Document:

Exhibit 10.13 9.30.12

Exhibit 10.13

To:  Fiduciary Trust Company International

FORM OF INVESTMENT MANAGEMENT WITH CUSTODY AGREEMENT
FOR ACCOUNT ENTITLED
“________________________________________________________________”

		
	1.
	Investment Management Account.  We appoint you to be the agent for the undersigned entity (referred to as “we” or “us”) to act as investment manager of an Investment Management with Custody Account (“Account”) in the name specified above to manage all assets and cash, including but not limited to the proceeds from the sale of such assets, and the income attributable to such assets, that are delivered to you for the Account (“Account Assets”).  We will deliver to you only assets owned solely by us, and will advise you of the cost, date and manner of acquisition of any additional assets contributed to the Account.  We will promptly notify you in writing of any reduction in the amount of the Account Assets subject to your investment management direction.

		
	2.
	Investment of Account Assets.  Subject to our right to give instructions with respect to the Account as described in Section 4 of this Investment Management with Custody Agreement (the “Agreement”), we authorize you, in your discretion, to:

		
	(a)
	invest, reinvest and/or hold cash un-invested, at the Account's risk, at such times and in such manner as you determine.  You may buy, sell, exchange, convert and otherwise invest or trade in any stocks, bonds, units and other instruments, whether the issuer is organized in or outside the United States, including but not limited to: 

		
	(1)
	deposit accounts, including your own or those of any of your Affiliated or Subsidiary Companies, as defined in Section 12;

		
	(2)
	shares of any mutual fund (including any money market mutual fund), including, without limiting the generality of this discretion, any mutual fund for which you and/or any of your Affiliated or Subsidiary Companies, acts as sponsor, distributor, administrator, adviser, or in any other capacity, or receives investment advisory or other fees (collectively, “Affiliated Funds”); provided, however, that if you invest in any Affiliated Fund, to the extent required by any applicable law, rule or regulation, this Agreement or any other governing document, you will exclude the value of any Account Assets so invested, from the calculation of your fee under Section 11of this Investment Management Agreement; and

		
	(3)
	securities acquired pursuant to any public, private and direct placement, including, without limiting the generality of this discretion, any fund not registered under the Investment Company Act of 1940, as amended (a “Non-Registered Fund”), for which you and/or any of your Affiliated or Subsidiary Companies acts sponsor, distributor, administrator, adviser, or in any other capacity, or receives investment advisory or other fees; provided, however, that if you invest in any Non-Registered Fund, to the extent required by any applicable law, rule or regulation, this Agreement or any other governing document, you will exclude the value of any Account Assets so invested, from the calculation of your fee under Section 11 of this Investment Management Agreement.  

		
	(b)
	execute any documentation as the Account's agent and attorney-in-fact as you may deem necessary to facilitate any such investment or reinvestment, including but not limited to signing the Account's or our name (1) on any securities registered in the Account's or our name in order to sell them or enable them to be deposited as authorized above, (2) on any documents necessary to establish your security interest under Section 8, and (3) on all necessary certificates of ownership or other instruments required by an issuer, depository or governmental authority under applicable law or regulation, and authorize your sub-custodians to do likewise;

		
	(c)
	place Account trades with any issuers or with any brokers or dealers, as you may select, including any of your Affiliated or Subsidiary Companies, which brokers or dealers are entitled to receive compensation out of the Account Assets for their services; and

		
	(d)
	purchase, sell, exchange, convert and otherwise execute non-US currency transactions in the spot or forward market as agent or as principal, at the market rate, as determined by you at your discretion. 

		
	3.
	Custody of Account Assets.  Subject to Sections 4 and 5(a), we authorize you, in your discretion: 

		
	(a)
	to hold cash and hold any issue of securities in the Account with securities of the same issue of your other clients, and deposit Account Assets (whether in “book entry” or physical form) with any domestic or non-US bank, broker or dealer, or securities depository, as your sub-custodian, in nominee name or otherwise;

		
	(b)
	with respect to trades reported on the Account's behalf through Depository Trust Company (“DTC”), to accept instructions from DTC (whether in a DTC report or otherwise) as though they were given by us; and

		
	(c)
	in those cases in which securities that have been purchased at varying prices are being sold or transferred, to use the “specific identification method” for allocating tax lots to a particular sale or transfer of securities for U.S. federal income tax purposes, unless we specifically request you to use another method of tax lot selection on or before the settlement date relating to that sale or transfer.  This delegation of authority includes, without limitation, the discretion to select tax lots using a lot selection method other than “FIFO” (first-in, first-out).

		
	4.
	Special Instructions.  We authorize you to record telephone conversations related to the Account, and to rely on our oral or written instructions or notices when you receive them from any of our Authorized Persons, as defined in Section 6(k).  We agree to confirm in writing any oral instruction given to you as soon thereafter as possible. You shall be under no duty to make any investigation or inquiry as to any statement contained in any oral or written instruction given and, unless and until specifically advised otherwise, you may accept the same as conclusive evidence of the truth and accuracy of the statements contained therein.  You agree to comply with the following special instructions:

_________________________________________________________________________________________________
_________________________________________________________________________________________________

Notwithstanding the foregoing, we agree that these special instructions shall continue to be effective until canceled or modified by us in a subsequent writing delivered to you.

		
	5.
	Administrative Provisions. 

		
	(a)
	Income.  Please remit income as follows: ______________________________________________________

		
	(b)
	Statements.  You agree to send us statements of principal and income transactions and appraisals of Account Assets at least quarterly, in written form or in any other form that you choose to make available, and provide an annual statement of income classified for federal income tax purposes, and a schedule of security transactions for the calendar year showing gains and losses, if the income tax costs and dates of acquisition are available.  For purposes of all reports made by you, any non-US securities denominated in non-US currencies will be valued in the Account's base currency, which will be in United States dollars unless we agree otherwise.  We agree to accept any form of communication transmitting such information.

		
	(c)
	Preparation of Income Tax Returns.  You are o are not o authorized to prepare our income tax returns.  If we have requested this service, you are authorized to charge the Account based on the amount of work involved.  

		
	(d)
	Shareholder Disclosure.  You may disclose the Account's or our name, address and security position when requested to do so by any issuer of securities held in the Account, unless we indicate that you may not (unless required by law) by checking the box o.

		
	6.
	Representations and Warranties.  We hereby acknowledge, represent and warrant to, and agree with you, as follows:

		
	(a)
	Client Assets.  We are the sole owner of all Account Assets and (1) there are no restrictions on the transfer, sale or public distribution of any such Account Assets and (2) no option, lien, charge, security or encumbrance exists over such Account Assets, except as described to you in writing. 

		
	(b)
	Authority.  All authority given to you under this Agreement will remain in effect until changed or terminated by us in writing.  You may give a copy of this Agreement to any broker, dealer or other party to a transaction, as evidence of your authority to act on the Account's behalf. 

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	(c)
	Understanding of Terms.  We have reviewed, either alone or with our independent agent, and understand the matters set forth in this Agreement.  We have received all information that we deem necessary or desirable in connection with our decision to enter into this Agreement. 

		
	(d)
	Compliance with Anti-Money Laundering Laws.  To comply with United States anti-money laundering laws and regulations, we represent as follows: 

		
	(1)
	The Account Assets were not, and are not, directly or indirectly derived from activities that may contravene United States federal, state or international anti-money laundering laws or regulations to the extent that any such laws or regulations may be applicable to us. 

		
	(2)
	If we are acting as agent or nominee for the beneficial owners of the Account Assets, we have adopted anti-money laundering policies and procedures with which we are in compliance.

		
	(3)
	If we are a non-US bank, we are not operating under an offshore banking license, which as a condition of our license, prohibits us from conducting banking activities with the citizens of, or in the local currency of, the jurisdiction that issued such license.

		
	(4)
	We have not been formed by, or for the benefit of, any individual described below; and none of the Authorized Persons identified to you from time to time in accordance herewith, is an individual described below:

		
	(A)
	a current or former senior official in the executive, legislative, administrative, military, or judicial branches of a non-US government (whether elected or not), or

		
	(B)
	a senior official of a major non-US political party, or

		
	(C)
	a senior executive of a non-US government-owned commercial enterprise, or

		
	(D)
	an immediate family member of any of the individuals described in subsections (A) through (C) above, or a person known to maintain a close personal or professional relationship with any such individuals.  

For purposes of this representation, “senior official or executive” means an individual with substantial authority over policy, operations, or the use of government-owned resources; “immediate family” includes a spouse, parents, siblings, children, and a spouse's parents or siblings.

		
	(5)
	We acknowledge that Federal law requires that you obtain, verify and record information and documents to identify the persons opening new accounts.  For natural persons, this may include, without limitation, name, address, date of birth, and social security numbers, as well as government-issued photo identification, and for clients, other than natural persons, tax identification numbers and documents evidencing formation (e.g., Articles of Incorporation).  We further acknowledge that you may also screen such names against various databases to verify identity.

		
	(6)
	We agree to provide you with information and documentation relating to our organizational structure, beneficial ownership, source of funds and Authorized Persons, including any changes relating thereto, whenever such changes occur, or if there are no such changes, upon request by you.

		
	(e)
	Changes to Account or Representations in Agreement.   We will promptly notify you in writing of: (1) any change to the Account of which you would not otherwise have knowledge; and/or (2) any occurrence that results, or threatens to result, in any representations by us contained in this Agreement becoming false, misleading or incomplete. 

