As filed with the Securities and Exchange Commission on June 24, 1998
Registration Nos.
No.
----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No.
Post-Effective Amendment No.
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No.
SEPARATE ACCOUNT VA-7
(Exact Name of Registrant)
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
(Name of Depositor)
Transamerica Square, 401 North Tryon Street, Charlotte, North Carolina 28202
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (704) 330-5600
Name and Address of Agent for Service: Copy to:
JAMES W. DEDERER, Esq. FREDERICK R. BELLAMY, Esq.
General Counsel and Secretary Sutherland, Asbill & Brennan LLP
Transamerica Life Insurance 1275 Pennsylvania Avenue, N.W.
and Annuity Company Washington, D.C. 20004-2415
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:
Flexible premium deferred variable annuity contracts.
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
(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
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>
6
PROFILE
of the
TRANSAMERICA BOUNTYsm VARIABLE ANNUITY
Issued by
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
September 1, 1998
This Profile is a summary of some of the more important points that you
should know and consider before purchasing the contract. The contract
is more fully described in the full prospectus that accompanies this
Profile. Please read the prospectus carefully.
1. The Contract. The Transamerica Bountysm Variable Annuity is a contract
between you and Transamerica Life Insurance and Annuity Company that allows you
to invest your purchase payments in your choice of 17 mutual funds portfolios
("portfolios") in the Variable Account and the general account options. The
portfolios are professionally managed and you can gain or lose money invested in
a portfolio, but you could also earn more than investing in the general account
options. Transamerica guarantees the safety of money invested in the general
account options. Certain portfolios and general account options may not be
available in all states.
The contract is a deferred annuity and it has two phases: the accumulation
phase, and the annuitization phase. During the accumulation phase, you can make
additional payments on your contract, transfer money among the investment
options, and withdraw some or all of your investment. During this phase, your
earnings accumulate on a tax-deferred basis for individuals, but some or all of
any money you withdraw may be taxable. Tax deferral is not available for
non-qualified contracts owned by corporations and some trusts.
During the annuitization phase, Transamerica will make periodic
payments to you. The dollar amount of the payments may depend on the amount of
money invested and earned during the accumulation phase and on other factors,
such as the annuitants' age and sex.
2. Annuity Payments. You can generally decide when to end the accumulation phase
and begin receiving annuity payments from Transamerica. You may choose fixed
payments, where the dollar amount of each payment generally remains the same, or
variable payments, where the dollar amount of each payment may increase or
decreased based on the investment performance of the portfolios you select. You
can choose among payments for the lifetime of an individual, or payments for the
longer of one lifetime or a guaranteed period of 10, 15 or 20 years, or payments
for one lifetime and the lifetime of another individual.
3. Purchasing a Contract. Generally you must invest at least $25,000 to purchase
a contract. You can make additional payments of at least $1,000 each ($100 each
if made under an automatic payment plan deducted from your bank account). You
may cancel your contract during the free look period (see item 10 below).
The Transamerica Bounty Variable Annuity is designed for long-term
tax-deferred accumulation of assets, generally for retirement and other
long-term goals. Individuals in high tax brackets get the most benefit from the
tax deferral feature. You should not invest in the contract for short-term
purposes or if you cannot take the risk of losing some of your investment.
<PAGE>
4. Investment Options. VARIABLE ACCOUNT: You can invest in any of the
following 17 portfolios:
Alger American Income & Growth MFS VIT Research
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
Janus Aspen Balanced OCC Accumulation Trust Small Cap
Janus Aspen Worldwide Growth Transamerica VIF Growth Portfolio
MFS VIT Emerging Growth Transamerica VIF Money Market
MFS VIT Growth with Income
You can earn or lose money in any of these portfolios. These portfolios
are described in their own prospectuses. All portfolios may not be available in
all states.
GENERAL ACCOUNT: You can also allocate payments to the general account
options, where Transamerica guarantees the principal invested plus an
annual interest rate of at least 3%. The general account options include
multi-year guarantee periods. 5. Expenses. Transamerica makes certain
charges and deductions in order to provide the benefits and features
available under the contract:
If you withdraw your money within seven years of investing it, there may be
a withdrawal charge of up to 6%
of the amount invested.
Transamerica currently deducts an annual account fee of $30 (the fee
is waived for account values over $50,000).
Transamerica deducts insurance and administrative charges of 1.40% per
year from your average daily value in the variable account.
If you elect the Guaranteed Minimum Death Benefit Rider, Transamerica
will deduct a monthly fee equal to 1/12 of 0.20% of the account value.
If you elect the Guaranteed Minimum Income Benefit Rider with the
Guaranteed Minimum Death Benefit Rider, Transamerica will deduct a
monthly fee equal to 1/12 of 0.40% of the account value.
The first 18 transfers each year are free (then Transamerica will deduct a
$10 fee for each additional
transfer).
Advisory fees are also deducted by the portfolios' manager, and the
portfolios pay other expenses which, in total, range from 0.60% to
1.15% of the amounts in the portfolios.
There might be premium tax charges ranging from 0 to 5% of your
investment and/or amounts you use to purchase annuity benefits
(depending on your state's law).
The following chart shows these charges (not including fees for the
optional Riders any transfer fees or premium taxes). These examples assume an
average account value of over $50,000 and, therefore, no deduction has been made
to reflect the $30 account fee. The third column is the sum of the first two
columns. The examples in the last two columns show the total amounts you would
be charged if you invested $1,000, the investment grew 5% each year, and you
withdrew your entire investment after one year or 10 years.
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Total Total
Annual Annual Total Expenses Expenses
Insurance Portfolio Annual at End of at End of
Sub-Accounts Charges Charges Charges 1 Year 10 Years
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 1.40% 0.74% 2.14 $21.71 $247.24
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 1.40% 0.72% 2.12 $21.51 $245.18
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 1.40% 0.95% 2.35 $23.81 $268.61
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital Appreciation Growth 1.40% 0.80% 2.20 $22.31 $253.39
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 1.40% 0.78% 2.18 $22.11 $251.35
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 1.40% 0.83% 2.23 $22.61 $256.46
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 1.40% 0.74% 2.14 $21.71 $247.24
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth 1.40% 0.87% 2.27 $23.01 $260.53
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income 1.40% 1.00% 2.40 $24.31 $273.63
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
MFS Research 1.40% 0.88 % 2.28 $23.11 $261.54
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed Income 1.40% 0.70% 2.10 $21.30 $243.11
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High Yield 1.40% 0.80% 2.20 $22.31 $253.39
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF International Magnum 1.40% 1.15% 2.55 $25.81 $288.52
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed 1.40% 0.87% 2.27 $22.98 $256.84
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap 1.40% 0.97% 2.37 $23.99 $268.16
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 1.40% 0.85% 2.25 $22.81 $258.49
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market 1.40% 0.60% 2.00 $20.30 $232.72
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Annual Portfolio Charges above are for the year ended December 31,
1997 (except for Transamerica VIF Money Market Portfolio) and do not reflect
expense reimbursements or fee waivers. The figures for Transamerica VIF Money
Market Portfolio are estimates for the year 1998, its first year of operation.
Expenses may be higher or lower in the future. See the "Variable Account Fee
Table" in the Transamerica Bounty Variable Annuity prospectus for more detailed
information.
6. Federal Income Taxes. Individuals generally are not taxed on increases in the
contract value until a distribution occurs (e.g., a withdrawal or annuity
payment) or is deemed to occur (e.g., a pledge, loan, or assignment of the
contract). If you withdraw money, earnings come out first and are taxed.
Generally, some portion (sometimes all) of any distribution or deemed
distribution is taxable as ordinary income. In some cases, income taxes will be
withheld from distributions. If you are under age 59 1/2 when you withdraw
money, an additional 10% federal tax penalty may apply on the withdrawn
earnings. Certain owners of non-qualified contracts that are not individuals may
be currently taxed on increase in the contract value, whether distributed or
not. Qualified contracts are subject to special income tax rules depending on
the plan or arrangement.
7. Access to Your Money. You can generally take money out at any time during the
accumulation phase. Transamerica does not assess withdrawal charges. However, if
you withdraw money from a guarantee period prematurely, you may forfeit some of
the interest that you earned, but you will always receive the principal you
invested plus 3% annual interest. Withdrawals from qualified contracts may be
subject to severe restrictions and, in certain circumstances, prohibited.
You may have to pay income taxes on amounts you withdraw and there may
also be a 10% tax penalty if you make withdrawals before you are 59 1/2 years
old.
8. Past Investment Performance. The value of the money you allocated to the
portfolios will go up or down, depending on the investment performance of
the portfolios you select. The following chart shows the past investment
performance on a year-by-year basis for each sub-account. These figures
have already been reduced by the insurance charges, and the advisory fee
and all the expenses of the portfolios. These figures do not include the
$30 account fee, the fees for the optional Riders, any transfer fees or
premium taxes, which would reduce performance if applied. Past performance
is no guarantee of future performance or earnings.
<TABLE>
<CAPTION>
CALENDAR YEAR
------------------------------------------------------------------------
SUB-ACCOUNT 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alger American Income & Growth 36.19% 18.43% 35.21% -8.52% 9.46%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 26.87% 20.50% 35.34% -1.06% 10.27%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 33.47% 19.66% 43.44% -3.38% 11.19%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital Appreciation Growth 26.87% 22.79% 31.79% 1.55%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 17.24% 15.13% 29.09% 7.81% 67.27%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 21.24% 14.58% 22.96% -0.63% N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 21.66% 26.43% 25.31% -0.20% N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth 21.51% 15.52% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income 29.09% 21.71% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS Research 19.79% 20.53% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed Income 8.42% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High Yield 11.97% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF International Magnum 2.37% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed 21.22% 20.48% 43.43% 1.73% 9.32%
- ---------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap 21.53% 16.91% 15.11% -1.41% 18.23%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 50.35% 26.63% 53.02% 7.71% 21.73%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
SUB-ACCOUNT 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 7.14% 22.74% -1.36% 5.94% N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 6.44% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital Appreciation Growth N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 70.64% 156.17% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
MFS Research N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed Income N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High Yield N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF International Magnum N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed 17.41% 43.74% -5.84% 31.11% N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap 18.87% 46.65% -11.15% 16.39% N/A
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 13.58% 41.47% -12.58% 32.93% 29.26%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
9. Death Benefit. If you die during the accumulation phase, a death benefit
equal to the account value will be paid to your beneficiary.
If the Guaranteed Minimum Death Benefit Rider is elected the death
benefit will be as described below. If you die before the annuitization phase
and before you turn 85, the death benefit will be the greatest of threeamounts:
(1) the account value; (2) the sum of all purchase payments less the proportion
of withdrawals taken and applicable premium taxes; or (3) 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 the proportion of
withdrawals taken and premium tax charges since that contract anniversary. If
death occurs after your or your joint owner's 85th birthday, the death
benefitwill be the greater of two amounts: (1) the account value; or (2) 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 the
proportion of withdrawals taken and premium tax charges since that contract
anniversary.
10. Other Information. The Transamerica Bounty Variable Annuity offers other
features you might be interest in. Some of these features are as follows:
Free Look. After you get your contract, you have ten days to look it
over and decide if it is really right for you (this period may be longer in
certain states). If you decide not to keep the contract, you can cancel it
during this period by delivering a written notice of cancellation and returning
the contract to the Service Center at the address listed in item 11 below.
Unless otherwise required by law, Transamerica will refund the purchase payments
allocated to any general account option (less any withdrawals) plus the value in
the Variable Account as of the date the written notice and the contract are
received by the Service Center.
Telephone Transfers. You can generally arrange to transfer money
between the investments in your contract by telephone.
Dollar Cost Averaging. You can instruct Transamerica to automatically
transfer money from the money market sub-account to any of the other variable
sub-accounts each month.
Automatic Rebalancing Option. The performance of each sub-account may
cause the allocation of value among the sub-accounts to change. You may instruct
Transamerica to periodically automatically rebalance the amounts in the
sub-accounts by reallocating amounts among them.
Systematic Withdrawal Option. You can arrange to have Transamerica send
you money automatically each month out of your contract during the accumulation
phase. There are limits on the amounts, and the payments may be taxable, and,
prior to age 59 1/2, subject to the penalty tax.
Automatic Payout Option. For qualified contracts, certain pension and
retirement plans require that certain amounts be distributed from the plan at
certain ages. You can arrange to have such amounts distributed automatically
during the accumulation phase.
These features may not be available in all state and may not be
suitable for your particular situation.
11. Inquiries. If you need further information or have any questions about the
contract, please write or call:
Transamerica Annuity Service Center
401 North Tryon Street, Suite 700
Charlotte, North Carolina 28202
800-420-7749
<PAGE>
PROSPECTUS FOR
TRANSAMERICA SERIES sm
TRANSAMERICA BOUNTYsm
VARIABLE ANNUITY
A Variable Annuity Issued by
Transamerica Life Insurance
and Annuity Company
Including Prospectuses for:
<TABLE>
<CAPTION>
<S> <C> <C>
Income and Growth Portfolio of The Alger American Fund
Growth and Income Portfolio and
Premier Growth Portfolio of Alliance Variable Products Series
Fund, Inc.
Capital Appreciation Portfolio and
Small Cap Portfolio of Dreyfus Variable Investment Fund
Balanced Portfolio and
Worldwide Growth Portfolio of Janus Aspen Series
Emerging Growth Series
Growth with Income Series and
Research Series of MFS Variable Insurance Trust
Fixed Income Portfolio
High Yield Portfolio and
International Magnum Portfolio of Morgan Stanley Universal Funds, Inc.
Managed Portfolio and
Small Cap Portfolio of OCC Accumulation Trust
Growth Portfolio and
Money Market Portfolio of Transamerica Variable Insurance
Fund, Inc.
</TABLE>
September 1, 1998
<PAGE>
TRANSAMERICA SERIES sm
TRANSAMERICA BOUNTY sm
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 Transamerica Bountysm 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-7 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 17 variable
sub-accounts:
Alger American Income & Growth MFS VIT Research
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
Janus Aspen Balanced OCC Accumulation Trust Small Cap
Janus Aspen Worldwide Growth Transamerica VIF Growth
MFS VIT Emerging Growth Transamerica VIF Money Market
MFS VIT Growth with Income
You may also place your purchase payments or accumulated value in the
general account options. The general account options are multi-year guarantee
period options in which Transamerica guarantees the return of the amount
invested at a declared rate of interest for a specified guarantee period.
Currently, the multi-year 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. The minimum
annual rate of interest credited will be 3%.
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 September 1, 1998.
The SAI is available free by writing to Transamerica Life Insurance and Annuity
Company, Annuity Service Center, 401 North Tryon Street, Suite 700, Charlotte,
North Carolina, 28202 or by calling 800-420-7749. 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 September 1, 1998
<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. Transfers from
a multi-year 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 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, SALESPERSON, 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
<TABLE>
<CAPTION>
Page
<S> <C>
DEFINITIONS.......................................................................................................6
SUMMARY...........................................................................................................8
CONDENSED FINANCIAL INFORMATION..................................................................................17
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT.........................................17
Transamerica Life Insurance and Annuity Company.........................................................17
Published Ratings.......................................................................................17
The Variable Account....................................................................................17
THE PORTFOLIOS...................................................................................................18
THE CONTRACT.....................................................................................................22
Ownership...............................................................................................23
PURCHASE PAYMENTS................................................................................................23
Purchase Payments.......................................................................................23
Allocation of Purchase Payments.........................................................................24
Investment Option Limits................................................................................24
ACCOUNT VALUE....................................................................................................24
TRANSFERS........................................................................................................25
Before the Annuity Date.................................................................................25
Other Restrictions......................................................................................25
Telephone Transfers.....................................................................................26
Dollar Cost Averaging...................................................................................26
Automatic Asset Rebalancing.............................................................................27
After the Annuity Date..................................................................................27
CASH WITHDRAWALS.................................................................................................27
Systematic Withdrawal Option............................................................................28
Automatic Payment Option (APO)..........................................................................28
DEATH BENEFIT....................................................................................................29
Payment of Death Benefit................................................................................29
Designation of Beneficiaries............................................................................30
Death of Owner Before Annuity Date......................................................................30
If Annuitant Dies Before Annuity Date...................................................................31
Death After Annuity Date................................................................................31
Survival Provision......................................................................................31
CHARGES, FEES AND DEDUCTIONS.....................................................................................31
..........................................................................................................
Administrative Charges..................................................................................33
Mortality and Expense Risk Charge.......................................................................34
Guaranteed Minimum Death Benefit Rider....................................................................
Guaranteed Minimum Income Benefit Rider...................................................................
Living Benefits Rider Fee...............................................................................34
Premium Tax Charges.....................................................................................34
Transfer Fee............................................................................................34
Option and Service Fees.................................................................................35
Taxes...................................................................................................35
Portfolio Expenses......................................................................................35
Interest Adjustment.....................................................................................35
Sales in Special Situations...............................................................................
DISTRIBUTION OF THE CONTRACT.......................................................................................
SETTLEMENT OPTION PAYMENTS.......................................................................................35
Annuity Date............................................................................................35
Guaranteed Minimum Income Benefit Rider...................................................................
Settlement Option Payments..............................................................................35
Election of Settlement Option Forms and Payment Options.................................................36
Payment Options.........................................................................................36
Fixed Payment Option....................................................................................36
Variable Payment Option.................................................................................36
Settlement Option Forms.................................................................................37
FEDERAL TAX MATTERS..............................................................................................38
Introduction............................................................................................38
Purchase Payments.......................................................................................38
Taxation of Annuities...................................................................................38
Qualified Contracts.....................................................................................40
Taxation of Transamerica ...............................................................................42
Tax Status of Contract..................................................................................42
Possible Changes in Taxation............................................................................43
Other Tax Consequences..................................................................................43
PERFORMANCE DATA ................................................................................................43
PREPARING FOR YEAR 2000............................................................................................
LEGAL PROCEEDINGS................................................................................................45
LEGAL MATTERS....................................................................................................45
ACCOUNTANTS......................................................................................................45
VOTING RIGHTS....................................................................................................45
AVAILABLE INFORMATION............................................................................................46
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS..........................................................47
APPENDIX A - THE GENERAL ACCOUNT OPTIONS........................................................................A-1
Multi-Year Guarantee Period Account Options............................................................A-1
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
APPENDIX C
Disclosure Statement for Individual Retirement
Annuities ........................................................................................C-1
The contract is not available in all states.
</TABLE>
<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, 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.
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 multi-year guarantee period options offered by us
to which the owner may allocate
purchase payments and transfers.
Guarantee Period: The number of years that a guaranteed rate of interest will be
credited to a guarantee period.
Guarantee Period Options: An option which credits a guaranteed rate of interest
for a specified guarantee period. There may be several guarantee periods, each
with a different guaranteed rate of interest. Guaranteed Interest Rate: The
annual effective rate of interest after daily compounding credited to a
guarantee period. Guaranteed Minimum Death Benefit Rider: Also referred to as
GMDB Rider, it must be elected before the contract effective date and if
cancelled cannot be reinstated and provides for the benefits described on page
___ at the fee described on page ___.
Guaranteed Minimum Income Benefit Rider: Also referred to as GMIB Rider, it must
be elected before the contract effective date and only if the oldest owner is
not yet 80 years old and if cancelled cannot be reinstated, provides for
benefits described on page ____ at the fee described on page ___ and can only be
elected if GMBD Rider is also elected.
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 31848,
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 tax-favored 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-7, 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 Bounty sm 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),
408 or 408A of the Code, with various types of pension and profit sharing plans
qualified under Section 401 of the Code, or with non-qualified plans. Some
qualified contracts 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.
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(s) of the individual contract or the owner(s)
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
$25,000. Generally each additional purchase payment must be at least $1,000,
unless an automatic purchase payment plan is selected. See "Purchase Payments"
page 23.
The Variable Account
The variable account is a separate account (designated Separate Account
VA-7) that is subdivided into variable sub-accounts. See "The Variable Account"
page 17. Assets of each variable sub-account are invested in a specified mutual
fund portfolio ("portfolio"). The variable sub-accounts currently available for
investment are:
Alger American Income & Growth MFS VIT Research
Alliance VPF Growth & Income Morgan Stanley UF Fixed Income
Alliance VPF Premier Growth Morgan Stanley UF High Yield
Dreyfus VIF Capital Appreciation Morgan Stanley UF International Magnum
Dreyfus VIF Small Cap OCC Accumulation Trust Managed
Janus Aspen Balanced OCC Accumulation Trust Small Cap
Janus Aspen Worldwide Growth Transamerica VIF Growth Portfolio
MFS VIT Emerging Growth Transamerica VIF Money Market
MFS VIT Growth with Income
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, Fees and Deductions" page 31. For more
information about the portfolios, see "The Portfolios" page 18 and the
accompanying portfolios' prospectuses.
General Account Options
The multi-year guarantee periodoptions, provide specified rates of
interest for specified terms of, currently, three, five and seven years, subject
to interest adjustments on early withdrawals or transfers which, if applicable,
could reduce the interest credited to the 3% minimum rate. See "The General
Account Options" in Appendix A. The multi-year guarantee period options may not
be available in all states.
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 24 .
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 27.
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 "The General Account Options" in
Appendix A.
Transamerica currently imposes a transfer fee of $10 for each transfer
in excess of 18 made during the same contract year. See "Transfers" on page 25
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, 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 $50,000. Transamerica may delay payment of any
withdrawal from the general account options for up to six months. See "Cash
Withdrawals" page 27.
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 38.
Other Charges and Deductions
Transamerica deducts a mortality and expense risk charge of 1.25%
(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 34 and "Administrative
Charges" page 33.
An account fee of currently $30 is deducted at the end of each contract
year and upon surrender. This fee may change but it is guaranteed not to exceed
$60 per contract year. If the account value is more than $50,000 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. We reserve the right to waive the
account fee under certain programs we offer.
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 18 during a contract year, a transfer fee of $10
will be imposed. See "Transfer Fee" page 34.
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 34.
In addition, amounts withdrawn or transferred out of a multi-year
guarantee period option prior to the end of its term may be subject to an
interest adjustment. See "Guaranteed Period Account Options" in Appendix A.
If the owner elects the Guaranteed Minimum Death Benefit ("GMDB") Rider
or both the GMDB Rider and the Guaranteed Minimum Income Benefit ("GMIB") Rider,
the appropriate annual fee will be deducted at the end of each contract month at
the rate of 1/12 times the annual fee times the account value. The annual fee
for the GMDB is 0.20% of the account value; the annual fee for both the
GMDB/GMIB Rider is 0.40% of the account value. The GMIB Rider is only available
if the GMBD Rider is also elected. These Riders may only be elected before the
contract effective date, cannot be reinstated if cancelled and may not be
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, asset
allocation 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, Fees and Deductions" on page 31 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
Sales Load Imposed on Purchase Payments 0%
Maximum Contingent Deferred Sales Load 0%
Contract Expenses
Transfer Fee (first 18 per contract year)(1) 0
Fees For Other Services and Options(42 0
Account Fee(53 $30
Riders (if elected)(4)
GMDB 0.20%
GMDB & GMIB 0.40%
Variable Account Annual Expenses(5)
(as a percentage of the variable accumulated value)
Mortality and Expense Risk Charge 1.25%
Administrative Expense Charge(86 0.15%
Total Variable Account Annual Expenses 1.40%
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>
Alger American Income & Growth 0.625 0.115 0.74
Alliance VPF Growth & Income 0.63 0.09 0.72
Alliance VPF Premier Growth 0.85 0.10 0.95
Dreyfus VIF Capital Appreciation 0.75 0.05 0.80
Dreyfus VIF Small Cap 0.75 0.03 0.78
Janus Aspen Balanced 0.76 0.07 0.83
Janus Aspen Worldwide Growth 0.66 0.08 0.74
MFS VIT Emerging Growth 0.75 0.12 0.87
MFS VIT Growth with Income 0.75 0.25 1.00
MFS VIT Research 0.75 0.13 0.88
Morgan Stanley UF Fixed Income 0.00 0.70 0.70
Morgan Stanley UF High Yield 0.00 0.80 0.80
Morgan Stanley UF International Magnum 0.00 1.15 1.15
OCC Accumulation Trust Managed 0.80 0.07 0.87
OCC Accumulation Trust Small Cap 0.80 0.17 0.97
Transamerica VIF Growth 0.62 0.23 0.85
Transamerica VIF Money Market 0.35 0.25 0.60
</TABLE>
Expense information regarding the portfolios has been provided by the
portfolios. In preparing the tables above and below and the examples that
follow, Transamerica has relied on the figures provided by the portfolios.
Transamerica has no reason to doubt the accuracy of that information, but
Transamerica has not verified those figures. These figures are for the year
ended December 31, 1997, except for the Transamerica VIF Money Market Portfolio
which are estimates for the year 1998, its first year of operation. Actual
expenses in future years may be higher or lower than these figures.
Notes to Fee Table:
(1) A transfer fee of $10 will be imposed for each transfer in excess of 18 in a
contract year. See "Charges, Fees and Deductions" page 31.
(2) 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 payouts, asset allocation and asset
rebalancing.
(3) The current account fee is $30 per contract year. This fee will be waived
for account values over $50,000 or with certain programs. This limit may be
changed in the future. The fee may be changed, but it may not exceed $60. See
"Charges, Fees and Deductions" page 31.
(4) If the owner elects a rider, the rider fee will be deducted at the rate
of 1/12 of the annual fee at the end of each contract month based on
the account value at that time. See "Guaranteed Minimum Death Benefit
Rider" page ___ and "Guaranteed Minimum Income Benefit Rider" page .
Note the GMIB rider can only be elected concurrently with the GMDB.
(5) The variable account annual expenses do not apply to the general account
options.
(6) The current annual administrative expense charge of 0.15% may be increased
to 0.35%. See "Charges, Fees and Deductions" page 31.
(7) From time to time, the portfolios' investment advisers, each in its own
discretion, may voluntarily waive all or part of their fees and/or
voluntarily assume certain portfolio expenses. The expenses shown in
the Portfolio Expenses table are the expenses paid for 1997 (except for
the Transamerica VIF Money Market Portfolio, which are estimates for
1998). The expenses shown in that table reflect a portfolio's adviser's
waivers of fees or reimbursement of expenses, if applicable. It is
anticipated that such waivers or reimbursements will continue for
calendar year 1998, except for Alliance VPF Premier Growth for which
the management fee, other expenses and total portfolios annual expenses
for 1998 without waivers or reimbursements are estimated to be 1.00%,
0.08% and 1.08%, respectively. Without such waivers or reimbursements,
the annual expenses for 1997 for certain portfolios would have been, as
a percentage of assets, as follows:
<TABLE>
<CAPTION>
Total Portfolio
Annual Expenses
Management Other Expenses
Fee
<S> <C> <C> <C>
Alliance VPF Growth & Income 0.63 0.09 0.72
Alliance VPF Premier Growth 1.00 0.10 1.10
Janus Aspen Balanced 0.77 0.06 0.83
Janus Aspen Worldwide Growth 0.72 0.09 0.81
MFS VIT Growth with Income 0.75 0.35 1.10
Morgan Stanley UF Fixed Income 0.40 1.31 1.71
Morgan Stanley UF High Yield 0.80 0.88 1.68
Morgan Stanley UF International Magnum 0.80 1.98 2.78
Transamerica VIF Growth 0.75 0.23 0.98
</TABLE>
Without expense reimbursements, the management fee, other expenses and
total portfolios expenses for the first year of operation for the
Transamerica VIF Money Market Portfolio are expected to be 0.35%, 0.45%
and 0.80%, respectively. There were no fee waivers or expense
reimbursements during 1997 for the Alger American Income and Growth
Portfolio, Dreyfus VIF Capital Appreciation Portfolio, Dreyfus VIF
Small Cap Portfolio, MFS VIT Emerging Growth Portfolio, MFS VIT
Research Portfolio, OCC Accumulation Trust Managed Portfolio or OCC
Accumulation Trust Small Cap Portfolio.
EXAMPLES
The following tables show the total expenses an owner would incur in
various situations assuming a $1,000 investment and a 5% annual return on
assets.
These examples assume an average account value of over $50,000 and,
therefore, no deduction has been made to reflect the $30 account fee. These
examples also assume that all amounts were allocated to the variable sub-account
indicated. These examples also assume that 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 34.
Example 1 shows expenses for contracts without the optional Riders
based on fee waivers and reimbursements for the portfolios for 1997. There is no
guarantee that any fee waivers or expense reimbursements will continue in the
future. Since there is no sales load, the expenses are the same whether the
owner does or does not annuitize or surrender the contract at the end of the
applicable time period.
<TABLE>
<CAPTION>
Example 1:
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alger American Income & Growth 21.71 67.00 114.92 247.24
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 21.51 66.39 113.90 245.18
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 23.81 73.34 125.54 268.61
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital Appreciation Growth 22.31 68.82 117.96 253.39
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 22.11 68.21 116.95 251.35
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 22.61 69.72 119.48 256.46
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 21.71 67.00 114.92 247.24
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth 23.01 70.93 121.50 260.53
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
MFS Growth & Income 24.31 74.85 128.05 273.63
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
MFS Research 23.11 71.23 122.01 261.54
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed Income 21.30 65.78 112.88 243.11
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High Yield 22.31 68.82 117.96 253.39
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF International Magnum 25.81 79.35 135.54 288.52
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed 22.98 70.64 120.66 256.84
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap 23.99 73.75 125.98 268.16
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 22.81 70.33 120.49 258.49
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market 20.30 62.75 107.78 232.72
- ----------------------------------------------------------------------------------------------------------------------------
Example 2: Example 2 shows expenses for contracts with the optional Guaranteed
Minimum Death Benefit Rider based on fee waivers and reimbursements for the
portfolios for 1997. There is no guarantee that any fee waivers or expense
reimbursements will continue in the future. Since there is no sales load, the
expenses are the same whether the owner does or does not annuitize or surrender
the contract at the end of the applicable time period.
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 23.71 73.04 125.03 267.60
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 23.51 72.44 124.03 265.59
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 25.81 79.35 135.54 288.52
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital Appreciation Growth 24.31 74.85 128.05 273.63
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 24.11 74.25 127.04 271.63
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 24.61 75.75 129.55 276.63
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 23.71 73.04 125.03 267.60
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth 25.01 76.95 131.55 280.61
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
MFS Growth & Income 26.31 80.85 138.03 293.43
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
MFS Research 25.11 77.25 132.05 281.60
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed Income 23.31 71.84 123.02 263.57
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High Yield 24.31 74.85 128.05 273.63
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF International Magnum 27.81 85.32 145.45 308.01
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Managed 24.98 76.63 130.64 276.65
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust Small Cap 25.99 79.73 135.93 287.85
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 24.81 76.35 130.55 278.62
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market 22.31 68.82 117.96 253.39
- ----------------------------------------------------------------------------------------------------------------------------
Example 3: Example 3 shows expenses for contracts with the optional Guaranteed
Minimum Death Benefit Rider and Guaranteed Minimum Income Benefit Rider based on
fee waivers and reimbursements for the portfolios for 1997. There is no
guarantee that any fee waivers or expense reimbursements will continue in the
future. Since there is no sales load, the expenses are the same whether the
owner does or does not annuitize or surrender the contract at the end of the
applicable time period.
---------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------------------------
Alger American Income & Growth 25.71 79.05 135.04 287.54
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & Income 25.51 78.45 134.05 285.56
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth 27.81 85.32 145.45 308.01
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital Appreciation Growth 26.31 80.85 138.03 293.43
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 26.11 80.25 137.03 291.47
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 26.61 81.74 139.52 296.37
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth 25.71 79.05 135.04 287.54
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth 27.01 82.94 141.50 300.27
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
MFS Growth & Income 28.31 86.81 147.91 312.81
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
MFS Research 27.11 83.23 141.99 301.24
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed Income 25.31 77.85 133.05 283.59
- ----------------------------------------------------------------------------------------------------------------------------
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Morgan Stanley UF High Yield 26.31 80.85 138.03 293.43
- ----------------------------------------------------------------------------------------------------------------------------
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Morgan Stanley UF International Magnum 29.80 91.25 155.25 327.07
- ----------------------------------------------------------------------------------------------------------------------------
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OCC Accumulation Trust Managed 26.97 82.59 140.51 296.03
- ----------------------------------------------------------------------------------------------------------------------------
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OCC Accumulation Trust Small Cap 27.98 85.68 145.78 307.12
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 26.81 82.34 140.51 298.32
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money Market 24.31 74.85 128.05 273.63
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
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. Certain qualified contracts may have restrictions as to
the annuity date and the types of settlement options available. See "Settlement
Option Payments" page 35.
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 37. If
the GMIB Rider is elected a minimum income benefit settlement option is
available. See "Guaranteed Minimum Income Benefit" page ___.
Death of Owner Before the Annuity Date
If an owner dies prior to the annuity date, the death benefit for the
contract will be the account value. If the GMDB Rider is elected the death
benefit may be greater than the account value. See "Death Benefit" page ____. 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. If no settlement method is elected the death benefit will be
distributed within five years after the owner's death. The death benefit may be
paid as either a lump sum or as a settlement option. See "Death Benefit" page
29. Amounts in the multi-year guarantee period options 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 38.
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 a written notice of cancellation and returning the contract
to the Service Center 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 23 and "Account Value" page 24.
Questions
Questions about procedures or the contract can be answered by the
Transamerica Annuity Service Center ("Service Center"), at P.O. Box 31848,
Charlotte, North Carolina 28231-1848, (800) 258-4260. 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 38.
CONDENSED FINANCIAL INFORMATION
Because the variable account did not commence operations during 1997,
no financial statements are 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,
a financial services organization. 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-7 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 seventeen 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 22.
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. The management fees listed below are fees
specified in the applicable advisory contract (i.e., before any fee waivers).
The Income and Growth Portfolio of The Alger American Fund seeks, primarily, a
high level of dividend income. Capital appreciation is a secondary objective of
the portfolio. Except during temporary defensive periods, the portfolio attempts
to invest 100%, and it is a fundamental policy of the portfolio to invest at
least 65%, of its total assets in dividend paying equity securities. Alger
Management will favor securities it believes also offer opportunities for
capital appreciation. The portfolio may invest up to 35% of its total assets in
money market instruments and repurchase agreements and in excess of that amount
(up to 100% of its assets) during temporary defensive periods.
Adviser: Fred Alger Management, Inc. Management Fee: 0.625%.
