As filed with the Securities and Exchange Commission on March 16, 2000
Registration Nos.
No. 811-09859
----------------------------------------------------------------------
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-8
---------------------
(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>
8
5
PROSPECTUS FOR THE
DURHAM VARIABLE ANNUITY
A FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
ISSUED BY
TRANSAMERICA LIFE INSURANCE
AND
ANNUITY COMPANY
OFFERING 19 SUB-ACCOUNTS WITHIN THE VARIABLE ACCOUNT
DESIGNATED AS SEPARATE ACCOUNT VA-8
IN ADDITION TO:
A FIXED ACCOUNT
<TABLE>
<CAPTION>
<S> <C> <C>
o THIS PROSPECTUS CONTAINS PORTFOLIOS ASSOCIATED WITH SUB-ACCOUNTS
---------------------------------------
INFORMATION YOU SHOULD ALGER AMERICAN INCOME AND GROWTH
KNOW BEFORE INVESTING. ALLIANCE VPF GROWTH AND INCOME
ALLIANCE VPF PREMIER GROWTH
o PLEASE KEEP THIS PROSPECTUS DREYFUS VIF CAPITAL APPRECIATION
FOR FUTURE REFERENCE. DREYFUS VIF SMALL CAP
JANUS ASPEN SERIES BALANCED
o YOU CAN OBTAIN MORE INFORMATION ABOUT JANUS ASPEN SERIES WORLDWIDE GROWTH
THE CONTRACT BY REQUESTING A COPY OF THE MFS VIT EMERGING GROWTH
STATEMENT OF ADDITIONAL INFORMATION ("SAI") MFS VIT GROWTH WITH INCOME
DATED JUNE 30, 2000. THE SAI IS AVAILABLE MFS VIT RESEARCH
FREE BY WRITING TO TRANSAMERICA LIFE MSDW UF EMERGING MARKETS EQUITY
INSURANCE AND ANNUITY COMPANY, MSDW UF FIXED INCOME
ANNUITY SERVICE CENTER, MSDW UF HIGH YIELD
9735 LANDMARK PKWY. DR., MSDW UF INTERNATIONAL MAGNUM
ST. LOUIS, MISSOURI 63127 OR OCC ACCUMULATION TRUST MANAGED
BY CALLING 800-317-2688. OCC ACCUMULATION TRUST SMALL CAP
PIMCO VIT STOCKSPLUS GROWTH & INCOME
THE CURRENT SAI HAS BEEN FILED WITH THE TRANSAMERICA VIF GROWTH
SECURITIES AND EXCHANGE COMMISSION AND TRANSAMERICA VIF MONEY MARKET
IS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. THE TABLE OF CONTENTS OF THE SAI
IS INCLUDED AT THE END OF THIS PROSPECTUS.
</TABLE>
o THE SEC'S WEB SITE IS HTTP://WWW.SEC.GOV
o TRANSAMERICA'S WEB SITE IS
HTTP://WWW.TRANSAMERICA.COM
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THIS INVESTMENT
OFFERING OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
JUNE 30, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Summary.....................................................................................................5
Transamerica Life Insurance and Annuity Company and the Variable Account...................................16
Transamerica Life Insurance and Annuity Company...................................................16
Published Ratings.................................................................................16
Insurance Marketplace Standards Association.......................................................16
The Variable Account..............................................................................16
The Portfolios.............................................................................................17
Portfolios Not Publicly Available.................................................................21
Addition, Deletion, or Substitution...............................................................21
The Contract...............................................................................................22
Ownership.........................................................................................22
Purchase Payments..........................................................................................23
Allocation of Purchase Payments...................................................................23
Free Look Option..................................................................................23
Investment Option Limit...........................................................................24
Account Value..............................................................................................24
How Variable Accumulation Units Are Valued........................................................24
Transfers..................................................................................................25
Before the Annuity Date...........................................................................25
Telephone Transfers...............................................................................25
Other Restrictions................................................................................25
Dollar Cost Averaging.............................................................................26
Eligibility Requirement for Dollar Cost Averaging ................................................26
Automatic Asset Rebalancing.......................................................................27
After the Annuity Date............................................................................27
Cash Withdrawals...........................................................................................27
Systematic Withdrawal Option......................................................................28
Automatic Payment Option (APO)....................................................................29
TSA LOANS....................................................................................................
Amounts and Conditions..............................................................................
Interest............................................................................................
Terms and Repayment.................................................................................
Default.............................................................................................
Partial Withdrawals.................................................................................
Cash Surrender......................................................................................
Annuitization.......................................................................................
Death...............................................................................................
Termination.........................................................................................
Death Benefit..............................................................................................29
Payment of Death Benefit..........................................................................30
Designation of Beneficiaries......................................................................30
Death of Owner or Joint Owner Before the Annuity Date.............................................30
If the Annuitant Dies Before the Annuity Date.....................................................31
Death After the Annuity Date......................................................................31
Survival Provision................................................................................31
Charges, Fees and Deductions...............................................................................31
Contingent Deferred Sales Load/Surrender Charge...................................................31
Free Withdrawals - Allowed Amount.................................................................32
Other Free Withdrawals............................................................................33
Administrative Charges............................................................................33
Mortality and Expense Risk Charge.................................................................34
Guaranteed Minimum Income Benefit Rider Fee.......................................................34
Premium Tax Charges...............................................................................34
Transfer Fee......................................................................................34
Option and Service Fees...........................................................................34
Taxes.............................................................................................34
Portfolio Expenses................................................................................34
Sales in Special Situations.......................................................................35
DISTRIBUTION OF THE CONTRACT...............................................................................35
Settlement Option Payments.................................................................................35
Annuity Date......................................................................................35
Annuity Amount......................................................................................
Guaranteed Minimum Income Benefit (GMIB) Rider......................................................
Settlement Option Payments........................................................................36
Election of Settlement Option Forms and Payment Options...........................................36
Payment Options...................................................................................36
Fixed Payment Option..............................................................................36
Variable Payment Option...........................................................................37
Settlement Option Forms...........................................................................37
Federal Tax Matters........................................................................................38
Introduction......................................................................................38
Purchase Payments.................................................................................39
Taxation of Annuities.............................................................................39
Qualified Contracts...............................................................................41
Contracts Purchased by Nonresident Aliens and Foreign Corporations................................43
Taxation of Transamerica .........................................................................43
Tax Status of Contract............................................................................43
Possible Changes in Taxation......................................................................44
Other Tax Consequences............................................................................45
Performance Data...........................................................................................45
Legal Proceedings..........................................................................................47
Legal Matters..............................................................................................47
Accountants AND FINANCIAL STATEMENTS.......................................................................47
Voting Rights..............................................................................................47
Available Information......................................................................................48
Statement of Additional Information - Table of Contents....................................................49
Appendix A - The Fixed account.............................................................................50
The Fixed Account ................................................................................50
The Guarantee Period Account .....................................................................51
Appendix B.................................................................................................54
Example of Variable Accumulation Unit Value Calculations..........................................54
Example of Variable Annuity Unit Value Calculations...............................................54
Example of Variable Annuity Payment Calculations..................................................54
APPENDIX C.................................................................................................55
Calculation of Yields and Total Returns.............................................................
Historical Performance Data.........................................................................
Appendix D.................................................................................................58
Definitions.......................................................................................56
APPENDIX E...................................................................................................
Disclosure Statement for Individual Retirement Annuities..........................................58
</TABLE>
<PAGE>
SUMMARY
This summary provides you with a brief overview of some of the more important
aspects of the DURHAM Variable Annuity contract. The remainder of the prospectus
and the contract will provide you with further details.
The DURHAM Variable Annuity is a contract between you and Transamerica Life
Insurance and Annuity Company, an indirect wholly-owned subsidiary of AEGON,
N.V., with its principal office at:
401 North Tryon Street
Charlotte, North Carolina 28202
The contract is a flexible purchase payment deferred annuity that has two
phases, the accumulation phase and the annuitization phase. During the
accumulation phase, your earnings accumulate on a tax-deferred basis for
individuals. Tax deferral is not available for non-qualified contracts owned by
corporations and some trusts.
As long as the contract is in effect, you may make additional purchase payments,
transfer money among the investment options and withdraw some or all of the
account value.
On a future date you select, called the annuity date, the annuitization phase
begins. During this phase, we apply the account value, after certain
adjustments, to a settlement option that provides periodic payments to you. The
dollar amount of the payments will depend on the amount of money invested and
earned during the accumulation phase, and on other factors, such as the
annuitant's age and sex and if variable payouts are elected.
If you or a joint owner die during the accumulation phase, we will pay a death
benefit to the beneficiary you designate in an amount at least equal to the
account value.
SUB-ACCOUNT VALUES WILL VARY ACCORDING TO INVESTMENT EXPERIENCE. The account
value before the annuity date, except for amounts in the fixed account, will
vary depending on the investment experience of each of the variable sub-accounts
you select. 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, before the annuity date, you bear 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.
WHAT IS THE CONTRACT'S OBJECTIVE?
We designed the contract to assist individuals in long-term financial planning
for retirement or other purposes. You may use the contract as:
a) a non-qualified annuity;
b) a qualified annuity as:
o a rollover or regular individual retirement annuity, or IRA, under Section
408(b) of the Internal Revenue Code, or Code; or
o a tax sheltered annuity, or TSA, qualified under Code Section 403(b).
Generally, qualified contracts contain restrictive provisions limiting the
timing and amount of purchase payments to, and distributions from, the qualified
contract. Some qualified contracts may not be available in all states or in all
situations.
HOW MUCH CAN I INVEST AND HOW OFTEN?
To purchase a contract, you must make an initial purchase payment of at least:
o $5,000 for a non-qualified contract; or
o $5,000 for an IRA contract issued as the result of a transfer or rollover
from an IRA or other qualified plan;
o $2,000 for a contract issued as the result of a transfer or rollover from
another TSA contract or for a regular IRA contract; or
o $50 for a TSA contract if you elect to make purchase payments through your
employer by payroll deduction of at least $50 per month.
Once we receive the initial purchase payment, we establish and maintain an
account for each contract.
You may make additional purchase payments at any time while the contract is in
effect. The minimum amount of each additional purchase payment is:
o $1,000; or
o $50 per month if payments are made through your employer by payroll
deduction for a TSA, or by electronic funds transfer, or EFT, for other
contracts.
HOW CAN I ALLOCATE MY MONEY?
You may choose to allocate all or part of your purchase payments to:
o one or more of 19 variable sub-accounts described in THE PORTFOLIOS on page
14; and/or
o the fixed account.
CAN I EXAMINE THE CONTRACT?
Yes. As the owner, you have the right to examine the contract for a limited
period, or free look period. You may cancel the contract during this period by
delivering or mailing a written notice of cancellation, or sending a telegram to
our Service Center. You must
return the contract before midnight of the tenth day after receipt of the
contract, or longer in some situations or if required by state law. Notice given
by mail returning the contract by mail will be effective on the date received by
us. The amount of the refund may depend on the state of issuance. In most cases,
we will refund the purchase payments allocated to the fixed account, minus any
withdrawals, plus the variable accumulated value as of the date we receive your
written notice to cancel and your contract. See PURCHASE PAYMENTS on page 20.
WHAT CHARGES, EXPENSES AND FEES WILL
I INCUR?
The following table assists you in understanding the various costs and expenses
that you will incur directly and indirectly. The table reflects expenses of the
variable account and the mutual fund portfolios, as well as contract expenses
and the fees for any optional riders. The table assumes that the entire account
value is in the variable account. You should consider the information below
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
apply.
<PAGE>
SALES LOAD(1)
----------
as a percentage of purchase payments withdrawn
Sales Load Imposed on Purchases 0%
Maximum Contingent Deferred Sales Load(2) 9%
RANGE OF CONTINGENT DEFERRED SALES LOAD OVER TIME:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
CONTRACT YEARS SINCE SALES LOAD
PURCHASE PAYMENT RECEIPT as a percentage of purchase payments
------------------------ ------------------------------------
<S> <C> <C>
Less than 1 year 9%
1 year but less than 2 years 9%
2 years but less than 3 years 8%
3 years but less than 4 years 8%
4 years but less than 5 years 6%
5 years but less than 6 years 6%
6 years but less 7 years 4%
7 or more years 0%
</TABLE>
<PAGE>
OTHER CONTRACT EXPENSES
Account Fee(3) $25
VARIABLE ACCOUNT ANNUAL EXPENSES(4)
-----------------------------------
as a percentage of the variable accumulated value
<TABLE>
<CAPTION>
<S> <C>
Mortality and Expense Risk Charge 1.60%
Administrative Expense Charge 0.15%
Total Variable Account Annual Expenses 1.75%
Guaranteed Minimum Income Benefit Rider Fee, if elected(5) 0.35%
</TABLE>
PORTFOLIO EXPENSES
as a percentage of assets after fee waiver and/or expense reimbursement(6)
<TABLE>
<CAPTION>
TOTAL
PORTFOLIO
MANAGEMENT OTHER ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES
--------- ---- -------- --------
<S> <C> <C> <C>
Alger American Income & Growth 0.625% 0.075% 0.70%
Alliance VPF Growth & Income 0.625% 0.105% 0.73%
Alliance VPF Premier Growth 0.97% 0.09% 1.06%
Dreyfus VIF Capital Appreciation 0.75% 0.06% 0.81%
Dreyfus VIF Small Cap 0.75% 0.02% 0.77%
Janus Aspen Series Balanced 0.65% 0.02% 0.67%
Janus Aspen Series Worldwide Growth 0.65% 0.05% 0.70%
MFS VIT Emerging Growth 0.75% 0.09% 0.84%
MFS VIT Growth with Income 0.75% 0.13% 0.88%
MFS VIT Research 0.75% 0.11% 0.86%
MSDW UF Emerging Markets Equity 0.00% 1.95% 1.95%
MSDW UF Fixed Income 0.06% 0.64% 0.70%
MSDW UF High Yield 0.15% 0.65% 0.80%
MSDW UF International Magnum 0.15% 1.00% 1.15%
OCC Accumulation Trust Managed 0.78% 0.04% 0.82%
OCC Accumulation Trust Small Cap 0.80% 0.08% 0.88%
PIMCO VIT StocksPLUS Growth & Income 0.40% 0.25% 0.65%
Transamerica VIF Growth 0.64% 0.21% 0.85%
Transamerica VIF Money Market 0.00% 0.60% 0.60%
</TABLE>
The portfolios have provided us with the expense information regarding the
portfolios. In preparing the tables above and below and the examples that
follow, we have relied on the figures provided by the portfolios. We have no
reason to doubt the accuracy of that information, but we have not verified those
figures. These figures are for the year ended December 31, 1999. Actual expenses
in future years may be higher or lower than these figures.
<PAGE>
Notes to Fee Table:
1. The contingent deferred sales load applies to each contract, regardless of
how the account value is allocated between the variable account and the
fixed account.
2. A portion of the purchase payments may be withdrawn each contract year
without imposition of any contingent deferred sales load. After a purchase
payment has been in the contract at least seven contract years, it may be
withdrawn free of any contingent deferred sales load. No contingent
deferred sales load is imposed on the withdrawal of any purchase payment
after the contract has been in effect for 14 contract years. See Charges,
Fees and Deductions on page 31.
The account fee is deducted at the end of each contract year and at surrender.
The fee is deducted on a pro rata basis from the account value. After the
annuity date, an annual fee of $30 is deducted proportionately from each
settlement option payment if a variable payout option is selected.
4. The variable account annual expenses do not apply to the fixed account.
If you elect the optional rider, we deduct the rider fee at the rate of 1/12 of
the annual rate at the end of each contract month based on the variable
accumulated value (except the money market sub-account) at that time.
6. 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 1999. 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 2000. Without
such waivers or reimbursements, the annual expenses for 1999 for the
following portfolios would have been, as a percentage of assets:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL PORTFOLIO
FEE EXPENSES ANNUAL EXPENSE
<S> <C> <C> <C>
Alliance VPF Premier Growth 1.00% 0.09% 1.09%
Janus Aspen Series Worldwide Growth 0.67% 0.07% 0.74%
MSDW UF Emerging Markets Equity 1.25% 2.20% 3.45%
MSDW UF Fixed Income 0.40% 0.64% 1.04%
MSDW UF High Yield 0.50% 0.65% 1.15%
MSDW UF International Magnum 0.80% 1.00% 1.80%
PIMCO VIT StocksPLUS Growth & Income 0.65% 0.07% 0.72%
Transamerica VIF Growth 0.75% 0.21% 0.96%
Transamerica VIF Money Market 0.35% 2.68% 3.03%
</TABLE>
EXAMPLES
The following tables show the total expenses you would incur in various
situations during the accumulation period using the following assumptions:
o a $1,000 investment;
o a 5% annual return on assets;
o an average account value of $40,000 with a deduction of 0.075% to reflect
the $25 account fee;
o all amounts are allocated to the variable sub-account indicated; and
no optional rider fees or premium tax charges are reflected. Premium tax
charges may apply. See Premium Tax Charges on page 34.
These examples show expenses for contracts based on fee waivers and
reimbursements for the portfolios for 1999. There is no guarantee that any fee
waivers or expense reimbursements will continue in the future. For
annuitizations before the first contract anniversary, and for annuitizations
under a form that does not include life contingencies, the contingent deferred
sales load may apply. The Year 1 column in expense example 3 illustrates this
occurrence.
EXAMPLE 1: If you surrender the contract at the end of the applicable time
period:
<TABLE>
<CAPTION>
--------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------
----------------------------------------
<S> <C> <C> <C> <C>
Alger American Income & Growth $73 $109 $148 $246
Alliance VPF Growth & Income $73 $110 $150 $249
Alliance VPF Premier Growth $76 $120 $166 $282
Dreyfus VIF Capital Appreciation $74 $112 $154 $257
Dreyfus VIF Small Cap $73 $111 $152 $253
Janus Aspen Series Balanced $73 $110 $150 $250
Janus Aspen Series Worldwide Growth $73 $110 $149 $248
MFS VIT Emerging Growth $74 $114 $156 $261
MFS VIT Growth with Income $74 $114 $157 $264
MFS VIT Research $74 $114 $156 $262
MSDW UF Emerging Markets Equity $85 $146 $210 $366
MSDW UF Fixed Income $73 $109 $148 $246
MSDW UF High Yield $74 $112 $153 $256
MSDW UF International Magnum $77 $123 $171 $291
OCC Accumulation Trust Managed $74 $113 $154 $258
OCC Accumulation Trust Small Cap $74 $114 $157 $264
PIMCO VIT StocksPLUS Growth & Income $72 $108 $146 $241
Transamerica VIF Growth $74 $114 $156 $261
Transamerica VIF Money Market $72 $106 $143 $235
------------------------------------------------------------------------------------------------------
EXAMPLE 2: If you do not surrender and do not annuitize the contract:
------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------
----------------------------------------
Alger American Income & Growth $22 $67 $114 $246
Alliance VPF Growth & Income $22 $67 $116 $249
Alliance VPF Premier Growth $25 $77 $132 $282
Dreyfus VIF Capital Appreciation $23 $70 $120 $257
Dreyfus VIF Small Cap $22 $69 $118 $253
Janus Aspen Series Balanced $22 $68 $116 $250
Janus Aspen Series Worldwide Growth $22 $67 $115 $248
MFS VIT Emerging Growth $23 $71 $122 $261
MFS VIT Growth with Income $23 $72 $123 $264
MFS VIT Research $23 $71 $122 $262
MSDW UF Emerging Markets Equity $34 $104 $176 $366
MSDW UF Fixed Income $22 $67 $114 $246
MSDW UF High Yield $23 $70 $119 $256
MSDW UF International Magnum $26 $80 $137 $291
OCC Accumulation Trust Managed $23 $70 $120 $258
OCC Accumulation Trust Small Cap $23 $72 $123 $264
PIMCO VIT StocksPLUS Growth & Income $21 $65 $112 $241
Transamerica VIF Growth $23 $71 $122 $261
Transamerica VIF Money Market $21 $64 $109 $235
----------------------------------------------------------------------------------------------------
EXAMPLE 3: If you elect to annuitize at the end of the applicable period under a
Settlement Option with life contingencies:
------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------
----------------------------------------
Alger American Income & Growth $73 $67 $114 $246
Alliance VPF Growth & Income $73 $67 $116 $249
Alliance VPF Premier Growth $76 $77 $132 $282
Dreyfus VIF Capital Appreciation $74 $70 $120 $257
Dreyfus VIF Small Cap $73 $69 $118 $253
Janus Aspen Series Balanced $73 $68 $116 $250
Janus Aspen Series Worldwide Growth $73 $67 $115 $248
MFS VIT Emerging Growth $74 $71 $122 $261
MFS VIT Growth with Income $74 $72 $123 $264
MFS VIT Research $74 $71 $122 $262
MSDW UF Emerging Markets Equity $85 $104 $176 $366
MSDW UF Fixed Income $73 $67 $114 $246
MSDW UF High Yield $74 $70 $119 $256
MSDW UF International Magnum $77 $80 $137 $291
OCC Accumulation Trust Managed $74 $70 $120 $258
OCC Accumulation Trust Small Cap $74 $72 $123 $264
PIMCO VIT StocksPLUS Growth & Income $72 $65 $112 $241
Transamerica VIF Growth $74 $71 $122 $261
Transamerica VIF Money Market $72 $64 $109 $235
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</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 and any optional riders that may
be available. The assumed 5% annual rate of return is hypothetical and
should not be considered a representation of past or future annual returns,
which may be greater or less than this assumed rate.
---------------------------------------
<PAGE>
CONDENSED FINANCIAL INFORMATION
Because the variable account did not commence operations during 1999, no
financial statements are available for the variable account.
WHAT ARE MY INVESTMENT OPTIONS?
The contract gives you the opportunity to select from a number of
investment options. Investment options include the variable sub-accounts
and the fixed account. Currently, you may not elect more than a total of 18
investment options over the life of the contract.
The variable account is a separate account, designated Separate Account
VA-8, that is subdivided into variable sub-accounts. Assets of each
variable sub-account are invested in a specified mutual fund portfolio. The
variable sub-accounts currently available for investment are:
Alger American Income & Growth Alliance VPF Growth & Income Alliance VPF
Premier Growth Dreyfus VIF Capital Appreciation Dreyfus VIF Small Cap Janus
Aspen Series Balanced Janus Aspen Series Worldwide Growth MFS VIT Emerging
Growth MFS VIT Growth with Income MFS VIT Research MSDW UF Emerging Markets
Equity MSDW UF Fixed Income MSDW UF High Yield MSDW UF International Magnum
OCC Accumulation Trust Managed OCC Accumulation Trust Small Cap PIMCO VIT
StocksPLUS Growth & Income Transamerica VIF Growth Portfolio Transamerica
VIF Money Market
The portfolios pay their investment advisers and administrators certain
fees charged against the assets of each portfolio. The variable accumulated
value, if any, of a contract and the amount of any variable settlement
option payments will vary to reflect the investment performance of the
variable sub-accounts to which amounts have been allocated. Additionally,
applicable charges are deducted. For more information see Charges, Fees and
Deductions on page 31, THE PORTFOLIOS on page 17, and the accompanying
portfolio prospectuses.
FIXED ACCOUNT
We credit interest to amounts you allocate to the fixed account with a rate
of not less than 3% annually. We may credit interest at a rate in excess of
3% at our discretion for any class. Each interest rate will be guaranteed
to be credited for at least 12 months.
The fixed account may not be available in all states. Refer to the contract
for limitations.
CAN I MAKE TRANSFERS AMONG THE
SUB-ACCOUNTS AND THE FIXED ACCOUNT?
Before the annuity date, you may transfer values between the variable
sub-accounts and the fixed account. For transfers after the annuity date,
see After the Annuity Date on page 27.
WHAT IF I NEED MY MONEY?
You may withdraw all or part of the cash surrender value after the contract
has been in effect for at least 30 days and before the annuity date. The
cash surrender value of your contract is the account value less any account
fee, and any contingent deferred sales load and applicable premium tax
charges. We may delay payment of any withdrawal from the fixed account for
up to six months.
Withdrawals may be taxable, subject to withholding and a penalty tax.
Withdrawals from qualified contracts may be subject to severe restrictions
and, in certain circumstances, prohibited. See Federal Tax Matters on page
38.
WHAT CHARGES WILL I INCUR ON A
WITHDRAWAL?
We do not deduct a sales charge when purchase payments are made, although
premium tax charges may be deducted. However, if any part of the account
value is withdrawn, we may deduct a contingent deferred sales load, or
surrender charge, of up to 9% of purchase payments withdrawn. See
Contingent Deferred Sales Load/Surrender Charge on page 31.
We do not assess the contingent deferred sales load on payment of death
benefits, on transfers within the contract, or on certain annuitizations.
Also, after the contract has been in effect for at least 12 months, you may
withdraw any portion of the allowed amount each contract year without
imposition of any contingent deferred sales load/surrender charge.
The allowed amount each contract year is equal to the greater of:
o accumulated earnings not
previously withdrawn; or
10% of the total purchase
payments received less than
seven contract years old as of the last contract anniversary, less
previous withdrawals taken.
WITHDRAWALS WILL BE MADE FIRST FROM EARNINGS AND THEN FROM PURCHASE
PAYMENTS ON A FIRST-IN/FIRST-OUT basis. The allowed amount may vary
depending on the state in which your contract is issued. If an allowed
amount is not withdrawn during a contract year, it does not carry over to
the next contract year.
Purchase payments not previously withdrawn that have been held at least
seven full years from the date we received them, and accumulated earnings
not previously withdrawn, may be withdrawn without charge. Also, after the
contract has been in effect for fourteen years, you may withdraw any
purchase payment without charge.
We will waive the contingent deferred sales load/surrender charge on a
withdrawal if you or the joint owner:
o receive extended medical care in a qualifying institution for at
least 60 consecutive days;
o receive medically required hospice or in-home care for at least
60 consecutive days and such care is certified by a qualified
medical professional; or
o are diagnosed as terminally ill after the first contract year and
are reasonably expected to die within 12 months.
Other conditions must also be met. See Contingent Deferred Sales
Load/Surrender Charge on page ___ and Cash Withdrawals on page ____. WHAT
ARE THE OTHER CHARGES AND DEDUCTIONS?
We deduct:
o a mortality and expense risk charge of 1.60% annually of the
assets in the variable account;
o an administrative expense charge of 0.15% annually of these
assets; and
o an account fee of currently $25 at the end of each contract year
and upon surrender.
After the annuity date, we will deduct an annual annuity fee of $30 in
equal installments from each periodic payment under the variable payment
option.
We do not currently deduct charges for premium taxes, including retaliatory
premium taxes, except for annuitizations. But we could impose such charges
in some jurisdictions. Depending on the applicability of such taxes, we
could deduct the charges from purchase payments, from amounts withdrawn,
and/or upon annuitization. See Premium Tax Charges on page 34.
GUARANTEED MINIMUM INCOME BENEFIT RIDER. If you elect the Guaranteed
Minimum Income Benefit, or GMIB, Rider, we will deduct a fee of 1/12 of
0.35% of the variable accumulated value (except from the money market
sub-account) at the end of each contract month. The rate is 1/12 times
0.35% times the variable accumulated value. The GMIB Rider is not available
in all states.
HOW AND WHEN ARE SETTLEMENT OPTION
PAYMENTS MADE?
You may select to receive settlement option payments on a fixed basis, a
variable basis or a combination of a fixed and variable basis. You have
flexibility in choosing the annuity date, but it may generally not be a
date later than an annuitant's 95th birthday. Certain qualified contracts
may have restrictions as to the annuity date and the types of settlement
options available.
Five settlement options are available under the contract:
1. life annuity;
2. life and contingent annuity;
3. life annuity with period certain;
4. joint and survivor annuity; and period certain only.
If the GMIB Rider is elected, a minimum income is also available. See
Guaranteed Minimum Income Benefit on page ___.
WHAT HAPPENS IF I DIE BEFORE THE
ANNUITY
DATE?
If you or the joint owner die before the annuity date and both you and the
joint owner are age 70 or less, the guaranteed minimum death benefit will
be the greatest of three amounts:
a) the account value;
b) the sum of all purchase payments, less previous withdrawals
taken, and any contingent deferred sales loads applicable to
those withdrawals and applicable premium tax charges; and
a) the highest account value on any contract anniversary before the
earlier of your or the joint owner's 70th birthday, plus purchase
payments made, less withdrawals taken since that contract
anniversary, adjusted as described in WITHDRAWAL ADJUSTMENTS on
page ___, and any contingent deferred sales loads applicable to
those withdrawals and applicable premium tax charges.
If you or the joint owner die before the annuity date and after either your
or the joint owner's 71st birthday, the death benefit will be the greater
of:
a) the account value; and
b) the guaranteed minimum death benefit at age 70, plus the total of
all purchase payments made since age 70, less withdrawals taken
after age 70, adjusted as described in WITHDRAWAL ADJUSTMENTS on
page ___, and any contingent deferred sales loads applicable to
those withdrawals and applicable premium tax charges.
The death benefit will generally be paid within seven days of receipt of
the required proof of death of an owner and election of the method of
settlement or as soon thereafter as we have 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. No contingent
deferred sales load is imposed. The death benefit may be paid as either a
lump sum or as a settlement option.
If the owner is not a natural person, we will treat the annuitant as the
owner for purposes of the death benefit.
WHAT ARE THE 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. A
taxable event would occur, for example, with a withdrawal or a settlement
option payment, or as the result of 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. Withholding is mandatory for certain qualified
contracts. In addition, a federal penalty tax may apply to certain
distributions. See FEDERAL TAX MATTERS on page 38.
WHO DO I CONTACT IF I HAVE QUESTIONS?
We will answer your questions about procedures or the contract if you write
to:
Transamerica Annuity Service Center
9735 Landmark Pkwy. Dr.
St. Louis, Missouri 63127
Or call us at: 1-800-317-2688
All inquiries should include the contract number and the owner's name.
Please Note: The above summary is qualified in its entirety by the detailed
information in the remainder of this prospectus and in the prospectuses for
the portfolios. Please refer to this prospectus and the portfolio
prospectuses for more detailed information. For qualified contracts, 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, or ERISA, as amended, may impose additional
limits or restrictions. These limits or restrictions may be 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 on page 38.
TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY AND THE VARIABLE
ACCOUNT
TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY
Transamerica Life Insurance and Annuity Company, or Transamerica, is a
stock life insurance company incorporated under the laws of the State of
California in 1966. The Company moved to North Carolina in 1994. It is
principally engaged in the sale of life insurance and annuity policies. The
address of Transamerica is 401 North Tryon Street, Charlotte, North
Carolina 28202.
