the Trust or MFS upon institution of formal proceedings
against the Company by the NASD, the SEC, or any insurance department or
any other regulatory body regarding the Company’s duties under this
Agreement or related to the sale of the Policies, the operation of the
Accounts, or the purchase of the Shares;
or
|
|
(d)
|
at
the option of the Company upon institution of formal proceedings against
the Trust by the NASD, the SEC, or any state securities or insurance
department or any other regulatory
|
12
body
regarding the Trust’s or MFS’ duties under this Agreement or related to the sale
of the shares; or
|
(e)
|
at
the option of the Company, the Trust or MFS upon receipt of any necessary
regulatory approvals and/or the vote of the Policy owners having an
interest in the Accounts (or any subaccounts) to substitute the shares of
another investment company for the corresponding Portfolio Shares in
accordance with the terms of the Policies for which those Portfolio Shares
had been selected to serve as the underlying investment media. The Company
will give thirty (30) days’
prior written notice to the Trust of the date of any proposed vote or
other action taken to replace the Shares;
or
|
|
(f)
|
termination
by either the Trust or MFS by thirty (30) days’ advanced written notice to
the Company, if either one or both of the Trust or MFS respectively, shall
determine, in their sole judgment exercised in good faith, that the
Company has suffered a material adverse change in its business,
operations, financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
|
|
(g)
|
termination
by the Company by thirty (30) days’ advanced written notice to the Trust
and MFS, if the Company shall determine, in its sole judgment exercised in
good faith, that the Trust or MFS has suffered a material adverse change
in this business, operations, financial condition or prospects since the
xxxx of this Agreement or is the subject of material adverse publicity;
or
|
|
(h)
|
at
the option of any party to this Agreement, upon another party’s failure to
cure any material breach of any provision of this Agreement within thirty
(30) days after written notice thereof;
or
|
|
(i)
|
upon
assignment of this Agreement, unless made with the written consent of the
parties hereto.
|
11.2 The
notice shall specify the Portfolio or Portfolios, Policies and, if applicable,
the Accounts as to which the Agreement is to be terminated.
11.3 It is
understood and agreed that the right of any party hereto to terminate this
Agreement pursuant to Section 11.1(a) may be exercised for cause or for no
cause.
11.4 Except as
necessary to implement Policy owner initiated transactions, or as required by
state insurance laws or regulations, the Company shall not redeem the Shares
attributable to the Policies (as opposed to the Shares attributable to the
Company’s assets held in the Accounts), and the Company shall not prevent Policy
owners from allocating payments to a Portfolio that was otherwise available
under the Policies, until thirty (30) days after the Company shall have notified
the Trust of its intention to do so.
11.5 Notwithstanding
any termination of this Agreement, the Trust and MFS shall, at the option of the
Company, continue to make available additional shares of the Portfolios pursuant
to the terms and conditions of this Agreement, for all Policies in effect on the
effective date of termination of this Agreement (the “Existing Policies”),
except as otherwise provided under Article VII of this Agreement. Specifically,
without limitation, the owners of the Existing Policies shall be permitted to
transfer or reallocate investment under the Policies, redeem investments in any
Portfolio and/or invest in the Trust upon the making of additional purchase
payments under the Existing Policies.
13
ARTICLE
XII. 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
parry.
If to the
Trust:
MFS
Variable Insurance Trust
000
Xxxxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Attn:
Xxxxxxx X. Xxxxx, Secretary
If to the
Company:
Kansas
City Life Insurance Company
0000
Xxxxxxxx
Xxxxxx
Xxxx, Xxxxxxxx 00000
Attn: C.
Xxxx Xxxxxxxxx, General Counsel
If to
MFS:
Massachusetts
Financial Services Company
000
Xxxxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Attn:
Xxxxxxx X. Xxxxx, General Counsel
ARTICLE
XIII. MISCELLANEOUS
13.1 Subject
to the requirement of legal process and regulatory authority, each party hereto
shall treat as confidential the names and addresses of the owners of the
Policies and all information reasonably identified as confidential in writing by
any other party hereto and, except as permitted by this Agreement or as
otherwise required by applicable law or regulation, shall not disclose,
disseminate or utilize such names and addresses and other confidential
information without the express written consent of the affected party until such
time as it may come into the public domain.
13.2 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.
13.3 This
Agreement may be executed simultaneously in one or more counterparts, each of
which taken together shall constitute one and the same instrument.
13.4 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.
13.5 The
Schedule attached hereto, as modified from time to time, is incorporated herein
by reference and is part of this Agreement.
14
13.6 Each
party hereto shall cooperate with each other party in connection with inquiries
by appropriate governmental authorities (including without limitation the SEC,
the NASD, and state insurance regulators) relating to this Agreement or the
transactions contemplated hereby.
13.7 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.
13.8 A copy of
the Trust’s Declaration of Trust is on file with the Secretary of
State of The Commonwealth of Massachusetts. The Company acknowledges that the
obligations of or arising out of this instrument are not binding upon any of the
Trust’s trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. The Company further acknowledges that the
assets and liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon the
assets or property of the Portfolio on whose behalf the Trust has executed this
instrument. The Company also agrees that the obligations of each Portfolio
hereunder shall be several and not joint, in accordance with its proportionate
interest hereunder, and the Company agrees not to proceed against any Portfolio
for the obligations of another Portfolio.
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 and
its seal to be hereunder affixed hereto as of the date specified
above.
KANSAS
CITY LIFE INSURANCE COMPANY
By its
authorized officer
By:
/s/ Xxxxxxx X. Xxxx
Title: SVP
MFS
VARIABLE INSURANCE TRUST, on behalf of the Portfolios
By its
authorized officer and not individually,
By: /s/
A. Xxxxx Xxxxxxx
A. Xxxxx
Xxxxxxx
Chairman
and President
MASSACHUSETTS
FINANCIAL SERVICES COMPANY
By its
authorized officer and not individually,
By: /s/
Xxxxxx X. Xxxxx
Xxxxxx X.
Xxxxx
Senior
Executive Vice President
15
