PARTICIPATION AGREEMENT AMONG MFS VARlABLE INSURANCE TRUST, PRINCIPAL LIFE INSURANCE COMPANY AND MASSACHUSETTS FINANCIAL SERVICES COMPANY
PARTICIPATION AGREEMENT |
AMONG |
MFS VARlABLE INSURANCE TRUST, |
PRINCIPAL LIFE INSURANCE COMPANY |
AND |
MASSACHUSETTS FINANCIAL SERVICES COMPANY |
THlS AGREEMENT, made and entered into this 26th day of March, 2002, by and among MFS |
VARIABLE INSURANCE TRUST, a Massachusetts business trust (the "Trust"), PRINCIPAL LIFE |
INSURANCE COMPANY, an Iowa corporation (the "Company") on it's 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 |
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, certain series of shares of the Trust are divided into two separate share classes, an |
Initial Class and a Service Class, and the Trust on behalf of the Service Class has adopted a Rule 12b-1 |
plan under the 1940Act pursuant to which the Service Class pays a distribution fee; |
WHEREAS, the series of shares of the Trust (each, a "Portfolio," and, collectively, the |
"Portfolios") and the classes of shares of those Portfolios (the "Shares") offered by the Trust to the |
Company and the Accounts are set forth on Schedule A attached hereto; |
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 1933Act; |
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 andlor 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 esempt 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, lnc. (the "NASD"); | |
WHEREAS, Princor 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 the Shares of the Portfolios as specified in Schedule A attached hereto 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 follo\vs: | |
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 prior to the close of regular trading on the new York Stock | |
Exchange, Lnc. (the "IWSE'') 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 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 lnsurance | |
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 an 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 request, any full or fractional |
Shares held by the Accounts (based on orders placed by Policy owners prior to the close of regular | |
trading on the NYSE 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 ~urchaseprice by the Company and of redemption proceeds by the Trust: | |
the Company and the Trust 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 1.6hereof. | |
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 Sl~aresis 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 nest Business Day after an order to | |
redeem the shares is made in accordance with the prowsions of Section 1.4. 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 make the net asset value per share for each Portfolio |
available 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 6:30p.m. New York time. In the event that the Trust is unable to meet the 6:30p.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. |
ARTlCLE 11. CERTAlN 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 fiom 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 othenvise be required by applicable law. The Company shall register and qualify the | |
Policies for sales in accordance with the securities laws of the various states only if and to the | |
extent deemed necessary by the Company. | |
2.2. | 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 contract under applicable | |
provisions of the Internal Revenue Code of 1956, as amended (the "Code"), that i t will maintain | |
such treatment and that it will notify the Trust or MFS immediately upon ha\mg 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 Princor, 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 Princor 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 1940 Act. . | |
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 ~tis lawfully organized and validly existing and in good standing |
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 exemptlve 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 Con~pany'sexpense, with as many copies of the current prospectus for the Shares | |
as the Company may reasonably request for distribution to prospective purchasers of Policies. The | |
Trust will provide such copies to the Company in timely manner so as to enable the Company to | |
print and distribute such materials within the time required by law. 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 assjstance as is 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 provides 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 ffee 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 onners of esisting 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 requircd by law, the Company shall | ||||||
(a) | solicit voting jnstn~ctionsfrom Policy owners; | ||||||
(b) | vote the Shares in accordance with instructions received from Policy owners; and | ||||||
(c) | 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; |
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. 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 |
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 three (3) 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 three (3) 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 distnbution to Policy owners or prospective Policy owners) 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 andor | |
the Accounts is named, at least three ( 3 ) Business Days prior to its use. No such material shall be | |
used if the Company or its designee reasonably objects to such use within three ( 3 ) 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 regisbation 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 Trust and MFS may not alter any material | |
so provided by the Company or its designee (including, without limitation, presenting or delivering | |
such material in a-differentmedium, e.g., electronic or internet) without the prior written consent | |
of the Company. 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 with the SEC or other regulatory authorities. | |
The Company and the Trust shall also each promptly inform the other of 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. | No party shall use any other party's names, logos, trademarks or service marks, whether |
registered or unregistered, without the prior written consent of such other party, or after written | |
consent therefor has been revoked, provided -thatseparate consent is not required under this Section | |
4.6 to the extent that consent to use a party's name, logo, trademark or service xxxx in connection | |
with a particular piece of advertising or sales literature has previously been giving by a party under | |
Sections 4.2 and 4.4 of this Agreement. The Company shall not use in advertising, publicly or | |
othenvise the name of the Trust: MFS or any of their affiliates nor any trade name, trademark, | |
trade device, servicemark, symbol or any abbreviation, contraction or simulation thereof of the | |
Trust, MFS, or their affiliates without the p r i g xxxxxx consent of the Trust or MFS in each | |
instance. The Trust and MFS shall not use in advertising, publicly or otherwise the name of the | |
Company or any of its affiliates nor any trade name, trademark, trade device, servicemark, symbol | |
or any abbreviation, contraction or simulation thereof of the Company or its affiliates without the | |
prior written consent of the Company in each instance. | |
4.7. | 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 beco~neeffective simultaneously with the annual updates for such | |
prospectuses. | |
4.8. | 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, to the extent the | |
