As filed with the Securities and Exchange Commission on August 21, 1997
Registration Nos. 333-9745
No. 811-07753
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. 1 |X|
Post-Effective Amendment No. |_|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 1 |X|
SEPARATE ACCOUNT VA-6
(Exact Name of Registrant)
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
(Name of Depositor)
101 North Tryon Street, Charlotte, North Carolina 28202
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (704) 344-2700
Name and Address of Agent for Service: Copy to:
JAMES W. DEDERER, Esq. FREDERICK R. BELLAMY, Esq.
Executive Vice President, General Counsel Sutherland, Asbill & Brennan, L.L.P.
and Corporate Secretary 1275 Pennsylvania Avenue, N.W.
Transamerica Occidental Life Insurance Company Washington, D.C. 20004-2404
1150 South Olive Street
Los Angeles, California 90015-2211
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the
Registration Statement.
Title of securities being registered:
Interests in a separate account under flexible premium deferred
variable annuity contracts.
DECLARATION PURSUANT TO RULE 24f-2
Declaration required pursuant to Rule 24f-2 of the Investment Company ACt of
1940: An indefinite amount of securities is being registered by this
Registration Statement. The $500 filing fee required by said Rule was paid with
initial filing.
-------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
<TABLE>
<CAPTION>
PART A
Item of Form N-4 Prospectus Caption
<S> <C> <C>
1. Cover Page............................................... Cover Page
2. Definitions.............................................. Definitions
3. Synopsis................................................. Summary of this Prospectus; Variable Account Fee Table
4. Condensed Financial Information.......................... Condensed Financial Information
5. General
(a) Depositor.......................................... Transamerica and the Separate Account
(b) Registrant......................................... Transamerica and the Separate Account
(c) Portfolio Company.................................. The Funds
(d) Fund Prospectus.................................... The Funds
(e) Voting Rights...................................... Voting Rights
(f) Administrator...................................... Charges under the Contracts
6. Deductions and Expenses
(a) General............................................ Charges under the Contracts
(b) Sales Load %....................................... Charges under the Contracts
(c) Special Purchase Plan.............................. Not Applicable
(d) Commissions........................................ Underwriter
(e) Fund Expenses...................................... Charges under the Contracts
(f) Operating Expenses................................. Fee Table
7. Contracts
(a) Persons with Rights................................ Description of the Contracts; Surrender of a Contract; Death
Benefits; Voting Rights; Ownership
(b) (i) Allocation of Purchase Payments
Payments..................................... Description of the Contracts
(ii) Transfers.................................... Transfers
(iii) Exchanges.................................... Federal Tax Matters
(c) Changes............................................ The Funds; Voting Rights
(d) Inquiries.......................................... Voting Rights
8. Annuity Period........................................... Settlement Payments
9. Death Benefit............................................ Death Benefits
10. Purchase and Contract Value
(a) Purchases.......................................... Description of the Contracts
(b) Valuation.......................................... Description of the Contracts
<PAGE>
(c) Daily Calculation.................................. Description of the Contracts
(d) Underwriter........................................ Underwriter
11. Redemptions
(a) By Contract Owners................................. Surrender of a Contract
By Annuitant....................................... Not Applicable
(b) Texas ORP.......................................... Not Applicable
(c) Check Delay........................................ Surrender of a Contract
(d) Lapse.............................................. Not Applicable
(e) Free Look.......................................... Right to Cancel
12. Taxes.................................................... Federal Tax Matters
13. Legal Proceedings........................................ Legal Proceedings
14. Table of Contents for the
Statement of
Additional Information................................... Table of Contents of the Statement of Additional Information
PART B
Item of Form N-4 Statement of Additional Information Caption
15. Cover Page............................................... Cover Page
16. Table of Contents........................................ Table of Contents
17. General Information
and History.............................................. General Information and History
18. Services
(a) Fees and Expenses
of Registrant...................................... (Prospectus) Variable Account Fee Table; (Prospectus) The
Funds
(b) Management Contracts............................... Not Applicable
(c) Custodian.......................................... Safekeeping of Separate Account Assets; Records and
Reports
Independent Auditors ............................. Accountants
(d) Assets of Registrant............................... Not Applicable
(e) Affiliated Person.................................. Not Applicable
(f) Principal Underwriter.............................. The Underwriter
19. Purchase of Securities
Being Offered............................................ (Prospectus) Description of the Contracts
Offering Sales Load...................................... Charges under the Contracts
20. Underwriters............................................. The Underwriter
21. Calculation of Performance
Data ...................................................Calculation of Yields and Total Returns
22. Annuity Payments......................................... (Prospectus) Settlement Option Payments
23. Financial Statements..................................... Financial Statements
<PAGE>
PART C -- OTHER INFORMATION
Item of Form N-4 Part C Caption
24. Financial Statements
and Exhibits
(a) Financial Statements............................... Financial Statements
(b) Exhibits........................................... Exhibits
25. Directors and Officers of
the Depositor............................................ Directors and Officers of the Depositor
26. Persons Controlled By or Under Common Control
with the Depositor or Registrant ........................ Persons Controlled By or Under Common Control with the
Depositor or Registrant
27. Number of Contract Owners................................ Number of Contract Owners
28. Indemnification.......................................... Indemnification
29. Principal Underwriters................................... Principal Underwriter
30. Location of Accounts
and Records.............................................. Location of Accounts and Records
31. Management Services...................................... Management Services
32. Undertakings............................................. Undertakings
Signature Page........................................... Signature Page
</TABLE>
<PAGE>
[LOGO]
PROSPECTUS FOR
TRANSAMERICA PROPRIETARY VARIABLE ANNUITY
A Variable Annuity Issued by
Transamerica Life Insurance
and Annuity Company
Including Fund Prospectuses for
Alliance Premier Growth
MFS Emerging Growth
Oppenheimer Capital Managed
Oppenheimer Capital Value Equity
Transamerica VIF Growth
Transamerica VIF Money Market
_______, 1997
<PAGE>
PROPRIETARY VARIABLE ANNUITY
A Flexible Premium Deferred Variable Annuity
Issued by
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
401 North Tryon Street, Charlotte, North Carolina 28202
This prospectus describes the Proprietary Variable Annuity, a variable
annuity contract ("contract") issued by Transamerica Life Insurance and Annuity
Company (referred to as "Transamerica"). The contract allows you, the owner, to
accumulate assets on a tax-deferred basis for retirement and other long-term
financial purposes.
You may direct your purchase payments, as well as any value accumulated
under the contract, to one or more variable sub-accounts of Separate Account
VA-6 or to the general account options, or to both. The money you place in each
variable sub-account will be invested solely in a corresponding mutual fund
investment portfolio ("portfolio"). The value of each variable sub-account will
vary in accordance with the investment performance of the portfolio in which
that variable sub-account invests. You bear the entire investment risk for all
assets you place in the variable sub-accounts. This means that, depending on
market conditions, the amount you invest in the variable sub-accounts may
increase or decline. Currently you may choose among the following six variable
sub-accounts:
Alliance Premier Growth
MFS Emerging Growth
Oppenheimer Capital Managed
Oppenheimer Capital Value Equity
Transamerica VIF Growth
Transamerica VIF Money Market
You may also place your purchase payments or accumulated value in the
general account options. We are currently offering two general account options.
In one, the fixed account, Transamerica guarantees the return of the amount
invested at a specified rate of interest for 12 months. Transamerica will
periodically declare the rate of interest applicable to each amount allocated to
the fixed account. In the second option, the guarantee period account,
Transamerica guarantees the return of the amount invested at a declared rate of
interest for a specified guarantee period. Currently, the guarantee periods
available are three, five and seven years; there may be a reduction made to the
amount of interest credited on amounts withdrawn or transferred before the end
of these periods. For both general account options, 3% will be the minimum rate
of interest credited.
This prospectus contains vital information that you should know before
investing. You can obtain more information about the contract by requesting a
copy of the Statement of Additional Information ("SAI") dated ____ , 1997. The
SAI is available free by writing to Transamerica Life Insurance and Annuity
Company, Annuity Service Center, P.O. Box 31848, Charlotte, North Carolina
28231-1848 or by calling (800) 258-4260, extension 5560. The current SAI has
been filed with the Securities and Exchange Commission and is incorporated by
reference into this prospectus. The table of contents of the SAI is included at
the end of this prospectus.
These securities have not been approved or disapproved by the
Securities and Exchange Commission, nor has the
Commission passed upon the accuracy or adequacy of
this prospectus. Any representation to the contrary
is a criminal offense.
For your own benefit and protection, please
read this prospectus carefully before you
invest. Keep it on hand for future
reference.
The date of this prospectus is ____ , 1997.
<PAGE>
Under the terms of the contract, we promise to pay you a series of
monthly settlement option payments. Payments may be for a fixed or a variable
amount or a combination of both for the life of the annuitant or for some other
period as you select prior to the annuity date.
On or before the annuity date, you may transfer assets between and
among the variable sub-accounts and the general account options. The fixed
account has restrictions on certain transfers while transfers from a guarantee
period account may be subject to an interest adjustment. After the annuity date,
transfers are permitted among the variable sub-accounts only if you elect to
receive variable settlement option payments.
On or before the annuity date, you may elect to withdraw all or a
portion of your cash surrender value in exchange for a cash payment. Withdrawals
out of the guarantee period account may be subject to an interest adjustment.
Withdrawals may be subject to a contingent deferred sales load, certain
administrative fees, premium tax charges, federal, state or local income taxes,
and/or a tax penalty.
This prospectus must be accompanied by current prospectuses
for the portfolios.
THIS PROSPECTUS MAY NOT BE OFFERED IN ANY JURISDICTION WHERE SUCH OFFERING IS
UNLAWFUL. ANY INFORMATION THAT A DEALER, SALESMAN, OR OTHER PERSON GIVES YOU
ABOUT THIS CONTRACT SHOULD BE CONTAINED IN THIS PROSPECTUS. IF YOU RECEIVE ANY
INFORMATION ABOUT THE CONTRACT THAT IS NOT CONTAINED IN THIS PROSPECTUS, YOU
SHOULD NOT RELY ON THAT INFORMATION.
Please note that your investment in the contract:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
Investing in the contract involves certain investment risks, including possible
loss of principal.
This prospectus generally describes only the
variable account portion of the contract,
except when the general account options are
specifically mentioned.
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS.................................................................
SUMMARY.....................................................................
CONDENSED FINANCIAL INFORMATION.............................................
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT....
Transamerica Life Insurance and Annuity Company....................
Published Ratings..................................................
The Variable Account...............................................
THE PORTFOLIOS..............................................................
THE CONTRACT................................................................
PURCHASE PAYMENTS...........................................................
Purchase Payments..................................................
Allocation of Purchase Payments....................................
Investment Option Limits...........................................
ACCOUNT VALUE...............................................................
TRANSFERS...................................................................
Before the Annuity Date............................................
Telephone Transfers................................................
Possible Restrictions..............................................
Dollar Cost Averaging..............................................
After the Annuity Date.............................................
CASH WITHDRAWALS............................................................
Withdrawals........................................................
Systematic Withdrawal Option...................................
Automatic Payment Option (APO).................................
DEATH BENEFIT...........................................................
Payment of Death Benefit.......................................
Designation of Beneficiaries...................................
Death of Annuitant Prior to the Annuity Date...................
Death After the Annuity Date...................................
Survival Provision
CHARGES, FEES AND DEDUCTIONS............................................
Contingent Deferred Sales Load.................................
Withdrawal of Funds Without Charges............................
Administrative Charges.........................................
Mortality and Expense Risk Charge..............................
Living Benefits Rider Fee......................................
Premium Tax Charges............................................
Transfer Fee...................................................
Other Fees.....................................................
Taxes..........................................................
Portfolio Expenses.............................................
Interest Adjustment............................................
SETTLEMENT OPTION PAYMENTS..............................................
Annuity Date...................................................
Settlement Option Payments.....................................
Election of Settlement Option Forms and Payment Options........
Payment Options................................................
Fixed Payment Option................................................
Variable Payment Option.............................................
Settlement Option Forms.............................................
FEDERAL TAX MATTERS..........................................................
Introduction........................................................
Purchase Payments...................................................
Taxation of Annuities...............................................
Qualified Contracts.................................................
Taxation of Transamerica
Tax Status of Contract
Possible Changes in Taxation........................................
Other Tax Consequences..............................................
PERFORMANCE DATA ............................................................
DISTRIBUTION OF THE CONTRACT.................................................
LEGAL PROCEEDINGS............................................................
LEGAL MATTERS................................................................
ACCOUNTANTS..................................................................
VOTING RIGHTS................................................................
AVAILABLE INFORMATION........................................................
STATEMENT OF ADDITIONAL INFORMATION _ TABLE OF CONTENTS......................
APPENDIX A - THE GENERAL ACCOUNT OPTIONS..................................A-1
Fixed Account ..................................................A-1
Guarantee Period Account .......................................A-2
APPENDIX B...............................................................B-1
Example of Variable Accumulation Unit Value Calculations........B-1
Example of Variable Annuity Unit Value Calculations.............B-1
Example of Variable Annuity Payment Calculations................B-1
The contract is not available in all states.
<PAGE>
DEFINITIONS
Account Value: The sum of the variable accumulated value and the general
account options accumulated value.
Annuity Date: The date on which the annuitization phase of the contract begins.
Cash Surrender Value: The amount we will pay to the owner if the contract
is surrendered on or before the
annuity date. The cash surrender value is equal to: the account value;
less any account fee, interest
adjustment, contingent deferred sales load, and premium tax charges.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued under it.
Contract Anniversary: The anniversary of the contract effective date each year.
Contract Effective Date: The effective date of the contract as shown on the
contract.
Contract Year: A 12-month period starting on the contract effective date and
ending with the day before the contract anniversary, and each 12-month period
thereafter.
Fixed Account: An account which credits a rate of interest for a period
of at least twelve months for each
allocation or transfer.
General Account Options Accumulated Value: The total dollar value of all amounts
the owner allocates or transfers to any general account options; plus interest
credited; less any amounts withdrawn, applicable fees or premium tax charges, or
transfers out to the variable account prior to the annuity date.
General Account Options: The fixed account and the guarantee period
account offered by us to which the owner
may allocate purchase payments and transfers.
Guaranteed Interest Rate: The annual effective rate of interest after daily
compounding credited to a guarantee
period.
Guarantee Period: The number of years that a guaranteed rate of interest will
be credited to a guarantee period.
Guarantee Period Account: An account which credits a guaranteed rate of interest
for a specified guarantee periods. There may be several guarantee periods, each
with a different guaranteed rate of interest, offered under the guarantee period
account.
Portfolio: The investment portfolio underlying each variable sub-account in
which we will invest any amounts the
owner allocates to that variable sub-account.
Service Center: Transamerica's Annuity Service Center, at P.O. Box XXXXX,
Charlotte, North Carolina 28231-1848,
telephone (800) 258-4260.
Status (Qualified and Non-Qualified): The contract has a qualified status
if it is issued in connection with a
retirement plan or program. Otherwise, the status is non-qualified.
Valuation Day: Any day the New York Stock Exchange is open. To determine
the value of an asset on a day that is
not a valuation day, we will use the value of that asset as of the end of the
next valuation day.
Valuation Period: The time interval between the closing (generally 4:00 p.m.
Eastern Time) of the New York Stock
Exchange on consecutive valuation days.
Variable Account: Separate Account VA-6, a separate account established and
maintained by Transamerica for the investment of a portion of its assets
pursuant to Section 58-7-95 of the North Carolina Insurance Code. Variable
Accumulation Unit: A unit of measure used to determine the variable accumulated
value before the annuity date. The value of a variable accumulation unit varies
with each variable sub-account.
Variable Accumulated Value: The total dollar value of all variable
accumulation units under this contract prior
to the annuity date.
Variable Sub-Account(s): One or more divisions of the variable account
which invests solely in shares of one of
the underlying portfolios.
We: The company, Transamerica.
You: The owner.
<PAGE>
SUMMARY
The Contract
The Transamerica Proprietary Variable Annuity is a flexible purchase
payment deferred annuity that is designed to aid your long-term financial
planning and retirement needs. The contract may be used in connection with a
retirement plan which qualifies as a retirement program under Sections 403(b) or
408 of the Code, with various types of qualified pension and profit sharing
plans under Section 401 of the Code, or with non-qualified plans. Qualified
contracts under Code Sections 401 and 403(b) may not be available in all states
or in all situations. The contract is issued by Transamerica Life Insurance and
Annuity Company ("Transamerica"), an indirect wholly-owned subsidiary of
Transamerica Corporation. Its principal office is at 401 North Tryon Street,
Charlotte, North Carolina 28202, telephone 704-344-2700.
This contract will be issued as a certificate under a group annuity
contract in some states and as an individual annuity contract in other states.
The term "contract" as used in this prospectus refers to either the individual
annuity contract or to a certificate issued under a group annuity contract. The
term "owner" refers to the owner of the individual contract or the owner of the
certificate, as appropriate.
Transamerica will establish and maintain an account for each contract.
Each owner will receive either an individual annuity contract, or a certificate
evidencing the owner's coverage under a group annuity contract. The contract
provides that the account value, after certain adjustments, will be applied to a
settlement option on a future date you select ("annuity date").
You may allocate all or portions of your purchase payments to one or
more variable sub-accounts or to the general account options.
The account value prior to the annuity date, except for amounts in the
general account options, will vary depending on the investment experience of
each of the variable sub-accounts selected by the owner. All benefits and values
provided under the contract, when based on the investment experience of the
variable account, are variable and are not guaranteed as to dollar amount.
Therefore, prior to the annuity date the owner bears the entire investment risk
under the contract for amounts allocated to the variable account.
There is no guaranteed or minimum cash surrender value on amounts
allocated to the variable account, so the proceeds of a surrender could be less
than the amount invested.
The initial purchase payment for each contract must be at least $5,000
($2,000 for contributory IRAs). Generally each additional purchase payment must
be at least $1,000, unless an automatic purchase payment plan is selected. See
"Purchase Payments" page __.
The Variable Account
The variable account is a separate account (designated Separate Account
VA-6) that is subdivided into variable sub-accounts. See "The Variable Account"
page __. Assets of each variable sub-account are invested in a specified mutual
fund portfolio ("portfolio"). The variable sub-accounts currently available for
investment are:
Alliance Premier Growth
MFS Emerging Growth
Oppenheimer Capital Managed
Oppenheimer Capital Value Equity
Transamerica VIF Growth
Transamerica VIF Money Market
The portfolios pay their investment advisers and administrators certain
fees charged against the assets of each portfolio. The variable accumulated
value, if any, of a contract and the amount of any variable settlement option
payments will vary to reflect the investment performance of the variable
sub-accounts to which amounts have been allocated. Additionally, applicable
charges are deducted. See "Charges and Deductions" page __. For more information
about the portfolios, see "The Portfolios" page __ and the accompanying
portfolios' prospectuses.
General Account Options
There are two types of general account options - the fixed account and
the guaranteed period account. See "The General Account Options" in Appendix A.
The amounts in the fixed account will be credited interest at a rate of
not less than 3% annually. Transamerica may credit interest at a rate in excess
of 3% at its discretion for any class. Each interest rate will be guaranteed to
be credited for at least 12 months.
The other general account option, the guarantee period account,
provides specified rates of interest for specified terms of one year or more,
subject to interest adjustments on early withdrawals or transfers which, if
applicable, could reduce the interest credited to the 3% minimum rate.
Investment Option Limits
Currently, the owner may not elect more than a total of eighteen
investment options over the life of the contract. Investment options include
variable sub-accounts and general account options. See "Investment Option
Limits" page __ .
Transfers Before the Annuity Date
Prior to the annuity date, you may transfer values between the variable
sub-accounts and the general account options. For transfers after the annuity
date, see "After the Annuity Date" page __.
Transfers out of the fixed account are restricted to four per contract
year and to a limited percentage of the fixed account value. More frequent
transfers may be allowed under certain services and options, for example, dollar
cost averaging. Transfers out of a guarantee period prior to the end of the term
may be subject to an interest adjustment which may reduce interest credited to
the 3% minimum rate. See "General Account Options" in Appendix A.
Transamerica currently imposes a transfer fee of $10 for each transfer
in excess of 12 made during the same contract year. See "Transfers" on page __
for additional limitations and information regarding transfers.
Withdrawals
You may withdraw all or part of the cash surrender value on or before
the annuity date. The cash surrender value of your contract is the account value
less any account fee, interest adjustment, contingent deferred sales load and
premium tax charges. The account fee generally will be deducted on a full
surrender of a contract if the account value is then less than $25,000.
Transamerica may delay payment of any withdrawal from the general account
options for up to six months. See "Cash Withdrawals" page ____.
Withdrawals may be taxable, subject to withholding and subject to
a penalty tax. Withdrawals from
qualified contracts may be subject to severe restrictions and, in
certain circumstances, prohibited. See
"Federal Tax Matters" page __.
Contingent Deferred Sales Load
Transamerica does not deduct a sales charge when purchase payments are
made (although premium tax charges may be deducted). However, if any part of the
account value is withdrawn, a contingent deferred sales load of up to 6% of
purchase payments may be deducted. After a purchase payment has been held by
Transamerica for seven years, it may be withdrawn without charge. In most
states, the owner may elect, for an extra charge, an optional Living Benefits
Rider that provides that the contingent deferred sales load will be waived in
certain circumstances. No contingent deferred sales load is assessed on payment
of the death benefit, on transfers within the contract, or on certain
annuitizations. See "Contingent Deferred Sales Load" page __, "Withdrawals" page
__and "Living Benefit Rider" page __.
Also, beginning 30 days from the contract effective date (or the end of
the free look period if later), any portion of an "allowed amount" may be
withdrawn each contract year without imposition of any contingent deferred sales
load. The allowed amount for each contract year is equal to 15% of purchase
payments, that were received during the last seven years, as of the prior
contract anniversary, less any withdrawals already taken that contract year. All
purchase payments not previously withdrawn that have been held at least seven
years are not subject to a contingent deferred sales load. For purposes of
calculating the contingent deferred sales load, withdrawals will be considered
to be taken first from purchase payments, on a first in/first out basis, and
then from earnings.
Other Charges and Deductions
Transamerica deducts a mortality and expense risk charge of 1.20%
(annually) of the assets in the variable account and an administrative expense
charge of 0.15% (annually) of these assets. The administrative expense charge
may change, but it is guaranteed not to exceed a maximum effective annual rate
of 0.35%. See "Mortality and Expense Risk Charge" page ____ and "Administrative
Charges" page _____.
An account fee of currently $30 (or 2% of the account value, if less)
is deducted at the end of each contract year and upon surrender. This fee may
change but it is guaranteed not to exceed $60 (or 2% of the account value, if
less) per contract year. If the account value is more than $25,000 on the last
business day of a contract year, (or as of the date the contract is
surrendered), the account fee will be waived for that year.
After the annuity date, the annual annuity fee of $30 will be deducted
in equal installments from each periodic payment under the variable payment
option.
For each transfer in excess of 12 during a contract year, a transfer
fee of $10 will be imposed. (See
"Transfer Fee" page __.)
Charges for premium taxes (including retaliatory premium taxes) are not
currently deducted, except for annuitizations, but such charges could be imposed
in some jurisdictions. Depending on the applicability of such taxes, the charges
could be deducted from purchase payments, from amounts withdrawn, and/or upon
annuitization.
(See "Premium Tax Charges" page __.)
In addition, amounts withdrawn or transferred out of a guarantee period
account prior to the end of its term may be subject to an interest adjustment.
(See "Guaranteed Period Account" in Appendix A.)
If the owner elects the Living Benefits Rider a fee of .05% (annually)
of the account value which will be deducted on the last day of each contract
month at the rate of 1/12 times 0. 05% times the account value on the last
valuation day of the month. (The Living Benefit Rider is not available in all
states.)
Currently, no fees are deducted for any other services or options under
the contract. However, Transamerica does reserve the right to impose fees to
cover processing for certain services and options in the future, including
dollar cost averaging, systematic withdrawals, automatic payouts, and asset
rebalancing.
Variable Account Fee Table
The purpose of this table is to assist in understanding the various
costs and expenses that the owner will bear directly and indirectly. The table
reflects expenses of the variable account as well as of the mutual fund
portfolios. The table assumes that the entire account value is in the variable
account. The information below should be considered together with the narrative
provided under the heading "Charges and Deductions" on page __ of this
prospectus, and with the prospectuses for the portfolios. In addition to the
expenses listed below, premium tax charges may be applicable.
Sales Load(1)
Sales Load Imposed on Purchase Payments 0
Maximum Contingent Deferred Sales Load(2) 6%
Range of Contingent Deferred Sales Load Over Time
Contingent Deferred
Years Since Sales Load
Purchase Payment Receipt (as a percentage of purchase payment)
Less than 2 years 6%
2 years but less than 4 years 5%
4 years but less than 5 years 4%
6 years but less 7 years 2%
7 or more 0%
Variable Account Annual Expenses(3)
(as a percentage of the variable accumulated value)
Morality and Expense Risk Charge 1.20%
Administrative Expense Charge(4) 0.15%
Total Variable Account Annual Expenses 1.35%
Other Contract Expenses
Transfer Fee (first 12 per contract year) (5) 0
Fees For Other Services and Options(6) 0
Account Fee (7) $30
Living Benefit Rider Fee (if elected )(8) .05%
Portfolio Expenses
(as a percentage of assets after fee waiver and/or expense reimbursement)(9)
<TABLE>
<CAPTION>
Total
Portfolio
Management Other Annual
Portfolio Fees Expenses Expenses
<S> <C> <C> <C>
Alliance Premier Growth .71% .24% .95%
MFS Emerging Growth .75.% .25% 1.00%
Oppenheimer Capital Managed .70% .14% .84%
Oppenheimer Capital Value Equity .70% .23% .93%
Transamerica VIF Growth .75% .10% .85%
Transamerica VIF Money Market .50% .25% .75%
</TABLE>
Expense information regarding the portfolios has been provided by the
portfolios. Transamerica has no reason to doubt the accuracy of that
information, but Transamerica has not verified those figures. In preparing the
table above and the examples that follow, Transamerica has relied on the figures
provided by the portfolios. These figures are for the year ended December 31,
1996, except for the Transamerica VIF Money Market Portfolio, which are
estimates for the year 1998. Actual expenses in future years may be higher or
lower than these figures.
Notes to Fee Table:
(1) The contingent deferred sales load applies to each contract, regardless
of how account value is allocated between the variable account and the
general account options.
(2) A portion of the purchase payments may be withdrawn each contract year
without imposition of any contingent deferred sales load, and after
seven years, a purchase payment may be withdrawn free of any contingent
deferred sales load. (See "Charges and Deductions" page __.)
(3) The variable account annual expenses do not apply to the general
account options.
(4) The current annual administrative expense charge of 0.15% may be
increased to 0.35%. (See "Charges and
Deductions" page __.)
(5) A transfer fee of $10 will be imposed for each transfer in excess
of 12 in a contract year. (See
"Charges and Deductions" page __.)
(6) Transamerica currently does not impose fees for any other services, or
options. However, Transamerica reserves the right to impose a fee for
various services and options including dollar cost averaging,
systematic withdrawals, automatic payout options, asset allocation and
asset rebalancing.
(7) The current account fee is $30 (or 2% of the account value, if less)
per contract year. This fee will
be waived for account values over $25,000. This limit may be
changed in the future. The fee may be
changed, but it may not exceed $60 (or 2% of the account value, if
less). See "Charges and Deductions"
page __.
(8) If the owner elects the Living Benefits Rider, the rider fee will
be deducted at the rate of 1/12 of
0.05% at the end of each contract month based on the account value
at that time. See Living Benefits
Rider Fee page___ .
(9) All portfolio expenses are for 1996 except for the money market
portfolio, which are estimates for the first year of operation. The
expenses reflect such portfolio's adviser's agreement to reimburse
expenses above certain limits.
Expense information shown for Alliance Premier Growth has been restated
to reflect current fees and is net of voluntary expense reimbursements.
The Alliance Premier Growth portfolio adviser has agreed to continue
such reimbursements for the foreseeable future. The total expenses in
the absence of expense reimbursement: for Alliance Premier Growth would
be 1.23%.
MFS Emerging Growth's adviser has agreed to bear, subject
reimbursement, expenses for the portfolio shown such that the
portfolio's total operating expenses shall not exceed, on an annualized
basis, 1.25% of the average daily net assets of the portfolio from
January 1, 1997 through December 31, 1998, and 1.50% of the daily net
assets of the portfolio from January 1, 1999 through December 31, 2004;
provided however, that this obligation may be terminated or revised at
any time. The total expenses in 1996 in the absence of expense
reimbursement for MFS Emerging Growth would be 1.16%.
During the periods presented above, the adviser for Oppenheimer Capital
waived a portion or all of its fees and assumed a portion of the
portfolio's operating expense for the year ended December 31, 1996, and
the portfolio benefited from an expense offset arrangements with its
custodian bank. If such waivers and expense offsets had not been in
effect, the ratios of net operating expenses to average daily net
assets and the ratios of net investment income daily net assets would
have been 1.15% for the managed portfolio and 1.65% for the value
equity portfolio respectively for the year ended December 31, 1996.
Transamerica VIF's adviser has voluntarily agreed to waive all or part
of its fees and/or assume certain portfolio expenses. Without such
waivers or reimbursements, the total annual portfolio expenses for
Transamerica VIF Growth portfolio would have been 1.34% for 1996. Total
portfolio annual expenses for the first year of operation of
Transamerica VIF Money Market portfolio are estimated to be 1.00%.
<PAGE>
EXAMPLES
The following tables show the total expenses an owner would incur in
various situations.1/ The tabular information assumes that the entire account
value is allocated to the variable account.
Examples 1 through 3 show expenses for contracts without the optional
Living Benefit Rider based on fee waivers and reimbursements for 1996. There is
no guarantee that any fee waivers or expense reimbursements will continue in the
future.
<TABLE>
<CAPTION>
3. If the owner elects
Examples to annuitize at the end
An owner would pay the following 1. If the owner 2. If the owner does of the applicable period
expenses on a $1,000 investment, surrenders the contract not surrender and does under a Settlement
assuming a 5% annual return on at the end of the not annuitize the Option with life
assets: applicable time period: contract: contingencies:3/
1 Year 3 Years 1 Year 3 Years 1 Year 3 Years
Alliance Premier Growth $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
90.99 130.46 23.31 71.84 23.31 71.84
MFS Emerging Growth
91.49 131.99 23.81 73.34 23.81 73.34
Oppenheimer Capital Managed 89.86 127.68 22.30 69.37 22.30 69.37
Oppenheimer Capital Value Equity 90.78 130.53 23.22 72.22 23.22 72.22
Transamerica VIF Growth 89.97 127.41 22.31 68.82 22.31 68.82
Transamerica VIF Money Market 88.96 124.34 21.30 65.78 21.30 65.78
</TABLE>
1/ These examples assume waiver of the $30 account fee since it is waived for
account values over $25,000. We anticipate the average account value will exceed
$25,000. These examples all assume no transfer fees or other option or service
fees, or premium tax charges have been assessed. Premium tax charges may be
applicable. (See "Premium Tax Charges" page __.)
2/ For annuitizations before the first contract anniversary, and for
annuitizations under a form that does not include life contingencies, the
contingent deferred sales load may apply (see expenses in column 1).
<PAGE>
Examples 4-6 show expenses for contracts with the optional Living
Benefits Rider, based on the waivers and reimbursements for 1996. There is no
guarantee that fee waivers or expense reimbursements will continue in the
future.
<TABLE>
<CAPTION>
6. If the owner elects
Examples to annuitize at the end
An owner would pay the following 4. If the owner 5. If the owner does of the applicable period
expenses on a $1,000 investment, surrenders the contract not surrender and does under a Settlement
assuming a 5% annual return on at the end of the not annuitize the Option with life
assets: applicable time period: contract: contingencies:1/
1 Year 3 Years 1 Year 3 Years 1 Year 3 Years
Alliance Premier Growth $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
91.49 131.99 23.81 73.34 23.81 73.34
MFS Emerging Growth
92.00 133.51 24.31 74.85 24.31 74.85
Oppenheimer Capital Managed 90.37 129.23 22.80 70.90 22.80 70.90
Oppenheimer Capital Value Equity 91.29 132.08 23.72 73.75 23.72 73.75
Transamerica VIF Growth 90.48 128.94 22.81 70.33 22.81 70.33
Transamerica VIF Money Market 89.46 125.88 21.81 67.30 21.81 67.30
</TABLE>
1/ For annuitizations before the first contract anniversary and for
annuitizations under a form that does not include life contingencies, a
contingent deferred sales load may apply (see examples in column 4).
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT
TO THE GUARANTEES IN THE CONTRACT. THE ASSUMED 5% ANNUAL RATE OF RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS THAN THIS ASSUMED RATE.
<PAGE>
Settlement Option Payments
Settlement option payments will be made either on a fixed basis or a
variable basis or a combination of a fixed and variable basis, as you select.
You have flexibility in choosing the annuity date, but it may generally not be a
date later than the annuitant's 85th birthday or the tenth contract anniversary,
whichever occurs last, but never later than the annuitant's 97th birthday.
Certain qualified contracts may have restrictions as to the annuity date and the
types of settlement options available. (See "Settlement Option Payments" page
___.)
Four settlement options are available under the contract: (1) life
annuity; (2) life and contingent
annuity; (3) life annuity with period certain; and (4) joint and survivor
annuity. (See "Settlement Option Forms"
page __.)
Death of Owner Before the Annuity Date
If an owner dies before either the owner's or any joint owner's 85th
birthday, the death benefit for the contract will be the greatest of (a) the
account value or (b) the sum of all purchase payments made to the contract, less
withdrawals and applicable premium tax charges, or (c) the highest account value
on any contract anniversary prior to the earlier of the owner's or joint owner's
85th birthday, plus purchase payments made and less withdrawals and applicable
premium tax charges since that contract anniversary. If death occurs after the
earlier of the owner's or joint owner's 85th birthday, the death benefit will be
the account value. If the owner is not a natural person, the annuitant will be
treated as the owner(s) for purposes of the death benefit.
The death benefit will generally be paid within seven days of receipt
of the required proof of death of the owner and election of the method of
settlement or as soon thereafter as Transamerica has sufficient information to
make the payment, but if no settlement method is elected the death benefit will
be paid one year from the date of death. No contingent deferred sales load is
imposed. The death benefit may be paid as either a lump sum or as a settlement
option. (See "Death Benefit" page __.) Amounts in the guarantee period account
will not be subject to interest adjustments in calculating the death benefit.
Federal Income Tax Consequences
An owner who is a natural person generally should not be taxed on
increases in the account value until a distribution under the contract occurs
(e.g., a withdrawal or settlement option payment) or is deemed to occur (e.g., a
pledge, loan, or assignment of a contract). Generally, a portion (up to 100%) of
any distribution or deemed distribution is taxable as ordinary income. The
taxable portion of distributions is generally subject to income tax withholding
unless the recipient elects otherwise (although withholding is mandatory for
certain qualified contracts). In addition, a federal penalty tax may apply to
certain distributions. (See "Federal Tax Matters" page __.)
Right to Cancel
The owner has the right to examine the contract for a limited period,
known as a "free look period." The owner can cancel the contract during this
period by delivering or mailing a written notice of cancellation, or sending a
telegram to the Service Center and by returning the contract before midnight of
the tenth day after receipt of the contract (or longer if required by state
law). Notice given by mail and the return of the contract by mail will be
effective on the date received by Transamerica. Unless otherwise required by
law, Transamerica will refund the purchase payment(s) allocated to any general
account option (less any withdrawals) plus the variable accumulated value as of
the date the written notice and the contract are received by Transamerica. See
"Purchase Payments" page __ and "Account Value" page __.)
Questions
Questions about procedures or the contract can be answered by the
Transamerica Annuity Service Center
("Service Center"), at P.O. Box31848, Charlotte, North Carolina 28231-1848,
(800) 258-4260, extension 5560. All
inquiries should include the contract number and the owner's name.
NOTE: The foregoing summary is qualified in its entirety by the
detailed information in the remainder of this prospectus and in the prospectuses
for the portfolios which should be referred to for more detailed information.
With respect to qualified contracts, it should be noted that the requirements of
a particular retirement plan, an endorsement to the contract, or limitations or
penalties imposed by the Code or the Employee Retirement Income Security Act of
1974, as amended, may impose additional limits or restrictions on purchase
payments, withdrawals, distributions, or benefits, or on other provisions of the
contract. This prospectus does not describe such limitations or restrictions.
(See "Federal Tax Matters" page __.)
CONDENSED FINANCIAL INFORMATION
Because the variable account has not yet commenced operations, there
are no financial statements available.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT
Transamerica Life Insurance and Annuity Company
Transamerica Life Insurance and Annuity Company ("Transamerica") is a
stock life insurance company incorporated under the laws of the State of
California in 1966 and redomesticated to North Carolina in 1994. It is
principally engaged in the sale of life insurance and annuity policies.
Transamerica is a wholly-owned indirect subsidiary of Transamerica Corporation.
The address of Transamerica is 401 North Tryon Street, Charlotte, North Carolina
28202.
Published Ratings
Transamerica may from time to time publish in advertisements, sales
literature and reports to owners, the ratings and other information assigned to
it by one or more independent rating organizations such as A.M. Best Company,
Standard & Poor's, Moody's, and Duff & Phelps. The ratings reflect the financial
strength and/or claims-paying ability of Transamerica and should not be
considered as bearing on the investment performance of the variable account.
Each year the A.M. Best Company reviews the financial status of thousands of
insurers, culminating in the assignment of Best's Ratings. These ratings reflect
their current opinion of the relative financial strength and operating
performance of an insurance company in comparison to the norms of the
life/health insurance industry. In addition, the claims-paying ability of
Transamerica as measured by Standard & Poor's Insurance Ratings Services,
Moody's, or Duff & Phelps may be referred to in advertisements or sales
literature or in reports to owners. These ratings are opinions of an operating
insurance company's financial capacity to meet the obligations of its insurance
and annuity policies in accordance with their terms, including its obligations
under the general account options of this contract. Such ratings do not reflect
the investment performance of the variable account or the degree of risk
associated with an investment in the variable account.
The Variable Account
Separate Account VA-6 of Transamerica (the "variable account") was
established by Transamerica as a separate account under the laws of the State of
North Carolina pursuant to June 11, 1996, resolutions of Transamerica's Board of
Directors. The variable account is registered with the Securities and Exchange
Commission ("Commission") under the Investment Company Act of 1940 (the "1940
Act") as a unit investment trust. It meets the definition of a separate account
under the federal securities laws. However, the Commission does not supervise
the management or the investment practices or policies of the variable account.
The assets of the variable account are owned by Transamerica but they
are held separately from the other assets of Transamerica. Section 58-7-95 of
the North Carolina Insurance Law provides that the assets of a separate account
are not chargeable with liabilities incurred in any other business operation of
the insurance company (except to the extent that assets in the separate account
exceed the reserves and other liabilities of the separate account). Income,
gains and losses incurred on the assets in the variable account, whether or not
realized, are credited to or charged against the variable account without regard
to other income, gains or losses of Transamerica. Therefore, the investment
performance of the variable account is entirely independent of the investment
performance of Transamerica's general account assets or any other separate
account maintained by Transamerica.
The variable account currently has six variable sub-accounts available
under the contract, each of which invests solely in a specific corresponding
portfolio. Changes to the variable sub-accounts may be made at the discretion of
Transamerica. (See "Addition, Deletion, or Substitution" page __.)
THE PORTFOLIOS
Each of the variable sub-accounts offered under the contract invests
exclusively in one of the portfolios. Descriptions of each portfolio's
investment objectives follow.
<TABLE>
<CAPTION>
<S> <C> <C>
Fund & Adviser Group Investment Portfolio Investment Objective and Management Fee
Alliance Variable Premier Growth Seeks growth of capital rather than current income. In
Products Series Fund, Inc. pursuing its investment objective, the portfolio will employ
aggressive investment policies. Since investments will be
Alliance Capital made based upon their potential for capital appreciation,
Management L.P. current income will be incidental to the objective of capital
growth. The portfolio is not intended for investors whose
principal objective is assured income or preservation of
capital.
Management Fee 1%
MFS Family of Funds Emerging Growth Seeks to provide long-term growth of capital. Dividend and
interest income from portfolio securities, if any, is
MFS Company incidental to the
Series' investment
objective of long-term
growth of capital.
Management Fee 0.75%
<PAGE>
Fund & Advisor Group Investment Portfolio Investment Objective
OCC Accumulation Trust
Managed Seeks to achieve growth of capital over time through
Oppenheimer Capital investment in a portfolio consisting of common stocks, bonds,
Advisors and cash equivalents, the percentages of which will vary
based on the Manager's assessments of the relative outlook
for such investments.
Management Fee 0.80%
Value Equity Seeks long term
capital appreciation
through investment in
securities (primarily
equity securities) of
companies that are believed
by the advisor to be
undervalued in the
marketplace in relation to
factors such as the
companies' assets or
earnings.
Management Fee 0.80%
Transamerica Variable Growth Seeks long-term capital growth. Common stock is the basic
Insurance Fund, Inc. form of investment. The portfolio may also invest in debt
securities and preferred stock having a call on common stocks.
Transamerica Occidental
Life Insurance Company
Management Fee 0.75%
Money Market Seeks to achieve as high a level of current income as is
consistent with the preservation of capital and the
maintenance of liquidity. It seeks to achieve its objective
by investing in short-term money market instruments. This
portfolio is neither insured nor guaranteed by the United
States Government, and there can be no assurance that it will
be able to maintain a stable net asset value of $1.00 per
share.
Management Fee 0.50%
</TABLE>
Meeting investment objectives depends on various factors,
including, but not limited to, how well the
portfolio managers anticipate changing economic and market conditions.
THERE IS NO ASSURANCE THAT ANY OF THESE
PORTFOLIOS WILL ACHIEVE THEIR STATED OBJECTIVES.
An investment in the contract is not a deposit or obligation of, or
guaranteed or endorsed, by any bank, nor is the contract federally insured by
the Federal Deposit Insurance Corporation or any other government agency.
Investing in the contract involves certain investment risks, including possible
loss of principal.
Since all of the portfolios are available to registered separate
accounts offering variable annuity and variable life products of Transamerica as
well as other insurance companies, there is a possibility that a material
conflict may arise between the interests of the variable account and one or more
other separate accounts investing in the portfolios. In the event of a material
conflict, the affected insurance companies will take any necessary steps to
resolve the matter, including stopping their separate accounts from investing in
the portfolios. See the portfolios' prospectuses for greater details.
Additional information concerning the investment objectives and
policies of all of the portfolios, the investment advisory services and
administrative services and charges can be found in the current prospectuses for
the portfolios which accompany this prospectus. The portfolios' prospectuses
should be read carefully before any decision is made concerning the allocation
of purchase payments to, or transfers among, the variable sub-accounts.
Transamerica may receive payments from some or all of the portfolios or
their advisers, in varying amounts, that may be based on the amount of assets
allocated to the portfolios.
Addition, Deletion, or Substitution
Transamerica does not control the portfolios and cannot guarantee that
any of the variable sub-accounts offered under this contract or any of the
portfolios will always be available for allocation of purchase payments or
transfers. Transamerica retains the right to make changes in the variable
account and in its investments.
Transamerica reserves the right to eliminate the shares of any
portfolio held by a variable sub-account and to substitute shares of another
portfolio or of another investment company for the shares of any portfolio, if
the shares of the portfolio are no longer available for investment or if, in
Transamerica's judgment, investment in any portfolio would be inappropriate in
view of the purposes of the variable account. To the extent required by the 1940
Act, a substitution of shares attributable to the owner's interest in a variable
sub-account will not be made without prior notice to the owner and the prior
approval of the Commission. Nothing contained herein shall prevent the variable
account from purchasing other securities for other series or classes of variable
annuitycontracts, or from effecting an exchange between series or classes of
variable contracts on the basis of requests made by owners.
New variable sub-accounts for the contracts may be established when, in
the sole discretion of Transamerica, marketing, tax, investment or other
conditions so warrant. Any new variable sub-accounts will be made available to
existing owners on a basis to be determined by Transamerica. Each additional
variable sub-account will purchase shares in a mutual fund portfolio or other
investment vehicle. Transamerica may also eliminate one or more variable
sub-accounts if, in its sole discretion, marketing, tax, investment or other
conditions so warrant. In the event any variable sub-account is eliminated,
Transamerica will notify owners and request a re-allocation of the amounts
invested in the eliminated variable sub-account.
In the event of any substitution or change, Transamerica may make such
changes in the contract as may be necessary or appropriate to reflect such
substitution or change. Furthermore, if deemed to be in the best interests of
persons having voting rights under the contracts, the variable account may be
operated as a management company under the 1940 Act or any other form permitted
by law, may be de-registered under such Act in the event such registration is no
longer required, or may be combined with one or more other separate accounts.
THE CONTRACT
The contract is a flexible purchase payment deferred annuity contract.
The rights and benefits are described below and in the individual contract or in
the certificate and group contract; however, Transamerica reserves the right to
make any modification to conform the individual contract and the group contract
and certificates thereunder to, or give the owner the benefit of, any federal or
state statute or rule or regulation. The obligations under the contract are
obligations of Transamerica. The contracts are available on a non-qualified
basis and on a qualified basis. Contract available on a qualified basis are as
follows: (1) rollover and contributory individual retirement annuities (IRAs)
under Code Sections 408(a) and 408(b); (2) simplified employee pension plans
(SEP/IRAs) that qualify for special federal income tax treatment under Code
Section 408(k); (3) Code Section 403(b) annuities and (4) qualified pension and
profit sharing plans intended to qualify under Code Section 401. Generally,
qualified contracts contain certain restrictive provisions limiting the timing
and amount of purchase payments to, and distributions from, the qualified
contract. (For further discussion concerning qualified contracts, see page ____,
"Federal Tax Matters".)
Ownership
The owner is entitled to the rights granted by the contract. If the
owner dies, the rights of the owner belong to the joint owner, if any, and then
to the owner's beneficiary. f there are joint owners, the one designated as the
primary owner will receive all mail and any tax reporting information.
For non-qualified contracts, the owner designates the annuitant and the
annuitant may be the same person as the owner. Different rules may apply to
qualified contracts; see Federal Tax Matters page ___.
Settlement option payments will be made to the annuitant after the
annuity date unless, in the case of a non-qualified contract, the owner changes
the payee.
For each contract, a different account will be established and values,
benefits and charges will be calculated separately. The various administrative
rules described below will apply separately to each contract, unless otherwise
noted.
PURCHASE PAYMENTS
Purchase Payments
All purchase payments must be paid to the Service Center. A
confirmation will be issued to the owner upon the acceptance of each purchase
payment.
The initial purchase payment must be at least $5,000 ($2,000 for
contributory IRAs).
The contract will be issued and the initial purchase payment generally
will be credited within two business days after the receipt of both sufficient
information to issue a contract and the initial purchase payment at the Service
Center. Acceptance is subject to sufficient information being provided in a form
acceptable to Transamerica, and Transamerica reserves the right to reject any
request for issuance of a contract or purchase payment. Contracts normally will
not be issued with respect to owners, joint owners, or annuitants more than 90
years old, although Transamerica in its discretion may waive this restriction in
appropriate cases. Transamerica further reserves the right to not accept
purchase payments after the owners' (or annuitants' if non-individual owner)
attained age 90 .
If the initial purchase payment allocated to the variable
sub-account(s) cannot be credited within two days of receipt of the purchase
payment and information requesting issuance of a contract because the
information is incomplete or for any other reason, then Transamerica will
contact the owner, explain the reason for the delay and will refund the initial
purchase payment within five business days, unless the owner consents to
Transamerica retaining the initial purchase payment and crediting it as soon as
the requirements are fulfilled.
Additional purchase payments may be made at any time prior to the
annuity date. Additional purchase payments must be at least $1,000 or at least
$100 if made pursuant to an automatic purchase payment plan under which the
additional purchase payments are automatically deducted from a bank account and
allocated to the contract. In addition, minimum allocation amounts apply (see
"Allocation of Purchase Payments" below). Additional purchase payments are
credited to the contract as of the date the payment is received.
Total purchase payments for any contract may not exceed $1,000,000
without prior approval of Transamerica.
In no event may the sum of all purchase payments for a contract during
any taxable year exceed the limits imposed by any applicable federal or state
law, rules, or regulations.
Allocation of Purchase Payments
You specify how purchase payments will be allocated under the contract.
You may allocate purchase payments between and among one or more of the variable
sub-accounts and the general account options as long as the portions are whole
number percentages and any allocation percentage for a variable sub-account is
at least 10%. In addition, there is a minimum initial allocation of $1,000 to
any variable sub-account, the fixed account, and each guarantee period.
Each purchase payment will be subject to the allocation percentages in
effect at the time of receipt of such purchase payment. The allocation
percentages for additional purchase payments may be changed by the owner at any
time by submitting a request for such change, in a form and manner acceptable to
Transamerica, to the Service Center. Any changes to the allocation percentages
are subject to the limitation(s) above. Any change will take effect with the
first purchase payment received with or after receipt by the Service Center of
the request for such change, in a form and manner acceptable to Transamerica and
will continue in effect until subsequently changed.
In certain jurisdictions and under certain conditions where by law
Transamerica is required to return upon the exercise of the free look option,
either (1) the purchase payment or (2) the greater of the purchase payment or
account value, any initial allocation to the variable account may be held in the
money market variable sub-account during the applicable free look period plus 5
days for delivery. Any such allocations to the money market variable sub-account
will automatically be transferred at the end of the free-look period plus 5 days
according to the owner's requested allocation. Such transfer will not count
against the 12 allowed transfers without charge during the first contract year.
If the allocation of additional purchase payments is directed to a
variable sub-account that currently does not have value, it must be at least
$1,000; if it is allocated to the guarantee period account, each amount
allocated must be at least $1,000.
Investment Option Limits
Currently, the owner may not allocate amounts to more than eighteen
investment options over the life of the contract. Investment options include
variable sub-accounts and general account options. Each variable sub-account,
each duration of guarantee period under the guarantee period account and the
fixed account that ever received a transfer or purchase payment allocation count
as one towards this total of eighteen limit.
Transamerica may waive this limit in the future.
For example, if the owner makes an allocation to the money market
variable sub-account and later transfers all amounts out of this money market
variable sub-account, it would still count as one for the purposes of the
limitation even if it held no value. If the owner transfers from a variable
sub-account to another variable sub-account and later back to the first, the
count towards the limitation would be two, not three. If the owner selects a
guarantee period and renews for the same term, the count will be one; but if the
owner renews to a guarantee period with a different term, the count will be two.
ACCOUNT VALUE
Before the annuity date, the account value is equal to: (a) the general
account options accumulated value plus (b) the variable accumulated value.
The variable accumulated value is determined at the end of each
valuation day. To determine the variable accumulated value on a day that is not
a valuation day, the value as of the end of the next valuation day will be used.
The variable accumulated value is expected to change from valuation period to
valuation period, reflecting the investment experience of the selected
portfolios as well as the deductions for charges and fees. A valuation period is
the period between successive valuation days. It begins at the close of the New
York Stock Exchange (generally 4:00 p.m. ET) on each valuation day and ends at
the close of the New York Stock Exchange on the next succeeding valuation day. A
valuation day is each day that the New York Stock Exchange is open for regular
business.
Purchase payments allocated to a variable sub-account are credited to
the variable accumulated value in the form of variable accumulation units. The
number of variable accumulation units credited for each variable sub-account is
determined by dividing the purchase payment allocated to the variable
sub-account by the variable accumulation unit value for that variable
sub-account. In the case of the initial purchase payment, variable accumulation
units for that payment will be credited to the variable accumulated value within
two valuation days of the later of: (a) the date sufficient information, in an
acceptable manner and form, is received at our Service Center; or (b) the date
our Service Center receives the initial purchase payment. In the case of any
additional purchase payment, variable accumulation units for that payment will
be credited at the end of the valuation period during which Transamerica
receives the payment. The value of a variable accumulation unit for each
variable sub-account is established at the end of each valuation period and is
calculated by multiplying the value of that unit at the end of the prior
valuation period by the variable sub-account's net investment factor for the
valuation period. The value of a variable accumulation unit may go up or down.
The net investment factor is used to determine the value of
accumulation and annuity unit values for the end of a valuation period. The
applicable formula can be found in the statement of additional information.
Transfers involving variable sub-accounts will result in the crediting
and/or cancellation of variable accumulation units having a total value equal to
the dollar amount being transferred to or from a particular variable
sub-account. The crediting and cancellation of such units is made using the
variable accumulation unit value of the applicable variable sub-account as of
the end of the valuation day in which the transfer is effective.
TRANSFERS
Before the Annuity Date
Before the annuity date, you may transfer all or any portion of the
account value among the variable sub-accounts and the guarantee periods.
Transfers are restricted into or out of the fixed account. See "General Account
Options" in Appendix A.
Transfers among the variable sub-accounts and the general account
options may be made by submitting a request, in a form and manner acceptable to
Transamerica, to the Service Center. The transfer request must specify: (1) the
variable sub-account(s) and/or the general account option(s) from which the
transfer is to be made; (2) the amount of the transfer; and (3) the variable
sub-account(s) and/or general account option(s) to receive the transferred
amount. The minimum amount which may be transferred is $1,000. Transfers among
the variable sub-accounts are also subject to such terms and conditions as may
be imposed by the portfolios.
When a transfer is made from a guarantee period before the end of its
term, the amount transferred may be subject to an interest adjustment. (See "The
General Account Options" in Appendix A.) A transfer from a guarantee period made
within 30 days before the last day of its term will not be subject to any
interest adjustment.
Transamerica currently imposes a transfer fee of $10 for each transfer
in excess of 12 made during the same contract year. Transamerica reserves the
right to waive the transfer fee or vary the number of transfers without charge
or not count transfers under certain options or services for purposes of the
allowed number without charge. See "Transfers" on page __ for additional
limitations regarding transfers. All requests received during a single valuation
period will be treated as a single transfer. A transfer generally will be
effective on the date the request for transfer is received by the Service
Center.
If a transfer reduces the value in a variable sub-account or guarantee
period or in the fixed account to less than $1,000, then Transamerica reserves
the right to transfer the remaining amount along with the amount requested to be
transferred in accordance with the transfer instructions provided by the owner.
Under current law, there will not be any tax liability for transfers within the
contract.
Other Restrictions
Transamerica reserves the right without prior notice to modify,
restrict, suspend or eliminate the transfer privileges (including telephone
transfers) at any time and for any reason. For example, restrictions may be
necessary to protect owners from adverse impacts on portfolio management of
large and/or numerous transfers by market timers or others. Transamerica has
determined that the movement of significant variable sub-account values from one
variable sub-account to another may prevent the underlying portfolio from taking
advantage of investment opportunities because the portfolio must maintain a
significant cash position in order to handle redemptions. Such movement may also
cause a substantial increase in portfolio transaction costs which must be
indirectly borne by owners. Therefore, Transamerica reserves the right to
require that all transfer requests be made by the owner and not by a third party
holding a power of attorney and to require that each transfer request be made by
a separate communication to Transamerica. Transamerica also reserves the right
to require that each transfer request be submitted in writing and be manually
signed by the owner or owners; telephone or facsimile transfer requests may not
be allowed.
Telephone Transfers
Transamerica will allow telephone transfers if the owner has provided
proper authorization for such transfers in a form and manner acceptable to
Transamerica. Transamerica reserves the right to suspend telephone transfer
privileges at any time, for some or all contracts, for any reason. Withdrawals
are not permitted by telephone.
Transamerica will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and if it follows such
procedures it will not be liable for any losses due to unauthorized or
fraudulent instructions. In the opinion of certain government regulators,
Transamerica may be liable for such losses if it does not follow those
procedures. The procedures Transamerica will follow for telephone transfers may
include requiring some form of personal identification prior to acting on
instructions received by telephone, providing written confirmation of the
transaction, and/or tape recording the instructions given by telephone.
Dollar Cost Averaging
Prior to the annuity date, the owner may request that amounts be
automatically transferred on a monthly basis from a "source account," which is
currently either the money market variable sub-account or the fixed account, to
any of the variable sub-accounts by submitting a request to the Service Center
in a form and manner acceptable to Transamerica. Other source accounts may be
available; call the Service Center for the availability of options.
Only one source account can be elected at a time. The transfers will
begin when the owner requests, but no sooner than one week following, receipt of
such request, provided that dollar cost averaging transfers will not commence
until the later of (a) 30 days after the contract effective date, or (b) the
estimated end of the free look period (allowing 5 days for delivery). Transfers
will continue for the number of consecutive months selected by the owner unless
(1) terminated by the owner, (2) automatically terminated by Transamerica
because there are insufficient amounts in the source account, or (3) for other
reasons as described in the election form. The owner may request that monthly
transfers be continued for a term then available by giving notice to the Service
Center in a form and manner acceptable to Transamerica within 30 days prior to
the last monthly transfer. If no request to continue the monthly transfers is
made by the owner, this option will terminate automatically with the last
transfer at the end of the term.
In order to be eligible for dollar cost averaging, the owner must meet
the following conditions: (1) the value of the source account must be at least
$5,000; (2) the minimum amount that can be transferred out of the source account
is $250 per month; and (3) the minimum amount transferred into any other
variable sub-account is the greater of $250 or 10% of the amount being
transferred. These limits may be changed for new elections of this service.
Dollar cost averaging transfers can not be made from a source account from which
systematic withdrawals or automatic payouts are also being made.
There is currently no charge for the dollar cost averaging option and
transfers due to dollar cost averaging currently will not count toward the
number of transfers allowed without charge per contract year.
Transamerica may charge in the future for dollar cost average.
Dollar cost averaging transfers may not be made to or from the
guarantee period account or to the fixed account.
Automatic Asset Rebalancing
After purchase payments have been allocated among the variable
sub-accounts, the performance of each variable sub-account may cause proportions
of the values in the variable sub-accounts to vary from the allocation
percentages. The owner may instruct Transamerica to automatically rebalance the
amounts in the variable account by reallocating amounts among the variable
sub-accounts, at the time, and in the percentages, specified in the owner
instructions to Transamerica and accepted by Transamerica. The owner may elect
to have the rebalancing done on an annual, semi-annual or quarterly basis. The
owner may elect to have amounts allocated among the variable sub-accounts using
whole percentages, with a minimum of 10% allocated to each variable sub-account.
The owner may elect to establish, change or terminate the automatic
asset rebalancing by submitting a request to the Service Center in a form and
manner acceptable to Transamerica. Automatic asset rebalancing currently will
not count towards the number of transfers without charge in a contract year.
Transamerica reserves the right to discontinue the automatic asset rebalancing
service at any time for any reason. There is currently no charge for the
automatic asset rebalancing service. Transamerica may in the future charge for
this service and may count the transfers toward those allowed without charge.
After the Annuity Date
If a variable payment option is elected, the owner may make transfers
among variable sub-accounts after the annuity date by giving a written request
to the Service Center, subject to the following provisions: (1) transfers after
the annuity date may be made no more than four times during any contract year;
and (2) the minimum amount transferred from one variable sub-account to another
is the amount supporting a current $75 monthly payment.
Transfers among variable sub-accounts after the annuity date will be
processed based on the formula outlined in the appendix in the Statement of
Additional Information.
CASH WITHDRAWALS
The owner of a non-qualified contract may withdraw all or part of the
cash surrender value at any time prior to the annuity date by giving a written
request to the Service Center. For qualified contracts, reference should be made
to the terms of the particular retirement plan or arrangement for any additional
limitations or restrictions, including prohibitions, on cash withdrawals. See
"Federal Tax Matters," page ____. The cash surrender value is equal to the
account value, less any account fee, interest adjustment, contingent deferred
sales load and premium tax charges. A full surrender will result in a cash
withdrawal payment equal to the cash surrender value at the end of the valuation
period during which the election is received along with all completed forms then
required by Transamerica. No surrenders or withdrawals may be made after the
annuity date. Partial withdrawals must be at least $1,000.
In the case of a partial withdrawal, you may direct the Service Center
to withdraw amounts from specific variable sub-account(s) and/or from the
general account options. If the owner does not specify, the withdrawal will be
taken pro rata based on value from all variable sub-accounts with current
values. If the variable accumulated value is insufficient, the withdrawal will
be taken pro rata from the general account options with current values. If the
requested withdrawal reduces the value of a variable sub-account from which the
withdrawal was made to less than $1,000, Transamerica reserves the right to
transfer the remaining value of that sub-account pro rata among the remaining
active variable sub-accounts with values equal to or greater than $1,000. If no
variable sub-accounts with value remain, any such transfer will be made to the
money market variable sub-account. The owner will be notified in writing of any
such transfer.
A partial withdrawal request cannot be made if it would reduce the
account value to less than $2,000. In that case, the owner will be notified.
Withdrawal (including surrender) requests generally will be processed
as of the end of the valuation period during which the request, including all
completed forms, is received. Payment of any cash withdrawal, settlement option
payment or lump sum death benefit due from the variable account and processing
of any transfers will occur within seven days from the date the election is
received, except that Transamerica may postpone such payment if: (1) the New
York Stock Exchange is closed for other than usual weekends or holidays, or
trading on the Exchange is otherwise restricted; or (2) an emergency exists as
defined by the Commission, or the Commission requires that trading be
restricted; or (3) the Commission permits a delay for the protection of owners.
The withdrawal request will be effective when all required withdrawal request
forms are received. Payments of any amounts derived from a purchase payment paid
by check may be delayed until the check has cleared the owner's bank.
When a withdrawal is made from a guarantee period before the end of its
term, the amount withdrawn may be subject to an interest adjustment. See "The
General Account Options" in Appendix A.
Transamerica may delay payment of any withdrawal from the general
account options for up to six months after Transamerica receives the request for
such withdrawal. If Transamerica delays payment for more than 30 days,
Transamerica will pay interest on the withdrawal amount up to the date of
payment.
SINCE THE OWNER ASSUMES THE INVESTMENT RISK FOR ALL AMOUNTS IN THE
VARIABLE ACCOUNT AND BECAUSE CERTAIN WITHDRAWALS ARE SUBJECT TO A CONTINGENT
DEFERRED SALES LOAD AND OTHER CHARGES, THE TOTAL AMOUNT PAID UPON SURRENDER OF
THE CONTRACT MAY BE MORE OR LESS THAN THE TOTAL PURCHASE PAYMENTS.
An owner may elect, under the systematic withdrawal option or automatic
payout option (but not both), to withdraw certain amounts on a periodic basis
from the variable sub-accounts prior to the annuity date.
The tax consequences of a withdrawal or surrender are discussed later
in this prospectus. See "Federal
Tax Matters" page ___.
Systematic Withdrawal Option
Prior to the annuity date, you may elect to have withdrawals
automatically made from one or more variable sub-account(s) on a monthly basis.
(Other distribution modes may be permitted.) The withdrawals will not begin
until than the later of (a) 30 days after the contract effective date or (b) the
end of the free look period. Withdrawals will be from the variable
sub-account(s) and in the percentage allocations that you specify. If no
specifications are made, withdrawals will be pro rata based on value from all
variable sub-account(s). Systematic withdrawals can not be made from a variable
sub-account from which dollar cost averaging transfers are being made and cannot
be elected concurrently with the automatic payment option. The systematic
withdrawal option is currently not available with respect to the general account
options.
To be eligible for the systematic withdrawal option, the account value
must be at least $12,000 at the time of election. The minimum monthly amount
that can be withdrawn is $100. Currently, the owner can elect any amount over
$100 to be withdrawn systematically. The owner may also make partial withdrawals
while receiving systematic withdrawals. If the total withdrawals (systematic,
automatic, or partial) in a contract year exceed the allowed amount to be
withdrawn without charge for that year, any applicable contingent deferred sales
load will then apply.
The withdrawals will continue indefinitely unless terminated. If this
option is terminated it may not be elected again until the next 12 full months.
Transamerica reserves the right to impose an annual fee of up to $25
for processing payments under this option. This fee, which is currently waived,
will be deducted in equal installments from each systematic withdrawal during a
contract year.
Automatic Payout Option ("APO")
Prior to the annuity date, for qualified contracts, the owner may elect
the automatic payout option (APO) to satisfy minimum distribution requirements
under Sections 401(a)(9), 403(b), and 408(b)(3) of the Code. See "Federal Tax
Matters" page ____. For IRAs and SEP/IRAs this may be elected no earlier than
six months prior to the calendar year in which the owner attains age 701/2, but
payments may not begin earlier than January of such calendar year. For other
qualified contracts, APO can be elected no earlier than six months prior to the
later of when the owner (a) attains age 70 1/2; and (b) retires from employment.
Additionally, APO withdrawals may not begin before the later of (a) 30 days
after the contract effective date or (b) the end of the free look period. APO
may be elected in any calendar month, but no later than the month in which the
owner attains age 84.
Withdrawals will be from the variable sub-account(s) and in the
percentage allocations you specify. If no specifications are made, withdrawals
will be pro rata based on value from all variable sub-account(s). Withdrawals
can not be made from a variable sub-account from which dollar cost averaging
transfers are being made. The APO is not currently available with respect to the
general account options. The calculation of the APO amount will reflect the
total account value although the withdrawals are only from the variable
sub-accounts. This calculation and APO are based solely on value in this
contract.
To be eligible for this option, the following conditions must be met:
(1) the account value must be at least $15,000 at the time of election; (2) the
annual withdrawal amount is the larger of the required minimum distribution
under Code Sections 401(a)(9) or 408(b)(3) or $500. This rule may change.
Currently, withdrawals under this option are only paid annually.
The withdrawals will continue indefinitely unless terminated. If there
are insufficient amounts in the variable account to make a withdrawal, this
option generally will terminate. Once terminated, APO may not be elected again.
DEATH BENEFIT
If the owner is not a natural person, the annuitant(s) will be treated
as the owner(s) for purposes of the death benefit. For example, if the owner is
a trust that allows a person(s) other than the trustee to exercise the ownership
rights under this certificate, such person(s) must be named annuitant(s) and
will be treated as the owner (s) so the death benefit will be payable on the
death of any annuitant.
If an owner dies before the annuity date, a death benefit is payable.
If death occurs prior to any owner's or joint owner's 85th birthday, the death
benefit will be equal to the greatest of (a) the account value, or (b) the sum
of all purchase payments made to the contract less withdrawals and applicable
premium tax charges, or (c) the highest account value on any contract
anniversary prior to the earlier of the owner's or joint owner's 85th birthday,
plus purchase payments made less withdrawals and applicable premium tax charges
since that contract anniversary. If death occurs after the earlier of the
owner's or joint owner's 85th birthday, the death benefit will be the account
value. If the owner is not a natural person, the annuitant(s) will be treated as
the owner(s) for purposes of the death benefit.
An ownership change will be subject to our then current underwriting
rules and may decrease the death benefit. However, such reduction will never
decrease the death benefit below the account value.
Payment of Death Benefit
The death benefit is generally payable upon receipt of proof of death
of the owner. Upon receipt of this proof and an election of a method of
settlement, the death benefit generally will be paid within seven days, or as
soon thereafter as Transamerica has sufficient information about the beneficiary
to make the payment.