The Growth and Income Portfolio of the Alliance Variable Products Series Fund,
Inc., seeks reasonable current income and reasonable opportunity for
appreciation through investments primarily in dividend-paying common stocks of
good quality. Whenever the economic outlook is unfavorable for investment in
common stock, investments in other types of securities, such as bonds,
convertible bonds, preferred stock and convertible preferred stocks may be made
by the portfolio. Purchases and sales of portfolio securities are made at such
times and in such amounts as are deemed advisable in light of market, economic
and other conditions.
Adviser: Alliance Capital Management L.P. Management Fee: 0.625%.
The Premier Growth Portfolio of Alliance Variable Products Series Fund, Inc.,
seeks growth of capital by pursuing aggressive investment policies. Since
investments will be made based upon their potential for capital appreciation,
current income will be incidental to the objective of capital growth. The
portfolio will invest predominantly in the equity securities (common stocks,
securities convertible into commons stocks and rights and warrants to subscribe
for or purchase common stocks) of a limited number of large, carefully selected,
high-quality U.S. companies that, in the judgment of the Adviser, are likely to
achieve superior earnings growth. The portfolio investments in the 25 such
companies most highly regarded at any point in time by the Adviser will usually
constitute approximately 70% of the portfolio's net assets. The portfolio thus
differs from more typical equity mutual funds by investing most of its assets in
a relatively small number of intensively researched companies. The portfolio
will, under normal circumstances, invest at least 85% of the value of its total
assets in the equity securities of U.S. companies.
Adviser: Alliance Capital Management L.P. Management Fee: 1%.
The Capital Appreciation Portfolio of the Dreyfus Variable Investment Fund is a
diversified portfolio, the primary investment objective of which is to provide
long-term capital growth consistent with the preservation of capital; current
income is a secondary investment objective. During periods which the Sub-Adviser
determines to be of market strength, the portfolio acts aggressively to increase
shareholders' capital by investing principally in common stocks of domestic and
foreign issuers, common stocks with warrants attached and debt securities of
foreign governments. The portfolio will seek investment opportunities generally
in large capitalization companies (those with market capitalizations exceeding
$500 million) which the Sub-Adviser believes have the potential to experience
above average and predictable earnings growth.
Adviser: The Dreyfus Corporation. Sub-Adviser: Fayez Sarofim & Co. Management
Fee: 0.75%.
The Small Cap Portfolio of the Dreyfus Variable Investment Fund seeks to
maximize capital appreciation. It seeks to achieve its objective by investing
principally in common stocks. Under normal market conditions, the portfolio will
invest at least 65% of its total assets in companies with market capitalizations
of less than $1.5 billion at the time of purchase which The Dreyfus Corporation
believes to be characterized by new or innovative products, services or
processes which should enhance prospects for growth in future earnings.
Adviser: The Dreyfus Corporation. Management Fee: 0.75%.
The Balanced Portfolio of the Janus Aspen Series seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. It is a
diversified portfolio that, under normal circumstances, pursues its objective by
investing 40-60% of its assets in securities selected primarily for their growth
potential and 40-60% of its assets in securities selected primarily for their
income potential. This portfolio normally invests at least 25% of its assets in
fixed-income senior securities, which include debt securities and preferred
stocks.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first $300
million plus 0.70% of the next $200 million plus 0.65% of the assets over $500
million.
The Worldwide Growth Portfolio of the Janus Aspen Series seeks long-term growth
of capital in a manner consistent with the preservation of capital. It is a
diversified portfolio that pursues its objective primarily through investments
in common stocks of foreign and domestic issuers. The portfolio has the
flexibility to invest on a worldwide basis in companies and other organizations
of any size, regardless of country of organization or place of principal
business activity. The portfolio normally invests in issuers from at least five
different countries, including the United States. The portfolio may at times
invest in fewer than five countries or even a single country.
Adviser: Janus Capital Corporation. Management Fee: 0.75% of the first $300
million plus 0.70% of the next $200
million plus 0.65% of the assets over $500 million.
The Emerging Growth Series of the MFS Variable Insurance Trust seeks to provide
long-term growth of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the investment objective of long-term
growth of capital. The policy is to invest primarily (i.e., at least 80% of its
assets under normal circumstances) in common stocks of companies that the
Adviser believes are early in their life cycle but which have the potential to
become major enterprises (emerging growth companies). While the portfolio will
invest primarily in common stocks, the portfolio may, to a limited extent, seek
appreciation in other types of securities such as fixed income securities (which
may be unrated), convertible securities and warrants when relative values make
such purchases appear attractive either as individual issues or as types of
securities in certain economic environments. The portfolio may invest in
non-convertible fixed income securities rated lower than "investment grade"
(commonly known as "junk bonds") or in comparable unrated securities, when, in
the opinion of the Adviser, such an investment presents a greater opportunity
for appreciation with comparable risk to an investment in "investment grade"
securities. Under normal market conditions the portfolio will invest not more
than 5% of its nets assets in these securities. Consistent with its investment
objective and policies described above, the portfolio may also invest up to 25%
(and generally expects to invest not more than 15%) of its net assets in foreign
securities (including emerging market securities and Brady Bonds) which are not
traded on a U.S. exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Growth with Income Series of the MFS Variable Insurance Trust seeks
reasonable current income and long-term growth of capital and income. Under
normal market conditions, the portfolio will invest at least 65% of its assets
in equity securities of companies that are believed to have long-term prospects
for growth and income. Equity securities in which the portfolio may invest
include the following: common stocks, preferred stocks and preference stock;
securities such as bonds, warrants or rights that are convertible into stocks;
and depository receipts for those securities. These securities may be listed on
securities exchanges, traded in various over-the-counter markets or have no
organized markets. Consistent with its investment objective and policies
described above, the portfolio may also invest up to 75% (and generally expects
to invest no more than 15%) of its net assets in foreign securities (including
emerging market securities and Brady Bonds) which are not traded on a U.S.
exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Research Series of the MFS Variable Insurance Trust seeks long-term growth
of capital and future income. The policy is to invest a substantial proportion
of its assets in equity securities of companies believed to possess better than
average prospects for long-term growth. Equity securities in which the portfolio
may invest include the following: common stocks, preferred stocks and preference
stocks, securities such as bonds, warrants or rights that are convertible into
stocks and depository receipts for those securities. These securities may be
listed on securities exchanges, traded in various over-the-counter markets or
have no organized markets. A smaller proportion of the assets may be invested in
bonds, short-term obligations, preferred stocks or common stocks whose principal
characteristic is income production rather than growth. Such securities may also
offer opportunities for growth of capital as well as income. In the case of both
growth stocks and income issues, emphasis is placed on the selection of
progressive, well-managed companies. The portfolio's non-convertible debt
investments, if any, may consist of "investment grade" securities, and, with
respect to no more than 10% of the portfolio's net assets, securities in the
lower rated categories or securities which the Adviser believes to be a similar
quality to these lower rated securities (commonly know as "junk bonds").
Consistent with its investment objective and policies described above, the
portfolio may also invest up to 20% of its net assets in foreign securities
(including emerging market securities) which are not traded on a U.S. exchange.
Adviser: Massachusetts Financial Services Company. Management Fee: 0.75%.
The Fixed Income Portfolio of the Morgan Stanley Universal Funds, Inc., seeks
above-average total return over a market cycle of three to five years by
investing primarily in a diversified portfolio of U.S. government and agencies,
corporate bonds, mortgage backed securities, foreign bonds and other fixed
income securities and derivatives. The portfolio's average weighted maturity
will ordinarily exceed five years and will usually be between five and fifteen
years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.40% of the first
$500 million plus 0.35% of the next $500 million plus 0.30% of the assets over
$1 billion.
The High Yield Portfolio of the Morgan Stanley Universal Funds, Inc., seeks
above-average total return over a market cycle of three to five years by
investing primarily in high yield securities of U. S. and foreign issuers,
including corporate bonds and other fixed income securities and derivatives.
High yield securities are rated below investment grade and are commonly referred
to as "junk bonds." The portfolio's average weighted maturity will ordinarily
exceed five years and will usually be between five and fifteen years.
Adviser: Miller Anderson & Sherrerd, LLP. Management Fee: 0.50% of first $500
million plus 0.45% of next $500
million plus 0.40% of the assets over $1 billion.
The International Magnum Portfolio of the Morgan Stanley Universal Funds, Inc.,
seeks long-term capital appreciation by investing primarily in equity securities
of non-U.S. issuers domiciled in EAFE countries. The countries in which the
portfolio will invest are those comprising the Morgan Stanley Capital
International EAFE Index, which includes Australia, Japan, New Zealand, most
nations located in Western Europe and certain developed countries in Asia, such
as Hong Kong and Singapore (collectively the "EAFE countries"). The portfolio
may invest up to 5% of its total assets in securities of issuers domiciled in
non-EAFE countries. Under normal circumstances, at least 65% of the total assets
of the portfolio will be invested in equity securities of issuers in at least
three different EAFE countries.
Adviser: Morgan Stanley Asset Management Inc. Management Fee: 0.80% of the first
$500 million plus 0.75% of the next $500 million plus 0.70% of the assets over
$1 billion.
The Managed Portfolio of the OCC Accumulation Trust seeks growth of capital over
time through investment in a portfolio consisting of common stocks, bonds and
cash equivalents, the percentages of which will vary based on the Adviser's
assessments of the relative outlook for such investments. Debt securities are
expected to be predominantly investment grade intermediate to long term U.S.
Government and corporate debt, although the portfolio will also invest in high
quality short term money market and cash equivalent securities and may invest
almost all of its assets in such securities when the Adviser deems it advisable
in order to preserve capital. In addition, the portfolio may also purchase
foreign securities provided that they are listed on a domestic or foreign
securities exchange or are represented by American depository receipts listed on
a domestic securities exchange or traded in domestic or foreign over-the-counter
markets.
Adviser: OpCap Advisors. Management Fee: 0.80% of first $400 million plus 0.75%
of next $400 million plus 0.70% of the assets over $800 million.
The Small Cap Portfolio of the OCC Accumulation Trust seeks capital appreciation
through investments in a diversified portfolio consisting primarily of equity
securities of companies with market capitalizations of under $1 billion. Under
normal circumstances at least 65% of the portfolio's assets will be invested in
equity securities. The majority of securities purchased by the portfolio will be
traded on the New York Stock Exchange, the American Stock Exchange or in the
over-the-counter market, and will also include options, warrants, bonds, notes
and debentures which are convertible into or exchangeable for, or which grant a
right to purchase or sell, such securities. In addition, the portfolio may also
purchase foreign securities provided that they are listed on a domestic or
foreign securities exchange or are represented by American depository receipts
listed on a domestic securities exchange or traded in domestic or foreign
over-the-counter markets.
Adviser: OpCap Advisors. Management Fee: 0.80% of the first $400 million plus
0.75% of the next $400 million plus 0.70% of assets over $800 million.
The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., seeks
long-term capital growth. Common stock (listed and unlisted) is the basic form
of investment. The Growth Portfolio invests primarily in common stocks of growth
companies that are considered by the manager to be premier companies. In the
manager's view, characteristics of premier companies include one or more of the
following: dominant market share; leading brand recognition; proprietary
products or technology; low-cost production capability; and excellent management
with shareholder orientation. The manager of the Portfolio believes in long-term
investing and places great emphasis on the sustainability of the above
competitive advantages. Unless market conditions indicate otherwise, the manager
also tries to keep the Portfolio fully invested in equity-type securities and
does not try to time stock market movements. When in the judgment of the
Sub-Adviser market conditions warrant, the portfolio may, for temporary
defensive purposes, hold part or all of its assets in cash, debt or money market
instruments. The portfolio may invest up to 10% of its assets in debt securities
having a call on common stocks that are rated below investment grade.
Adviser: Transamerica Occidental Life Insurance Company. Sub-Adviser:
Transamerica Investment Services, Inc. Management Fee: 0.75%.
The Money Market Portfolio of the Transamerica Variable Insurance Fund, Inc.,
seeks to maximize current income from money market securities consistent with
liquidity and the preservation of principal. The portfolio invests primarily in
high quality U. S. dollar-denominated money market instruments with remaining
maturities of 13 months or less, including: obligations issued or guaranteed by
the U. S. and foreign governments and their agencies and instrumentalities;
obligations of U. S. and foreign banks, or their foreign branches, and U. S.
savings banks; short-term corporate obligations, including commercial paper,
notes and bonds; other short-term debt obligations with remaining maturities of
397 days or less; and repurchase agreements involving any of the securities
mentioned above. The portfolio may also purchase other marketable,
non-convertible corporate debt securities of U. S. issuers. These investments
include bonds, debentures, floating rate obligations, and issues
with optional maturities.
Adviser: Transamerica Occidental Life Insurance Company. Sub-Adviser:
Transamerica Investment Services, Inc. Management Fee: 0.35%.
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. The payments are for administrative or distribution
services.
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
annuity contracts, 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 variable annuity
contract. Other variable annuity contracts are available from Transamerica. The
rights and benefits under this contract 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.
Contracts available on a qualified basis are as follows: (1) rollover individual
retirement annuities (IRAs) under Code Sections 408(a) and 408(b) with or
without additional purchase payments; (2) conversion and rollover Roth IRAs
under Code Section 408A with or without additional purchase payments; (3)
simplified employee pension plans (SEP/IRAs) that qualify for special federal
income tax treatment under Code Section 408(k); (4) rollover Code Section 403(b)
annuities (Rev. Rul. 90-24 transfers)with no additional purchase payments; and
(5) transfers into qualified pension and profit sharing plans intended to
qualify under Code Section 401 with no additional purchase payments. 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 "Federal
Tax Matters" page .
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. If 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 is entitled to designate the
annuitant(s) and, if the owner is an individual, the owner can change the
annuitant(s) at any time before the annuity date. Any such change will be
subject to our then current underwriting requirements. Transamerica reserves the
right to reject any change of annuitant(s) which has been made without our prior
written consent. The annuitant cannot be changed while the GMIB Rider is
elected, and the owner and annuitant must be the same person to elect the GMIB
Rider.
If the owner is not an individual, the annuitant(s) may not be changed
once the contract is issued. Different rules apply to qualified contracts. See
"Federal Tax Matters," page 38.
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 $25,000.
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)
91st birthday.
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 allocation of $100 to any variable
sub-account, and $1,000 to each multi-year guarantee period. Transamerica may
waive this minimum allocation amount under certain options and circumstances.
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 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 18 allowed transfers without charge during the first contract year.
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 and
each duration of guarantee period under the multi-year guarantee period options
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 value of a variable
accumulation unit is affected by the investment performance, expenses and
deduction of certain charges of the portfolio in which that variable sub-account
invests.
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 multi-year guarantee
period options. See "The 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 from the variable
sub-accounts and the general account options 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 multi-year 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
multi-year 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 18 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. 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 multi-year
guarantee period 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(s); 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," currently
the money market sub-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
availability. 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 following
conditions must be met: (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. Dollar cost
averaging may not be elected at the same time automatic asset rebalancing is in
effect.
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 averaging.
Dollar cost averaging transfers may not be made to or from any
multi-year guarantee period option .
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.
Automatic asset rebalancing may not be elected at the same time that
dollar cost averaging is in effect.
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 38. The cash surrender value is equal to the account
value, less any account fee, interest adjustment, 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 from account value.
A partial withdrawal request cannot be made if it would reduce the
account value to less than $15,000. 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 multi-year 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 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 38.
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
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) and
general account options with value and any applicable interest adjustment will
apply to withdrawals from the multi-year guarantee periods. Systematic
withdrawals cannot be made from a variable sub-account from which dollar cost
averaging transfers are being made and cannot be elected concurrently with the
automatic payout 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 $25,000 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.
The withdrawals will continue indefinitely unless terminated. If this
option is terminated it may not be elected again until the end of 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.
Systematic withdrawals may be taxable and, prior to age 59 1/2, subject to
a 10% federal tax penalty. See "Federal Tax Matters," page 38.
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 38. 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 of the owner's
84th birthday.
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 account value. 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 $25,000 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. These conditions 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 an owner dies before the annuity date, a death benefit equal to the
account value is payable.
If the Guaranteed Minimum Death Benefit Rider is elected and if death
occurs before the annuity date and 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 less withdrawals taken, adjusted
as described below, and the applicable premium tax charges, or (c) the highest
account value in any contract anniversary prior to the earlier of the owner's or
joint owner's 85th birthday, plus purchase payments made less withdrawals taken,
adjusted as described below, and applicable premium tax charges since that
contract anniversary. If the Guaranteed Minimum Death Benefit Rider is elected
and if the owner or joint owner dies before the annuity date and after either
the deceased owner's or joint owner's 85th birthday the death benefit will be
equal to the greater of (a) the account value or (b) 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 taken, adjusted as
described below, and any applicable premium tax charges since that anniversary.
Upon any withdrawal, the amount of the Guaranteed Minimum Death Benefit
will be reduced. The amount of that reduction will depend upon whether the
account value is more or less than the Guaranteed Minimum Death Benefit on the
date of withdrawal. If the account value is equal to or more than the Guaranteed
Minimum Death Benefit, the Guaranteed Minimum Death Benefit will be reduced by
the dollar amount of any withdrawals. If the account value is less than the
Guaranteed Minimum Death Benefit, the Guaranteed Minimum Death Benefit will be
reduced proportionately to the reduction in the Account Value. For example, if
the withdrawal reduces the account value by 20%, then the Guaranteed Minimum
Death Benefit will also be reduced by 20%.
For purposes of calculating the death benefit, the account value is
determined as of the date the benefit is paid.
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 determined based on
the age of the annuitant(s).
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 a lump sum distributed within five years after the
owner's death. No 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 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.
Transamerica may rely on any affidavit by any responsible person in
determining the identity or non-existence of any beneficiary not identified
by name
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 will 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, the contract 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.
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. The account fee may be increased upon
30 days advance written notice, but in no event may it exceed $60 per contract
year. If the contract is surrendered, the account fee, unless waived, will be
deducted from a full surrender. 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 multi-year
guarantee period option. The account fee for a contract year will be waived if
the account value exceeds $50,000 on the last business day of that contract year
or as of the date the contract is surrendered. We reserve the right to waive the
account fee in connection with certain services or options.
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 but may be waived. 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 annuity 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
1.25% of the assets in the variable account. Transamerica guarantees that this
charge of 1.25% will never increase. The mortality and expense risk charge is
reflected in the variable accumulation and variable annuity 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.
The cost of contract distribution, will be met from Transamerica's
general corporate assets which may include amounts, if any, derived from the
mortality and expense risk charge.
Guaranteed Minimum Death Benefit Rider
If the owner elects the Guaranteed Minimum Death Benefit (GMDB) Rider,
a fee will be deducted at the end of each contract month while the rider
continues in force in the amount of 1/12 of 0.20% of the account value at that
time. The fee is deducted from each variable sub-account pro rata based on the
value in each variable sub-account through the cancellation of variable
accumulation units. If there is not sufficient variable accumulated value, the
fee will be deducted pro rata from the values in the general account options
(any interest adjustment will apply, although Transamerica reserves the right to
waive the interest adjustment).
Guaranteed Minimum Income Benefit Rider
The Guaranteed Minimum Income Benefit Rider can be elected only
concurrently with the GMDB Rider. The total fee deducted at the end of each
month for these Riders is 1/12 of 0.40% of the account value at that time. The
fee is deducted from each variable sub-account pro rata based on the value in
each variable sub-account through the cancellation of variable accumulation
units. If there is any sufficient variable accumulated value, the fee will be
deducted pro rata from the values in the general account options (any interest
adjustment will apply, although Transamerica reserves the right to waive the
interest adjustment). 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 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
and jurisdictions, 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 law.
Transfer Fee
Transamerica currently imposes a fee for each transfer in excess of the
first 18 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 fees for
administrative expenses associated with processing certain options and services.
These fees 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 18.
Interest Adjustment
For a description of the interest adjustment applicable to early
withdrawals and transfers from a multi-year guaranteed periodoption, see "The
General Account Options " in Appendix A.
Sales in Special Situations
Transamerica may sell the contracts in special situations that are
expected to involve reduced expenses for Transamerica. These instances may
include: 1) sales in certain group arrangements, such as employee savings plans;
2) sales to current or former officers, directors and employees (and their
families) of Transamerica and its affiliates; 3) sales to officers, directors,
and employees (and their families) of the portfolios' investment advisers and
their affiliates; and 4) sales to officers, directors, employees and sales
agents (registered representatives) (and their families) of broker-dealers and
other financial institutions that have sales agreements with Transamerica to
sell the contracts. In these situations, 1) the mortality and expense risk
charge or administration charges may be reduced or waived; and/or 2) certain
amounts may be credited to the contract account value (for examples, amounts
related to commissions or sales compensation otherwise payable to a
broker-dealer may be credited to the contract account value. These reductions in
fees or charges or credits to account value will not unfairly discriminate
against any contract owner. These reductions in fees or charges or credits to
account value are generally taxable and treated as purchase payments for
purposes of income tax and any possible premium tax charge.
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 plus compensation annually based
on a percentage of account value. Both percentages may be up to 1.00% and in
certain situations additional amounts for marketing allowances, production
bonuses, service fees, sales awards and meetings, and asset based trailer
commissions may be paid.
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 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. 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. See "Federal
Tax Matters," page 38.
Annuity Amount
The annuity amount is the account value on the annuity date, less any
interest adjustment and less any applicable premium tax charges.
Guaranteed Minimum Income Benefit
The owner may elect the Guaranteed Minimum Income Benefit (GMIB) Rider
only if the Guaranteed Minimum Death Benefit Rider is also elected. If
cancelled, the GMIB Rider cannot be reinstated. The GMIB Rider can only be
elected before contract effective date and only if the oldest owner is not yet
80 years old. If the Rider is elected, the Guaranteed Minimum Income Benefit
prior to the contract anniversary on which the owner's or joint owner's age is
85, will be the settlement option which can be purchased at the rates described
below with the amount which is the greatest of (a) the account value, (b) the
sum of all purchase payments less withdrawal taken, adjusted as described below,
and the applicable premium tax charges, or (c) the highest account value on any
contract anniversary plus purchase payments made less withdrawals taken,
adjusted as described below, and any applicable premium tax charges since that
contract anniversary. Between the contract anniversary on which the owner's or
joint owner's age is 85 and the contract anniversary on which the owner's or
joint owner's age is 90 the Guaranteed Minimum Income Benefit is the settlement
option which can be purchased with the amount calculated prior to the owner's
age 85 plus purchase payments made and minus withdrawals taken, adjusted as
described below. After the contract anniversary on which the owner's or joint
owner's age is 90, the Guaranteed Minimum Income Benefit is the settlement
option which can be purchased with the annuity amount described in the preceding
paragraph. The settlement option which can be purchased with the Guaranteed
Minimum Income Benefit is a life and 10 year period certain annuity. If the life
expectancy of the oldest owner is less than 10 years as specified by life
expectancy table used by the Internal Revenue Service, then the settlement
option will be a life and period certain annuity in which the period certain is
the life expectancy of the oldest owner. The actuarial basis for the annuity
rates under this option is the 1983 IAM Table, project scale G, with an interest
rate of 3% per year for males, females or unisex, as appropriate.
Upon any withdrawal, the Guaranteed Minimum Income Benefit amount will
be reduced. The amount of that reduction will depend upon whether the account
value is more or less than the Guaranteed Minimum Income Benefit amount on the
date of withdrawal. If the account value is equal to or more than the Guaranteed
Minimum Income Benefit amount, the Guaranteed Minimum Income Benefit amount will
be reduced by the amount of the withdrawal. If the account value is less than
the Guaranteed Minimum Income Benefit amount, the Guaranteed Minimum Income
Benefit amount will be reduced proportionately to the reduction in the account
value. For example if the withdrawal reduces the account value by 20%, then the
Guaranteed Minimum Income Benefit will also be reduced by 20%.
Owners who have elected the Guaranteed Minimum Income Benefit may
exercise a settlement option under the Rider only during the 30 days following
each contract anniversary beginning with the seventh contract anniversary and
only between the oldest owner's 60th to 90th birthdays.
Settlement Option Payments
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 contingencies, 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 annuity 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.
For elections of of settlement option when GMIB Rider is in effects, see
"Guaranteed Minimum Income Benefit" above at page____.
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 account 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 an annuitant under some options; the amounts of variances are fixed on
the annuity date.
Variable Payment Option
A variable payment 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 form 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 after
the annuity date but 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 to be made after the
annuitant dies. 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 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 the annuity date.
The written request for this form must: (a) name the joint annuitant;
and (b) state the percentage of continued payments to be made after the first
death. 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 annuitant and joint
annuitant before payments start.
(5) Other Forms of Payment. Benefits can be provided under other
settlement options 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
annuity date by written notice to us at the Service Center, change the payee of
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 ("IRS"). 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 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), 408 and 408A 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, conversion 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
With respect to non-qualified contracts, partial withdrawals (including
withdrawals under the systematic withdrawal 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 non-deductible
purchase payments made.
In the case of a withdrawal from qualified contracts (including
withdrawals under the systematic withdrawal option or the automatic payout
option), a ratable portion of the amount received is taxable, generally based on
the ratio of the "investment in the contract" to the individual's total accrued
benefit under the retirement plan or arrangement. The "investment in the
contract" generally equals the amount of non-deductible purchase payments made
by or on behalf of any individual. For certain qualified contracts, the
"investment in the contract" can be zero. Special tax rules applicable to
certain distributions from qualified contracts are discussed below, under
"Qualified Contracts."
If a partial withdrawal from a multi-year guarantee period 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 a partial withdrawal, the
account value will be treated as including the amount deducted from the
multi-year guarantee period 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."
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. Withholding applies only if the taxable amount of
the distribution is at least $200. Some states also require withholding for
state income taxes.
The withholding rate varies according to the type of distribution and
the Owner's tax status. "Eligible rollover distributions" from Section 401(a)
plans and Section 403(b) tax sheltered annuities are subject to mandatory
federal income tax withholding at the rate of 20%. An eligible rollover
distribution is the taxable portion of any distribution from such a plan, except
for certain distributions or settlement option payments made in a specified
form. The 20% mandatory withholding does not apply, however, if the Owner
chooses a "direct rollover" from the plan to another tax-qualified plan or to an
IRA.
The federal income tax withholding rate for a distribution that is not
an "eligible rollover distribution" is 10% of the taxable amount of the
distribution.
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
59 1/2; (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 59 1/2 (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.
For qualified plans under Section 401(a), 403(a) and 403(b), the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the Owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner (or plan
participant) reach age 70 1/2. For IRAs described in Section 408, distributions
generally must commence no later than the later of April 1 of the calendar year
following the calendar year in which the Owner (or plan participant) reaches age
70 1/2. Roth IRAs under Section 408A do not require distributions at any time
prior to the Owner's death.
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. The contract can be used to fund transfers
from Code Section 401(a) plans but is not designed to accept subsequent ongoing
contributions.
Individual Retirement Annuities, Simplified Employee Plans and Roth IRAs
The sale of a contract for use with any 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.
The contract is also designed to fund IRA rollovers and is designed to
accept subsequent annual contributions. An IRA is a contract to which 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.
Earnings in an IRA are not taxed until distribution. IRA contributions
are limited each year to the lesser of $2,000 or 100% of the Owner's
compensation (including earned income as defined in Code Section 401(c)(2)) and
may be deductible in whole or in part depending on the individual's adjusted
gross income and whether or not the individual is considered an active
participant in a qualified plan. The limit on the amount contributed to an IRA
does not apply to distributions from certain other types of qualified plans that
are "rolled over" on a tax-deferred basis into an IRA. Amounts in the IRA (other
than nondeductible contributions) are taxed when distributed from the IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are subject
to a 10% penalty tax.
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. SEP/IRAs are subject to certain Code requirements
regarding participation and amounts of contributions.
The contract may also be used to fund Roth IRA conversions and transfers and is
designed to accept subsequent annual contributions. A Roth IRA is a contract to
which purchase payments are subject to limitations imposed by the Code. Section
408A of the Code permits eligible individuals to contribute to an individual
retirement program known as a Roth IRA on a non-deductible basis. In addition,
distributions from a non-Roth IRA may be converted to a Roth IRA. A non-Roth IRA
is an individual retirement account or annuity described in section 408(a) or
408(b), other than a Roth IRA. You should consult a tax adviser before combining
any converted amounts with any other Roth IRA contributions, including any other
conversion amounts from other tax years. Distributions from a Roth IRA generally
are not taxed, except that, once aggregate distributions exceed contributions to
the Roth IRA, income tax and a 10% penalty tax may apply to distributions made
(1) before age 59 1/2 (subject to certain exceptions) or (2) during the five
taxable years starting with the year in which the first contribution is made to
the Roth IRA. Purchasers should seek competent advice as to the suitability of
the contract for use with Roth IRAs.
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.
The contract may be used to fund rollovers or transfers from Code Section
403(a) and 403(b) but is not
designed to accept subsequent ongoing contributions.
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. A qualified
contract will be amended as necessary to conform to the requirements of the
Code.
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
Legislation has been proposed in 1998 that, if enacted, would adversely
modify the federal taxation of certain insurance and annuity contracts. For
example, one proposal would tax transfers among investment options and tax
exchanges involving variable contracts. A second proposal would reduce the
"investment in the contract" under cash value life insurance and certain annuity
contracts by certain amounts, thereby increasing the amount of income for
purposes of computing gain. Although the likelihood of there being any changes
is uncertain, there is always the possibility that the tax treatment of the
Contracts could be changed by legislation or other means. Moreover, it is also
possible that any change could be retroactive (that is, effective prior to the
date of the change). You should consult a tax adviser with respect to
legislative developments and their effect on the Contract.
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 premium taxes
or rider fees that may be applicable to a particular contract. To the extent
that premium taxes or rider fees 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 (excluding deduction of any premium taxes or
rider fees) 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., Morningstar, 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. Transamerica may from time to time also disclose
yield, and 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.
PREPARING FOR YEAR 2000
As a result of computer systems that may recognize a date of 12/31/00
as the year 1900 rather than the year 2000, disruptions of business activities
may occur with the year 2000. In response, Transamerica established in 1997 a
"Y2K" committee to address this issue. With regard to the systems and software
which administer and affect the contracts, Transamerica has determined that is
own internal systems will be Year 2000 compliant. Additionally, Transamerica
requires any third party vendor which supplies software or administrative
services to Transamerica in connection with the administration of the contracts,
to certify that the software or services will be Year 2000 compliant. In
determining the variable accumulation unit values for each variable sub-account,
Transamerica is reliant upon information received from the portfolios and is
confirming that Year 2000 issues will not interfere with this flow of
information. As of the date of this prospectus, it is not anticipated that
contract owners will experience negative affects on their investment, or on the
services received in connection with their contracts, as a result of Year 2000
issues. However, especially when taking into account interaction with other
systems, it is difficult to predict with precision that there will be no
disruption of service connection with the year 2000.
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, 1997, have been audited by Ernst &
Young LLP, Independent Auditors, 515 South Flower Street, Los Angeles,
California 90071, as set forth in their report appearing in the Statement of
Additional Information, and is included in reliance upon such report 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 in 1997.
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
coinciding 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>
<TABLE>
<CAPTION>
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
<S> <C>
THE CONTRACT .....................................................................................................3
NET INVESTMENT FACTOR.............................................................................................3
SETTLEMENT OPTION PAYMENTS........................................................................................3
Variable Annuity Units and Payments......................................................................3
Variable Annuity Unit Value..............................................................................3
Transfers After the Annuity Date ........................................................................4
GENERAL PROVISIONS ...............................................................................................4
IRS Required Distributions...............................................................................4
Non-Participating........................................................................................4
Misstatement of Age or Sex ..............................................................................4
Proof of Existence and Age ..............................................................................4
Annuity Data.............................................................................................4
Assignment...............................................................................................5
Annual Report............................................................................................5
Incontestability.........................................................................................5
Entire Contract..........................................................................................5
Changes in the Contract..................................................................................5
Protection of Benefits...................................................................................5
Delay of Payments........................................................................................5
Notices and Directions...................................................................................6
CALCULATION OF YIELDS AND TOTAL RETURNS...........................................................................6
Money Market Sub-Account Yield Calculation...............................................................6
Other Sub-Account Yield Calculations.....................................................................6
Standard Total Return Calculations.......................................................................7
Adjusted Historical Portfolio Performance Data...........................................................7
Other Performance Data...................................................................................8
HISTORIC PERFORMANCE DATA.........................................................................................8
General Limitations......................................................................................8
Adjusted Historical Sub-Account Performance Data.........................................................8
DISTRIBUTION OF THE CONTRACT.....................................................................................18
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS...........................................................................18
STATE REGULATION.................................................................................................18
RECORDS AND REPORTS..............................................................................................18
FINANCIAL STATEMENTS.............................................................................................18
APPENDIX - Accumulation Transfer Formula.........................................................................19
</TABLE>
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.
.........The 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.
THE MULTI-YEAR GUARANTEE PERIOD OPTIONS
The multi-year guarantee period options provide guaranteed fixed rates
of interest compounded annually for specific guarantee periods. Amounts
allocated to the multi-year guarantee period options will be credited with
interest of no less than 3% per year. Amounts withdrawn from a guarantee period
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 offering 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 3% per year to amounts
allocated to the multi-year guarantee periodoptions.
Each amount allocated or transferred to the multi-year guarantee period
options 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 multi-year guarantee
period is $1,000. Purchase payments allocated to a multi-year guarantee period
will be credited on the date the payment is received at the Service Center. Any
amount transferred from another multi-year guarantee period or from a variable
sub-account to a guarantee period will establish a new guarantee period as of
the effective date of the transfer.
Multi-Year Guarantee Period
Each multi-year 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, the duration
chosen by the owner and the class of that guarantee period . A guarantee period
chosen may not extend beyond the annuity date.
Transamerica reserves the right to limit the maximum number of
multi-year guarantee periods that may be in effect at any one time.
Transamerica will establish effective annual rates of interest for each
multi-year guarantee period. The effective annual rate of interest established
by Transamerica for a multi-year guarantee period will remain in effect for the
duration of the guarantee period.
Interest will be credited to a multi-year 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
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 multi-year 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 .003814% (the daily equivalent of the current charge of 1.40%
on an annual basis) gives a Net Investment Factor of 1.002449. 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
15.537966 (15.5 x 1.002449). 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 13.531613
(13.5 x 1.002449 (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 Sub-Account.
Also suppose that the Variable Accumulation Unit Value and the Variable
Annuity Unit Value for the particular 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 option 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).
