EXHIBIT 99.(d)(xxiv)
FRANKLIN XXXXXXXXX VARIABLE INSURANCE PRODUCTS TRUST
ON BEHALF OF
FRANKLIN S&P 500 INDEX FUND
FORM OF
SUBADVISORY AGREEMENT
This Agreement is entered into as of ______________, 2000, by and between
Franklin Advisers, Inc., a California corporation (the "Manager"), and State
Street Global Advisors, , a Massachusetts trust company (the "Subadvisor")
WHEREAS, Franklin S&P 500 Index Fund (the "Fund") is a series of Franklin
Xxxxxxxxx Variable Insurance Products Trust (the "Trust"), an investment company
registered with the U.S. Securities and Exchange Commission ("SEC") pursuant to
the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, Manager is registered as an investment adviser under the Investment
Advisers Act of 1940 (the "Advisers Act"), and Subadvisor is a "bank" as defined
in the Advisors Act and both are engaged in the business of supplying, among
other things, investment advice and investment management services to investment
companies and other investment counseling clients; and
WHEREAS, Manager has been retained to render investment advisory services to the
Fund pursuant to an Investment Advisory Agreement (the "Management Contract"),
and Manager desires to retain Subadvisor to render investment advisory, research
and related services to the Fund pursuant to this Agreement, and Subadvisor is
willing to provide such services; and
WHEREAS, the Trust's board of trustees (the "Board"), including a majority of
trustees who are not "interested persons" (as defined below) of any party to
this Agreement, have consented to such an arrangement.
NOW, THEREFORE, in consideration of the covenants and mutual promises contained
herein, the parties hereto, intending to be legally bound hereby, mutually agree
as follows:
I. APPOINTMENT OF SUBADVISOR; COMPENSATION
1.1 Appointment of Subadvisor.
Subject to and in accordance with the provisions hereof, Manager hereby appoints
Subadvisor as investment subadvisor to provide the various investment advisory
and other services to the Fund set forth herein and, subject to the restrictions
set forth herein, and hereby delegates to Subadvisor the authority vested in
Manager pursuant to the Management Contract to the extent necessary to enable
Subadvisor to perform its obligations under this Agreement. Subadvisor accepts
such appointment for the compensation herein provided and agrees to use its best
efforts in performing the services to be provided pursuant to this Agreement.
Manager shall continue to have responsibility for all services to be provided to
the Fund pursuant to the Management Contract and shall oversee and review the
Subadvisor's performance of its duties under this Agreement.
1.2 Scope of Investment Authority.
(a) Subadvisor is hereby authorized, on a discretionary basis, to manage the
investments and determine the composition of the assets of the Fund,
subject at all times to (i) the supervision and control of the Board, (ii)
the investment objectives, policies and limitations, as contained in the
Fund's current Prospectus and Statement of Additional Information and other
governing documents, including the Trust's Declaration of Trust and
By-laws, and (iii) such instructions, policies and limitations relating to
the Fund as the Board or Manager may from time to time adopt and
communicate in writing to Subadvisor. Notwithstanding anything herein to
the contrary, Subadvisor is not authorized to take any
1
action, including the purchase and sale of Fund securities, in
contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence.
(b) It is understood and agreed that, for so long as this Agreement shall
remain in effect, Subadvisor shall, subject to Section 1.2(a) hereof,
retain discretionary investment authority over the manner in which the
Fund's assets are invested, provided that the Board and Manager shall at
all times have the right to monitor the Fund's investment activities and
performance, require Subadvisor to make reports and give explanations as to
the manner in which the Fund's assets are being invested, and, should
either Manager or the Board become dissatisfied with Subadvisor's
performance in any way, terminate this Agreement in accordance with the
provisions of Section 8.2 hereof.
1.3 Independent Contractor.
Notwithstanding anything herein to the contrary, Subadvisor shall be an
independent contractor and will have no authority to act for or represent the
Trust, the Fund or Manager in any way or otherwise be deemed an agent of any of
them, except to the extent expressly authorized by this Agreement or in writing
by the Trust or Manager.
1.4 Compensation.
Subadvisor shall be compensated for the services it performs on behalf of the
Fund in accordance with the terms set forth in Appendix A to this Agreement.