The death benefit will be determined as of the end of the valuation
period during which our Service Center receives both proof of death of the owner
or joint owner and the written notice of the settlement option elected by the
person to whom the death benefit is payable. If no settlement method is elected,
the death benefit will be paid in a lump sum no later than one year after the
date of death. No contingent deferred sales load nor interest adjustment will
apply.
Until the death benefit is paid, the account value allocated to the
variable account remains in the variable account, and fluctuates with investment
performance of the applicable portfolio(s). Accordingly, the amount of the death
benefit depends on the account value at the time the death benefit is paid, not
at the time of death.
Designation of Beneficiaries
The owner may select one or more beneficiaries by designating the
person(s) to receive the amounts payable under this contract if: the owner dies
before the annuity date and there is no joint owner; or the owner dies after the
annuity date and settlement option payments have begun under a selected
settlement option that guarantees payments for a certain period of time. The
interest of any beneficiary who dies before the owner will terminate at time of
death of such beneficiary.
A beneficiary may be named or changed at any time in a form and manner
acceptable to us. Any change made to an irrevocable beneficiary must also
include the written consent of the beneficiary, except as other wise required by
law.
If more than one beneficiary is named, each named beneficiary will share equally
in any benefits or rights granted by this contract unless the owner gives us
other instructions at the time the beneficiaries are named.
Transamerica may rely on any affidavit by any responsible person
in determining the identity or
non-existence of any beneficiary not identified by name
Amount of Death Benefit after the Owner or Joint Owner attains age 85
If the owner or joint owner dies before the annuity date and either the
deceased owner or joint owner had attained the age of 85, the death benefit is
equal to the account value. For purposes of calculating such death benefit, the
account value is determined as of the date the benefit is paid.
Death of Owner or Joint Owner Before the Annuity Date
If the owner or joint owner dies before the annuity date, we will pay
the death benefit as specified in this section. The entire death benefit must be
distributed within five years after the owner's death. If the owner is not an
individual, an annuitant's death will be treated as the death of the owner as
provided in Code Section 72 (s)(6). For example, this certificate will remain in
force with the annuitant's surviving spouse as the new annuitant if:
o This contract is owned by a trust; and
o The beneficiary is either the annuitant's surviving spouse, or
a trust holding the contract solely for the benefit of such
spouse.
The manner in which we will pay the death benefit depends on the status
of the person(s) involved in the contract. The death benefit will be payable to
the first person from the applicable list below:
If the owner is the annuitant:
o The joint owner, if any
o The beneficiary, if any
If the owner is not the annuitant:
o The joint owner, if any
o The beneficiary, if any
o The annuitant;
o The joint annuitant; if any
If the death benefit is payable to the owner's surviving spouse (or to a trust
for the sole benefit of such surviving spouse),
We will continue this contract with the owner's spouse as the new
annuitant (if the owner was the annuitant) and the new owner (if applicable),
unless such spouse selects another option as provided below.
If the death benefit is payable to someone other that the owner's surviving
spouse,
We will pay the death benefit in a lump sum payment to, or for the
benefit of, such person within five years after the owner's death, unless such
person(s) selects another option as provided below.
In lieu of the automatic form of death benefit specified above,
The person(s) to whom the death benefit is payable may elect to receive
it:
o In a lump sum; or
o As settlement option payments, provided the person making the
election is an individual. Such payments must begin within one
year after the owner's death and must be in equal amounts over
a period of time not extending beyond the individual's life or
life expectancy.
Election of either option must be made no later than 60 days prior to
the one-year anniversary of the owner's death. Otherwise, the death benefit will
be settled under the appropriate automatic form of benefit specified above.
If the person to whom the death benefit is payable dies before the entire death
benefit is paid,
We will pay the remaining death benefit in a lump sum to the payee
named by such person or, if no payee was named, to such person's estate.
If the death benefit is payable to a non-individual (subject to the special rule
for a trust for the sole benefit of a surviving spouse),
We will pay the death benefit in a lump sum within one year after the
owner's death.
If the Annuitant Dies Before the Annuity Date
If an owner and an annuitant are not the same individual and the
annuitant (or the last of joint annuitants) dies before the annuity date, the
owner will become the annuitant until a new annuitant is selected.
Death after the Annuity Date
If an owner or the annuitant dies after the annuity date, any amounts
payable will continue to be distributed at least as rapidly as under the
settlement and payment option then in effect on the date of death.
Upon the owner's death after the annuity date, any remaining ownership
rights granted under this contract will pass to the person to whom the death
benefit would have been paid if the owner had died before the annuity date, as
specified above.
Survival Provision
The interest of any person to whom the death benefit is payable who
dies at the time of, or within 30 days after, the death of the owner will also
terminate if no benefits have been paid to such beneficiary, unless the owner
had given us written notice of some other arrangement.
CHARGES, FEES AND DEDUCTIONS
No deductions are currently made from purchase payments (although we
reserve the right to charge for any applicable premium tax charges). Therefore,
the full amount of the purchase payments are invested in one or more of the
variable sub-accounts and/or the general account options.
Contingent Deferred Sales Load
No deduction for sales charges is made from purchase payments at the
time they are made. However, a contingent deferred sales load of up to 6% of
purchase payments may be imposed on certain withdrawals or surrenders to
partially cover certain expenses incurred by Transamerica relating to the sale
of the contract, including commissions paid to sales persons, the costs of
preparation of sales literature and other promotional costs and acquisition
expenses.
The contingent deferred sales load percentage varies according to the
number of years between when a purchase payment was credited to the contract and
when the withdrawal is made. The amount of the contingent deferred sales load is
determined by multiplying the amount withdrawn subject to the contingent
deferred sales load by the contingent deferred sales load percentage in
accordance with the following table. In no event shall the aggregate contingent
deferred sales load assessed against the contract exceed 6% of the aggregate
purchase payments.
Number of Years
Since Receipt of Contingent Deferred Sales Load
contingent deferred sales load
Purchase Payment As a Percentage of Purchase Payment
Less than one year 6%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 5%
4 years but less than 5 years 4%
5 years but less than 6 years 4%
6 years but less than 7 years 2%
7 or more years 0%
Free Withdrawals-Allowed Amount
Beginning 30 days after the contract effective date (or the end of the
free look period, if later), the owner may make a withdrawal up to the "allowed
amount" without incurring a contingent deferred sales load each contract year
before the annuity date.
The allowed amount each contract year is equal to 15% of the total
purchase payments received during the last seven years determined as of the last
contract anniversary less any withdrawals during the present contract year. In
the first contract year, the 15% will be applied to the total purchase payments
at the time of the first withdrawal.
Purchase payments held for seven full years may be withdrawn without
charge.
Withdrawals will be made first from purchase payments on a first
- -in/first-out basis and then from
earnings. The allowed amount may vary depending on the state of issuance.
If the allowed amount is not fully
withdrawn or paid out during a contract year, it does not carry over to the next
contract year.
Free Withdrawals - Living Benefits Rider
When the contract is purchased, the owner may also elect, in certain
states, a Living Benefits Rider for an additional fee that provides the
contingent deferred sales load will be waived in any of the three following
instances:
(1) if the owner receives extended medical care in a licensed hospital or
nursing care facility (as defined in the contract) for at least 60 consecutive
days, and the request for the withdrawal or surrender, together with proof of
such extended care, is received at the Service Center during the term of such
care or within 90 days after the last day upon which the owner received such
extended care; or
(2) if the owner receives medically required in-home care for at least 60 days
and such extended in-home medical care is certified by a qualified medical
professional. (The owner may also be required to submit other evidence as
required by Transamerica such as evidence of medicare eligibility.)
(3) if the owner becomes terminally ill after the first contract year and the
terminal illness is diagnosed by a qualified medical professional and is
reasonably expected to result in death within 12 months.
Neither (1) nor (2) apply if the owner is receiving extended medical care in a
licensed hospital or nursing care facility or in-home medical care at the time
the contract is purchased; or
Transamerica reserves the right to not accept purchase payments after
the owner has qualified for any of these waivers. Owner under this rider means
either the owner or the joint owner if any. Any withdrawals under this rider on
which the contingent deferred sales load is waived will not reduce the allowed
amount for the contract year.
Other Free Withdrawals
In addition, no contingent deferred sales load is assessed: upon
annuitization after the first contract year to an option involving life
contingencies; upon payment of the death benefit; or upon transfers of account
value. Any applicable contingent deferred sales load will be deducted from the
amount requested for both partial withdrawals (including withdrawals under the
systematic withdrawal option or the APO) and full surrenders unless the owner
elects to "gross-up" the amount for a partial withdrawal to cover the applicable
contingent deferred sales load. The contingent deferred sales load and any
premium tax charge applicable to a withdrawal from the guaranteed period account
will be deducted from the amount withdrawn after the interest adjustment, if
any, is applied and before payment is made.
Administrative Charges
Account Fee
At the end of each contract year before the annuity date, Transamerica
deducts an annual account fee as partial compensation for expenses relating to
the issue and maintenance of the contract and the variable account. The annual
account fee is equal to the lesser of $30 or 2% of the account value. The
account fee may be increased upon 30 days advance written notice, but in no
event may it exceed $60 (or 2% of the account value, if less) per contract year.
If the contract is surrendered, The account fee, unless waived will be deducted
from a full surrender before the application of any continent deferred sales
load. The account fee will be deducted on a pro rata basis (based on values)
from the account value including both the variable sub-accounts and the general
account options. No interest adjustment will be assessed on any deduction for
the account fee taken from the guaranteed period amount. If the entire account
value is in the general account options, then the annual account fee will be
deducted on a pro rata basis from the general account options. The account fee
for a contract year will be waived if the account value exceeds $25,000 on the
last business day of that contract year or as of the date the contract is
surrendered.
Annuity Fee
After the annuity date, an annual annuity fee of $30 to help cover
processing costs will be deducted in equal amounts from each variable payment
made during the year ($2.50 each month if monthly payments). This fee will not
be changed. No annuity fee will be deducted from fixed payments.
Administrative Expense Charge
Transamerica also makes a daily deduction (the administrative expense
charge) from the variable account (both before and after the contract date) at
an effective current annual rate of 0.15% of assets held in each variable
sub-account to reimburse Transamerica for administrative expenses. Transamerica
has the ability in most states to increase or decrease this charge, but the
charge is guaranteed not to exceed 0.35%. Transamerica will provide 30 days
written notice of any change in fees. The administrative charges do not bear any
relationship to the actual administrative costs of a particular contract. The
administrative expense charge is reflected in the variable accumulation or
variable contract unit values for each variable sub-account.
Mortality and Expense Risk Charge
Transamerica deducts a charge for bearing certain mortality and expense
risks under the contracts. This is a daily charge at an effective annual rate of
1.20% of the assets in the variable account. Transamerica guarantees that this
charge of 1.20% will never increase. The mortality and expense risk charge is
reflected in the variable accumulation and variable contract unit values for
each variable sub-account.
Variable accumulated values and variable settlement option payments are
not affected by changes in actual mortality experience incurred by Transamerica.
The mortality risks assumed by Transamerica arise from its contractual
obligations to make settlement option payments determined in accordance with the
settlement option tables and other provisions contained in the contract and to
pay death benefits prior to the annuity date.
The expense risk assumed by Transamerica is the risk that
Transamerica's actual expenses in administering the contracts and the variable
account will exceed the amount recovered through the administrative expense
charge, account fees, transfer fees and any fees imposed for certain options and
services.
If the mortality and expense risk charge is insufficient to cover
actual costs and risks assumed, the loss will fall on Transamerica. Conversely,
if this charge is more than sufficient, any excess will be profit to
Transamerica. Currently, Transamerica expects a profit from this charge.
Transamerica anticipates that the contingent deferred sales load will
not generate sufficient funds to pay the cost of distributing the contracts. To
the extent that the contingent deferred sales load is insufficient to cover the
actual cost of contract distribution, the deficiency will be met from
Transamerica's general corporate assets which may include amounts, if any,
derived from the mortality and expense risk charge.
Living Benefits Rider Fee
If the owner elected the Living Benefits Rider when the contract was
purchased, a fee will be deducted at the end of each contract month while the
rider continues in force. The fee each month will be 1/12 of .05% of the account
value at that time. The fee is deducted from each variable sub-account on pro
rata based on the value in each variable sub-account through the cancellation of
variable accumulation units. If there is insufficient variable accumulated
value, the fee will be deducted pro rata from the values in the general account
options (any interest adjustment will apply.) Transamerica reserves the right to
waive the interest adjustment for deduction from the guarantee period account
for this rider fee.
Premium Tax Charges
Currently there is no charge for premium taxes except upon
annuitization. However, Transamerica may be required to pay premium or
retaliatory taxes currently ranging from 0% to 3.5%. Transamerica reserves the
right to deduct a charge for these premium taxes from premium payments, from
amounts withdrawn, or from amounts applied on the annuity date. In some states,
charges for both direct premium taxes and retaliatory premium taxes may be
imposed at the same or different times with respect to the same purchase
payment, depending upon applicable state law.
In certain limited circumstances, a broker-dealer or other entity
distributing the contracts may elect to pay to Transamerica an amount equal to
the premium taxes that would otherwise be attributable to that entity's
customers. In such cases, Transamerica will not impose a premium tax charge on
those contracts.
Transfer Fee
Transamerica currently imposes a fee for each transfer in excess of the
first 12 in a single contract year. Transamerica will deduct the charge from the
amount transferred. This fee is $10 and will be used to help cover
Transamerica's costs of processing transfers. Transamerica reserves the right to
waive this fee or to not count transfers under certain options and services as
part of the number of allowed annual transfers without charge.
Option and Service Fees
Transamerica reserves the right to impose reasonable a fees for
administrative expenses associated with processing certain options and services.
This fee would be deducted from each use of the option or service during a
contract year.
Taxes
No charges are currently made for taxes. However, Transamerica reserves
the right to deduct charges in the future for federal, state, and local taxes or
the economic burden resulting from the application of any tax laws that
Transamerica determines to be attributable to the contracts.
Portfolio Expenses
The value of the assets in the variable account reflects the value of
portfolio shares and therefore the fees and expenses paid by each portfolio. A
complete description of the fees, expenses, and deductions from the portfolios
are found in the portfolios' prospectuses. (See "The Portfolios" page __.)
Interest Adjustment
For a description of the interest adjustment applicable to early
withdrawals and transfers from the guaranteed period account, see "The General
Account Options -- the Guarantee Period Account" in Appendix A.
SETTLEMENT OPTION PAYMENTS
Annuity Date
The annuity date is the date that the annuitization phase of the
contract begins. On the annuity date, we will apply the annuity amount (defined
below) to provide payments under the settlement option selected by the owner.
The first settlement option payment will be made 30 days after the annuity date.
The annuity date is selected by the owner and may be changed from time to time
by the owner by giving notice, in a form and manner acceptable to Transamerica,
to the Service Center, provided that notice of each change is received by the
Service Center at least thirty (30) days prior to the then-current annuity date.
The annuity date cannot be earlier than the first contract anniversary except
for certain qualified contracts. The latest annuity date which may be elected is
the later of (a) the first day of the calendar month immediately preceding the
month of the annuitant's or joint annuitants' 85th birthday, or (b) the first
day of the month coinciding with or next following the tenth contract
anniversary (but in no event later than the annuitants' or joint annuitants'
97th birthday). The latest allowed annuity date may vary in certain
jurisdictions.
The annuity date must be the first day of a calendar month. The first
settlement option payment will be on the first day of the month immediately
following the annuity date. Certain qualified contracts may have restrictions as
to the annuity date and the types of settlement options available.
Settlement Option Payments
The annuity amount is the account value, less any interest adjustment,
less any applicable contingent deferred sales load, and less any applicable
premium taxes. Any contingent deferred sales load will be waived if the
settlement option payments involve life contingencies and begin on or after the
first contract anniversary.
If the amount of the monthly payment from the settlement option
selected by the owner would result in a monthly settlement option payment of
less than $150, or if the annuity amount is less than $5,000, Transamerica
reserves the right to offer a less frequent mode of payment or pay the cash
surrender value in a cash payment. Monthly settlement option payments from the
variable payment option will further be subject to a minimum monthly payment of
$75 from each variable sub-account from which such payments are made.
The owner may choose from the settlement options below. Transamerica
may consent to other plans of payment before the annuity date. For settlement
options involving life income, the actual age and/or sex of the annuitant, or a
joint annuitant will affect the amount of each payment. Sex-distinct rates
generally are not allowed under certain qualified contracts. Transamerica
reserves the right to ask for satisfactory proof of the annuitant's (or joint
annuitant's) age. Transamerica may delay settlement option payments until
satisfactory proof is received. Since payments to older annuitants are expected
to be fewer in number, the amount of each annuity payment shall be greater for
older annuitants than for younger annuitants.
The owner may choose from the two payment options described below. The
annuity date and settlement options available for qualified contracts may also
be controlled by endorsements, the plan or applicable law.
Election of Settlement Option Forms and Payment Options
Before the annuity date, and while the annuitant is living, the owner
may, by written request, change the settlement option or payment option. The
request for change must be received by the Service Center at least 30 days prior
to the annuity date.
In the event that a settlement option form and payment option is not
selected at least 30 days before the contract date, Transamerica will make
settlement option payments in accordance with the 120 month period certain and
life settlement option and the applicable provisions of the contract.
Payment Options
Owners may elect a fixed or a variable payment option, or a
combination of both (in 25% increments of
the annuity amount).
Unless specified otherwise, the annuity amount in the variable account
will be used to provide a variable payment option and the amount in the general
account options will be used to provide a fixed payment option. In this event,
the initial allocation of variable annuity units for the variable sub-accounts
will be in proportion to the contract's value in the variable sub-accounts on
the annuity date.
Fixed Payment Option
A fixed payment option provides for payments which will remain constant
pursuant to the terms of the settlement option elected. If a fixed payment
option is selected, the portion of the annuity amount used to provide that
payment option will be transferred to the general account assets of
Transamerica, and the amount of payments will be established by the fixed
settlement option selected and the age and sex (if sex-distinct rates are
allowed by law) of the annuitant(s) and will not reflect investment experience
after the annuity date. The fixed payment amounts are determined by applying the
fixed settlement option purchase rate specified in the contract to the portion
of the annuity amount applied to the payment option. Payments may vary after the
death of the owner under some options; the amounts of variances are fixed on the
annuity date.
Variable Payment Option
A variable payout option provides for payments that vary in dollar
amount, based on the investment performance of the selected variable
sub-account(s). The variable settlement option purchase rate tables in the
contract reflect an assumed annual interest rate of 4%, so if the actual net
investment performance of the variable sub-account(s) is less than 4%, then the
dollar amount of the actual payments will decrease. If the actual net investment
performance of the variable sub-account(s) is higher than 4%, then the dollar
amount of the actual payments will increase. If the net investment performance
exactly equals the 4% rate, then the dollar amount of the actual payments will
remain constant. Transamerica may offer other assumed annual interest rates.
Variable payments will be based on the variable sub-accounts selected
by the owner, and on the allocations among the variable sub-accounts.
For further details as to the determination of variable payments, see
the Statement of Additional Information.
Settlement Option Forms
The owner may choose any of the settlement option forms described
below. Subject to approval by Transamerica, the owner may select any other
settlement option forms then being offered by Transamerica.
(1) Life Annuity. Payments start on the first day of the month
immediately following the annuity date, if the annuitant is living. Payments end
with the payment due just before the annuitant's death. There is no death
benefit. It is possible that no payment will be made if the annuitant dies
before the first payment is due; only one payment will be made if the annuitant
dies before the second payment is due, and so forth.
(2) Life and Contingent Annuity. Payments start on the first day of the
month immediately following the annuity date, if the annuitant is living.
Payments will continue for as long as the annuitant lives. After the annuitant
dies, payments will be made to the contingent annuitant, for as long as the
contingent annuitant lives. The continued payments can be in the same amount as
the original payments, or in an amount equal to one-half or two-thirds thereof.
Payments will end with the payment due just before the death of the contingent
annuitant. There is no death benefit after both die. If the contingent annuitant
does not survive the annuitant, payments will end with the payment due just
before the death of the annuitant. It is possible that no payments or very few
payments will be made, if the annuitant and contingent annuitant die shortly
after the annuity date.
The written request for this form must: (a) name the contingent
annuitant; and (b) state the percentage of payments for the contingent
annuitant. Once payments start under this settlement option form, the person
named as contingent annuitant for purposes of being the measuring life, may not
be changed. Transamerica will require proof of age for the annuitant and for the
contingent annuitant before payments start.
(3) Life Annuity With Period Certain. Payments start on the
first day of the month immediately
following the annuity date, if the annuitant is living. Payments will be
made for the longer of: (a) the
annuitant's life; or (b) the period certain. The period certain may be 120 or
180 or 240 months.
If the annuitant dies after all payments have been made for the period
certain, payments will cease with the payment due just before the annuitant's
death. No benefit will then be payable to the beneficiary.
If the annuitant dies during the period certain, the rest of the period
certain payments will be made to the beneficiary, unless the owner provides
otherwise.
The written request for this form must: (a) state the length of the
period certain; and (b) name the
beneficiary.
(4) Joint and Survivor Annuity. Payments will be made to the owner,
starting on the first day of the month immediately following the annuity date,
if and for as long as the annuitant and joint annuitant are living. After the
annuitant or joint annuitant dies, payments will continue for so long as the
survivor lives. Payments end with the payment due just before the death of the
survivor. The continued payments can be in the same amount as the original
payments, or in an amount equal to one-half or two-thirds thereof. It is
possible that no payments or very few payments will be made under this form if
the annuitant and joint annuitant both die shortly after annuity date.
The written request for this form must: (a) name the joint annuitant;
and (b) state the percentage of continued payments for the survivor. Once
payments start under this settlement option form, the person named as joint
annuitant, for the purpose of being the measuring life, may not be changed.
Transamerica will need proof of age for the joint annuitant before payments
start.
(5) Other Forms of Payment. Benefits can be provided under any other
settlement option not described in this section subject to Transamerica's
agreement and any applicable state or federal law or regulation. Requests for
any other settlement option must be made in writing to the Service Center at
least 30 days before the annuity date.
After the annuity date, (a) no changes can be made in the settlement
option and payment option; (b) no additional purchase payment will be accepted
under the contract; and (c) no further withdrawals will be allowed.
The owner of a non-qualified contract may, at any time after the
contract date by written notice to us at our Service Center, change the payee of
contract benefits being provided under the contract. The effective date of
change in payee will be the latter of: (a) the date we receive the written
request for such change; or (b) the date specified by the owner. The owner of a
qualified contract may not change payees, except as permitted by the plan,
arrangement or federal law.
FEDERAL TAX MATTERS
Introduction
The following discussion is a general description of federal tax
considerations relating to the contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under the contract. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon Transamerica's understanding of the
present federal income tax laws as they are currently interpreted by the
Internal Revenue Service. No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the Internal Revenue Service ("IRS"). Moreover, no attempt has
been made to consider any applicable state or other tax laws.
The contract may be purchased on a non-tax qualified basis
("non-qualified contract") or purchased and used in connection with plans or
arrangements qualifying for special tax treatment ("qualified contract").
Qualified contracts are designed for use in connection with plans or
arrangements entitled to special income tax treatment under Sections 401,
403(b), and 408 of the Code. The ultimate effect of federal income taxes on the
amounts held under a contract, on settlement option payments, and on the
economic benefit to the owner, the annuitant, or the beneficiary may depend on
the type of retirement plan or arrangement for which the contract is purchased,
on the tax and employment status of the individual concerned, and on
Transamerica's tax status. In addition, certain requirements must be satisfied
in purchasing a qualified contract with proceeds from a tax qualified retirement
plan or arrangement and receiving distributions from a qualified contract in
order to continue receiving favorable tax treatment. Therefore, purchasers of
qualified contracts should seek competent legal and tax advice regarding the
suitability of the contract for their situation, the applicable requirements,
and the tax treatment of the rights and benefits of the contract. The following
discussion is based on the assumption that the contract qualifies as an annuity
for federal income tax purposes and that all purchase payments made to qualified
contracts are in compliance with all requirements under the Code and the
specific retirement plan or arrangement.
Purchase Payments
At the time the initial purchase payment is paid, a prospective
purchaser must specify whether he or she is purchasing a non-qualified contract
or a qualified contract. If the initial purchase payment is derived from an
exchange, transfer or surrender of another annuity contract, Transamerica may
require that the prospective purchaser provide information with regard to the
federal income tax status of the previous annuity contract. Transamerica will
require that persons purchase separate contracts if they desire to invest monies
qualifying for different annuity tax treatment under the Code. Each such
separate contract would require the minimum initial purchase payment previously
described. Additional purchase payments under a contract must qualify for the
same federal income tax treatment as the initial purchase payment under the
contract; Transamerica will not accept an additional purchase payment under a
contract if the federal income tax treatment of such purchase payment would be
different from that of the initial purchase payment.
Taxation of Annuities
In General
Section 72 of the Code governs taxation of annuities in general.
Transamerica believes that an owner who is a natural person generally is not
taxed on increases in the value of a contract until distribution occurs by
withdrawing all or part of the account value (e.g., withdrawals or settlement
option payments). For this purpose, the assignment, pledge, or agreement to
assign or pledge any portion of the account value (and in the case of a
qualified contract, any portion of an interest in the plan) generally will be
treated as a distribution. The taxable portion of a distribution is taxable as
ordinary income.
The owner of any contract who is not a natural person generally must
include in income any increase in the excess of the account value over the
"investment in the contract" (discussed below) during the taxable year. There
are some exceptions to this rule and a prospective owner that is not a natural
person should discuss these with a competent tax adviser.
The following discussion generally applies to a contract owned by a
natural person.
Withdrawals
Partial withdrawals (including withdrawals under the systematic
withdrawal option or the automatic payout option) are generally treated as
taxable income to the extent that the account value immediately before the
withdrawal exceeds the "investment in the contract" at that time. The
"investment in the contract" generally equals the amount of any non-deductible
purchase payments paid by or on behalf of any individual. For a qualified
contract , the "investment in the contract" can be zero. If a partial withdrawal
from the guarantee period account is subject to an interest adjustment, the
account value immediately before the withdrawal will not be altered to take into
account the interest adjustment. As a result, for purposes of determining the
taxable portion of the partial withdrawal, the account value will be treated as
including the amount deducted from the guarantee period account due to the
interest adjustment. Full surrenders are treated as taxable income to the extent
that the amount received exceeds the "investment in the contract." Special tax
rules applicable to certain distributions from a qualified contract are
discussed below, under "Qualified Contracts."
Settlement Option Payments
Although the tax consequences may vary depending on the settlement
option elected under the contract, in general a ratable portion of each payment
that represents the amount by which the account value exceeds the "investment in
the contract" will be taxed based on the ratio of the "investment in the
contract" to the total benefit payable; after the "investment in the contract"
is recovered, the full amount of any additional settlement option payments is
taxable.
For variable payments, the taxable portion is generally determined by
an equation that establishes a specific dollar amount of each payment that is
not taxed. The dollar amount is determined by dividing the "investment in the
contract" by the total number of expected periodic payments. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her "investment in the contract."
For fixed payments, in general there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the payments for the term selected ;
however, the remainder of each settlement option payment is taxable. Once the
"investment in the contract" has been fully recovered, the full amount of any
additional settlement option payments is taxable. If settlement option payments
cease as a result of an annuitant's death before full recovery of the
"investment in the contract," consult a competent tax adviser regarding
deductibility of the unrecovered amount.
Withholding
The Code requires Transamerica to withhold federal income tax from
withdrawals. However, except for certain qualified contracts, an owner will be
entitled to elect, in writing, not to have tax withholding apply. Withholding
applies to the portion of the distribution which is includible in income and
subject to federal income tax. The federal income tax withholding rate is 10%,
or 20% in the case of certain qualified plans, of the taxable amount of the
distribution. Withholding applies only if the taxable amount of the distribution
is at least $200. Some states also require withholding for state income taxes.
Penalty Tax
There may be imposed a federal income tax penalty equal to 10% of the
amount treated as taxable income. In general, however, there is no penalty tax
on distributions: (1) made on or after the date on which the owner attains age
591/2; (2) made as a result of death or disability of the owner; or (3) received
in substantially equal periodic payments as a life annuity or a joint and
survivor annuity for the life(ves) or life expectancy(ies) of the owner and a
"designated beneficiary." Other exceptions to the tax penalty may apply to
certain distributions from a qualified contract.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the contract because of the death of an
owner. Generally such amounts are includible in the income of the recipient as
follows: (1) if distributed in a lump sum, they are taxed in the same manner as
a full surrender as described above, or (2) if distributed under a settlement
option, they are taxed in the same manner as settlement option payments, as
described above. For these purposes, the investment in the contract is not
affected by the owner's death. That is, the investment in the contract remains
the amount of any purchase payments paid which are not excluded from gross
income.
Transfers, Assignments, or Exchanges of the Contract
For non-qualified contracts, a transfer of ownership of a contract, the
designation of an annuitant, payee, or other beneficiary who is not also the
owner, or the exchange of a contract may result in certain tax consequences to
the owner that are not discussed herein. An owner contemplating any such
designation, transfer, assignment, or exchange should contact a competent tax
adviser with respect to the potential tax effects of such a transaction.
Qualified contracts may not be assigned or transferred, except as permitted by
the Code or the Employee Retirement Income Security Act of 1974 (ERISA).
Multiple Contracts
All deferred non-qualified contracts that are issued by Transamerica
(or its affiliates) to the same owner during any calendar year are treated as
one contract for purposes of determining the amount includible in gross income
under Section 72(e) of the Code. In addition, the Treasury Department has
specific authority to issue regulations that prevent the avoidance of Section
72(e) through the serial purchase of contracts or otherwise. Congress has also
indicated that the Treasury Department may have authority to treat the
combination purchase of an immediate annuity contract and separate deferred
annuity contracts as a single annuity contract under its general authority to
prescribe rules as may be necessary to enforce the income tax laws.
Qualified Contracts
In General
The qualified contracts are designed for use with several types of
retirement plans and arrangements. The tax rules applicable to participants and
beneficiaries in retirement plans or arrangements vary according to the type of
plan and the terms and conditions of the plan. Special tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions prior to age 591/2 (subject to certain exceptions); distributions
that do not conform to specified commencement and minimum distribution rules;
aggregate distributions in excess of a specified annual amount; and in other
specified circumstances.
We make no attempt to provide more than general information about use
of the contracts with the various types of retirement plans. Owners and
participants under retirement plans, as well as annuitants and beneficiaries,
are cautioned that the rights of any person to any benefits under qualified
contracts may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the contract (including any
endorsements) issued in connection with such a plan. Some retirement plans are
subject to distribution and other requirements that are not incorporated in the
administration of the contracts. Owners are responsible for determining that
contributions and other transactions with respect to the contracts satisfy
applicable law. Purchasers of contracts for use with any retirement plan should
consult their legal counsel and tax adviser regarding the suitability of the
contract.
Qualified Pension and Profit Sharing Plans
Section 401(a) of the Code permits employers to establish various types
of retirement plans for employees. Such retirement plans may permit the purchase
of the contract in order to provide retirement savings under the plans. Adverse
tax consequences to the plan, to the participant or to both may result if this
contract is assigned or transferred to any individual as a means to provide
benefits payments. Purchasers of a contract for use with such plans should seek
competent advice regarding the suitability of the proposed plan documents and
the contract to their specific needs.
Individual Retirement Annuities and Simplified Employee Plans
The contract is also designed for use with IRA rollovers and
contributory IRA's. A contributory IRA is a contract to which initial and
subsequent purchase payments are subject to limitations imposed by the Code.
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity or
Individual Retirement Account (each hereinafter referred to as an "IRA"). Also,
distributions from certain other types of qualified plans may be "rolled over"
on a tax-deferred basis into an IRA.
The sale of a contract for use with an IRA may be subject to special
disclosure requirements of the Internal Revenue Service. Purchasers of a
contract for use with IRAs will be provided with supplemental information
required by the Internal Revenue Service or other appropriate agency. Such
purchasers will have the right to revoke their purchase within 7 days of the
earlier of the establishment of the IRA or their purchase. Purchasers should
seek competent advice as to the suitability of the contract for use with IRAs.
Eligible employers that meet specified criteria under Code Section
408(k) could establish simplified employee pension plans (SEP/IRAs) for their
employees using IRAs. Employer contributions that may be made to such plans are
larger than the amounts that may be contributed to regular IRAs, and may be
deductible to the employer.
Tax Sheltered Annuities
Under Code Section 403(b), payments made by public school systems and
certain tax exempt organizations to purchase annuity contracts for their
employees are excludable from the gross income of the employee, subject to
certain limitations. However, these payments may be subject to Social Security
and Medicare (FICA) taxes.
Code Section 403(b)(11) restricts the distribution under Code Section
403(b) annuity contracts of: (1) elective contributions made in years beginning
after December 31, 1988; (2) earnings on those contributions; and (3) earnings
in such years on amounts held as of the last year beginning before January 1,
1989. Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Pre-1989 contributions and earnings through December 31, 1989 are not
subject to the restrictions described above. However, funds transferred to a
qualified contract from a Section 403(b)(7) custodial account will be subject to
the restrictions.
Restrictions under Qualified contracts
Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under qualified contracts or under the terms
of the plans in respect of which qualified contracts are issued.
Taxation of Transamerica
Transamerica is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the variable account is not an entity separate
from Transamerica, and its operations form a part of Transamerica, it will not
be taxed separately as a "regulated investment company" under Subchapter M of
the Code. Investment income and realized capital gains are automatically applied
to increase reserves under the contracts. Under existing federal income tax law,
Transamerica believes that the variable account investment income and realized
net capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the contracts.
Accordingly, Transamerica does not anticipate that it will incur any
federal income tax liability attributable to the variable account and,
therefore, Transamerica does not intend to make provisions for any such taxes.
However, if changes in the federal tax laws or interpretations thereof result in
Transamerica being taxed on income or gains attributable to the variable
account, then Transamerica may impose a charge against the variable account
(with respect to some or all contracts) in order to set aside provisions to pay
such taxes.
Tax Status of the Contract
Diversification Requirements
Section 817(h) of the Code requires that with respect to
non-qualified contracts, the investments of the portfolios be "adequately
diversified" in accordance with Treasury regulations in order for the contracts
to qualify as annuity contracts under federal tax law. The variable account,
through the portfolios, intends to comply with the diversification requirements
prescribed by the Treasury in Reg. Sec. 1.817-5, which affect how the
portfolios' assets may be invested.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includible in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control for the investments of a
segregated asset account may cause the investor (i.e., the owner), rather than
the insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Sub-Accounts without being treated as owners of the
underlying assets."
The ownership rights under the contract are similar to, but different
in certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner has additional flexibility in allocating premium payments and
account values. These differences could result in an owner being treated as the
owner of a pro rata portion of the assets of the variable account. In addition,
Transamerica does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury Department has stated it expects to
issue. Transamerica therefore reserves the right to modify the contract as
necessary to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the variable account.
Required Distributions
In order to be treated as an annuity contract for federal income tax
purposes, section 72(s) of the Code requires any non-qualified contract to
provide that (a) if any owner dies on or after the annuity date but prior to the
time the entire interest in the contract has been distributed, the remaining
portion of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that owner's death; and (b)
if any owner dies prior to the annuity date, the entire interest in the contract
will be distributed within five years after the date of the owner's death. These
requirements will be considered satisfied as to any portion of the owner's
interest which is payable to or for the benefit of a "designated beneficiary"
and which is distributed over the life of such "designated beneficiary" or over
a period not extending beyond the life expectancy of that beneficiary, provided
that such distributions begin within one year of the owner's death. The owner's
"designated beneficiary" refers to a natural person designated by such owner as
a beneficiary and to whom ownership of the contract passes by reason of death.
However, if the owner's "designated beneficiary" is the surviving spouse of the
deceased owner, the contract may be continued with the surviving spouse as the
new owner.
The non-qualified contracts contain provisions which are intended to
comply with the requirements of Section 72(s) of the Code, although no
regulations interpreting these requirements have yet been issued. All provisions
in the contract will be interpreted to maintain such tax qualification. We may
make changes in order to maintain this qualification or to conform the contract
to any applicable changes in the tax qualification requirements. We will provide
you with a copy of any changes made to the contract.
Possible Changes in Taxation
In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is credited
to the annuity. Although as of the date of this prospectus Congress is not
actively considering any legislation regarding the taxation of annuities, there
is always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, judicial
decisions, etc.). Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change).
Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect to
other tax situations not discussed in this prospectus. Further, the federal
income tax consequences discussed herein reflect Transamerica's understanding of
current law and the law may change. Federal estate and gift tax consequences and
state and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under the contract depend on the individual
circumstances of each owner or recipient of the distribution. A competent tax
adviser should be consulted for further information.
PERFORMANCE DATA
From time to time, Transamerica may advertise yields and average annual
total returns for the variable sub-accounts. In addition, Transamerica may
advertise the effective yield of the money market variable sub-account. These
figures will be based on historical information and are not intended to indicate
future performance.
The yield of the money market variable sub-account refers to the
annualized income generated by an investment in that variable sub-account over a
specified seven-day period. The yield is calculated by assuming that the income
generated for that seven-day period is generated each seven-day period over a
52-week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in that variable sub-account is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a variable sub-account (other than the money market
variable sub-account) refers to the annualized income generated by an investment
in the variable sub-account over a specified thirty-day period. The yield is
calculated by assuming that the income generated by the investment during that
thirty-day period is generated each thirty-day period over a twelve-month period
and is shown as a percentage of the investment.
The yield calculations do not reflect the effect of any contingent
deferred sales load or premium taxes that may be applicable to a particular
contract. To the extent that the contingent deferred sales load or premium taxes
are applicable to a particular contract, the yield of that contract will be
reduced. For additional information regarding yields and total returns, please
refer to the Statement of Additional Information.
The average annual total return of a variable sub-account refers to
return quotations assuming an investment has been held in the variable
sub-account for various periods of time including, but not limited to, a period
measured from the date the variable sub-account commenced operations. When a
variable sub-account has been in operation for 1, 5, and 10 years, respectively,
the average annual total return for these periods will be provided. The average
annual total return quotations will represent the average annual compounded
rates of return that would equate an initial investment of $1,000 to the
redemption value of that investment (including the deduction of any applicable
contingent deferred sales load but excluding deduction of any premium taxes) as
of the last day of each of the periods for which total return quotations are
provided.
Performance information for any variable sub-account reflects only the
performance of a hypothetical contract under which account value is allocated to
a variable sub-account during a particular time period on which the calculations
are based. Performance information should be considered in light of the
investment objectives and policies and characteristics of the portfolios in
which the variable sub-account invests, and the market conditions during the
given time period, and should not be considered as a representation of what may
be achieved in the future. For a description of the methods used to determine
yield and total returns, see the Statement of Additional Information.
Reports and promotional literature may also contain other information
including (1) the ranking of any variable sub-account derived from rankings of
variable annuity separate accounts or their investment products tracked by
Lipper Analytical Services, Inc., VARDS, IBC/Donoghue's Money Fund Report,
Financial Planning Magazine, Money Magazine, Bank Rate Monitor, Standard and
Poor's Indices, Dow Jones Industrial Average, and other rating services,
companies, publications, or other persons who rank separate accounts or other
investment products on overall performance or other criteria, and (2) the effect
of tax deferred compounding on variable sub-account investment returns, or
returns in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the return
from an investment in a contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a currently taxable basis.
Other ranking services and indices may be used.
In its advertisements and sales literature, Transamerica may discuss,
and may illustrate by graphs, charts, or otherwise, the implications of longer
life expectancy for retirement planning, the tax and other consequences of
long-term investment in the contract, the effects of the contract's lifetime
payout options, and the operation of certain special investment features of the
contract -- such as the dollar cost averaging option. Transamerica may explain
and depict in charts, or other graphics, the effects of certain investment
strategies, such as allocating purchase payments between the general account
options and a variable sub-account. Transamerica may also discuss the Social
Security system and its projected payout levels and retirement plans generally,
using graphs, charts and other illustrations.
Transamerica may from time to time also disclose average annual total
return in non-standard formats and cumulative (non-annualized) total return for
the variable sub-accounts. The non-standard average annual total return and
cumulative total return will assume that no contingent deferred sales load is
applicable. Transamerica may from time to time also disclose yield, standard
total returns, and non-standard total returns for any or all variable
sub-accounts.
All non-standard performance data will only be disclosed if the
standard performance data is also disclosed. For additional information
regarding the calculation of other performance data, please refer to the
Statement of Additional Information.
Transamerica may also advertise performance figures for the variable
sub-accounts based on the performance of a portfolio prior to the time the
variable account commenced operations.
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is the principal
underwriter of the contracts under a Distribution Agreement with Transamerica.
TSSC may also serve as an underwriter and distributor of other contracts issued
through the variable account and certain other separate accounts of Transamerica
and affiliates of Transamerica. TSSC is an indirect wholly-owned subsidiary of
Transamerica Corporation. TSSC is registered with the Commission as a
broker/dealer and is a member of the National Association of Securities Dealers,
Inc. ("NASD"). Its principal offices are located at 1150 South Olive Street, Los
Angeles, California 90015. TSSC may enter into sales agreements with
broker/dealers to solicit applications for the contracts through registered
representatives who are licensed to sell securities and variable insurance
products.
Under the Sales Agreements, TSSC will pay broker-dealers compensation
based on a percentage of each purchase payment. This percentage is within the
range of industry practice. Additional amounts for marketing allowances,
production bonuses, service fees, sales awards and meetings, and asset based
trailer commissions may be paid in certain situations.
LEGAL PROCEEDINGS
There is no pending material legal proceeding affecting the variable
account. Transamerica is involved in various kinds of routine litigation which,
in management's judgment, are not of material importance to Transamerica's
assets or to the variable account.
LEGAL MATTERS
Advice regarding certain legal matters concerning the federal
securities laws applicable to the issue and sale of the contract has been
provided by Sutherland, Asbill & Brennan LLP. The organization of Transamerica,
its authority to issue the contract and the validity of the form of the contract
have been passed upon by James W. Dederer, General Counsel and Secretary of
Transamerica.
ACCOUNTANTS
The consolidated financial statements of Transamerica for each of the
three years in the period ended December 31, 1996, have been audited by Ernst &
Young LLP, Independent Auditors, as set forth in their reports appearing in the
Statement of Additional Information, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing. There are no audited financial statements for the variable account
since it had not commenced operations as of the date of this prospectus.
VOTING RIGHTS
To the extent required by applicable law, all portfolio shares held in
the variable account will be voted by Transamerica at regular and special
shareholder meetings of the respective portfolio in accordance with instructions
received from persons having voting interests in the corresponding variable
sub-account. If, however, the 1940 Act or any regulation thereunder should be
amended, or if the present interpretation thereof should change, or if
Transamerica determines that it is allowed to vote all portfolio shares in its
own right, Transamerica may elect to do so.
The person with the voting interest is the owner. The number of votes
which are available to an owner will be calculated separately for each variable
sub-account. Before the annuity date, that number will be determined by applying
his or her percentage interest, if any, in a particular variable sub-account to
the total number of votes attributable to that variable sub-account. The owner
holds a voting interest in each variable sub-account to which the account value
is allocated. After the annuity date, the number of votes decreases as
settlement option payments are made and as the reserves for the contract
decrease.
The number of votes of a portfolio will be determined as of the date
coincident with the date established by that portfolio for determining
shareholders eligible to vote at the meeting of the portfolios. Voting
instructions will be solicited by written communication prior to such meeting in
accordance with procedures established by the respective portfolios.
Shares as to which no timely instructions are received and shares held
by Transamerica as to which owners have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
contracts participating in the variable sub-account. Voting instructions to
abstain on any item to be voted upon will be applied on a pro rata basis.
Each person or entity having a voting interest in a variable
sub-account will receive proxy material, reports and other material relating to
the appropriate portfolio.
It should be noted that generally the portfolios are not required, and
do not intend, to hold annual or other regular meetings of shareholders.
AVAILABLE INFORMATION
Transamerica has filed a registration statement (the "Registration
Statement") with the Securities and Exchange Commission under the 1933 Act
relating to the contract offered by this prospectus. This prospectus has been
filed as a part of the Registration Statement and does not contain all of the
information set forth in the Registration Statement and exhibits thereto, and
reference is hereby made to such Registration Statement and exhibits for further
information relating to Transamerica and the contract. Statements contained in
this prospectus, as to the content of the contract and other legal instruments,
are summaries. For a complete statement of the terms thereof, reference is made
to the instruments filed as exhibits to the Registration Statement. The
Registration Statement and the exhibits thereto may be inspected and copied at
the office of the Commission, located at 450 Fifth Street, N.W., Washington,
D.C.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this prospectus. The following is
the Table of Contents for that Statement:
TABLE OF CONTENTS Page
THE CONTRACT ...........................................................
DOLLAR COST AVERAGING...................................................
NET INVESTMENT FACTOR...................................................
VARIABLE PAYMENT OPTIONS................................................
Variable Annuity Units and Payments............................
Variable Annuity Unit Value....................................
Transfers After the Annuity Date ..............................
GENERAL PROVISIONS .....................................................
Non-Participating..............................................
Misstatement of Age or Sex ....................................
Proof of Existence and Age ....................................
Annuity Data
Assignment.....................................................
Annual Report..................................................
Incontestability...............................................
Entire Contract................................................
Changes in the Contract........................................
Protection of Benefits.........................................
Delay of Payments..............................................
Notices and Directions.........................................
CALCULATION OF YIELDS AND TOTAL RETURNS.................................
Money Market Sub-Account Yield Calculation............
Other Sub-Account Yield Calculations..................
Standard Total Return Calculations....................
Adjusted Historical Portfolio Performance Data........
Other Performance Data................................
DISTRIBUTION OF THE CONTRACT
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS.........................
STATE REGULATION...............................................
RECORDS AND REPORTS............................................
FINANCIAL STATEMENTS...........................................
APPENDIX
<PAGE>
Appendix A
THE GENERAL ACCOUNT OPTIONS
.........This prospectus is generally intended to serve as a disclosure
document only for the contract and the
variable account. For complete details regarding the general account options,
see the contract itself.
.........Account value allocated to the general account options becomes part of
the general account of Transamerica, which supports insurance and annuity
obligations. Because of exemptive and exclusionary provisions, interests in the
general account have not been registered under the Securities Act of 1933 (the
"1933 Act"), nor is the general account registered as an investment company
under the 1940 Act. Accordingly, neither the general account nor any interests
therein are generally subject to the provisions of the 1933 Act or the 1940 Act,
and Transamerica has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this prospectus which relate to
the general account options.
.........The general account options are part of the general account of
Transamerica. The general account of
Transamerica consists of all the general assets of Transamerica, other than
those in the variable account, or in
any other separate account. Transamerica has sole discretion to invest the
assets of its general account subject
to applicable law.
.........The allocation or transfer of funds to the general account options
does not entitle the owner to share
in the investment experience of Transamerica's general account.
.........There are two general account options: the fixed account and the
guarantee period account, as described
below.
THE FIXED ACCOUNT
.........Currently, Transamerica guarantees that it will credit interest at
a rate of not less than 3% per year,
compounded annually, to amounts allocated to the fixed account under the
contracts. However, Transamerica
reserves the right to change the minimum rate according to state insurance law.
Transamerica may credit interest
at a rate in excess of 3% per year. There is no specific formula for the
determination of excess interest
credits. Some of the factors that the company may consider in determining
whether to credit excess interest to
amounts allocated to the fixed account and the amount in that account, are
general economic trends, rates of
return currently available and anticipated on the company's investments,
regulatory and tax requirements, and
competitive factors.
======================================
Any interest credited to amounts allocated to the fixed account
in excess of 3% per year will be determined in the sole discretion of
Transamerica. The owner assumes the risk that interest credited to the fixed
account allocations may not exceed the minimum guarantee of 3% for any given
year.
=====================================================================
================================================
.........Rates of interest credited to the fixed account will be guaranteed for
at least twelve months and will vary by the timing and class of the allocation,
transfer or renewal. At any time after the end of the twelve month period for a
particular allocation, Transamerica may change the annual rate of interest for
that class; this new annual rate of interest will remain in effect for at least
twelve months. New purchase payments made to the contact which are allocated to
the fixed account may receive different rates of interest and these rates of
interest may differ from those interest rates credited amounts transferred from
the variable sub-accounts or guarantee period account to the fixed account and
from those credited amounts not transferred out but remaining in the fixed
account from allocations applied under certain options and services.
Transfers
.........Each contract year the owner may transfer a percentage of the
value of the fixed account to variable
sub-accounts or to the guarantee period account. The maximum percentage that
may be transferred will be declared
annually by Transamerica. This percentage will be determined by Transamerica
at its sole discretion, but will
not be less than 10% of the value of the fixed account on the preceding
contract anniversary and will be
declared each year. Currently, this percentage is 25%. The owner is limited
to four transfers from the fixed
account each contract year, and the total of all such transfers canno
exceed the current maximum. If
Transamerica permits dollar cost averaging from the fixed account to the
variable sub-accounts, the above
restrictions are not applicable.
.........Generally, transfers may not be made from any variable sub-
account to the fixed account for the
six-month period following any transfer from the fixed account to one or
more of the variable sub-accounts.
Additionally, transfers may not be made from the fixed account to: 1) any
guarantee period; 2) the Transamerica
VIF Money Market Sub-Account; and 3) any variable sub-account identified
by Transamerica and investing in a
portfolio of fixed income investments. Transamerica reserves the right to
modify the limitations on transfers to
and from the fixed account and to defer transfers from the fixed account
for up to six months from the date of
request.
THE GUARANTEE PERIOD ACCOUNT
The guarantee period account provides a guaranteed fixed rate of
interest compounded annually for a specific guarantee period. Amounts allocated
to the guarantee period account will be credited with interest of no less than
3% per year. Amounts withdrawn from a guarantee period account prior to the end
of its guarantee period will be subject to an interest adjustment, as explained
below.
Each guarantee period offers a specified duration with a corresponding
guaranteed interest rate. Currently Transamerica is offered three, five and
seven year guarantee periods but these may change at any time.
==========================================================
The owner bears the risk that, after the initial guarantee period,
Transamerica will not credit interest in excess of three % per year to amounts
allocated to the guarantee period account.
============================
Each amount allocated or transferred to the guarantee period account
will establish a new guarantee period of a duration selected by the owner from
among those then being offered by Transamerica. Every guarantee period offered
by Transamerica will have a duration of at least one year. The minimum amount
that may be allocated or transferred to a guarantee period is $1,000. Purchase
payments allocated to the guarantee period account will be credited on the date
the payment is received at the Service Center. Any amount transferred from
another guarantee period or from a variable sub-account to the guarantee period
account will establish a new guarantee period as of the effective date of the
transfer.
Guarantee Period
Each guarantee period will have its own guaranteed interest rate and
expiration date. The guaranteed interest rate applicable to a guarantee period
will depend on the date the guarantee period is established and the duration
chosen by the owner. A guarantee period chosen may not extend beyond the annuity
date.
Transamerica reserves the right to limit the maximum number of
guarantee periods that may be in effect at any one time.
Transamerica will establish effective annual rates of interest for each
guarantee period. The effective annual rate of interest established by
Transamerica for a guarantee period will remain in effect for the duration of
the guarantee period.
Interest will be credited to a guarantee period based on its daily
balance at a daily rate which is equivalent to the guaranteed interest rate
applicable to that guarantee period for amounts held during the entire guarantee
period. Amounts withdrawn or transferred from a guarantee period prior to its
expiration date will be subject to an Interest Adjustment as described below. In
no event will the effective annual rate of interest applicable to a guarantee
period be less than 3% per year.
Interest Adjustment
If any amount is withdrawn or transferred from a guarantee period prior
to its expiration date (excluding withdrawals for the purpose of paying the
death benefit), the amounts withdrawn or transferred will be subject to an
interest adjustment. The interest adjustment reflects the impact that changing
interest rates have on the value of money invested at a fixed interest rate. The
interest adjustment is computed by multiplying the amount withdrawn or
transferred by the following factor:
[(1 + I) divided by (1 + J + 0.005)]N/12 -1
where:
I is the guaranteed interest rate in effect;
J is the current interest rate available for a period equal to
the number of years remaining in the guarantee period at the
time of withdrawal or transfer (fractional years are rounded
up to the next full year); and
N is the number of full months remaining in the term at the time
the withdrawal or transfer request is processed.
In general the interest adjustment will operate to decrease the value
upon withdrawal or transfer when the guaranteed interest rate in effect for that
allocation is lower than the current interest rate (as of the date of the
transaction) that would apply for a guarantee period equal to the number of full
or fractional years remaining in the guarantee period as of that date. (For
purposes of determining the interest adjustment, if the company does not offer a
guarantee period of that duration, the applicable current interest rate will be
determined by linear interpolation between current interest rates for two
periods that are available). If the current interest rate thus determined plus
1/2 of one percent is greater than the guaranteed interest rate, the interest
adjustment will be negative and amount withdrawn or transferred will be
decreased. However, the value will never be decreased below the initial
allocation plus daily interest at 3% interest per year. There are no positive
interest adjustments.
Expiration of a guarantee period
At least 45 days, but not more than 60 days, prior to the expiration
date of a guarantee period, Transamerica will notify the owner as to the options
available when a guarantee period expires. The owner may elect one of the
following:
(a) transfer the amount held in that guarantee period to a new
guarantee period from among those being offered by
Transamerica at such time.
(b) transfer the amount held in that guaranteed period to one or
more variable sub-accounts or to another general account
option then available.
Transamerica must receive the owner's notice electing one of these at
the Service Center by the expiration date of the guarantee period. If such
election has not been received by Transamerica at the Service Center, the amount
held in that guarantee period will remain in the guaranteed period account and a
new guarantee period of the same duration as the expiring guarantee period, if
offered, will automatically be established by Transamerica with a new guaranteed
interest rate declared by Transamerica for that guarantee period. The new
guarantee period will start on the day following the expiration date of the
previous guarantee period.
If Transamerica is not currently offering guarantee period having the
same duration as the expiring guarantee period, the new guarantee period will be
the next longer duration, or if Transamerica is not offering a guarantee period
longer than the duration of the expiring guarantee period, the next shorter
duration. However, no guarantee period can extend beyond the annuity date.
If the amount held in an expiring guarantee period is less than $1,000,
Transamerica reserves the right to transfer such amount to the money market
variable sub-account.
<PAGE>
Appendix B
Example of Variable Accumulation Unit Value Calculations
Suppose the net asset value per share of a portfolio at the end of the
current valuation period is $20.15; at the end of the immediately preceding
valuation period it was $20.10; the valuation period is one day; and no
dividends or distributions caused the portfolio to go "ex-dividend" during the
current valuation period. $20.15 divided by $20.10 is 1.002488. Subtracting the
one day risk factor for mortality and expense risk charge and the administrative
expense charge of .00367% (the daily equivalent of the current charge of 1.35%
on an annual basis) gives a net investment factor of 1.00245. If the value of
the variable accumulation unit for the immediately preceding valuation period
had been 15.500000, the value for the current valuation period would be 15.53798
(15.5 x 1.00245).
Example of Variable Annuity Unit Value Calculations
Suppose the circumstances of the first example exist, and the value of
a variable annuity unit for the immediately preceding valuation period had been
13.500000. If the first variable annuity payment is determined by using an
annuity payment based on an assumed interest rate of 4% per year, the value of
the variable annuity unit for the current valuation period would be 13.53163
(13.5 x 1.00245 (the net investment factor) x 0.999893). 0.999893 is the factor,
for a one day valuation period, that neutralizes the assumed rate of four
percent (4%) per year used to establish the variable annuity rates found in the
contract.
Example of Variable Annuity Payment Calculations
Suppose that the account is currently credited with 3,200.000000
variable accumulation units of a particular variable sub-account.
Also suppose that the variable accumulation unit value and the variable
annuity unit value for the particular variable sub-account for the valuation
period which ends immediately preceding the first day of the month is 15.500000
and 13.500000 respectively, and that the variable annuity rate for the age and
elected is $5.73 per $1,000. Then the first variable annuity payment would be:
3.200 x 15.5 x 5.73 divided by 1,000 = $284.21,
and the number of variable annuity units credited for future payments
would be:
284.21 divided by 13.5 = 21.052444.
For the second monthly payment, suppose that the variable annuity unit
value on the 10th day of the second month is 13.565712. Then the second variable
annuity payment would be $285.59 (21.052444 x 13.565712).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION FOR
TRANSAMERICA PROPRIETARY VARIABLE ANNUITY
Issued By
Transamerica Life Insurance and Annuity Company
This statement of additional information expands upon subjects
discussed in the current prospectus for the Transamerica Variable Annuity
("contract") issued by Transamerica Life Insurance and Annuity Company
("Transamerica") through Separate Account VA-6. The owner may obtain a free copy
of the prospectus by writing to: Transamerica Life Insurance and Annuity
Company, Annuity Service Center, P.O. Box, 31848, Charlotte, NC 28202 or calling
(800) 258-4260, extension 5560. Terms used in the current prospectus for the
contract are incorporated into this statement.
The contract will be issued as a certificate under a group annuity
contract in some states and as an individual annuity contract in other states.
The term "contract" as used herein refers to both the individual contract and
the certificates issued under the group contract.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
PROSPECTUS AND SHOULD BE READ ONLY IN
CONJUNCTION WITH THE PROSPECTUS FOR THE
CONTRACT AND THE PORTFOLIOS.
Dated ______, 1997
<PAGE>
TABLE OF CONTENTS
Page
THE CONTRACT
DOLLAR COST AVERAGING
NET INVESTMENT FACTOR
VARIABLE PAYMENT OPTIONS Variable Annuity Units and Payments
Variable Annuity Unit Value
Transfers After the Annuity Date
GENERAL PROVISIONS
Non-Participating
Misstatement of Age or Sex
Proof of Existence and Age
Annuity Data
Assignment
Annual Report
Incontestability
Entire Contract
Changes in the Contract
Protection of Benefits
Delay of Payments
Notices and Directions
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Sub-Account Yield Calculation
Other Sub-Account Yield Calculations
Standard Total Return Calculations
Adjusted Historical Portfolio Performance Data
Other Performance Data
DISTRIBUTION OF THE CONTRACT
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
STATE REGULATION
RECORDS AND REPORTS
FINANCIAL STATEMENTS
<PAGE>
THE CONTRACT
The following pages provides additional information about the
contract which may be of interest to some owners.
DOLLAR COST AVERAGING
We reserve the right to send written notification to the owner as to
the options available if termination of dollar cost averaging, either by the
owner or by Transamerica, results in the value in the receiving sub-account(s)
to which monthly transfers were made to be less than $1,000. The owner will have
a reasonable period from the date our notice is mailed to:
(a) transfer the value of the sub-account(s) to another
sub-account with a value equal to or
greater than $1,000; or
(b) transfer funds from another sub-account into the receiving
sub-account(s) to bring the value of
that sub-account to at least $1,000; or
(c) submit an additional purchase payment (subject to the $1000
minimum) to make the value of the
sub-account equal to or greater than $1,000; or
(d) transfer the entire value of the receiving sub-account(s) back
into the source account from which the automatic transfers
were made.
If no election, in a form and manner acceptable to Transamerica, is
made by the owner prior to the end of the allowed period, we reserve the right
to transfer the value of the receiving sub-account(s) back into the source
account from which the automatic transfers were made. Transfers made as a result
of (a), (b), or (d) above will not be counted for purposes of the twelve
transfers allowable without charge per contract year limitation.
NET INVESTMENT FACTOR
For any sub-account of the variable account, the net investment factor
for a valuation period, before the annuity date, is (a) divided by (b), minus
(c) minus (d):
Where (a) is:
The net asset value per share held in the sub-account, as of the end of
the valuation period; plus the per-share amount of any dividend or
capital gain distributions if the "exdividend" date occurs in the
valuation period; plus or minus a per-share charge or credit as
Transamerica may determine, as of the end of the valuation period, for
taxes.
Where (b) is:
The net asset value per share held in the sub-account as of the end of
the last prior valuation period.
Where (c) is:
The daily charge of 0.00329% (1.20% annually) for the mortality and
expense risk charge times the number of calendar days in the current
valuation period.
Where (d) is:
The daily administrative expense charge, currently 0.000411% (0.15%
annually) times the number of calendar days in the current valuation
period. This charge may be increased, but will not exceed 0.00096%
(0.35% annually).
A valuation day is defined as any day that the New York Stock
Exchange is open.
VARIABLE PAYMENT OPTIONS
The variable payment option provide for payments that fluctuate in
dollar amount, based on the investment performance of these elected variable
sub-account(s).
Variable Annuity Units and Payments
For the first monthly payment, the number of variable annuity units
credited in each variable sub-account will be determined by dividing: (a) the
product of the portion of the value to be applied to the variable sub-account
and the variable annuity purchase rate specified in the contract; by (b) the
value of one variable annuity unit in that sub-account on the annuity date.
The amount of each subsequent variable payment equals the product of
the number of variable annuity units in each variable sub-account and the
variable sub-account's variable annuity unit value as of the tenth day of the
month before the payment due date. The amount of each payment may vary.
Variable Annuity Unit Value
The value of a variable annuity unit in a variable sub-account on any
valuation day is determined as described below.
The net investment factor for the valuation period (for the appropriate
payment frequency) just ended is multiplied by the value of the variable annuity
unit for the sub-account on the preceding valuation day. The net investment
factor after the annuity date is calculated in the same manner as before the
annuity date and then multiplied by an interest factor. The interest factor
equals (.999893)n where n is the number of days since the preceding valuation
day. This compensates for the 4% interest assumption built into the variable
annuity purchase rates. Transamerica may offer other assumed interest rates than
4%. The appropriate interest factor will be applied to compensate for the
assumed interest rate.
Transfers After the Annuity Date
After the annuity date, the owner may transfer variable annuity units
from one sub-account to another, subject to certain limitations. (See
"Transfers" page ___ of the prospectus.) The dollar amount of each subsequent
monthly annuity payment after the transfer must be determined using the new
number of variable annuity units multiplied by the variable sub-account's
variable annuity unit value on the tenth day of the month preceding payment.
Transamerica reserves the right to change this day of the month.
The formula used to determine a transfer after the annuity date can be
found in the Appendix to this statement of additional information.
GENERAL PROVISIONS
Non-Participating
The contract is non-participating. No dividends are payable and the
contract will not share in the profits or surplus earnings of Transamerica.
Misstatement of Age or Sex
If the age or sex of the annuitant or any other measuring life has been
misstated in the application, the settlement option payments under the contract
will be whatever the annuity amount applied on the annuity date would purchase
on the basis of the correct age or sex of the annuitant and/or other measuring
life. Any overpayments or underpayments by Transamerica as a result of any such
misstatement may be respectively charged against or credited to the settlement
option payment or payments to be made after the correction so as to adjust for
such overpayment or underpayment.
Proof of Existence and Age
Before making any payment under the contract, Transamerica may require
proof of the existence and/or proof of the age of the annuitant or any other
measuring life, or any other information deemed necessary in order to provide
benefits under the contract.
Annuity Data
Transamerica will not be liable for obligations which depend on
receiving information from a payee or
measuring life until such information is received in a satisfactory form.
Assignment
No assignment of a contract will be binding on Transamerica unless made
in writing and given to Transamerica at its Service Office. Transamerica is not
responsible for the adequacy of any assignment. The owner's rights and the
interest of any annuitant or non-irrevocable beneficiary will be subject to the
rights of any assignee of record.
Annual Report
At least once each contract year prior to the annuity date, the owner
will be given a report of the current account value allocated to each
sub-account of the variable account and any general account option. This report
will also include any other information required by law or regulation. After the
annuity date, a confirmation will be provided with every variable annuity
payment.
Incontestability
Each contract is incontestable from the contract effective date.
<PAGE>
Entire Contract
Transamerica has issued the contract in consideration and acceptance of
the payment of the initial purchase payment and certain required information in
an acceptable form and manner or, where state law requires, the application. In
those states that require a written application, a copy of the application is
attached to and is part of the contract and along with the contract constitutes
the entire contract.
The group annuity contract has been issued to a trust organized under
Missouri law. However, the sole purpose of the trust is to hold the group
annuity contract. The owner has all rights and benefits under the individual
certificate issued under the group contract.
Changes in the Contract
Only two authorized officers of Transamerica, acting together, have the
authority to bind Transamerica or to make any change in the individual contract
or the group contract or individual certificates thereunder and then only in
writing. Transamerica will not be bound by any promise or representation made by
any other persons.
Transamerica may change or amend the individual contract or the group
contract or individual certificates thereunder if such change or amendment is
necessary for the individual contract or the group contract or individual
certificates thereunder to comply with any state or federal law, rule or
regulation.
Protection of Benefits
To the extent permitted by law, no benefit (including death benefits)
under the contract will be subject to any claim or process of law by any
creditor.
Delay of Payments
Payment of any cash withdrawal, lump sum death benefit, or variable
payment or transfer due from the variable account will occur within seven days
from the date the election becomes effective, except that Transamerica may be
permitted to postpone such payment if: (1) the New York Stock Exchange is closed
for other than usual weekends or holidays, or trading on the Exchange is
otherwise restricted; or (2) an emergency exists as defined by the Securities
and Exchange Commission (Commission), or the Commission requires that trading be
restricted; or (3) the Commission permits a delay for the protection of owners.
In addition, while it is our intention to process all transfers from
the sub-accounts immediately upon receipt of a transfer request, we have the
right to delay effecting a transfer from a variable sub-account for up to seven
days. We may delay effecting such a transfer if there is a delay of payment from
an affected portfolio. If this happens, then we will calculate the dollar value
or number of units involved in the transfer from a variable sub-account on or as
of the date we receive a transfer request in a acceptable form and manner, but
will not process the transfer to the transferee sub-account until a later date
during the seven-day delay period when the portfolio underlying the transferring
sub-account obtains liquidity to fund the transfer request through sales of
portfolio securities, new purchase payments, transfers by investors or
otherwise. During this period, the amount transferred would not be invested in a
variable sub-account.
Transamerica may delay payment of any withdrawal from any general
account options for a period of not more than six months after Transamerica
receives the request for such withdrawal. If Transamerica delays payment for
more than 30 days, Transamerica will pay interest on the withdrawal amount up to
the date of payment. (See "Cash Withdrawals" page __ of the prospectus.)
Notices and Directions
Transamerica will not be bound by any authorization, direction,
election or notice which is not, in a form and manner acceptable to
Transamerica, and received at our Service Center.
Any written notice requirement by Transamerica to the owner will be
satisfied by our mailing of any such required written notice, by first-class
mail, to the owner's last known address as shown on our records.
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Sub-Account Yield Calculation
In accordance with regulations adopted by the Commission, Transamerica
is required to compute the money market sub-account's current annualized yield
for a seven-day period in a manner which does not take into consideration any
realized or unrealized gains or losses on shares of the money market series or
on its portfolio securities. This current annualized yield is computed by
determining the net change (exclusive of realized gains and losses on the sale
of securities and unrealized appreciation and depreciation) in the value of a
hypothetical account having a balance of one unit of the money market
sub-account at the beginning of such seven-day period, dividing such net change
in account value by the value of the account at the beginning of the period to
determine the base period return and annualizing this quotient on a 365-day
basis. The net change in account value reflects the deductions for the annual
account fee, the mortality and expense risk charge and administrative expense
charges and income and expenses accrued during the period. Because of these
deductions, the yield for the money market sub-account of the variable account
will be lower than the yield for the money market series or any comparable
substitute funding vehicle.