Appendix C
Transamerica Life Insurance and Annuity Company
DISCLOSURE STATEMENT
for Individual Retirement Annuities
The following information is being provided to you, the Owner, in
accordance with the requirements of the Internal Revenue Service (IRS). This
Disclosure Statement contains information about opening and maintaining an
Individual Retirement Annuity ("IRA") and summarizes some of the financial and
tax consequences of establishing an IRA. Part I of this Disclosure Statement
discusses Traditional IRAs, while Part II addresses Roth IRAs. Because the tax
consequences of the two categories of IRAs differ significantly, it is important
that you review the correct part of this Disclosure Statement to learn about
your particular IRA. This Disclosure Statement is intended to be read together
with, and be a part of, the prospectus and the terms used here will have the
same meaning as in the prospectus, unless otherwise stated.
We have filed the Transamerica Life Insurance and Annuity Company's
Individual Retirement Annuity ("Transamerica Life IRA") Contract with the IRS
for approval. Please note that IRS approval applies only to the form of the
contract and does not represent a determination of the merits of such IRA
contract.
It may be necessary for us to amend your Transamerica Life IRA Contract
in order for us to obtain or maintain IRS approval. In addition, laws and
regulations adopted in the future may require changes to your contract in order
to preserve its status as an IRA. We will send you a copy of any such amendment.
No contribution will be accepted under a SIMPLE plan established by any
employer pursuant to Internal Revenue Code Section 408(p). No funds attributable
to contributions made by an employer to your SIMPLE IRA under the employer's
SIMPLE plan may be transferred or rolled over to your Transamerica Life IRA
prior to the expiration of the two (2) year period beginning on the date you
first participated in the employer's SIMPLE plan. In addition, depending on the
annuity contract you purchased, contributory IRAs may or may not be available.
Please refer to your prospectus.
This Disclosure Statement includes the non-technical explanation of
some of the changes made by the Tax Reform Act of 1986 applicable to IRAs and
more recent changes made by the Small Business Job Protection Act of 1996
(SBA-96), the Health Insurance Portability and Accountability Act of 1996
(HIPAA) and the Tax Relief Act of 1997 (TRA-97). The information provided
applies to contributions made and distributions received after December 31,
1986, and reflects the relevant provisions of the Code as in effect on January
1, 1998. This Disclosure Statement is not intended to constitute tax advice, and
you should consult a tax professional if you have questions about your own
circumstances.
Definitions
Contributions - Purchase Payments or Premiums as applicable to your Contract.
Contract - Certificate or contract as applicable.
Compensation - For purposes of determining allowable contributions, the term
"Compensation" includes all earned-income, including net earnings from
self-employment and alimony or separate maintenance payments received and
includable in your gross income, but does not include deferred compensation or
any amount received as a pension or annuity.
Revocation of Your IRA or Roth IRA
You have the right to revoke your IRA or Roth IRA during the seven
calendar day period following its establishment. The establishment of your IRA
or Roth IRA will be the contract effective date for your contract. This seven
day calendar period may or may not coincide with the free look period of your
contract. In order to revoke your IRA or Roth IRA, you must notify us in writing
and you must mail or deliver your revocation to us postage prepaid, at: P.O. Box
31848, Charlotte, NC 28231-1848. The date of the postmark (or the date of
certification or registration if sent by certified or registered mail) will be
considered your revocation date. If you revoke your IRA or Roth IRA during the
seven day period, an amount equal to your purchase payment (without any
adjustments for items such as administrative expenses, fees, or fluctuation in
market value) will be returned to you.
The rules that apply to a Traditional Individual Retirement Annuity
(which is referred to in this Disclosure Statement simply as an "IRA" or as a
"Traditional IRA") generally also apply to IRAs under Simplified Employee
Pension plans (SEP/IRAs), unless specific rules for SEP/IRAs are stated.
IRA PART I: TRADITIONAL IRAs
1. Contributions
(a) Regular IRA. You may make contributions to a regular IRA in any
amount up to the combined tax deductible and non-tax deductible contribution
limit described in Part I Section 2 of this Disclosure Statement. Such
contributions are also subject to the minimum amount under the contract. Such
contributions shall be in cash. Your contribution to a regular IRA for a tax
year must be made by the due date (not including extensions) for your federal
tax return for that tax year.
(b) Spousal IRA. If you and your spouse file a joint federal income tax
return for the taxable year and if your spouse's compensation, if any,
includable in gross income for the year is less than the compensation includable
in your gross income for the year, you and your spouse may each establish your
own individual IRA and may make contributions to those IRAs in accordance with
the rules and limits for tax deductible and non-tax deductible contributions
contained in Section 219(c) of the Code, which are summarized in Part I, Section
2 of this Disclosure Statement. Such contributions shall be in cash. Your
contribution to a Spousal IRA for a tax year must be made by the due date (not
including extensions) for your federal income tax return for that tax year.
(c) Rollover IRA. Rollover contributions are unlimited in dollar
amount. These consist of eligible distributions received by you from another IRA
or tax-qualified retirement plan. If you elect to make a direct rollover from
another IRA, your distribution will be directly deposited into your rollover
IRA. However, you may only rollover the amounts from one IRA into another IRA
once in any 365-day period. A direct rollover distribution is not taxable until
you withdraw the amounts from your rollover IRA, and no income tax will be
withheld from the direct rollover distribution. If a distribution is paid to you
and you want to roll over all or part of the distributed amount to this IRA, the
rollover must be accomplished within 60 days of the date you receive the amount
to be rolled over. Generally, any distribution from a tax-qualified retirement
plan, such as a pension plan, 401(k) plan, profit sharing or Keogh plan, can be
rolled over unless it is a "minimum required distribution" (see below). A direct
transfer from a tax-qualified retirement plan to an IRA is considered a
rollover. However, distributions of "after-tax" plan contributions (i.e. amounts
which are not subject to federal income tax when distributed from a
tax-qualified retirement plan) cannot be rolled over to an IRA. In addition, you
may not roll over any payment that is a minimum required distribution (as
discussed in Part I, Section 4(a)), or that is part of a series of payments that
are to be made to you from a tax-qualified retirement plan or IRA that is to be
paid to your over your life, life expectancy, or for a period of at least 10
years.
Strict limitations apply to rollovers, and you should seek competent
tax advice in order to comply with all the rules governing rollovers.
(d) Transfers. You may make an initial or subsequent contribution to
your Transamerica IRA hereunder by directing a Trustee of an existing individual
retirement account or IRA to transfer an amount in cash to this IRA.
(e) Simplified Employee Pension Plan (SEP/IRA). If an IRA is
established that meets the requirements of a SEP/IRA, your employer may
contribute an amount not to exceed the lesser of 15% of your includable
compensation ($160,000 for 1998, adjusted for inflation thereafter) or $30,000.
The amount of such contribution is not includable in your income as wages for
federal income tax purposes. Within that overall limit you may elect to defer up
to $10,000 of your compensation in 1998 (as adjusted for inflation in accordance
with the Code) if your employer's SEP/IRA plan permits and if the compensation
deferral feature was in effect prior to January 1, 1997. The amount of such
elective deferral is excludable from your income as wages for federal income tax
purposes.
Your employer is not required to make a SEP/IRA contribution in any
year nor make the same percentage contribution each year. But, if contributions
are made, they must be made to the SEP/IRA for all eligible employees and must
not discriminate in favor of highly compensated employees. If the rules are not
met, any SEP/IRA contributions by the employer will be treated as taxable to the
employees and could result in adverse tax consequences to the participating
employee. For further details, see your employer.
(f) Responsibility of the Owner. Contributions, rollovers, or transfers
to this IRA must be made in accordance with the appropriate sections of the
Code. It is your full and sole responsibility to determine the tax deductibility
of any contribution, and to make such contributions in accordance with the Code.
Transamerica does not provide tax advice, and assumes no liability for the tax
consequences of any contribution to this IRA.
2. Deductibility of Contributions
(a) Eligibility. If neither you, nor your spouse, is an active
participant (see (b) below) and you file a joint income tax return, for each
taxable year you and your spouse may contribute up to $4,000 together (but no
more than $2,000 to each IRA) if your combined compensation is at least equal to
that amount. In this case you and your spouse may take a deduction for the
entire amount contributed. If you are an active participant but have an adjusted
gross income (AGI) below a certain level (see (c) below), you may make a
deductible contribution as under current law. If, however, you or your spouse is
an active participant and your combined AGI is above the specified level, the
amount of the deductible contribution you may make to an IRA is phased out and
eventually eliminated. Beginning in 1998, if you are not an active participant
(even though your spouse is), you may take a full $2,000 deduction for
contributions to an IRA. This deduction is subject to phase out at joint AGI
levels between $150,000 and $160,000, and is eliminated for AGI levels above
$160,000.
(b) Active Participant. You are an "active participant" for a year if
you participate in a retirement plan. For example, if you participate in a
pension plan, profit sharing plan, a 401 plan, certain government plans, a
tax-sheltered arrangement under Code Section 403, or a SEP/IRA plan, you are
considered to be an active participant. Your Form W-2 for the year should
indicate your participation status.
(c) Adjusted Gross Income (AGI). If you are an active participant, you
must look at your AGI for the year (or if you and your spouse file a joint tax
return, you use your combined AGI) to determine whether you can make a
deductible IRA contribution for that taxable year. The instructions for your tax
return will show you how to calculate your AGI for this purpose. If you are at
or below a certain AGI level, called the Threshold Level, you are treated as if
you were not an active participant and can make a deductible contribution under
the same rules as a person who is not an active participant.
Your Threshold Level depends upon whether you are a married taxpayer
filing a joint tax return, an unmarried taxpayer, or a married taxpayer filing a
separate tax return. If you are a married taxpayer but file a separate tax
return, the Threshold Level is $0. If you are a married taxpayer filing a joint
tax return, or an unmarried taxpayer, your Threshold Level depends upon the
taxable year, and can be determined using the appropriate table below:
Married Filing Jointly Unmarried
Taxable Applicable Taxable Applicable
Year Dollar Limitation Year Dollar Limitation
1997...........$40,000 1997................ $25,000
1998...........$50,000 1998................ $30,000
1999...........$51,000 1999................ $31,000
2000...........$52,000 2000................ $32,000
2001...........$53,000 2001.................$33,000
2002...........$54,000 2002.................$34,000
2003...........$60,000 2003.................$40,000
2004...........$65,000 2004.................$45,000
2005...........$70,000 2005 and
2006...........$75,000 thereafter...........$50,000
2007 and
thereafter.....$80,000
If your AGI is less than $10,000 above your Threshold Level ($20,000
for married taxpayers filing jointly for the taxable year beginning on or after
January 1, 2007) you will still be able to make a deductible contribution, but
it will be limited in amount. The amount by which your AGI exceeds your
Threshold Level is called your Excess AGI. The Maximum Allowable Deduction is
$2,000 (and an additional $2,000 for a Spousal IRA).
You can calculate your Deduction Limit as follows:
10,000 - Excess AGI x Maximum Allowable Deduction = Deduction Limit
-------------------
10,000
For taxable years beginning on or after January 1, 2007, married
taxpayers filing jointly should substitute 20,000 for 10,000 in the numerator
and denominator of the above equation.
If you are married, but you and your spouse lived apart during the
entire taxable year and file separate income tax returns, the deductibility of
your IRA contribution is calculated as if you were not married.
You must round up the result to the next highest $10 level (the next
highest number which ends in zero). For example, if the result is $1,525, you
must round it up to $1,530. If the final result is below $200 but above zero,
your Deduction Limit is $200. Your Deduction Limit cannot in any event exceed
100% of your earned income.
(d) Restrictions.No deduction is allowed for (i) contributions other
than in cash; (ii) contributions (other than those by an employer to a SEP/IRA)
made during the calendar year in which you attain age 70 1/2 or thereafter; or
(iii) for any amount you contribute which was a distribution from another
retirement plan ("rollover" contribution). However, the limitations in
paragraphs (a) and (c) of this section do not apply to rollover contributions.
3. Nondeductible Contributions to IRAs
Even if you are above the Threshold Level and, thus, may not make a
deductible contribution of $2,000 (and an additional $2,000 for a Spousal IRA),
you may still contribute up to the lesser of 100% of compensation or $2,000 to
an IRA (and an additional $2,000 for a Spousal IRA). The amount of your
contribution which is not deductible will be a nondeductible contribution to the
IRA. You may also choose to make a nondeductible contribution even if you could
have deducted part or all of the contribution. Interest or other earnings on
your IRA contribution, whether from deductible or nondeductible contributions,
will not be taxed until taken out of your IRA and distributed to you.
If you make a nondeductible contribution to an IRA you must report the
amount of the nondeductible contribution to the IRS as a part of your tax return
for the year.
4. Distributions
(a) Required Minimum Distributions. Distribution of your IRA must be
made or begin no later than April 1 of the calendar year following the calendar
year in which you attain age 70 1/2 (the required beginning date). You may take
required minimum distributions from any IRA you maintain as long as: (i)
distributions begin when required; (ii) periodic payments are made at least once
a year; and (iii) the amount to be distributed is not less than the minimum
required under current federal law. If you own more than one IRA, you can choose
whether to take your minimum distribution from one IRA or a combination of your
IRAs. A distribution may be made at once in a lump sum, or it may be made in
installments. Installment payments must be made in equal or substantially equal
amounts over: (i) your life or the joint lives of you and your beneficiary; or
(ii) a period not exceeding your life expectancy (as redetermined annually under
IRS tables in the income tax regulations), or the joint life expectancy of you
and your beneficiary (as redetermined annually, if that beneficiary is your
spouse). Also, special rules may apply if the age difference between you and
your designated beneficiary (other than your spouse) is greater than ten year.
If settlement option payments start prior to the April 1 following the
year you turn age 70 1/2, 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.
If you die before the entire interest in your IRA is distributed to
you, but after your required beginning date, the entire interest in the IRA must
be distributed to your beneficiary at least as rapidly as your IRA was being
distributed prior to your death. If you die before your required beginning date
and if you have no designated beneficiary, distribution must be completed by
December 31 of the calendar year that is five years after your death. If you die
before your required beginning date and if you have a designated beneficiary,
your designated beneficiary may elect to receive distributions in the form of
settlement option payments made in substantially equal installments over the
life of life expectancy of the designated beneficiary, beginning by December 31
of the calendar year that is one year after your death.
If the beneficiary is your surviving spouse, and you die before your
required beginning date your surviving spouse will become the new
owner/annuitant and can continue this IRA on the same basis as before your
death. If your surviving spouse does not wish to continue this contract as his
or her IRA, he or she may elect to receive the death benefit in the form of
settlement option payments. Such payments must be in equal amounts over your
spouse's life or a period not extending beyond his or her life expectancy. Your
surviving spouse must elect this option and begin receiving payments no later
than the earliest of the following dates: (i) December 31 of the year following
the year you died; or (ii) December 31 of the year in which you would have
reached the required beginning date if you had not died. Either you or, if
applicable, your beneficiary, is responsible for assuring that the required
minimum distribution is taken in a timely manner and that the correct amount is
distributed.
(b) Taxation of IRA Distributions.Because nondeductible IRA
contributions are made using income which has already been taxed (that is, they
are not deductible contributions), the portion of the IRA distributions
consisting of nondeductible contributions will not be taxed again when received
by you. If you make any nondeductible IRA contributions, each distribution from
your IRAs will consist of a nontaxable portion (return of nondeductible
contributions) and a taxable portion (return of deductible contributions, if
any, and earnings).
Thus, if you receive a distribution from your IRA and you previously
made deductible and nondeductible contributions, you may not take an IRA
distribution which is entirely tax-free. The following formula is used to
determine the nontaxable portion of your distributions for a taxable year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Remaining Nondeductible contributions Total distributions Nontaxable distributions
Year-end total IRA balances X (for the year) = (for the year)
</TABLE>
To figure the year-end total IRA balance, you must treat all of your
IRAs as a single IRA. This includes all regular IRAs, as well as SEP/IRAs, and
Rollover IRAs. You also add back the distributions taken during the year. Please
refer to IRS Publication 590, Individual Retirement Arrangements, for
instructions, including worksheets that can assist you in these calculations.
Transamerica will report all distributions to the IRS as fully taxable income to
you.
Even if you withdrew all of the money in your IRA in a lump sum, you
will not be entitled to use any form of income averaging to reduce the federal
income tax on your distribution. Also, no portion of your distribution is
taxable as a capital gain.
(c) Withholding. Unless you elect not to have withholding apply,
federal income tax will be withheld from your IRA distributions if you received
distributions under a settlement option, tax will be withheld in the same manner
as taxes withheld on wages, calculated as if you are married and claim three
withholding allowances. If you are receiving any other type of distribution, tax
will be withheld in the amount of 10% of the distribution. If payments are
delivered to foreign countries, federal income tax will generally be withheld at
a 10% rate unless you certify to Transamerica that you are not a U.S. citizen
residing abroad or a "tax avoidance expatriate" as defined in Code Section 877.
Such certification may result in mandatory withholding of federal income taxes
at a different rate.
5. Penalties
(a) Excess Contributions. If at the end of any taxable year your IRA
contributions (other than rollovers or transfers) exceed the maximum allowable
(deductible and nondeductible) contributions for that year, the excess
contribution amount will be subject to a nondeductible 6% excise (penalty) tax.
However, if you withdraw the excess contribution, plus any earnings on it,
before the due date for filing your federal income tax return for the year
(including extensions) for the taxable year in which you made the excess
contribution, the excess contribution will not be subject to the 6% penalty tax.
The amount of the excess contribution withdrawn will not be considered an early
distribution, but the earnings withdrawn will be taxable income to you and may
be subject to an additional 10% tax on early distributions. Alternatively,
excess contributions for one year maybe withdrawn in a later year or may be
carried forward as IRA contributions in the following year to the extent that
the excess, when aggregated with your IRA contribution (if any) for the
subsequent year, does not exceed the maximum allowable (deductible and
nondeductible) amount for that year. The 6% excise tax will be imposed on excess
contributions in each year they are neither returned to you, or applied as
contributions in subsequent years.
Excess contributions that were withdrawn will not be taxable income to
you if you did not take a deduction for the excess amount.
(b) Early Distributions. Since the purpose of an IRA is to accumulate
funds for retirement, your receipt or use of any portion of your IRA before you
attain age 59 1/2 constitutes an early distribution subject to a 10% penalty tax
unless the distribution occurs as a result of your death or disability or is
part of a series of substantially equal payments made over your life expectancy
or the joint life expectancies of you and your beneficiary (as determined from
IRS tables in the income tax regulations). Also, the 10% penalty will not apply
if distributions are used to pay for medical expenses in excess of 7.5% of your
AGI or if distributions are used to pay for health insurance premiums for you,
your spouse and/or your dependents if you are an unemployed individual who is
receiving unemployment compensation under federal or state programs for at least
12 consecutive weeks. Effective for distribution made in 1998 or later, the 10%
penalty tax also will not apply to an early distribution made to pay for
first-time homebuyer expenses of you or certain family members, or for higher
education expenses for you or certain family members. First-time homebuyer
expenses must be paid within 120 days of the distribution from the IRA and
include up to $10,000 of the costs of acquiring, constructing, or reconstructing
a principal residence, including settlement, financing and closing costs. Higher
education expenses include tuition, fees, books, supplies, and equipment
required for enrollment, attendance, and room and board at a post-secondary
educational institution. The amount of an early distribution (excluding any
nondeductible contribution included therein) is includable in your gross income
and may be subject to the 10% penalty tax unless you transfer it to another IRA
as a qualifying rollover contribution.
(c) Required Minimum Distributions (RMD). If the RMD rules described in
Part I, Section 4 (a) of this Disclosure Statement apply to you and if the
amount distributed during a calendar year is less than the minimum amount
required to be distributed, you will be subject to a penalty tax equal to 50% of
the difference between the amount required to be distributed and the amount
actually distributed.
(d) Prohibited Transactions. If you or the beneficiary engage in any
prohibited transaction (such as any sale, exchange or leasing of any property
between you and the IRA, or any interference with the independent status of the
IRA), the IRA will lose its tax exemption and be treated as having been
distributed to you. The value of the entire IRA (excluding any nondeductible
contributions included therein) will be includable in your gross income; and, if
at the time of the prohibited transaction you are under age 59 1/2, you may also
be subject to the 10% penalty tax on early distributions. If you pledge your
IRA, or your benefits under the contract, as security for a loan, the portion
pledged as security will cease to be tax-qualified, the value of that portion
will be treated as distributed to you, and you will have to include the value of
the portion pledged as security in your income that year for federal tax
purposes. You may also be subject to early withdrawal penalties, as described in
Part I, Section 5.b.
(e) Overstatement or Understatement of Nondeductible Contributions. If
you overstate your nondeductible IRA contributions on your federal income tax
return (without reasonable cause) you may be subject to a penalty. A penalty
also applies for failure to file any form required by the IRS to report
nondeductible contributions. These penalties are in addition to any generally
applicable tax, interest, and penalties for which you may be liable if you
understate income upon receiving a distribution from your IRA. See Part I,
Section 4(b) of this Disclosure Statement. See Part I, Section 4(b).
IRA PART II: ROTH IRAs
1. Contributions
(a) Regular Roth IRA. You may make contributions to a regular Roth IRA
in any amount up to the contribution limits described in Part II, Section 3 of
this Disclosure Statement. Such contributions are also subject to the minimum
amount under the Contract. Such contribution shall be in cash. Your contribution
for a tax year must be made by the due date (not including extensions) for your
federal income tax return for that tax year. Unlike traditional IRAs, you may
continue making contributions after you reach age 70 1/2.
(b) Spousal Roth IRA. If you and your spouse file a joint federal
income tax return for the taxable year and if your spouse's compensation, if
any, includable in gross income for the year is less than the compensation
includable in your gross income for the year, you and your spouse may each
establish your own individual Roth IRA and may make contributions to those Roth
IRAs in accordance with the rules and limits for contributions contained in the
Code, which are described in Part II, Section 3 of this Disclosure Statement.
Such contributions shall be in cash. Your contribution to a Spousal Roth IRA for
a tax year must be made by the due date (not including extensions) for your
federal income tax return for that tax year.
(c) Rollover Roth IRA. You may make contributions to a Rollover Roth
IRA within 60 days after receiving a distribution from an existing Roth IRA,
subject to certain limitations discussed in Part II, Section 3.
(d) Transfer Roth IRA. You may make an initial or subsequent
contribution hereunder by directing a Trustee of an existing Roth IRA to
transfer the assets in that Roth IRA to your new Roth IRA.
(e) Conversion Roth IRA. You may open a Conversion Roth IRA within 60
days of receiving a distribution form an existing Traditional IRA or by
instructing the Trustee or issuer of an existing Traditional IRA to transfer the
assets in that Traditional IRA account to your new Roth IRA, subject to certain
restrictions and subject to income tax on some or all of the converted amounts.
If your Adjusted Gross Income ("AGI"), not including the rollover or transfer
amount, is greater than $100,000, or if you are married and you and your spouse
file separate tax returns, you may not convert a Traditional IRA into a Roth
IRA.
(f) Responsibility of the Owner. Contributions, rollovers, transfers,
or conversions to this Roth IRA must be made in accordance with the appropriate
sections of the Code. It is your full and sole responsibility to make
contributions to your Roth IRA in accordance with the Code. Transamerica does
not provide tax advice, and assumes no liability for the tax consequences of any
contribution to your Roth IRA.
2. Deductibility of Contributions
Your Roth IRA permits only nondeductible after-tax contributions.
However, distributions from your Roth IRA are generally not subject to federal
income tax (see Part II, 4(b) below). This is unlike a Traditional IRA, which
permits deductible and nondeductible contributions, but which provides that most
distributions are subject to federal income tax.
3. Contribution Limits
Contributions for each taxable year to all Traditional and Roth IRAs
may not exceed the lesser of 100% of your compensation or $2,000 each year.
Rollover, transfer and conversion contributions, if properly made, do not count
towards your maximum annual contribution limit.
(a) Regular Roth IRAs. The maximum amount you may contribute to a
Regular Roth IRA will depend on the amount of your income. Your maximum $2,000
contribution begins to phase out when your AGI reaches $95,000 (unmarried) or
$150,000 (married filing jointly). Under the phase out, your maximum
contributions generally will not be less than $200; however, no contribution is
allowed if your AGI exceeds $110,000 (unmarried) or $160,000 (married filing
jointly). If you are married and you and your spouse file separate tax returns,
your maximum contribution phases out between $0 and $10,000. You should consult
your tax advisor to determine your maximum contribution.
If you are married but you and your spouse lived apart for the entire
taxable year and file separate federal income tax returns, your maximum
contribution is calculated as if you were not married.
(b) Spousal Roth IRAs. Contributions to your lower-earning spouse's
Spousal Roth IRA may not exceed the lesser of (a) 100% of both spouses' combined
compensation minus any Roth or deductible Traditional IRA contribution for the
spouse with the higher compensation or (b) $2,000. A maximum of $4,000 may be
contributed to both spouses' Spousal Roth IRAs. Contributions can be divided
between the spouses' Roth IRAs as you and your spouse wish, but no more than
$2,000 can be contributed to either one of the Roth IRAs each year.
(c) Rollover Roth IRAs. There is no contribution limit on the amounts
that you may rollover from another Roth IRA into this Roth IRA. You may roll
over a distribution from any single Roth IRA to another Roth IRA only once in
any 365-day period.
(d) Transfer Roth IRAs. There is no contribution limit on amounts that
you transfer from another Roth IRA into this Roth IRA.
(e) Conversion Roth IRAs. There is no contribution limit on amounts
that you convert from your Traditional IRA into this Roth IRA if you are
eligible to open a Conversion Roth IRA as described above. However, the
distribution proceeds from your Traditional IRA are includable in your taxable
income to the extent that they represent a return of deductible contributions
and earnings on any contributions. The distribution proceeds from your
Traditional IRA are not subject to the 10% early distribution penalty tax
(described below) if the distribution proceeds are deposited to your Rollover
Roth IRA within 60 days. You may roll over a distribution from any single
Traditional IRA to a conversion Roth IRA or any other IRA only once in any
365-day period.
You can also open a Conversion Roth IRA by instructing the issuer,
custodian or trustee of your existing Traditional IRA to transfer your
Traditional IRA assets to a Roth IRA, which will be the successor to your
existing Traditional IRA. The transfer will be treated as a distribution from
your Traditional IRA, and that amount will be includable in your taxable income
to the extent that it represents a return of deductible contributions and
earnings on any contributions, but will not be subject to the 10% distribution
penalty tax.
For tax years before 1999, if you make a rollover or transfer from a
Traditional IRA to a Roth IRA, the income tax due upon distribution from the
Traditional IRA is payable ratably over four years beginning in the year of the
conversion.
Also, consult your tax advisor before combining amounts in a Conversion
Roth IRA with any regular contributions or with amounts rolled over or
transferred into the Conversion IRA in other tax years.
4. Distributions
(a) Required Minimum Distribution. Unlike a Traditional IRA, there are
no rules that require that distribution be made to you from your Roth IRA during
your lifetime.
If you die before the entire value of your Roth IRA is distributed to
you, the balance of your Roth IRA must be distributed by December 31 of the
calendar year that is five years after your death. However, if you die and you
have a designated beneficiary, your designated beneficiary may elect to take
distributions in the form of settlement option payments made in substantially
equal installments over the life or life expectancy of the designated
beneficiary, beginning by December 31 of the calendar year that is one year
after your death.
If your beneficiary is your surviving spouse, he or she will become a
new owner/annuitant and can continue this Roth IRA on the same basis as before
your death. If your surviving spouse does not wish to continue this Contract as
his or her Roth IRA, he or she may elect to receive the death benefit in the
form of settlement option payments. Such payments must be in equal amounts over
your spouse's life or a period not extending beyond his or her expectancy. Your
surviving spouse must elect this option and begin receiving payments no later
than the earliest of the following dates: (i) December 31 of the year following
the year you died; or (ii) December 31 of the year in which you would have
reached age 70 1/2.
Your beneficiary is responsible for assuring that the required minimum
distribution following your death is taken in a timely manner and that the
correct amount is distributed.
(b) Taxation of Roth IRA Distributions. The amounts that you withdraw
from your Roth IRA are generally tax-free. However, since the purpose of a Roth
IRA is to accumulate funds for retirement, your receipt or use of Roth IRA
earnings before you attain age 59 1/2 , or within 5 years of your first
contribution to the Roth IRA, or within 5 years of a contribution rolled over,
transferred, or converted from a Traditional IRA, will generally be treated as
an early distribution subject to regular income tax. No income tax will apply to
earnings that are withdrawn before you attain age 59 1/2, but which are
withdrawn five or more years after the first contribution or the rollover or
transfer contribution from a Traditional IRA to the Roth IRA, where the
withdrawal is made (i) upon your death or disability, or (ii) to pay first-time
homebuyer expenses of you or certain family members. Note that for amounts
converted from a Traditional IRA to a Roth IRA, the five-year period applies
separately to amounts converted. No portion of your distribution is taxable as a
capital gain.
(c) Withholding. If the distribution from your Roth IRA is subject to
federal income tax, unless you elect not to have withholding apply, federal
income tax will be withheld from your Roth IRA distributions. If you receive
distributions under a settlement option tax will be withheld in the same manner
as taxes withheld on wages, calculated as if you are married and claim three
withholding allowances. If you are receiving any other type of distribution, tax
will be withheld in the amount of 10% of the distribution. If payments are
delivered to foreign countries, federal income tax will generally be withheld at
a 10% rate unless you certify to Transamerica that you are not a U.S. citizen
residing abroad or a "tax avoidance expatriate" as defined in Code Section 877.
Such certification may result in mandatory withholding of federal income taxes
at a different rate.
5. Penalties
(a) Excess Contributions. If at the end of any taxable year your Roth
IRA contributions (other than rollovers, transfers, or conversions) exceed the
maximum allowable contributions for that year, the excess contribution amount
will be subject to a nondeductible 6% excise (penalty) tax. However, if you
withdraw the excess contribution, plus any earnings on it, before the due date
for filing your federal income tax return (including extensions) for the taxable
year in which you made the excess contribution, the excess contribution will not
be subject to the 6% penalty tax. The amount of the excess contribution
withdrawn will not be considered an early distribution, but the earnings
withdrawn will be taxable income to you and may be subject to an additional 10%
tax on early distributions. Alternatively, excess contributions for one year may
be withdrawn in a later year or may be carried forward as Roth IRA contributions
in a later year to the extent that the excess, when aggregated with your Roth
IRA contribution (if any) for the subsequent year, does not exceed the maximum
allowable contribution for that year. The 6% excise tax will be imposed on
excess contributions in each year they are neither returned to your nor applied
as contributions in subsequent years.
(b) Early Distributions. Since the purpose of a Roth IRA is to
accumulate funds for retirement, your receipt or use of any portion of your Roth
IRA before you attain age 59 1/2 , or within 5 years of your first contribution
to the Roth IRA, or within 5 years of a contribution rolled over, transferred or
converted from a Traditional IRA, constitutes an early distribution subject a
10% penalty tax on the earnings in your Roth IRA. This penalty tax will not
apply if the distribution occurs as a result of your death or disability or is
part of a series of substantially equal payments made over your life expectancy
or the joint life expectancies of you and your beneficiary (as determined from
IRA tables in the income tax regulations). Also, the 10% penalty will not apply
if distributions are used to pay for medical expenses in excess of 7.5% or your
AGI, or if distributions are used to pay for health insurance premiums for you,
your spouse and/or your dependents if you are an unemployed individual who is
receiving unemployment compensation under federal or state programs for at least
12 consecutive weeks. The 10% penalty tax also will not apply to an early
distribution made to pay for first-time homebuyer expenses for you or certain
family members, or for higher education expenses for you or certain family
members. First-time homebuyer expenses must be paid within 120 days of the
distribution from the Roth IRA and include up to $10,000 of the costs of
acquiring, constructing, or reconstructing a principle residence, including
settlement, financing and closing costs. Higher education expenses include
tuition, fees, books, supplies, and equipment required for enrollment,
attendance, and room and board at a post-secondary educational institution.
In addition, it is likely that the law will change in 1998 to provide
retroactively that if amounts transferred, rolled over, or converted from a
Traditional IRA to a Roth IRA are withdrawn before five years, (i) the entire
amount that was transferred or rolled over, not just the earnings, may be
subject to the 10% penalty tax, and (ii) an additional 10% tax may apply if the
amounts transferred, rolled over, or converted were (or are to be) included in
income ratably over four years. Special rules may apply to withdrawals from a
Roth IRA that includes both amounts transferred, rolled over or converted from a
Traditional IRA and annual contributions to the Roth IRA; for that reason, it
may be advisable to establish separate Roth IRAs for amounts transferred, rolled
over, or converted and annual contributions.
(c) Required Distributions Upon Death. If the required minimum
distribution rules described in Part II, Section 4(a) of this Disclosure
Statement apply to your beneficiary and if the amount distributed in during a
calendar year is less than the minimum amount required to be distributed, your
beneficiary will be subject to a penalty tax equal to 50% of the difference
between the amount required to be distributed and the amount actually
distributed.
(d) Prohibited Transactions. If you or the beneficiary engage in any
prohibited transaction (such as any sale, exchange or leasing of any property
between you and the Roth IRA, or any interference with the independent status of
the Roth IRA), the Roth IRA will lose its tax exemption and be treated as having
been distributed to you. The value of any earnings on your Roth IRA
contributions will be includable in your gross income; and, if at the time of
the prohibited transaction, you are under age 59 1/2 or it is within five years
of your first contribution to the Roth IRA, or within five years of a rollover,
transfer or conversion from a Traditional IRA, you may also be subject to the
10% penalty tax on early distributions. If you pledge your Roth IRA, or your
benefits under the contract, as a security for a loan, the portion pledged as
security will cease to be tax-qualified, the value of that portion will be
treated as distributed to you, and you may be subject to the 10% penalty tax on
early distributions from a Roth IRA.
PART III: OTHER INFORMATION
1. Federal Estate and Gift Taxes
Any amount distributed from your IRAs or Roth IRAs upon your death may
be subject to federal estate tax, although certain credits and deductions may be
available. The exercise or non-exercise of an option to pay an annuity to your
beneficiary at or after your death will not be considered a transfer for gift
tax purposes under Code Section 2517.
2. Tax Reporting
You need not file IRS Form 5329 with your income tax return unless
during the taxable year there is an excess contribution to, an early
distribution from, or insufficient minimum required distributions from your IRA
or Roth IRA. You must report contributions to, and distributions from your IRA
and Roth IRA (including the year end aggregate account balance of all IRAs and
Roth IRA) on your federal income tax return for the year. For Traditional IRA,
you must designate on the return how much of your annual contribution is
deductible and how much is nondeductible.
