FUND PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into this day September of 1999 (the
"Agreement") by and among American Skandia Life Assurance Corporation, organized
under the laws of the State of Connecticut (the "Company"), on behalf of itself
and each separate account of the Company named in Schedule A to this Agreement,
as may be amended from time to time (each separate account referred to as the
"Separate Account" and collectively as the "Separate Accounts"); First Defined
Portfolio Fund LLC, a non-diversified open-end management investment company
organized as a limited liability company under the laws of the State of Delaware
(the "Fund"); First Trust Advisors L.P., a limited partnership organized under
the laws of the State of Illinois and investment adviser to the Fund (the
"Adviser"); and Nike Securities L.P. (the "Distributor"), a corporation
organized under the laws of the State of Illinois and principal
underwriter/distributor of the Fund.
WHEREAS, the Fund engages in business as an open-end management investment
company and was established exclusively for the purpose of serving as the
investment vehicle for sub-accounts of American Skandia Life Assurance
Corporation Variable Separate Account B which was established as a vehicle to
support various variable annuity contracts to be offered by American Skandia
Life Assurance Corporation; and
WHEREAS, beneficial interests in the Fund are divided into several series of
membership interests, each representing the interest in a particular managed
portfolio of securities and other assets (each a "Portfolio" and collectively
the "Portfolios"); and
WHEREAS, the Company, as depositor, has established the Separate Accounts to
serve as investment vehicles for certain variable annuity contracts and variable
life insurance policies and funding agreements offered by the Company set forth
on Schedule A (the "Contracts"); and
WHEREAS, the Separate Accounts are duly organized, validly existing segregated
asset accounts, established by resolutions of the Board of Directors of the
Company under the insurance laws of the State of Connecticut, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase membership interests of the Portfolios named in
Schedule B, as such schedule may be amended from time to time (the "Designated
Portfolios") on behalf of the Separate Accounts to fund the Contracts;
WHEREAS, the Distributor is authorized to sell such membership interests of the
Portfolios to unit investment trusts such as the Separate Accounts at net asset
value.
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Adviser and the Distributor agree as follows:
ARTICLE I - SALE OF FUND MEMBERSHIP INTERESTS
1.1 The Distributor agrees to sell to the Company those membership
interests of the Designated Portfolios which the Company orders on
behalf of each Separate Account, executing such orders on a daily basis
at the net asset value (and with no sales charges) next computed after
receipt and acceptance by the Fund or its designee of the order for the
membership interests of the Fund. For purposes of this Section 1.1, the
Company will be the designee of the Fund for receipt of such orders
from each Separate Account and receipt by such designee will constitute
receipt by the Fund; provided that the Fund receives notice of such
order by 11:00 a.m. Eastern Time on the next following business day.
"Business Day" will mean any day on which the New York Stock Exchange
is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission
(the "Commission"). The Fund may net the notice of redemptions it
receives from the Company under Section 1.3 of this Agreement against
the notice of purchases it receives from the Company under this Section
1.1.
1.2 The Company will pay for Fund membership interests on the next Business
Day after an order to purchase Fund membership interests is made in
accordance with Section 1.1. Payment will be made in federal funds
transmitted by wire. Upon receipt by the Fund of the payment, such
funds shall cease to be the responsibility of the Company and shall
become the responsibility of the Fund.
1.3 The Fund agrees to redeem for cash, upon the Company's request, any
full or fractional membership interests of the Fund held by the
Company, executing such requests on a daily basis at the net asset
value next computed after receipt and acceptance by the Fund or its
agent of the request for redemption. For purposes of this Section 1.3,
the Company will be the designee of the Fund for receipt of requests
for redemption from each Separate Account and receipt by such designee
will constitute receipt by the Fund; provided the Fund receives notice
of such requests for redemption by 11:00 a.m. Eastern Time on the next
following Business Day. Payment will be made in federal funds
transmitted by wire to the Company's account as designated by the
Company in writing from time to time, on the same Business Day the Fund
receives notice of the redemption order from the Company. After
consulting with the Company, the Fund reserves the right to delay
payment of redemption proceeds, but in no event may such payment be
delayed longer than the period permitted under Section 22(e) of the
Investment Company Act of 1940 (the "1940 Act"). The Fund will not bear
any responsibility whatsoever for the proper disbursement or crediting
of redemption proceeds; the Company alone will be responsible for such
action. If notification of redemption is received after 11:00 Eastern
Time, payment for redeemed membership interests will be made on the
next following Business Day. The Fund may net the notice of purchases
it receives from the Company under Section 1.1 of this Agreement
against the notice of redemptions it receives from the Company under
this Section 1.3.
1.4 The Fund agrees to make membership interests of the Designated
Portfolios available continuously for purchase at the applicable net
asset value per share by the Company and its separate accounts on those
days on which the Fund calculates the net asset value of each
Designated Portfolio pursuant to rules of the Commission; provided,
however, that the Board of Trustees of the Fund (the "Fund Board") may
refuse to sell membership interests of any Portfolio to any person, or
suspend or terminate the offering of membership interests of any
Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the
Fund Board, acting in good faith and in light of its fiduciary duties
under federal and any applicable state laws, necessary in the best
interests of the shareholders of such Portfolio.
1.5 The Fund and the Distributor agree that membership interests of the
Fund will be sold only to the Company and its separate accounts of the
Company set forth on Schedule A. No membership interests of any
Portfolio will be sold directly to the general public.
1.6 The Company agrees to purchase and redeem the membership interests of
the Designated Portfolios offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus.
1.7 Issuance and transfer of the Fund's membership interests will be by
book entry only. Stock certificates will not be issued to the Company
or to any Separate Account. Purchase and redemption orders for Fund
membership interests will be recorded in an appropriate title for each
Separate Account or the appropriate sub-account of each Separate
Account.