The Commission also permits Transamerica to disclose the effective
yield of the money market sub-account for the same seven-day period, determined
on a compounded basis. The effective yield is calculated by compounding the
unannualized base period return by adding one to the base period return, raising
the sum to a power equal to 365 divided by 7, and subtracting one from the
result.
The yield on amounts held in the money market sub-account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The money market sub-account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
money market series or substitute funding vehicle, the types and quality of
portfolio securities held by the money market series or substitute funding
vehicle, and operating expenses. In addition, the yield figures do not reflect
the effect of any contingent deferred sales load (of up to 6% of purchase
payments) that may be applicable to a contract.
Other Sub-Account Yield Calculations
Transamerica may from time to time disclose the current annualized
yield of one or more of the variable sub-accounts (except the money market
sub-account) for 30-day periods. The annualized yield of a sub-account refers to
the income generated by the sub-account over a specified 30-day period. Because
this yield is annualized, the yield generated by a sub-account during the 30-day
period is assumed to be generated each 30-day period. The yield is computed by
dividing the net investment income per variable accumulation unit earned during
the period by the price per unit on the last day of the period, according to the
following formula:
YIELD= 2[{a-b + 1}6 - 1]
cd
Where:
a = net investment income earned during the period by the
portfolio attributable to the shares
owned by the sub-account.
b = expenses for the sub-account accrued for the period (net of
reimbursements).
c = the average daily number of variable accumulation units
outstanding during the period.
d = the maximum offering price per variable accumulation unit on
the last day of the period.
Net investment income will be determined in accordance with rules
established by the Commission. Accrued expenses will include all recurring fees
that are charged to all contracts. The yield calculations do not reflect the
effect of any contingent deferred sales load that may be applicable to a
particular contract. contingent deferred sales load range from 6% to 0% of the
amount of account value withdrawn depending on the elapsed time since the
receipt of each purchase payment.
Because of the charges and deductions imposed by the variable account,
the yield for the sub-account will be lower than the yield for the corresponding
portfolio. The yield on amounts held in the variable sub-accounts normally will
fluctuate over time. Therefore, the disclosed yield for any given period is not
an indication or representation of future yields or rates of return. The
variable sub-account's actual yield will be affected by the types and quality of
portfolio securities held by the portfolio, and its operating expenses.
Standard Total Return Calculations
Transamerica may from time to time also disclose average annual total
returns for one or more of the sub-accounts for various periods of time. Average
annual total return quotations are computed by finding the average annual
compounded rates of return over one, five and ten year periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
P{1 + T}n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five or
ten-year period at the end of the one, five, or
ten-year period (or fractional portion of such
period).
All recurring fees are recognized in the ending redeemable value. The
standard average annual total return calculations will reflect the effect of any
contingent deferred sales loads that may be applicable to a particular period.
Adjusted Historical Portfolio Performance Data
Transamerica may also disclose "historic" performance data for a
portfolio, for periods before the variable sub-account commenced operations.
Such performance information will be calculated based on the performance of the
portfolio and the assumption that the sub-account was in existence for the same
periods as those indicated for the portfolio, with a level of contract charges
currently in effect.
This type of adjusted historical performance data may be disclosed on
both an average annual total return and a cumulative total return basis.
Moreover, it may be disclosed assuming that the contract is not surrendered
(i.e., with no deduction for the contingent deferred sales load) and assuming
that the contract is surrendered at the end of the applicable period (i.e.,
reflecting a deduction for any applicable contingent deferred sales load).
Other Performance Data
Transamerica may from time to time also disclose average annual total
returns in a non-standard format in conjunction with the standard described
above. The non-standard format will be identical to the standard format except
that the contingent deferred sales load percentage will be assumed to be 0%.
Transamerica may from time to time also disclose cumulative total
returns in conjunction with the standard format described above. The cumulative
returns will be calculated using the following formula assuming that the
contingent deferred sales load percentage will be 0%.
CTR = {ERV/P} - 1
Where:
CTR = the cumulative total return net of sub-account
recurring charges for the period.
ERV = ending redeemable value of a hypothetical $1,000
payment at the beginning of the one,
five, or ten-year period at the end of the one, five,
or ten-year period (or fractional portion of the
period).
P = a hypothetical initial payment of $1,000.
All non-standard performance data will be advertised only if the
standard performance data is also disclosed.
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is principal
underwriter of the contracts. TSSC may also serve as principal underwriter and
distributor of other contracts issued through the variable account and certain
other separate accounts of Transamerica and any affiliated of Transamerica. TSSC
is a wholly owned subsidiary of Transamerica Insurance Corporation of
California, which is a subsidiary of Transamerica Corporation. TSSC is
registered with the Commission as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). Transamerica pays
TSSC for acting as the principal underwriter under a distribution agreement.
TSSC has entered into sales agreements with other broker-dealers to
solicit applications for the contracts through registered representatives who
are licensed to sell securities and variable insurance products. These
agreements provide that applications for the contracts may be solicited by
registered representatives of the broker-dealers appointed by Transamerica to
sell its variable life insurance and variable annuities. These broker-dealers
are registered with the Commission and are members of the NASD. The registered
representatives are authorized under applicable state regulations to sell
variable life insurance and variable annuities.
Under the agreements, applications for contracts will be sold by
broker-dealers which will receive compensation as described in the Prospectus.
The offering of the contracts is expected to be continuous and TSSC
does not anticipate discontinuing the offering of the contracts. However, TSSC
reserves the right to discontinue the offering of the contracts.
During fiscal year 1996, no commissions were paid to TSSC as
underwriter of the contracts; no amounts were retained by TSSC. The dollar
amounts of commissions reflect the commissions paid to the various
broker-dealers which range from 4% to 6%.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
Title to assets of the variable account is held by Transamerica. The
assets of the variable account are kept separate and apart from Transamerica
general account assets. Records are maintained of all purchases and redemptions
of portfolio shares held by each of the sub-accounts.
STATE REGULATION
Transamerica is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain contract
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the contract will be
modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the variable account will be
maintained by Transamerica or by its Service Office. As presently required by
the provisions of the 1940 Act and regulations promulgated thereunder which
pertain to the variable account, reports containing such information as may be
required under the 1940 Act or by other applicable law or regulation will be
sent to owners semi-annually at their last known address of record. FINANCIAL
STATEMENTS
Because the variable account has not yet commenced operations, there is
no financial statement for the variable account.
The financial statements for Transamerica included in this statement of
additional information should be considered only as bearing on the ability of
Transamerica to meet its obligations under the contracts. They should not be
considered as bearing on the investment performance of the assets in the
variable account.
<PAGE>
APPENDIX
Accumulation Transfer Formula
Transfers after the annuity date are implemented according to the
following formulas:
(1) Determine the number of units to be transferred from the variable
variable sub-account as follows:
= AT/AUV1
(2) Determine the number of variable accumulation units remaining in
such variable sub-account (after the transfer):
= UNIT1 AT/AUV1
(3) Determine the number of variable accumulation units in the
transferee variable sub-account (after the transfer):
= UNIT2 + AT/AUV2
(4) Subsequent variable accumulation payments will reflect the changes
in variable accumulation units in each variable sub-account as of the
next Variable Accumulation Payment's due date.
Where:
(AUV1) is the variable accumulation Unit value of the Variable
sub-account that the transfer is being made from as of the end of the
valuation Period in which the transfer request was received.
(AUV2) is the variable accumulation unit value of the variable
sub-account that the transfer is being made to as of the end of the
valuation period in which the transfer request was received.
(UNIT1) is the number of variable accumulation units in the Variable
sub-account that the transfer is being made from, before the transfer.
(UNIT2) is the number of variable accumulation units in the variable
sub-account that the transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the variable
sub-account.
<PAGE>
Audited Consolidated Financial Statements
Transamerica Life Insurance and Annuity Company and Subsidiaries
December 31, 1996
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
Audited Consolidated Financial Statements
December 31, 1996
Audited Consolidated Financial Statements
Report of Independent Auditors............................ 1
Consolidated Balance Sheet................................ 2
Consolidated Statement of Income.......................... 3
Consolidated Statement of Shareholder's Equity............ 4
Consolidated Statement of Cash Flows...................... 5
Notes to Consolidated Financial Statements................ 6
<PAGE>
1
4112/T-4
3/20/97
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Transamerica Life Insurance and Annuity Company
We have audited the accompanying consolidated balance sheet of Transamerica Life
Insurance and Annuity Company and Subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of income, shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Transamerica Life
Insurance and Annuity Company and subsidiaries at December 31, 1996 and 1995,
and the consolidated results of their operations and cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note A, Transamerica Life Insurance and Annuity Company and
subsidiaries changed their method of accounting for certain debt securities
effective January 1, 1994.
February 12, 1997
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31
1996 1995
--------------------- ------------
(In thousands, except
for share data)
ASSETS
Investments:
<S> <C> <C>
Fixed maturities available for sale $ 13,687,899 $ 12,951,154
Equity securities available for sale 87,812 52,930
Mortgage loans on real estate 395,855 399,711
Real estate 608 3,426
Policy loans 20,362 16,619
Other long-term investments 11,302 14,810
Short-term investments 33,790 45,977
--------------------- ---------------------
14,237,628 13,484,627
Cash 4,368 22,421
Accrued investment income 177,420 170,838
Accounts receivable 47,261 19,501
Reinsurance recoverable on paid and unpaid losses 22,104 19,165
Deferred policy acquisitions costs 248,442 198,349
Other assets 35,544 74,501
Separate account assets 1,638,946 1,348,388
--------------------- ---------------------
$ 16,411,713 $ 15,337,790
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 10,271,301 $ 9,305,237
Reserves for future policy benefits 3,150,082 3,242,722
Policy claims and other 40,241 25,583
--------------------- ---------------------
13,461,624 12,573,542
Income tax liabilities 115,457 192,436
Accounts payable and other liabilities 132,019 95,913
Separate account liabilities 1,638,946 1,348,388
--------------------- ---------------------
15,348,046 14,210,279
Shareholder's equity:
Common stock ($100 par value):
Authorized--50,000 shares
Issued and outstanding --15,300 shares 1,530 1,530
Additional paid-in capital 241,791 241,561
Retained earnings 632,098 533,330
Net unrealized investment gains 188,248 351,090
--------------------- ---------------------
1,063,667 1,127,511
--------------------- ---------------------
$ 16,411,713 $ 15,337,790
===================== =====================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31
1996 1995 1994
---------------- --------------- ----------
(In thousands)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 219,381 $ 294,163 $ 201,182
Net investment income 1,037,417 956,134 840,725
Net realized investment gains (losses) 8,333 19,023 (740)
--------------- --------------- ---------------
TOTAL REVENUES 1,265,131 1,269,320 1,041,167
Benefits:
Benefits paid or provided 937,084 860,118 731,117
Increase in policy reserves and
liabilities 51,508 158,040 109,799
--------------- --------------- ---------------
988,592 1,018,158 840,916
Expenses:
Amortization of deferred policy
acquisition costs 16,949 12,048 13,952
Salaries and salary related expenses 46,261 38,846 32,791
Other expenses 63,993 46,889 41,025
--------------- --------------- ---------------
127,203 97,783 87,768
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 1,115,795 1,115,941 928,684
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 149,336 153,379 112,483
Provision for income taxes 50,568 80,532 39,163
--------------- --------------- ---------------
NET INCOME $ 98,768 $ 72,847 $ 73,320
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
Net
Unrealized
Additional Investment
Common Stock Paid-in Retained Gains
Shares Amount Capital Earnings (Losses)
(in thousands, except for share data)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 15,000 $ 1,500 $ 239,895 $ 387,163 $ 7,652
Cumulative effect of change in
accounting for investments 413,800
Net income 73,320
Change in net unrealized
investment gains (losses) (637,116)
Balance at December 31, 1994 15,000 1,500 239,895 460,483 (215,664)
Net income 72,847
Common stock issued 300 30
Capital contributions from
parent 1,666
Change in net unrealized
investment gains (losses) 566,754
Balance at December 31, 1995 15,300 1,530 241,561 533,330 351,090
Net income 98,768
Capital contributions from
parent 230
Change in net unrealized
investment gains (162,842)
Balance at December 31, 1996 15,300 $ 1,530 $ 241,791 $ 632,098 $ 188,248
========== =========== ============ ============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31
1996 1995 1994
----------------- ------------------ ----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 98,768 $ 72,847 $ 73,320
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in:
Reinsurance recoverable
and accounts receivable (30,699) (19,588) (10,310)
Policy liabilities 589,476 647,724 563,969
Other assets, accounts payable and other
liabilities, and income taxes 66,536 (88,884) (17,527)
Policy acquisition costs deferred (57,498) (50,483) (45,504)
Amortization of deferred policy acquisition costs 16,969 13,910 16,832
Net realized gains on investment transactions (8,353) (20,885) (2,140)
Other (18,875) 26,818 (32,014)
----------------- ----------------- -----------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 656,324 581,459 546,626
INVESTMENT ACTIVITIES
Purchases of securities (4,044,338) (3,873,531) (5,922,110)
Purchases of other investments (114,058) (219,898) (101,984)
Sales of securities 2,669,548 2,386,893 2,763,971
Sales of other investments 117,881 70,071 51,969
Maturities of securities 247,411 252,315 2,016,369
Net change in short-term investments 12,187 (15,466) 11,345
Other (5,614) (6,204) 2,253
----------------- ----------------- -----------------
NET CASH USED BY
INVESTING ACTIVITIES (1,116,983) (1,405,820) (1,178,187)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 4,254,998 3,321,069 2,311,431
Withdrawals from policyholder contract deposits (3,812,392) (2,477,169) (1,680,994)
Capital contribution from parent - 30 -
----------------- ----------------- -----------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 442,606 843,930 630,437
----------------- ----------------- -----------------
INCREASE (DECREASE) IN CASH (18,053) 19,569 (1,124)
Cash at beginning of year 22,421 2,852 3,976
----------------- ----------------- -----------------
CASH AT END OF YEAR $ 4,368 $ 22,421 $ 2,852
================= ================= =================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: Transamerica Life Insurance and Annuity Company ("TALIAC") and its
subsidiaries (collectively, "the Company") engage in providing life insurance,
pension and annuity products, structured settlements and investments, which are
distributed through a network of independent and company-affiliated agents and
independent brokers. The Company's customers are primarily in the United States.
Basis of Presentation: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles which
differ from statutory accounting practices prescribed or permitted by regulatory
authorities.
Use of Estimates: Certain amounts reported in the accompanying consolidated
financial statements are based on the management's best estimates and judgment.
Actual results could differ from those estimates.
New Accounting Standards: In June of 1996, the Financial Accounting Standards
Board issued a new standard on accounting for transfers of financial assets,
servicing of financial assets and extinguishment of liabilities. The Company
must adopt the standard in 1997. The standard requires that a transfer of
financial assets be accounted for as a sale only if certain specified conditions
for surrender of control over the transferred assets exist. When adopted, the
standard is not expected to have a material effect on the consolidated financial
position or results of operations of the Company.
In 1996, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for the impairment of long-lived assets and for
long-lived assets to be disposed of. The standard requires that an impaired
long-lived asset be measured based on the fair value of the asset to be held and
used or the fair value less cost to sell of the asset to be disposed of. There
was no material effect on the consolidated financial position or results of
operations of the Company.
In 1995, the Company adopted the Financial Accounting Standards Board's standard
on accounting for impairment of loans which requires that an impaired loan be
measured based on the present value of expected cash flows discounted at the
loan's effective interest rate or the fair value of the collateral if the loan
is collateral dependent. There was no material effect on the consolidated
financial position or results of operations of the Company.
In 1994, the Company adopted the Financial Accounting Standards Board's standard
on accounting for certain investments in debt and equity securities which
requires the Company to report at fair value, with unrealized gains and losses
excluded from earnings and reported on an after tax basis as a separate
component of shareholder's equity, its investments in debt securities for which
the Company does not have the positive intent and ability to hold to maturity.
Additionally, such unrealized gains and losses are considered in evaluating
deferred policy acquisition costs and policy liabilities, with any resultant
adjustment also excluded from earnings and reported on an after tax basis in
shareholder's equity. As of January 1, 1994, the impact of adopting the standard
was to increase shareholder's equity by $413.8 million (net of deferred policy
acquisition cost adjustment of $107.6 million and deferred taxes of $222.8
million) with no effect on net income.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Principles of Consolidation: The consolidated financial statements of the
Company include the accounts of TALIAC and its subsidiaries, all of which
operate primarily in the life insurance industry. TALIAC is a wholly owned
subsidiary of Transamerica Occidental Life Insurance Company (the "parent")
which is an indirect wholly owned subsidiary of Transamerica Corporation. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Investments: Investments are shown on the following bases:
Fixed maturities--All debt securities, including redeemable preferred
stocks, are classified as available for sale and carried at fair value.
The Company does not carry any debt securities principally for the
purpose of trading. Prepayments are considered in establishing
amortization periods for premiums and discounts and amortized cost is
further adjusted for other-than-temporary fair value declines. Derivative
instruments are also reported as a component of fixed maturities and are
carried at fair value if designated as hedges of securities available for
sale or at amortized cost if designated as hedges of liabilities. See
Note K - Financial Instruments.
Equity securities available for sale (common and nonredeemable preferred
stocks)--at fair value. The Company does not carry any equity securities
principally for the purpose of trading.
Mortgage loans on real estate--at unpaid balances, adjusted for
amortization of premium or discount, less allowance for possible
impairment.
Real estate--Investment real estate that the Company intends to hold for
the production of income is carried at depreciated cost less allowance
for possible impairment. Properties held for sale, primarily foreclosed
assets, are carried at the lower of depreciated cost or fair value less
estimated selling costs.
Policy loans--at unpaid balances.
Other long-term investments--at cost, less allowance for possible
impairment.
Short-term investments--at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined generally on
a specific
identification basis. The Company reports realized gains and losses on
investment transactions in the accompanying consolidated statement of income,
net of the amortization of deferred policy acquisition costs when such
amortization results from the realization of gains or losses other than as
originally anticipated on the sale of investments associated with
interest-sensitive products. Changes in fair values of fixed maturities
available for sale and equity securities available for sale are included in net
unrealized investment gains or losses after adjustment of deferred policy
acquisition costs and reserves for future policy benefits, net of deferred
income taxes as a separate component of shareholder's equity and, accordingly,
have no effect on net income.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Policy Acquisition Costs (DPAC): Certain costs of acquiring new and
renewal insurance contracts, principally commissions, medical examination and
inspection report fees, and certain variable underwriting, issue and field
office expenses, all of which vary with and are primarily related to the
production of such business, have been deferred. DPAC for non-traditional life
and investment-type products are amortized over the life of the related policies
in relation to estimated future gross profits. DPAC for traditional life
insurance products are amortized over the premium-paying period of the related
policies in proportion to premium revenue recognized, using principally the same
assumptions used for computing future policy benefit reserves. DPAC is adjusted
as if the unrealized gains or losses on securities available for sale were
realized. Changes in such adjustments are included in net unrealized investment
gains or losses on an after tax basis as a separate component of shareholder's
equity and, accordingly, have no effect on net income.
Separate Accounts: The Company administers segregated asset accounts for certain
holders of variable annuity contracts and other pension deposit contracts. The
assets held in these Separate Accounts are invested primarily in fixed
maturities, equity securities, other marketable securities, and short-term
investments. The Separate Account assets are stated at fair value and are not
subject to liabilities arising out of any other business the Company may
conduct. Investment risks associated with fair value changes are borne by the
contract holders. Accordingly, investment income and realized gains and losses
attributable to Separate Accounts are not reported in the Company's results of
operations.
Policyholder Contract Deposits: Non-traditional life insurance products include
universal life and other interest-sensitive life insurance policies.
Investment-type products include single and flexible premium deferred annuities,
single premium immediate annuities, guaranteed investment contracts, and other
group pension deposit contracts that do not have mortality or morbidity risk.
Policyholder contract deposits on non-traditional life insurance and
investment-type products represent premiums received plus accumulated interest,
less mortality charges on universal life products and other administration
charges as applicable under the contract. Interest credited to these policies
ranged from 3.2% to 9.5% in 1996 and 2.8% to 10% in 1995 and 1994.
Reserves for Future Policy Benefits: Traditional life insurance products
primarily include limited-payment life insurance policies, annuities with life
contingencies and term life insurance policies. The reserves for future policy
benefits for traditional life insurance products have been provided on a
net-level premium method based upon estimated investment yields, withdrawals,
mortality, and other assumptions which were appropriate at the time the policies
were issued. Such estimates are based upon past experience with a margin for
adverse deviation. Interest assumptions range from 3.5% in earlier years to
11.25%. Reserves for future policy benefits are evaluated as if unrealized gains
or losses on securities available for sale were realized and adjusted for any
resultant premium deficiencies. Changes in such adjustments are included in net
unrealized investment gains or losses on an after tax basis as a separate
component of shareholder's equity and, accordingly, have no effect on net
income.
Recognition of Revenue and Costs: Traditional life insurance contract premiums
are recognized as revenue over the premium-paying period, with reserves for
future policy benefits established from such premiums.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenues for universal life and investment products consist of policy charges
for the cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products consist of
interest credited to policyholder account balances and benefit claims incurred
in excess of policyholder account balances.
Claim reserves include provisions for reported claims and claims incurred but
not reported.
Reinsurance: Coinsurance premiums, commissions, expense reimbursements, and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for the original policies and the terms of the
reinsurance contracts. Yearly renewable term reinsurance is accounted for the
same as direct business. Premiums ceded and recoverable losses have been
reported as a reduction of premium income and benefits, respectively. The ceded
amounts related to policy liabilities have been reported as an asset.
Income Taxes: TALIAC and its subsidiaries are included in the consolidated
federal income tax returns filed by Transamerica Corporation, which by the terms
of a tax sharing agreement generally requires TALIAC and its subsidiaries to
accrue and settle income tax obligations in amounts that would result from
filing separate tax returns with federal taxing authorities.
Deferred income taxes arise from temporary differences between the bases of
assets and liabilities for financial reporting purposes and income tax purposes,
based on enacted tax rates in effect for the years in which the temporary
differences are expected to reverse.
Fair Values of Financial Instruments: Fair values for debt securities are based
on quoted market prices, where available. For debt securities not actively
traded and private placements, fair values are estimated using values obtained
from independent pricing services. Fair values for derivative instruments,
including off-balance-sheet instruments, are estimated using values obtained
from independent pricing services.
Fair values for equity securities are based on quoted market prices.
Fair values for mortgage loans on real estate and policy loans are estimated
using discounted cash flow calculations, based on interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans with
similar characteristics are aggregated for calculation purposes.
The carrying amounts of short-term investments, cash, and accrued investment
income approximate their fair value.
Fair values for liabilities under investment-type contracts are estimated using
discounted cash flow calculations, based on interest rates currently being
offered by similar contracts with maturities consistent with those remaining for
the contracts being valued. The liabilities under investment-type contracts are
included in policyholder contract deposits in the accompanying consolidated
balance sheet.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
<TABLE>
<CAPTION>
NOTE B--INVESTMENTS
The cost and fair value of fixed maturities and equity securities available for
sale are as follows (in thousands):
Gross Gross
Unrealized Unrealized Fair
Cost Gain Loss Value
December 31, 1996
U.S. Treasury securities and
obligations of U.S. government
<S> <C> <C> <C> <C>
corporations and agencies $ 133,066 $ 14,715 $ 49 $ 147,732
Obligations of states and political
subdivisions 116,066 2,285 46 118,305
Foreign governments 30,162 2,057 - 32,219
Corporate securities 7,649,254 273,390 58,781 7,863,863
Public utilities 1,700,327 80,106 8,331 1,772,102
Mortgage-backed securities 3,546,032 166,605 29,532 3,683,105
Redeemable preferred stocks 65,285 10,280 4,992 70,573
----------------- ---------------- ----------------- -----------------
Total fixed maturities $ 13,240,192 $ 549,438 $ 101,731 $ 13,687,899
================= ================ ================= =================
Equity securities $ 31,749 $ 58,095 $ 2,032 $ 87,812
================= ================ ================ =================
December 31, 1995
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 63,123 $ 5,612 $ 68,735
Obligations of states and political
subdivisions 90,371 3,080 93,451
Foreign governments 33,024 4,480 37,504
Corporate securities 5,718,182 445,286 $ 10,797 6,152,671
Public utilities 1,643,203 141,813 1,082 1,783,934
Mortgage-backed securities 4,502,214 296,683 6,116 4,792,781
Redeemable preferred stocks 18,727 3,757 406 22,078
----------------- ---------------- ---------------- ----------------
Total fixed maturities $ 12,068,844 $ 900,711 $ 18,401 $ 12,951,154
================= ================ ================ ================
Equity securities $ 27,379 $ 26,685 $ 1,134 $ 52,930
================= ================ ================ ================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
The cost and fair value of fixed maturities available for sale at December 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties (in thousands):
Fair
Cost Value
Maturity
<S> <C> <C> <C>
Due in 1997 $ 283,203 $ 290,779
Due in 1998-2001 2,610,341 2,636,570
Due in 2002-2006 2,344,952 2,401,802
Due after 2006 4,390,379 4,605,070
---------------- ----------------
9,628,875 9,934,221
Mortgage-backed securities 3,546,032 3,683,105
Redeemable preferred stock 65,285 70,573
---------------- ----------------
$ 13,240,192 $ 13,687,899
================ ===============
The components of the carrying value of real estate are as follows (in
thousands):
1996 1995
--------------- ----------
Investment real estate $ 608 $ 628
Properties held for sale - 2,798
--------------- ---------------
$ 608 $ 3,426
=============== ===============
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE B--INVESTMENTS (Continued)
As of December 31, 1996, the Company held total investments in each of the
following issuers, other than the United States Government or a United States
Government agency or authority, which exceeded 10% of total shareholder's equity
(in thousands) (See Note H.):
Name of Issuer Carrying Value
Transamerica Corporation $ 283,292
MBNA Corporation 240,861
First U.S.A. Bank 133,382
Secured Bond Trust 1996-1 128,945
Dean Witter Discover Co. 120,957
The carrying value of assets on deposit with public officials in compliance with
regulatory requirements was $14.8 million at December 31, 1996.
<TABLE>
<CAPTION>
Net investment income (expense) by major investment category is summarized as
follows (in thousands):
1996 1995 1994
--------------- ---------------- ----------
<S> <C> <C> <C>
Fixed maturities $ 1,003,698 $ 929,826 $ 819,747
Equity securities 1,915 708 1,193
Mortgage loans on real estate 33,432 26,322 22,310
Real estate 320 462 908
Policy loans 841 693 628
Other long-term investments (518) 442 746
Short-term investments 4,685 5,375 3,316
---------------- ---------------- ----------------
1,044,373 963,828 848,848
Investment expenses (6,956) (7,694) (8,123)
---------------- ---------------- ----------------
$ 1,037,417 $ 956,134 $ 840,725
================ ================ ================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
<TABLE>
<CAPTION>
NOTE B--INVESTMENTS (Continued)
Significant components of net realized investment gains (losses) are as follows
(in thousands):
1996 1995 1994
---------------- ----------------- -----------
Net gains (losses) on disposition of investment in:
<S> <C> <C> <C>
Fixed maturities $ 6,247 $ 29,272 $ 3,380
Equity securities 7,023 3,206 372
Other (175) 220 (40)
---------------- ---------------- ----------------
13,095 32,698 3,712
Provision for impairment (4,742) (11,813) (1,572)
Accelerated amortization of DPAC (20) (1,862) (2,880)
---------------- ---------------- ----------------
$ 8,333 $ 19,023 $ (740)
================ ================ ================
The components of net gains on disposition of investment in fixed maturities are as follows (in thousands):
1996 1995 1994
---------------- ----------------- -----------
Gross gains $ 22,962 $ 31,163 $ 22,868
Gross losses (16,715) (1,891) (19,488)
---------------- ---------------- ----------------
$ 6,247 $ 29,272 $ 3,380
================ ================ ================
</TABLE>
Proceeds from disposition of investments in fixed maturities available for sale
were $2,899.9 million in 1996, $2,560.9 million in 1995 and $4,778.3 million in
1994.
<TABLE>
<CAPTION>
The costs of certain investments have been reduced by the following allowances
for impairment in value (in thousands):
December 31
1996 1995
<S> <C> <C>
Fixed maturities $ 22,495 $ 29,430
Mortgage loans on real estate 11,031 10,031
--------------- ---------------
$ 33,526 $ 39,461
=============== ===============
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE B--INVESTMENTS (Continued)
<TABLE>
<CAPTION>
The components of net unrealized investment gains in the accompanying
consolidated balance sheet are as follows (in thousands):
December 31,
1996 1995
Unrealized gains on investment in:
<S> <C> <C>
Fixed maturities $ 447,707 $ 882,310
Equity securities 56,063 25,551
-------------------- --------------------
503,770 907,861
Fair value adjustments to:
DPAC (19,159) (28,723)
Reserves for future policy benefits (195,000) (339,000)
-------------------- --------------------
(214,159) (367,723)
Related deferred taxes (101,363) (189,048)
-------------------- --------------------
$ 188,248 $ 351,090
==================== ====================
</TABLE>
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
<TABLE>
<CAPTION>
Significant components of changes in DPAC are as follows (in thousands):
1996 1995 1994
-------------------- -------------------- -------------
<S> <C> <C> <C>
Balance at beginning of year $ 198,349 $ 238,526 $ 161,827
Cumulative effect of change in
accounting for investments - - (107,590)
Amounts deferred:
Commissions 39,736 34,717 33,166
Other 17,762 15,766 12,338
Amortization attributed to:
Net gain on disposition of investments (20) (1,862) (2,880)
Operating income (16,949) (12,048) (13,952)
Fair value adjustment 9,564 (76,750) 155,617
-------------------- -------------------- --------------------
Balance at end of year $ 248,442 $ 198,349 $ 238,526
==================== ==================== ====================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
<TABLE>
<CAPTION>
NOTE D--POLICY LIABILITIES
Components of policyholder contract deposits are as follows (in thousands):
December 31
1996 1995
------------------ ------------
<S> <C> <C>
Liabilities for investment-type products $ 10,050,058 $ 9,135,930
Liabilities for non-traditional life insurance products 221,243 169,307
------------------ ------------------
$ 10,271,301 $ 9,305,237
================== ==================
</TABLE>
Reserves for future policy benefits were evaluated as if the unrealized gains on
securities available for sale had been realized and adjusted for resultant
premium deficiencies by $195 million as of December 31, 1996 and $339 million as
of December 31, 1995.
<TABLE>
<CAPTION>
NOTE E--INCOME TAXES
Components of income tax liabilities are as follows (in thousands):
December 31
1996 1995
------------------ ------------
<S> <C> <C>
Current tax liabilities $ 963 $ 6,205
Deferred tax liabilities 114,494 186,231
------------------ ------------------
$ 115,457 $ 192,436
================== ==================
</TABLE>
<TABLE>
<CAPTION>
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1996 1995
------------------ ------------
<S> <C> <C>
Deferred policy acquisition costs $ 85,629 $ 114,032
Unrealized investment gains 101,363 189,048
Life insurance policy liabilities (60,263) (102,634)
Provision for impairment of investments (11,734) (13,811)
Other-net (501) (404)
------------------ ------------------
$ 114,494 $ 186,231
================== ==================
</TABLE>
TALIAC offsets all deferred tax assets and liabilities and presents them in a
single amount in the consolidated balance sheet.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
<TABLE>
<CAPTION>
NOTE E--INCOME TAXES
Components of provision for income taxes are as follows (in thousands):
1996 1995 1994
------------------ ------------------ ------------
<S> <C> <C> <C>
Current tax expense $ 34,627 $ 20,335 $ 31,415
Deferred tax expense 15,941 60,197 7,748
------------------ ------------------ ------------------
$ 50,568 $ 80,532 $ 39,163
================== ================== ==================
The differences between federal income taxes computed at the statutory rate and
the provision for income taxes as reported are as follows (in thousands):
1996 1995 1994
------------------ ------------------ ------------
Income before income taxes $ 149,336 $ 153,379 $ 112,483
Tax rate 35% 35% 35%
------------------ ------------------ ------------------
Federal income taxes at statutory rate 52,268 53,683 39,369
Income not subject to tax (855) (532) (254)
Adjustment to deferred tax asset - 28,300 -
Other (845) (919) 48
------------------ ------------------ ------------------
$ 50,568 $ 80,532 $ 39,163
================== ================== =================
</TABLE>
In 1995, the Company determined that certain deferred tax assets were not
realizable and wrote down the deferred tax assets by $28.3 million.
Under the Life Insurance Company Income Tax Act of 1959, a portion of "gain from
operations" was not subject to current income taxation but was accumulated, for
tax purposes, in a memorandum account designated as "policyholders' surplus
account." The balance in this account was frozen at December 31, 1983 pursuant
to the Deficit Reduction Act of 1984. This amount becomes subject to tax when it
exceeds a certain maximum or when cash dividends are paid therefrom. The
policyholders' surplus account balance at December 31, 1996 was $20.3 million.
At December 31, 1996, $610 million was available for payment of dividends
without such tax consequences. No income taxes has been provided on the
policyholders' surplus account since the conditions that would cause such taxes
are remote.
Income taxes of $39.9 million, $29.0 million and $35.0 million, were paid
principally to the parent in 1996, 1995, and 1994, respectively.
NOTE F--REINSURANCE
The Company is involved in both the cession and assumption of reinsurance with
other companies. Risks are reinsured with other companies to permit the recovery
of a portion of the direct losses, however, the Company remains liable to the
extent the reinsuring companies do not meet their obligations under these
reinsurance agreements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE F--REINSURANCE (Continued)
<TABLE>
<CAPTION>
The components of the Company's life insurance in force and premiums and other
considerations are summarized as follows (in thousands):
Ceded to Assumed
Direct Other from the Net
Amount Companies Parent Amount
1996
Life insurance in force,
<S> <C> <C> <C> <C>
at end of year $ 25,452,566 $ 5,773,367 $ - $ 19,679,199
=================== =================== =================== ==================
Premiums and other
considerations $ 140,479 $ 34,965 $ 113,867 $ 219,381
=================== =================== =================== ==================
Benefits paid or
provided $ 663,344 $ 68 $ 273,808 $ 937,084
=================== =================== =================== ==================
1995
Life insurance in force,
at end of year $ 17,685,133 $ 4,540,826 $ - $ 13,144,307
=================== =================== =================== ==================
Premiums and other
considerations $ 272,272 $ 28,393 $ 50,284 $ 294,163
=================== =================== =================== ==================
Benefits paid or
provided $ 588,044 $ 520 $ 272,594 $ 860,118
=================== =================== =================== ==================
1994
Life insurance in force,
at end of year $ 11,419,732 $ 4,475,693 $ 154 $ 6,944,193
=================== =================== =================== ==================
Premiums and other
considerations $ 92,022 $ 27,630 $ 136,790 $ 201,182
=================== =================== =================== ==================
Benefits paid or
provided $ 464,873 $ 320 $ 266,564 $ 731,117
=================== =================== =================== ==================
</TABLE>
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by noncontributory
defined pension benefit plans sponsored by the Company and the Retirement Plan
for Salaried Employees of Transamerica Corporation and Affiliates. Pension
benefits are based on the employee's compensation during the highest paid 60
consecutive months during the 120 months before retirement. Annual contributions
to the plans generally include a provision for current service costs plus
amortization of prior service costs over periods ranging from 10 to 30 years.
Assets of the plans are invested principally in publicly listed stocks and
bonds.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (Continued)
The Company's total pension costs (benefits) recognized for all plans were
$(1.5) million in 1996, $0.4 million in 1995 and $0.8 million in 1994, all of
which related to the plan sponsored by Transamerica Corporation. The plans
sponsored by the Company are not material to the consolidated financial position
of the Company.
The Company also participates in various contributory defined benefit programs
sponsored by Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. Postretirement benefit costs charged to income
were not significant in 1996, 1995 and 1994.
NOTE H--RELATED PARTY TRANSACTIONS
The Company has various transactions with Transamerica Corporation and certain
of its affiliates in the normal course of operations. These transactions include
premiums received for employee benefit services (none in 1996 or in 1995, and
$0.7 million in 1994) administration of pension funds, loans and advances,
investments in a money market fund managed by an affiliated company, rental of
space, and other specialized services. At December 31, 1996, pension funds
administered for these related companies aggregated $1,067.9 million and the
investment in an affiliated money market fund, included in short-term
investments, was $13.1 million.
During 1996, the Company transferred certain below investment grade bonds with
an aggregate book value of $242 million, including an aggregate interest
receivable of $5.6 million, to a special purpose subsidiary of Transamerica
Corporation in exchange for assets with a fair value of $247.4 million,
comprised of collateralized higher-rated bond obligations of $233.3 million
issued by the special purpose subsidiary and cash of $14.1 million. The excess
of fair value of the consideration received over the book value of the bonds
transferred is included in net realized investment gains.
During 1995, the Company transferred real estate with an aggregate book value of
$7.4 million to an affiliate within the Transamerica Corporation group of
consolidated companies and cash of $25.2 million to the parent in exchange for
mortgage loans of $35.1 million. The excess of fair value of the consideration
received over the book value of the real estates transferred, net of related tax
payable to the parent, is included as a capital contribution.
Included in the investment in fixed maturities available for sale is a note
receivable from Transamerica Corporation of $50 million. The note receivable
matures in 2013 and bears interest at 7%.
NOTE I--REGULATORY MATTERS
TALIAC and its subsidiaries are subject to state insurance laws and regulations,
principally those of the Company's state of incorporation. Such regulations
include the risk-based capital requirement and the restriction on the payment of
dividends. Generally, dividends during any year may not be paid, without prior
regulatory approval, in excess of the greater of 10% of the Company's statutory
capital and surplus as of the preceding year end or the Company's statutory net
income from operations for the preceding year. The insurance department of the
domiciliary
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE I--REGULATORY MATTERS (Continued)
<TABLE>
<CAPTION>
state recognizes these amounts as determined in conformity with statutory
accounting practices prescribed or permitted by the insurance department, which
vary in some respects from generally accepted accounting principles. The
Company's statutory net income and statutory capital and surplus which are
represented by TALIAC's net income and capital and surplus are summarized as
follows (in thousands):
1996 1995 1994
------------------- ------------------- ------------
<S> <C> <C> <C>
Statutory net income $ 75,836 $ 69,103 $ 57,293
Statutory capital and surplus, at
end of year 596,526 527,276 447,239
</TABLE>
NOTE J-COMMITMENTS AND CONTINGENCIES
The Company issues synthetic guaranteed investment contracts which guaranty, in
exchange for a fee, the liquidity of pension plans to pay certain qualified
benefits if other sources of plan liquidity are exhausted. Unlike traditional
guaranteed investment contracts, the plan sponsor retains the credit risk in a
synthetic contract while the Company assumes some limited degree of interest
rate risk. To minimize the risk of loss, the Company underwrites these contracts
based on plan sponsor agreement, at the inception of the contract, on investment
guidelines to be followed, including overall portfolio credit and maturity
requirements. Adherence to these investment requirements is monitored regularly
by the Company. At December 31, 1996, commitments to maintain liquidity for
benefit payments on notional amounts of $1.9 billion were outstanding compared
to $620 million at December 31, 1995.
The Company is subject to mandatory assessments by state guaranty funds to cover
losses to policyholders of those insurance companies that are under regulatory
supervision. Certain states allow such assessments to be used to reduce future
premium taxes. The Company estimates and recognizes its obligation for guaranty
fund assessments, net of premium tax deductions, based on the survey data
provided by National Organization of Life and Health Insurance Guaranty
Associations. At December 31, 1996 and 1995, the estimated exposures and the
resultant accruals recorded were not material to the consolidated financial
position or results of operations of the Company.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE J-COMMITMENTS AND CONTINGENCIES (Continued)
Substantially all leases of the Company are operating leases principally for the
rental of real estate. Rental expenses for equipment and properties were $6.9
million in 1996, $3.3 million in 1995 and $2.7 million in 1994. The following is
a schedule by years of future minimum rental payments required under operating
leases that have initial or remaining noncancelable lease terms in excess of one
year as of December 31, 1996 (in thousands):
Year ending December 31:
1997 $ 1,837
1998 2,463
1999 2,399
2000 2,225
2001 2,181
Later years 17,033
$ 28,138
==================
The Company is a defendant in various legal actions arising from its operations.
These include legal actions similar to those faced by many other major life
insurers which allege damages related to sales practices for universal life
policies sold between January 1981 and June 1996. In one such action, the
Company and plaintiffs' counsel are working toward a settlement. Any such
proposed settlement is subject to of significant contingencies, including
approval by the court. The lawsuit may proceed if such contingencies are not
satisfied. In the opinion of TALIAC, any ultimate liability which might result
from such litigation would not have a materially adverse effect on the
consolidated financial position of TALIAC or the results of its operations.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE K--FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
The carrying values and estimated fair values of financial instruments are as
follows (in thousands):
December 31
--------------------------------------------
1996 1995
----------------------------------- --------------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
<S> <C> <C> <C> <C>
Fixed maturities available for sale $ 13,687,899 $ 13,687,899 $ 12,951,154 $ 12,951,154
Equity securities available for sale 87,812 87,812 52,930 52,930
Mortgage loans on real estate 395,855 413,798 399,711 452,204
Policy loans 20,362 20,362 16,619 16,619
Short-term investments 33,790 33,790 45,977 45,977
Cash 4,368 4,368 22,421 22,421
Accrued investment income 177,420 177,420 170,838 170,838
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 3,890,964 3,623,710 3,749,666 3,584,500
Single premium immediate annuities 90,133 90,256 81,178 86,905
Guaranteed investment contracts 2,790,663 2,811,556 2,619,768 2,696,459
Other deposit contracts 3,278,298 3,319,115 2,685,318 2,747,908
Off-balance-sheet assets (liabilities):
Interest rate swap agreements
hedges of liabilities in a:
Receivable position - 37,348 - 23,658
Payable position - (5,095) - (3,086)
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE K--FINANCIAL INSTRUMENTS (Continued)
The Company enters into various interest rate agreements in the normal course of
business, primarily as a means of managing its interest rate exposure in
connection with asset and liability management.
Interest rate swap agreements generally involve the periodic exchange of fixed
rate interest and floating rate interest payments by applying a specified market
index to the underlying contract or notional amount, without exchanging the
underlying notional amounts. The differential to be paid or received on those
interest rate swap agreements that are designated as hedges of financial assets
is recorded on an accrual basis as a component of net investment income. The
differential to be paid or received on those interest rate swap agreements that
are designated as hedges of financial liabilities is recorded on an accrual
basis as a component of benefits paid or provided. While the Company is not
exposed to credit risk with respect to the notional amounts of the interest rate
swap agreements, the Company is subject to credit risk from potential
nonperformance of counterparties throughout the contract periods. The amounts
potentially subject to such credit risk are much smaller than the notional
amounts. The Company controls this credit risk by entering into transactions
with only a selected number of high quality institutions, establishing credit
limits and maintaining collateral when appropriate.
Interest rate floor and cap agreements generally provide for the receipt of
payments in the event the average interest rates during a settlement period fall
below specified levels under interest rate floor agreements or rise above
specified levels under interest rate cap agreements. A swaption generally
provides for an option to enter into an interest rate swap agreement in the
event of unfavorable interest rate movements. These agreements generally require
upfront premium payments. The costs of swaptions and interest rate floor and cap
agreements are amortized over the contractual periods and resulting amortization
expenses are included in net investment income. Any conditional receipts under
these agreements are recorded on an accrual basis as a component of net
investment income if designated as hedges of financial assets or as a component
of benefits paid or provided if designated as hedges of financial liabilities.
Gains of losses on terminated interest rate agreements are deferred and
amortized over the remaining life of the underlying assets or liabilities being
hedged.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE K--FINANCIAL INSTRUMENTS (Continued)
<TABLE>
<CAPTION>
The information on derivative instruments is summarized as follows (in
thousands):
Aggregate Weighted
Notional Average
Amount Fixed Rate Fair Value
December 31, 1996
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
<S> <C> <C> <C>
Fixed rate interest $ 240,035 $ 6.69% $ 1,970
Floating rate interest 245,905 6.76% 5,711
Floating rate interest based on one
index and receives floating rate
interest based on another index 312,118 - (8,989)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC
pays:
Fixed rate interest 60,000 4.39% 333
Floating rate interest 1,323,953 6.16% 31,477
Floating rate interest based on one
index and receives floating rate
interest based on another index 58,585 - 443
Interest rate floor agreements 160,500 7.00% 11,107
Swaptions 1,827,570 4.93% 10,403
December 31, 1995
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
Fixed rate interest $ 145,173 7.87% $ (5,708)
Floating rate interest 140,000 5.65% (679)
Floating rate interest based on one
index and receives floating rate
interest based on another index 65,000 - (229)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC
pays:
Fixed rate interest 60,000 4.39% 741
Floating rate interest 922,678 6.18% 20,025
Floating rate interest based on one
index and receives floating rate
interest based on another index 52,000 - (110)
Interest rate floor agreements 160,500 7.00% 19,507
Interest rate cap agreements 250,000 5.93% 792
Swaptions 1,117,140 5.52% 20,957
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Generally, notional amounts indicate the volume of transactions and estimated
fair values indicate the amounts subject to credit risk.
Activities with respect to the notional amounts are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Beginning End
of Year Additions Maturities Terminations of Year
1996:
Interest rate swap agreements
designated as hedges of
<S> <C> <C> <C> <C> <C>
securities available for sale $ 350,173 $ 516,497 $ 53,554 $ 15,058 $ 798,058
Interest rate swap agreements
designated as hedges of
financial liabilities 1,034,678 1,411,285 902,225 101,200 1,442,538
Interest rate floor agreements 160,500 - - - 160,500
Interest rate cap agreements 250,000 - 250,000 - -
Swaptions 1,117,140 820,000 109,570 - 1,827,570
--------------- -------------- --------------- ---------------- ---------------
$ 2,912,491 $ 2,747,782 $ 1,315,349 $ 116,258 $ 4,228,666
=============== ============== =============== ================ ===============
1995:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 184,777 $ 246,791 $ 59,948 $ 21,447 $ 350,173
Interest rate swap agreements
designated as hedges of
financial liabilities 501,545 1,023,910 460,777 30,000 1,034,678
Interest rate floor agreements 160,500 - - - 160,500
Interest rate cap agreements 100,000 250,000 100,000 - 250,000
Swaptions - 1,117,140 - - 1,117,140
--------------- -------------- --------------- ---------------- ---------------
$ 946,822 $ 2,637,841 $ 620,725 $ 51,447 $ 2,912,491
=============== ============== =============== ================ ===============
1994:
Interest rate swap agreements
designated as hedges of
securities available for sale $ 63,000 $ 121,777 $ 184,777
Interest rate swap agreements
designated as hedges of
financial liabilities 110,000 391,545 501,545
Interest rate floor agreements - 160,500 160,500
Interest rate cap agreements - 100,000 100,000
--------------- -------------- --------------- ---------------- ---------------
$ 173,000 $ 773,822 $ - $ - $ 946,822
=============== ============== =============== ================ ===============
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, fixed maturities
and mortgage loans on real estate. The Company places its temporary cash
investments with high credit quality financial institutions. Concentrations of
credit risk with respect to investments in fixed maturities and mortgage loans
on real estate are limited due to the large number of such investments and their
dispersion across many different industries and geographic areas. At December
31, 1996, the Company had no significant concentration of credit risk.
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
All required financial statements are included in Parts A and B of this
Registration Statement.
(b) Exhibits:
(1) Resolutions of Board of Directors of Transamerica Life Insurance and
Annuity Company (the "Company") authorizing the creation of Separate Account
VA-6 (the "Separate Account"). 1/
(2) Not Applicable.
(3) Form of Underwriting Agreement between the Company, the Separate
Account and Transamerica Securities Sales Corporation.2/
(4) Form of Flexible Premium Deferred Variable Annuity Contract. 2/
(5) Form of Application for Flexible Premium Variable Annuity. 2/
(6) (a) Articles of Incorporation of Transamerica Life Insurance and
Annuity Company.1/
(b) By-Laws of Transamerica Life Insurance and Annuity Company.1/
(7) Not Applicable.
(8) Form of Participation Agreements between the Company and the Funds.2/
(9) Opinion and Consent of Counsel.2/
(10) (a) Consent of Counsel.2/
(b) Consent of Independent Auditors.2/
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Performance Data Calculations.3/
(14) Not Applicable.
(15) Powers of Attorney.2/
(27) Financial Data Schedule 2/
- ----------------------------
1/ Incorporated by reference to the like numbered exhibit to the initial filing
of the Registration Statement of Transamerica Life Insurance and Annuity
Company's Separate Account VA-6 on Form N-4, File No. 333-9745, (August 8,
1996).
2/ Filed herewith.
3/ To be filed by subsequent pre-effective amendment.
<PAGE>
Items 25. Directors and Officers of the Depositor.
The names of Directors and Executive Officers of the Company, their
positions and offices with the Company, and their other affiliations are as
follows. The address of Directors and Executive Officers is 1150 South Olive
Street, Los Angeles, California 90015-2211, unless indicated by asterisk.
List of Directors of Transamerica Life Insurance and Annuity Company
Robert Abeles Richard N. Latzer
Thomas J. Cusack
James W. Dederer Karen MacDonald
Gary U. Rolle'
Richard H. Finn
David E. Gooding T. Desmond Sugrue
Edgar H. Grubb Nooruddin Veerjee
Frank C. Herringer Robert A. Watson
List of Officers for Transamerica Life Insurance and Annuity Company
Thomas J. Cusack Chairman
Nooruddin S. Veerjee FSA President
Robert Abeles Executive Vice President and Chief Financial Officer
James W. Dederer CLU General Counsel and Secretary
Nicki Bair FSA Senior Vice President
Roy Chong-Kit Senior Vice President and Chief Actuary
Bruce Clark Senior Vice President
Karen MacDonald Senior Vice President and Corporate Actuary
John O. Meyers Senior Vice President
Richard N. Latzer Chief Investment Officer
Gary U. Rolle' CFA Chief Investment Officer
William R. Wellnitz FSA Senior Vice President and Actuary
Stephen J. Ahearn Investment Officer
Glen. E. Bickerstaff Investment Officer
John M. Casparian Investment Officer
Heather E. Creeden Investment Officer
Colin Funai Investment Officer
William L. Griffin Investment Officer
Sharon K. Kilmer Investment Officer
Matthew W. Kuhns Investment Officer
Lyman Lokken Investment Officer
Michael G. Luongo Investment Officer
Thomas D. Lyon Investment Officer
Thomas C. Pokorski Investment Officer
Susan A. Silbert Investment Officer
Philip W. Treick Investment Officer
Jeffrey S. Van Harte Investment Officer
Paul Wintermute Investment Officer
Lawrence M. Agin FSA Vice President & Associate Actuary
Frank Beardsley Vice President
Marsha Blackman Vice President
Rose Ann Bremser Vice President
David Chernow Vice President
Matt Coben Vice President
Thomas P. Dolan Vice President
Paul Hankowitz MD Vice President & Chief Medical Director
Thomas Hauptli Vice President
Phoebe Huang Vice President
Zahid Hussain Vice President and Associate Actuary
Ahmad Kamil Vice President & Associate Acutary
Michael Kappos Vice President
Kenneth Kiefer Vice President
Ken Kilbane Vice President
James D. Lamb FSA Vice President & Acutary
Maureen McCarthy Vice President
Vic Modugno Vice President & Associate Actuary
Mischelle Mullin Vice President
Paul L. Norris FSA Vice President & Actuary
Thomas P. O'Neill Vice President
Alison B. Pettingall Vice President
Donald P. Radisich Vice President
William N. Scott FLMI Vice President
Christina Stiver Vice President
Karen Stout Vice President
James O. Strand Vice President
Alice Su Vice President
Colleen Vandermark Vice President
Richard L. Weinstein FSA Vice President & Associate Actuary
Sally S. Yamada CPA, FLMI Vice President & Treasurer
Reid A. Evers Second Vice President & Assistant General Counsel
David Fairhall FSA Second Vice President & Associate Actuary
Sharon Haley Second Vice President
Karin Kemenes Second Vice President
Emily Urbano Second Vice President
Aldo Davanzo Assitant Secretary
Kamran Haghighi Tax Officer
Kim A. Tursky Assistant Secretary
Virginia M. Wilson Controller
James Wolfenden Statement Officer
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
Registrant is a separate account of Transamerica Life Insurance and Annuity
Company, is controlled by the Contract Owners, and is not controlled by or under
common control with any other person. The Depositor, Transamerica Life Insurance
and Annuity Company, is wholly owned by Transamerica Occidental Life Insurance
Company, which is wholly owned by Transamerica Insurance Corporation of
California (Transamerica-California). Transamerica-California may be deemed to
be controlled by its parent, Transamerica Corporation.
The following chart indicates the persons controlled by or under common
control with Transamerica.
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
Transamerica Corporation
ARC Reinsurance Corporation - Hawaii
Inter-America Corporation - California
Mortgage Corporation of America - California
Pyramid Insurance Company, Ltd. - Hawaii
Pacific Cable Ltd. - Bermuda
TC Cable, Inc. - Delaware
River Thames Insurance Company Limited - England
RTI Holdings, Inc. - Delaware
Transamerica Airlines, Inc. - Delaware
Transamerica Asset Management Group, Inc. - Delaware
Criterion Investment Management Company - Texas
Transamerica CBO I, Inc. - Delaware
Transamerica Corporation (Oregon) - Oregon
Transamerica Delaware, L.P. - Delaware
Transamerica Finance Group, Inc. - Delaware
BWAC Twelve, Inc. - Delaware
Transamerica Insurance Finance Corporation - Maryland
Transamerica Insurance Finance Company (Europe) - Maryland
Transamerica Insurance Finance Corporation, California - California
Transamerica Insurance Finance Corporation, Canada - Ontario
Transamerica Finance Corporation - Delaware
TA Leasing Holding Co., Inc. - Delaware
Trans Ocean Ltd. - Delaware
Trans Ocean Container Corp. - Delaware
Cool Solutions, Inc. - Delaware
TOD Liquidating Corp. - California
TOL S.R.L. - Italy
Trans Ocean Leasing Deutschland GMBH - Germany
Trans Ocean Leasing PTY Limited - Australia
Trans Ocean Management Corporation -
Trans Ocean Regional Corporate Holdings - California
Trans Ocean SARL - France
Trans Ocean Tank Services Corporation - Delaware
Trans Ocean Container Finance Corp. - Delaware
Transamerica Leasing Inc. - Delaware
Better Asset Management Company LLC - Delaware
Greybox L.L.C. - Delaware
Transamerica Leasing Holdings Inc. - Delaware
Greybox Services Limited - United Kingdom
Intermodal Equipment, Inc. - Delaware
Transamerica Leasing N.V. - Belgium
Transamerica Leasing SRL - Italy
Transamerica Distribution Services Inc. - Delaware
Transamerica Leasing Coordination Center - Belgium
Transamerica Leasing do Brasil Ltda. - Brazil
Transamerica Leasing GmbH - West Germany
Transamerica Leasing Limited - United Kingdom
ICS Terminals (UK) Limited - United Kingdom
Transamerica Leasing Pty. Ltd. - Australia
Transamerica Leasing (Canada) Inc. - Canada
Transamerica Leasing (HK) Ltd. - Hong Kong
Transamerica Leasing (Proprietary) Limited - South Africa
Transamerica Tank Container Leasing Pty. Limited - Australia
Transamerica Trailer Holdings I Inc. - Delaware
Transamerica Trailer Holdings II Inc. - Delaware
Transamerica Trailer Holdings III Inc. - Delaware
Transamerica Trailer Leasing AB - Sweden
Transamerica Trailer Leasing A/S - Denmark.
Transamerica Trailer Leasing GmbH - Germany
Transamerica Trailer Leasing S.A. - Fra.
Transamerica Trailer Leasing S.p.A. - Italy
Transamerica Trailer Leasing (Belgium) N.V. - Belg.
Transamerica Trailer Leasing (Netherlands) B.V. - Neth.
Transamerica Trailer Spain S.A. - Spn.
Transamerica Transport Inc. - NJ
TELColorado Holding Co., Inc. - Delaware
Transamerica Commercial Finance Corporation, I - Delaware
BWAC Credit Corporation - Delaware
BWAC International Corporation - Delaware
Transamerica Business Credit Corporation - Delaware
The Plain Company - Delaware
Transamerica Global Distribution Finance Corporation - Delaware
Transamerica Inventory Finance Corporation - Delaware
BWAC Seventeen, Inc. - Delaware
Transamerica Commercial Finance Canada, Limited - Ontario
Transamerica Commercial Finance Corporation, Canada - Canada
TCF Commercial Leasing Corporation, Canada - Ontario
BWAC Twenty-One, Inc. - Delaware
Transamerica Commercial Holdings Limited - United Kingdom
Transamerica Commercial Finance Limited - United Kingdom
Transamerica Trailer Leasing Limited - United Kingdom
Transamerica Commercial Finance Corporation - Delaware
TCF Asset Management Corporation - Colorado
Transamerica Joint Ventures, Inc. - Delaware
Transamerica Commercial Finance France S.A. - France
Transamerica GmbH Inc. - Delaware
Transamerica Financieringsmaatschappij B.V. - Netherlands
Transamerica GmbH - Germany - Germany
Transamerica Finance Loan Company - Delaware
Transamerica Financial Services Holding Company - Delaware
Arcadia General Insurance Company - Arizona
Arcadia National Life Insurance Company - Arizona
First Credit Corporation - Delaware
Pacific Agency, Inc. - Indiana
Pacific Agency, Inc. - Nevada
Pacific Finance Loans - California
Pacific Service Escrow Inc. - Delaware
Transamerica Acceptance Corporation - Delaware
Transamerica Financial Services Limited, United Kingdom -
United Kingdom
Transamerica Credit Corporation - Nevada
Transamerica Credit Corporation (Washington) - Washington
Transamerica Financial Consumer Discount Company (Pennsylvania) -
Pennsylvania
Transamerica Financial Corporation - Nevada
Transamerica Financial Services Mortgage Company - Delaware
Transamerica Financial Professional Services, Inc. - California
Transamerica Financial Services - California
NAB Services, Inc. - California
Transamerica Financial Services Company - Ohio
Transamerica Financial Services Inc. - Hawaii
Transamerica Financial Services Inc. - Minnesota
Transamerica Financial Services of Dover, Inc. - Delaware
Transamerica Financial Services, Inc. - Alabama
Transamerica Financial Services, Inc. - British Columbia
Transamerica Financial Services, Inc. - New Jersey
Transamerica Financial Services, Inc. - Texas
Transamerica Financial Services, Inc. - West Virginia
Transamerica Insurance Administrators, Inc. - Delaware
Transamerica Mortgage Company - Delaware
Transamerica Financial Services Finance Co. - Delaware
Transamerica HomeFirst, Inc. - California
Transamerica Foundation - California
Transamerica Information Management Services, Inc. - Delaware
Transamerica Insurance Corporation of California - California
Arbor Life Insurance Company - Arizona
Plaza Insurance Sales, Inc. - California
Transamerica Advisors, Inc. - California
Transamerica Annuity Service Corporation - New Mexico
Transamerica Financial Resources, Inc. - Delaware
Financial Resources Insurance Agency of Texas - Texas
TBK Insurance Agency of Ohio, Inc. - Ohio
Transamerica Financial Resources Insurance Agency of Alabama Inc.
- Alabama
Transamerica Financial Resources Insurance Agency of Massachusetts Inc. -
Massachusetts
Transamerica International Insurance Services, Inc. - Delaware
Home Loans and Finance Ltd. - United Kingdom
Transamerica Occidental Life Insurance Company - California Bulkrich
Trading Limited - Hong Kong First Transamerica Life Insurance
Company - New York NEF Investment Company - California Transamerica
Life Insurance and Annuity Company - North Carolina
Transamerica Assurance Company - Colorado
Transamerica Life Insurance Company of Canada - Canada
Transamerica Variable Insurance Fund, Inc. - Maryland
USA Administration Services, Inc. - Kansas
Transamerica Products, Inc. - California
Transamerica Leasing Ventures, Inc. - California
Transamerica Products II, Inc. - California
Transamerica Products IV, Inc. - California
Transamerica Products I, Inc. - California
Transamerica Securities Sales Corporation - Maryland
Transamerica Service Company - Delaware
Transamerica International Holdings, Inc. - Delaware
Transamerica Investment Services, Inc. - Delaware
Transamerica Income Shares, Inc. (managed by TA Investment Services)
- Maryland
Transamerica LP Holdings Corp. - Delaware
Transamerica Properties, Inc. - Delaware
Transamerica Retirement Management Corporation - Delaware
Transamerica Real Estate Tax Service (A Division of Transamerica
Corporation) - N/A
Transamerica Flood Hazard Certification (A Division of TA Real Estate
Tax Service) - N/A
Transamerica Realty Services, Inc. - Delaware
Bankers Mortgage Company of California - California
Pyramid Investment Corporation - Delaware
The Gilwell Company - California
Transamerica Affordable Housing, Inc. - California
Transamerica Minerals Company - California
Transamerica Oakmont Corporation - California
Ventana Inn, Inc. - California
Transamerica Telecommunications Corporation - Delaware
*Designates INACTIVE COMPANIES
A Division of Transamerica Corporation
Limited Partner; Transamerica Corporation is General Partner
Item 27. Number of Contractowners
None.
Item 28. Indemnification
Transamerica Life Insurance and Annuity Company's Articles of Incorporation
provide in Article VIII as follows:
To the full extent from time to time permitted by law, no person who is
serving or who has served as a director of the Corporation shall be personally
liable in any action for monetary damages for breach of his or her duty as a
director, whether such action is brought by or in the right of the corporation
or otherwise. Neither the amendment or repeal of this Article nor inconsistent
with this Article, shall eliminate or reeduce the protection afforded by this
Article to a director of the Corporation with respect to any matter which
occurred, or any cause of action, suit or claim which but for this Article would
have accrued or arising prior to such amendment, repeal or adoption.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling person of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liability (other than the payment by the registrant of expenses incurred or paid
by the director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
The directors and officers of Transamerica Life Insurance and Annuity
Company are covered under a Directors and Officers liability program which
includes direct coverage to directors and officers (Coverage A) and corporate
reimbursement (Coverage B) to reimburse the Company for indemnification of its
directors and officers. Such directors and officers are indemnified for loss
arising from any covered claim by reason of any Wrongful Act in their capacities
as directors or officers. In general, the term "loss" means any amount which the
insureds are legally obligated to pay for a claim for Wrongful Acts. In general,
the term "Wrongful Acts" means any breach of duty, neglect, error, misstatement,
misleading statement or omission caused, committed or attempted by a director or
officer while acting individually or collectively in their capacity as such,
claimed against them solely by reason of their being directors and officers.
Item 29. Principal Underwriter
(a) Transamerica Securities Sales Corporation, the principal underwriter,
is also the underwriter for: Transamerica Investors, Inc.; Transamerica
Variable Insurance
Fund, Inc.; Transamerica Occidental Life Insurance Company's Separate Accounts:
VA-2; VA-2L; VA-2NL; VA-2NLNY; VA-5; and VA-5NLNY; Transamerica Life Insurance
and Annuity Company's Separate Accounts VL and VA-1. The Underwriter is
wholly-owned by Transamerica Insurance Corporation of California.
(b) The following table furnishes information with respect to each director
and officer of the principal Underwriter currently distributing securities of
the registrant:
Barbara Kelley Director & President
Regina Fink Director & Secretary
Nooruddin Veerjee Director
Dan Trivers Senior Vice President
Nicki Bair Vice President
Chris Shaw Second Vice President
Ben Tang Treasurer
Item 30. Location of Accounts and Records
Physical possession of each account, book, or other document required to be
maintained is kept at the Company's offices at 101401 North Tryon Street,
Charlotte, North Carolina 28202.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The registrant undertakes that it will file a post-effective amendment
to this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for as long as purchase payments under the contracts offered
herein are being accepted.
(b) Registrant hereby undertakes to include either (1) as part of any
application to purchase a Contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a Statement of Additional
Information;
(c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
Form N-4 promptly upon written or oral request.
(d) Transamerica hereby represents that the fees and charges deducted
under the
Contracts are reasonable in the aggregate in relation to services rendered,
expenses expected
to be incurred and risks assumed by Transamerica.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Transamerica Life Insurance and Annuity Company certifies that it has
caused this registration statement to be signed on its behalf in the City of Los
Angeles, State of California, on the day of August, 1996.
SEPARATE ACCOUNT VA-6 OF
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
(REGISTRANT)
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
(DEPOSITOR)
----------------------------
Aldo Davanzo
Assistant Secretary
As required by the Securities Act of 1933, this Registration Statement has
been signed below on August 21, 1997 by the following persons or by their duly
appointed attorney-in-fact in the capacities specified:
Signatures Titles Date
______________________* President and Director,
Chief Executive Officer August 21, 1997
Nooruddin S. Veerjee
______________________* Director August 21_, 1997
Robert Abeles
______________________* Chairman and Director August 21_, 1997
Thomas J. Cusack
______________________* Director August 21_, 1997
James W. Dederer
______________________* Director August 21_, 1997
Richard H. Finn
______________________* Director August 21_, 1997
David E. Gooding
______________________* Director August 21_, 1997
Edgar H. Grubb
______________________* Director August 21_, 1997
Frank C. Herrringer
______________________* Director August 21_, 1997
Richard N. Latzer
______________________* Director August 21_, 1997
Karen MacDonald
______________________* Director August 21_, 1997
Gary U. Rolle'
______________________* Director August 21_, 1997
T. Desmond Sugrue
______________________* Director August 21_, 1997
Robert A. Watson
_________________________ On August 21, 1997 as Attorney-in-Fact
pursuant to
*By: Aldo Davanzo powers of attorney filed herewith.
<PAGE>
Exhibits
(3) Form of Underwriting Agreement
(4) Form of Flexible Premium Deferred Variable Annuity Contract
(5) Application for Flexible Premium Variable Annuity
(8) Form of Participation Agreement .
(9) Opinion and Consent of Counsel.
(10) (a) Consent of Counsel.
(b) Consent of Independent Auditors.
(15) Powers of Attorney.
(27) Financial Data Schedule
<PAGE>
Exhibit (3)
Form of Underwriting Agreement
<PAGE>
DISTRIBUTION AGREEMENT BETWEEN
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
AND TRANSAMERICA SECURITIES SALES CORPORATION
This Agreement (the "Agreement") made as of this 1st day of August, 1997,
by and between TRANSAMERICA INSURANCE SECURITIES SALES CORPORATION (the
"Distributor"), a corporation organized and existing under the laws of the State
of Maryland with its principal place of business in Los Angeles, California, and
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY (the "Company"), an insurance
company organized and existing under the laws of the State of North Carolina
with its principal place of business in Charlotte, North Carolina, for itself
and on behalf of certain of its separate accounts.
