EXHIBIT (h)(8)(a)
AMENDED AND RESTATED PARTICIPATION AGREEMENT
as of October 1, 2002
Franklin Xxxxxxxxx Variable Insurance Products Trust
Franklin/Xxxxxxxxx Distributors, Inc.
American General Life Insurance Company
American General Equity Services Corporation
CONTENTS
Section Subject Matter
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1. Parties and Purpose
2. Representations and Warranties
3. Purchase and Redemption of Trust Portfolio Shares
4. Fees, Expenses, Prospectuses, Proxy Materials and Reports
5. Voting
6. Sales Material, Information and Trademarks
7. Indemnification
8. Notices
9. Termination
10. Miscellaneous
SCHEDULES TO THIS AGREEMENT
A. The Company
B. Accounts of the Company
C. Available Portfolios and Classes of Shares of the Trust;
Investment Advisers
D. Contracts of the Company
E. [this schedule is not used]
F. Rule 12b-1 Plans of the Trust
G. Addresses for Notices
H. Shared Funding Order
1. PARTIES AND PURPOSE
This agreement (the "Agreement") is between certain portfolios and
classes thereof, specified below and in Schedule C, of Franklin Xxxxxxxxx
Variable Insurance Products Trust, an open-end management investment company
organized as a business trust under Massachusetts law (the "Trust"),
Franklin/Xxxxxxxxx Distributors, Inc., a California corporation which is the
principal underwriter for the Trust (the "Underwriter," and together
with the Trust, "we" or "us") and the insurance company identified on
Schedule A ("you") and your distributor, on your own behalf and on behalf of
each segregated asset account maintained by you that is listed on Schedule B, as
that schedule may be amended from time to time ("Account" or "Accounts").
The purpose of this Agreement is to entitle you, on behalf of the
Accounts, to purchase and or redeem the shares, and classes of shares, of
portfolios of the Trust ("Portfolios") that are identified on Schedule C,
consistent with the terms of the prospectuses of the Portfolios, solely for the
purpose of funding benefits of your variable life insurance policies or variable
annuity contracts ("Contracts") that are identified on Schedule D. This
Agreement does not authorize any other purchases or redemptions of shares of the
Trust.
2. REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES BY YOU
You represent and warrant that:
2.1.1 You are an insurance company duly organized and in good
standing under the laws of your state of incorporation.
2.1.2 All of your directors, officers, employees, and other
individuals or entities dealing with the money and/or securities of the Trust
are and shall be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust, in an amount not less than $5 million.
Such bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. You agree to make all reasonable efforts
to see that this bond or another bond containing such provisions is always in
effect, and you agree to notify us in the event that such coverage no longer
applies.
2.1.3 Each Account is a duly organized, validly existing
segregated asset account under applicable insurance law and interests in each
Account are offered exclusively through the purchase of or transfer into a
"variable contract" within the meaning of such terms under Section 817 of the
Internal Revenue Code of 1986, as amended ("Code") and the regulations
thereunder. You will use your best efforts to continue to meet such definitional
requirements, and will notify us immediately upon having a reasonable basis for
believing that such requirements have ceased to be met or that they might not be
met in the future.
2.1.4 Each Account either: (i) has been registered or,
prior to any issuance or sale of the Contracts, will be registered as a unit
investment trust under the Investment Company Act of 1940 ("1940 Act"); or (ii)
has not been so registered in proper reliance upon an exemption from
registration under Section 3(c) of the 1940 Act; if the Account is exempt from
registration as an investment company under Section 3(c) of the 1940 Act, you
will use your best efforts to maintain such exemption and will notify us
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future.
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2.1.5 The Contracts or interests in the Accounts: (i) are
or, prior to any issuance or sale will be, registered as securities under the
Securities Act of 1933, as amended (the "1933 Act"); or (ii) are not registered
because they are properly exempt from registration under Section 3(a)(2) of the
1933 Act or will be offered exclusively in transactions that are properly exempt
from registration under Section 4(2) or Regulation D of the 1933 Act, in which
case you will make every effort to maintain such exemption and will notify us
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future.
2.1.6 The Contracts: (i) will be sold by broker-dealers, or
their registered representatives, who are registered with the Securities and
Exchange Commission ("SEC") under the Securities and Exchange Act of 1934, as
amended (the "1934 Act") and who are members in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); (ii) will be issued and
sold in compliance in all material respects with all applicable federal and
state laws; and (iii) will be sold in compliance in all material respects with
state insurance suitability requirements and NASD suitability guidelines.
Without limiting the foregoing, you agree that in recommending to a Contract
owner the purchase, sale or exchange of any subaccount units under the
Contracts, you shall have reasonable grounds for believing that the
recommendation is suitable for such Contract owner.
2.1.7 The Contracts currently are and will be treated as
modified endowment contracts, annuity contracts or life insurance contracts
under applicable provisions of the Code and you will use your best efforts to
maintain such treatment; you will notify us immediately upon having a reasonable
basis for believing that any of the Contracts have ceased to be so treated or
that they might not be so treated in the future.
2.1.8 The fees and charges deducted under each Contract, in
the aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by you.
2.1.9 You will use shares of the Trust only for the purpose
of funding benefits of the Contracts through the Accounts.
2.1.10 Contracts will not be sold outside of the United States.
2.1.11 With respect to any Accounts which are exempt from
registration under the 1940 Act in reliance on 3(c)(1) or Section 3(c)(7)
thereof:
2.1.11.1 the principal underwriter for each such
Account and any subaccounts thereof is a
registered broker-dealer with the SEC under
the 1934 Act;
2.1.11.2 the shares of the Portfolios of the Trust
are and will continue to be the only
investment securities held by the
corresponding subaccounts; and
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2.1.11.3 with regard to each Portfolio, you, on
behalf of the corresponding subaccount,
will:
(a) vote such shares held by it in the same
proportion as the vote of all other
holders of such shares; and
(b) refrain from substituting shares of
another security for such shares unless
the SEC has approved such substitution
in the manner provided in Section 26 of
the 0000 Xxx.
2.1.12 As covered financial institutions we, only with respect
to Portfolio shareholders, and you each undertake and agree to comply, and to
take full responsibility in complying with any and all applicable laws,
regulations, protocols and other requirements relating to money laundering
including, without limitation, the International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT Act).
2.2 REPRESENTATIONS AND WARRANTIES BY THE TRUST
The Trust represents and warrants that:
2.2.1 It is duly organized and in good standing under the
laws of the State of Massachusetts.
2.2.2 All of its directors, officers, employees and others
dealing with the money and/or securities of a Portfolio are and shall be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust in an amount not less than the minimum coverage required by Rule 17g-1
or other regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
2.2.3 It is registered as an open-end management investment
company under the 0000 Xxx.
2.2.4 Each class of shares of the Portfolios of the Trust
is registered under the 0000 Xxx.
2.2.5 It will amend its registration statement under the
1933 Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares.
2.2.6 It will comply, in all material respects, with the
1933 and 1940 Acts and the rules and regulations thereunder.
2.2.7 It is currently qualified as a "regulated investment
company" under Subchapter M of the Code, it will make every effort to maintain
such qualification, and will
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notify you immediately upon having a reasonable basis for believing that it has
ceased to so qualify or that it might not so qualify in the future.
2.2.8 The Trust will use its best efforts to comply with the
diversification requirements for variable annuity, endowment or life insurance
contracts set forth in Section 817(h) of the Code, and the rules and regulations
thereunder, including without limitation Treasury Regulation 1.817-5. Upon
having a reasonable basis for believing any Portfolio has ceased to comply and
will not be able to comply within the grace period afforded by Regulation
1.817-5, the Trust will notify you immediately and will take all reasonable
steps to adequately diversify the Portfolio to achieve compliance.
2.2.9 It currently intends for one or more classes of
shares (each, a "Class") to make payments to finance its distribution expenses,
including service fees, pursuant to a plan ("Plan") adopted under rule 12b-1
under the 1940 Act ("Rule 12b-1"), although it may determine to discontinue such
practice in the future. To the extent that any Class of the Trust finances its
distribution expenses pursuant to a Plan adopted under rule 12b-1, the Trust
undertakes to comply with any then current SEC interpretations concerning rule
12b-1 or any successor provisions.
2.3 REPRESENTATIONS AND WARRANTIES BY THE UNDERWRITER
The Underwriter represents and warrants that:
2.3.1 It is registered as a broker dealer with the SEC
under the 1934 Act, and is a member in good standing of the NASD.
2.3.2 Each investment adviser listed on Schedule C (each,
an "Adviser") is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and any applicable state securities law.
2.4 WARRANTY AND AGREEMENT BY BOTH YOU AND US
We received an order from the SEC dated November 16, 1993 (file no.
812-8546), which was amended by a notice and an order we received on September
17, 1999 and October 13, 1999, respectively (file no. 812-11698) (collectively,
the "Shared Funding Order," attached to this Agreement as Schedule H). The
Shared Funding Order grants exemptions from certain provisions of the 1940 Act
and the regulations thereunder to the extent necessary to permit shares of the
Trust to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
and qualified pension and retirement plans outside the separate account context.
You and we both warrant and agree that both you and we will comply with the
"Applicants' Conditions" prescribed in the Shared Funding Order as though such
conditions were set forth verbatim in this Agreement, including, without
limitation, the provisions regarding potential conflicts of interest between the
separate accounts which invest in the Trust and regarding contract owner voting
privileges. In order for the Trust's Board of Trustees to perform its duty to
monitor for conflicts of interest, you agree to inform us of the occurrence of
any of the events specified in
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condition 2 of the Shared Funding Order to the extent that such event may or
does result in a material conflict of interest as defined in that order.
3. PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
3.1 AVAILABILITY OF TRUST PORTFOLIO SHARES
3.1.1 We will make shares of the Portfolios available to
the Accounts for the benefit of the Contracts. The shares will be available for
purchase at the net asset value per share next computed after we (or our agent,
or you as our designee) receive a purchase order, as established in accordance
with the provisions of the then current prospectus of the Trust. All orders are
subject to acceptance by us and by the Portfolio or its transfer agent, and
become effective only upon confirmation by us. Notwithstanding the foregoing,
the Trust's Board of Trustees ("Trustees") may refuse to sell shares of any
Portfolio to any person, or may suspend or terminate the offering of shares of
any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or if, in the sole discretion of the Trustees, they deem
such action to be in the best interests of the shareholders of such Portfolio.
3.1.2 Without limiting the other provisions of this Section
3.1, among other delegations by the Trustees, the Trustees have determined that
there is a significant risk that the Trust and its shareholders may be adversely
affected by investors with short term trading activity and/or whose purchase and
redemption activity follows a market timing pattern as defined in the prospectus
for the Trust, and have authorized the Trust, the Underwriter and the Trust's
transfer agent to adopt procedures and take other action (including, without
limitation, rejecting specific purchase orders in whole or in part) as they deem
necessary to reduce, discourage, restrict or eliminate such trading and/or
market timing activity. You agree that your purchases and redemptions of
Portfolio shares are subject to, and that you will assist us in implementing,
the Market Timing Trading Policy and Additional Policies (as described in the
Trust's prospectus) and the Trust's restrictions on excessive and/or short term
trading activity and/or purchase and redemption activity that follows a market
timing pattern.
3.1.3 We agree that shares of the Trust will be sold only
to life insurance companies which have entered into fund participation
agreements with the Trust ("Participating Insurance Companies") and their
separate accounts or to qualified pension and retirement plans in accordance
with the terms of the Shared Funding Order. No shares of any Portfolio will be
sold to the general public.