1.8 The Fund will furnish same day notice (by facsimile) to the Company of
the declaration of any income, dividends or capital gain distributions
payable on each Designated Portfolio's membership interests. The
Company hereby elects to receive all such dividends and distributions
as are payable on the Portfolio membership interests in the form of
additional membership interests of that Portfolio at the ex-dividend
date net asset values. The Company reserves the right to revoke this
election and to receive all such dividends and distributions in cash.
The Fund will notify the Company of the number of membership interests
so issued as payment of such dividends and distributions.
1.9 The Fund will make the net asset value per share for each Designated
Portfolio available to the Company via electronic means on a daily
basis as soon as reasonably practical after the net asset value per
share is calculated and will use its best efforts to make such net
asset value per share available by 5:30 p.m., Eastern Time, each
Business Day. If the Fund provides the Company materially incorrect net
asset value per share information (as determined under SEC guidelines),
the Company shall be entitled to an adjustment to the number of
membership interests purchased or redeemed to reflect the correct net
asset value per share. Any material error in the calculation or
reporting of net asset value per share, dividend or capital gain
information shall be reported to the Company upon discovery by the
Fund.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are or will be
registered under the Securities Act of 1933 (the "1933 Act"), or are
exempt from registration thereunder, and that the Contracts will be
issued and sold in compliance with all applicable federal and state
laws. The Company further represents and warrants that: (i) it is an
insurance company duly organized and in good standing under applicable
law; (ii) it has legally and validly established each Separate Account
as a separate account under Section 38a-433 of the General Statutes of
Connecticut; (iii) each Separate Account is or will be registered as a
unit investment trust in accordance with the provisions of the 1940 Act
to serve as a segregated investment account for the Contracts, or is
exempt from registration thereunder; and (iv) it will maintain such
registration for so long as any Contracts are outstanding. The Company
will amend each registration statement under the 1933 Act for the
Contracts and the registration statement under the 1940 Act for the
Separate Account from time to time as required in order to effect the
continuous offering of the Contracts or as may otherwise be required by
applicable law. The Company will register and qualify the Contracts for
sale in accordance with the securities laws of the various states only
if, and to the extent, deemed necessary by the Company.
2.2 Subject to the Fund's representations in Article III, the Company
represents that the Contracts are currently and at the time of issuance
will be treated as annuity contracts and/or life insurance policies (as
applicable) under applicable provisions of the Code, and that it will
make every effort to maintain such treatment and that it will notify
the Fund and the Distributor immediately upon having a reasonable basis
for believing that the Contracts have ceased to be so treated or that
they might not be so treated in the future.
2.3 The Company represents and warrants to the Fund, the Adviser, and the
Distributor that its has a Year 2000 compliance program in existence
and that each reasonably intends to be Year 2000 compliant so as to be
able perform all of the services and/or obligation contemplated by or
under this Agreement without interruption. The Company shall
immediately notify the Fund, the Adviser, and the Distributor if it
determines that it will be unable perform all of the services and/or
obligations contemplated by or under this Agreement in a manner that is
Year 2000 complaint.
2.4 The Company represents and warrants that it will not purchase
membership interests of the Designated Portfolio[s] with assets derived
from tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
2.5 The Fund represents and warrants that membership interests of the
Designated Portfolio[s] sold pursuant to this Agreement will be
registered under the 1933 Act and duly authorized for issuance in
accordance with applicable law and that the Fund is and will remain
registered as an open-end management investment company under the 1940
Act for as long as such membership interests of the Designated
Portfolio[s] are sold. The Fund will amend the registration statement
for its membership interests under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of
its membership interests. The Fund will register and qualify the
membership interests of the Designated Portfolio[s] for sale in
accordance with the laws of the various states only if and to the
extent deemed advisable by the Fund or the Distributor.
2.6 The Fund represents that it will use its best efforts to comply with
any applicable state insurance laws or regulations as they may apply to
the investment objectives, policies and restrictions of the Portfolios,
to the extent specifically requested in writing by the Company. If the
Fund cannot comply with such state insurance laws or regulations, it
will so notify the Company in writing. The Fund makes no other
representation as to whether any aspect of its operations (including,
but not limited to, fees and expenses, and investment policies)
complies with the insurance laws or regulations of any state. The
Company represents that it will use its best efforts to notify the Fund
of any restrictions imposed by state insurance laws that may become
applicable to the Fund as a result of the Separate Accounts'
investments therein. The Fund and the Adviser agree that they will
furnish the information required by state insurance laws in order for
the Company to obtain the authority needed to issue the Contracts in
various states.
2.7 The Fund undertakes to comply with the terms and conditions of its plan
of distribution pursuant to Rule 12b-1 under the 1940 Act and to have
the trustees of its Fund Board, a majority of whom are not "interested"
persons of the Fund, approve any plan under Rule 12b-1 to finance
distribution expenses.
2.8 The Fund represents that it is a limited liability company lawfully
organized and validly existing under the laws of the State of Delaware
and that it does and will comply in all material respects with
applicable provisions of the 0000 Xxx.
2.9 The Fund represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having
access to the funds and/or securities of the Fund will to be at all
times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less than the minimal coverage as
required currently by Rule 17g-(1) of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond
includes coverage for larceny and embezzlement and is issued by a
reputable bonding company.
2.10 The Adviser represents and warrants that: (i) it is duly registered as
an investment adviser under the Investment Advisers Act of 1940, as
amended and will remain duly registered under all applicable federal
and state securities laws; and (ii) it will perform its obligations for
the Fund in accordance in all material respects with the laws of the
State of Illinois and any applicable state and federal securities laws.