3. Vesting
Your interest in your IRA and Roth IRA must be non-forfeitable at all times.
4. Exclusive Benefit
Your interest in your IRA and Roth IRA is for the exclusive benefit of
you and your beneficiaries.
5. Publication 590
Additional information about your IRA or Roth IRA can be obtained from
any district office of the IRS and by calling 1-800-TAX-FORM for a free copy of
Publication 590, Individual Retirement Arrangements.
<PAGE>
Please forward (without charge) a copy of the Statement of Additional
Information concerning the Transamerica Seriessm - Transamerica Bountysm
Variable Annuity issued by Transamerica Life Insurance and Annuity Company to:
(Please print or type and fill in all information)
--------------------------------------------------
Name
--------------------------------------------------
Address
--------------------------------------------------
City/State/Zip
--------------------------------------------------
Date: ________________________ Signed: _______________________
Return to Transamerica Life Insurance and Annuity Company, Annuity Service
Center, 401 North Tryon Street, Suite 700, Charlotte, North Carolina 28202.
<PAGE>
TRANSAMERICA SERIES sm
TRANSAMERICA BOUNTY sm VARIABLE ANNUITY
Contract Form4-705 Certificate Form TCG-317
Issued by Transamerica Life Insurance and Annuity Company
401 North Tryon Street, Suite 700, Charlotte, North Carolina, 28202
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION FOR
TRANSAMERICA SERIES sm -
TRANSAMERICA BOUNTYsm
VARIABLE ANNUITY
Issued By
Transamerica Life Insurance and Annuity Company
This statement of additional information expands upon subjects
discussed in the September 1, 1998, prospectus for the Transamerica Bounty sm
Variable Annuity ("contract") issued by Transamerica Life Insurance and Annuity
Company ("Transamerica") through Separate Account VA-7. The owner may obtain a
free copy of the prospectus by writing to: Transamerica Life Insurance and
Annuity Company, Annuity Service Center, 401 North Tryon Street, Suite 700,
Charlotte, North Carolina 28202 or calling (800) 420-7749. 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.
September 1, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
THE CONTRACT .....................................................................................................3
NET INVESTMENT FACTOR.............................................................................................3
SETTLEMENT OPTION PAYMENTS........................................................................................3
Variable Annuity Units and Payments......................................................................3
Variable Annuity Unit Value..............................................................................3
Transfers After the Annuity Date ........................................................................4
GENERAL PROVISIONS ...............................................................................................4
IRS Required Distributions...............................................................................4
Non-Participating........................................................................................4
Misstatement of Age or Sex ..............................................................................4
Proof of Existence and Age ..............................................................................4
Annuity Data.............................................................................................4
Assignment...............................................................................................5
Annual Report............................................................................................5
Incontestability.........................................................................................5
Entire Contract..........................................................................................5
Changes in the Contract..................................................................................5
Protection of Benefits...................................................................................5
Delay of Payments........................................................................................5
Notices and Directions...................................................................................6
CALCULATION OF YIELDS AND TOTAL RETURNS...........................................................................6
Money Market Sub-Account Yield Calculation...............................................................6
Other Sub-Account Yield Calculations.....................................................................6
Standard Total Return Calculations.......................................................................7
Adjusted Historical Portfolio Performance Data...........................................................7
Other Performance Data...................................................................................8
HISTORIC PERFORMANCE DATA.........................................................................................8
General Limitations......................................................................................8
Adjusted Historical Sub-Account Performance Data.........................................................8
DISTRIBUTION OF THE CONTRACT.....................................................................................18
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS...........................................................................18
STATE REGULATION.................................................................................................18
RECORDS AND REPORTS..............................................................................................18
FINANCIAL STATEMENTS.............................................................................................18
APPENDIX - Accumulation Transfer Formula.........................................................................19
</TABLE>
<PAGE>
THE CONTRACT
......... The following pages provides additional information about the contract
which may be of interest to
some owners.
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 "ex-dividend" 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 0.003403% (1.25% 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.
SETTLEMENT OPTION PAYMENTS The variable settlement options provide for payments
that fluctuate in dollar amount, based on the investment performance of the
selected 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 25 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
IRS Required Distributions
If any owner under a non-qualified contract dies before the entire
interest in the contract is distributed, the value generally must be distributed
to the designated beneficiary so that the contract qualifies as an annuity under
the Code. (See "Federal Tax Matters" page 38 of the prospectus.)
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.
<PAGE>
Assignment
No assignment of a contract will be binding on Transamerica unless made
in writing and given to Transamerica at the Service Center. 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.
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 27 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 the 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 and income other than
investment income) 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.
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.
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.
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.
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.
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.
HISTORIC PERFORMANCE DATA
General Limitations
The figures below represent past performance and are not indicative of
future performance. The figures may reflect the waiver of advisory fees and
reimbursement of other expenses which may not continue in the future.
Portfolio information, including historical daily net asset values and
capital gains and dividends distributions regarding each portfolio has been
provided by that portfolio. The adjusted historical sub-account performance data
is derived from the data provided by the portfolios. Transamerica has no reason
to doubt the accuracy of the figures provided by the portfolios. Transamerica
has not verified these figures.
Adjusted Historical Sub-Account Performance Data
The charts below show adjusted historical performance date for
seventeen sub-accounts for the periods, prior to the inception of the
sub-accounts, based on the performance of the corresponding portfolios since
their inception date, with a level of charges equal to those currently assessed
under the contracts. These figures are not an indication of the future
performance of the sub-accounts.
The dates next to each sub-account name indicates the date of
commencement of operation of the corresponding portfolio. There is no actual
performance data for the Transamerica VIF Money Market because that portfolio
did not commence operations until January 1998. Notes:
1. On September 16, 1994, an investment company which had commenced operations
on August 1, 1988, called Quest for Value Accumulation Trust (the "Old Trust")
at which time the Present Trust commenced operations. The total net assets of
the Small Cap Portfolio immediately after the transaction were $139,812,573 in
the Old Trust and $8,129,274 in the Present Trust. For the period prior to
September 16, 1994, the performance figures for the Small Cap Portfolio of the
Present Trust reflect the performance of the Small Cap Portfolio of the Old
Trust.
2. The Growth Portfolio of the Transamerica Variable Insurance Fund, Inc., is
the successor to Separate Account Fund C of Transamerica Occidental Life
Insurance Company, a management investment company funding variable annuities,
through a reorganization on November 1, 1996. Accordingly, the performance data
for the Transamerica VIF Growth Portfolio includes performance of its
predecessor.
3. On September 16, 1994, an investment company which had commenced operations
on August 1, 1988, called Quest for Value Accumulation Trust (the "Old Trust")
was effectively divided into two investment funds - The Old Trust and the
present OCC Accumulation Trust (the "Present Trust") at the time of the
transaction there was $682,601,380 in the Old Trust and $51,345,102 in the
Present Trust. For the period prior to September 16, 1994, the performance
figures for the Managed Portfolio of the Present Trust reflect the performance
of the Managed Portfolio of the Old Trust.
Adjusted Historical Performance Data Charts
Average Annual Total Returns - Assuming surrender but no Living Benefits Rider
Average Annual Total Returns - Assuming surrender and Living Benefits Rider
Average Annual Total Returns - Assuming no surrender or Living Benefits Rider
Average Annual Total Returns - Assuming no surrender but reflecting Living
Benefits Rider Cumulative Returns - Assuming surrender but no Living Benefits
Rider Cumulative Returns - Assuming surrender and Living Benefits Rider
Cumulative Returns - Assuming no surrender or Living Benefits Rider Cumulative
Returns - Assuming no surrender but reflecting Living Benefits Rider
1. Average Annual Total Returns - Assuming no Riders
2. Average Annual Total Returns - Assuming Guaranteed Minimum Death Benefit
(GMDB) Rider
3. Average Annual Total Returns - Assuming Guaranteed Minimum Death Benefit and
Guaranteed Minimum Income Benefit (GMIB) Riders
4. Cumulative Returns - Assuming no Riders
5. Cumulative Returns - Assuming Guaranteed Minimum Death Benefit Rider
6. Cumulative Returns - Assuming Guaranteed Minimum Death Benefit and Guaranteed
Minimum Income Benefit Riders
<PAGE>
1. Standard average annual total returns for periods since inception of the
portfolio, including adjusted historical performance for each sub-account are as
follows. These figures include mortality and expense risk charge of 1.25% per
annum and administrative expense charge of 0.15% per annum but do not reflect
any fee deduction for any optional Riders. These performance numbers assume an
average annual account value of over $50,000 and, therefore, no deduction has
been made to reflect the $30 account fee.
<TABLE>
<CAPTION>
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the For the 3-year For the For the 10-year commencement of
operation of 1-year period period ending 5-year period period ending portfolio
corresponding portfolio) ending 12/31/97 ending 12/31/97 operations to
12/31/97 12/31/97 12/31/97
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
21.66%
<S> <C> <C>
Janus Aspen Worldwide 24.31% N/A N/A 21.20%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF 2.37% N/A N/A N/A 2.38%
International Magnum
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 17.24% 19.56% 24.59% N/A 41.98%
(8/31/90) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 21.53% 17.56% 13.11% N/A 13.86%
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 21.54% N/A N/A N/A 21.81%
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 33.46% 31.83% 19.41% N/A 20.05%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 26.87% 27.25% N/A N/A 18.49%
Appreciation (4/28/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/26/95) 19.79% N/A N/A N/A 20.44%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 50.35% 42.65% 29.98% 24.12% N/A
(2./26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 36.19% 28.96% 15.92% N/A 12.22%
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 26.87% 27.89% 17.66% N/A 13.72%
Income (1/15/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 29.09% N/A N/A N/A 25.85%
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 21.24% 19.26% N/A N/A 14.68%
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 21.21% 27.94% 18.32% N/A 18.67%
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High 11.96% N/A N/A N/A 12.03%
Yield (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed 8.41% N/A N/A N/A 8.41%
Income (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
2. Standard average annual total returns for periods since inception
of the portfolio, including adjusted historical performance for each
sub-account are as follows. These figures include mortality and
expense risk charge of 1.25% per annum, administrative expense charge
of 0.15% per annum, and the optional Guaranteed Minimum Death Benefit
Rider fee of 0.20% per annum. These performance numbers assume an
average annual account value of over $50,000 and, therefore, no
deduction has been made to reflect the $30 account fee.
<TABLE>
<CAPTION>
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the For the 3-year For the For the 10-year commencement of
operation of 1-year period period ending 5-year period period ending portfolio
corresponding portfolio) ending 12/31/96 ending 12/31/96 operations to
12/31/96 12/31/96 12/31/96
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 21.42% 24.06% N/A N/A 20.96%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
2.16% N/A N/A N/A 2.18%
Morgan Stanley UF
International Magnum
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
17.00% 19.32% 24.34% N/A 41.69%
Dreyfus VIF Small Cap
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.29% 17.32% 12.88% N/A 13.64%
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.27% N/A N/A N/A 21.56%
MFS VIT Emerging Growth
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
33.20% 31.57% 19.17% N/A 19.81%
Alliance VPF Premier
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
26.62% 27.00% N/A N/A 18.25%
Dreyfus VIF Capital
Appreciation (4/28/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
19.56% N/A N/A N/A 20.20%
MFS VIT Research (7/26/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
50.05% 42.36% 29.72% 23.87% N/A
Transamerica VIF Growth
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
35.92% 28.71% 16.69% N/A 12.00%
Alger American Income &
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
26.62% 27.63% 17.42% N/A 13.49%
Alliance VPF Growth &
Income (1/15/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
28.84% N/A N/A N/A 25.59%
MFS VIT Growth w/ Income
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.00% 19.03% N/A N/A 14.45%
Janus Aspen Balanced
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
20.97% 27.69% 18.08% N/A 18.43%
OCC Accumulation Trust
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
11.74% N/A N/A N/A 11.81%
Morgan Stanley UF High
Yield (1/2/97)
- -----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
8.20% N/A N/A N/A 8.25%
Morgan Stanley UF Fixed
Income (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Transamerica VIF Money
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
3. Standard average annual total returns for periods since inception of the
portfolio, including adjusted historical performance for each sub-account are as
follows. These figures include mortality and expense risk charge of 1.25% per
annum, administrative expense charge of 0.15% per annum and the optional
Guaranteed Minimum Death Benefit (GMDB) and Guaranteed Minimum Insurance Benefit
(GMIB) and Rider fees of 0.40% per annum. These performance numbers assume an
average annual account value of over $50,000 and, therefore, no deduction has
been made to reflect the $30 account fee.
<TABLE>
<CAPTION>
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the For the 3-year For the For the 10-year commencement of
operation of 1-year period period ending 5-year period period ending portfolio
corresponding portfolio) ending 12/31/97 ending 12/31/97 operations to
12/31/97 12/31/97 12/31/97
- ---------------------------- --------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
21.18%
<S> <C> <C>
Janus Aspen Worldwide 23.82% N/A N/A 20.72%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
1.96% N/A N/A N/A 1.97%
Morgan Stanley UF
International Magnum
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
16.77% 19.08% 24.10% N/A 41.41%
Dreyfus VIF Small Cap
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.05% 17.09% 12.66% N/A 13.41%
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.03% N/A N/A N/A 21.32%
MFS VIT Emerging Growth
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
32.94% 31.31% 18.94% N/A 19.57%
Alliance VPF Premier
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
26.37% 26.75% N/A N/A 18.02%
Dreyfus VIF Capital
Appreciation (4/28/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
19.32% N/A N/A N/A 19.96%
MFS VIT Research (7/29/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
49.75% 42.08% 29.46% 23.63% N/A
Transamerica VIF Growth
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
35.65% 28.45% 15.46% N/A 11.77%
Alger American Income &
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
26.37% 27.38% 17.19% N/A 13.27%
Alliance VPF Growth &
Income (1/15/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
28.58% N/A N/A N/A 25.34%
MFS VIT Growth w/ Income
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
20.76% 18.79% N/A N/A 14.22%
Janus Aspen Balanced
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
20.73% 27.43% 17.85% N/A 18.19%
OCC Accumulation Trust
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
11.52% N/A N/A N/A 11.58%
Morgan Stanley UF High
Yield (1/2/97)
- -----------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
7.98% N/A N/A N/A 8.03%
Morgan Stanley UF Fixed
Income (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Transamerica VIF Money
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
4. Adjusted historical standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follows. These figures
include mortality and expense risk charge of 1.25% per annum, and administrative
expenses charge of 0.15% per annum but, do not reflect any fee deduction for any
optional Rider. These performance numbers assume an average annual account value
of over $50,000 and, therefore, no deduction has been made to reflect the $30
account fee.
<TABLE>
<CAPTION>
- --------------------------- ---------------- ---------------- --------------- ----------------- ---------------------
For the period from
SUB-ACCOUNT For the 3-year For the For the 10-year commencement of
(date of commencement of For the 1-year period ending 5-year period period ending portfolio
operation of period ending 12/31/97 ending 12/31/97 operations to
corresponding portfolio) 12/31/97 12/31/97 12/31/97
- --------------------------- ---------------- ---------------- --------------- ----------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 21.66% 92.09% N/A N/A 128.66%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
2.37% N/A N/A N/A 2.37%
Morgan Stanley UF
International Magnum
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
17.24% 70.89% 200.21% N/A 1209.87%
Dreyfus VIF Small Cap
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.53% 62.46% 85.11% N/A 239.82%
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.51% N/A N/A N/A 61.85%
MFS VIT Emerging Growth
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
33.46% 129.12% 142.78% N/A 174.05%
Alliance VPF Premier
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
26.87% 106.07% N/A N/A 121.21%
Dreyfus VIF Capital
Appreciation (4/28/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
19.79% N/A N/A N/A 57.30%
MFS VIT Research (7/26/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
50.35% 190.26% 271.02% 767.83% N/A
Transamerica VIF Growth
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
36.19% 114.48% 109.29% N/A 186.61%
Alger American Income &
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
26.87% 109.17% 125.49% N/A 144.84%
Alliance VPF Growth &
Income (1/15/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
29.09% N/A N/A N/A 66.98%
MFS VIT Growth w/ Income
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.24% 69.64% N/A N/A 80.25%
Janus Aspen Balanced
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
21.21% 109.42% 131.86% N/A 401.51%
OCC Accumulation Trust
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
11.96% N/A N/A N/A 11.96%
Morgan Stanley UF High
Yield (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
8.41% N/A N/A N/A 8.41%
Morgan Stanley UF Fixed
Income (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
N/A N/A N/A N/A N/A
Transamerica VIF Money
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
5. Adjusted historical standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follows. These figures
include mortality and expense risk charge of 1.25% per annum, administrative
expense charge of 0.15% per annum and the optional GMDB Rider fee of 0.20% per
annum. These performance numbers assume an average annual account value of over
$50,000 and, therefore, no deduction has been made to reflect the $30 account
fee.
<TABLE>
<CAPTION>
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the 1-year For the For the 5-year For the commencement of
operation of period ending 3-year period period ending 10-year period portfolio
corresponding portfolio) 12/31/96 ending 12/31/96 ending 12/31/96 operations to
12/31/96 12/31/96
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 21.42% 90.95% N/A N/A 126.71%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF 2.16% N/A N/A N/A 2.16%
International Magnum
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 17.00% 69.87% 197.23% N/A 1190.81%
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 21.29% 61.49% 83.28% N/A 233.48%
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 21.27% N/A N/A N/A 61.07%
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 33.20% 127.76% 140.37% N/A 171.05%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 26.62% 104.84% N/A N/A 119.15%
Appreciation (4/28/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/26/95) 19.56% N/A N/A N/A 56.53%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 50.05% 188.53% 267.34% 750.69% N/A
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 35.92% 113.20% 107.22% N/A 181.43%
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 26.62% 107.93% 123.25% N/A 141.46%
Income (1/15/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 28.84% N/A N/A N/A 66.23%
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 21.00% 68.63% N/A N/A 78.71%
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 20.97% 108.17% 129.56% N/A 392.16%
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High 11.74% N/A N/A N/A 11.74%
Yield (1/8/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed 8.20% N/A N/A N/A 8.20%
Income (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
6. Adjusted historical standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follows. These figures
include mortality and expense risk charge of 1.25% per annum, administrative
expenses charge of 0.15% per annum and the optional GMDB and GMIB Riders fee of
0.40% per annum. These performance numbers assume an average annual account
value of over $50,000 and, therefore, no deduction has been made to reflect the
$30 account fee.
<TABLE>
<CAPTION>
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
SUB-ACCOUNT For the period from
(date of commencement of For the 1-year For the For the 5-year For the commencement of
operation of period ending 3-year period period ending 10-year period portfolio
corresponding portfolio) 12/31/96 ending 12/31/96 ending 12/31/96 operations to
12/31/96 12/31/96
- --------------------------- ----------------- --------------- ---------------- ---------------- ---------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Janus Aspen Worldwide 21.18% 89.81% N/A N/A 124.77%
Growth (9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF 1.96% N/A N/A N/A 1.96%
International Magnum
(1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap 16.77% 68.86% 194.29% N/A 1172.06%
(8/31/90)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 21.05% 60.53% 81.46% N/A 227.27%
Small Cap (8/1/88) (1)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth 21.03% N/A N/A N/A 60.28%
(7/24/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier 32.94% 126.40% 138.00% N/A 168.09%
Growth (6/26/92)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital 26.37% 103.62% N/A N/A 117.11%
Appreciation (4/28/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Research (7/26/95) 19.32% N/A N/A N/A 55.77%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth 49.75% 186.81% 263.71% 733.90% N/A
(2/26/69) (2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alger American Income & 35.65% 111.93% 105.17% N/A 176.35%
Growth (11/15/88)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth & 26.37% 106.69% 121.04% N/A 138.13%
Income (1/15/91)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income 28.58% N/A N/A N/A 65.50%
(10/9/95)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced 20.76% 67.63% N/A N/A 77.18%
(9/13/93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust 20.73% 106.93% 127.29% N/A 383.00%
Managed (8/1/88) (3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF High 11.52% N/A N/A N/A 11.52%
Yield (1/8/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley UF Fixed 7.98% N/A N/A N/A 7.98%
Income (1/2/97)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money N/A N/A N/A N/A N/A
Market (1/1/98)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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 year1997, no commissions were paid to TSSC as underwriter
of the contracts; no amounts were retained by TSSC. Under the Sales Agreement,
TSSC will pay broker-dealers compensation based on a percentage of each purchase
payment plus compensation based on a percentage of account value. Both
percentages may be up to1.00% and in certain situations additional amounts for
marketing allowances, production bonuses, service fees, sales awards and
meetings, and asset based trailer commission may be paid.
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 the Service Center. 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 had not yet commenced operations in 1997,
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
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 Subsidiary
December 31, 1997
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
Audited Consolidated Financial Statements
December 31, 1997
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>
25
1010 Folder T
02/25/98 9:58 AM
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 Subsidiary as of December 31, 1997 and 1996,
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, 1997.
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 subsidiary at December 31, 1997 and 1996, and
the consolidated results of their operations and cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
January 23, 1998
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31
1997 1996
--------------------- ------------
(In thousands, except
for share data)
ASSETS
Investments:
<S> <C> <C>
Fixed maturities available for sale $ 14,691,836 $ 13,687,899
Equity securities available for sale 119,078 87,812
Mortgage loans on real estate 365,454 395,855
Policy loans 19,433 20,362
Other long-term investments 8,215 11,910
Short-term investments 76,806 33,790
--------------------- ---------------------
15,280,822 14,237,628
Cash 8,544 4,368
Accrued investment income 242,606 177,420
Accounts receivable 11,695 47,261
Reinsurance recoverable on paid and unpaid losses 48,487 22,104
Deferred policy acquisitions costs 244,485 248,442
Other assets 28,233 35,544
Separate account assets 2,668,885 1,638,946
--------------------- ---------------------
$ 18,533,757 $ 16,411,713
===================== =====================
LIABILITIES AND SHAREHOLDER'S EQUITY
Policy liabilities:
Policyholder contract deposits $ 10,885,993 $ 10,271,301
Reserves for future policy benefits 3,230,216 3,150,082
Policy claims and other 53,545 40,241
--------------------- ---------------------
14,169,754 13,461,624
Income tax liabilities 257,252 115,457
Accounts payable and other liabilities 102,139 132,019
Separate account liabilities 2,668,885 1,638,946
--------------------- ---------------------
17,198,030 15,348,046
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 209,257 241,791
Retained earnings 723,051 632,098
Net unrealized investment gains 401,889 188,248
--------------------- ---------------------
1,335,727 1,063,667
--------------------- ---------------------
$ 18,533,757 $ 16,411,713
===================== =====================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
---------------- --------------- ----------
(In thousands)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 146,516 $ 219,381 $ 294,163
Net investment income 1,076,951 1,037,417 956,134
Net realized investment gains 23,333 8,333 19,023
--------------- --------------- ---------------
TOTAL REVENUES 1,246,800 1,265,131 1,269,320
Benefits:
Benefits paid or provided 938,170 937,084 860,118
Increase (decrease) in policy reserves and
liabilities (13,815) 51,508 158,040
---------------- --------------- ---------------
924,355 988,592 1,018,158
Expenses:
Amortization of deferred policy
acquisition costs 32,930 16,949 12,048
Salaries and salary related expenses 48,834 46,261 38,846
Other expenses 44,764 63,993 46,889
--------------- --------------- ---------------
126,528 127,203 97,783
--------------- --------------- ---------------
TOTAL BENEFITS AND EXPENSES 1,050,883 1,115,795 1,115,941
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 195,917 149,336 153,379
Provision for income taxes 64,964 50,568 80,532
--------------- --------------- ---------------
NET INCOME $ 130,953 $ 98,768 $ 72,847
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
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, 1995 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 566,754
Balance at December 31, 1995 15,300 1,530 241,561 533,330 351,090
Net income 98,768
Common stock issued
Capital contributions from 230
parent
Change in net unrealized
investment losses (162,842)
Balance at December 31, 1996 15,300 1,530 241,791 632,098 188,248
Net income 130,953
Capital transactions with
parent (32,534)
Dividends declared (40,000)
Change in net unrealized
investment gains 213,641
Balance at December 31, 1997 15,300 $ 1,530 $ 209,257 $ 723,051 $ 401,889
========== =========== ============ ============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
----------------- ------------------ ----------
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 130,953 $ 98,768 $ 72,847
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in:
Reinsurance recoverable
and accounts receivable 9,183 (30,699) (19,588)
Policy liabilities 605,480 589,476 647,724
Other assets, accounts payable and other
liabilities, and income taxes (118,713) 66,536 (88,884)
Policy acquisition costs deferred (64,316) (57,498) (50,483)
Amortization of deferred policy acquisition costs 31,998 16,969 13,910
Net realized gains on investment transactions (22,401) (8,353) (20,885)
Other 1,893 (18,875) 26,818
----------------- ----------------- -----------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 574,077 656,324 581,459
INVESTMENT ACTIVITIES
Purchases of securities (5,166,388) (4,044,338) (3,873,531)
Purchases of other investments (26,067) (114,058) (219,898)
Sales of securities 4,350,361 2,669,548 2,386,893
Sales of other investments 61,616 117,881 70,071
Maturities of securities 279,040 247,411 252,315
Net change in short-term investments (43,016) 12,187 (15,466)
Other (2,097) (5,614) (6,204)
----------------- ----------------- -----------------
NET CASH USED BY
INVESTING ACTIVITIES (546,551) (1,116,983) (1,405,820)
FINANCING ACTIVITIES
Additions to policyholder contract deposits 4,162,515 4,254,998 3,321,069
Withdrawals from policyholder contract deposits (4,145,865) (3,812,392) (2,477,169)
Dividends paid to parent or its affiliates (40,000) - -
Capital contribution from parent - - 30
----------------- ----------------- -----------------
NET CASH (USED BY) PROVIDED BY
FINANCING ACTIVITIES (23,350) 442,606 843,930
----------------- ----------------- -----------------
INCREASE (DECREASE) IN CASH 4,176 (18,053) 19,569
Cash at beginning of year 4,368 22,421 2,852
----------------- ----------------- -----------------
CASH AT END OF YEAR $ 8,544 $ 4,368 $ 22,421
================= ================= =================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Business: Transamerica Life Insurance and Annuity Company ("TALIAC") and its
subsidiary (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 1997, the Financial Accounting Standards
Board issued a new standard on reporting comprehensive income, which establishes
standards for reporting and displaying comprehensive income and its components
in the financial statements. This standard is effective for interim and annual
periods beginning after December 15, 1997. Reclassification of financial
statements for all periods presented will be required upon adoption. Application
of this statement will not change recognition or measurement of net income and,
therefore, will not impact the Company's consolidated results of operations or
financial position.
In 1997, the Company adopted the Financial Accounting Standards Board's new
standard on accounting for transfers of financial assets, servicing of financial
assets and extinguishment of liabilities. 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. There was
no 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.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Principles of Consolidation: The consolidated financial statements of the
Company include the accounts of TALIAC and its subsidiary, Transamerica
Assurance Company, both of which operate primarily in the life insurance
industry. TALIAC is a wholly owned subsidiary of Transamerica Occidental Life
Insurance Company (TOLIC) 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.
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 SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Policy Acquisition Costs (DPAC): Certain costs of acquiring new and
renewal insurance contracts, principally commissions, and certain variable
sales, underwriting and 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 related to non-traditional and
investment-type products 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, mutual funds, 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 3.0% to 9.7% in 1997 and 3.2% to 9.5% in 1996 and 2.8% to 10% in
1995.
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 2.25% in earlier years to
11.82%. 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 SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
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: The Company is included in the consolidated federal income tax
return of TOLIC which, with its domestic subsidiaries and affiliates, is
included in the consolidated federal income tax returns filed by Transamerica
Corporation, which by the terms of a tax sharing agreement generally requires
the Company to accrue and settle income tax obligations in amounts that would
result if the Company filed 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 SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE B--INVESTMENTS
The cost and fair value of fixed maturities and equity securities available for
sale are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gain Loss Value
December 31, 1997
U.S. Treasury securities and
obligations of U.S. government
<S> <C> <C> <C> <C>
corporations and agencies $ 134,940 $ 38,105 $ - $ 173,045
Obligations of states and political
subdivisions 84,372 4,450 3 88,819
Foreign governments 30,050 4,642 - 34,692
Corporate securities 9,413,812 502,196 29,974 9,886,034
Public utilities 1,658,497 128,976 300 1,787,173
Mortgage-backed securities 2,455,496 206,585 664 2,661,417
Redeemable preferred stocks 48,069 21,396 8,809 60,656
----------------- ---------------- ----------------- -----------------
Total fixed maturities $ 13,825,236 $ 906,350 $ 39,750 $ 14,691,836
================= ================ ================= =================
Equity securities $ 30,954 $ 90,542 $ 2,418 $ 119,078
================= ================ ================ =================
December 31, 1996
U.S. Treasury securities and
obligations of U.S. government
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
================= ================ ================ =================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE B--INVESTMENTS (Continued)
The cost and fair value of fixed maturities available for sale at December 31,
1997, 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):
<TABLE>
<CAPTION>
Fair
Cost Value
Maturity
<S> <C> <C> <C>
Due in 1998 $ 355,557 $ 361,307
Due in 1999-2002 2,464,514 2,530,987
Due in 2003-2007 3,050,649 3,213,985
Due after 2007 5,450,951 5,863,484
---------------- ----------------
11,321,671 11,969,763
Mortgage-backed securities 2,455,496 2,661,417
Redeemable preferred stock 48,069 60,656
---------------- ----------------
$ 13,825,236 $ 14,691,836
================ ================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE B--INVESTMENTS (Continued)
As of December 31, 1997, 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
TA CBO I Inc. $ 233,292
MBNA Corporation 177,992
Secured Bond Trust 1997-1 227,588
Hill Street Funding 419,253
Olive Street Funding 172,020
The carrying value of assets on deposit with public officials in compliance with
regulatory requirements was $15.3 million at December 31, 1997 and $14.8 million
at December 31, 1996.
Net investment income (expense) by major investment category is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------------- ---------------- ----------
<S> <C> <C> <C>
Fixed maturities $ 1,047,214 $ 1,003,698 $ 929,826
Equity securities 2,115 1,915 708
Mortgage loans on real estate 33,681 33,432 26,322
Real estate 8 320 462
Policy loans 988 841 693
Other long-term investments - (518) 442
Short-term investments 4,277 4,685 5,375
--------------- ---------------- ----------------
1,088,283 1,044,373 963,828
Investment expenses (11,332) (6,956) (7,694)
--------------- ---------------- ----------------
$ 1,076,951 $ 1,037,417 $ 956,134
=============== ================ ================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE B--INVESTMENTS (Continued)
Significant components of net realized investment gains are as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ----------------- -----------
Net gains (losses) on disposition of investment in:
<S> <C> <C> <C>
Fixed maturities $ (7,824) $ 6,247 $ 29,272
Equity securities 39,075 7,023 3,206
Other 1,524 (175) 220
---------------- ---------------- ----------------
32,775 13,095 32,698
Provision for impairment (10,374) (4,742) (11,813)
Accelerated amortization of DPAC 932 (20) (1,862)
---------------- ---------------- ----------------
$ 23,333 $ 8,333 $ 19,023
================ ================ ================
</TABLE>
The components of net gains (losses) on disposition of investment in fixed
maturities are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ----------------- -----------
<S> <C> <C> <C>
Gross gains $ 43,422 $ 22,962 $ 31,163
Gross losses (51,246) (16,715) (1,891)
----------------- ---------------- ----------------
$ (7,824) $ 6,247 $ 29,272
================= ================ ================
</TABLE>
Proceeds from disposition of investments in fixed maturities available for sale
were $4,260.1 million in 1997, $2,652.5 million in 1996 and $2,308.6 million in
1995.
The costs of certain investments have been reduced by the following allowances
for impairment in value (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996
<S> <C> <C>
Fixed maturities $ 31,869 $ 22,495
Mortgage loans on real estate 12,031 11,031
--------------- ---------------
$ 43,900 $ 33,526
=============== ===============
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE B--INVESTMENTS (Continued)
The components of net unrealized investment gains in the accompanying
consolidated balance sheet are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996
-------------------- ------------
Unrealized gains on investment in:
<S> <C> <C>
Fixed maturities $ 866,600 $ 447,707
Equity securities 88,124 56,063
-------------------- --------------------
954,724 503,770
Fair value adjustments to:
DPAC (55,434) (19,159)
Reserves for future policy benefits (281,000) (195,000)
--------------------- --------------------
(336,434) (214,159)
Related deferred taxes (216,401) (101,363)
--------------------- --------------------
$ 401,889 $ 188,248
==================== ====================
</TABLE>
NOTE C--DEFERRED POLICY ACQUISITION COSTS (DPAC)
Significant components of changes in DPAC are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- -------------------- -------------
<S> <C> <C> <C>
Balance at beginning of year $ 248,442 $ 198,349 $ 238,526
Amounts deferred:
Commissions 42,960 39,736 34,717
Other 21,356 17,762 15,766
Amortization attributed to:
Net gain on disposition of investments 932 (20) (1,862)
Operating income (32,930) (16,949) (12,048)
Fair value adjustment (36,275) 9,564 (76,750)
--------------------- -------------------- --------------------
Balance at end of year $ 244,485 $ 248,442 $ 198,349
==================== ==================== ====================
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE D--POLICY LIABILITIES
Components of policyholder contract deposits are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996
------------------ ------------
<S> <C> <C>
Liabilities for investment-type products $ 10,569,050 $ 10,050,058
Liabilities for non-traditional life insurance products 316,943 221,243
------------------ ------------------
$ 10,885,993 $ 10,271,301
================== ==================
</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 $281 million as of December 31, 1997, $195 million as of
December 31, 1996 and $339 million as of December 31, 1995.