3.2 MANUAL OR AUTOMATED PORTFOLIO SHARE TRANSACTIONS
3.2.1 Section 3.3 of this Agreement shall govern and
Section 3.4 shall not be operative, unless we receive from you at the address
provided in the next sentence, written notice that you wish to communicate,
process and settle purchase and redemptions for shares (collectively, "share
transactions") via the Fund/SERV and Networking systems of the National
Securities Clearing Corporation ("NSCC"). The address for you to send such
written notice shall be: Retirement Services, Franklin Xxxxxxxxx Investments,
000 Xxxx Xxxxx, 0xx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000-0000. After giving ten
(10) days' advance written notice
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at the address provided in the previous sentence of your desire to use NSCC
processing, Section 3.4 of this Agreement shall govern and Section 3.3 shall not
be operative.
3.2.2 At any time when, pursuant to the preceding paragraph,
Section 3.4 of this Agreement governs, any party to this Agreement may send
written notice to the other parties that it chooses to end the use of the NSCC
Fund/SERV and Networking systems and return to manual handling of share
transactions. Such written notice shall be sent: (i) if from you to us, to the
address provided in the preceding paragraph; (ii) if from us to you, to your
address in Schedule G of this Agreement. After giving ten (10) days' advance
written notice at the address as provided in the previous sentence, Section 3.3
of this Agreement shall govern and Section 3.4 shall not be operative.
3.3 MANUAL PURCHASE AND REDEMPTION
3.3.1 You are hereby appointed as our designee for the sole
purpose of receiving from Contract owners purchase and exchange orders and
requests for redemption resulting from investment in and payments under the
Contracts that pertain to subaccounts that invest in Portfolios
("Instructions"). "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Trust calculates its net asset
value pursuant to the rules of the SEC and its current prospectus. "Close of
Trading" shall mean the close of trading on the New York Stock Exchange,
generally 4:00 p.m. Eastern Time. You represent and warrant that all
Instructions transmitted to us for processing on or as of a given Business Day
("Day 1") shall have been received in proper form and time stamped by you prior
to the Close of Trading on Day 1. Such Instructions shall receive the share
price next calculated following the Close of Trading on Day 1, provided that we
receive such Instructions from you before 9:30 a.m. Eastern Time on the next
Business Day ("Day 2"). You represent and warrant that Instructions received in
proper form and time stamped by you after the Close of Trading on Day 1 shall be
treated by you and transmitted to us as if received on Day 2. Such Instructions
shall receive the share price next calculated following the Close of Trading on
Day 2. You represent and warrant that you have, maintain and periodically test,
procedures and systems in place reasonably designed to prevent Instructions
received after the Close of Trading on Day 1 from being executed with
Instructions received before the Close of Trading on Day 1. All Instructions we
receive from you after 9:30 a.m. Eastern Time on Day 2 shall be processed by us
on the following Business Day and shall receive the share price next calculated
following the Close of Trading on Day 2.
3.3.2 We shall calculate the net asset value per share of
each Portfolio on each Business Day, and shall communicate these net asset
values to you or your designated agent on a daily basis as soon as reasonably
practical after the calculation is completed (normally by 6:30 p.m. Eastern
Time).
3.3.3 You shall submit payment for the purchase of shares
of a Portfolio on behalf of an Account in federal funds transmitted by wire to
the Trust or to its designated custodian, which must receive such wires no later
than the close of the Reserve Bank, which is 6:00 p.m. Eastern Time, on the
Business Day following the Business Day as of which such purchases orders are
made.
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3.3.4 We will redeem any full or fractional shares of any
Portfolio, when requested by you on behalf of an Account, at the net asset value
next computed after receipt by us (or our agent or you as our designee) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Trust. We shall make payment for such shares in
the manner we establish from time to time, but in no event shall payment be
delayed for a greater period than is permitted by the 0000 Xxx.
3.3.5 Issuance and transfer of the Portfolio shares will be
by book entry only. Stock certificates will not be issued to you or the
Accounts. Portfolio shares purchased from the Trust will be recorded in the
appropriate title for each Account or the appropriate subaccount of each
Account.
3.3.6 We shall furnish, on or before the ex-dividend date,
notice to you of any income dividends or capital gain distributions payable on
the shares of any Portfolio. You hereby elect to receive all such income
dividends and capital gain distributions as are payable on shares of a Portfolio
in additional shares of that Portfolio, and you reserve the right to change this
election in the future. We will notify you of the number of shares so issued as
payment of such dividends and distributions.
3.3.7 Each party to this Agreement agrees that, in the
event of a material error resulting from incorrect information or confirmations,
the parties will seek to comply in all material respects with the provisions of
applicable federal securities laws.
3.4 AUTOMATED PURCHASE AND REDEMPTION
3.4.1 "Fund/SERV" shall mean NSCC's Mutual Fund Settlement,
Entry and Registration Verification System, a system for automated, centralized
processing of mutual fund purchase and redemption orders, settlement, and
account registration; "Networking" shall mean NSCC's system that allows mutual
funds and life insurance companies to exchange account level information
electronically; and "Settling Bank" shall mean the entity appointed by the Trust
or you, as applicable, to perform such settlement services on behalf of the
Trust and you, as applicable, which entity agrees to abide by NSCC's then
current rules and procedures insofar as they relate to same day funds
settlement. In all cases, processing and settlement of share transactions shall
be done in a manner consistent with applicable law.
3.4.2 You are hereby appointed as our designee for the sole
purpose of receiving from Contract owners purchase and exchange orders and
requests for redemption resulting from investment in and payments under the
Contracts that pertain to subaccounts that invest in Portfolios
("Instructions"). "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Trust calculates its net asset
value pursuant to the rules of the SEC and its current prospectus. "Close of
Trading" shall mean the close of trading on the New York Stock Exchange,
generally 4:00 p.m. Eastern Time. Upon receipt of Instructions, and upon your
determination that there are good funds with respect to Instructions involving
the purchase of shares, you will calculate the net purchase or redemption order
for each Portfolio.
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3.4.3 On each Business Day, you shall aggregate all purchase
and redemption orders for shares of a Portfolio that you received prior to the
Close of Trading. You represent and warrant that all orders for net purchases or
net redemptions derived from Instructions received by you and transmitted to
Fund/SERV for processing on or as of a given Business Day ("Day 1") shall have
been received in proper form and time stamped by you prior to the Close of
Trading on Day 1. Such orders shall receive the share price next calculated
following the Close of Trading on Day 1, provided that we receive Instructions
from Fund/SERV by 6:30 a.m. Eastern Time on the next Business Day ("Day 2"). You
represent and warrant that orders received in good order and time stamped by you
after the Close of Trading on Day 1 shall be treated by you and transmitted to
Fund/SERV as if received on Day 2. Such orders shall receive the share price
next calculated following the Close of Trading on Day 2. All Instructions we
receive from Fund/SERV after 6:30 a.m. Eastern Time on Day 2 shall be processed
by us on the following Business Day and shall receive the share price next
calculated following the close of trading on Day 2. You represent and warrant
that you have, maintain and periodically test, procedures and systems in place
reasonably designed to prevent orders received after the Close of Trading on Day
1 from being executed with orders received before the Close of Trading on Day 1,
and periodically monitor the systems to determine their effectiveness. Subject
to your compliance with the foregoing, you will be considered the designee of
the Underwriter and the Portfolios, and the Business Day on which Instructions
are received by you in proper form prior to the Close of Trading will be the
date as of which shares of the Portfolios are deemed purchased, exchanged or
redeemed pursuant to such Instructions. Dividends and capital gain distributions
will be automatically reinvested at net asset value in accordance with the
Portfolio's then current prospectus.
3.4.4 We shall calculate the net asset value per share of
each Portfolio on each Business Day, and shall furnish to you through NSCC's
Networking or Mutual Fund Profile System: (i) the most current net asset value
information for each Portfolio; and (ii) in the case of fixed income funds that
declare daily dividends, the daily accrual or the interest rate factor. All such
information shall be furnished to you by 6:30 p.m. Eastern Time on each Business
Day or at such other time as that information becomes available.
3.4.5 You will wire payment for net purchase orders by the
Trust's NSCC Firm Number, in immediately available funds, to an NSCC settling
bank account designated by you in accordance with NSCC rules and procedures on
the same Business Day such purchase orders are communicated to NSCC. For
purchases of shares of daily dividend accrual funds, those shares will not begin
to accrue dividends until the day the payment for those shares is received.
3.4.6 We will redeem any full or fractional shares of any
Portfolio, when requested by you on behalf of an Account, at the net asset value
next computed after receipt by us (or our agent or you as our designee) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Trust. NSCC will wire payment for net redemption
orders by the Trust, in immediately available funds, to an NSCC settling bank
account designated by you in accordance with NSCC rules and procedures on the
Business Day such redemption orders are communicated to NSCC, except as provided
in the Trust's prospectus and statement of additional information.
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3.4.7 Issuance and transfer of the Portfolio shares will be
by book entry only. Stock certificates will not be issued to you or the
Accounts. Portfolio shares purchased from the Trust will be recorded in the
appropriate title for each Account or the appropriate subaccount of each
Account.
3.4.8 We shall furnish through NSCC's Networking or Mutual
Fund Profile System on or before the ex-dividend date, notice to you of any
income dividends or capital gain distributions payable on the shares of any
Portfolio. You hereby elect to receive all such income dividends and capital
gain distributions as are payable on shares of a Portfolio in additional shares
of that Portfolio, and you reserve the right to change this election in the
future. We will notify you of the number of shares so issued as payment of such
dividends and distributions.
3.4.9 All orders are subject to acceptance by Underwriter
and become effective only upon confirmation by Underwriter. Underwriter reserves
the right: (i) not to accept any specific order or part of any order for the
purchase or exchange of shares through Fund/SERV; and (ii) to require any
redemption order or any part of any redemption order to be settled outside of
Fund/SERV, in which case the order or portion thereof shall not be "confirmed"
by Underwriter, but rather shall be accepted for redemption in accordance with
Section 3.4.11 below.
3.4.10 All trades placed through Fund/SERV and confirmed by
Underwriter via Fund/SERV shall settle in accordance with Underwriter's profile
within Fund/SERV applicable to you. Underwriter agrees to provide you with
account positions and activity data relating to share transactions via
Networking.
3.4.11 If on any specific day you or Underwriter are unable
to meet the NSCC deadline for the transmission of purchase or redemption orders
for that day, a party may at its option transmit such orders and make such
payments for purchases and redemptions directly to you or us, as applicable, as
is otherwise provided in the Agreement; provided, however, that we must receive
written notification from you by 9:00 a.m. Eastern Time on any day that you wish
to transmit such orders and/or make such payments directly to us.
3.4.12 In the event that you or we are unable to or
prohibited from electronically communicating, processing or settling share
transactions via Fund/SERV, you or we shall notify the other, including
providing the notification provided above in Section 3.4.11. After all parties
have been notified, you and we shall submit orders using manual transmissions as
are otherwise provided in the Agreement.
3.4.13 These procedures are subject to any additional terms
in each Portfolio's prospectus and the requirements of applicable law. The Trust
reserves the right, at its discretion and without notice, to suspend the sale of
shares or withdraw the sale of shares of any Portfolio.
3.4.14 Each party to the Agreement agrees that, in the event
of a material error resulting from incorrect information or confirmations, the
parties will seek to comply in all material respects with the provisions of
applicable federal securities laws.
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3.4.15 You and Underwriter represent and warrant that each:
(a) has entered into an agreement with NSCC; (b) has met and will continue to
meet all of the requirements to participate in Fund/SERV and Networking; (c)
intends to remain at all times in compliance with the then current rules and
procedures of NSCC, all to the extent necessary or appropriate to facilitate
such communications, processing, and settlement of share transactions; and (d)
will notify the other parties to this Agreement if there is a change in or a
pending failure with respect to its agreement with NSCC.