W I T N E S S E T H
WHEREAS, the Company may establish and maintain a class or classes of
variable insurance contracts as set forth on Schedule 1 to this Agreement, as
may be amend from time to time in accordance with Section 18 of this Agreement,
and including any riders to such contracts and any other contract offered in
connection therewith (collectively the "Contracts") (A "class of Contracts"
shall mean those Contracts issued by the Company on the same policy form or
forms and covered by the same Registration Statement.); and
WHEREAS, the Distributor, a wholly-owned subsidiary of Transamerica
Insurance Corporation of California, is registered as a broker-dealer with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (the "1934 Act") and is a member of the National Association
of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the parties desire to have the Distributor act as the principal
underwriter for and in connection with the sale of the Contracts to the public
and assume full responsibility for the securities activities of each "associated
person" (as that term is defined in Section 3(a)(18) of the 1934 Act) of the
Distributor, including each associated person of the Distributor engaged in the
offer and sale of the Contracts (a "Representative"); and
WHEREAS, the Distributor and the Company acknowledge that the Company is
best suited to provide certain administrative functions in connection with the
Contracts, subject at all times to the control and direction of the Distributor
with respect to the broker-dealer operations;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, the Distributor and the Company agree as follows:
1. Definitions
a. Fund -- An investment company serving as the funding medium for any
Contracts, specified in Schedule 2 to this Agreement as in effect at the
time this Agreement is executed, and such other investment companies that
may be added to Schedule 2 from time to time in accordance with Section 18
of this Agreement.
b. Intermediary Distributors -- A person registered as a broker-dealer
and licensed as a life insurance agent or affiliated with a person so
licensed, and authorized to distribute the Contracts pursuant to a sales
agreement as provided for in Section 2 of this Agreement (the "Sales
Agreement").
c. Separate Account -- Each separate account of the Company specified
on Schedule 3 to this Agreement as in effect at the time this Agreement is
executed, and such other separate accounts of the Company that may be added
to Schedule 3 from time to time in accordance with Section 18 of this
Agreement, each of which will be approved by the Commissioner of Insurance
of the State of California under Section 10506 of the California Insurance
Code.
2. Distribution Duties and Responsibilities. The Distributor shall act as
principal underwriter for the Contracts in connection with their sale during the
term of this Agreement in each state or other jurisdiction where they may
legally be sold (the "Territory"). The Distributor is authorized to solicit
applications for the Contracts ("Applications") directly from customers and
prospective customers in the Territory and to select all persons who will be
authorized to engage in solicitation activities with respect to the Contracts.
Such selection activity shall include the recruitment and appointment of third
parties to act as distributors. In turn such third parties may be authorized as
Intermediary Distributors to engage in solicitation activities, including the
solicitation of Applications directly from customers and prospective customers
in the Territory and/or as Intermediary Distributors to recruit other third
parties to act as Intermediary Distributors, in each case as the Company and the
Distributor shall agree to. The Distributor shall enter into separate written
Sales Agreements with each such Intermediary Distributor. Such Sales Agreements
will be substantially in the form attached to this Agreement as Exhibit A, but
may include such additional or alternative terms and conditions that are not
otherwise inconsistent with this Agreement, subject to the Company's review and
prior written consent (which may be given by facsimile), which consent will not
be unreasonably withheld, and which will be deemed to have been given if the
Company has not responded in writing (by facsimile or otherwise) within 10
calendar days. The Distributor will provide the Company with a profile on each
Intermediary Distributor. The Distributor shall use its best efforts to market
the Contracts actively, both directly and through Intermediary Distributors.
The Distributor shall have the power and authority to select and recommend
Representatives of the Distributor, and to authorize an Intermediary Distributor
to select and recommend representatives of such Intermediary Distributor (the
"Intermediary's Representatives"), for appointment as agents of the Company, and
only such Representatives and Intermediary's Representatives shall become agents
of the Company with authority to engage in solicitation activities with respect
to the Contracts. The Distributor shall be solely responsible for background
investigations of its Representatives to determine their qualifications, good
character and moral fitness to sell the Contracts, and pursuant to the Sales
Agreement, each Intermediary Distributor shall be solely responsible for
background investigations of its Intermediary's Representatives to determine
their qualifications, good character and moral fitness to sell the Contracts.
The Company shall appoint in the appropriate states or jurisdictions such
selected and recommended agents, provided that the Company reserves the right,
which right shall not be exercised unreasonably, to refuse to appoint as agent
any Representative or Intermediary's Representative, or, once appointed, to
terminate the same at any time with or without cause. No other individuals,
persons or entities, other than affiliates of the Company, shall have authority
to engage in solicitation activities with respect to the Contracts, without the
express prior written consent of the Distributor.
The Distributor shall at all times be an independent contractor, and shall
be under no obligation to produce any particular amount of sales of the
Contracts. Anything in this Agreement to the contrary notwithstanding, the
Company retains ultimate responsibility for the direction and control of the
services provided under this Agreement, and the ultimate right to control the
sale of the Contracts, including the right to suspend sales in any jurisdiction
or jurisdictions, to appoint and discharge agents of the Company, or to refuse
to sell a Contract to any applicant for purchase of a Contract (an "Applicant")
for any reason whatsoever. The Distributor and the Distributor's Representatives
shall not have the authority, and shall not grant the authority to Intermediary
Distributors or the Intermediary's Representatives, on behalf of the Company: to
make, alter or discharge any Contract or other contract entered into pursuant to
a Contract; to waive any Contract forfeiture provision; to extend the time of
paying any premium on the Contracts; or to receive any monies or premiums
(except for the sole purpose of forwarding such monies or premiums to the
Company). The Distributor shall not possess or exercise any authority on behalf
of the Company other than that expressly conferred upon the Distributor by this
Agreement.
3. Filings, Marketing Materials and Representatives. The Distributor will
assume full responsibility for the securities activities of its Representatives,
and, similarly, each Intermediary Distributor shall assume, pursuant to the
Sales Agreement, full responsibility for the Intermediary's Representatives'
securities activities, including compliance with the NASD Rules of Fair Practice
and any applicable state securities laws and regulations. The Distributor,
either directly or indirectly through the Company as its agent, shall: (a) make
timely filings with the SEC, the NASD, and any other appropriate securities
regulatory authorities of any advertisements, sales literature, or other
materials relating to the Contracts, as required by law or regulation to be
filed; (b) make available to the Company for approval copies of all agreements
and other written plans and documents relating to the sale of the Contracts, and
shall, if necessary, submit such agreements and other plans and documents to the
appropriate securities regulatory authorities for approval prior to their use;
(c) assist its Representatives in their efforts to prepare themselves to pass
any and all applicable NASD and state insurance qualification examinations; (d)
register its Representatives with the NASD and any other appropriate securities
regulatory authorities; and (e) supervise and control their Representatives in
the performance of their selling activities. The Intermediary Distributors,
pursuant to each Sales Agreement, shall have similar responsibilities with
regard to the assistance, registration, supervision and control of the
Intermediary's Representatives. In connection with obtaining the clearances of
the appropriate regulatory authorities, the parties agree to use their best
efforts to obtain such clearances as expeditiously as possible, and shall not
use any sales material, plan, or other agreement in any jurisdiction unless the
appropriate filings have been made and approvals obtained that are necessary to
make their use proper and legal therein.
The Distributor will take reasonable steps to ensure that the
Representatives do not make any recommendations to Applicants for the purchase
of a Contract(s) in the absence of reasonable grounds to believe that the
purchase of such Contracts is suitable for the Applicants. Determinations of
suitability will be based on various types of information including, but not
limited to, information furnished to a Representative by an Applicant after
reasonable inquiry by the Representative concerning the Applicant's insurance
and investment objectives, financial situation, and needs, including the
likelihood that the Applicant will be financially able to make sufficient
premium payments to derive the benefits from the Contracts. Likewise, pursuant
to each Sales Agreement, each Intermediary Distributor shall take reasonable
steps to ensure that the Intermediary's Representatives do not make any
recommendations to any Applicant in the absence of reasonable grounds to believe
that the purchase of such Contracts is suitable for the Applicant, with
determinations of suitability based upon the factors set forth immediately
above.
The Distributor will not encourage a prospective Applicant to surrender or
exchange an insurance contract in order to purchase a Contract, nor will the
Distributor encourage any existing holder of a Contract (a "Contractholder") to
surrender or exchange a Contract in order to purchase another insurance
contract. Likewise, each Intermediary Distributor, pursuant to each Sales
Agreement with the Distributor, shall not encourage a prospective Applicant to
surrender or exchange an insurance contract in order to purchase a Contract, nor
encourage any Contractholder to surrender or exchange a Contract in order to
purchase another insurance contract. The obligations under this paragraph are
subject to applicable NASD Rules of Fair Practice and any other applicable laws,
regulations and regulatory guidelines.
The Distributor and each Intermediary Distributor, pursuant to each Sales
Agreement, each shall take reasonable steps to ensure that their respective
Representatives or Intermediary's Representatives do not use any advertisement,
sales literature, or other promotional material which has not been specifically
approved in advance by the Company; and the Company, as agent for the
Distributor, shall be responsible for filing such items, as necessary, with the
SEC, the NASD, and any other appropriate securities regulatory authorities, and,
where necessary, shall obtain the approvals of such authorities. No associated
person, either of the Distributor or of any Intermediary Distributor, shall, in
connection with the offer and sale of the Contracts, make any representation or
communicate any information regarding the Contracts or the Company, which is not
inconsistent with (i) materials approved by the Company for distribution to the
public, or (ii) a current prospectus relating to the Contracts, or (iii) the
then effective registration statements under the Securities Act of 1933 (the
"1933 Act") for the Contracts.
4. Offer, Sale and Acceptance of Applications. The Company will undertake
to appoint the Representatives and Intermediary's Representatives as life
insurance agents of the Company, and will be responsible for ensuring that only
agents properly qualified under the insurance laws of all relevant jurisdictions
will engage in the offer and sale of the Contracts. Completed Applications shall
be transmitted directly to the Company for acceptance or rejection by the
Company in its sole discretion, in accordance with its insurance underwriting
and selection rules. Initial and subsequent premium payments under the Contracts
shall be made payable to the Company, and when such payments are received by a
Representative or Intermediary's Representative they shall be held in a
fiduciary capacity and forwarded promptly, and in any event not later than two
business days, in full to the Company. All such premium payments, whether by
check, money order or wire, shall be the property of the Company.
5. Undertakings. The Distributor, in order to discharge its duties under
this Agreement, may designate certain employees of the Company to become limited
or general securities principals of the Distributor, and the Company will use
its best efforts to ensure the cooperation of such employees. These individuals
will perform various functions on behalf of the Distributor, including, but not
limited to, supervision of the securities sales activities of the
Representatives and enforcement of the compliance rules and procedures of the
Distributor. All books and records relating to the Distributor's operations
shall: (a) be maintained and preserved by the Company as agent for the
Distributor, in conformity with the requirements of SEC Rules 17a-3 and 17a-4
under the 1934 Act; (b) be and remain the property of the Distributor; and (c)
be at all times subject to inspection by the SEC and the NASD in accordance with
Section 17(a) of the 1934 Act.
The Distributor will fully cooperate with the Company in executing such
papers and performing such acts as may be reasonably requested by the Company
from time to time for the purpose of: (a) maintaining the registration of the
Contracts under the 1933 Act, and of the Separate Account(s) under the
Investment Company Act of 1940 (the "1940 Act"); and (b) maintaining the
qualification of the Contracts for sale under applicable state laws.
Upon the completion of each transaction relating to the Contracts for which
a confirmation is legally required, the Company shall, acting as agent of the
Distributor, send a written confirmation of such transaction to the customer.
6. Servicing of the Contracts. The Company shall provide all necessary
insurance operations, including such actuarial, financial, statistical, premium
billing and collection, accounting, data processing, and investment services as
may be required with respect to the Contracts. In addition to these services, or
other services provided hereunder, the Company shall provide such executive,
legal, clerical, and other personnel related services as may be required to
carry out the Company's obligations under this Agreement, including its
obligation to perform certain functions on behalf of the Distributor.
7. Recordkeeping. The Company shall provide recordkeeping and general
office administration services incidental to or necessary for the proper
performance of the services to be performed by the Company and, to the extent
the Distributor does not elect to perform said recordkeeping and administration
functions, the Distributor in accordance with this Agreement. In addition, the
Company shall maintain all book and records relating to the Contracts, which
materials will be available to the Distributor (to the extent that they relate
to the broker-dealer operations) and to the appropriate regulatory authorities
upon request.
All books, accounts, and records of the Company and the Distributor as may
pertain to the Contracts and this Agreement shall be maintained so as to clearly
and accurately disclose the nature and details of all Contract transactions and
all other transactions relating to this Agreement. The Company shall own and
control all records pertinent to its variable insurance products operations that
are maintained by the Distributor under this Agreement, and in the event this
Agreement is terminated for any reason, all such records shall promptly be
returned to the Company without charge, free from any claim or retention of
rights of the Distributor.
8. Confidentiality. The Distributor shall keep confidential any information
obtained pursuant to this Agreement, and shall disclose such information only if
the Company has authorized such disclosure, or if such disclosure is expressly
required by the appropriate federal or state regulatory authorities.
9. Expenses and Fees. The Company shall pay commissions to the Distributor
on premiums paid under all Contracts sold pursuant to this Agreement and any
Sales Agreements entered into pursuant to Section 2 of this Agreement. The
Company shall, in connection with the sale of the Contracts, pay all amounts,
including sales commissions, owed by the Distributor to the Representatives or
Intermediary Distributors. The Distributor shall be responsible for all tax
reporting information which the Distributor is required to provide under
applicable tax law to its agents, Representatives or employees with respect to
the Contracts.
The Company shall pay, or cause another person to pay, all expenses related
to: (a) registering the Distributor's associated persons with the NASD and all
other appropriate securities regulatory authorities; (b) preparing the
Distributor's associated persons to pass the applicable NASD and state
qualification examinations; (c) preparing and distributing all prospectuses
(including all amendments and supplements thereto), Contracts, notices,
confirmations, periodic reports, proxy solicitation materials, sales literature
and advertising relating to the sale of the Contracts; and (d) ensuring
compliance with all applicable insurance and securities laws and regulations
relating to the registration of the Contracts and the activities of the
Representatives in connection with the offer and sale of the Contracts. Except
as otherwise indicated herein, or by written agreement of the parties, the
Company shall pay, or cause another person to pay, all expenses resulting from
this Agreement.
10. Dual Interests. It is understood that any shareholder, director,
officer, employee, or agent of the Distributor, or of any organization
affiliated with the Distributor, or of any organization which the Distributor
may have an interest, or of any organization which may have an interest in the
Distributor may be a Contractholder; and that the existence of any such dual
interest shall not affect the validity thereof or the validity of any
transaction hereunder except as may be otherwise provided in the articles of
incorporation or by-laws of the Distributor, or by the specific provisions of
applicable law. For the purpose of this Section 10, the term "affiliated person"
shall have the same definition as set forth in the 1940 Act subject, however, to
such exemptions as may be granted pursuant to the 1940 Act.
11. Customer Claims. The Company shall provide all services relating to
claims made under the Contracts, including investigation, adjustment, and
defense of claims, and shall make all payments relating to the Contracts,
including payments representing claims, Contract loans, full and partial
surrenders, and amounts paid under Contract settlement options. The Company
shall retain ultimate authority for adjustments and claim payments, which
payments shall be final and conclusive.
12. Cooperation Regarding Investigations and Proceedings. The Distributor
and the Company agree to fully cooperate with each other in any insurance
regulatory examination, investigation, or proceeding, or in any judicial
proceeding arising in connection with the Contracts distributed under this
Agreement. The Distributor and the Company further agree to fully cooperate with
each other in any securities regulatory examination, investigation, or
proceeding, or in any judicial proceeding with respect to the Company, the
Distributor, their affiliates and agents, or representatives, to the extent that
such examination, investigation, or proceeding is in connection with Contracts
distributed under this Agreement. The Distributor shall, upon request by the
appropriate federal and state regulatory authorities, furnish such authorities
with any information or reports in connection with the Distributor's services
under this Agreement.
13. Sharing of Information. Each party hereto will promptly advise the
other of: (a) any action taken by the SEC, the NASD, or other regulatory
authorities, of which it has knowledge, affecting the registration or
qualification of the Contracts, or the right to offer the Contracts for sale;
and (b) the happening of any event which makes untrue any statement contained in
the registration statements or prospectus, or which requires the making of any
change in the registration statements or prospectus in order to make the
statements therein not misleading.
14. Indemnification.
a. The Company. The Company shall indemnify and hold harmless the
Distributor and each person who controls or is associated with the
Distributor within the meaning of such terms under the federal securities
laws, and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or
several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of any
action, suit or proceeding or any claim asserted), to which the Distributor
and/or any such person may become subject, under any statute or regulation,
any NASD rule or interpretation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged
omission to state a materials fact required to be stated therein or
necessary to make the statements therein not misleading, in light of
the circumstances in which they were made, contained in any (A)
registration statement or in any prospectus; or (B) a blue-sky
application or other document executed by the Company specifically for
the purpose of qualifying any or all of the Contracts for sale under
the securities laws of any jurisdiction; provided that the Company
shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, an untrue
statement or alleged untrue statement or omission or alleged omission:
(A) made in reliance upon information furnished in writing to the
Company by the Distributor specifically for use in the preparation of
any registration statement or any such blue-sky application or any
amendment thereof or supplement thereto; or (B) contained in any
registration statement, or any post-effective amendment thereto which
becomes effective, filed by a Fund with the SEC relating to shares of
such Fund (the "Shares"), including any financial statements included
in, or any exhibit to, such registration statement or post-effective
amendment, any prospectus of a Fund relating to the Shares either
contained in any such registration statement or post-effective
amendment or filed pursuant to Rule 497(c) or Rule 497(e) under the
1933 Act, any blue-sky application or other document executed by a
Fund specifically for the purpose of qualifying any or all of the
shares of such Fund for sale under the securities laws of any
jurisdiction or any promotional, sales or advertising material or
written information relating to the Shares authorized by a Fund; or
(ii) result because of the terms of any Contract or because of
any breach by the Company of any provision of this Agreement or of any
Contract or which proximately result from any activities of the
Company's officers, directors, employees or agents or their failure to
take any action in connection with the sale, processing or
administration of the Contracts. This indemnification agreement shall
be in addition to any liability that the Company may
otherwise have; provided, however, that no person shall be entitled to
indemnification pursuant to this provision if such loss, claim, damage or
liability is due to the willful misfeasance, bad faith, gross negligence or
reckless disregard of duty by the person seeking indemnification.
b. The Distributor. The Distributor shall indemnify and hold harmless
the Company and each person who controls or is associated with the Company
within the meaning of such terms under the federal securities laws, and any
officer, director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection
with, and any amounts paid in settlement of any action, suit or proceeding
or any claim asserted), to which the Company and/or any such person may
become subject, under any statute or regulation, any NASD rule or
interpretation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon:
(i) violations(s) by the Distributor or a Representative of
federal or state securities law(s) or regulation(s), applicable
banking law(s) or regulation(s), insurance law(s) or regulation(s) or
any rule or requirement of the NASD; or
(ii) any unauthorized use of sales or advertising material, any
oral or written misrepresentations, or any unlawful sales practices
concerning the Contracts, by the Distributor or a Representative; or
(iii) claims by the Representatives or other agents or
representatives of the Distributor
for commissions or other compensation or remuneration of any type; or
(iv) any action or inaction by a clearing broker through whom
the Distributor
purchases any transaction pursuant to this Agreement; or
(v) any failure on the part of the Distributor or a
Representative to submit premiums or Applications to the Company, or
to submit the correct amount of a premium, on a timely basis and in
accordance with Section 4 of this Agreement, subject to applicable
law; or
(vi) any failure on the part of the Distributor or a
Representative to deliver the
Contracts to purchasers thereof on a timely basis; or
(vii) a breach by the Distributor of any provisions of this
Agreement.
This indemnification agreement shall be in addition to any liability
that the Distributor may otherwise have; provided, however, that no person
shall be entitled to indemnification pursuant to this provision if such
loss, claim, damage or liability is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the person seeking
indemnification.
c. In General. After receipt by a party entitled to indemnification
(the "indemnified party") under this Section 14 of notice of the
commencement of any action, if a claim in respect thereof is to be made
against any person obligated to provide indemnification under this Section
14 (the "indemnifying party"), such indemnified party shall notify the
indemnifying party in writing of the commencement thereof as soon as
practicable thereafter, provided that the omission to so notify the
indemnifying party shall not relieve the indemnifying party from any
liability under this Section 14, except to the extent that the omission
results in a failure of actual notice to the indemnifying party and such
indemnifying party is damaged solely as a result of the failure to give
such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the indemnifying
party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel or (ii) 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 shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party shall indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
The indemnification provisions contained in this Section 14 shall
remain operative in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company or by or on behalf of any
controlling person thereof, (ii) delivery of any Contracts and premiums
therefor, and (iii) any termination of this Agreement. A successor by law
of the Distributor or the Company, as the case may be, shall be entitled to
the benefits of the indemnification provisions contained in this Section
14.
15. Standard of Care. Neither the Company nor the Distributor shall be
liable to the other for any action taken or omitted by any of their officers,
directors, employees, or agents, in connection with the good faith performance
of their responsibilities under this Agreement, except for willful misconduct,
bad faith, negligence, or reckless disregard of the duties of the parties under
this Agreement.
16. Assignment. The Distributor may not assign or delegate its
responsibilities under this
Agreement without the prior written consent of the Company.
17. Termination. This Agreement shall become effective as of the date of
its execution, shall continue in full force and effect until terminated, and may
be terminated by either party at any time without penalty upon sixty (60) days
written notice to the other party. This Agreement may be terminated upon ten
days notice upon the other party's material breach of any provision of this
Agreement, unless such breach has been cured to the satisfaction of the
non-breaching party within ten days of receipt by the breaching party of notice
of such breach from the non-breaching party. This Agreement may also be
terminated at any time without penalty if, in the sole discretion of the
Company, the Distributor is not performing its duties in a satisfactory manner.
Upon termination of this Agreement all authorizations, rights and
obligations shall cease except for the obligation to settle accounts hereunder,
including commissions on premiums subsequently received for Contracts in effect
at the time of termination or issued pursuant to Applications received by the
Company prior to termination, and the obligations contained in Sections 7, 10,
11, 12, 13, and 14.
18. Amendment. This Agreement and the Schedules hereto may be amended at
any time by a
writing executed by both of the parties hereto.
19. Governing Law. This Agreement, and the rights and liabilities of the
parties hereunder, shall
be construed in accordance with the internal laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
TRANSAMERICA INSURANCE SECURITIES
SALES CORPORATION
By: ____________________________
----------------------------
Name
----------------------------
Title
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
By: _____________________________
-----------------------------
Name
-----------------------------
Title
<PAGE>
Exhibit 4
Form of Flexible Premium Deferred Variable Annuity Contract.
<PAGE>
============================================================
Transamerica Life Insurance and Annuity Company
[OBJECT OMITTED] Home Office: 401 N. Tryon Street
Charlotte, NC 28202
A Stock Company
About your certificate
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<PAGE>
This certificate is a legal contract between you, the "owner", and Transamerica
Life Insurance and Annuity Company (referred to as "we", "us", and "our" in this
certificate). Please read it carefully.
This certifies that the owner of this certificate is participating under a group
annuity contract. As such, the owner will be entitled to certain benefits
provided under this certificate, subject to its provisions. This certificate
describes the owner's rights under the group annuity contract.
Right to Cancel
The owner may cancel this certificate by returning it to: (a) the agent or (b)
Transamerica Life Insurance and Annuity Company, Annuity Service Center, P.O.
Box 31848, Charlotte, North Carolina 28231-1848, before midnight of the tenth
day after receipt of the certificate. The return of the certificate will be
effective as of the date the notice is received. We will refund an amount equal
to the sum of: (i) all purchase payments allocated to the general account
options less any withdrawals; and (ii) the variable accumulated value of the
certificate.
<PAGE>
PAYMENTS AND VALUES PROVIDED UNDER THIS CERTIFICATE WHEN BASED ON THE INVESTMENT
PERFORMANCE OF THE VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT. REFER TO PAGE 7 FOR ADDITIONAL INFORMATION ON THE VARIABLE
ACCOUNT.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
PRESIDENT AND CHIEF EXECUTIVE OFFICER GENERAL COUNSEL AND SECRETARY
- ---------------------------------------------------------------------------
Certificate of participation
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- ------------------------------------------------------------------------------
issued in connection with
- --------------------------------------------------------------------------
Group flexible premium deferred annuity contract form no. TGP-711-197
Variable and fixed dollar settlement options
Separate Account Investments
- -------------------------------------------------------------------------
Non-participating - No annual dividends
- -----------------------------------------------------------------------
Information page
Certificate Information Beneficiary Information
Certificate Number: Specimen Beneficiary: Judy Doe
Certificate Effective Date: July 1, 1997 Date of Birth: January 1, 1959
Income Tax Status: Non-Qualified Tax ID Number: 999-99-9999
Group Annuity Contract Number: 582331
Initial Purchase Payment: $20,000
Annuity Date: July 1, 2044
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------------------------------------------------------
Owner Information Annuitant Information
- -------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Owner: John Doe Annuitant: John Doe
Date of Birth: January 1, 1959 Date of Birth: January 1, 1959
Tax ID Number: 999-99-9999 Tax ID Number: 999-99-9999
- -------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------- ------------------------------------------------------------
Joint Owner Information Joint Annuitant Information
- -------------------------------------------------------------- ------------------------------------------------------------
Joint Owner: Jane Doe Joint Annuitant: Jane Doe
Date of Birth: January 1, 1959 Date of Birth: January 1, 1959
Tax ID Number: 999-99-9999 Tax ID Number: 999-99-9999
- -------------------------------------------------------------- ------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Allocation of Initial Purchase Payment
- ---------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Variable Sub-accounts
<S> <C> <C> <C>
[Transamerica VIF Money Market Portfolio 20%] [Foreign
[Transamerica VIF Growth Bond
Fund 0%] 0%]
[MFS Emerging [OCC Accumulation Trust Small
Growth 0%] Cap 0%]
[MFS Value [OCC Accumulation Trust Managed
Series 0%]
0%] [OCC Accumulation Trust
[Alliance Premier Equity 10%]
Growth 0%] General Account Options
[Growth and [Fixed
Income Account
0%] 0%]
[International [Initial Interest
0%] Rate
[Emerging ]
Markets [Guarantee Period Account
0%] Guarantee Periods- 1 Yr. -10
[Gold and Natural Yr. 0%]
Resources 0%] Total Allocation: 100%
[Balanced
30%]
[High
Yield
40%]
- ------------------------------------------------------------
</TABLE>
The data above reflects the information you provided us to issue this
certificate. If you wish to change/correct any information on this page or for
inquiries regarding coverage or customer service please call us immediately at
our service center.
SERVICE CENTER: Transamerica Life Insurance and Annuity Company
Annuity Service Center
P.O. Box 31848
Charlotte, North Carolina 28231-1848
1-800 258-4260
<TABLE>
<CAPTION>
ANNUAL CHARGES AND FEES
Charges and fees at the time we issued this
certificate are shown below.
- ------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------- --------------------------------------------------------------
<S> <C>
Mortality and Expense Risk Charge [1.20% of the assets in each variable sub-account]
- --------------------------------------------------------------
-------------------------------------------------------------
- -------------------------------------------------------------- [0.15% of the assets in each variable sub-account]
Administrative Expense Charge -------------------------------------------------------------
- -------------------------------------------------------------- $10 for each transfer over [twelve] in each certificate year
Transfer Fee -------------------------------------------------------------
- -------------------------------------------------------------- [Currently None]
- -------------------------------------------------------------- -------------------------------------------------------------
Systematic Withdrawal Fee [($30 or 2% of the account value if less)]
- -------------------------------------------------------------- [(We will waive
if account value is over $25,000)]
-------------------------------------------------------------
Account Fee (before the annuity date) [$30]
- --------------------------------------------------------------
Annuity Fee (after the annuity date)
- --------------------------------------------------------------
- --------------------------------------------------------------- --------------------------------------------------------------
- --------------------------------------------------------------- --------------------------------------------------------------
Living Benefits Rider Fee [If elected, 0.05% of the account value ]
[This fee will be deducted monthly]
- --------------------------------------------------------------- --------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES LOAD
Number of Complete Years Contingent Deferred Sales Load
From Receipt of Purchase Payment as a Percentage of Purchase Payment
Less than 1 year................................................6%
1 year but less than 2 years....................................6%
2 years but less than 3 years...................................5%
3 years but less than 4 years...................................5%
4 years but less than 5 years...................................4%
5 years but less than 6 years...................................4%
6 years but less than 7 years...................................2%
7 or more years.................................................0%
Additional Information
Minimum Initial Purchase Payment: [$5,000]
[$2,000 for IRA's]
Additional Purchase Payment Minimum: [$1,000]
Maximum Total Purchase Payment(s): [$1,000,000]
Minimum Initial Variable Sub-account Allocation or Transfer: [$1,000]
Minimum Initial Fixed Account Allocation or Transfer: [$1,000]
Minimum for Each Guarantee Period Allocation or Transfer: [$1,000]
Maximum Transfer Percentage
from the Fixed Account: [10%]
Minimum Account Value: [$2,000]
- -------------------------------------------------------------------
Table of Contents
- ---------------------------------------------------------------------
<PAGE>
PAGE
INFORMATION PAGE...............................2 & 2A
DEFINITIONS....
......................................................................
4
OWNER, ANNUITANT, BENEFICIARY...............................5
ESTABLISHING THIS CERTIFICATE...................................6
THE VARIABLE
ACCOUNT................................................... 7
THE GENERAL
ACCOUNT.....................................................8
TRANSFER
PROVISIONS..................................................... 9
WITHDRAWAL PROVISIONS..............................................9
SETTLEMENT OPTION PROVISIONS ...............................11
SETTLEMENT OPTION PAYMENTS...................................12
DEATH BENEFIT PROVISIONS ...........................................13
CHARGES, FEES AND SERVICES ......................................15
GENERAL PROVISIONS
..............................................16
APPENDIX - ANNUITY RATE TABLES....................18
Definitions
Account Value
The sum of the variable accumulated value and the general account options
accumulated value.
Annuity Date
The date the annuitization phase of this certificate begins. The annuity date is
shown on the Information Page.
Cash Surrender Value
The amount we will pay to the owner if the certificate is surrendered on or
before the annuity date. The cash surrender value is equal to the account value;
less the account fee, if any; less any applicable interest adjustment,
contingent deferred sales load, or premium tax charges.
Certificate
This certificate describes your coverage and participation under the group
annuity contract.
Certificate Anniversary
The anniversary each year of the certificate effective date as shown on the
Information Page.
Certificate Year
The 12-month period starting on the certificate effective date and ending with
the day before the certificate anniversary, and each 12-month period thereafter.
Code
The Internal Revenue Code of 1986, as amended, and the rules and regulations
issued under it.
Fixed Account
An account which credits a rate of interest for a period of at least twelve
months for each allocation or transfer.
General Account
The assets of the Company that are not allocated to a separate account.
General Account Options Accumulated Value
The total dollar value of all amounts the owner allocates or transfers to any
general account option; plus interest credited; less any amounts withdrawn,
applicable fees and premium tax charges, and/or transfers out to the variable
account prior to the annuity date.
General Account Options
The fixed account and the guarantee period account offered by us in the general
account. The general account options selected by the owner are shown on the
Information Page.
Guarantee Period Account
An account which credits a guaranteed rate of interest for specified guarantee
period(s). There may be several guarantee period(s) offered under the guarantee
period account.
Guarantee Period
The number of years that a guaranteed rate of interest may be credited to a
guarantee period account.
Guaranteed Interest Rate
The annual effective rate of interest after daily compounding credited to a
guarantee period.
Portfolio
The investment portfolio underlying each variable sub-account in which we will
invest any amounts the owner allocates to that variable sub-account.
Status (Qualified and Non-Qualified)
The status shown on the Information Page. This certificate has a qualified
status if it is issued in connection with a retirement plan or program.
Valuation Day
Any day the New York Stock Exchange is open. To determine the value of an asset
on a day that is not a valuation day, we will use the value of that asset as of
the end of the next valuation day.
Valuation Period
The time interval between the closing (generally 4:00 p.m. Eastern Time) of the
New York Stock Exchange on consecutive valuation days.
Variable Account
The variable account (separate account VA-6) is a separate account established
and maintained by us for the investment of a portion of our assets.
Variable Accumulated Value
The total dollar value of all variable accumulation units under this certificate
prior to the annuity date.
<PAGE>
Variable Accumulation Unit
- ------------------------------------------------------------
A unit of measure used to determine the variable accumulated value before the
annuity date. The value of a variable accumulation unit varies with each
variable sub-account.
Variable Sub-accounts
One or more divisions of the variable account each of which invests solely in
shares of one of the portfolios. The variable sub-accounts selected by the owner
are shown on the Information Page.
- ------------------------------------------------------------------
Owner, Annuitant, Beneficiary
- -------------------------------------------------------------
- ---------------------------------------------------
Owner (Joint Owners)
- --------------------------------------------------------------------
The person(s) named on the Information Page who, while living, controls all
rights and benefits under this certificate. If the owner is a trust that allows
a person(s) other than the trustee to exercise the ownership rights under this
certificate, such person(s) must be named annuitant(s) and will be treated as
the owner.
If joint owners are named, the joint owners share ownership in this certificate
equally with the right of survivorship. The right of survivorship means that if
a joint owner dies, his or her interest in the certificate will pass to the
surviving joint owner subject to the death benefit provisions.
The owner(s) is entitled to designate the annuitant, beneficiary or other payee,
settlement option, and annuity date. The owner must notify us at our service
center to make changes to these designations in a form and manner acceptable to
us.
Annuitant (Joint Annuitant)
The person(s) named on the Information Page whose age and sex is used to
determine the amount of settlement option payments on the annuity date. If a
joint annuitant is named, that joint annuitant must be the annuitant's spouse.
The joint annuitant will become the annuitant if the annuitant dies. If there is
no joint annuitant and the annuitant dies, an individual owner will become the
new annuitant until the owner names another annuitant.
If the owner is an individual, the annuitant(s) may be changed by the owner at
any time before the annuity date. Any such change will be subject to the then
current underwriting requirements. We reserve the right to reject any change of
the annuitant(s) which has been made without our prior written consent.
If the owner is not an individual, the annuitant(s) may not be changed.
Beneficiary
The person(s) named on the Information Page who is designated to receive the
amounts payable under this certificate if:
The owner dies before the annuity date and there is no joint owner; or
The owner dies after the annuity date and settlement option payments have
begun under a selected settlement option that guarantees payments for a
certain period of time.
The interest of any beneficiary who dies before the owner will terminate at time
of death of such beneficiary.
A beneficiary may be named or changed at any time. Any change made to an
irrevocable beneficiary must also include the written consent of the
beneficiary, except as otherwise required by law.
If more than one beneficiary is named, each named beneficiary will share equally
in any benefits or rights granted by this certificate unless the owner gives us
other instructions at the time the beneficiaries are named.
- ---------------------------------------------------------
Establishing this Certificate
<PAGE>
- -------------------------------------------------------------------------
This certificate was established on the certificate effective date
shown on the Information Page.
- --------------------------------------------------------------------------
Any time before the annuity date the owner may make additional purchase payments
to this certificate. We reserve the right to not accept additional purchase
payments beyond certain attained ages of the owner or annuitant.
The owner may allocate purchase payments to one or more of the variable
sub-accounts or general account options we offer at the time we receive a
purchase payment. We reserve the right to limit the total number of investment
options that may be chosen over the lifetime of the certificate.
All purchase payments are subject to the conditions listed below.
<PAGE>
- ---------------------------------------------------------------------------
Purchase Payment Provisions
- ---------------------------------------------------------------
Payment and Acceptance of Purchase Payments
Purchase payments are payments the owner makes to us for the benefits under this
certificate. All purchase payments must be made to either an agent designated by
us or our service center.
The initial purchase payment, as shown on the Information Page, will be credited
to the variable sub-accounts and/or general account options according to the
owner's instructions within two business days of the date our service center
receives both the initial purchase payment and sufficient information, in a form
and manner acceptable to us, to issue this certificate.
Additional purchase payments will be credited on the date we receive them at our
service center and are subject to the conditions listed below. Purchase payments
must:
Meet the additional payment minimum shown on the Information Page.
Not exceed any federal or state limitations during any taxable year; and
Not exceed the maximum total purchase payment amount, as shown on the
Information Page, without our prior approval.
We may return to the owner any purchase payments that do not meet the conditions
described in this section.
Allocating Each Purchase Payment
Allocations the owner makes to the variable sub-accounts and general account
options are subject to the following conditions. The owner must allocate:
In whole number percentages;
A minimum of 10% of each purchase payment to any variable sub-account or
general account option.
Not less than the variable sub-account minimum, as shown on the
Information Page, to variable sub-accounts with a zero balance.
Not less than the fixed account and guaranteed period account minimum, as
shown on the Information Page.
The owner may change allocation elections for future purchase payments any time
before the annuity date by notifying us at our service center.
Continuation of this Certificate
If the owner stops making additional purchase payments to this certificate, the
provisions of the certificate will continue in force until all values have been
distributed. The owner may exercise all ownership rights under this certificate
during that time, including making withdrawals and applying the annuity amount,
as defined in the settlement option provisions section, to provide payments
under a settlement option described in this certificate.
<PAGE>
- ----------------------------------------------------------------------------
The Variable Account
- --------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------
The variable account is a separate investment account established and
maintained by the Company for the investment of a
portion of our assets pursuant to North Carolina Insurance Law. We will use
the assets of the variable account to buy
shares in the various portfolios. Purchase payments allocated or transfers made
to one or more variable sub-accounts will become a part of the variable account.
- -------------------------------------------------------------------------
The assets of the variable account are owned by us. The assets in the variable
account are not chargeable with liabilities arising out of any other business we
conduct, except to the extent that they exceed the reserves and other
liabilities of the variable account. The assets of the variable account
maintained under this certificate will be kept separate from the assets held in
our general account.
Variable Sub-accounts
The variable account is composed of a number of variable sub-accounts. The
investment performance of each variable sub-account is linked directly to the
investment performance of the underlying portfolio.
We cannot and do not guarantee that any of the variable sub-accounts will always
be available for investment. We reserve the right, subject to compliance with
applicable federal or state law, rules or regulations, to add, delete, or
substitute the variable sub-accounts or the portfolio shares held by a variable
sub-account, if we believe that further investment in the shares is no longer
appropriate or shares in a portfolio become no longer available for investment.
We will send written notification to the owner of such changes.
Variable Accumulation Unit
A variable accumulation unit is a unit of measure we use to determine the
variable accumulated value each day before the annuity date. The variable
accumulated value is the total dollar value of all variable accumulation units
for each variable sub-account. The value of a variable accumulation unit varies
with each variable sub-account. Purchase payments allocated or transfers made to
a variable sub-account are credited to the variable accumulated value in the
form of variable accumulation units. Transfers, withdrawals, or fees made from a
variable sub-account will result in the cancellation of variable accumulation
units.
Each time a purchase payment is allocated or a transfer is made to a variable
sub-account, the number of variable accumulation units credited will be
determined. We will determine the number of variable accumulation units by
dividing the total amount allocated by the value of that variable sub-account's
variable accumulation unit for the valuation day on which either we received the
purchase payment allocation or transfer request at our service center.
The value of a variable accumulation unit for each variable sub-account is
determined by multiplying the value of that unit at the end of the prior
valuation period by the net investment factor of the variable sub-account for
the valuation period. The value of a variable accumulation unit may increase or
decrease.
Net Investment Factor
The net investment factor is the formula that measures the investment
performance of a variable sub-account from one valuation period to the next. For
any variable sub-account, the net investment factor for a valuation period is
determined by dividing (A) by (B), then subtracting (C) where;
(A) is
The net asset value per share held in the variable sub-account, as of the end of
the valuation period; plus (minus)
The per-share amount of any dividend or capital gain distributions if the
"ex-dividend" date occurs in the valuation period; plus (minus)
A per-share charge or credit as of the end of the valuation period for tax
reserves for realized and unrealized capital gains, if any.
<PAGE>
(B) is
- -----------------------------------------------------------
The net asset value per share held in the variable sub-account as of the end of
the prior valuation period.
(C) is
The daily mortality and expense risk charge multiplied by the number of calendar
days in the current valuation period; plus
The daily administrative expense charge multiplied by the number of calendar
days in the current valuation period.
<PAGE>
- ---------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------
The General Account
- ------------------------------------------------------------------
- ------------------------------------------------------------------------
The Company's general account includes all assets not allocated to one of the
Company's separate accounts. The general account options under this certificate
include a fixed account and a guarantee period account to which the owner may
allocate purchase payments and transfers.
Fixed Account
Crediting of Interest
We will establish effective annual rates of interest for any amounts allocated
or transferred to this fixed account from time to time. Any purchase payment
allocation or transfer to the fixed account will be credited interest at the
rate applicable for its class. We guarantee that the rate of interest in effect
for any amounts allocated or transferred will remain in effect for at least
twelve months from the date such allocation or transfer is made. At any time
after the end of the twelve month period for a particular allocation, we may
change the annual rate of interest without prior notice. We guarantee that any
subsequent change in the annual rate of interest will remain in effect for a
minimum of twelve months from the effective date of change.
Interest will be credited on a daily basis at a daily rate which is equivalent
to the effective annual interest rate for that allocation. The effective annual
interest rate applicable to an allocation will never be less than 3% annually.
Transfer Limitations
Transfers from and to the fixed account are subject to the following conditions:
The owner may make four transfers from the fixed account to any guarantee
period or variable sub-account each certificate year. The total amount
transferred may not exceed the maximum amount allowed for
any certificate year. We reserve the right to waive this limitation.
The maximum amount that may be transferred each certificate year is a
percentage of the value of the fixed account as of the last certificate
anniversary less any prior transfers made that certificate year. The
percentage rate, which will be declared by the Company from time to time,
will not be less than 10 percent. The percentage rate on the certificate
effective date for the maximum transfer amount is shown on the Information
Page.
Amounts from the fixed account may not be transferred to any guarantee
period or variable sub-account as identified by us whose underlying
portfolio's assets consist of more than 50% investment in income producing
securities, such as the money market accounts, certificates of deposit,
U.S. Treasury or other U.S. Government securities, bonds or any other fixed
income investment.
Amounts transferred from the variable account into the fixed account may
not be transferred back to the variable account for six months following
the date of the original transfer.
Guarantee Period Account
Guarantee Periods
Each purchase payment allocation or transfer to the guarantee period account
will establish a new guarantee period. Each guarantee period offers a specified
duration with a corresponding guaranteed interest rate. The owner may not select
a guarantee period whose duration will extend beyond the annuity date, as
described in the settlement option provision section. We will never offer a
guarantee period with a duration of less than a year.
<PAGE>
- --------------------------------------------------------------------------------
Crediting of Interest
- ------------------------------------------------------------------------
We will establish a guaranteed interest rate for each guarantee period. This
rate will remain in effect for the specified duration of the guarantee period.
Interest will be credited on a daily basis at a daily rate which is equivalent
to the effective annual guaranteed interest rate for that guarantee period. The
guaranteed interest rate applicable to a guarantee period will never be less
than 3% annually.
Interest Adjustment
We will deduct an interest adjustment from amounts withdrawn or transferred from
a guarantee period before the end of the guarantee period. We will not make an
interest adjustment upon the death of the owner or within the 30-day period
before the end of the guarantee period. We may waive the interest adjustment in
connection with certain options offered with this certificate.
Any applicable interest rate adjustment will be calculated by multiplying the
amount withdrawn, transferred or annuitized before the reduction for any
contingent deferred sales load by the formula described below:
[(1 + I)/(1 + J + .005)]n/12 - 1
I = The guaranteed interest rate credited to the current guarantee period.
J = The current interest rate offered for a guarantee period equal to the
number of years remaining in the current guarantee period (fractional years
are rounded up to the next full year). If no guarantee period equal to the
number of years remaining in the current guarantee period is available, the
rate will be established by linear interpolation.
N = The number of full months remaining to the end of the current guarantee
period.
The interest adjustment will be made if the current interest rate plus .005 is
greater than the guaranteed interest rate.
The interest adjustment will never reduce the amount under a guarantee period to
less than the purchase payment allocation or transfer amount which initiated the
guarantee period; less any prior withdrawals or transfers; plus daily interest
accumulated at a 3% annual rate. There will be no upward adjustments.
Guarantee Period Expiration
At least 45 days, but not more than 60 days, prior to the expiration date of a
guarantee period, we will notify the owner as to the options available when a
guarantee period expires. The owner may elect to transfer the amount held in
that guarantee period to another general account option or to a variable
sub-account being offered by us at that time. The transfer request must be
received no later than the day immediately following the end of the expiring
guarantee period.
If no election is made, we will establish a new guarantee period of the same
duration as the expiring guarantee period, if offered, with a new guaranteed
interest rate declared by us for that guarantee period. If we are not currently
offering guarantee periods with the same duration as the expiring guarantee
period, the new guarantee period will be the next higher duration. If the
guarantee period extends beyond the annuity date, we will then select the
longest period that will not extend the guarantee period beyond such date.
- -----------------------------------------------------------
Transfer Provisions
<PAGE>
- ------------------------------------------
The owner may transfer all or a portion of the account value between and among
the variable sub-accounts and general account options subject to the limitations
as described in this section and the general account section of this
certificate.
All transfer requests must specify (a) the amount of the transfer; (b) the
variable sub-account or general account option from which the transfer is to be
made; and (c) the variable sub-account or general account option which is to
receive the transfer. All transfers will be made as of the valuation day we
receive the request at our service center.
Before the annuity date, transfers in excess of the maximum per certificate
year, as shown on the Information Page, will be subject to a transfer fee, as
described in the charges, fees and services section of this certificate. We
reserve the right to waive the transfer fee.
- ------------------------------------------------------------------------------
After the annuity date, transfers are only permitted if a variable payment
option is elected. Such transfers among the
variable sub-accounts are limited to four per certificate year. We reserve the
right to change the number of transfers available after the annuity date.
- ------------------------------------------------------------------------------
The minimum amount that may be transferred from a variable sub-account, the
fixed account or any guarantee period under the guarantee period account is the
lesser of $1,000 or the entire value of the variable sub-account, fixed account
or guarantee period from which the transfer is being made. The minimum amount
that may be initially allocated or transferred into a variable sub-account or
the fixed account is shown on the Information Page. The minimum amount that must
always be transferred into any guarantee period is shown on the Information
Page. We reserve the right to waive the minimum(s) in connection with certain
options offered with this certificate.
<PAGE>
- -------------------------------------------------------------
Withdrawal Provisions
- -------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
Before the annuity date and subject to the conditions below the owner may:
- -----------------------------------------------------------------------------
Withdraw a portion of the account value for cash subject to any applicable
interest adjustment; contingent deferred sales load, and premium tax
charges; or
Automatically withdraw a portion of the account value by electing the
systematic withdrawal option; or
Withdraw the cash surrender value and terminate this certificate.
Any amount withdrawn that exceeds the allowed amount, as described below, may be
subject to a contingent deferred sales load. All withdrawals will be made from
purchase payments on a first in, first out basis and then from earnings.
<PAGE>
- --------------------------------------------------------------------------
Partial Withdrawal Provisions
- --------------------------------------------------------------------------
Partial withdrawals taken from the variable sub-accounts or general account
options are subject to a minimum withdrawal amount equal to the lesser of $1,000
or the entire value of the variable sub-account, fixed account or guarantee
period from which the withdrawal is being made. We reserve the right to limit
the number of partial withdrawals that may be taken from the general account
options in any certificate year. We reserve the right not to process any
withdrawal if the resulting account value is below the minimum, as shown on the
Information Page.
Systematic Withdrawal Option
The owner may elect to automatically receive a series of partial withdrawals
under the systematic withdrawal option subject to the following conditions:
Systematic withdrawals may be subject to a fee as described in the
charges, fees and services section of this certificate.
Systematic withdrawals may only be taken from variable sub-accounts and
general account options as designated by us from time to time. We reserve
the right to prospectively change such designations.
The owner may terminate systematic withdrawals at any time by notifying us at
our service center. Once the option has been terminated, it may not be elected
again for a twelve month period. Systematic withdrawals will automatically
terminate if the certificate is annuitized, surrendered or otherwise distributed
as a result of the owner's death.
Surrender of this Certificate
The owner may surrender this certificate to us for its cash surrender value on
or before the annuity date. Surrender of the certificate will be subject to any
withdrawal limitations imposed under applicable federal or state law, rules or
regulations.
Payment of the cash surrender value to the owner will be in full settlement of
our liability under the certificate.
Withdrawal of Funds Without Charges
At the end of the free look period or 30 days after the certificate effective
date, whichever is later, the owner may make withdrawals up to the allowed
amount each certificate year before the annuity date without incurring a
contingent deferred sales load.
<PAGE>
<PAGE>
- --------------------------------------------------------------------------
The allowed amount is equal to 15% of purchase payments less than seven years
old as of the last certificate anniversary, less any previous withdrawals taken
in that certificate year. For the first certificate year, the allowed amount is
equal to 15% of purchase payments as of the time of the first withdrawal, less
any previous withdrawals taken that certificate year. Previous withdrawals
include partial withdrawals and certain scheduled withdrawals, such as
systematic withdrawals. Any amounts that exceed the allowed amount will be
subject to a contingent deferred sales load. Purchase payments that are older
than seven years old will not be subject to a contingent deferred sales load.
- ----------------------------------------------------------------------------
Amounts withdrawn from any guarantee period account may be subject to an
interest adjustment as described in the general account section of this
certificate.
Contingent Deferred Sales Load
A contingent deferred sales load may apply when a withdrawal from, or surrender
of, this certificate occurs. For purposes of determining the contingent deferred
sales load, all withdrawals are made first from purchase payments on a first-in,
first-out basis and then from earnings.
We calculate the contingent deferred sales load separately for each purchase
payment received by us. The contingent deferred sales load is a percentage of
the withdrawn purchase payment.
The applicable contingent deferred sales load percentages, as shown on the
Information Page, are based on the number of complete years from the receipt of
the purchase payment(s) to the date of withdrawal.
Waiver of Contingent Deferred Sales Load We will waive the contingent deferred
sales load:
On the allowed amount.
Upon annuitization on or after the first certificate anniversary, if the
selected settlement option involves life contingencies.
Upon the owner's death before the annuity date.
<PAGE>
- ------------------------------------------------
Settlement Option Provisions
- ------------------------------------------------
On the annuity date, we will apply the annuity amount, as defined below,
to provide payments under the settlement option selected by the owner. The
first settlement option payment will be made 30 days after the annuity
date.
Settlement option payments may be made in monthly, quarterly, semi-annual
or annual installments as selected by the owner.
<PAGE>
- ------------------------------------------------------------------------
The owner may change the annuity date and settlement and payment option by
notifying our service center at least 30 days in advance of the annuity date.
The annuity date must be on or before the later of (A) and (B) where:
(A) is the first day of the calendar month immediately preceding the month of
the annuitant's or joint annuitant's 85th birthday, whichever is earlier, and;
(B) is the first day of the month immediately following the tenth certificate
anniversary.
The annuity date may not be earlier than the first day of the calendar month
coinciding with the first certificate anniversary and may in no event be later
than the earlier of the annuitant's or joint annuitant's 97th birthday.
After the annuity date, we will not allow the owner to make:
Any changes to either the settlement or payment option;
Additional purchase payments; or
Any further withdrawals.
Annuity Amount
The annuity amount we will apply to provide payments is equal to the account
value, less any interest adjustment, less any contingent deferred sales load,
and less any premium tax charges.
<PAGE>
- -------------------------------------------------------------
Minimum Requirements
- ---------------------------------------------------------------------------
We reserve the right to offer a less frequent mode of payment than the mode
selected by the owner or make a cash payment to the owner equal to the cash
surrender value if:
The annuity amount is less than $5,000; or
The amount of the first fixed payment is less than $150; or
The amount of the first variable payment is less than $150 or if a
variable payment from a variable sub-account is
less than $75.
If we make such a cash payment it will be in full settlement of our liability
under this certificate.
Settlement Options
The settlement options the owner may choose from are listed below. For any
settlement option involving life contingencies, it is possible that no
settlement option payments will be made from this certificate if, after the
annuity date but before the first settlement option payment is made, the
annuitant and joint annuitant or contingent annuitant, as applicable, dies.
Life Annuity
Provides payments to the owner for as long as the annuitant lives. Payments will
end with the payment due just before the annuitant's death and there is no
provision for a death benefit payable to a beneficiary.
Life Annuity with Period Certain
Provides payments to the owner for the longer of: a) the annuitant's life; or
(b) the period certain. The period certain
may be 120, 180 or 240 months. If the annuitant dies during the period
certain, payments will continue until the end of
the period certain.
Life and Contingent Annuity
Provides payments to the owner for as long as the annuitant lives. If the
annuitant dies, payments will continue for as long as the contingent annuitant
lives in an amount equal to 50%, 66 2/3% or 100% of the original payment, as
selected. Payments will then end with the payment due just before the contingent
annuitant's death.
Joint and Survivor Annuity
Provides payments to the owner for as long as the survivor of the annuitant or
joint annuitant lives. After the first annuitant dies, payments will continue
for as long as the survivor lives in an amount equal to 50%, 66 2/3% or 100% of
the original payment, as selected. Payments will then end with the payment due
just before the death of the survivor.
Other Forms of Payment
Payments can be provided under other settlement options not described in this
section. Contact our service center for more information.
<PAGE>
- -------------------------------------------------------------------
Settlement Option Payments
- -------------------------------------------------------------------
Settlement option payments may be fixed or variable or a combination of
both.
The fixed payment option provides for settlement option payments that
remain constant and are not affected by the investment performance of the
variable sub-accounts.
The variable payment option provides for settlement option payments that
vary based on the investment performance of the variable sub-account(s)
selected by the owner. These payments may increase, decrease or remain the
same.
<PAGE>
- ---------------------------------------------------------------
Payment Option
- ---------------------------------------------------------------
Amount of Fixed Payment
The owner may elect to have all or a portion of the annuity amount applied to
provide fixed payments. On the annuity date, we will determine the dollar amount
of the fixed payments by applying the portion of the annuity amount allocated to
provide fixed payments as a single payment based on the settlement option chosen
and the age and sex of the annuitant(s), using the appropriate guaranteed
annuity rate tables. If required by law, we will use the appropriate unisex
guaranteed annuity rate tables. The monthly annuity rate tables are contained in
the appendix.
Variable Payment Option
Amount of First Variable Payment
The owner may elect to have all or a portion of the annuity amount applied to
provide settlement option payments that vary based on the investment performance
of selected variable sub-accounts. The amount of the first variable
<PAGE>
- ------------------------------------------------------------------
payment will be equal to the benefit that could be purchased by applying the
portion of the annuity amount allocated to provide the variable payments as a
single payment based on the settlement option chosen and age and sex of the
annuitant(s) using the appropriate guaranteed annuity rate tables. If required
by law, we will use the appropriate unisex guaranteed annuity rate tables. The
monthly annuity rate tables are contained in the appendix.
- --------------------------------------------------------------
Amount of Subsequent Variable Payments
We determine the dollar amount of the second and subsequent variable payments by
first identifying the number and value of the variable annuity units for each
variable sub-account. Variable annuity units are the unit of measure used to
determine such payments. For each payment we multiply the number of variable
annuity units by the value of the variable annuity units for each variable
sub-account.
The number of variable annuity units for each variable sub-account will remain
the same for the second and subsequent variable payments (unless amounts are
transferred to or from a variable sub-account) and the value of the variable
annuity units in each variable sub-account will vary. As a result of the
variation in the value of variable annuity units for each variable sub-account
between payments, the dollar amount of each variable payment after the first may
increase, decrease or remain the same.
Number of Variable Annuity Units
The number of variable annuity units for each variable sub-account is determined
by dividing the first variable payment by the value of the variable annuity
units of each variable sub-account on the annuity date.
Value of Variable Annuity Units
The variable annuity unit values depend on the net investment factor and the
assumed interest rate. The value of a variable annuity unit for each variable
sub-account for any valuation day is equal to (A) times (B) times (C), where:
(A)is the variable annuity unit value on the immediately preceding valuation
day;
(B) is the net investment factor (determined in accordance with the net
investment factor provision on Page 7), for the valuation period just ended; and
(C) is the investment result adjustment factor (.99989255)n, which recognizes an
assumed interest rate of 4% per year. The Company reserves the right to offer
other assumed interest rates with appropriate investment result adjustment
factors. The "n" in the investment result adjustment factor is the number of
days since the preceding valuation day.
Once settlement option payments begin, we guarantee the amount of each variable
payment will not be affected by variations in expenses or mortality experience.
<PAGE>
- -----------------------------------------------
Death Benefit Provisions
- -----------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
We must distribute death benefits or continue making settlement option payments
under this certificate according to the requirements of Code Section 72(s) as
long as this certificate is in force or benefits remain to be paid.
- --------------------------------------------------------------------------------
We will not accept any additional purchase payments after the death of the owner
or joint owner.
If any ownership change is made, the death benefit
under this certificate may be reduced in accordance with our then current
underwriting rules. Such reduction will never decrease the death benefit below
the account value.
We must receive proof of death before any benefits are distributed from this
certificate. Proof of death acceptable to us includes:
A certified copy of a death certificate
A certified copy of a court decree stating the cause of death A written
statement by a medical doctor who attended the deceased Any other proof or
documents we may require
- --------------------------------------------------------------------------------
Amount of Death Benefit
- --------------------------------------------------------------------------------
If the owner or joint owner dies before the annuity date and neither the
deceased owner nor the joint owner had attained the age of 85, the guaranteed
minimum death benefit is equal to the greatest of (A), (B) or (C) where:
(A) is the account value.
<PAGE>
- --------------------------------------------------------------------------------
(B) is 100% of purchase payments, less the sum of all withdrawals and any
applicable premium tax charges.
- --------------------------------------------------------------------------------
(C) is the highest account value on any certificate anniversary, increased by
the sum of all purchase payments received since that certificate anniversary,
less the sum of all withdrawals and any applicable premium tax charges since
that anniversary.
The guaranteed minimum death benefit will be determined as of the end of the
valuation period during which our service center receives both proof of death of
the owner or joint owner and the written notice of the form of benefit elected
by the person to whom the death benefit is payable.
Amount of Death Benefit after the Owner or Joint Owner attains age 85
If the owner or joint owner dies before the annuity date and either the deceased
owner or surviving owner had attained the age of 85, the death benefit is equal
to the account value. For purposes of calculating such death benefit, the
account value is determined as of the date the death benefit is paid.
Death of Owner or Joint Owner before the Annuity Date
If the owner or joint owner dies before the annuity date, we will pay the death
benefit as specified in this section. The entire death benefit must be
distributed within five years after the owner's death. If the owner is not an
individual, an annuitant's death will be treated as the death of the owner as
provided in Code Section 72(s)(6). For example, this certificate will remain in
force with the annuitant's surviving spouse as the new annuitant if:
This certificate is owned by a trust; and
The beneficiary shown on the Information Page is either the annuitant's
surviving spouse, or a trust holding the certificate solely for the benefit
of such spouse.
The manner in which we will pay the death benefit depends on the status of the
person(s) involved in this certificate. The death benefit will be payable to the
first person from the applicable list below:
If the owner is the annuitant:
The joint owner, if any
The beneficiary, if any
If the owner is not the annuitant:
The joint owner, if any
The beneficiary, if any
The annuitant;
The joint annuitant; if any
If the death benefit is payable to the owner's surviving spouse, (or to a trust
for the sole benefit of such surviving spouse), we will continue this
certificate with the owner's spouse as the new annuitant (if the owner was the
annuitant) and the new owner (if applicable), unless such spouse selects another
option as provided below.
If the death benefit is payable to someone other that the owner's surviving
spouse, we will pay the death benefit in a lump sum payment to, or for the
benefit of, such person within five years after the owner's death, unless such
person(s) selects another option as provided below.
In lieu of the automatic form of death benefit specified above, the person(s) to
whom the death benefit is payable may elect to receive it:
In a lump sum; or
As settlement option payments, provided the person making the election is
an individual. Such payments must begin within one year after the owner's
death and must be in equal amounts over a period of time not extending
beyond the individual's life or life expectancy.
Election of either option must be made no later than 60 days prior to the one
year anniversary of the owner's death. Otherwise, the death benefit will be
settled under the appropriate automatic form of benefit specified above.
If the person to whom the death benefit is payable dies before the entire death
benefit is paid, we will pay the remaining death benefit in a lump sum to the
payee named by such person or, if no payee was named, to such person's estate.
<PAGE>
- --------------------------------------------------------------------------------
If the death benefit is payable to a non-individual (subject to the special rule
for a trust for the sole benefit of a surviving spouse), we
- --------------------------------------------------------------------------------
will pay the death benefit in a lump sum within one year after the owner's
death.
If the Annuitant Dies Before the Annuity Date
If an owner and an annuitant are not the same individual and the annuitant (or
the last of joint annuitants) dies before the annuity date, the owner will
become the annuitant until a new annuitant is selected.
Death after the Annuity Date
If an owner or an annuitant dies after the annuity date, any amounts payable
will continue to be distributed at least as rapidly as under the settlement and
payment option then in effect on the date of death.
Upon the owner's death after the annuity date, any remaining ownership rights
granted under this certificate will pass to the person to whom the death benefit
would have been paid if the owner had died before the annuity date, as specified
above.
Survival Provision
The interest of any person to whom the death benefit is payable who dies at the
time of, or within 30 days after, the death of the owner will also terminate if
no benefits have been paid to such beneficiary, unless the owner had given us
written notice of some other arrangement.
<PAGE>
- ----------------------------------------------------------
Charges, Fees and Services
- ----------------------------------------------------------
- ---------------------------------------
Premium Tax Charge
Some jurisdictions impose on us a premium tax on annuities. If a premium tax is
imposed, we reserve the right to deduct this amount from purchase payments or
account value, as appropriate. For purposes of this certificate, premium tax
charges include retaliatory taxes or other similar taxes.
Mortality and Expense Risk Charge
The amount of the annual mortality and expense risk charge is shown on the
Information Page. The mortality and expense risk charge will be deducted on a
daily basis from the assets in each variable sub-account as part of the
calculation of the variable accumulation unit.
Administrative Expense Charge
The amount of the annual administrative expense charge on the certificate
effective date is shown on the Information Page. The administrative expense
charge will be deducted on a daily basis from the assets in each variable
sub-account as part of the calculation of the variable accumulation unit.
We may change this charge upon 30 days advance written notice to the owner. Any
increase in the administrative expense charge will apply prospectively to
administrative expense charges deducted after the effective date of change. The
administrative expense charge will not exceed an annual charge of 0.35%.
Transfer Fee
We reserve the right to impose a transfer fee for each transfer in excess of the
number shown on the Information Page made during a single certificate year. The
amount of the transfer fee on the certificate effective date is shown on the
Information Page. This fee will not increase. The transfer fee will be deducted
from the amount of the transfer prior to its reallocation. We reserve the right
to waive the transfer fee.
Systematic Withdrawal Fee
We reserve the right to impose an annual processing fee for the systematic
withdrawal option. The amount of the systematic withdrawal fee on the
certificate effective date is shown on the Information Page. Any fee imposed
will not exceed $25 per certificate year.
Account Fee
Before the annuity date, an annual account fee will be deducted from the account
value on the last business day of each certificate year and if different, the
date the certificate is surrendered. The amount of the annual account fee on the
certificate effective date is shown on the Information Page. The account fee
will be deducted on a pro rata basis from the account value. There will be no
interest adjustment on any deductions from the guarantee period account for this
fee.
We may change this fee prospectively upon 30 days advance written notice to
the owner. Any increase will not result in the account fee exceeding
a maximum annual account fee equal to the lesser of 2% of the
account value or $60.
- ---------------------------------------------------------------------Annuity Fee
After the annuity date, an annual fee equal to the amount shown on the
Information Page will be deducted in equal amounts from distributions made under
the variable payment option. We reserve the right to waive this fee.
Statements of Account
At least once during each certificate year, we will send the owner a statement
of account reflecting the account value of the certificate. Statements of
account will cease to be provided to the owner after the annuity date.
<PAGE>
- --------------------------------------
General Provisions
- --------------------------------------
<PAGE>
- ---------------------------------
Entire Contract
- ---------------------------------
This certificate, the group certificate contract and any attached endorsements
and riders are the entire contract.
Misstatement of Age and Sex
If the age or sex of the annuitant(s) and/or of any other measuring life has
been misstated, the settlement option payments payable under this certificate
will be whatever the annuity amount would provide for the correct age or sex of
the annuitant(s) and/or of any other measuring life on the annuity date. Any
underpayment by us, as a result of such misstatement, will be paid in a lump sum
on the next settlement option payment made by us, and any overpayment will be
deducted from the current or succeeding payments.
Proof of Existence and Age
Before making any payment under this certificate, we may require proof of the
existence and age of the owner, the annuitant and/or any other measuring life.
We may also require any other information as we may need in order to provide
benefits under the certificate.
Changes
No provision of this certificate may be changed or waived unless done in writing
and signed by two of our authorized officers. We will not make any change that
reduces the amounts payable under this certificate unless the change is required
by law. We will provide the owner a copy of any changes we make to this
certificate.
Income Tax Qualification
This certificate is intended to qualify as an annuity contract for federal
income tax purposes. All provisions in this certificate will be interpreted to
maintain such tax qualification. We may make changes in order to maintain this
qualification or to conform this certificate to any applicable changes made in
the tax qualification requirements. We will provide the owner with a copy of any
changes we make to this certificate.
Incontestability
This certificate is incontestable from the certificate effective date.
Assignment of this Certificate
To make ownership changes or assign rights to another person, the owner must
notify us at our service center. An assignment or ownership change is not
binding on us until we receive the necessary documentation and acknowledge the
request. We are not responsible for the validity or effect - tax or otherwise -
of any assignment or ownership change. If an ownership change is made, the death
benefit under this certificate may be reduced in accordance with our then
current underwriting rules.
Such reduction will never decrease the death benefit below the account value.
Payments by/to the Company
All purchase payments paid to us or amounts paid by us from this certificate
will be made in the legal currency of the United States of America.
Delay of Payment or Transfer
Except as provided below, we will pay amounts due from this certificate within
seven days of the date our service center receives both the request for such
amount and all the necessary requirements in a form and manner acceptable to us.
<PAGE>
- ----------------------------------
We reserve the right to delay the payment of any benefits payable, amounts
withdrawn or transfers requested from the variable account due to: (a) the
closure of the New York Stock Exchange for reasons other than usual
- -------------------------------------------------------------------------------
weekends, holidays or if trading on such Exchange is restricted; (b) the
existence of an emergency as defined by the Securities and Exchange Commission
of the United States Government or restrictions of trading by the Commission; or
(c) delays permitted by the Securities and Exchange Commission for the
protection of security holders.
We further reserve the right to delay payment of any withdrawal from the general
account options for up to six months after we receive the request for
withdrawal. If we delay payment for more than 30 days, we will pay interest as
provided in this certificate on the withdrawal amount up to the date of payment.
Minimum Benefits
Any settlement option payments, cash surrender or death benefits that may be
available under this certificate will not be less than the minimum benefits
required by any statute of the jurisdiction in which this certificate was
issued.