NOTE E--INCOME TAXES
Components of income tax liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996
------------------ ------------
<S> <C> <C>
Current tax liabilities $ 19,613 $ 963
Deferred tax liabilities 237,639 114,494
------------------ ------------------
$ 257,252 $ 115,457
================== ==================
Significant components of deferred tax liabilities (assets) are as follows (in
thousands):
December 31
1997 1996
------------------ ------------
Deferred policy acquisition costs $ 93,754 $ 85,629
Unrealized investment gains 216,401 101,363
------------------ ------------------
Total deferred tax liabilities 310,155 186,992
------------------ ------------------
Life insurance policy liabilities (56,648) (60,263)
Provision for impairment of investments (15,365) (11,734)
Other-net (503) (501)
------------------ ------------------
Total deferred tax assets (72,516) (72,498)
------------------ ------------------
$ 237,639 $ 114,494
================== ==================
</TABLE>
The Company 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 SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE E--INCOME TAXES
Components of provision for income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ ------------
<S> <C> <C> <C>
Current tax expense $ 56,857 $ 34,627 $ 20,335
Deferred tax expense 8,107 15,941 60,197
------------------ ------------------ ------------------
$ 64,964 $ 50,568 $ 80,532
================== ================== ==================
The differences between federal income taxes computed at the statutory rate and
the provision for income taxes as reported are as follows (in thousands):
1997 1996 1995
------------------ ------------------ ------------
Income before income taxes $ 195,917 $ 149,336 $ 153,379
Tax rate 35% 35% 35%
------------------ ------------------ ------------------
Federal income taxes at statutory rate 68,571 52,268 53,683
Income not subject to tax (1,374) (855) (532)
Adjustment to deferred tax asset - - 28,300
Other (2,233) (845) (919)
------------------ ------------------ ------------------
$ 64,964 $ 50,568 $ 80,532
================== ================== ==================
</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, 1997 was $20.3 million.
At December 31, 1997, $724 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 $38.2 million, $39.9 million and $29.0 million, were paid
principally to the parent in 1997, 1996 and 1995, 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 SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE F--REINSURANCE (Continued)
The components of the Company's life insurance in force and premiums and other
considerations are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Ceded to Assumed
Direct Other from the Net
Amount Companies Parent Amount
1997
Life insurance in force,
<S> <C> <C> <C> <C>
at end of year $ 31,178,888 $ 26,957,773 $ - $ 4,221,115
=================== =================== =================== ==================
Premiums and other
considerations $ 197,440 $ 97,155 $ 46,231 $ 146,516
=================== =================== =================== ==================
Benefits paid or
provided $ 528,162 $ 37,052 $ 447,060 $ 938,170
=================== =================== =================== ==================
1996
Life insurance in force,
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
=================== =================== =================== ==================
</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 SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE G--PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS (Continued)
The Company's total pension costs (benefits) recognized for all plans were $0.4
million in 1997, $(1.5) million in 1996 and $0.4 million in 1995, 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 1997, 1996 and 1995.
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
reinsurance (see Note F), 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, 1997, pension funds
administered for these related companies aggregated $1,467.4 million ($1,067.9
million in 1996) and the investment in an affiliated money market fund, included
in short-term investments, was $51.1 million ($13.1 million in 1996).
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.
During 1997, equity securities with a fair value of $50 million (cost of $2.6
million) were received from Transamerica Corporation in payment of a $50 million
note. The excess of fair value over cost ($47.4 million) was reclassified from
additional paid-in capital to unrealized gain. The Company also received a
capital contribution of $14.9 million from its parent.
NOTE I--REGULATORY MATTERS
TALIAC and its subsidiary 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
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE I--REGULATORY MATTERS (Continued)
operations for the preceding year. The insurance department of the domiciliary
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):
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------- ------------
<S> <C> <C> <C>
Statutory net income $ 128,897 $ 75,836 $ 69,103
Statutory capital and surplus, at
end of year 707,487 596,526 527,276
</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, 1997, commitments to maintain liquidity for
benefit payments on notional amounts of $3.3 billion were outstanding compared
to $1.9 billion in 1996.
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, 1997 and 1996, 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 SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
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 $4.3
million in 1997, $6.9 million in 1996 and $3.3 million in 1995. 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, 1997 (in thousands):
Year ending December 31:
1998 $ 1,979
1999 1,894
2000 1,670
2001 1,587
2002 1,453
Later years 12,436
$ 21,019
==================
The Company is a defendant in various legal actions arising from its operations.
These include legal actions against its subsidiary 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 subsidiary and plaintiffs' counsel entered into a settlement which
was approved on June 26, 1997. The settlement required prompt notification of
affected policyholders. Administrative and policy benefit costs associated with
the settlement are not material to the Company. Additional costs related to the
settlement are not currently determinable. In the opinion of management, any
ultimate liability which might result from other litigation would not have a
materially adverse effect on the combined financial position of the Company or
the results of its operations.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE K--FINANCIAL INSTRUMENTS
The carrying values and estimated fair values of financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
December 31
--------------------------------------------
1997 1996
----------------------------------- --------------------
Carrying Fair Carrying Fair
Value Value Value Value
Financial Assets:
<S> <C> <C> <C> <C>
Fixed maturities available for sale $ 14,691,836 $ 14,691,836 $ 13,687,899 $ 13,687,899
Equity securities available for sale 119,078 119,078 87,812 87,812
Mortgage loans on real estate 365,454 404,437 395,855 413,798
Policy loans 19,433 19,433 20,362 20,362
Short-term investments 76,806 76,806 33,790 33,790
Cash 8,544 8,544 4,368 4,368
Accrued investment income 242,606 242,606 177,420 177,420
Financial Liabilities:
Liabilities for investment-type contracts:
Single and flexible premium
deferred annuities 3,971,539 3,695,431 3,890,964 3,623,710
Single premium immediate annuities 89,474 92,469 90,133 90,256
Guaranteed investment contracts 2,811,890 2,843,680 2,790,663 2,811,556
Other deposit contracts 3,696,147 3,739,713 3,278,298 3,319,115
Off-balance-sheet assets (liabilities):
Interest rate swap agreements
hedges of liabilities in a:
Receivable position - 7,416 - 37,348
Payable position - (3,643) - (5,095)
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
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 or 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 SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE K--FINANCIAL INSTRUMENTS (Continued)
The information on derivative instruments is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Aggregate Weighted
Notional Average
Amount Fixed Rate Fair Value
December 31, 1997
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
<S> <C> <C> <C>
Fixed rate interest $ 237,868 7.20% $ (586)
Floating rate interest 275,905 6.46% 2,751
Floating rate interest based on one
index and receives floating rate
interest based on another index 311,538 - (162)
Interest rate swap agreements designated as
hedges of financial liabilities, where TLC
pays:
Fixed rate interest - - -
Floating rate interest 1,429,834 6.25% 5,334
Floating rate interest based on one
index and receives floating rate
interest based on another index 304,820 - (1,565)
Interest rate floor agreements 160,500 7.00% 13,434
Swaptions 1,826,030 4.90% 27,495
Other 4,466 - 1,449
December 31, 1996
Interest rate swap agreements designated as hedges of securities available
for sale, where TLC pays:
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
Interest rate cap agreements - - -
Swaptions 1,827,570 4.93% 10,403
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
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
1997:
Interest rate swap agreements
designated as hedges of
<S> <C> <C> <C> <C> <C>
securities available for sale $ 798,058 $ 144,011 $ 91,858 $ 24,900 $ 825,311
Interest rate swap agreements
designated as hedges of
financial liabilities 1,442,538 1,263,016 955,900 15,000 1,734,654
Interest rate floor agreements 160,500 - - - 160,500
Swaptions 1,827,570 - - 1,540 1,826,030
Other - 4,466 - - 4,466
--------------- -------------- --------------- ---------------- ---------------
$ 4,228,666 $ 1,411,493 $ 1,047,758 $ 41,440 $ 4,550,961
=============== ============== =============== ================ ===============
1996:
Interest rate swap agreements
designated as hedges of
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
- 1,117,140 - - 1,117,140
--------------- -------------- --------------- ---------------- ---------------
$ 946,822 $ 2,637,841 $ 620,725 $ 51,447 $ 2,912,491
=============== ============== =============== ================ ===============
</TABLE>
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1997
NOTE K--FINANCIAL INSTRUMENTS (Continued)
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments, derivatives,
fixed maturities, mortgage loans on real estate and reinsurance recoverables.
The Company places its temporary cash investments and enters into derivative
transactions 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. The Company
places reinsurance with only highly rated insurance companies. At December 31,
1997, 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-7 (the
"Separate Account"). 1/
(2) Not Applicable.
(3) Form of Underwriting Agreement between the Company, the Separate Account and
Transamerica Securities Sales Corporation. 1/
(4) Forms of Flexible Premium Deferred Variable Annuity Contracts.
A) Form of Flexible Premium Deferred Variable Annuity Contract for
Transamerica Bounty Variable Annuity. Guaranteed Minimum Death Benefit Rider
and Guaranteed Minimum Income Rider. 1/
(5) Form of Application for Flexible Premium Variable Annuity. 1/
(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.
(a) re The Alger American Fund 1
(b) re Alliance Variable Products Series Fund, Inc. 1
(c) re Dreyfus Variable Investment Fund 1
(d) re Janus Aspen Series 1
(e) re MFS Variable Insurance Trust 1
(f) re Morgan Stanley Universal Funds, Inc. 1
(g) re OCC Accumulation Trust 1
(h) re Transamerica Variable Insurance Fund, Inc. 1
(9) Opinion and Consent of Counsel. 1/
(10) (a) Consent of Counsel.
(b) Consent of Independent Auditors. 1
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Performance Data Calculations. 2/
(14) Not Applicable.
(15) Powers of Attorney. 1
- ----------------------------
1/ Filed herewith.
2/ To be filed by subsequent Pre-Effective Amendment.
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 Karen MacDonald
James W. Dederer Gary U. Rolle'
Richard H. Finn Paul E. Rutledge III
George A. Foegele T. Desmond Sugrue
David E. Gooding Bruce A. Turkstra
Edgar H. Grubb Nooruddin Veerjee
Frank C. Herringer Robert A. Watson
<PAGE>
List of Officers for Transamerica Life Insurance and Annuity Company
Thomas J. Cusack Chairman
Paul E. Rutledge III President - Reinsurance Division
Nooruddin S. Veerjee FSA President
Bruce A. Turkstra Executive Vice President and Chief Information Officer
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. Myers Senior Vice President
Larry H. Roy Senior Vice President
William R. Wellnitz FSA Senior Vice President and Actuary
Richard N. Latzer Chief Investment Officer
Gary U. Rolle' CFA Chief Investment Officer
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
Matthew A. Palmer 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
Michael Barnhart Regional Vice President
Frank Beardsley Vice President
Marsha Blackman Vice President
Nancy Blozis Vice President and Controller
Jim Bowman Vice President
Rose Ann Bremser Vice President
David Chernow Vice President
Matt Coben Vice President
Catherine Collinson Vice President
John Dohmen Vice President
Thomas P. Dolan Vice President
J. Peter Donlon Vice President
Harry Dunn Vice President
Paul Hankowitz MD Vice President & Chief Medical Director
Meheriar Hasan Vice President
Phoebe Huang Vice President
Zahid Hussain Vice President and Associate Actuary
Ahmad Kamil Vice President & Associate Actuary
Michael Kappos Vice President
Ken Kilbane Vice President
Richard Lau Vice President
Carl Macero Vice President and Chief Reinsurance Underwriter
Maureen McCarthy Vice President
Philip McHale Vice President and Chief Underwriter
Vic Modugno Vice President & Associate Actuary
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
Bill Tate Vice President
Colleen Vandermark Vice President
Richard L. Weinstein FSA Vice President & Associate Actuary
Timothy Weis Vice President
Ronald Wolfe Regional Vice President
Sally S. Yamada CPA, FLMI Vice President & Treasurer
Sandra Bailey-Whichard Second Vice President
Daniel J. Bohmfalk Second Vice President and Associate Actuary
Barry Buner Second Vice President
Reid A. Evers Second Vice President & Assistant General Counsel
David Fairhall FSA Second Vice President & Associate Actuary
Toni Forge Second Vice President
Sharon Haley Second Vice President
Andrew G. Kanelos Second Vice President
Karin Kemenes Second Vice President
Catherine A. Lenton Second Vice President
Liwen Lien Second Vice President
Danny Mahoney Second Vice President
Clay Moye Second Vice President
Daniel A. Norwick Second Vice President
Paul W. Reisz Second Vice President
Beverly Rockecharlie Second Vice President
Frank Snyder Second Vice President
Michael Stein Second Vice President
Suzette Stover-Hoyt Second Vice President and Assistant Secretary
Boning Tong Second Vice President and Associate Actuary
Emily Urbano Second Vice President
Joan Ward Second Vice President
Aldo Davanzo Assitant Secretary
Kamran Haghighi Tax Officer
Kim A. Tursky Assistant Secretary
Virginia M. Wilson Controller
James Wolfenden Statement Officer
<PAGE>
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 - DE
ARC Reinsurance Corporation - HI
Transamerica Management, Inc. - DE
Criterion Investment Management Company - TX
Inter-America Corporation - CA
Mortgage Corporation of America - CA
Pyramid Insurance Company, Ltd. - HI
Pacific Cable Ltd. - Bmda.
TC Cable, Inc. - DE
RTI Holdings, Inc. - DE
Transamerica Airlines, Inc. - DE
Transamerica Business Technologies Corporation - DE
Transamerica CBO I, Inc. - DE
Transamerica Corporation (Oregon) - OR
Transamerica Delaware, L.P. - DE
Transamerica Finance Corporation - DE
TA Leasing Holding Co., Inc. - DE
Trans Ocean Ltd. - DE
Trans Ocean Container Corp. - DE
SpaceWise Inc. - DE
TOD Liquidating Corp. - CA
TOL S.R.L. - Itl.
Trans Ocean Container Finance Corp. - DE
Trans Ocean Leasing Deutschland GmbH - Ger.
Trans Ocean Leasing PTY Limited - Aust.
Trans Ocean Management Corporation - CA
Trans Ocean Management S.A. - SWTZ
Trans Ocean Regional Corporate Holdings - CA
Trans Ocean Tank Services Corporation - DE
Transamerica Leasing Inc. - DE
Better Asset Management Company LLC - DE
Transamerica Leasing Holdings Inc. - DE
Greybox Logistics Services Inc. - DE
Greybox L.L.C. - DE
Transamerica Trailer Leasing S.N.C. - Fra.
Greybox Services Limited - U.K.
Intermodal Equipment, Inc. - DE
Transamerica Leasing N.V. - Belg.
Transamerica Leasing SRL - Itl.
Transamerica Distribution Services Inc. - DE
Transamerica Leasing Coordination Center - Belg.
Transamerica Leasing do Brasil Ltda. - Braz.
Transamerica Leasing GmbH - Ger.
Transamerica Leasing Limited - U.K.
ICS Terminals (UK) Limited - U.K.
Transamerica Leasing Pty. Ltd. - Aust.
Transamerica Leasing (Canada) Inc. - Can.
Transamerica Leasing (HK) Ltd. - H.K.
Transamerica Leasing (Proprietary) Limited - S.Afr.
Transamerica Tank Container Leasing Pty. Limited - Aust.
Transamerica Trailer Holdings I Inc. - DE
Transamerica Trailer Holdings II Inc. - DE
Transamerica Trailer Holdings III Inc. - DE
Transamerica Trailer Leasing AB - Swed.
Transamerica Trailer Leasing AG - SWTZ
Transamerica Trailer Leasing A/S - Denmk.
Transamerica Trailer Leasing GmbH - Ger.
Transamerica Trailer Leasing (Belgium) N.V. - Belg.
Transamerica Trailer Leasing (Netherlands) B.V. - Neth.
Transamerica Trailer Spain S.A. - Spn.
Transamerica Transport Inc. - NJ
Transamerica Commercial Finance Corporation, I - DE
BWAC Credit Corporation - DE
BWAC International Corporation - DE
BWAC Twelve, Inc. - DE
TIFCO Lending Corporation - IL
Transamerica Insurance Finance Corporation - MD
Transamerica Insurance Finance Company (Europe) - MD
Transamerica Insurance Finance Corporation, California - CA
Transamerica Insurance Finance Corporation, Canada - ON
Transamerica Business Credit Corporation - DE
Direct Capital Equity Investment, Inc. - DE
TA Air East, Corp. -
TA Air III, Corp. - DE
TA Air II, Corp. - DE
TA Air IV, Corp. - DE
TA Air I, Corp. - DE
TBC III, Inc. - DE
TBC II, Inc. - DE
TBC IV, Inc. -
TBC I, Inc. - DE
TBC Tax III, Inc. -
TBC Tax II, Inc. -
TBC Tax IV, Inc. -
TBC Tax IX, Inc. -
TBC Tax I, Inc. -
TBC Tax VIII, Inc. -
TBC Tax VII, Inc. -
TBC Tax VI, Inc. -
TBC Tax V, Inc. -
TBC Tax XII, Inc. -
TBC Tax XI, Inc. -
TBC V, Inc. -
The Plain Company - DE
Transamerica Distribution Finance Corporation - DE
Transamerica Accounts Holding Corporation - DE
Transamerica Commercial Finance Corporation - DE
Inventory Funding Trust - DE
Inventory Funding Company, LLC - DE
TCF Asset Management Corporation - CO
Transamerica Joint Ventures, Inc. - DE
Transamerica Inventory Finance Corporation - DE
BWAC Seventeen, Inc. - DE
Transamerica Commercial Finance Canada, Limited - ON
Transamerica Commercial Finance Corporation, Canada - Can.
BWAC Twenty-One, Inc. - DE
Transamerica Commercial Finance Limited - U.K.
WFC Polska Sp. Zo.o -
Transamerica Commercial Holdings Limited - U.K.
Transamerica Commercial Holdings, Inc. -
Transamerica Trailer Leasing Limited - NY
Transamerica Commercial Finance France S.A. - Fra.
Transamerica GmbH Inc. - DE
Transamerica Retail Financial Services Corporation - DE
Transamerica Consumer Finance Holding Company - DE
Metropolitan Mortgage Company - FL
Easy Yes Mortgage, Inc. - FL
Easy Yes Mortgage, Inc. - GA
First Florida Appraisal Services, Inc. - FL
First Georgia Appraisal Services, Inc. - GA
Freedom Tax Services, Inc. - FL
J.J. & W. Advertising, Inc. - FL
J.J. & W. Realty Corporation - FL
Liberty Mortgage Company of Ft. Myers, Inc. - FL
Metropolis Mortgage Company - FL
Perfect Mortgage Company - FL
Whirlpool Financial National Bank - DE
Transamerica Vendor Financial Services - DE
Transamerica Distribution Finance Corporation de Mexico -
Transamerica Corporate Services de Mexico -
Transamerica Federal Savings Bank -
Transamerica HomeFirst, Inc. - CA
Transamerica Home Loan - CA
Transamerica Lending Company - DE
Transamerica Financial Products, Inc. - CA
Transamerica Foundation - CA
Transamerica Insurance Corporation of California - CA
Arbor Life Insurance Company - AZ
Plaza Insurance Sales, Inc. - CA
Transamerica Advisors, Inc. - CA
Transamerica Annuity Service Corporation - NM
Transamerica Financial Resources, Inc. - DE
Financial Resources Insurance Agency of Texas - TX
TBK Insurance Agency of Ohio, Inc. - OH
Transamerica Financial Resources Insurance Agency of Alabama Inc.
- AL
Transamerica Financial Resources Insurance Agency of Massachusetts
Inc. - MA
Transamerica International Insurance Services, Inc. - DE
Home Loans and Finance Ltd. - U.K.
Transamerica Occidental Life Insurance Company - CA
NEF Investment Company - CA
Transamerica China Investments Holdings Limited - H.K.
Transamerica Life Insurance and Annuity Company - NC
Transamerica Assurance Company - CO
Transamerica Life Insurance Company of Canada - Can.
Transamerica Life Insurance Company of New York - NY
Transamerica South Park Resources, Inc. - DE
Transamerica Variable Insurance Fund, Inc. - MD
USA Administration Services, Inc. - KS
Transamerica Products, Inc. - CA
Transamerica Leasing Ventures, Inc. - CA
Transamerica Products II, Inc. - CA
Transamerica Products IV, Inc. - CA
Transamerica Products I, Inc. - CA
Transamerica Securities Sales Corporation - MD
Transamerica Service Company - DE
Transamerica Intellitech, Inc. - DE
Transamerica International Holdings, Inc. - DE
Transamerica Investment Services, Inc. - DE
Transamerica Income Shares, Inc. (managed by TA Investment Services)
- MD
Transamerica LP Holdings Corp. - DE
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. - DE
Bankers Mortgage Company of California - CA
Pyramid Investment Corporation - DE
The Gilwell Company - CA
Transamerica Affordable Housing, Inc. - CA
Transamerica Minerals Company - CA
Transamerica Oakmont Corporation - CA
Ventana Inn, Inc. - CA
Transamerica Senior Properties, Inc. - DE
Transamerica Senior Living, Inc. - DE
*Designates INACTIVE COMPANIES
A Division of Transamerica Corporation
Limited Partner; Transamerica Corporation is General Partner
Item 27. Number of Contract Owners
Bounty 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 reduce 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. The
limit of liability under the program is $95,000,000 for Coverage A and
$80,000,000 for Coverage B for the period 11/15/98 to 11/15/2000. Coverage B is
subject to a self insured retention of $15,000,000. The primary policy under the
program is with CNA Lloyds, Gulf, Chubb and Travelers.
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 and VL; Transamerica
Life Insurance and Annuity Company's Separate Accounts 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
(c) The following table lists the amounts of commissions paid to the
co-underwriter during the last fiscal year.
<TABLE>
<CAPTION>
Name of
Principal Net Underwriting Compensation on Brokerage
Underwriter Discounts & Commission Redemption Commissions Compensation
<S> <C> <C> <C> <C>
TSSC 0 0 0 0
</TABLE>
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 the charges deducted
under the Contracts, in the aggregate, are reasonable in relation to
the services rendered, the expenses expected to be incurred, and the
risks assumed by Transamerica.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Transamerica Life Insurance and Annuity Company has caused this
Registration Statement to be signed on its behalf by the undersigned in the City
of Los Angeles, State of California on the _____ day of June, 1998.
SEPARATE ACCOUNT VA-6 OF
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
(REGISTRANT)
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
(DEPOSITOR)
----------------------------------
David M. Goldstein Vice President
As required by the Securities Act of 1933, this Registration Statement has been
signed below on June ____, 1998 by the following persons or by their duly
appointed attorney-in-fact in the capacities specified:
Signatures Titles Date
______________________* Director and President June 23, 1998
Nooruddin S. Veerjee
______________________* Director, Executive Vice President,
Robert Abeles and Chief Financial Officer June 23, 1998
______________________* Director and Chairman June 23, 1998
Thomas J. Cusack
______________________* Director June 23, 1998
James W. Dederer
______________________* Director June 23, 1998
Richard H. Finn
______________________* Director June 23, 1998
George A. Foegele
______________________* Director June 23, 1998
David E. Gooding
______________________* Director June 23, 1998
Edgar H. Grubb
______________________* Director June 23, 1998
Frank C. Herringer
______________________* Director June 23, 1998
Richard N. Latzer
______________________* Director June 23, 1998
Karen MacDonald
______________________* Director June 23, 1998
Gary U. Rolle'
______________________* Director June 23, 1998
Paul E. Rutledge III
______________________* Director June 23, 1998
T. Desmond Sugrue
______________________* Director June 23, 1998
Bruce A. Turkstra
______________________* Director June 23, 1998
Robert A. Watson
_________________________ On June ______, 1998 as Attorney-in-Fact pursuant
*By: David M. Goldstein to powers of attorney filed herewith.
<PAGE>
Exhibit List
(1) Resolution authorizing Separate Account VA-7
(3) Underwriting Agreement between TALIAC & TSSC
(4) Contract and Riders
(5) Application
(6)(a) Articles of Incorporation
(6)(b) By-laws
(8) Participation Agreements with Underlying Funds
(9) Opinion and Consent of Counsel
(10)(b) Ernst & Young Consent
(15) Powers of Attorney (TALIAC)
<PAGE>
(1) Resolution authorizing Separate Account VA-7
<PAGE>
SEPARATE ACCOUNTS
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
WHEREAS, this Corporation, as a domestic California insurance company,
adopted resolutions authorizing its proper officers to enter into, make, perform
and carry out contracts and to establish any number of separate accounts,
without further action or approval by this Board of Directors, pursuant to
Section 10506 of the California Insurance Code;
WHEREAS, this Corporation was redomesticated in North Carolina on November
6, 1994, and pursuant to that redomestication, has continued to conduct its
business pursuant to North Carolina laws; and
WHEREAS, this Corporation desires reaffirm its intention to continue
entering into variable contracts and establishing separate accounts, including
those for which registration with the SEC may be appropriate, without further
action or approval by the Board, pursuant to Section 58-7-95 of the North
Carolina Insurance Code;
THEREFORE IT IS RESOLVED, that this Corporation reaffirms that its proper
officers, be and hereby are authorized (1) to enter into, make, perform and
carry out contracts of every sort and kind which may be necessary, suitable or
convenient to the conduct of business pursuant to Section 58-7-95 of the North
Carolina Insurance Code, which permits a life insurance company to establish one
or more separate accounts and to allocate these separate accounts amounts that
are received or retained in connections with variable contracts; and (2) to do
all and everything necessary, suitable or convenient to the conduct of such
business, including any act or thing incidental to, or growing out of, or
connected with the conduct of such business and further including, but not
limited to, the power to establish new separate accounts, both pooled and
non-pooled, without further action or approval by this Board of Directors; and
FURTHER RESOLVED, that 1) the income, if any, and gains and losses,
realized and unrealized, from assets allocated to each such separate account
shall be credited to or charged against the account without regard to other
income, gains or losses of the Company; and 2) if and to the extent so provided
under the applicable contract, that portion of the assets of any such separate
account equal to the reserves and other contract liabilities with respect to
such account shall not be chargeable with liabilities rising out of any other
business that Company may conduct.
FURTHER RESOLVED, that the proper officers are authorized to take all
necessary and appropriate actions in order to effectuate the offering and sales
of variable contracts, including preparing, executing and/or filing all
necessary papers and documents including, but not limited to, registration
statements and applications for exemption, and amendments thereto, with the
Securities and Exchange Commission and/or other appropriate regulators and
government agencies.
<PAGE>
Exhibit (3) Underwriting Agreement between TALIAC and TSSC
<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) Contract and Riders
<PAGE>
[GRAPHIC OMITTED]
[OBJECT OMITTED] Transamerica Life Insurance and Annuity Company
Home Office: 401 N. Tryon Street
Charlotte, NC 28202
A Stock Company
- ------------------------------------------
About your certificate
- ------------------------------------------
<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
[OBJECT OMITTED] [OBJECT OMITTED]
PRESIDENT GENERAL COUNSEL AND SECRETARY
Certificate of participation
issued in connection with
Group flexible premium deferred annuity contract form no. TGP-717-198
Variable and fixed dollar settlement options
Separate Account Investments
Non-participating - No annual dividends
TCG-317-198 Page 1
- -----------------------------------------------------------------------------
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>
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 [Small
Growth 0%] Cap
[MFS Value 0%]
Series [OCC Accumulation Trust Managed 0%]
0%] [OCC Accumulation Trust Equity 10%]
[Alliance Premier General Account Options
Growth 0%] [(2 yr. - 10 yr.) Guarantee Period
[Growth and 0%]
Income [Initial Interest
0%] Rate ]
[International Total Allocation: 100%
0%]
[Emerging
Markets
0%]
[Gold and Natural
Resources 0%]
[Balanced
30%]
[High
Yield
40%]
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
Continued on the next page
TCG-317-198 Page 2
<PAGE>
Information page (continued)
- ------------------------------------------------
<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 [1.25% of the assets in each variable sub-account]
- --------------------------------------------------------------
-------------------------------------------------------------
- -------------------------------------------------------------- [Currently 0.15% of the assets in each variable sub-account;
Administrative Expense Charge guaranteed not to exceed 0.35%]
-------------------------------------------------------------
- -------------------------------------------------------------- $10 for each transfer over [twelve] in each certificate year
Transfer Fee -------------------------------------------------------------
[Currently None; guaranteed not to exceed $25 per
- -------------------------------------------------------------- certificate year]
Systematic Withdrawal Fee -------------------------------------------------------------
- -------------------------------------------------------------- {Currently None; guaranteed not to exceed $30]
[(We will waive if account value is over $50,000)]
Account Fee (before the annuity date) -------------------------------------------------------------
[$30]
- -------------------------------------------------------------- --------------------------------------------
Annuity Fee (after the annuity date) [If elected, 0.20% of the account value]
___________________________________________ [This fee will be deducted monthly.]
- --------------------------------------------------------------
Guaranteed Minimum Death Benefit (GMDB) Rider Fee
- --------------------------------------------------------------
- --------------------------------------------------------------- --------------------------------------------------------------
- --------------------------------------------------------------- --------------------------------------------------------------
- -------------------------------------------------------------- [If elected
together with the GMDB Rider, 0.40% of the Guaranteed Minimum Income Benefit
(GMIB) Rider Fee account value for both the GMDB and GMIB Riders]
-------------------------------------------------------------
[This fee will be deducted monthly.]
- --------------------------------------------------------------- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Additional Information
<S> <C>
Minimum Initial Purchase Payment: [$25,000]
Additional Purchase Payment Minimum: [$1,000]
Maximum Total Purchase Payment(s): [$1.000,000]
Minimum Variable Sub-account Allocation or Transfer: [$100]
Minimum Allocation or Transfer for Each Multi-Year Guarantee Period: [$1,000]
Minimum Partial Withdrawal Amount [$1,000]
Minimum Account Value: [$2,000]
End of Information Page
</TABLE>
TCG-317-198 Page 2A
- ------------------------------------------------
Table of Contents
- ---------------------------------
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
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 ...............................................................10
SETTLEMENT OPTION PAYMENTS..................................................................11
DEATH BENEFIT PROVISIONS ..........................................................................12
CHARGES, FEES AND SERVICES .................................. ....................................13
GENERAL PROVISIONS
.......................................................................................14
APPENDIX - ANNUITY RATE BASES...............................................................16
</TABLE>
TCG-317-198 Page 3
- -------------------------------------
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 certificate begins. The annuity date is
shown on the Information Page.
Cash Surrender Value
The amount we will pay you 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, and 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.
General Account
Our assets that are not allocated to a separate account. An account that credits
a rate of interest for a period of at least twelve months for each allocation or
transfer. The general account options you selected are shown on the Information
Page.
General Account Options Accumulated Value
The total dollar value of all amounts you allocate 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.
Guarantee Period
The number of years that a guaranteed rate of interest will be credited to a
multi-year guarantee period option.
Guaranteed Interest Rate
The annual effective rate of interest after daily compounding credited to a
guarantee period.
Multi-Year Guarantee Period Option
A general account option that credits a guaranteed rate of interest for
specified guarantee periods. There may be several guarantee periods offered.
Portfolio
The investment portfolio underlying each variable sub-account in which we will
invest any amounts you allocate 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>
TCG-317-198 Page 4
<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 you selected 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 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.
You are entitled to designate the annuitant, beneficiary or other payee,
settlement option, and annuity date. To make changes to these designations you
must notify us at our service center 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 rules. We reserve the right to reject any change of the
annuitant(s) that 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) 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.
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 you give us other
instructions at the time the beneficiaries are named.
<PAGE>
TCG-317-198 Page 5
<PAGE>
Establishing this Certificate
<PAGE>
This certificate was established on the certificate effective date
shown on the Information Page.
Any time before the annuity date you may make additional purchase payments to
this certificate. We reserve the right to not accept additional purchase
payments beyond certain attained ages of you or the annuitant.
You 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 you make 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 your
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 purchase 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 you any purchase
payments that do not meet the conditions described in this section.
Allocating Each Purchase Payment
Allocations you make to the variable sub-accounts and general account options
are subject to the following conditions. You 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; and
Not less than the multi-year guarantee period minimum, as shown on the
Information Page.
You 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 you stop making additional purchase payments to this certificate, all
provisions of the certificate will continue in force until all values have been
distributed.
<PAGE>
TCG-317-198 Page 6
<PAGE>
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The Variable Account
- ----------------------------------------------
<PAGE>
The variable account is a separate investment account established and maintained
by us 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
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
you written notification of such changes.
Variable Accumulation Unit
A variable accumulation unit is a 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 as 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>
TCG-317-198
Page 7
<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>
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The General Account
- ---------------------------------------------------
<PAGE>
Our general account includes all assets not allocated to one of our separate
accounts. The general account options under this certificate allow you to select
an interest guarantee period of one or more years to which you may allocate
purchase payments and transfers.
Multi-year Guarantee Period Account Option
Guarantee Periods
Each purchase payment allocation or transfer to a multi-year guarantee period
option will establish a new guarantee period. Each guarantee period offers a
specified duration with a corresponding guaranteed interest rate. You may not
select a guarantee period whose duration will extend beyond the annuity date, as
described in the settlement option provision section.
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 that 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 multi-year 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 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 (partial 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 that 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
multi-year guarantee period, we will notify you as to the options available when
a guarantee period expires. You 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.
<PAGE>
TCG-317-198
Page 8
<PAGE>
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>
You 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 that 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, or any
general account option is the lesser of the amount shown on the Information Page
or the entire value of the variable sub-account or general account option from
which the transfer is being made. The minimum amount that may be initially
allocated or transferred into a variable sub-account or a general account option
is shown on the Information Page. The minimum amount that must always be
transferred into any guarantee period option 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 you may:
Withdraw a portion of the account value for cash subject to any applicable
interest adjustment 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.
For purposes of adjusting the account value under this certificate, 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 the
amount shown on the Information Page or the entire value of the variable
sub-account or general account option 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.
<PAGE>
TCG-317-198
Page 9
<PAGE>
Systematic Withdrawal Option
You may elect to automatically receive a series of partial withdrawals under 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.
You 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
You 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 federal or state law, rules or regulations.
Payment of the cash surrender value to you will be in full settlement of our
liability under the certificate.
<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 you selected. 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 you selected.
<PAGE>
You 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 100th birthday.
After the annuity date, we will not allow you 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 settlement option payments is equal
to the account value, less any interest adjustment, and less any premium tax
charges.
Minimum Requirements
We reserve the right to offer a less frequent mode of payment than the mode
selected by you or make a cash payment to you 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 you 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 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.
<PAGE>
CG-317-198 Page
10
<PAGE>
Life Annuity with Period Certain
Provides payments 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 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 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
<PAGE>
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) you
selected. These payments may increase, decrease or remain the same.
<PAGE>
Fixed Payment Option
Amount of Fixed Payment
You 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 basis. If required by law, we will use the appropriate unisex
guaranteed annuity rate basis. The monthly annuity rate basis are contained in
the appendix.
Variable Payment Option
Amount of First Variable Payment
You 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 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 basis. If required by law, we will use
the appropriate unisex guaranteed annuity rate basis.
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 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.
<PAGE>
TCG-317-198 Page 11
<PAGE>
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. We reserve 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; or Any other
proof or documents we may require.
<PAGE>
Amount of Death Benefit
If the owner or joint owner dies before the annuity date the death benefit is
the account value.