Trust or any Portfolio has adopted and implemented a plan pursuant to Rule 12b-1 under the 1940 | |
Act to finance distribution and for Shareholder servicing expenses, then the Trust may make | |
payments to the Company or to the underwriter for the Policies in accordance with such plan. Each | |
party, however, shall, in accordance with the allocation of expenses specified in Articles III and V | |
hereof, ieimburse other parties for expenses 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 con~pensationfor, 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 Tnlst'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 UI 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-1 under the 1940 Act. 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 to Policy owners. The Company shall bear all expenses associated with the | |
registration, 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. | |
5.4. | MFS will monthly reimburse the Company certain of the administrative costs and expenses |
by the Company as a result of operations necessitated by the beneficial ownership by | |
Policy owners of shares of the Portfolios of the Trust equal to 0.20% per annum of the aggregate | |
net assets of the Trust attributable to variable life or variable annuity contracts offered by the | |
Company or its affiliates. In no event shall such fee be paid by the Trust. its shareholders or by the | |
Policy holders. |
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. 1.817-5, 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), as if | |
those requirements applied directly to each such Portfolio. | |
6.2. | The Trust and MFS represent that each Portfolio will elect to be qualified as a Regulated |
Investment Company under Subchapter M of the Code and that they will maintain such | |
qualification (under Subchapter M or any successor or similar provision). | |
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 andor 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 dismterested trustees of the Board. The Board will give | |
prompt notice of any such detemination to the Company. | |
7.2. | The Company agrees that it will be responsible for assisting the Board in c a v i n g 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 its own cost remedy | |
such conflict up to and 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 | |
n~anagementinvestment 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 rlk 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 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 1940Act or the rules promulgated thereunder | |
with respect to mixed or shared funding (as defined in the Mixed and Shared Funding Exemptive | |
Order) on terms and conditions materially different from those contained in the Mixed and Shared | |
Funding Exernptive Order, then (a) the Trust andlor 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.l, 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. INDElMNIFlCATION | |
8.1. Indemnification bv the Companv |
The Company agees 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 a11 losses, claims, damages, liabilities (including |
amounts paid in settlement with the n~ittenconsent of the Company) or expenses (including |
reasonable counsel fees) to which any 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 lo 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 infomation 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 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 its 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 |
(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 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 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 Indenmfied 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 materlal 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 fumished 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 statements or representations (other than statements or |
representations contained in the repstration statement, prospectus, statement of | |
additional information or sales literature or other promotional matenal 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 | |
(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 Accounts or | |
relating to the Policies, 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 | |
Company by or on behalf of the Trust, MFS or the Underwriter; or | |
(d) | arise out of or result from any matenal breach of any representation andtor |
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 | |
(e) | 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 | |
(f) | arise as a result of any 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 holder, 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) the failure by the Company or any | |
Participating lnsurance Company to maintain its variable annuity andlor 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 notice of |
commencement of any 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 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 VIIl. The indemnification provisions contained in this | |
Article VIll shall survive any termination of this Agreement. | |
ARTlCLE IX. APPLlCABLE 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. | |
ARTlCLE X. NOTICE O F FORIIIAL 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. | |
ARTlCLE XI. TERMINATION | |
1 1 . 1 . | This Agreement shall terminate with respect to the Accounts, or one, some, or all |
(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 1940Act. 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 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 andlor 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 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 matenal |
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) terminstion by the Company by xxxxxx 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 date 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 matenal breach |
of any provision of this Agreement; 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 |
othenvise 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 |
ternination 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. |
ARTICLE XII. 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 Tnlst: |
MFS Variable Insurance Trust |
000 Xxxxxxxx Xxxxxx |
Xxxxxx, Xxxxxxxxxxxxx 021 16 |
Facsimile No.: (000) 000-0000 |
Attn: Xxxxxxx X. Xxxx, Secretary |
If to the Company: |
Principal Life lns~lranceCompany |
71 0 Xxxx Xxxxxx |
Xxx Xxxxxx, Xxxx 00000-0000 |
Facsimile No.: (5 15) 248-301 1 |
Attn: Xxxxx Xxxxx, Counsel |
If to MFS: |
Massachusetts Financial Services Company |
000 Xxxxxxxx Xxxxxx |
Xxxxxx, Xxxxxxxxxxxxx 021I 6 |
Facsimile No.: (000) 000-0000 |
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 othenvise, 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. |
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 cumillative and are in |
addition to any and all rights, remedies and obligations, at law or in equity, \vhich 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 |
Commona:ealth of Massachusetts. The Company acknowledges that the obl~gationsof or arising |
out of this instrument are not binding upon any of the Trust's tnlstees, 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 ft~rtheracknowledges 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 agees 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 author~zedrepresentative and its seal to be hereunder affixed hereto |
as of the date specified above. |
EXHIBIT A-I | |
1. | MFS VIT Emerging Growth Series-Service Class |
2. | MFS VIT Mid Cap Growth Series-Service Class |
3. | MFS VIT New Discovery Series-Service Class |
4. | MFS VIT Value Series-Service Class |