Amended and Restated Business Agreement
Franklin Xxxxxxxxx Distributors, Inc.
Allianz Life Insurance Company of North America
This agreement, originally entered into as of December 1, 1999, and as
subsequently amended by an Addendum to Schedule C in 2000 (the 1999 Business
Agreement) is amended and restated as of October 1, 2003 (this 2003 Restated
Business Agreement) by and among Allianz Life Insurance Company of North
America, a life insurance corporation organized under the laws of Minnesota, and
its affiliates as applicable, (collectively Allianz), and Franklin Xxxxxxxxx
Distributors, Inc., a California corporation, (FTDI) and its affiliates as
applicable, (collectively Franklin).
Background Information
This 2003 Restated Business Agreement is written in plain English to
better reflect the goals of Franklin and Allianz and is to be interpreted in
that spirit.
Allianz and Franklin entered into an agreement dated July 30, 1987, and
subsequent amendments and other agreements (Prior Agreements) under which, among
other things, Franklin had the obligation and right to be the exclusive
wholesaler of variable insurance product contracts issued by Allianz (referred
to as Valuemark Products and comprised of Valuemark II/III/IV, VIP, Charter, and
Life), Franklin agreed not to wholesale other insurers' variable products, and
the Franklin Valuemark Funds were the exclusive funds in those Valuemark
Products.
The parties entered into the 1999 Business Agreement to reflect their
mutual decision: (1) to have an open and non-exclusive relationship; (2) to have
a strategic relationship, reflected by the substantial number of Franklin
advised mutual funds (referred to as Franklin Funds) in Allianz issued annuity
variable products introduced after December 31, 1999 (referred to as Allianz
Annuity Products) and Franklin's payments to Allianz; and (3) to protect the
existing block of business in the Valuemark Products built up by both parties
over the previous twelve years.
The 1999 Business Agreement replaced all of the Prior Agreements, with
three exceptions (Agreements Remaining After 1999): (1) the agreements relating
to marketing support payments to Franklin; (2) the agreement for profit sharing
related to Valuemark II and III dated as of January 1, 1996; and (3) the
agreements related to the equal sharing of a 0.25% trail commission payable to
broker/dealers for Valuemark II and III contracts sold from inception to
February 2, 1997, which were amended by the 1999 Business Agreement.
In view of their historical and close relationship, the current assets
under management of approximately $5 billion that the relationship involves, and
the anticipation of significant additional assets under management, the parties
now seek to establish a special business arrangement by amending and restating
the 1999 Business Agreement in this 2003 Restated Business Agreement to: (1)
reflect their mutual decision to continue the open and non-exclusive strategic
relationship and to protect the existing block of business in the Valuemark
Products built up by both parties; (2) reflect the occurrence of events and
passage of time periods provided for by the 1999 Business Agreement; and (3)
provide for changes in the special business arrangement effective as of the date
of this 2003 Restated Business Agreement.
THEREFORE, in consideration of the terms and conditions set forth
herein, the parties agree as follows:
1. Prior Agreements Superceded and Replaced
Franklin and Allianz both agree that this 2003 Restated Business Agreement shall
supercede and replace in their entirety all previous agreements, amendments,
writings and understandings by and among the parties to this 2003 Restated
Business Agreement and their affiliates concerning the subject matter of this
Agreement including, without limitation, the Prior Agreements and the Agreements
Remaining After 1999.
2. Duties of, and Compensation to, Allianz
2.1 General
2.1.1 Marketing and Sales
Allianz agrees that the provisions regarding forms of distribution or
service payment arrangements, 12b-1 payments, fund wholesale marketing
allowances, and standards for determining fund wholesale marketing
allowances shall be no less favorable to Franklin than to any other
fund manager participating in any Valuemark or Allianz Annuity
Products. In particular, Allianz agrees: (a) to provide no greater
prominence to underlying funds advised or subadvised by entities other
than Franklin (Non-Franklin Funds) than to the Franklin Funds in core
advertising and marketing literature; (b) to provide no greater
wholesaling support, on a relative basis, to Non-Franklin Funds than to
the Franklin Funds; and (c) to compensate wholesalers in a manner which
does not encourage or discourage allocation of Valuemark or Allianz
Annuity Product assets to the Franklin Funds relative to the
Non-Franklin Funds. Allianz agrees generally that its marketing and
sales efforts shall in the aggregate be no less favorable to Franklin
than to any other fund manager participating in any Valuemark or
Allianz Annuity Products.