		
	(f)
	Past Performance Not Indicative of Future Results.  We acknowledge that past performance results achieved by accounts supervised and/or managed by you may not be indicative of the future performance of the Account.

		
	(g)
	Notice of Certain Events.  We or our successor or legal representative, as the case may be, shall promptly notify you in writing of our dissolution, termination, merger, bankruptcy and/or the occurrence of any other event that might affect the validity of this Agreement or your authority under this Agreement.  All directions given and actions taken or omitted by you prior to the time that such notice is given to you and which would otherwise be appropriate under the terms of this Agreement shall be binding upon us and any successor or legal representative thereto.  Neither we nor any successor or legal representative thereto shall hold you liable for any loss, damage or liability arising out of or based upon any action taken or omitted by you in accordance with this Section 6(g). 

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	(h)
	Authority to Enter Into Agreement and of Signatory.  We have full authority and power to engage you under the terms and conditions of this Agreement, and to execute, deliver and perform this Agreement without the need for any governmental or other authorizations, approvals or consents.  Any individual whose signature is affixed to this Agreement on our behalf has full authority and power to execute this Agreement on our behalf.  Any such individual and/or we shall promptly notify you in writing of any event that could reasonably be anticipated to affect any such individual's authority under this Agreement. 

		
	(i)
	Binding Obligations.  We represent that your engagement by us pursuant to the terms of this Agreement constitutes our legal, valid and binding obligation and does not violate our constituent documents, any other material agreement, order or judgment of any court or governmental authority, or any law applicable to us.  We further represent that all investments permitted herein are within our power to enter into and have been duly authorized, and that when you enter into such investments on the Account's behalf and they are binding against a counterparty, they will constitute our legal, valid, and binding obligations.

		
	(j)
	Organizational Documents.  We represent that you have been furnished a true and complete copy of such documentation, as amended to date, that establishes and evidences our organization as a legal entity and our authority to retain you.  We will furnish promptly to you any amendments to such documentation, and we agree that, if any amendment affects your rights or obligations, such amendment will be binding on you only when you agree in writing.  If the Account contains only part of our investment assets, we understand that you will have no responsibility for the diversification or concentration of all of our investments, and that you will have no duty, responsibility or liability for assets that are not in the Account.

		
	(k)
	Corporations, Partnerships and Other Entities.  We represent that the individual(s) specified below in subsections (1) and (2) of this Section 6(k) are authorized to certify to you from time to time those persons who are duly authorized to act for us under this Agreement (“Authorized Persons”) and those persons or entities who are our shareholders, partners or members.  We agree to notify you promptly in writing of any changes in the information specified below or on the Exhibits referred to below and attached hereto.  We further represent as follows:

		
	(1)
	Corporations.  If we are a Corporation:

		
	(A)
	Our President, Secretary or Chief Financial Officer listed on the attached Certification of Authorized Persons (Exhibit A) is authorized to act for us as an Authorized Person and to certify to you from time to time, by listing on, and delivering to you, Exhibit A or a substantially similar form, those other persons who also are so authorized to act on our behalf.

		
	(B)
	We have not issued bearer shares.

		
	(C)
	If we have five or fewer shareholders, we have accurately and completely listed on the attached Certification of Ownership (Exhibit B) all of the applicable information requested.

		
	(D)
	Check as applicable:

o we are incorporated under the laws of            as a for-profit corporation; or
o we are incorporated under the laws of            as a not-for-profit corporation. 

		
	(2)
	Partnerships and Other Entities. 

		
	(A)
	If we are a partnership, an Authorized Person is any one of the general partners named on the attached Certification of Authorized Persons (Exhibit A).

		
	(B)
	If we are an entity other than a corporation or partnership, the officer specified on the attached Certification of Authorized Persons (Exhibit A) is authorized to act for us as an Authorized Person and to certify to you from time to time, by listing on, and delivering to you, Exhibit A or a substantially similar form, those other persons who also are so authorized to act on our behalf.

		
	(C)
	If we are a partnership or entity other than a corporation, and have five or fewer partners or members, we have accurately and completely listed on the attached Certification of Ownership (Exhibit B) all of the applicable information requested.

		
	(D)
	If we are a partnership or other entity, other than a corporation, we were formed under the laws of           .

		
	(3)
	Our taxable (or fiscal year) ends           .

		
	(4)
	We are not required to be registered under the United States Investment Company Act of 1940, as amended. 

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	(l)
	Non-US Entities.  If we are a non-US entity including but not limited to a corporation or partnership formed under the laws of a country other than the United States, we further represent as follows: 

		
	(1)
	We have checked here o if we meet any of the criteria under Test I on Exhibit C hereto; and we have checked here o if we meet any of the criteria under Test II on such Exhibit C. 

		
	(2)
	We are not a dealer in stocks or securities and we do not have our principal office in the United States, nor are we otherwise engaged in trade or business in the United States.

We agree to notify you promptly in writing of any changes in the information specified above.

		
	7.
	Repayment of Debts; Payment of Interest.  We agree to repay you whether or not demand is made (a) the amount of any overdraft or other amounts (including but not limited to fees) owed by us, or charges or liabilities advanced or incurred by you, a sub-custodian, or nominee in connection with the Account (including but not limited to attorneys' fees) or any other account that we maintain with you, and (b) interest thereon at the rate then charged by you to your investment management clients on demand notes, as that rate may change from time to time (collectively “Debts”).  You may charge the Account, or any other account that we may then have with you, for any Debts.

		
	8.
	Grant of Security Interest.  To collateralize our obligations to repay any Debts, by signing this Agreement we grant you a continuing security interest in the Account Assets and the assets in any other account (including, but not limited to cash, certificated and uncertificated securities and other financial assets) that we maintain with you in the same legal capacity at any time that any Debts are outstanding ("Collateral").  You may apply any cash, or sell any other Collateral and apply the proceeds to repayment of the Debts and related expenses.  We agree that you will have all the rights of a secured creditor that are provided by New York law and that you may assign any such rights.

		
	9.
	Your Responsibilities. Your responsibilities are solely as stated in this Agreement.  Specifically, we agree that, except as may otherwise be provided by law, you shall not be liable for:

		
	(a)
	any loss that the Account may suffer by reason of any investment decision made or other action taken or omitted in good faith and with that degree of care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity would use in the conduct of an enterprise of a like character and with like aims; 

		
	(b)
	any loss, expense or other liability (including but not limited to attorneys' fees) arising or incurred as a result of your compliance with our instructions, reasonably and in good faith believed by you to be genuine; 

		
	(c)
	any act or failure to act by any broker or other person with whom you or the Account may deal in connection with the subject matter of this Agreement; or

		
	(d)
	any failure or delay in performance of any obligation under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond your reasonable control, including without limitation, acts of God; earthquakes; fires; floods; wars; terrorism; civil or military disturbances; sabotages; epidemics; riots; interruptions, loss or malfunctions of utility, transportation or communication service; accidents; labor disputes; acts of civil or military authority; governmental actions and inability to obtain labor, material, equipment or transportation.

We understand that the value of investments made for the Account may go down as well as up, and may be subject to various market, economic and/or business risks (and if the Account is invested in international markets, currency and political risks, including but not limited to the risks of nationalization, confiscatory taxation and exchange restrictions), as well as the risk that the investment decisions made may not always be profitable or prove to have been wise.  We also understand that there is no guarantee as to the value of our investments or the specific performance level of the Account.

We understand that securities, mutual funds and other non-deposit investments are not deposits or other obligations of, or guaranteed by you or any other bank, are not insured by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency, and are subject to investment risk, including possible loss of principal amounts invested.

		
	10.
	General Indemnification.  We agree to indemnify you to the fullest extent permitted by law for any expense or liability (including, without limitation, attorneys' fees and related charges and expenses) incurred by you with respect to the Account 

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when acting in accordance with this Agreement or to enforce this Agreement or any part thereof, including, without limitation, this Section 10.  

		
	11.
	Compensation.  For your services under this Agreement, we authorize you to charge the fees and charges as set forth in Schedule 1 attached to this Agreement, as that schedule may be amended from time to time.  You may charge ___% against income and ___% against principal; or to the extent that the income is insufficient to cover the percentage of fees and charges indicated, then the balance thereof is to be charged against principal.

		
	12.
	Conflicts.  Nothing in this Agreement shall be deemed to limit or restrict your right, or the right of any of your officers, directors or employees, to engage in any other business or to render investment management services or services of any kind to any other client.  We understand that you provide investment management services to numerous other accounts.  We understand that you may give advice and take action with respect to any of your other clients and their accounts that may differ from the timing or nature of action taken by you with respect to the Account.  Nothing in this Agreement shall impose upon you any obligation to purchase or sell or to recommend for purchase or sale, with respect to the Account, any security (including long and short positions) that you, or your Affiliated or Subsidiary Companies, or your or their directors, officers, employees or family members of any of them may purchase or sell for its or their own account(s) or for the account of any other client.  For purposes of this Agreement, “Affiliated or Subsidiary Companies” are those operating companies and investment entities, directly or indirectly controlled by, or under common control with, you or your parent company, Franklin Resources, Inc., and whether using the name Fiduciary, Templeton, Franklin, FTI or any other name.

We acknowledge that your ability and that of your Affiliated and Subsidiary Companies to effect and/or recommend transactions may be restricted by applicable regulatory requirements in the United States and elsewhere and/or your or their internal policies designed to comply with such requirements.  Consequently, there may be periods when you may not initiate or recommend certain types of transactions in certain investments when you or your Affiliated or Subsidiary Companies are performing services or when aggregated position limits have been reached, and we will not be advised of that fact.

