Participation Agreement
Exhibit 99.(8)(e)
as of May 1, 2008
Xxxxxxxx Xxxxxxxxx Variable Insurance Products Trust
Franklin/Xxxxxxxxx Distributors, Inc.
Pacific Life Insurance Company
Pacific Select Distributors, Inc.
Xxxxxxxx Xxxxxxxxx Variable Insurance Products Trust
Franklin/Xxxxxxxxx Distributors, Inc.
Pacific Life Insurance Company
Pacific Select Distributors, Inc.
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 and its Distributor | |
B.
|
Accounts of the Company | |
C.
|
Available Portfolios and Classes of Shares of the Trust | |
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 entered by and 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 statutory trust under Delaware 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”),
the insurance company identified on Schedule A (together “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”).
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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, 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.
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
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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
Exchange Act of 1934, as amended (the “1934 Act”) and who are members in good standing of the
Financial Industry Regulatory Authority (“FINRA”); (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 FINRA
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 and, to the extent such recommendations are made by broker-dealers not affiliated with you,
you shall require in written agreements with such broker-dealers that they have reasonable grounds
for believing that such recommendation is suitable for such Contract owner.
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: |
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| (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 Delaware.
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 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.
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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 FINRA.
2.3.2 Each investment adviser (each, an “Adviser”) of a Portfolio, as indicated in the current
prospectus of the Portfolio, is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended or exempt from such registration.
| 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.
2.4.1 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.
2.4.2 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).
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| 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 by the Accounts 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
such 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: (i) 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; and (ii) investment companies in the form of funds of
funds. 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 00000-1906. After giving ten (10) days’ advance written notice
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.
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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 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 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 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 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 p.m. Eastern Time, on
the same Business Day on which such purchase orders are transmitted to us for processing on that
Business Day in conformance with section 3.3.1.
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
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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 1940 Act.
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 to the Accounts 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 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.
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
8
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 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 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 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.
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
9
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
to the Accounts 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 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.
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
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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
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.
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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. We shall reimburse you for usual, customary and reasonable
costs you incur in connection with delivery of the proxy (or similar materials such as voting
solicitation instructions) including bulk rate postage costs of mailing proxy materials (or similar
materials as voting solicitation instructions) to Contract owners, as well as processing,
tabulation and project management costs provided that you give us copies of appropriate invoices
you have received for such costs.
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 owned by subaccounts for which no instructions have
been received from Contract owners in the same proportion as Trust shares of such Portfolio for
which instructions have been received from Contract owners; so long as and to the extent that the
SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable
contract owners. 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
fifteen (15) 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.
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 mark as soon as reasonably practicable.
13
6.6 You shall furnish to us ten (10) Business Days prior to its first submission to the SEC or
its staff, any request or filing for no-action assurance or exemptive relief naming, pertaining to,
or affecting, the Trust, the Underwriter or any of the Portfolios.
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 or .pdf format
file provided to you by us (except that you may reformat .pdf format prospectus files in order to
delete blank pages and to insert .pdf format prospectus supplement files provided by us to you);
(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
15
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;
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
16
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 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 by the Accounts 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 to the Accounts; 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
17
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.
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
19
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 mutual agreement at any time. If this Agreement is so
terminated, we shall, at your option, continue to make available additional shares of any Portfolio
and redeem shares of any Portfolio for any or all Contracts or Accounts existing on the effective
date of termination of this Agreement, pursuant to the terms and conditions of this Agreement.
9.2 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. If this Agreement is so terminated, we may, at our option, continue to make available
additional shares of any Portfolio and redeem shares of any Portfolio for any or all Contracts or
Accounts existing on the effective date of termination of this Agreement, pursuant to the terms and
conditions of this Agreement; alternatively, we may, at our option, redeem the Portfolio shares
held by the Accounts, provided that such redemption shall not occur prior to six (6) months
following written notice of termination, during which time we will cooperate with you in effecting
a transfer of Portfolio assets to another underlying fund pursuant to any legal and appropriate
means.
9.3 This Agreement may be terminated immediately by us upon written notice to you if you
materially breach any of the representations and warranties made in this Agreement or you are
materially in default in the performance of any of your duties or obligations under the Agreement,
receive a written notice thereof and fail to remedy such default or breach to our reasonable
satisfaction within 30 days after such notice. If this Agreement so terminates, the parties shall
cooperate to effect an orderly windup of the business which may include, at our option, a
redemption of the Portfolio shares held by the Accounts, provided that such redemption shall not
occur prior to a period of up to six (6) months following written notice of termination, during
which time we will cooperate reasonably with you in effecting a transfer of Portfolio assets to
another underlying fund pursuant to any legal and appropriate means.