PUBLISHED RATINGS
We may from time to time publish our ratings in advertisements, sales
literature and reports to owners. We receive ratings and other information
from one or more independent rating organizations such as A.M. Best
Company, Standard & Poor's, Moody's, and Duff & Phelps. The ratings reflect
our financial strength and/or claims-paying ability. These ratings should
not be considered as bearing on the investment performance of the variable
account. Ratings and investment performance are unrelated. Each year the
A.M. Best Company reviews the financial status of thousands of insurers,
resulting in the assignment of Best's Ratings. These ratings reflect A.M.
Best's 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, our claims-paying ability, 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 provided by the companies named above. These opinions relate
to how well they have determined we are prepared, from a financial
standpoint, to meet our insurance and annuity obligations. The terms of our
obligations are stated within the fixed account of this contract. These
ratings do not reflect the investment performance of the variable account
or the degree of risk associated with an investment in the variable
account.
INSURANCE MARKETPLACE STANDARDS
ASSOCIATION
In recent years, the insurance industry has recognized the need to develop
specific principles and practices to help maintain the highest standards of
marketplace behavior and enhance credibility with consumers. As a result,
the industry established the Insurance Marketplace Standards Association,
or IMSA.
As an IMSA member, we agree to follow a set of standards in our
advertising, sales and service for individual life insurance and annuity
products. The IMSA logo, which you will see on our advertising and
promotional materials, demonstrates that we take our commitment to ethical
conduct seriously.
THE VARIABLE ACCOUNT
Separate Account VA-8 of Transamerica, or the variable account, was
established by Transamerica as a separate account under the laws of the
State of North Carolina following June 11, 1996, resolutions adopted by
Transamerica's Board of Directors. The variable account is registered with
the Securities and Exchange Commission, or the Commission, under the
Investment Company Act of 1940 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.
We own the assets of the variable account, but they are held separately
from our other assets. 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. This is the case 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 our other income, gains or losses. Therefore, the
investment performance of the variable account is entirely independent of
the investment performance of our general account assets or any other
separate account maintained by us.
The variable account currently has 19 variable sub-accounts available under
the contract, each of which invests solely in a specific corresponding
portfolio. At our discretion, we may make changes to the variable
sub-accounts.
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 objective follow. The management fees listed below are specified
in each portfolio adviser's contract 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. The portfolio invests in dividend
paying equity securities, such as common or preferred stocks, preferably
those which the Manager believes also offer opportunities for capital
appreciation.
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, this portfolio may invest in other types of
securities, such as bonds, convertible bonds, preferred stock and
convertible preferred stocks. The portfolio managers will purchase and sell
portfolio securities at times and in amounts as management deems 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 this portfolio's investments will be made based upon their potential
for capital appreciation, current income will not be a high priority for
this portfolio. The portfolio will invest mainly in the equity securities,
such as common stocks, securities convertible into common stocks and rights
and warrants to subscribe for or purchase common stocks. Equity investments
will be of a limited number of large, carefully selected, high-quality U.S.
companies. In the Adviser's judgement, the companies chosen will be those
which are likely to achieve superior earnings growth. Approximately 25
companies believed by the Adviser to show superior potential for capital
appreciation will usually constitute approximately 70% of the portfolio's
net assets at any one time. 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. Under normal circumstances the
portfolio will 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: 1.00%.
THE CAPITAL APPRECIATION PORTFOLIO OF THE DREYFUS VARIABLE INVESTMENT FUND
is a diversified portfolio seeking long-term capital growth and
preservation of principal. Current income is a secondary investment
objective. During periods of strong market momentum, the portfolio will
invest aggressively to increase its holdings in: common stocks of foreign
and domestic issuers, common stocks with warrants attached and debt
securities of foreign governments. Generally, the portfolio will invest in
large cap companies, defined as those with market capitalizations exceeding
$500 million. These companies will also be selected on the basis of their
potential to achieve predictable, above average 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 by investing principally in common stocks of
domestic and foreign issuers. 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.
Companies selected for this portfolio will include those thought to possess
new or innovative products or services which are expected to propel 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 current income.
Normally, this diversified portfolio invests 40-60% of its assets in
securities selected primarily for their growth potential. The balance of
its holdings is invested in securities selected primarily for their
capacity to generate income. Such holdings are likely to consist of bonds
and preferred stocks. Typically, at least 25% of this portfolio is made up
of fixed-income securities.
Adviser: Janus Capital Corporation.
Management Fee: 0.65% 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 origin 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
long-term growth of capital. The series may invest up to 25% of its net
assets in foreign securities, including emerging market securities.
Emerging markets are generally defined as countries in the initial stages
of their industrialization cycles with low per capita income.
Adviser: Massachusetts Financial Services Company.
Management Fee: 0.75%.
THE GROWTH WITH INCOME SERIES OF THE MFS VARIABLE INSURANCE TRUST seeks
long-term growth of capital and future income while providing more current
dividend income than is normally obtainable from a portfolio of only growth
stocks. The series invests, under normal market conditions, at least 65% of
its total assets in common stock and related securities, such as preferred
stocks, convertible securities and depositary receipts for those
securities. The series will also seek to provide income equal to
approximately 90% of the dividend yield on the Standard & Poor's 500
Composite Index. While the fund may invest in companies of any size, the
fund generally focuses on companies with larger market capitalizations that
the series' adviser believes have sustainable growth prospects and
attractive valuations based on current and expected earnings or cash flow.
The series may invest in foreign securities through which it may have
exposure to foreign currencies.
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 series invests, under normal
market conditions, at least 80% of its total assets in common stocks and
related securities, such as preferred stocks, convertible securities and
depositary receipts. The series focuses on companies that the series'
adviser believes have favorable prospects for long-term growth, attractive
valuations based on current and expected earnings or cash flow, dominant or
growing market share and superior management. The series may invest in
foreign equity securities (including emerging market securities) through
which it may have exposure to foreign currencies.
Adviser: Massachusetts Financial Services Company.
Management Fee: 0.75%.
THE EMERGING MARKETS EQUITY PORTFOLIO OF MORGAN STANLEY DEAN WITTER
UNIVERSAL FUNDS, INC., seeks long-term capital appreciation by investing
primarily in equity securities of issuers in emerging market countries. The
Adviser seeks to maximize returns by investing in growth-oriented equity
securities in emerging markets. The Adviser's investment approach combines
top-down country allocation with bottom-up stock selection. Investment
selection criteria include attractive growth characteristics, reasonable
valuations and managements with a strong shareholder value orientation. The
portfolio's assets are allocated among emerging markets based on relative
economic, political and social fundamentals, stock valuations and investor
sentiments.
Adviser: Morgan Stanley Dean Witter
Investment Management Inc.
Management Fee: 1.25% of the first
$500 million plus 1.20% of the next
$500 million plus 1.15% of the assets
over $1 billion.
THE FIXED INCOME PORTFOLIO OF MORGAN STANLEY DEAN WITTER 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 agency bonds, corporate bonds, mortgage backed securities, foreign
bonds and other fixed income securities and derivatives. The portfolio
invests primarily in investment grade securities, but may also invest a
portion of its assets in high yield securities, also known as junk bonds.
The portfolio's average weighted maturity will ordinarily exceed five
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 MORGAN STANLEY DEAN WITTER 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 high yield
securities of U.S. and foreign issuers (including emerging markets),
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.
Adviser: Miller Anderson & Sherrerd, LLP.
Management Fee: 0.50% of the
first $500 million plus 0.45% of the
next $500 million plus 0.40% of the
assets over $1 billion.
THE INTERNATIONAL MAGNUM PORTFOLIO OF MORGAN STANLEY DEAN WITTER 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,
we refer to these as 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 Dean Witter Investment 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. 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
necessary to preserve capital. In addition, the portfolio may also purchase
foreign securities. These foreign securities must be listed on a domestic
or foreign securities exchange or represented by American depository
receipts.
Adviser: OpCap Advisors.
Management Fee: 0.80% of the first
$400 million plus 0.75% of the 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 of stocks
issued by small companies. It will consist 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. The portfolio's holdings may also
include options, warrants, bonds, notes and convertible bonds. In addition,
the portfolio may also purchase foreign securities. Foreign securities must
listed on a domestic or foreign securities exchange or be represented by
American depository receipts.
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 STOCKSPLUS GROWTH AND INCOME PORTFOLIO OF PIMCO VARIABLE INSURANCE
TRUST seeks to achieve a total return which exceeds the total return
performance of the S&P 500. The Portfolio invests in common stocks,
options, futures, options on futures and swaps. Under normal market
conditions, the Portfolio invests substantially all of its assets in S&P
500 derivatives, backed by a portfolio of fixed income instruments. The
Portfolio uses S&P 500 derivatives in addition to or in place of S&P 500
stocks to attempt to equal or exceed the performance of the S&P 500. The
Adviser actively manages the fixed income assets held by the Portfolio,
with a view to enhancing the Portfolio's total return investment
performance, subject to an overall portfolio duration which is normally not
expected to exceed one year. The Portfolio may invest up to 10% of its
assets in high yield bonds rated B or higher by Moody's or S&P, or if
unrated, determined by the Adviser to be comparable quality. The Portfolio
may also invest up to 20% of its assets in securities denominated in
foreign currencies and may invest beyond this limit in U.S. dollar
denominated securities of foreign issuers.
Adviser: Pacific Investment Management Company.
Management Fee: 0.65%
THE GROWTH PORTFOLIO OF THE TRANSAMERICA VARIABLE INSURANCE FUND, INC.,
seeks long-term capital growth through investment in common stocks of
listed and over the counter issues. 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 dictate otherwise, the manager tries
to keep the Portfolio fully invested in equity securities. Attempting to
enter and exit the market at strategic times is not a commonly used
strategy for this portfolio. However 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 Investment Management LLC.
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. These include:
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 Investment Management LLC.
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 and to
other insurance companies as well, there is a possibility of a material
conflict. If such a conflict arises between the interests of the variable
account and one or more other separate accounts investing in the
portfolios, the affected insurance companies will take steps to resolve the
matter. These steps may include stopping their separate accounts from
investing in the portfolios. See the portfolios' prospectuses for greater
detail on this subject.
You can find additional information concerning the investment objectives
and policies of all of the portfolios, the investment advisory services and
administrative services and charges in the current prospectuses for the
portfolios which accompany this prospectus.
Carefully read the prospectuses of the portfolios which interest you before
you make any decision concerning how you will invest in, or transfer monies
among, the variable sub-accounts.
We may receive payments from some or all of the portfolios or their
advisers, in varying amounts. These payments may be based on the amount of
assets allocated to the portfolios. The payments are for administrative or
distribution services.
PORTFOLIOS NOT PUBLICLY AVAILABLE
The portfolios are open-end management investment companies, or portfolios
or series of, open-end management companies registered with the SEC under
the 1940 Act, that are often referred to as mutual funds. This SEC
registration does not involve SEC supervision of the investments or
investment policies of the portfolios. Shares of the portfolios are not
offered to the public but solely to the insurance company separate accounts
and other qualified purchasers as limited by federal tax laws. These
portfolios are not the same as mutual funds that may have very similar
names that are sold directly to the public, and the performance of such
publicly available funds, which have different portfolios and expenses,
should not be considered as an indication of the performance of the
portfolios. The assets of each portfolio are held separate from the assets
of the other portfolios. Each portfolio operates as a separate investment
vehicle. The income or losses of one portfolio have no effect on the
investment performance of another portfolio. The sub-accounts reinvest
dividends and/or capital gains distributions received from a portfolio in
more shares of that portfolio as retained assets.
ADDITION, DELETION, OR SUBSTITUTION
We do not control the portfolios. For this reason, we cannot guarantee that
any of the variable sub-accounts offered under the contract or any of the
portfolios will always be available to you for investment purposes. We
retain the right to make changes in the variable account and in its
investments.
We reserve the right to eliminate the shares of any portfolio held by a
variable sub-account. We may also substitute shares of another portfolio or
of another investment company for the shares of any portfolio. We would do
this if the shares of the portfolio are no longer available for investment
or if, in our 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, if we substitute shares in a variable sub-account that you
own, we will provide you with advance notice. We will also seek advance
permission from the Commission. This does not prevent the variable account
from purchasing other securities for other series or classes of variable
annuity contracts. Nor does it prevent the variable account from effecting
an exchange between series or classes of variable contracts on the basis of
requests made by owners.
We reserve the right to create new variable sub-accounts for the contracts
when, in our sole discretion, marketing, tax, investment or other
conditions warrant that we do. Any new variable sub-accounts will be made
available to existing owners on a basis to be determined by us. Each
additional variable sub-account will purchase shares in a mutual fund
portfolio or other investment vehicle. We may also eliminate one or more
variable sub-accounts if, in our sole discretion, marketing, tax,
investment or other conditions warrant that we do. So, in the event any
variable sub-account is eliminated, we 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, we may make the changes in the
contract that we deem necessary or appropriate to reflect substitutions or
changes. Furthermore, if we believe it to be in the best interest 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. It may also be de-registered under such Act in the event
that registration is no longer required. Finally, it may also be combined
with one or more other separate accounts.
THE CONTRACT
The DURHAM contract is a flexible purchase payment deferred variable
annuity contract. The rights and benefits of the contract are described
below and in the contract. We reserve the right to modify the contract if
required by law. We also reserve the right to give you, the owner, the
benefit of any federal or state statute, 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:
a) rollover and regular IRAs under Code Section 408(b); or
b) TSAs qualifying under Code Section 403(b).
Generally, qualified contracts contain certain restrictive provisions
limiting the timing and amount of purchase payments to, and distributions
from, the qualified contract.
OWNERSHIP
As the owner, you are entitled to the rights granted by the contract. If
there are joint owners, the one designated as the primary owner will
receive all mail and any tax reporting information.
For TSAs, your employer and/or your spouse may need to acknowledge certain
requests you make before your separation from service.
For non-qualified contracts, the owner is entitled to designate the
annuitant(s) and, if the owner is an individual, as opposed to a trust,
corporation or other legal entity, 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. We reserve the right to reject any
change of annuitants which has been made without our prior written consent.
If the owner of a non-qualified contract is not an individual, the
annuitant(s) may not be changed once the contract is issued.
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
All purchase payments can be paid to our Service Center in a check payable
to Transamerica. We will issue you a confirmation upon the acceptance of
each purchase payment.
The initial purchase payment must be at least:
o $5,000 for a non-qualified contract; or
o $5,000 for an IRA contract issued as the result of a transfer or
rollover from an IRA or other qualified plan; or
o $2,000 for a contract issued as the result of a transfer or
rollover from another TSA contract or for a regular IRA contract;
or
o $50 per month for a TSA contract if you elect to make purchase
payments through your employer by payroll deduction.
We will issue your contract and credit your initial purchase payment
generally within two business days after our Service Center receives the
initial purchase payment and sufficient information to issue a contract.
For us to issue your contract, you must provide sufficient information in a
form acceptable to us. We reserve the right to reject any purchase payment
or request for issuance of a contract. Normally we will not issue contracts
with owners, joint owners, or annuitants more than 90 years old. Nor will
we normally accept purchase payments after any owner's (or annuitant's if
non-individual owner), 91st birthday. In our discretion we may waive these
restrictions in appropriate cases.
If we cannot credit the initial purchase payment to the variable
sub-account(s) within two days of receipt because the information is
incomplete, or for any other reason, we will contact you. We will explain
the reason for the delay and will refund the initial purchase payment
within five business days. If you consent to us retaining the initial
purchase payment we will credit it to the variable sub-account of your
choice as soon as the requirements are fulfilled.
You may make additional purchase payments at any time before the annuity
date. The minimum amount of each additional purchase payment is:
o $1,000; or
o $50 per month if payments are made through your employer by payroll
deduction for a TSA, or EFT for other contracts.
In addition, minimum allocation amounts apply. See Allocation of Purchase
Payments below. We credit additional purchase payments to the contract as
of the date we receive your payment.
Total purchase payments for any contract may not exceed $1,000,000 without
our prior approval. 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 among one or more of the variable
sub-accounts and the fixed account. Allocations must be equal to the lesser
of 10% of the purchase payments or $250. Percentage allocations must be in
whole numbers.
During the free look period, the portion of the purchase payment you
selected to be allocated to the fixed account will be so allocated. Any
allocation you make to the variable sub-accounts, in most situations, will
be held in the money market sub-account during the applicable free look
period, allowing 10 days for delivery. The dollar value of the variable
accumulation units held in the money market sub-account attributed to such
purchase payments will then be allocated among the variable sub-accounts
according to your selected allocations. This initial allocation after the
free look period from the money market sub-account according to your
selected allocations does not count toward the limit of 18 investment
options over the life of the contract.
Each purchase payment will be divided among the investment options
according to the allocations in effect at the time such purchase payment is
received in our Service Center. You may change your allocations for
additional purchase payments at any time by submitting a request for such
change to our Service Center in a form and manner acceptable to us. Any
changes to the allocations are subject to the limitations above. Any change
will take effect with the first purchase payment we receive which
accompanies your request. If we receive your request separately, all
purchase payments arriving after it will be subject to its terms. Your
allocation choices will continue in effect until you change them again.
FREE LOOK OPTION
If you exercise the free look option, unless otherwise required by law, we
will refund:
a) the purchase payment allocated to the fixed account, minus any
withdrawals; plus
b) the variable accumulated value as of the date we receive your
written notice to cancel and your contract.
In certain jurisdictions, under certain conditions, we are legally required
to return either:
a) the purchase payments, minus any withdrawals; or
b) the greater of purchase payments minus any withdrawals, or the
account value.
Any initial allocation you make to the variable account may be held in the
money market sub-account during the applicable free look period plus 10
days for delivery. Any allocations you make to the money market variable
sub-account will automatically be transferred at the end of the free-look
period plus 10 days according to your requested allocation.
INVESTMENT OPTION LIMIT
Currently, you may not allocate monies to more than eighteen investment
options over the life of the contract. Investment options include variable
sub-accounts and fixed account. Each variable sub-account and the fixed
account that ever received a transfer or purchase payment allocation counts
as one towards this total of eighteen limit. We may waive this limit in the
future.
For example, if you make an allocation to the money market variable
sub-account and later transfer all of the funds out of this money market
variable sub-account, this would count as one transfer for the purposes of
the limitation, even if it held no value. If you transfer 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.
ACCOUNT VALUE
Before the annuity date, the account value is equal to:
a) the fixed account 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 how investments within selected
portfolios performed. The variable accumulated value will also reflect
deductions for charges and fees. A valuation period 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.
HOW VARIABLE ACCUMULATION UNITS ARE
VALUED
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 the date our
Service Center receives:
a) sufficient information, in an acceptable manner and form; or
b) 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 we receive 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
can go either up or down.
The net investment factor is used to determine the value of accumulation
and annuity unit values for the end of a valuation period. The applicable
formula can be found in the Statement of Additional Information.
Transfers involving variable sub-accounts will result in the crediting
and/or cancellation of variable accumulation units having a total value
equal to the dollar amount being transferred to or from a particular
variable sub-account. The crediting and cancellation of such units is made
using the variable accumulation unit value of the applicable variable
sub-account as of the end of the valuation day in which the transfer is
effective.
TRANSFERS
BEFORE THE ANNUITY DATE
Before the annuity date, you may transfer all or any portion of the account
value among the variable sub-accounts and the fixed account.
Transfers among the variable sub-accounts and the fixed account may be made
by submitting a request to our Service Center in a form and manner
acceptable to us. The transfer request must specify:
a) the variable sub-accounts and/or the fixed account from which
your transfer is to be made;
b) the amount of your transfer; and
c) the variable sub-accounts and/or fixed account to receive the
transferred amount.
The minimum amount which you may transfer is equal to the lesser of:
o 10% of the value in the account from which the transfer is being
made; and
o $250.
Transfers among the variable sub-accounts are also subject to the terms and
conditions imposed by the portfolios.
We will generally process a transfer as of the end of the valuation period
during which the request is received by our Service Center.
If a transfer reduces the value in a variable sub-account or in the fixed
account to less than $250, we reserve the right to transfer the remaining
amount along with the amount requested to be transferred. We will do this
according to the transfer instructions provided by you. Under current law,
there will not be any tax liability for transfers within the contract.
TELEPHONE TRANSFERS
We will allow telephone transfers if you have provided proper authorization
for such transfers in a form and manner acceptable to us. Withdrawals are
not permitted by telephone. We will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. If we follow such
procedures, we will not be liable for any losses due to unauthorized or
fraudulent instructions. In the opinion of certain government regulators,
we may be liable for such losses if it does not follow those procedures.
The procedures we will follow for telephone transfers may include requiring
some form of personal identification before acting on instructions received
by telephone, providing written confirmation of the transaction, and/or
tape recording the instructions given by telephone.
OTHER RESTRICTIONS
We reserve 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. We have 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. This is likely to arise when the
volume of transfers is high, since each 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, we reserve the right to require
that all transfer requests be made by the owner and not by a third party
holding a power of attorney. We may also require that each transfer you
request be made by a separate communication to us. We also reserve the
right to require that each transfer request be submitted in writing and be
manually signed by owners. We may choose not to allow telephone or
facsimile transfer requests.
DOLLAR COST AVERAGING
Before the annuity date, you may request that amounts be automatically
transferred on a monthly basis from a source account to any of the variable
sub-accounts. The source account is currently the fixed account. You can do
this by submitting a request to our Service Center in a form and manner
acceptable to us. Other source accounts may be available. Call our Service
Center for information regarding availability.
You may only dollar cost average from one source account at a time. The
transfers will begin when you request, but no sooner than one week
following, receipt of such request. For new variable annuity contracts,
dollar cost averaging transfers will not begin until the later of:
a) 30 days after the contract effective date; or
b) the estimated end of the free look period which allows 10 days
for delivery.
Transfers will continue for the number of consecutive months which you
selected unless:
a) you terminate the transfers;
b) we automatically terminate the transfers because there are
insufficient amounts in the source account; or
c) for other reasons that are described in the election form.
You may request that monthly transfers be continued for a specific length
of time. You can do this by giving notice to our Service Center in a form
and manner acceptable to us within 30 days before the last monthly
transfer. If you do not make a request to continue the monthly transfers,
this option will terminate automatically with the last transfer at the end
of the length of time you initially designated.
ELIGIBILITY REQUIREMENTS FOR DOLLAR
COST
AVERAGING
In order to be eligible for dollar cost averaging, the value of your source
account must be at least $5,000. This limit 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 that automatic
asset rebalancing is in effect.
SPECIAL DOLLAR COST AVERAGING OPTION
(May not be available in all states. See contract for availability of the
fixed account options.)
Before the annuity date, you may elect to allocate entire purchase payments
to either the six or twelve month special Dollar Cost Averaging account of
the fixed account. The purchase payment will be credited with interest at a
guaranteed fixed rate. Amounts will then be transferred from the special
Dollar Cost Averaging account to the variable sub-accounts pro rata on a
monthly basis for six or twelve months (depending on the option you select)
in the allocations you specify.
Amounts from the sub-accounts and/or fixed account options may not be
transferred into the special Dollar Cost Averaging accounts. In addition,
if you request a transfer (other than a Dollar Cost Averaging transfer) or
a withdrawal from a special Dollar Cost Averaging account, any amounts
remaining in the special account will be transferred to the variable
sub-accounts according to your allocation instructions. The special Dollar
Cost Averaging option will end and cannot be reelected.
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
percentages which you initially defined. You may instruct us 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 your instructions to us and accepted by us. You
may elect to have the rebalancing done on an annual, semi-annual or
quarterly basis. You may elect to have amounts allocated among the variable
sub-accounts using whole percentages. The fixed account cannot be
rebalanced.
You may elect to establish, change or terminate the automatic asset
rebalancing by submitting a request to our Service Center in a form and
manner acceptable to us. We reserve the right to discontinue the automatic
asset rebalancing service at any time for any reason.
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, you may make transfers among
variable sub-accounts after the annuity date by giving a written request to
our Service Center, subject to the following provisions:
a) you may not make any more than four transfers per contract year
after the annuity date; and
b) 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
If you own a non-qualified contract, you may withdraw all or part of the
cash surrender value at any time after the contract has been in effect for
30 days and before the annuity date by giving a written request to our
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.
For example, if you are married, you may be required to show us advance
written consent from your spouse before we make certain transactions. In
addition, your employer may also need to acknowledge certain transactions
requiring your separatation from service.
The cash surrender value is equal to the account value, minus any account
fee, and any contingent deferred sales load and applicable 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. It must be received along with all completed
forms required at that time by us. No surrenders or withdrawals may be made
after the annuity date. Partial withdrawals must be at least $250.
In the case of a partial withdrawal, you may direct our Service Center to
withdraw amounts from specific variable sub-accounts and/or from the fixed
account. If you do not specify, the withdrawal will be taken pro rata from
the account value.
A partial withdrawal request cannot be fulfilled if it would reduce your
account value to less than $500. In such instances, you will be notified.
We will generally process any withdrawal requests, including surrender
requests, as of the end of the valuation period during which the request
and all completed forms are received. We will pay any cash withdrawal,
settlement option payment or lump sum death benefit due from the variable
account and process of any transfers within seven days from the date we
receive your request. However, we may postpone such payment if:
o the New York Stock Exchange is closed for other than usual
weekends or holidays, or trading on the Exchange is otherwise
restricted;
o an emergency exists as defined by the Commission, or the
Commission requires that trading be restricted; or
o the Commission permits a delay for the protection of owners.
The withdrawal request will be effective when we receive all required
withdrawal request forms. Payments to you for any monies derived from a
purchase payment which you made by check may be delayed until your check
has cleared your bank.
We may delay payment of any withdrawal from the fixed account for up to six
months after we receive the request for such withdrawal. If we delay
payment for more than 30 days, we will pay interest on the withdrawal
amount up to the date of payment.
Since you assume the investment risk for all amounts in the variable
account and because certain withdrawals are subject to a contingent
deferred sales load and other charges, the total amount paid upon surrender
of your contract may be more or less than the total purchase payments.
You 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 before the annuity date.
The tax consequences of a withdrawal or surrender are discussed later in
this prospectus.
SYSTEMATIC WITHDRAWAL OPTION
Before the annuity date, you may elect to have withdrawals automatically
made from one or more variable sub-accounts 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-accounts in the percentage
allocations that you specify. Unless you specify otherwise, withdrawals
will be pro rata based on account value. You cannot make systematic
withdrawals from a variable sub-account from which dollar cost averaging
transfers are being made. Likewise, systematic withdrawals cannot be used
at the same time that the automatic payout option is in effect.
To be eligible for the systematic withdrawal option, the account value must
be at least $12,000 at the time of election. The minimum monthly amount
that can be withdrawn is $100. Currently you can elect any amount over $100
to be withdrawn systematically. You may not make partial withdrawals while
receiving systematic withdrawals.
If the total of all withdrawals (systematic, automatic or partial) in a
contract year exceed the allowed amount to be withdrawn without charge for
that year, your account value will be charged any contingent deferred sales
load that may apply. The withdrawals will continue indefinitely unless you
terminate them. If you choose to terminate this option, you may not elect
to use it again until the end of the next 12 full months.
Systematic withdrawals may be taxable and, before age 59 1/2, subject to a
10% federal tax penalty.
AUTOMATIC PAYOUT OPTION
Before the annuity date, for certain qualified contracts, you may elect the
automatic payout option, or APO, to satisfy minimum distribution
requirements under the following sections of the Code:
403(b); and
o 408(b)(3).
For regular IRAs, this option may be elected no earlier than six months
before the calendar year in which you, as the owner, attain age 70 1/2.
Payments may not begin earlier than January of such calendar year.
For TSAs, APO can be elected no earlier than six months before the later of
when you:
a) attain age 70 1/2; or
b) retire 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
your 95th birthday.
OTHER AUTOMATIC PAYOUT OPTION INFORMATION. Withdrawals will be from the
variable sub-accounts you designate and in the percentage allocations you
specify. If you do not indicate otherwise, withdrawals will be pro rata
from account value. You can not make withdrawals from a variable
sub-account from which you have designated that dollar cost averaging
transfers be made. 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 the value in
this contract.
To be eligible for this option, you must meet the following conditions:
a) your account value must be at least $12,000 at the time at which
you select this option; and
b) the annual withdrawal amount is the larger of the required
minimum distribution under Code Section 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 you terminate them. 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.
TSA LOANS
If your plan allows for loans to be made, you may borrow against the
account value at any time before the annuity date if you fill out our loan
forms and mail them to us. We reserve the right to delay making a loan for
up to six months from the date we receive your request. See FEDERAL TAX
MATTERS regarding taxation of loans.
AMOUNTS AND CONDITIONS
Your account value will be collateral for the loan. The aggregate amount
borrowed from all employer-sponsored plans may not exceed the lesser of:
o $10,000 or one half of the amount available for withdrawal,
whichever is greater; or
o $50,000 reduced by the excess (if any) of your highest
outstanding loan balance during the preceding 12 month period,
over your outstanding loan balance on the date the loan is made.
We will not allow a loan for an amount:
o of less than $1,000; or
o that would reduce the remaining net account value to less than
$500.
INTEREST
The portion of the account value against which you have borrowed will earn
an effective annual interest rate of 3.0% credited daily. Interest on each
loan will be charged at the effective annual interest rate of 6.0%.
TERMS AND REPAYMENT
You must generally repay each loan within five years from the date it is
made. However, if the loan is used to acquire a dwelling that you will use
as your principle residence within a reasonable period of time, you must
repay the loan within 30 years from the date it is made.
Payments are due on the date specified in the loan documents. Each payment
we receive will be applied to interest first, then to principal. The
portion of each payment applied to principal will reduce the outstanding
loan balance and will be transferred back to the annuity value.
Repayment (of principal and interest) must be made in substantially equal
installments, not less frequently than quarterly. You must clearly mark a
payment as a loan repayment, or we will credit the amount as a premium
payment. You may repay a loan at any time subject to these restrictions.
DEFAULT
If you fail to repay the loan according to the terms of the loan documents
that you signed, we will consider the loan to be in default.
In order to correct the default, we must receive the missed payments before
the last day of the calendar quarter following the quarter in which the
payment was missed. If you do not correct the default by the last day of
the next calendar quarter, you must include the outstanding loan amount,
including interest, in your gross income for the year of the default. The
loan remains an outstanding debt which must be fully repaid, unless one of
the following events occurs allowing the loan to be distributed:
o you are at least age 59 1/2;
o you become disabled;
o you separate from employment with your employer; or
o you incur a financial hardship. A financial hardship withdrawal
may not include any earnings on your elective deferrals;
o a withdrawal is for payment to an alternate payee under a
Qualified Domestic Relations Order, or QDRO; or
o a withdrawal is made in order to make a direct transfer to
another qualified TSA.
Until you repay a defaulted loan, such loan will be considered outstanding
for purposes of calculating the maximum allowed amount of any subsequent
loan.