4. FEES, EXPENSES, PROSPECTUSES, PROXY MATERIALS AND REPORTS
4.1 We shall pay no fee or other compensation to you under this
Agreement except as provided on Schedule F, if attached.
4.2 We shall prepare and be responsible for filing with the SEC, and
any state regulators requiring such filing, all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
We shall bear the costs of preparation and filing of the documents listed in the
preceding sentence, registration and qualification of the Trust's shares of the
Portfolios.
4.3 We shall use reasonable efforts to provide you, on a timely
basis, with such information about the Trust, the Portfolios and each Adviser,
in such form as you may reasonably require, as you shall reasonably request in
connection with the preparation of disclosure documents and annual and
semi-annual reports pertaining to the Contracts.
4.4 At your option, we shall provide you, at our expense, with
either: (i) for each Contract owner who is invested through the Account in a
subaccount corresponding to a Portfolio ("designated subaccount"), one copy of
each of the following documents on each occasion that such document is required
by law or regulation to be delivered to such Contract owner who is invested in a
designated subaccount: the Trust's current prospectus, annual report,
semi-annual report and other shareholder communications, including any
amendments or supplements to any of the foregoing, pertaining specifically to
the Portfolios ("Designated Portfolio Documents"); or (ii) a camera ready copy
of such Designated Portfolio Documents in a form suitable for printing and from
which information relating to series of the Trust other than the Portfolios has
been deleted to the extent practicable. In connection with clause (ii) of this
paragraph, we will pay for proportional printing costs for such Designated
Portfolio Documents in order to provide one copy for each Contract owner who is
invested in a designated subaccount on each occasion that such document is
required by law or regulation to be delivered to such Contract owner, and
provided the appropriate documentation is provided and approved by us. We shall
provide you with a copy of the Trust's current statement of additional
information, including any amendments or supplements, in a form suitable for you
to duplicate. The expenses of furnishing, including mailing, to Contract owners
the documents referred to in this paragraph shall be borne by you. For each of
the documents provided to you in accordance with clause (i) of this paragraph
4.4, we shall provide you, upon your request and at your expense, additional
copies. In no event shall we be
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responsible for the costs of printing or delivery of Designated Portfolio
Documents to potential or new Contract owners or the delivery of Designated
Portfolio Documents to existing contract owners.
4.5 We shall provide you, at our expense, with copies of any
Trust-sponsored proxy materials in such quantity as you shall reasonably require
for distribution to Contract owners who are invested in a designated subaccount.
You shall bear the costs of distributing proxy materials (or similar materials
such as voting solicitation instructions) to Contract owners.
4.6 You assume sole responsibility for ensuring that the Trust's
prospectuses, shareholder reports and communications, and proxy materials are
delivered to Contract owners in accordance with applicable federal and state
securities laws.
5. VOTING
5.1 All Participating Insurance Companies shall have the obligations
and responsibilities regarding pass-through voting and conflicts of interest
corresponding to those contained in the Shared Funding Order.
5.2 If and to the extent required by law, you shall: (i) solicit
voting instructions from Contract owners; (ii) vote the Trust shares in
accordance with the instructions received from Contract owners; and (iii) vote
Trust shares for which no instructions have been received in the same proportion
as Trust shares of such Portfolio for which instructions have been received; 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. You reserve
the right to vote Trust shares held in any Account in your own right, to the
extent permitted by law.
5.3 So long as, and to the extent that, the SEC interprets the 1940
Act to require pass-through voting privileges for Contract owners, you shall
provide pass-through voting privileges to Contract owners whose Contract values
are invested, through the Accounts, in shares of one or more Portfolios of the
Trust. We shall require all Participating Insurance Companies to calculate
voting privileges in the same manner and you shall be responsible for assuring
that the Accounts calculate voting privileges in the manner established by us.
With respect to each Account, you will vote shares of each Portfolio of the
Trust held by an Account and for which no timely voting instructions from
Contract owners are received in the same proportion as those shares held by that
Account for which voting instructions are received. You and your agents will in
no way recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contracts without our prior written consent,
which consent may be withheld in our sole discretion.
6. SALES MATERIAL, INFORMATION AND TRADEMARKS
6.1 For purposes of this Section 6, "Sales literature or other
Promotional material" includes, but is not limited to, portions of the following
that use any logo or other trademark related to the Trust, or Underwriter or its
affiliates, or refer to the Trust: advertisements (such as material published or
designed for use in a newspaper, magazine or other periodical, radio,
12
television, telephone or tape recording, videotape display, signs or billboards,
motion pictures, electronic communication or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts or
any other advertisement, sales literature or published article or electronic
communication), educational or training materials or other communications
distributed or made generally available to some or all agents or employees in
any media, and disclosure documents, shareholder reports and proxy materials.
6.2 You shall furnish, or cause to be furnished to us or our
designee, at least one complete copy of each registration statement, prospectus,
statement of additional information, private placement memorandum, retirement
plan disclosure information or other disclosure documents or similar
information, as applicable (collectively "Disclosure Documents"), as well as any
report, solicitation for voting instructions, Sales literature or other
Promotional materials, and all amendments to any of the above that relate to the
Contracts or the Accounts prior to its first use. You shall furnish, or shall
cause to be furnished, to us or our designee each piece of Sales literature or
other Promotional material in which the Trust or an Adviser is named, at least
ten (10) Business Days prior to its proposed use. No such material shall be used
unless we or our designee approve such material and its proposed use. We shall
generally seek to review such material within ten (10) Business Days from the
date we receive it.
6.3 You and your agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or an Adviser, other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Trust shares (as such registration statement and prospectus
may be amended or supplemented from time to time), annual and semi-annual
reports of the Trust, Trust-sponsored proxy statements, or in Sales literature
or other Promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee. You shall send us a complete copy of
each Disclosure Document and item of Sales literature or other Promotional
materials in its final form within twenty (20) days of its first use.
6.4 We shall not give any information or make any representations or
statements on behalf of you or concerning you, the Accounts or the Contracts
other than information or representations, including naming you as a Trust
shareholder, contained in and accurately derived from Disclosure Documents for
the Contracts (as such Disclosure Documents may be amended or supplemented from
time to time), or in materials approved by you for distribution, including Sales
literature or other Promotional materials, except as required by legal process
or regulatory authorities or with your written permission.
6.5 Except as provided in Section 6.2, you shall not use any
designation comprised in whole or part of the names or marks "Franklin" or
"Xxxxxxxxx" or any logo or other trademark relating to the Trust or the
Underwriter without prior written consent, and upon termination of this
Agreement for any reason, you shall cease all use of any such name or xxxx as
soon as reasonably practicable.
13
6.6 The Trust shall use reasonable efforts to provide you, on a
timely basis, with such information about the Trust, the Portfolios and each
Adviser, in such form as you may reasonably require, as you shall reasonably
request in connection with the preparation of disclosure documents and annual
and semi-annual reports pertaining to the Contracts.
6.7 You agree that any posting of Portfolio prospectuses on your
website will result in the Portfolio prospectuses: (i) appearing identical to
the hard copy printed version; (ii) being clearly associated with the particular
Contracts in which they are available and posted in close proximity to the
applicable Contract prospectuses; (iii) having no less prominence than
prospectuses of any other underlying funds available under the Contracts; and
(iv) being used in an authorized manner. Notwithstanding the above, you
understand and agree that you are responsible for ensuring that participation in
the Portfolios, and any website posting, or other use, of the Portfolio
prospectuses is in compliance with this Agreement and applicable state and
federal securities and insurance laws and regulations, including as they relate
to paper or electronic use of fund prospectuses. The format of such
presentation, the script and layout for any website that mentions the Trust, the
Underwriter, an Adviser or the Portfolios shall be routed to us as sales
literature or other promotional materials, pursuant to Section 6 of this
Agreement.
In addition, you agree to be solely responsible for maintaining and
updating the Portfolio prospectuses' PDF files (including prospectus
supplements) and removing and/or replacing promptly any outdated prospectuses,
as necessary, ensuring that any accompanying instructions by us, for using or
stopping use are followed. You agree to designate and make available to us a
person to act as a single point of communication contact for these purposes. We
are not responsible for any additional costs or additional liabilities that may
be incurred as a result of your election to place the Portfolio prospectuses on
your website. We reserve the right to revoke this authorization, at any time and
for any reason, although we may instead make our authorization subject to new
procedures.
6.8 Each of your and your distributor's registered representatives,
agents, independent contractors and employees, as applicable, will have access
to our websites at xxxxxxxxxxxxxxxxx.xxx, and such other URLs through which we
may permit you to conduct business concerning the Portfolios from time to time
(referred to collectively as the "Site") as provided herein: (i) upon
registration by such individual on a Site; (ii) if you cause a Site Access
Request Form (an "Access Form") to be signed by your authorized supervisory
personnel and submitted to us, as a Schedule to, and legally a part of, this
Agreement; or (iii) if you provide such individual with the necessary access
codes or other information necessary to access the Site through any generic or
firm-wide authorization we may grant you from time to time. Upon receipt by us
of a completed registration submitted by an individual through the Site or a
signed Access Form referencing such individual, we shall be entitled to rely
upon the representations contained therein as if you had made them directly
hereunder and we will issue a user identification, express number and/or
password (collectively, "Access Code"). Any person to whom we issue an Access
Code or to whom you provide the necessary Access Codes or other information
necessary to access the Site through any generic or firm-wide authorization we
may grant you from time to time shall be an "Authorized User."
14
We shall be entitled to assume that such person validly represents you
and that all instructions received from such person are authorized, in which
case such person will have access to the Site, including all services and
information to which you are authorized to access on the Site. All inquiries and
actions initiated by you (including your Authorized Users) are your
responsibility, are at your risk and are subject to our review and approval
(which could cause a delay in processing). You agree that we do not have a duty
to question information or instructions you (including Authorized Users) give to
us under this Agreement, and that we are entitled to treat as authorized, and
act upon, any such instructions and information you submit to us. You agree to
take all reasonable measures to prevent any individual other than an Authorized
User from obtaining access to the Site. You agree to inform us if you wish to
restrict or revoke the access of any individual Access Code. If you become aware
of any loss or theft or unauthorized use of any Access Code, you agree to
contact us immediately. You also agree to monitor your (including Authorized
Users') use of the Site to ensure the terms of this Agreement are followed. You
also agree that you will comply with all policies and agreements concerning Site
usage, including without limitation the Terms of Use Agreement(s) posted on the
Site ("Site Terms"), as may be revised and reposted on the Site from time to
time, and those Site Terms (as in effect from time to time) are a part of this
Agreement. Your duties under this section are considered "services" required
under the terms of this Agreement. You acknowledge that the Site is transmitted
over the Internet on a reasonable efforts basis and we do not warrant or
guarantee their accuracy, timeliness, completeness, reliability or
non-infringement. Moreover, you acknowledge that the Site is provided for
informational purposes only, and is not intended to comply with any requirements
established by any regulatory or governmental agency.