2.11 The Distributor represents and warrants that it: (i) is registered as a
broker-dealer under the Securities and Exchange Act of 1934, as amended
(the "1934 Act") and will remain duly registered under all applicable
federal and state securities laws; (ii) is a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD"); (iii)
serves as principal underwriter/distributor of the Fund; and (iv) will
perform its obligations for the Fund in accordance in all material
respects with the laws of the State of Illinois and any applicable
state and federal securities laws.
2.12 The Fund, the Adviser and the Distributor represent and warrant to the
Company that each has a Year 2000 compliance program in existence and
that each reasonably intends to be Year 2000 compliant so as to be able
perform all of the services and/or obligations contemplated by or under
this Agreement without interruption. The Fund, the Adviser, and the
Distributor shall immediately notify the Company if it determines that
it will be unable perform all of the services and/or obligations
contemplated by or under this Agreement in a manner that is Year 2000
compliant.
ARTICLE III - FUND COMPLIANCE
3.1 The Fund represents that it will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, as amended from
time to time, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts, and with Section
817(d) of the Code, relating to the definition of a variable contract,
and any amendments or other modifications to such Section or
Regulation. The Fund will notify the Company immediately upon having a
reasonable basis for believing that the Fund or a Portfolio thereunder
has ceased to comply with the diversification requirements or that the
Fund or Portfolio might not comply with the diversification
requirements in the future. In the event of a breach of this
representation by the Fund, it will take all reasonable steps to
adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Treasury Regulation 1.817-5.
3.2 The Adviser agrees to provide the Company with a certificate or
statement indicating compliance by each Portfolio of the Fund with
Section 817(h) of the Code, such certificate or statement to be sent to
the Company no later than thirty (30) days following the end of each
calendar quarter.
3.3 The Company acknowledges and agrees that the Fund is not responsible
for other factors unrelated to the Fund's compliance with Section
817(h) of the Code that could result in the Contracts not being treated
as variable contracts under the Code.
ARTICLE IV - PROSPECTUS AND PROXY STATEMENTS/VOTING
4.1 The Fund or the Distributor will provide the Company with as many
copies of the current Fund prospectus and any supplements thereto for
the Designated Portfolio[s] as the Company may reasonably request for
distribution, at the Fund's or Distributor's expense, to Contract
owners at the time of Contract fulfillment and confirmation. To the
extent that the Designated Portfolio[s] are one or more of several
Portfolios of the Fund, the Fund shall bear the cost of providing the
Company only with disclosure related to the Designated Portfolio[s].
The Fund will provide, at the Fund's or Distributor's expense, as many
copies of said prospectus as necessary for distribution, at the Fund's
or Distributor's expense, to existing Contract owners. The Fund will
provide the copies of said prospectus to the Company or to its mailing
agent. The Company will distribute the prospectus to existing Contract
owners and will xxxx the Fund or Distributor for the reasonable cost of
such distribution. If requested by the Company, in lieu thereof, the
Fund or Distributor will provide such documentation, including a final
copy of a current prospectus set in type at the Fund's or Distributor's
expense, and other assistance as is reasonably necessary in order for
the Company at least annually (or more frequently if the Fund
prospectus is amended more frequently) to have the new prospectus for
the Contracts and the Fund's new prospectus printed together, in which
case the Fund or Distributor agrees to pay its proportionate share of
reasonable expenses directly related to the required disclosure of
information concerning the Fund. The Fund or Distributor will, upon
request, provide the Company with a copy of the Fund's prospectus
through electronic means to facilitate the Company's efforts to provide
Fund prospectuses via electronic delivery, in which case the Fund or
Distributor agrees to pay its proportionate share of reasonable
expenses related to the required disclosure of information concerning
the Fund.
4.2 The Fund's prospectus will state that the Statement of Additional
Information (the "SAI") for the Fund is available from the Distributor.
4.3 The Fund, at its expense, will provide the Company or its mailing agent
with copies of its proxy material, if any, reports to members/Contract
owners and other permissible communications to members/ Contract owners
in such quantity as the Company will reasonably require. The Company
will distribute this proxy material, reports and other communications
to existing Contract owners and will xxxx the Fund for the reasonable
cost of such distribution.
4.4 If and to the extent required by law, the Company will:
(a) solicit voting instructions from Contract owners;
(b) vote the membership interests of the Designated Portfolios held in
the Separate Account in accordance with instructions received from
Contract owners; and
(c) vote membership interests of the Designated Portfolios held in the
Separate Account for which no timely instructions have been
received, in the same proportion as membership interests of such
Designated Portfolio for which instructions have been received
from the Company's Contract owners,
so long as and to the extent that the Commission continues to interpret
the 1940 Act to require pass-through voting privileges for variable
Contract owners. The Company reserves the right to vote Fund membership
interests held in any segregated asset account in its own right, to the
extent permitted by law. The Company will be responsible for assuring
that the Separate Accounts participating in the Fund calculates voting
privileges in a manner consistent with all legal requirements,
including the Proxy Voting Procedures set forth in Schedule C.
4.5 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Fund either will provide
for annual meetings (except insofar as the Commission may interpret
Section 16 of the 1940 Act not to require such meetings) or, as the
Fund currently intends, to comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c)
of the 0000 Xxx) as well as with Sections 16(a) and, if and when
applicable, 16(b) of the 1940 Act. Further, the Fund will act in
accordance with the Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE V - SALES MATERIAL AND INFORMATION
5.1 The Company will furnish, or will cause to be furnished, to the Fund or
the Distributor, each piece of sales literature or other promotional
material in which the Fund, the Adviser or the Distributor is named, at
least ten (10) business days prior to its use. No such material will be
used if the Fund or the Distributor reasonably objects to such use
within five (5) business days after receipt of such material.