PARTIAL WITHDRAWALS
You may make a partial withdrawal from the annuity contract while a loan is
outstanding. Any partial withdrawal may not:
o exceed 50% of the remaining net account value; and
o reduce the net account value to an amount less than the
outstanding loan balance plus $500.
Partial withdrawals are subject to the restrictions and applicable
withdrawal provisions of the contract.
We will waive the above restrictions if the partial withdrawal is required
to satisfy minimum distribution requirements.
CASH SURRENDER
If you request a surrender while a loan is outstanding, we will treat the
loan as in default. Any surrender is subject to the restrictions and
applicable withdrawal provisions of the contract. The value used to
determine the cash surrender value will be:
o the net account value on the date of the surrender; less
o any contingent deferred sales load and applicable premium tax
charges.
ANNUITIZATION
If you elect to begin receiving payments under a settlement option while a
loan is outstanding, we will treat the loan as in default. The value used
to provide settlement option payments will be:
o the net account value on the date of the surrender; less
o any contingent deferred sales load and applicable premium tax
charrges.
DEATH
If you die before the annuity date and while a loan is outstanding, we will
treat the loan as in default as of your date of death. The amount used to
determine the death benefit payable will be the net account value.
TERMINATION
Subject to applicable provisions of the Code, the contract will end on the
date that any loan and unpaid interest reduce the amount available for
withdrawal to less than $500. Termination will become effective 31 days
after we mail notice to you at your last known address.
DEATH BENEFIT
If an owner dies before the annuity date and both owners are age 70 or
less, the guaranteed minimum death benefit will be equal to the greatest
of:
a) the account value; and
b) the sum of all purchase payments, less withdrawals taken,
adjusted as described below, and any contingent deferred sales
loads applicable to those withdrawals, and applicable premium tax
charges; and
c) the highest account value on any contract anniversary before the
earlier of the owner's or joint owner's 70th birthday, plus
purchase payments made, less withdrawals taken since that
contract anniversary, adjusted as described below, and any
contingent deferred sales loads applicable to those withdrawals,
and applicable premium tax charges.
If death occurs before the annuity date and after either the deceased
owner's or joint owner's 71st birthday, the guaranteed minimum death
benefit will be equal to the greater of:
a) the account value; and
b) the guaranteed minimum death benefit at age 70, plus total of all
purchase payments made since age 70, less withdrawals taken after
age 70, adjusted as described below, and any contingent deferred
sales loads applicable to those withdrawals and applicable
premium tax charges.
If the owner is not a natural person, such as a trust, corporation or other
legal entity, the annuitant will be treated as the owners for purposes of
the death benefit.
WITHDRAWAL ADJUSTMENT. If you make a withdrawal, the amount of the death
benefit may be reduced. The amount of the reduction will depend on 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 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 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%.
PAYMENT OF DEATH BENEFIT
We will generally pay the death benefit when we receive proof of death of
an owner. Once we receive this proof, and the beneficiary has selected a
method of settlement, the death benefit generally will be paid within seven
days, or as soon thereafter as we have sufficient information to make the
payment.
The death benefit will be determined as of the end of the valuation period
during which our Service Center receives:
a) proof of death of the owner or joint owner; and
b) 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 an owner's death. No contingent
deferred sales load 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 portfolios. For this reason, 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
You may select one or more beneficiaries by designating the person or
persons to receive the amounts payable under the contract. The persons you
designate will receive the percentage you establish if:
o you die before the annuity date and there is no joint owner; or
o you die after the annuity date and settlement option payments
have begun under a selected settlement option that guarantees
payments for a certain period of time.
If a beneficiary dies before the owner, that beneficiary's interest in the
annuity will end upon his or her death.
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 the contract unless the owner
gives us other instructions at the time the beneficiaries are named.
We 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 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). The contract will remain in
force with the annuitant's surviving spouse as the new annuitant, however,
if:
o the 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 persons 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; or
o the beneficiary, if any
If the owner is not the annuitant:
o the joint owner, if any; or
o the beneficiary, if any; or
o the annuitant; or
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 the
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 than 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 or persons selects another option as provided below.
In lieu of the automatic form of death benefit specified above, the person
or persons 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 before 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 the 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 fixed account.
CONTINGENT DEFERRED SALES LOAD/
SURRENDER CHARGE
No deduction for sales charges is made from purchase payments at the time
they are made. However, a contingent deferred sales load, or surrender
charge, of up to 9% of purchase payments may be imposed on certain
withdrawals or surrenders. This charge is designed to partially cover
certain expenses incurred by us relating to the sale of the contract,
including commissions paid to salespersons, the costs of preparation of
sales literature and other promotional costs and acquisition expenses.
The contingent deferred sales load/surrender charge percentage varies
according to the number of years between when a purchase payment was
credited to the contract and when the withdrawal is made. The amount of
this charge is determined by multiplying the amount withdrawn that is
subject to the charge by the contingent deferred sales load percentage
according to the following table. In no event will the total contingent
deferred sales load/surrender charge assessed against the contract exceed
9% of the total purchase payments.
NUMBER OF CONTRACT CONTINGENT
YEARS SINCE RECEIPT DEFERRED
OF PURCHASE PAYMENT SALES LOAD AS
A
PERCENTAGE OF
PURCHASE PAYMENT
Less than 2 years 9%
2 years but less than 3 years 8%
3 years but less than 4 years 8%
4 years but less than 5 years 6%
5 years but less than 6 years 6%
6 years but less than 7 years 4%
7 years or more 0%
- -------------------------------
Any applicable contingent deferred sales load will be deducted from the amount
requested for both partial withdrawals, including withdrawals under the
systematic withdrawal option or the APO, and full surrenders, unless you elect
to add the amount of the applicable load to the amount requested for a partial
withdrawal to cover the applicable contingent deferred sales load. We will not
impose any contingent deferred sales load on withdrawals after the contract has
been in effect for 14 contract years.
FREE WITHDRAWALS-ALLOWED AMOUNT
After the first contract year, you may make a withdrawal up to the allowed
amount without incurring a contingent deferred sales load/surrender charge each
contract year before the annuity date.
The allowed amount each contract year is equal to the greater of:
a) accumulated earnings not previously withdrawn; or
10% of the total purchase payments received less than seven contract
years old as of the last contract anniversary, less any previous
withdrawals.
Withdrawals will be made first from earnings and then from purchase payments on
a first-in/first-out basis. The allowed amount may vary depending on the state
in which your contract is issued. If an allowed amount is not withdrawn during a
contract year, it does not carry over to the next contract year.
Purchase payments not previously withdrawn that have been held at least seven
full contract years, and accumulated earnings not previously withdrawn may be
withdrawn without charge. We will not impose any contingent deferred sales load
for withdrawals of
purchase payments after the contract has been in effect for fourteen years.
OTHER FREE WITHDRAWALS
We will waive the contingent deferred sales load:
a) upon annuitization after the first contract year to an option involving
life contingencies; or
b) upon annuitization at age 95 or over; or
c) upon payment of the death benefit before the annuity date; or
d) if you or the joint owner receive extended medical care in a qualifying
institution (as defined in the contract) for at least 60 consecutive days,
and the request for the withdrawal or surrender, together with proof of
such extended care, is received at our Service Center during the term of
such care, or within 90 days after the last day upon which you or joint
owner received such extended care; or
e) if you or the joint owner receive medically required hospice or in-home
care for at least 60 consecutive days and such extended care is certified
by a qualified medical professional. You may also be required to submit
other evidence as required by us such as evidence of Medicare eligibility;
or
f) if you or the joint owner are diagnosed as terminally ill by a qualified
medical professional after the first contract year and are reasonably
expected to die within 12 months.
NEITHER D) NOR E) APPLY IF YOU OR THE JOINT OWNER ARE RECEIVING EXTENDED MEDICAL
CARE IN A QUALIFYING INSTITUTION OR RECEIVING IN-HOME CARE AT THE TIME THE
CONTRACT IS PURCHASED.
If you or the joint owner qualifies for a waiver of contingent deferred sales
load due to receipt of qualified extended care or are diagnosed with a terminal
illness, we reserve the right to not accept purchase payments after you or the
joint owner have qualified for any of these waivers. Any withdrawals on which
the contingent deferred sales load is waived will not reduce the allowed amount
for the contract year.
ADMINISTRATIVE CHARGES
ACCOUNT FEE. At the end of each contract year and before the annuity date, we
deduct 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 $25. If the contract is surrendered, the account fee will be
deducted from a full surrender before the application of any contingent deferred
sales load. The account fee will be deducted on a pro rata basis, based on
values, from the account value. The fee deductions will be based on both the
variable sub-accounts and the fixed account.
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. This fee will not be changed. No annuity fee will be
deducted from fixed payments. This fee may be waived.
ADMINISTRATIVE EXPENSE CHARGE. We also make a daily deduction for the
administrative expense charge from the variable account before and after the
contract effective date at an effective current annual rate of 0.15% of assets
held in each variable sub-account to reimburse us for administrative expenses.
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
We deduct a charge for bearing certain mortality and expense risks under the
contracts. This is a daily charge at an effective annual rate of 1.60% of the
assets in the variable account. We guarantee that this charge of 1.60% 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 us. The mortality
risks assumed by us arise from our 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 before the
annuity date.
The expense risk assumed by us is the risk that our 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, we will bear these losses. If this charge is more than
sufficient, any excess will accrue to us. Currently, we expect a profit from
this charge.
We anticipate that the contingent deferred sales load will not generate
sufficient funds to pay the cost of distributing the contracts. To the extent
that the contingent deferred sales load is insufficient to cover the actual cost
of contract distribution, the deficiency will be met from our general corporate
assets which may include amounts, if any, derived from the mortality and expense
risk charge.
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)
RIDER
The total fee we will deduct at the end of each month is 1/12 of 0.35% of the
variable accumulated value at that time. The fee for the GMIB Rider is deducted
from each variable sub-account on a pro rata basis based on the value in each
variable sub-account (except the money market sub-account) through the
cancellation of variable accumulation units. If there is insufficient variable
accumulated value, the fee will be deducted from the value in the fixed account.
PREMIUM TAX CHARGES
Currently there is no charge for premium taxes except upon annuitization.
However, we may be required to pay premium or retaliatory taxes currently
ranging from 0% to 5%. We reserve 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 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.
TAXES
No charges are currently made for taxes. However, we reserve 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 we determine 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.
SALES IN SPECIAL SITUATIONS
We may sell the contracts in special situations that are expected to involve
reduced expenses for us. These instances may include sales:
o in certain group arrangements, such as employee savings plans;
o to current or former officers, directors and employees, and their
families, of Transamerica and its affiliates;
o to officers, directors, and employees, and their families, and
the portfolios' investment advisers and their affiliates; or
o to officers, directors, employees and sales agents also known as
registered representatives, and their families, and
broker-dealers and other financial institutions that have sales
agreements with us to sell the contracts.
In these situations:
a) the contingent deferred sales load may be reduced or waived;
b) the mortality and expense risk charge or administration charges
may be reduced or waived; and/or
c) 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 may be 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, a subsidiary of AEGON N.V.. 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. The percentage may be up to 9%, 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 you. You select the
annuity date and you may change the date from time to time by giving notice to
our Service Center in a form and manner acceptable to us. Notice of each change
must be received by our Service Center at least 30 days before 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 first day of the calendar
month immediately preceding the month of the oldest annuitant's or joint
annuitants' 95th birthday.
The latest allowed annuity date may vary in certain jurisdictions and under
certain programs or circumstances.
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.
ANNUITY AMOUNT
Unless you elected the GMIB Rider, the annuity amount is the account value,
minus any applicable premium tax charges. Any contingent deferred sales load
will be waived if:
o the settlement option payments involve life contingencies and
begin on or after the first contract anniversary; or
the annuity date is on or after the oldest annuitant's or joint
annuitant's 95th birthday.
GMIB RIDER
The GMIB Rider assures you of a minimum level of income in the future by
guaranteeing a minimum annuitization value after the rider has been in effect
for seven years. You may elect this rider if the annuitant or joint annuitant
are less than age 69 and the election is made within 30 days after the contract
date. You may terminate this Rider at any time before the annuity date. If you
terminate the GMIB Rider, you may not reelect it. In addition, if you terminate
this benefit, amounts paid for the benefitwill not be returned.
The guaranteed minimum income benefit before you and a joint owner reaches age
95 is the greater of:
a) the account value; or
b) the sum of all purchase payments, plus credited interest, and less the sum
of all withdrawals, adjusted as described below, and premium taxes
applicable to those withdrawals, up to the rider anniversary before either
you or the joint owner reach age 95.
After the contract anniversary on which the annuitant or joint annuitant reaches
age 95, the GMIB is the settlement option that can be purchased with the account
value. GUARANTEED MINIMUM INCOME BENEFIT'S BENEFIT BASE. On the contract date,
the benefit base for the GMIB is equal to the initial purchase payment allocated
among the variable sub-accounts, other than the money market account. The
benefit base after the contract date will be credited with interest each day
through the annuitant's 75th birthday. We will not credit interest after the
annuitant's 75th birthday. If you make additional purchase payments to the
contract, we will increase the current benefit base by the dollar amount of the
purchase payment on the date the contribution is allocated to the variable
sub-accounts.
The annual effective interest rate for the GMIB is currently 6% per year. We
may, at our discretion, change the rate in the future, but the rate will never
be less than 3% per year, and once the rider is added to your contract, the
annual rate will not vary during the life of that rider. Withdrawals may reduce
the minimum annuitization value on a basis greater than dollar-for-dollar. See
the Statement of Additional Information for more information.
If you take a withdrawal from the contract, we will adjust the benefit base for
the withdrawal, as described below, on the date that you make the withdrawal. If
you transfer money from a variable sub-account to either the fixed account or
the money market variable sub-account, the benefit base will be reduced in the
same proportion as the transfer. The benefit base is not an account value or a
cash value and is used solely for the purpose of calculating the GMIB.
WITHDRAWAL ADJUSTMENT. If you make a withdrawal, the amount of the benefit base
may be reduced. The amount of the reduction will depend on 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 benefit base will reduced by the dollar amount of the
withdrawal. If the account value is less than the guaranteed minimum income
benefit, the benefit base 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%.
ANNUITIZATION. You can only annuitize using the GMIB within 30 days after the
seventh or later rider anniversary after the GMIB is elected. We may, at our
discretion, change the waiting period before the GMIB can be exercised in the
future. You cannot, however, annuitize using the GMIB after the rider
anniversary after your 94th birthday (earlier if required by state law).
Note Carefully--If you annuitize at any time other than indicated above, you
cannot use the GMIB. Also, for purposes of the GMIB rider, systematic
withdrawals and APO distributions under the contract are considered withdrawals
and will reduce the amount of the GMIB.
The settlement option that you may purchase with the GMIB rider is a life
annuity or with a 10 year period certain. If the life expectancy of the oldest
owner is less than 10 years as specified by the life expectancy table used by
the Internal Revenue Service, or IRS, then the settlement option will be a life
and period certain annuity in which the period certain is the life expectancy of
the oldest annuitant. The actuarial basis for the annuity rates under this
option is the 1983 IAM Table, with projection G, with an interest rate of 3% per
year for males, females or unisex, as appropriate.
The GMIB 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 you. When you begin receiving the guaranteed minimum income benefit, you may
not make any additional purchase payments to, or withdrawals from, the contract.
SETTLEMENT OPTION PAYMENTS
You may choose from the settlement options below. We 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 and in some jurisdictions. We reserve
the right to ask for satisfactory proof of the annuitant's or joint annuitant's
age. We 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.
You 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.
If the amount of the monthly payment from the settlement option you selected
would result in a monthly settlement option payment of less than $150, or if the
annuity amount is less than $5,000, we reserve 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.
ELECTION OF SETTLEMENT OPTION FORMS AND PAYMENT OPTIONS
Before the annuity date, and while the annuitant is living, you may, by written
request, change the settlement option or payment option. The request for change
must be received by our Service Center at least 30 days before 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, we will make settlement option payments
according to the 120 month period certain and life settlement option and the
applicable provisions of the contract.
PAYMENT OPTIONS
You 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 fixed account
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
according to the terms of the settlement option you select. If you select a
fixed payment option, the portion of the annuity amount used to provide that
payment option will be transferred to the general account assets of
Transamerica. The amount of payments will be established by the fixed settlement
option which you select and by the age and sex, if sex-distinct rates are
allowed by law, of the annuitants. Payment amounts will not reflect investment
performance after the annuity date. The fixed payment amounts are determined by
applying the fixed settlement option purchase rate, which is 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-accounts. The
variable settlement option purchase rate tables in the contract reflect an
assumed, but not guaranteed, annual interest rate of 5.35%. If the actual net
investment performance of the variable sub-accounts is less than 5.35%, then the
dollar amount of the actual payments will decrease. If the actual net investment
performance of the variable sub-accounts is higher than 5.35%, then the dollar
amount of the actual payments will increase. If the net investment performance
exactly equals the 5.35% rate, then the dollar amount of the actual payments
will remain constant. We may offer other assumed annual interest rates.
Variable payments will be based on the variable sub-accounts you select, and on
the monies which you allocate among them.
For further details as to the determination of variable payments, see the
Statement of Additional Information.
SETTLEMENT OPTION FORMS
As owner, you may choose any of the settlement option forms described below.
Subject to our approval, you may select any other settlement option forms
offered by us in the future.
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 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. We 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 60, 120, 180 or 240 months.
If the annuitant dies after all payments have been made for the period certain,
payments will cease with the payment that is paid just before the annuitant
dies. No death 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 you provide 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 as 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 arrangement
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 upon 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. We will need proof of age for the annuitant and joint annuitant
before payments start.
5. Period Certain Only. 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 period certain elected.
The period certain may be 60, 120, 180 or 240 months.
If the annuitant dies after all payments have been made for the period
certain, payments will cease with the payment that is paid just before the
annuitant dies. No death 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 you provide
otherwise.
The written request for this form must:
c) state the length of the period certain; and
d) name the beneficiary.
6. Other Forms of Payment. We can provide benefits under any other settlement
option not described in this section as long as we agree to these options
and they comply with any applicable state or federal law or regulation.
Requests for any other settlement option must be made in writing to our
Service Center at least 30 days before the annuity date.
After the annuity date:
a) you will not be allowed to make any changes in the settlement option
and payment option;
b) no additional purchase payments will be accepted under the contract;
and
c) no further withdrawals will be allowed for fixed payment options or
for variable payment options under which payments are being made based
on life contingencies.
As the owner of a non-qualified contract, you may, at any time after the
contract date, write to us at our Service Center to change the payee of benefits
being provided under the contract. The effective date of change in payee will be
the later of:
a) the date we receive the written request for such change; or
b) the date specified by you.
As the owner of a qualified contract, you 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
for U.S. persons 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. If you are concerned about these tax
implications, you should consult a competent tax adviser before initiating any
transaction. This discussion is based upon our understanding of the present
federal income tax laws as they are currently interpreted by the Internal
Revenue Service, or 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. If a prospective owner is not a U.S. person,
see Contracts Purchased by Nonresident Aliens and Foreign Corporations below.
The contract may be purchased on a non-tax qualified basis, as a non-qualified
contract, or purchased and used in connection with plans or arrangements
qualifying for special tax treatment as a qualified contract. Qualified
contracts are designed for use in connection with plans or arrangements entitled
to special income tax treatment under Code Sections 403(b) and 408. 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:
o the type of retirement plan or arrangement for which the contract is
purchased;
o the tax and employment status of the individual concerned; or
o our tax status.
In addition, certain requirements must be satisfied when purchasing a qualified
contract with proceeds from a tax qualified retirement plan or other
arrangement. Certain requirements must also be met when 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
individual situations, 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, as prospective purchaser, you
must specify whether you are 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, we may require that the
prospective purchaser provide information regarding the federal income tax
status of the previous annuity contract. We 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 requires 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. We 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. Code Section 72 governs taxation of annuities in general. We believe
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, for example, via 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" 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. For 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.
For withdrawals 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.
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 us to withhold federal income tax from
withdrawals. However, except for certain qualified contracts, an owner will be
entitled to elect, in writing, not to have tax withholding apply. Withholding
applies to the portion of the distribution which is includible in income and
subject to federal income tax. The federal income tax withholding rate is 10%,
or 20% in the case of certain qualified plans, of the taxable amount of the
distribution. Withholding applies only if the taxable amount of the distribution
is at least $200. Some states also require withholding for state income taxes.
The withholding rate varies according to the type of distribution and the
owner's tax status. Eligible rollover distributions from Section 403(b) TSAs 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, for
certain direct rollovers to other plans or arrangements.
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.
If distributions are delivered to foreign countries, federal income tax will
generally be withheld at a 10% rate unless you certify to us 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.
PENALTY TAX. A federal income tax penalty equal to 10% of the amount treated as
taxable income may be imposed. In general, however, there is no penalty tax on
distributions:
a) made on or after the date on which the owner attains age 59 1/2;
b) made as a result of death or disability of the owner; or
c) 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:
a) if distributed in a lump sum, they are taxed in the same manner as a
full surrender as described above; or
b) 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. 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 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 Code Section 72(e). 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 that 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 before age 59 1/2, subject to certain exceptions; distributions
that do not conform to specified commencement and minimum distribution rules;
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 regular IRAs and TSAs, the Code requires that distributions generally must
begin 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; or
the owner or plan participant retires.
INDIVIDUAL RETIREMENT ANNUITIES (IRA). The sale of a contract for use with any
IRA may be subject to special disclosure requirements of the IRS. If you
purchase a contract for use with an IRA you will be provided with supplemental
information required by the Internal Revenue Service, or IRS, or other
appropriate agency.
You will have the right to cancel your purchase within 7 days of whichever is
earliest:
a) the establishment of your IRA; or
b) your purchase.
If you intend to make such a purchase, you should seek competent advice as to
the suitability of the contract you are considering purchasing for use with an
IRA.
The contract is designed for use with traditional IRA rollovers and contributory
IRAs. A contributory IRA is a contract to which initial and subsequent purchase
payments are subject to limitations imposed by the Code. Code Section 408
permits eligible individuals to contribute to an individual retirement program
known as an Individual Retirement Annuity or Individual Retirement Account, or
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). These
contributions 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 before age 59 1/2, unless certain
exceptions apply, are subject to a 10% penalty tax.
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 incomes of the
employees, 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:
a) elective contributions made in years beginning after December 31, 1988;
b) earnings on those contributions; and
c) earnings in such years on amounts held as of the last year beginning before
January 1, 1989. Distribution of those amounts may only occur upon death of the
employee, attainment of age 59 1/2, separation from service, disability, or
financial hardship. In addition, income attributable to elective contributions
may not be distributed in the case of hardship.
Pre-1989 contributions and earnings through December 31, 1989 are not subject to
the restrictions described above. However, funds transferred to a qualified
contract from a Section 403(b)(7) custodial account will be subject to the
restrictions.
RESTRICTIONS UNDER QUALIFIED CONTRACTS. There may be other restrictions that
apply to the election, commencement, or distribution of benefits under qualified
contracts, or under the terms of the plans under which contracts are issued. A
qualified contract will be amended as necessary to conform to the requirements
of the Code.
CONTRACTS PURCHASED BY
NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to annuity owners that are U.S. persons. Taxable distributions
made to owners who are not U.S. persons will generally be subject to U.S.
federal income tax withholding at a 30% rate, unless a lower treaty rate
applies. In addition, distributions may be subject to state and/or municipal
taxes and taxes that may be imposed by the owner's country of citizenship or
residence. Prospective foreign owners are advised to consult with a qualified
tax adviser regarding U.S., state, and foreign taxation for any annuity contract
purchase.
TAXATION OF TRANSAMERICA
We are 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, we believe 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, we do not anticipate that it will
incur any federal income tax liability attributable to the variable account and,
therefore, we do not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in our being
taxed on income or gains arising from the variable account, then we 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. Code Section 817(h) requires that for
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, as 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, we do 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. We therefore
reserve 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, Code Section 72(s) requires any non-qualified
contract to provide that:
a) if any owner dies on or after the annuity date but before 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 before the annuity date, the entire interest in the
contract will be distributed within five years after the date of the
owner's death. This requirement 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, provided it is distributed over the life of the
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 the
owner as a beneficiary. Upon the owner's death, ownership of the contract passes
to the designated beneficiary and the mandatory distribution rules above will
apply. 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, postponing application of such payout requirements.
The non-qualified contracts contain provisions which are intended to comply with
the requirements of Code Section 72(s), although no regulations interpreting
these requirements have yet been issued. All provisions in the contract will be
interpreted to maintain this 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 the past 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 before 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 our 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, we may advertise yields and average annual total returns for
the variable sub-accounts. In addition, we may advertise the effective yield of
the money market variable sub-account. THESE FIGURES WILL BE BASED ON HISTORICAL
INFORMATION AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
The yield of the money market variable sub-account refers to the annualized
income generated by an investment in that variable sub-account over a specified
seven-day period. The yield is calculated by assuming that the income generated
for that seven-day period is generated each seven-day period over a 52-week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned by an investment in
that variable sub-account is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
The yield of a variable sub-account, other than the money market variable
sub-account, refers to the annualized income generated by an investment in the
variable sub-account over a specified thirty-day period. The yield is calculated
by assuming that the income generated by the investment during that thirty-day
period is generated each thirty-day period over a twelve-month period and is
shown as a percentage of the investment.
The yield calculations do not reflect the effect of any contingent deferred
sales load or premium taxes that may be applicable to a particular contract. To
the extent that the contingent deferred sales load or premium taxes are
applicable to a particular contract, the yield of that contract will be reduced.
For additional information regarding yields and total returns, please refer to
the Statement of Additional Information.
The average annual total return of a variable sub-account refers to return
quotations assuming an investment has been held in the variable sub-account for
various periods of time including, but not limited to, a period measured from
the date the variable sub-account commenced operations. When a variable
sub-account has been in operation for 1, 5, and 10 years, respectively, the
average annual total return for these periods will be provided. The average
annual total return quotations will represent the average annual compounded
rates of return that would equate an initial investment of $1,000 to the
redemption value of that investment, including the deduction of any applicable
contingent deferred sales load but excluding deduction of any premium taxes, as
of the last day of each of the periods for which total return quotations are
provided.
Performance information for any variable sub-account reflects only the
performance of a hypothetical contract under which account value is allocated to
a variable sub-account during a particular time period on which the calculations
are based. Performance information should be considered in light of the
investment objectives and policies and characteristics of the portfolios in
which the variable sub-account invests, and the market conditions during the
given time period, and should not be considered as a representation of what may
be achieved in the future. For a description of the methods used to determine
yield and total returns, see the Statement of Additional Information.
Reports and promotional literature may also contain other information including:
a) the ranking of any variable sub-account derived from rankings of variable
annuity separate accounts or their investment products tracked by Lipper
Analytical Services, Inc., VARDS, IBC/Donoghue's Money Fund Report,
Financial Planning Magazine, Money Magazine, Bank Rate Monitor, Standard
and Poor's Indices, Dow Jones Industrial Average, and other rating
services, companies, publications, or other persons who rank separate
accounts or other investment products on overall performance or other
criteria; and
b) 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 our advertisements and sales literature, we may discuss, and may illustrate
by graphs, charts, or through other means of written communication:
o the implications of longer life expectancy for retirement planning;
the tax and other consequences of long-term investment in the
contract;
o the effects of the contract's lifetime payout options; and
o the operation of certain special investment features of the contract
-- such as the dollar cost averaging option.
We may explain and depict in charts, or other graphics, the effects of certain
investment strategies, such as allocating purchase payments between the fixed
account and a variable sub-account. We may also discuss the Social Security
system and its projected payout levels and retirement plans generally, using
graphs, charts and other illustrations.
We may from time to time also disclose average annual total return in
non-standard formats and cumulative non-annualized total return for the variable
sub-accounts. The non-standard average annual total return and cumulative total
return will assume that no contingent deferred sales load is applicable.
Transamerica may from time to time also disclose yield, standard total returns,
and non-standard total returns for any or all variable sub-accounts.
All non-standard performance data will only be disclosed if the standard
performance data is also disclosed. For additional information regarding the
calculation of other performance data, please refer to the Statement of
Additional Information.
We may also advertise performance figures for the variable sub-accounts based on
the performance of a portfolio before the time the variable account commenced
operations.
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
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 AND FINANCIAL
STATEMENTS
The consolidated financial statements of Transamerica as of December 31, 1999
and 1998 appearing in the Statement of Additional Information have been audited
by Ernst & Young LLP, Independent Auditors, as set forth in their reports
appearing in the Statement of Additional Information. Transamerica Separate
Account VA-8 had not commenced operations as of December 31, 1999 and,
therefore, no financial statements are included for the separate account. The
financial statements audited by Ernst & Young LLP have been included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
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. The shares will be voted in
accordance with instructions received from persons having voting interests in
the corresponding variable sub-account. If, however, the 1940 Act or any
regulation thereunder should be amended, or if the present interpretation
thereof should change, or if Transamerica determines that it is allowed to vote
all portfolio shares in its own right, Transamerica may elect to do so.
The person with the voting interest is the owner. The number of votes which are
available to an owner will be calculated separately for each variable
sub-account. Before the annuity date, that number will be determined by applying
his or her percentage interest, if any, in a particular variable sub-account to
the total number of votes attributable to that variable sub-account. The owner
holds a voting interest in each variable sub-account to which the account value
is allocated. After the annuity date, the number of votes decreases as
settlement option payments are made and as the reserves for the contract
decrease.
The number of votes of a portfolio will be determined as of the date coincident
with the date established by that portfolio for determining shareholders
eligible to vote at the meeting of the portfolios. Voting instructions will be
solicited by written communication before such meeting in accordance with
procedures established by the respective portfolios.
Shares for which no timely instructions are received and shares held by
Transamerica for 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 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.
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
VARIABLE PAYMENT OPTIONS......................................................................... 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
DISTRIBUTION OF THE CONTRACT.....................................................................18
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS...........................................................18
STATE REGULATION.................................................................................19
RECORDS AND REPORTS..............................................................................19
FINANCIAL STATEMENTS.............................................................................19
APPENDIX.........................................................................................20
</TABLE>
<PAGE>
APPENDIX A
THE FIXED ACCOUNT
(Not available in all states)
This prospectus is generally intended to serve as a disclosure document only for
the contract and the variable account. For complete details regarding the fixed
account, see the contract itself.
THE ACCOUNT VALUE ALLOCATED TO THE FIXED ACCOUNT BECOMES PART OF OUR GENERAL
ACCOUNT, 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 WE HAVE BEEN
ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO THE FIXED ACCOUNT.
The fixed account is part of our general account. The general account consists
of all our general assets, other than those in the variable account, or in any
other separate account. We have sole discretion to invest the assets of its
general account subject to applicable law.