7. INDEMNIFICATION
7.1 INDEMNIFICATION BY YOU
7.1.1 You agree to indemnify and hold harmless the
Underwriter, the Trust and each of its Trustees, officers, employees and agents
and each person, if any, who controls the Trust within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" and individually the
"Indemnified Party" for purposes of this Section 7) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with your
written consent, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses are related to the sale or acquisition of
shares of the Trust or the Contracts and
7.1.1.1 arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact contained in a
Disclosure Document for the Contracts or in the Contracts themselves or in sales
literature generated or approved by you on behalf of the Contracts or Accounts
(or any amendment or supplement to any of the foregoing) (collectively, "Company
Documents" for the purposes of this Section 7), or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be
15
stated therein or necessary to make the statements therein not misleading,
provided that this indemnity shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and was accurately derived from written information furnished to you by or
on behalf of the Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
7.1.1.2 arise out of or result from statements or
representations (other than statements or representations contained in and
accurately derived from Trust Documents as defined below in Section 7.2) or
wrongful conduct of you or persons under your control, with respect to the sale
or acquisition of the Contracts or Trust shares; or
7.1.1.3 arise out of or result from any untrue statement
or alleged untrue statement of a material fact contained in Trust Documents as
defined below in Section 7.2 or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was made in
reliance upon and accurately derived from written information furnished to the
Trust by or on behalf of you; or
7.1.1.4 arise out of or result from any failure by you
to provide the services or furnish the materials required under the terms of
this Agreement;
7.1.1.5 arise out of or result from any material breach
of any representation and/or warranty made by you in this Agreement or arise out
of or result from any other material breach of this Agreement by you; or
7.1.1.6 arise out of or result from a Contract failing
to be considered a life insurance policy or an annuity Contract, whichever is
appropriate, under applicable provisions of the Code thereby depriving the Trust
of its compliance with Section 817(h) of the Code.
7.1.2 You shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to the Trust or Underwriter,
whichever is applicable. You shall also not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified you in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify you of any such claim shall not relieve
you from any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
you shall be entitled to participate, at your own expense, in the defense of
such action. Unless the Indemnified Party releases you from any further
obligations under this Section 7.1, you also shall be entitled to
16
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from you to such party of your election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and you will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
7.1.3 The Indemnified Parties will promptly notify you of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust shares or the Contracts or the operation of
the Trust.
7.2 INDEMNIFICATION BY THE UNDERWRITER
7.2.1 The Underwriter agrees to indemnify and hold harmless
you, and each of your directors and officers and each person, if any, who
controls you within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually an "Indemnified Party" for purposes of
this Section 7.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses") to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such Losses are related to the sale or acquisition of the shares of
the Trust or the Contracts and:
7.2.1.1 arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact contained
in the Registration Statement, prospectus or sales literature of the
Trust (or any amendment or supplement to any of the foregoing)
(collectively, the "Trust Documents") 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 of
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to us by or on behalf of you for
use in the Registration Statement or prospectus for the Trust or in
sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Trust shares; or
7.2.1.2 arise out of or as a result of statements or
representations (other than statements or representations contained in
the Disclosure Documents or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or wrongful
conduct of the Trust, Adviser or Underwriter or persons under their
control, with respect to the sale or distribution of the Contracts or
Trust shares; or
7.2.1.3 arise out of any untrue statement or alleged
untrue statement of a material fact contained in a Disclosure Document
or sales literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged
17
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 you by or on behalf of the Trust; or
7.2.1.4 arise as a result of any failure by us to
provide the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good faith
or otherwise, to comply with the qualification representation specified
above in Section 2.2.7 and the diversification requirements specified
above in Section 2.2.8); or
7.2.1.5 arise out of or result from any material breach
of any representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Underwriter; as limited by and in accordance with
the provisions of Sections 7.2.2 and 7.2.3 hereof.
7.2.2 The Underwriter shall not be liable under this
indemnification provision with respect to any Losses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to you or the
Accounts, whichever is applicable.
7.2.3 The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. Unless the Indemnified
Party releases the Underwriter from any further obligations under this Section
7.2, the Underwriter also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Underwriter to such party of the Underwriter's election to assume the defense
thereof, the Indemnified Party shall bear the expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.2.4 You agree promptly to notify the Underwriter of the
commencement of any litigation or proceedings against you or the Indemnified
Parties in connection with the issuance or sale of the Contracts or the
operation of each Account.
18
7.3 INDEMNIFICATION BY THE TRUST
7.3.1 The Trust agrees to indemnify and hold harmless you, and
each of your directors and officers and each person, if any, who controls you
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Trust, which consent shall not be unreasonably withheld) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the operations of
the Trust, and arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise out
of or result from any other material breach of this Agreement by the Trust; as
limited by and in accordance with the provisions of Sections 7.3.2 and 7.3.3
hereof. It is understood and expressly stipulated that neither the holders of
shares of the Trust nor any Trustee, officer, agent or employee of the Trust
shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder, but
the Trust only shall be liable.
7.3.2 The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against any Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
you, the Trust, the Underwriter or each Account, whichever is applicable.
7.3.3 The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Trust of any
such claim shall not relieve the Trust from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to participate, at
its own expense, in the defense thereof. Unless the Indemnified Party releases
the Trust from any further obligations under this Section 7.3, the Trust also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Trust to such party of the
Trust's election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the Trust
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
19
7.3.4 You agree promptly to notify the Trust of the
commencement of any litigation or proceedings against you or the Indemnified
Parties in connection with this Agreement, the issuance or sale of the
Contracts, with respect to the operation of the Account, or the sale or
acquisition of shares of the Trust.
8. NOTICES
Any notice, except for those provided in Sections 3.2.1 and 3.2.2 of the
Agreement, shall be sufficiently given when sent by registered or certified
mail, or by nationally recognized overnight courier services, to the other party
at the address of such party set forth in Schedule G below or at such other
address as such party may from time to time specify in writing to the other
party.
9. TERMINATION
9.1 This Agreement may be terminated by any party in its entirety or
with respect to one, some or all Portfolios for any reason by sixty (60) days
advance written notice delivered to the other parties. This Agreement shall
terminate immediately in the event of its assignment by any party without the
prior written approval of the other parties, or as otherwise required by law.
9.2 This Agreement may be terminated immediately by us upon written
notice to you if:
9.2.1 (i) you breach any of the representations and warranties
made in this Agreement; or (ii) you inform us that any of such representations
and warranties may no longer be true or might not be true in the future; or
(iii) any of such representations and warranties were not true on the effective
date of this Agreement, are at any time no longer true, or have not been true
during any time since the effective date of this Agreement; or
9.2.2 either one or both of the Trust or the Underwriter
respectively, shall determine, in their sole judgment exercised in good faith,
that you have suffered a material adverse change in your business, operations,
financial condition or prospects since the date of this Agreement or are the
subject of material adverse publicity; or
9.2.3 you give us the written notice specified above in
Section 3.3 and at the same time you give us such notice there was no notice of
termination outstanding under any other provision of this Agreement; provided,
however, that any termination under this Section 9.2.3 shall be effective
forty-five (45) days after the notice specified in Section 3.3 was given.
9.3 If this Agreement is terminated for any reason, except as
required by the Shared Funding Order, we may, at our option and pursuant to all
of the terms and conditions of this Agreement: (i) continue to make available
additional shares of any Portfolio for any or all Contracts or Accounts existing
on the effective date of termination of this Agreement; or (ii) involuntarily
redeem, at our option in kind or for cash, shares of any Portfolio, for any or
20
all Contracts or Accounts existing on the effective date of termination of this
Agreement. If this Agreement is terminated as required by the Shared Funding
Order, its provisions shall govern.
9.4 The provisions of Sections 2 (Representations and Warranties)
and 7 (Indemnification) shall survive the termination of this Agreement. All
other applicable provisions of this Agreement shall survive the termination of
this Agreement, as long as shares of the Trust are held on behalf of Contract
owners in accordance with Section 9.3, except that we shall have no further
obligation to sell Trust shares with respect to Contracts issued after
termination.
9.5 You shall not redeem Trust shares attributable to the Contracts
(as opposed to Trust shares attributable to your assets held in the Account)
except: (i) as necessary to implement Contract owner initiated or approved
transactions; (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"); or (iii) as permitted by an order of the
SEC pursuant to Section 26(b) of the 1940 Act. Upon request, you shall promptly
furnish to us the opinion of your counsel (which counsel shall be reasonably
satisfactory to us) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, you shall not prevent Contract
owners from allocating payments to a Portfolio that was otherwise available
under the Contracts without first giving us ninety (90) days notice of your
intention to do so.
10. MISCELLANEOUS
10.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions of this
Agreement or otherwise affect their construction or effect.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.
10.3 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.
10.4 This Agreement shall be construed and its provisions interpreted
under and in accordance with the laws of the State of California. It shall also
be subject to the provisions of the federal securities laws and the rules and
regulations thereunder, to any orders of the SEC on behalf of the Trust granting
it exemptive relief, and to the conditions of such orders. We shall promptly
forward copies of any such orders to you.
10.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or
21
holder of shares of beneficial interest of the Trust shall be personally liable
for any such liabilities.
10.6 The parties to this Agreement agree that the assets and
liabilities of each Portfolio of the Trust are separate and distinct from the
assets and liabilities of each other Portfolio. No Portfolio shall be liable or
shall be charged for any debt, obligation or liability of any other Portfolio.
10.7 Each party to this Agreement shall cooperate with each other
party and all appropriate governmental authorities (including without limitation
the SEC, the NASD, and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
10.8 Each party shall treat as confidential all information of the
other party which the parties agree in writing is confidential ("Confidential
Information"). Except as permitted by this Agreement or as required by
appropriate governmental authority (including, without limitation, the SEC, the
NASD, or state securities and insurance regulators) the receiving party shall
not disclose or use Confidential Information of the other party before it enters
the public domain, without the express written consent of the party providing
the Confidential Information.
10.9 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 to this Agreement are
entitled to under state and federal laws.
10.10 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
10.11 Neither this Agreement nor any rights or obligations created by
it may be assigned by any party without the prior written approval of the other
parties.
10.12 No provisions of this Agreement may be amended or modified in
any manner except by a written agreement properly authorized and executed by
both parties. Notwithstanding the foregoing, the Site Terms may be separately
amended as provided therein and, as so amended and in effect from time to time,
shall be a part of this Agreement.
10.13 Each party to the Agreement agrees to limit the disclosure of
nonpublic personal information of Contract owners and customers consistent with
its policies on privacy with respect to such information and Regulation S-P of
the SEC. Each party hereby agrees that it will comply with all applicable
requirements under the regulations implementing Title V of the
Xxxxx-Xxxxx-Xxxxxx Act and any other applicable federal and state consumer
privacy acts, rules and regulations. Each party further represents that it has
in place, and agrees that it will maintain, information security policies and
procedures for protecting nonpublic personal customer information adequate to
conform to applicable legal requirements.
22
IN WITNESS WHEREOF, each of the parties have caused their duly
authorized officers to execute this Agreement.
The Company: American General Life Insurance Company
By:
-------------------------------------
Name:
Title:
[Corporate Seal] Attest:
---------------------------------
Name:
Title:
Distributor for the Company: American General Equity Services
Corporation
By:
-------------------------------------
Name:
Title:
[Corporate Seal] Attest:
---------------------------------
Name:
Title:
The Trust: Franklin Xxxxxxxxx Variable Insurance
Products Trust
Only on behalf of each
Portfolio listed on
Schedule C hereof.
By:
-------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Assistant Vice President
The Underwriter: Franklin/Xxxxxxxxx Distributors, Inc.
By:
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
23
SCHEDULE A
THE COMPANY AND ITS DISTRIBUTOR
THE COMPANY:
American General Life Insurance Company
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
A life insurance company organized as a corporation under Texas laws.
THE DISTRIBUTOR:
American General Equity Services Corporation
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
A corporation organized under Delaware laws.