5.2 The Company will not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement, prospectus or
SAI for Fund membership interests, as such registration statement,
prospectus and SAI may be amended or supplemented from time to time, or
in reports or proxy statements for the Fund, or in published reports
for the Fund which are in the public domain or approved by the Fund,
the Adviser or the Distributor for distribution, or in sales literature
or other material provided by the Fund, the Adviser or the Distributor,
except with permission of the Fund, the Adviser or the Distributor. The
Fund and the Adviser agree to respond to any request for approval on a
prompt and timely basis.
5.3 The Fund, the Adviser or the Distributor will furnish, or will cause to
be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or its
separate account is named, at least ten (10) business days prior to its
use. No such material will be used if the Company reasonably objects to
such use within five (5) business days after receipt of such material.
5.4 The Fund, the Adviser or the Distributor will not give any information
or make any representations or statements on behalf of the Company or
concerning the Company, each Separate Account, or the Contracts other
than the information or representations contained in a registration
statement, prospectus or SAI for the Contracts, as such registration
statement, prospectus and SAI may be amended or supplemented from time
to time, or in published reports for each Separate Account or the
Contracts which are in the public domain or approved by the Company for
distribution to Contract owners, or in sales literature or other
material provided by the Company, except with permission of the
Company. The Company agrees to respond to any request for approval on a
prompt and timely basis.
5.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, reports, proxy statements,
sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Fund or its membership interests,
contemporaneously with the filing of each such document with the
Commission or the NASD.
5.6 The Company will provide to the Fund at least one complete copy of all
definitive prospectuses, definitive SAI, reports, solicitations for
voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no action letters, and all
amendments to any of the above, that relate to the Contracts or each
Separate Account, contemporaneously with the filing of each such
document with the Commission or the NASD (Except that with respect to
post-effective amendments to such prospectuses and SAIs and sales
literature and promotional material, only those prospectuses and SAIs
and sales literature and promotional material that relate to or refer
to the Fund will be provided.) In addition, the Company will provide to
the Fund at least one complete copy of (i) a registration statement
that relates to the Contracts or each Separate Account, containing
representative and relevant disclosure concerning the Fund; and (ii)
any post-effective amendments to any registration statements relating
to the Contracts or such Separate Account that refer to or relate to
the Fund.
5.7 For purposes of this Article V, the phrase "sales literature or other
promotional material" includes, but is not limited to, 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, or
other public media, (i.e., on-line networks such as the Internet or
other electronic messages)), 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 of any other
advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made
generally available to some or all agents or employees, registration
statements, prospectuses, SAIs, shareholder reports, and proxy
materials and any other material constituting sales literature or
advertising under the NASD Conduct Rules, the 1933 Act or the 0000 Xxx.
5.8 The Fund, the Adviser, and the Distributor hereby consent to the
Company's use of the names First Defined Portfolios Fund LLC, First
Trust Advisors L.P. and Nike Securities L.P., as well as the names of
the Designated Portfolios set forth in Schedule B of this Agreement, in
connection with marketing the Contracts, subject to the terms of
Sections 5.1 and 5.2 of this Agreement. The Fund, the Adviser and the
Distributor hereby consent to the use of any trademark, tradename,
service xxxx or logo used by the Fund, the Adviser, or the Distributor
subject to the Fund's, the Adviser's or the Distributor's approval of
such use and in accordance with reasonable requirements of the Fund or
the Adviser. Such consent will terminate with the termination of this
Agreement. The Company agrees and acknowledges that either of the Fund,
the Adviser or the Distributor are the owner of the name, trademark,
tradename, service xxxx or logo and that all use of any designation
comprised in whole or in part of the name, trademark, tradename,
service xxxx or logo under this Agreement shall inure to the benefit of
the Fund, Adviser and/or the Distributor.
5.9 The Company hereby consents to the Advisor's or Distributor's use of
the name American Skandia Life Assurance Corporation, as well as the
names of the Company's Contracts set forth in Schedule A of this
Agreement, subject to the terms of Sections 5.1 and 5.2 of this
Agreement. The Company hereby consents to the use of any trademark,
tradename, service xxxx or logo used by the Company, subject to the
Company's approval of such use and in accordance with reasonable
requirements of the Company. Such consent will terminate with the
termination of this Agreement. The Adviser and Distributor agree and
acknowledges that the Company is the owner of the name, trademark,
tradename, service xxxx or logo and that all use of any designation
comprised in whole or in part of the name, trademark, tradename,
service xxxx or logo under this Agreement shall inure to the benefit of
the Company.
5.10 The Fund, the Adviser, the Distributor and the Company agree to adopt
and implement procedures reasonably designed to ensure that information
concerning the Company, the Fund, the Adviser or the Distributor,
respectively, and their respective affiliated companies, that is
intended for use only by brokers or agents selling the Contracts (i.e.
information that is not intended for distribution to Contract owners or
prospective Contract owners) and is properly marked as "Not For Use
With The Public" or "For Broker-Dealer Use Only" and that such
information is only so used.
ARTICLES VI - FEES, COSTS AND EXPENSES
6.1 The Fund will pay no fee or other compensation to the Company under
this Agreement, except subject to a plan pursuant to Rule 12b-1 under
the 1940 Act to finance distribution expenses, in which case, subject
to obtaining any required exemptive orders or other regulatory
approvals, the Fund may make payments to the Distributor as a service
fee to compensate the Company for providing services to owners of the
Contracts in such amounts agreed to by the Fund in writing and as
described in Schedule D. Each party, however, shall in accordance with
the allocation of expenses specified in this Agreement, reimburse other
parties for expenses initially paid by one party but allocated to
another party. In addition, nothing herein shall prevent the parties
hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other administrative services provided to
Contract owners relating to the Fund that are not primarily intended to
result in the sale of shares of the Designated Portfolios.