The allocation or transfer of funds to the fixed account does not entitle the
owner to share in the investment performance of our general account.
Currently, we guarantee that we will credit interest at a rate of not less than
3% per year, compounded annually, to amounts allocated to the fixed account
under the contracts. However, we reserve the right to change the minimum rate
according to state insurance law. We may credit interest at a rate in excess of
3% per year.
There is no specific formula for the determination of excess interest credits.
Some of the factors that we may consider in determining whether to credit excess
interest to amounts allocated to the fixed account and the amount in that
account are:
o general economic trends;
o rates of return currently available;
o returns anticipated on the company's investments;
o regulatory and tax requirements; and
o competitive factors.
ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3%
PER YEAR WILL BE DETERMINED AT OUR SOLE DISCRETION. THE OWNER ASSUMES THE RISK
THAT INTEREST CREDITED TO THE FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE
MINIMUM GUARANTEE OF 3% FOR ANY GIVEN YEAR.
Rates of interest credited to the fixed account will be guaranteed for at least
twelve months and will vary according to the timing and class of the allocation,
transfer or renewal. At any time after the end of the twelve month period for a
particular allocation, we may change the annual rate of interest for that class.
This new annual rate of interest will remain in effect for at least twelve
months. New purchase payments made to the contract which are allocated to the
fixed account may receive different rates of interest.
These rates of interest may differ from those interest rates credited to amounts
transferred from the variable sub-accounts and from those credited to amounts
remaining in the fixed account and receiving renewal rates. These rates of
interest may also differ from rates for allocations applied under certain
options and services we may be offering.
TRANSFERS
Each contract year, you may transfer a portion of the value of the fixed account
to variable sub-accounts. The maximum percentage that may be transferred will be
declared annually by us. This percentage will be determined by us at our sole
discretion, but will not be less than 10% of the value of the fixed account or
$250.
If we permit dollar cost averaging from the fixed account to the variable
sub-accounts, the above restrictions are not applicable.
Generally, transfers may not be made from any variable sub-account to the fixed
account for the six-month period following any transfer from the fixed account
to one or more of the variable sub-accounts. Additionally, transfers may not be
made from the fixed account to:
the Transamerica VIF Money Market Sub-Account; or
b) any variable sub-account identified by Transamerica and investing in a
portfolio of fixed income investments.
We reserve the right to modify the limitations on transfers to and from the
fixed account and to defer transfers from the fixed account for up to six months
from the date of request.
SPECIAL DOLLAR COST AVERAGING OPTION
(May not be available in all states. See contract for availability of the fixed
account options.)
Before the annuity date, you may elect to allocate entire purchase payments to
either the six or twelve month special Dollar Cost Averaging account of the
fixed account. The purchase payment will be credited with interest at a
guaranteed fixed rate. Amounts will then be transferred from the special Dollar
Cost Averaging account to the variable sub-accounts pro rata on a monthly basis
for six or twelve months (depending on the option you select) in the allocations
you specify.
Amounts from the sub-accounts and/or fixed account may not be transferred into
the special Dollar Cost Averaging accounts. In addition, if you request a
transfer (other than a Dollar Cost Averaging transfer) or a withdrawal from a
special Dollar Cost Averaging account, any amounts remaining in the special
account will be transferred to the variable sub-accounts according to your
allocation instructions. The special Dollar Cost Averaging option will end and
cannot be reelected.
<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 .004795% (the daily equivalent of the
current charge of 1.75%on an annual basis) gives a net investment factor of
1.00244.
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 15.53782 (15.5 x 1.00244).
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 13.53149, (13.5 x
1.002444 (the net investment factor) x 0.999893).
0.999893 is the factor, for a one day valuation period, that neutralizes the
assumed rate of four percent (4%) per year used to establish the variable
annuity rates found in the contract.
EXAMPLE OF VARIABLE ANNUITY PAYMENT CALCULATIONS
Suppose that the account is currently credited with 3,200.000000 variable
accumulation units of a particular variable sub-account.
Also suppose that the variable accumulation unit value and the variable annuity
unit value for the particular variable sub-account for the valuation period
which ends immediately preceding the first day of the month is 15.500000 and
13.500000 respectively, and that the variable annuity rate for the age and
elected is $5.73 per $1,000.
Then the first variable annuity payment would be:
3,200 x 15.5 x 5.73 divided by 1,000 = $284.21,
and the number of variable annuity units credited for future payments would be:
284.21 divided by 13.5 = 21.052444.
For the second monthly payment, suppose that the variable annuity unit value on
the 10th day of the second month is 13.565712. Then the second variable annuity
payment would be
$285.59 (21.052444 x 13.565712).
<PAGE>
66
67
69
APPENDIX C
<PAGE>
CALCULATION OF YIELDS AND TOTAL
RETURNS
MONEY MARKET SUB-ACCOUNT YIELD CALCULATION
In accordance with regulations adopted by the Commission, we are required to
compute the money market sub-account's current annualized yield for a seven-day
period in a manner which does not take into consideration any realized or
unrealized gains or losses on shares of the money market series or on its
portfolio securities. This current annualized yield is computed by determining
the net change (exclusive of realized gains and losses on the sale of securities
and unrealized appreciation and depreciation) in the value of a hypothetical
account having a balance of one unit of the money market sub-account at the
beginning of such seven-day period, dividing such net change in account value by
the value of the account at the beginning of the period to determine the base
period return and annualizing this quotient on a 365-day basis. The net change
in account value reflects the deductions for the annual account fee, the
mortality and expense risk charge and administrative expense charges and income
and expenses accrued during the period. Because of these deductions, the yield
for the money market sub-account of the variable account will be lower than the
yield for the money market series or any comparable substitute funding vehicle.
The Commission also permits us to disclose the effective yield of the money
market sub-account for the same seven-day period, determined on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result.
The yield on amounts held in the money market sub-account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The money market sub-account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
money market series or substitute funding vehicle, the types and quality of
portfolio securities held by the money market series or substitute funding
vehicle, and operating expenses. In addition, the yield figures do not reflect
the effect of any contingent deferred sales load (of up to 6% of purchase
payments) that may be applicable to a contract.
OTHER SUB-ACCOUNT YIELD CALCULATIONS
We may from time to time disclose the current annualized yield of one or more of
the variable sub-accounts (except the money market sub-account) for 30-day
periods. The annualized yield of a sub-account refers to the income generated by
the sub-account over a specified 30-day period. Because this yield is
annualized, the yield generated by a sub-account during the 30-day period is
assumed to be generated each 30-day period. The yield is computed by dividing
the net investment income per variable accumulation unit earned during the
period by the price per unit on the last day of the period, according to the
following formula:
YIELD = 2[{a-b + 1}6 - 1]
----
cd
Where:
a = net investment income earned during the period by the portfolio
attributable to the shares owned by the sub-account.
b = expenses for the sub-account accrued for the period (net of
reimbursements).
c = the average daily number of variable accumulation units outstanding
during the period.
d = the maximum offering price per variable accumulation unit on the
last day of the period.
Net investment income will be determined in accordance with rules established by
the Commission. Accrued expenses will include all recurring fees that are
charged to all contracts. The yield calculations do not reflect the effect of
any contingent deferred sales load that may be applicable to a particular
contract. Contingent deferred sales loads range from 6% to 0% of the amount of
account value withdrawn depending on the elapsed time since the receipt of each
purchase payment.
Because of the charges and deductions imposed by the variable account, the yield
for the sub-account will be lower than the yield for the corresponding
portfolio. The yield on amounts held in the variable sub-accounts normally will
fluctuate over time. Therefore, the disclosed yield for any given period is not
an indication or representation of future yields or rates of return. The
variable sub-account's actual yield will be affected by the types and quality of
portfolio securities held by the portfolio, and its operating expenses. STANDARD
TOTAL RETURN CALCULATIONS
We may from time to time also disclose average annual total returns for one or
more of the sub-accounts for various periods of time. Average annual total
return quotations are computed by finding the average annual compounded rates of
return over one, five and ten year periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P{1 + T}n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the one, five or ten-year period at
the end of the one, five, or ten-year period (or fractional
portion of such period).
All recurring fees are recognized in the ending redeemable value. The standard
average annual total return calculations will reflect the effect of any
contingent deferred sales load that may be applicable to a particular period.
ADJUSTED HISTORICAL PORTFOLIO PERFORMANCE DATA
We may also disclose "historical" performance data for a portfolio, for periods
before the variable sub-account commenced operations. Such performance
information will be calculated based on the performance of the portfolio and the
assumption that the sub-account was in existence for the same periods as those
indicated for the portfolio, with a level of contract charges currently in
effect.
This type of adjusted historical performance data may be disclosed on both an
average annual total return and a cumulative total return basis. Moreover, it
may be disclosed assuming that the contract is not surrendered (i.e., with no
deduction for the contingent deferred sales load) and assuming that the contract
is surrendered at the end of the applicable period (i.e., reflecting a deduction
for any applicable contingent deferred sales load).
OTHER PERFORMANCE DATA
We 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%.
We may from time to time also disclose cumulative total returns in conjunction
with the standard format described above. The cumulative returns will be
calculated using the following formula assuming that the contingent deferred
sales load percentage will be 0%.
CTR = {ERV/P}- 1
Where:
CTR = the cumulative total return net of sub-account recurring charges for
the period.
ERV = ending redeemable value of a hypothetical $1,000 payment at the
beginning of the one, five, or ten-year period at the end of the one,
five, or ten-year period (or fractional portion of the period).
P = a hypothetical initial payment of $1,000.
All non-standard performance data will be advertised only if the standard
performance data is also disclosed.
HISTORICAL 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. We have no reason to doubt the
accuracy of the figures provided by the portfolios. We have not verified these
figures.
HISTORICAL PERFORMANCE DATA
The charts below show historical performance data for the sub-accounts,
including adjusted historical performance for the periods prior to the June 30,
2000 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 contract. THESE FIGURES ARE NOT AN INDICATION OF THE FUTURE PERFORMANCE OF
THE SUB-ACCOUNTS. The date next to each sub-account name indicates the date of
commencement of operation of the corresponding portfolio.
<PAGE>
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") was effectively divided into two investment funds - The Old Trust
and the present OCC Accumulation Trust (the "Present 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.
HISTORICAL PERFORMANCE DATA CHARTS
1. Average Annual Total Returns - Assuming surrender but no optional
Rider
2. Average Annual Total Returns - Assuming surrender and the Guaranteed
Minimum Income Benefit Rider
3. Average Annual Total Returns - Assuming no surrender or optional Rider
4. Average Annual Total Returns - Assuming no surrender but reflecting
the Guaranteed Minimum Income Benefit Rider
5. Cumulative Returns - Assuming surrender but no optional Rider
6. Cumulative Returns - Assuming surrender and the Guaranteed Minimum
Income Benefit Rider
7. Cumulative Returns - Assuming no surrender or optional Rider
8. Cumulative Returns - Assuming no surrender but reflecting the
Guaranteed Minimum Income Benefit Rider
<PAGE>
<TABLE>
<CAPTION>
1. AVERAGE ANNUAL TOTAL RETURNS - Assuming surrender but no optional Rider
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 charges of 1.60% per annum,
administrative expense charge of 0.15% per annum, an account fee of $25 per
annum and the applicable contingent deferred sales load (maximum of 9% of
purchase payments) and do not reflect any fee deduction for the optional Rider.
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
SUB-ACCOUNT For the For the For the For the period from
(date of commencement 1-year period 3-year For the 10-year commencement of
of operation of ending period 5-year period period ending portfolio operations
corresponding portfolio) 12/31/99 ending ending 12/31/99 to 12/31/99
12/31/99 12/31/99
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
<S> <C> <C> <C> <C> <C>
Alger American Income &
Growth (11/15/88)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Alliance VPF Growth &
Income (1/14/91)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Alliance VPF Premier Growth
(6/26/92)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Dreyfus VIF Capital
Appreciation (4/5/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Dreyfus VIF Small Cap
(8/31/90)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Janus Aspen Series Balanced
(9/13/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Janus Aspen Series
WorldwideGrowth (9/13/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Emerging Growth
(7/24/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Growth w/ Income
(10/9/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Research
(7/26/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF Emerging Markets Equity
(10/1/96)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF Fixed Income
(1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF High Yield
(1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF International
Magnum (1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
OCC Accumulation Trust
Managed (8/1/88)(3)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
PIMCO VIT StocksPLUS Growth &
Income (1/2/98)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Transamerica VIF Growth
(2/26/69) (2)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Transamerica VIF Money
Market (1/2/98)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
2. AVERAGE ANNUAL TOTAL RETURNS - Assuming surrender and reflecting the
optional Guaranteed Minimum Income Benefit Rider
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 charges of 1.60% per annum,
administrative expense charge of 0.15% per annum, an account fee of $25 per
annum, the applicable contingent deferred sales load (maximum 9% of purchase
payments) and the optional Guaranteed Minimum Income Benefit Rider fee of 0.35%
per annum.
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
SUB-ACCOUNT For the For the For the For the period from
(date of commencement of 1-year period 3-year For the 10-year commencement of
operation of ending period 5-year period period ending portfolio operations
corresponding portfolio) 12/31/99 ending ending 12/31/99 to 12/31/99
12/31/99 12/31/99
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Alger American Income &
Growth (11/15/88)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Alliance VPF Growth &
Income (1/14/91)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Alliance VPF Premier
Growth (6/26/92)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Dreyfus VIF Capital
Appreciation (4/5/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Dreyfus VIF Small Cap
(8/31/90)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Janus Aspen Series Balanced
(9/13/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Janus Aspen Series
Worldwide Growth (9/13/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Emerging Growth
(7/24/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Growth w/ Income
(10/9/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Research
(7/26/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF Emerging
Markets Equity (10/1/96)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF Fixed Income
(1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF High Yield
(1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF International
Magnum (1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
OCC Accumulation Trust
Managed (8/1/88)(3)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
PIMCO StocksPLUS Growth
and Income (1/2/98)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Transamerica VIF Growth
(2/26/69) (2)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Transamerica VIF Money
Market (1/2/98)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
3. AVERAGE ANNUAL TOTAL RETURNS - Assuming no surrender or optional Rider
Non-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 charges of 1.60% per
annum, administrative expense charge of 0.15% per annum and an account fee of
$25 per annum, but do not reflect any applicable contingent deferred sales load
(maximum of 9% of purchase payments) and do not reflect any fee deduction for
the optional Rider.
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
SUB-ACCOUNT For the For the For the For the period from
(date of commencement of 1-year period 3-year For the 10-year commencement of
operation of ending period 5-year period period ending portfolio operations
corresponding portfolio) 12/31/99 ending ending 12/31/99 to 12/31/99
12/31/99 12/31/99
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Alger American Income &
Growth (11/15/88)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Alliance VPF Growth &
Income (1/14/91)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Alliance VPF Premier
Growth (6/26/92)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Dreyfus VIF Capital
Appreciation (4/5/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Dreyfus VIF Small Cap
(8/31/90)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Janus Aspen Series Balanced
(9/13/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Janus Aspen Series
Worldwide Growth (9/13/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Emerging Growth
(7/24/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Growth w/ Income
(10/9/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Research
(7/26/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF Emerging
Markets Equity (10/1/96)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF Fixed Income
(1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF High Yield
(1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF International
(1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
OCC Accumulation Trust
Managed (8/1/88) (3)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
PIMCO StocksPLUS Growth
and Income (1/2/98)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Transamerica VIF Growth
(2/26/69) (2)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Transamerica VIF Money
Market (1/2/98)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
4. AVERAGE ANNUAL TOTAL RETURNS - Assuming no surrender but reflecting the
optional Guaranteed Minimum Benefit Rider
Non-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 charges of 1.60% per
annum, administrative expense charge of 0.15% per annum and, an account fee of
$25 per annum, but do not reflect any applicable contingent deferred sales load
(maximum 9% of purchase payments). They do reflect deduction of the fee for the
optional Guaranteed Minimum Income Benefit Rider fee of 0.35% per annum.
- --------------------------------- --------------- -------------- ---------------- -------------- ----------------------
SUB-ACCOUNT For the For the For the For the period from
(date of commencement of 1-year period 3-year For the 5-year 10-year commencement of
operation of ending period period ending period portfolio operations
corresponding portfolio) 12/31/99 ending 12/31/99 ending to 12/31/99
12/31/99 12/31/99
- --------------------------------- --------------- -------------- ---------------- -------------- ----------------------
- -----------------------------------------------------------------------------------------------------------------------
Alger American Income &
Growth (11/15/88)
- -----------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth &
Income (1/14/91)
- -----------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth
(6/26/92)
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital
Appreciation (4/5/93)
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap
(8/31/90)
- -----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced
(9/13/93)
- -----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide
Growth (9/13/93)
- -----------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth
(7/24/95)
- -----------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income
(10/9/95)
- -----------------------------------------------------------------------------------------------------------------------
MFS VIT Research
(7/26/95)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF Emerging Markets
Equity (10/1/96)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income
(1/2/97)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield
(1/2/97)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income
(1/2/97)
- -----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust
Managed (8/1/88) (3)
- -----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- -----------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth &
Income (1/2/98)
- -----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth
(2/26/69) (2)
- -----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money
Market (1/2/98)
- -----------------------------------------------------------------------------------------------------------------------
5. CUMULATIVE RETURNS - Assuming surrender but no optional Rider
Adjusted historical cumulative total returns for periods since inception of
the portfolio for each sub-account are as follows. These figures include
mortality and expenses charges of 1.60% per annum, administrative expenses
charge of 0.15% per annum, an account fee of $25 per annum and the applicable
contingent deferred sales load (maximum of 9% of purchase payments) and do not
reflect any fee deduction for the optional Rider.
- --------------------------------- --------------- -------------- ---------------- -------------- ----------------------
SUB-ACCOUNT For the 1- For the 3- For the 10- For the period from
(date of commencement of year period year period For the 5-year year period commencement of
operation of ending ending period ending ending portfolio operations
corresponding portfolio) 12/31/99 12/31/99 12/31/99 12/31/99 to 12/31/99
- --------------------------------- --------------- -------------- ---------------- -------------- ----------------------
- -----------------------------------------------------------------------------------------------------------------------
Alger American Income &
Growth (11/15/88)
- -----------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth &
Income (1/14/91)
- -----------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth
(6/26/92)
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital
Appreciation (4/5/93)
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap
(8/31/90)
- -----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced
(9/13/93)
- -----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide
Growth (9/13/93)
- -----------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth
(7/24/95)
- -----------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/Income
(7/24/95)
- -----------------------------------------------------------------------------------------------------------------------
MFS VIT Research
(7/26/95)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF Emerging Markets
Equity (10/1/96)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income
(1/2/97)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield
(1/2/97)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF International
Magnum (1/2/97)
- -----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust
Managed (8/1/88) (3)
- -----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- -----------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth &
Income (1/2/98)
- -----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth
(2/26/69) (2)
- -----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money
Market (1/2/98)
- -----------------------------------------------------------------------------------------------------------------------
6. CUMULATIVE RETURNS - Assuming surrender and the optional Guaranteed Minimum
Income Benefit Rider
Adjusted historical cumulative total returns for periods since inception of
the portfolio for each sub-account are as follows. These figures include
mortality and expense charges of 1.60% per annum, administrative expense charge
of 0.15% per annum, an account fee of $25 per annum, the applicable contingent
deferred sales load (maximum 9% of purchase payments) and the optional
Guaranteed Minimum Income Benefit Rider fee of 0.35% per annum.
- --------------------------------- --------------- -------------- --------------- -------------- ----------------------
SUB-ACCOUNT For the 1- For the For the For the period from
(date of commencement of year period 3-year For the 10-year commencement of
operation of ending period 5-year period period portfolio operations
corresponding portfolio) 12/31/99 ending ending ending to 12/31/99
12/31/99 12/31/99 12/31/99
- --------------------------------- --------------- -------------- --------------- -------------- ----------------------
- ----------------------------------------------------------------------------------------------------------------------
Alger American Income &
Growth (11/15/88)
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth &
Income (1/14/91)
- ----------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth
(6/26/92)
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital
Appreciation (4/5/93)
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap
(8/31/90)
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced
(9/13/93)
- ----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide
Growth (9/13/93)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth
(7/24/95)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income
(10/9/95)
- ----------------------------------------------------------------------------------------------------------------------
MFS VIT Research
(7/26/95)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF Emerging Markets
Equity (10/1/96)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income
(1/2/97)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield
(1/2/97)
- ----------------------------------------------------------------------------------------------------------------------
MSDW UF International
Magnum (1/2/97)
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust
Managed (8/1/88) (3)
- ----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- ----------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth &
Income (1/2/98)
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth
(2/26/69) (2)
- ----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money
Market (1/2/98)
- ----------------------------------------------------------------------------------------------------------------------
7. Cumulative Returns - Assuming no surrender or optional Rider
Adjusted historical non-standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follow. These figures
include mortality and expense charges of 1.60% per annum, administrative expense
charge of 0.15% per annum and an account fee of $25 per annum but do not reflect
any applicable contingent deferred sales load (maximum of 9% of purchase
payments) and do not reflect any fee deduction for the optional Rider.
- --------------------------------- --------------- -------------- ---------------- -------------- ----------------------
SUB-ACCOUNT For the 1- For the For the 5-year For the For the period from
(date of commencement of year period 3-year period ending 10-year commencement of
operation of ending period 12/31/99 period portfolio operations
corresponding portfolio) 12/31/99 ending ending to 12/31/99
12/31/99 12/31/99
- --------------------------------- --------------- -------------- ---------------- -------------- ----------------------
- -----------------------------------------------------------------------------------------------------------------------
Alger American Income &
Growth (11/15/88)
- -----------------------------------------------------------------------------------------------------------------------
Alliance VPF Growth &
Income (1/14/91)
- -----------------------------------------------------------------------------------------------------------------------
Alliance VPF Premier Growth
(6/26/92)
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Capital
Appreciation (4/5/93)
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap
(8/31/90)
- -----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Balanced
(9/13/93)
- -----------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Worldwide
Growth (9/13/93)
- -----------------------------------------------------------------------------------------------------------------------
MFS VIT Emerging Growth
(7/24/95)
- -----------------------------------------------------------------------------------------------------------------------
MFS VIT Growth w/ Income
(10/9/95)
- -----------------------------------------------------------------------------------------------------------------------
MFS VIT Research
(7/26/95)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF Emerging Markets
Equity (10/1/96)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF Fixed Income
(1/2/97)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF High Yield
(1/2/97)
- -----------------------------------------------------------------------------------------------------------------------
MSDW UF International
Magnum (1/2/97)
- -----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust
Managed (8/1/88) (3)
- -----------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust
Small Cap (8/1/88) (1)
- -----------------------------------------------------------------------------------------------------------------------
PIMCO VIT StocksPLUS Growth &
Income (1/2/98)
- -----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Growth
(2/26/69) (2)
- -----------------------------------------------------------------------------------------------------------------------
Transamerica VIF Money
Market (1/2/98)
- -----------------------------------------------------------------------------------------------------------------------
8. Cumulative Returns - Assuming no surrender but reflecting the optional
Guaranteed Minimum Income Benefit Rider
Adjusted historical non-standard cumulative total returns for periods since
inception of the portfolio for each sub-account are as follow. These figures
include mortality and expense charges of 1.60% per annum, administrative expense
charge of 0.15% per annum and an account fee of $25 per annum, but do not
reflect any applicable contingent deferred sales load (maximum 9% of purchase
payments). They do reflect deductions of the fee for the optional Guaranteed
Minimum Income Benefit Rider fee of 0.35% per annum.
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
SUB-ACCOUNT For the For the For the For the period from
(date of commencement of 1-year period 3-year For the 10-year commencement of
operation of ending period 5-year period period ending portfolio operations
corresponding portfolio) 12/31/99 ending ending 12/31/99 to 12/31/99
12/31/99 12/31/99
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Alger American Income &
Growth (11/25/88)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Alliance VPF Growth &
Income (1/14/91)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Alliance VPF Premier
Growth (6/26/92)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Dreyfus VIF Capital
Appreciation (4/5/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Dreyfus VIF Small Cap
(8/31/90)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Janus Aspen Series Balanced
(9/13/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Janus Aspen Series
Worldwide Growth (9/13/93)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Emerging Growth
(7/24/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Growth w/ Income
(10/9/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MFS VIT Research
(7/26/95)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF Emerging Markets Equity
(10/1/96)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF Fixed Income
(1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF High Yield
(1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
MSDW UF International
Magnum (1/2/97)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
OCC Accumulation Trust
Managed (8/1/88)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
OCC Accumulation Trust
Small Cap (8/1/88)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
PIMCO VIT StocksPLUS Growth &
Income (1/2/98)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Transamerica VIF Growth
(2/26/69)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
Transamerica VIF Money
(1/2/98)
- --------------------------------- --------------- -------------- --------------- --------------- ----------------------
</TABLE>
<PAGE>
APPENDIX D
<PAGE>
DEFINITIONS
ACCOUNT VALUE: The sum of the variable accumulated value and the fixed account
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, contingent deferred sales load, and
applicable premium tax charges.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued under it.
CONTINGENT DEFERRED SALES LOAD: A charge equal to a percentage of purchase
payments withdrawn from the contract that are less than seven years old. See
Contingent Deferred Sales Load/Surrender Charge on page 31 for the specific
percentages.
CONTRACT ANNIVERSARY: The anniversary of the contract effective date each year.
CONTRACT EFFECTIVE DATE: The effective date of the contract as shown in the
contract.
CONTRACT YEAR: A 12-month period starting on the contract effective date and
ending with the day before the contract anniversary, and each 12-month period
thereafter.
FIXED ACCOUNT: An account which credits a rate of interest for a period of at
least twelve months for each allocation or transfer.
FIXED ACCOUNT ACCUMULATED VALUE: The total dollar value of all amounts the owner
allocates or transfers to any fixed account; PLUS interest credited; LESS any
amounts withdrawn, applicable fees or premium tax charges, and/or transfers out
to the variable account before the annuity date.
GENERAL ACCOUNT: The assets of Transamerica that are not allocated to a separate
account.
GUARANTEED INTEREST RATE: The annual effective rate of interest after daily
compounding credited to a guarantee period.
INVESTMENT OPTIONS: the fixed account and the variable sub-account to which you
may allocate all or portions of purchase payments.
NET ACCOUNT VALUE: The account value, less any outstanding loans, plus interest
on such loans, and less any applicable contingent deferred sales load.
PLAN: The employee pension benefit plan as defined under Section 3(2)(A) of the
Employee Retirement Income Security Act of 1974, or ERISA, as amended.
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 Annuity Service Center at 9735 Landmark Pkwy. Dr.,
St. Louis, Missouri 63127, telephone 800-317-2688.
STATUS, QUALIFIED AND NON-QUALIFIED: The contract has a qualified status if it
is issued in connection with a retirement plan or program. Otherwise, the status
is non-qualified.
SURRENDER CHARGE: See CONTINGENT DEFERRED SALES LOAD.
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, which is generally 4:00
p.m. Eastern Time of the New York Stock Exchange on consecutive valuation days.
VARIABLE ACCOUNT: Separate Account VA-8, 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 the contract before 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.
<PAGE>
APPENDIX E
<PAGE>
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 Account or 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 does not discuss Education IRAs or SIMPLE-IRAs, except as necessary in
the context of discussing other types of IRAs.
Your Transamerica Life Insurance and Annuity Company's Individual Retirement
Annuity, also referred to as a Transamerica Life IRA Contract, has been approved
as to form by the IRS. In addition, we are using an IRA and a Roth IRA
Endorsement based on the IRS-approved text. 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 or Roth IRA
Contract in order for us to obtain or maintain IRS approval of its tax
qualification. 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 to a Transamerica Life IRA will be accepted under a SIMPLE plan
established by any employer pursuant to Internal Revenue Code Section 408(p). No
transfer or rollover of 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 before the expiration of the two 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.
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, the Health
Insurance Portability and Accountability Act of 1996, the Tax Relief Act of 1997
and the IRS Restructuring and Reform Act of 1998.
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, 2000. 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.
REVOCATION OF YOUR IRA OR ROTH IRA
You have the right to revoke your Traditional IRA or Roth IRA issued by us
during the seven calendar day period following its establishment. The
establishment of your Traditional IRA or Roth IRA contract will be the contract
effective date. This seven day calendar period may or may not coincide with the
free look period of your contract.
In order to revoke your Traditional IRA or Roth IRA, you must notify us in
writing and you must mail or deliver your revocation to us postage prepaid, at:
Transamerica Annuity Service Center, 9735 Landmark Pkwy. Dr., St. Louis, MO
63127. 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 Traditional IRA or Roth IRA during the seven day period, an
amount equal to your premium will be returned to you without any adjustment.
DEFINITIONS
CODE - Internal Revenue Code of 1986, as amended, and regulations issued
thereunder.
CONTRIBUTIONS - Purchase payments paid to your contract.
CONTRACT - The annuity policy, certificate or contract which you purchased.
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 under a
decree of divorce or separate maintenance and includable in your gross income,
but does not include deferred compensation or any amount received as a pension
or annuity.
REGULAR CONTRIBUTIONS - IN GENERAL
As is more fully discussed below, for 1998 and later years, the maximum total
amount that you may contribute for any tax year to your regular IRAs and your
regular Roth IRAs combined is $2,000, or if less, your compensation for that
year. Once you attain age 70 1/2, this limit is reduced to zero only for your
regular IRAs, not for your Roth IRAs, but the separate limit on Roth IRA
contributions can be reduced to zero for taxpayers with adjusted gross income,
or AGI, above certain levels, as described below in Part II, Section 1. While
your Roth IRA contributions are never deductible, your regular IRA contributions
are fully deductible, unless you, or your spouse, is an active participant in
some form of tax-qualified retirement plan for the tax year. In the latter case,
any deductible portion of your regular IRA contributions for each year is
subject to the limits that are described below in Part I, Section 2, and any
remaining regular IRA contributions for that year must be reported to the IRS as
nondeductible IRA contributions, along with your Roth IRA contributions.
IRA PART I: TRADITIONAL IRAS
The rules that apply to a Traditional Individual Retirement Account or Annuity,
which is referred to in this Disclosure Statement simply as an "IRA" or as a
"Traditional IRA" and which includes a regular or Spousal IRA and a rollover
IRA, generally also apply to IRAs under Simplified Employee Pension plans or
SEP-IRAs, unless specific rules for SEP-IRAs are stated.
1. CONTRIBUTIONS
REGULAR IRA. Regular IRA contributions must be in cash and are subject to the
limits described above. Such contributions are also subject to the minimum
amount under the Transamerica IRA contract. In addition, any of your regular
contributions to an IRA for a tax year must be made by the due date, not
including extensions, for your federal tax return for that tax year. See also
Part II, Section 4 below about recharacterizing IRA and Roth IRA contributions
by such date.