A
SCHEDULE B
ACCOUNTS OF THE COMPANY
1. Name: American General Life Insurance Company
Separate Account D
Date Established: November 19, 1993
SEC Registration Number: 811-02441
2. Name: American General Life Insurance Company
Separate Account VL-R
Date Established: May 6, 1997
SEC Registration Number: 811-08561
B
SCHEDULE C
AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST; INVESTMENT ADVISERS
Franklin Xxxxxxxxx Variable Insurance Products Trust Investment Adviser
---------------------------------------------------- ------------------
Franklin Small Cap Fund Class 2 Franklin Advisers, Inc.
Franklin Small Cap Value Securities Fund Class 2 Franklin Advisory Services, LLC
Franklin U.S. Government Fund Class 2 Franklin Advisers, Inc.
Mutual Shares Securities Fund Class 2 Franklin Mutual Advisers, LLC
Templeton Developing Markets Securities Fund Class 2 Xxxxxxxxx Asset Management, Ltd.
Templeton Foreign Securities Fund Class 2 Xxxxxxxxx Investment Counsel, LLC
Templeton Global Asset Allocation Fund Class 2 Xxxxxxxxx Investment Counsel, LLC
C
SCHEDULE D
CONTRACTS OF THE COMPANY
PRODUCT NAME SEPARATE ACCOUNT NAME
REGISTERED Y/N REGISTRATION DATE
# 1933 ACT #, STATE ID # 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS
------------------------------------------------------------------------------------------------------------------------
1 AG Legacy Plus VUL American General Life Insurance Class 2 shares:
Yes Company Separate Account VL-R Franklin Small Cap Fund
333-89897 May 6, 1997 Xxxxxxxxx Foreign Securities Fund
99616 811-08561
------------------------------------------------------------------------------------------------------------------------
2 Legacy Plus VUL American General Life Insurance Class 2 shares:
Yes Company Separate Account VL-R Franklin Small Cap Fund
333-53909 Yes Xxxxxxxxx Developing Markets Securities Fund
98615 May 6, 1997 Xxxxxxxxx Foreign Securities Fund
811-08561
------------------------------------------------------------------------------------------------------------------------
3 Platinum Investor I VUL American General Life Insurance Class 2 shares:
Yes Company Separate Account VL-R Franklin U.S. Government Fund
333-42567 May 6, 1997 Mutual Shares Securities Fund
97600 811-08561 Xxxxxxxxx Foreign Securities Fund
------------------------------------------------------------------------------------------------------------------------
4 Platinum Investor II VUL American General Life Insurance Class 2 shares:
Yes Company Separate Account VL-R Franklin Small Cap Value Securities Fund
333-103361 May 6, 0000 Xxxxxxxx X.X. Government Fund
97610 811-08561 Mutual Shares Securities Fund
Xxxxxxxxx Foreign Securities Fund
------------------------------------------------------------------------------------------------------------------------
5 Platinum Investor III American General Life Insurance Class 2 shares:
VUL Company Separate Account VL-R Franklin Small Cap Value Securities Fund
Yes May 6, 0000 Xxxxxxxx X.X. Government Fund
333-43264 811-08561 Mutual Shares Securities Fund
00600 Xxxxxxxxx Foreign Securities Fund
------------------------------------------------------------------------------------------------------------------------
6 Platinum Investor PLUS American General Life Insurance Class 2 shares:
VUL Company Franklin Small Cap Value Securities Fund
Yes Separate Account VL-R Franklin U.S. Government Fund
333-82982 May 6, 1997 Mutual Shares Securities Fund
02600 811-08561 Xxxxxxxxx Foreign Securities Fund
------------------------------------------------------------------------------------------------------------------------
7 Platinum Investor American General Life Insurance Class 2 shares:
Survivor VUL Company Separate Account VL-R Franklin Small Cap Value Securities Fund
Yes May 6, 0000 Xxxxxxxx X.X. Government Fund
333-90787 811-08561 Mutual Shares Securities Fund
99206 Xxxxxxxxx Foreign Securities Fund
------------------------------------------------------------------------------------------------------------------------
D-1
PRODUCT NAME SEPARATE ACCOUNT NAME
# REGISTERED Y/N REGISTRATION DATE CLASSES OF SHARES AND PORTFOLIOS
1933 ACT #, STATE ID # 1940 ACT #
------------------------------------------------------------------------------------------------------------------------
8 Platinum Investor American General Life Insurance Class 2 shares:
Survivor II VUL Company Separate Account VL-R Franklin Small Cap Value Securities Fund
Yes May 6, 0000 Xxxxxxxx X.X. Government Fund
333-65170 811-08561 Mutual Shares Securities Fund
01206 Xxxxxxxxx Foreign Securities Fund
------------------------------------------------------------------------------------------------------------------------
9 Platinum Investor American General Life Insurance Class 2 shares:
Variable Annuity Company Separate Account X Xxxxxxxxx Global Asset Allocation Fund
Yes November 19, 1993 Xxxxxxxxx Foreign Securities Fund
333-70667 811-02441
98020
------------------------------------------------------------------------------------------------------------------------
10 The One VUL Solution American General Life Insurance Class 2 shares:
Yes Company Separate Account VL-R Franklin Small Cap Fund
333-87307 May 6, 1997 Xxxxxxxxx Developing Markets Securities Fund
99615 811-08561
------------------------------------------------------------------------------------------------------------------------
11 Platinum Investor American General Life Insurance Class 2 shares:
Immediate VA Company Separate Account D Franklin Small Cap Value Securities Fund
Yes November 19, 0000 Xxxxxxxx X.X. Government Fund
333-109206 811-02441 Mutual Shares Securities Fund
03017
------------------------------------------------------------------------------------------------------------------------
12 Platinum Investor American General Life Insurance Class 2 shares
FlexDirector Company Separate Account VL-R Franklin Small Cap Value Securities Fund
Yes May 6, 0000 Xxxxxxxx X.X. Government Fund
333-109613 811-08561 Mutual Shares Securities Fund
03601
------------------------------------------------------------------------------------------------------------------------
13 Corporate America American General Life Insurance Class 2 shares
Yes Company Separate Account VL-R Franklin Small Cap Value Securities Fund
333-80191 May 6, 1997
99301 811-08561
------------------------------------------------------------------------------------------------------------------------
D-2
SCHEDULE E
THIS SCHEDULE IS NOT USED
E
SCHEDULE F
RULE 12b-1 PLANS
COMPENSATION SCHEDULE
Each Portfolio named below shall pay the following amounts pursuant to the terms
and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan,
stated as a percentage per year of Class 2's average daily net assets
represented by shares of Class 2.
PORTFOLIO NAME MAXIMUM ANNUAL PAYMENT RATE
--------------- ---------------------------
Franklin Small Cap Fund 0.25%
Franklin Small Cap Value Securities Fund 0.25%
Franklin U.S. Government Fund 0.25%
Mutual Shares Securities Fund 0.25%
Xxxxxxxxx Developing Markets Securities Fund 0.25%
Xxxxxxxxx Foreign Securities Fund 0.25%
Templeton Global Asset Allocation Fund 0.25%
AGREEMENT PROVISIONS
If the Company, on behalf of any Account, purchases Trust Portfolio
shares ("Eligible Shares") which are subject to a Rule 12b-1 plan adopted under
the 1940 Act (the "Plan"), the Company may participate in the Plan.
To the extent the Company or its affiliates, agents or designees
(collectively "you") provide any activity or service which is primarily intended
to assist in the promotion, distribution or account servicing of Eligible Shares
("Rule 12b-1 Services") or variable contracts offering Eligible Shares, the
Underwriter, the Trust or their affiliates (collectively, "we") may pay you a
Rule 12b-1 fee. "Rule 12b-1 Services" may include, but are not limited to,
printing of prospectuses and reports used for sales purposes, preparing and
distributing sales literature and related expenses, advertisements, education of
dealers and their representatives, and similar distribution-related expenses,
furnishing personal services to owners of Contracts which may invest in Eligible
Shares ("Contract Owners"), education of Contract Owners, answering routine
inquiries regarding a Portfolio, coordinating responses to Contract Owner
inquiries regarding the Portfolios, maintaining such accounts or providing such
other enhanced services as a Trust Portfolio or Contract may require, or
providing other services eligible for service fees as defined under NASD rules.
Your acceptance of such compensation is your acknowledgment that eligible
services have been rendered. All Rule 12b-1 fees, shall be based on the value of
Eligible Shares owned by the Company on behalf of its Accounts, and shall be
calculated on the basis and at the rates set forth in the Compensation Schedule
stated above. The aggregate annual fees paid pursuant to each Plan shall not
exceed the amounts stated as the "annual maximums" in the Portfolio's
prospectus, unless an increase is approved by shareholders as provided in the
Plan. These maximums shall be a specified percent of the value of a Portfolio's
net assets attributable to Eligible
F-1
Shares owned by the Company on behalf of its Accounts (determined in the same
manner as the Portfolio uses to compute its net assets as set forth in its
effective Prospectus). The Rule 12b-1 fee will be paid to you within thirty (30)
days after the end of the three-month periods ending in January, April, July and
October.
You shall furnish us with such information as shall reasonably be
requested by the Trust's Boards of Trustees ("Trustees") with respect to the
Rule 12b-1 fees paid to you pursuant to the Plans. We shall furnish to the
Trustees, for their review on a quarterly basis, a written report of the amounts
expended under the Plans and the purposes for which such expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Trustees, including the Trustees who are not
interested persons of the Trust and who have no financial interest in the Plans
or any related agreement ("Disinterested Trustees"). Each Plan may be terminated
at any time by the vote of a majority of the Disinterested Trustees, or by a
vote of a majority of the outstanding shares as provided in the Plan, on sixty
(60) days' written notice, without payment of any penalty. The Plans may also be
terminated by any act that terminates the Underwriting Agreement between the
Underwriter and the Trust, and/or the management or administration agreement
between Franklin Advisers, Inc. and its affiliates and the Trust. Continuation
of the Plans is also conditioned on Disinterested Trustees being ultimately
responsible for selecting and nominating any new Disinterested Trustees. Under
Rule 12b-1, the Trustees have a duty to request and evaluate, and persons who
are party to any agreement related to a Plan have a duty to furnish, such
information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, the Trust is permitted to implement or continue Plans or the provisions
of any agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Trustees are able to conclude that the Plans
will benefit each affected Trust Portfolio and class. Absent such yearly
determination, the Plans must be terminated as set forth above. In the event of
the termination of the Plans for any reason, the provisions of this Schedule F
relating to the Plans will also terminate. You agree that your selling
agreements with persons or entities through whom you intend to distribute
Contracts will provide that compensation paid to such persons or entities may be
reduced if a Portfolio's Plan is no longer effective or is no longer applicable
to such Portfolio or class of shares available under the Contracts.
Any obligation assumed by the Trust pursuant to this Agreement shall be limited
in all cases to the assets of the Trust and no person shall seek satisfaction
thereof from shareholders of the Trust. You agree to waive payment of any
amounts payable to you by Underwriter under a Plan until such time as the
Underwriter has received such fee from the Trust.
The provisions of the Plans shall control over the provisions of the
Participation Agreement, including this Schedule F, in the event of any
inconsistency.
You agree to provide complete disclosure as required by all applicable statutes,
rules and regulations of all rule 12b-1 fees received from us in the prospectus
of the Contracts.
F-2
SCHEDULE G
ADDRESSES FOR NOTICES
To the Company: American General Life Insurance Company
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
To the Distributor: American General Equity Services Corporation
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
To the Trust: Franklin Xxxxxxxxx Variable Insurance Products
Trust
Xxx Xxxxxxxx Xxxxxxx
Xxxxxxxx 000, 0xx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx,
Assistant Vice President
With a copy to Xxxxxx Xxxxxxx, General Counsel
To the Underwriter: Franklin/Xxxxxxxxx Distributors, Inc.