6.2 All expenses incident to performance by the Fund of this Agreement will
be paid by the Fund or the Distributor to the extent permitted by law.
All membership interests of the Designated Portfolios will be duly
authorized for issuance and registered in accordance with applicable
federal law and, to the extent deemed advisable by the Fund, in
accordance with applicable state law, prior to sale. The Fund will bear
the expenses for the cost of registration and qualification of the
Fund's membership interests, including without limitation, the
preparation of and filing with the SEC of Forms N-SAR and Rule 24f-2
Notices with respect to membership interests of the Fund; preparation
and filing of the Fund's prospectus, SAI and registration statement,
proxy materials and reports; typesetting the Fund's prospectus;
typesetting and printing proxy materials and reports to Contract owners
(including the costs of printing a Fund prospectus that constitutes an
annual report); the preparation of all statements and notices required
by any federal or state law; all taxes on the issuance or transfer of
the Fund's membership interests; any expenses permitted to be paid or
assumed by the Fund pursuant to a plan, if any, under Rule 12b-1 under
the 1940 Act; and other costs associated with preparation of
prospectuses and SAIs for the Designated Portfolios in electronic or
typeset format, as well as any distribution expenses as set forth in
Article III of this Agreement.
6.3 The Company shall bear all expenses associated with the registration,
qualification, and filing of the Contracts under applicable federal
securities and state insurance laws; the cost of preparing, printing,
and distributing the Contracts' prospectus and SAI; and the cost of
printing and distribution annual individual account statements for
Contract owners are required by state law.
ARTICLE VII - INDEMNIFICATION
7.1 Indemnification by the Company
(a) The Company agrees to indemnify and hold harmless the Fund, the
Adviser, the Distributor, and each of its directors, officers,
partners, employees or agents and each person, if any, who
controls or is associated with the Fund, the Adviser, or the
Distributor within the meaning of such terms under the federal
securities laws (collectively, the "Indemnified Parties" for
purposes of this Section 7.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or actions in respect thereof
(including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or litigation in respect
thereof) or settlements:
(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 SAI for the
Contracts or contained in the Contracts or sales literature
or other promotional material for the Contracts (or any
amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated or
necessary to make such statements not misleading in light of
the circumstances in which they were made; provided that this
agreement to indemnify will not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the
Fund, the Adviser, or the Distributor for use in the
registration statement, prospectus or SAI for the Contracts
or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Fund membership interests; or
(2) arise out of or as a result of statements or representations
by or on behalf of the Company (other than statements or
representations contained in the Fund registration statement,
prospectus, SAI or sales literature or other promotional
material of the Fund, or any amendment or supplement to the
foregoing, not supplied by the Company or persons under its
control) or wrongful conduct of the Company or persons under
its control, with respect to the sale or distribution of the
Contracts or Fund membership interests; or
(3) arise out of untrue statement or alleged untrue statement of
a material fact contained in the Fund registration statement,
prospectus, SAI or sales literature or other promotional
material of the Fund (or amendment or supplement) or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make such
statements not misleading in light of the circumstances in
which they were made, if such a statement or omission was
made in reliance upon and in conformity with information
furnished to the Fund by or on behalf of the Company or
persons under its control; or
(4) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of
this Agreement; or
(5) arise out of any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out
of or result from any other material breach by the Company of
this Agreement;
except to the extent provided in Sections 7.1(b) and 7.4
hereof. This indemnification will be in addition to any
liability that the Company otherwise may have.
(b) No party will be entitled to indemnification under Section 7.1(a)
if such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, gross negligence or reckless
disregard in the performance of such party's duties and
obligations under this Agreement.
(c) The Indemnified Parties promptly will notify the Company of the
commencement of any litigation, proceedings, complaints or actions
by regulatory authorities against them in connection with the
issuance or sale of the Fund membership interests or the Contracts
or the operation of the Fund.
7.2 Indemnification by the Distributor
(a) The Distributor agrees to indemnify and hold harmless the Company
and each of its directors, officers, employees or agents and each
person, if any, who controls or is associated with the Company
within the meaning of such terms under the federal securities laws
(collectively, the "Indemnified Parties" 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 Distributor) or litigation in respect thereof
(including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or litigation in respect
thereof) or settlements:
(1) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus or SAI for the Fund or
sales literature or other promotional material of the Fund
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated or necessary to make such statements not misleading in
light of the circumstances in which they were made; provided
that this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to the Distributor
by or on behalf of the Company for use in the registration
statement, prospectus or SAI for the Fund or in sales
literature of the Fund (or any amendment or supplement
thereto) or otherwise for use in connection with the sale of
the Contracts or Fund membership interests; or
(2) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Contracts or in the Contract or Fund registration statements,
prospectuses or statements of additional information or sales
literature or other promotional material for the Contracts or
of the Fund, or any amendment or supplement to the foregoing,
not supplied by the Adviser or the Fund or persons under the
control of the Adviser or the Fund respectively) or wrongful
conduct of the Distributor or persons under the control of
the Distributor, with respect to the sale or distribution of
the Contracts or Fund membership interests; or
(3) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, SAI or sales literature or other promotional
material covering the Contracts (or any amendment or
supplement thereto), or the omission or alleged omission to
state therein a material fact required to be stated or
necessary to make such statement or statements not misleading
in light of the circumstances in which they were made, if
such statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on
behalf of the Distributor or persons under the control of the
Distributor; or
(4) arise as a result of any failure by the Distributor to
provide the services and furnish the materials under the
terms of this Agreement;
except to the extent provided in Sections 7.2(b) and 7.4 hereof.
This indemnification will be in addition to any liability that the
Distributor otherwise may have.