2.1.2 Nonsolicitation of Valuemark Contract Owners
Allianz agrees that it shall not, directly or indirectly, contact or
authorize any other person to contact owners of Valuemark Products
which are invested in Franklin Funds for the purpose of soliciting
surrender, exchange or termination of such contracts in a manner
constituting systematic replacement of such contracts.
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2.2 Administrative Services
Allianz agrees to provide administrative services on behalf of the Franklin
Funds in the Allianz Annuity Products in accordance with Administrative Services
Agreements as of even date with this 2003 Restated Business Agreement.
2.3 Distribution Services
Allianz agrees to provide distribution, including servicing, under the terms of
each Franklin Fund (excluding in all cases, the Franklin Money Market Fund)
class 2's rule 12b-1 plan and the applicable Participation Agreements as of even
date with this 2003 Restated Business Agreement.
2.4 Asset Retention Services
Allianz agrees to provide asset retention services with respect to Valuemark
Products including, but not limited to, the following: (i) Allianz will staff
and deploy wholesalers to represent all Allianz issued annuity products, with a
focus on both retention of the existing Valuemark business block and new annuity
production; (ii) Allianz will staff and deploy internal wholesalers, who will
also focus on conservation of the existing Valuemark business; (iii) Allianz
will institute product enhancements and other special programs designed to
conserve existing Valuemark business; (iv) Allianz will develop programs
designed to encourage conservation of Valuemark business; and (v) Allianz will
maintain and enhance the customer service and support capabilities for Valuemark
clients and investment representatives.
3. Duties of, and Compensation to, Franklin
3.1 General
Franklin will use its best efforts to make available to Allianz Franklin Funds
which issue class 2 shares with an available rule 12b-1 fee to compensate
Allianz for servicing and/or distribution activities. This fee will be available
to Allianz as long as it is available to Franklin. Franklin encourages Allianz
to include in its agreements with registered broker-dealers a provision that
compensation to such broker-dealer may be reduced if a Franklin Fund's rule
12b-1 plan is no longer effective, consistent with Franklin's practice in its
agreements related to the distribution of its retail funds.
3.2 Special Wholesaling Services
3.2.1 Wholesaling Support
Franklin will provide wholesaling support for marketing or promoting
the Franklin Funds available in the Valuemark and Allianz Annuity
Products. The parties understand and agree that Franklin does not
assume any responsibility to, and will not, wholesale the Valuemark
Products or Allianz Annuity Products.
4934-6 3
3.2.2 Training of Wholesalers
Franklin will conduct training of wholesalers of Allianz regarding the
Franklin Funds' approach to investment management and specific fund
positioning and sales techniques.
3.2.3 Broker/Dealer Visits
Allianz will provide sales information to Franklin with respect to the
Valuemark and Allianz Annuity Products that are invested in the
Franklin Funds. Franklin wholesalers will reinforce the Franklin Funds'
investment management story with those broker/dealers as appropriate
during their regular visits.
3.2.4 Wholesaler Match-Ups
Franklin will assign wholesaler match-ups between FTDI and Allianz
wholesalers working in the same territories. FTDI wholesalers will
provide answers to questions and other support with regard to the
Frankin Funds as reasonably requested by Allianz. In connection with
this Franklin Fund support, FTDI wholesalers will not use any materials
referring to Allianz or the Valuemark and Allianz Annuity Products
without obtaining the prior consent of Allianz.
3.2.5 Payments to Franklin for Services
In consideration of these special wholesaling services, Allianz shall
pay to Franklin an amount equal to 0.10% of the premium payments made
under Allianz variable insurance contracts and directed to Franklin
Funds in the first full policy year.