Xxx Xxxxxxxx Xxxxxxx
Xxxxxxxx 000, 0xx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Vice President
With a copy to Xxxxxx Xxxxxxx, General Counsel
G
SCHEDULE H
SHARED FUNDING ORDER
Templeton Variable Products Series Fund, et al.
File No. 812-11698
SECURITIES AND EXCHANGE COMMISSION
Release No. IC-24018
1999 SEC LEXIS 1887
September 17, 1999
ACTION: Notice of application for an amended order of exemption pursuant to
Section 6(c) of the Investment Company Act of 1940 (the "1940 Act") from the
provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.
TEXT: Summary of Application: Templeton Variable Products Series Fund (the
"Templeton Trust"), Franklin Xxxxxxxxx Variable Insurance Products Trust
(formerly Franklin Valuemark Funds) (the "VIP Trust," and together with the
Templeton Trust, the "Funds"), Xxxxxxxxx Funds Annuity Company ("TFAC") or any
successor to TFAC, and any future open-end investment company for which TFAC or
any affiliate is the administrator, sub-administrator, investment manager,
adviser, principal underwriter, or sponsor ("Future Funds") seek an amended
order of the Commission to (1) add as parties to that order the VIP Trust and
any Future Funds and (2) permit shares of the Funds and Future Funds to be
issued to and held by qualified pension and retirement plans outside the
separate account context.
Applicants: Templeton Variable Products Series Fund, Franklin Xxxxxxxxx
Variable Insurance Products Trust, Xxxxxxxxx Funds Annuity Company or any
successor to TFAC, and any future open-end investment company for which TFAC or
any affiliate is the administrator, sub-administrator, investment manager,
adviser, principal underwriter, or sponsor (collectively, the "Applicants").
Filing Date: The application was filed on July 14, 1999, and amended and
restated on September 17, 1999.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested persons may
request a hearing by writing to the Secretary of the Commission and serving
Applicants with a copy of the request, personally or by mail. Hearing requests
should be received by the Commission by 5:30 p.m., on October 12, 1999, and
should be accompanied by proof of service on the Applicants in the form of an
affidavit or, for lawyers, a certificate of service. Hearing requests should
state the nature of the writer's interest, the reason for the request, and the
issues contested. Persons who wish to be notified of a hearing may request
notification by writing to the Secretary of the Commission.
Addresses: Secretary, Securities and Exchange Commission, 000 Xxxxx
Xxxxxx, XX, Xxxxxxxxxx, X.X. 00000-0000.
Applicants: Templeton Variable Products Series Fund and Franklin
Xxxxxxxxx Variable Insurance Products Trust, 000 Xxxxxxxx Xxxxxx Xxxxxxxxx, Xxx
Xxxxx, Xxxxxxxxxx 00000, Attn: Xxxxx X. Xxxxxxxx, Esq.
For Further Information Contact: Xxxxx X. XxXxxxx, Senior Counsel, or
Xxxxx X. Xxxxx, Branch Chief, Office of Insurance Products, Division of
Investment Management, at (000) 000-0000.
H-1
Supplementary Information: The following is a summary of the
application. The complete application is available for a fee from the SEC's
Public Reference Branch, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000-0000
(tel. (000) 000-0000).
Applicants' Representations:
1. Each of the Funds is registered under the 1940 Act as an open-end
management investment company and was organized as a Massachusetts business
trust. The Templeton Trust currently consists of eight separate series, and the
VIP Trust consists of twenty-five separate series. Each Fund's Declaration of
Trust permits the Trustees to create additional series of shares at any time.
The Funds currently serve as the underlying investment medium for variable
annuity contracts and variable life insurance policies issued by various
insurance companies. The Funds have entered into investment management
agreements with certain investment managers ("Investment Managers") directly or
indirectly owned by Franklin Resources, Inc. ("Resources"), a publicly owned
company engaged in the financial services industry through its subsidiaries.
2. TFAC is an indirect, wholly owned subsidiary of Resources. TFAC is
the sole insurance company in the Franklin Xxxxxxxxx organization, and
specializes in the writing of variable annuity contracts. The Templeton Trust
has entered into a Fund Administration Agreement with Franklin Xxxxxxxxx
Services, Inc. ("FT Services"), which replaced TFAC in 1998 as administrator,
and FT Services subcontracts certain services to TFAC. FT Services also serves
as administrator to all series of the VIP Trust. TFAC and FT Services provide
certain administrative facilities and services for the VIP and Templeton Trusts.
3. On November 16, 1993, the Commission issued an order granting
exemptive relief to permit shares of the Xxxxxxxxx Trust to be sold to and held
by variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (Investment Company Act
Release No. 19879, File No. 812-8546) (the "Original Order"). Applicants
incorporate by reference into the application the Application for the Original
Order and each amendment thereto, the Notice of Application for the Original
Order, and the Original Order, to the extent necessary, to supplement the
representations made in the application in support of the requested relief.
Applicants represent that all of the facts asserted in the Application for the
Original Order and any amendments thereto remain true and accurate in all
material respects to the extent that such facts are relevant to any relief on
which Applicants continue to rely. The Original Order allows the Templeton Trust
to offer its shares to insurance companies as the investment vehicle for their
separate accounts supporting variable annuity contracts and variable life
insurance contracts (collectively, the "Variable Contracts"). Applicants state
that the Original Order does not (i) include the VIP Trust or Future Funds as
parties, nor (ii) expressly address the sale of shares of the Funds or any
Future Funds to qualified pension and retirement plans outside the separate
account context including, without limitation, those trusts, plans, accounts,
contracts or annuities described in Sections 401(a), 403(a), 403(b), 408(b),
408(k), 414(d), 457(b), 501(c)(18) of the Internal Revenue Code of 1986, as
amended (the "Code"), and any other trust, plan, contract, account or annuity
that is determined to be within the scope of Treasury Regulation
1.817.5(f)(3)(iii) ("Qualified Plans").
4. Separate accounts owning shares of the Funds and their insurance
company depositors are referred to in the application as "Participating Separate
Accounts" and "Participating Insurance Companies," respectively. The use of a
common management investment company as the underlying investment medium for
both variable annuity and variable life insurance separate accounts of a single
insurance company (or of two or more affiliated insurance companies) is referred
to as "mixed funding." The use of a common management investment company as the
underlying investment medium for variable annuity and/or variable life insurance
separate accounts of unaffiliated insurance companies is referred to as "shared
funding."
Applicants' Legal Analysis:
1. Applicants request that the Commission issue an amended order
pursuant to Section 6(c) of the 1940 Act, adding the VIP Trust and Future Funds
to the Original Order and exempting scheduled premium variable life insurance
separate accounts and flexible premium variable life insurance separate accounts
of Participating Insurance Companies (and, to the extent necessary, any
principal underwriter and depositor of such an account) and the Applicants from
Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and
6e-3(T)(b)(15)
H-2
(and any comparable rule) thereunder, respectively, to the extent necessary to
permit shares of the Funds and any Future Funds to be sold to and held by
Qualified Plans. Applicants submit that the exemptions requested are appropriate
in the public interest, consistent with the protection of investors, and
consistent with the purposes fairly intended by the policy and provisions of the
1940 Act.
2. The Original Order does not include the VIP Trust or Future Funds as
parties nor expressly address the sale of shares of the Funds or any Future
Funds to Qualified Plans. Applicants propose that the VIP Trust and Future Funds
be added as parties to the Original Order and the Funds and any Future Funds be
permitted to offer and sell their shares to Qualified Plans.
3. Section 6(c) of the 1940 Act provides, in part, that the Commission,
by order upon application, may conditionally or unconditionally exempt any
person, security or transaction, or any class or classes of persons, securities
or transactions from any provisions of the 1940 Act or the rules or regulations
thereunder, if and to the extent that such exemption is necessary or appropriate
in the public interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the 1940 Act.
4. In connection with the funding of scheduled premium variable life
insurance contracts issued through a separate account registered under the 1940
Act as a unit investment trust ("UIT"), Rule 6e-2(b)(15) provides partial
exemptions from various provisions of the 1940 Act, including the following: (1)
Section 9(a), which makes it unlawful for certain individuals to act in the
capacity of employee, officer, or director for a UIT, by limiting the
application of the eligibility restrictions in Section 9(a) to affiliated
persons directly participating in the management of a registered management
investment company; and (2) Sections 13(a), 15(a) and 15(b) of the 1940 Act to
the extent that those sections might be deemed to require "pass-through" voting
with respect to an underlying fund's shares, by allowing an insurance company to
disregard the voting instructions of contractowners in certain circumstances.
5. These exemptions are available, however, only where the management
investment company underlying the separate account (the "underlying fund")
offers its shares "exclusively to variable life insurance separate accounts of
the life insurer, or of any affiliated life insurance company." Therefore, Rule
6e-2 does not permit either mixed funding or shared funding because the relief
granted by Rule 6e-2(b)(15) is not available with respect to a scheduled premium
variable life insurance separate account that owns shares of an underlying fund
that also offers its shares to a variable annuity or a flexible premium variable
life insurance separate account of the same company or of any affiliated life
insurance company. Rule 6e-2(b)(15) also does not permit the sale of shares of
the underlying fund to Qualified Plans.
6. In connection with flexible premium variable life insurance contracts
issued through a separate account registered under the 1940 Act as a UIT, Rule
6e-3(T)(b)(15) also provides partial exemptions from Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act. These exemptions, however, are available only where
the separate account's underlying fund offers its shares "exclusively to
separate accounts of the life insurer, or of any affiliated life insurance
company, offering either scheduled contracts or flexible contracts, or both; or
which also offer their shares to variable annuity separate accounts of the life
insurer or of an affiliated life insurance company." Therefore, Rule 6e-3(T)
permits mixed funding but does not permit shared funding and also does not
permit the sale of shares of the underlying fund to Qualified Plans. As noted
above, the Original Order granted the Xxxxxxxxx Trust exemptive relief to permit
mixed and shared funding, but did not expressly address the sale of its shares
to Qualified Plans.
7. Applicants note that if the Funds were to sell their shares only to
Qualified Plans, exemptive relief under Rule 6e-2 and Rule 6e-3(T) would not be
necessary. Applicants state that the relief provided for under Rule 6e-2(b)(15)
and Rule 6e-3(T)(b)(15) does not relate to qualified pension and retirement
plans or to a registered investment company's ability to sell its shares to such
plans.
8. Applicants state that changes in the federal tax law have created the
opportunity for each of the Funds to increase its asset base through the sale of
its shares to Qualified Plans. Applicants state that Section 817(h) of the
Internal Revenue Code of 1986, as amended (the "Code"), imposes certain
diversification standards on the assets underlying Variable Contracts. Treasury
Regulations generally require that, to meet the diversification requirements,
all of the beneficial interests in the underlying investment company must be
held by the segregated asset accounts of
H-3
one or more life insurance companies. Notwithstanding this, Applicants note that
the Treasury Regulations also contain an exception to this requirement that
permits trustees of a Qualified Plan to hold shares of an investment company,
the shares of which are also held by insurance company segregated asset
accounts, without adversely affecting the status of the investment company as an
adequately diversified underlying investment of Variable Contracts issued
through such segregated asset accounts (Treas. Reg. 1.817-5(f)(3)(iii)).