(b) The Company will not be entitled to indemnification under Section
7.2(a) if such loss, claim, damage, liability or litigation is due
to the willful misfeasance, bad faith, gross negligence or
reckless disregard in the performance of such party's duties and
obligations under this Agreement, including the Company's failure
to ensure that the Contracts will be treated as variable contracts
under the Code for reasons other than the Fund's compliance with
Section 817(h) of the Code.
(c) The Indemnified Parties will promptly notify the Distributor of
the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection with
the issuance or sale of the Contracts or the operation of the
Separate Account.
7.3 Indemnification by the Fund & Adviser
(a) The Fund and the Adviser agree to indemnify and hold harmless the
Company and each of its directors, officers, employees or agents
and each person, if any, who controls or is associated with the
Company within the meaning of such terms under the federal
securities laws (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 Fund and the Adviser) or litigation in
respect thereof (including reasonable legal and other expenses) to
which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or litigation in
respect thereof) or settlements, are related to the operations of
the Fund and:
(1) arise as a result of any failure by the Fund or the Adviser
to provide the services and furnish the materials under the
terms of this Agreement; or
(2) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or the
Adviser in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund or the
Adviser (including a failure, whether intentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article III of this Agreement); or
(3) arise out of or result from the incorrect or untimely
calculation or reporting of daily net asset value per share
or dividend or capital gain distribution rate;
except to the extent provided in Sections 7.3(b) and 7.4
hereof. This indemnification will be in addition to any
liability that the Fund or the Adviser otherwise may have.
(b) The Company will not be entitled to indemnification under Section
7.3(a) if such loss, claim, damage, liability or litigation is due
to the willful misfeasance, bad faith, gross negligence or
reckless disregard in the performance of such party's duties and
obligations under this Agreement, including the Company's failure
to ensure that the Contracts will be treated as variable contracts
under the Code for reasons other than the Fund's compliance with
Section 817(h) of the Code.
(c) The Indemnified Parties will promptly notify the Fund and the
Adviser of the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against them in
connection with the issuance or sale of the Contracts or the
operation of the Separate Account.
7.4 Indemnification Procedure
Any person obligated to provide indemnification under this Article VII
("Indemnifying Party" for the purpose of this Section 7.4) will not be
liable under the indemnification provisions of this Article VII with
respect to any claim made against a party entitled to indemnification
under this Article VII ("Indemnified Party" for the purpose of this
Section 7.4) unless such Indemnified Party will have notified the
Indemnifying Party in writing within a reasonable time after the
summons or other first legal process giving information of the nature
of the claim will have been served upon such Indemnified Party (or
after such party will have received notice of such service on any
designated agent), but failure to notify the Indemnifying Party of any
such claim will not relieve the Indemnifying Party from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of the indemnification provision of
this Article VII, except to the extent that the failure to notify
results in the failure of actual notice to the Indemnifying Party and
such Indemnifying Party is damaged solely as a result of failure to
give such notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to
participate, at its own expense, in the defense thereof. The
Indemnifying Party also will be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from the Indemnifying Party to the Indemnified Party of the
Indemnifying Party's election to assume the defense thereof, the
Indemnified Party will bear the fees and expenses of any additional
counsel retained by it, and the Indemnifying Party 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,
unless: (a) the Indemnifying Party and the Indemnified Party will have
mutually agreed to the retention of such counsel; or (b) the named
parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. The Indemnifying Party will not be liable for any settlement of
any proceeding effected without its written consent but if settled with
such consent or if there is a final judgment for the plaintiff, the
Indemnifying Party agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement will be entitled to
the benefits of the indemnification contained in this Article VII. The
indemnification provisions contained in this Article VII will survive
any termination of this Agreement.
7.5 Indemnification for Failure to Comply with Diversification Requirements
The Fund and the Adviser acknowledge that any failure (whether
intentional or in good faith or otherwise) to comply with the
diversification requirements specified in Article III, Section 3.1 of
this Agreement may result in the Contracts not being treated as
variable contracts for federal income tax purposes, which would have
adverse tax consequences for Contract owners and could also adversely
affect the Company's corporate tax liability. Accordingly, without in
any way limiting the effect of Sections 7.2(a) and 7.3(a) hereof and
without in any way limiting or restricting any other remedies available
to the Company, the losses, claims, damages, liabilities, including
reasonable legal and other expenses for a failure to comply with the
diversification requirements specified in Article III, Section 3.1
include, but are not limited to, the costs involved in creating,
organizing, and registering a new investment company as a funding
medium for the Contracts and/or the costs of obtaining whatever
regulatory authorizations are required to substitute membership
interests of another investment company for those of the failed Fund or
Portfolio (including but not limited to an order pursuant to Section
26(b) of the 1940 Act); fees and expenses of legal counsel and other
advisors to the Company and any federal income taxes or tax penalties
(or "toll charges" or exactments or amounts paid in settlement)
incurred by the Company in connection with any such failure or
anticipated or reasonably foreseeable failure.
ARTICLE VIII - APPLICABLE LAW
8.1 This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Illinois.
8.2 This Agreement will be subject to the provisions of the 1933 Act, the
1934 Act and the 1940 Act, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the Commission may grant and the terms hereof will be
interpreted and construed in accordance therewith.