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 form of benefit elected by the person
to whom the death benefit is payable.
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.
<PAGE>
TCG-317-198
Page 12
<PAGE>
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.
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 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 person, unless the owner had given us written
notice of some other arrangement.
<PAGE>
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Charges, Fees and Services
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<PAGE>
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 you. Any
increase in the administrative expense charge will apply prospectively to
administrative expense charges deducted after the effective date of change.
<PAGE>
TCG-317-198 Page 13
<PAGE>
Transfer Fee
We reserve the right to impose a transfer fee for each transfer made during a
single certificate year in excess of the number shown on the Information Page.
The amount of the transfer fee on the certificate effective date is shown on the
Information Page. This fee will not increase.
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.
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 multi-year guarantee period
option(s) for this fee.
We may change this fee prospectively upon 30 days advance written notice to you.
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 you a statement of
account reflecting the account value of the certificate. Statements of account
will cease to be provided to you after the annuity date.
<PAGE>
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General Provisions
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<PAGE>
Entire Contract
This certificate, the group annuity 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 made by us as a result of such misstatement, will be paid in a lump
sum on the next settlement option payment, 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 that 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 you 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 changes made in the tax
qualification requirements. We will provide you with a copy of any changes we
make to this certificate.
Incontestability
This certificate is incontestable from the certificate effective date.
<PAGE>
TCG-317-198 Page 14
<PAGE>
Assignment of this Certificate
To make ownership changes or assign rights to another person, you 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 Us
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 requirements in a form and manner acceptable to us.
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 and
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 or restrictions on 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 value 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
share in our profits or surplus, and therefore no dividends are payable.
<PAGE>
TCG-317-198 Page 15
<PAGE>
APPENDIX
ANNUITY RATE BASES
<PAGE>
Fixed Annuity Payment Option
The actuarial basis for fixed annuity male or female rates is the 1983a Annuity
Mortality Table, projection G, for males or females as appropriate, with an
interest rate of 3% per year.
The actuarial basis for fixed annuity unisex rates is the 1983a Annuity
Mortality Table, projection G, blended 60% males and 49% females, with an
interest rate of 3% per year.
Variable Annuity Payment Option
The actuarial basis for variable annuity male or female rates is the 1983a
Annuity Mortality Table, projection G, for males or females as appropriate, with
an assumed interest rate of 4% per year.
The actuarial basis for variable annuity unisex rates is the 1983a Annuity
Mortality Table, projection G, blended 60% males and 49% females, with an
assumed interest rate of 4% per year.
TCG-317-198 Page 16
<PAGE>
Certificate of participation
issued in connection with
Group flexible premium deferred annuity contract form no. TGP-717-197
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
TCG-317-198
A Stock Company
<PAGE>
4-007 469-198 Page 1
Guaranteed Minimum Death Benefit 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 guarantee a minimum death benefit
regardless of the performance of the separate account portfolios.
This rider 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>
Guaranteed Minimum Death Benefit
??This is repeated below???The amount of the annual Guaranteed Minimum Death
Benefit fee is shown on the Information Page???.
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.
(B) is 100% of purchase payments, less the sum of all withdrawals taken 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 and adjusted as described in the Withdrawals provision.
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.
If the owner or joint owner dies before the annuity date, and either the
deceased owner or surviving owner had attained age 85, the death benefit will be
the greater of (A), and (B) where:
(A) is the account value.
(B) is the highest account value on any certificate anniversary prior to such
owner's 85th birthday, 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.
Withdrawals
Upon any withdrawal, the amount of the Guaranteed Minimum Death Benefit will be
reduced. The amount of that reduction will depend upon whether the account value
is more or less than the Guaranteed Minimum Death Benefit on the date of
withdrawal.
If the account value is equal to or more than the Guaranteed Minimum Death
Benefit, the Guaranteed Minimum Death Benefit will be reduced by the dollar
amount of any withdrawals.
If the account value is less than the Guaranteed Minimum Death Benefit, the
Guaranteed Minimum Death Benefit will be reduced proportionately to the
reduction in the account value. For example, if the withdrawal reduces the
account value by 20%, then the Guaranteed Minimum Death Benefit will also be
reduced by 20%.
Guaranteed Minimum Death Benefit Fee
The Guaranteed Minimum Income Benefit fee is an annual fee for the benefit
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.
<PAGE>
Signed for the Company at Charlotte, North Carolina, to be effective on the
certificate effective date.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
[OBJECT OMITTED] [OBJECT OMITTED]
PRESIDENT GENERAL COUNSEL AND SECRETARY
<PAGE>
4-007 470-198 Page 2
Guaranteed Minimum Income Benefit 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 guarantee a minimum income benefit
regardless of the performance of the separate account portfolios.
This rider 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>
Guaranteed Minimum Income Benefit
??this is repeated belowThe amount of the annual Guaranteed Minimum Income
Benefit fee is shown on the Information Page.??
In the event of joint owners, any reference to age is to the age of the older
owner.
Prior to the certificate anniversary on which the owner's age is 85, the amount
to be applied under the Guaranteed Minimum Income Benefit is equal to the
greatest of (A), (B) or (C) where:
(A) is the account value.
(B) is 100% of purchase payments, less the sum of all withdrawals taken,
adjusted as described in the Withdrawals provision, 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, adjusted as described in
the Withdrawals provision, and any applicable premium tax charges since
that anniversary.
Between the certificate anniversary on which the owner's age is 85 and the
certificate anniversary on which the owner's age is 90, the amount to be applied
under the Guaranteed Minimum Income Benefit does not change, except for purchase
payments made and withdrawals taken.
After the certificate anniversary on which the owner's age is 90, the Guaranteed
Minimum Income Benefit is the account value.
The Guaranteed Minimum Income Benefit will be determined as of the end of the
valuation period during which our Service Center receives the written notice of
the settlement option elected by the owner(s).
Owner
While this Rider is in effect, the owner(s) and the annuitant(s) must be the
same and no change is allowed.
Exercising this Option
The owner(s) may elect a settlement option under this rider for 30 days
following each certificate anniversary beginning with the seventh certificate
anniversary. The amount described in the Guaranteed Minimum Income Benefit
provision will be applied to purchase the settlement option described below.
The only settlement option available under this rider is Life and 10 Year
certain. However, if the owner(s)' projected life expectancy is less than 10
years, then the settlement option available is Life and a Period Certain equal
to the owner(s)' life expectancy. The actuarial basis for the annuity rates
under this option is the 1983 IAM Table, project scale G, with an interest rate
of 3% per year, for males, females or unisex, as appropriate. The annuity
purchase rates under this benefit may be different from those of the base
certificate.
Withdrawals
Upon any withdrawal, the amount of the Guaranteed Minimum Income Benefit will be
reduced. The amount of that reduction will depend upon whether the account value
is more or less than the Guaranteed Minimum Income Benefit on the date of
withdrawal.
If the account value is equal to or more than the Guaranteed Minimum Income
Benefit, the Guaranteed Minimum Income Benefit will be reduced by the amount of
the withdrawal.
If the account value is less than the Guaranteed Minimum Income Benefit, the
Guaranteed Minimum Income Benefit will be reduced proportionately to the
reduction in the account value. For example, if the withdrawal reduces the
account value by 20%, then the Guaranteed Minimum Income Benefit will also be
reduced by 20%.
Guaranteed Minimum Income Benefit Fee
The Guaranteed Minimum Income Benefit fee is an annual fee for the benefit
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.
<PAGE>
Signed for the Company at Charlotte, North Carolina, to be effective on the
certificate effective date.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
[OBJECT OMITTED] [OBJECT OMITTED]
PRESIDENT GENERAL COUNSEL AND SECRETARY
<PAGE>
Exhbiit (5) Form of Application
<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 (6)(a) Articles of Incorporation
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
I
The name of this Corporation is TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY. The location of the home office of the Corporation is
NationsBank Corporate Center, 100 N. Tryon Street, Suite 2500, Charlotte,
Mecklenburg County, North Carolina, 28202-4004.
II
The period of duration of the Corporation shall be perpetual.
III
The address of the registered office of the Corporation is NationsBank
Corporate Center, 100 N. Tryon Street, Suite 2500, Charlotte, Mecklenburg
County, North Carolina, 28202-4004, and the name of the registered agent of the
Corporation at such address is William E. Simms. The Corporation may have one or
more branch offices and places of business either in the State of North Carolina
or in any other state.
IV
The purposes for which this Corporation is organized are:
1. To write and issue as a stock company insurance upon the lives of
human beings and every insurance appertaining thereto, including, but not
limited to, the granting of endowment benefits; additional benefits in the event
of death by accident or accidental means; additional benefits operating to
safeguard the contract from lapse, or to provide a special surrender value, in
the event of total and permanent disability of the insured, including industrial
sick benefit; and the optional modes of settlement of proceeds;
2. To write and issue all agreements to make periodical payments,
whether in fixed or variable dollar amounts, or both, at specified intervals;
3. To writer and issue insurance against death or personal injury by
accident or by any specified kinds of accident and insurance against sickness,
ailment or bodily injury;
4. To write and issue insurance against disability resulting from
sickness, ailment or bodily injury (but not including insurance solely against
accidental injury), under any contract that does not give the insurer the option
to cancel or otherwise terminate the contract at or after one year from its
effective date or renewal date;
5. To engage in such other kind or kinds of business to the extent
necessarily or properly incidental to the kind of insurance business which it is
authorized to do in the State of North Carolina and in any other state of the
United States of America and other lawful act or activity for which a
corporation may be organized under the North Carolina Business Corporation Act.
V
The Corporation is authorized to issue only one class of stock; and
the total number of shares this Corporation is authorized to issue is Fifty
Thousand (50,000) share with a par value of $100.00 per share.
VI
The Corporation shall be authorized to write and issue all such
policies of insurance authorized and described in Article IV of the Articles of
Incorporation when it shall have obtained a certificate authorizing the issuance
of such policies from, and shall have been duly licensed to do business by, the
Commissioner of Insurance of the State of North Carolina.
VII
No holders of stock of the Corporation of any class shall have any
preemptive or other right to subscribe for or purchase any part of any new or
additional issue of stock of any class of or securities convertible into stock
of the Corporation of any class, even though hereafter authorized or whether
issued for money, for consideration other than money or by way of a dividend.
VIII
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
the adoption of any provision of these Articles of Incorporation inconsistent
with this Article, shall eliminate or reduce 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.
IX
The foregoing Restated Articles of Incorporation were approved by the
sole shareholder of the Corporation on August 11, 1994.
<PAGE>
<PAGE>
(b) By-Laws of Transamerica Life Insurance and Annuity
Company. 1/
<PAGE>
REVISED
BYLAWS
Bylaws for the regulation, except as
otherwise provided by statute or its
Articles of Incorporation, of
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY,
a North Carolina corporation
ARTICLE I
ANNUAL SHAREHOLDERS' MEETING
The annual meeting of the shareholders of Transamerica Life Insurance
and Annuity Company (the "Company") shall be held on the first Tuesday in March
of each year, if not a legal holiday, in which case the annual meeting shall be
on the next business day following, at 10:00 a.m., for the purpose of electing
directors and for the transaction of such other business as may be brought
before the meeting.
ARTICLE II
BOARD OF DIRECTORS
The number of directors of the Company shall be not less than nine (9)
nor more than seventeen (17). The exact number of directors shall be fixed,
within the limits specified, by a resolution adopted by the Board of Directors
or by the shareholders.
ARTICLE III
CHIEF EXECUTIVE OFFICER
The Board of Directors shall from time to time designate one of the
officers of the Company to be the Chief Executive Officer.
ARTICLE IV
GENERAL
Except as is expressly set forth herein, this Company shall be
governed by the applicable statutes of the North Carolina Business Corporation
Act, together with any amendments to said Act as enacted from time to time, as
though said statutes had been fully set forth herein.
<PAGE>
ARTICLES OF REDOMESTICATION AND RESTATEMENT
OF
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
The undersigned, TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY (the
"Corporation"), hereby submits these Articles of Redomestication and Restatement
for the purposes of changing the domicile of the Corporation from the State of
California to the State of North Carolina, integrating into one document its
original articles of incorporation and all amendments thereto and also for the
purpose of amending its articles of incorporation.
1. The name of the Corporation is TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY. The location of the home office of the Corporation is
NationsBank Corporate Center, 100 N. Tryon Street, Suite 2500, Charlotte,
Mecklenburg County, North Carolina, 28202-4004.
2. Attached hereto as an exhibit are the amended and restated articles
of incorporation which contain amendments to the articles of incorporation
requiring shareholder approval.
3. The amended and restated articles of incorporation of the
Corporation were adopted by its sole shareholder on the 11th day of August,
1994, in the manner prescribed by law.
4. The number of shares of the Corporation outstanding at the time of
such adoption was 15,000; the number of shares entitled to be cast thereon was
15,000; and the number of votes indisputably represented at the meeting of
shareholder was 15,000.
5. The number of votes cast for the amended and restated articles of
incorporation was 15,000. No votes were cast against the amended and restated
articles.
6. These articles are effective on November 7, 1994.
Executed on this the 1st day of November, 1994.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
By:__________________________________
Nooruddin Veerjee, President
<PAGE>
Exhibit (8) Participation Agreements with Underlying Funds
<PAGE>
8
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this _____ day of ______________ , 1997, by and
among The Alger American Fund (the "Trust"), an open-end management investment
company organized as a Massachusetts business trust, Fred Alger Management,
Inc., an investment adviser organized under the laws of the state of New York (
the "Adviser"), Transamerica Life Insurance Company of New York, a life
insurance company organized as a corporation under the laws of the State of New
York, (the "Company"), on its own behalf and on behalf of each segregated asset
account of the Company set forth in Schedule A, as may be amended from time to
time (the "Accounts"), and Fred Alger and Company, Incorporated, a Delaware
corporation, the Trust's distributor (the "Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used
as an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into
the following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, Alger American Income & Growth Portfolio, Alger American Balanced
Portfolio, Alger American MidCap Growth Portfolio, and Alger American Leveraged
AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the Trust to be sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised;
WHEREAS, the Company may contract with an Administrator to perform
certain services with regard to the Contracts and, therefore, certain
obligations ans services of the Adviser and/or Trust should be directed to the
Administrator, as directed by the Company,
WHEREAS, the Company desires to use shares of the Portfolios
indicated on Schedule A as investment
vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1. For purposes of this Article I, the Company or its administrator shall
be the Trust's agent for the receipt from each account of purchase
orders and requests for redemption pursuant to the Contracts relating
to each Portfolio, provided that the Company or its administrator
notifies the Trust of such purchase orders and requests for redemption
by 9:30 a.m. Eastern time on the next following Business Day, as
defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the
Accounts at the net asset value next
computed after receipt of a purchase order by the Trust (or its
agent), as established in accordance
with the provisions of the then current prospectus of the
Trust describing Portfolio purchase
procedures. The Company or its administrator will transmit order
from time to time to the Trust for
the purchase and redemption of shares of the Portfolios. The Trustees
of the Trust (the "Trustees") 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 if,
in the sole discretion of the Trustees acting in good faith and in
light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in th
best interests of the shareholders
of such Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to
the Trust, with the reasonable expectation of receipt by the Trust by
2:00 p.m. Eastern time on the next Business Day after the Trust (or its
agent) receives the purchase order. Upon receipt by the Trust of the
federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Trust for
this purpose. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the
Company on behalf of an Account, at the net asset value next computed
after receipt by the Trust (or its
agent) of the request for redemption, as established in accordance
with the provisions of the then
current prospectus of the Trust describing Portfolio redemption
procedures. The Trust shall make
payment for such shares in the manner established from time to
time by the Trust. Proceeds of
redemption with respect to a Portfolio will be paid to the Company
for an Account in federal funds
transmitted by wire to the Company by order of the Trust with the
reasonable expectation of receipt by
the Company by 2:00 p.m. Eastern time on the next Business Day
after the receipt by the Trust (or its
agent) of the request for redemption. Such payment may be delayed if,
for example, the Portfolio's cash
position so requires or if extraordinary market conditions exist,
but in no event shall payment be
delayed for a greater period than is permitted by the 1940 Act. The
Trust reserves the right to suspend
the right of redemption, consistent with Section 22(e) of the 1940 Act
and any rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of
the Trust's Portfolios under Section 1.4 on any Business Day may be
netted against one another for the purpose of determining the amount of
any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Portfolio Shares purchased from the Trust will be recorded in
the appropriate title for each Account or the appropriate subaccount of
each Account.
1.7. The Trust shall furnish, two days before the ex-dividend date, notice
to the Company that an income dividend or capital gain distribution
will be paid on the shares of any Portfolio of the Trust. The Company
hereby elects to receive all such income dividends and capital gain
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.
1.8. The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or
its designated agent 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 to the
Company by 6:30 p.m. Eastern time each Business Day.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as may
be permitted by Section 817(h) of the Code, the regulations hereunder,
or judicial or administrative interpretations thereof. No shares of any
Portfolio will be sold directly to the general public. The Company
agrees that it will use Trust shares only for the purposes of funding
the Contracts through the Accounts listed in Schedule A, as amended
from time to time.
1.10. The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
ARTICLE II.
Obligations of the Parties
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and
statements of additional information of the Trust. The Trust shall bear
the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance
and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state
law.
2.3. The Trust shall provide such documentation (including a final copy of
the prospectus(es) of the Portfolios indicated on Schedule A as set in
type or in camera-ready copy) and other assistance as is reasonably
necessary in order for the Company to print together in one document
the current prospectus for the Contracts issued by the Company and the
current prospectus for the Trust. The Trust shall bear the expense of
printing copies of its current prospectus that will be distributed to
existing Contract owners, and the Company shall bear the expense of
printing copies of the Trust's prospectus that are used in connection
with offering the Contracts issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense,
one copy of the Trust's current Statement of Additional Information
("SAI") to the Company and to any Contract owner who requests such SAI,
(2) at the Company's expense, such additional copies of the Trust's
current SAI as the Company shall reasonably request and that the
Company shall require in accordance with applicable law in connection
with offering the Contracts issued by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of
its proxy material, periodic reports
to shareholders and other communications to shareholders in
such quantity as the Company shall
reasonably require for purposes of distributing to Contract
owners. The Trust, at the Company's
expense, shall provide the Company with copies of its periodic
reports to shareholders and other
communications to shareholders in such quantity as the Company
shall reasonably request for use in
connection with offering the Contracts issued by the Company.
If requested by the Company in lieu
thereof, the Trust shall provide such documentation (including
a final copy of the Trust's proxy
materials, periodic reports to shareholders and other communications
to shareholders, as set in type or
in camera-ready copy) and other assistance as reasonably
necessary in order for the Company to print
such shareholder communications for distribution to Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the sole
owner of the name and mark "Alger" and that all use of any designation
comprised in whole or part of such name or mark under this Agreement
shall inure to the benefit of the Distributor. Except as provided in
Section 2.5, the Company shall not use any such name or mark on its own
behalf or on behalf of the Accounts or Contracts in any registration
statement, advertisement, sales literature or other materials relating
to the Accounts or Contracts without the prior written consent of the
Distributor. Upon termination of this Agreement for any reason, the
Company shall cease all use of any such name or mark as soon as
reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the
Trust or its designee a copy of each
Contract prospectus and/or statement of additional information
describing the Contracts, each report to
Contract owners, proxy statement, application for exemption or
request for no-action letter in which the
Trust or the Distributor is named contemporaneously with the
filing of such document with the
Commission. 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 or the Distributor is
named, at least five Business Days prior to its use. No such material
shall be used if the Trust or its
designee reasonably objects to such use within three Business Days
after receipt of such material.
2.8. The Company shall not give any information or make any
representations or statements on behalf of the
Trust or concerning the Trust or the Distributor in connection with
the sale of the Contracts other than
information or representations contained in and accurately derived
from the registration statement or
prospectus for the Trust shares (as such registration statement
and prospectus may be amended or
supplemented from time to time), annual and semi-annual reports of
the Trust, Trust-sponsored proxy
statements, or in sales literature or other promotional material
approved by the Trust or its designee,
except as required by legal process or regulatory authorities or
with the prior written permission of
the Trust, the Distributor or their respective designees. The
Trust and the Distributor agree 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 "broker only"
materials including information therein
about the Trust or the Distributor are not distributed to existing or
prospective Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and
the Distributor, in such form as the Company may reasonably require, as
the Company shall reasonably request in connection with the preparation
of registration statements, prospectuses and annual and semi-annual
reports pertaining to the Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give,
any information or make any representations or statements on
behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and
accurately derived from the registration statement or prospectus for
the Contracts (as such registration
statement and prospectus may be amended or supplemented from time to
time), or in materials approved by
the Company for distribution including sales literature or other
promotional materials, except as
required by legal process or regulatory authorities or with the
prior written permission of the
Company. The Company agrees to respond to any request for approval of
a prompt and timely basis.
2.11. So long as, and to the extent that, the Commission interprets
the 1940 Act to require pass-through
voting privileges for Contract owners, the Company will provide
pass-through voting privileges to
Contract owners whose cash values are invested, through the
registered Accounts, in shares of one or
more Portfolios of the Trust. The Trust shall require all
Participating Insurance Companies to
calculate voting privileges in the same manner and the Company
shall be responsible for assuring that
the Accounts calculate voting privileges in the manner established
by the Trust. With respect to each
registered Account, the Company will vote shares of each Portfolio
of the Trust held by a registered
Account and for which no timely voting instructions from Contract
owners are received in the same
proportion as those shares for which voting instructions are
received. The Company and its agents will
in no way recommend or oppose or interfere with the solicitation of
proxies for Portfolio shares held to
fund the Contacts without the prior written consent of the Trust,
which consent may be withheld in the
Trust's sole discretion. The Company reserves the right, to the
extent permitted by law, to vote shares
held in any Account in its sole discretion.
2.12. The Company and the Trust will each provide to the other information
about the results of any regulatory examination relating to the
Contracts or the Trust, including relevant portions of any "deficiency
letter" and any response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified
expense reimbursements). However, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust, the
Accounts or both.
ARTICLE III.
Representations and Warranties
3.1. The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of New
York and that it has legally and validly established each Account as a
segregated asset account under such law as of the date set forth in
Schedule A, and that _________________________________, the principal
underwriter for the Contracts, is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member in good standing of
the National Association of Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act
and cause each Account to remain so registered to serve as a segregated
asset account for the Contracts, unless an exemption from registration
is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the Contracts
will be issued and sold in compliance in all material respects with all
applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance law suitability
requirements.
3.4. The Trust represents and warrants that it is duly 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
the rules and regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered
under the 1933 Act and sold in accordance with all applicable federal
and state laws, and the Trust shall be registered under the 1940 Act
prior to and at the time of any issuance or sale of such shares. The
Trust shall amend its registration statement under the 1933 Act and the
1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and qualify
its shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Trust.
3.6. The Trust and Adviser represent and warrant that the investments of
each Portfolio complies and will comply with the diversification
requirements for variable annuity, endowment or life insurance
contracts set forth in Section 817(h) of the Internal Revenue Code of
1986, as amended (the "Code"), and the rules and regulations
thereunder, including without limitation Treasury Regulation 1.817-5,
and will notify the Company immediately upon having a reasonable basis
for believing any Portfolio has ceased to comply or might not so comply
and will immediately take all reasonable steps to adequately diversify
the Portfolio to achieve compliance within the grace period afforded by
Regulation 1.817-5.
3.7. The Trust and Adviser represent and warrant that each Portfolio is
currently qualified as a "regulated investment company" under
Subchapter M of the Code, that such qualification will be maintained
and the Trust or the Adviser will notify the Company immediately upon
having a reasonable basis for believing it has ceased to so qualify or
might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of
a Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less
than the minimum coverage required by Rule 17g-1 or other applicable
regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of 1934
and is a member in good standing of the National Association of
Securities Dealers, Inc.
ARTICLE IV.
Potential Conflicts
4.1. The parties acknowledge that a Portfolio's shares may be made available for
investment to other
Participating Insurance Companies. In such event, the Trustees wil
monitor the Trust for the existence
of any material irreconcilable conflict between the interests
of the contract owners of all
Participating Insurance Companies. A material irreconcilable
conflict may arise for a variety of
reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in
applicable federal or state insurance, tax or securities laws or
regulations, or a public ruling,
private letter ruling, no-action or 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 an insurer to disregard the voting
instructions of contract owners. The Trust
shall promptly inform the Company of any determination by the
Trustees that a material irreconcilable
conflict exists and of the implications thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist
the Trustees in carrying out their responsibilities under the Shared
Funding Exemptive Order by providing the Trustees with all information
reasonably necessary for and requested by the Trustees to consider any
issues raised including, but not limited to, information as to a
decision by the Company to disregard Contract owner voting
instructions. All communications from the Company to the Trustees may
be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a
material irreconcilable conflict exists that affects the interests
of contract owners, the Company
shall, in cooperation with other Participating Insurance
Companies whose contract owners are also
affected, at its own expense and to the extent reasonably
practicable (as determined by the Trustees)
take whatever steps are necessary to remedy or eliminate the
material irreconcilable conflict, which
steps could include: (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 the
question of whether or not 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 (b) establishing a new registered management investment
company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract
owner voting instructions and that decision represents a minority
position or would preclude a majority
vote, the Company may be required, at the Trust's election, to
withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to
such Account; 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 Trustees. Any such withdrawal
and termination must take place within six (6) months after the Trust
gives written notice that this
provision is being implemented. Until the end of such six (6) month
period, the Trust shall continue to
accept and implement orders by the Company for the purchase and
redemption of shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision
applicable to the Company conflicts with the majority of other state
regulators, then the Company will
withdraw the affected Account's investment in the Trust and
terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the
Company in writing that the Trust has
determined that such decision has created a material irreconcilable
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 Trustees. Until the end of
such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for
the purchase and redemption of shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees
shall determine whether any proposed action adequately remedies
any material irreconcilable conflict,
but in no event will the Trust be required to establish a new
funding medium for any Contract. The
Company shall not be required 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 material
irreconcilable conflict. In the event that the Trustees determine
that any proposed action does not
adequately remedy any material irreconcilable conflict, then the
Company will withdraw the Account's
investment in the Trust and terminate this Agreement within six (6
months after the Trustees inform the
Company in writing of the foregoing determination; provided,
however, that such withdrawal and
termination shall be limited to the extent required by any such
material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so
that the Trustees may fully carry out the duties imposed upon them by
the Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if reasonably deemed
appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is 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 Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared
Funding Exemptive Order, then the Trust and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-3(T), as amended, or Rule 6e-3, as
adopted, to the extent such rules are applicable.
ARTICLE V.
Indemnification
5.1. Indemnification By the Company. The Company agrees to indemnify and hold
harmless the Adviser,
---------------------------------
Distributor, the Trust and each of its Trustees, officers, employee
and agents and each person, if any,
who controls the Trust within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified
Parties" for purposes of this Section 5.1) against any and all
losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of
the Company, which consent shall not
be unreasonably withheld) or expenses (including the reasonable
costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject
under any statute or regulation, or at common law or otherwise,
insofar as such Losses are related to
the sale or acquisition of the Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any
material fact contained in a registration statement o
prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or
approved by the Company on behalf of
the Contracts or Accounts (or any amendment or
supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of
this Article V), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if
such statement or omission or such
alleged statement or omission was made in reliance upon and
was accurately derived from written
information furnished to the Company by or on behalf of the
Trust for use in Company Documents
or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company or persons under
its control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such statement or omission was made in
reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company or
administrator to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company or
administrator in this Agreement or arise out of or result from
any other material breach of this Agreement by the Company or
administrator; or
(f) arise out of or result from the provision by the Company or
administrator to the Trust of insufficient or incorrect
information regarding the purchase or sale of shares of any
Portfolio, or the failure of the Company or administrator to
provide such information on a timely basis.
5.2. Indemnification by the Distributor. The Distributor, Adviser and
Trust each jointly and severally agree
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to indemnify and hold harmless the Company and each of its directors,
officers, employees, and agents
and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for the purposes of this
Section 5.2) against any and all
losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of
the Distributor, which consent shall not be unreasonably withheld)
or expenses (including the reasonable
costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at
common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the Contracts or
Trust shares and:
(a) 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 for the Trust (or any amendment or supplement
thereto) (collectively, "Trust Documents" for the purposes of
this Article V), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and was accurately derived from
written information furnished to the Adviser, Distributor or
the Trust by or on behalf of the Company for use in Trust
Documents or otherwise for use in connection with the sale of
the Contracts or Trust shares and; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived form Company Documents) or wrongful conduct
of the Adviser, Distributor or persons under their control,
with respect to the sale or acquisition of the Contracts or
Portfolio shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading if such statement
or omission was made in reliance upon and accurately derived
from written information furnished to the Company by or on
behalf of the Trust, Adviser or Distributor; or
(d) arise out of or result from any failure by the Adviser,
Distributor or the Trust to provide the services or furnish
the materials required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser,
Distributor or the Trust in this Agreement ( including a
failure, whether unintentional or in good faith or otherwise,
to comply with the diversification and subchapter M
requirements specified in Article III ) or arise out of or
result from any other material breach of this Agreement by the
Adviser Distributor or the Trust; or
(f) arise out of or result from the materially incorrect or materially
untimely calculation or reporting of the daily net asset value per share or
dividend or capital gain distribution rate.
5.3. None of the Company, the Adviser, the Trust or the Distributor shall be
liable under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any Losses incurred or assessed against an
Indemnified Party that arise from 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.
5.4. None of the Company, the Adviser, Trust or the Distributor shall
be liable under the indemnification
provisions of Sections 5.1 or 5.2, as applicable, with respect to
any claim made against an Indemnified
party unless such Indemnified Party shall have notified the other
party in writing within a reasonable
time after the summons, or other first written notification, giving
information of the nature of the
claim shall have been served upon or otherwise received by such
Indemnified Party (or after such
Indemnified Party shall have received notice of service upon or
other notification to any designated
agent), but failure to notify the party against whom indemnification
is sought of any such claim shall
not relieve that party from any liability which it may have to the
Indemnified Party in the absence of
Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party,
the indemnifying party shall be
entitled to participate, at its own expense, in the defense of such
action. The indemnifying party also
shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the party named
in the action. After notice from the indemnifying party to the
Indemnified Party of an election to
assume such defense, 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
the Indemnified 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.
ARTICLE VI.
Termination
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written notice
to the other parties, unless a shorter time is agreed to by
the parties;
(b) at the option of the Trust or the Distributor if the Contracts
issued by the Company cease to qualify as annuity contracts or
life insurance contracts, as applicable, under the Code or if
the Contracts are not registered, issued or sold in accordance
with applicable state and/or federal law; or
(c) at the option of any party upon a determination by a majority
of the Trustees of the Trust, or a majority of its
disinterested Trustees, that a material irreconcilable
conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD,
the SEC, or any state securities or insurance department or
any other regulatory body regarding the Trust's or the
Distributor's duties under this Agreement or related to the
sale of Trust shares or the operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio fails
to meet the diversification requirements specified in Section
3.6 hereof; or
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company,
and upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of
the Portfolio 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 Variable Contracts issued or to be issued by the
Company; or
(h) at the option of the Company, if the Portfolio fails to
qualify as a Regulated Investment Company under Subchapter M
of the Code; or
(i) at the option of the Distributor if it shall determine in its
sole judgment exercised in good faith, that the Company and/or
its affiliated companies 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.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares
of any Portfolio and redeem shares of any Portfolio pursuant to the
terms and conditions of this Agreement for all Contracts in effect on
the effective date of termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Articles I,II,III,IV, and VII and
shall survive the termination of this Agreement as long as shares of
the Trust are held on behalf of Contract owners in accordance with
Section 6.2.
ARTICLE VII.
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail 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, its Adviser, or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Transamerica Life Insurance Company of New York
Corporate Secretary
100 Manhattanville Rd.
Purchase, NY 10577
ARTICLE VIII.
Miscellaneous
8.1. 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.
8.2. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York. It
shall also be subject to the provisions of the federal securities laws
and the rules and regulations thereunder and to any orders of the
Commission granting exemptive relief therefrom and the conditions of
such orders. Copies of any such orders shall be promptly forwarded by
the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under
this Agreement, of any and every nature whatsoever, shall be satisfied
solely out of the assets of the Trust and no Trustee, officer, agent or
holder of shares of beneficial interest of the Trust shall be
personally liable for any such liabilities.
<PAGE>
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission,
the National Association of Securities Dealers, Inc. and state
insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation or
inquiry relating to this Agreement or the transactions contemplated
hereby.
8.7. 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.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the
other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties.
8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, 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
shall not disclose such confidential information without the written
consent of the affected party unless such information has become
publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
Fred Alger and Company, Incorporated
By:________________________________
Name:
Title:
The Alger American Fund
By:_________________________________
Name:
Title:
Transamerica Life Insurance Company of New York
By:___________________________________
Name:
Title:
SCHEDULE A
The Alger American Fund:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American Income & Growth Portfolio
<PAGE>
33
S:\DEPT550\DREW\AGREEMEN\PART-AGR.TR2
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
DECEMBER 15, 1997
<PAGE>
6
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 15th day of December
1997 ("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 Securites 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 and
Growth and Income (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"), File No. 333-9745 (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,
WHEREAS the Insurer may contract with an administrator (the
"Administrator") to perform certain services with respect to the Contracts and,
therefore, certain obligations of the Adviser may be directed to such
Administrator, if the Insurer so directs the Adviser;
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 or
its Administrator, as directed by Insurer, at the close of trading on each day
(a "Business Day") on which the New York Stock Exchange is open for regular
trading. 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.
If the Adviser provides material incorrect share net asset value
information, the Adviser shall make an adjustment to the number of shares
purchased or redeemed for the Separate Account 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 Insurer.
2.2 Timely Payments.
Insurer or its Administrator 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").
<PAGE>
2.3 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 and its Administrator 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. The Adviser shall give Insurer or
its Administrator, as directed by Insurer, two Business Days' notice of any
distributions.
<PAGE>
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.
<PAGE>
Section 4. Legal Compliance
4.1 Tax Laws.
(a) The Adviser represents and warrants that each Portfolio will elect
to qualify as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and shall maintain such
qualification, 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 life insurance or annuity contracts under sections
7702 or 72 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 Adviser represents and warants that it will 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, and they will immediately
take all steps to adequately diversify the Portfolio to achieve compliance
within the grace period afforded by Treasury Regulation 1.817-5.
(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 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 North Carolina 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 North Carolina 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 Maryland 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.