We acknowledge that you or your Affiliated or Subsidiary Companies may obtain and keep profits, commissions and fees in connection with activities for other clients and from their own accounts.  We also acknowledge that you may receive compensation from distributors of mutual funds, including money market funds, for performing shareholder servicing functions that such distributors would otherwise have to perform themselves.  If any Account Assets are invested in such funds, you are authorized to receive this compensation.

		
	13.
	Proxies and Other Legal Notices.  Decisions on proxy voting will be made by you unless such decisions are expressly reserved by us. You shall not be expected or required to take any action other than the rendering of investment-related advice with respect to lawsuits involving securities presently or formerly held in the Account, or the issuers thereof. However, you will use commercially reasonable efforts to file proofs of claim on behalf of the Account in class-action suits and, in that connection, you may, without prior permission or consent, include information about the Account. We acknowledge that by filing a proof of claim on our behalf, you may waive our right to pursue separate litigation against the issuer with respect to the subject matter of the lawsuit. Should you determine to undertake litigation against an issuer on behalf of one or more clients, you shall obtain our prior written consent to undertake such litigation before we are included in any such litigation. If we consent to such litigation, we agree to pay the portion of any reasonable legal fees associated with our claim or we will forfeit any claim to any assets that you may recover on behalf of the Account, up to the amount of such legal fees owed by us to you. If we do not consent to such litigation, we agree to hold you harmless for excluding the Account from such action and agree to indemnify you against any claims the Account may have against you resulting from the Account exclusion.

		
	14.
	Brokerage.  In selecting brokers or dealers to execute trades, you are expressly authorized to consider the fact that a broker or dealer has furnished statistical, research or other information or services which enhance your investment research and portfolio management capability, generally, even if the commission exceeds the commission which another broker would have charged for effecting the transaction; provided that you determine in good faith that the amount of commission charged was reasonable in relation to the value of brokerage and/or research services provided by such broker, either in respect of the Account or your overall responsibilities to your discretionary accounts. 

Nothing herein shall preclude the “bunching” of orders for the sale or purchase of portfolio securities in the Account with other accounts managed by you.  In some cases, prevailing trading activity may cause you to receive various execution prices on the entire volume of any security sold for the accounts of your clients.  When this happens you may average the various prices and charge or credit the Account with the average price, even though the effect of this aggregation of price may sometimes work to the disadvantage of the Account.  We also understand and acknowledge that you or your Affiliated 

6

or Subsidiary Companies may, based upon factors that you deem to be important, such as the relative size, investment objectives and/or investment restrictions of client accounts, restrict to certain accounts purchases and sales of securities acquired in initial public offerings, including those that trade or are expected to trade at a premium in the secondary market.

		
	15.
	Confidential Relationships.  All information and recommendations furnished by either party to the other shall at all times be treated in strictest confidence and shall not be disclosed to third persons, except as may be permitted by law or regulation, or except upon the prior written approval of the other party to this Agreement. 

		
	16.
	Communications.  All Account documents and other instructions or notices, as applicable, required to be in writing shall be deemed duly given when delivered in person or sent by first-class mail, postage prepaid, overnight courier, or confirmed facsimile, with original to follow, to us at our address below, or to you addressed as follows: 

Fiduciary Trust Company International
600 Fifth Avenue
New York, New York 10020

Either party may, by written notice given at any time, designate a different address for the receipt of Account documents, instructions or notices due under this Agreement.

		
	17.
	Use of Affiliated or Subsidiary Companies.  You may delegate all or part of your duties under this Agreement to any Affiliated or Subsidiary Company.

		
	18.
	Governing Law.  This Agreement will be governed by the laws of the State of New York without regard to any laws that might otherwise apply under principles of choice of law or conflicts of law. 

		
	19.
	Entire Agreement; Amendment; Termination.  This Agreement sets forth and restates the entire understanding of the parties with respect to the Account, and replaces all previous agreements, understandings and communications, oral or written.  It can only be amended by both parties in writing, except that, if you send us notice of an amendment, it will become effective thirty days later unless we object in writing within that time.  We may terminate this Agreement at any time by written notice to you.  You may terminate it on thirty days' written notice to us.  Sections 6, 7, 8, 9, 10, 11, 15, 16, 18 and 19 shall survive the termination of this Agreement.  Upon termination you will have no further obligations hereunder, provided that any liability under this Agreement of either party to the other shall survive and remain in full force and effect with respect to transactions that have been initiated, but not completed, and with respect to any other claim or matter of which either of the parties has given the other written notice prior to such termination, until such liability has been finally settled (except that you will be entitled to your fees, prorated to the date of termination).  If liquidation of any part of the Account is necessary or desired by us, you will do so in an orderly manner and, after settlement of all amounts outstanding from the Account, you will transfer such liquidated assets and any other remaining Account Assets to us or in accordance with our instructions.

		
	20.
	Severability.  The provisions of this Agreement are severable.  If any provision, or part thereof, is determined to be void, voidable, illegal or invalid, the remaining provisions of this Agreement, including parts thereof, if applicable, shall continue to be valid and enforceable.

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	21.
	FDIC Insurance Disclosure.  We acknowledge that securities, mutual funds and other non-deposit investments in the Account are subject to the following: 

NOT FDIC-INSURED
May lose value
No bank guarantee. 
We understand that any cash balances placed on deposit in the Account are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the maximum extent allowed under the FDIC's general deposit insurance rules; and that through December 31, 2012, deposits placed in non-interest-bearing transaction accounts, including demand deposits and checking accounts, are fully insured without monetary limit. 
	
					
	AGREED:
	 
	 
	 

	 
	Name of Legal Entity

	FIDUCIARY TRUST COMPANY
INTERNATIONAL
	 
	By:
	 

	 
	 
	Signature

	By:
	 
	 
	 
	 

	 
	Signature
	 
	Name and Title (Please Print)

	 
	 
	 
	 
	 

	 
	Name and Title (Please Print)
	 
	Address

	Date:
	 
	 
	 
	 

	 
	 
	City                           State                   Zip Code

	 
	 
	 
	 

	 
	Telephone

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Fiduciary Trust Company International 

EXHIBIT A

CERTIFICATION OF AUTHORIZED PERSONS
UNDER THE INVESTMENT MANAGEMENT WITH CUSTODY AGREEMENT 
FOR ACCOUNT ENTITLED
“____________________________________________________________”

I certify, as the ____________________________ (specify title; e.g., general partner [of a partnership]; president, secretary [of a corporation]; managing member [of an LLC]), that the following persons are “Authorized Persons” under the Agreement.  If box is checked o, complete shaded fields.

	
							
	NAME
	 
	TITLE
	 
	TAX ID NO.
	 
	SPECIMEN SIGNATURE

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	
		
	 

	Name of Legal Entity (Please Print)

	By:
	 

	 
	Signature

	 
	 

	 
	Name and Title (Please Print)

	Date:
	 

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Fiduciary Trust Company International 

EXHIBIT B
CERTIFICATION OF OWNERSHIP
of _______________________ (the “Company”)*
*Insert Name of Company above signature line below
Part A.
The undersigned hereby certifies on behalf of the Company:
		
	1.
	As of the ___________ day of ___________________, 20___, the Company's books and records reflect that those listed below are the sole holders and beneficial owners of the Company's issued and outstanding shares or ownership interests:

	
			
	Name of Holder of Ownership Interests
 (“Owner”)* (e.g., Shareholder / Partner / Member)
	 
	Residential Address

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

		
	*
	Complete Part B for each Owner that is a “Fiduciary Account” (e.g., Trust, Estate, Uniform Transfers to Minors Act Account, etc.)

		
	2.
	For any Fiduciary Account specified above, the funder, each beneficiary to whom income or principal is currently distributable, and each acting trustee, executor, custodian (under the Uniform Transfers to Minors Act), and other fiduciary, together with the legal capacity and residence of each, are listed in Part B.

Part B.
    	
					
	Name of Person
	 
	Legal Capacity
	 
	Legal Residence (City and State)

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	
		
	 

	Insert name of Company

	By:
	 

	 
	Signature

	Name:
	 

	 
	Please print

	Title:
	 

    

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Fiduciary Trust Company International 

(APPLICABLE TO NON-US ENTITIES ONLY)

EXHIBIT C

TO THE INVESTMENT MANAGEMENT WITH CUSTODY AGREEMENT 
FOR ACCOUNT ENTITLED 
“___________________________________________________________________”

U.S. federal law places certain restrictions on non-US ownership of any interest in oil and gas leases on federal (U.S.) land and on non-US control of United States shipping and communications companies.  In connection with such securities that are or may be held in a client's account, Fiduciary must certify to issuers or to domestic depositories where the securities may be held (e.g., Depository Trust Company (“DTC”)) whether the client meets any of the criteria set forth in either Test I or Test II.

TEST I

For purposes of shipping and communications companies, do you meet any of the following criteria?

		
	(a)
	Any individual person who is not a United States citizen;

		
	(b)
	Any non-US government;

		
	(c)
	Any corporation, the president, chief executive officer, chairman of the board of directors or other executive officer of which is not a United States citizen, or of which more than a minority of its directors necessary to constitute a quorum or more than a minority of its directors are not United States citizens;

		
	(d)
	Any corporation organized under the laws of any non-US government;

		
	(e)
	Any corporation of which more than one-fourth of its stock is owned beneficially or of record, or may be voted, by persons who are not United States citizens, or which by any other means whatsoever is controlled by or in which control is permitted to be exercised by persons who are not United States citizens;

		
	(f)
	Any partnership or association which is controlled by persons who are not United States citizens; or

		
	(g)
	Any person (including any individual, partnership, corporation or association) who acts as representative of, or fiduciary for, any person described in clauses (a) through (f) above.