Protection of Benefits/Proceeds
To the extent permitted by law, no payment of benefits or interest will be
subject to the claim(s) of any creditor of any owner, annuitant or beneficiary
or to any claim or process of law against any owner, annuitant or beneficiary.
Non-Participating
This certificate is classified as a non-participating certificate. It does not
participate in our profits or surplus, and therefore no dividends are payable.
- --------------------------------------------------
APPENDIX
ANNUITY RATE TABLES
<PAGE>
- --------------------------------------------------------------------------------
Applicability of Rates - The guaranteed annuity rates contained in Tables I, II
and III will be used to provide a minimum guaranteed monthly annuity under the
fixed annuity payment option. The annuity rates contained in Tables IV, V and VI
will be used to determine the first monthly annuity payment under the variable
annuity payment option.
- --------------------------------------------------------------------------------
The rates contained in this certificate are for each $1,000 applied under the
applicable settlement option and do not include any applicable premium tax
charges. Any applicable premium tax charges will be withdrawn as described in
the premium tax charge provision of the certificate.
Tables I and II under the fixed annuity payment option and Tables IV and V under
the variable annuity payment option, as applicable, will be used for all
settlement options, subject to any limitations imposed under: (a) a retirement
plan or program under which this certificate is issued; or (b) applicable
federal or state law, rules or regulations which restrict the use of such rates.
If any federal or state law, rules or regulations prohibits the use of the rates
provided under these Tables, then the annuity rates provided under Tables III
and VI, as applicable, will be used.
Rates Not Shown - Any rates not shown in the Tables contained in this
certificate will be provided by us upon request.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF GUARANTEED ANNUITY RATES UNDER
FIXED ANNUITY PAYMENT OPTION
TABLE I - MALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 3.76 3.76 3.75 3.73
41 3.80 3.79 3.78 3.76
42 3.84 3.83 3.82 3.80
43 3.88 3.87 3.86 3.83
44 3.93 3.92 3.90 3.87
45 3.97 3.96 3.94 3.91
46 4.02 4.01 3.98 3.95
47 4.07 4.06 4.03 3.99
48 4.13 4.11 4.08 4.03
49 4.18 4.16 4.13 4.08
50 4.24 4.21 4.18 4.13
51 4.30 4.27 4.23 4.17
52 4.37 4.33 4.29 4.22
53 4.43 4.40 4.34 4.28
54 4.51 4.46 4.41 4.33
55 4.58 4.53 4.47 4.38
56 4.66 4.60 4.54 4.44
57 4.74 4.68 4.60 4.50
58 4.83 4.76 4.67 4.56
59 4.92 4.84 4.75 4.61
60 5.02 4.93 4.83 4.68
61 5.12 5.02 4.90 4.74
62 5.23 5.12 4.99 4.80
63 5.34 5.22 5.07 4.87
64 5.47 5.33 5.16 4.93
65 5.60 5.45 5.25 5.00
66 5.74 5.57 5.35 5.06
67 5.90 5.69 5.45 5.12
68 6.06 5.83 5.55 5.18
69 6.24 5.97 5.64 5.24
70 6.43 6.11 5.74 5.30
71 6.63 6.26 5.84 5.35
72 6.84 6.42 5.95 5.41
73 7.07 6.58 6.05 5.45
74 7.32 6.74 6.14 5.50
75 7.58 6.91 6.24 5.54
76 7.86 7.08 6.33 5.57
77 8.16 7.26 6.42 5.61
78 8.48 7.43 6.50 5.63
79 8.83 7.61 6.58 5.66
80 9.20 7.79 6.65 5.68
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table I, is the 1983a Annuity Mortality Table for males, without
projection, set back 5 years, with an interest rate of 3.5% per annum.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF GUARANTEED ANNUITY RATES UNDER
FIXED ANNUITY PAYMENT OPTION
TABLE II - FEMALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 3.58 3.58 3.57 3.56
41 3.61 3.60 3.60 3.59
42 3.64 3.64 3.63 3.62
43 3.67 3.67 3.66 3.65
44 3.71 3.70 3.69 3.68
45 3.74 3.74 3.73 3.71
46 3.78 3.77 3.76 3.75
47 3.82 3.81 3.80 3.78
48 3.86 3.85 3.84 3.82
49 3.90 3.89 3.88 3.86
50 3.95 3.94 3.92 3.90
51 4.00 3.98 3.97 3.94
52 4.05 4.03 4.01 3.98
53 4.10 4.08 4.06 4.03
54 4.15 4.14 4.11 4.08
55 4.21 4.19 4.17 4.13
56 4.28 4.25 4.22 4.18
57 4.34 4.32 4.28 4.23
58 4.41 4.38 4.34 4.28
59 4.48 4.45 4.41 4.34
60 4.56 4.52 4.47 4.40
61 4.64 4.60 4.55 4.46
62 4.73 4.68 4.62 4.52
63 4.82 4.77 4.70 4.59
64 4.92 4.86 4.78 4.66
65 5.03 4.96 4.86 4.72
66 5.14 5.06 4.95 4.79
67 5.26 5.17 5.04 4.86
68 5.39 5.28 5.14 4.93
69 5.52 5.40 5.24 5.01
70 5.67 5.52 5.34 5.07
71 5.82 5.66 5.44 5.14
72 5.99 5.80 5.55 5.21
73 6.17 5.95 5.66 5.27
74 6.36 6.10 5.77 5.34
75 6.57 6.27 5.88 5.40
76 6.80 6.44 6.00 5.45
77 7.04 6.61 6.11 5.50
78 7.31 6.80 6.21 5.54
79 7.60 6.99 6.32 5.58
80 7.91 7.18 6.42 5.62
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table II, is the 1983a Annuity Mortality Table for females, without
projection, set back 5 years, with an interest rate of 3.5% per annum.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF GUARANTEED ANNUITY RATES UNDER
FIXED ANNUITY PAYMENT OPTION
TABLE III - UNISEX RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 3.69 3.69 3.68 3.66
41 3.73 3.72 3.71 3.70
42 3.76 3.76 3.75 3.73
43 3.80 3.79 3.78 3.76
44 3.84 3.83 3.82 3.80
45 3.88 3.87 3.86 3.83
46 3.93 3.92 3.90 3.87
47 3.97 3.96 3.94 3.91
48 4.02 4.01 3.98 3.95
49 4.07 4.06 4.03 4.00
50 4.13 4.11 4.08 4.04
51 4.18 4.16 4.13 4.08
52 4.24 4.22 4.18 4.13
53 4.30 4.27 4.24 4.18
54 4.37 4.33 4.29 4.23
55 4.44 4.40 4.35 4.28
56 4.51 4.47 4.42 4.34
57 4.59 4.54 4.48 4.40
58 4.66 4.61 4.55 4.45
59 4.75 4.69 4.62 4.51
60 4.84 4.77 4.69 4.57
61 4.93 4.86 4.77 4.64
62 5.03 4.95 4.85 4.70
63 5.14 5.05 4.93 4.76
64 5.25 5.15 5.02 4.83
65 5.37 5.26 5.11 4.89
66 5.50 5.37 5.20 4.96
67 5.64 5.49 5.29 5.03
68 5.79 5.61 5.39 5.09
69 5.95 5.75 5.49 5.15
70 6.12 5.88 5.59 5.22
71 6.31 6.03 5.69 5.28
72 6.50 6.18 5.80 5.34
73 6.71 6.33 5.90 5.39
74 6.93 6.49 6.01 5.44
75 7.17 6.66 6.11 5.49
76 7.43 6.84 6.21 5.53
77 7.71 7.01 6.31 5.57
78 8.01 7.19 6.40 5.61
79 8.33 7.37 6.49 5.63
80 8.67 7.56 6.57 5.66
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table III, is the 1983a Annuity Mortality Table, without projection,
blended 60% males and 40% females, set back 5 years, with an interest rate of
3.5% per annum.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF ANNUITY RATES UNDER
VARIABLE ANNUITY PAYMENT OPTION
TABLE IV - MALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 4.08 4.07 4.06 4.04
41 4.12 4.11 4.09 4.07
42 4.16 4.15 4.13 4.11
43 4.20 4.18 4.17 4.14
44 4.24 4.23 4.21 4.18
45 4.29 4.27 4.25 4.21
46 4.33 4.32 4.29 4.25
47 4.38 4.36 4.33 4.29
48 4.44 4.41 4.38 4.33
49 4.49 4.46 4.43 4.38
50 4.55 4.52 4.48 4.42
51 4.61 4.57 4.53 4.47
52 4.67 4.63 4.59 4.52
53 4.74 4.69 4.64 4.57
54 4.81 4.76 4.70 4.62
55 4.88 4.83 4.76 4.67
56 4.96 4.90 4.83 4.73
57 5.04 4.97 4.89 4.78
58 5.13 5.05 4.96 4.84
59 5.22 5.13 5.04 4.90
60 5.31 5.22 5.11 4.96
61 5.42 5.31 5.19 5.02
62 5.52 5.41 5.27 5.08
63 5.64 5.51 5.36 5.14
64 5.76 5.62 5.44 5.20
65 5.90 5.73 5.53 5.27
66 6.04 5.85 5.62 5.33
67 6.19 5.98 5.72 5.39
68 6.36 6.11 5.82 5.45
69 6.53 6.25 5.91 5.51
70 6.72 6.39 6.01 5.56
71 6.92 6.54 6.11 5.61
72 7.14 6.69 6.21 5.67
73 7.37 6.85 6.31 5.71
74 7.62 7.01 6.40 5.75
75 7.88 7.18 6.49 5.79
76 8.16 7.35 6.58 5.83
77 8.46 7.52 6.67 5.86
78 8.79 7.70 6.75 5.89
79 9.13 7.87 6.83 5.91
80 9.51 8.05 6.90 5.93
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table IV, is the 1983a Annuity Mortality Table for males, without
projection, set back 5 years, with an assumed interest rate of 4% per annum.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF ANNUITY RATES UNDER
VARIABLE ANNUITY PAYMENT OPTION
TABLE V - FEMALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 3.90 3.90 3.89 3.88
41 3.93 3.92 3.92 3.91
42 3.96 3.95 3.95 3.94
43 3.99 3.98 3.97 3.96
44 4.02 4.01 4.01 3.99
45 4.06 4.05 4.04 4.02
46 4.09 4.08 4.07 4.06
47 4.13 4.12 4.11 4.09
48 4.17 4.16 4.15 4.13
49 4.21 4.20 4.19 4.16
50 4.26 4.24 4.23 4.20
51 4.30 4.29 4.27 4.24
52 4.35 4.34 4.32 4.28
53 4.40 4.39 4.36 4.33
54 4.46 4.44 4.41 4.37
55 4.52 4.49 4.46 4.42
56 4.58 4.55 4.52 4.47
57 4.64 4.61 4.58 4.52
58 4.71 4.68 4.64 4.57
59 4.78 4.75 4.70 4.63
60 4.86 4.82 4.77 4.69
61 4.94 4.89 4.84 4.75
62 5.03 4.98 4.91 4.81
63 5.12 5.06 4.98 4.87
64 5.22 5.15 5.06 4.94
65 5.32 5.24 5.14 5.00
66 5.43 5.34 5.23 5.07
67 5.55 5.45 5.32 5.14
68 5.68 5.56 5.41 5.21
69 5.81 5.68 5.51 5.27
70 5.96 5.80 5.61 5.34
71 6.11 5.93 5.71 5.41
72 6.28 6.08 5.82 5.48
73 6.46 6.22 5.93 5.54
74 6.65 6.37 6.04 5.60
75 6.86 6.54 6.15 5.66
76 7.09 6.71 6.25 5.71
77 7.33 6.88 6.37 5.76
78 7.60 7.07 6.47 5.80
79 7.89 7.25 6.57 5.84
80 8.20 7.45 6.67 5.88
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table V, is the 1983a Annuity Mortality Table for females, without
projection, set back 5 years, with an assumed interest rate of 4% per annum.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF ANNUITY RATES UNDER
VARIABLE ANNUITY PAYMENT OPTION
TABLE VI - UNISEX RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 4.01 4.00 4.00 3.98
41 4.05 4.04 4.03 4.01
42 4.08 4.07 4.06 4.04
43 4.12 4.11 4.09 4.07
44 4.16 4.14 4.13 4.11
45 4.20 4.18 4.17 4.14
46 4.24 4.22 4.21 4.18
47 4.28 4.27 4.25 4.22
48 4.33 4.31 4.29 4.26
49 4.38 4.36 4.33 4.30
50 4.43 4.41 4.38 4.34
51 4.49 4.46 4.43 4.38
52 4.55 4.52 4.48 4.43
53 4.61 4.57 4.54 4.48
54 4.67 4.64 4.59 4.53
55 4.74 4.70 4.65 4.58
56 4.81 4.76 4.71 4.63
57 4.89 4.83 4.77 4.68
58 4.96 4.91 4.84 4.74
59 5.05 4.99 4.91 4.80
60 5.14 5.07 4.98 4.86
61 5.23 5.15 5.05 4.92
62 5.33 5.24 5.13 4.98
63 5.43 5.34 5.21 5.04
64 5.55 5.44 5.30 5.10
65 5.67 5.54 5.39 5.17
66 5.80 5.66 5.48 5.23
67 5.94 5.77 5.57 5.30
68 6.09 5.90 5.67 5.36
69 6.25 6.03 5.76 5.42
70 6.42 6.16 5.86 5.48
71 6.60 6.31 5.96 5.54
72 6.79 6.46 6.06 5.60
73 7.00 6.61 6.17 5.65
74 7.23 6.77 6.27 5.70
75 7.47 6.93 6.37 5.75
76 7.73 7.10 6.46 5.79
77 8.01 7.28 6.56 5.82
78 8.31 7.46 6.65 5.86
79 8.63 7.64 6.73 5.89
80 8.98 7.82 6.82 5.91
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table VI, is the 1983a Annuity Mortality Table, without projection, blended
60% males and 40% females, set back 5 years, with an assumed interest rate of 4%
per annum.
Certificate of participation
issued in connection with
Group flexible premium deferred annuity contract form no. TGP-711-197
Variable and fixed dollar settlement options
Separate Account Investments
Non-participating - No annual dividends
[GRAPHIC OMITTED]
Home Office:
401 N. Tryon Street
Charlotte, NC 28202
A Stock Company
TCG-311-197
Page 17
<PAGE>
============================================================
Transamerica Life Insurance and Annuity Company
[OBJECT OMITTED] Home Office: 401 N. Tryon Street
Charlotte, NC 28202
A Stock Company
============================================================
- --------------------------------------------------------
About your contract
- --------------------------------------------------------
<PAGE>
This is a legal contract between you, the "owner", and Transamerica Life
Insurance and Annuity Company (referred to as "we", "us", and "our" in this
contract). Please read it carefully.
The owner will be entitled to certain benefits provided under this contract,
subject to its provisions.
Right to Cancel
The owner may cancel this contract by returning it to: (a) the agent or (b)
Transamerica Life Insurance and Annuity Company, Annuity Service Center, P.O.
Box 31848, Charlotte, North Carolina 28231-1848, before midnight of the tenth
day after receipt of the contract. The return of the contract will be effective
as of the date the notice is received. We will refund an amount equal to the sum
of: (i) all purchase payments allocated to the general account options less any
withdrawals; and (ii) the variable accumulated value of the contract.
<PAGE>
PAYMENTS AND VALUES PROVIDED UNDER THIS CONTRACT WHEN BASED ON THE INVESTMENT
PERFORMANCE OF THE VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT. REFER TO PAGE 7 FOR ADDITIONAL INFORMATION ON THE VARIABLE
ACCOUNT.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
PRESIDENT AND CHIEF EXECUTIVE OFFICER GENERAL COUNSEL AND SECRETARY
Variable and fixed dollar settlement options
Separate Account Investments
Non-participating - No annual dividends
TCG-701-197
- --------------------------------------------
Information page
- --------------------------------------------
<TABLE>
<CAPTION>
Contract Information Beneficiary Information
- -------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C>
Contract Number: Specimen Beneficiary: Judy Doe
Contract Effective Date: July 1, 1997 Date of Birth: January 1, 1959
Income Tax Status: Non-Qualified Tax ID Number: 999-99-9999
Initial Purchase Payment: $20,000
Annuity Date: July 1, 2044
- -------------------------------------------------------------- ------------------------------------------------------------
Owner Information Annuitant Information
- -------------------------------------------------------------- ------------------------------------------------------------
Owner: John Doe Annuitant: John Doe
Date of Birth: January 1, 1959 Date of Birth: January 1, 1959
Tax ID Number: 999-99-9999 Tax ID Number: 999-99-9999
- -------------------------------------------------------------- ------------------------------------------------------------
- -------------------------------------------------------------- ------------------------------------------------------------
Joint Owner Information Joint Annuitant Information
- -------------------------------------------------------------- ------------------------------------------------------------
Joint Owner: Jane Doe Joint Annuitant: Jane Doe
Date of Birth: January 1, 1959 Date of Birth: January 1, 1959
Tax ID Number: 999-99-9999 Tax ID Number: 999-99-9999
</TABLE>
Allocation of Initial Purchase Payment
- -------------------------------------------
Variable Sub-accounts
[Transamerica VIF Money Market Portfolio 20%] [Foreign
[Transamerica VIF Growth Bond
Fund 0%] 0%]
[MFS Emerging [OCC Accumulation Trust Small
Growth 0%] Cap 0%]
[MFS Value [OCC Accumulation Trust Managed
Series 0%]
0%] [OCC Accumulation Trust
[Alliance Premier Equity 10%]
Growth 0%] General Account Options
[Growth and [Fixed
Income Account
0%] 0%]
[International [Initial Interest
0%] Rate
[Emerging ]
Markets [Guarantee Period Account
0%] Guarantee Periods- 1 Yr. -10
[Gold and Natural Yr. 0%]
Resources 0%] Total Allocation: 100%
[Balanced
30%]
[High
Yield
40%]
The data above reflects the information you provided us to issue this contract.
If you wish to change/correct any information on this page or for inquiries
regarding coverage or customer service please call us immediately at our service
center.
SERVICE CENTER: Transamerica Life Insurance and Annuity Company
Annuity Service Center
P.O. Box 31848
Charlotte, North Carolina 28231-1848
1-800 258-4260
<PAGE>
<TABLE>
<CAPTION>
ANNUAL CHARGES AND FEES
Charges and fees at the time we issued this contract
are shown below.
- ------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------- --------------------------------------------------------------
<S> <C>
Mortality and Expense Risk Charge [1.20% of the assets in each variable sub-account]
- --------------------------------------------------------------
-------------------------------------------------------------
Administrative Expense Charge [0.15% of the assets in each variable sub-account]
-------------------------------------------------------------
- --------------------------------------------------------------
Transfer Fee $10 for each transfer over [twelve] in each contract year
-------------------------------------------------------------
- -------------------------------------------------------------- [Currently None]
Systematic Withdrawal Fee
- -------------------------------------------------------------- -------------------------------------------------------------
[($30 or 2% of the account value if less)]
Account Fee (before the annuity date) [(We will waive if account value is over $25,000)]
-------------------------------------------------------------
- -------------------------------------------------------------- [$30]
Annuity Fee (after the annuity date)
- --------------------------------------------------------------
- --------------------------------------------------------------- --------------------------------------------------------------
- --------------------------------------------------------------- --------------------------------------------------------------
Living Benefits Rider Fee [If elected, 0.05% of the account value ]
[This fee will be deducted monthly]
- --------------------------------------------------------------- --------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES LOAD
Number of Complete Years Contingent Deferred Sales Load
From Receipt of Purchase Payment as a Percentage of Purchase Payment
Less than 1 year................................................6%
1 year but less than 2 years....................................6%
2 years but less than 3 years...................................5%
3 years but less than 4 years...................................5%
4 years but less than 5 years...................................4%
5 years but less than 6 years...................................4%
6 years but less than 7 years...................................2%
7 or more years.................................................0%
Additional Information
Minimum Initial Purchase Payment: [$5,000]
[$2,000 for IRA's]
Additional Purchase Payment Minimum: [$1,000]
Maximum Total Purchase Payment(s): [$1,000,000]
Minimum Initial Variable Sub-account Allocation or Transfer: [$1,000]
Minimum Initial Fixed Account Allocation or Transfer: [$1,000]
Minimum for Each Guarantee Period Allocation or Transfer: [$1,000]
Maximum Transfer Percentage
from the Fixed Account: [10%]
Minimum Account Value: [$2,000]
- -----------------------------------------------------------------------
End of Information Page
- -----------------------------------------------------------------------
- ---------------------------------------------
Table of Contents
<PAGE>
PAGE
INFORMATION PAGE..............................2 & 2A
DEFINITIONS....
.....................................................................
4
OWNER, ANNUITANT, BENEFICIARY..............................5
ESTABLISHING THIS CONTRACT..................................6
THE
VARIABLE
ACCOUNT.................................................. 7
THE
GENERAL
ACCOUNT....................................................8
TRANSFER
PROVISIONS.................................................... 9
WITHDRAWAL PROVISIONS.............................................9
SETTLEMENT OPTION PROVISIONS ..............................11
SETTLEMENT OPTION PAYMENTS..................................12
DEATH BENEFIT PROVISIONS ..........................................13
CHARGES, FEES AND SERVICES .....................................15
GENERAL
PROVISIONS
......................................................16
APPENDIX - ANNUITY RATE TABLES............................18
- ----------------------------
Definitions
- --------------
<PAGE>
- -------------------------------------------------------------------------
Account Value
The sum of the variable accumulated value and the general account options
accumulated value.
Annuity Date
The date the annuitization phase of this contract begins. The annuity date is
shown on the Information Page.
Cash Surrender Value
The amount we will pay to the owner if the contract is surrendered on or before
the annuity date. The cash surrender value is equal to the account value; less
the account fee, if any; less any applicable interest adjustment, contingent
deferred sales load, or premium tax charges.
Contract Anniversary
The anniversary each year of the contract effective date as shown on the
Information Page.
Contract Year
The 12-month period starting on the contract effective date and ending with the
day before the contract anniversary, and each 12-month period thereafter.
Code
The Internal Revenue Code of 1986, as amended, and the rules and regulations
issued under it.
Fixed Account
An account which credits a rate of interest for a period of at least twelve
months for each allocation or transfer.
General Account
The assets of the Company that are not allocated to a separate account.
General Account Options Accumulated Value
The total dollar value of all amounts the owner allocates or transfers to any
general account option; plus interest credited; less any amounts withdrawn,
applicable fees and premium tax charges, and/or transfers out to the variable
account prior to the annuity date.
General Account Options
The fixed account and the guarantee period account offered by us in the general
account. The general account options selected by the owner are shown on the
Information Page.
Guarantee Period Account
An account which credits a guaranteed rate of interest for specified guarantee
period(s). There may be several guarantee period(s) offered under the guarantee
period account.
Guarantee Period
The number of years that a guaranteed rate of interest may be credited to a
guarantee period account.
Guaranteed Interest Rate
The annual effective rate of interest after daily compounding credited to a
guarantee period.
Portfolio
The investment portfolio underlying each variable sub-account in which we will
invest any amounts the owner allocates to that variable sub-account.
Status (Qualified and Non-Qualified)
The status shown on the Information Page. This contract has a qualified status
if it is issued in connection with a retirement plan or program.
Valuation Day
Any day the New York Stock Exchange is open. To determine the value of an asset
on a day that is not a valuation day, we will use the value of that asset as of
the end of the next valuation day.
Valuation Period
The time interval between the closing (generally 4:00 p.m. Eastern Time) of the
New York Stock Exchange on consecutive valuation days.
Variable Account
The variable account (separate account VA-6) is a separate account established
and maintained by us for the investment of a portion of our assets.
Variable Accumulated Value
The total dollar value of all variable accumulation units under this contract
prior to the annuity date.
<PAGE>
Variable Accumulation Unit
A unit of measure used to determine the variable accumulated value before the
annuity date. The value of a variable accumulation unit varies with each
variable sub-account.
Variable Sub-accounts
One or more divisions of the variable account each of which invests solely in
shares of one of the portfolios. The variable sub-accounts selected by the owner
are shown on the Information Page.
<PAGE>
- ----------------------------------------------------------------------------
Owner, Annuitant, Beneficiary
- ----------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------
Owner (Joint Owners)
- -------------------------------------------------------------
The person(s) named on the Information Page who, while living, controls all
rights and benefits under this contract. If the owner is a trust that allows a
person(s) other than the trustee to exercise the ownership rights under this
contract, such person(s) must be named annuitant(s) and will be treated as the
owner.
If joint owners are named, the joint owners share ownership in this contract
equally with the right of survivorship. The right of survivorship means that if
a joint owner dies, his or her interest in the contract will pass to the
surviving joint owner subject to the death benefit provisions.
The owner(s) is entitled to designate the annuitant, beneficiary or other payee,
settlement option, and annuity date. The owner must notify us at our service
center to make changes to these designations in a form and manner acceptable to
us.
Annuitant (Joint Annuitant)
The person(s) named on the Information Page whose age and sex is used to
determine the amount of settlement option payments on the annuity date. If a
joint annuitant is named, that joint annuitant must be the annuitant's spouse.
The joint annuitant will become the annuitant if the annuitant dies. If there is
no joint annuitant and the annuitant dies, an individual owner will become the
new annuitant until the owner names another annuitant.
If the owner is an individual, the annuitant(s) may be changed by the owner at
any time before the annuity date. Any such change will be subject to the then
current underwriting requirements. We reserve the right to reject any change of
the annuitant(s) which has been made without our prior written consent.
If the owner is not an individual, the annuitant(s) may not be changed.
Beneficiary
The person(s) named on the Information Page who is designated to receive the
amounts payable under this contract if:
The owner dies before the annuity date and there is no joint owner; or
The owner dies after the annuity date and settlement option payments have
begun under a selected settlement option that guarantees payments for a
certain period of time.
The interest of any beneficiary who dies before the owner will terminate at time
of death of such beneficiary.
A beneficiary may be named or changed at any time. Any change made to an
irrevocable beneficiary must also include the written consent of the
beneficiary, except as otherwise required by law.
If more than one beneficiary is named, each named beneficiary will share equally
in any benefits or rights granted by this contract unless the owner gives us
other instructions at the time the beneficiaries are named.
- ----------------------------------
Establishing this Contract
<PAGE>
- -------------------------------------------
This contract was established on the contract effective date shown on
the Information Page.
- ------------------------------------------------------
Any time before the annuity date the owner may make additional purchase payments
to this contract. We reserve the right to not accept additional purchase
payments beyond certain attained ages of the owner or annuitant.
The owner may allocate purchase payments to one or more of the variable
sub-accounts or general account options we offer at the time we receive a
purchase payment. We reserve the right to limit the total number of investment
options that may be chosen over the lifetime of the contract.
All purchase payments are subject to the conditions listed below.
<PAGE>
- --------------------------------------------------
Purchase Payment Provisions
- --------------------------------------------------
Payment and Acceptance of Purchase Payments
Purchase payments are payments the owner makes to us for the benefits under this
contract. All purchase payments must be made to either an agent designated by us
or our service center.
The initial purchase payment, as shown on the Information Page, will be credited
to the variable sub-accounts and/or general account options according to the
owner's instructions within two business days of the date our service center
receives both the initial purchase payment and sufficient information, in a form
and manner acceptable to us, to issue this contract.
Additional purchase payments will be credited on the date we receive them at our
service center and are subject to the conditions listed below. Purchase payments
must:
Meet the additional payment minimum shown on the Information Page.
Not exceed any federal or state limitations during any taxable year; and
Not exceed the maximum total purchase payment amount, as shown on the
Information Page, without our prior approval.
We may return to the owner any purchase payments that do not meet the conditions
described in this section.
Allocating Each Purchase Payment
Allocations the owner makes to the variable sub-accounts and general account
options are subject to the following conditions. The owner must allocate:
In whole number percentages;
A minimum of 10% of each purchase payment to any variable sub-account or
general account option.
Not less than the variable sub-account minimum, as shown on the
Information Page, to variable sub-accounts with a zero balance.
Not less than the fixed account and guaranteed period account minimum, as
shown on the Information Page.
The owner may change allocation elections for future purchase payments any time
before the annuity date by notifying us at our service center.
Continuation of this Contract
If the owner stops making additional purchase payments to this contract, the
provisions of the contract will continue in force until all values have been
distributed. The owner may exercise all ownership rights under this contract
during that time, including making withdrawals and applying the annuity amount,
as defined in the settlement option provisions section, to provide payments
under a settlement option described in this contract.
<PAGE>
- ---------------------------------------------
The Variable Account
- -----------------------------------
<PAGE>
- -------------------------------------------------------------------------------
The variable account is a separate investment account established and
maintained by the Company for the investment of a
portion of our assets pursuant to North Carolina Insurance Law. We will
use the assets of the variable account to buy
shares in the various portfolios. Purchase payments allocated or transfers made
to one or more variable sub-accounts will become a part of the variable account.
- ------------------------------------------------------
The assets of the variable account are owned by us. The assets in the variable
account are not chargeable with liabilities arising out of any other business we
conduct, except to the extent that they exceed the reserves and other
liabilities of the variable account. The assets of the variable account
maintained under this contract will be kept separate from the assets held in our
general account.
Variable Sub-accounts
The variable account is composed of a number of variable sub-accounts. The
investment performance of each variable sub-account is linked directly to the
investment performance of the underlying portfolio.
We cannot and do not guarantee that any of the variable sub-accounts will always
be available for investment. We reserve the right, subject to compliance with
applicable federal or state law, rules or regulations, to add, delete, or
substitute the variable sub-accounts or the portfolio shares held by a variable
sub-account, if we believe that further investment in the shares is no longer
appropriate or shares in a portfolio become no longer available for investment.
We will send written notification to the owner of such changes.
Variable Accumulation Unit
A variable accumulation unit is a unit of measure we use to determine the
variable accumulated value each day before the annuity date. The variable
accumulated value is the total dollar value of all variable accumulation units
for each variable sub-account. The value of a variable accumulation unit varies
with each variable sub-account. Purchase payments allocated or transfers made to
a variable sub-account are credited to the variable accumulated value in the
form of variable accumulation units. Transfers, withdrawals, or fees made from a
variable sub-account will result in the cancellation of variable accumulation
units.
Each time a purchase payment is allocated or a transfer is made to a variable
sub-account, the number of variable accumulation units credited will be
determined. We will determine the number of variable accumulation units by
dividing the total amount allocated by the value of that variable sub-account's
variable accumulation unit for the valuation day on which either we received the
purchase payment allocation or transfer request at our service center.
The value of a variable accumulation unit for each variable sub-account is
determined by multiplying the value of that unit at the end of the prior
valuation period by the net investment factor of the variable sub-account for
the valuation period. The value of a variable accumulation unit may increase or
decrease.
Net Investment Factor
The net investment factor is the formula that measures the investment
performance of a variable sub-account from one valuation period to the next. For
any variable sub-account, the net investment factor for a valuation period is
determined by dividing (A) by (B), then subtracting (C) where;
(A) is
The net asset value per share held in the variable sub-account, as of the end of
the valuation period; plus (minus)
The per-share amount of any dividend or capital gain distributions if the
"ex-dividend" date occurs in the valuation period; plus (minus)
A per-share charge or credit as of the end of the valuation period for tax
reserves for realized and unrealized capital gains, if any.
<PAGE>
(B) is
- ------------------------------------------------
The net asset value per share held in the variable sub-account as of the end of
the prior valuation period.
(C) is
The daily mortality and expense risk charge multiplied by the number of calendar
days in the current valuation period; plus
The daily administrative expense charge multiplied by the number of calendar
days in the current valuation period.
<PAGE>
- -----------------------------------------
The General Account
- -----------------------------------------
<PAGE>
- --------------------
- --------------------
The Company's general account includes all assets not allocated to one of the
Company's separate accounts. The general account options under this contract
include a fixed account and a guarantee period account to which the owner may
allocate purchase payments and transfers.
Fixed Account
Crediting of Interest
We will establish effective annual rates of interest for any amounts allocated
or transferred to this fixed account from time to time. Any purchase payment
allocation or transfer to the fixed account will be credited interest at the
rate applicable for its class. We guarantee that the rate of interest in effect
for any amounts allocated or transferred will remain in effect for at least
twelve months from the date such allocation or transfer is made. At any time
after the end of the twelve month period for a particular allocation, we may
change the annual rate of interest without prior notice. We guarantee that any
subsequent change in the annual rate of interest will remain in effect for a
minimum of twelve months from the effective date of change.
Interest will be credited on a daily basis at a daily rate which is equivalent
to the effective annual interest rate for that allocation. The effective annual
interest rate applicable to an allocation will never be less than 3% annually.
Transfer Limitations
Transfers from and to the fixed account are subject to the following conditions:
The owner may make four transfers from the fixed account to any guarantee
period or variable sub-account each contract year. The total amount
transferred may not exceed the maximum amount allowed for
any contract year. We reserve the right to waive this limitation.
The maximum amount that may be transferred each contract year is a
percentage of the value of the fixed account as of the last contract
anniversary less any prior transfers made that contract year. The
percentage rate, which will be declared by the Company from time to time,
will not be less than 10 percent. The percentage rate on the contract
effective date for the maximum transfer amount is shown on the Information
Page.
Amounts from the fixed account may not be transferred to any guarantee
period or variable sub-account as identified by us whose underlying
portfolio's assets consist of more than 50% investment in income producing
securities, such as the money market accounts, contracts of deposit, U.S.
Treasury or other U.S. Government securities, bonds or any other fixed
income investment.
Amounts transferred from the variable account into the fixed account may
not be transferred back to the variable account for six months following
the date of the original transfer.
Guarantee Period Account
Guarantee Periods
Each purchase payment allocation or transfer to the guarantee period account
will establish a new guarantee period. Each guarantee period offers a specified
duration with a corresponding guaranteed interest rate. The owner may not select
a guarantee period whose duration will extend beyond the annuity date, as
described in the settlement option provision section. We will never offer a
guarantee period with a duration of less than a year.
<PAGE>
- ----------------------------------
Crediting of Interest
- --------------------------------------------------------
We will establish a guaranteed interest rate for each guarantee period. This
rate will remain in effect for the specified duration of the guarantee period.
Interest will be credited on a daily basis at a daily rate which is equivalent
to the effective annual guaranteed interest rate for that guarantee period. The
guaranteed interest rate applicable to a guarantee period will never be less
than 3% annually.
Interest Adjustment
We will deduct an interest adjustment from amounts withdrawn or transferred from
a guarantee period before the end of the guarantee period. We will not make an
interest adjustment upon the death of the owner or within the 30-day period
before the end of the guarantee period. We may waive the interest adjustment in
connection with certain options offered with this contract.
Any applicable interest rate adjustment will be calculated by multiplying the
amount withdrawn, transferred or annuitized before the reduction for any
contingent deferred sales load by the formula described below:
[(1 + I)/(1 + J + .005)]n/12 - 1
I = The guaranteed interest rate credited to the current guarantee period.
J = The current interest rate offered for a guarantee period equal to the
number of years remaining in the current guarantee period (fractional years
are rounded up to the next full year). If no guarantee period equal to the
number of years remaining in the current guarantee period is available, the
rate will be established by linear interpolation.
N = The number of full months remaining to the end of the current guarantee
period.
The interest adjustment will be made if the current interest rate plus .005 is
greater than the guaranteed interest rate.
The interest adjustment will never reduce the amount under a guarantee period to
less than the purchase payment allocation or transfer amount which initiated the
guarantee period; less any prior withdrawals or transfers; plus daily interest
accumulated at a 3% annual rate. There will be no upward adjustments.
Guarantee Period Expiration
At least 45 days, but not more than 60 days, prior to the expiration date of a
guarantee period, we will notify the owner as to the options available when a
guarantee period expires. The owner may elect to transfer the amount held in
that guarantee period to another general account option or to a variable
sub-account being offered by us at that time. The transfer request must be
received no later than the day immediately following the end of the expiring
guarantee period.
If no election is made, we will establish a new guarantee period of the same
duration as the expiring guarantee period, if offered, with a new guaranteed
interest rate declared by us for that guarantee period. If we are not currently
offering guarantee periods with the same duration as the expiring guarantee
period, the new guarantee period will be the next higher duration. If the
guarantee period extends beyond the annuity date, we will then select the
longest period that will not extend the guarantee period beyond such date.
<PAGE>
- -----------------------------------------------
Transfer Provisions
<PAGE>
- -----------------------------
The owner may transfer all or a portion of the account value between and among
the variable sub-accounts and general account options subject to the limitations
as described in this section and the general account section of this contract.
All transfer requests must specify (a) the amount of the transfer; (b) the
variable sub-account or general account option from which the transfer is to be
made; and (c) the variable sub-account or general account option which is to
receive the transfer. All transfers will be made as of the valuation day we
receive the request at our service center.
Before the annuity date, transfers in excess of the maximum per contract year,
as shown on the Information Page, will be subject to a transfer fee, as
described in the charges, fees and services section of this contract. We reserve
the right to waive the transfer fee.
<PAGE>
- -----------------------------------------
After the annuity date, transfers are only permitted if a variable payment
option is elected. Such transfers among the
variable sub-accounts are limited to four per contract year. We reserve the
right to change the number of transfers available after the annuity date.
The minimum amount that may be transferred from a variable sub-account, the
fixed account or any guarantee period under the guarantee period account is the
lesser of $1,000 or the entire value of the variable sub-account, fixed account
or guarantee period from which the transfer is being made. The minimum amount
that may be initially allocated or transferred into a variable sub-account or
the fixed account is shown on the Information Page. The minimum amount that must
always be transferred into any guarantee period is shown on the Information
Page. We reserve the right to waive the minimum(s) in connection with certain
options offered with this contract.
- ----------------------------------------------------------------
Withdrawal Provisions
- ------------------------
<PAGE>
- ----------------------------------------------------------------------------
Before the annuity date and subject to the conditions below the owner may:
- ----------------------------------------------------------------------------
Withdraw a portion of the account value for cash subject to any applicable
interest adjustment; contingent deferred sales load, and premium tax
charges; or
Automatically withdraw a portion of the account value by electing the
systematic withdrawal option; or
Withdraw the cash surrender value and terminate this contract.
Any amount withdrawn that exceeds the allowed amount, as described below, may be
subject to a contingent deferred sales load. All withdrawals will be made from
purchase payments on a first in, first out basis and then from earnings.
<PAGE>
- --------------------------------------------
- --------------------------------------------
- ---------------------------------------------------------
Partial Withdrawal Provisions
- ---------------------------------------------------------
Partial withdrawals taken from the variable sub-account or general account
options are subject to a minimum withdrawal amount equal to the lesser of $1,000
or the entire value of the variable sub-account, fixed account or guarantee
period from which the withdrawal is being made. We reserve the right to limit
the number of partial withdrawals that may be taken from the general account
options in any contract year. We reserve the right not to process any withdrawal
if the resulting account value is below the minimum, as shown on the Information
Page.
Systematic Withdrawal Option
The owner may elect to automatically receive a series of partial withdrawals
under the systematic withdrawal option subject to the following conditions:
Systematic withdrawals may be subject to a fee as described in the
charges, fees and services section of this contract.
Systematic withdrawals may only be taken from variable sub-accounts and
general account options as designated by us from time to time. We reserve
the right to prospectively change such designations.
The owner may terminate systematic withdrawals at any time by notifying us at
our service center. Once the option has been terminated, it may not be elected
again for a twelve month period. Systematic withdrawals will automatically
terminate if the contract is annuitized, surrendered or otherwise distributed as
a result of the owner's death.
Surrender of this Contract
The owner may surrender this contract to us for its cash surrender value on or
before the annuity date. Surrender of the contract will be subject to any
withdrawal limitations imposed under applicable federal or state law, rules or
regulations.
Payment of the cash surrender value to the owner will be in full settlement of
our liability under the contract.
Withdrawal of Funds Without Charges
At the end of the free look period or 30 days after the contract effective date,
whichever is later, the owner may make withdrawals up to the allowed amount each
contract year before the annuity date without incurring a contingent deferred
sales load.
<PAGE>
- --------------------------------------------------
The allowed amount is equal to 15% of purchase payments less than seven
years old as of the last contract anniversary,
less any previous withdrawals taken in that contract year. For the first
contract year, the allowed amount is equal to
15% of purchase payments as of the time of the first withdrawal, less any
previous withdrawals taken that contract year.
Previous withdrawals include partial withdrawals and certain scheduled
withdrawals, such as systematic withdrawals. Any
amounts that exceed the allowed amount will be subject to a contingent deferred
sales load. Purchase payments that are older than seven years old will not be
subject to a contingent deferred sales load
- --------------------------------------------------------------
Amounts withdrawn from any guarantee period account may be subject to an
interest adjustment as described in the general account section of this
contract.
Contingent Deferred Sales Load
A contingent deferred sales load may apply when a withdrawal from, or surrender
of, this contract occurs. For purposes of determining the contingent deferred
sales load, all withdrawals are made first from purchase payments on a first-in,
first-out basis and then from earnings.
We calculate the contingent deferred sales load separately for each purchase
payment received by us. The contingent deferred sales load is a percentage of
the withdrawn purchase payment.
The applicable contingent deferred sales load percentages, as shown on the
Information Page, are based on the number of complete years from the receipt of
the purchase payment(s) to the date of withdrawal.
Waiver of Contingent Deferred Sales Load We will waive the contingent deferred
sales load:
On the allowed amount.
Upon annuitization on or after the first contract anniversary, if the
selected settlement option involves life contingencies.
Upon the owner's death before the annuity date.
<PAGE>
- --------------------------
Settlement Option Provisions
- ------------------------------------------------------
<PAGE>
On the annuity date, we will apply the annuity amount, as defined below,
to provide payments under the settlement option selected by the owner. The
first settlement option payment will be made 30 days after the annuity
date.
Settlement option payments may be made in monthly, quarterly, semi-annual
or annual installments as selected by the owner.
- ----------------------------------
The owner may change the annuity date and settlement and payment option by
notifying our service center at least 30 days in advance of the annuity date.
The annuity date must be on or before the later of (A) and (B) where:
(A) is the first day of the calendar month immediately preceding the month of
the annuitant's or joint annuitant's 85th birthday, whichever is earlier, and;
(B) is the first day of the month immediately following the tenth contract
anniversary.
The annuity date may not be earlier than the first day of the calendar month
coinciding with the first contract anniversary and may in no event be later than
the earlier of the annuitant's or joint annuitant's 97th birthday.
After the annuity date, we will not allow the owner to make:
Any changes to either the settlement or payment option;
Additional purchase payments; or
Any further withdrawals.
Annuity Amount
The annuity amount we will apply to provide payments is equal to the account
value, less any interest adjustment, less any contingent deferred sales load,
and less any premium tax charges.
<PAGE>
- -------------------------
Minimum Requirements
- ------------------------------------------
We reserve the right to offer a less frequent mode of payment than the mode
selected by the owner or make a cash payment to the owner equal to the cash
surrender value if:
The annuity amount is less than $5,000; or
The amount of the first fixed payment is less than $150; or
The amount of the first variable payment is less than $150 or if a
variable payment from a variable sub-account is
less than $75.
If we make such a cash payment it will be in full settlement of our liability
under this contract.
Settlement Options
The settlement options the owner may choose from are listed below. For any
settlement option involving life contingencies, it is possible that no
settlement option payments will be made from this contract if, after the annuity
date but before the first settlement option payment is made, the annuitant and
joint annuitant or contingent annuitant, as applicable, dies.
Life Annuity
Provides payments to the owner for as long as the annuitant lives. Payments will
end with the payment due just before the annuitant's death and there is no
provision for a death benefit payable to a beneficiary.
Life Annuity with Period Certain
Provides payments to the owner for the longer of: a) the annuitant's life; or
(b) the period certain. The period certain
may be 120, 180 or 240 months. If the annuitant dies during the period
certain, payments will continue until the end of
the period certain.
Life and Contingent Annuity
Provides payments to the owner for as long as the annuitant lives. If the
annuitant dies, payments will continue for as long as the contingent annuitant
lives in an amount equal to 50%, 66 2/3% or 100% of the original payment, as
selected. Payments will then end with the payment due just before the contingent
annuitant's death.
Joint and Survivor Annuity
Provides payments to the owner for as long as the survivor of the annuitant or
joint annuitant lives. After the first annuitant dies, payments will continue
for as long as the survivor lives in an amount equal to 50%, 66 2/3% or 100% of
the original payment, as selected. Payments will then end with the payment due
just before the death of the survivor.
Other Forms of Payment
Payments can be provided under other settlement options not described in this
section. Contact our service center for more information.
<PAGE>
- -------------------------------------------------------
Settlement Option Payments
- -------------------------------------------------------
- ------------------------------
Settlement option payments may be fixed or variable or a combination of
both.
The fixed payment option provides for settlement option payments that
remain constant and are not affected by the investment performance of the
variable sub-accounts.
The variable payment option provides for settlement option payments that
vary based on the investment performance of the variable sub-account(s)
selected by the owner. These payments may increase, decrease or remain the
same.
- ---------------------------------------------------
Fixed Payment Option
- ---------------------------------------------------
Amount of Fixed Payment
The owner may elect to have all or a portion of the annuity amount applied to
provide fixed payments. On the annuity date, we will determine the dollar amount
of the fixed payments by applying the portion of the annuity amount allocated to
provide fixed payments as a single payment based on the settlement option chosen
and the age and sex of the annuitant(s), using the appropriate guaranteed
annuity rate tables. If required by law, we will use the appropriate unisex
guaranteed annuity rate tables. The monthly annuity rate tables are contained in
the appendix.
Variable Payment Option
Amount of First Variable Payment
The owner may elect to have all or a portion of the annuity amount applied to
provide settlement option payments that vary based on the investment performance
of selected variable sub-accounts. The amount of the first variable
<PAGE>
- ----------------------------------
payment will be equal to the benefit that could be purchased by applying the
portion of the annuity amount allocated to provide the variable payments as a
single payment based on the settlement option chosen and age and sex of the
annuitant(s) using the appropriate guaranteed annuity rate tables. If required
by law, we will use the appropriate unisex guaranteed annuity rate tables. The
monthly annuity rate tables are contained in the appendix.
Amount of Subsequent Variable Payments
We determine the dollar amount of the second and subsequent variable payments by
first identifying the number and value of the variable annuity units for each
variable sub-account. Variable annuity units are the unit of measure used to
determine such payments. For each payment we multiply the number of variable
annuity units by the value of the variable annuity units for each variable
sub-account.
The number of variable annuity units for each variable sub-account will remain
the same for the second and subsequent variable payments (unless amounts are
transferred to or from a variable sub-account) and the value of the variable
annuity units in each variable sub-account will vary. As a result of the
variation in the value of variable annuity units for each variable sub-account
between payments, the dollar amount of each variable payment after the first may
increase, decrease or remain the same.
Number of Variable Annuity Units
The number of variable annuity units for each variable sub-account is determined
by dividing the first variable payment by the value of the variable annuity
units of each variable sub-account on the annuity date.
Value of Variable Annuity Units
The variable annuity unit values depend on the net investment factor and the
assumed interest rate. The value of a variable annuity unit for each variable
sub-account for any valuation day is equal to (A) times (B) times (C), where:
(A) is the variable annuity unit value on the immediately preceding valuation
day;
(B) is the net investment factor (determined in accordance with the net
investment factor provision on Page 7), for the valuation period just ended; and
(C) is the investment result adjustment factor (.99989255)n, which recognizes an
assumed interest rate of 4% per year. The Company reserves the right to offer
other assumed interest rates with appropriate investment result adjustment
factors. The "n" in the investment result adjustment factor is the number of
days since the preceding valuation day.
Once settlement option payments begin, we guarantee the amount of each variable
payment will not be affected by variations in expenses or mortality experience.
<PAGE>
- ---------------------------------------------------
Death Benefit Provisions
- ---------------------------------------------------
- ----------------------------------------------------------------------
We must distribute death benefits or continue making settlement option payments
under this contract according to the requirements of Code Section 72(s) as long
as this contract is in force or benefits remain to be paid.
We will not accept any additional purchase payments after the death of the owner
or joint owner.
If any ownership change is made, the death benefit
under this contract may be reduced in accordance with our then current
underwriting rules. Such reduction will never decrease the death benefit below
the account value.
We must receive proof of death before any benefits are distributed from this
contract. Proof of death acceptable to us includes:
A certified copy of a death contract
A certified copy of a court decree stating the cause of death A written
statement by a medical doctor who attended the deceased Any other proof or
documents we may require
<PAGE>
- --------------------------------------------------------------
Amount of Death Benefit
- --------------------------------------------------------------
If the owner or joint owner dies before the annuity date and neither the
deceased owner nor the joint owner had attained the age of 85, the guaranteed
minimum death benefit is equal to the greatest of (A), (B) or (C) where:
(A) is the account value
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
(B) is 100% of purchase payments, less the sum of all withdrawals and any
applicable premium tax charges.
- --------------------------------------------------------------------------------
(C) is the highest account value on any contract anniversary, increased by the
sum of all purchase payments received since that contract anniversary, less the
sum of all withdrawals and any applicable premium tax charges since that
anniversary.
The guaranteed minimum death benefit will be determined as of the end of the
valuation period during which our service center receives both proof of death of
the owner or joint owner and the written notice of the form of benefit elected
by the person to whom the death benefit is payable.
Amount of Death Benefit after the Owner or Joint Owner attains age 85
If the owner or joint owner dies before the annuity date and either the deceased
owner or surviving owner had attained the age of 85, the death benefit is equal
to the account value. For purposes of calculating such death benefit, the
account value is determined as of the date the death benefit is paid.
Death of Owner or Joint Owner before the Annuity Date
If the owner or joint owner dies before the annuity date, we will pay the death
benefit as specified in this section. The entire death benefit must be
distributed within five years after the owner's death. If the owner is not an
individual, an annuitant's death will be treated as the death of the owner as
provided in Code Section 72(s)(6). For example, this contract will remain in
force with the annuitant's surviving spouse as the new annuitant if:
This contract is owned by a trust; and
The beneficiary shown on the Information Page is either the annuitant's
surviving spouse, or a trust holding the contract solely for the benefit of
such spouse.
The manner in which we will pay the death benefit depends on the status of the
person(s) involved in this contract. The death benefit will be payable to the
first person from the applicable list below:
If the owner is the annuitant:
The joint owner, if any
The beneficiary, if any
If the owner is not the annuitant:
The joint owner, if any
The beneficiary, if any
The annuitant;
The joint annuitant; if any
If the death benefit is payable to the owner's surviving spouse, (or to a trust
for the sole benefit of such surviving spouse), we will continue this contract
with the owner's spouse as the new annuitant (if the owner was the annuitant)
and the new owner (if applicable), unless such spouse selects another option as
provided below.
If the death benefit is payable to someone other that the owner's surviving
spouse, we will pay the death benefit in a lump sum payment to, or for the
benefit of, such person within five years after the owner's death, unless such
person(s) selects another option as provided below.
In lieu of the automatic form of death benefit specified above, the person(s) to
whom the death benefit is payable may elect to receive it:
In a lump sum; or
As settlement option payments, provided the person making the election is
an individual. Such payments must begin within one year after the owner's
death and must be in equal amounts over a period of time not extending
beyond the individual's life or life expectancy.
Election of either option must be made no later than 60 days prior to the one
year anniversary of the owner's death. Otherwise, the death benefit will be
settled under the appropriate automatic form of benefit specified above.
If the person to whom the death benefit is payable dies before the entire death
benefit is paid, we will pay the remaining death benefit in a lump sum to the
payee named by such person or, if no payee was named, to such person's estate.
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
If the death benefit is payable to a non-individual (subject to the special rule
for a trust for the sole benefit of a surviving spouse), we
- --------------------------------------------------------------------------------
will pay the death benefit in a lump sum within one year after the owner's
death.
If the Annuitant Dies Before the Annuity Date
If an owner and an annuitant are not the same individual and the annuitant (or
the last of joint annuitants) dies before the annuity date, the owner will
become the annuitant until a new annuitant is selected.
Death after the Annuity Date
If an owner or an annuitant dies after the annuity date, any amounts payable
will continue to be distributed at least as rapidly as under the settlement and
payment option then in effect on the date of death.
Upon the owner's death after the annuity date, any remaining ownership rights
granted under this contract will pass to the person to whom the death benefit
would have been paid if the owner had died before the annuity date, as specified
above.
Survival Provision
The interest of any person to whom the death benefit is payable who dies at the
time of, or within 30 days after, the death of the owner will also terminate if
no benefits have been paid to such beneficiary, unless the owner had given us
written notice of some other arrangement.
<PAGE>
- -------------------------------------------------
Charges, Fees and Services
- -------------------------------------------------
- --------------------------------------
Premium Tax Charge
Some jurisdictions impose on us a premium tax on annuities. If a premium tax is
imposed, we reserve the right to deduct this amount from purchase payments or
account value, as appropriate. For purposes of this contract, premium tax
charges include retaliatory taxes or other similar taxes.
Mortality and Expense Risk Charge
The amount of the annual mortality and expense risk charge is shown on the
Information Page. The mortality and expense risk charge will be deducted on a
daily basis from the assets in each variable sub-account as part of the
calculation of the variable accumulation unit.
Administrative Expense Charge
The amount of the annual administrative expense charge on the contract effective
date is shown on the Information Page. The administrative expense charge will be
deducted on a daily basis from the assets in each variable sub-account as part
of the calculation of the variable accumulation unit.
We may change this charge upon 30 days advance written notice to the owner. Any
increase in the administrative expense charge will apply prospectively to
administrative expense charges deducted after the effective date of change. The
administrative expense charge will not exceed an annual charge of 0.35%.
Transfer Fee
We reserve the right to impose a transfer fee for each transfer in excess of the
number shown on the Information Page made during a single contract year. The
amount of the transfer fee on the contract effective date is shown on the
Information Page. This fee will not increase. The transfer fee will be deducted
from the amount of the transfer prior to its reallocation. We reserve the right
to waive the transfer fee.
Systematic Withdrawal Fee
We reserve the right to impose an annual processing fee for the systematic
withdrawal option. The amount of the systematic withdrawal fee on the contract
effective date is shown on the Information Page. Any fee imposed will not exceed
$25 per contract year.
Account Fee
Before the annuity date, an annual account fee will be deducted from the account
value on the last business day of each contract year and if different, the date
the contract is surrendered. The amount of the annual account fee on the
contract effective date is shown on the Information Page. The account fee will
be deducted on a pro rata basis from the account value. There will be no
interest adjustment on any deductions from the guarantee period account for this
fee.
We may change this fee prospectively upon 30 days advance written notice to
the owner. Any
<PAGE>
increase will not result in the account fee exceeding a maximum annual
account fee equal to the lesser of 2% of the
account value or $60.
Annuity Fee
After the annuity date, an annual fee equal to the amount shown on the
Information Page will be deducted in equal amounts from distributions made under
the variable payment option. We reserve the right to waive this fee.
Statements of Account
At least once during each contract year, we will send the owner a statement of
account reflecting the account value of the contract. Statements of account will
cease to be provided to the owner after the annuity date.
<PAGE>
- -------------------------------------------------------------
General Provisions
- -----------------------
<PAGE>
- -------------------------------------------------------
Entire Contract
- ----------------------------------------------
This contract and any attached endorsements and riders are the entire contract.
Misstatement of Age and Sex
If the age or sex of the annuitant(s) and/or of any other measuring life has
been misstated, the settlement option payments payable under this contract will
be whatever the annuity amount would provide for the correct age or sex of the
annuitant(s) and/or of any other measuring life on the annuity date. Any
underpayment by us, as a result of such misstatement, will be paid in a lump sum
on the next settlement option payment made by us, and any overpayment will be
deducted from the current or succeeding payments.
Proof of Existence and Age
Before making any payment under this contract, we may require proof of the
existence and age of the owner, the annuitant and/or any other measuring life.
We may also require any other information as we may need in order to provide
benefits under the contract.
Changes
No provision of this contract may be changed or waived unless done in writing
and signed by two of our authorized officers. We will not make any change that
reduces the amounts payable under this contract unless the change is required by
law. We will provide the owner a copy of any changes we make to this contract.
Income Tax Qualification
This contract is intended to qualify as an annuity contract for federal income
tax purposes. All provisions in this contract will be interpreted to maintain
such tax qualification. We may make changes in order to maintain this
qualification or to conform this contract to any applicable changes made in the
tax qualification requirements. We will provide the owner with a copy of any
changes we make to this contract.
Incontestability
This contract is incontestable from the contract effective date.
Assignment of this Contract
To make ownership changes or assign rights to another person, the owner must
notify us at our service center. An assignment or ownership change is not
binding on us until we receive the necessary documentation and acknowledge the
request. We are not responsible for the validity or effect - tax or otherwise -
of any assignment or ownership change. If an ownership change is made, the death
benefit under this contract may be reduced in accordance with our then current
underwriting rules. Such reduction will never decrease the death benefit below
the account value.
Payments by/to the Company
All purchase payments paid to us or amounts paid by us from this contract will
be made in the legal currency of the United States of America.
Delay of Payment or Transfer
Except as provided below, we will pay amounts due from this contract within
seven days of the date our service center receives both the request for such
amount and all the necessary requirements in a form and manner acceptable to us.
<PAGE>
- ------------------------------------------------
We reserve the right to delay the payment of any benefits payable, amounts
withdrawn or transfers requested from the variable account due to: (a) the
closure of the New York Stock Exchange for reasons other than usual
- ------------------------------------------------------------------
weekends, holidays or if trading on such Exchange is restricted; (b) the
existence of an emergency as defined by the Securities and Exchange Commission
of the United States Government or restrictions of trading by the Commission; or
(c) delays permitted by the Securities and Exchange Commission for the
protection of security holders.
We further reserve the right to delay payment of any withdrawal from the general
account options for up to six months after we receive the request for
withdrawal. If we delay payment for more than 30 days, we will pay interest as
provided in this contract on the withdrawal amount up to the date of payment.
Minimum Benefits
Any settlement option payments, cash surrender or death benefits that may be
available under this contract will not be less than the minimum benefits
required by any statute of the jurisdiction in which this contract was issued.
Protection of Benefits/Proceeds
To the extent permitted by law, no payment of benefits or interest will be
subject to the claim(s) of any creditor of any owner, annuitant or beneficiary
or to any claim or process of law against any owner, annuitant or beneficiary.
Non-Participating
This contract is classified as a non-participating contract. It does not
participate in our profits or surplus, and therefore no dividends are payable.
<PAGE>
- ------------------------------------
APPENDIX
ANNUITY RATE TABLES
<PAGE>
- --------------------------------------------------------------------------------
Applicability of Rates - The guaranteed annuity rates contained in Tables I, II
and III will be used to provide a minimum guaranteed monthly annuity under the
fixed annuity payment option. The annuity rates contained in Tables IV, V and VI
will be used to determine the first monthly annuity payment under the variable
annuity payment option.
The rates contained in this contract are for each $1,000 applied under the
applicable settlement option and do not include any applicable premium tax
charges. Any applicable premium tax charges will be withdrawn as described in
the premium tax charge provision of the contract.
Tables I and II under the fixed annuity payment option and Tables IV and V under
the variable annuity payment option, as applicable, will be used for all
settlement options, subject to any limitations imposed under: (a) a retirement
plan or program under which this contract is issued; or (b) applicable federal
or state law, rules or regulations which restrict the use of such rates. If any
federal or state law, rules or regulations prohibits the use of the rates
provided under these Tables, then the annuity rates provided under Tables III
and VI, as applicable, will be used.
Rates Not Shown - Any rates not shown in the Tables contained in this contract
will be provided by us upon request.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF GUARANTEED ANNUITY RATES UNDER
FIXED ANNUITY PAYMENT OPTION
TABLE I - MALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 3.76 3.76 3.75 3.73
41 3.80 3.79 3.78 3.76
42 3.84 3.83 3.82 3.80
43 3.88 3.87 3.86 3.83
44 3.93 3.92 3.90 3.87
45 3.97 3.96 3.94 3.91
46 4.02 4.01 3.98 3.95
47 4.07 4.06 4.03 3.99
48 4.13 4.11 4.08 4.03
49 4.18 4.16 4.13 4.08
50 4.24 4.21 4.18 4.13
51 4.30 4.27 4.23 4.17
52 4.37 4.33 4.29 4.22
53 4.43 4.40 4.34 4.28
54 4.51 4.46 4.41 4.33
55 4.58 4.53 4.47 4.38
56 4.66 4.60 4.54 4.44
57 4.74 4.68 4.60 4.50
58 4.83 4.76 4.67 4.56
59 4.92 4.84 4.75 4.61
60 5.02 4.93 4.83 4.68
61 5.12 5.02 4.90 4.74
62 5.23 5.12 4.99 4.80
63 5.34 5.22 5.07 4.87
64 5.47 5.33 5.16 4.93
65 5.60 5.45 5.25 5.00
66 5.74 5.57 5.35 5.06
67 5.90 5.69 5.45 5.12
68 6.06 5.83 5.55 5.18
69 6.24 5.97 5.64 5.24
70 6.43 6.11 5.74 5.30
71 6.63 6.26 5.84 5.35
72 6.84 6.42 5.95 5.41
73 7.07 6.58 6.05 5.45
74 7.32 6.74 6.14 5.50
75 7.58 6.91 6.24 5.54
76 7.86 7.08 6.33 5.57
77 8.16 7.26 6.42 5.61
78 8.48 7.43 6.50 5.63
79 8.83 7.61 6.58 5.66
80 9.20 7.79 6.65 5.68
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table I, is the 1983a Annuity Mortality Table for males, without
projection, set back 5 years, with an interest rate of 3.5% per annum.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF GUARANTEED ANNUITY RATES UNDER
FIXED ANNUITY PAYMENT OPTION
TABLE II - FEMALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 3.58 3.58 3.57 3.56
41 3.61 3.60 3.60 3.59
42 3.64 3.64 3.63 3.62
43 3.67 3.67 3.66 3.65
44 3.71 3.70 3.69 3.68
45 3.74 3.74 3.73 3.71
46 3.78 3.77 3.76 3.75
47 3.82 3.81 3.80 3.78
48 3.86 3.85 3.84 3.82
49 3.90 3.89 3.88 3.86
50 3.95 3.94 3.92 3.90
51 4.00 3.98 3.97 3.94
52 4.05 4.03 4.01 3.98
53 4.10 4.08 4.06 4.03
54 4.15 4.14 4.11 4.08
55 4.21 4.19 4.17 4.13
56 4.28 4.25 4.22 4.18
57 4.34 4.32 4.28 4.23
58 4.41 4.38 4.34 4.28
59 4.48 4.45 4.41 4.34
60 4.56 4.52 4.47 4.40
61 4.64 4.60 4.55 4.46
62 4.73 4.68 4.62 4.52
63 4.82 4.77 4.70 4.59
64 4.92 4.86 4.78 4.66
65 5.03 4.96 4.86 4.72
66 5.14 5.06 4.95 4.79
67 5.26 5.17 5.04 4.86
68 5.39 5.28 5.14 4.93
69 5.52 5.40 5.24 5.01
70 5.67 5.52 5.34 5.07
71 5.82 5.66 5.44 5.14
72 5.99 5.80 5.55 5.21
73 6.17 5.95 5.66 5.27
74 6.36 6.10 5.77 5.34
75 6.57 6.27 5.88 5.40
76 6.80 6.44 6.00 5.45
77 7.04 6.61 6.11 5.50
78 7.31 6.80 6.21 5.54
79 7.60 6.99 6.32 5.58
80 7.91 7.18 6.42 5.62
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table II, is the 1983a Annuity Mortality Table for females, without
projection, set back 5 years, with an interest rate of 3.5% per annum.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF GUARANTEED ANNUITY RATES UNDER
FIXED ANNUITY PAYMENT OPTION
TABLE III - UNISEX RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 3.69 3.69 3.68 3.66
41 3.73 3.72 3.71 3.70
42 3.76 3.76 3.75 3.73
43 3.80 3.79 3.78 3.76
44 3.84 3.83 3.82 3.80
45 3.88 3.87 3.86 3.83
46 3.93 3.92 3.90 3.87
47 3.97 3.96 3.94 3.91
48 4.02 4.01 3.98 3.95
49 4.07 4.06 4.03 4.00
50 4.13 4.11 4.08 4.04
51 4.18 4.16 4.13 4.08
52 4.24 4.22 4.18 4.13
53 4.30 4.27 4.24 4.18
54 4.37 4.33 4.29 4.23
55 4.44 4.40 4.35 4.28
56 4.51 4.47 4.42 4.34
57 4.59 4.54 4.48 4.40
58 4.66 4.61 4.55 4.45
59 4.75 4.69 4.62 4.51
60 4.84 4.77 4.69 4.57
61 4.93 4.86 4.77 4.64
62 5.03 4.95 4.85 4.70
63 5.14 5.05 4.93 4.76
64 5.25 5.15 5.02 4.83
65 5.37 5.26 5.11 4.89
66 5.50 5.37 5.20 4.96
67 5.64 5.49 5.29 5.03
68 5.79 5.61 5.39 5.09
69 5.95 5.75 5.49 5.15
70 6.12 5.88 5.59 5.22
71 6.31 6.03 5.69 5.28
72 6.50 6.18 5.80 5.34
73 6.71 6.33 5.90 5.39
74 6.93 6.49 6.01 5.44
75 7.17 6.66 6.11 5.49
76 7.43 6.84 6.21 5.53
77 7.71 7.01 6.31 5.57
78 8.01 7.19 6.40 5.61
79 8.33 7.37 6.49 5.63
80 8.67 7.56 6.57 5.66
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table III, is the 1983a Annuity Mortality Table, without projection,
blended 60% males and 40% females, set back 5 years, with an interest rate of
3.5% per annum.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF ANNUITY RATES UNDER
VARIABLE ANNUITY PAYMENT OPTION
TABLE IV - MALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 4.08 4.07 4.06 4.04
41 4.12 4.11 4.09 4.07
42 4.16 4.15 4.13 4.11
43 4.20 4.18 4.17 4.14
44 4.24 4.23 4.21 4.18
45 4.29 4.27 4.25 4.21
46 4.33 4.32 4.29 4.25
47 4.38 4.36 4.33 4.29
48 4.44 4.41 4.38 4.33
49 4.49 4.46 4.43 4.38
50 4.55 4.52 4.48 4.42
51 4.61 4.57 4.53 4.47
52 4.67 4.63 4.59 4.52
53 4.74 4.69 4.64 4.57
54 4.81 4.76 4.70 4.62
55 4.88 4.83 4.76 4.67
56 4.96 4.90 4.83 4.73
57 5.04 4.97 4.89 4.78
58 5.13 5.05 4.96 4.84
59 5.22 5.13 5.04 4.90
60 5.31 5.22 5.11 4.96
61 5.42 5.31 5.19 5.02
62 5.52 5.41 5.27 5.08
63 5.64 5.51 5.36 5.14
64 5.76 5.62 5.44 5.20
65 5.90 5.73 5.53 5.27
66 6.04 5.85 5.62 5.33
67 6.19 5.98 5.72 5.39
68 6.36 6.11 5.82 5.45
69 6.53 6.25 5.91 5.51
70 6.72 6.39 6.01 5.56
71 6.92 6.54 6.11 5.61
72 7.14 6.69 6.21 5.67
73 7.37 6.85 6.31 5.71
74 7.62 7.01 6.40 5.75
75 7.88 7.18 6.49 5.79
76 8.16 7.35 6.58 5.83
77 8.46 7.52 6.67 5.86
78 8.79 7.70 6.75 5.89
79 9.13 7.87 6.83 5.91
80 9.51 8.05 6.90 5.93
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table IV, is the 1983a Annuity Mortality Table for males, without
projection, set back 5 years, with an assumed interest rate of 4% per annum.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF ANNUITY RATES UNDER
VARIABLE ANNUITY PAYMENT OPTION
TABLE V - FEMALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 3.90 3.90 3.89 3.88
41 3.93 3.92 3.92 3.91
42 3.96 3.95 3.95 3.94
43 3.99 3.98 3.97 3.96
44 4.02 4.01 4.01 3.99
45 4.06 4.05 4.04 4.02
46 4.09 4.08 4.07 4.06
47 4.13 4.12 4.11 4.09
48 4.17 4.16 4.15 4.13
49 4.21 4.20 4.19 4.16
50 4.26 4.24 4.23 4.20
51 4.30 4.29 4.27 4.24
52 4.35 4.34 4.32 4.28
53 4.40 4.39 4.36 4.33
54 4.46 4.44 4.41 4.37
55 4.52 4.49 4.46 4.42
56 4.58 4.55 4.52 4.47
57 4.64 4.61 4.58 4.52
58 4.71 4.68 4.64 4.57
59 4.78 4.75 4.70 4.63
60 4.86 4.82 4.77 4.69
61 4.94 4.89 4.84 4.75
62 5.03 4.98 4.91 4.81
63 5.12 5.06 4.98 4.87
64 5.22 5.15 5.06 4.94
65 5.32 5.24 5.14 5.00
66 5.43 5.34 5.23 5.07
67 5.55 5.45 5.32 5.14
68 5.68 5.56 5.41 5.21
69 5.81 5.68 5.51 5.27
70 5.96 5.80 5.61 5.34
71 6.11 5.93 5.71 5.41
72 6.28 6.08 5.82 5.48
73 6.46 6.22 5.93 5.54
74 6.65 6.37 6.04 5.60
75 6.86 6.54 6.15 5.66
76 7.09 6.71 6.25 5.71
77 7.33 6.88 6.37 5.76
78 7.60 7.07 6.47 5.80
79 7.89 7.25 6.57 5.84
80 8.20 7.45 6.67 5.88
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table V, is the 1983a Annuity Mortality Table for females, without
projection, set back 5 years, with an assumed interest rate of 4% per annum.