ARTICLE IX - TERMINATION
9.1 This Agreement will terminate automatically in the event of it
assignment, unless made with the written consent of each party, or:
(a) at the option of any party, with or without cause, with respect to
one, some or all of the Portfolios, upon twelve (12) month's
advance written notice to the other parties or, if later, upon
receipt of any required exemptive relief or orders from the SEC,
unless otherwise agreed in a separate written agreement among the
parties; or
(b) at the option of the Company, with respect to any Portfolio if
membership interests of the Portfolio are not reasonably available
to meet the requirements of the Contracts as determined in good
faith by the Company; or
(c) at the option of the Company, with respect to any Portfolio in the
event any of the Portfolio's membership interests are not
registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such
membership interests as the underlying investment media of the
Contracts issued or to be issued by Company; or
(d) at the option of the Fund, upon institution of formal proceedings
against the Company by the NASD, the Commission, the insurance
commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Contracts, the administration of the Contracts, the operation
of the Separate Account, or the purchase of the Fund membership
interests, provided that the Fund determines in its reasonable
judgment, that any such proceeding would have a material adverse
effect on the Company's ability to perform its obligations under
this Agreement; or
(e) at the option of the Company, upon institution of formal
proceedings against the Fund, the Adviser or the Distributor by
the NASD, the Commission or any state securities or insurance
commission or any other regulatory body, provided that the Company
determines in its reasonable judgment, that any such proceeding
would have a material adverse effect on the Fund's, the Adviser's
or the Distributor's ability to perform its obligations under this
Agreement; or
(f) at the option of the Company, with respect to any Portfolio if the
Fund fails to meet the diversification requirements specified in
Section 3.1 hereof or if the Company reasonably believes the Fund
may fail to meet such requirements; or
(g) at the option of any party to this Agreement, upon another party's
material breach of any provision of this Agreement; or
(h) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith that either the Fund, the
Adviser or the Distributor has suffered a material adverse change
in its business, operations or financial condition since the date
of this Agreement or is the subject of material adverse publicity
which is likely to have a material adverse impact upon the
business and operations of the Company, or the Contracts
(including the sale thereof); or
(i) at the option of the Fund, the Adviser or the Distributor, if the
Fund, the Adviser or the Distributor respectively, determines in
its sole judgment exercised in good faith that the Company has
suffered a material adverse change in its business, operations or
financial condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to have a
material adverse impact upon the business and operations of the
Fund, the Adviser, or the Distributor.; or
(j) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the Contract
owners having an interest in the Separate Account (or any
sub-account) to substitute the membership interests of another
investment company for the corresponding Portfolio's membership
interests of the Fund in accordance with the terms of the
Contracts for which those Portfolio membership interests had been
selected to serve as the underlying portfolio. The Company will
give sixty (60) days' prior written notice to the Fund of the date
of any proposed vote or other action taken to replace the Fund's
membership interests or of the filing of any required regulatory
approval(s). The effective date of any proposed substitution shall
not be earlier than twelve (12) months from the date of such prior
written notice; or (k) subject to the Fund's compliance with
Article III at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with applicable
federal and/or state law. Termination will be effective
immediately upon such occurrence without notice.
9.2 Notice Requirement
(a) In the event that a party to this Agreement terminates the
Agreement based upon the provisions of Sections 10.1(b)-(g),
prompt written notice of the election to terminate this Agreement
for cause shall be furnished by the party terminating the
Agreement to the non-terminating party. The Agreement shall be
terminated effective upon receipt of such notice by the
non-terminating party(ies).
(b) In the event that a party to this Agreement terminates the
Agreement based upon the provisions of Sections 10.1(h) or (i),
prior written notice of the election to terminate this Agreement
for cause shall be furnished by the party terminating the
Agreement to the non-terminating party(ies). Such prior written
notice shall be given by the party terminating this Agreement to
the non-terminating party(ies) at least sixty (60) days before the
effective date of termination.
9.3 Effect of Termination
Notwithstanding any termination of this Agreement, the Fund, the
Adviser and the Distributor will, at the option of the Company,
continue to make available additional membership interests of the Fund
pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts
will be permitted to reallocate investments in the Designated
Portfolios (as in effect on such date), redeem investments in the
Designated Portfolios and/or invest in the Designated Portfolios upon
the making of additional purchase payments under the Existing
Contracts.
9.4 Surviving Provisions
Notwithstanding any termination of this Agreement, each party's
obligations under Article VII to indemnify other parties will survive
and not be affected by any termination of this Agreement. In addition,
with respect to Existing Contracts, all provisions of this Agreement
also will survive and not be affected by any termination of this
Agreement.
ARTICLE X - NOTICES
Any notice will be deemed duly given when sent by certified mail, return receipt
requested, to the other party at the address of such party set forth below or at
such other address as such party may from time to time specify in writing to the
other parties. All notices will be deemed given three (3) business days after
the date received or rejected by the addressee:
If to the Company:
-----------------
American Skandia Life Assurance Corporation
0 Xxxxxxxxx Xxxxx
X.X. Xxx 000
Xxxxxxx, Xxxxxxxxxxx 00000-0000
Attn: Xx. Xxxxxx X. Xxxxxxx
If to the Fund:
--------------
First Defined Portfolio Fund LLC
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attn: W. Xxxxx Xxxxxxx, Esq.
If to the Adviser:
-----------------
First Trust Advisors L.P.
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attn: W. Xxxxx Xxxxxxx, Esq.
If to the Distributor:
---------------------
Nike Securities L.P.
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attn: W. Xxxxx Xxxxxxx, Esq.
ARTICLE XI - MISCELLANEOUS
11.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither
the trustees, employees, managers, officers, agents or members assume
any personal liability for obligations entered into on behalf of the
Fund.