11

Fiduciary Trust Company International 
    
(APPLICABLE TO NON-US ENTITIES ONLY)

EXHIBIT C (cont'd)

TO THE INVESTMENT MANAGEMENT WITH CUSTODY AGREEMENT
FOR ACCOUNT ENTITLED
“____________________________________________________________________”

TEST II

For purposes of ownership interests in oil and gas leases on federal (U.S.) land, do you meet any of the following criteria?

		
	(a)
	Any individual person who is not a citizen of the United States;

		
	(b)
	Any association (including a partnership, joint tenancy and tenancy in common) organized or existing under the laws of any government outside the United States or any state or territory thereof, or of which any members are not citizens of the United States; 

		
	(c)
	Any corporation organized under the laws of any government outside the United States or any state or territory thereof, or of which corporation, to the best of its knowledge, more than 5% of the voting stock, or if all of the voting stock, is owned or controlled by citizens of countries that deny to United States citizens privileges to own stock in corporations holding oil and gas leases similar to the privileges of non-United States citizens to own stock in corporations holding oil and gas leases on federal lands; or

		
	(d)
	Any person otherwise not qualified to hold an interest in oil and gas leases on federal lands, including offshore areas, under federal laws and regulations in effect from time to time.

12

Fiduciary Trust Company International 

SCHEDULE 1

FEE SCHEDULE
INVESTMENT MANAGEMENT WITH CUSTODY AGREEMENT 
FOR ACCOUNT ENTITLED
“                                            ”

As compensation for managing and maintaining custody of my Account, you shall be paid an Investment Management Fee (the “Fee”) in accordance with the schedule set forth below based on the aggregate amount of assets under management in the “Relationship Accounts.” The Fee shall be allocated among, and charged pro rata to, each of the Relationship Accounts in proportion to the amount that each Relationship Account bears to the aggregate amount of all Relationship Accounts.

    
Investment Management Fee:

     % of the first       million assets

     % of the next       million assets

     % of the balance of the assets

The minimum annual Fee for the Relationship Accounts (in the aggregate) shall be _________.

From time to time, assets in an account may be invested in one or more of Fiduciary Trust's affiliated mutual funds.  The value of these affiliated mutual funds will be excluded from our calculation of the Portfolio Management Account Services fee at the account level, but will be subject to an administrative fee of ___%, where permitted by law.

You shall be paid the Fee quarterly in arrears, based on the aggregate value of the assets in the Relationship Accounts valued as of the last Business Day of the previous calendar quarter, equal to one-fourth of the annual rates specified above.  For purposes of this Schedule, “Business Day” shall mean any day on which banking institutions in New York State are required to be open for business.

13

	
	
	 

	Fiduciary

	Trust

	International

	 

	 

PERMISSION TO USE YOUR NAME ON A REPRESENTATIVE CLIENT LIST

We frequently receive requests from prospective clients for a sample or representative list of clients invested in one of our investment styles or strategies.  We would greatly appreciate your taking a moment to consider being included on such a list.
We wish to honor your preference with respect to releasing the name of your organization to any third-party entity.  For this reason, we wish to obtain your permission prior to including your name on a representative client list.  Please note that inclusion of your name on such a list does not constitute an endorsement by you of Fiduciary Trust Company International.  In addition, in the event a prospective client asks us for additional contact information with respect to your organization, we will obtain your permission to do so prior to releasing any such information.
Please review and indicate your preference in the appropriate space below in the "Permission to Use Name" box.  Should your preference change at a later date, simply let your Portfolio Manager know, and we will make the necessary changes. 
Thank you for your time and consideration.
	
							
	 
	 
	 
	 
	 

	Permission to Use Name

	 
	 
	 
	 
	 

	 
	You may use the name of our organization (but no contact or address information) in a representative or sample client list.

	 
	 
	 
	 
	 

	 
	We prefer that the name of our organization not be used in any representative or sample client list.

	 
	 
	 
	 
	 

	[INSERT NAME OF CLIENT]
	 
	 
	 
	 

	 
	 
	 
	 
	 

	By:
	 
	 
	 
	 
	 

	Name:
	 
	 
	Date
	 
	 

	Title:
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

14

15

16Exhibit 10.15 9.30.12

Exhibit 10.15
Form of Agreement

Form of Participation Agreement
as of __________, 20__
Franklin Templeton Variable Insurance Products Trust
Franklin/Templeton Distributors, Inc.
[Company]
[Company Distributor]

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 Templeton Variable Insurance Products Trust, an open-end management investment company organized as a statutory trust under Delaware law (the “Trust”), Franklin/Templeton Distributors, Inc., a California corporation which is the principal underwriter for the Trust (the “Underwriter,” and together with the Trust, “we” or “us”), 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”).
The purpose of this Agreement is to entitle you, directly 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.  

Form of Agreement

2.    Representations and Warranties  
2.1    Representations and Warranties by You 
You represent and warrant that:
2.1.1    You are an insurance company duly organized and in good standing under the laws of your state of incorporation.
2.1.2    All of your directors, officers, employees, and other individuals or entities dealing with the money and/or securities of the Trust are and shall be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Trust, in an amount not less than $5 million.  Such bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company.  You agree to make all reasonable efforts to see that this bond or another bond containing such provisions is always in effect, and you agree to notify us in the event that such coverage no longer applies.

2.1.3    Each Account is a duly organized, validly existing segregated asset account under applicable insurance law and interests in each Account are offered exclusively through the purchase of or transfer into a "variable contract" within the meaning of such terms under Section 817 of the Internal Revenue Code of 1986, as amended (“Code”) and the regulations thereunder.  You will use your best efforts to continue to meet such definitional requirements, and will notify us immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future.
2.1.4    Each Account either: (i) has been registered or, prior to any issuance or sale of the Contracts, will be registered as a unit investment trust under the Investment Company Act of 1940 (“1940 Act”); or (ii) has not been so registered in proper reliance upon an exemption from registration under Section 3(c) of the 1940 Act; if the Account is exempt from registration as an investment company under Section 3(c) of the 1940 Act, you will use your best efforts to maintain such exemption and will notify us immediately upon having a reasonable basis for believing that such exemption no longer applies or might not apply in the future.
2.1.5    The Contracts or interests in the Accounts: (i) are or, prior to any issuance or sale will be, registered as securities under the Securities Act of 1933, as amended (the “1933 Act”); or (ii) are not registered because they are properly exempt from registration under Section 3(a)(2) of the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under Section 4(2) or Regulation D of the 1933 Act, in which case you will make every effort to maintain such exemption and will notify us immediately upon having a reasonable basis for believing that such exemption no longer applies or might not apply in the future.
2.1.6    The Contracts: (i) will be sold by broker-dealers, or their registered representatives, who are registered with the Securities and Exchange Commission (“SEC”) under the Securities 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

Form of Agreement

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 Section 3(c)(1) or Section 3(c)(7) thereof:
		
	2.1.11.1
	the principal underwriter for each such Account and any subaccounts thereof is a registered broker-dealer with the SEC under the 1934 Act;

		
	2.1.11.2
	the shares of the Portfolios of the Trust are and will continue to be the only investment securities held by the corresponding subaccounts; and

		
	2.1.11.3
	with regard to each Portfolio, you, on behalf of the corresponding subaccount, will:

		
	(a)
	vote such shares held by it in the same proportion as the vote of all other holders of such shares; and

		
	(b)
	refrain from substituting shares of another security for such shares unless the SEC has approved such substitution in the manner provided in Section 26 of the 1940 Act.

2.2    Representations and Warranties by the Trust
The Trust represents and warrants that:
2.2.1    It is duly organized and in good standing under the laws of the State of 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.  
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.

3

Form of Agreement

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.

2.4.1You 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.

2.4.2As 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).

3.    Purchase and Redemption of Trust Portfolio Shares

3.1    Availability of Trust Portfolio Shares
3.1.1We 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. 
3.1.2Without 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. You further agree to cooperate fully in the implementation and fulfillment of the Trust's obligations pursuant to Rule 22c-2 under the 1940 Act.

4

Form of Agreement

3.1.3We 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

3.2.1Section 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 Templeton Investments, 910 Park Place, 1st Floor, San Mateo, California 94403-1906.  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.