II. SERVICES TO BE PERFORMED BY SUBADVISOR
2.1 Investment Advisory Services.
(a) In fulfilling its obligations to manage the assets of the Fund, Subadvisor
will:
(i) provide the Fund with such investment research, advice and
supervision as the Board and Manager may from time to time consider
necessary for the proper management of the assets of the Fund;
(ii) formulate and implement a continuous investment program for the
Fund;
(iii) take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities and other
investments, including the selection of brokers or dealers, the
placing of orders for such purchases and sales in accordance with
the provisions of paragraph (b) below and the affirming of such
purchases and sales with counterparties and clearing agents and
ensuring that such purchases and sales are properly settled and
cleared in a timely manner;
(iv) provide to Manager, the Fund's custodian and/or to such other
entities as Manager shall request, such information and reports
with respect to the implementation of the Fund's investment
program as Manager shall request, including daily reporting of
all transactions effected by Subadvisor on behalf of the Fund and
daily reporting of pricing and all other information sufficient
to enable the Fund to comply with Rule 22c-1 under the 1940 Act.
Subadvisor shall promptly forward to Manager and the Fund's
custodian copies of all brokerage or dealer confirmations for
each transaction effected for the Fund and shall as soon as is
practicable provide Manager and the Fund's custodian with copies
of the trade blotter for each such transaction;
(v) provide the Board in advance of the Board's regular and special
meetings and at such other times as may be reasonably requested
by the Board, a report of its activities hereunder on behalf of
the Fund and its proposed strategy, and such other periodic or
special reports as the
2
Board or Manager may reasonably request, all in such form and
detail as requested by the Board, and make an investment officer
available to attend such meetings as the Board may request.
Subadvisor shall also provide the Board and Manager with copies of
Subadvisor's quarterly compliance reports prepared in connection
with Subadvisor's code of ethics adopted in compliance with Rule
17j-1 of the 1940 Act promptly after such reports are available;
and
(vi) provide advice and assistance to Manager as to the determination of
the fair value of certain securities where market quotations are
not readily available for purposes of calculating net asset value
of the Fund in accordance with valuation procedures and methods
established by the Board.
(b) Subadvisor shall place all orders for the purchase and sale of portfolio
securities for the Fund's account with brokers, dealers, futures commission
merchants or banks selected by Subadvisor. Subadvisor shall use its best
efforts to obtain for the Fund the most favorable net price and execution
available. Subject to the policies and procedures adopted by the Board,
Subadvisor may, to the extent authorized by law and in accordance with the
Fund's Prospectus and Statement of Additional Information, cause the Fund
to pay a broker or dealer who provides brokerage and research services (as
defined in Section 28(e) of the Securities Exchange Act of 1934) an amount
of commission for effecting a portfolio investment transaction in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction, in recognition of the brokerage and research
services provided by the broker or dealer. To the extent authorized by
applicable law, Subadvisor shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise solely by
reason of such action. The Board shall periodically review the commissions
paid by the Fund to determine if the commissions paid over representative
periods were reasonable in relation to the benefits to the Fund. Subject to
applicable law and the policies and procedures adopted by the Board,
Subadvisor may select brokers or dealers that are affiliated with
Subadvisor in executing purchases and sales of securities for the Fund.
2.2 Administrative and Other Services.
(a) Facilities and Personnel.
Subadvisor will, at its expense, furnish (i) all necessary investment and
management facilities, including salaries of personnel required for it to
execute its duties faithfully under this Agreement, and (ii) administrative
facilities, including bookkeeping, clerical personnel and equipment
necessary for the efficient conduct of the investment affairs of the Fund
(excluding determination of net asset value and shareholder accounting
services).
(b) Maintenance of Books and Records.