9.4 This Agreement may be terminated immediately by us upon written notice to you if, with
respect to the representations and warranties made in sections 2.1.3, 2.1.5, 2.1.7 and 2.4.2 of
this Agreement: (i) you materially breach any of such representations and warranties; 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
20
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. If this Agreement is so terminated, the Trust may
redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on the
effective date of termination of this Agreement.
9.5 This Agreement may be terminated by the Board of Trustees of the Trust, in the exercise of
its fiduciary duties, either upon its determination that such termination is a necessary and
appropriate remedy for a material breach of this Agreement which includes a violation of laws, or
upon its determination to completely liquidate a Portfolio. Pursuant to such termination, the
Trust may redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on
the effective date of termination of this Agreement.
9.6 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. If this
Agreement is so terminated, the Trust may redeem, at its option in kind or for cash, the Portfolio
shares held by the Accounts on the effective date of termination of this Agreement.
9.7 This Agreement shall be terminated as required by the Shared Funding Order, and its
provisions shall govern.
9.8 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, except that we shall have no further obligation to sell Trust shares with
respect to Contracts issued after termination.
9.9 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(c) 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) of this Section 9.9 is a Legally Required Redemption. Furthermore, you shall not
prevent Contract owners from allocating payments to any Portfolio that has been available under a
Contract without first giving us ninety (90) days advance written 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.
21
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, FINRA, 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, FINRA, 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.
22
Notwithstanding the foregoing:
(i) 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; and (ii) Schedule C may be separately amended
as provided therein and, as so amended 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.
23
IN WITNESS WHEREOF, each of the parties has caused their duly authorized officers to execute
this Agreement.
| The Company: | Pacific Life Insurance Company |
|||
| By: | /s/ Xxxxxxx X. Xxxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxxx | |||
| Title: | Assistant Vice President | |||
| Attest: | /s/ Xxxxxx X. Xxxxx | |||
| Xxxxxx X. Xxxxx, Corporate Secretary | ||||
| Distributor for the Company: | Pacific Select Distributors, Inc. |
|||
| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Name: | Xxxxxx X. Xxxxxx | |||
| Title: | Vice President & Chief Financial Officer | |||
| Attest: | /s/ Xxxxxx X. Xxxxx | |||
| Xxxxxx X. Xxxxx, Corporate Secretary | ||||
| The Trust:
Only on behalf of each
Portfolio listed on Schedule C hereof. |
Franklin Xxxxxxxxx Variable Insurance Products Trust | |||
| By: | /s/ Xxxxx X. Xxxxxxxx | |||
| Name: | Xxxxx X. Xxxxxxxx | |||
| Title: | Vice President | |||
| The Underwriter: | Franklin/Xxxxxxxxx Distributors, Inc. |
|||
| By: | /s/ Xxxxxx Xxxxxx | |||
| Name: | Xxxxxx Xxxxxx | |||
| Title: | Senior Vice President | |||
24
Schedule A
The Company and its Distributor
THE COMPANY
Pacific Life Insurance Company
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
An insurance company organized under the laws of the State of Nebraska.
THE DISTRIBUTOR
Pacific Select Distributors, Inc.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
A corporation organized under the laws of the State of California.
A
Schedule B
Accounts of the Company
| Name of Account | SEC Registration Yes/No | |||
| Yes | ||||
Pacific Select Variable Annuity Separate Account
of Pacific Life Insurance Company |
Yes | |||
B
Schedule C
Available Portfolios and Classes of Shares of the Trust
Xxxxxxxx Xxxxxxxxx VIP Founding Funds Allocation Fund — Class 4
In addition to portfolios and classes of shares listed above (if any), any additional Portfolios
and classes of shares are included in this Schedule C listing provided that:
| (1) | the Legal Department of the Trust receives from a person authorized by you a written notice in the form attached (which may be electronic mail or sent by electronic mail) (“Notice”) identifying this Agreement as provided in the Notice and specifying: (i) the names and classes of shares of additional Portfolios that you propose to offer as investment options of the Separate Accounts under the Contracts; and (ii) the date that you propose to begin offering Separate Account interests investing in the additional Portfolios under the Contracts; and | ||
| (2) | we do not within ten (10) Business Days following receipt of the Notice send you a writing (which may be electronic mail) objecting to your offering such Separate Accounts investing in the additional Portfolios and classes of shares under the Contracts. |
Provided that we do not object as provided above, your Notice shall amend, supplement and become a
part of this Schedule C and the Agreement.