(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 separate
regular IRA, and Roth IRA, and may make contributions to such IRAs for your
spouse that are not limited by your spouse's lower amount of compensation.
Instead, the limit for the total contribution to spousal IRAs that can be made
by you or your spouse for the tax year is:
1. $2,000; or
2. if less, the total combined compensation for both you and your spouse
reduced by any deductible IRA contributions and any Roth IRA
contributions for such year.
As with any regular IRA contributions, those for your spouse cannot be made for
any tax year in which your spouse has attained age 70 1/2, must be in cash, and
must be made by the due date, not including extensions, for your federal income
tax return for that tax year.
ROLLOVER IRA. Rollover contributions to a Traditional IRA are unlimited in
dollar amount. These can include rollover contributions of eligible
distributions received by you from another Traditional IRA or tax-qualified
retirement plan. Generally, any distribution from a tax-qualified
retirement plans, such as a pension or profit sharing plan, Code Section
401(k) plan, H.R. 10 or Keogh plan, or a Traditional IRA can be rolled over
to a Traditional IRA unless it is a required minimum distribution as
discussed below in Part I, Section 4(a) or it is part of a series of
payments to be paid to you over your life, life expectancy or a period of
at least 10 years. In addition, 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, are not eligible to
be rolled over to an IRA. If a distribution from a tax-qualified plan or a
Traditional IRA is paid to you and you want to roll over all or part of the
eligible distributed amount to a Transamerica Life Traditional IRA, the
rollover must be accomplished within 60 days of the date you receive the
amount to be rolled over. However, you may roll over any amount from one
Traditional IRA into another Traditional IRA only once in any 365-day
period.
A timely rollover of an eligible distributed amount that has been paid to you
directly will prevent its being taxable to you at the time of distribution; that
is, none of it will be includable in your gross income until you withdraw some
amount from your rollover IRA. However, any such distribution directly to you
from a tax-qualified retirement plan is generally subject to a mandatory 20%
withholding tax.
By contrast, a direct transfer from a tax-qualified retirement plan to a
Traditional IRA is considered a "direct" rollover and is not subject to any
mandatory withholding tax, or other federal income tax, upon the direct
transfer. If you elect to make such a "direct" rollover from a tax-qualified
plan to a Transamerica Life Traditional IRA, the transferred amount will be
deposited directly into your rollover IRA.
Strict limitations apply to rollovers, and you should seek competent tax advice
in order to comply with all the rules governing rollovers.
(D) DIRECT TRANSFERS FROM ANOTHER TRADITIONAL IRA. You may make an initial or
subsequent contribution to your Transamerica Life Traditional IRA by directing
the fiduciary or issuer of any of your existing IRAs to make a direct transfer
of all or part of such IRAs in cash to your Transamerica Life Traditional IRA.
Such a direct transfer between Traditional IRAs is not considered a rollover ,
e.g., for purposes of the 1-year waiting period or withholding.
(E) SIMPLIFIED EMPLOYEE PENSION PLAN, OR SEP-IRA. If an IRA is established that
meets the requirements of a SEP-IRA, generally your employer may contribute an
amount not to exceed the lesser of 15% of your includable compensation ($160,000
for 1999, adjusted for inflation thereafter) or $30,000, even after you attain
age 70 1/2. The amount of such contribution is not includable in your income for
federal income tax purposes. In the case of a SEP-IRA that has a grandfathered
qualifying form of salary reduction, referred to as a SARSEP, that was
established by an employer before 1997, generally any employee, including a
self-employed individual, who:
1. has worked for the employer for 3 of the last 5 preceding tax years;
2. is at least age 21; and
3. has received from the employer compensation of at least $400 for the
current tax year, adjusted for inflation after 2000.
is eligible to make a before tax salary reduction contribution to the SARSEP for
the current tax year of up to $10,500, adjusted for inflation after 2000,
subject to the overall limits for SEP-IRA contributions.
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 these rules are not
met, any SEP-IRA contributions by the employer could be treated as taxable to
the employees and could result in adverse tax consequences to the participating
employee. For further details about SARSEPs and SEP-IRAs, e.g., for computing
contribution limits for self-employed individuals, see IRS Publication 590, as
indicated below.
(F) RESPONSIBILITY OF THE OWNER. Contributions, rollovers, or transfers to any
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 to your Traditional IRA, 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 your Transamerica
Life Traditional IRA.
2. DEDUCTIBILITY OF CONTRIBUTIONS FOR A REGULAR IRA
(A) GENERAL RULES. The deductible portion of the contributions made to the
regular IRAs for you, or your spouse, for a tax year depends on whether you, or
your spouse, is an "active participant" in some type of a tax-qualified
retirement plan for such year, as described in Section 2(b) immediately below.
If you and your spouse file a joint return for a tax year and neither of you is
an active participant for such year, then the permissible contributions to the
regular IRAs for each of you are fully deductible up to $2,000 each, i.e., your
combined deductible IRA contribution limit for the tax year could be $4,000.
Similarly, if you are not married, or treated as such, for the tax year and you
are not an active participant for such year, the permissible contributions to
your regular IRAs for the tax year are fully deductible up to $2,000. For
instance, if you and your spouse file separate returns for the tax year and you
did not live together at any time during such tax year, then you are treated as
unmarried for such year, and if you were not an active participant for the tax
year, then your deductible limit for your regular IRA contribution is $2,000,
even if your spouse was an active participant for such year.
If you are an active participant for the tax year, then your $2,000 limit is
subject to a phase-out rule if your AGI for such year exceeds a Threshold Level,
depending on your tax filing status and the calendar year. If, however, you are
not an active participant for the tax year but your spouse is, then your $2,000
limit is subject to the phase-out rule only if your AGI exceeds a higher
Threshold Level. See Part I, Section 2(c), below.
(B) ACTIVE PARTICIPANT. You are an "active participant" for a year if you
participate in some type of tax-qualified retirement plan. For example, if you
participate in a qualified pension or profit sharing plan, a Code Section 401(k)
plan, certain government plans,
a tax-sheltered arrangement under Code Section 403, a SIMPLE plan 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, OR 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 you can make a deductible contribution
under the same rules as a person who is not an active participant.
If you are an active participant for the tax year, then 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:
<PAGE>
<TABLE>
<CAPTION>
MARRIED FILING JOINTLY UNMARRIED
TAXABLE THRESHOLD TAXABLE THRESHOLD
YEAR LEVEL YEAR LEVEL
<S> <C> <C> <C> <C>
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
</TABLE>
<PAGE>
If you are not an active participant for the tax year but your spouse is, and
you are not treated as unmarried for filing purposes, then your Threshold Level
is $150,000.
If your AGI is less than $10,000 above your Threshold Level, or $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, even for Spousal IRAs. 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. You must round up any computation of the
Deduction Limit to the next highest $10 level, that is, to 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 compensation.
3. NONDEDUCTIBLE CONTRIBUTIONS TO REGULAR IRAS
The amounts of your regular IRA contributions which are not deductible will be
nondeductible contributions to such IRAs. You may also choose to make a
nondeductible contribution to your regular IRA, even if you could have deducted
part or all of the contribution. Interest or other earnings on your regular IRA
contributions, 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, e.g., on Form 8606.
4. DISTRIBUTIONS
(A) REQUIRED MINIMUM DISTRIBUTIONS, OR RMD. Distributions from your Traditional
IRAs 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 RMDs from any Traditional IRA you maintain, but not from any Roth
IRA, as long as:
1. distributions begin when required;
2. distributions are made at least once a year; and
3. the amount to be distributed is not less than the minimum required
under current federal tax law.
If you own more than one Traditional IRA, you can choose whether to take your
RMD from one Traditional IRA or a combination of your Traditional IRAs. A
distribution may be made at once in a lump sum, as qualifying partial
withdrawals or as qualifying settlement option payments. Qualifying partial
withdrawals and settlement option payments must be made in equal or
substantially equal amounts over:
1. your life or the joint lives of you and your beneficiary; or
2. 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 your designated beneficiary, other than your
spouse, is more than ten years younger than you.
If qualifying settlement option payments start before 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 RMD
provisions, above, and the death benefit provisions, below.
If you die before the entire interest in your Traditional IRAs is distributed to
you, but after your required beginning date, the entire interest in your
Traditional IRAs must be distributed to your beneficiaries at least as rapidly
as under the method in effect at your death. If you die before your required
beginning date and if you have a designated beneficiary, distributions to your
designated beneficiary can be 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 the year of your death. Otherwise,
if you die before your required beginning date and your surviving spouse is not
your designated beneficiary, distributions must be completed by December 31 of
the calendar year that is five years after the year of your death.
If your designated beneficiary is your surviving spouse, and you die before your
required beginning date, your surviving spouse can become the new
owner/annuitant and can continue the Transamerica Life Traditional IRA on the
same basis as before your death. If your surviving spouse does not wish to
continue the contract as his or her IRA, he or she may elect to receive the
death benefit in the form of qualifying settlement option payments in order to
avoid the 5-year rule. Such payments must be made in substantially 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 later of the following dates:
1. December 31 of the year following the year you died; or
2. 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 RMD is taken in a timely manner and that the correct amount is distributed.
(B) TAXATION OF IRA DISTRIBUTIONS. Because nondeductible Traditional IRA
contributions are made using income which has already been taxed, that is, they
are not deductible contributions, the portion of the Traditional IRA
distributions consisting of nondeductible contributions will not be taxed again
when received by you. If you make any nondeductible contributions to your
Traditional IRAs, each distribution from any of your Traditional 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 any of your Traditional IRAs and you
previously made deductible and nondeductible contributions to such IRAs, you may
not take a Traditional IRA distribution which is entirely tax-free. The
following formula is used to determine the nontaxable portion of your
distributions for a taxable year.
Remaining nondeductible contributions
Divided by
Year-end total adjusted Traditional IRA balances
Multiplied by
Total distributions
for the year
Equals:
Nontaxable distributions
for the year
To figure the year-end total adjusted Traditional IRA balance, you must treat
all of your Traditional IRAs as a single Traditional IRA. This includes all
regular IRAs, as well as SEP-IRAs, SIMPLE IRAs and Rollover IRAs, but not Roth
IRAs. You also add back to your year-end total Traditional IRA balances,
specifically the distributions taken during the year from your Traditional IRAs.
Please refer to IRS Publication 590, Individual Retirement Arrangements for
instructions, including worksheets, that can assist you in these calculations.
Transamerica Life Insurance and Annuity Company will report all distributions
from your Transamerica Traditional IRA to the IRS as fully taxable income to
you.
Even if you withdraw all of the assets in your Traditional IRAs in a lump sum,
you will not be entitled to use any form of lump sum treatment or income
averaging to reduce the federal income tax on your distribution. Also, no
portion of your distribution qualifies as a capital gain. Moreover, any
distribution made before you reach age 59 1/2, may be subject to a 10% penalty
tax on early distributions, as indicated below.
(C) WITHHOLDING. Unless you elect not to have withholding apply, federal income
tax will be withheld from your Traditional 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 were 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. PENALTY TAXES
(A) EXCESS CONTRIBUTIONS. If at the end of any taxable year the total regular
IRA contributions you made to your Traditional IRAs and your Roth IRAs, 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. Such penalty tax cannot
exceed 6% of the value of your IRAs at the end of such year.
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, nor
otherwise be includible in your gross income if you have not taken a deduction
for the excess amount.
However, the earnings withdrawn will be taxable income to you and may be subject
to the 10% penalty tax on early distributions. Alternatively, excess
contributions for one year may be withdrawn in a later year or may be carried
forward as regular IRA contributions in the following year to the extent that
the excess, when aggregated with your regular IRA contributions, 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 subsequent year they are neither returned to you nor
applied as permissible regular IRA contributions for such year.
(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 tax 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. The 10%
penalty tax also will not apply to an early distribution made to pay for certain
qualifying first-time homebuyer expenses of you or certain family members, or
for certain qualifying 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 any usual or reasonable
settlement, financing or other 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) FAILURE TO SATISFY RMD. If the RMD rules described above in Part I, Section
4(a) 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 excess of the amount required to be distributed
over the amount actually distributed.
(D) POLICY LOANS AND PROHIBITED TRANSACTIONS. If you or any beneficiary engage
in any prohibited transaction, such as any sale, exchange or leasing of any
property between you and the Traditional IRA, or any interference with the
independent status of such IRA, the Traditional IRA will lose its tax exemption
and be treated as having been distributed to you. The value of the entire
Traditional 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, as described above in Part I, Section 5(b).
If you borrow from or pledge your Traditional IRA, or your benefits under the
contract, as security for a loan, the portion borrowed or 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
borrowed or pledged as security in your income that year for federal tax
purposes. You may also be subject to the 10% penalty tax on early distributions.
(E) OVERSTATEMENT OR UNDERSTATEMENT OF NONDEDUCTIBLE CONTRIBUTIONS. If you
overstate your nondeductible Traditional IRA contributions on your federal
income tax return, without reasonable cause, you may be subject to a reporting
penalty. Such 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 ordinary income or penalty taxes, interest, and penalties for which you
may be liable if you underreport income upon receiving a distribution from your
Traditional IRA. See Part I, Section 4(b) above for the tax treatment of such
distributions.
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, below.
Such contributions are also subject to the minimum amount under the Transamerica
Life Roth IRA contract. Such contribution must 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 Roth IRA contributions after reaching age 70 1/2 to the extent
that your AGI does not exceed the levels described below.
(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, below. Such contributions must 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, below.
(D) TRANSFER ROTH IRA. You may make an initial or subsequent contribution to
your Transamerica Life Roth IRA by directing a fiduciary or issuer of any of
your existing Roth IRAs to make a direct transfer of all or a portion of the
assets from such Roth IRAs to your Transamerica Life Roth IRA.
(E) CONVERSION ROTH IRA. You may make contributions to a Conversion Roth IRA
within 60 days of receiving a distribution from an existing Traditional IRA or
by instructing the fiduciary or issuer of any of your existing Traditional IRAs
to make a direct transfer of all or a portion of the assets from such a
Traditional IRA to your Transamerica Life Roth IRA, subject to certain
restrictions and subject to income tax on some or all of the converted amounts.
If your AGI, not including the conversion amount, is greater than $100,000 for
the tax year, or if you are married and you and your spouse file separate tax
returns, you may not convert or transfer any amount from a Traditional IRA to a
Roth IRA.
(F) RESPONSIBILITY OF THE OWNER. Contributions, rollovers, transfers or
conversions to a 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 Life
Insurance and Annuity Company 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 for any calendar year,
subject to AGI phase-out rules described below in Section 3(a). Rollover,
transfer and conversion contributions, if properly made, do not count towards
your maximum annual contribution limit, nor do employer contributions to a
SEP-IRA or SIMPLE IRA.
(A) REGULAR ROTH IRAS. The maximum amount you may contribute to a regular Roth
IRA will depend on the amount of your AGI for the calendar year. Your maximum
$2,000 contribution limit begins to phase out when your AGI reaches $95,000 as
unmarried or $150,000 when married filing jointly. Under this phase out, your
maximum regular Roth IRA contributions generally will not be less than $200;
however, no contribution is allowed if your AGI exceeds $110,000 as unmarried or
$160,000 when married filing jointly. If you are married and you and your spouse
file separate tax returns, your maximum regular Roth IRA contribution phases out
between $0 and $10,000. 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. You should
consult your tax adviser to determine your maximum contribution.
You may make contributions to a regular Roth IRA after age 70 1/2, subject to
the phase-out rules. Regular Roth IRA contributions for a tax year should be
reported on your tax return for that year, specifically, on Form 8606.
(B) SPOUSAL ROTH IRAS. Contributions to your lower-earning spouse's Spousal Roth
IRA may not exceed the lesser of:
1. 100% of both spouses' combined compensation minus any Roth IRA or
deductible Traditional IRA contribution for the spouse with the higher
compensation for the year; or
2. $2,000, as reduced by the phase-out rules described above for regular
Roth IRAs.
A maximum of $4,000 may be contributed to both spouses' Roth IRAs. Contributions
can be divided between the spouses' Roth IRAs as you and your spouse wish, but
no more than $2,000 in regular Roth IRA contributions can be contributed to
either individual's Roth IRA each year.
(C) ROLLOVER ROTH IRAS. There is no limit on the amounts that you may rollover
from one Roth IRA into another Roth IRA, including your Transamerica Life 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 limit on amounts that you may transfer
directly from one Roth IRA into another Roth IRA, including your Transamerica
Life Roth IRA. Such a direct transfer does not constitute a rollover for
purposes of the 1-year waiting period.
(E) CONVERSION ROTH IRAS. There is no limit on amounts that you may convert from
your Traditional IRA into your Transamerica Life Roth IRA if you are eligible to
open a Conversion Roth IRA as described in Part II, Section 1(e), above. In the
case of a conversion from a SIMPLE-IRA, the conversion may only be done after
the expiration of your 2-year participation period described in Code Section
72(t)(6). 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
Roth IRA within 60 days.
You can also make contributions to a Roth IRA by instructing the fiduciary or
issuer, custodian or trustee of your existing Traditional IRAs to transfer the
assets in your Traditional IRAs to the Roth IRA, which can be a successor to
your existing Traditional IRAs. The transfer will be treated as a distribution
from your Traditional IRAs, 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% early
distribution penalty tax.
If you converted from a Traditional IRA to a Roth IRA during 1998, the income
reportable upon distribution from the Traditional IRA may be reportable entirely
for 1998 or reportable ratably over four years beginning in 1998.
4. RECHARACTERIZATION OF IRA CONTRIBUTIONS
(A) ELIGIBILITY. By making a timely transfer and election, you generally can
treat a contribution made to one type of IRA as made to a different type of IRA
for a taxable year. For example, if you make contributions to a Roth IRA and
later discover that you are not eligible to make Roth IRA contributions, you may
recharacterize all or a portion of the contribution as a Traditional IRA
contribution by the filing due date, including extensions, for the applicable
tax year.
You may not recharacterize amounts paid into a Traditional IRA that represented
tax-free rollovers or transfers, or employer contributions.
(B) ELECTION. You may elect to recharacterize a contribution amount made to one
type of IRA by simply making a trustee-to-trustee transfer of such amount, plus
net income attributable to it, to a second type of IRA on or before the federal
income tax due date, including extensions, for the tax year for which the
contribution was initially made. After the recharacterization has been made, you
may not revoke or modify the election.
(C) TAXATION OF A RECHARACTERIZATION. For federal income tax purposes, a
recharacterized contribution will be treated as having been contributed to the
transferee IRA, rather than to the transferor IRA, on the same date and for the
same tax year that the contribution was initially made to the transferor IRA. A
recharacterized transfer is not considered a rollover for purposes of the 1-year
waiting period.
The transfer of the contribution amount being recharacterized must include the
net income attributable to such amount. If such amount has experienced net
losses as of the time of the recharacterization transfer, the amount
transferred, the original contribution amount less any losses, will generally
constitute a transfer of the entire contribution amount. You must treat the
contribution amount as made to the transferee IRA on your federal income tax
return for the year to which the original contribution amount related.
For reconversions following a recharacterization, see Publication 590 and
Treasury Regulation Section 1.408A-5.
5. DISTRIBUTIONS
(A) REQUIRED MINIMUM DISTRIBUTION, OR RMD. Unlike a Traditional IRA, there are
no rules that require that any 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 beneficiary may elect to take distributions in the
form of qualifying settlement option payments 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 can become the new
owner/annuitant and can continue the Transamerica Life Roth IRA on the same
basis as before your death. If your surviving spouse does not wish to continue
the Transamerica Life Roth IRA as his or her Roth IRA, he or she may elect to
receive the death benefit in the form of qualifying settlement option payments
in order to avoid the 5-year distribution requirement. Such payments must be
made in substantially 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 later of the
following dates:
1. December 31 of the year following the year you died; or
2. December 31 of the year in which you would have reached age 70 1/2.
Your beneficiary is responsible for assuring that the RMD 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. For federal income tax purposes, all of your
Roth IRAs are aggregated and Roth IRA distributions are treated as made first
from Roth IRA contributions and second from earnings. Distributions that are
treated as made from Roth IRA contributions are treated as made first from
regular Roth IRA contributions, which are always tax-free, and second from
conversion or rollover Roth IRA contributions on a first-in, first-out basis. A
distribution allocable to a particular conversion or rollover Roth IRA
contribution is treated as consisting first of the portion, if any, of the
conversion contribution that was previously includible in gross income by reason
of the conversion.
In any event, 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, including a
contribution rolled over, transferred or converted from a Traditional IRA, will
generally be treated as an early distribution subject to regular income tax and
to the 10% penalty tax described below in Section 6(b).
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 to
the Roth IRA, including a rollover or transfer contribution or conversion from a
Traditional IRA, where the withdrawal is made:
1. upon your death or disability; or
2. to pay qualified first-time homebuyer expenses of you or certain
family members.
No portion of your Roth IRA distribution qualifies as a capital gain. There is
also a separate 5-year rule for the recapture of the 10% penalty tax that is
described below in Section 6(b) and that applies to any Roth IRA distribution
made before age 59 1/2 if any conversion or rollover contribution has been made
to any Roth IRA owned by the individual within the 5 most recent taxable years,
even if this current distribution from the Roth IRA is otherwise tax-free under
the rules described in this Subsection 5(b).
(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 were 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 amount 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 Life Insurance and Annuity Company
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.
6. PENALTY TAXES
(A) EXCESS CONTRIBUTIONS. If at the end of any taxable year your total regular
Roth IRA contributions, other than rollovers, transfers or conversions, exceed
the maximum allowable contributions for that year, taking into account
Traditional IRA contributions, the excess contribution amount will be subject to
a nondeductible 6% excise penalty tax. Such penalty tax cannot exceed 6% of the
value of your Roth IRAs at the end of such year. 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 the 10% penalty 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 regular Roth IRA contributions, 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
subsequent year they are neither returned to you nor applied as permissible
regular Roth IRA contributions for such year.
(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 constitutes an early distribution subject to the 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 IRS
tables in the income tax regulations. Also, the 10% penalty tax 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.
The 10% penalty tax also will not apply to an early distribution made to pay for
certain qualifying first-time homebuyer expenses for you or certain family
members, or for certain qualifying 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 any
usual or reasonable settlement, financing or other 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.
There is also a separate 5-year recapture rule for the 10% penalty tax in the
case of a Roth IRA distribution made before age 59 1/2 that is made within 5
years after a conversion or rollover contribution from a Traditional IRA. This
recapture rule exists because such a prior Roth IRA contribution avoided the 10%
penalty tax when it was rolled over or converted from the Traditional IRA. Under
this 5-year recapture rule, any Roth IRA distribution made before age 59 1/2
that is attributable to any conversion or rollover contribution from a
Traditional IRA made within the previous 5 years to any of the individual's Roth
IRAs is generally subject to the 10% penalty tax, and its exceptions, to the
extent that such prior Roth IRA contribution was subject to ordinary tax upon
the conversion or rollover, even if the Roth IRA distribution is otherwise
tax-free. Under the distribution ordering rules for a Roth IRA, all of an
individual's Roth IRAs and distributions therefrom are treated as made: first
from regular Roth IRA contributions; then from conversion or rollover Roth IRA
contributions on a first-in, first-out basis; and last from earnings. However,
whenever any Roth IRA distribution amount is attributable to any conversion or
rollover contribution made within the 5 most recent tax years, this distributed
amount is attributed first to the taxable portion of such prior contribution,
for purposes of determining the amount of this Roth IRA distribution that is
subject to the recapture of the 10% PENALTY TAX, UNLESS SOME EXCEPTION TO THE
PENALTY TAX APPLIES TO THE CURRENT ROTH IRA DISTRIBUTION, SUCH AS AGE 59 1/2,
DISABILITY OR CERTAIN HEALTH, EDUCATION OR HOMEBUYER EXPENSES, AS DESCRIBED
ABOVE IN THIS SUBSECTION 6(B).
(C) FAILURE TO SATISFY RMDS UPON DEATH. If the RMD rules described above in Part
II, Section 4(a) apply to the beneficiary of your Roth IRA after your death and
if the amount distributed 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 excess of the amount required to be distributed over the
amount actually distributed.
(D) POLICY LOANS AND PROHIBITED TRANSACTIONS. If you or any 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 591/2 you may also be subject to the
10% penalty tax on early distributions, as described above in Part II, Section
5(b). If you borrow from or pledge your Roth IRA, or your benefits under the
contract, as a security for a loan, the portion borrowed or 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.
IRA PART III: OTHER INFORMATION
(1) FEDERAL ESTATE AND GIFT TAXES
Any amount in or distributed from your Traditional and/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 that
would pay a survivor an annuity at or after your death should not be considered
a transfer for federal gift tax purposes.
(2) TAX REPORTING
You must report contributions to, and distributions from, your Traditional IRA
and Roth IRA, including the year-end aggregate account balance of all
Traditional IRAs and Roth IRAs, on your federal income tax return for the year
specifically on IRS Form 8606. For Traditional IRAs, you must designate on the
return how much of your annual contribution is deductible and how much is
nondeductible. You need not file IRS Form 5329 with your income tax return for a
particular year unless for that year you are subject to a penalty tax because
there has been an excess contribution to, an early distribution from, or
insufficient RMDs from your Traditional IRA or Roth IRA, as applicable.
(3) VESTING
Your interest in your Traditional IRA or Roth IRA is nonforfeitable at all
times.
(4) EXCLUSIVE BENEFIT
Your interest in your Traditional IRA or Roth IRA is for the exclusive benefit
of you and your beneficiaries.
(5) IRS PUBLICATION 590
Additional information about your Traditional IRA or Roth IRA or about SEP-IRAs
and SIMPLE-IRAs can be obtained from any district office of the IRS or by
calling 1-800-TAX-FORM for a free copy of IRS Publication 590, Individual
Retirement Arrangements.
<PAGE>
Please forward, without charge, a copy of the Statement of Additional
Information concerning the Durham 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>
STATEMENT OF ADDITIONAL INFORMATION FOR
DURHAM VARIABLE ANNUITY
SEPARATE ACCOUNT VA-8
ISSUED BY
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
This statement of additional information expands upon subjects discussed in
the August 1, 2000 prospectus for the DURHAM Variable Annuity ("contract")
issued by Transamerica Life Insurance and Annuity Company ("Transamerica")
through Separate Account VA-8. You may obtain a free copy of the prospectus by
writing to: Transamerica Life Insurance and Annuity Company, Annuity Service
Center, 9735 Landmark Pkwy. Dr., St. Louis, MO 63127, or calling 800-371-2688.
Terms used in the current prospectus for the contract are incorporated into this
statement.
The contract will be issued as a certificate under a group annuity contract
in some states and as an individual annuity contract in other states. The term
"contract" as used herein refers to both the individual contract and the
certificates issued under the group contract.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the prospectus for the contract and the
portfolios.
Dated August 1, 2000
<PAGE>
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<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
THE CONTRACT .................................................................................... 3
NET INVESTMENT FACTOR ........................................................................... 3
VARIABLE PAYMENT OPTIONS......................................................................... 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
DISTRIBUTION OF THE CONTRACT..................................................................... 6
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS........................................................... 6
STATE REGULATION................................................................................. 7
RECORDS AND REPORTS.............................................................................. 7
FINANCIAL STATEMENTS............................................................................. 7
APPENDIX......................................................................................... 8
</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 OR MINUS 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 we 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 mortality and expense risk charge of 0.004384% (1.60% annually)
times the number of calendar days in the current valuation period.
Where (d) is:
The daily administrative expense charge, currently 0.004795% (0.15%
annually) times the number of calendar days in the current valuation
period.
A valuation day is defined as any day that the New York Stock Exchange is open.
VARIABLE PAYMENT OPTIONS
The variable payment option provide for payments that fluctuate in dollar
amount, based on the investment performance of the elected variable
sub-account(s).
VARIABLE ANNUITY UNITS AND PAYMENTS
For the first monthly payment, the number of variable annuity units
credited in each variable sub-account will be determined by dividing: (a) the
product of the portion of the value to be applied to the variable sub-account
and the variable annuity purchase rate specified in the contract; BY (b) the
value of one variable annuity unit in that sub-account on the annuity date.
The amount of each subsequent variable payment equals the product of the
number of variable annuity units in each variable sub-account and the variable
sub-account's variable annuity unit value as of the tenth day of the month
before the payment due date. The amount of each payment may vary.
VARIABLE ANNUITY UNIT VALUE
The value of a variable annuity unit in a variable sub-account on any
valuation day is determined as described below.
The net investment factor for the valuation period (for the appropriate
payment frequency) just ended is multiplied by the value of the variable annuity
unit for the sub-account on the preceding valuation day. The net investment
factor after the annuity date is calculated in the same manner as before the
annuity date and then multiplied by an interest factor. The interest factor
equals (.999893)n where n is the number of days since the preceding valuation
day. This compensates for the 4% interest assumption built into the variable
annuity purchase rates. We may offer assumed interest rates other 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, you may transfer variable annuity units from one
sub-account to another, subject to certain limitations (See "Transfers" page 24
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. We reserve 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" on page 39 of the prospectus.)
NON-PARTICIPATING
The contract is non-participating. No dividends are payable and the
contract will not share in our profits or surplus earnings.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the annuitant or any other measuring life has been
misstated, 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. Where
required by law, rule or regulation, we may only consider the age of the
annuitant and/or other measuring life. Any overpayments or underpayments by us
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, we may require proof of the
existence and/or proof of the age of an owner and/or an annuitant or any other
measuring life, or any other information deemed necessary in order to provide
benefits under the contract.
ANNUITY DATA
We will not be liable for obligations which depend on receiving information
from a payee or measuring life until such information is received in a
satisfactory form.
ASSIGNMENT
No assignment of a contract will be binding on us unless made in writing
and given to us at our Service Center. We are not responsible for the adequacy
of any assignment. Your 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 before the annuity date, you 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 except in
certain states where medical questions are required on the application for the
optional Guaranteed Minimum Income Benefit Rider.
ENTIRE CONTRACT
We have 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. You have 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 us or to make any change in the individual contract or the
group contract or individual certificates thereunder and then only in writing.
We will not be bound by any promise or representation made by any other persons.
We 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 we 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 an 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.
We may delay payment of any withdrawal from ANY general account options for
a period of not more than six months after we receive the request for such
withdrawal. If we delay payment for more than 30 days, we will pay interest on
the withdrawal amount up to the date of payment. (See "Cash Withdrawals" on page
26 of the prospectus.)
NOTICES AND DIRECTIONS
We will not be bound by any authorization, direction, election or notice
which is not in a form and manner acceptable to us and received at our Service
Center.