<PAGE>
<TABLE>
<CAPTION>
APPENDIX (continued)
TABLES OF ANNUITY RATES UNDER
VARIABLE ANNUITY PAYMENT OPTION
TABLE VI - UNISEX RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
Age ANNUITY 120 Months 180 Months 240 Months
==============================================================================================================
<S> <C> <C> <C> <C> <C>
40 4.01 4.00 4.00 3.98
41 4.05 4.04 4.03 4.01
42 4.08 4.07 4.06 4.04
43 4.12 4.11 4.09 4.07
44 4.16 4.14 4.13 4.11
45 4.20 4.18 4.17 4.14
46 4.24 4.22 4.21 4.18
47 4.28 4.27 4.25 4.22
48 4.33 4.31 4.29 4.26
49 4.38 4.36 4.33 4.30
50 4.43 4.41 4.38 4.34
51 4.49 4.46 4.43 4.38
52 4.55 4.52 4.48 4.43
53 4.61 4.57 4.54 4.48
54 4.67 4.64 4.59 4.53
55 4.74 4.70 4.65 4.58
56 4.81 4.76 4.71 4.63
57 4.89 4.83 4.77 4.68
58 4.96 4.91 4.84 4.74
59 5.05 4.99 4.91 4.80
60 5.14 5.07 4.98 4.86
61 5.23 5.15 5.05 4.92
62 5.33 5.24 5.13 4.98
63 5.43 5.34 5.21 5.04
64 5.55 5.44 5.30 5.10
65 5.67 5.54 5.39 5.17
66 5.80 5.66 5.48 5.23
67 5.94 5.77 5.57 5.30
68 6.09 5.90 5.67 5.36
69 6.25 6.03 5.76 5.42
70 6.42 6.16 5.86 5.48
71 6.60 6.31 5.96 5.54
72 6.79 6.46 6.06 5.60
73 7.00 6.61 6.17 5.65
74 7.23 6.77 6.27 5.70
75 7.47 6.93 6.37 5.75
76 7.73 7.10 6.46 5.79
77 8.01 7.28 6.56 5.82
78 8.31 7.46 6.65 5.86
79 8.63 7.64 6.73 5.89
80 8.98 7.82 6.82 5.91
==============================================================================================================
</TABLE>
Basis of Computation - The actuarial basis for the annuity rates contained in
this Table VI, is the 1983a Annuity Mortality Table, without projection, blended
60% males and 40% females, set back 5 years, with an assumed interest rate of 4%
per annum.
Variable and fixed dollar settlement options
Separate Account Investments
Non-participating - No annual dividends
[GRAPHIC OMITTED]
Home Office:
401 N. Tryon Street
Charlotte, NC 28202
A Stock Company
<PAGE>
<PAGE>
Living Benefits Rider
About this rider
<PAGE>
Transamerica Life Insurance and Annuity Company has issued this rider as a part
of the certificate to which it is attached.
This rider amends the certificate to waive the contingent deferred sales load on
withdrawals made as the result of the owner's or joint owner's extended care or
terminal illness. A withdrawal request must include proof acceptable to us of
extended care or terminal illness. This benefit may only be elected at the time
the certificate is issued. It will remain in effect until the owner's or joint
owner's death, this rider is terminated or this certificate is annuitized or
surrendered.
The owner(s) may terminate this benefit at any time by notifying us at our
service center. Once terminated, it may not be re-elected.
<PAGE>
- ------------------------------------------------------------------------
Definition of Terms
- -------------------------------------------------------------------------
Unless redefined below, the terms defined in the certificate will have the same
meaning when used in this rider. For purposes of this rider, the following
definitions apply:
Extended Care is your confinement in a qualifying institution for
treatment prescribed by a qualifying medical practitioner.
Qualifying Institution is a licensed hospital or licensed skilled or
intermediate care nursing facility at which medical treatment is available
on a daily basis and daily medical records are kept for each patient. It is
not a facility whose purpose is to provide accommodations, board or
personal care services to individuals who do not need daily medical or
nursing care, or a place mainly for rest.
Qualifying Medical Professional is a legally qualified practitioner of the
healing arts who is acting within the scope of his or her license, and who
is not a resident of your household and not related to you by blood or
marriage.
Terminal Illness is an illness or physical condition which is reasonably
expected to result in death within 12 months from the date a qualifying
medical professional certifies to such fact.
Treatment is the rendering of medical care or advice. Treatment must
relate to a specific medical condition and includes diagnosis and
subsequent care. Treatment does not include routine monitoring unless
medically necessary.
Waiver for Extended Care and Terminal Illness
We will waive contingent deferred sales load charges after the first certificate
year if:
The owner receives extended care in a qualifying institution from a
qualifying medical professional for at least 60 consecutive days and the
request for the withdrawal or surrender together with proof of such
extended care is received within 90 days after the owner received extended
care treatment; or
The owner receives medically required care from a hospice or home health
care service for at least 60 consecutive days. Such in-home care must be
certified by a qualifying medical professional. Other evidence may also be
required, such as evidence of Medicare eligibility; or
The owner is diagnosed with a terminal illness and we receive the
withdrawal request and proof of terminal illness.
None of the benefits described above will apply if the owner was confined in a
qualifying institution, receiving home health care services or diagnosed with a
terminal illness on the certificate effective date.
No additional purchase payments will be accepted after you have exercised a
waiver as provided by this rider. Any waiver as described in this rider is in
addition to the waiver provided under the withdrawal of funds without charges
provision of the certificate.
<PAGE>
- ---------------------------------------------------------------------------
Living Benefits Rider Fee
- --------------------------------------------------------------------------
The living benefits rider fee is an annual fee for the waivers provided under
this rider and is shown on the certificate Information Page. The fee will be
calculated and deducted monthly at a rate of 1/12 the annual fee. The fee is a
percentage of the account value at the time the fee is deducted.
The fee will be deducted on a pro rata basis from the variable accumulated
value. If the variable accumulated value is not sufficient, the remaining fee
will be deducted on a pro rata basis from the general account options
accumulated value.
Signed for the Company at Charlotte, North Carolina to be effective on the
certificate effective date.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
[GRAPHIC OMITTED]
PRESIDENT AND CHIEF EXECUTIVE OFFICER
[GRAPHIC OMITTED]
GENERAL COUNSEL AND SECRETARY
<PAGE>
- ----------------------------------------------------------------------------
- --------------------------------------------------------------------------
<PAGE>
Tax Sheltered Annuity
Endorsement
(Code Section 403(b))
- ---------------------------------------------------------------------------
SPECIAL NOTICE - Please read this endorsement carefully. It contains
important information which can affect the tax
status of the owner's Tax Sheltered Annuity. If the owner does not comply
with the provisions of this endorsement, the
owner may be subject to adverse tax consequences. As with all tax matters, the
owner should consult a tax adviser to assess the impact of the owner's failure
to comply with these provisions.
- --------------------------------------
About this endorsement
<PAGE>
- -------------------------------------------------------------------------------
Transamerica Life Insurance and Annuity Company (we) has issued this endorsement
as part of the attached contract. This endorsement supersedes any contrary
provision of the contract.
- -----------------------------------------------------------------
This contract is issued to the owner as part of a TSA. This means that part or
all of the purchase payments for this contract are paid either with "pre-tax"
contributions that the owner made through elective salary deferral contributions
under a salary reduction agreement between the owner and the owner's employer or
with employer contributions. Income taxation on the purchase payments paid for
this contract is deferred, thus providing the owner with a current tax benefit.
However, as a condition of this special tax treatment, the Code imposes several
limitations, including restrictions on when the owner may make withdrawals of
the account value under Code Section 403(b)(11) and minimum distribution
requirements for the owner and/or the beneficiary under Code Sections 401(a)(9)
and 403(b)(10), including the incidental death requirements of Code Section
401(a)(9)(G). The owner must comply with the provisions of this endorsement in
order to maintain the deferred tax benefits of this contract. If the owner does
not comply with the provisions of this endorsement, the owner will lose the
special tax treatment and may incur additional tax penalties.
This contract is for the exclusive benefit of the owner and the beneficiary. The
owner's rights and entire interest in this contract are nonforfeitable.
<PAGE>
- -----------------------------------------------------
Definition of Terms
- -----------------------------------------------------
Unless redefined below, the terms used in the contract will have the same
meaning when used in this endorsement. For purposes of this endorsement, the
following definitions apply:
Beneficiary is any individual the owner named in writing in the
application, enrollment form or any subsequent change of beneficiary form.
The beneficiary will receive the proceeds of the contract in the event the
owner dies before permissible distribution of those proceeds is made to the
owner.
Direct Rollover is a distribution made directly to an eligible retirement
plan of all or a portion of the account value.
Eligible Retirement Plan is (1) an annuity contract as described in Code
Section 403(b); or (2) an individual retirement account as described in
Code Section 408(a);
4-007 446-197
or (3) an individual retirement annuity as described in Code Section 408
(b).
Eligible Rollover Distribution is any distribution to the owner or to the
owner's surviving spouse (or if the owner is divorced, to the owner's
former spouse as an alternate payee under a QDRO) of all or any portion of
the account value. An eligible rollover distribution does not include any
distribution: (1) that is a minimum required distribution under Code
Section 401(a)(9); or (2) that is not included in the owner's gross income;
or (3) that is one of a series of substantially equal periodic payments
over the owner's life (or life expectancy ) or the joint lives(or joint
life expectancies) of the owner and the beneficiary or for a period of 10
years or more.
Page 1
Pension Plan is an employee pension benefit plan as defined under Section
3(2)(A) of the Employee Retirement Income Security Act of 1974, as amended
(ERISA).
Owner is the individual in whose name and for whose exclusive benefit the
contract was purchased, whether the contract describes such individual as
owner or annuitant. While such individual is living, he or she will be the
sole owner of the contract.
Qualified Domestic Relations Order (QDRO) is a domestic relations order
described in Code Section 414(p) that creates or recognizes the existence
of an alternate payee's right to, or assigns to an alternate payee the
right to, receive all or a portion of the benefits payable to the owner
under this contract. A domestic relations order is a judgment, decree, or
order (including approval of a property settlement agreement) made pursuant
to a state domestic relations law (including a community property law) that
relates to the provision of child support, alimony payments, or marital
property rights of an alternate payee.
Required Beginning Date is April 1 of the calendar year following the
later of (1) the calendar year in which the owner attains age 70 1/2, or
(2) the calendar year in which the owner retires. However, the required
beginning date means April 1 of the calendar year following the calendar
year in which the owner attains age 70 1/2 for an owner who:
(a) is a 5% owner (as defined in Code Section 416) of an organization
described in Code Section 403(b)(1)(A) with respect to the plan year ending
in the calendar year in which the owner attains age 70 1/2; and
(b) did not attain age 70 1/2 before January 1, 1988; and
(c) is not in a governmental plan or a church plan (as defined in Code
Section 401(a)(9)(C)).
Tax Sheltered Annuity (TSA) is an annuity contract intended to meet the
requirements of Code Section 403(b).
4-007 446-197
Ownership
As a TSA, the following conditions apply:
The owner and annuitant must be the same person.
Joint ownership is not allowed.
The owner cannot pledge or assign any interest in this contract to another
person, except as permitted by law, such as in the case of a QDRO.
The owner cannot borrow any amounts from this contract, nor use this
contract as security for a loan.
Nontransferability
Except as permitted by law, no person has the right to anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge any benefit under the
contract. When permitted by law, an assignment of benefits to which the owner is
entitled under the contract will not be binding on the Company unless made in
writing and given to us at our Home Office. We are not responsible for the
adequacy of any assignment. However, when a written assignment is filed with us
and recorded by us at our Home Office, the owner's rights and those of any
revocable beneficiary will be subject to the assignment.
Purchase payment limitations
No purchase payments will be accepted unless they represent amounts rolled over
or transferred from another Code Section 403(b)(1) TSA contract, Code Section
403(b)(7) custodial account in conformance with Code Section 403(b)(8) or any
other rule or regulation issued under the Code, or a transfer pursuant to
Revenue Ruling 90-24, 1990-1 C.B. 97.
Restrictions on Withdrawals
Withdrawals of any part of the account value may not be made under the contract
except as provided in this provision. The owner may not make a withdrawal of any
part of the account value made pursuant to a salary reduction agreement after
December 31, 1988, and the earnings on such contributions and amounts held on
December 31, 1988, unless the owner (1) is at least age 59 1/2; (2) becomes
disabled within the meaning of Code Section 72(m)(7); (3) separates from
employment with the owner's employer; or (4) incurs financial hardship within
the meaning of Code Section 403(b)(11) (any withdrawal to meet a financial
hardship may not include any earnings attributable to the owner's elective
deferrals).
The owner may not make a withdrawal from a custodial account qualifying under
Code Section 403(b)(7) (or amounts attributable to such an account) and earnings
on such amounts unless the owner (1) dies; (2) is at least age 59 1/2; (3)
becomes disabled within the meaning of Code Section 72(m)(7); (4) separates from
employment with the owner's employer; or (5) incurs a financial hardship within
the meaning of Code Section 403(b)(11) (any withdrawal to meet a financial
hardship may not include any earnings attributable to the owner's elective
deferrals).
However, these restrictions do not apply if (a) the withdrawal is for payment to
an alternate payee under a QDRO; or (b) the withdrawal is made for the purpose
of making a direct transfer to another Code Section 403(b) TSA as provided in
Revenue Ruling 90-24, 1990-1 C.B. 97.
Code Section 72(m)(7) currently defines disability as the inability to engage in
any substantial gainful activity by reason of any medically determined physical
or mental impairment which can be expected to be of long-continued and
indefinite duration, or which will result in the owner's death.
Under Code Section 403(b)(11), a financial hardship currently means an immediate
and heavy financial need for which funds are not available from any other
resources. Any withdrawal based upon financial hardship cannot exceed the amount
required to meet the immediate financial need and cannot include earnings.
4-007 446-197
The owner's employer or the employer's TSA plan administrator, if any, will
determine whether a domestic relations order is a QDRO, and will tell us whether
or not to comply with the order. However, if the owner's employer or the TSA
administrator asks us to make this determination, we will do so. We will provide
the owner's employer, the TSA administrator and/or the owner with information
about the value and form of the benefits available under such an order.
Any withdrawals of the account value will be subject to the qualified
pre-retirement survivor annuity and qualified joint and survivor annuity
requirements of ERISA Section 205, as set forth in the Waiver and Spousal
Requirements provision.
Required Minimum Distribution
Federal law requires that the owner begin receiving distributions from this TSA
or from another TSA arrangement by the required beginning date. If settlement
option payments start prior to the required beginning date, then the annuity
date of such settlement option payments will be treated as the required
beginning date for purposes of the death benefit provisions below. The owner may
take required minimum distributions from any TSA the owner currently maintains,
as long as:
Distributions begin when required;
Periodic payments are made at least once per year; and
The amount to be distributed each year is not less than the minimum
required under current federal law.
The required minimum distribution payments from this contract are considered
partial withdrawals. The amount of each withdrawal during any calendar year must
meet federal TSA requirements and be in equal or substantially equal amounts
over:
The owner's life or over the joint lives of the owner and the beneficiary;
or
A period not extending beyond the owner's life expectancy or the joint
life expectancies of the owner and the beneficiary.
Required minimum distribution payments will be made annually and the amount will
not increase or will increase only as allowed under federal tax law. Contingent
deferred sales load may be charged on any required minimum distribution payments
made under the contract. We reserve the right to waive any applicable contingent
deferred sales load.
Life Expectancy
Life expectancy is:
The owner's remaining life;
The remaining joint life expectancy of both the owner and the beneficiary;
or
The remaining life expectancy of the beneficiary.
The owner's life expectancy or the joint life expectancy of both the owner and
the beneficiary are calculated by use of the return multiples in Tables V and VI
of Income Tax Regulation Section 1.72-9.
Before required minimum distributions begin, the owner may choose to have the
owner's life expectancy determined under the (1) age recalculation, or (2) no
age recalculation method as determined under federal law. If the owner does not
make an election before the required beginning date, the owner's life expectancy
will be recalculated annually. After the owner's election is made, it may not be
changed and will apply to all subsequent years in which required minimum
distributions are made.
If the owner dies before the required beginning date and the beneficiary is the
owner's surviving spouse, then he or she may also choose to have his or her life
expectancy determined under the (1) age recalculation, or (2) no age
recalculation method. Once the beneficiary makes an election, such election may
not be changed and will apply to all subsequent years. If the beneficiary does
not make an election by the time distributions are scheduled to begin under the
Death Provisions, the beneficiary's life expectancy will be recalculated
annually for all years and may not be changed.
In all cases, if the beneficiary is not the owner's surviving spouse, his or her
life expectancy may not be recalculated and will be determined using his or her
attained age on the date settlement
4-007 446-197
option payments or any other distribution is scheduled to begin. Payments for
subsequent years will be based on the beneficiary's life expectancy reduced by
one year for each calendar year which has elapsed since the calendar year in
which the life expectancy of the beneficiary was first calculated.
Automatic Payout Option (APO)
Before the annuity date, and subject to our then current underwriting
guidelines, the owner may elect to have us calculate and annually distribute
required minimum distribution amounts from this contract if the owner meets the
following requirements:
The owner is or will be age 70 1/2 and is retired in the year the first
APO payment is to be made;
This contract has been in force at least one year;
The owner is not receiving distributions under any other periodic payment
option;
The owner elects one of the methods of calculating minimum required
distributions that we offer.
The owner's distributions under this option must begin no earlier than
January 1 of the year in which the owner reaches age 70 1/2 and the owner must
be retired. The owner's election of APO must be in a form and manner we
prescribe. We must receive the owner's election at least 30 days before the
payments are to begin.
We will automatically postpone the owner's annuity date one year for each year
the owner receives APO payments up to the later of:
The owner's 85th birthday; or
The first day of the eleventh contract year.
If the owner decides he or she does not want us to delay the annuity date,
please contact us.
We will automatically cancel this option if:
The owner makes more than one change in beneficiaries, unless the changes
are made due to death, divorce or marriage;
The owner begins receiving settlement option payments;
A withdrawal (whether partial or an APO payment) reduces the account value
to less than the minimum value shown on the Information Page.
If this happens, we reserve the right to pay the owner the cash surrender
value and cancel the contract; or
The owner dies.
After this option is canceled for any reason, the owner may not reelect it.
Contingent deferred sales load may be charged on APO payments made under the
contract. We reserve the right to waive any applicable contingent deferred sales
load.
Death Provisions
If the owner dies before the required beginning date, the entire death benefit
must:
Be completely distributed no later than December 31 of the fifth year
following the year the owner died; or
Begin to be distributed to the beneficiary in the form of settlement
option payments, as described below.
The settlement option must pay out equal or substantially equal amounts over the
beneficiary's life or over a period not extending beyond the beneficiary's life
expectancy. Once settlement option payments begin, no changes may be made to the
option.
If the beneficiary is the owner's surviving spouse, he or she must
elect to begin receiving settlement option payments no later than the earliest
of (1) December 31 of the year following the year following the year the owner
died; or (2) December 31 of the year following the year in which the owner would
have reached the required beginning date if the owner had not died.
If the beneficiary is not the owner's surviving spouse, he or she must elect to
begin receiving settlement option payments no later than December 31 of the year
following the year in which the owner died.
4-007 446-197
If the owner dies after the required beginning date, we will continue to
distribute the remaining death benefit at least as rapidly as under the
settlement option in effect at the date of the owner's death.
If the contract is subject to the requirements of ERISA, the following
provisions shall apply:
Limitation of Payment
If the account value at the time of annuitization is $3,500 or less, we will pay
the account value in a cash payment, regardless of the settlement option the
owner or any other payee chooses. Such cash payment will be in full settlement
of our liability to the payee for the benefit. In addition, such cash payment
will not require spousal consent as described below.
Waiver and Spousal Requirements
If the owner is legally married, we will require the owner's written waiver of
the qualified pre-retirement survivor annuity and/or qualified joint and
survivor annuity and his or her spouse's written consent before the owner can:
(a) name a beneficiary other than the owner's spouse; or (b) make a partial or
full withdrawal from the contract; or (c) choose a form of payment other than a
life and contingent annuity where the spouse is not named as the contingent
annuitant. The spouse's written consent must (i) be on a form we approve; (ii)
acknowledge his/her understanding of the effect of such consent; and (iii) be
witnessed by a notary public. However, the owner's written waiver and the
spouse's written consent will not be required if the withdrawal is made for the
purpose of making a direct transfer to another Code Section 403(b) TSA as
provided in Revenue Ruling 90-24, 1990-1 C.B. 97.
We will not accept any request under (a), (b) or (c), above, without the owner's
written waiver and the spouse's written consent. However, if the owner can prove
that the spouse's written consent cannot be obtained because: (1) the spouse has
died; or (2) the spouse cannot be located; or (3) the spouse is held to be
incompetent and the owner has a court order to that effect; or (4) the owner has
been abandoned by
the spouse (within the meaning of local law) and the owner has a court order to
that effect, then, unless required by a QDRO, the owner's request under (a), (b)
or (c), above, will be accepted without the owner's written waiver and the
spouse's written consent.
Payments to Minors
If the owner has died, any amount paid to a child of the owner will be treated
as if it had been paid to the owner's surviving spouse if the remainder of the
value of the contract becomes payable to the surviving spouse when the child
reaches the age of majority.
<PAGE>
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This endorsement shall terminate when the contract is surrendered or the account
value is otherwise distributed.
Signed for the Company at Charlotte, North Carolina, to be effective on the
contract effective date.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
PRESIDENT AND CHIEF EXECUTIVE OFFICER GENERAL COUNSEL AND SECRETARY
<PAGE>
Pension and Profit Sharing Plan
Endorsement
- --------------------------------------------------------------------
SPECIAL NOTICE - Please read this endorsement carefully. It contains
important information which can affect the tax
status of the pension plan. If the owner does not comply with the
provisions of this endorsement, the owner may be
subject to adverse tax consequences. As with all tax matters, the owner should
consult a tax adviser to assess the impact of the owner's failure to comply with
these provisions.
- --------------------------------------------------
About this endorsement
<PAGE>
- ----------------------------
This contract is issued as part of a pension plan. This means that part or all
of the purchase payments for this contract are paid either with "pre-tax"
contributions made through elective salary deferral contributions under an
employee salary reduction agreement or with employer contributions. Income
taxation on the purchase payments paid for this contract is deferred, thus
providing the owner with a current tax benefit. However, as a condition of this
special tax treatment, the Code imposes several limitations, including minimum
distribution requirements for the owner and/or the beneficiary under Code
Section 401(a)(9), including the incidental death requirements of Code Section
401(a)(9)(G). The owner must comply with the provisions of this endorsement in
order to maintain the deferred tax benefits of this contract. If the owner does
not comply with the provisions of this endorsement, the owner will lose the
special tax treatment and may incur additional tax penalties.
This contract is for the exclusive benefit of the owner and the beneficiary. The
owner's rights and entire interest in this contract are nonforfeitable.
<PAGE>
- ---------------
Definition of Terms
- -------------------------------------------------------------
Unless redefined below, the terms used in the contract will have the same
meaning when used in this endorsement. For purposes of this endorsement, the
following definitions apply:
Beneficiary is any individual the owner named in writing in the
application, enrollment form or any subsequent change of beneficiary form.
The beneficiary will receive the proceeds of the contract in the event the
owner dies before permissible distribution of those proceeds is made to the
owner.
Direct Rollover is a distribution made directly to an eligible retirement
plan of all or a portion of the account value.
Eligible Retirement Plan is (1) a qualified trust as described in Code
Section 401(a); or (2) an individual retirement account as described in
Code Section 408(a); or (3) an individual retirement annuity as described
in Code Section 408(b); or (4) an annuity plan as described in Code Section
403(a).
4-007 447-197
Eligible Rollover Distribution is any distribution to the owner or to the
owner's surviving spouse (or if the owner is divorced, to the owner's
former spouse as an alternate payee under a QDRO) of all or any portion of
the account value. An eligible rollover distribution does not include any
distribution: (1) that is a minimum required distribution under Code
Section 401(a)(9); or (2) that is not included in the owner's gross income;
or (3) that is one of a series of substantially equal periodic payments
over the owner's life (or life expectancy) or the joint lives (or joint
life expectancies) of the owner and the beneficiary or for a period of 10
years or more.
Pension Plan is an employee pension benefit plan as defined under Section
3(2)(A) of the Employee Retirement Income Security Act of 1974, as amended
(ERISA).
Owner is the individual in whose name and for whose exclusive benefit the
contract was purchased, whether the contract describes such individual as
owner or annuitant. While such individual is living, he or she will be the
sole owner of the contract.
Qualified Domestic Relations Order (QDRO) is a domestic relations order
described in Code Section 414(p) that creates or recognizes the existence
of an alternate payee's right to, or assigns to an alternate payee the
right to, receive all or a portion of the benefits payable to the owner
under this contract. A domestic relations order is a judgment, decree, or
order (including approval of a property settlement agreement) made pursuant
to a state domestic relations law (including a community property law) that
relates to the provision of child support, alimony payments, or marital
property rights of an alternate payee.
Required Beginning Date is April 1 of the calendar year following the
later of (1) the calendar year in which the owner attains age 70 1/2, or
(2) the calendar year in which the owner retires. However, the required
beginning date means April 1 of the calendar year following the calendar
year in which the owner attains age 70 1/2 for an owner who:
(a) is a 5% owner (as defined in Code Section 416) with respect
to the plan year ending in the calendar year
in which the owner attains age 70 1/2; and
(b) did not attain age 70 1/2 before January 1, 1988; and
(c) is not in a governmental plan or a church plan (as defined in Code
Section 401(a)(9)(C)).
Ownership
As a qualified plan, the following conditions apply:
The owner and annuitant must be the same person.
Joint ownership is not allowed.
The owner cannot pledge or assign any interest in this contract to another
person, except as permitted by law, such as in the case of a QDRO.
The owner cannot borrow any amounts from this contract, nor use this
contract as security for a loan.
4-007 447-197
Distributions
The owner's entire interest in this contract shall be distributed as required
under Section 401(a)(9) of the Code.
Limitation on Period Certain Distributions
In compliance with Code Sections 401(a)(9), no period certain settlement option
which extends beyond the life expectancy of the owner will be allowed.
Required Minimum Distribution
Distribution must be made from the contract in a manner which satisfies the
requirements of Code Section 401(a)(9), including the incidental death benefit
requirements of Code Section 401(a)(9)(G) as follows:
(a) The entire account value must be distributed, or must begin to be
distributed, no later than the required beginning date, in equal or
substantially equal amounts over (a) the life of the owner or over the joint
lives of the owner and the beneficiary; or (b) a period certain not extending
beyond the life expectancy of the owner, or the joint life expectancy of such
owner and the beneficiary.
(b) If the account value is to be distributed in any form other than a lump sum,
then the amount to be distributed each calendar year must be at least an amount
equal to the quotient obtained by dividing (a) the entire account value as of
December 31 of the calendar year immediately preceding the calendar year for
which the distribution is being made; by (b) the life expectancy of the owner,
or the joint life expectancy of such owner and the beneficiary.
If settlement option payments start prior to the required beginning date, then
the annuity date of such settlement option payments will be treated as the
required beginning date for purposes of the death benefit provisions below.
Contingent deferred sales load may be charged on any required minimum
distribution payments made under the contract. We reserve the right to waive any
applicable contingent deferred sales load.
Life Expectancy
Life expectancy is:
The owner's remaining life;
The remaining joint life expectancy of both the owner and the beneficiary; or
The remaining life expectancy of the beneficiary.
The owner's life expectancy or the joint life expectancy of both the owner and
the beneficiary are calculated by use of the return multiples in Tables V and VI
of Income Tax Regulation Section 1.72-9.
Before required minimum distributions begin, the owner may choose to have the
owner's life expectancy determined under (1) the age recalculation, or (2) no
age recalculation method as determined under federal law. If the owner does not
make an election before the required beginning date, the owner's life expectancy
will be recalculated annually. After the owner makes an election, such election
may not be changed and will apply to all subsequent years in which required
minimum distributions are made.
If the owner dies before the required beginning date and the beneficiary is the
owner's surviving spouse, then he or she may also choose to have his or her life
expectancy determined under (1) the age recalculation, or (2) no age
recalculation method. Once the beneficiary makes an election, such election may
not be changed and will apply to all subsequent years. If the beneficiary does
not make an election by the time distributions are scheduled to begin under the
Death Provisions, the beneficiary's life expectancy will be recalculated
annually for all years and may not be changed.
In all cases, if the beneficiary is not the owner's surviving spouse, his or her
life expectancy may not be recalculated and will be determined using his or her
attained age on the date settlement option payments or any other distribution is
scheduled to begin. Payments for subsequent years will be based on such life
expectancy reduced by one year for each calendar year which has elapsed since
the calendar year in which the life expectancy of the non-spouse beneficiary was
first calculated.
Automatic Payout Option (APO)
Before the annuity date, and subject to our then current underwriting
guidelines, the owner may elect to have us calculate and annually distribute
required minimum distribution amounts from
4-007 447-197
this contract if the owner meets the following requirements:
The owner is or will be age 70 1/2 and is retired in the year the first
APO payment is to be made;
This contract has been in force at least one year;
The owner is not receiving distributions under any other payment option;
The owner elects one of the methods of calculating minimum required
distributions that we offer.
The distributions under this option must begin no earlier than January 1 of the
year in which the owner reaches age 70 1/2 and the owner must be retired. The
owner's election of APO must be in a form and manner we prescribe. We must
receive the owner's election at least 30 days before the payments are to begin.
We will automatically postpone the owner's annuity date one year for each year
the owner receives APO payments up to the later of:
The owner's 85th birthday; or
The first day of the eleventh contract year.
If the owner decides he or she does not want us to delay the annuity date,
please contact us.
We will automatically cancel this option if:
The owner makes more than one change in beneficiaries, unless the changes
are made due to death, divorce or marriage;
The owner begins receiving settlement option payments;
A withdrawal (whether partial or an APO payment) reduces the account value
to less than the minimum account value shown on the Information Page.
If this happens, we reserve the right to pay the owner the cash surrender
value and cancel the contract; or
The owner dies.
After this option is canceled for any reason, the owner may not reelect it.
Contingent deferred sales load may be charged on APO payments made under the
contract. We reserve the right
to waive any applicable contingent deferred sales load.
Death Provisions
If the owner dies before the required beginning date, the entire death benefit
must:
Be completely distributed no later than December 31 of the fifth year
following the year the owner died; or
Begin to be distributed to the beneficiary in the form of settlement
option payments, as described below.
The settlement option must pay out equal or substantially equal amounts over the
beneficiary's life or over a period not extending beyond the beneficiary's life
expectancy. Once settlement option payments begin, no changes may be made to the
option.
If the beneficiary is the owner's surviving spouse, he or she must
elect to begin receiving settlement option payments no later than the earliest
of (1) December 31 of the year following the year the owner died; or (2)
December 31 of the year following the year in which the owner would have reached
the required beginning date if the owner had not died.
If the beneficiary is not the owner's surviving spouse, he or she must elect to
begin receiving settlement option payments no later than December 31 of the year
following the year in the owner died.
If the owner dies after the required beginning date, we will continue to
distribute the remaining death benefit at least as rapidly as under the
settlement option in effect at the date of the owner's death.
Limitation of Payment
If the account value at the time of annuitization is $3,500 or less, we will pay
the account value in a cash payment, regardless of the settlement option the
owner or any other payee chooses. Such cash payment will be in full settlement
of our liability to the payee for the benefit. In addition, such cash payment
will not require spousal consent as described below.
Waiver and Spousal Requirements
If the owner is legally married, we will require the owner's written waiver of
the qualified pre-retirement survivor annuity and/or qualified joint and
survivor annuity and his or her spouse's written consent before the owner can:
(a) name a beneficiary other than the spouse; or (b) make a partial or full
withdrawal from the contract; or (c) choose a form of payment other than a life
and contingent annuity where the spouse is not named as the contingent
annuitant. The spouse's written consent must (i) be on a form we approve; (ii)
acknowledge his/her understanding of the effect of such consent; and (iii) be
witnessed by a notary public.
We will not accept any request under (a), (b) or (c), above, without the owner's
written waiver and the spouse's written consent. However, if the owner can prove
that the spouse's written consent cannot be obtained because: (1) the spouse has
died; or (2) the spouse cannot be located; or (3) the spouse is held to be
incompetent and the owner has a court order to that effect; or (4) the owner has
been abandoned by the spouse (within the meaning of local law) and the owner has
a court order to that effect, then, unless required by a QDRO, the owner's
request under (a), (b) or (c), above, will be accepted without the owner's
written waiver and the spouse's written consent.
Payments to Minors
If the owner has died, any amount paid to a child of the owner will be treated
as if it had been paid to the owner's surviving spouse if the remainder of the
value of the contract becomes payable to the surviving spouse when the child
reaches the age of majority.
<PAGE>
4-007 447-197
This endorsement shall terminate when the contract is surrendered or the account
value is otherwise distributed.
Signed for the Company at Charlotte, North Carolina, to be effective on the
contract effective date.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
GRAPHIC OMITTED] [GRAPHIC OMITTED]
PRESIDENT AND CHIEF EXECUTIVE OFFICER GENERAL COUNSEL AND SECRETARY
<PAGE>
Individual Retirement Annuity
Endorsement
About this endorsement
<PAGE>
Transamerica Life Insurance and Annuity Company has issued this endorsement as a
part of the certificate to which it is attached.
An Individual Retirement Annuity (IRA) is a retirement plan described in Code
Section 408(b). It must comply with federal IRA requirements. As an IRA, this
certificate is intended to qualify under Code Section 408(b) and all provisions
of this certificate will be interpreted to ensure and maintain such
qualification, despite any other provisions to the contrary. This certificate is
for the exclusive benefit of the owner and the beneficiary. The owner's rights
and entire interest in this certificate are nonforfeitable.
Some of the provisions in this endorsement will be different than as described
in the attached certificate. The specific differences in your IRA annuity are
described below.
<PAGE>
- ---------------------------
Ownership Provisions
- ----------------------------------------------------------------
As an IRA, the following conditions apply:
The owner and annuitant must be the same person.
Joint ownership is not allowed.
The owner cannot pledge or assign any interest in this certificate to
another person.
The owner cannot transfer ownership, except in the event of divorce or
separation, as allowed by federal IRA requirements.
The owner cannot borrow any amounts from this certificate, nor use this
certificate as security for a loan.
Contributions
Purchase payments must be paid to us in cash. Except in the case of an allowable
rollover or transfer contribution, or a contribution made according to the terms
of a Simplified Employee Pension (SEP) plan, the total purchase payment for any
taxable year cannot be more than $2,000. We reserve the right to return any
portion of a purchase payment that represents an excess contribution.
No contribution will be accepted under a SIMPLE plan established by any employer
pursuant to Code Section 408(p). No transfer or rollover of funds attributable
to contributions made by a particular employer under its SIMPLE plan will be
accepted from a SIMPLE IRA, (an IRA used in conjunction with a SIMPLE plan)
prior to the expiration of the two (2) year period beginning on the date the
owner first participated in the employer's SIMPLE plan.
Required Minimum Distributions
Federal law requires that the owner begin receiving payments from any or all IRA
certificates no later than the April 1 following the year the owner turns age 70
1/2 (the required beginning date). If settlement option payments start prior to
the April 1 following the year the owner turns age 70 1/2, then the annuity date
of such settlement option payments will be treated as the required beginning
date for the purposes of the death benefit provisions below. The owner may take
required minimum distributions from any IRA certificate he or she currently
maintains, as long as:
Distributions begin when required;
Periodic payments must be made at least once per year; and
The amount to be distributed each year is not less than the minimum
required under current federal law.
The required minimum distribution payments from this certificate are considered
partial withdrawals. The amount of each withdrawal during any calendar year must
meet federal IRA requirements and be in equal or substantially equal amounts
over:
<PAGE>
- -----------------------------------------------------------------------------
The life of the owner or over the joint lives of the owner and the beneficiary;
or
- ---------------------------------------
A period not extending beyond the life expectancy of the owner or the
joint life expectancy of the owner and the beneficiary.
Required minimum distribution payments will be made annually and the amount will
not increase or will increase only as allowed under federal tax law.
Life Expectancy
Life expectancy is:
The remaining life of the owner;
The remaining joint life expectancy of both the owner and the beneficiary; or
The remaining life expectancy of the beneficiary.
The life expectancy of the owner or the joint life expectancy of the owner and
the beneficiary are calculated by use of the return multiples in Tables V and VI
of Income Tax Regulation Section 1.72-9.
Before required minimum distributions begin, the owner may choose to have his or
her life expectancy determined under the age recalculation or no age
recalculation method as determined under federal law. If the owner does not make
an election before the required beginning date, the life expectancy of the owner
will be recalculated annually. After an election is made, it may not be changed
and will apply to all subsequent years in which required minimum distributions
are made.
If the owner dies before the required beginning date and the beneficiary is the
owner's surviving spouse, then such beneficiary may also choose to have his or
her life expectancy determined under the age recalculation or no age
recalculation method. Once the owner's surviving spouse makes an election, such
election may not be changed and will apply to all subsequent years. If the
owner's surviving spouse does not make an election by the time distributions are
scheduled to begin under the Death Provisions, the surviving spouse's life
expectancy will be recalculated annually for all years and may not be changed.
In all cases, if the beneficiary is not the owner's surviving spouse, his or her
life expectancy may not be recalculated and will be determined using his or her
attained age on the date settlement option payments or any other distribution is
scheduled to begin. Payments for subsequent years will be based on such life
expectancy reduced by one year for each calendar year which has elapsed since
the calendar year in which the life expectancy of the non-spouse beneficiary was
first calculated.
Automatic Payout Option (APO)
Before the annuity date, the owner may elect to have us calculate and annually
distribute required minimum distribution amounts from this certificate if the
following requirements are met:
The owner is or will be age 70 1/2 in the year the first APO payment is
to be made;
This certificate is at least one certificate year old;
The owner is not receiving distributions under any other periodic payment
option;
The owner elects one of the methods of calculating minimum required
distributions that we offer.
While receiving APO payments, the owner may not make any additional purchase
payments to this certificate. Rollovers and transfers may be accepted, but only
with our approval.
Distributions under this option must begin no earlier than January of the year
in which the owner reaches age 70 1/2. The election of APO must be in a form and
manner prescribed by us. We must receive such election at least 30 days before
payments are to begin.
We will automatically postpone the annuity date one year for each year the owner
receives APO payments up to the later of:
The owner's 85th birthday; or
The first day of the eleventh annuity year.
If the owner does not want us to delay the annuity date, he or she should
contact our service center.
<PAGE>
<PAGE>
We will automatically cancel this option if:
The owner makes more than one change in beneficiaries, unless the changes
are made due to death, divorce or marriage;
The owner begins receiving settlement option payments;
A withdrawal (whether partial or an APO payment) reduces the account value
to less than the minimum account value required as shown on the Information
Page.
If this happens, we reserve the right to pay the owner the total withdrawal
value and cancel the certificate;
The owner makes more than one partial withdrawal in the same certificate
year he or she receives APO payments; or
The owner dies.
After this option is canceled for any reason, it may not be reelected.
We reserve the right to impose an annual processing fee for the automatic payout
option. The amount of the automatic payout fee at issue is shown on the
Information Page.
Death Provisions
If the owner dies before the required beginning date, the entire death benefit
must:
Be completely distributed no later than December 31 of the fifth year
following the year the owner died; or
Begin to be distributed under one of the options available to the
beneficiary, as described below.
The following options are available to the beneficiary as soon as we receive
proof of the owner's death.
The beneficiary may elect to receive the death benefit in the form of
settlement option payments from us. The option selected must pay out equal
or substantially equal amounts over the beneficiary's life or over a period
not extending beyond the beneficiary's life expectancy. Once settlement
option payments begin, no changes may be made to the selected option.
If the beneficiary is the owner's surviving spouse, he or she will become
the new owner/annuitant and can continue this IRA on the same basis as
before the owner's death.
If the owner's surviving spouse does not wish to continue this certificate
as his or her own IRA, he or she may elect to receive the death benefit in
the form of settlement option payments. Such payments must be in equal or
substantially equal amounts over the spouse's life or a period not
extending beyond his or her life expectancy.
The surviving spouse must elect this option and begin receiving payments no
later than the earliest of the following dates:
December 31 of the year following the year the owner died; or
December 31 of the year in which the owner would have reached the
required beginning date if he or she had not died.
If the owner dies after the required beginning date, we will continue to
distribute the remaining death benefit at least as rapidly as under the
settlement option in effect at the date of the owner's death.
<PAGE>
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TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
- ----------------------------------------------------------------------
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
EXECUTIVE VICE PRESIDENT GENERAL COUNSEL AND SECRETARY
<PAGE>
Individual Retirement Annuity
Endorsement
About this endorsement
<PAGE>
Transamerica Life Insurance and Annuity Company has issued this endorsement as a
part of the contract to which it is attached.
An Individual Retirement Annuity (IRA) is a retirement plan described in Code
Section 408(b). It must comply with federal IRA requirements. As an IRA, this
contract is intended to qualify under Code Section 408(b) and all provisions of
this contract will be interpreted to ensure and maintain such qualification,
despite any other provisions to the contrary. This contract is for the exclusive
benefit of the owner and the beneficiary. The owner's rights and entire interest
in this contract are nonforfeitable.
Some of the provisions in this endorsement will be different than as described
in the attached contract. The specific differences in your IRA annuity are
described below.
<PAGE>
- -----------------------------------------------
Ownership Provisions
- -------------------------------------------------------------
As an IRA, the following conditions apply:
The owner and annuitant must be the same person.
Joint ownership is not allowed.
The owner cannot pledge or assign any interest in this contract to another
person.
The owner cannot transfer ownership, except in the event of divorce or
separation, as allowed by federal IRA requirements.
The owner cannot borrow any amounts from this contract, nor use this
contract as security for a loan.
Contributions
Purchase payments must be paid to us in cash. Except in the case of an allowable
rollover or transfer contribution, or a contribution made according to the terms
of a Simplified Employee Pension (SEP) plan, the total purchase payment for any
taxable year cannot be more than $2,000. We reserve the right to return any
portion of a purchase payment that represents an excess contribution.
No contribution will be accepted under a SIMPLE plan established by any employer
pursuant to Code Section 408(p). No transfer or rollover of funds attributable
to contributions made by a particular employer under its SIMPLE plan will be
accepted from a SIMPLE IRA, (an IRA used in conjunction with a SIMPLE plan)
prior to the expiration of the two (2) year period beginning on the date the
owner first participated in the employer's SIMPLE plan.
Required Minimum Distributions
Federal law requires that the owner begin receiving payments from any or all IRA
contracts no later than the April 1 following the year the owner turns age 70
1/2 (the required beginning date). If settlement option payments start prior to
the April 1 following the year the owner turns age 70 1/2, then the annuity date
of such settlement option payments will be treated as the required beginning
date for the purposes of the death benefit provisions below. The owner may take
required minimum distributions from any IRA contract he or she currently
maintains, as long as:
Distributions begin when required;
Periodic payments must be made at least once per year; and
The amount to be distributed each year is not less than the minimum
required under current federal law.
The required minimum distribution payments from this contract are considered
partial withdrawals. The amount of each withdrawal during any calendar year must
meet federal IRA requirements and be in equal or substantially equal amounts
over:
<PAGE>
- -------------------------------------------------------------
The life of the owner or over the joint lives of the owner and the beneficiary;
or
- ---------------------------------------------------------------------------
A period not extending beyond the life expectancy of the owner or the
joint life expectancy of the owner and the beneficiary.
Required minimum distribution payments will be made annually and the amount will
not increase or will increase only as allowed under federal tax law.
Life Expectancy
Life expectancy is:
The remaining life of the owner;
The remaining joint life expectancy of both the owner and the beneficiary; or
The remaining life expectancy of the beneficiary.
The life expectancy of the owner or the joint life expectancy of the owner and
the beneficiary are calculated by use of the return multiples in Tables V and VI
of Income Tax Regulation Section 1.72-9.
Before required minimum distributions begin, the owner may choose to have his or
her life expectancy determined under the age recalculation or no age
recalculation method as determined under federal law. If the owner does not make
an election before the required beginning date, the life expectancy of the owner
will be recalculated annually. After an election is made, it may not be changed
and will apply to all subsequent years in which required minimum distributions
are made.
If the owner dies before the required beginning date and the beneficiary is the
owner's surviving spouse, then such beneficiary may also choose to have his or
her life expectancy determined under the age recalculation or no age
recalculation method. Once the owner's surviving spouse makes an election, such
election may not be changed and will apply to all subsequent years. If the
owner's surviving spouse does not make an election by the time distributions are
scheduled to begin under the Death Provisions, the surviving spouse's life
expectancy will be recalculated annually for all years and may not be changed.
In all cases, if the beneficiary is not the owner's surviving spouse, his or her
life expectancy may not be recalculated and will be determined using his or her
attained age on the date settlement option payments or any other distribution is
scheduled to begin. Payments for subsequent years will be based on such life
expectancy reduced by one year for each calendar year which has elapsed since
the calendar year in which the life expectancy of the non-spouse beneficiary was
first calculated.
Automatic Payout Option (APO)
Before the annuity date, the owner may elect to have us calculate and annually
distribute required minimum distribution amounts from this contract if the
following requirements are met:
The owner is or will be age 70 1/2 in the year the first APO payment is to be
made;
This contract is at least one contract year old;
The owner is not receiving distributions under any other periodic payment
option;
The owner elects one of the methods of calculating minimum required
distributions that we offer.
While receiving APO payments, the owner may not make any additional purchase
payments to this contract. Rollovers and transfers may be accepted, but only
with our approval.
Distributions under this option must begin no earlier than January of the year
in which the owner reaches age 70 1/2. The election of APO must be in a form and
manner prescribed by us. We must receive such election at least 30 days before
payments are to begin.
We will automatically postpone the annuity date one year for each year the owner
receives APO payments up to the later of:
The owner's 85th birthday; or
The first day of the eleventh annuity year.
If the owner does not want us to delay the annuity date, he or she should
contact our service center.
<PAGE>
We will automatically cancel this option if:
The owner makes more than one change in beneficiaries, unless the changes
are made due to death, divorce or marriage;
The owner begins receiving settlement option payments;
A withdrawal (whether partial or an APO payment) reduces the account value
to less than the minimum account value required as shown on the Information
Page.
If this happens, we reserve the right to pay the owner the total withdrawal
value and cancel the contract;
The owner makes more than one partial withdrawal in the same contract year
he or she receives APO payments; or
The owner dies.
After this option is canceled for any reason, it may not be reelected.
We reserve the right to impose an annual processing fee for the automatic payout
option. The amount of the automatic payout fee at issue is shown on the
Information Page.
Death Provisions
If the owner dies before the required beginning date, the entire death benefit
must:
Be completely distributed no later than December 31 of the fifth year
following the year the owner died; or
Begin to be distributed under one of the options available to the
beneficiary, as described below.
The following options are available to the beneficiary as soon as we receive
proof of the owner's death.
The beneficiary may elect to receive the death benefit in the form of
settlement option payments from us. The option selected must pay out equal
or substantially equal amounts over the beneficiary's life or over a period
not extending beyond the beneficiary's life expectancy. Once settlement
option payments begin, no changes may be made to the selected option.
If the beneficiary is the owner's surviving spouse, he or she will become
the new owner/annuitant and can continue this IRA on the same basis as
before the owner's death.
If the owner's surviving spouse does not wish to continue this contract as
his or her own IRA, he or she may elect to receive the death benefit in the
form of settlement option payments. Such payments must be in equal or
substantially equal amounts over the spouse's life or a period not
extending beyond his or her life expectancy.
The surviving spouse must elect this option and begin receiving payments no
later than the earliest of the following dates:
December 31 of the year following the year the owner died; or
December 31 of the year in which the owner would have reached the
required beginning date if he or she had not died.
If the owner dies after the required beginning date, we will continue to
distribute the remaining death benefit at least as rapidly as under the
settlement option in effect at the date of the owner's death.
<PAGE>
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TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
- ----------------------------------------------------------------------
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
EXECUTIVE VICE PRESIDENT GENERAL COUNSEL AND SECRETARY
<PAGE>
Tax Sheltered Annuity
Endorsement
(Code Section 403(b))
- --------------------------------------------------------------------
SPECIAL NOTICE - Please read this endorsement carefully. It contains
important information which can affect the tax
status of the owner's Tax Sheltered Annuity. If the owner does not comply
with the provisions of this endorsement, the
owner may be subject to adverse tax consequences. As with all tax matters, the
owner should consult a tax adviser to assess the impact of the owner's failure
to comply with these provisions.
About this endorsement
<PAGE>
- -----------------------------------------------------------
Transamerica Life Insurance and Annuity Company (we) has issued this endorsement
as part of the attached certificate. This endorsement supersedes any contrary
provision of the certificate.
- ------------------------------------------------------------
This certificate is issued to the owner as part of a TSA. This means that part
or all of the purchase payments for this certificate are paid either with
"pre-tax" contributions that the owner made through elective salary deferral
contributions under a salary reduction agreement between the owner and the
owner's employer or with employer contributions. Income taxation on the purchase
payments paid for this certificate is deferred, thus providing the owner with a
current tax benefit. However, as a condition of this special tax treatment, the
Code imposes several limitations, including restrictions on when the owner may
make withdrawals of the account value under Code Section 403(b)(11) and minimum
distribution requirements for the owner and/or the beneficiary under Code
Sections 401(a)(9) and 403(b)(10), including the incidental death requirements
of Code Section 401(a)(9)(G). The owner must comply with the provisions of this
endorsement in order to maintain the deferred tax benefits of this certificate.
If the owner does not comply with the provisions of this endorsement, the owner
will lose the special tax treatment and may incur additional tax penalties.
This certificate is for the exclusive benefit of the owner and the beneficiary.
The owner's rights and entire interest in this certificate are nonforfeitable.
<PAGE>
- --------------------------------------
Definition of Terms
- ----------------------------------------------------
Unless redefined below, the terms used in the certificate will have the same
meaning when used in this endorsement. For purposes of this endorsement, the
following definitions apply:
Beneficiary is any individual the owner named in writing in the
application, enrollment form or any subsequent change of beneficiary form.
The beneficiary will receive the proceeds of the certificate in the event
the owner dies before permissible distribution of those proceeds is made to
the owner.
Direct Rollover is a distribution made directly to an eligible retirement
plan of all or a portion of the account value.
Eligible Retirement Plan is (1) an annuity contract as described in Code
Section 403(b); or (2) an individual retirement account as described in
Code Section 408(a);
TCE 106-197
or (3) an individual retirement annuity as described in Code Section
408(b).
Eligible Rollover Distribution is any distribution to the owner or to the
owner's surviving spouse (or if the owner is divorced, to the owner's
former spouse as an alternate payee under a QDRO) of all or any portion of
the account value. An eligible rollover distribution does not include any
distribution: (1) that is a minimum required distribution under Code
Section 401(a)(9); or (2) that is not included in the owner's gross income;
or (3) that is one of a series of substantially equal periodic payments
over the owner's life (or life expectancy ) or the joint lives(or joint
life expectancies) of the owner and the beneficiary or for a period of 10
years or more.
Pension Plan is an employee pension benefit plan as defined under Section
3(2)(A) of the Employee Retirement Income Security Act of 1974, as amended
(ERISA).
Owner is the individual in whose name and for whose exclusive benefit the
certificate was purchased, whether the certificate describes such
individual as owner or annuitant. While such individual is living, he or
she will be the sole owner of the certificate.
Qualified Domestic Relations Order (QDRO) is a domestic relations order
described in Code Section 414(p) that creates or recognizes the existence
of an alternate payee's right to, or assigns to an alternate payee the
right to, receive all or a portion of the benefits payable to the owner
under this certificate. A domestic relations order is a judgment, decree,
or order (including approval of a property settlement agreement) made
pursuant to a state domestic relations law (including a community property
law) that relates to the provision of child support, alimony payments, or
marital property rights of an alternate payee.
Required Beginning Date is April 1 of the calendar year following the
later of (1) the calendar year in which the owner attains age 70 1/2, or
(2) the calendar year in which the owner retires. However, the required
beginning date means April 1 of the calendar year following the calendar
year in which the owner attains age 70 1/2 for an owner who:
(a) is a 5% owner (as defined in Code Section 416) of an organization
described in Code Section 403(b)(1)(A) with respect to the plan year ending
in the calendar year in which the owner attains age 70 1/2; and
(b) did not attain age 70 1/2 before January 1, 1988; and
(c) is not in a governmental plan or a church plan (as defined in Code
Section 401(a)(9)(C)).
Tax Sheltered Annuity (TSA) is an annuity contract intended to meet the
requirements of Code Section 403(b).
TCE 106-197
Ownership
As a TSA, the following conditions apply:
The owner and annuitant must be the same person.
Joint ownership is not allowed.
The owner cannot pledge or assign any interest in this certificate to
another person, except as permitted by law, such as in the case of a QDRO.
The owner cannot borrow any amounts from this certificate, nor use this
certificate as security for a loan.
Nontransferability
Except as permitted by law, no person has the right to anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge any benefit under the
certificate. When permitted by law, an assignment of benefits to which the owner
is entitled under the certificate will not be binding on the Company unless made
in writing and given to us at our Home Office. We are not responsible for the
adequacy of any assignment. However, when a written assignment is filed with us
and recorded by us at our Home Office, the owner's rights and those of any
revocable beneficiary will be subject to the assignment.
Purchase payment limitations
No purchase payments will be accepted unless they represent amounts rolled over
or transferred from another Code Section 403(b)(1) TSA contract, Code Section
403(b)(7) custodial account in conformance with Code Section 403(b)(8) or any
other rule or regulation issued under the Code, or a transfer pursuant to
Revenue Ruling 90-24, 1990-1 C.B. 97.
Restrictions on Withdrawals
Withdrawals of any part of the account value may not be made under the
certificate except as provided in this provision. The owner may not make a
withdrawal of any part of the account value made pursuant to a salary reduction
agreement after December 31, 1988, and the earnings on such contributions and
amounts held on December 31, 1988, unless the owner (1) is at least age 59 1/2;
(2) becomes disabled within the meaning of Code Section 72(m)(7); (3) separates
from employment with the owner's employer; or (4) incurs financial hardship
within the meaning of Code Section 403(b)(11) (any withdrawal to meet a
financial hardship may not include any earnings attributable to the owner's
elective deferrals).
The owner may not make a withdrawal from a custodial account qualifying under
Code Section 403(b)(7) (or amounts attributable to such an account) and earnings
on such amounts unless the owner (1) dies; (2) is at least age 59 1/2; (3)
becomes disabled within the meaning of Code Section 72(m)(7); (4) separates from
employment with the owner's employer; or (5) incurs a financial hardship within
the meaning of Code Section 403(b)(11) (any withdrawal to meet a financial
hardship may not include any earnings attributable to the owner's elective
deferrals).
However, these restrictions do not apply if (a) the withdrawal is for payment to
an alternate payee under a QDRO; or (b) the withdrawal is made for the purpose
of making a direct transfer to another Code Section 403(b) TSA as provided in
Revenue Ruling 90-24, 1990-1 C.B. 97.
Code Section 72(m)(7) currently defines disability as the inability to engage in
any substantial gainful activity by reason of any medically determined physical
or mental impairment which can be expected to be of long-continued and
indefinite duration, or which will result in the owner's death.
Under Code Section 403(b)(11), a financial hardship currently means an immediate
and heavy financial need for which funds are not available from any other
resources. Any withdrawal based upon financial hardship cannot exceed the amount
required to meet the immediate financial need and cannot include earnings.
TCE 106-197
The owner's employer or the employer's TSA plan administrator, if any, will
determine whether a domestic relations order is a QDRO, and will tell us whether
or not to comply with the order. However, if the owner's employer or the TSA
administrator asks us to make this determination, we will do so. We will provide
the owner's employer, the TSA administrator and/or the owner with information
about the value and form of the benefits available under such an order.
Any withdrawals of the account value will be subject to the qualified
pre-retirement survivor annuity and qualified joint and survivor annuity
requirements of ERISA Section 205, as set forth in the Waiver and Spousal
Requirements provision.
Required Minimum Distribution
Federal law requires that the owner begin receiving distributions from this TSA
or from another TSA arrangement by the required beginning date. If settlement
option payments start prior to the required beginning date, then the annuity
date of such settlement option payments will be treated as the required
beginning date for purposes of the death benefit provisions below. The owner may
take required minimum distributions from any TSA the owner currently maintains,
as long as:
Distributions begin when required;
Periodic payments are made at least once per year; and
The amount to be distributed each year is not less than the minimum
required under current federal law.
The required minimum distribution payments from this certificate are considered
partial withdrawals. The amount of each withdrawal during any calendar year must
meet federal TSA requirements and be in equal or substantially equal amounts
over:
The owner's life or over the joint lives of the owner and the beneficiary;
or
A period not extending beyond the owner's life expectancy or the joint
life expectancies of the owner and the beneficiary.
Required minimum distribution payments will be made annually and the amount will
not increase or will increase only as allowed under federal tax law. Contingent
deferred sales load may be charged on any required minimum distribution payments
made under the certificate. We reserve the right to waive any applicable
contingent deferred sales load.
Life Expectancy
Life expectancy is:
The owner's remaining life;
The remaining joint life expectancy of both the owner and the beneficiary;
or
The remaining life expectancy of the beneficiary.
The owner's life expectancy or the joint life expectancy of both the owner and
the beneficiary are calculated by use of the return multiples in Tables V and VI
of Income Tax Regulation Section 1.72-9.
Before required minimum distributions begin, the owner may choose to have the
owner's life expectancy determined under the (1) age recalculation, or (2) no
age recalculation method as determined under federal law. If the owner does not
make an election before the required beginning date, the owner's life expectancy
will be recalculated annually. After the owner's election is made, it may not be
changed and will apply to all subsequent years in which required minimum
distributions are made.
If the owner dies before the required beginning date and the beneficiary is the
owner's surviving spouse, then he or she may also choose to have his or her life
expectancy determined under the (1) age recalculation, or (2) no age
recalculation method. Once the beneficiary makes an election, such election may
not be changed and will apply to all subsequent years. If the beneficiary does
not make an election by the time distributions are scheduled to begin under the
Death Provisions, the beneficiary's life expectancy will be recalculated
annually for all years and may not be changed.
In all cases, if the beneficiary is not the owner's surviving spouse, his or her
life expectancy may not be recalculated and will be determined using his or her
attained age on the date settlement
TCE 106-197
option payments or any other distribution is scheduled to begin. Payments for
subsequent years will be based on the beneficiary's life expectancy reduced by
one year for each calendar year which has elapsed since the calendar year in
which the life expectancy of the beneficiary was first calculated.
Automatic Payout Option (APO)
Before the annuity date, and subject to our then current underwriting
guidelines, the owner may elect to have us calculate and annually distribute
required minimum distribution amounts from this certificate if the owner meets
the following requirements:
The owner is or will be age 70 1/2 and is retired in the year the first
APO payment is to be made;
This certificate has been in force at least one year;
The owner is not receiving distributions under any other periodic payment
option;
The owner elects one of the methods of calculating minimum required
distributions that we offer.
The owner's distributions under this option must begin no earlier than
January 1 of the year in which the owner reaches age 70 1/2 and the owner must
be retired. The owner's election of APO must be in a form and manner we
prescribe. We must receive the owner's election at least 30 days before the
payments are to begin.
We will automatically postpone the owner's annuity date one year for each year
the owner receives APO payments up to the later of:
The owner's 85th birthday; or
The first day of the eleventh certificate year.
If the owner decides he or she does not want us to delay the annuity date,
please contact us.
We will automatically cancel this option if:
The owner makes more than one change in beneficiaries, unless the changes
are made due to death, divorce or marriage;
The owner begins receiving settlement option payments;
A withdrawal (whether partial or an APO payment) reduces the account value
to less than the minimum value shown on the Information Page.
If this happens, we reserve the right to pay the owner the cash surrender
value and cancel the certificate; or
The owner dies.
After this option is canceled for any reason, the owner may not reelect it.
Contingent deferred sales load may be charged on APO payments made under the
certificate. We reserve the right to waive any applicable contingent deferred
sales load.
Death Provisions
If the owner dies before the required beginning date, the entire death benefit
must:
Be completely distributed no later than December 31 of the fifth year
following the year the owner died; or
Begin to be distributed to the beneficiary in the form of settlement
option payments, as described below.
The settlement option must pay out equal or substantially equal amounts over the
beneficiary's life or over a period not extending beyond the beneficiary's life
expectancy. Once settlement option payments begin, no changes may be made to the
option.
If the beneficiary is the owner's surviving spouse, he or she must
elect to begin receiving settlement option payments no later than the earliest
of (1) December 31 of the year following the year following the year the owner
died; or (2) December 31 of the year following the year in which the owner would
have reached the required beginning date if the owner had not died.
If the beneficiary is not the owner's surviving spouse, he or she must elect to
begin receiving settlement option payments no later than December 31 of the year
following the year in which the owner died.
TCE 106-197
If the owner dies after the required beginning date, we will continue to
distribute the remaining death benefit at least as rapidly as under the
settlement option in effect at the date of the owner's death.
If the certificate is subject to the requirements of ERISA, the following
provisions shall apply:
Limitation of Payment
If the account value at the time of annuitization is $3,500 or less, we will pay
the account value in a cash payment, regardless of the settlement option the
owner or any other payee chooses. Such cash payment will be in full settlement
of our liability to the payee for the benefit. In addition, such cash payment
will not require spousal consent as described below.
Waiver and Spousal Requirements
If the owner is legally married, we will require the owner's written waiver of
the qualified pre-retirement survivor annuity and/or qualified joint and
survivor annuity and his or her spouse's written consent before the owner can:
(a) name a beneficiary other than the owner's spouse; or (b) make a partial or
full withdrawal from the certificate; or (c) choose a form of payment other than
a life and contingent annuity where the spouse is not named as the contingent
annuitant. The spouse's written consent must (i) be on a form we approve; (ii)
acknowledge his/her understanding of the effect of such consent; and (iii) be
witnessed by a notary public. However, the owner's written waiver and the
spouse's written consent will not be required if the withdrawal is made for the
purpose of making a direct transfer to another Code Section 403(b) TSA as
provided in Revenue Ruling 90-24, 1990-1 C.B. 97.
We will not accept any request under (a), (b) or (c), above, without the owner's
written waiver and the spouse's written consent. However, if the owner can prove
that the spouse's written consent cannot be obtained because: (1) the spouse has
died; or (2) the spouse cannot be located; or (3) the spouse is held to be
incompetent and the owner has a court order to that effect; or (4) the owner has
been abandoned by
the spouse (within the meaning of local law) and the owner has a court order to
that effect, then, unless required by a QDRO, the owner's request under (a), (b)
or (c), above, will be accepted without the owner's written waiver and the
spouse's written consent.
Payments to Minors
If the owner has died, any amount paid to a child of the owner will be treated
as if it had been paid to the owner's surviving spouse if the remainder of the
value of the certificate becomes payable to the surviving spouse when the child
reaches the age of majority.
<PAGE>
- --------------------------------------
This endorsement shall terminate when the certificate is surrendered or the
account value is otherwise distributed.
Signed for the Company at Charlotte, North Carolina, to be effective on the
certificate effective date.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
PRESIDENT AND CHIEF EXECUTIVE OFFICER GENERAL COUNSEL AND SECRETARY
<PAGE>
Pension and Profit Sharing Plan
Endorsement
- ----------------------------------------------------------
SPECIAL NOTICE - Please read this endorsement carefully. It contains
important information which can affect the tax
status of the pension plan. If the owner does not comply with the
provisions of this endorsement, the owner may be
subject to adverse tax consequences. As with all tax matters, the owner should
consult a tax adviser to assess the impact of the owner's failure to comply with
these provisions.
- -----------------------------
About this endorsement
<PAGE>
- -------------------------------------
This certificate is issued as part of a pension plan. This means that part or
all of the purchase payments for this certificate are paid either with "pre-tax"
contributions made through elective salary deferral contributions under an
employee salary reduction agreement or with employer contributions. Income
taxation on the purchase payments paid for this certificate is deferred, thus
providing the owner with a current tax benefit. However, as a condition of this
special tax treatment, the Code imposes several limitations, including minimum
distribution requirements for the owner and/or the beneficiary under Code
Section 401(a)(9), including the incidental death requirements of Code Section
401(a)(9)(G). The owner must comply with the provisions of this endorsement in
order to maintain the deferred tax benefits of this certificate. If the owner
does not comply with the provisions of this endorsement, the owner will lose the
special tax treatment and may incur additional tax penalties.
This contract is for the exclusive benefit of the owner and the beneficiary. The
owner's rights and entire interest in this contract are nonforfeitable.