Subadvisor agrees to maintain, in the form and for the period required by
Rules 31a-1 and 31a-2 under the 1940 Act, all accounts, books and records
with respect to the Fund as are required to be maintained pursuant to the
1940 Act. Subadvisor agrees that such accounts, books and records are the
property of the Trust and will be surrendered to the Trust or Manager (or
any other party at the Trust's direction) promptly upon request. Subadvisor
agrees to provide copies of such accounts, books and records to Manager and
the Fund's accountants and auditors promptly upon request. Subadvisor shall
timely furnish to Manager all information relating to Subadvisor's services
under this Agreement needed by Manager to keep the other books and records
of the Fund required by Rule 31a-1 under the 1940 Act. Subadvisor further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940
Act any such records as are required to be maintained by it pursuant to
this Agreement.
(c) Provision of Certain Additional Information.
Subadvisor shall provide such information as is necessary to enable the
Trust and Manager to prepare and update the Trust's registration statement
(and any supplement thereto), the Fund's financial
3
statements and any other periodic financial reports or other documents
required to be filed with the SEC and any other regulatory entity.
Subadvisor understands that the Trust and Manager will rely on such
information in the preparation of the Trust's registration statement, the
Fund's financial statements and other reports and documents, and hereby
covenants that any such information provided by Subadvisor expressly for
use in such registration statements, financial statements and/or other
reports or documents shall be true and complete in all material respects.
Subadvisor agrees to provide such other information as the Fund or Manager
may reasonably request for use in the preparation of other materials
necessary or helpful for the underwriting and distribution of the Fund's
shares.
(d) Exercise of Voting Rights for Investments.
Manager hereby delegates to Subadvisor discretionary authority to determine
the manner in which any voting rights, rights to consent to corporate
action and any other rights pertaining to the Fund's investment securities
shall be exercised. Subadvisor shall use its best good faith judgment to
exercise such rights in a manner which best serves the interests of the
Fund and its shareholders. Subadvisor shall promptly notify Manager and the
Fund's custodian of corporate actions and shall notify Manager of Proxy
votes in the event Subadvisor exercises any such rights with respect to the
Fund's investment securities. Upon written notice to Subadvisor, the Board
or Manager may at any time withdraw the authority granted to Subadvisor
pursuant to this Section to perform any or all of the voting services
contemplated hereby.
III. EXPENSES
During the term of this Agreement, Subadvisor will pay all expenses incurred by
it in connection with its activities under this Agreement other than the cost of
securities (including brokerage commissions, if any) purchased for the Fund. The
Fund and Manager will be responsible for their respective expenses and
liabilities.
IV. COMPLIANCE WITH APPLICABLE LAWS AND GOVERNING DOCUMENTS;
CONFIDENTIALITY
4.1 Compliance with Applicable Laws and Governing Documents.
Subadvisor will comply with (i) all applicable state and federal laws and
regulations governing the performance of Subadvisor's duties hereunder, (ii) the
investment objective, policies and limitations, as provided in the Fund's
current Prospectus, Statement of Additional Information and other governing
documents, and (iii) such instructions, policies and limitations relating to the
Fund as the Board or Manager may from time to time adopt and communicate to
Subadvisor. Without limiting the generality of the foregoing, Subadvisor shall
ensure that (1) the Fund shall comply with Section 817(h) of the Internal
Revenue Code of 1986 and the regulations issued thereunder (the "Code"),
specifically Regulation Section 1.817-5, relating to the diversification
requirements for variable annuity, endowment, and life insurance contracts, and
any amendments or other modifications to such Section or regulations; (2)
Subadvisor's activities do not disqualify the Fund as a regulated investment
company under Subchapter M of the Code or any successor provision; and (3) any
and all applicable state insurance law restrictions on investments that operate
to limit or restrict the investments that the Fund may otherwise make and which
Manager has provided to Subadvisor in writing are complied with as well as any
changes thereto.
Subadvisor shall submit to all regulatory and administrative bodies having
jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may reasonably request or require pursuant to applicable laws and
regulations.
Manager will provide Subadvisor with copies of (i) the Trust's Declaration of
Trust and By-laws, as currently in effect, (ii) the Fund's currently effective
Prospectus and Statement of Additional Information, and all updates thereto, as
set forth in the Trust's registration statement under the 1940 Act and the
Securities Act of 1933, as amended, (iii) any instructions, investment policies
or other restrictions adopted
4
by the Board or Manager supplemental thereto, and (iv) the Management Contract.