Any written notice requirement by us to you will be satisfied by our
mailing of any such required written notice, by first-class mail, to your last
known address as shown on our records.
DISTRIBUTION OF THE CONTRACT
Transamerica Securities Sales Corporation ("TSSC") is principal underwriter
of the contracts under a Distribution Agreement with Transamerica. 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
affiliates of Transamerica. TSSC is an indirect wholly-owned subsidiary of
Transamerica Corporation, a subsidiary of AEGON N.V.. 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.
Separate Account VA-8 did not begin operations until August 1, 2000.
Therefore, no commissions were paid during fiscal year 1999 to TSSC as
underwriter of Separate Account VA-8. Under the sales agreements, TSSC will pay
broker-dealers compensation based on a percentage of each purchase payment. This
percentage may be up to 9% 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.
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
We are subject to the insurance laws and regulations of all the states
where we are 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 us or by our Service Office. As presently required by the
provisions of the 1940 Act and regulations promulgated thereunder which pertain
to the variable account, reports containing such information as may be required
under the 1940 Act or by other applicable law or regulation will be sent to
owners semi-annually at their last known address of record.
FINANCIAL STATEMENTS
The variable account had not begun operations as of December 31, 1999.
Therefore, no financial statements of the variable account are included in this
Statement of Additional Information.
The financial statements for Transamerica included in this Statement of
Additional Information should be considered only as bearing on our ability to
meet our 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>
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-8 (the "Separate Account"). 1/
(2) Not Applicable.
(3) Form of Distribution 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.
(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/
(i) re PIMCO Variable Insurance Trust 1/
(9) Opinion and Consent of Counsel. 1/
(10) (a) Consent of Counsel.
(b) Consent of Independent Auditors.
(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 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(s).
List of Directors of Transamerica Life Insurance and Annuity Company
Patrick S. Baird*
Brenda K. Clancy*
James W. Dederer
George A. Foegele**
Douglas C. Kolsrud*
Richard N. Latzer
Karen O. MacDonald
Gary U. Rolle'
Paul E. Rutledge III***
Nooruddin S. Veerjee
Craig D. Vermie*
*4333 Edgewood Road, NE, Cedar Rapids, Iowa 52499
**300 Consilium Place, Scarborough, Ontario M1H362 Canada
***401 N. Tryon Street, Charlotte, North Carolina 28202-2108
<PAGE>
<TABLE>
<CAPTION>
List of Officers for Transamerica Life Insurance and Annuity Company
<S> <C>
Paul E. Rutledge III President - Reinsurance Division
Nooruddin S. Veerjee FSA President
William R. Gernert Executive Vice President, Diversified Financial Products Division
John R. Kenney Executive Vice President, Agency Group
Larry N. Norman Executive Vice President, Financial Markets Division
James W. Dederer CLU General Counsel and Secretary
Nicki Bair FSA Senior Vice President
Brenda Clancy Senior Vice President, Corporate
Roy Chong-Kit Senior Vice President and Chief Actuary
Douglas C. Kolsrud Senior Vice President, Investment Division
Karen MacDonald Senior Vice President and Corporate Actuary
Thomas O'Neill Senior Vice President
Ron F. Wagley, CLU Senior Vice President
William R. Wellnitz FSA Senior Vice President and Actuary
Colin Funai Investment Officer
Heidi Y. Hu Investment Officer
Matthew W. Kuhns Investment Officer
Richard N. Latzer Investment Officer
Matthew A. Palmer Investment Officer
Thomas C. Pokorski Investment Officer
Gary U. Rolle' CFA Investment Officer
Jeffrey S. Van Harte Investment Officer
Paul Wintermute Investment Officer
Lawrence M. Agin FSA Vice President & Associate Actuary
Lynn Allen Vice President, Diversified Financial Products Division
Clifford Angstman Vice President and Chief Actuary
Michael G. Ayers Vice President, Diversified Financial Products Division
John Bailey Vice President, Investment Division
Michael Barnhart Regional Vice President
James A. Beardsworth Vice President-Accounting, Corporate
Cal Birkey Vice President, Financial Markets Division
David L. Blankenship Vice President, Investment Division
Nancy Blozis Vice President and Controller
Jim Bowman Vice President
Rose Ann Bremser Vice President
Sandy Brown Vice President
Kirk Buese Vice President, Investment Division
Frank A. Camp Vice President & Division General Counsel, Financial Markets Division
Dave Carney Vice President, Investment Division
Steven C. Chamberlin Vice President
Cindy L. Chanley Vice President, Financial Markets Division
Wonjoon Cho Vice President
Matt Coben Vice President
Ken Cochrane Vice President
Catherine Collinson Vice President
Bill Cook Vice President, Investment Division
Jane A. Coyne Vice President, Financial Markets Division
Glen Cunningham Vice President
Maureen DeWald Vice President & Assistant Secretary, Investment Division
John Dohmen Vice President
J. Peter Donlon Vice President
Mark E. Dunn Vice President, Investment Division
Steven Fenic Vice President
Roger Freeman Vice President, Financial Markets Division
Jerry Gable Vice President
Diana Geraci Vice President
Eric B. Goodman Vice President, Investment Division
Richard R. Greer Vice President, Financial Markets Division
David R. Halfpap Vice President, Investment Division
Paul Hankowitz MD Vice President & Chief Medical Director
Robert L. Hansen Vice President, Investment Division
Meheriar Hasan Vice President
Joy Heckendorf Vice President
Paul Henry Vice President
Jo Ann B. Hepperman Vice President and Division General Counsel, Marketing Partnerships
Marsha Hicks Vice President & Assistant Secretary, Investment Division
Aruna Hobbs Vice President, Diversified Financial Products Division
Frederick B. Howard Vice President, Investment Division
Suzette Hoyt Vice President and Assistant Secretary
Marvin A. Johnson Vice President
Carolyn M. Johnson Vice President, Marketing Partnerships
Ahmad Kamil Vice President & Associate Actuary
Michael Kappos President
Patrick Kelleher Vice President and Reinsurance Financial Officer
Jon D. Kettering Vice President, Investment Administration, Investment Division
Ken Kilbane Vice President
Larry M. Kirkland Vice President & Managing Actuary, Equity Group
Bill Kling Vice President, Financial Markets Division
Michael Lane Vice President, Financial Markets Division
Lisa Layman Vice President, Diversified Financial Products Division
Carl Macero Vice President and Chief Reinsurance Underwriter
Susan Mack Vice President and Associate General Counsel
James MacKinnon Vice President, Investment Division
Maureen McCarthy Vice President
Philip McHale Vice President and Chief Underwriter
Diane Meiners Vice President-Accounting, Corporate
Vic Modugno Vice President & Associate Actuary
Kate Modzelewski Vice President-Tax, Corporate
Daniel C. Mohwinkel Vice President, Financial Markets Division
Maureen E. Nielsen Vice President, Financial Markets Division
Thomas L. Nordstrom Vice President, Investment Division
Paul L. Norris FSA Vice President & Actuary
Ralph M. O'Brien Vice President, Investment Division
Mary T. Pech Vice President, Investment Division
Thomas E. Pierpan Vice President, Equity Group
Donald P. Radisich Vice President
Brian Rolland Vice President, Investment Division
Jeffrey L. Rosen Vice President, Diversified Financial Products Division
Lorne W. Schinbein Vice President & Managing Actuary, Equity Group
Lindsay Schmuacher Vice President, Investment Division
Gary H. Scott Vice President, Financial Markets Division
William N. Scott FLMI Vice President
Clifford Sheets Vice President, Investment Division
Michael Simpson Vice President, Investment Division
Jon L. Skaggs Vice President, Investment Division
R. Michael Slaven Vice President & Assistant Secretary, Diversified Financial
Products Division
Robert A. Smedley Vice President, Investment Division
Michael S. Smith Vice President, Investment Division
Anne M. Spaes Vice President, Financial Markets Division
Christina Stiver Vice President
Bradley L. Stofferahn Vice President, Investment Division
Karen Stout Vice President
James O. Strand Vice President
Alice Su Vice President
Bill Tate Vice President
Gregory Theobald Vice President & Assistant Secretary, Investment Division
Colleen Tobiason Vice President, Financial Markets Division
Barry Tobin Vice President
Emily Urbano Vice President
Colleen Vandermark Vice President
Craig D. Vermie Vice President & Counsel, Corporate
William A. Waldie Vice President, Financial Markets Division
Richard L. Weinstein FSA Vice President & Associate Actuary
James Wilson Vice President
Timothy Weis Vice President
Ronald Wolfe Regional Vice President
Sally S. Yamada CPA, FLMI Vice President & Treasurer
Ronald L. Ziegler Vice President & Actuary, Financial Markets Division
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
Toni Forge Second Vice President
Selma Fox Second Vice President
Thomas Freitas Second Vice President
Linda Goodwin M.D. Second Vice President and Reinsurance Medical Director
Andrew G. Kanelos 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
John O'Bryan Second Vice President, Corporate Tax
Paul W. Reisz Second Vice President
Beverly Rockecharlie Second Vice President
Stacy Schultz Second Vice President
Frank Snyder Second Vice President
Donna J. Spalding Second Vice President, Financial Markets Division
Boning Tong Second Vice President and Associate Actuary
Tonya J. Vessels Second Vice President
Joan Ward Second Vice President
Kimberly A. Bivins Assistant Vice President, Diversified Financial Products Division
Erik Furnish Assistant Vice President, Diversified Financial Products Division
Jacqueline D. Griffin Assistant Vice President, Diversified Financial Products Division
Thomas J. Hartlage Assistant Vice President, Diversified Financial Products Division
Priscilla I. Hechler Assistant Vice President & Assistant Secretary, Equity Group
JoAnn Herndon Assistant Vice President, Financial Markets Division
Michael G. Herp Assistant Vice President, Diversified Financial Products Division
Richard C. Hicks Assistant Vice President & Assistant Secretary, Equity Group
Melanie Mabe Assistant Vice President, Diversified Financial Products Division
William R. Maurer Assistant Vice President, Financial Markets Division
Lisa L. Patterson Assistant Vice President, Diversified Financial Products Division
Robert E. Payne Assistant Vice President, Financial Markets Division
Rhonda L. Pritchett Assistant Vice President, Diversified Financial Products Division
Darin Smith Assistant Vice President & Assistant Secretary, Financial Markets
Division
Teresa L. Stolba Assistant Vice President, Financial Markets Division
Thomas E. Walsh Assistant Vice President, Diversified Financial Products Division
Harvey E. Willis Assistant Vice President, Diversified Financial Products Division
Jill A.H. Andersen Counsel, Corporate
Mary J. Clark Counsel, Corporate
Katherine A. Schulze Counsel, Corporate
Emarie S. Payne Counsel, Corporate
Kamran Haghighi Tax Officer
Neva Curtis Assistant Secretary, Marketing Partnerships
John Donner Assistant Secretary, Investment Division
Gregory E. Miller-Breetz Assistant Secretary, Financial Markets Division
Mary Schaefer Assistant Secretary, Financial Markets Division
Marie W. Schmitt Assistant Secretary, Marketing Partnerships
Kim A. Tursky Assistant Secretary
Susan Vivino Assistant Secretary
Clifton W. Flenniken III Assistant Treasurer, Investment Division
James Wolfenden Statement Officer
James T. Bradley Product Compliance Officer, Marketing Partnerships
</TABLE>
<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 charts indicate the persons controlled by or under common
control with Transamerica Corporation and AEGON N.V.
TRANSAMERICA CORPORATION AND SUBSIDIARIES
WITH STATE OR COUNTRY OF INCORPORATION
Transamerica Corporation
(Common Parent Corporation)
Inter-America Corporation
Transamerica Corporation (Oregon)
Transamerica LP Holdings Corporation
Transamerica Finance Corporation
Transamerica HomeFirst, Inc. (Common)
Transamerica HomeFirst, Inc. (Preferred)
TREIC Enterprises, Inc.
Transamerica CBO I, Inc.
Transamerica International Holdings, Inc.
Transamerica Financial Products, Inc.
Pyramid Insurance Company Ltd. (Common)
Pyramid Insurance Company Ltd. (Preferred)
RTI Holdings, Inc. (dormant)
Transamerica Business Technologies Corporation
ARC Reinsurance Corporation
Transamerica Management, Inc.
Transamerica Intellitech, Inc.
Realist, Inc.
Transamerica Home Loan
Transamerica Lending Company
Transamerica Insurance Corporation of California
Arbor Life Insurance Company
Plaza Insurance Sales, Inc.
Transamerica International Insurance Services, Inc.
Transamerica Annuity Service Corporation
Transamerica Advisors, Inc.
Transamerica Securities Sales Corporation
Transamerica Products, Inc.
Transamerica Products I, Inc.
Transamerica Products II, Inc.
NEF Investment Company
Greenwich Potomac Holding Corporation
Transamerica Products IV, Inc.
Transamerica Service Company
Transamerica South Park Resources, Inc.
Transamerica Financial Resources Insurance Agency
Of Alabama, Inc.
Transamerica Financial Resources Insurance Agency
Of Massachusetts, Inc.
USA Administration Services, Inc.
Financial Resources Insurance Agency of Texas
Transamerica Financial Resources, Inc.
Gemini Investments, Inc.
Transamerica Senior Properties, Inc.
Transamerica Senior Living, Inc.
Transamerica Investment Services, Inc.
TA Leasing Holding Co., Inc.
Transamerica Leasing Inc.
Intermodal Equipment Inc.
Transamerica Distribution Services Inc.
Transamerica Transport Inc.
Transamerica Leasing Holdings Inc.
Transamerica Trailer Holdings I, Inc.
Transamerica Trailer Holdings II, Inc.
Transamerica Trailer Holdings III, Inc.
Trans Ocean Ltd.
Trans Ocean Container Finance Corp.
Trans Ocean Container Corp.
Trans Ocean Tank Services Corp.
SpaceWise, Inc.
Trans Ocean Regional Corporate Holdings
Trans Ocean Management Corp.
Greybox Logistics Services, Inc.
Transamerica Commercial Finance Corporation, I
Pacific Agency, Inc. (Indiana)
Transamerica Consumer Mortgage Receivables Corporation
Transamerica Mortgage Company
Transamerica Consumer Finance Holding Company
Metropolitan Mortgage Company
Easy Yes Mortgage, Inc. (Florida) (dormant)
Easy Yes Mortgage, Inc. (Georgia) (dormant)
First Florida Appraisal Services, Inc. (dormant)
First Georgia Appraisal Services, Inc. (dormant)
Freedom Tax Services, Inc. (dormant)
J.J. & W. Advertising, Inc. (dormant)
J.J. & W. Realty Services, Inc. (dormant)
Liberty Mortgage Company of Fort Myers, Inc. (dormant)
Metropolis Mortgage Company (dormant)
Perfect Mortgage Company (dormant)
TCF Asset Management Corporation
BWAC Twelve, Inc.
Transamerica Commercial Finance Corporation
BWAC International Corporation
BWAC Credit Corporation
BWAC Seventeen, Inc.
BWAC Twenty-One, Inc.
Transamerica GmbH, Inc.
Transamerica Insurance Finance Corporation Transamerica Insurance Finance
Corporation of California Transamerica Business Credit Corporation (Common)
Transamerica Business Credit Corporation (Preferred) Transamerica Insurance
Finance Company (Europe) Transamerica Inventory Finance Corporation Transamerica
Joint Ventures, Inc.
The Plain Company
Direct Capital Equity Investments, Inc. Transamerica Distribution Finance
Corporation Transamerica Retail Financial Services Corporation Transamerica
Vendor Financial Services Corporation TIFCO Lending Corporation TA Air I,
Corporation TA Air II, Corporation TA Air III, Corporation TA Air IV,
Corporation TBC I, Inc.
TBC II, Inc.
TBC III, Inc.
Transamerica Accounts Holding Corporation
TBC IV, Inc.
TBC V, Inc.
TA Air East, Corporation
TBC Tax I, Inc.
TBC Tax II, Inc.
TBC Tax III, Inc. TBC Tax IV, Inc. TBC Tax V, Inc. TBC Tax VI, Inc. TBC Tax VII,
Inc. TBC Tax VIII, Inc. TBC Tax IX, Inc.
Bay Capital Corporation
Gulf Capital Corporation
Coast Funding Corporation
Inventory Funding Trust (Delaware Trust, 1997 Form 8832)
Transamerica Bank N.A.
TBCC Funding Trust I (Delaware Trust, 1998 Form 8832) TBCC Funding Trust II
(Delaware Trust, 1998 Form 8832) TA Air V, Corporation TA Air VI, Corporation TA
Air VII, Corporation TA Air VIII, Corporation Transamerica Equipment Financial
Services Corporation
Transamerica Mezzanine Financing, Inc.
Transamerica Small Business Services, Inc.
Transamerica Distribution Finance - Overseas, Inc.
TA Marine I, Inc.
TA Marine II, Inc. TA Air IX, Corporation TA Air X, Corporation TBC VI, Inc.
Emergent Business Capital Holdings, Inc. TA Air XI Corporation Transamerica
Business Advisory Group, Inc. TA Air XII Corporation TA Air XIII Corporation TA
Air XIV Corporation TA Air XV Corporation Transamerica Realty Services, Inc.
Pyramid Investment Corporation The Gilwell Company Bankers Mortgage Company of
California Transamerica Minerals Company Transamerica Oakmont Corporation
Ventana Inn, Inc.
Transamerica Affordable Housing, Inc.
Transamerica Occidental Life Insurance Company
Transamerica Life Insurance & Annuity Company
Transamerica Assurance Company
Transamerica Life Insurance Company of New York
Transamerica Pacific Insurance Company, Ltd.
Transamerica International Re (Bermuda) Ltd.
Transamerica International Re (Bermuda) Ltd.
*Designates INACTIVE COMPANIES
A Division of Transamerica Corporation
Limited Partner; Transamerica Corporation is General Partner
VERENGING AEGON - Netherlands Membership Association
AEGON N.V. - Netherlands corporation (51.16%)
Transamerica Corporation and subsidiaries (100%) (DE) AEGON Nederland N.V. -
Netherlands corporation (100%) AEGON NEVAK HOLDING B.V. - Netherlands
corporation (100%) GRONINGER FINANCIERINGEN B.V. - Netherlands corporation
(100%) AEGON INTERNATIONAL N.V. - Netherlands corporation (100%)
Voting Trust - (Trustees - K.J. Storm, Donald J. Shepard, H.B. Van Wijk,
Dennis Hersch)(DE)
AEGON U.S. Holding Corporation (DE) (100%)
Short Hills Management Company (NJ) (100%) CORPA
Reinsurance Company (NY) (100%) AEGON Management
Company (IN) (100%) RCC North America Inc. (DE)
(100%)
AEGON USA, Inc. - holding co. (IA) (100%)
AEGON Funding Corp. (DE) (100%)
First AUSA Life Insurance Company - insurance
holding co. (MD) (100%) AUSA Life Insurance Company, Inc. -
insurance (NY) (82.33%) Life Investors Insurance Company of America
- insurance (IA) (100%)
Bankers United Life Assurance Company - insurance (IA) (100%)
Great American Insurance Agency, Inc. (IA) (100%)
Life Investors Alliance, LLC (DE) (100%)
PFL Life Insurance Company - insurance (IA) (100%) AEGON Financial
Services Group, Inc. (MN) (100%) AEGON Assignment Corporation of
Kentucky (KY) (100%) AEGON Assignment Corporation (IL) (100%)
Southwest Equity Life Insurance Company - insurance (AZ) (100%
Voting Common) Iowa Fidelity Life Insurance Company - insurance
(AZ) (100% Voting Common) Western Reserve Life Assurance Co. of
Ohio - insurance (OH) (100%) WRL Investment Management, Inc. -
investment adviser (FL) (100%) WRL Investment Services, Inc. -
transfer agent (FL)(100%) WRL Series Fund, Inc. - mutual fund (MD)
ISI Insurance Agency, Inc. and subsidiaries (CA) (100%) AEGON
Equity Group, Inc. (FL) (100%) Monumental General Casualty Company
- insurance (MD) (100%) United Financial Services, Inc. - general
agency (MD) (100%) Bankers Financial Life Insurance Company -
insurance (AZ) The Whitestone Corporation - insurance agency (MD)
(100%) Cadet Holding Corp. - holding company (IA) (100%) Monumental
General Life Insurance Company of Puerto Rico (PR) (51%)
AUSA Holding Company - holding company (MD) (100%)
Monumental General Insurance Group, Inc. - holding company
(MD) (100%)
Monumental General Administrators, Inc. (MD) (100%)
Executive Management and Consultant Services, Inc. - consulting
services (MD) (100%)
Trip Mate Insurance Agency, Inc. (KS) (100%)
Monumental General Mass Marketing, Inc. - marketing (MD) (100%)
AUSA Financial Markets, Inc. - marketing (IA) (100%)
Endeavor Group (CA) (100%)
Endeavor Management Company (CA) (100%)
Universal Benefits Corporation - third party administrator (IA)
(100%) Investors Warranty of America, Inc. - provider of automobile
extended maintenance
contracts (IA) (100%)
Massachusetts Fidelity Trust Company - trust company (IA) (100%)
Money Services, Inc. - financial counseling for employees and
agents of affiliated companies (DE) (100%)
ORBA Insurance Services, Inc. (CA) (10.56%)
Zahorik Company, Inc. - broker-dealer (CA) (100%)
ZCI, Inc. (AL) (100%)
Long, Miller & Associates, L.L.C. (CA) (33-1/3%)
AEGON Asset Management Services, Inc. (DE) (100%)
InterSecurities, Inc. - broker-dealer (DE) (100%)
Associated Mariner Financial Group, Inc. - holding company
(MI) (100%)
Mariner Financial Services, Inc. - broker/dealer (MI)(100%)
Associated Mariner Agency of Hawaii, Inc. - insurance
agency (MI) (100%)
Associated Mariner Agency of New Mexico, Inc. (MI) (100%)
Idex Investor Services, Inc. - shareholder services (FL) (100%)
Idex Management, Inc. - investment adviser (DE) (100%)
IDEX Mutual Funds - mutual fund (MA)
Diversified Investment Advisors, Inc. - investment adviser
(DE) (100%)
Diversified Investors Securities Corporation - broker-dealer
(DE) (100%)
AEGON USA Securities, Inc. - broker-dealer (IA) (100%)
AEGON USA Managed Portfolios, Inc. - mutual fund (MD)
Creditor Resources, Inc. - credit insurance (MI) (100%)
CRC Creditor Resources Canadian Dealer Network Inc. - insurance
agency (Canada)(100%)
Weiner Agency, Inc. (MD) (100%)
AEGON USA Investment Management, Inc. - investment adviser
(IA) (100%)
AEGON USA Realty Advisors, Inc. - real estate investment services
(IA) (100%)
QSC Holding, Inc. (DE) (100%)
Landauer Realty Advisors, Inc. - real estate counseling
(IA) (100%)
Landauer Associates, Inc. - real estate counseling (DE) (100%)
Landauer Realty Associates, Inc. (TX) (100%)
Realty Information Systems, Inc. - information systems for real
estate investment management (IA) (100%)
USP Real Estate Investment Trust - real estate investment trust
(IA) RCC Properties Limited Partnership (IA)
Item 27. Number of Contract Owners
Durham 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-2L; VA-2NL; VUL-1; VUL-2; VUL-3 and VL;
Transamerica Life Insurance and Annuity Company's Separate Accounts VA-1;
VA-6 and VA-7; and Transamerica Life Insurance Company of New York VA-2LNY;
VA-2NLNY; VA-5NLNY; and VA-6NY
The Underwriter is wholly-owned by Transamerica Insurance Corporation of
California, a wholly-owned subsidiary of Transamerica Corporation, a subsidiary
of AEGON, N.V.
(b) The following table furnishes information with respect to each director
and officer of the principal Underwriter currently distributing securities of
the registrant:
Nooruddin Veerjee Director and Chairman
Nicki Bair Director and President
Sandy Brown Director, Senior Vice President and Treasurer
Roy Chong-Kit Director
George Chuang Vice President and Chief Financial Officer
Chris Shaw Vice President and Compliance Officer
(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 NAVISYS, 9375 Landmark Parkway Drive, St. Louis,
Missouri 63127-1690
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 15th day of March, 2000.
SEPARATE ACCOUNT VA-8 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 March 15, 2000 by the following persons or by their duly
appointed attorney-in-fact in the capacities specified:
<TABLE>
<CAPTION>
Signatures Titles Date
<S> <C> <C>
Nooruddin S. Veerjee* ___________________________ March 15, 2000
President and Director
Patrick S. Baird* ___________________________ March 15, 2000
Director
Brenda K. Clancy* ___________________________ March 15, 2000
Director and Senior Vice President
James W. Dederer* ___________________________ March 15, 2000
Director, General Counsel and Secretary
George A. Foegele* __________________________ March 15, 2000
Director
Douglas C. Kolsrud* __________________________ March 15, 2000
Director and Senior Vice President
Richard N. Latzer* __________________________ March 15, 2000
Director and Investment Officer
Karen O. MacDonald* _________________________ March 15, 2000
Director and Acting Chief Financial Officer
Gary U. Rolle'* _________________________ March 15, 2000
Director and Investment Officer
Paul E. Rutledge III* _________________________ March 15, 2000
Director and President - Reinsurance Division
Craig D. Vermie* _________________________ March 15, 2000
Director, Vice President and Counsel
</TABLE>
_________________________ On March 15, 2000 as Attorney-in-Fact pursuant to
*By: David M. Goldstein powers of attorney filed herewith.
<PAGE>
<PAGE>
Exhibit List
(1) Resolution authorizing Separate Account VA-8
(3) Distribution Agreement between TALIAC & TSSC
(4) Contract and Riders
(6)(a) Articles of Incorporation
(6)(b) By-laws
(8) Participation Agreements with Underlying Funds
(9) Opinion and Consent of Counsel
(15) Powers of Attorney (TALIAC)
<PAGE>
(1) Resolution authorizing Separate Account VA-8
<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.
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>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
Home Office: Charlotte, NC
Service Center:
9735 Landmark Parkway Drive
St. Louis, MO 63127
A Stock Company
ABOUT YOUR CERTIFICATE
<PAGE>
This is a legal certificate 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, 9735
Landmark Parkway Drive, St. Louis, Missouri, 63127, 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 fixed account option
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
/s/Nooruddin S. Veerjee /s/James W. Dederer
CERTIFICATE OF PARTICIPATION
ISSUED IN CONNECTION WITH
GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY CONTRACT FORM NO. TGP-729-100
VARIABLE AND FIXED DOLLAR SETTLEMENT OPTIONS
SEPARATE ACCOUNT INVESTMENTS
NON-PARTICIPATING - NO ANNUAL DIVIDENDS
TCG-329-100
Page 1
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
INFORMATION PAGE
- ----------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------- ------------------------------------------------------------
CERTIFICATE INFORMATION BENEFICIARY INFORMATION
<S> <C> <C> <C>
CERTIFICATE NUMBER: 7833354 BENEFICIARY: Helen L. Willis
CERTIFICATE EFFECTIVE DATE: March 26, 1999 DATE OF BIRTH: January 20, 1906
INCOME TAX STATUS: IRA BENEFICIARY: N/A
INITIAL PURCHASE PAYMENT: $2,000.00 DATE OF BIRTH: N/A
ANNUITY DATE: December 1, 2027
OWNER INFORMATION ANNUITANT INFORMATION
OWNER: Nancy J. Willis ANNUITANT: Nancy J. Willis
DATE OF BIRTH: January 25, 1943 DATE OF BIRTH: January 25, 1943
TAX ID NUMBER: ###-##-#### TAX ID NUMBER: ###-##-####
JOINT OWNER INFORMATION JOINT ANNUITANT INFORMATION
JOINT OWNER: None. JOINT ANNUITANT: None.
DATE OF BIRTH: N/A DATE OF BIRTH: N/A
TAX ID NUMBER: N/A TAX ID NUMBER: N/A
ALLOCATION OF INITIAL PURCHASE PAYMENT
FIXED ACCOUNT
100.00%
INITIAL INTEREST RATE 3.0% TOTAL ALLOCATION: 100%
GUARANTEED MINIMUM INCOME
BENEFIT INTEREST RATE 6.0%
</TABLE>
FOR INQUIRIES REGARDING COVERAGE OR
CUSTOMER SERVICE, PLEASE CALL:
1-800-317-2688
CONTINUED ON THE NEXT PAGE
TCG-329-100
Page 2
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
INFORMATION PAGE (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
ANNUAL CHARGES AND FEES
CHARGES AND FEES AT THE TIME WE ISSUED THIS CERTIFICATE ARE SHOWN BELOW
<S> <C>
MORTALITY AND EXPENSE RISK CHARGE [1.60% of the assets in each variable sub-account]
ADMINISTRATIVE EXPENSE CHARGE [0.15% of the assets in each variable sub-account]
SYSTEMATIC WITHDRAWAL FEE [Currently None]
ACCOUNT FEE (BEFORE THE ANNUITY DATE) [$25]
ANNUITY FEE (AFTER THE ANNUITY DATE) [$30]
GUARANTEED MINIMUM INCOME BENEFIT RIDER [If elected, annually an amount equal to 0.35% of the variable
FEE accumulated value, excluding the money market sub-account]
[This fee will be reflected in the daily unit value calculation]
</TABLE>
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES LOAD
NUMBER OF COMPLETE YEARS CONTINGENT DEFERRED SALES LOAD
FROM RECEIPT OF PURCHASE PAYMENT AS A PERCENTAGE OF PURCHASE PAYMENT
-------------------------------- -----------------------------------
<S> <C> <C>
Less than 1 year................................................9%
1 year but less than 2 years....................................9%
2 years but less than 3 years...................................8%
3 years but less than 4 years...................................8%
4 years but less than 5 years...................................6%
5 years but less than 6 years...................................6%
6 years but less than 7 years...................................4%
7 or more years.................................................0%
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL INFORMATION
<S> <C> <C>
MINIMUM ADDITIONAL PURCHASE PAYMENT: [$1,000 or $50 salary
reduction on a TSA]
MAXIMUM TOTAL PURCHASE PAYMENT(S): [$1,000,000]
MINIMUM ALLOCATION: [the lesser of 10% of
purchase payments or $250]
MINIMUM TRANSFER: [$250]
MINIMUM ACCOUNT VALUE: [$500]
- ----------------------------------------------------------------------------------------------------------------------------
END OF INFORMATION PAGE (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
TCG-329-100
Page 2A
TABLE OF CONTENTS
<PAGE>
INFORMATION PAGE 2 & 2A
DEFINITIONS 4
OWNER, ANNUITANT, BENEFICIARY 5
ESTABLISHING THIS CERTIFICATE 6
THE VARIABLE ACCOUNT 7
THE GENERAL ACCOUNT 8
TRANSFER PROVISIONS 9
WITHDRAWAL PROVISIONS 9
SETTLEMENT OPTION PROVISIONS 11
SETTLEMENT OPTION PAYMENTS 12
DEATH BENEFIT PROVISIONS 13
CHARGES, FEES AND SERVICES 15
GENERAL PROVISIONS 16
APPENDIX - ANNUITY RATE TABLES 18
TCG-329-100
Page 3
DEFINITIONS
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ACCOUNT VALUE
The sum of the variable accumulated value and the fixed account accumulated
value.