<PAGE>
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:
Transamerica Life Insurance and Annuity
Company
Corporate Secretary
1150 South Olive Street
Los Angeles, California 90015
Transamerica Securities Sales Corporation
Transamerica Center
1150 South Olive Street
Los Angeles, California 90015
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York NY 10105
Attn.: Edmund P. Bergan
FAX: (212) 969-2290
<PAGE>
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 employee
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 and Distributor.
(a) Except to the extent provided in Sections 12.2(d) and 12.2(e),
below, Adviser and Distributor
agree 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 o
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;
(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;
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser or
Distributor in this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the diversification and Sub-Chapter M qualification
requirements specified in Section 4 of this Agreement) or
arise out of or result form any other material breach of this
Agreement by the Adviser or Distributor; or
(vi) 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.
(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.
<PAGE>
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:
S:\DEPT550\DREW\AGREEMEN\PART-AGR.TR2
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the day of _________, 1998, between
Transamerica Life Insurance and Annuity Company a life insurance company
organized under the laws of the State of North Carolina ("Insurance Company"),
and DREYFUS VARIABLE INVESTMENT FUND("Fund").
----
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors or Trustees, as the case may be,
of a Fund, which has the responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which a Fund calculates net asset
value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity or life insurance contract that
uses any Participating Fund (as defined below) as an underlying investment
medium. Individuals who participate under a group Contract are "Participants."
1.6 "Contractholder" shall mean any entity that is a party to a Contract with a
Participating Company (as defined below).
1.7 "Disinterested Board Members" shall mean those members of the Board of a
Fund that are not deemed to be "interested persons" of the Fund, as defined
by the Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates, including
Dreyfus Service Corporation.
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company) that offers variable annuity and/or variable life insurance
contracts to the public and that has entered into an agreement with one or more
of the Funds.
1.10 "Participating Fund" shall mean each Fund, including, as applicable, any
series thereof, specified in Exhibit A, as such Exhibit may be amended from time
to time by agreement of the parties hereto, the shares of which are available to
serve as the underlying investment medium for the aforesaid Contracts.
1.11 "Prospectus" shall mean the current prospectus and statement of additional
information of a Fund, as most recently filed with the Commission.
1.12 "Separate Account" shall mean Separate Account VA-7, a separate account
established by Insurance Company in accordance with the laws of the State of
North Carolina.
1.13 "Software Program" shall mean the software program used by a Fund for
providing Fund and account balance information including net asset value per
share. Such Program may include the Lion System. In situations where the Lion
System or any other Software Program used by a Fund is not available, such
information may be provided by telephone. The Lion System shall be provided to
Insurance Company at no charge.
1.14 "Insurance Company's General Account(s)" shall mean the general account(s)
of Insurance Company and its affiliates that invest in a Fund.
ARTICLE II
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an insurance
company duly organized and in good standing under applicable law; (b) it has
legally and validly established the Separate Account pursuant to the North
Carolina Insurance Code for the purpose of offering to the public certain
individual and group variable annuity and life insurance contracts; (c) it has
registered the
Separate Account as a unit investment trust under the Act to serve as the
segregated investment account for the
Contracts; and (d) the Separate Account is eligible to invest in shares
of each Participating Fund without such investment disqualifying any
Participating Fund as an investment medium for insurance company separate
accounts supporting variable annuity contracts or variable life insurance
contracts.
2.2 Insurance Company represents and warrants that (a) the Contracts will be
described in a registration statement filed under the Securities Act of 1933, as
amended ("1933 Act"); (b) the Contracts will be issued and sold in compliance in
all material respects with all applicable federal and state laws; and (c) the
sale of the Contracts shall comply in all material respects with state insurance
law requirements. Insurance Company agrees to notify each Participating Fund
promptly of any investment
restrictions imposed by state insurance law and applicable to the
Participating Fund.
2.3 Insurance Company represents and warrants that the income, gains and losses,
whether or not realized, from assets allocated to the Separate Account
are, in accordance with the applicable Contracts, to be credited to or charged
against such Separate Account without regard to other income, gains or losses
from assets allocated to any other accounts of Insurance Company. Insurance
Company represents and warrants that the assets of the Separate Account are
and will be kept separate from Insurance
Company's General Account and any other separate accounts Insurance
Company may have, and will not be charged with liabilities from any business
that Insurance Company may conduct or the liabilities of any companies
affiliated with Insurance Company.
2.4 Each Participating Fund represents that it is registered with the Commission
under the Act as an open-end, management investment company and possesses, and
shall maintain, all legal and regulatory licenses, approvals, consents and/or
exemptions required for the Participating Fund to operate and offer its shares
as an underlying investment medium for Participating Companies.
2.5 Each Participating 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 Insurance 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.
2.6 Insurance Company represents and agrees that the Contracts are currently,
and at the time of issuance will be, treated as life insurance
policies or annuity contracts, whichever is appropriate, under applicable
provisions of the Code, and that it will make every effort to maintain such
treatment and that it will notify each Participating Fund and Dreyfus
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. Insurance Company agrees that any prospectus offering a
Contract that is a "modified endowment contract," as that term is defined in
Section 7702A of the Code, will identify such Contract as a modified endowment
contract (or policy).
2.7 Each Participating Fund agrees that its assets shall be managed and invested
in a manner that complies with the requirements of Section 817(h) of the Code.
2.8 Insurance Company agrees that each Participating Fund shall be permitted
(subject to the other terms of this Agreement) to make its shares available to
other Participating Companies and Contractholders.
2.9 Each Participating Fund represents and warrants that any of its directors,
trustees, officers, employees, investment advisers, and other
individuals/entities who deal with the money and/or securities of the
Participating Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Participating
Fund in an amount not less than that required by Rule 17g-1 under the Act. The
aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10 Insurance Company represents and warrants that all of its employees and
agents who deal with the money and/or securities of each Participating Fund
are and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage in an amount not less than the coverage required to be
maintained by the Participating Fund. The aforesaid Bond shall include coverage
for larceny and embezzlement and shall be issued by a reputable bonding company.
2.11 Insurance Company agrees that Dreyfus shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights conferred by
virtue of this Agreement.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in shares of each Participating Fund.
3.2 Each Participating Fund agrees to make its shares available for purchase at
the then applicable net asset value per share by Insurance Company and the
Separate Account on each Business Day pursuant to rules of the Commission.
Notwithstanding the foregoing, each Participating Fund may refuse to sell its
shares to any person, or suspend or terminate the offering of its shares, if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of its
Board, acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary and in the best interests of
the Participating Fund's shareholders.
3.3 Each Participating Fund agrees that shares of the Participating Fund will be
sold only to (a) Participating Companies and their separate accounts or
(b) "qualified pension or retirement plans" as determined under Section 817(h)
(4) of the Code. Except as otherwise set forth in this Section 3.3, no shares of
any Participating Fund will be sold to the general public.
3.4 Each Participating Fund shall use its best efforts to provide closing net
asset value, dividend and capital gain information on a per-share basis to
Insurance Company by 6:00 p.m. Eastern time on each Business Day. Any material
errors in the calculation of net asset value, dividend and capital gain
information shall be reported immediately upon discovery to Insurance Company.
Non-material errors will be corrected in the next Business Day's net asset
value per share.
3.5 At the end of each Business Day, Insurance Company will use the information
described in Sections 3.2 and 3.4 to calculate the unit values of the Separate
Account for the day. Using this unit value, Insurance Company will process the
day's Separate Account transactions received by it by the close of trading on
the floor of the New York Stock Exchange (currently 4:00 p.m. Eastern time) to
determine the net dollar amount of each Participating Fund's shares that will be
purchased or redeemed at
that day's closing net asset value per share. The net purchase or
redemption orders will be transmitted to each Participating Fund by Insurance
Company by 11:00 a.m. Eastern time on the Business Day next following
Insurance Company's receipt of that information. Subject to Sections 3.6 and
3.8, all purchase and redemption orders for Insurance Company's General Accounts
shall be effected at the net asset value per share of each
Participating Fund next calculated after receipt of the order by the
Participating Fund or its Transfer Agent.
3.6 Each Participating Fund appoints Insurance Company as its agent for the
limited purpose of accepting orders for the purchase and redemption of
Participating Fund shares for the Separate Account. Each Participating
Fund will execute orders at the applicable net asset value per share
determined as of the close of trading on the day of receipt of such
orders by Insurance Company acting as agent ("effective trade date"),
provided that the Participating Fund receives notice of such orders by
11:00 a.m. Eastern time on the next following Business Day and, if such
orders request the purchase of Participating Fund shares, the
conditions specified in Section 3.8, as applicable, are satisfied. A
redemption or purchase request that does not satisfy the conditions
specified above and in Section 3.8, as applicable, will be effected at
the net asset value per share computed on the Business Day immediately
preceding the next following Business Day upon which such conditions
have been satisfied in accordance with the requirements of this Section
and Section 3.8. Insurance Company represents and warrants that all
orders submitted by the Insurance Company for execution on the
effective trade date shall represent purchase or redemption orders
received from Contractholders prior to the close of trading on the New
York Stock Exchange on the effective trade date.
3.7 Insurance Company will make its best efforts to notify each applicable
Participating Fund in advance of any unusually large purchase or redemption
orders.
3.8 If Insurance Company's order requests the purchase of a Participating
Fund's shares, Insurance Company will pay for such purchases by wiring
Federal Funds to the Participating Fund or its designated custodial
account on the day the order is transmitted. Insurance Company shall
make all reasonable efforts to transmit to the applicable Participating
Fund payment in Federal Funds by 12:00 noon Eastern time on the
Business Day the Participating Fund receives the notice of the order
pursuant to Section 3.5. Each applicable Participating Fund will
execute such orders at the applicable net asset value per share
determined as of the close of trading on the effective trade date if
the Participating Fund receives payment in Federal Funds by 12:00
midnight Eastern time on the Business Day the Participating Fund
receives the notice of the order pursuant to Section 3.5. If payment in
Federal Funds for any purchase is not received or is received by a
Participating Fund after 12:00 noon Eastern time on such Business Day,
Insurance Company shall promptly, upon each applicable Participating
Fund's request, reimburse the respective Participating Fund for any
charges, costs, fees, interest or other expenses incurred by the
Participating Fund in connection with any advances to, or borrowings or
overdrafts by, the Participating Fund, or any similar expenses incurred
by the Participating Fund, as a result of portfolio transactions
effected by the Participating Fund based upon such purchase request. If
Insurance Company's order requests the redemption of any Participating
Fund's shares valued at or greater than $1 million dollars, the
Participating Fund will wire such amount to Insurance Company within
seven days of the order.
3.9 Each Participating Fund has the obligation to ensure that its shares are
registered with applicable federal agencies at all times.
3.10 Each Participating Fund will confirm each purchase or redemption order made
by Insurance Company. Transfer of Participating Fund shares will
be by book entry only. No share certificates will be issued to Insurance
Company. Insurance Company will record shares ordered from a Participating Fund
in an appropriate title for the corresponding account.
3.11 Each Participating Fund shall credit Insurance Company with the appropriate
number of shares.
3.12 On each ex-dividend date of a Participating Fund or, if not a Business Day,
on the first Business Day thereafter, each Participating Fund shall
communicate to Insurance Company the amount of dividend and capital gain, if
any, per share. All dividends and capital gains shall be automatically
reinvested in additional shares of the applicable Participating Fund at the
net asset value per share on the ex-dividend date. Each Participating Fund
shall, on the day after the ex-dividend date or, if not
a Business Day, on the first Business Day thereafter, notify Insurance
Company of the number of shares so issued.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Each Participating Fund shall provide monthly statements of account as of
the end of each month for all of Insurance Company's accounts by the fifteenth
(15th) Business Day of the following month.
4.2 Each Participating Fund shall distribute to Insurance Company copies of the
Participating Fund's Prospectuses, proxy materials, notices, periodic
reports and other printed materials (which the Participating Fund customarily
provides to its shareholders) in quantities as Insurance Company may reasonably
request for distribution to each Contractholder and Participant.
4.3 Each Participating Fund will provide to Insurance Company at least one
complete copy of all registration statements, Prospectuses, 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 Participating Fund or its shares, contemporaneously
with the filing of such document with the Commission or other regulatory
authorities.
4.4 Insurance Company will provide to each Participating Fund at least one copy
of all registration statements, Prospectuses, 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 Contracts or the Separate Account, contemporaneously with the
filing of such document with the Commission.
<PAGE>
ARTICLE V
EXPENSES
5.1 The charge to each Participating Fund for all expenses and costs of the
Participating Fund, including but not limited to management fees, administrative
expenses and legal and regulatory costs, will be made in the determination of
the Participating Fund's daily net asset value per share so as
to accumulate to an annual charge at the rate set forth in the Participating
Fund's Prospectus. Excluded from the expense limitation described herein shall
be brokerage commissions and transaction fees and
extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly any expenses
of any Participating Fund or expenses relating to the distribution of its
shares. Insurance Company shall pay the following expenses or costs:
a. Such amount of the production expenses of any Participating Fund
materials, including the cost of printing a Participating Fund's Prospectus, or
marketing materials for prospective Insurance Company Contractholders and
Participants as Dreyfus and Insurance Company shall agree from time to time.
b. Distribution expenses of any Participating Fund materials or
marketing materials for prospective Insurance Company Contractholders and
Participants.
c. Distribution expenses of any Participating Fund materials or
marketing materials for Insurance Company Contractholders and Participants.
Except as provided herein, all other expenses of each Participating
Fund shall not be borne by Insurance Company.
ARTICLE VI
6. EXEMPTIVE RELIEF
6.1 Insurance Company has reviewed a copy of (i) the amended order dated
December 31, 1997 of the Securities and Exchange Commission under
Section 6(c) of the Act with respect to Dreyfus Variable Investment
Fund and Dreyfus Life and Annuity Index Fund, Inc.; and (ii) the order
dated February 5, 1998 of the Securities and Exchange Commission under
Section 6(c) of the Act with respect to The Dreyfus Socially
Responsible Growth Fund, Inc. and Dreyfus Investment Portfolios, and,
in particular, has reviewed the conditions to the relief set forth in
each related Notice. As set forth therein, if Dreyfus Variable
Investment Fund, Dreyfus Life and Annuity Index Fund, Inc., The Dreyfus
Socially Responsible Growth Fund, Inc. or Dreyfus Investment Portfolios
is a Participating Fund, Insurance Company agrees, as applicable, to
report any potential or existing conflicts promptly to the respective
Board of Dreyfus Variable Investment Fund, Dreyfus Life and Annuity
Index Fund, Inc., The Dreyfus Socially Responsible Growth Fund, Inc.
and/or Dreyfus Investment Portfolios, and, in particular, whenever
contract voting instructions are disregarded, and recognizes that it
will be responsible for assisting each applicable Board in carrying out
its responsibilities under such application. Insurance Company agrees
to carry out such responsibilities with a view to the interests of
existing Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board Members,
determines that a material irreconcilable conflict exists with regard to
Contractholder investments in a Participating Fund, the Board shall
give prompt notice to all Participating Companies and any other Participating
Fund. If the Board determines that Insurance Company is responsible for causing
or creating said conflict, Insurance Company shall at its sole cost and
expense, and to the extent reasonably practicable (as
determined by a majority of the Disinterested Board Members), take such
action as is necessary to remedy or eliminate the irreconcilable material
conflict. Such necessary action may include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from the
Participating Fund and reinvesting such assets in another Participating Fund (if
applicable) or a different investment medium, or
submitting the question of whether such segregation should be implemented to
a vote of all affected Contractholders; and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a decision by
Insurance Company to disregard Contractholder voting instructions and said
decision represents a minority position or would preclude a majority vote by all
Contractholders having an interest in a Participating Fund, Insurance Company
may be required, at the Board's election, to withdraw the investments of the
Separate Account in that Participating Fund.
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict, but in no event will any Participating
Fund be required to bear the expense of establishing a new funding medium for
any Contract. Insurance Company shall not be required by this Article to
establish a new funding medium for any Contract if an offer to
do so has been declined by vote of a majority of the
Contractholders materially adversely affected by the irreconcilable
material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by the
Separate Account or any Participating Fund taken or omitted as a result of any
act or failure to act by Insurance Company pursuant to this Article VI, shall
relieve Insurance Company of its obligations under, or otherwise affect the
operation of, Article V.
ARTICLE VII
VOTING OF PARTICIPATING FUND SHARES
7.1 Each Participating Fund shall provide Insurance Company with copies, at no
cost to Insurance Company, of the Participating Fund's proxy material, reports
to shareholders and other communications to shareholders in such quantity as
Insurance Company shall reasonably require for distributing to Contractholders
or Participants.
Insurance Company shall:
(a) solicit voting instructions from Contractholders or
Participants on a timely basis and in accordance with applicable law;
(b) vote the Participating Fund shares in accordance with instructions
received from Contractholders or Participants; and
(c) vote the Participating Fund shares for which no instructions have
been received in the same proportion as Participating Fund shares for which
instructions have been received.
Insurance Company agrees at all times to vote its General Account
shares in the same proportion as the Participating Fund shares for which
instructions have been received from Contractholders or Participants.
Insurance Company further agrees to be responsible for assuring that voting
the Participating Fund shares for the Separate Account is conducted in a manner
consistent with other Participating Companies.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of each applicable Participating Fund and Dreyfus, solicit, induce or
encourage Contractholders to (a) change or supplement the Participating Fund's
current investment adviser or (b) change, modify, substitute, add to or delete
from the current investment media for the Contracts.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 Each Participating Fund or its underwriter shall periodically furnish
Insurance Company with the following documents, in quantities as Insurance
Company may reasonably request:
a. Current Prospectus and any supplements thereto; and
b. Other marketing materials.
Expenses for the production of such documents shall be borne by
Insurance Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities that shall
have the requisite licenses to solicit applications for the sale of Contracts.
No representation is made as to the number or amount of Contracts that are to be
sold by Insurance Company. Insurance Company shall make reasonable efforts to
market the Contracts and shall comply with all applicable federal and state laws
in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished, to each
applicable Participating Fund or its designee, each piece of sales
literature or other promotional material in which the Participating Fund, its
investment adviser or the administrator is named, at least fifteen Business Days
prior to its use. No such material shall be used unless the Participating Fund
or its designee approves such material. Such approval (if given) must be in
writing and shall be presumed not given if
not received within ten Business Days after receipt of such material.
Each applicable Participating Fund or its designee, as the case may be, shall
use all reasonable efforts to respond within ten days of receipt.
8.4 Insurance Company shall not give any information or make any representations
or statements on behalf of a Participating Fund or concerning a Participating
Fund in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or Prospectus of, as may
be amended or supplemented from time to time, or in reports or proxy statements
for, the applicable Participating Fund, or in sales
literature or other promotional material approved by
the applicable Participating Fund.
8.5 Each Participating Fund shall furnish, or shall cause to be furnished, to
Insurance Company, each piece of the Participating Fund's sales literature
or other promotional material in which Insurance Company or the Separate Account
is named, at least fifteen Business Days prior to its use. No such material
shall be used unless Insurance Company approves such material. Such approval (if
given) must be in writing and shall be presumed not given if not received within
ten Business Days after receipt
of such material. Insurance Company shall use all reasonable efforts
to respond within ten days of receipt.
8.6 Each Participating Fund shall not, in connection with the sale of
Participating Fund shares, give any information or make any representations on
behalf of Insurance Company or concerning Insurance Company, the Separate
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as may
be amended or supplemented from time to time, or in published reports for the
Separate Account that are in the public domain or
approved by Insurance Company for distribution to Contractholders or
Participants, or in sales literature or other promotional material approved by
Insurance Company.
8.7 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without
limitation, 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 (such as any
written communication distributed or made generally available to
customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, or 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
National Association of Securities Dealers, Inc. rules, the Act or the
1933 Act.
ARTICLE IX
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless each Participating
Fund, Dreyfus, each respective Participating Fund's investment adviser and
sub-investment adviser (if applicable), each respective Participating Fund's
distributor, and their respective affiliates, and each of their directors,
trustees, officers, employees, agents and each person, if any, who controls or
is associated with any of the foregoing entities or persons within the meaning
of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of Section 9.1), 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) for which the Indemnified Parties may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect to thereof) (i) aris
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in information furnished by Insurance
Company for use in the registration statement or Prospectus or sales literature
or advertisements of the respective Participating Fund or with respect to the
Separate Account or Contracts, 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; (ii) arise out of or as a result of conduct,
statements or representations (other than statements or representations
contained in the Prospectus and sales literature or advertisements of the
respective Participating Fund) of Insurance Company or its agents, with respect
to the sale and distribution of Contracts for which the respective
Participating Fund's shares are an underlying investment; (iii) arise out of the
wrongful conduct of Insurance Company or persons under its
control with respect to the sale or distribution of the Contracts or
the respective Participating Fund's shares; (iv) arise out of Insurance
Company's incorrect calculation and/or untimely reporting of net purchase or
redemption orders; or (v) arise out of any breach by Insurance Company of a
material term of this Agreement or as a result of any failure by Insurance
Company to provide the services and furnish the materials or to make any
payments provided for in this Agreement. Insurance Company
will reimburse any Indemnified Party in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that with respect to clauses (i) and (ii) above Insurance Company will
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
omission or alleged omission made in such registration statement, prospectus,
sales literature, or advertisement in conformity
with written information furnished to Insurance Company by the
respective Participating Fund specifically for use therein. This indemnity
agreement will be in addition to any liability which Insurance Company may
otherwise have.
9.2 Each Participating Fund severally agrees to indemnify and hold harmless
Insurance Company and each of its directors, officers, employees,
agents and each person, if any, who controls Insurance Company within
the meaning of the 1933 Act against any losses, claims, damages or
liabilities to which Insurance Company or any such director, officer,
employee, agent or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (1) 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
sales literature or advertisements of the respective Participating
Fund; (2) arise out of or are based upon the omission to state in the
registration statement or Prospectus or sales literature or
advertisements of the respective Participating Fund any material fact
required to be stated therein or necessary to make the statements
therein not misleading; or (3) 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 sales
literature or advertisements with respect to the Separate Account or
the Contracts and such statements were based on information provided to
Insurance Company by the respective Participating Fund; and the
respective Participating Fund will reimburse any legal or other
expenses reasonably incurred by Insurance Company or any such director,
officer, employee, agent or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the respective Participating Fund will
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or omission or alleged omission made in such registration statement,
Prospectus, sales literature or advertisements in conformity with
written information furnished to the respective Participating Fund by
Insurance Company specifically for use therein. This indemnity
agreement will be in addition to any liability which the respective
Participating Fund may otherwise have.
9.3 Each Participating Fund severally shall indemnify and hold Insurance
Company harmless against any and all liability, loss, damages, costs or
expenses which Insurance Company may incur, suffer or be required to
pay due to the respective Participating Fund's (1) incorrect
calculation of the daily net asset value, dividend rate or capital gain
distribution rate; (2) incorrect reporting of the daily net asset
value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital
gain distribution rate; provided that the respective Participating Fund
shall have no obligation to indemnify and hold harmless Insurance
Company if the incorrect calculation or incorrect or untimely reporting
was the result of incorrect information furnished by Insurance Company
or information furnished untimely by Insurance Company or otherwise as
a result of or relating to a breach of this Agreement by Insurance
Company.
9.4 Promptly after receipt by an indemnified party under this Article of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying
party under this Article, notify the indemnifying party of the
commencement thereof. The omission to so notify the indemnifying party
will not relieve the indemnifying party from any liability under this
Article IX, 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. 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, and to the extent that the
indemnifying party has given notice to such effect to the indemnified
party and is performing its obligations under this Article, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation.
Notwithstanding the foregoing, 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.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article IX. The
provisions of this Article IX shall survive termination of this Agreement.
9.5 Insurance Company shall indemnify and hold each respective Participating
Fund, Dreyfus and sub-investment adviser of the Participating Fund harmless
against any tax liability incurred by the Participating Fund under Section 851
of the Code arising from purchases or redemptions by Insurance Company's General
Accounts or the account of its affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall continue
in force until terminated in accordance with the provisions herein.
10.2 This Agreement shall terminate without penalty:
a. As to any Participating Fund, at the option of Insurance Company or
the Participating Fund at any time from the date hereof upon 180 days' notice,
unless a shorter time is agreed to by the respective Participating
Fund and Insurance Company;
b. As to any Participating Fund, at the option of Insurance Company, if
shares of that Participating Fund are not reasonably available to meet the
requirements of the Contracts as determined by Insurance Company. Prompt notice
of election to terminate shall be furnished by Insurance Company,
said termination to be effective ten days after receipt of notice unless the
Participating Fund makes available a sufficient number of shares to meet the
requirements of the Contracts within said ten-
day period;
c. As to a Participating Fund, at the option of Insurance Company, upon
the institution of formal proceedings against that Participating Fund by the
Commission, National Association of Securities Dealers or any other regulatory
body, the expected or anticipated ruling, judgment or outcome of which would, in
Insurance Company's reasonable judgment, materially impair that Participating
Fund's ability to meet and perform the Participating Fund's obligations and
duties hereunder. Prompt notice
of election to terminate shall be furnished by Insurance
Company with said termination to be effective upon receipt of notice;
d. As to a Participating Fund, at the option of each Participating
Fund, upon the institution of formal proceedings against
Insurance Company by the Commission, National Association of Securities Dealers
or any other regulatory body, the expected or anticipated ruling, judgment or
outcome of which would, in the Participating Fund's reasonable judgment,
materially impair Insurance Company's ability to meet and perform Insurance
Company's obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by such Participating
Fund with said termination to be effective upon receipt of notice;
e. As to a Participating Fund, at the option of that
Participating Fund, if the Participating Fund shall determine,
in its sole judgment reasonably exercised in good faith, that
Insurance Company has suffered a material adverse change in
its business or financial condition or is the subject of
material adverse publicity and such material adverse change or
material adverse publicity is likely to have a material
adverse impact upon the business and operation of that
Participating Fund or Dreyfus, such Participating Fund shall
notify Insurance Company in writing of such determination and
its intent to terminate this Agreement, and after considering
the actions taken by Insurance Company and any other changes
in circumstances since the giving of such notice, such
determination of the Participating Fund shall continue to
apply on the sixtieth (60th) day following the giving of such
notice, which sixtieth day shall be the effective date of
termination;
f. As to a Participating Fund, upon termination of the Investment
Advisory Agreement between that Participating Fund and Dreyfus or its successors
unless Insurance Company specifically approves the selection of a new
Participating Fund investment adviser. Such Participating Fund shall promptly
furnish notice of such termination to Insurance Company;
g. As to a Participating Fund, in the event that Participating Fund's
shares are not registered, issued or sold in accordance with applicabl
federal law, or such law precludes the use of such shares as the underlying
investment medium of Contracts issued or to be issued by Insurance Company.
Termination shall be effective immediately as to that Participating Fund only
upon such occurrence without notice;
h. At the option of a Participating Fund upon a determination by its
Board in good faith that it is no longer advisable and in the best
interests of shareholders of that Participating Fund to continue to operate
pursuant to this Agreement. Termination pursuant to this Subsection (h) shall be
effective upon notice by such Participating Fund to Insurance Company of such
termination;
i. At the option of a Participating Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies, as applicable, under
the Code, or if such Participating Fund reasonably believes that the Contracts
may fail to so qualify;
j. At the option of any party to this Agreement, upon another party's
breach of any material provision of this Agreement;
k. At the option of a Participating Fund, if the Contracts are not
registered, issued or sold in accordance with applicable federal and/or
state law; or
l. Upon assignment of this Agreement, unless made with the written
consent of every other non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
10.2k herein shall not affect the operation of Article V of this Agreement.
Any termination of this Agreement shall not affect the operation of Article IX
of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to Section
10.2 hereof, each Participating Fund and Dreyfus may, at the option of
the Participating Fund, continue to make available additional shares of
that Participating Fund for as long as the Participating Fund desires
pursuant to the terms and conditions of this Agreement as provided
below, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, if that Participating Fund and
Dreyfus so elect to make additional Participating Fund shares
available, the owners of the Existing Contracts or Insurance Company,
whichever shall have legal authority to do so, shall be permitted to
reallocate investments in that Participating Fund, redeem investments
in that Participating Fund and/or invest in that Participating Fund
upon the making of additional purchase payments under the Existing
Contracts. In the event of a termination of this Agreement pursuant to
Section 10.2 hereof, such Participating Fund and Dreyfus, as promptly
as is practicable under the circumstances, shall notify Insurance
Company whether Dreyfus and that Participating Fund will continue to
make that Participating Fund's shares available after such termination.
If such Participating Fund shares continue to be made available after
such termination, the provisions of this Agreement shall remain in
effect and thereafter either of that Participating Fund or Insurance
Company may terminate the Agreement as to that Participating Fund, as
so continued pursuant to this Section 10.3, upon prior written notice
to the other party, such notice to be for a period that is reasonable
under the circumstances but, if given by the Participating Fund, need
not be for more than six months.
10.4 Termination of this Agreement as to any one Participating Fund shall not be
deemed a termination as to any other Participating Fund unless Insurance
Company or such other Participating Fund, as the case may be, terminates this
Agreement as to such other Participating Fund in accordance with this Article X.
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement, except for the addition
or deletion of any Participating Fund as specified in Exhibit A, shall be made
by agreement in writing between Insurance Company and each
respective Participating Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified mail,
return receipt requested, to the appropriate parties at the following addresses:
Insurance Company: Transamerica Life Insurance
and Annuity Company
401 North Tryon Street, Suite 700
Charlotte, NC 28202
Participating Funds: Dreyfus Variable Investment Fund
c/o Premier Mutual Fund Services, Inc.
200 Park Avenue
New York, New York 10166
Attn: Vice President and Assistant Secretary
with copies to: [Name of Fund]
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Attn: Mark N. Jacobs, Esq.
Lawrence B. Stoller, Esq.
Stroock & Stroock & Lavan
180 Maiden Lane
New York, New York 10038-4982
Attn: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the
addresses as evidenced by the return receipt.
ARTICLE XIII
12.
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of each Fund by the undersigned
officer of the Fund in his capacity as an officer of the Fund.
The obligations of this Agreement shall only be binding upon the assets and
property of the Fund and shall not be binding upon any director, trustee,
officer or shareholder of the Fund individually. It is agreed that the
obligations of the Funds are several and not joint, that no Fund shall be liable
for any amount owing by another Fund and that the Funds
have executed one instrument for convenience only.
ARTICLE XIV
LAW
14.1 This Agreement shall be construed in accordance with the internal laws of
the State of North Carolina, without giving effect to principles of conflict
of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
Transamerica Life Insurance
And Annuity Company
By:
Its:
Attest:_____________________
DREYFUS VARIABLE INVESTMENT FUND
By:
Its:
Attest:_____________________
<PAGE>
EXHIBIT A
LIST OF PARTICIPATING FUNDS
<PAGE>
<PAGE>
N:\BMH\JAS\TRANSAME\PARTAGT.TLI
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this ____ day of __________, 199_, between JANUS
ASPEN SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), JANUS CAPITAL CORPORATION (the "Adviser"), a
Colorado Corporation and the investment adviser to the Trust, and TRANSAMERICA
LIFE INSURANCE AND ANNUITY COMPANY, a life insurance company organized under the
laws of the State of North Carolina (the "Company"), on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A,
as may be amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and
Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act (the
"Contracts"); and
<PAGE>
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) each Account as a unit
investment trust under the 1940 Act; and
<PAGE>
-16-
N:\BMH\JAS\TRANSAME\PARTAGT.TLI
WHEREAS, the Adviser is registered with the Securities and Exchange
Commission as an investment adviser under the Investment Advisers Act of 1940,
as amended;
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the
Accounts;
WHEREAS, the Company may contract with an Administrator to perform
certain administrative services with regard to the Contracts and Account(s) and,
therefore, certain obligations of the Trust and/or Adviser shall be directed to
the Administrator, as directed by the Company.
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
Sale of Trust Shares
1.1 The Trust and the Adviser shall make shares of the Trust's
Portfolios available to the Accounts at the net asset value next computed after
receipt of such purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of the Trust.
Shares of a particular Portfolio of the Trust shall be ordered in such
quantities and at such times as determined by the Company or its Administrator
to be necessary to meet the requirements of the Contracts. The Trustees of the
Trust (the "Trustees") 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 Trustees 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.
1.2 The Trust will redeem any full or fractional shares of any
Portfolio when requested by the Company or its Administrator on behalf of an
Account at the net asset value next computed after receipt by the Trust (or its
agent) of the request for redemption, as established in accordance with the
provisions of the then current prospectus of the Trust.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints
the Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and payments under
the Contracts. Receipt by the Company shall constitute receipt by the Trust
provided that i) such orders are received by the Company in good order prior to
the time the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 11:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading unless the Trust is not
required to calculate its net asset value on such a day pursuant to the rules of
the Securities and Exchange Commission ("SEC").
1.4 Purchase orders that are transmitted to the Trust in accordance
with Section 1.3 shall be paid for no later than 12:00 noon New York time on the
same Business Day that the Trust receives notice of the order. The Trust shall
use its best efforts to make payment for redemption orders transmitted to the
Trust in accordance with Section 1.3 by 3:00 p.m. New York time on the same
Business Day that the Trust receives notice of the order, but in no event shall
payment be delayed for a greater period than is permitted by the 1940 Act.
Payments shall be made in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish prompt notice to the Company or its
Administrator, as specified by the Company, of any income dividends or capital
gain distributions payable on the Trust's shares prior to the payment of such
dividends. The Company hereby elects to receive all such income dividends and
capital gain distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio. The Trust shall notify the Company or its
Administrator, as specified by the Company, of the number of shares so issued as
payment of such dividends and distributions prior to the payment of such
dividends.
1.7 The Trust shall make the net asset value per share for each
Portfolio available to the Company or its Administrator, as specified by the
Company, on a daily basis every 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 p.m. New York time.
1.8 The Trust and the Adviser agree that the Trust's shares will be
sold only to Participating Insurance Companies and their separate accounts and
to certain qualified pension and retirement plans to the extent permitted by the
Exemptive Order. No shares of any Portfolio will be sold directly to the general
public. The Company agrees that Trust shares will be used only for the purposes
of funding the Contracts and Accounts listed in Schedule A, as amended from time
to time.
<PAGE>
1.9 The Trust and the Adviser agree that all Participating Insurance
Companies shall have the obligations and responsibilities regarding pass-through
voting and conflicts of interest corresponding to those contained in Section 2.8
and Article IV of this Agreement.