3.2.2At 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
3.3.1You are hereby appointed as our designee for the sole purpose of receiving from Contract owners purchase and exchange orders and requests for redemption resulting from investment in and payments under the Contracts that pertain to subaccounts that invest in Portfolios (“Instructions”).  “Business Day” shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the SEC and its current prospectus.  “Close of Trading” shall mean the close of trading on the New York Stock Exchange, generally 4:00 p.m. Eastern Time.  You represent and warrant that all Instructions transmitted to us for processing on or as of a given Business Day (“Day 1”) shall have been received in proper form and time stamped by you prior to the Close of Trading on Day 1.  Such Instructions shall receive the share price next calculated following the Close of Trading on Day 1, provided that we receive such Instructions from you before 9:00 a.m. Eastern Time on the next Business Day (“Day 2”).  You represent and warrant that Instructions received in proper form and time stamped by you after the Close of Trading on Day 1 shall be treated by you and transmitted to us as if received on Day 2.  Such Instructions shall receive the share price next calculated following the Close of Trading on Day 2.  You represent and warrant that you have, maintain and periodically test, procedures and systems in place reasonably designed to prevent Instructions received after the Close of Trading on Day 1 from being executed with Instructions received before the Close of Trading on Day 1.  All Instructions we receive from you after 9:00 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.
3.3.2We shall calculate the net asset value per share of each Portfolio on each Business Day, and shall communicate these net asset values to you or your designated agent on a daily basis as soon as reasonably practical after the calculation is completed (normally by 6:30 p.m. Eastern Time).
3.3.3You 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 currently 6:00 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.
3.3.4We will redeem any full or fractional shares of any Portfolio, when requested by you on behalf of an Account, at the net asset value next computed after receipt by us (or our agent or you as our designee) of the request for redemption, as established in accordance with the provisions of the then current prospectus of the Trust.  We shall make payment for such shares in the manner we establish from time to time, but in no event shall payment be delayed for a greater period than is permitted by the 1940 Act. 

5

Form of Agreement

3.3.5Issuance 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.
3.3.6We 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. 
3.3.7Each 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.
3.4.2You are hereby appointed as our designee for the sole purpose of receiving from Contract owners purchase and exchange orders and requests for redemption resulting from investment in and payments under the Contracts that pertain to subaccounts that invest in Portfolios ("Instructions").  "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the SEC and its current prospectus.  "Close of Trading" shall mean the close of trading on the New York Stock Exchange, generally 4:00 p.m. Eastern Time.  Upon receipt of Instructions, and upon your determination that there are good funds with respect to Instructions involving the purchase of shares, you will calculate the net purchase or redemption order for each Portfolio.
3.4.3On each Business Day, you shall aggregate all purchase and redemption orders for shares of a Portfolio that you received prior to the Close of Trading. You represent and warrant that all orders for net purchases or net redemptions derived from Instructions received by you and transmitted to Fund/SERV for processing on or as of a given Business Day (“Day 1”) shall have been received in proper form and time stamped by you prior to the Close of Trading on Day 1.  Such orders shall receive the share price next calculated following the Close of Trading on Day 1, provided that we receive Instructions from Fund/SERV by 6:30 a.m. Eastern Time on the next Business Day (“Day 2”).  You represent and warrant that orders received in good order and time stamped by you after the Close of Trading on Day 1 shall be treated by you and transmitted to Fund/SERV as if received on Day 2.  Such orders shall receive the share price next calculated following the Close of Trading on Day 2.  All Instructions we receive from Fund/SERV after 6:30 a.m. Eastern Time on Day 2 shall be processed by us on the following Business Day and shall receive the share price next calculated following the close of trading on Day 2.  You represent and warrant that you have, maintain and periodically test, procedures and  systems in place reasonably designed to prevent orders received after the Close of Trading on Day 1 from being executed with orders received before the Close of Trading on Day 1, and periodically monitor the systems to determine their effectiveness.  Subject to your compliance with the foregoing, you will be considered the designee of the Underwriter and the Portfolios, and the Business Day on which Instructions are received by you in proper form prior to the Close of Trading will be the date as of which shares of the Portfolios are deemed purchased, exchanged or redeemed pursuant to such Instructions.  Dividends and capital gain distributions will be automatically reinvested at net asset value in accordance with the Portfolio's then current prospectus.
3.4.4We shall calculate the net asset value per share of each Portfolio on each Business Day, and shall furnish to you through NSCC's Networking or Mutual Fund Profile System: (i) the most current net asset value information for each Portfolio; and (ii) in the case of fixed income funds that declare daily dividends, the daily accrual or the interest rate factor.  All such information shall be furnished to you by 6:30 p.m. Eastern Time on each Business Day or at such other time as that information becomes available.

6

Form of Agreement

3.4.5You 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.
3.4.6We 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.
3.4.7Issuance and transfer of the Portfolio shares will be by book entry only.  Stock certificates will not be issued to you or the Accounts.  Portfolio shares purchased from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount of each Account.
3.4.8We 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.
3.4.9All 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.
3.4.10All 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.
3.4.11If on any specific day you or Underwriter are unable to meet the NSCC deadline for the transmission of purchase or redemption orders for that day, a party may at its option transmit such orders and make such payments for purchases and redemptions directly to you or us, as applicable, as is otherwise provided in the Agreement; provided, however, that we must receive written notification from you by 9:00 a.m. Eastern Time on any day that you wish to transmit such orders and/or make such payments directly to us.
3.4.12In 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.
3.4.13These 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.
3.4.14Each 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. 
3.4.15You and Underwriter represent and warrant that each:  (a) has entered into an agreement with NSCC; (b) has met and will continue to meet all of the requirements to participate in Fund/SERV and Networking; (c) intends to remain at all times in compliance with the then current rules and procedures of NSCC, all to the extent necessary or appropriate to facilitate such communications, processing, and settlement of share transactions; and (d) will notify the other parties to this Agreement if there is a change in or a pending failure with respect to its agreement with NSCC.

7

Form of Agreement

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, including any profile or summary prospectus (if, at the sole discretion of the Trust, it chooses to create or authorize creation of such short profile or summary  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”); (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; or (iii) a .pdf format file of such Designated Portfolio Documents for posting on your website or using in other electronic format.  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 or, upon your request, in a .pdf format file.  The expenses of furnishing, including mailing or posting on your website, to Contract owners the documents referred to in this paragraph in typeset or electronic format 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.
4.5    We shall provide you, at our expense, with copies of any Trust-sponsored proxy materials in such quantity as you shall reasonably require for distribution to Contract owners who are invested in a designated subaccount.  You shall bear the costs of distributing proxy materials (or similar materials such as voting solicitation instructions) to Contract owners.
4.6    You assume sole responsibility for ensuring that the Trust's Designated Portfolio Documents and proxy materials are delivered to Contract owners in accordance with applicable federal and state securities laws.  For Designated Portfolio Documents and other Trust materials provided by you on your website or by other electronic means, you assume sole responsibility for ensuring that such delivery is in compliance with applicable state and federal requirements pertaining to electronic delivery, including consent, access, searchability by users, notice and evidence of delivery.
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 

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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/ 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, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, web-sites and other electronic communications 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 may use the name of the Trust and trademarks and the logo of the Underwriter in Sales Literature/Promotional Material as reasonably necessary to carry out your performance and obligations under this Agreement provided that you comply with the provisions of this Agreement.  You agree to abide by any reasonable use guidelines regarding use of such trademarks and logos that we may give from time to time.  You shall, as we may request from time to time, promptly 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/ Promotional Material created and approved by you, and all amendments to any of the above that relate to the Contracts, the Accounts, the Trust, or Underwriter or its affiliates. 
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/Promotional Material created by us for the Trust and provided by the Trust or its designee to you, except as required by legal process or regulatory authorities or with the written permission of the Trust or its designee.      
6.4    You agree, represent and warrant that you are solely responsible for any Sales Literature/ Promotional Material prepared by you and that such material will: (a) conform to all requirements of any applicable laws or regulations of any government or authorized agency having jurisdiction over the offering or sale of shares of the Portfolios or Contracts; (b) be solely based upon and not contrary to or inconsistent with the information or materials provided to you by us or a Portfolio; and (c) be made available promptly to us upon our request. You agree to file any Sales Literature/Promotional Material prepared by you with FINRA, or other applicable legal or regulatory authority, within the timeframes that may be required from time to time by FINRA or such other legal or regulatory authority. Unless otherwise expressly agreed to in writing, it is understood that we will neither review nor approve for use any materials prepared by you and will not be materially involved in the preparation of, or have any responsibility for, any such materials prepared by you.  You are not authorized to modify or translate any materials we have provided to you.
6.5    You shall promptly notify us of any written customer complaint or notice of any regulatory investigation or proceeding received by you relating to any Disclosure Documents or Sales Literature/Promotional Material.  

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6.6    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/ Promotional Material, except as required by legal process or regulatory authorities or with your written permission.  
6.7    Except as provided in Section 6.2, you shall not use any designation comprised in whole or part of the names or marks “Franklin” or “Templeton” or any logo or other trademark relating to the Trust or the Underwriter without prior written consent, and upon termination of this Agreement for any reason, you shall cease all use of any such name or mark as soon as reasonably practicable.
6.8    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.
6.9    You agree that any posting of Designated Portfolio Documents on your website or use of Designated Portfolio Documents in any other electronic format will result in the Designated Portfolio Documents:  (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; (iv) in compliance with any statutory prospectus delivery requirements and (v) 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 Designated Portfolio Documents 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 delivery or use of fund prospectuses.  We reserve the right to inspect and review your website if any Designated Portfolio Documents and/or other Trust documents are posted on your website and you shall, upon our reasonable request, provide us timely access to your website materials to perform such inspection and review.
In addition, you agree to be solely responsible for maintaining and updating the Designated Portfolio Documents' .pdf files and removing and/or replacing promptly any outdated prospectuses and other documents, 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 Designated Portfolio Documents 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.

6.10    Each of your and your distributor's registered representatives, agents, independent contractors and employees, as applicable, will have access to our websites at franklintempleton.com, 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.”