ANNUITY DATE
The date the annuitization phase of this certificate begins. The annuity date is
shown on the Information Page.
CASH SURRENDER VALUE
The amount we will pay to the owner if the certificate is surrendered on or
before the annuity date. The cash surrender value is equal to the account value;
LESS the account fee, if any; LESS any contingent deferred sales load and
premium tax charges.
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.
EXTENDED CARE
Confinement in a qualifying institution for treatment prescribed by a qualifying
medical practitioner.
FIXED ACCOUNT
An account which credits a rate of interest for a period of at least twelve
months for each allocation or transfer.
FIXED ACCOUNT ACCUMULATED VALUE
The total dollar value of all amounts the owner allocates or transfers to any
fixed 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.
TCG-329-100
GENERAL ACCOUNT
The assets of the Company that are not allocated to a separate account.
GUARANTEED INTEREST RATE
The effective annual interest rate established by the company for amounts
allocated to the fixed account.
PORTFOLIO
The investment portfolio underlying each variable sub-account in which we will
invest any amounts the owner allocates to that variable sub-account.
QUALIFYING INSTITUTION
A licensed hospital or licensed skilled or intermediate care nursing facility at
which medical treatment is available on a daily basis and daily medical records
are kept for each patient. It is not a facility whose purpose is to provide
accommodations, board or personal care services to individuals who do not need
daily medical or nursing care, or a place mainly for rest.
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.
Otherwise, the status is non-qualified.
TERMINAL ILLNESS
An illness or physical condition which is reasonably expected to result in death
within 12 months from the date a qualifying medical professional certifies to
such fact.
TREATMENT
Treatment is the rendering of medical care or advice. Treatment must relate to a
specific medical condition and includes diagnosis and subsequent care. Treatment
does not include routine monitoring unless medically necessary.
VALUATION DAY
Any day the New York Stock Exchange is open. To determine the value of a
variable account 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.
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<PAGE>
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-8) 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.
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 invest solely in
shares of one of the portfolios. The variable sub-accounts selected by the owner
are shown on the Information Page.
<PAGE>
OWNER, ANNUITANT, BENEFICIARY
<PAGE>
OWNER (JOINT OWNERS)
The person(s) named on the Information Page who, while living, controls all
rights and benefits under this certificate. If the owner is a trust that allows
a person(s) other than the trustee, for the sole benefit of the annuitant for
purposes of the death benefit, to exercise the ownership rights under this
certificate, such person(s) must be named annuitant(s) and will be treated as
the owner.
Joint owners, if named, share this annuity contract equally. Both owners must
exercise ownership rights together. If either joint owner dies, all ownership
rights will belong solely to the surviving owner.
The owner(s) is entitled to designate the annuitant, beneficiary or other payee,
settlement option, and annuity date. The owner must notify us at our service
center to make changes to these designations in a form and manner acceptable to
us.
ANNUITANT (JOINT ANNUITANT)
The person(s) named on the Information Page whose age and sex is used to
determine the amount of settlement option payments on the annuity date. If a
joint annuitant is named, that joint annuitant must be the annuitant's spouse.
The joint annuitant will become the annuitant if the annuitant dies. If there is
no joint annuitant and the annuitant dies, an individual owner will become the
new annuitant until the owner names another annuitant.
If the owner is an individual, the annuitant(s) may be changed by the owner at
any time before
TCG-329-100
the annuity date. Any such change will be subject to the then current
underwriting requirements. We reserve the right to reject any change of the
annuitant(s) which has been made without our prior written consent.
If the owner is not an individual, the annuitant(s) may not be changed.
BENEFICIARY
The person(s) named on the Information Page who is designated to receive the
amounts payable under this certificate if:
The owner dies before the annuity date and there is no joint owner; or
The owner dies after the annuity date and settlement option payments
have begun under a selected settlement option that guarantees payments for
a certain period of time.
The interest of any beneficiary who dies before the owner will terminate at time
of death of such beneficiary.
A beneficiary may be named or changed at any time. Any change made to an
irrevocable beneficiary must also include the written consent of the
beneficiary, except as otherwise required by law.
If more than one beneficiary is named, each named beneficiary will share equally
in any benefits or rights granted by this certificate unless the owner gives us
other instructions at the time the beneficiaries are named.
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<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 the owner may make additional purchase payments
to this certificate. We reserve the right not to accept additional purchase
payments beyond certain attained ages of the owner or annuitant. The owner may
allocate purchase payments to one or more of the variable sub-accounts or to any
fixed account option we offer at the time we receive a purchase payment. We
reserve the right to limit the total number of investment options that may be
chosen over the lifetime of the certificate.
All purchase payments are subject to the conditions listed below.
<PAGE>
PURCHASE PAYMENT PROVISIONS
PAYMENT AND ACCEPTANCE OF PURCHASE PAYMENTS
Purchase payments are payments the owner makes to us for the benefits under this
certificate. All purchase payments must be made to either an agent designated by
us or our service center.
The initial purchase payment, as shown on the Information Page, will be held in
the money market sub-account during the free-look period. After the free-look
period, the dollar value of the variable accumulation units held in the money
market sub-account will be credited to the variable sub-accounts and/or the
fixed account option according to the owner's instructions.
Additional purchase payments will be credited on the date we receive them at our
service center and are subject to the conditions listed below. Purchase payments
must:
Meet the additional payment minimum shown on the Information Page;
Not exceed any federal or state limitations; and
Not exceed the maximum total purchase payment amount, as shown on the
Information Page, without our prior approval.
TCG-329-100
We may return to the owner any purchase payments that do not meet the conditions
described in this section.
ALLOCATING EACH PURCHASE PAYMENT
Allocations the owner makes to the variable sub-accounts and fixed account
option are subject to the following conditions. The owner must allocate:
In whole number percentages;
Not less than the minimum allocation, as shown on the Information Page.
The owner may change allocation elections for future purchase payments any time
before the annuity date by notifying us at our service center.
CONTINUATION OF THIS CERTIFICATE
If the owner stops making additional purchase payments to this certificate, the
provisions of the certificate will continue in force until all values have been
distributed. The owner may exercise all ownership rights under this certificate
during that time, including making withdrawals and applying the annuity amount,
as defined in the settlement option provisions section, to provide payments
under a settlement option described in this certificate.
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<PAGE>
THE VARIABLE ACCOUNT
The variable account is a separate investment account established and maintained
by the Company for the investment of a portion of our assets pursuant to North
Carolina Insurance Law. We will use the assets of the variable account to buy
shares in the various portfolios. Purchase payments allocated or transfers made
to one or more variable sub-accounts will become a part of the variable account.
The assets of the variable account are owned by us. The assets in the variable
account are not chargeable with liabilities arising out of any other business we
conduct, except to the extent that they exceed the reserves and other
liabilities of the variable account. The assets of the variable account
maintained under this certificate will be kept separate from the assets held in
our general account.
VARIABLE SUB-ACCOUNTS
The variable account is composed of a number of variable sub-accounts. The
investment performance of each variable sub-account is linked directly to the
investment performance of the underlying portfolio.
We cannot and do not guarantee that any of the variable sub-accounts will always
be available for investment. We reserve the right, subject to compliance with
applicable federal or state law, rules or regulations, to add, delete, or
substitute the variable sub-accounts or the portfolio shares held by a variable
sub-account, if we believe that further investment in the shares is no longer
appropriate or shares in a portfolio become no longer available for investment.
We will send written notification to the owner of such changes.
VARIABLE ACCUMULATION UNIT
A variable accumulation unit is a unit of measure we use to determine the
variable accumulated value each day before the annuity date. The variable
accumulated value is the total dollar value of all variable accumulation units
for each variable sub-account. The value of a variable accumulation unit varies
with each variable sub-account.
TCG-329-100
Purchase payments allocated or transfers made to a variable sub-account are
credited to the variable accumulated value in the form of variable accumulation
units. Transfers, withdrawals, or fees made from a variable sub-account will
result in the cancellation of variable accumulation units. Each time a purchase
payment is allocated or a transfer is made to a variable sub-account, the number
of variable accumulation units credited will be determined. We will determine
the number of variable accumulation units by dividing the total amount allocated
by the value of that variable sub-account's variable accumulation unit for the
valuation day on which either we received the purchase payment allocation or
transfer request at our service center.
The value of a variable accumulation unit for each variable sub-account is
determined by multiplying the value of that unit at the end of the prior
valuation period by the net investment factor of the variable sub-account for
the valuation period. The value of a variable accumulation unit may increase or
decrease.
NET INVESTMENT FACTOR
The net investment factor is the formula that measures the investment
performance of a variable sub-account from one valuation period to the next. For
any variable sub-account, the net investment factor for a valuation period is
determined by dividing (A) by (B), then subtracting (C) where;
(A) IS The net asset value per share held in the variable sub-account, as of the
end of the valuation period; PLUS
The per-share amount of any dividend or capital gain distributions if the
"ex-dividend" date occurs in the valuation period; PLUS
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 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>
THE FIXED ACCOUNT
The Company's fixed account includes all assets not allocated to one of the
Company's separate accounts.
FIXED ACCOUNT
CREDITING OF INTEREST
We will establish effective annual rates of interest for any amounts allocated
or transferred to the fixed account from time to time. Any purchase payment
allocation or transfer to the fixed account will be credited interest at the
rate applicable for its class. We guarantee that the rate of interest in effect
for any amounts allocated or transferred will remain in effect for at least
twelve months from the date such allocation or transfer is made. At any time
after the end of the twelve month period for a particular allocation, we may
change the annual rate of interest without prior notice. We guarantee that any
subsequent change in the annual rate of interest will remain in effect for a
minimum of twelve months from the effective date of change.
Interest will be credited on a daily basis at a daily rate which is equivalent
to the effective annual interest rate for that allocation. The effective annual
interest rate applicable to an allocation will never be less than 3% annually.
TRANSFER LIMITATIONS
Transfers to and from the fixed account are subject to the following conditions:
The minimum amount that may be transferred to or from the fixed account
is shown on the Information Page.
Amounts from the fixed account may not be transferred to any variable
sub-account as identified by us whose underlying portfolio's assets consist
of more than 50% investment in income producing securities, such as the
money market accounts, certificates of deposit, U.S. Treasury or other U.S.
Government securities, bonds or any other fixed income investment.
Each time an amount is transferred from the fixed account into the
variable account, the owner may not transfer any amounts back to the fixed
account for six months following the date of the original transfer.
<PAGE>
TRANSFER PROVISIONS
<PAGE>
The owner may transfer all or a portion of the account value between and among
the variable sub-accounts and the fixed account option subject to the
limitations as described in this section and the fixed account section of this
certificate.
All transfer requests must specify (a) the amount of the transfer; (b) the
variable sub-account or fixed account option from which the transfer is to be
made; and (c) the variable sub-account or fixed account option which is to
receive the transfer. All transfers will be made as of the valuation day we
receive the request at our
TCG-329-100
service center. We reserve the right to modify, restrict, suspend or eliminate
the transfer privileges at any time and for any reason.
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 (4) 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 the
fixed account is the minimum transfer amount shown on the Information Page or
the entire value of the
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<PAGE>
variable sub-account or fixed account from which the transfer is being made. The
minimum amount that may be initially allocated or transferred into a variable
sub-account or the fixed account is shown on the Information Page. We reserve
the right to waive the minimum(s) in connection with certain options offered
with this certificate.
<PAGE>
WITHDRAWAL PROVISIONS
<PAGE>
Before the annuity date and subject to the conditions below the owner may:
Withdraw a portion of the account value for cash subject to any
applicable contingent deferred sales load and premium tax charges; or
Automatically withdraw a portion of the account value by electing the
systematic withdrawal option; or
Withdraw the cash surrender value and terminate this certificate.
Any amount withdrawn that exceeds the allowed amount, as described below, may be
subject to a contingent deferred sales load. All withdrawals will be made first
from earnings and then from purchase payments on a first in, first out basis.
Withdrawal will be subject to any withdrawal limitations imposed under
applicable federal or state law, rules or regulations.
<PAGE>
PARTIAL WITHDRAWAL PROVISIONS
Partial withdrawals taken from the variable sub-accounts or fixed account
options are subject to a minimum withdrawal amount equal to the lesser of $250
or the entire value of the variable sub-account or fixed account from which the
withdrawal is being made. We reserve the right to limit the number of partial
withdrawals that may be taken from the fixed account option in any certificate
year. We reserve the right not to process any withdrawal if the resulting
account value is below the minimum, as shown on the Information Page.
SYSTEMATIC WITHDRAWAL OPTION
The owner may elect to automatically receive a series of partial withdrawals
under the systematic withdrawal option subject to the following conditions:
Systematic withdrawals may be subject to a fee as described in the
charges, fees and services section of this certificate.
Systematic withdrawals may only be taken from variable sub-accounts and
fixed account option as designated by us from time to time. We reserve the
right to prospectively change such designations.
Each systematic withdrawal must be for at least $100.
The owner may terminate systematic
TCG-329-100
withdrawals at any time by notifying us at our service center. Once the option
has been terminated, it may not be elected again for a twelve month period.
Systematic withdrawals will automatically terminate if the certificate is
annuitized, surrendered or otherwise distributed as a result of the owner's
death.
SURRENDER OF THIS CERTIFICATE
The owner may surrender this certificate to us for its cash surrender value on
or before the annuity date.
Payment of the cash surrender value to the owner will be in full settlement of
our liability under the certificate.
For the first certificate year, the allowed amount is equal to the greater of:
Accumulated earnings not previously withdrawn; or
10% of purchase payments received as of the time of the first
withdrawal, less any previous withdrawals taken that certificate year.
Previous withdrawals include partial withdrawals and certain scheduled
withdrawals, such as systematic withdrawals. Any amounts that exceed the allowed
amount will be subject to a contingent deferred sales load. No contingent
deferred sales load will be charged on any withdrawal after the fourteenth
(14th) certificate anniversary.
Page 9
CONTINGENT DEFERRED SALES LOAD
A contingent deferred sales load may apply
when a withdrawal from, or surrender of, this certificate occurs. For purposes
of determining the contingent deferred sales load, all withdrawals are made
first from earnings and then from purchase payments on a first-in, first-out
basis.
The applicable contingent deferred sales load percentages, as shown on the
Information Page, are based on the number of complete years from receipt of the
purchase payment to the date of withdrawal.
WAIVER OF CONTINGENT DEFERRED SALES LOAD
At the end of the free look period or 30 days after the certificate effective
date, whichever is later, the owner may make withdrawals up to the allowed
amount each certificate year before the annuity date without incurring a
contingent deferred sales load.
The allowed amount is equal to the greater of:
Accumulated earnings not previously withdrawn; or
10% of purchase payments received less than seven years old as of the
last certificate anniversary, less any previous withdrawals taken in that
certificate year.
We will also waive the contingent deferred sales load:
On the allowed amount.
Upon annuitization on or after the first certificate anniversary, if
the selected settlement option involves life contingencies.
Upon annuitization at age 95 or over.
Upon the owner's death before the annuity date.
No additional purchase payments will be accepted after you have exercised a
waiver for Extended Care and Terminal Illness. Any waiver as described herein,
is in addition to the waiver provided under the withdrawal of funds without
charges provision of the certificate.
WAIVER FOR EXTENDED CARE AND TERMINAL ILLNESS
We will waive contingent deferred sales load charges after the first certificate
year if:
The owner receives extended care in a qualifying institution from a
qualifying medical professional for at least 60 consecutive days and the
request for the withdrawal or surrender together with proof of such
extended care is received within 90 days after the owner received extended
care treatment; or
The owner receives medically required care from a hospice or home
health care service for at least 60 consecutive days. Such in-home care
must be certified by a qualifying medical professional. Other evidence may
also be required, such as evidence of Medicare eligibility; or
The owner is diagnosed with a terminal illness and we receive the
withdrawal request and proof of terminal illness.
None of the benefits described above will apply if the owner was confined in a
Qualifying Institution, receiving home health care services or diagnosed with a
terminal illness on the certificate effective date.
No additional purchase payments will be accepted after you have exercised this
benefit. Any waiver exercised under this benefit is in addition to the waiver
provided under the Waiver of Contingent Deferred Sales Loan provision.
<PAGE>
SETTLEMENT OPTION PROVISIONS
<PAGE>
On the annuity date, we will apply the annuity amount, as defined
below, to provide payments under the settlement option selected by the
owner. The first settlement option payment will be made 30 days after the
annuity date.
Settlement option payments may be made in monthly, quarterly, semi-annual
or annual installments as selected by the owner.
<PAGE>
TCG-329-100
PAGE 10
<PAGE>
The owner may change the annuity date settlement option or payment mode by
notifying our service center at least 30 days in advance of the annuity date.
The annuity date must be no later than the first day of the calendar month
immediately preceding the month of the annuitant's or joint annuitant's 95th
birthday; and
The annuity date may not be earlier than he first day of the calendar month
coinciding with the first certificate anniversary.
After the annuity date, we will not allow the owner to make:
Any changes to either the settlement or payment option;
Additional purchase payments; or
Any further withdrawals.
ANNUITY AMOUNT
The annuity amount we will apply to provide payments is equal to the account
value, LESS any contingent deferred sales load, 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 the owner or make a cash payment to the owner equal to the cash
surrender value if:
The annuity amount is less than $5,000; or
The amount of the first fixed payment is less than $150; or
The amount of monthly payments from each variable sub-account is less
than $75.
If we make such a cash payment it will be in full settlement of our liability
under this certificate.
SETTLEMENT OPTIONS
The settlement options the owner may choose from are listed below. For any
settlement option involving life contingencies, it is possible that no
settlement option payments will be made from this certificate if, after the
annuity date but before the first settlement option payment is made, the
annuitant and joint annuitant or contingent annuitant, as applicable, dies.
TCG-329-100
LIFE ANNUITY
Provides payments to the owner for as long as the annuitant lives. Payments will
end with the payment due just before the annuitant's death and there is no
provision for a death benefit payable to a beneficiary.
LIFE ANNUITY WITH PERIOD CERTAIN
Provides payments to the owner for the longer of: a) the annuitant's life; or
(b) the period certain. The period certain may be 60, 120, 180 or 240 months. If
the annuitant dies during the period certain, payments will continue until the
end of the period certain.
LIFE AND CONTINGENT ANNUITY
Provides payments to the owner for as long as the annuitant lives. If the
annuitant dies, payments will continue for as long as the contingent annuitant
lives in an amount equal to 50%, 66 2/3% or 100% of the original payment, as
selected. Payments will then end with the payment due just before the contingent
annuitant's death.
JOINT AND SURVIVOR ANNUITY
Provides payments to the owner for as long as the survivor of the annuitant or
joint annuitant lives. After the first annuitant dies, payments will continue
for as long as the survivor lives in an amount equal to 50%, 66 2/3% or 100% of
the original payment, as selected. Payments will then end with the payment due
just before the death of the survivor.
PERIOD CERTAIN ONLY
Payments start on the first day of the month immediately following the annuity
date, if the annuitant is living. The period certain may be 60, 120, 180 or 240
months. If the annuitant dies after all payments have been made for the period
certain, payments will cease with the payment that is paid just before the
annuitant dies. No death 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 you provide otherwise.
OTHER FORMS OF PAYMENT
Payments can be provided under other settlement options not described in this
section. Contact our service center for more information.
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<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) selected by the owner. These payments may increase, decrease
or remain the same.
<PAGE>
FIXED PAYMENT OPTION
AMOUNT OF FIXED PAYMENT
The owner may elect to have all or a portion of the annuity amount applied to
provide fixed payments. On the annuity date, we will determine the dollar amount
of the fixed payments by applying the portion of the annuity amount allocated to
provide fixed payments as a single payment based on the settlement option chosen
and the age and sex of the annuitant(s), using the appropriate guaranteed
annuity rate tables. If required by law, we will use the appropriate unisex
guaranteed annuity rate tables. The monthly annuity rate tables are contained in
the appendix.
VARIABLE PAYMENT OPTION
AMOUNT OF FIRST VARIABLE PAYMENT
The owner may elect to have all or a portion of the annuity amount applied to
provide settlement option payments that vary based on the investment performance
of selected variable sub-accounts. The amount of the first variable payment will
be equal to the benefit that could be purchased by applying the portion of the
annuity amount allocated to provide the variable payments as a single payment
based on the settlement option chosen and age and sex of the annuitant(s) using
the appropriate guaranteed annuity rate tables. If required by law, we will use
the appropriate unisex guaranteed annuity rate tables. The monthly annuity rate
tables are contained in the appendix.
AMOUNT OF SUBSEQUENT VARIABLE PAYMENTS
We determine the dollar amount of the second and subsequent variable payments by
first identifying the number and value of the variable annuity units for each
variable sub-account. Variable annuity units are the unit of measure used to
determine such payments. For each
TCG-329-100
payment we multiply the number of variable annuity units by the value of the
variable annuity units for each variable sub-account.
The number of variable annuity units for each variable sub-account will remain
the same for the second and subsequent variable payments (unless amounts are
transferred to or from a variable sub-account) and the value of the variable
annuity units in each variable sub-account will vary. As a result of the
variation in the value of variable annuity units for each variable sub-account
between payments, the dollar amount of each variable payment after the first may
increase, decrease or remain the same.
NUMBER OF VARIABLE ANNUITY UNITS
The number of variable annuity units for each variable sub-account is determined
by dividing the first variable payment by the value of the variable annuity
units of each variable sub-account on the annuity date.
VALUE OF VARIABLE ANNUITY UNITS
The variable annuity unit values depend on the net investment factor and the
assumed interest rate. The value of a variable annuity unit for each variable
sub-account for any valuation day is equal to (A) times (B) times (C), where:
(A) is the variable annuity unit value on the immediately preceding valuation
day;
(B) is the net investment factor (determined in accordance with the net
investment factor provision on Page 7), for the valuation period just ended; and
(C) is the investment result adjustment factor (.99989255)n, which recognizes an
assumed interest rate of 4% per year. The Company reserves the right to offer
other assumed interest
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<PAGE>
rates with appropriate investment result adjustment factors. The "n" in the
investment result adjustment factor is the number of days since the preceding
valuation day.
Once settlement option payments begin, we guarantee the amount of each variable
payment will not be affected by variations in expenses or mortality experience.
<PAGE>
DEATH BENEFIT PROVISIONS
<PAGE>
We must distribute death benefits or continue making settlement option payments
under this certificate according to the requirements of Code Section 72(s) as
long as this certificate is in force or benefits remain to be paid.
We will not accept any additional purchase payments after the death of the owner
or joint owner.
If any ownership change is made, the death benefit
under this certificate may be reduced in accordance with our then current
underwriting rules. Such reduction will never decrease the death benefit below
the account value.
We must receive proof of death before any benefits are distributed from this
certificate. Proof of death acceptable to us includes:
A certified copy of a death certificate
A certified copy of a court decree stating the cause of death A written
statement by a medical doctor who attended the deceased Any other proof
or documents we may require.
<PAGE>
AMOUNT OF DEATH BENEFIT
If the owner or joint owner dies before the annuity date and neither the
deceased owner nor the joint owner had attained the age of 71, the guaranteed
minimum death benefit is equal to the greatest of (A), (B) and (C) where:
(A) is the account value; and
(B) is 100% of purchase payments, LESS the sum of all withdrawals taken, any
contingent deferred sales load on such withdrawals and any applicable premium
tax charges; and
(C) is the highest account value on any certificate anniversary before or on the
earlier of the owner's or joint owner's 70th birthday, the sum of all purchase
payments received since that certificate anniversary, less the sum of all
withdrawals taken, any contingent deferred sales load on such withdrawals and
any applicable premium tax charges since that anniversary.
The guaranteed minimum death benefit will be determined as of the end of the
valuation period during which our service center receives both proof of death of
the owner or joint owner and the written notice of the form of benefit elected
by the person to whom the death benefit is payable.
AMOUNT OF DEATH BENEFIT AFTER THE OWNER OR JOINT OWNER ATTAINS AGE 70 If the
owner or joint owner dies before the
TCG-329-100
annuity date and either the deceased owner or surviving owner had attained the
age of 70, the death benefit is equal to the greater of:
(A) the account value; or
(B) the guaranteed minimum death benefit at age 70; plus the total of all
purchase payments made since age 70, less the sum of all withdrawals taken,
any contingent deferred sales loads on such withdrawals and any applicable
premium tax charges.
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). 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)
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<PAGE>
involved in this certificate. The death benefit will be payable to the first
person from the applicable list below:
IF THE OWNER IS THE ANNUITANT:
The joint owner, if any
The beneficiary, if any
IF THE OWNER IS NOT THE ANNUITANT:
The joint owner, if any
The beneficiary, if any
The annuitant;
The joint annuitant; if any
IF THE DEATH BENEFIT IS PAYABLE TO THE OWNER'S SURVIVING SPOUSE, (or to a trust
for the sole benefit of such surviving spouse), we will continue this
certificate with the owner's spouse as the new annuitant (if the owner was the
annuitant) and the new owner (if applicable), unless such spouse selects another
option as provided below.
IF THE DEATH BENEFIT IS PAYABLE TO SOMEONE OTHER THAN 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 then in effect on the date of death.
Upon the owner's death after the annuity date, any remaining ownership rights
granted under this certificate will pass to the person to whom the death benefit
would have been paid if the owner had died before the annuity date, as specified
above.
SURVIVAL PROVISION
The interest of any person to whom the death benefit is payable who dies at the
time of, or within 30 days after, the death of the owner will also terminate if
no benefits have been paid to such beneficiary, unless the owner had given us
written notice of some other arrangement.
<PAGE>
CHARGES, FEES AND SERVICES
PREMIUM TAX CHARGE
Some jurisdictions impose on us a premium tax on annuities. If a premium tax is
imposed, we reserve the right to deduct this amount from purchase payments or
account value, as appropriate. For purposes of this certificate,
TCG-329-100
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.
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<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.
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.
ANNUITY FEE
After the annuity date, an annual fee equal to the amount shown on the
Information Page will be deducted in equal amounts from distributions made under
the variable payment option. We reserve the right to waive this fee.
STATEMENTS OF ACCOUNT
At least once during each certificate year, we will send the owner a statement
of account reflecting the account value of the certificate. Statements of
account will cease to be provided to the owner after the annuity date.
<PAGE>
GENERAL PROVISIONS
ENTIRE CERTIFICATE
This certificate and any attached endorsements and riders are the entire
certificate.
MISSTATEMENT OF AGE AND SEX
If the age or sex of the annuitant(s) and/or of any other measuring life has
been misstated, the settlement option payments payable under this certificate
will be whatever the annuity amount would provide for the correct age or sex of
the annuitant(s) and/or of any other measuring life on the annuity date. Any
underpayment by us, as a result of such misstatement, will be paid in a lump sum
on the next settlement option payment made by us, and any overpayment will be
deducted from the current or succeeding payments.
PROOF OF EXISTENCE AND AGE
Before making any payment under this certificate, we may require proof of the
existence and age of the owner, the annuitant and/or any other measuring life.
We may also require other information 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
TCG-329-100
payable under this certificate unless the change is required by law. We will
provide the owner a copy of any changes we make to this certificate.
INCOME TAX QUALIFICATION
This contract is intended to qualify as an annuity certificate for federal
income tax purposes. All provisions in this certificate will be interpreted to
maintain such tax qualification. We may make changes in order to maintain this
qualification or to conform this certificate to any applicable changes made in
the tax qualification requirements. We will provide the owner with a copy of any
changes we make to this certificate.
INCONTESTABILITY
THIS ANNUITY CERTIFICATE IS INCONTESTABLE FROM THE CERTIFICATE EFFECTIVE DATE.
ADMINISTRATIVE ERROR
This group annuity certificate states the amount of annuity benefits to be
provided thereunder. No action by the Company, whether by mistake or otherwise,
will convey any greater or lesser benefit other than that which was applied for,
and for which premiums have been paid.
ASSIGNMENT OF THIS CERTIFICATE
To make ownership changes or assign rights to another person, the owner must
notify us at our service center. An assignment or ownership
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<PAGE>
change is not binding on us until we receive the necessary documentation and
acknowledge the request. We are not responsible for the validity or effect - tax
or otherwise - of any assignment or ownership change. If an ownership change is
made, the death benefit under this certificate may be reduced in accordance with
our then current underwriting rules. Such reduction will never decrease the
death benefit below the account value.
PAYMENTS BY/TO THE COMPANY
All purchase payments paid to us or amounts paid by us from this certificate
will be made in the legal currency of the United States of America.
DELAY OF PAYMENT OR TRANSFER
Except as provided below, we will pay amounts due from this certificate within
five (5) days of the date our service center receives both the request for such
amount and all the necessary requirements in a form and manner acceptable to us.
We reserve the right to delay the payment of any benefits payable, amounts
withdrawn or transfers requested from the variable account due to: (a) the
closure of the New York Stock Exchange for reasons other than usual weekends,
holidays or if trading on such Exchange is restricted; (b) the existence of an
emergency as defined by the Securities and Exchange Commission of the United
States Government or restrictions of trading by the Commission; or (c) delays
permitted by the Securities and Exchange Commission for the protection of
security holders.
We further reserve the right to delay payment of any withdrawal from the fixed
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
participate in our profits or surplus, and therefore no dividends are payable.
<PAGE>
TCG-329-100
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<PAGE>
APPENDIX
ANNUITY RATE TABLES
<PAGE>
APPLICABILITY OF RATES - The guaranteed annuity rates contained in TABLES I, II
and III will be used to provide a minimum guaranteed monthly annuity under the
fixed annuity payment option. The annuity rates contained in TABLES IV, V and VI
will be used to determine the first monthly annuity payment under the variable
annuity payment option.
The rates contained in this certificate are for each $1,000 applied under the
applicable settlement option and do not include any applicable premium tax
charges. Any applicable premium tax charges will be withdrawn as described in
the premium tax charge provision of the certificate.
TABLES I and II under the fixed annuity payment option and TABLES IV and V under
the variable annuity payment option, as applicable, will be used for all
settlement options, subject to any limitations imposed under: (a) a retirement
plan or program under which this certificate is issued; or (b) applicable
federal or state law, rules or regulations which restrict the use of such rates.