Manager will provide Subadvisor with such further documentation and information
concerning the investment objectives, policies and restrictions applicable to
the Fund, and such other information relating to the business affairs of the
Fund as Subadvisor from time to time reasonably requests in order to discharge
its obligations hereunder. Manager shall provide or cause to be provided timely
information to Subadvisor regarding such matters as inflows to and outflows from
the Fund and the cash requirements of the Fund.
4.2 Confidentiality.
Subadvisor will treat confidentially and as proprietary information of the Fund
all records and other information relative to the Fund and prior, present and
potential shareholders, and will not use such records or information other than
in performance of its responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Fund. The foregoing shall not be
applicable to any information that is publicly available when provided or which
thereafter becomes publicly available other than in contravention of this
Section or which is required to be disclosed by any regulatory authority in the
lawful and appropriate exercise of its jurisdiction, by judicial or
administrative process or otherwise by applicable law or regulation.
Subadvisor agrees not to disclose the existence of this Agreement or the
underlying business relationship without the prior written approval of Manager.
V. ACTIVITIES OF SUBADVISOR AND CONFLICTS OF INTEREST
It is understood that the services provided by Subadvisor are not to be deemed
exclusive. Manager acknowledges that Subadvisor may have investment
responsibilities, or render investment advice to, or perform other investment
advisory services, for individuals or entities, including other investment
companies registered pursuant to the 1940 Act ("Clients"), which may invest in
the same type of securities as the Fund, and Subadvisor is free to render
services to others so long as Subadvisor's services under this Agreement are not
impaired. Manager agrees that Subadvisor may give advice or exercise investment
responsibility and take such other action with respect to Clients which may
differ from advice given or the timing or nature of action taken with respect to
the Fund.
If purchases or sales of securities for the Fund or other Clients of Subadvisor
or its affiliates arise for consideration at or about the same time, Subadvisor
shall make transactions in such securities for the Fund and its other Clients in
a manner deemed equitable to all. It is agreed that, on occasions when
Subadvisor deems the purchase or sale of a security to be in the best interest
of the Fund as well as other Clients, it may, to the extent permitted by
applicable laws or regulations, but will not be obligated to, aggregate the
securities to be sold or purchased for the Fund and the other Clients in order
to obtain favorable execution and lower brokerage commissions or prices. In that
event, allocation of the securities purchased or sold, as well as the expenses
incurred in the transaction, will be made by Subadvisor in the manner that is
most equitable and consistent with its fiduciary obligations to the Fund and to
such other Clients. In some cases these procedures may adversely affect the size
of the position obtainable for or disposed of by the Fund or have an adverse
effect on price.
It is understood that the trustees, officers, agents and shareholders of the
Trust are or may be interested in Subadvisor as directors, officers,
stockholders or otherwise; that directors, officers, agents and stockholders of
Subadvisor are or may be interested in the Trust as trustees, officers,
shareholders or otherwise; that Subadvisor may be interested in the Trust; and
that the existence of any such dual interest shall not affect the validity of
this Agreement or of any transactions hereunder except as otherwise provided in
the Trust's Declaration of Trust and the declaration of trust of Subadvisor,
respectively, or by specific provisions of applicable law.
No provision of this Agreement shall be construed to protect any director or
officer of Manager or Subadvisor from liability in violation of Sections 17(h)
and (i) of the 1940 Act.
5
VI. REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Representations of Manager. Manager represents, warrants and agrees that:
(a) Manager is a corporation organized under the laws of the State of
California;
(b) Manager is and shall remain duly registered as an "investment adviser"
under the Advisers Act;
(c) Manager has been duly appointed by the Board to provide investment services
to the Fund as contemplated by the Management Contract;
(d) the execution, delivery and performance of this Agreement are within
Manager's powers, have been and remain duly authorized by all necessary
corporate action and will not violate or constitute a default under any
applicable law or regulation or of any decree, order, judgment, agreement
or instrument binding on Manager;
(e) no consent (including, but not limited to, exchange control consents) of
any applicable governmental authority or body is necessary, except for such
consents as have been obtained and are in full force and effect, and all
conditions of which have been duly complied with; and
(f) this Agreement constitutes a legal, valid and binding obligation
enforceable against Manager.