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 

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to the Site.  You agree to inform us if you wish to restrict or revoke the access of any individual Access Code.   If you become aware of any loss or theft or unauthorized use of any Access Code, you agree to contact us immediately. You also agree to monitor your (including Authorized Users') use of the Site to ensure the terms of this Agreement are followed.  You also agree that you will comply with all policies and agreements concerning Site usage, including without limitation the Terms of Use Agreement(s) posted on the Site (“Site Terms”), as may be revised and reposted on the Site from time to time, and those Site Terms (as in effect from time to time) are a part of this Agreement. Your duties under this section are considered “services” required under the terms of this Agreement.  You acknowledge that the Site is transmitted over the Internet on a reasonable efforts basis and we do not warrant or guarantee their accuracy, timeliness, completeness, reliability or non-infringement.  Moreover, you acknowledge that the Site is provided for informational purposes only, and is not intended to comply with any requirements established by any regulatory or governmental agency.

7.    Indemnification

7.1    Indemnification By You

7.1.1    You agree to indemnify and hold harmless the Underwriter, the Trust and each of its Trustees, officers, employees and agents and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” and individually the “Indemnified Party” for purposes of this Section 7) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with your written consent, which consent shall not be unreasonably withheld) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, “Losses”), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses are related to the sale or acquisition of shares of the Trust or the Contracts and

7.1.1.1 arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a Disclosure Document for the Contracts or in the Contracts themselves or in sales literature generated or approved by you on behalf of the Contracts or Accounts (or any amendment or supplement to any of the foregoing) (collectively, “Company Documents” for the purposes of this Section 7), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be 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; 

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; or
7.1.1.7 arise out of or result from any failure by you to satisfy requirements, including but not limited to compliance with all applicable laws, relating to your electronic delivery of Designated Portfolio Documents or your making such documents available on-line.

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7.1.2    You shall not be liable under this indemnification provision with respect to any Losses to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Trust or Underwriter, whichever is applicable.  You shall also not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified you in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify you of any such claim shall not relieve you from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision.  In case any such action is brought against the Indemnified Parties, you shall be entitled to participate, at your own expense, in the defense of such action.  Unless the Indemnified Party releases you from any further obligations under this Section 7.1, you also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action.  After notice from you to such party of 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 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

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7.2.1.5    arise out of or result from any material breach of any representation and/or warranty made by the Underwriter in this Agreement or arise out of or result from any other material breach of this Agreement by the Underwriter; as limited by and in accordance with the provisions of Sections 7.2.2 and 7.2.3 hereof.
7.2.2    The Underwriter shall not be liable under this indemnification provision with respect to any Losses to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to you or the Accounts, whichever is applicable.
7.2.3    The Underwriter shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Underwriter in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Underwriter of any such claim shall not relieve the Underwriter from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision.  In case any such action is brought against the Indemnified Parties, the Underwriter will be entitled to participate, at its own expense, in the defense thereof.  Unless the Indemnified Party releases the Underwriter from any further obligations under this Section 7.2, the Underwriter also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action.  After notice from the Underwriter to such party of the Underwriter's election to assume the defense thereof, the Indemnified Party shall bear the expenses of any additional counsel retained by it, and the Underwriter will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.
7.2.4    You agree promptly to notify the Underwriter of the commencement of any litigation or proceedings against you or the Indemnified Parties in connection with the issuance or sale of the Contracts or the operation of each Account.
7.3    Indemnification By The Trust
7.3.1    The Trust agrees to indemnify and hold harmless you, and each of your directors and officers and each person, if any, who controls you within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” for purposes of this Section 7.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust, which consent shall not be unreasonably withheld) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements result from the gross negligence, bad faith or willful misconduct of the Board or any member thereof, are related to the operations of the Trust, and arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust; as limited by and in accordance with the provisions of Sections 7.3.2 and 7.3.3 hereof.  It is understood and expressly stipulated that neither the holders of shares of the Trust nor any Trustee, officer, agent or employee of the Trust shall be personally liable hereunder, nor shall any resort be had to other private property for the satisfaction of any claim or obligation hereunder, but the Trust only shall be liable.
7.3.2    The Trust shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against any Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to you, the Trust, the Underwriter or each Account, whichever is applicable.
7.3.3    The Trust shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Trust in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claims shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Trust of any such claim shall not relieve the Trust from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision.  In case any such action is brought against the Indemnified Parties, the Trust will be entitled to participate, at its own expense, in the defense thereof.  Unless the Indemnified Party releases the Trust from any further obligations under this Section 7.3, the Trust also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action.  After notice from the Trust to such party of the Trust's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional 

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counsel retained by it, and the Trust will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.
7.3.4    You agree promptly to notify the Trust of the commencement of any litigation or proceedings against you or the Indemnified Parties in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of the Account, or the sale or acquisition of shares of the Trust.
8.    Notices
Any notice, 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. If termination by you occurs in connection with the substitution of securities, as provided for in Section 26(c) of the 1940 Act, advance written notice to us shall be no later than the date of the filing of the application for approval of the proposed substitution of securities.
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 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.

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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.
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.

15

Form of Agreement

10.9    The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties to this Agreement are entitled to under state and federal laws.
10.10    The parties to this Agreement acknowledge and agree that this Agreement shall not be exclusive in any respect.
10.11    Neither this Agreement nor any rights or obligations created by it may be assigned by any party without the prior written approval of the other parties.

10.12    No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties.  Notwithstanding the foregoing:  (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 Gramm-Leach-Bliley 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.

[This page has been intentionally left blank]
    

16

Form of Agreement

IN WITNESS WHEREOF, each of the parties has caused their duly authorized officers to execute this Agreement.

	
					
	The Trust:
	 
	Franklin Templeton Variable Insurance Products Trust

	 
	Only on behalf of each
Portfolio listed on 
Schedule C hereof.
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	

	By: __________________________________________
	 

	 
	 
	Name:
	 
	 

	 
	 
	Title:
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	The Underwriter:
	Franklin/Templeton Distributors, Inc.
	 

	 
	 
	 
	 
	 

	 
	 
	By: __________________________________________
	 

	 
	 
	Name:
	 
	 

	 
	 
	Title:
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	The Company:
	______________________________________________
	 

	 
	 
	 
	 
	 

	 
	 
	By: __________________________________________
	 

	 
	 
	Name:
	 
	 

	 
	 
	Title:
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	Distributor for the Company:
	______________________________________________
	 

	 
	 
	 
	 
	 

	 
	 
	By: __________________________________________
	 

	 
	 
	Name:
	 
	 

	 
	 
	Title:
	 
	 

	 
	 
	 
	 
	 

17

Form of Agreement

Schedule A

The Company and its Distributor

THE COMPANY

[name]
[address]

An insurance company organized under the laws of the State of __________.

THE DISTRIBUTOR

[name of Distributor]
[address of Distributor]

A corporation organized under the laws of the State of _________.

A

Form of Agreement

Schedule B

Accounts of the Company

	
		
	Name of Account
	SEC Registration Yes/No

	Smith VA Account
	Yes

	Smith VLI Account
	No

    

B

Form of Agreement

Schedule C

Available Portfolios and Classes of Shares of the Trust

[funds and classes currently listed in schedule, if any]

In addition to portfolios and classes of shares listed above, any additional Portfolios and classes of shares other than Class 3 shares are included in this Schedule C listing provided that:  

		
	(1)
	the General Counsel of Franklin Templeton Investments 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

Form of Agreement

FORM OF NOTICE PURSUANT TO SCHEDULE C OF PARTICIPATION AGREEMENT

To:      General Counsel c/o
[__________________]
Fax: [______________]
Franklin Templeton Investments
1 Franklin Parkway, 
Bldg. 920, 2nd Floor
San Mateo, CA  94402

With respect to the following agreement(s) (altogether, the “Agreement”) 
(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 Templeton Variable Insurance Products Trust, and Franklin/Templeton 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
Listing of current classes for your reference:
           Class 1 (no 12b-1 fee); 
           Class 2 (12b-1 fee of 25 bps); or 
           Class 4 (12b-1 fee of 35 bps).
	Offering Date(s)

	 
	 

	 
	 

	 
	 

	 
	 

Name and title of authorized person of insurance company:
Contact Information:
    

C

Form of Agreement

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

Form of Agreement

Schedule E

This schedule is not used

    

E

Form of Agreement

Schedule F

Rule 12b-1 Plans of the Trust

Compensation

Each Class 2 or Class 4 Portfolio named or referenced on Schedule C of this Agreement may make payments at a rate stated in its prospectus pursuant to the terms and conditions of its 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 that 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.

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.  

F-1

Form of Agreement

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

Form of Agreement

Schedule G

Addresses for Notices

To the Company:            [        ] Insurance Company
[address]
[address]
Attention:  [name, title]

To the Distributor:        ______________
Address
__________
Attention: 

		
	To the Trust:
	Franklin Templeton Variable Insurance Products Trust

One Franklin Parkway, Bldg. 920 2nd Floor
San Mateo, California 94403
Attention:   [_______________]

To the Underwriter:        Franklin/Templeton Distributors, Inc.
100 Fountain Parkway, Bldg. 140 7th Floor
St. Petersburg, FL 33716
Attention:   [_______________]

If to the Trust or Underwriter 
with a copy to:             Franklin Templeton Investments
One Franklin Parkway, Bldg. 920 2nd Floor
San Mateo, California 94403
Attention:  General Counsel

G

Form of Agreement

Schedule H

Shared Funding Order

Templeton Variable Products Series Fund, et al.

