EXHIBIT (d) xx
FRANKLIN ▇▇▇▇▇▇▇▇▇ VARIABLE INSURANCE PRODUCTS TRUST
ON BEHALF OF
FRANKLIN S&P 500 INDEX FUND
SUBADVISORY AGREEMENT
This Agreement is entered into as of May 1, 2000, by and between Franklin
Advisers, Inc., a California corporation (the "Manager"), and State Street
Global Advisors, a division of State Street Bank and Trust Company, a
Massachusetts trust company (the "Subadvisor")
WHEREAS, Franklin S&P 500 Index Fund (the "Fund") is a series of Franklin
▇▇▇▇▇▇▇▇▇ 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
1
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 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;
2
(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 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
3
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 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.
4
(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.
5
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 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
6
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.
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;
7
(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.
(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
8
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.
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,
9
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 ▇▇▇▇ 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.
10
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
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 May 1, 2000, 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
▇▇▇▇ ▇▇▇) 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 ▇▇▇▇ ▇▇▇) 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.
11
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 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 ▇▇▇▇ ▇▇▇) 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.
12
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.
13
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 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.
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Executive Vice President
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 ▇▇▇▇▇▇▇▇▇ VARIABLE INSURANCE PRODUCTS TRUST on behalf of
FRANKLIN S&P 500 INDEX FUND
/S/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President &
Assistant Secretary
14
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.
15