1.10 If the Trust provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to an
adjustment with respect to the Trust shares purchased or redeemed to reflect the
correct net asset value per share. The determination of the materiality of any
net asset value pricing error shall be based on the SEC's recommended guidelines
regarding such errors. The correction of any such errors shall be made at the
Company level and shall be made pursuant to the SEC's recommended guidelines.
Any material error in the calculation or reporting of net asset value per share,
dividend or capital gain information shall be reported promptly upon discovery
to the Company.
ARTICLE II
Obligations of the Parties
2.1 The Trust and the Adviser shall prepare and be responsible for
filing with the Securities and Exchange Commission and any state regulators
requiring such filing all shareholder reports, notices, proxy materials (or
similar materials such as voting instruction solicitation materials),
prospectuses, statements of additional information, and fund profiles (upon the
adoption of Rule 498 under the 1933 Act) of the Trust. The Trust shall bear the
costs of registration and qualification of its shares, preparation and filing of
the documents listed in this Section 2.1 and all taxes to which an issuer is
subject on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide
the Company (at the Company's expense) with as many copies of the current
prospectus, annual report, semi-annual report, fund profiles and other
shareholder communications, including any amendments or supplements to any of
the foregoing, for the Trust's Portfolios in which the Accounts invest, as the
Company shall reasonably request; or (b) provide the Company with a camera ready
copy of such documents in a form suitable for printing. The Trust shall provide
the Company with a copy of its statement of additional information in a form
suitable for duplication by the Company. The Trust (at its expense) shall
provide the Company with copies of any Trust-sponsored proxy materials in such
quantity as the Company shall reasonably require for distribution to Contract
owners.
2.3 The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to owners of and applicants for policies for
which the Trust is serving or is to serve as an investment vehicle. The Company
shall bear the costs of distributing proxy materials (or similar materials such
as voting solicitation instructions) to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 The Company agrees and acknowledges that the Adviser is the sole
owner of the name and mark "Janus" and that all use of any designation comprised
in whole or part of Janus (a "Janus Mark") under this Agreement shall inure to
the benefit of the Adviser. Except as provided in Section 2.5, the Company shall
not use any Janus Mark on its own behalf or on behalf of the Accounts or
Contracts in any registration statement, advertisement, sales literature or
other materials relating to the Accounts or Contracts without the prior written
consent of the Adviser. Upon termination of this Agreement for any reason, the
Company shall cease all use of any Janus Mark(s) as soon as reasonably
practicable except with respect to shares of the Trust that continue to be made
available to Contract owners in accordance with Section 6.2.
2.5 The Company shall furnish, or cause to be furnished, to the Trust
or its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or the Adviser is named prior to the filing of
such document with the Securities and Exchange Commission. 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 or
the Adviser is named, at least fifteen Business Days prior to its use. No such
material shall be used if the Trust or its designee reasonably objects to such
use within fifteen Business Days after receipt of such material.
2.6 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
the Adviser in connection with the sale of the Contracts other than information
or representations contained in and accurately derived from the registration
statement or prospectus for the Trust shares (as such registration statement and
prospectus may be amended or supplemented from time to time), reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as required
by legal process or regulatory authorities or with the written permission of the
Trust or its designee.
2.7 The Trust and the Adviser shall not give any information or make
any representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Contracts (as such registration statement and prospectus may
be amended or supplemented from time to time), or in materials approved by the
Company for distribution including sales literature or other promotional
materials, except as required by legal process or regulatory authorities or with
the written permission of the Company.
2.8 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as shares it
owns that are held by that Account, in the same proportion as those shares for
which voting instructions are received. The Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
2.9 The Company shall notify the Trust of any applicable state
insurance laws that restrict the Portfolios' investments or otherwise affect the
operation of the Trust and shall notify the Trust of any changes in such laws.
ARTICLE III
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of North
Carolina and that it has legally and validly established each Account as a
segregated asset account under such law.
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or, alternatively (2) has not been registered in proper reliance upon
an exclusion from registration under the 1940 Act.
3.3 The Company represents and warrants that the Contracts or interests
in the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the Contracts will be
issued in compliance in all material respects with all applicable federal and
state laws and the Company represents and warrants that it will make every
effort to see that the Contracts are 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.
3.4 The Trust and the Adviser represent and warrant that the Trust is
duly organized and validly existing under the laws of the State of Delaware.
<PAGE>
3.5 The Trust and the Adviser represent and warrant that the Trust
shares offered and sold pursuant to this Agreement will be registered under the
1933 Act and the Trust shall be registered under the 1940 Act prior to any
issuance or sale of such shares. The Trust shall amend its registration
statement under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Trust shall register
and qualify its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust.
3.6 The Trust and the Adviser represent and warrant that the
investments of each Portfolio will comply with the diversification requirements
set forth in Section 817(h) of the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder, that the Trust and Adviser will notify
the Company immediately upon having a reasonable basis for believing that the
Trust or any Portfolio has ceased to meet such diversification requirements and
will immediately take steps to adequately diversify the Trust and/or Portfolio
to achieve compliance within the grace period afforded by Treas. Reg. Section
1.817-5.
3.7 the Trust and the Adviser represent and warrant that the Trust and
each Portfolio is currently qualified as a regulated investment company under
Subchapter M of the Code, that they will maintain that qualification and that
they will notify the Company immediately upon having a reasonable basis for
believing that the Trust has ceased to qualify or may not qualify in the future.
ARTICLE IV
Potential Conflicts
4.1 The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. 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 variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (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 the question of
whether or not 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 (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; 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 Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six (6) months after the Trustees inform the
Company 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
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required 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. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 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
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Exemptive Order) on terms and conditions materially
different from those contained in the Exemptive Order, then the Trust 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.
ARTICLE V
Indemnification
5.1 Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Trust, the Adviser, and each of their Trustees, Directors,
officers, employees and agents and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Article V) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or expenses (including the reasonable costs of
investigating or defending any alleged loss, claim, damage, liability or expense
and reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may become subject
under any statute or regulation, or at common law or otherwise, insofar as such
Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or approved by
the Company on behalf of the Contracts or Accounts (or any amendment or
supplement to any of the foregoing) (collectively, "Company Documents"
for the purposes of this Article V), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not apply as
to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Company by or on
behalf of the Trust for use in Company Documents or otherwise for use
in connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2(a)) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived
from written information furnished to the Trust by or on behalf of the
Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) 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.
5.2 Indemnification By the Trust and the Adviser. The Trust and the
Adviser agree to indemnify and hold harmless the Company and each of its
directors, officers, employees and agents and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Article V) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Trust or the Adviser) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in connection
therewith) (collectively, "Losses"), to which the Indemnified Parties may become
subject under any statute or regulation, or at common law or otherwise, insofar
as such Losses:
<PAGE>
(a) 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 for the Trust (or any amendment or
supplement thereto), (collectively, "Trust Documents" for the purposes
of this Article V), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Trust by or on behalf
of the Company for use in Trust Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Trust or
Adviser or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Trust or the Adviser;
or
(d) arise out of or result from any failure by the Trust or
the Adviser to provide the services or furnish the materials required
under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust or the Adviser in this
Agreement (including a failure, whether unintentional or in good faith
or otherwise, to comply with the diversification or Sub-Chapter M
requirements of Article III of this Agreement) or arise out of or
result from any other material breach of this Agreement by the Trust or
the Adviser.
(f) 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.
5.3 Neither the Company nor the Trust or the Adviser shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any Losses incurred or assessed against an Indemnified Party that
arise from 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.
5.4 Neither the Company nor the Trust or the Adviser shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the other party in writing within a reasonable time
after the summons, or other first written notification, giving information of
the nature of the claim shall have been served upon or otherwise received by
such Indemnified Party (or after such Indemnified Party shall have received
notice of service upon or other notification to any designated agent), but
failure to notify the party against whom indemnification is sought of any such
claim shall not relieve that party from any liability which it may have to the
Indemnified Party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the Indemnified
Party of an election to assume such defense, 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 the Indemnified 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.
ARTICLE VI
Termination
6.1 This Agreement may be terminated
(a) by any party for any reason by ninety (90) days' advance
written notice delivered to the other parties.
(b) at the option of the Company to the extent that the
Portfolios are not reasonably available to meet the requirements of the
Contracts or are not "appropriate funding vehicles" for the Contracts,
as reasonably determined by the Company. Without limiting the
generality of the foregoing, the Portfolios would not be "appropriate
funding vehicles" if, for example, such Portfolios did not meet the
diversification or other requirements referred to in Article III
hereof; or if the Company would be permitted to disregard Contract
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 the Adviser upon institution
of formal proceedings against the Company by the NASD, the SEC, or any
insurance department or other regulatory body regarding the Company's
duties under this Agreement or related to the sale of the Contracts,
the operation of the Accounts, or the purchase of the shares of the
Portfolios; 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 the Adviser's duties under this Agreement or
related to the sale of the shares of the Portfolios; or
(e) at the option of the Company, the Trust or the Adviser
upon receipt of any necessary regulatory approvals and/or the vote of
the Contract 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
Contracts 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 Portfolio shares; or
(f) termination by either the Trust or the Adviser by written
notice to the Company, if either one or both of the Trust or the
Adviser 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 the Adviser, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or the Adviser 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.
6.2 Notwithstanding any termination of this Agreement, the Trust and
the Adviser shall, at the option of the Company, continue to make available
additional shares of the Trust (or any Portfolio) pursuant to the terms and
conditions of this Agreement for all Contracts in
<PAGE>
effect on the effective date of termination of this Agreement, provided
that the Company continues to pay the costs set forth in Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.8 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail 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:
Janus Aspen Series
100 Fillmore Street
Denver, Colorado 80206
Attention: General Counsel
If to the Adviser:
Janus Capital Corporation
100 Fillmore Street
Denver, Colorado 80206
Attention: General Counsel
If to the Company:
Transamerica Life Insurance and Annuity Company
1150 South Olive Street
Los Angeles, California 90015
Attention: Corporate Secretary
<PAGE>
ARTICLE VIII
Miscellaneous
8.1 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.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of North
Carolina.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
8.7 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.
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
JANUS ASPEN SERIES
By:
Name:
Title:
JANUS CAPITAL CORPORATION
By:
Name:
Title:
TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY
By:
Name:
Title:
<PAGE>
-17-
N:\BMH\JAS\TRANSAME\PARTAGT.TLI
Schedule A
Separate Accounts and Associated Contracts
Contracts Funded
Name of Separate Account By Separate Account
Separate Account VA-6 TCG-311-197
-------------
TCG-313-197
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.
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:
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.
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: ____________________________
As of ____________________
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
Name of Separate
Account
Portfolios
Applicable to Policies
Separate Account VA-7
MFS Emerging Growth
<PAGE>
4
THIS AGREEMENT, made and entered into as of the 15th day of
December , 1997 by and among TRANSAMERICA LIFE INSURANCE AND ANNUITY
COMPANY (hereinafter the "Company"), a North Carolina corporation, on
its own behalf and on behalf of each separate account of the Company
set forth on Schedule A hereto as may be amended from time to time
(each such account hereinafter referred to as the "Account"), and
MORGAN STANLEY UNIVERSAL FUNDS, INC. (hereinafter the "Fund"), a
Maryland corporation, and MORGAN STANLEY ASSET MANAGEMENT INC. and
MILLER ANDERSON & SHERRERD, LLP (hereinafter collectively the
"Advisers" and individually the "Adviser"), a Delaware corporation and
a Pennsylvania limited liability partnership, respectively.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products") and (ii) the investment vehicle for certain
qualified pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Contracts enter into
participation agreements with the Fund and the Advisers (the "Participating
Insurance Companies");
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available under this
Agreement, as may be amended from time to time by mutual agreement of the
parties hereto (each such series hereinafter referred to as a "Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 19, 1996 (File No. 812-10118), granting
Participating Insurance Companies and Variable Insurance Product 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 Product separate accounts of both affiliated and unaffiliated life
insurance companies and Qualified Plans (hereinafter the "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, each Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, each Adviser manages certain Portfolios of the Fund; and
WHEREAS, Morgan Stanley & Co. Incorporated (the "Underwriter") is
registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD") and serves
as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase, on behalf of each Account, shares
in the Portfolios, set forth in Schedule B attached to this Agreement, to fund
certain of the aforesaid Variable Insurance Products and the Underwriter is
authorized to sell such shares to each such 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. Purchase of Fund Shares
1.1. The Fund agrees to make available for purchase by the Company
shares of the Fund and shall execute orders placed for each Account on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of such order. For purposes of this Section 1.1, the Company or its
administrator 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.
1.2. The Fund, so long as this Agreement is in effect, agrees to make
its shares available indefinitely for purchase at the applicable net asset value
per share by the Company and its Accounts on those days on which the Fund
calculates its net asset value pursuant to rules of the Securities and Exchange
Commission and the Fund shall use reasonable efforts to 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 permit the Fund 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 agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts and to certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, V,VI, VII and Section 2.5 of Article II of
this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on 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 by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company or its administrator 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 that the Fund receives
notice of such request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Variable Insurance
Products issued by the Company, under which amounts may be invested in the Fund
(hereinafter the "Contracts"), are listed on Schedule A attached hereto and
incorporated herein by reference, as such Schedule A may be amended from time to
time by mutual written agreement of all of the parties hereto. The Company will
give the Fund and the Adviser 45 days written notice of its intention to make
available in the future, as a funding vehicle under the Contracts, any other
investment company.
1.7. The Company shall pay for Fund shares 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.
For purposes of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
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.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company or its administrator of any
income, dividends or capital gain distributions payable on the Fund's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company or its administrator, as directed by 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 or its administrator, as directed by the
Company, on a daily basis as soon as reasonably practical after the net asset
value per share is calculated (normally by 6:30 p.m. Eastern time) and shall use
its best efforts to make such net asset value per share available by 7:00 p.m.
Eastern time.
1.11. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company or its administrator
shall be entitled to an adjustment with respect to the Fund shares purchased or
redeemed to reflect the correct net asset value per share. The determination of
the materiality of any net asset value pricing error shall be based on the SEC's
recommended guidelines regarding such errors. The correction of any such errors
shall be made at the Company level and shall be made pursuant to the SEC's
recommended guidelines. Any material error in the calculation or reporting of
net asset value per share, dividend or capital gain information shall be
reported promptly upon discovery to the Company.
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 in
compliance in all material respects with all applicable federal and state laws.
The Company represents and warrants that it will make every effort to ensure
that the Contracts are sold in compliance in all material respects with all
applicable federal and state laws and that the sale of the Contracts comply in
all material respects with state insurance suitability requirements. 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 prior to any issuance or sale thereof as a segregated
asset account under North Carolina Law and has registered or, prior to any
issuance or sale of the Contracts, will register each 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 Fund 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 Maryland and all
applicable federal and state securities laws 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 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.
2.3 The Fund and each Adviser represents with respect to the Portfolios
for which it acts as investment adviser, that the Portfolios to which this
agreement applies are currently qualified as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), that the Portfolios will maintain such qualification (under Subchapter
M or any successor or similar provision) and that they 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.
2.4. The Company represents that the Contracts are currently treated as
life insurance policies or annuity contracts, under Sections 7702, 7702A or 72,
their amendments and successors thereto, of the Code and that it will maintain
such treatment and that it will notify the Fund 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.
2.5.. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. 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 or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Maryland and the Fund represents that their respective operations are
and shall at all times remain in material compliance with the laws of the State
of Maryland to the extent required to perform this Agreement.
2.7. The Fund represents 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.
2.8. Each Adviser represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws.
2.9. The Fund represents and warrants that its directors, officers,
employees, and other individuals/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 as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10. 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, in an amount not less $5 million. The aforesaid
includes coverage for larceny and embezzlement 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, Reports to Shareholders and Proxy
Statements; Voting
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus (relating to the Portfolios) and
statement of additional information as the Company may reasonably request. If
requested by the Company, in lieu of providing printed copies the Fund shall
provide camera-ready film or computer diskettes containing the Fund's prospectus
(relating to the Portfolios) and statement of additional information, and such
other assistance as is reasonably necessary in order for the Company once each
year (or more frequently if the prospectus and/or statement of additional
information for the Fund is amended during the year) to have the prospectus for
the Contracts and the Fund's prospectus (relating to the Portfolios) printed
together in one document, and to have the statement of additional information
for the Fund and the statement of additional information for the Contracts
printed together in one document. Alternatively, the Company may print the
Fund's prospectus and/or its statement of additional information in combination
with other fund companies' prospectuses and statements of additional
information.
3.2. Except as provided in this Section 3.2., all expenses of printing
and distributing Fund prospectuses and statements of additional information
shall be the expense of the Company. For prospectuses and statements of
additional information provided by the Company to its existing owners of
Contracts who currently own shares of one or more of the Fund's Portfolios, in
order to update disclosure as required by the 1933 Act and/or the 1940 Act, the
cost of printing shall be borne by the Fund. If the Company chooses to receive
camera-ready film or computer diskettes in lieu of receiving printed copies of
the Fund's prospectus, the Fund will reimburse the Company in an amount equal to
the product of x and y where x is the number of such prospectuses distributed to
owners of the Contracts who currently own shares of one or more of the Fund's
Portfolios, and y is the Fund's per unit cost of typesetting and printing the
Fund's prospectus. The same procedures shall be followed with respect to the
Fund's statement of additional information. The Company agrees to provide the
Fund or its designee with such information as may be reasonably requested by the
Fund to assure that the Fund's expenses do not include the cost of printing any
prospectuses or statements of additional information other than those actually
distributed to existing owners of the Contracts.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Company or such other person as the Fund may designate, as
agreed upon by the parties.
3.4. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.5. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract
owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners; and
(iii) vote Fund shares for which no instructions
have been received in the same proportion as
Fund shares of such Portfolio for which
instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C, which standards will also be provided to the other Participating
Insurance Companies.
3.7. 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 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 Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
3.8. The Fund shall use reasonable efforts to provide Fund
prospectuses, reports to shareholders, proxy materials and other Fund
communications (or camera-ready equivalents) to the Company sufficiently in
advance of the Company's mailing dates to enable the Company to complete, at
reasonable cost, the printing, assembling and/or distribution of the
communications in accordance with applicable laws and regulations.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser(s) is named, at least ten Business
Days prior to its use. No such material shall be used if the Fund or its
designee reasonably objects to such use within ten Business Days after receipt
of such material. The Fund and the Adviser(s) shall use their best efforts to
review any such material within five Business Days of receipt from the Company.
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 its
designee, except with the permission of the Fund.
4.3. The Fund 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 its separate account(s)
is named at least ten Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within ten
Business Days after receipt of such material. The Company shall use its best
efforts to review any such material within five Business Days of receipt from
the Fund or the Fund's designee.
4.4. The Fund and the Advisers 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 Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
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, which are relevant
to the Company or the Contracts.
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 investment
in the Fund under the Contracts.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: 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, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund 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
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.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, 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, proxy materials and reports, setting the prospectus in type, setting
in type and printing 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,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
6.1. The Advisers and the Fund each represent and warrant that they
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 Code and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund will at all times comply with Section 817(h) of the Code and Treasury
Regulation 1.817-5, and Treasury interpretations thereof, 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 the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify immediately the Company of such breach
and (b) to adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Regulation 817-5.
ARTICLE VII. Potential Conflicts
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 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 Insurance Product owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company 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 the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested members, that a material irreconcilable 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 Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance policy
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.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); 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.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company 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 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 Board 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. 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 Contract owners materially adversely affected by the
irreconcilable material conflict.
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
1940 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
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.
<PAGE>
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a) The Company agrees to indemnify and hold harmless the Fund and
each member of the Board and officers, and each Adviser and each director and
officer of each Adviser, and each person, if any, who controls the Fund or the
Adviser within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually, "Indemnified Party," 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 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 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 for the Contracts or
contained in the Contracts or sales literature 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 the Company by or on behalf of the 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
(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 the Company, or persons under its control
and other than statements or representations authorized by the
Fund or an Adviser) or unlawful 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 or as a result 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 and in conformity with
information furnished to the Fund by or on behalf of the
Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) 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, as limited by and in
accordance with the provisions of Sections 8.1(b) and 8.1(c)
hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed
against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement.
8.1(c). The Company 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 Company 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 Company of any such claim
shall not relieve the Company 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 Company shall be entitled to
participate, at its own expense, in the defense of such
action. The Company also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Company to such party of
the Company'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 Company 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
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 Advisers
8.2(a). Each Adviser agrees, with respect to each
Portfolio that it manages, 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 (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," 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 Adviser) or litigation
(including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of shares
of the Portfolio that it manages 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
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
furnished to the Fund by or on behalf of the
Company 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
Portfolio 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 Fund or persons under its
control and other than statements or
representations authorized by the Company)
or unlawful conduct of the Fund, Adviser(s)
or Underwriter or persons under their
control, with respect to the sale or
distribution of the Contracts or Portfolio
shares; or
(iii) arise out of or as a result of
any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, or sales
literature covering the Contracts, or any
amendment thereof or supplement thereto, or
the omission or alleged omission to state
therein a material fact required to be
stated therein or necessary to make the
statement or statements therein not
misleading, if such statement or omission
was made in reliance upon information
furnished to the Company by or on behalf of
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; or
(v) arise out of or result from any
material breach of any representation and/or
warranty made by the Adviser in this
Agreement or arise out of or result from any
other material breach of this Agreement by
the Adviser (including a failure, whether
unintentional or in good faith or otherwise,
to comply with the diversification
requirements of Article IV or the Subchapter
M qualification of Section 2.3 of this
Agreement); as limited by and in accordance
with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). An Adviser shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed
against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement.
8.2(c). An Adviser 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 Adviser 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 Adviser of any such claim
shall not relieve the Adviser 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 Adviser will be entitled to
participate, at its own expense, in the defense thereof. The
Adviser also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action.
After notice from the Adviser to such party of the Adviser'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 Adviser 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). The Company agrees promptly to notify the
Adviser 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
each Account.
8.3. Indemnification by the Fund
8.3(a). The Fund 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 (hereinafter
collectively, the "Indemnified Parties" and individually,
"Indemnified Party," for purposes of this Section 8.3) against
any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the
Fund) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or
any member thereof, are related to the operations of the Fund
and:
(i) arise as a result of
any failure by the Fund to provide the
services and furnish the materials under the
terms of this Agreement; or
(ii) arise out of or result
from any material breach of any
representation and/or warranty made by the
Fund in this Agreement or arise out of or
result from any other material breach of
this Agreement by the Fund (including a
failure, whether unintentional or in good
faith or otherwise, to comply with the
diversifictation requirements of Article IV
or the Subchapter M qualification of Section
2.3 of this Agreement);
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed
against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement.
8.3(c). The Fund 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 Fund 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 Fund of any such claim shall
not relieve the Fund 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 Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be
entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice
from the Fund to such party of the Fund'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
Fund 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.
8.3(d). The Company agrees promptly to notify the
Fund of the commencement of any litigation or proceedings
against it or any of its respective officers or directors in
connection with this Agreement, the issuance or sale of the
Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
<PAGE>
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 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.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and
effect until the first to occur of:
(a) termination by any party for any reason by
ninety (90) days advance written
notice delivered to the other parties; or
(b) termination by the Company by written notice to
the Fund and the Adviser with respect to any Portfolio based
upon the Company's determination that shares of such Portfolio
is not reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to
the Fund and the Adviser 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
the Company; or
(d) termination by the Company by written notice to
the Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to
the Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio falls to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund by written notice
to the Company if the Fund shall determine, in its sole
judgment exercised in good faith, that the Company and/or its
affiliated companies 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 Fund and the Adviser, if the Company shall determine, in
its sole judgment exercised in good faith, that either the
Fund or the Adviser 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
(h) termination by the Fund or the Adviser by written
notice to the Company, if the Company gives the Fund and the
Adviser the written notice specified in Section 1.6 hereof and
at the time such notice was given there was no notice of
termination outstanding under any other provision of this
Agreement; provided, however any termination under this
Section 10.1(h) shall be effective forty five 45 days after
the notice specified in Section 1.6 was given.
10.2. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company,
continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing,
Contracts"). Specifically, without limitation, the owners of
the Existing Contracts shall be permitted to direct
reallocation of investments in the Fund, redemption of
investments in the Fund and/or investment in the Fund upon the
making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.2 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.
10.3. The Company shall not redeem Fund shares
attributable to the Contracts (as distinct from Fund shares
attributable to the Company's assets held in the Account)
except (i) as necessary to implement Contract Owner initiated
or approved transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal
precedent of general application (hereinafter referred to as a
"Legally Required Redemption") or (iii) as permitted by an
order of the Securities and Exchange Commission pursuant to
Section 26(b) of the 1940 Act. Upon request, the Company will
promptly furnish to the Fund the opinion of counsel for the
Company (which counsel shall be reasonably satisfactory to the
Fund) to the effect that any redemption pursuant to clause
(ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the
Contracts, the Company shall not prevent Contract Owners from
allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund 90
days prior written notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by
registered or certified mail 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:
Morgan Stanley Universal Funds, Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Secretary
If to Adviser:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr., Esq.
If to Adviser:
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, Pennsylvania 19428
Attention: Lorraine Truten
If to the Company:
Transamerica Life Insurance and Annuity Company
1150 South Olive Street
Los Angeles, California 90015
Attention: Corporate Secretary
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 Board, officers, agents
or shareholders assume any personal liability for obligations
entered into on behalf of the Fund.
12.2. 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 until such time as it may come into
the public domain without the express 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. Each party hereto shall cooperate with each
other party and all appropriate governmental authorities
(including without limitation the Securities and Exchange
Commission, the National Association of Securities Dealers and
state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. 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 insurance operations of the
Company are being conducted in a manner consistent with the
California Insurance Regulations and any other applicable law
or regulations.
12.7. 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.
12.8. 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; provided,
however, that an Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company
under common control with the Adviser, if such assignee is
duly licensed and registered to perform the obligations of the
Adviser under this Agreement.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following
reports:
(a) the Company's annual statement (prepared
under statutory accounting principles) and annual
report (prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of each
fiscal year;
(b) the Company's quarterly statements
(statutory) (and GAAP, if any), as soon as practical
and in any event within 45 days after the end of each
quarterly period:
(c) any financial statement, proxy
statement, notice or report of the Company sent to
stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without
exhibits) and financial reports of the Company filed
with the Securities and Exchange Commission or any
state insurance regulator, as soon as practical after
the filing thereof;
(e) any other report submitted to the
Company by independent accountants in connection with
any annual, interim or special audit made by them of
the books of the Company, as soon as practical after
the receipt thereof.
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.
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
By: ______________________________
Name:
Title:
MORGAN STANLEY UNIVERSAL FUNDS, INC.
By: ______________________________
Name:
Title:
MORGAN STANLEY ASSET MANAGEMENT INC.
By: ______________________________
Name:
Title:
MILLER ANDERSON & SHERRERD, LLP
By: ______________________________
Name:
Title:
<PAGE>
PartTrans.doc
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account Form Number and Name of Contract Funded by Separate
-------------------
Account
Sep Acct VA-6
Variable Annuity - Products A, B and C
(A) Policy Form No. TCG - 311-197
(B) Policy Form No. - Not yet assigned
(C) Policy Form No. TCG - 313-197
A-1
<PAGE>
SCHEDULE B
PORTFOLIOS OF MORGAN STANLEY
UNIVERSAL FUNDS, INC.
Fixed Income Portfolio
High Yield Portfolio
International Magnum Portfolio
B-1
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to
call in the number of Customers to the Fund , as soon as possible, but
no later than two weeks after the Record Date.
. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting,
instruction solicitation material. The Fund will provide the last
Annual Report to the Company pursuant to the terms of Section 3.3 of
the Agreement to which this Schedule relates.
. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
C-1
. name (legal name as found on account registration)
. address
. fund or account number
. coding to state number of units
. individual Card number for use in tracking and verification of
votes (already on Cards as
printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Company). Contents of envelope sent to Customers by the Company
will include:
. Voting Instruction Card(s)
. One proxy notice and statement (one document)
. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that
requests Customers to vote as quickly as possible and that
their vote is important. One copy will be supplied by the
Fund.)
. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including,) the meeting, counting backwards.
. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
C-2
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance
company's internal procedure and has not been required by the Fund in
the past.
. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, if the account registration is under "John A.
Smith, Trustee," then that is the
exact legal name to be printed on the Card and is the signature needed
on the Card.
. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important
that the Fund receives the tabulations stated in terms of a percentage
and the number of shares.) The
Fund must review and approve tabulation format.
. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. The Fund will provide a standard form for each Certification.
C-3
. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
C-4
<PAGE>
PARTICIPATION AGREEMENT
Among
MORGAN STANLEY UNIVERSAL FUNDS, INC.,
MORGAN STANLEY ASSET MANAGEMENT INC.
MILLER ANDERSON & SHERRERD, LLP
and
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
DATED AS OF
DECEMBER 15, 1997
PartTran.doc
<PAGE>
<PAGE>
10
PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
And
OCC DISTRIBUTORS
And
OpCap Advisors
THIS AGREEMENT, made and entered into this 18th day of
December, 1997, 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"), OpCap Advisors (hereinafter the "Adviser") 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 or life insurance 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;
WHEREAS, the Company may contract with an Administrator to
perform certain services with regard to the Contracts and, therefore, certain
obligations and services of the Adviser and/or Trust should be directed to the
Administrator, as directed by the Company;
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 or its Administrator 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 or its
Administrator 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.
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 each Business Day; 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 shall 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 shall be sold to the general public.
1.5. The Fund and the Underwriter shall not sell Fund shares
to any insurance company or separate account unless an agreement containing
provisions substantially the same as Articles I, III, V, VI 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 or its Administrator
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 to Contract
owners; 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 to Company or its
Administrator by Company, two days prior to the distribution 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
the day of distribution when it reports the Portfolio's NAV pursuant to Section
1.10.
1.10. The Fund shall report the net asset value per share for
each Portfolio to the Company or its Administrator, as directed by 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. If the Fund
provides materially incorrect share net asset value information, the Fund 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.
<PAGE>
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 the Contracts are currently
and at the time of issuance will be treated as life insurance or annuity
contracts under Sections 7702 or 72 of the Internal Revenue Code and that it
will 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 and Adviser represent and warrant 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 and Adviser represent and warrant that the Fund
and each of the Portfolios is currently qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code, and that they will
maintain such qualification (under Subchapter M or any successor or similar
provision) (or correct any failure during the applicable grace period) and that
they 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 and the Adviser represent and warrant
that Adviser 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, Adviser 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 current prospectuses for the
Portfolios listed on Schedule 2 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
prospectuses 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 said
prospectuses are amended more frequently) to have the new prospectus for the
Contracts and the Portfolios' new prospectuses 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 proxy material, if any, reports to shareholders and other
communications to shareholders with regard to the Portfolios listed in Schedule
2 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 contract
owners 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 five 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.
5.3 Adviser will quarterly reimburse the Company certain of
the administrative costs and expenses incurred by the Company as a result of
operations necessitated by the beneficial ownership by Contract owners of shares
of the Portfolios of the Fund, equal to 0.15% per annum of the average daily net
assets of the Fund attributable to variable life or variable annuity contracts
offered by the Company or its affiliates up to $300 million and 0.20% per annum
of the average daily net assets of the Fund attributable to such contracts in
excess of $300 million but less than $600 million and 0.25% per annum of the
average daily net assets of the Fund attributable to such contracts in excess of
$600 million. In no event shall such fee be paid by the Fund, its shareholders
or by the contract holders.
ARTICLE VI. Diversification
6.1. The Fund and the Adviser represent and warrant that 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 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 Adviser, 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 statemen
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 and Adviser, on their own behalf and on
behalf of the Fund, joint and severally agree to indemnify and hold harmless the
Company and each of its directors, officers, employees or agents and each
person, if any, who controls or is associated with the Company within the
meaning of such terms under the federal securities laws (collectively, the
"indemnified parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter or Adviser) 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 or the Sub-Chapter M
qualification specified in Section 2.4 of
this Agreement; 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; or
(vi) 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;
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 advanc 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: ______________________________
Adviser:
OpCap Advisors
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 VUL-1
[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
<PAGE>
PARTICIPATION AGREEMENT
Among
TRANSAMERICA VARIABLE INSURANCE FUND, INC.
TRANSAMERICA SECURITIES SALES CORPORATION
and
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
THIS AGREEMENT, made and entered into as of this ____ day of _________,
1996 by and among TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY hereinafter
"Transamerica"), a North Carolina 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
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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.
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<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.
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<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
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<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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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 furnished
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
covering the Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon information
furnished 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.
- 29 -
<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
- 30 -
<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
- 31 -
<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
- 32 -
<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 LIFE INSURANCE AND ANNUITY COMPANY
Transamerica Center
401 North Tryon Street
Charlotte, North Carolina 28202
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>
Exhibit (9) Opinion and Consent of Counsel
<PAGE>
June 17, 1998
Transamerica Life Insurance
and Annuity Company
401 North Tryon Street
Charlotte, North Carolina 28202
Gentlemen:
With reference to the Registration Statement on Form N-4 filed by Transamerica
Life Insurance and Annuity Company and its Separate Account VA-7 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 Form
N-4 Registration Statement and to the reference to my name under the caption
"Legal Matters" in the Prospectus contained in the said Registration Statement.
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)(b) Consent of Independent Auditors
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Accountants" in the
initial registration statement on Form N-4 and the related Prospectus and
Statement of Additional Information of Separate Account VA-7 of Transamerica
Life Insurance and Annuity Company and to the use of our report dated January
23, 1998 with respect to the consolidated financial statements of Transamerica
Life Insurance and Annuity Company included in the Statement of Additional
Information.
/s/ Ernst & Young LLP
Los Angeles, California
June 23, 1998
<PAGE>
Exhibit (15) Powers of Attorney
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Robert Abeles
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Thomas J. Cusack
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
James W. Dederer
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Richard H. Finn
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
George A. Foegele
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
David E. Gooding
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Edgar H. Grubb
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Frank C. Herringer
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Richard N. Latzer
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst and each of them (with full power to each of them to act
alone), her true and lawful attorney-in-fact and agent, with full power of
substitution to each, for her and on her behalf and in her 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 life insurance and 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 her 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
20th day of March, 1998.
------------------------------
Karen MacDonald
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Mark McEachen
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Gary U. Rolle'
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Paul E. Rutledge III
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
T. Desmond Sugrue
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Bruce A. Turkstra
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Nooruddin Veerjee
<PAGE>
POWER OF ATTORNEY
The undersigned director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Aldo Davanzo, James W. Dederer, David M. Goldstein, David E. Gooding,
and William M. Hurst 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 him 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 life insurance and 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
20th day of March, 1998.
------------------------------
Robert A. Watson
<PAGE>