6.2 Representations of Subadvisor. Subadvisor represents, warrants and agrees
that:
(a) Subadvisor is a Massachusetts trust company established pursuant to the
laws of the Commonwealth of Massachusetts;
(b) Subadvisor is registered as an "investment adviser" under the Advisers Act
or is not required to register as an "investment adviser" thereunder;
(c) Subadvisor has filed a notice of exemption pursuant to Rule 4.14 under the
Commodity Exchange Act with the Commodities Futures Trading Commission and
the National Futures Association, or is not required to file such
exemption;
(d) the execution, delivery and performance of this Agreement are within
Subadvisor's powers, have been and remain duly authorized by all necessary
corporate action and will not violate or constitute a default under any
applicable law or regulation or of any decree, order, judgment, agreement
or instrument binding on Subadvisor;
(e) no consent (including, but not limited to, exchange control consents) of
any applicable governmental authority or body is necessary, except for such
consents as have been obtained and are in full force and effect, and all
conditions of which have been duly complied with;
(f) this Agreement constitutes a legal, valid and binding obligation
enforceable against Subadvisor; and
(g) the total fee to be paid by Manager to Subadvisor pursuant to this
Agreement is not higher than the total fee, determined on a percentage of
assets basis and including the total fee payable after any reduction or
waiver of fees by Subadvisor or its affiliates (the "Total Fee"), paid as
of the effective date of this Agreement, and shall be no higher than the
Total Fee that may be paid in the future, by any investment manager,
registered investment company (or series thereof), separate account or
other entity to Subadvisor (and its affiliates) in connection with the
provision of investment management or subadvisory investment management
services by Subadvisor (and its affiliates) to any registered investment
company (or series thereof), separate account or other investment vehicle
which has (i) as its principal investment strategy tracking or replicating
the total return performance of the S&P 500 Composite Stock Price Index,
(ii) total net assets less than $1 billion dollars, and (iii) a
substantially similar relationship with a subadvisor (including
non-investment management services) (each, an "Equivalent Client").
(1) In the event Subadvisor (or any affiliate of Subadvisor) enters into
any arrangement with an Equivalent Client where the Total Fee to be
paid to Subadvisor (or its affiliates) by such Equivalent Client is
less than the fee payable to Subadvisor under this Agreement (a
"Lesser Fee"), Subadvisor agrees to promptly notify Manager of such
arrangement and shall agree to promptly amend this Agreement so that
the total fees payable hereunder are at most equal to the Lesser Fee
payable to Subadvisor (or its affiliates) by any Equivalent Client.
6
(2) To the extent that a delay occurs between (i) the date Subadvisor
(or any affiliate of Subadvisor) enters into any arrangement with an
Equivalent Client under which such Equivalent Client is to pay a
Lesser Fee, and (ii) the date Subadvisor notifies Manager of such
arrangement, then (iii) Manager shall receive a corresponding credit
against its Total Fee based on the difference between the Lesser Fee
and the Total Fee paid by Manager during the period of the delay.
6.3 Covenants of Subadvisor.
(a) Notification Regarding Certain Events Affecting Subadvisor.
Subadvisor will promptly notify the Trust and Manager in writing of the
occurrence of any event that could have a material impact on the
performance of its obligations pursuant to this Agreement, including
without limitation: (i) the occurrence of any event which could disqualify
Subadvisor from serving as an investment adviser of a registered investment
company pursuant to Section 9(a) of the 1940 Act or otherwise; (ii) any
material change in Subadvisor's overall business activities that may have a
material adverse effect on Subadvisor's ability to perform under its
obligations under this Agreement; (iii) any event that would constitute a
change in control of Subadvisor; and (iv) the existence of any pending or
threatened audit, investigation, complaint, examination or other inquiry
(other than routine regulatory examinations or inspections) relating to the
Fund conducted by any state or federal governmental regulatory authority.
(b) Code of Ethics.
Subadvisor will adopt a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and will provide the Trust
and Manager with a copy of such code of ethics, evidence of its adoption
and copies of any supplemental policies and procedures implemented to
ensure compliance therewith. Subadvisor agrees that it will promptly supply
Manager with copies of any material changes to any of the documents
provided by Subadvisor pursuant to this Section.