C-1
Form of Notice Pursuant to Schedule C of Participation Agreement
To:
Franklin Xxxxxxxxx Investments
0 Xxxxxxxx Xxxxxxx,
Xxxx. 000, 0xx Xxxxx
Xxx Xxxxx, XX 00000
0 Xxxxxxxx Xxxxxxx,
Xxxx. 000, 0xx Xxxxx
Xxx Xxxxx, XX 00000
With respect to the following agreement(s) (altogether, the “Agreement”)
(please reproduce and complete table for multiple agreements):
(please reproduce and complete table for multiple agreements):
Date of Participation Agreement: |
Insurance Company(ies): |
Insurance Company Distributor(s): |
As provided by Schedule C of the Agreement, this Notice proposes to Franklin Xxxxxxxxx Variable
Insurance Products Trust, and Franklin/Xxxxxxxxx Distributors, Inc. the addition as of the offering
date(s) listed below of the following Portfolios as additional investment options listed on
Schedule C:
| Names and Classes of Shares of Additional Portfolios | Offering Date(s) | |||
Listing of current classes for your reference: |
||||
Class 1 (no 12b-1 fee); |
||||
Class 2 (12b-1 fee of 25 bps); |
||||
Class 3 (redemption fee and 12b-1 fee of 25 bps) or |
||||
Class 4 (12b-1 fee of 35 bps). |
||||
Name and title of authorized person of insurance company:
C-2
Schedule D
Contracts of the Company
All variable life and variable annuity contracts issued by separate accounts listed on Schedule B
of this Agreement.
D
Schedule E
This schedule is not used
E
Schedule F
Rule 12b-1 Plans of the Trust
Compensation
Each Class 2 Portfolio named or referenced on Schedule C of this Agreement may pay a maximum
annual payment rate of % stated as a percentage per year of that Portfolio’s Class 2 average daily
net assets, pursuant to the terms and conditions of its Class 2 Rule 12b-1 distribution plan. Each
Class 4 Portfolio named or referenced on Schedule C of this Agreement may pay a maximum annual
payment rate of % stated as a percentage per year of that Portfolio’s Class 4 average daily net
assets, pursuant to the terms and conditions of its Class 4 Rule 12b-1 distribution plan.
Agreement Provisions
If the Company, on behalf of any Account, purchases Trust Portfolio shares (“Eligible Shares”)
that are subject to a Rule 12b-1 plan adopted under the 1940 Act (the “Plan”), the Company, on
behalf of its distributor, 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 FINRA
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 provision 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 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.
F-1
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, or as provided in the Plan. 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:
|
Pacific Life Insurance Company 000 Xxxxxxx Xxxxxx Xxxxx Xxxxxxx Xxxxx, XX 00000 Attention: General Counsel |
|
To the Distributor:
|
Pacific Select Distributors, Inc. 000 Xxxxxxx Xxxxxx Xxxxx Xxxxxxx Xxxxx, XX 00000 Attention: Vice President |
|
To the Trust:
|
Xxxxxxxx Xxxxxxxxx Variable Insurance Products Trust Xxx Xxxxxxxx Xxxxxxx, Xxxx. 000 0xx Xxxxx Xxx Xxxxx, Xxxxxxxxxx 00000 Attention: Vice President |
|
To the Underwriter:
|
Franklin/Xxxxxxxxx Distributors, Inc. 000 Xxxxxxxx Xxxxxxx, 0xx Xxxxx Xx. Xxxxxxxxxx, XX 00000 Attention: President |
|
If to the Trust or Underwriter
with a copy to:
|
Xxxxxxxx Xxxxxxxxx Investments Xxx Xxxxxxxx Xxxxxxx, Xxxx. 000 0xx Xxxxx Xxx Xxxxx, Xxxxxxxxxx 00000 Attention: General Counsel |
G
Schedule H
Shared Funding Order
Xxxxxxxxx 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: Xxxxxxxxx Variable Products Series Fund (the “Xxxxxxxxx Trust”),
Franklin Xxxxxxxxx Variable Insurance Products Trust (formerly Franklin Valuemark Funds) (the “VIP
Trust,” and together with the Xxxxxxxxx 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: Xxxxxxxxx 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. 00000-0609.
Applicants: Xxxxxxxxx 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 Xxxxxxxxx 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 Xxxxxxxxx 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 Xxxxxxxxx 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 Xxxxxxxxx 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,
H-3
all of the beneficial
interests in the underlying investment company must be held by the segregated asset accounts of
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)
H-4
when the authority to manage, acquire or dispose of assets
of the Qualified Plan is delegated to one or more
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, Xxxxxxxxxx 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
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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.
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:
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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
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
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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
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.
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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
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.
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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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