11.2 The Fund, the Adviser and the Distributor acknowledge that the
identities of the customers of the Company or any of its affiliates
(collectively the "Protected Parties" for purposes of this Section
11.2), information maintained regarding those customers, and all
computer programs and procedures developed by the Protected Parties or
any of their employees or agents in connection with the Company's
performance of its duties under this Agreement are the valuable
property of the Protected Parties. The Fund, the Adviser and the
Distributor agree that if they come into possession of any list or
compilation of the identities of or other information about the
Protected Parties' customers, or any other property of the Protected
Parties, other than such information as may be independently developed
or compiled by the Fund, the Adviser and the Distributor from
information supplied to them by the Protected Parties' customers who
also maintain accounts directly with the Fund, the Adviser and the
Distributor, the Fund, the Adviser and the Distributor will hold such
information or property in confidence and refrain from using,
disclosing or distributing any of such information or other property
except: (a) with the Company' s prior written consent; or (b) as
required by law or judicial process. The Fund, the Adviser and the
Distributor acknowledge that any breach of the agreements in this
Section 11.2 would result in immediate and irreparable harm to the
Protected Parties for which there would be no adequate remedy at law
and agree that in the event of such a breach, the Protected Parties
will be entitled to equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
11.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
11.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the
same instrument.
11.5 If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement will not be affected thereby.
11.6 This Agreement will not be assigned by any party hereto without the
prior written consent of all the parties.
11.7 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 hereto are entitled
to under state and federal law.
11.8 The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect.
11.9 Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including without limitation
the Commission, the NASD and state insurance regulators) and will
permit each other and 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.
11.10 Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or board action, as
applicable, by such party and when so executed and delivered this
Agreement will be the valid and binding obligation of such party
enforceable in accordance with its terms.
11.11 The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts,
the Separate Accounts or the Portfolios of the Fund or other applicable
terms of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.
AMERICAN SKANDIA I.IFE ASSURANCE
CORPORATION
By: ______________________________
Xxxxxx X. Xxxxxxx
Deputy Chief Executive Officer and President
FIRST DEFINED PORTFOLIO FUND LLC
By: ______________________________
FIRST TRUST ADVISORS L.P.
By: ______________________________
NIKE SECURITIES L.P.
By: ______________________________
September 8, 1999 Page 1 of 1
PARTICIPATION AGREEMENT
SCHEDULE A
The following Separate Accounts and Associated Contracts of American Skandia
Life Assurance Corporation are permitted in accordance with the provisions of
this Agreement to invest in Portfolios of the Fund shown in Schedule B:
Contracts Funded by Separate Account Name of Separate Account
------------------------------------ ------------------------
Defined Investments Annuity American Skandia Life Assurance
Corporation Variable Separate Account B
(Class 3 Sub-Accounts)
PARTICIPATION AGREEMENT
SCHEDULE B
The Separate Account(s) shown on Schedule A may invest in the following
Portfolios of the Fund.
The DowSM Target 5 Portfolio
The DowSM DART 10 Portfolio
Global Target 15 Portfolio
S&P Target 10 Portfolio
NASDAQ Target 15 Portfolio
First Trust(R) 10 Uncommon Values Portfolio
First Trust(R) Internet Sector Portfolio
First Trust(R) Pharmaceutical Sector Portfolio
First Trust(R) Financial Services Sector Portfolio
First Trust(R) Technology Sector Portfolio
First Trust(R) Energy Sector Portfolio
PARTICIPATION AGREEMENT
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call in
the number of Customers to the Fund , as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting,
instruction solicitation material. The Fund will provide the last Annual
Report to the Company pursuant to the terms of Section 3.3 of the Agreement
to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Fund or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
|X| name (legal name as found on account registration)
|X| address
|X| Fund or account number
|X| coding to state number of units
|X| individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
|X| Voting Instruction Card(s)
|X| one proxy notice and statement (one document)
|X| return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
|X| "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
|X| cover letter - optional, supplied by Company and reviewed and approved
in advance by the Fund
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company as
the shareowner. (A 5-week period is recommended.) Solicitation time is
calculated as calendar days from (but NOT including,) the meeting, counting
backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card. Note: For Example, if the account registration is
under "Xxxx X. Xxxxx, Trustee," then that is the exact legal name to be
printed on the Card and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
membership interests. (It is very important that the Fund receives the
tabulations stated in terms of a percentage and the number of MEMBERSHIP
INTERESTS.) The Fund must review and approve tabulation format.
13. Final tabulation in membership interests is verbally given by the Company
to the Fund on the morning of the meeting not later than 10:00 a.m. Eastern
time. The Fund may request an earlier deadline if reasonable and if
required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Membership interests
will be required from the Company as well as an original copy of the final
vote. The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will be
permitted reasonable access to such Cards.
16. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
PARTICIPATION AGREEMENT
SCHEDULE D
Pursuant to the 12b-1 Service Plan adopted by the Fund, the Distributor has been
compensated a service fee in the amount of 0.25% per annum of the average daily
net assets of each Portfolio of the Fund which amounts the Distributor has
elected to provide to the Company as a service fee for providing account
services to Contract owners. Such account services include, but are not limited
to:
1. establishing and maintaining Contract owner accounts;
2. answering inquiries;
3. providing other personal services to Contract owners;
4. providing information periodically to Contract owners showing, their
interest in the Separate Account or sub-accounts thereof that invest in the
Fund or in any Portfolios thereof;
5. addressing inquiries of Contract owners relating to investing, exchanging
or transferring, or redeeming interest under the Contracts, which inquires
may relate to the Fund or a Portfolio;
6. providing explanations to Contract owners regarding Fund investment
objectives and policies and other information abut the Fund and the
Portfolios, including the performance of the Portfolios;
7. delivering any prospectuses, statements of additional information or annual
or semi-annual reports relating to the Fund; and
8. delivering any notices of shareholder meetings and proxy statements
accompanying such notices in connection with general and special meeting of
shareholders of the Fund under which contract owners may have voting rights
and tabulating the votes of Contract owners tendering voting instructions
to the Separate Account.
Such amounts shall be payable by the Distributor to the Company on a monthly
basis, in arrears.
September 8, 1999