(c) Insurance.
Subadvisor shall maintain for the duration hereof, with an insurer
acceptable to Manager, a blanket bond and professional liability (errors
and omissions) insurance in amounts reasonably acceptable to Manager.
Subadvisor agrees that such insurance shall be considered primary and
Subadvisor shall assure that such policies pay claims prior to similar
policies that may be maintained by Manager. In the event Subadvisor fails
to have in force such insurance, that failure will not exclude Subadvisor's
responsibility to pay up to the limit Subadvisor would have had to pay had
said insurance been in force.
(d) Year 2000 Compliance.
(i) WARRANTY AND DEFINITION. Subadvisor is taking reasonable and
comprehensive steps to ensure that its products and services (and those of
its third-party suppliers) ("Services") are Year 2000 Compliant. "Year 2000
Compliant" means that:
(aa) Such Services operate correctly with dates on or after January 1,
2000;
(bb) Such Services accurately account for twentieth and twenty-first
century dates; and
(cc) All date-related data fields, user interfaces and data interfaces
include an indication of the century such that such Services accurately
recognize and accommodate the rollover to the Year 2000 (including
processing the fact that Year 2000 is a leap year) without normal operation
being impaired by the advent of the Year 2000.
7
At Manager's request, Subadvisor shall provide test scripts
sufficient to verify the Services' compliance with this Section.
(ii) BREACH OF YEAR 2000 WARRANTY: Upon a breach of this subsection
6.3(d), and in addition to any other remedies available to the Fund, Trust
and Manager hereunder, Subadvisor shall provide correction(s) to the
products and services to make them Year 2000 Compliant within a
commercially reasonable time frame of receiving notice of such
non-compliance. If Subadvisor is unable to supply such correction(s)
within such period, Manager may at its option treat such failure as a
material breach and terminate this Agreement effective thirty (30) days
after Subadvisor's receipt of Manager's notice of non-compliance.
Alternatively, in the event of any breach of this subsection 6.3(d),
Manager may elect immediately to terminate this Agreement for Subadvisor's
material breach without any cure period.
VII. LIABILITY OF SUBADVISOR; INDEMNIFICATION
7.1 Liability of Subadvisor.
(a) Neither Subadvisor, nor any of its directors, officers or employees, shall
be liable to Manager, the Fund or the Trust for any loss resulting from
Subadvisor's acts or omissions as subadvisor to the Fund, except to the
extent any such losses result from (i) Subadvisor's breach of its duties
hereunder, or (ii) bad faith, willful misfeasance, reckless disregard or
gross negligence on the part of Subadvisor in the performance of
Subadvisor's duties and obligations under this Agreement.
(b) Notwithstanding the foregoing, Subadvisor agrees to reimburse the Trust,
the Fund and Manager for any and all costs, expenses, and counsel and
trustees' fees reasonably incurred by the Trust, the Fund and Manger in the
preparation, printing and distribution of proxy statements, amendments to
the Trust's Registration Statement, holdings of meetings of the Trust's
shareholders or trustees, the conduct of factual investigations, any legal
or administrative proceedings (including any applications for exemptions or
determinations by the SEC) which the Trust, the Fund or Manager incurs as
the result of action or inaction of the Subadvisor or any of its affiliates
or any of their officers, directors, employees or stockholders where the
action or inaction necessitating such expenditures (i) is directly or
indirectly related to any transactions or proposed transaction in the stock
or control of Subadvisor or its affiliates (or litigation related to any
pending or proposed or future transaction in such shares or control) which
shall have been undertaken without the prior, express approval of the
Trust's Board of Trustees; or, (ii) is within the control of Subadvisor or
any of its affiliates or any of their officers, directors, employees or
stockholders. So long as this Agreement is in effect, the Subadvisor shall
pay to the Trust and Manager the amount due for expenses subject to this
Section 7.1(b) within 30 days after a xxxx or statement has been received
by Subadvisor therefor. This provision shall not be deemed to be a waiver
of any claim the Trust, the Fund or Manager may have or may assert against
Subadvisor or others for costs, expenses or damages heretofore incurred by
the Trust, the Fund or Manager or for costs, expenses or damages the Trust,
the Fund or Manager may hereafter incur which are not reimbursable to it
hereunder. The Trust, the Fund, Manager and Subadvisor agree that
Subadvisor's maximum liability under this Section 7.1(b) shall be no more
than the greater of (i) $20,000, or (ii) 20% of the total fee received by
Subadvisor for its services hereunder for the twelve month period
immediately preceding such action or inaction.