9. Applicants state that the promulgation of Rules 6e-2(b)(15) and
6e-3(T)(b)(15) under the 1940 Act preceded the issuance of these Treasury
Regulations. Thus, Applicants assert that the sale of shares of the same
investment company to both separate accounts and Qualified Plans was not
contemplated at the time of the adoption of Rules 6e-2(b)(15) and
6e-3(T)(b)(15).
10. Section 9(a) provides that it is unlawful for any company to serve
as investment adviser or principal underwriter of any registered open-end
investment company if an affiliated person of that company is subject to a
disqualification enumerated in Section 9(a)(1) or (2). Rules 6e-2(b)(15) and
6e-3(T)(b)(15) provide exemptions from Section 9(a) under certain circumstances,
subject to the limitations on mixed and shared funding. These exemptions limit
the application of the eligibility restrictions to affiliated individuals or
companies that directly participate in the management of the underlying
portfolio investment company.
11. Applicants state that the relief granted in Rule 6e-2(b)(15) and
6e-3(T)(b)(15) from the requirements of Section 9 limits, in effect, the amount
of monitoring of an insurer's personnel that would otherwise be necessary to
ensure compliance with Section 9 to that which is appropriate in light of the
policy and purposes of Section 9. Applicants submit that those Rules recognize
that it is not necessary for the protection of investors or the purposes fairly
intended by the policy and provisions of the 1940 Act to apply the provisions of
Section 9(a) to the many individuals involved in an insurance company complex,
most of whom typically will have no involvement in matters pertaining to
investment companies funding the separate accounts.
12. Applicants to the Original Order previously requested and received
relief from Section 9(a) and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) to the extent
necessary to permit mixed and shared funding. Applicants maintain that the
relief previously granted from Section 9(a) will in no way be affected by the
proposed sale of shares of the Funds to Qualified Plans. Those individuals who
participate in the management or administration of the Funds will remain the
same regardless of which Qualified Plans use such Funds. Applicants maintain
that more broadly applying the requirements of Section 9(a) because of
investment by Qualified Plans would not serve any regulatory purpose. Moreover,
Qualified Plans, unlike separate accounts, are not themselves investment
companies and therefore are not subject to Section 9 of the 1940 Act.
13. Applicants state that Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii)
provide exemptions from the pass-through voting requirement with respect to
several significant matters, assuming the limitations on mixed and shared
funding are observed. Rules 6e-2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A)
provide that the insurance company may disregard the voting instructions of its
contractowners with respect to the investments of an underlying fund or any
contract between a fund and its investment adviser, when required to do so by an
insurance regulatory authority (subject to the provisions of paragraphs
(b)(5)(i) and (b)(7)(ii)(A) of the Rules). Rules 6e-2(b)(15)(iii)(B) and
6e-3(T)(b)(15)(iii)(A)(2) provide that the insurance company may disregard
contractowners' voting instructions if the contractowners initiate any change in
such company's investment policies, principal underwriter, or any investment
adviser (provided that disregarding such voting instructions is reasonable and
subject to the other provisions of paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and
(C) of the Rules).
14. Applicants assert that Qualified Plans, which are not registered as
investment companies under the 1940 Act, have no requirement to pass-through the
voting rights to plan participants. Applicants state that applicable law
expressly reserves voting rights to certain specified persons. Under Section
403(a) of the Employment Retirement Income Security Act ("ERISA"), shares of a
fund sold to a Qualified Plan must be held by the trustees of the Qualified
Plan. Section 403(a) also provides that the trustee(s) must have exclusive
authority and discretion to manage and control the Qualified Plan with two
exceptions: (1) when the Qualified Plan expressly provides that the trustee(s)
are subject to the direction of a named fiduciary who is not a trustee, in which
case the trustees are subject to proper directions made in accordance with the
terms of the Qualified Plan and not contrary to ERISA; and (2) when the
authority to manage, acquire or dispose of assets of the Qualified Plan is
delegated to one or more
H-4
investment managers pursuant to Section 402(c)(3) of ERISA. Unless one of the
two above exceptions stated in Section 403(a) applies, Qualified Plan trustees
have the exclusive authority and responsibility for voting proxies. Where a
named fiduciary to a Qualified Plan appoints an investment manager, the
investment manager has the responsibility to vote the shares held unless the
right to vote such shares is reserved to the trustees or the named fiduciary.
Where a Qualified Plan does not provide participants with the right to give
voting instructions, Applicants do not see any potential for material
irreconcilable conflicts of interest between or among variable contract holders
and Qualified Plan investors with respect to voting of the respective Fund's
shares. Accordingly, Applicants state that, unlike the case with insurance
company separate accounts, the issue of the resolution of material
irreconcilable conflicts with respect to voting is not present with respect to
such Qualified Plans since the Qualified Plans are not entitled to pass-through
voting privileges.
15. Even if a Qualified Plan were to hold a controlling interest in one
of the Funds, Applicants believe that such control would not disadvantage other
investors in such Fund to any greater extent than is the case when any
institutional shareholder holds a majority of the voting securities of any
open-end management investment company. In this regard, Applicants submit that
investment in a Fund by a Qualified Plan will not create any of the voting
complications occasioned by mixed funding or shared funding. Unlike mixed or
shared funding, Qualified Plan investor voting rights cannot be frustrated by
veto rights of insurers or state regulators.
16. Applicants state that some of the Qualified Plans, however, may
provide for the trustee(s), an investment adviser (or advisers), or another
named fiduciary to exercise voting rights in accordance with instructions from
participants. Where a Qualified Plan provides participants with the right to
give voting instructions, Applicants see no reason to believe that participants
in Qualified Plans generally or those in a particular Qualified Plan, either as
a single group or in combination with participants in other Qualified Plans,
would vote in a manner that would disadvantage Variable Contract holders. In
sum, Applicants maintain that the purchase of shares of the Funds by Qualified
Plans that provide voting rights does not present any complications not
otherwise occasioned by mixed or shared funding.
17. Applicants do not believe that the sale of the shares of the Funds
to Qualified Plans will increase the potential for material irreconcilable
conflicts of interest between or among different types of investors. In
particular, Applicants see very little potential for such conflicts beyond that
which would otherwise exist between variable annuity and variable life insurance
contractowners.
18. As noted above, Section 817(h) of the Code imposes certain
diversification standards on the underlying assets of variable contracts held in
an underlying mutual fund. The Code provides that a variable contract shall not
be treated as an annuity contract or life insurance, as applicable, for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the Treasury Department, adequately
diversified.
19. Treasury Department Regulations issued under Section 817(h) provide
that, in order to meet the statutory diversification requirements, all of the
beneficial interests in the investment company must be held by the segregated
asset accounts of one or more insurance companies. However, the Regulations
contain certain exceptions to this requirement, one of which allows shares in an
underlying mutual fund to be held by the trustees of a qualified pension or
retirement plan without adversely affecting the ability of shares in the
underlying fund also to be held by separate accounts of insurance companies in
connection with their variable contracts (Treas. Reg. 1.817-5(f)(3)(iii)). Thus,
Applicants believe that the Treasury Regulations specifically permit "qualified
pension or retirement plans" and separate accounts to invest in the same
underlying fund. For this reason, Applicants have concluded that neither the
Code nor the Treasury Regulations or revenue rulings thereunder presents any
inherent conflict of interest.
20. Applicants note that while there are differences in the manner in
which distributions from Variable Contracts and Qualified Plans are taxed, these
differences will have no impact on the Funds. When distributions are to be made,
and a Separate Account or Qualified Plan is unable to net purchase payments to
make the distributions, the Separate Account and Qualified Plan will redeem
shares of the Funds at their respective net asset value in conformity with Rule
22c-1 under the 1940 Act (without the imposition of any sales charge) to provide
proceeds to meet distribution needs. A Qualified Plan will make distributions in
accordance with the terms of the Qualified Plan.
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21. Applicants maintain that it is possible to provide an equitable
means of giving voting rights to Participating Separate Account contractowners
and to Qualified Plans. In connection with any meeting of shareholders, the
Funds will inform each shareholder, including each Participating Insurance
Company and Qualified Plan, of information necessary for the meeting, including
their respective share of ownership in the relevant Fund. Each Participating
Insurance Company will then solicit voting instructions in accordance with Rules
6e-2 and 6e-3(T), as applicable, and its participation agreement with the
relevant Fund. Shares held by Qualified Plans will be voted in accordance with
applicable law. The voting rights provided to Qualified Plans with respect to
shares of the Funds would be no different from the voting rights that are
provided to Qualified Plans with respect to shares of funds sold to the general
public.
22. Applicants have concluded that even if there should arise issues
with respect to a state insurance commissioner's veto powers over investment
objectives where the interests of contractowners and the interests of Qualified
Plans are in conflict, the issues can be almost immediately resolved since the
trustees of (or participants in) the Qualified Plans can, on their own, redeem
the shares out of the Funds. Applicants note that state insurance commissioners
have been given the veto power in recognition of the fact that insurance
companies usually cannot simply redeem their separate accounts out of one fund
and invest in another. Generally, time-consuming, complex transactions must be
undertaken to accomplish such redemptions and transfers. Conversely, the
trustees of Qualified Plans or the participants in participant-directed
Qualified Plans can make the decision quickly and redeem their interest in the
Funds and reinvest in another funding vehicle without the same regulatory
impediments faced by separate accounts or, as is the case with most Qualified
Plans, even hold cash pending suitable investment.
23. Applicants also state that they do not see any greater potential for
material irreconcilable conflicts arising between the interests of participants
under Qualified Plans and contractowners of Participating Separate Accounts from
possible future changes in the federal tax laws than that which already exist
between variable annuity contractowners and variable life insurance
contractowners.
24. Applicants state that the sale of shares of the Funds to Qualified
Plans in addition to separate accounts of Participating Insurance Companies will
result in an increased amount of assets available for investment by the Funds.
This may benefit variable contractowners by promoting economies of scale, by
permitting increased safety of investments through greater diversification, and
by making the addition of new portfolios more feasible.
25. Applicants assert that, regardless of the type of shareholders in
each Fund, each Fund's Investment Manager is or would be contractually and
otherwise obligated to manage the Fund solely and exclusively in accordance with
that Fund's investment objectives, policies and restrictions as well as any
guidelines established by the Board of Trustees of such Fund (the "Board"). The
Investment Manager works with a pool of money and (except in a few instances
where this may be required in order to comply with state insurance laws) does
not take into account the identity of the shareholders. Thus, each Fund will be
managed in the same manner as any other mutual fund. Applicants therefore see no
significant legal impediment to permitting the sale of shares of the Funds to
Qualified Plans.
26. Applicants state that the Commission has permitted the amendment of
a substantially similar original order for the purpose of adding a party to the
original order and has permitted open-end management investment companies to
offer their shares directly to Qualified Plan in addition to separate accounts
of affiliated or unaffiliated insurance companies which issue either or both
variable annuity contracts or variable life insurance contracts. Applicants
state that the amended order sought in the application is identical to precedent
with respect to the conditions Applicants propose should be imposed on Qualified
Plans in connection with investment in the Funds.
Applicants' Conditions:
If the requested amended order is granted, Applicants consent to the
following conditions:
1. A majority of the Board of each Fund shall consist of persons who are
not "interested persons" thereof, as defined by Section 2(a)(19) of the 1940
Act, and the rules thereunder and as modified by any applicable orders of the
Commission, except that if this condition is not met by reason of the death,
disqualification or bona fide resignation of any Board Member or Members, then
the operation of this condition shall be suspended: (a) for a period of 45 days
if the vacancy or vacancies may be filled by the remaining Board Members; (b)
for a period of 60 days if a vote
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of shareholders is required to fill the vacancy or vacancies; or (c) for such
longer period as the Commission may prescribe by order upon application.