4. Equal Sharing of Certain Trail Commission for Valuemark II and III
Allianz and Franklin shall share equally the 0.25% trail commission payable to
broker/dealers for Valuemark II and III contracts sold from the inception of
those contracts until February 2, 1997. The commission benchmark shall be based
solely on assets invested in Franklin Funds (excluding, in all cases, the
Franklin Money Market Fund).
5. Calculation and Payment of Fee
The fee provided for in Section 3.2.5 of this 2003 Restated Business Agreement
will be paid in arrears for, and following, the three month periods ending in
January, April, July and October (each, a "quarter") of each year. Franklin
shall provide to Allianz an invoice for such payment as soon as is reasonably
possible after the end of each such quarter. Such invoice shall indicate the
amounts payable to Franklin under Section 3.2.5 of this 2003 Restated Business
Agreement. Payment of the fee provided for in Section 3.2.5 shall be due no
later than 30 days after such invoice is sent to Allianz by Franklin.
4934-6 4
6. Confidentiality
During the term of this 2003 Restated Business Agreement and for a period of
five years after its termination, Allianz and Franklin shall take reasonable
steps to prevent disclosure of any confidential or proprietary information (the
Information) of the other party which it receives, and shall use at least the
same degree of care to avoid disclosure of such Information as it uses with
respect to its own confidential or proprietary information. Information
disclosed shall remain the property of the disclosing party, and nothing in this
2003 Restated Business Agreement shall be deemed as granting to the other party
any express or implied license under any patent, copyright or other statutory
right of the disclosing party, except as otherwise required by applicable law.
7. Indemnification
Franklin and Allianz each agree to indemnify and hold the other party harmless
from and against any and all losses, costs, damages, and expenses (including
attorney's fees) which the other party may incur by reason of any demand or
action by any person arising out of the gross negligence of the party in the
performance of its duties under this 2003 Restated Business Agreement.
8. Dispute Settlement
Any controversy relating to this 2003 Restated Business Agreement will be
determined by arbitration in Minneapolis, Minnesota in accordance with the
Commercial Arbitration Rules of the American Arbitration Association using
arbitrators who will follow substantive rules of laws. The dispute will be
determined by an arbitrator acceptable to both parties who will be selected
within 7 days of filing of notices of intention to arbitrate. Otherwise, the
dispute will be determined by a panel of three arbitrators selected as follows:
Within 7 days of filing notice of intention to arbitrate, an arbitrator, who
will be an attorney admitted before the bar of any state of the United States,
to preside over the panel. If either party fails to appoint an arbitrator, or if
the two arbitrators do not name a third arbitrator within 7 days, either party
may request the American Arbitration Association to appoint the necessary
arbitrator(s) pursuant to its rules. Arbitrators will be compensated for their
services at the standard hourly rate charged in their private professional
activities. Each party will pay its own costs and expenses. Arbitration fees and
expenses will be shared equally by the parties. Federal rules of civil procedure
will apply. All testimony will be reasons for the decision. All parties agree to
be bound by the results of this arbitration; judgment upon the award so rendered
may be entered and enforced in any court of competent jurisdiction. To the
extent reasonably practicable, both parties agree to continue performing their
respective obligations under this 2003 Restated Business Agreement while the
dispute is being resolved. All matters relating to such arbitration will be
maintained in confidence.
4934-6 5
9. Termination and Orderly Wind-Up
This 2003 Restated Business Agreement may be terminated upon ninety (90) days'
written notice from one party to the other party. The parties agree to cooperate
after termination to effect an orderly windup of the business.
10. Notices
Any notice or other communication required or permitted hereunder shall be
deemed to be sufficient if contained in a written instrument delivered in person
or duly sent by first class certified mail, postage prepaid, by Federal Express
or similar courier service with courier fees paid by the sender or by facsimile
addressed to such party at the address or facsimile number set forth below or
such other address or facsimile number as may hereafter be designated in writing
by the addressee to the address or listing all parties:
If to Allianz:
Allianz Life Insurance Company of North America
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxxxxxxxxx Xxxxxxxxx, Senior Vice President
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to Franklin:
Franklin Xxxxxxxxx Distributors, Inc.