<PAGE>
- --------------------------------------------
Definition of Terms
- --------------------------------------------
Unless redefined below, the terms used in the certificate will have the same
meaning when used in this endorsement. For purposes of this endorsement, the
following definitions apply:
Beneficiary is any individual the owner named in writing in the
application, enrollment form or any subsequent change of beneficiary form.
The beneficiary will receive the proceeds of the certificate in the event
the owner dies before permissible distribution of those proceeds is made to
the owner.
Direct Rollover is a distribution made directly to an eligible retirement
plan of all or a portion of the account value.
Eligible Retirement Plan is (1) a qualified trust as described in Code
Section 401(a); or (2) an individual retirement account as described in
Code Section 408(a); or (3) an individual retirement annuity as described
in Code Section 408(b); or (4) an annuity plan as described in Code Section
403(a).
TCE 107-197
Eligible Rollover Distribution is any distribution to the owner or to the
owner's surviving spouse (or if the owner is divorced, to the owner's
former spouse as an alternate payee under a QDRO) of all or any portion of
the account value. An eligible rollover distribution does not include any
distribution: (1) that is a minimum required distribution under Code
Section 401(a)(9); or (2) that is not included in the owner's gross income;
or (3) that is one of a series of substantially equal periodic payments
over the owner's life (or life expectancy) or the joint lives (or joint
life expectancies) of the owner and the beneficiary or for a period of 10
years or more.
Pension Plan is an employee pension benefit plan as defined under Section
3(2)(A) of the Employee Retirement Income Security Act of 1974, as amended
(ERISA).
Owner is the individual in whose name and for whose exclusive benefit the
certificate was purchased, whether the certificate describes such
individual as owner or annuitant. While such individual is living, he or
she will be the sole owner of the certificate.
Qualified Domestic Relations Order (QDRO) is a domestic relations order
described in Code Section 414(p) that creates or recognizes the existence
of an alternate payee's right to, or assigns to an alternate payee the
right to, receive all or a portion of the benefits payable to the owner
under this certificate. A domestic relations order is a judgment, decree,
or order (including approval of a property settlement agreement) made
pursuant to a state domestic relations law (including a community property
law) that relates to the provision of child support, alimony payments, or
marital property rights of an alternate payee.
Required Beginning Date is April 1 of the calendar year following the
later of (1) the calendar year in which the owner attains age 70 1/2, or
(2) the calendar year in which the owner retires. However, the required
beginning date means April 1 of the calendar year following the calendar
year in which the owner attains age 70 1/2 for an owner who:
(a) is a 5% owner (as defined in Code Section 416) with respect
to the plan year ending in the calendar year
in which the owner attains age 70 1/2; and
(b) did not attain age 70 1/2 before January 1, 1988; and
(c) is not in a governmental plan or a church plan (as defined in Code
Section 401(a)(9)(C)).
Ownership
As a qualified plan, the following conditions apply:
The owner and annuitant must be the same person.
Joint ownership is not allowed.
The owner cannot pledge or assign any interest in this certificate to
another person, except as permitted by law, such as in the case of a QDRO.
The owner cannot borrow any amounts from this certificate, nor use this
certificate as security for a loan.
TCE 107-197
Distributions
The owner's entire interest in this certificate shall be distributed as required
under Section 401(a)(9) of the Code.
Limitation on Period Certain Distributions
In compliance with Code Sections 401(a)(9), no period certain settlement option
which extends beyond the life expectancy of the owner will be allowed.
Required Minimum Distribution
Distribution must be made from the certificate in a manner which satisfies the
requirements of Code Section 401(a)(9), including the incidental death benefit
requirements of Code Section 401(a)(9)(G) as follows:
(a) The entire account value must be distributed, or must begin to be
distributed, no later than the required beginning date, in equal or
substantially equal amounts over (a) the life of the owner or over the joint
lives of the owner and the beneficiary; or (b) a period certain not extending
beyond the life expectancy of the owner, or the joint life expectancy of such
owner and the beneficiary.
(b) If the account value is to be distributed in any form other than a lump sum,
then the amount to be distributed each calendar year must be at least an amount
equal to the quotient obtained by dividing (a) the entire account value as of
December 31 of the calendar year immediately preceding the calendar year for
which the distribution is being made; by (b) the life expectancy of the owner,
or the joint life expectancy of such owner and the beneficiary.
If settlement option payments start prior to the required beginning date, then
the annuity date of such settlement option payments will be treated as the
required beginning date for purposes of the death benefit provisions below.
Contingent deferred sales load may be charged on any required minimum
distribution payments made under the certificate. We reserve the right to waive
any applicable contingent deferred sales load.
Life Expectancy
Life expectancy is:
The owner's remaining life;
The remaining joint life expectancy of both the owner and the beneficiary; or
The remaining life expectancy of the beneficiary.
The owner's life expectancy or the joint life expectancy of both the owner and
the beneficiary are calculated by use of the return multiples in Tables V and VI
of Income Tax Regulation Section 1.72-9.
Before required minimum distributions begin, the owner may choose to have the
owner's life expectancy determined under (1) the age recalculation, or (2) no
age recalculation method as determined under federal law. If the owner does not
make an election before the required beginning date, the owner's life expectancy
will be recalculated annually. After the owner makes an election, such election
may not be changed and will apply to all subsequent years in which required
minimum distributions are made.
If the owner dies before the required beginning date and the beneficiary is the
owner's surviving spouse, then he or she may also choose to have his or her life
expectancy determined under (1) the age recalculation, or (2) no age
recalculation method. Once the beneficiary makes an election, such election may
not be changed and will apply to all subsequent years. If the beneficiary does
not make an election by the time distributions are scheduled to begin under the
Death Provisions, the beneficiary's life expectancy will be recalculated
annually for all years and may not be changed.
In all cases, if the beneficiary is not the owner's surviving spouse, his or her
life expectancy may not be recalculated and will be determined using his or her
attained age on the date settlement option payments or any other distribution is
scheduled to begin. Payments for subsequent years will be based on such life
expectancy reduced by one year for each calendar year which has elapsed since
the calendar year in which the life expectancy of the non-spouse beneficiary was
first calculated.
Automatic Payout Option (APO)
Before the annuity date, and subject to our then current underwriting
guidelines, the owner may elect to have us calculate and annually distribute
required minimum distribution amounts from
TCE 107-197
this certificate if the owner meets the following requirements:
The owner is or will be age 70 1/2 and is retired in the year the first
APO payment is to be made;
This certificate has been in force at least one year;
The owner is not receiving distributions under any other payment option;
The owner elects one of the methods of calculating minimum required
distributions that we offer.
The distributions under this option must begin no earlier than January 1 of the
year in which the owner reaches age 70 1/2 and the owner must be retired. The
owner's election of APO must be in a form and manner we prescribe. We must
receive the owner's election at least 30 days before the payments are to begin.
We will automatically postpone the owner's annuity date one year for each year
the owner receives APO payments up to the later of:
The owner's 85th birthday; or
The first day of the eleventh certificate year.
If the owner decides he or she does not want us to delay the annuity date,
please contact us.
We will automatically cancel this option if:
The owner makes more than one change in beneficiaries, unless the changes
are made due to death, divorce or marriage;
The owner begins receiving settlement option payments;
A withdrawal (whether partial or an APO payment) reduces the account value
to less than the minimum account value shown on the Information Page.
If this happens, we reserve the right to pay the owner the cash surrender
value and cancel the certificate; or
The owner dies.
After this option is canceled for any reason, the owner may not reelect it.
Contingent deferred sales load may be charged on APO payments made under the
certificate. We reserve the right
to waive any applicable contingent deferred sales load.
Death Provisions
If the owner dies before the required beginning date, the entire death benefit
must:
Be completely distributed no later than December 31 of the fifth year
following the year the owner died; or
Begin to be distributed to the beneficiary in the form of settlement
option payments, as described below.
The settlement option must pay out equal or substantially equal amounts over the
beneficiary's life or over a period not extending beyond the beneficiary's life
expectancy. Once settlement option payments begin, no changes may be made to the
option.
If the beneficiary is the owner's surviving spouse, he or she must
elect to begin receiving settlement option payments no later than the earliest
of (1) December 31 of the year following the year the owner died; or (2)
December 31 of the year following the year in which the owner would have reached
the required beginning date if the owner had not died.
If the beneficiary is not the owner's surviving spouse, he or she must elect to
begin receiving settlement option payments no later than December 31 of the year
following the year in the owner died.
If the owner dies after the required beginning date, we will continue to
distribute the remaining death benefit at least as rapidly as under the
settlement option in effect at the date of the owner's death.
Limitation of Payment
If the account value at the time of annuitization is $3,500 or less, we will pay
the account value in a cash payment, regardless of the settlement option the
owner or any other payee chooses. Such cash payment will be in full settlement
of our liability to the payee for the benefit. In addition, such cash payment
will not require spousal consent as described below.
Waiver and Spousal Requirements
If the owner is legally married, we will require the owner's written waiver of
the qualified pre-retirement survivor annuity and/or qualified joint and
survivor annuity and his or her spouse's written consent before the owner can:
(a) name a beneficiary other than the spouse; or (b) make a partial or full
withdrawal from the certificate; or (c) choose a form of payment other than a
life and contingent annuity where the spouse is not named as the contingent
annuitant. The spouse's written consent must (i) be on a form we approve; (ii)
acknowledge his/her understanding of the effect of such consent; and (iii) be
witnessed by a notary public.
We will not accept any request under (a), (b) or (c), above, without the owner's
written waiver and the spouse's written consent. However, if the owner can prove
that the spouse's written consent cannot be obtained because: (1) the spouse has
died; or (2) the spouse cannot be located; or (3) the spouse is held to be
incompetent and the owner has a court order to that effect; or (4) the owner has
been abandoned by the spouse (within the meaning of local law) and the owner has
a court order to that effect, then, unless required by a QDRO, the owner's
request under (a), (b) or (c), above, will be accepted without the owner's
written waiver and the spouse's written consent.
Payments to Minors
If the owner has died, any amount paid to a child of the owner will be treated
as if it had been paid to the owner's surviving spouse if the remainder of the
value of the certificate becomes payable to the surviving spouse when the child
reaches the age of majority.
<PAGE>
Page 4
This endorsement shall terminate when the certificate is surrendered or the
account value is otherwise distributed.
Signed for the Company at Charlotte, North Carolina, to be effective on the
certificate effective date.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
PRESIDENT AND CHIEF EXECUTIVE OFFICER GENERAL COUNSEL AND SECRETARY
<PAGE>
Exhibit 5
Application for Flexible Premium Variable Annuity
<PAGE>
====================================================================
[GRAPHIC OMITTED]
Variable Annuity Application
====================================================================
Transamerica Life Insurance and Annuity Company
Home Office: 401 N. Tryon Street P.O. Box 31848
Charlotte, North Carolina 28232-2128
Annuity Service Center: (800) 258-4260
<PAGE>
=====
1
=====
Check one only:
|_| Non-Qualified |_| TSA 403(b)*
|_| IRA 408(b) |_| 401(a) Pension/Profit
Sharing*
|_| SEP-IRA 408(k)* [|_| Other]
* Submit required additional forms
2
Note: All mail and tax reporting will be sent only to the Owner.
- ------------------------------------------ |-| |-|
Print Full
Name
Male Female
- -------------------------------------------------------
Residence Street Address
- -------------------------------------------------------
City
State Zip Code
- ---------------- -------------------------------------
Date of Birth Taxpayer Identification Number
Married: |_| Yes |_| No
( )------------------------ ( )-------------------------
Daytime Telephone Evening
Telephone
3
Note: Non-Qualified Contracts only.
- ------------------------------------------- |-| |-|
Print Full
Name
Male Female
- ---------------- ------------------------------------
Date of Birth Taxpayer Identification Number
4
Note: If More Than One, Use Beneficiary Designation Form.
- --------------------------- --------------------------
Full Name Taxpayer
Identification Number
- ------------------------ -----------------------------
Date of Birth Relationship to Owner
5
Note: Complete only if different from Owner.
- ------------------------------------------ |-| |-|
Print Full
Name
Male Female
- -------------------------------------------------------
Residence Street Address
- -------------------------------------------------------
City
State Zip Code
- ----------------------- ------------------------------
Date of Birth Social Security Number
6
Note: Non-Qualified Contracts only. Must be Annuitant's spouse.
- ------------------------------------------ |-| |-|
Print Full
Name
Male Female
- ----------------------- -----------------------------
Date of Birth Social Security Number
TGA-028-197
7
Please use whole percentages. No fractions, please.
Minimum 10% allocation per Portfolio. Total must equal 100%.
[The maximum number of total investment options is limited to
18 over the lifetime of the contract.]
[Alliance Premier Growth] ____%
[Balanced] ____%
[Emerging Markets] ____%
[Foreign Bond] ____%
[Gold and Natural Resources] ____%
[Growth with Income Series] ____%
[High Yield] ____%
[International] ____%
[MFS Value Series] ____%
[MFS Emerging Growth] ____%
[OCC Accumulation Trust Managed] ____%
[OCC Accumulation Trust Equity] ____%
[Small Cap] ____%
[Transamerica VIF Growth Fund] ____%
[Transamerica VIF Money Market Portfolio] ____%
[Fixed Account] ____%
[Guarantee Period Account Option- 1-10 Yr.] ____%
[Guarantee Period Account Option- 1-10 Yr.] ____%
[Guarantee Period Account Option- 1-10 Yr.] ____%
Total
100%
8
|_| I/We elect the Living Benefits Rider for an additional fee each year.
(See your registered representative or prospectus for more information)
9
Please indicate the method of payment below:
Minimum Initial Payment: $5,000 ($2,000 for contributory IRA's)
|_| Check for $ ____________ (payable to Transamerica Life
Insurance and Annuity Company) is enclosed.
For new Transamerica IRAs: Amount remitted includes $__________ as a
rollover, which Owner irrevocably elects to treat as a rollover
contribution; $__________ for Tax Year ________; and
$__________ for Tax Year ________.
|_| Pre-authorized Payment Plan on a monthly basis. To establish this option,
submit the Automatic Investing form.
|_| Transfer balance from existing life insurance or annuity contract (submit
the 1035 Exchange Form).
|_| Transfer funds from my existing qualified plan or IRA (submit the Transfer
Letter of Direction Form).
- -------------------------------------------------------------------
Do not write in this space. Home office use only.
(Not applicable in Pennsylvania)
- -------------------------------------------------------------------
<PAGE>
- -----
10
- -----
If the Owner is not the Annuitant, the Owner is:
|_| Individual |_| Trust* |_| [Other ______________]
|_| Custodianship |_| Corporation
*If the Owner is a Trust, this annuity must be held by the Trust as an agent for
the Annuitant(s). If the Annuitant is a minor please provide (1) the
relationship to the Owner and (2) the mother's name and father's name:
================================================================
Has the Owner purchased or applied for other non-qualified deferred annuities
issued by any of the Transamerica Life Companies during the current calendar
year? |_| Yes |_| No If Yes, provide contract number(s):
- ---------------------------------------------------------
11
Will this annuity replace or change any life insurance or annuity contract(s).
|_| Yes |_| No If Yes, provide name and address of insurance company and
contract number(s):______________________
- --------------------------------------------- ------------------
- ---------------------------------------------------------------
Note: Please submit replacement forms as required.
12
|_| Yes |_| Annually |_| Semi-Annually |_| Quarterly I/We elect the variable
sub-account rebalancing option. With this election, all amounts in the variable
sub-accounts are re-allocated to reflect the percentages indicated on this
application. Unless and until a rebalancing election form has been submitted
changing these allocation percentages, Transamerica will allocate all
contributions according to the percentages shown on this application. Note: Not
available if Dollar Cost Averaging (DCA) is in effect.
13
|_| ________ (Please initial) I/We authorize Transamerica to honor my/our
telephone instructions in order to make transfers among the various variable
sub-accounts. I/We hereby acknowledge that all telephone instructions given
pursuant to this authorization are subject to the conditions set forth by
Transamerica. Transamerica will not be liable for any loss, liability, cost or
expense for acting in accordance with such instructions believed by it to be
genuine in accordance with the conditions. |_| ________ (Please initial) I
hereby appoint the registered representative named on this application to act as
my Limited Power of Attorney in Fact to direct Transamerica's Annuity Service
Center to effect transfers among the variable sub-accounts and/or general
account options. I and my Limited Power of Attorney in Fact, jointly, and
severally, agree to indemnify and hold harmless Transamerica, and its
affiliates, officers, directors, and employees from any and all losses, costs
(including reasonable attorney's fees), expenses, judgments, and liabilities of
any nature whatsoever arising from reliance on my grant of this Limited Power of
Attorney, or any action or commission by my Limited Power of Attorney in Fact.
This Limited Power of Attorney remains valid until Transamerica's Annuity
Service Center is furnished with its written revocation, and Transamerica
records the revocation. This Limited Power of Attorney is personal to the holder
and may not be delegated to any other person. The holder must be a currently
licensed and appointed representative of the Broker of Record for this Annuity,
or this Limited Power of Attorney will automatically terminate.
TGA-028-197
14
|_| I/We elect Dollar Cost Averaging (DCA) for a period of
_______ months. (6 to 60 months) Each month transfer $ _________
From: (Circle One) [(Money Market or Fixed Account)]
To: (Total must equal 100%)
Amount Fund
======================= ===================================
- ----------------------- -----------------------------------
Note: Not available if Rebalancing is in effect.
15
===============================================
16
I/We understand that I/We have applied for a variable annuity contract
("contract") issued by Transamerica Life Insurance and Annuity Company. I/We
have received current prospectuses for the contract and for the portfolios. I/We
are aware that (a) payments and values provided under the contract, when based
on the investment experience of the Variable Account, vary and are not
guaranteed as to dollar amount; (b) periodic charges and fees are associated
with the contract; and (c) this contract and its associated investment
portfolios are not deposits or obligations of, or guaranteed or endorsed by, any
bank, credit union, or the U.S. government, and are not federally insured by the
FDIC, the Federal Reserve Board, or any other agency. Portfolio shares involve
certain investment risks, including the possible loss of principal. I/We declare
that all statements made on this application are true to the best of my/our
knowledge and belief. Any person who knowingly and with the intent to defraud
any insurance company or other person files an application for insurance or
statement of claim containing any materially false information or conceals for
the purpose of misleading, information concerning any fact material thereto
commits a frudulent insurance act, which is a crime and subjects such person to
criminal and civil penalties.
Signed at _____________________________on _________________
City State Date
- -----------------------------------------------------
Owner's Signature
- -----------------------------------------------------
Joint Owner's Signature (If Any)
- -----------------------------------------------------
Annuitant's Signature (If Different from Owner)
17
Registered Representative: Do you have reason to believe the
annuity applied for will replace any life insurance or annuity
contract with us or any other company? |_| Yes |_| No
Please check one of the following boxes (contact your home office for more
information). Once selected, an option may not be changed. [|_| Option A |_|
Option B |_| Option C ]
- --------------------------------------------------------------
Witness (Licensed Registered Representative)
- --------------------------------------------------------------
Print or Type Name of Registered Representative/Code
- --------------------------------------------------------------
Print or Type Name of Broker/Dealer
- --------------------------------------------------------------
Branch Office/Telephone Number/Code
Mail completed application and any additional required forms to the Annuity
Service Center address shown on Page 1.
<PAGE>
Exhibit (8)
Form of Participation Agreements between the Company and the Funds
<PAGE>
PARTICIPATION AGREEMENT
AMONG
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
TRANSAMERICA SECURITIES SALES CORPORATION
ALLIANCE CAPITAL MANAGEMENT LP
AND
ALLIANCE FUND DISTRIBUTORS, INC.
DATED AS OF
[ ]
<PAGE>
2
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ___ day of ___________,
199__ ("Agreement"), by and among Transamerica Life Insurance and Annuity
Company, a North Carolina life insurance company ("Insurer") (on behalf of
itself and its "Separate Account," defined below); Transamerica Securities Sales
Corporation, a Maryland corporation ("Contracts Distributor"), the principal
underwriter with respect to the Contracts referred to below; Alliance Capital
Management L.P., a Delaware limited partnership ("Adviser"), the investment
adviser of the Fund referred to below; and Alliance Fund Distributors, Inc., a
Delaware, corporation ("Distributor"), the Fund's principal underwriter
(collectively, the "Parties"),
WITNESSETH THAT:
WHEREAS Insurer, the Distributor, and Alliance Variable Products Series
Fund, Inc. (the "Fund") desire that shares of the Fund's Premier Growth
Portfolio (the "Portfolios"; reference herein to the "Fund" includes reference
to each Portfolio to the extent the context requires) be made available by
Distributor to serve as underlying investment media for those combination fixed
and variable annuity contracts of Insurer that are the subject of Insurer's Form
N-4 registration statement filed with the Securities and Exchange Commission
(the "SEC"), (the "Contracts"), to be offered through Contracts Distributor and
other registered broker-dealer firms as agreed to by Insurer and Contracts
Distributor; and
WHEREAS the Contracts provide for the allocation of net amounts
received by Insurer to separate series (the "Divisions"; reference herein to the
"Separate Account" includes reference to each Division to the extent the context
requires) of the Separate Account for investment in the shares of corresponding
Portfolios of the Fund that are made available through the Separate Account to
act as underlying investment media,
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Fund and Distributor will make shares of the Portfolios
available to Insurer for this purpose at net asset value and with no sales
charges, all subject to the following provisions:
Section 1. Additional Portfolios
The Fund has and may, from time to time, add additional Portfolios,
which will become subject to this Agreement, if, upon the written consent of
each of the Parties hereto, they are made available as investment media for the
Contracts.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
The Adviser or its designated agent will provide closing net asset
value, dividend and capital gain information for each Portfolio to Insurer at
the close of trading on each day (a "Business Day") on which (a) the New York
Stock Exchange is open for regular trading, (b) the Fund calculates the
Portfolio's net asset value and (c) Insurer is open for business. The Fund or
its designated agent will use its best efforts to provide this information by
6:00 p.m., Eastern time. Insurer will use these data to calculate unit values,
which in turn will be used to process transactions that receive that same
Business Day's Separate Account Division's unit values. Such Separate Account
processing will be done the same evening, and corresponding orders with respect
to Fund shares will be placed the morning of the following Business Day. Insurer
will use its best efforts to place such orders with the Fund by 10:00 a.m.,
Eastern time.
2.2 Timely Payments.
Insurer will transmit orders for purchases and redemptions of Fund
shares to Distributor, and will wire payment for net purchases to a custodial
account designated by the Fund on the day the order for Fund shares is placed,
to the extent practicable. Payment for net redemptions will be wired by the Fund
to an account designated by Insurer on the same day as the order is placed, to
the extent practicable, and in any event be made within six calendar days after
the date the order is placed in order to enable Insurer to pay redemption
proceeds within the time specified in Section 22(e) of the Investment Company
Act of 1940, as amended (the "1940 Act").
2.3 Redemption in Kind.
The Fund reserves the right to pay any portion of a redemption in kind
of portfolio securities, if the Fund's board of directors (the "Board of
Directors") determines that it would be detrimental to the best interests of
shareholders to make a redemption wholly in cash.
2.4 Applicable Price.
The Parties agree that Portfolio share purchase and redemption orders
resulting from Contract owner purchase payments, surrenders, partial
withdrawals, routine withdrawals of charges, or other transactions under
Contracts will be executed at the net asset values as determined as of the close
of regular trading on the New York Stock Exchange on the Business Day that
Insurer receives such orders and processes such transactions, which, Insurer
agrees shall occur not earlier than the Business Day prior to Distributor's
receipt of the corresponding orders for purchases and redemptions of Portfolio
shares. For the purposes of this section, Insurer shall be deemed to be the
agent of the Fund for receipt of such orders from holders or applicants of
contracts, and receipt by Insurer shall constitute receipt by the Fund. All
other purchases and redemptions of Portfolio shares by Insurer, will be effected
at the net asset values next computed after receipt by Distributor of the order
therefor, and such orders will be irrevocable. Insurer hereby elects to reinvest
all dividends and capital gains distributions in additional shares of the
corresponding Portfolio at the record-date net asset values until Insurer
otherwise notifies the Fund in writing, it being agreed by the Parties that the
record date and the payment date with respect to any dividend or distribution
will be the same Business Day.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided herein, each Party will bear
all expenses incident to its performance under this Agreement.
3.2 Registration.
The Fund will bear the cost of its registering as a management
investment company under the 1940 Act and registering its shares under the
Securities Act of 1933, as amended (the "1933 Act"), and keeping such
registrations current and effective; including, without limitation, the
preparation of and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices
respecting the Fund and its shares and payment of all applicable registration or
filing fees with respect to any of the foregoing. Insurer will bear the cost of
registering the Separate Account as a unit investment trust under the 1940 Act
and registering units of interest under the Contracts under the 1933 Act and
keeping such registrations current and effective; including, without limitation,
the preparation and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices
respecting the Separate Account and its units of interest and payment of all
applicable registration or filing fees with respect to any of the foregoing.
3.3 Other (Non-Sales-Related) Expenses.
The Fund will bear the costs of preparing, filing with the SEC and
setting for printing the Fund's prospectus, statement of additional information
and any amendments or supplements thereto (collectively, the "Fund Prospectus"),
periodic reports to shareholders, Fund proxy material and other shareholder
communications and any related requests for voting instructions from
Participants (as defined below). Insurer will bear the costs of preparing,
filing with the SEC and setting for printing, the Separate Account's prospectus,
statement of additional information and any amendments or supplements thereto
(collectively, the "Separate Account Prospectus"), any periodic reports to
owners, annuitants or participants under the Contracts (collectively,
"Participants"), and other Participant communications. The Fund and Insurer each
will bear the costs of printing in quantity and delivering to existing
Participants the documents as to which it bears the cost of preparation as set
forth above in this Section 3.3, it being understood that reasonable cost
allocations will be made in cases where any such Fund and Insurer documents are
printed or mailed on a combined or coordinated basis. If requested by Insurer,
the Fund will provide annual Prospectus text to Insurer on diskette for printing
and binding with the Separate Account Prospectus.
3.4 Other Sales-Related Expenses.
Expenses of distributing the Portfolio's shares and the Contracts will
be paid by Contracts Distributor and other parties, as they shall determine by
separate agreement.
3.5 Parties to Cooperate.
The Adviser, Insurer, Contracts Distributor, and Distributor each
agrees to cooperate with the others, as applicable, in arranging to print, mail
and/or deliver combined or coordinated prospectuses or other materials of the
Fund and Separate Account.
Section 4. Legal Compliance
4.1 Tax Laws.
(a) The Adviser will use its best efforts to qualify and to maintain
qualification of each Portfolio as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
the Adviser or Distributor will notify Insurer immediately upon having a
reasonable basis for believing that a Portfolio has ceased to so qualify or that
it might not so qualify in the future.
(b) Insurer represents that it believes, in good faith, that the
Contracts will be treated as annuity contracts under applicable provisions of
the Code and that it will make every effort to maintain such treatment. Insurer
will notify the Fund and Distributor 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.
(c) The Fund will use its best efforts to comply and to maintain each
Portfolio's compliance with the diversification requirements set forth in
Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the
Code, and the Fund, Adviser or Distributor will notify Insurer immediately upon
having a reasonable basis for believing that a Portfolio has ceased to so comply
or that a Portfolio might not so comply in the future.
(d) Insurer represents that it believes, in good faith, that the
Separate Account is a "segregated asset account" and that interests in the
Separate Account are offered exclusively through the purchase of or transfer
into a "variable contract," within the meaning of such terms under Section
817(h) of the Code and the regulations thereunder. Insurer will make every
effort to continue to meet such definitional requirements, and it will notify
the Fund and Distributor 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.
(e) The Adviser will manage the Fund as a RIC in compliance with
Subchapter M of the Code and will use its best efforts to manage to be in
compliance with Section 817(h) of the Code and regulations thereunder. The Fund
has adopted and will maintain procedures for ensuring that the Fund is managed
in compliance with Subchapter M and Section 817(h) and regulations thereunder.
(f) Should the Distributor or Adviser become aware of a failure of
Fund, or any of its Portfolios, to be in compliance with Subchapter M of the
Code or Section 817(h) of the Code and regulations thereunder, they represent
and agree that they will immediately notify Insurer of such in writing.
4.2 Insurance and Certain Other Laws.
(a) The Adviser will use its best efforts to cause the Fund to comply
with any applicable state insurance laws or regulations, to the extent
specifically requested in writing by Insurer. If it cannot comply, it will so
notify Insurer in writing.
(b) Insurer represents and warrants that (i) it is an insurance company
duly organized, validly existing and in good standing under the laws of the
State of [____________] and has full corporate power, authority and legal right
to execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains the
Separate Account as a segregated asset account under [State Law], and (iii) the
Contracts comply in all material respects with all other applicable federal and
state laws and regulations.
(c) Insurer and Contracts Distributor represent and warrant that
Contracts Distributor is a business corporation duly organized, validly
existing, and in good standing under the laws of the State of [____________] and
has full corporate power, authority and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
(d) Distributor represents and warrants that it is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full corporate power, authority and legal
right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(e) Distributor represents and warrants that the Fund is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Maryland and has full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement.
(f) Adviser represents and warrants that it is a limited partnership,
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement.
4.3 Securities Laws.
(a) Insurer represents and warrants that (i) interests in the Separate
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act and the Contracts will be duly authorized for
issuance and sold in compliance with [State] law, (ii) the Separate Account is
and will remain registered under the 1940 Act to the extent required by the 1940
Act, (iii) the Separate Account does and will comply in all material respects
with the requirements of the 1940 Act and the rules thereunder, (iv) the
Separate Account's 1933 Act registration statement relating to the Contracts,
together with any amendments thereto, will, at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder, and (v)
the Separate Account Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(b) The Adviser and Distributor represent and warrant that (i) Fund
shares sold pursuant to this Agreement will be registered under the 1933 Act to
the extent required by the 1933 Act and duly authorized for issuance and sold in
compliance with Maryland law, (ii) the Fund is and will remain registered under
the 1940 Act to the extent required by the 1940 Act, (iii) the Fund will amend
the registration statement for its shares under the 1933 Act and itself under
the 1940 Act from time to time as required in order to effect the continuous
offering of its shares, (iv) the Fund does and will comply in all material
respects with the requirements of the 1940 Act and the rules thereunder, (v) the
Fund's 1933 Act registration statement, together with any amendments thereto,
will at all times comply in all material respects with the requirements of the
1933 Act and rules thereunder, and (vi) the Fund Prospectus will at all times
comply in all material respects with the requirements of the 1933 Act and the
rules thereunder.
(c) The Fund will register and qualify its shares for sale in
accordance with the laws of any state or other jurisdiction only if and to the
extent reasonably deemed advisable by the Fund, Insurer or any other life
insurance company utilizing the Fund.
(d) Distributor and Contracts Distributor each represents and warrants
that it is registered as a broker-dealer with the SEC under the Securities
Exchange Act of 1934, as amended, and is a member in good standing of the
National Association of Securities Dealers Inc. (the "NASD").
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) Distributor or the Fund shall immediately notify Insurer of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Fund's registration statement
under the 1933 Act or the Fund Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Fund Prospectus, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of the Fund's shares, or (iv) any other action
or circumstances that may prevent the lawful offer or sale of Fund shares in any
state or jurisdiction, including, without limitation, any circumstances in which
(x) the Fund's shares are not registered and, in all material respects, issued
and sold in accordance with applicable state and federal law or (y) such law
precludes the use of such shares as an underlying investment medium of the
Contracts issued or to be issued by Insurer. Distributor and the Fund will make
every reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
(b) Insurer and Contracts Distributor shall immediately notify the Fund
of (i) the issuance by any court or regulatory body of any stop order, cease and
desist order or similar order with respect to the Separate Account's
registration statement under the 1933 Act relating to the Contracts or the
Separate Account Prospectus, (ii) any request by the SEC for any amendment to
such registration statement or Separate Account Prospectus, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of the Separate Account interests pursuant to the
Contracts, or (iv) any other action or circumstances that may prevent the lawful
offer or sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. Insurer and Contracts Distributor will make every reasonable effort
to prevent the issuance of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting thereof at
the earliest possible time.
4.5 Insurer to Provide Documents.
Upon request, Insurer will provide the Fund and the Distributor one
complete copy of SEC registration statements, Separate Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and amendments to
any of the above, that relate to the Separate Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6 Fund to Provide Documents.
Upon request, the Fund will provide to Insurer one complete copy of SEC
registration statements, Fund Prospectuses, reports, any preliminary and final
proxy material, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
Section 5. Mixed and Shared Funding
5.1 General.
The Fund has obtained an order exempting it from certain provisions of
the 1940 Act and rules thereunder so that the Fund is available for investment
by certain other entities, including, without limitation, separate accounts
funding variable life insurance policies and separate accounts of insurance
companies unaffiliated with Insurer ("Mixed and Shared Funding Order"). The
Parties recognize that the SEC has imposed terms and conditions for such orders
that are substantially identical to many of the provisions of this Section 5.
5.2 Disinterested Directors.
The Fund agrees that its Board of Directors shall at all times consist
of directors a majority of whom (the "Disinterested Directors") are not
interested persons of Adviser or Distributor within the meaning of Section
2(a)(I 9) of the 1940 Act.
5.3 Monitoring for Material Irreconcilable Conflicts.
The Fund agrees that its Board of Directors will monitor for the
existence of any material irreconcilable conflict between the interests of the
participants in all separate accounts of life insurance companies utilizing the
Fund, including the Separate Account. Insurer agrees to inform the Board of
Directors of the Fund of the existence of or any potential for any such material
irreconcilable conflict of which it is aware. The concept of a "material
irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder,
but the Parties recognize that such a conflict may arise for a variety of
reasons, including, without limitation:
(a) an action by any state insurance or other 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 interpretative 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 any Portfolio are being
managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract participants or by participants of
different life insurance companies utilizing the Fund; or
(f) a decision by a life insurance company utilizing the Fund to
disregard the voting instructions of
participants.
Insurer will assist the Board of Directors in carrying out its
responsibilities by providing the Board of Directors with all information
reasonably necessary for the Board of Directors to consider any issue raised,
including information as to a decision by Insurer to disregard voting
instructions of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members
of the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, Insurer and the other life insurance
companies utilizing the Fund will, at their own expense and to the extent
reasonably practicable (as determined by a majority of the Disinterested
Directors), take whatever steps are necessary to remedy or eliminate the
material irreconcilable conflict, which steps may include, but are not limited
to:
(i) withdrawing the assets allocable to some or all of the
separate accounts from the Fund or any
Portfolio and reinvesting such assets in a different
investment medium, including another
Portfolio of the Fund, or submitting the question whether
such segregation should be implemented
to a vote of all affected participants and, as appropriate,
segregating the assets of any
particular group (e.g., annuity contract owners or
participants, life insurance contract owners
or all contract owners and participants of one or more life
insurance companies utilizing the
Fund) that votes in favor of such segregation, or
offering to the affected contract owners
or participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "Management Company" in Section 4(3) of the 1940
Act or a new separate account that is operated as a Management
Company.
(b) If the material irreconcilable conflict arises because of Insurer's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, Insurer may be
required, at the Fund's election, to withdraw the Separate Account's investment
in the Fund. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal must take place within six months after the Fund
gives notice to Insurer that this provision is being implemented, and until such
withdrawal Distributor and the Fund shall continue to accept and implement
orders by Insurer for the purchase and redemption of shares of the Fund.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Insurer conflicts with the
majority of other state regulators, then Insurer will withdraw the Separate
Account's investment in the Fund within six months after the Fund's Board of
Directors informs Insurer that it has determined that such decision has created
a material irreconcilable conflict, and until such withdrawal Distributor and
Fund shall continue to accept and implement orders by Insurer for the purchase
and redemption of shares of the Fund.
(d) Insurer agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will the Fund or Distributor be
required to establish a new funding medium for any Contracts. Insurer will not
be required by the terms hereof to establish a new funding medium for any
Contracts if an offer to do so has been declined by vote of a majority of
Participants materially adversely affected by the material irreconcilable
conflict.
5.5 Notice to Insurer.
The Fund will promptly make known in writing to Insurer the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Directors.
Insurer and the Fund will at least annually submit to the Board of
Directors of the Fund such reports, materials or data as the Board of Directors
may reasonably request so that the Board of Directors may fully carry out the
obligations imposed upon it by the provisions hereof, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Directors. All reports received by the Board of Directors of
potential or existing conflicts, and all Board of Directors actions with regard
to determining the existence of a conflict, notifying life insurance companies
utilizing the Fund of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
Board of Directors or other appropriate records, and such minutes or other
records will be made available to the SEC upon request.
5.7 Compliance with SEC Rules.
If, at any time during which the Fund is serving an investment medium
for variable life insurance policies, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to mixed and shared funding, the Parties agree that they will comply
with the terms and conditions thereof and that the terms of this Section 5 shall
be deemed modified if and only to the extent required in order also to comply
with the terms and conditions of such exemptive relief that is afforded by any
of said rules that are applicable.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a
Portfolio:
(a) at the option of Insurer or Distributor upon at least six
months advance written notice to the
other Parties, or
(b) at the option of the Fund upon (i) at least sixty days advance
written notice to the other parties, and (ii) approval by (x) a majority of the
disinterested Directors upon a finding that a continuation of this Contract is
contrary to the best interests of the Fund, or (y) a majority vote of the shares
of the affected Portfolio in the corresponding Division of the Separate Account
(pursuant to the procedures set forth in Section 10 of this Agreement for voting
Trust shares in accordance with Participant instructions).
(c) at the option of the Fund upon institution of formal proceedings
against Insurer or Contracts Distributor by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding Insurer's obligations
under this Agreement or related to the sale of the Contracts, the operation of
the Separate Account, or the purchase of the Fund shares, if, in each case, the
Fund reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on the Portfolio to be terminated; or
(d) at the option of Insurer upon institution of formal proceedings
against the Fund, Adviser, or Distributor by the NASD, the SEC, or any state
insurance regulator or any other regulatory body regarding the Fund's, Adviser's
or Distributor's obligations under this Agreement or related to the operation or
management of the Fund or the purchase of Fund shares, if, in each case, Insurer
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on Insurer, Contracts Distributor or the Division
corresponding to the Portfolio to be terminated; or
(e) at the option of any Party in the event that (i) the Portfolio's
shares are not registered and, in all material respects, issued and sold in
accordance with any applicable state and federal law or (ii) such law precludes
the use of such shares as an underlying investment medium of the Contracts
issued or to be issued by Insurer; or
(f) upon termination of the corresponding Division's investment
in the Portfolio pursuant to Section
5 hereof; or
(g) at the option of Insurer if the Portfolio ceases to qualify
as a RIC under Subchapter M of the
Code or under successor or similar provisions; or
(h) at the option of Insurer if the Portfolio fails to comply
with Section 817(h) of the Code or with
successor or similar provisions; or
(i) at the option of Insurer if Insurer reasonably believes that any
change in a Fund's investment adviser or investment practices will materially
increase the risks incurred by Insurer.
6.2 Funds to Remain Available.
Except (i) as necessary to implement Participant-initiated
transactions, (ii) as required by state insurance laws or regulations, (iii) as
required pursuant to Section 5 of this Agreement, or (iv) with respect to any
Portfolio as to which this Agreement has terminated, Insurer shall not (x)
redeem Fund shares attributable to the Contracts, or (y) prevent Participants
from allocating payments to or transferring amounts from a Portfolio that was
otherwise available under the Contracts, until, in either case, 90 calendar days
after Insurer shall have notified the Fund or Distributor of its intention to do
so.
6.3 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of
this Agreement.
6.4 Continuance of Agreement for Certain Purposes.
Notwithstanding any termination of this Agreement, the Distributor
shall continue to make available shares of the Portfolios pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (the "Existing Contracts"), except as
otherwise provided under Section 5 of this Agreement. Specifically, and without
limitation, the Distributor shall facilitate the sale and purchase of shares of
the Portfolios as necessary in order to process premium payments, surrenders and
other withdrawals, and transfers or reallocations of values under Existing
Contracts.
Section 7. Parties to Cooperate Respecting Termination
The other Parties hereto agree to cooperate with and give reasonable
assistance to Insurer in taking all necessary and appropriate steps for the
purpose of ensuring that the Separate Account owns no shares of a Portfolio
after the Final Termination Date with respect thereto.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 2 hereof
will be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
Insurer
[address]
[Contracts Distributor]
[address]
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York NY 10105
Attn.: Edmund P. Bergan
FAX: (212) 969-2290
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York NY 10105
Attn: Edmund P. Bergan
FAX: (212) 969-2290
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3
hereof, Insurer will distribute all proxy material furnished by the Fund to
Participants and will vote Fund shares in accordance with instructions received
from Participants. Insurer will vote Fund shares that are (a) not attributable
to Participants or (b) attributable to Participants, but for which no
instructions have been received, in the same proportion as Fund shares for which
said instructions have been received from Participants. Insurer agrees that it
will disregard Participant voting instructions only to the extent it would be
permitted to do so pursuant to Rule 6e-3 (T)(b)(15)(iii) under the 1940 Act if
the Contracts were variable life insurance policies subject to that rule. Other
participating life insurance companies utilizing the Fund will be responsible
for calculating voting privileges in a manner consistent with that of Insurer,
as prescribed by this Section 10.
Section 11. Foreign Tax Credits
The Adviser agrees to consult in advance with Insurer concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to the Fund's shareholders.
Section 12. Indemnification
12.1 Of Fund, Distributor and Adviser by Insurer.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, Insurer agrees to indemnify and hold harmless the Fund, Distributor and
Adviser, each of their directors and officers, and each person, if any, who
controls the Fund, Distributor or Adviser within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 12. 1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of Insurer) or
actions in respect thereof (including, to the extent 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 actions are related to the sale, acquisition, or holding
of the Fund's shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material
fact contained in the Separate Account's 1933 Act registration
statement, the Separate Account
Prospectus, the Contracts or, to the extent prepared by
Insurer or Contracts Distributor, sales
literature or advertising 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 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 or such alleged statement
or omission was made in reliance
upon and in conformity with information furnished to Insurer
or Contracts Distributor by or on
behalf of the Fund, Distributor or Adviser for use in the
Separate Account's 1933 Act
registration statement, the Separate Account Prospectus, the
Contracts, or sales literature or
advertising (or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or
representations contained in the Fund's 1933 Act registration
statement, Fund Prospectus, sales
literature or advertising of the Fund, or any amendment or
supplement to any of the foregoing,
not supplied for use therein by or on behalf of Insurer or
Contracts Distributor) or the
negligent, illegal or fraudulent conduct of Insurer or
Contracts Distributor or persons under
their control (including, without limitation, their employees
and "Associated Persons," as that
term is defined in paragraph (m) of Article I of the NASD's
By-Laws), in connection with the sale
or distribution of the Contracts or Fund shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material
fact contained in the Fund's 1933 Act registration statement,
Fund Prospectus, sales literature
or advertising of the Fund, or any amendment or supplement to
any of the foregoing, 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 a statement or omission was made
in reliance upon and in conformity with information furnished
to the Fund, Adviser or Distributor
by or on behalf of Insurer or Contracts Distributor for use
in the Fund's 1933 Act registration
statement, Fund Prospectus, sales literature or advertising
of the Fund, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by Insurer or Contracts
Distributor to perform the obligations, provide the services
and furnish the materials required of them under the terms of
this Agreement.
(b) Insurer shall not be liable under this Section 12.1 with respect to
any losses, claims, damages, liabilities or actions to which an Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance by that Indemnified Party of its duties or
by reason of that Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to Distributor or to the Fund.
(c) Insurer shall not be liable under this Section 12.1 with respect to
any action against an Indemnified Party unless the Fund, Distributor or Adviser
shall have notified Insurer in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action 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 Insurer of any such action shall not relieve
Insurer from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this Section 12. 1. In
case any such action is brought against an Indemnified Party, Insurer shall be
entitled to participate, at its own expense, in the defense of such action.
Insurer also shall be entitled to assume the defense thereof, with counsel
approved by the Indemnified Party named in the action, which approval shall not
be unreasonably withheld. After notice from Insurer to such Indemnified Party of
Insurer's election to assume the defense thereof, the Indemnified Party will
cooperate fully with Insurer and shall bear the fees and expenses of any
additional counsel retained by it, and Insurer will not be liable to such
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
12.2 Indemnification of Insurer and Contracts Distributor by Adviser.
(a) Except to the extent provided in Sections 12.2(d) and 12.2(e),
below, Adviser agrees to indemnify and hold harmless Insurer and Contracts
Distributor, each of their directors and officers, and each person, if any, who
controls Insurer or Contracts Distributor within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 12.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of Adviser) or
actions in respect thereof (including, to the extent reasonable, 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 actions are related to the sale, acquisition, or holding of the Fund's shares
and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material
fact contained in the Fund's 1933 Act registration statement, Fund
Prospectus, sales literature
or advertising of the Fund or, to the extent not prepared by Insurer
or Contracts Distributor,
sales literature or advertising 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 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 or such alleged statement or
omission was made in reliance
upon and in conformity with information furnished to Distributor,
Adviser or the Fund by or on
behalf of Insurer or Contracts Distributor for use in the Fund's 1933
Act registration statement,
Fund Prospectus, or in sales literature or advertising (or any
amendment or supplement to any of
the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or
representations contained in the Separate Account's 1933 Act
registration statement, Separate
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or
supplement to any of the foregoing, not supplied for use
therein by or on behalf of Distributor,
Adviser, or the Fund) or the negligent, illegal or fraudulent
conduct of the Fund, Distributor,
Adviser or persons under their control (including, without
limitation, their employees and
Associated Persons), in connection with the sale or
distribution of the Contracts or Fund shares;
or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material
fact contained in the Separate Account's 1933 Act registration
statement, Separate Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or
supplement to any of the foregoing, 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 in conformity with
information furnished to Insurer or Contracts Distributor by
or on behalf of the Fund,
Distributor or Adviser for use in the Separate Account's 1933
Act registration statement,
Separate Account Prospectus, sales literature or advertising
covering the Contracts, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by the Fund, Adviser or
Distributor to perform the obligations, provide the services
and furnish the materials required of them under the terms of
this Agreement;
(b) Except to the extent provided in Sections 12.2(d) and 12.2(e)
hereof, Adviser agrees to indemnify and hold harmless the Indemnified Parties
from and against any and all losses, claims, damages, liabilities (including
amounts paid in settlement thereof with, except as set forth in Section 12.2(c)
below, the written consent of Adviser) or actions in respect thereof (including,
to the extent reasonable, legal and other expenses) to which the Indemnified
Parties may become subject directly or indirectly under any statute, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
actions directly or indirectly result from or arise out of the failure of any
Portfolio to operate as a regulated investment company in compliance with (i)
Subchapter M of the Code and regulations thereunder and (ii) Section 817(h) of
the Code and regulations thereunder (except to the extent that such failure is
caused by Insurer), including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Contract owners or
Participants asserting liability against Insurer or Contracts Distributor
pursuant to the Contracts, the costs of any ruling and closing agreement or
other settlement with the Internal Revenue Service, and the cost of any
substitution by Insurer of shares of another investment company or portfolio for
those of any adversely affected Portfolio as a funding medium for the Separate
Account that Insurer deems necessary or appropriate as a result of the
noncompliance.
(c) The written consent of Adviser referred to in Section 12.2(b) above
shall not be required with respect to amounts paid in connection with any ruling
and closing agreement or other settlement with the Internal Revenue Service.
(d) Adviser shall not be liable under this Section 12.2 with respect to
any losses, claims; damages, liabilities or actions to which an Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance by that Indemnified Party of its duties or
by reason of such Indemnified Party's reckless disregard of its obligations and
duties under this Agreement or to Insurer, Contracts Distributor or the Separate
Account.
(e) Adviser shall not be liable under this Section 12.2 with respect to
any action against an Indemnified Party unless Insurer or Contracts Distributor
shall have notified Adviser in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action 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 Adviser of any such action shall not relieve
Adviser from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this Section 12.2. In
case any such action is brought against an Indemnified Party, Adviser will be
entitled to participate, at its own expense, in the defense of such action.
Adviser also shall be entitled to assume the defense thereof (which shall
include, without limitation, the conduct of any ruling request and closing
agreement or other settlement proceeding with the Internal Revenue Service),
with counsel approved by the Indemnified Party named in the action, which
approval shall not be unreasonably withheld. After notice from Adviser to such
Indemnified Party of Adviser's election to assume the defense thereof, the
Indemnified Party will cooperate fully with Adviser and shall bear the fees and
expenses of any additional counsel retained by it, and Adviser will not be
liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Section 12.1(c) or 12.2(e) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with New York law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
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, that the Parties are entitled to under federal and state
laws.
Section 17. Restrictions on Sales of Fund Shares
Insurer agrees that the Fund will be permitted (subject to the other
terms of this
Agreement) to make its shares available to separate accounts of other
life insurance companies.
Section 18. Headings
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
By:
Name:
Title:
TRANSAMERICA SECURITIES SALES CORPORATION
By:
Name:
Title:
ALLIANCE CAPITAL MANAGEMENT LP
By: Alliance Capital Management Corporation,
its General Partner
By:
Name:
Title:
ALLIANCE FUND DISTRIBUTORS, INC.
By:
Name:
Title:
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this ____ day of ____ 1997, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), Transamerica Life Insurance and Annuity Company, a North Carolina
corporation (the "Company") on its own behalf and on behalf of each of the
segregated asset accounts of the Company set forth in Schedule A hereto, as may
be amended from time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL
SERVICES COMPANY, a Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or
variable life insurance contracts (individually, the "Policy" or, collectively,
the "Policies") which, if required by applicable law, will be registered under
the 1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered
as a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, the company, the underwriter for the individual variable
annuity and the variable life policies, is registered as a broker-dealer with
the SEC under the 1934 Act and is a member in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that
Business Day, as defined below) and which are available for purchase by
such Accounts, executing such orders on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the
order for the Shares. For purposes of this Section 1.1, the Company
shall be the designee of the Trust for receipt of such orders from
Policy owners and receipt by such designee shall constitute receipt by
the Trust; provided that the Trust receives notice of such orders by
9:30 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange, Inc. (the
"NYSE") is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such
net asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of the Shares if such action is
required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Board acting in good faith and in light
of its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements
with the Trust and MFS (the "Participating Insurance Companies") and
their separate accounts, qualified pension and retirement plans and MFS
or its affiliates. The Trust and MFS will not sell Trust shares to any
insurance company or separate account unless an agreement containing
provisions substantially the same as Articles III and VII of this
Agreement is in effect to govern such sales. The Company will not
resell the Shares except to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed
by Policy owners on that Business Day), executing such requests on a
daily basis at the net asset value next computed after receipt by the
Trust or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Trust for
receipt of requests for redemption from Policy owners and receipt by
such designee shall constitute receipt by the Trust; provided that the
Trust receives notice of such request for redemption by 9:30 a.m.
New York time on the next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an
order to purchase the Shares is made in accordance with the provisions
of Section 1.1. hereof. In the event of net redemptions, the Trust
shall pay the redemption proceeds by 2:00 p.m. New York time on the
next Business Day after an order to redeem the shares is made in
accordance with the provisions of Section 1.4. hereof. All such
payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable
on a Portfolio's Shares in additional Shares of that Portfolio. The
Trust shall notify the Company of the number of Shares so issued as
payment of such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per
share for each Portfolio available to the Company on each Business Day
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:30 p.m. New York time. In the event that the
Trust is unable to meet the 6:30 p.m. time stated herein, it shall
provide additional time for the Company to place orders for the
purchase and redemption of Shares. Such additional time shall be equal
to the additional time which the Trust takes to make the net asset
value available to the Company. If the Trust provides materially
incorrect share net asset value information, the Trust shall make an
adjustment to the number of shares purchased or redeemed for the
Accounts 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 gains information shall be reported promptly upon
discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold,
and distributed in compliance in all material respects with all
applicable state and federal laws, including without limitation the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the 1940 Act. The Company further represents and warrants
that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established
the Account as a segregated asset account under applicable law and has
registered or, prior to any issuance or sale of the Policies, will
register the Accounts as unit investment trusts in accordance with the
provisions of the 1940 Act (unless exempt therefrom) to serve as
segregated investment accounts for the Policies, and that it will
maintain such registration for so long as any Policies are outstanding.
The Company shall amend the registration statements under the 1933 Act
for the Policies and the registration statements under the 1940 Act for
the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales in accordance with the securities laws of the various states only
if and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are
currently and at the time of issuance will be treated as life
insurance, endowment or annuity contract under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), that it
will maintain such treatment and that it will notify the Trust or MFS
immediately upon having a reasonable basis for believing that the
Policies have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Company represents and warrants that Transamerica Securities
Sales Corporation, the underwriter for the individual variable annuity
and the variable life policies, is a member in good standing of the
NASD and is a registered broker-dealer with the SEC. The Company
represents and warrants that the Company and American National will
sell and distribute such policies in accordance in all material
respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust shall amend the registration statement for its
Shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares. The
Trust shall register and qualify the Shares for sale in accordance with
the laws of the various states only if and to the extent deemed
necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the
SEC. The Trust and MFS represent that the Trust and the Underwriter
will sell and distribute the Shares in accordance in all material
respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
any applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it
shall perform its obligations for the Trust in compliance in all
material respects with any applicable federal securities laws and with
the securities laws of The Commonwealth of Massachusetts. MFS
represents and warrants that it is not subject to state securities laws
other than the securities laws of The Commonwealth of Massachusetts and
that it is exempt from registration as an investment adviser under the
securities laws of The Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably
request so that it may carry out fully the obligations imposed upon it
by the conditions contained in the exemptive application pursuant to
which the SEC has granted exemptive relief to permit mixed and shared
funding (the "Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to
existing Policy owners whose Policies are funded by such Shares. The
Trust or its designee shall provide the Company, at the Company's
expense, with as many copies of the current prospectus for the Shares
as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof,
the Trust or its designee shall provide such documentation (including a
"camera ready" copy of the new prospectus as set in type or, at the
request of the Company, as a diskette in the form sent to the financial
printer) and other assistance as is reasonably necessary in order for
the parties hereto once each year (or more frequently if the prospectus
for the Shares is supplemented or amended) to have the prospectus for
the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a)
the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear
the cost of printing the Shares' prospectus portion of such document
for distribution to owners of existing Policies funded by the Shares
and the Company to bear the expenses of printing the portion of such
document relating to the Accounts; provided, however, that the Company
shall bear all printing expenses of such combined documents where used
for distribution to prospective purchasers or to owners of existing
Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust's prospectus
in a "camera ready" or diskette format, the Trust shall be responsible
for providing the prospectus in the format in which it or MFS is
accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus in such format (e.g., typesetting expenses),
and the Company shall bear the expense of adjusting or changing the
format to conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or
its designee. The Trust or its designee, at its expense, shall print
and provide such statement of additional information to the Company (or
a master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust
or its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by
the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require
for distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of
printing or providing documents to the extent such cost is considered a
distribution expense. Distribution expenses would include by way of
illustration, but are not limited to, the printing of the Shares'
prospectus or prospectuses for distribution to prospective purchasers
or to owners of existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions
received from Policy owners; and
(c) vote the Shares for which no instructions have been
received in the same proportion as the Shares of such
Portfolio for which instructions have been received
from Policy owners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass through voting privileges for variable
contract owners. The Company will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies
for the Shares held for such Policy owners. The Company reserves the
right to vote shares held in any segregated asset account in its own
right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate
accounts holding Shares calculates voting privileges in the manner
required by the Mixed and Shared Funding Exemptive Order. The Trust and
MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other
promotional material in which the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least three
(3) Business Days prior to its use. No such material shall be used if
the Trust, MFS, or their respective designees reasonably objects to
such use within three (3) Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in the
registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus
and statement of additional information may be amended or supplemented
from time to time, or in reports or proxy statements for the Trust, or
in sales literature or other promotional material approved by the
Trust, MFS or their respective designees, except with the permission of
the Trust, MFS or their respective designees. The Trust, MFS or their
respective designees each agrees to respond to any request for approval
on a prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning
the Trust, MFS or any of their affiliates which is intended for use
only by brokers or agents selling the Policies (i.e., information that
is not intended for distribution to Policy owners or prospective Policy
owners) is so used, and neither the Trust, MFS nor any of their
affiliates shall be liable for any losses, damages or expenses relating
to the improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or
the Accounts is named, at least three (3) Business Days prior to its
use. No such material shall be used if the Company or its designee
reasonably objects to such use within three (3) Business Days after
receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf
of the Company or concerning the Company, the Accounts, or the Policies
in connection with the sale of the Policies other than the information
or representations contained in a registration statement, prospectus,
or statement of additional information for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to
respond to any request for approval on a prompt and timely basis. The
parties hereto agree that this Section 4.4. is neither intended to
designate nor otherwise imply that MFS is an underwriter or distributor
of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other at least
one complete copy of all registration statements, prospectuses,
statements of additional information, 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 Policies, or to the Trust or its
Shares, prior to or contemporaneously with the filing of such document
with the SEC or other regulatory authorities. The Company and the Trust
shall also each promptly inform the other of the results of any
examination by the SEC (or other regulatory authorities) that relates
to the Policies, the Trust or its Shares, and the party that was the
subject of the examination shall provide the other party with a copy of
relevant portions of any "deficiency letter" or other correspondence or
written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
particularly any change resulting in change to the registration
statement or prospectus or statement of additional information for any
Account. The Trust and MFS will cooperate with the Company so as to
enable the Company to solicit proxies from Policy owners or to make
changes to its prospectus, statement of additional information or
registration statement, in an orderly manner. The Trust and MFS will
make reasonable efforts to attempt to have changes affecting Policy
prospectuses become effective simultaneously with the annual updates
for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, 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), and sales literature (such as
brochures, circulars, reprints or excerpts or any other advertisement,
sales literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials
or communications distributed or made generally available to some or
all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution and Shareholder servicing expenses, then,
subject to obtaining any required exemptive orders or regulatory
approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust
in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof,
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 services relating to the Trust
and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration
fees; preparation and filing of the Trust's proxy materials and reports
to Shareholders; setting in type and printing its prospectus and
statement of additional information (to the extent provided by and as
determined in accordance with Article III above); setting in type and
printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by
any federal or state law with respect to its Shares; all taxes on the
issuance or transfer of the Shares; and the costs of distributing the
Trust's prospectuses and proxy materials to owners of Policies funded
by the Shares and any expenses permitted to be paid or assumed by the
Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
The Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports to Policy owners.
The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing
and distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing
annual individual account statements for Policy owners as required by
state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1)
of the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, as they may be amended from time to time (and any revenue
rulings, revenue procedures, notices, and other published announcements
of the Internal Revenue Service interpreting these sections), as if
those requirements applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the
Code and that they will maintain such qualification (under Subchapter M
or any successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for
the existence of any material irreconcilable conflict between the
interests of the variable annuity contract owners and the variable life
insurance policy owners of the Company and/or affiliated companies
("contract owners") investing in the Trust. The Board shall have the
sole authority to determine if a material irreconcilable conflict
exists, and such determination shall be binding on the Company only if
approved in the form of a resolution by a majority of the Board, or a
majority of the disinterested trustees of the Board. The Board will
give prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set
forth in the Trust's exemptive application pursuant to which the SEC
has granted the Mixed and Shared Funding Exemptive Order by providing
the Board, as it may reasonably request, with all information necessary
for the Board to consider any issues raised and agrees that it will be
responsible for promptly reporting any potential or existing conflicts
of which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded. The Company also agrees that, if a
material irreconcilable conflict arises, it will at its own cost remedy
such conflict up to and including (a) withdrawing the assets allocable
to some or all of the Accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium, including
(but not limited to) another Portfolio of the Trust, or submitting to a
vote of all affected contract owners whether to withdraw assets from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium and, as appropriate, segregating the assets
attributable to any appropriate group of contract owners that votes in
favor of such segregation, or offering to any of the affected contract
owners the option of segregating the assets attributable to their
contracts or policies, and (b) establishing a new registered management
investment company and segregating the assets underlying the Policies,
unless a majority of Policy owners materially adversely affected by the
conflict have voted to decline the offer to establish a new registered
management investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately
remedies any material irreconcilable conflict. In the event that the
Board determines that any proposed action does not adequately remedy
any material irreconcilable conflict, the Company will withdraw from
investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 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 (as defined in the Mixed and Shared Funding
Exemptive Order) on terms and conditions materially different from
those contained in the Mixed and Shared Funding Exemptive Order, then
(a) the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with
Rule 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2,
7.3 and 7.4 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust,
MFS, any affiliates of MFS, and each of their respective
directors/trustees, officers and each person, if any, who controls the
Trust or MFS within the meaning of Section 15 of the 1933 Act, and any
agents or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Shares or the Policies
and:
(a) 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 statement of
additional information for the Policies or contained
in the Policies or sales literature
or other promotional material for the Policies (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 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 or such alleged statement
or omission was made in reasonable reliance upon
and in conformity with information
furnished to the Company or its designee by or on
behalf of the Trust or MFS for use in
the registration statement, prospectus or
statement of additional information for the
Policies or in the Policies or sales literature
or other promotional material (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Policies
or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material of the Trust not supplied by the Company or
its designee, or persons under its control and on
which the Company has reasonably relied) or wrongful
conduct of the Company or persons under its control,
with respect to the sale or distribution of the
Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Trust, 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 the Trust by or on
behalf of the Company; or
(d) arise out of or result from 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 of this Agreement by
the Company; or
(e) arise as a result of any failure by the Company to
provide the services and furnish the
materials under the terms of this Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. Indemnification by the Trust
The Trust agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act,
and any agents or employees of the foregoing (each an "Indemnified
Party," or collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Trust) or expenses (including reasonable counsel fees) to which any
Indemnified Party 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 are related to
the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any
material fact contained in the registration statement,
prospectus, statement of
additional information or sales literature or other promotional
material of the Trust (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 therein or necessary to make the statement therein not
misleading, provided that
--------
this agreement to indemnify shall not apply as to any Indemnified
Party if such statement
or omission or such alleged statement or omission was made in
reasonable reliance upon
and in conformity with information furnished to the Trust, MFS, the
Underwriter or their
respective designees by or on behalf of the Company for use
in the registration
statement, prospectus or statement of additional information for
the Trust or in sales
literature or other promotional material for the Trust (or any
amendment or supplement)
or otherwise for use in connection with the sale of the Policies or
Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material for the Policies not supplied by the Trust,
MFS, the Underwriter or any of their respective
designees or persons under their respective control
and on which any such entity has reasonably relied)
or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of
the Policies or Shares; or
(c) arise out of any untrue statement or alleged
untrue statement of a material fact
contained in the registration statement, prospectus,
statement of additional information,
or sales literature or other promotional
literature of the Accounts or relating to the
Policies, 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 the Company by or on behalf of the
Trust, MFS or the Underwriter; or
(d) arise out of or result from any material breach of
any representation and/or warranty made by the Trust
in this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to
comply with the diversification requirements
specified in Article VI of this Agreement) or arise
out of or result from any other material breach of
this Agreement by the Trust; or
(e) arise out of or result from the materially incorrect
or untimely calculation or reporting of the daily net
asset value per share or dividend or capital gain
distribution rate; or
(f) arise as a result of any failure by the Trust to
provide the services and furnish the
materials under the terms of the Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating
Insurance Company or any Policy holder, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result
from (i) a breach of any representation, warranty, and/or covenant made
by the Company hereunder or by any Participating Insurance Company
under an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by the Company or any
Participating Insurance Company to maintain its segregated asset
account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as
a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by the Company
or any Participating Insurance Company to maintain its variable annuity
and/or variable life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle) as life insurance,
endowment or annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, 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.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party
will, if a claim in respect thereof is to be made against the
indemnifying party under this section, notify the indemnifying party of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any Indemnified Party otherwise than under this section. In
case any such action is brought against any Indemnified Party, and it
notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such Indemnified Party. After notice from the
indemnifying party of its intention to assume the defense of an action,
the Indemnified Party shall bear the expenses of any additional counsel
obtained by it, and the indemnifying party shall not be liable to such
Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of
its respective officers, directors, trustees, employees or 1933 Act
control persons in connection with the Agreement, the issuance or sale
of the Policies, the operation of the Accounts, or the sale or
acquisition of Shares.
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this Article
VIII shall survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance
with the laws of The Commonwealth of Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
<PAGE>
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts,
or one, some, or all Portfolios:
(a) at the option of any party upon six (6) months'
advance written notice to the other
parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not
reasonably available to meet the requirements of the Policies or
are not "appropriate
funding vehicles" for the Policies, as reasonably determined by
the Company. Without
limiting the generality of the foregoing, the Shares of a
Portfolio would not be
"appropriate funding vehicles" if, for example, such Shares
did not meet the
diversification or other requirements referred to in Article VI
hereof; or if the Company
would be permitted to disregard Policy owner voting instructions
pursuant to Rule 6e-2 or
6e-3(T) under the 1940 Act. Prompt notice of the election to
terminate for such cause
and an explanation of such cause shall be furnished to the Trust by the
Company; or
(c) at the option of the Trust or MFS upon institution of
formal proceedings against the Company by the NASD,
the SEC, or any insurance department or any other
regulatory body regarding the Company's duties under
this Agreement or related to the sale of the
Policies, the operation of the Accounts, or the
purchase of the Shares; or
(d) at the option of the Company upon institution of
formal proceedings against the Trust by the NASD, the
SEC, or any state securities or insurance department
or any other regulatory body regarding the Trust's or
MFS' duties under this Agreement or related to the
sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon
receipt of any necessary regulatory approvals and/or
the vote of the Policy owners having an interest in
the Accounts (or any subaccounts) to substitute the
shares of another investment company for the
corresponding Portfolio Shares in accordance with the
terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying
investment media. The Company will give thirty (30)
days' prior written notice to the Trust of the Date
of any proposed vote or other action taken to replace
the Shares; or
(f) termination by either the Trust or MFS by written
notice to the Company, if either one or both of the
Trust or MFS respectively, shall determine, in their
sole judgment exercised in good faith, that the
Company has suffered a material adverse change in its
business, operations, financial condition, or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(g) termination by the Company by written notice to the
Trust and MFS, if the Company shall determine, in its
sole judgment exercised in good faith, that the Trust
or MFS has suffered a material adverse change in this
business, operations, financial condition or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon
another party's material breach of any
provision of this Agreement; or
(i) upon assignment of this Agreement, unless made
with the written consent of the parties
hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised
for cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations,
the Company shall not redeem the Shares attributable to the Policies
(as opposed to the Shares attributable to the Company's assets held in
the Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under
the Policies, until thirty (30) days after the Company shall have
notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Policies in effect on the
effective date of termination of this Agreement (the "Existing
Policies"), except as otherwise provided under Article VII of this
Agreement. Specifically, without limitation, the owners of the Existing
Policies shall be permitted to transfer or reallocate investment under
the Policies, redeem investments in any Portfolio and/or invest in the
Trust upon the making of additional purchase payments under the
Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile 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 party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
Facsimile No.:
Attn:
<PAGE>
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or
utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. 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.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. 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.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. 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 laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets
and liabilities of each Portfolio are separate and distinct and that
the obligations of or arising out of this instrument are binding solely
upon the assets or property of the Portfolio on whose behalf the Trust
has executed this instrument. The Company also agrees that the
obligations of each Portfolio hereunder shall be several and not joint,
in accordance with its proportionate interest hereunder, and the
Company agrees not to proceed against any Portfolio for the obligations
of another Portfolio.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
By its authorized officer,
By: _______________________________
Title: ____________________________
MFS VARIABLE INSURANCE TRUST, on behalf of the Portfolios
By its authorized officer and not individually,
By: _______________________________
Title: ____________________________
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: _______________________________
Title: ____________________________
<PAGE>
As of ____________________
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
- -------------------------------------------- =================================
Name of Separate
Account Portfolios
Applicable to Policies
- -------------------------------------------- ===============================
Separate Account VA-6 MFS Emerging Growth
- -------------------------------------------- ---------------------------
<PAGE>
34
PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
And
OCC DISTRIBUTORS
THIS AGREEMENT, made and entered into this day of _________
199_ by and among Transamerica Life Insurance and Annuity Company, a North
Carolina Corporation (hereinafter the "Company"), on its own behalf and on
behalf of each separate account of the Company named in Schedule 1 to this
Agreement, as may be amended from time to time (each account referred to as the
"Account"), OCC ACCUMULATION TRUST, an open-end diversified management
investment company organized under the laws of the State of Massachusetts
(hereinafter the "Fund") and OCC DISTRIBUTORS, a Delaware general partnership
(hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end
diversified, management investment company and was established for the purpose
of serving as the investment vehicle for separate accounts established for
variable life insurance contracts and variable annuity contracts to be offered
by insurance companies which have entered into participation agreements
substantially identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, beneficial interests in the Fund are divided into
several series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities &
Exchange Commission (alternatively referred to as the "SEC" or the
"Commission"), dated February 22, 1995 (File No. 812-9290), granting
Participating Insurance Companies and variable annuity separate accounts and
variable life insurance separate accounts relief from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity separate accounts and variable life insurance
separate accounts of both affiliated and unaffiliated Participating Insurance
Companies and qualified pension and retirement plans (hereinafter the "Mixed and
Shared Funding Exemptive Order");and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain
variable annuity contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company under the insurance laws of the State of North Carolina, to set
aside and invest assets attributable to the Contracts; and
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act;
and
WHEREAS, the Underwriter is registered as a broker-dealer with
the SEC under the Securities Exchange Act of 1934, as amended (hereinafter the
"1934 Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios named
in Schedule 2 on behalf of the Account to fund the Contracts and the Underwriter
is authorized to sell such shares to unit investment trusts such as the Account
at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those
shares of the Fund which the Company orders on behalf of the Account, executing
such orders on a daily basis at the net asset value next computed after receipt
and acceptance by the Fund or its agent of the order for the shares of the Fund.