7.2 Indemnification.
(a) Subadvisor agrees to indemnify and hold the Trust, the Fund and Manager
harmless from any and all direct or indirect liabilities, losses or damages
(including reasonable attorneys fees) suffered by the Trust, the Fund or
Manager resulting from (i) Subadvisor's breach of its duties hereunder, or
(ii) bad faith, willful misfeasance, reckless disregard or gross negligence
on the part of Subadvisor in the performance of Subadvisor's duties and
obligations under this Agreement, except to the extent such loss results
from the Trust's, the Fund's or Manager's own willful misfeasance, bad
faith, reckless
8
disregard or negligence in the performance of their respective duties and
obligations under the Management Contract or this Agreement.
(b) Manager hereby agrees to indemnify and hold Subadvisor harmless from any
and all direct or indirect liabilities, losses or damages (including
reasonable attorneys fees) suffered by Subadvisor resulting from (i)
Manager's breach of its duties hereunder, or (ii) bad faith, willful
misfeasance, reckless disregard or gross negligence on the part of Manager
in the performance of Manager's duties and obligations under this
Agreement, except to the extent such loss results from Subadvisor's own
willful misfeasance, bad faith, reckless disregard or negligence in the
performance of Subadvisor's duties and obligations under this Agreement.
VIII. DURATION, TERMINATION AND AMENDMENT OF AGREEMENT
8.1 Effective Date; Duration; Continuance.
(a) This Agreement shall become effective on September 14, 1999, provided that
this Agreement shall not take effect unless it has first been approved (i)
by a vote of a majority of those trustees of the Trust who are not parties
to this Agreement or "interested persons" (as defined in the 0000 Xxx) of
any such party, and (ii) by vote of a majority of the Fund's outstanding
voting securities.
(b) Subject to prior termination pursuant to Section 8.2 below, this Agreement
shall continue in effect for two (2) years following the effective date,
and indefinitely thereafter, but only so long as the continuance after such
date shall be specifically approved at least annually (i) by vote of the
Board or by a vote of a majority of the outstanding voting securities of
the Fund, and (ii) by the vote of a majority of the trustees of the Trust
who are not "interested persons" (as defined in the 0000 Xxx) of any party
to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval.
(c) If any continuance of this Agreement is not obtained, Subadvisor will
continue to act as the Fund's investment subadvisor pending the required
approval of the continuance of this Agreement or of a new contract with
Subadvisor or a different subadvisor or other definitive action; provided,
that the compensation received by Subadvisor during such period is in
compliance with Rule 15a-4 under the 1940 Act or any successor provision.
8.2 Termination and Assignment.
(a) Subject to earlier termination as provided pursuant to Section 6.3(d), this
Agreement may be terminated at any time, without the payment of any
penalty, by the Board or the vote of a majority of the outstanding voting
securities of the Fund upon sixty days' written notice to Manager and
Subadvisor, and by Manager or Subadvisor upon sixty days' written notice to
the Trust and the other party.
(b) This Agreement will terminate automatically, without the payment of any
penalty, in the event of its assignment (as defined in the 1940 Act), or in
the event the Management Contract is terminated for any reason.
(c) Notwithstanding the foregoing, this Agreement may be terminated by Manager
upon material breach by Subadvisor of any of the representations and
warranties set forth in this Agreement, if such breach shall not have been
cured within a 20 day period after notice of such breach; or immediately if
Subadvisor becomes unable to discharge its duties and obligations under
this Agreement.
8.3 Amendments.
This Agreement may not be amended without the prior written consent of each of
the parties hereto and unless such amendment is specifically approved (i) if
required by law, by the vote of a majority of the
9
outstanding voting securities of the Fund, and (ii) by the vote of a majority of
the trustees of the Trust who are not interested persons (as defined in the 0000
Xxx) of any person to this Agreement cast in person at a meeting called for the
purpose of voting on such approval.