2. The Board will monitor their respective Fund for the existence of any
material irreconcilable conflict among the interests of the Variable Contract
owners of all Separate Accounts investing in the Funds and of the Qualified Plan
participants investing in the Funds. The Board will determine what action, if
any, shall be taken in response to such conflicts. A material irreconcilable
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretive letter, or any similar action
by insurance, tax or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of the Funds are being managed; (e) a difference in voting
instructions given by variable annuity contract owners, variable life insurance
contract owners, and trustees of Qualified Plans; (f) a decision by an insurer
to disregard the voting instructions of Variable Contract owners; or (g) if
applicable, a decision by a Qualified Plan to disregard the voting instructions
of Qualified Plan participants.
3. Participating Insurance Companies, the Investment Managers, and any
Qualified Plan that executes a fund participation agreement upon becoming an
owner of 10 percent or more of the assets of an Fund (a "Participating Qualified
Plan"), will report any potential or existing conflicts of which it becomes
aware to the Board of any relevant Fund. Participating Insurance Companies, the
Investment Managers and the Participating Qualified Plans will be responsible
for assisting the Board in carrying out its responsibilities under these
conditions by providing the Board with all information reasonably necessary for
the Board to consider any issues raised. This responsibility includes, but is
not limited to, an obligation by each Participating Insurance Company to inform
the Board whenever voting instructions of Contract owners are disregarded and,
if pass-through voting is applicable, an obligation by each Participating
Qualified Plan to inform the Board whenever it has determined to disregard
Qualified Plan participant voting instructions. The responsibility to report
such information and conflicts, and to assist the Board, will be contractual
obligations of all Participating Insurance Companies investing in the Funds
under their agreements governing participation in the Funds, and such agreements
shall provide that these responsibilities will be carried out with a view only
to the interests of the Variable Contract owners. The responsibility to report
such information and conflicts, and to assist the Board, will be contractual
obligations of all Participating Qualified Plans under their agreements
governing participation in the Funds, and such agreements will provide that
their responsibilities will be carried out with a view only to the interests of
Qualified Plan participants.
4. If it is determined by a majority of the Board of a Fund, or by a
majority of the disinterested Board Members, that a material irreconcilable
conflict exists, the relevant Participating Insurance Companies and
Participating Qualified Plans will, at their own expense and to the extent
reasonably practicable as determined by a majority of the disinterested Board
Members, take whatever steps are necessary to remedy or eliminate the material
irreconcilable conflict, which steps could include: (a) in the case of
Participating Insurance Companies, withdrawing the assets allocable to some or
all of the Separate Account s from the Fund or any portfolio thereof and
reinvesting such assets in a different investment medium, including another
portfolio of an Fund or another Fund, or submitting the question as to whether
such segregation should be implemented to a vote of all affected Variable
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., variable annuity contract owners or variable life insurance
contract owners of one or more Participating Insurance Companies) that votes in
favor of such segregation, or offering to the affected Variable Contract owners
the option of making such a change; (b) in the case of Participating Qualified
Plans, withdrawing the assets allocable to some or all of the Qualified Plans
from the Fund and reinvesting such assets in a different investment medium; and
(c) establishing a new registered management investment company or managed
Separate Account. If a material irreconcilable conflict arises because of a
decision by a Participating Insurance Company to disregard Variable Contract
owner voting instructions, and that decision represents a minority position or
would preclude a majority vote, then the insurer may be required, at the Fund's
election, to withdraw the insurer's Separate Account investment in such Fund,
and no charge or penalty will be imposed as a result of such withdrawal. If a
material irreconcilable conflict arises because of a Participating Qualified
Plan's decision to disregard Qualified Plan participant voting instructions, if
applicable, and that decision represents minority position or would preclude a
majority vote, the Participating Qualified Plan may be required, at the Fund's
election, to withdraw its investment in such Fund, and no charge or penalty will
be imposed as a result of such withdrawal. The responsibility to take remedial
action in the event of a determination by a Board of a material irreconcilable
conflict and to bear the cost of such remedial action will be a contractual
obligation of all Participating
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Insurance Companies and Participating Qualified Plans under their agreements
governing participation in the Funds, and these responsibilities will be carried
out with a view only to the interest of Variable Contract owners and Qualified
Plan participants.
5. For purposes of Condition 4, a majority of the disinterested Board
Members of the applicable Board will determine whether or not any proposed
action adequately remedies any material irreconcilable conflict, but in no event
will the relevant Fund or the Investment Managers be required to establish a new
funding medium for any Contract. No Participating Insurance Company shall be
required by Condition 4 to establish a new funding medium for any Variable
Contract if any offer to do so has been declined by vote of a majority of the
Variable Contract owners materially and adversely affected by the material
irreconcilable conflict. Further, no Participating Qualified Plan shall be
required by Condition 4 to establish a new funding medium for any Participating
Qualified Plan if (a) a majority of Qualified Plan participants materially and
adversely affected by the irreconcilable material conflict vote to decline such
offer, or (b) pursuant to governing Qualified Plan documents and applicable law,
the Participating Qualified Plan makes such decision without a Qualified Plan
participant vote.
6. The determination of the Board of the existence of a material
irreconcilable conflict and its implications will be made known in writing
promptly to all Participating Insurance Companies and Participating Qualified
Plans.
7. Participating Insurance Companies will provide pass-through voting
privileges to Variable Contract owners who invest in registered Separate
Accounts so long as and to the extent that the Commission continues to interpret
the 1940 Act as requiring pass-through voting privileges for Variable Contract
owners. As to Variable Contracts issued by unregistered Separate Accounts,
pass-through voting privileges will be extended to participants to the extent
granted by issuing insurance companies. Each Participating Insurance Company
will also vote shares of the Funds held in its Separate Accounts for which no
voting instructions from Contract owners are timely received, as well as shares
of the Funds which the Participating Insurance Company itself owns, in the same
proportion as those shares of the Funds for which voting instructions from
contract owners are timely received. Participating Insurance Companies will be
responsible for assuring that each of their registered Separate Accounts
participating in the Funds calculates voting privileges in a manner consistent
with other Participating Insurance Companies. The obligation to calculate voting
privileges in a manner consistent with all other registered Separate Accounts
investing in the Funds will be a contractual obligation of all Participating
Insurance Companies under their agreements governing their participation in the
Funds. Each Participating Qualified Plan will vote as required by applicable law
and governing Qualified Plan documents.
8. All reports of potential or existing conflicts received by the Board
of a Fund and all action by such Board with regard to determining the existence
of a conflict, notifying Participating Insurance Companies and Participating
Qualified Plans of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
meetings of such Board or other appropriate records, and such minutes or other
records shall be made available to the Commission upon request.
9. Each Fund will notify all Participating Insurance Companies that
separate disclosure in their respective Separate Account prospectuses may be
appropriate to advise accounts regarding the potential risks of mixed and shared
funding. Each Fund shall disclose in its prospectus that (a) the Fund is
intended to be a funding vehicle for variable annuity and variable life
insurance contracts offered by various insurance companies and for qualified
pension and retirement plans; (b) due to differences of tax treatment and other
considerations, the interests of various Contract owners participating in the
Fund and/or the interests of Qualified Plans investing in the Fund may at some
time be in conflict; and (c) the Board of such Fund will monitor events in order
to identify the existence of any material irreconcilable conflicts and to
determine what action, if any, should be taken in response to any such conflict.
10. Each Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders (which, for these purposes, will be the persons having a
voting interest in the shares of the Funds), and, in particular, the Funds will
either provide for annual shareholder meetings (except insofar as the Commission
may interpret Section 16 of the 1940 Act not to require such meetings) or comply
with Section 16(c) of the 1940 Act, although the Funds are not the type of trust
described in Section 16(c) of the 1940 Act, as well as with Section 16(a) of the
1940 Act and, if and when applicable, Section 16(b) of the 1940 Act. Further,
each Fund will act in accordance with the Commission's
H-8
interpretation of the requirements of Section 16(a) with respect to periodic
elections of Board Members and with whatever rules the Commission may promulgate
with respect thereto.
11. If and to the extent Rules 6e-2 or 6e-3(T) under the 1940 Act is
amended, or proposed Rule 6e-3 under the 1940 Act is adopted, to provide
exemptive relief from any provision of the 1940 Act or the rules promulgated
thereunder, with respect to mixed or shared funding on terms and conditions
materially different from any exemptions granted in the order requested in the
application, then the Funds and/or Participating Insurance Companies and
Participating Qualified Plans, as appropriate, shall take such steps as may be
necessary to comply with such Rules 6e-2 and 6e-3(T), as amended, or proposed
Rule 6e-3, as adopted, to the extent that such Rules are applicable.
12. The Participating Insurance Companies and Participating Qualified
Plans and/or the Investment Managers, at least annually, will submit to the
Board such reports, materials or data as the Board may reasonably request so
that the Board may fully carry out obligations imposed upon it by the conditions
contained in the application. Such reports, materials and data will be submitted
more frequently if deemed appropriate by the Board. The obligations of the
Participating Insurance Companies and Participating Qualified Plans to provide
these reports, materials and data to the Board, when the Board so reasonably
requests, shall be a contractual obligation of all Participating Insurance
Companies and Participating Qualified Plans under their agreements governing
participation in the Funds.
13. If a Qualified Plan should ever become a holder of ten percent or
more of the assets of a Fund, such Qualified Plan will execute a participation
agreement with the Fund that includes the conditions set forth herein to the
extent applicable. A Qualified Plan will execute an application containing an
acknowledgment of this condition upon such Qualified Plan's initial purchase of
the shares of any Fund.
Conclusion:
Applicants assert that, for the reasons summarized above, the requested
exemptions are appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy and
provisions of the 1940 Act.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
H-9
Xxxxxxxxx Variable Products Series Fund, et al.
File No. 812-11698
SECURITIES AND EXCHANGE COMMISSION
Release No. IC-24079
1999 SEC LEXIS 2177
October 13, 1999
ACTION: Order Granting Exemptions
TEXT: Xxxxxxxxx Variable Products Series Fund ("Xxxxxxxxx Trust"), Franklin
Xxxxxxxxx Variable Insurance Products Trust ("VIP Trust"), Xxxxxxxxx Funds
Annuity Company ("TFAC") or any successor to TFAC, and any future open-end
investment company for which TFAC or any affiliate is the administrator,
sub-administrator, investment manager, adviser, principal underwriter, or
sponsor ("Future Funds") filed an application on July 14, 1999, and an amendment
on September 17, 1999 seeking an amended order of the Commission pursuant to
Section 6(c) of the Investment Company Act of 1940 ("1940 Act") exempting them
from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15). The prior order (Rel. No. IC-19879)
granted exemptive relief to permit shares of the Xxxxxxxxx Trust to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies. The proposed relief
would amend the prior order to add as parties to that order the VIP Trust and
any Future Funds and to permit shares of the Xxxxxxxxx Trust, the VIP Trust, and
Future Funds to be issued to and held by qualified pension and retirement plans
outside the separate account context.
A notice of the filing of the application was issued on September 17,
1999 (Rel. No. IC-24018). The notice gave interested persons an opportunity to
request a hearing and stated that an order granting the application would be
issued unless a hearing should be ordered. No request for a hearing has been
filed, and the Commission has not ordered a hearing.
The matter has been considered, and it is found that granting the
requested exemptions is appropriate in the public interest and consistent with
the protection of investors and the purposes intended by the policy and
provisions of the 1940 Act.
Accordingly,
IT IS ORDERED, pursuant to Section 6(c) of the 1940 Act, that the
requested exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act,
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, be, and hereby are,
granted, effective forthwith.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
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