For purposes of this Section 1.1, the Company shall be the designee of the Fund
for receipt of such orders from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following Business Day. "Business
Day" shall 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 SEC.
1.2. The Company shall pay for Fund shares on the next
Business Day after it places an order to purchase Fund shares in accordance with
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
1.3. The Fund agrees to make its shares available indefinitely
for purchase at the applicable net asset value per share by Participating
Insurance Companies and their separate accounts on those days on which the Fund
calculates its net asset value pursuant to rules of the SEC; provided, however,
that the Board of Trustees of the Fund (hereinafter the "Directors") may refuse
to sell shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Directors, acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the
Fund will be sold only to Participating Insurance Companies and their separate
accounts, qualified pension and retirement plans or such other persons as are
permitted under applicable provisions of the Internal Revenue Code of 1986, as
amended, (the "Internal Revenue Code"), and regulations promulgated thereunder,
the sale to which will not impair the tax treatment currently afforded the
contracts. No shares of any Portfolio will be sold to the general public.
1.5. The Fund and the Underwriter will not sell Fund shares to
any insurance company or separate account unless an agreement containing
provisions substantially the same as Articles I, III, V, and VII of this
Agreement are in effect to govern such sales. The Fund shall make available upon
written request from the Company (i) a list of all other Participating Insurance
Companies and (ii) a copy of the Participation Agreement executed by any other
Participating Insurance Company.
1.6. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares 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 1.6, the Company shall be the designee
of the Fund for receipt of requests for redemption from each Account and receipt
by such designee shall constitute receipt by the Fund; provided the Fund
receives notice of request for redemption by 10:00 a.m. Eastern Time on the next
following Business Day. Payment shall be 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 except that 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 1940 Act. Neither the Fund nor the
Underwriter shall bear any responsibility whatsoever for the proper disbursement
or crediting of redemption proceeds; the Company alone shall be responsible for
such action. If notification of redemption is received after 10:00 a.m. Eastern
Time, payment for redeemed shares will be made on the next following Business
Day.
1.7. The Company agrees to purchase and redeem the shares of
the Portfolios named in Schedule 2 offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the Contracts shall be invested in the
Fund, or in the Company's general account; provided that such amounts may also
be invested in an investment company other than the Fund if (a) such other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
the Portfolios of the Fund named in Schedule 2; or (b) the Company gives the
Fund and the Underwriter 45 days written notice of its intention to make such
other investment company available as a funding vehicle for the Contracts; or
(c) such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs the
Fund and Underwriter prior to their signing this Agreement; or (d) the Fund or
Underwriter consents in writing to the use of such other investment company.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock certificates will not be issued to the Company or any
Account. Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
1.9. The Fund shall furnish notice as soon as reasonably
practicable to the Company of any income, dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to receive
all such dividends and distributions as are payable on the Portfolio shares in
the form of additional shares of that Portfolio. The Company reserves the right
to revoke this election and to receive all such dividends and distributions in
cash. The Fund shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 5:30 p.m.,
Eastern Time, each business day.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts
are or will be registered under the 1933 Act 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 it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established each Account as a segregated asset account under applicable
state law and has registered each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as segregated investment
accounts for the Contracts, and that it will maintain such registration for so
long as any Contracts are outstanding. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statement
under the 1940 Act for the 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 shall 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. The Company represents that it believes that the
Contracts are currently and at the time of issuance will be treated as annuity
contracts under applicable provisions of the Internal Revenue Code and that it
will make every effort to maintain such treatment and that it will notify the
Fund and the Underwriter 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 Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law and that the Fund is
and shall remain registered under the 1940 Act for as long as the Fund shares
are sold. The Fund shall amend the registration statement for its shares under
the 1933 Act and the 1940 Act from time to time as required in order to effect
the continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund or the Underwriter.
2.4. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code,
and that it will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that it will notify the
Company 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.
2.5. The Fund represents that its investment objectives,
policies and restrictions comply with applicable state investment laws as they
may apply to the Fund. The Fund makes no 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 and regulations of any
state. The Company alone shall be responsible for informing the Fund of any
insurance restrictions imposed by state insurance laws which are applicable to
the Fund. To the extent feasible and consistent with market conditions, the Fund
will adjust its investments to comply with the aforementioned state insurance
laws upon written notice from the Company of such requirements and proposed
adjustments, it being agreed and understood that in any such case the Fund shall
be allowed a reasonable period of time under the circumstances after receipt of
such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments
to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund
undertakes to have its Board of Trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.7. The Underwriter represents and warrants that it is a
member in good standing of the National Association of Securities Dealers, Inc.,
("NASD") and is registered as a broker-dealer with the SEC. The Underwriter
further represents that it will sell and distribute the Fund shares in
accordance with all applicable federal and state securities laws, including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and
validly existing under the laws of Massachusetts and that it does and will
comply with applicable provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that the Fund's
Adviser, OpCap Advisors, is and shall remain duly registered under all
applicable federal and state securities laws and that the Adviser will perform
its obligations to the Fund in accordance with the laws of Massachusetts and any
applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all
of their directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and continue 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.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, in an amount not less than $5 million. The aforesaid includes coverage for
larceny and embezzlement and is issued by a reputable bonding company. The
Company agrees to make all reasonable efforts to see that this bond or another
bond containing these provisions is always in effect, and agrees to notify the
Fund and the Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company, at the
Company's expense, with as many copies of the Fund's current prospectus as the
Company may reasonably request for use with prospective contractowners and
applicants. The Underwriter shall print and distribute, at the Fund's or
Underwriter's expense, as many copies of said prospectus as necessary for
distribution to existing contractowners or participants. If requested by the
Company in lieu thereof, the Fund shall provide such documentation including a
final copy of a current prospectus set in type at the Fund'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 one document. In such case the Fund shall bear its share of expenses
as described above.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or
alternatively from the Company (or, in the Fund's discretion, the Prospectus
shall state that such Statement is available from the Fund), and the Underwriter
(or the Fund) shall provide such Statement, at its expense, to the Company and
to any owner of or participant under a Contract who requests such Statement or,
at the Company's expense, to any prospective contractowner and applicant who
requests such statement.
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy material, if any, reports to shareholders and other
communications to shareholders in such quantity as the Company shall reasonably
require and shall bear the costs of distributing them to existing contractowners
or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contractowners or participants;
(ii) vote the Fund shares held in the Account in accordance with instructions
received from contractowners or participants; and
(iii) vote Fund shares held in the Account for
which no timely instructions have been
received, in the same proportion as Fund
shares of such Portfolio for which
instructions have been received from the
Company's contractowners or participants;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contractowners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. Participating Insurance Companies
shall be responsible for assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a manner consistent
with other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular as required, the Fund will
either provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the SEC 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 IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be
furnished, to the Fund or the Underwriter, each piece of sales literature or
other promotional material in which the Fund or the Fund's adviser or the
Underwriter is named, at least fifteen business days prior to its use. No such
material shall be used if the Fund or the Underwriter reasonably objects in
writing to such use within fifteen business days after receipt of such material.
4.2. The Company shall 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 or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall 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 fifteen business days prior to its use. No such material shall
be used if the Company reasonably objects in writing to such use within fifteen
business days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in published reports for each Account which
are in the public domain or approved by the Company for distribution to
contractowners or participants, or in sales literature or other promotional
material approved by the Company, except with the permission of the Company. The
Company agrees to respond to any request for approval on a prompt and timely
basis.
4.5. The Fund will provide to the Company at least one
complete copy of all registration statements, prospectuses, statements of
additional information, 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
shares, contemporaneously with the filing of such document with the SEC or other
regulatory authorities. 4.6. The Company will provide to the Fund at least one
complete copy of all registration statements, prospectuses, statements of
additional information, 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 Account, contemporaneously with the filing of
such document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, 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),
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, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then, subject to obtaining any required exemptive orders
or other regulatory approvals, the Underwriter may make payments to the Company
or to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this
Agreement shall be paid by the Fund to the extent permitted by law. All Fund
shares 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 shall bear the
expenses for the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration statement, Fund
proxy materials and reports, setting in type, printing and distributing the
prospectuses, the proxy materials and reports to existing shareholders and
contractowners, 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
shares, and 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.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the
Contracts in such a manner as to ensure that the Contracts will be treated as
variable contracts under the Internal Revenue Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Fund will comply
with Section 817(h) of the Internal Revenue Code and Treasury Regulation
1.817-5, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts and any amendments or other modifications
to such Section or Regulations in accordance with guidelines provided by the
Company prior to the execution of this Agreement and as necessary thereafter. In
the event of a breach of this Article VI by the Fund, it will take all
reasonable steps (a) to notify the Company of such breach and (b) to adequately
diversify the Fund so as to achieve compliance with the grace period afforded by
Treasury Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board of Trustees of the Fund (the "Fund Board") will
monitor the Fund for the existence of any material irreconcilable conflict among
the interests of the contractowners of all separate accounts investing in the
Fund. An irreconcilable material 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
interpretative 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 any Portfolio
are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity contract and variable
life insurance contractowners; or (f) a decision by an insurer to disregard the
voting instructions of contractowners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof. A majority of the Fund Board shall consist of persons who
are not "interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared
Funding Exemptive Order, and in particular, has reviewed the conditions to the
requested relief set forth therein. As set forth in the Mixed and Shared Funding
Exemptive Order, the Company will report any potential or existing conflicts of
which it is aware to the Fund Board. The Company agrees to assist the Fund Board
in carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order, by providing the Fund Board with all information reasonably
necessary for the Fund Board to consider any issues raised. This includes, but
is not limited to, an obligation by the Company to inform the Fund Board
whenever contractowner voting instructions are disregarded. The Fund Board shall
record in its minutes or other appropriate records, all reports received by it
and all action with regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested Directors, that an irreconcilable material
conflict exists, the Company and other Participating Insurance Companies shall,
at their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Directors), take whatever steps are necessary to
remedy or eliminate the irreconcilable material conflict, up to and including:
(1) withdrawing the assets allocable to some or all of the separate accounts
from the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the Fund,
or submitting the question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate, segregating the assets
of any appropriate group (i.e., variable annuity contractowners or variable life
insurance contractowners, of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected contractowners
the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
7.4. If the Company's disregard of voting instructions could
conflict with the majority of contractowner voting instructions, and the
Company's judgment represents a minority position or would preclude a majority
vote, the Company may be required, at the Fund's election, to withdraw the
Account's investment in the Fund and terminate this Agreement with respect to
such Account. Any such withdrawal and termination must take place within 60 days
after the Fund gives written notice to the Company that this provision is being
implemented. Until the end of such 60 day period the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.5. If a particular state insurance regulator's decision
applicable to the Company conflicts with the majority of other state insurance
regulators, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement with respect to such Account. Any such withdrawal
and termination must take place within 60 days after the Fund gives written
notice to the Company that this provision is being implemented. Until the end of
such 60 day period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this
Agreement, a majority of the disinterested members of the Fund Board shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Fund or Quest Advisors be required
to establish a new funding medium for the Contracts. The Company shall not be
required by Section 7.3 to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of contractowners
materially adversely affected by the irreconcilable material conflict.
7.7. The Company shall at least annually submit to the Fund
Board such reports, materials or data as the Fund Board may reasonably request
so that the Fund Board may fully carry out the duties imposed upon it as
delineated in the Mixed and Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Fund Board.
7. 8. If and to the extent that Rule 6e-2 and Rule 6e-3 (T)
are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Mixed and Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the Mixed
and Shared Funding Exemptive Order, (a) the Fund and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be necessary
to comply with Rules 6e-2 and 6e-3 (T), as amended, and Rule 6e-3, as adopted,
to the extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2,
7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the extent
that terms and conditions substantially identical to such Sections are contained
in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Underwriter, and each of the Fund's or the Underwriter's directors,
officers, employees or agents and each person, if any, who controls or is
associated with the Fund or the Underwriter within the meaning of such terms
under the federal securities laws (collectively, the "indemnified parties" for
purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (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 actions in respect thereof) or settlements:
(i)
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 statement of additional information 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 therein or necessary to make the
statements therein not misleading in light of the circumstances in which they
were made; provided that this agreement to indemnify 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 in conformity with information
furnished to the Company by or on behalf of the Fund for use in the
registration statement, prospectus or statement of additional information for
the Contracts or in the Contracts or sales literature or other promotional
material for the Contracts (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Fund shares; or
(ii) 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, Fund prospectus,
Fund statement of additional information or
sales literature or other promotional
material of the Fund 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
shares; or
(iii)
arise out of any untrue statement or alleged untrue statement of a material
fact contained in the Fund registration statement, Fund prospectus, statement
of additional information or sales literature or other promotional material of
the Fund 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 statements therein 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
(iv) arise as a result of any failure by the
Company to provide the services and
furnish the materials or to make any
payments under the terms of this
Agreement; or
(v) 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 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b) No party shall be entitled to indemnification if such
loss, claim, damage, liability or litigation is due to the willful misfeasance,
bad faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Contracts or the operation
of the Fund.
8.2. Indemnification By the Underwriter
(a) The Underwriter, on its own behalf and on behalf of the
Fund, 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 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter) or litigation (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 actions in respect thereof) or settlements:
(i)
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 statement of additional information 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 therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made; provided that this
agreement to indemnify 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 in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Fund or in sales
literature or other promotional material of the Fund (or any amendment or
supplement thereto) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii)
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 statement, the Contract or Fund prospectus, statement of
additional information, or sales literature or other promotional material for
the Contracts or of the Fund not supplied by the Underwriter or the Fund or
persons under the control of the Underwriter or the Fund respectively) or
wrongful conduct of the Underwriter or the Fund or persons under the control
of the Underwriter or the Fund respectively, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact
contained in a registration statement,
prospectus, statement of additional
information or sales literature or other
promotional material 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 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 Underwriter
or the Fund or persons under the control of
the Underwriter or the Fund; or
(iv) arise as a result of any failure by the Fund
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 diversification requirements and
procedures related thereto specified in
Article VI of this Agreement except if such
failure is a result of the Company's failure
to comply with the notification procedures
specified in Article VI); or
(v) arise out of or result from any material
breach of any representation and/or warranty
made by the Underwriter or the Fund in this
Agreement or arise out of or result from any
other material breach of this Agreement by
the Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
(b) No party shall be entitled to indemnification if such
loss, claim, damage, liability or litigation is due to the willful misfeasance,
bad faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the
Underwriter of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Contracts or the operation of the
Account.
8.3. Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("indemnifying party" for the purpose of this Section 8.3) shall
not be liable under the indemnification provisions of this Article VIII with
respect to any claim made against a party entitled to indemnification under this
Article VIII ("indemnified party" for the purpose of this Section 8.3) unless
such indemnified party shall 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 shall have been served upon such
indemnified party (or after such party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provision of this Article VIII, 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 shall 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 shall 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 (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) 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 shall not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there be 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 shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
8.4. Contribution
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Article VIII is
due in accordance with its terms but for any reason is held to be unenforceable
with respect to a party entitled to indemnification ("indemnified party" for
purposes of this Section 8.4) pursuant to the terms of this Article VIII, then
each party obligated to indemnify pursuant to the terms of this Article VIII
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and litigations in such
proportion as is appropriate to reflect the relative benefits received by the
parties to this Agreement in connection with the offering of Fund shares to the
Account and the acquisition, holding or sale of Fund shares by the Account, or
if such allocation is not permitted by applicable law, in such proportions as is
appropriate to reflect the relative net benefits referred to above but also the
relative fault of the parties to this Agreement in connection with any actions
that lead to such losses, claims, damages, liabilities or litigations, as well
as any other relevant equitable considerations.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of New
York.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance written notice to the other
parties unless otherwise agreed in a separate written agreement among the
parties; or
(b) at the option of the Company if shares of the Portfolios delineated in
Schedule 2 are not reasonably available to meet the requirements
of the Contracts as determined by the Company; or (c)
at the option of the Fund upon institution of formal
proceedings against the
Company by the NASD, the SEC, 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 Account, or the purchase of the Fund shares, which would have a material
adverse effect on the Company's ability to perform its obligations under this
Agreement; or
(d) at the option of the Company upon institution of
formal proceedings against the
Fund or the Underwriter by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, which would have a material
adverse effect on the Fund's or the Underwriter's ability to perform its
obligations under this Agreement; or
(e) at the option of the Company or the Fund upon
receipt of any necessary regulatory
approvals and/or the vote of the contractowners having an interest in the
Account (or any subaccount) to substitute the shares of another investment
company for the corresponding Portfolio shares of the Fund in accordance with
the terms of the Contracts for which those Portfolio shares had been selected to
serve as the underlying investment media. The Company will give 30 days prior
written notice to the Fund of the date of any proposed vote or other action
taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a
determination by a majority of the
Fund Board, or a majority of the disinterested Fund Board members, that an
irreconcilable material conflict exists among the interests of (i) all
contractowners of variable insurance products of all separate accounts or (ii)
the interests of the Participating Insurance Companies investing in the Fund as
delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Fund ceases
to qualify as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, or under any
successor or similar provision, or if the Company reasonably believes that the
Fund may fail to so qualify; or
(h) at the option of the Company if the Fund fails
to meet the diversification
requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement,
upon another party's material
breach of any provision of this Agreement; or
(j) at the option of the Company, if the Company
determines in its sole judgment
exercised in good faith, that either the Fund or the Underwriter 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
(k) at the option of the Fund or Underwriter, if the
Fund or Underwriter respectively,
shall determine 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 or Underwriter; or
(l) 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 shall be
effective immediately upon such occurrence without notice.
10.2. Notice Requirement
(a) In the event that any termination of this
Agreement is based upon the provisions
of Article VII, such prior written notice shall be given in advance of the
effective date of termination as required by such provisions.
(b) In the event that any termination of this
Agreement is based upon the provisions
of Sections 10.1(b) - (d) or 10.1(g) - (i), 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 parties, with said termination
to be effective upon receipt of such notice by the non-terminating parties.
(c) In the event that any termination of this
Agreement is based upon the provisions
of Sections 10.1(j) or 10.1(k), prior written notice of the election to
terminate this Agreement for cause shall be furnished by the party terminating
this Agreement to the non-terminating parties. Such prior written notice shall
be given by the party terminating this Agreement to the non-terminating parties
at least 30 days before the effective date of termination.
10.3. It is understood and agreed that the right to terminate
this Agreement pursuant to Section 10.1(a) may be exercised for any reason or
for no reason.
10.4. Effect of Termination
(a) Notwithstanding any termination of this
Agreement pursuant to Section 10.1 of
this Agreement, and subject to Section 1.3 of this Agreement, the Company may
require the Fund and the Underwriter to, continue to make available additional
shares of the Fund for so long after the termination of this Agreement as the
Company desires pursuant to the terms and conditions of this Agreement as
provided in paragraph (b) below, 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 shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
(b) If shares of the Fund continue to be made
available after termination of this
Agreement pursuant to this Section 10.4, the provisions of this Agreement shall
remain in effect except for Section 10.1(a) and thereafter the Fund, the
Underwriter, or the Company may terminate the Agreement, as so continued
pursuant to this Section 10.4, upon written notice to the other party, such
notice to be for a period that is reasonable under the circumstances but, if
given by the Fund or Underwriter, need not be for more than 90 days.
10.5. Except as necessary to implement contractowner initiated
or approved transactions, or as required by state insurance laws or regulations,
the Company shall not redeem Fund shares attributable to the Contracts (as
opposed to Fund shares attributable to the Company's assets held in the
Account), and the Company shall not prevent contractowners from allocating
payments to a Portfolio that was otherwise available under the Contracts, until
90 days after the Company shall have notified the Fund or Underwriter of its
intention to do so.
ARTICLE XI. Notices
Any notice shall be deemed duly given only if sent by hand, evidenced
by written receipt or 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 party. All
notices shall be deemed given three business days after the date received or
rejected by the addressee.
If to the Fund:
Mr. Bernard H. Garil
President
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
[Name]
[Title]
[Co. Name]
[Address]
If to the Underwriter:
Mr. Thomas E. Duggan
Secretary
OCC Distributors
200 Liberty Street
New York, NY 10281
ARTICLE XII. Miscellaneous
12.1. 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 Directors, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party
hereto shall treat as confidential all information reasonably identified as such
in writing by any other party hereto (including without limitation the names and
addresses of the owners of the Contracts) and, except as contemplated by this
Agreement, shall not disclose, disseminate or utilize such confidential
information until such time as it may come into the public domain without the
express prior written consent of the affected party.
12.3. 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.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
12.5. 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.
12.6. This Agreement shall not be assigned by any party
hereto without the prior written
consent of all the parties.
12.7. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD and state insurance regulators) and shall 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.
12.8. 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 trust 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.
12.9. 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 Accounts or the Portfolios of the Fund.
<PAGE>
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 as of the date and year first written above.
Company:
TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY
SEAL By: ______________________________
Fund:
OCC ACCUMULATION TRUST
SEAL By: ______________________________
Underwriter:
OCC DISTRIBUTORS
By: ______________________________
<PAGE>
Schedule 1
Participation Agreement
Among
OCC Accumulation Trust, Transamerica Life Insurance and Annuity Company
and
OCC Distributors
The following separate accounts of Transamerica Life Insurance and
Annuity Company are permitted in accordance with the provisions of this
Agreement to invest in Portfolios of the Fund shown in Schedule 2:
Separate Account VA-6
[Date]
<PAGE>
Schedule 2
Participation Agreement
Among
OCC Accumulation Trust, Transamerica Life Insurance and Annuity Company
and
OCC Distributors
The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust:
[Date]
Oppenheimer Capital Managed
Oppenheimer Capital Value Equity
funds\asset\word\partagr2.cln
<PAGE>
PARTICIPATION AGREEMENT
Among
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
TRANSAMERICA SECURITIES SALES CORPORATION
and
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this ____ day of _________,
1996 by and among TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY (hereinafter
"Transamerica"), a California life insurance company, on its own behalf and on
behalf of its SEPARATE ACCOUNT C (the "Account"); TRANSAMERICA VARIABLE
INSURANCE FUND, INC., a corporation organized under the laws of Maryland
(hereinafter the "Fund"); and TRANSAMERICA SECURITIES SALES CORPORATION,
(hereinafter the "Underwriter"), a _________ corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and/or
variable annuity contracts (collectively, the "Variable Insurance Products") to
be offered by insurance companies which have entered into participation
agreements similar to this Agreement (hereinafter "Participating Insurance
Companies"), as well as qualified pension and retirement plans; and
<PAGE>
WHEREAS, the beneficial interests in the Fund are divided into several
series of shares, each designated a "Portfolio" and representing interests in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (hereinafter the "SEC"), dated __________ (File No.
812-_____), granting Participating Insurance Companies and variable annuity and
variable life insurance separate accounts exemptions from the provisions of
sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as
amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T) (b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
life insurance companies that may or may not be affiliated with one another
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Underwriter is duly registered as a broker-dealer under
the Securities Exchange Act of 1934, as amended (the "1934 Act") and is a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, Transamerica has registered certain variable annuity contracts
supported wholly or partially by the Account (the "Contracts") under the 1933
Act and said Contracts are listed in Schedule A hereto, as it may be amended
from time to time by mutual written agreement; and
- 2 -
<PAGE>
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of
Transamerica on ________________, to set aside and invest assets attributable to
the Contracts; and
WHEREAS, Transamerica has registered the Account as a unit investment
trust under
the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Transamerica intends to purchase shares in the Portfolios listed in
Schedule B hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios"), on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises,
Transamerica, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to Transamerica those shares of the
Designated Portfolios which Transamerica orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Fund or
its designee of the order for the shares of the Portfolios. For purposes of this
Section 1.1, Transamerica shall be the designee of the Fund for receipt of such
orders and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by ____ a.m. _________ time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund calculates
its net asset value.
- 3 -
<PAGE>
1.2. The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per share by
Transamerica on those days on which the Fund calculates its net asset values,
and the Fund shall calculate such net asset value on each day which the New York
Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of
Directors of the Fund (hereinafter the "Board") may refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering of shares of any
Portfolio if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith and
in light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Designated
Portfolios will be sold only to Participating Insurance Companies and their
separate accounts and qualified pension and retirement plans. No shares of any
Designated Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell shares of the
Designated Portfolios to any other insurance company, separate account or
qualified pension and retirement plan unless an agreement containing provisions
substantially the same as Sections 2.1, 3.6, 3.7, 3.8, and Article VII of this
Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on Transamerica's request, any
full or fractional shares of the Fund held by Transamerica, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption or
- 4 -
<PAGE>
postpone the date of payment or satisfaction upon redemption consistent with
Section 22(e) of the 1940 Act. For purposes of this Section 1.5, Transamerica
shall be the designee of the Fund for receipt of requests for redemption and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such request for redemption by _________ a.m.
___________ time on the next following Business Day.
1.6. The Parties hereto acknowledge that the arrangement contemplated
by this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies and qualified pension and retirement plans (subject to
Section 1.4 and Article VI hereof) and the cash value of the Contracts may be
invested in other investment companies.
1.7. Transamerica shall pay for Fund shares by _______ a.m.
______________ time on the next Business Day after an order to purchase Fund
shares is made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire and/or by a credit for any shares
redeemed the same day as the purchase. Upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of Transamerica
and shall become the responsibility of the Fund.
1.8. The Fund shall pay and transmit the proceeds of redemptions of
Fund shares by _____ a.m. ____________ time on the next Business Day after a
redemption order is received, subject to Section 1.5 hereof. Payment shall be in
federal funds transmitted by wire and/or a credit for any shares purchased the
same day as the redemption.
1.9. Issuance and transfer of the Fund's shares will be by book
entry only. Stock
certificates will not be issued to Transamerica or the Account. Shares ordered
from the Fund
- 5 -
<PAGE>
will be recorded in an appropriate title for the Account or the appropriate
subaccount of the
Account.
1.10. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to Transamerica of any income, dividends or
capital gain distributions payable on the Designated Portfolios' shares.
Transamerica hereby elects to receive all such income dividends and capital gain
distributions in additional shares of that Portfolio. Transamerica reserves the
right to revoke this election and to receive all such income dividends and
capital gain distributions in cash. The Fund shall notify Transamerica by the
end of the next following Business Day of the number of shares so issued as
payment of such dividends and distributions.
1.11. The Fund shall make the net asset value per share for each
Designated Portfolio available to Transamerica on a daily basis as soon as
reasonably practical after the net asset value per share is calculated and shall
use its best efforts to make such net asset value per share available by _____
p.m. ________ time. If the Fund provides incorrect per share net asset value
information, Transamerica shall be entitled to an adjustment to the number of
shares 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 gains information shall be reported immediately upon
discovery to Transamerica. Any error of a lesser amount shall be corrected in
the next Business Day's net asset value per share.
In the event adjustments are required to correct any error in the
computation of a Designated Portfolio's net asset value per share, or dividend
or capital gain distribution, the Underwriter (or the Underwriter or the Fund)
shall notify Transamerica as soon as possible
- 6 -
<PAGE>
after discovering the need for such adjustments. Notification can be made
orally, but must be confirmed in writing. If an adjustment is necessary to
correct an error which caused Contract owners to receive less than the amount to
which they are entitled, the Fund shall make all necessary adjustments to the
number of shares owned by the Account and distribute to the Account the amount
of the underpayment. In no event shall Transamerica be liable to the Fund or the
Underwriter for any such adjustments or overpayment amounts.
ARTICLE II. Representations and Warranties
2.1. Transamerica represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. Transamerica further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established the Account as a segregated asset account under Section 10506 of the
California Insurance Law and has registered the Account as a unit investment
trust in accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2. The Fund represents and warrants that Designated Portfolio shares
sold pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
California and all applicable federal and state securities laws including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act and that the
Fund is and shall remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act
- 7 -
<PAGE>
from time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states if and to the extent required by applicable
law.
2.3. The Fund reserves the right to adopt a plan pursuant to Rule 12b-1
under the 1940 Act or impose an asset-based or other charge to finance
distribution expenses as permitted by applicable law and regulation. In any
event, the Fund represents and warrant that the investment advisory or
management fees paid to the adviser by the Fund are legitimate and not
excessive. To the extent that the Fund decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have a Board, a majority of whom
are not interested persons of the Fund, formulate and approve any plan pursuant
to Rule 12b- 1 under the 1940 Act to finance distribution expenses.
2.4. The Fund represents and warrants that the investment policies and
fees and expenses of the Designated Portfolios are and shall at all times remain
in compliance with the insurance and other applicable laws of the State of
California and any other applicable state to the extent required to perform this
Agreement. The Fund further represents and warrants that Designated Portfolio
shares will be sold in compliance with the insurance laws of the State of
California and all applicable state securities laws or exemptions therefrom.
Without limiting the generality of the foregoing, the Fund represents and
warrants that it is and shall at all times remain in compliance with the
policies and restrictions enumerated in Schedule C hereto, as amended by
Transamerica from time to time, provided that such amendments shall either be
(a) agreed to by the Fund and Transamerica, or (b) necessary to comply with
applicable laws of the State of California.
- 8 -
<PAGE>
2.5. The Fund represents and warrants that it is lawfully organized and
validly existing under the laws of the State of Maryland and that it does and
will comply in all material respects with the 1940 Act.
2.6. The Fund represents and warrant that all of their directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Fund are, and shall continue 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 required by
Section 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.7. The Fund will provide Transamerica with as much advance notice as
is reasonably practicable of any material change affecting the Designated
Portfolios (including, but not limited to, any material change in its
registration statement or prospectus affecting the Designated Portfolios and any
proxy solicitation affecting the Designated Portfolios) and consult with
Transamerica in order to implement any such change in an orderly manner,
recognizing the expenses of changes and attempting to minimize such expenses by
implementing them in conjunction with regular annual updates of the prospectuses
for the Contracts. The Fund agrees to share equitably in expenses incurred by
Transamerica as a result of actions taken by the Fund, as set forth in the
allocation of expenses contained in Schedule D.
- 9 -
<PAGE>
2.8. Transamerica represents, assuming that the Fund complies with
Article VI of this Agreement, that the Contracts are currently treated as
annuity contracts under applicable provisions of the Internal Revenue Code of
1986, as amended, and that it will make every effort to maintain such treatment
and that it will notify the Underwriter 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.
2.9. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify Transamerica 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.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1(a). At least annually, the Fund, at its expense, shall provide
Transamerica or its designee with as many copies of the Fund's current
prospectuses for the Designated Portfolios as Transamerica may reasonably
request for marketing purposes (including distribution to Contract owners with
respect to new sales of a Contract). If requested by Transamerica in lieu
thereof, the Fund shall provide such documentation (including a final "camera
ready" copy of the new prospectuses for the Designated Portfolios as set in type
at the Fund's expense or, at the request of Transamerica, as a diskette or such
other form as is required by the financial printer) and other assistance as is
reasonably necessary in order for Transamerica once each year (or more
frequently if the prospectus for the Designated Portfolio is amended)
- 10 -
<PAGE>
to have the prospectus for the Contract and the Fund's prospectus for the
Designated Portfolios printed together in one document (the cost of such
printing to be born by the Fund and Transamerica in proportion to the size of
the prospectuses for the Fund and the Contracts).
3.1(b). The Fund agrees that the prospectuses for the Designated
Portfolios will describe only the Designated Portfolios and will not name or
describe any other portfolios or series that may be in the Fund, and that the
Fund will bear the cost of preparing and producing the prospectuses for the
Designated Portfolios that are so custom tailored for use in connection with the
Contracts.
3.2. If applicable state or Federal laws or regulations require that
the Statement of Additional Information ("SAI") for the Fund be distributed to
all purchasers of the Contract, then the Fund shall provide Transamerica with
the Fund's SAI or documentation thereof for the Designated Portfolios in such
quantities and/or with expenses to be borne in accordance with paragraph 3.1(a)
hereof.
3.3. The Fund, at its expense, shall provide Transamerica with as many
copies of the SAI for the Designated Portfolios as may reasonably be requested.
The Fund, at its expense, shall also provide such SAI free of charge to any
owner of a Contract or prospective owner who requests such SAI.
3.4. The Fund, at its expense, shall provide Transamerica with copies
of its prospectus, SAI, proxy material, reports to shareholders and other
communications to shareholders for the Designated Portfolios in such quantity as
Transamerica shall reasonably require for distributing to Contract owners. If
the Contract and Fund prospectuses are printed
- 11 -
<PAGE>
together in one document, the Fund shall bear the portion of such printing
expense as is attributable to the Fund's prospectus. If applicable SEC rules
require that any of the foregoing Fund prospectuses, Fund SAIs, proxy materials,
Fund reports to shareholders or other communications to shareholders be filed
with the SEC, then the Fund or its designee shall prepare and file with the SEC
such prospectus, SAI, proxy materials, reports to shareholders, or other
communications to shareholders in such format as required by such applicable
rules and shall notify Transamerica of such filing.
3.5. It is understood and agreed that, except with respect to
information regarding Transamerica provided in writing by Transamerica,
Transamerica shall not be responsible for the content of the prospectus or SAI
for the Designated Portfolios. It is also understood and agreed that, except
with respect to information regarding the Fund and provided in writing by the
Fund, the Fund shall not be responsible for the content of the prospectus or SAI
for the Contracts.
3.6. If and to the extent required by law Transamerica shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Designated Portfolio shares in accordance
with instructions
received from Contract owners: and
(iii) vote Designated Portfolio shares for which no
instruction have been received in the same proportion
as Designated Portfolio shares for which instructions
have been received from Contract owners, so long as
and to the extent that the SEC continues to interpret
the 1940 Act to require pass-through voting
privileges for variable contract owners. Transamerica
reserves the right to vote Fund shares held in any
segregated asset account in its own right, to the
extent permitted by law.
- 12 -
<PAGE>
3.7. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts holding shares of a Designated
Portfolio calculates voting privileges in the manner required by the Shared
Funding Exemptive Order. The Fund agrees to promptly notify Transamerica of any
amendments or changes of interpretations of the Shared Funding Exemptive Order.
3.8. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Fund currently intends, comply with
Section 16(c) of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in accordance with the
SEC'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 IV. Sales Material and Information
4.1. Transamerica shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature and other promotional
material that Transamerica develops or uses and in which the Fund (or a
Portfolio thereof), its investment adviser or one of its sub-advisers or the
Underwriter for the Fund shares is named in connection with the Contracts, at
least 10 (ten) Business Days prior to its use. No such material shall be used if
the Fund or its designee objects to such use within 10 (ten) Business Days after
receipt of such material.
- 13 -
<PAGE>
4.2. Transamerica shall 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 inconsistent with the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
4.3. The Fund shall furnish, or shall cause to be furnished, to
Transamerica, each piece of sales literature and other promotional material in
which Transamerica and/or the Account is named at least 10 (ten) Business Days
prior to its use. No such material shall be used if Transamerica objects to such
use within 10 (ten) Business Days after receipt of such material.
Notwithstanding the fact that Transamerica or its designee may not initially
object to a piece of sales literature or other promotional material,
Transamerica reserves the right to object at a later date to the continued use
of any such sales literature or promotional material in which Transamerica is
named, and no such material shall be used thereafter if Transamerica or its
designee so objects.
4.4. The Fund shall not give any information or make any
representations on behalf of Transamerica or concerning Transamerica, the
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports for the Account, or in sales literature or other
promotional
- 14 -
<PAGE>
material approved by Transamerica or its designee, except with the permission of
Transamerica.
4.5. The Fund will provide to Transamerica at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, all supplements thereto, 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 Designated Portfolios, contemporaneously with the filing of such
document(s) with the SEC, NASD or other regulatory authorities.
4.6. Transamerica will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, all supplements thereto, 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 the Account, contemporaneously with the
filing of such document(s) with the SEC, NASD, or other regulatory authority.
4.7. For purposes of this Article IV, the phrase "sales literature and
other promotional material" includes, but is not limited to, advertisements
(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, telephone directories (other than routine
listings), electronic or other public media), sales literature (i.e., any
written or electronic communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, performance reports or summaries, form letters, telemarketing
scripts, seminar texts, reprints or excerpts of any other
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<PAGE>
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, and registration statements, prospectuses,
Statements of Additional Information, supplements thereto, shareholder reports,
and proxy materials.
4.8. At the request of any party to this Agreement, each other party
will make available to the other party's independent auditors and/or
representative of the appropriate regulatory agencies, all records, data and
access to operating procedures that may be reasonably requested in connection
with compliance and regulatory requirements related to this Agreement or any
party's obligations under this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to Transamerica
under this Agreement, except that if the Fund or any Designated Portfolio adopts
and implements a plan pursuant to Rule 12b-1 of the 1940 Act to finance
distribution and shareholder servicing expenses, then the Underwriter may make
payments to Transamerica or to the distributor for the Contracts if and in
amounts agreed to by the Underwriter in writing and such payments will be made
out of existing fees otherwise payable to the Underwriter, past profits of the
Underwriter or other resources available to the Underwriter. No such payments
shall be made directly by the Fund. Nothing herein shall prevent the parties
hereto from otherwise agreeing to perform, and arrange for appropriate
compensation for, other services relating to the Fund and/or the Account.
Transamerica shall pay no fee or other compensation to the Fund under this
Agreement, although the parties hereto will bear certain expenses in accordance
with Schedule D, Articles III, V, and other provisions of this Agreement.
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<PAGE>
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, as further provided in Schedule E. The Fund
shall see to it that all shares of the Designated Portfolios are registered and
authorized for issuance in accordance with applicable federal law and, if and to
the extent required, in accordance with applicable state laws prior to their
sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, supplements thereto, proxy materials and
reports, setting the prospectus in type, printing prospectuses for distribution
to Contract owners, setting in type, printing and filing the proxy materials and
reports to shareholders (including the costs of printing a 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 shares, and the costs of distributing the Fund's prospectuses and
proxy materials to such Contract owners and 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.
5.3. Transamerica shall bear the expenses of routine annual
distribution of the Fund's prospectus to owners of Contracts issued by
Transamerica and of distributing the Fund's proxy materials and reports to such
Contract owners; this shall not include distribution of the Fund's prospectus
with respect to new sales of a Contract. Transamerica 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 Contract prospectus and SAI; and the
cost of preparing, printing and
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<PAGE>
distributing annual individual account statement to Contract owners as required
by state insurance laws.
5.4. The Fund acknowledges that a principal feature of the Contracts is
the Contract owner's ability to choose from a number of unaffiliated mutual
funds (and portfolios or series thereof), including the Designated Portfolios
("Unaffiliated Funds"), and to transfer the Con- tract's cash value between
funds and portfolios. The Fund and Underwriter agree to cooperate with
Transamerica in facilitating the operation of the Account and the Contracts as
intended, including but not limited to cooperation in facilitating transfers
between Unaffiliated Funds.
ARTICLE VI. Diversification and Qualification
6.1. The Fund and Underwriter represent and warrant that the Fund will
at all times sell its shares and invest its assets in such a manner as to ensure
that the Contracts will be treated as annuity contracts under the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Fund and
Underwriter represent and warrant that the Fund and each Designated Portfolio
thereof will at all times comply with Section 817(h) of the Code and Treasury
Regulation ss. 1.817-5, as amended from time to time, and any Treasury
interpretations thereof, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts and any amendments or
other modifications or successor provisions to such Section or Regulations. The
Fund and the Underwriter agree that shares of the Designated Portfolios will be
sold only to Participating Insurance Companies and their separate accounts and
qualified pension and retirement plans.
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<PAGE>
6.2. No shares of any series or portfolio of the Fund will be sold
to the general
public.
6.3. The Fund and Underwriter represent and warrant that the Fund and
each Designated Portfolio is currently qualified as a Regulated Investment
Company under Subchapter M of the Code, and that it will maintain such
qualification (under Subchapter M or any successor or similar provisions) as
long as this Agreement is in effect.
6.4. The Fund or Underwriter will notify Transamerica immediately upon
having a reasonable basis for believing that the Fund or any Portfolio has
ceased to comply with the aforesaid Section 817(h) diversification or Subchapter
M qualification requirements or might not so comply in the future.
6.5. The Fund and Underwriter acknowledge that full compliance with the
requirements referred to in Sections 6.1, 6.2, and 6.3 hereof is absolutely
essential because any failure to meet those requirements would result in the
Contracts not being treated as annuity contracts for federal income tax
purposes, which would have adverse tax consequences for Contract owners and
could also adversely affect Transamerica's corporate tax liability. The Fund and
Underwriter also acknowledge that it is solely within their power and control to
meet those requirements. Accordingly, without in any way limiting the effect of
Section 8.3 hereof and without in any way limiting or restricting any other
remedies available to Transamerica, the Underwriter will pay all costs
associated with or arising out of any failure, or any anticipated or reasonably
foreseeable failure, of the Fund or any Designated Portfolio to comply with
Sections 6.1, 6.2, or 6.3 hereof, including all costs associated with correcting
or responding to any such failure; such costs may include, but are not limited
to,
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<PAGE>
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 shares of another
investment company for those of the failed Portfolio (including but not limited
to an order pursuant to Section 26(b) of the 1940 Act); such costs are to
include, but are not limited to, fees and expenses of legal counsel and other
advisors to Transamerica and any federal income taxes or tax penalties (or "toll
charges" or exactments or amounts paid in settlement) incurred by Transamerica
in connection with any such failure or anticipated or reasonably foreseeable
failure.
6.6. The Fund shall provide Transamerica or its designee with reports
certifying compliance with the aforesaid Section 817(h) diversification and
Subchapter M qualification requirements, at times provided for and substantially
in the form attached hereto as Schedule E; provided, however, that providing
such reports does not relieve the Fund or Underwriter of their responsibility
for such compliance or of their liability for any non-compliance.
6.7. The Fund and the Underwriter represent and warrant that the Fund
will comply with the investment limitations under applicable state law for
investment companies funding separate accounts.
ARTICLE VII. Potential Conflicts and Compliance With
Shared Funding Exemptive Order
7.1. The Board will monitor the Fund for the existence of any
material
irreconcilable conflict between the interests of the contract owners of all
separate accounts
investing in the Fund. An irreconcilable material conflict may arise for a
variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in
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<PAGE>
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or interpretative 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 any Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Board shall promptly inform Transamerica if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. Transamerica will report any potential or existing conflicts of
which it is aware to the Board. Transamerica will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by
Transamerica to inform the Board whenever contract owner voting instructions are
disregarded. Such responsibilities shall be carried out by Transamerica with a
view only to the interests of its Contract Owners.
7.3. If it is determined by a majority of the Board, or a majority of
its directors who are not interested persons of the Fund, its adviser or any
sub-adviser to any of the Portfolios (the "Independent Directors"), that a
material irreconcilable conflict exists, Transamerica and other Participating
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to
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<PAGE>
and including: (1) withdrawing the assets allocable to some or all of the
separate accounts from the Fund or any Portfolio and reinvesting such assets in
a different investment medium, including (but not limited to) another Portfolio
of the Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
life insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected contract owners the option of making such a change; and
(2) establishing a new registered management investment company or managed
separate account. Transamerica shall not be required by this Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict.
7.4. If a material irreconcilable conflict arises because of a decision
by Transamerica to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote,
Transamerica may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement; provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
Independent Directors. Any such withdrawal and termination must take place
within six (6) months after the Fund gives written notice that this provision is
being implemented, and until the end of that six month period the Underwriter
and the Fund shall continue to
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<PAGE>
accept and implement orders by Transamerica for the purchase (and redemption
of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Transamerica conflicts with
the majority of other state regulators, then Transamerica will withdraw the
Account's investment in the Fund and terminate this Agreement within six months
after the Board informs Transamerica in writing that it has determined that such
decision has created an irreconcilable material conflict; provided, however,
that such withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a majority of
the disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and the Fund shall continue to accept and implement
orders by Transamerica for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules
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<PAGE>
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable: and (b) Sections 3.6, 3.7, 3.8, 7.1, 7.2, 7.3, 7.4, and
7.5 of this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By Transamerica
8.1(a). Transamerica agrees to indemnify and hold harmless the
Fund and its officers and each member of its Board (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of Transamerica) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any statute
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement or
prospectus or SAI for the Contracts or contained in 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 therein or necessary to make the
statements therein not misleading, provided that this Agreement to in-
--------
demnify 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 in conformity with information furnished in writing to
Transamerica by or on behalf of the Underwriter or Fund for use in the
registration statement or prospectus 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 shares; or
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<PAGE>
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of the Fund not supplied by Transamerica
or persons under its control) or wrongful conduct of
Transamerica or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares;
or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund 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 statements therein not misleading if such a statement
or omission was made in reliance upon information
furnished in writing to the Fund by or on behalf of
Transamerica; or
(iv) arise as a result of any failure by Transamerica to
provide the services
and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by Transamerica in
this Agreement or arise out of or result from any other
material breach of this Agreement by Transamerica,
as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1
(c) hereof.
8.1(b). Transamerica shall not be liable under this
indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject if caused by such Indemnified
Party's willful misfeasance, bad faith, or negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund,
whichever is applicable.
8.1(c). Transamerica 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 Transamerica 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
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<PAGE>
upon such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify
Transamerica of any such claim shall not relieve Transamerica 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, Transamerica shall be
entitled to participate, at its own expense, in the defense of such action.
Transamerica also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from Transamerica to
such party of Transamerica's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and Transamerica 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.
8.1(d). The Indemnified Parties will promptly notify
Transamerica of the commencement of any litigation or proceedings against them
in connection with the issuance or sale of the Fund Shares or the Contracts or
the operation of the Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harm-less
Transamerica and each of its directors and officers and each person, if any, who
controls Transamerica within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
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<PAGE>
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or SAI or sales literature 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 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 or such alleged statement or
omission was made in reliance upon and in conformity with information fur-
nished in writing to the Underwriter or Fund by or on behalf of
Transamerica for use in the Registration Statement or prospectus for the
Fund or in sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful
conduct of the Fund or Underwriter or persons under their
control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii)
arise out of any untrue statement or alleged untrue statement of a material
fact contained in a registration statement, prospectus or sales literature cov-
ering 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 in writing to Transamerica by or on behalf of the
Underwriter or Fund; or
(iv) arise as a result of any failure by the Fund or
Underwriter 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 diversification and other
qualification requirements specified in Article VI of this
Agreement); or
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<PAGE>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or
Underwriter in this Agreement or arise out of or result
from any other material breach of this Agreement by the
Fund or Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof. This indemnification is in addition to and apart from the
responsibilities and obligations of the Underwriter specified in Article VI
hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance or such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to Transamerica or the Account, whichever is applicable.
8.2(c). 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. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party
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<PAGE>
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 fees and 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.
8.2(d). Transamerica agrees promptly to notify the Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of California.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
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<PAGE>
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with
respect to some or all Portfolios, upon one (1) year advance
written notice delivered to the other parties; provided,
however, that such notice shall not be given earlier than one
year following the date of this Agreement; or (b) at the
option of Transamerica by written notice to the other parties
with respect to any Portfolio based upon Transamerica's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or (c) at
the option of Transamerica by written notice to the other
parties with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/ or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
Transamerica; or (d) at the option of the Fund in the event
that formal administrative proceedings are instituted against
Transamerica by the National Association of Securities
Dealers, Inc. ("NASD"), the Securities and Exchange
Commission, the Insurance Commissioner or like official of any
state or any other regulatory body regarding Transamerica's
duties under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the purchase of
the Fund shares, provided, however, that the Fund determines
in its sole judgment
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<PAGE>
exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the
ability of Transamerica to perform its obligations under this
Agreement; or (e) at the option of Transamerica in the event
that formal administrative proceedings are instituted against
the Fund or Underwriter by the NASD, the Securities and
Exchange Commission, or any state securities or insurance
department or any other regulatory body, provided, however,
that Transamerica determines in its sole judgment exercised in
good faith, that any such administrative proceedings will have
a material adverse effect upon the ability of the Fund or
Underwriter to perform its obligations under this Agreement;
or (f) at the option of Transamerica by written notice to the
Fund and the Underwriter with respect to any Portfolio if
Transamerica reasonably believes that the Portfolio may fail
to meet the Section 817(h) diversification requirements or
Subchapter M qualifications specified in Article VI hereof; or
(g) at the option of either the Fund or the Underwriter, if
(i) the Fund or Underwriter, respectively, shall determine, in
their sole judgement reasonably exercised in good faith, that
Transamerica has suffered a material adverse change in its
business or financial condition or is the subject of material
adverse publicity and that material adverse change or
publicity will have a material adverse impact on
Transamerica's ability to perform its obligations under this
Agreement, (ii) the Fund or Underwriter notifies Transamerica
of that determination and its intent to terminate this
Agreement, and (iii) after
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<PAGE>
considering the actions taken by Transamerica and any other
changes in circumstances since the giving of such a notice,
the determination of the Fund or Underwriter shall continue on
the sixtieth (60th) day following the giving of that notice,
which sixtieth day shall be the effective date of termination;
or (h) at the option of Transamerica, if (i) Transamerica
shall determine, in its sole judgement reasonably exercised in
good faith, that either the Fund or the Underwriter have
suffered a material adverse change in their business or
financial condition or is the subject of material adverse
publicity and that material adverse change or publicity will
have a material adverse impact on the Fund's or Underwriter's
ability to perform its obligations under this Agreement, (ii)
Transamerica notifies the Fund or Underwriter, as appropriate,
of that determination and its intent to terminate this
Agreement, and (iii) after considering the actions taken by
the Fund or Underwriter and any other changes in circumstances
since the giving of such a notice, the determination of
Transamerica shall continue on the sixtieth (60th) day
following the giving of that notice, which sixtieth day shall
be the effective date of termination; or (i) at the option of
any party to this Agreement, upon another party's material
breach of any provision of this Agreement; or (j) upon
assignment of this Agreement, unless made with the written
consent of the parties hereto; or (k) at the option of
Transamerica or the Fund by written notice to the other party
upon a determination by the Fund's Board that a material
irreconcilable
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<PAGE>
conflict exists among the interests of (i) all contract owners
of all separate accounts investing in the Fund or (ii) the
interests of the Participating Insurance Companies; or (l) at
the option of Transamerica by written notice to the Fund or
the Underwriter upon the sale, acquisition or change of
control of the Underwriter.
10.2. Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties of its intent to terminate, which notice
shall set forth the basis for the termination.
10.3. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of Transamerica,
continue to make available additional shares of the Fund for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts") pursuant to the terms and conditions of
this Agreement. Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.3 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.4. Surviving Provisions. Notwithstanding any termination of
this Agreement,
each party's obligations under Article VIII to indemnify other parties shall
survive and not be
affected by any termination of this Agreement. In addition, with respect to
Existing
- 33 -
<PAGE>
Contracts, all provisions of this Agreement shall also survive and not be
affected by any termination of this Agreement.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail or by overnight mail sent through a nationally-recognized
delivery service 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 party.
If to the Fund:
Transamerica Variable Insurance Fund, Inc.
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
Attention: General Counsel
If to Transamerica:
Transamerica Occidental Life Insurance Company
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
Attention: President, Living Benefits Division
If to the Underwriter:
Transamerica Securities Sales Corporation, Inc.
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
- 34 -
<PAGE>
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain. Without limiting the foregoing, no party hereto shall disclose
any information that another party reasonably considers to be proprietary.
12.2. 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.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. 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.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry
- 35 -
<PAGE>
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of Transamerica are being conducted in a manner consistent with the
California Variable Annuity Regulations and any other applicable law or
regulations.
12.6. 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 laws.
12.7. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.
12.8. The Schedules attached hereto, as modified from time to time, are
incorporated herein by reference and are part of this Agreement.
- 36 -
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE
COMPANY
By its authorized officer
SEAL By:
Title:
Date:
TRANSAMERICA VARIABLE INSURANCE FUND, INC.:
By its authorized officer,
SEAL By:
Title:
Date:
TRANSAMERICA SECURITIES SALES CORPORATION:
By its authorized officer,
SEAL By:
Title:
Date:
- 37 -
<PAGE>
SCHEDULE A
Contracts Form Numbers
<PAGE>
SCHEDULE B
Designated Portfolios
<PAGE>
SCHEDULE C
Certain Investment Policies and Restrictions
Imposed by the
California Department of Insurance
Pursuant to Section 2.4 hereof, the Fund represents and warrants that
it is and shall all times remain in compliance with the following investment
policies and restrictions. THESE ARE IN ADDITION TO other related obligations of
the Fund, including the general obligation to comply with all applicable laws
and regulation, including but not limited to California insurance laws and
regulations, the Investment Company Act of 1940, and other applicable insurance
and securities laws.
[Note: The following are derived from a questionnaire used by the California
Department of
Insurance as part of an insurance company's application for qualification to
transact a variable
annuity business. The parenthetical references below are to question numbers
in that
questionnaire.]
The Fund represents and warrants that:
1. All repurchase agreements will be transacted only with entities meeting
specific credit and solvency standards administered and verified by the
Underwriter (46(a)).
2. All repurchase transactions will be executed pursuant to a comprehensive
master repurchase agreement setting forth the terms and conditions of the
transaction, and having the incidents of a valid promissory note in favor of the
Fund (46(b)).
3. A valid, binding security interest in favor of the Fund or portfolio thereof
will be created and perfected in all collateral securing such repurchase
agreements (46(c)).
4. All such repurchase agreements will be secured at all times by collateral
consisting of liquid assets having a market value of not less than 102% of the
cash or assets transferred to the other party (46(d)).
5. All securities lending activities will be entered into only with entities
meeting specific credit and solvency standards administered and verified by the
Underwriter (47).
6. All investments in instruments or certificates of any sort issued by
the U.S. Office of a
bank or other savings institution domiciled in a foreign nation, or a foreign
branch of a U.S.
savings institution, will be instruments or certificates payable in the United
States and in U.S.
dollars (48).
<PAGE>
7. All investments of the Fund which possess a readily-available market value
will be valued either at their market value on the date of valuation, or at
amortized cost if it approximates market value within the limits and constraints
imposed by the U.S. Securities and Exchange Commission (49).
8. All investments of the Fund which lack a readily-available market will be
valued according to specific, objective methods or procedures set forth in
writing (50).
9. The investment manager of each portfolio or series of the Fund possesses
substantial expertise and experience as an investment manager or advisor of a
portfolio consisting of asset and investments of the same type as he or she will
manage in regard to the portfolio or series. (If experience is less than three
years, please provide resume of investment manager; note that in this case, the
Company must provide notarized certifications that it has fully investigated and
is satisfied with the qualifications, background, and expertise of the
investment manager.) (52).
10. At no time during the past ten years have the managers of any portfolio or
series resigned to avoid dismissal or been dismissed or requested to resign from
any position involving investment duties, on account of violation of any law,
rule or ethical standard relating to insurance, annuities, or securities (53).
11. The investment advisory agreements concerning the Fund's operations provide
in substance that notwithstanding any other provisions of the agreement, it is
understood and agreed that the Fund shall retain the ultimate responsibility for
and control of all investments made pursuant to the agreement, and reserve the
right to direct, approve or disapprove any action taken on its behalf by the
investment advisor (54).
12. Every custodian holding securities or other assets of the Fund is an
institution permitted to serve in such capacity by the Investment Company Act of
1940 and/or reviewed and approved for such purpose by the U.S. Securities and
Exchange Commission (55).
13. The Fund refuses to employ in any material connection with the handling
of assets of
the Fund, any person who:
(a) In the last 10 years has been convicted of any felony or misdemeanor arising
out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or involving violations of Title 18,
United States Code ss.ss.1341, 1342, or 1343 (58(a)).
(b) Within the last 10 years has been found by any-state regulatory authority to
have violated, or has acknowledged violation of, any provision of any state
insurance law involving fraud, deceit or knowing misrepresentation (59(b)).
(c) Within the last 10 years has been found by any federal or state regulatory
authorities to have violated, or have acknowledged violation of, any provisions
of federal or state securities laws involving fraud, deceit, or knowing
misrepresentation (58(c)).
<PAGE>
14. The Fund will make inquiries and attempt to determine that no persons,
firms, or employees of firms which supply consulting, investment,
administrative, custodial or other services affecting the administration of the
Company's variable annuity business (including such services for the Fund), have
been subject to the sanctions described in the preceding representation (59).
15. The Fund will seek to prevent its officers and Board members, and officers,
directors and portfolio managers of the investment advisor, from receiving,
directly or indirectly, any commission, or any other compensation with respect
to the purchase or sale of assets of the Fund (61).
16. No officer, director, trustee, or member of any governing board or body of
the Fund will receive directly or indirectly any commissions or any other
compensation contingent upon the writing, issuance, sale, procurement of
application for, or renewal, of any variable annuity contract (62).
17. All service agreements affecting the administration of the Fund allow the
Fund to terminate such contracts without payment of any penalty, forfeiture,
compulsory buyout amount, or performance of any other obligation which could
deter termination (65).
18. All service agreements affecting the administration of the Fund afford the
Fund a right to cancel the contract and discharge the servicing entity or person
in the event such entity or person fails to perform in a satisfactory manner
(66).
19. All service agreements affecting the administration of the Fund provide that
the Fund shall own and control all the pertinent records pertaining to its
operations (67).
20. All service agreements affecting the administration of the Fund provide that
the Fund shall have the right to inspect, audit and copy all records pertaining
to performance of services under the agreement (68).
<PAGE>
SCHEDULE D
Expenses
==============================================================
RESPONSIBLE
ITEM FUNCTION PARTY
- ----------------------------------------------------------------------------
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
- ---------------------------------------------------------------------------
MARKETING
1. Prospect Printing
us
Supply copies of prospectus described in Parts 3.1
and 3.3 in numbers equal to Transamerica's
reasonable request.
If requested by Transamerica in lieu thereof
such documentation and other assistance as
is reasonably necessary for Transamerica to
have the prospectus for the Contracts and
the prospectus for the Fund printed together
in one document.
2. Initial
Sales Distribution
Printing
Distribution
- --------------------------------------------------------------
EXISTING OWNERS
1. Annual Printing
Updates Distribution
Printing & Distribution
(a) If required by Fund or Adviser or Distributor
2. Interim (b) If required by Transamerica
Updates (c) If required by other participating insurance
company (PIC)
- -----------------------------------------------------------------------------
PROXY MATERIALS Printing and Distribution
OF THE FUND (a) If required by law
(b) If required by Transamerica
(c) If required by other participating insurance
company
(d) If required by Fund or Adviser or Distributor
<PAGE>
PrintingDER
Distribution
- ---------------------------------------------------------------------------
OTHER Printing & Distribution
COMMUNICATIONS (a) If required by law
WITH (b) If required by Transamerica
SHAREHOLDERS OF (c) If required by other participating insurance
THE FUND company
(d) If required by Fund or Adviser or Distributor
- ----------------------------------------------------------------------------
OPERATIONS OF All operations and related expenses, including the
FUND cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's
prospectus and registration statement, proxy
materials and reports, the preparation of
all statements and notices required by any
federal or state law and all taxes on the
issuance or transfer of the Fund's shares,
and all costs of management of the business
affairs of the Fund
<PAGE>
SCHEDULE E
Reports per Section 6.6
With regard to the reports relating to the quarterly testing
of compliance with the requirement of Section 817(h) and Subchapter M under the
Internal Revenue Code (the "Code") and the regulations thereunder, the Fund
shall provide within twenty (20) Business Days of the close of the calendar
quarter a report [in a form to be attached] regarding the status under such
sections of the Code of the Designated Portfolios, and if necessary,
identification of any remedial action to be taken to remedy non-compliance.
With regard to the reports relating to the year-end testing of
compliance with the requirements of Subchapter M of the Code, referred to
hereinafter as "RIC status," the Fund will provide the reports on the following
basis: (i) the last quarter's quarterly reports can be supplied within the
20-day period, and (ii) the year-end report [in a form to be attached] will be
provided 45 days after the end of the calendar year, but prior thereto, the Fund
will provide the additional interim and supplemental reports, described below.
The additional reports are as follows:
1. A report in the usual reporting format and content,
as of November 30, of each future fiscal year. The
report will be provided under cover of a letter from
the Underwriter stating that the Fund is in full
compliance with the requirements of Section 817(h)
and Subchapter M of the Code. Assuming such
satisfactory report, the Fund will not provide any
additional interim reports. The report will be
delivered by facsimile by the twentieth day of
December.
2.In the alternative, if a problem, as defined below, is identified in the
November report or its accompanying transmittal letter, additional interim
reports, on a weekly basis, starting on the 15th of December and through the
30th of December, also will be supplied ("additional interim reports"). The
additional interim reports will not follow the format of the regular reports,
but will specifically address the problem identified in the November 30 report.
If any interim report, thereafter, memorialize the cure of the problem,
subsequent additional reports will not be required.
With regard to delivery of the additional reports, they
will be transmitted by facsimile on the next Business Day,
subject to the following schedule of special dates: if the
15th of December is a Saturday, the required report date
will be accelerated to the 14th of December; if the 15th
of December is a Sunday, the report will be transmitted on
the 16th of December.
3. A problem with regard to RIC status is defined as any violation of the
following standards, as referenced to the applicable sections of the Code:
<PAGE>
(a) Less than ninety-five percent of gross income is derived from sources
of income specified in Section 851(b)(2);
(b) Twenty-five percent or greater gross income is derived from the sale
or disposition of assets specified in Section 851(b)(3);
(c) Fifty-five percent or less of the value of total assets consists of
assets specified in Section 851(b)(4)(A); and
(d) Twenty percent or more of the value of total
assets is invested in the securities of one
issuer, as that requirement is set forth in
Section 851(b)(4)(B).
<PAGE>
<PAGE>
Exhibit (9)
Opinion and Consent of Counsel
<PAGE>
August 19, 1997
Transamerica Life Insurance
and Annuity Company
1150 South Olive Street
Los Angeles, California 90015
Gentlemen:
With reference to the Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-4 filed by Transamerica Life Insurance and Annuity Company
and its Separate Account VA-6 with the Securities and Exchange Commission
covering certain variable annuity contracts, I have examined such documents and
such law as I considered necessary and appropriate, and on the basis of such
examinations, it is my opinion that:
1.) Transamerica Life Insurance and Annuity Company is duly organized and
validly existing under the laws of the State of North Carolina.
2.) The variable annuity contracts, when issued as contemplated by the
said Form N-4 Registration Statement, as amended, will constitute
legal, validly issued and binding obligations of Transamerica Life
Insurance and Annuity Company.
I hereby consent to the filing of this opinion as an exhibit to the said
Pre-Effective Amendment No. 1 to the Form N-4 Registration Statement and to the
reference to my name under the caption "Legal Matters" in the Prospectus
contained in the said Pre-Effective Amendment No. 1. In giving this consent, I
am not admitting that I am in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
Very truly yours,
James W. Dederer
Executive Vice President,
General Counsel and
Corporate Secretary
<PAGE>
Exhibit (10)(a)
Consent of Counsel
<PAGE>
Sutherland, Asbill & Brennan, L.L.P
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
202-383-0126
fax: 202-637-3593
August 20, 1997
Board of Directors
Transamerica Life Insurance and Annuity Company
1150 South Olive
Los Angeles, CA 90015-2211
Re: Separate Account VA-6, Form N-4 Registration Statement, File No.
333-9745
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus contained in Pre-Effective Amendment No. 1 to the
above-referenced registration statement. In giving this consent, we do not admit
that we are in the category of entities whose consent is required by Section 7
of the Securities Act of 1933.
Sutherland, Asbill & Brennan, L.L.P.
By /s/ Frederick R. Bellamy
<PAGE>
Exhibit 10(b)
Consent of Independent Auditors
<PAGE>
Exhibit 15
Power of Attorney
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Occidental Life Insurance Company,
a California corporation (the "Company"), hereby constitutes and appoints Aldo
Davanzo, James W. Dederer, Charles E. LeDoyen and David E. Gooding and each of
them (with full power to each of them to act alone), his true and lawful
attorney-in-fact and agent, with full power of substitution to each, for his and
on his behalf and in his name, place and stead, to execute and file any of the
documents referred to below relating to registrations under the Securities Act
of 1933 and under the Investment Company Act of 1940 with respect to any
variable life insurance or annuity policies: registration statements on any form
or forms under the Securities Act of 1933 and under the Investment Company Act
of 1940, and any and all amendments and supplements thereto, with all exhibits
and all instruments necessary or appropriate in connection therewith, each of
said attorneys-in-fact and agents and his or their substitutes being empowered
to act with or without the others or other, and to have full power and authority
to do or cause to be done in the name and on behalf of the undersigned each and
every act and thing requisite and necessary or appropriate with respect thereto
to be done in and about the premises in order to effectuate the same, as fully
to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand, this
24th day of March, 1997.
T. Desmond Sugrue