File No. 812-11698

 SECURITIES AND EXCHANGE COMMISSION

Release No. IC-24018

1999 SEC LEXIS 1887

September 17, 1999 

ACTION:  Notice of application for an amended order of exemption pursuant to Section 6(c) of the Investment Company Act of 1940 (the "1940 Act") from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.  

TEXT: Summary of Application: Templeton Variable Products Series Fund (the "Templeton Trust"), Franklin Templeton Variable Insurance Products Trust (formerly Franklin Valuemark Funds) (the "VIP Trust," and together with the Templeton Trust, the "Funds"), Templeton Funds Annuity Company ("TFAC") or any successor to TFAC, and any future open-end investment company for which TFAC or any affiliate is the administrator, sub-administrator, investment manager, adviser, principal underwriter, or sponsor ("Future Funds") seek an amended order of the Commission to (1) add as parties to that order the VIP Trust and any Future Funds and (2) permit shares of the Funds and Future Funds to be issued to and held by qualified pension and retirement plans outside the separate account context.  

   Applicants: Templeton Variable Products Series Fund, Franklin Templeton Variable Insurance Products Trust, Templeton 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, 450 Fifth Street, NW, Washington, D.C. 20549-0609. 

   Applicants: Templeton Variable Products Series Fund and Franklin Templeton Variable Insurance Products Trust, 777 Mariners Island Boulevard, San Mateo, California 94404, Attn: Karen L. Skidmore, Esq.  

   For Further Information Contact: Kevin P. McEnery, Senior Counsel, or Susan M. Olson, Branch Chief, Office of Insurance Products, Division of Investment Management, at (202) 942-0670.  

   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, 450 Fifth Street, N.W., Washington, D.C. 20549-0102 (tel. (202) 942‐8090).  

   

H-1

Form of Agreement

Applicants' Representations:  

   1. Each of the Funds is registered under the 1940 Act as an open-end management investment company and was organized as a Massachusetts business trust. The Templeton Trust currently consists of eight separate series, and the VIP Trust consists of twenty-five separate series. Each Fund's Declaration of Trust permits the Trustees to create additional series of shares at any time. The Funds currently serve as the underlying investment medium for variable annuity contracts and variable life insurance policies issued by various insurance companies. The Funds have entered into investment management agreements with certain investment managers ("Investment Managers") directly or indirectly owned by Franklin Resources, Inc. ("Resources"), a publicly owned company engaged in the financial services industry through its subsidiaries.  

   2. TFAC is an indirect, wholly owned subsidiary of Resources. TFAC is the sole insurance company in the Franklin Templeton organization, and specializes in the writing of variable annuity contracts. The Templeton Trust has entered into a Fund Administration Agreement with Franklin Templeton Services, Inc. ("FT Services"), which replaced TFAC in 1998 as administrator, and FT Services subcontracts certain services to TFAC. FT Services also serves as administrator to all series of the VIP Trust. TFAC and FT Services provide certain administrative facilities and services for the VIP and Templeton Trusts.  

   3. On November 16, 1993, the Commission issued an order granting exemptive relief to permit shares of the Templeton Trust to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies (Investment Company Act Release No. 19879, File No. 812-8546) (the "Original Order"). Applicants incorporate by reference into the application the Application for the Original Order and each amendment thereto, the Notice of Application for the Original Order, and the Original Order, to the extent necessary, to supplement the representations made in the application in support of the requested relief. Applicants represent that all of the facts asserted in the Application for the Original Order and any amendments thereto remain true and accurate in all material respects to the extent that such facts are relevant to any relief on which Applicants continue to rely. The Original Order allows the Templeton Trust to offer its shares to insurance companies as the investment vehicle for their separate accounts supporting variable annuity contracts and variable life insurance contracts (collectively, the "Variable Contracts"). Applicants state that the Original Order does not (i) include the VIP Trust or Future Funds as parties, nor (ii) expressly address the sale of shares of the Funds or any Future Funds to qualified pension and retirement plans outside the separate account context including, without limitation, those trusts, plans, accounts, contracts or annuities described in Sections 401(a), 403(a), 403(b), 408(b), 408(k), 414(d), 457(b), 501(c)(18) of the Internal Revenue Code of 1986, as amended (the "Code"), and any other trust, plan, contract, account or annuity that is determined to be within the scope of Treasury Regulation 1.817.5(f)(3)(iii) ("Qualified Plans").  

   4. Separate accounts owning shares of the Funds and their insurance company depositors are referred to in the application as "Participating Separate Accounts" and "Participating Insurance Companies," respectively. The use of a common management investment company as the underlying investment medium for both variable annuity and variable life insurance separate accounts of a single insurance company (or of two or more affiliated insurance companies) is referred to as "mixed funding." The use of a common management investment company as the underlying investment medium for variable annuity and/or variable life insurance separate accounts of unaffiliated insurance companies is referred to as "shared funding."  

   Applicants' Legal Analysis:  

   1. Applicants request that the Commission issue an amended order pursuant to Section 6(c) of the 1940 Act, adding the VIP Trust and Future Funds to the Original Order and exempting scheduled premium variable life insurance separate accounts and flexible premium variable life insurance separate accounts of Participating Insurance Companies (and, to the extent necessary, any principal underwriter and depositor of such an account) and the Applicants from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) (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.  

   

H-2

Form of Agreement

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 Templeton Trust exemptive relief to permit mixed and shared funding, but did not expressly address the sale of its shares to Qualified Plans.  

   7. Applicants note that if the Funds were to sell their shares only to Qualified Plans, exemptive relief under Rule 6e-2 and Rule 6e-3(T) would not be necessary. Applicants state that the relief provided for under Rule 6e-2(b)(15) and Rule 6e-3(T)(b)(15) does not relate to qualified pension and retirement plans or to a registered investment company's ability to sell its shares to such plans.  

   8. Applicants state that changes in the federal tax law have created the opportunity for each of the Funds to increase its asset base through the sale of its shares to Qualified Plans. Applicants state that Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code"), imposes certain diversification standards on the assets underlying Variable Contracts. Treasury Regulations generally require that, to meet the diversification requirements, all of the beneficial interests in the underlying investment company must be held by the segregated asset accounts of 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,

H-3

Form of Agreement

 subject to the limitations on mixed and shared funding. These exemptions limit the application of the eligibility restrictions to affiliated individuals or companies that directly participate in the management of the underlying portfolio investment company.  

   11. Applicants state that the relief granted in Rule 6e-2(b)(15) and 6e-3(T)(b)(15) from the requirements of Section 9 limits, in effect, the amount of monitoring of an insurer's personnel that would otherwise be necessary to ensure compliance with Section 9 to that which is appropriate in light of the policy and purposes of Section 9. Applicants submit that those Rules recognize that it is not necessary for the protection of investors or the purposes fairly intended by the policy and provisions of the 1940 Act to apply the provisions of Section 9(a) to the many individuals involved in an insurance company complex, most of whom typically will have no involvement in matters pertaining to investment companies funding the separate accounts.  

   12. Applicants to the Original Order previously requested and received relief from Section 9(a) and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) to the extent necessary to permit mixed and shared funding. Applicants maintain that the relief previously granted from Section 9(a) will in no way be affected by the proposed sale of shares of the Funds to Qualified Plans. Those individuals who participate in the management or administration of the Funds will remain the same regardless of which Qualified Plans use such Funds. Applicants maintain that more broadly applying the requirements of Section 9(a) because of investment by Qualified Plans would not serve any regulatory purpose. Moreover, Qualified Plans, unlike separate accounts, are not themselves investment companies and therefore are not subject to Section 9 of the 1940 Act.  

   13. Applicants state that Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) provide exemptions from the pass-through voting requirement with respect to several significant matters, assuming the limitations on mixed and shared funding are observed. Rules 6e-2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A) provide that the insurance company may disregard the voting instructions of its contractowners with respect to the investments of an underlying fund or any contract between a fund and its investment adviser, when required to do so by an insurance regulatory authority (subject to the provisions of paragraphs (b)(5)(i) and (b)(7)(ii)(A) of the Rules). Rules 6e-2(b)(15)(iii)(B) and 6e-3(T)(b)(15)(iii)(A)(2) provide that the insurance company may disregard contractowners' voting instructions if the contractowners initiate any change in such company's investment policies, principal underwriter, or any investment adviser (provided that disregarding such voting instructions is reasonable and subject to the other provisions of paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and (C) of the Rules). 

   14. Applicants assert that Qualified Plans, which are not registered as investment companies under the 1940 Act, have no requirement to pass-through the voting rights to plan participants. Applicants state that applicable law expressly reserves voting rights to certain specified persons. Under Section 403(a) of the Employment Retirement Income Security Act ("ERISA"), shares of a fund sold to a Qualified Plan must be held by the trustees of the Qualified Plan. Section 403(a) also provides that the trustee(s) must have exclusive authority and discretion to manage and control the Qualified Plan with two exceptions: (1) when the Qualified Plan expressly provides that the trustee(s) are subject to the direction of a named fiduciary who is not a trustee, in which case the trustees are subject to proper directions made in accordance with the terms of the Qualified Plan and not contrary to ERISA; and (2) when the authority to manage, acquire or dispose of assets of the Qualified Plan is delegated to one or more 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

H-4

Form of Agreement

 Qualified Plan provides participants with the right to give voting instructions, Applicants see no reason to believe that participants in Qualified Plans generally or those in a particular Qualified Plan, either as a single group or in combination with participants in other Qualified Plans, would vote in a manner that would disadvantage Variable Contract holders. In sum, Applicants maintain that the purchase of shares of the Funds by Qualified Plans that provide voting rights does not present any complications not otherwise occasioned by mixed or shared funding.  

