Participation Agreement
as of [ , ] 2000
Franklin Templeton Variable Insurance Products Trust
Franklin Templeton Distributors, Inc.
[Company]
CONTENTS
Section Subject Matter
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. Other Portfolios Available under the Contracts
F. (Redacted)
G. Addresses for Notices
H. Shared Funding Order
1. Parties and Purpose
This agreement (the "Agreement") is between certain portfolios, specified
below and in Schedule-C, of Franklin Templeton Variable Insurance Products
Trust, an open-end management investment company organized as a business trust
under Massachusetts law (the "Trust"), Franklin Templeton 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"), 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 the shares, and classes of shares, of portfolios of the Trust
("Portfolios") that are identified on Schedule-C, 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.
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.
2.1.7 The Contracts currently are and will be treated as 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
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 1940 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 that 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 1940 Act.
2.2.4 Each class of shares of the Portfolios of the Trust is
registered under the 1933 Act.
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 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 (Redacted)
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 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 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) receive a purchase
order, as established in accordance with the provisions of the then current
prospectus of the Trust. 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. Without limiting the
foregoing, the Trustees have determined that there is a significant risk that
the Trust and its shareholders may be adversely affected by investors whose
purchase and redemption activity follows a market timing pattern, 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) as they deem necessary to reduce, discourage or
eliminate market timing activity. You agree to cooperate with us to assist us in
implementing the Trust's restrictions on purchase and redemption activity that
follows a market timing pattern.
3.2 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.
3.3 (Redacted)
3.4 (Redacted)
3.5 (Redacted)
3.6 (Redacted)
3.7 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) 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 1940 Act. Payments for the purchase or redemption of shares by
you may be netted against one another on any Business Day for the purpose of
determining the amount of any wire transfer on that Business Day.
3.8 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.
3.9 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.
4. Fees, Expenses, Prospectuses, Proxy Materials and Reports
4.1 (Redacted)
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 (Redacted)
4.5 (Redacted)
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 (Redacted)
6.2 (Redacted)
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.
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 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. We may use the names of you, the Accounts and the Contracts in our
sales literature and disclosure documents.
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 "Templeton" 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 mark as soon as reasonably
practicable.
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
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 (including a failure, whether unintentional or in good faith
or otherwise, to comply with the requirements specified above in
Sections 2.1.3 and 2.1.7);
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 assume
the defense thereof, with counsel satisfactory to the party named in the
action. After notice from you to such party of the 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 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.
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.
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 shall be sufficiently given when sent by registered or certified mail
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, and shall terminate immediately
in the event of its assignment, as that term is used in the 1940 Act.
9.2 This Agreement may be terminated immediately by us upon written notice
to you if:
9.2.1 you notify the Trust or the Underwriter that the exemption from
registration under Section 3(c) of the 1940 Act no longer applies, or might
not apply in the future, to the unregistered Accounts, or that the
exemption from registration under Section 4(2) or Regulation D promulgated
under the 1933 Act no longer applies or might not apply in the future, to
interests under the unregistered Contracts; 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; or
9.2.4 upon your assignment of this Agreement without our prior written
approval.
9.3 If this Agreement is terminated for any reason, except as required by
the Shared Funding Order or pursuant to Section 9.2.1, above, we shall, at your
option, continue to make available additional shares of any Portfolio and redeem
shares of any Portfolio pursuant to all of the terms and conditions of this
Agreement for all Contracts in effect 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 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 to this Agreement shall treat as confidential all
information reasonably identified as confidential in writing by any other party
to this Agreement, and, except as permitted by this Agreement or as required by
legal process or regulatory authorities, shall not disclose, disseminate, or use
such names and addresses and other confidential information until such time as
they may come into the public domain, without the express written consent of the
affected party. Without limiting the foregoing, no party to this Agreement shall
disclose any information that such party has been advised is proprietary, except
such information that such party is required to disclose by any appropriate
governmental authority (including, without limitation, the SEC, the NASD, and
state securities and insurance regulators).
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, except as provided above in
Section 3.3.
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.
IN WITNESS WHEREOF, each of the parties have caused their duly authorized
officers to execute this Agreement.
The Company: ______________________________________________________
By:___________________________________________________
Name:_________________________________________________
Title:________________________________________________
The Trust: Franklin Templeton Variable Insurance Products Trust
Only on behalf of each
Portfolio listed on
Schedule C hereof.
By:___________________________________________________
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant Secretary
The Underwriter: Franklin Templeton Distributors, Inc.
By:___________________________________________________
Name: [ ]
Title: [ ]
Schedule A
(REDACTED)
Schedule B
(REDACTED)
Schedule C
(REDACTED)
Schedule D
(REDACTED)
Schedule E
(REDACTED)
Schedule F
(REDACTED)
Schedule G
(REDACTED)
Schedule H
(REDACTED)