8.4 Definitions.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons," when
used herein, shall have the respective meanings specified in the 1940 Act as now
in effect or as hereafter amended, and subject to such orders or no-action
letters as may be granted by the SEC.
IX. MISCELLANEOUS PROVISIONS
9.1 Notices and Instructions.
All notices required to be given pursuant to this Agreement shall be delivered
or mailed to the last known business address of the Trust, Manager or
Subadvisor, as the case may be, in person or by registered mail or a private
mail or delivery service providing the sender with notice of receipt. Notice
shall be deemed given on the date delivered or mailed in accordance with this
Section 9.1. Instructions may be given by letter, telex, telefax or telephone
confirmed by telex, by the Board or by any other person authorized by a
resolution of the Board, provided a certified copy of such resolution has been
supplied to Subadvisor.
9.2 Entire Agreement.
This Agreement contains the entire understanding and agreement of the parties
with respect to the subject hereof.
9.3 Captions.
The headings in the sections of this Agreement are inserted for convenience of
reference only and shall not constitute a part of the Agreement.
9.4 Severability.
If any provision of this Agreement shall be held or made invalid by court
decision, statute, rule or otherwise, this Agreement shall be construed, insofar
as is possible, as if such portion had never been contained herein.
9.5 Governing Law.
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of California (without giving effect to
the choice of law provisions thereof), or any of the applicable provisions of
the 1940 Act. To the extent that the laws of the State of California, or any of
the provisions in this Agreement, conflict with applicable provisions of the
1940 Act, the latter shall control.
9.6 Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, all of which shall together constitute one and the same
instrument.
9.7 Limitation of Liability.
Subadvisor acknowledges that it has received notice of and accepts the
limitations on the Trust's liability as set forth in its Agreement and
Declaration of Trust. Subadvisor agrees that the Trust's obligations hereunder,
if any, shall be limited to the assets of the Fund, and that Subadvisor shall
not seek satisfaction
10
of any such obligation from any shareholders of the Fund or from any trustee,
officer, employee or agent of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers as of the date first above written.
FRANKLIN ADVISERS, INC.
By:
---------------------------
Name:
Title:
STATE STREET GLOBAL ADVISORS,
a division of State Street Bank and Trust Company
By:
---------------------------
Name:
Title:
Franklin S&P 500 Index Fund hereby acknowledges and agrees to the provisions of
Section 3 and Section 7.1 of this Agreement.
FRANKLIN XXXXXXXXX VARIABLE INSURANCE PRODUCTS TRUST on behalf of
FRANKLIN S&P 500 INDEX FUND
By:
---------------------------
Name:
Title:
11
APPENDIX A
Pursuant to Section 1.4 of the Agreement, Manager shall pay a monthly
subadvisory fee in cash to Subadvisor based upon a percentage of the value of
the Fund's net assets, calculated as set forth below, which fee shall be payable
on the first business day of the month in each year as compensation for the
services rendered and obligations assumed by Subadvisor during the preceding
month. The fee shall be payable on the first business day of the first month
following the effective date of the Agreement.
For purposes of calculating such fee, the value of the net assets of the Fund
shall be determined in the same manner as that the Fund uses to compute the
value of its net assets in connection with the determination of the net asset
value of its shares, all as set forth more fully in the Fund's currently
effective Prospectus and Statement of Additional Information. The rate of the
subadvisory fee payable by Manager shall be calculated daily at the following
annual rates:
0.05% of the value of its net assets up to and including
$50,000,000; and
0.04% of the value of its net assets over $50,000,000 up to
and including $100,000,000; and
0.02% of the value of its net assets over $100,000,000.
If the Agreement is terminated prior to the end of any month, the monthly
subadvisory fee shall be prorated for the portion of the month the Agreement is
in effect and shall be payable promptly after the date of the termination.
Subadvisor agrees to look exclusively to Manager, and not to any assets of the
Trust or the Fund, for the payment of Subadvisor's fees arising under the
Agreement.
12