   17. Applicants do not believe that the sale of the shares of the Funds to Qualified Plans will increase the potential for material irreconcilable conflicts of interest between or among different types of investors. In particular, Applicants see very little potential for such conflicts beyond that which would otherwise exist between variable annuity and variable life insurance contractowners.  

   18. As noted above, Section 817(h) of the Code imposes certain diversification standards on the underlying assets of variable contracts held in an underlying mutual fund. The Code provides that a variable contract shall not be treated as an annuity contract or life insurance, as applicable, for any period (and any subsequent period) for which the investments are not, in accordance with regulations prescribed by the Treasury Department, adequately diversified.  

   19. Treasury Department Regulations issued under Section 817(h) provide that, in order to meet the statutory diversification requirements, all of the beneficial interests in the investment company must be held by the segregated asset accounts of one or more insurance companies.  However, the Regulations contain certain exceptions to this requirement, one of which allows shares in an underlying mutual fund to be held by the trustees of a qualified pension or retirement plan without adversely affecting the ability of shares in the underlying fund also to be held by separate accounts of insurance companies in connection with their variable contracts (Treas. Reg. 1.817-5(f)(3)(iii)). Thus, Applicants believe that the Treasury Regulations specifically permit "qualified pension or retirement plans" and separate accounts to invest in the same underlying fund. For this reason, Applicants have concluded that neither the Code nor the Treasury Regulations or revenue rulings thereunder presents any inherent conflict of interest.  

   20. Applicants note that while there are differences in the manner in which distributions from Variable Contracts and Qualified Plans are taxed, these differences will have no impact on the Funds. When distributions are to be made, and a Separate Account or Qualified Plan is unable to net purchase payments to make the distributions, the Separate Account and Qualified Plan will redeem shares of the Funds at their respective net asset value in  conformity with Rule 22c-1 under the 1940 Act (without the imposition of any sales charge) to provide proceeds to meet distribution needs. A Qualified Plan will make distributions in accordance with the terms of the Qualified Plan.  

   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.  

H-5

Form of Agreement

   24. Applicants state that the sale of shares of the Funds to Qualified Plans in addition to separate accounts of Participating Insurance Companies will result in an increased amount of assets available for investment by the Funds. This may benefit variable contractowners by promoting economies of scale, by permitting increased safety of investments through greater diversification, and by making the addition of new portfolios more feasible.  

   25. Applicants assert that, regardless of the type of shareholders in each Fund, each Fund's Investment Manager is or would be contractually and otherwise obligated to manage the Fund solely and exclusively in accordance with that Fund's investment objectives, policies and restrictions as well as any guidelines established by the Board of Trustees of such Fund (the "Board"). The Investment Manager works with a pool of money and (except in a few instances where this may be required in order to comply with state insurance laws) does not take into account the identity of the shareholders. Thus, each Fund will be managed in the same manner as any other mutual fund. Applicants therefore see no significant legal impediment to permitting the sale of shares of the Funds to Qualified Plans.  

   26. Applicants state that the Commission has permitted the amendment of a substantially similar original order for the purpose of adding a party to the original order and has permitted open-end management investment companies to offer their shares directly to Qualified Plan in addition to separate accounts of affiliated or unaffiliated insurance companies which issue either or both variable annuity contracts or variable life insurance contracts. Applicants state that the amended order sought in the application is identical to precedent with respect to the conditions Applicants propose should be imposed on Qualified Plans in connection with investment in the Funds.  

   Applicants' Conditions:  

   If the requested amended order is granted, Applicants consent to the following conditions:  

   1. A majority of the Board of each Fund shall consist of persons who are not "interested persons" thereof, as defined by Section 2(a)(19) of the 1940 Act, and the rules thereunder and as modified by any applicable orders of the Commission, except that if this condition is not met by reason of the death, disqualification or bona fide resignation of any Board Member or Members, then the operation of this condition shall be suspended: (a) for a period of 45 days if the vacancy or vacancies may be filled by the remaining Board Members; (b) for a period of 60 days if a vote 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,

H-6

Form of Agreement

 will be contractual obligations of all Participating Qualified Plans under their agreements governing participation in the Funds, and such agreements will provide that their responsibilities will be carried out with a view only to the interests of Qualified Plan participants.  

   4. If it is determined by a majority of the Board of a Fund, or by a majority of the disinterested Board Members, that a material irreconcilable conflict exists, the relevant Participating Insurance Companies and Participating Qualified Plans will, at their own expense and to the extent reasonably practicable as determined by a majority of the disinterested Board Members, take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps could include: (a) in the case of Participating Insurance Companies, withdrawing the assets allocable to some or all of the Separate Account s from the Fund or any portfolio thereof and reinvesting such assets in a different investment medium, including another portfolio of an Fund or another Fund, or submitting the question as to whether such segregation should be implemented to a vote of all affected Variable Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., variable annuity contract owners or variable life insurance contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Variable Contract owners the option of making such a change; (b) in the case of Participating Qualified Plans, withdrawing the assets allocable to some or all of the Qualified Plans from the Fund and reinvesting such assets in a different investment medium; and (c) establishing a new registered management investment company or managed Separate Account. If a material irreconcilable conflict arises because of a decision by a Participating Insurance Company to disregard Variable Contract owner voting instructions, and that decision represents a minority position or would preclude a majority vote, then the insurer may be required, at the Fund's election, to withdraw the insurer's Separate Account investment in such Fund, and no charge or penalty will be imposed as a result of such withdrawal. If a material irreconcilable conflict arises because of a Participating Qualified Plan's decision to disregard Qualified Plan participant voting instructions, if applicable, and that decision represents minority position or would preclude a majority vote, the Participating Qualified Plan may be required, at the Fund's election, to withdraw its investment in such Fund, and no charge or penalty will be imposed as a result of such withdrawal. The responsibility to take remedial action in the event of a determination by a Board of a material irreconcilable conflict and to bear the cost of such remedial action will be a contractual obligation of all Participating 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.  

   

H-7

Form of Agreement

8. All reports of potential or existing conflicts received by the Board of a Fund and all action by such Board with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Qualified Plans of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the meetings of such Board or other appropriate records, and such minutes or other records shall be made available to the Commission upon request.  

   9. Each Fund will notify all Participating Insurance Companies that separate disclosure in their respective Separate Account prospectuses may be appropriate to advise accounts regarding the potential risks of mixed and shared funding. Each Fund shall disclose in its prospectus that (a) the Fund is intended to be a funding vehicle for variable annuity and variable life insurance contracts offered by various insurance companies and for qualified pension and retirement plans; (b) due to differences of tax treatment and other considerations, the interests of various Contract owners participating in the Fund and/or the interests of Qualified Plans investing in the Fund may at some time be in conflict; and (c) the Board of such Fund will monitor events in order to identify the existence of any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflict.  

   10. Each Fund will comply with all provisions of the 1940 Act requiring voting by shareholders (which, for these purposes, will be the persons having a voting interest in the shares of the Funds), and, in particular, the Funds will either provide for annual shareholder meetings (except insofar as the Commission may interpret Section 16 of the 1940 Act not to require such meetings) or comply with Section 16(c) of the 1940 Act, although the Funds are not the type of trust described in Section 16(c) of the 1940 Act, as well as with Section 16(a) of the 1940 Act and, if and when applicable, Section 16(b) of the 1940 Act. Further, each Fund will act in accordance with the Commission's interpretation of the requirements of Section 16(a) with respect to periodic elections of Board Members and with whatever rules the Commission may promulgate with respect thereto. 

   11. If and to the extent Rules 6e-2 or 6e-3(T) under the 1940 Act is amended, or proposed Rule 6e-3 under the 1940 Act is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder, with respect to mixed or shared funding on terms and conditions materially different from any exemptions granted in the order requested in the application, then the Funds and/or Participating Insurance Companies and Participating Qualified Plans, as appropriate, shall take such steps as may be necessary to comply with such Rules 6e-2 and 6e-3(T), as amended, or proposed Rule 6e-3, as adopted, to the extent that such Rules are applicable.  

   12. The Participating Insurance Companies and Participating Qualified Plans and/or the Investment Managers, at least annually, will submit to the Board such reports, materials or data as the Board may reasonably request so that the Board may fully carry out obligations imposed upon it by the conditions contained in the application. Such reports, materials and data will be submitted more frequently if deemed appropriate by the Board. The obligations of the Participating Insurance Companies and Participating Qualified Plans to provide these reports, materials and data to the Board, when the Board so reasonably requests, shall be a contractual obligation of all Participating Insurance Companies and Participating Qualified Plans under their agreements governing participation in the Funds.  

   13.  If a Qualified Plan should ever become a holder of ten percent or more of the assets of a Fund, such Qualified Plan will execute a participation agreement with the Fund that includes the conditions set forth herein to the extent applicable. A Qualified Plan will execute an application containing an acknowledgment of this condition upon such Qualified Plan's initial purchase of the shares of any Fund.  

   Conclusion:  

   Applicants assert that, for the reasons summarized above, the requested exemptions are appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act.  

   For the Commission, by the Division of Investment Management, pursuant to delegated authority. 

H-8 

Form of Agreement

Templeton 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: Templeton Variable Products Series Fund ("Templeton Trust"), Franklin Templeton Variable Insurance Products Trust ("VIP Trust"), Templeton 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 Templeton 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 Templeton 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. 

H-9

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