000 Xxxxxxxx Xxxxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxx, President
Telephone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx, General Counsel
Franklin Resources, Inc.
Xxx Xxxxxxxx Xxxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
All such notices and other communications shall be deemed to have been received:
(a) in the case of personal delivery against proper receipt, on the date of such
delivery; (b) in the case of mailing, on the fifth business day following the
date of such mailing; (c) in the case of Federal Express or similar courier
service, on the second business day following the date sent; and (d) in the case
of confirmed facsimile, when received.
4934-6 6
11. Miscellaneous
11.1 Complete Agreement
This 2003 Restated Business Agreement is the complete and exclusive statement of
the agreement between the parties as to its subject matter, which supercedes all
proposals or agreements, oral or written, and all other communications or
letters of intent between the parties related to the subject matter of this 2003
Restated Business Agreement.
11.2 Modification or Amendment
This 2003 Restated Business Agreement may be amended or modified only by a
written instrument executed by all parties.
11.3 Interpretation
The headings contained in this 2003 Restated Business Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this 2003 Restated Business Agreement.
11.4 Severability
In the event that any part of this 2003 Restated Business Agreement is declared
by any Court or other judicial or administrative body to be null, void, or
unenforceable, said provision shall survive to the extent it is not so declared,
and all of the other provisions of this 2003 Restated Business Agreement shall
remain in full force and effect.
11.5 Governing Law
This 2003 Restated Business Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
11.6 Waiver
No waiver by either party of any default by the other in the performance of any
promise, term, or condition of this 2003 Restated Business Agreement will be
construed to be a waiver by such party of any other or subsequent default in
performance of the same or any other covenant, promise, term, or condition
hereof. No prior transactions or dealings between the parties will be deemed to
establish any custom or usage waiving or modifying any provision hereof.
4934-6 7
11.7 Acts Beyond the Control of the Parties
No liability will result to either party, nor will either party be deemed to be
in default, as a result of delay in its performance or from its nonperformance
caused by circumstances beyond its control, including but not limited to: act of
God, act of war, riot, epidemic, fire, flood, or other disaster, or act of
government. Nevertheless, the party will be required to be diligent in
attempting to remove such cause or causes.
11.8 Non-Assignable
This 2003 Restated Business Agreement and the parties' rights, duties and
obligations under this 2003 Restated Business Agreement are not transferable or
assignable by any of them without the express, prior written consent of the
other party hereto. Any attempt by a party to transfer or assign this 2003
Restated Business Agreement or any of its rights, duties or obligations under
this 2003 Restated Business Agreement without such consent is void.
11.9 Successors
This 2003 Restated Business Agreement shall inure to the benefit of and be
binding upon Allianz and Franklin and their respective successors and permitted
assigns. Nothing expressed or mentioned in this 2003 Restated Business Agreement
is intended or shall be construed to give any person or corporation, other than
the parties hereto and their respective successors and permitted assigns, any
legal or equitable right, remedy or claim in respect of this 2003 Restated
Business Agreement or any provision herein contained.
11.10 Counterparts
This 2003 Restated Business Agreement and any amendment to it may be executed in
one (1) or more counterparts. All of those counterparts shall constitute one (1)
and the same agreement. Neither this 2003 Restated Business Agreement nor any
amendment shall become effective until all counterparts have been fully executed
and delivered.
11.11 Survival
The provisions contained in Section 6 of this 2003 Restated Business Agreement
shall survive the termination of this 2003 Restated Business Agreement for so
long as any of the Franklin Fund shares remain as investment options in
Valuemark Products or Allianz Annuity Products.
4934-6 8
IN WITNESS WHEREOF, Allianz and Franklin have caused this 2003 Restated Business
Agreement to be signed by them as of the date first written above.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA (ALLIANZ)
By: /s/ Xxxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx Xxxxxxxxx, Senior Vice President
FRANKLIN XXXXXXXXX DISTRIBUTORS, INC. (FRANKLIN)
By: /s/ Xxxxx Xxxxx
Xxxxx Xxxxx, President
4934-6 9