If any federal or state law, rules or regulations prohibits the use of the rates
provided under these Tables, then the annuity rates provided under TABLES III
and VI, as applicable, will be used.
RATES NOT SHOWN - Any rates not shown in the Tables contained in this
certificate will be provided by us upon request.
TCG-329-100
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<PAGE>
<TABLE>
<CAPTION>
APPENDIX (CONTINUED)
TABLES OF GUARANTEED ANNUITY RATES UNDER
FIXED ANNUITY PAYMENT OPTION
TABLE I - MALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
AGE ANNUITY 120 MONTHS 180 MONTHS 240
MONTHS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
40 3.76 3.76 3.75 3.73
41 3.80 3.79 3.78 3.76
42 3.84 3.83 3.82 3.80
43 3.88 3.87 3.86 3.83
44 3.93 3.92 3.90 3.87
45 3.97 3.96 3.94 3.91
46 4.02 4.01 3.98 3.95
47 4.07 4.06 4.03 3.99
48 4.13 4.11 4.08 4.03
49 4.18 4.16 4.13 4.08
50 4.24 4.21 4.18 4.13
51 4.30 4.27 4.23 4.17
52 4.37 4.33 4.29 4.22
53 4.43 4.40 4.34 4.28
54 4.51 4.46 4.41 4.33
55 4.58 4.53 4.47 4.38
56 4.66 4.60 4.54 4.44
57 4.74 4.68 4.60 4.50
58 4.83 4.76 4.67 4.56
59 4.92 4.84 4.75 4.61
60 5.02 4.93 4.83 4.68
61 5.12 5.02 4.90 4.74
62 5.23 5.12 4.99 4.80
63 5.34 5.22 5.07 4.87
64 5.47 5.33 5.16 4.93
65 5.60 5.45 5.25 5.00
66 5.74 5.57 5.35 5.06
67 5.90 5.69 5.45 5.12
68 6.06 5.83 5.55 5.18
69 6.24 5.97 5.64 5.24
70 6.43 6.11 5.74 5.30
71 6.63 6.26 5.84 5.35
72 6.84 6.42 5.95 5.41
73 7.07 6.58 6.05 5.45
74 7.32 6.74 6.14 5.50
75 7.58 6.91 6.24 5.54
76 7.86 7.08 6.33 5.57
77 8.16 7.26 6.42 5.61
78 8.48 7.43 6.50 5.63
79 8.83 7.61 6.58 5.66
80 9.20 7.79 6.65 5.68
- -----------------------------------------------------------------------------------------------------
BASIS OF COMPUTATION - The actuarial basis for the annuity rates contained in
this Table I, is the 1983a Annuity Mortality Table for males, without
projection, set back 5 years, with an interest rate of 3.5% per annum.
TCG-329-100
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<PAGE>
APPENDIX (CONTINUED)
TABLES OF GUARANTEED ANNUITY RATES UNDER
FIXED ANNUITY PAYMENT OPTION
TABLE II - FEMALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
AGE ANNUITY 120 MONTHS 180 MONTHS 240
MONTHS
- -----------------------------------------------------------------------------------------------------
40 3.58 3.58 3.57 3.56
41 3.61 3.60 3.60 3.59
42 3.64 3.64 3.63 3.62
43 3.67 3.67 3.66 3.65
44 3.71 3.70 3.69 3.68
45 3.74 3.74 3.73 3.71
46 3.78 3.77 3.76 3.75
47 3.82 3.81 3.80 3.78
48 3.86 3.85 3.84 3.82
49 3.90 3.89 3.88 3.86
50 3.95 3.94 3.92 3.90
51 4.00 3.98 3.97 3.94
52 4.05 4.03 4.01 3.98
53 4.10 4.08 4.06 4.03
54 4.15 4.14 4.11 4.08
55 4.21 4.19 4.17 4.13
56 4.28 4.25 4.22 4.18
57 4.34 4.32 4.28 4.23
58 4.41 4.38 4.34 4.28
59 4.48 4.45 4.41 4.34
60 4.56 4.52 4.47 4.40
61 4.64 4.60 4.55 4.46
62 4.73 4.68 4.62 4.52
63 4.82 4.77 4.70 4.59
64 4.92 4.86 4.78 4.66
65 5.03 4.96 4.86 4.72
66 5.14 5.06 4.95 4.79
67 5.26 5.17 5.04 4.86
68 5.39 5.28 5.14 4.93
69 5.52 5.40 5.24 5.01
70 5.67 5.52 5.34 5.07
71 5.82 5.66 5.44 5.14
72 5.99 5.80 5.55 5.21
73 6.17 5.95 5.66 5.27
74 6.36 6.10 5.77 5.34
75 6.57 6.27 5.88 5.40
76 6.80 6.44 6.00 5.45
77 7.04 6.61 6.11 5.50
78 7.31 6.80 6.21 5.54
79 7.60 6.99 6.32 5.58
80 7.91 7.18 6.42 5.62
- -----------------------------------------------------------------------------------------------------
BASIS OF COMPUTATION - The actuarial basis for the annuity rates contained in
this Table II, is the 1983a Annuity Mortality Table for females, without
projection, set back 5 years, with an interest rate of 3.5% per annum.
TCG-329-100
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<PAGE>
APPENDIX (CONTINUED)
TABLES OF GUARANTEED ANNUITY RATES UNDER
FIXED ANNUITY PAYMENT OPTION
TABLE III - UNISEX RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
AGE ANNUITY 120 MONTHS 180 MONTHS 240
MONTHS
- -----------------------------------------------------------------------------------------------------
40 3.69 3.69 3.68 3.66
41 3.73 3.72 3.71 3.70
42 3.76 3.76 3.75 3.73
43 3.80 3.79 3.78 3.76
44 3.84 3.83 3.82 3.80
45 3.88 3.87 3.86 3.83
46 3.93 3.92 3.90 3.87
47 3.97 3.96 3.94 3.91
48 4.02 4.01 3.98 3.95
49 4.07 4.06 4.03 4.00
50 4.13 4.11 4.08 4.04
51 4.18 4.16 4.13 4.08
52 4.24 4.22 4.18 4.13
53 4.30 4.27 4.24 4.18
54 4.37 4.33 4.29 4.23
55 4.44 4.40 4.35 4.28
56 4.51 4.47 4.42 4.34
57 4.59 4.54 4.48 4.40
58 4.66 4.61 4.55 4.45
59 4.75 4.69 4.62 4.51
60 4.84 4.77 4.69 4.57
61 4.93 4.86 4.77 4.64
62 5.03 4.95 4.85 4.70
63 5.14 5.05 4.93 4.76
64 5.25 5.15 5.02 4.83
65 5.37 5.26 5.11 4.89
66 5.50 5.37 5.20 4.96
67 5.64 5.49 5.29 5.03
68 5.79 5.61 5.39 5.09
69 5.95 5.75 5.49 5.15
70 6.12 5.88 5.59 5.22
71 6.31 6.03 5.69 5.28
72 6.50 6.18 5.80 5.34
73 6.71 6.33 5.90 5.39
74 6.93 6.49 6.01 5.44
75 7.17 6.66 6.11 5.49
76 7.43 6.84 6.21 5.53
77 7.71 7.01 6.31 5.57
78 8.01 7.19 6.40 5.61
79 8.33 7.37 6.49 5.63
80 8.67 7.56 6.57 5.66
- -----------------------------------------------------------------------------------------------------
BASIS OF COMPUTATION - The actuarial basis for the annuity rates contained in
this Table III, is the 1983a Annuity Mortality Table, without projection,
blended 60% males and 40% females, set back 5 years, with an interest rate of
3.5% per annum.
TCG-329-100
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Page 15
<PAGE>
APPENDIX (CONTINUED)
TABLES OF ANNUITY RATES UNDER
VARIABLE ANNUITY PAYMENT OPTION
TABLE IV - MALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
AGE ANNUITY 120 MONTHS 180 MONTHS 240
MONTHS
- -----------------------------------------------------------------------------------------------------
40 4.08 4.07 4.06 4.04
41 4.12 4.11 4.09 4.07
42 4.16 4.15 4.13 4.11
43 4.20 4.18 4.17 4.14
44 4.24 4.23 4.21 4.18
45 4.29 4.27 4.25 4.21
46 4.33 4.32 4.29 4.25
47 4.38 4.36 4.33 4.29
48 4.44 4.41 4.38 4.33
49 4.49 4.46 4.43 4.38
50 4.55 4.52 4.48 4.42
51 4.61 4.57 4.53 4.47
52 4.67 4.63 4.59 4.52
53 4.74 4.69 4.64 4.57
54 4.81 4.76 4.70 4.62
55 4.88 4.83 4.76 4.67
56 4.96 4.90 4.83 4.73
57 5.04 4.97 4.89 4.78
58 5.13 5.05 4.96 4.84
59 5.22 5.13 5.04 4.90
60 5.31 5.22 5.11 4.96
61 5.42 5.31 5.19 5.02
62 5.52 5.41 5.27 5.08
63 5.64 5.51 5.36 5.14
64 5.76 5.62 5.44 5.20
65 5.90 5.73 5.53 5.27
66 6.04 5.85 5.62 5.33
67 6.19 5.98 5.72 5.39
68 6.36 6.11 5.82 5.45
69 6.53 6.25 5.91 5.51
70 6.72 6.39 6.01 5.56
71 6.92 6.54 6.11 5.61
72 7.14 6.69 6.21 5.67
73 7.37 6.85 6.31 5.71
74 7.62 7.01 6.40 5.75
75 7.88 7.18 6.49 5.79
76 8.16 7.35 6.58 5.83
77 8.46 7.52 6.67 5.86
78 8.79 7.70 6.75 5.89
79 9.13 7.87 6.83 5.91
80 9.51 8.05 6.90 5.93
- -----------------------------------------------------------------------------------------------------
BASIS OF COMPUTATION - The actuarial basis for the annuity rates contained in
this Table IV, is the 1983a Annuity Mortality Table for males, without
projection, set back 5 years, with an assumed interest rate of 4% per annum.
TCG-329-100
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<PAGE>
APPENDIX (CONTINUED)
TABLES OF ANNUITY RATES UNDER
VARIABLE ANNUITY PAYMENT OPTION
TABLE V - FEMALE RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
AGE ANNUITY 120 MONTHS 180 MONTHS 240
MONTHS
- -----------------------------------------------------------------------------------------------------
40 3.90 3.90 3.89 3.88
41 3.93 3.92 3.92 3.91
42 3.96 3.95 3.95 3.94
43 3.99 3.98 3.97 3.96
44 4.02 4.01 4.01 3.99
45 4.06 4.05 4.04 4.02
46 4.09 4.08 4.07 4.06
47 4.13 4.12 4.11 4.09
48 4.17 4.16 4.15 4.13
49 4.21 4.20 4.19 4.16
50 4.26 4.24 4.23 4.20
51 4.30 4.29 4.27 4.24
52 4.35 4.34 4.32 4.28
53 4.40 4.39 4.36 4.33
54 4.46 4.44 4.41 4.37
55 4.52 4.49 4.46 4.42
56 4.58 4.55 4.52 4.47
57 4.64 4.61 4.58 4.52
58 4.71 4.68 4.64 4.57
59 4.78 4.75 4.70 4.63
60 4.86 4.82 4.77 4.69
61 4.94 4.89 4.84 4.75
62 5.03 4.98 4.91 4.81
63 5.12 5.06 4.98 4.87
64 5.22 5.15 5.06 4.94
65 5.32 5.24 5.14 5.00
66 5.43 5.34 5.23 5.07
67 5.55 5.45 5.32 5.14
68 5.68 5.56 5.41 5.21
69 5.81 5.68 5.51 5.27
70 5.96 5.80 5.61 5.34
71 6.11 5.93 5.71 5.41
72 6.28 6.08 5.82 5.48
73 6.46 6.22 5.93 5.54
74 6.65 6.37 6.04 5.60
75 6.86 6.54 6.15 5.66
76 7.09 6.71 6.25 5.71
77 7.33 6.88 6.37 5.76
78 7.60 7.07 6.47 5.80
79 7.89 7.25 6.57 5.84
80 8.20 7.45 6.67 5.88
- -----------------------------------------------------------------------------------------------------
BASIS OF COMPUTATION - The actuarial basis for the annuity rates contained in
this Table V, is the 1983a Annuity Mortality Table for females, without
projection, set back 5 years, with an assumed interest rate of 4% per annum.
TCG-329-100
Page 22
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<PAGE>
APPENDIX (CONTINUED)
TABLES OF ANNUITY RATES UNDER
VARIABLE ANNUITY PAYMENT OPTION
TABLE VI - UNISEX RATES
LIFE LIFE ANNUITY WITH PERIOD CERTAIN
AGE ANNUITY 120 MONTHS 180 MONTHS 240
MONTHS
- -----------------------------------------------------------------------------------------------------
40 4.01 4.00 4.00 3.98
41 4.05 4.04 4.03 4.01
42 4.08 4.07 4.06 4.04
43 4.12 4.11 4.09 4.07
44 4.16 4.14 4.13 4.11
45 4.20 4.18 4.17 4.14
46 4.24 4.22 4.21 4.18
47 4.28 4.27 4.25 4.22
48 4.33 4.31 4.29 4.26
49 4.38 4.36 4.33 4.30
50 4.43 4.41 4.38 4.34
51 4.49 4.46 4.43 4.38
52 4.55 4.52 4.48 4.43
53 4.61 4.57 4.54 4.48
54 4.67 4.64 4.59 4.53
55 4.74 4.70 4.65 4.58
56 4.81 4.76 4.71 4.63
57 4.89 4.83 4.77 4.68
58 4.96 4.91 4.84 4.74
59 5.05 4.99 4.91 4.80
60 5.14 5.07 4.98 4.86
61 5.23 5.15 5.05 4.92
62 5.33 5.24 5.13 4.98
63 5.43 5.34 5.21 5.04
64 5.55 5.44 5.30 5.10
65 5.67 5.54 5.39 5.17
66 5.80 5.66 5.48 5.23
67 5.94 5.77 5.57 5.30
68 6.09 5.90 5.67 5.36
69 6.25 6.03 5.76 5.42
70 6.42 6.16 5.86 5.48
71 6.60 6.31 5.96 5.54
72 6.79 6.46 6.06 5.60
73 7.00 6.61 6.17 5.65
74 7.23 6.77 6.27 5.70
75 7.47 6.93 6.37 5.75
76 7.73 7.10 6.46 5.79
77 8.01 7.28 6.56 5.82
78 8.31 7.46 6.65 5.86
79 8.63 7.64 6.73 5.89
80 8.98 7.82 6.82 5.91
- -----------------------------------------------------------------------------------------------------
</TABLE>
BASIS OF COMPUTATION - The actuarial basis for the annuity rates contained in
this Table VI, is the 1983a Annuity Mortality Table, without projection, blended
60% males and 40% females, set back 5 years, with an assumed interest rate of 4%
per annum.
TCG-329-100
Page 23
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VARIABLE AND FIXED DOLLAR SETTLEMENT OPTIONS
SEPARATE ACCOUNT INVESTMENTS
NON-PARTICIPATING - NO ANNUAL DIVIDENDS
Home Office:
401 N. Tryon Street
Charlotte, NC 28202 TCG-329-100
A Stock Company
<PAGE>
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 establish a guaranteed minimum
annuitization value that will provide a Guaranteed 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 certificate
is annuitized or surrendered. Once elected, the owner may not terminate this
rider at any time.
Guaranteed Minimum Income Benefit payments must begin on or before the rider
anniversary following the annuitant's 95th birthday (earlier if required by
state law). Your election to begin receiving the Guaranteed Minimum Income
Benefit must be made within 30 days following the seventh rider anniversary or
30 days following any subsequent rider anniversary after this rider is issued.
If you make an election at any other time, you will not receive the Guaranteed
Minimum Income Benefit.
<PAGE>
- -------------------------------------------------------------------------------
<PAGE>
GUARANTEED MINIMUM INCOME BENEFIT
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 you or the joint owner's age is
95, the amount of the guaranteed minimum annuitization value is the greater of
(A) and (B) where:
(A) is the account value.
(B) is the benefit base.
The benefit base on the certificate date is equal to the portion of the initial
purchase payment allocated to the variable sub-accounts other than any money
market account. Thereafter, the benefit base will be such amount, plus
additional purchase payments so allocated, plus interest credited each day
through the annuitant's (or younger joint annuitant's) 75th birthday, less the
sum of all withdrawals taken, adjusted as described in the Withdrawals provision
up to the rider anniversary before either you or the joint owner reaches age 95,
and any applicable premium tax charges. Interest will be credited at the rate
shown on the certificate Information Page.
After the certificate anniversary on which the owner or the joint owner reaches
age 95, the Guaranteed Minimum Income Benefit is the account value.
EXERCISING THIS OPTION
Your election to begin receiving the Guaranteed Minimum Income Benefit must be
made within 30 days following the seventh rider anniversary or 30 days following
any subsequent rider anniversary after this rider is issued.
The Guaranteed Minimum Income Benefit will be paid as a Life with 10-Year Period
Certain annuity. 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)' projected 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. Exercise of this option shall be subject to the certificate's
requirements regarding the election of a life with period certain settlement
option.
Page 1
<PAGE>
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.
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 is equal to the annual fee for this benefit shown on the certificate's
Information Page. The annual fee is a percentage of the variable accumulated
value (except the money market sub-account value).
The fee will be included in the daily unit value calculations.
Signed for the Company at Charlotte, North Carolina, to be effective on the
certificate effective date.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
Nooruddin S. Veerjee
PRESIDENT
James W. Dederer
GENERAL COUNSEL AND SECRETARY
TCE-147-100
Page 2
<PAGE>
Tax Sheltered Annuity
Endorsement
(Code Section 403(b))
SPECIAL NOTICE - Please read this endorsement carefully. It contains important
information which can affect the tax status of your Tax Sheltered Annuity (TSA).
If you do not comply with the provisions of this endorsement, you may be subject
to adverse tax consequences. As with all tax matters, you should consult a tax
adviser to assess the impact of your failure to comply with these provisions.
About this endorsement
<PAGE>
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY (we) has issued this endorsement
as part of the annuity certificate to which it is attached.
The annuity certificate is issued to you as part of a Tax Sheltered Annuity
(TSA). As a TSA, the annuity certificate is intended to qualify under Code
Section 403(b) and all provisions of the annuity certificate will be interpreted
to ensure and maintain such qualification, despite any other provisions to the
contrary. The annuity certificate is for the exclusive benefit of you and your
beneficiary. Your rights and entire interest in the annuity certificate are
nonforfeitable.
Some of the provisions of this endorsement will be different than described in
the annuity certificate. The specific differences in your TSA are described
below.
<PAGE>
DEFINITION OF TERMS
For purposes of this endorsement, the following definitions apply:
DIRECT ROLLOVER is a distribution made directly to an eligible
retirement plan of all or a portion of the net annuity value.
DISABILITY is currently defined in Code Section 72(m)(7) as your
inability to engage in any substantial gainful activity by reason of any
medically determined physical or mental impairment which can be expected to
be of long-continued and indefinite duration, or which will result in your
death.
ELIGIBLE ROLLOVER DISTRIBUTION is any distribution to you or your
surviving spouse (or if you are divorced, your former spouse as an
alternate payee under a QDRO) of all or any portion of the net annuity
value. An eligible rollover distribution does NOT include any distribution:
(a) that is a minimum required distribution
under Code Section 401(a)(9); or
(b) that is not included in your gross in-come; or
(c) that is one of a series of substantially equal periodic payments over
your life (or life expectancy ) or the joint lives (or joint life
expectancies) of you and the beneficiary or for a period of 10 years or
more.
ERISA is the Employee Retirement Income Security Act of 1974, as
amended.
FINANCIAL HARDSHIP is currently defined in Code Section 403(b)(11) as
an immediate and heavy financial need for which funds are not readily
available from any other resource. Any withdrawal based on financial
hardship cannot exceed the amount required to meet the immediate financial
need.
NET ANNUITY VALUE is the certificate annuity value, LESS any
outstanding loans, plus interest on such loans; AND LESS any applicable
contingent deferred sales load.
PLAN is an employee pension benefit plan as defined under Section
3(2)(A) of the Employee Retirement Income Security Act of 1974 (ERISA), as
amended.
<PAGE>
TCE-146-198 Page 1
<PAGE>
QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) is a domestic relations order
described in Code Section 414(p) that creates or recognizes the existence
of an alternate payee's right to, or assigns to an alternate payee the
right to, receive all or a portion of the benefits payable to you under
this annuity certificate. A domestic relations order is a judgment, decree,
or order (including approval of a property settlement agreement) made
pursuant to a state domestic relations law (including a community property
law) that relates to the provision of child support, alimony payments, or
marital property rights of an alternate payee.
REQUIRED BEGINNING DATE is April 1 of the calendar year following the
later of:
(a) the calendar year in which you attain age 70 1/2; or
(b) the calendar year in which you retire.
However, your required beginning date will be April 1 of the calendar year
following the calendar year in which you attain age 70 1/2 if you:
(a) are a 5% owner (as defined in Code Section 416) of an organization
described in Code Section 403(b)(1)(A) with respect to the plan year
ending in the calendar year in which you attain age 70 1/2; and
(b) are not a participant in a governmental plan or a church plan (as
defined in Code Section 401(a)(9)(C)).
OWNER
Your ownership rights are affected as follows:
You must be the annuitant.
Joint ownership is not allowed.
You cannot pledge or assign any interest in this annuity certificate to
another person, except as permitted by law, such as in the case of a QDRO.
CONTRIBUTIONS
We will accept premiums to the annuity certificate if they represent amounts:
Directly rolled over or transferred from another Code Section 403(b)(1)
TSA certificate or from a Code Section 403(b)(7) custodial account in
conformance with Code Section 403(b)(8) or any other rule or regulation
issued under the Code; or
Transferred pursuant to Revenue Ruling 90-24, 1990-1 C.B. 97.
The premiums paid to the annuity certificate represent contributions made to the
plan by your employer on your behalf as a result of an elective salary deferral
arrangement. No premiums will be accepted if they represent employer
contributions that are subject to the requirements of Title I of ERISA.
RESTRICTIONS ON WITHDRAWALS
You may NOT withdraw any part of the annuity value made pursuant to an elective
salary deferral arrangement after December 31, 1988, and the earnings on such
contributions and amounts held on December 31, 1988, unless you:
Are at least age 59 1/2;
Become disabled;
Separate from employment with your employer; or
Incur a financial hardship. A withdrawal to meet a financial hardship
may not include any earnings attributable to your elective deferrals.
These restrictions will NOT apply if the withdrawal is:
For payment to an alternate payee under a QDRO; or
Made in order to make a direct transfer to another Code Section 403(b)
TSA as provided in Revenue Ruling 90-24, 1990-1 C.B. 97.
Your employer or your employer's TSA plan administrator, if any, will determine
whether a domestic relations order is a QDRO, and will tell us whether or not to
comply with the order. If your employer or the TSA administrator asks us to make
this determination, we will do so. We will provide your employer, the TSA
administrator and/or you with information about the value and form of the
benefits available under such an order.
<PAGE>
TCE-146-198 Page 2
<PAGE>
LOANS
If the plan allows for loans to be made, you may borrow against the annuity
value at any time before the annuity date if you send us a written request and
any other documents we require in order to process the loan. We reserve the
right to delay making a loan for up to six months from the date we receive your
request.
AMOUNTS AND CONDITIONS. Your annuity value will be collateral for the loan. The
aggregate amount borrowed from all employer-sponsored plans, including this
annuity certificate, may not exceed the lesser of:
$10,000 or one half of the amount available for withdrawal, whichever
is greater; or
$50,000 reduced by the excess (if any) of your highest outstanding loan
balance during the preceding 12 month period, over your outstanding loan
balance on the date the loan is made.
We will not allow a loan for an amount:
Less than $1,000; or
That would reduce the remaining net annuity value to less than the
minimum annuity value required after withdrawal shown on the annuity
certificate's Information Page.
INTEREST. The portion of the annuity value against which you have borrowed will
earn an effective annual interest rate of 3.0% credited daily. Interest on each
loan will be charged at the effective annual interest rate of 6.0%.
TERMS AND REPAYMENT. You must generally repay each loan within five years from
the date it is made. However, if the loan is used to acquire a dwelling unit
that you will use as your principle residence within a reasonable period of
time, you must repay the loan within thirty (30) years from the date it is made.
Payments are due on the date specified in the loan documents. Each payment we
receive will be applied to interest first, then to principal. The portion of
each payment applied to principal will reduce the outstanding loan balance and
will be transferred back to the annuity value.
Repayment (of principal and interest) must be made in substantially equal
installments, not less frequently than quarterly. You must clearly mark a
payment as a loan repayment, or we will credit the amount as a premium payment.
You may repay a loan at any time subject to these restrictions.
DEFAULT. If you fail to repay the loan according to the terms of the loan
documents that you signed, we will consider the loan to be in default.
In order to correct the default, we must receive the missed payments before the
last day of the calendar quarter following the quarter in which the payment was
missed. If you do not correct the default by the last day of the next calendar
quarter, you must include the outstanding loan amount, including interest, in
your gross income for the year of the default. The loan remains an outstanding
debt which must be fully repaid, unless one of the events described in the
RESTRICTIONS ON WITHDRAWALS section occurs allowing the loan to be distributed.
Until you repay a defaulted loan, such loan will be considered outstanding for
purposes of calculating the maximum allowed amount of any subsequent loan.
PARTIAL WITHDRAWALS. You may make a partial withdrawal from the annuity
certificate while a loan is outstanding. Any partial withdrawal is subject to
the RESTRICTIONS ON WITHDRAWALS section, the applicable withdrawal provisions of
the annuity certificate and may not:
Exceed 50% of the remaining net annuity value; and
Reduce the net annuity value to an amount less than the outstanding
loan balance plus the minimum annuity value required after withdrawal shown
on the annuity certificate's Information Page.
We will waive the above restrictions if the partial withdrawal is required to
satisfy minimum distribution requirements.
<PAGE>
TCE-146-198 Page 3
<PAGE>
TOTAL WITHDRAWAL. If you request a total withdrawal while a loan is outstanding,
we will treat the loan as in default. Any total withdrawal is subject to the
RESTRICTIONS ON WITHDRAWALS section. The value used to determine the total
withdrawal value will be:
The net annuity value on the date of the total withdrawal; LESS
Any applicable withdrawal charge.
ANNUITIZATION. If you elect to begin receiving payments under a settlement
option while a loan is outstanding, we will treat the loan as in default. The
value used to provide settlement option payments will be:
The net annuity value on the date of the total withdrawal; less
Any applicable withdrawal charge.
DEATH. If you die before the annuity date and while a loan is outstanding, we
will treat the loan as in default as of your date of death. The amount used to
determine the death benefit payable will be the net annuity value.
TERMINATION. Subject to applicable provisions of the Code, the annuity
certificate will end on the date that any loan and unpaid interest reduce the
amount available for withdrawal to less than the minimum annuity value required
after withdrawal shown on the annuity certificate's Information Page.
Termination will become effective 31 days after we mail notice to you at your
last known address.
REQUIRED MINIMUM DISTRIBUTION
Federal law requires that you begin receiving distributions from any or all of
your TSAs by the required beginning date. If you begin receiving settlement
option payments before the required beginning date, then the annuity date of
such settlement option payments will be treated as the required beginning date
for purposes of the DEATH PROVISIONS below.
You may take required minimum distributions from any TSA you currently maintain,
as long as:
Distributions begin when required;
Distributions are made at least once per year; and
The amount to be distributed each year is not less than the minimum
required under current federal law.
The required minimum distribution payments from the annuity certificate are
considered partial withdrawals unless they are made under a settlement option.
The amount of each withdrawal during any calendar year must meet federal TSA
requirements and be in equal or substantially equal amounts over:
Your life or over the joint lives of you and the beneficiary; or
A period not extending beyond your life expectancy or the joint life
expectancies of you and the beneficiary.
Required minimum distribution payments will be made annually and the amount will
not increase or will increase only as allowed under federal tax law. A
contingent deferred sales load may apply to any required minimum distributions
made under the annuity certificate. We reserve the right to waive any applicable
early withdrawal charge.
LIFE EXPECTANCY
Life expectancy is:
Your remaining life;
The remaining joint life expectancy of both you and the beneficiary; or
The remaining life expectancy of the beneficiary.
Your life expectancy or the joint life expectancy of both you and the
beneficiary are calculated by use of the return multiples in Tables V and VI of
Income Tax Regulation Section 1.72-9. Before required minimum distributions
begin, you may choose to have your life expectancy determined under the age
recalculation, or no age recalculation method as determined under federal law.
If you do not make an election before the required beginning date, your life
expectancy will be recalculated annually. After your election is made, it may
not be changed and will apply to all subsequent years in which required minimum
distributions are made.
<PAGE>
TCE-146-198 Page 4
<PAGE>
If you die before the required beginning date and the beneficiary is your
surviving spouse, then he or she may also choose to have his or her life
expectancy determined under the age recalculation or no age recalculation
method. Once your spouse makes an election, such election may not be changed and
will apply to all subsequent years. If your spouse does not make an election by
the time distributions are scheduled to begin under the DEATH PROVISIONS, your
spouse's life expectancy will be recalculated annually for all years and may not
be changed.
In all cases, if the beneficiary is not your surviving spouse, his or her life
expectancy may not be recalculated and will be determined using his or her
attained age on the date settlement option payments or any other distribution is
scheduled to begin. Payments for subsequent years will be based on the
beneficiary's life expectancy reduced by one year for each calendar year which
has elapsed since the calendar year in which the life expectancy of the
non-spouse beneficiary was first calculated.
AUTOMATIC PAYOUT OPTION (APO)
Before the annuity date, you may elect to have us calculate and annually
distribute required minimum distribution amounts from the annuity certificate if
you meet the following requirements:
You reach your required beginning date in the year the first APO
payment is to be made;
The annuity certificate is at least one year old;
You are not receiving distributions under any other periodic payment
option;
You elect one of the methods of calculating minimum required
distributions that we offer.
Distributions under this option must begin no earlier than January 1 of the year
in which you reach your required beginning date. Your election of APO must be in
a form and manner we prescribe. We must receive your election at least 30 days
before the payments are to begin.
We will automatically postpone your annuity date one year for each year you
receive APO payments up to your 90th birthday.
If you decide you do not want us to delay the annuity date, please contact us.
We will automatically cancel this option if:
You make more than one change in beneficiaries, unless the changes are
made due to death, divorce or marriage;
You begin receiving settlement option payments;
A withdrawal (whether partial or an APO payment) reduces the net
annuity value to less than the minimum value shown on the annuity
certificate's Information Page.
If this happens, we reserve the right to pay you the net withdrawal
value and cancel the annuity certificate; or
You die.
After this option is canceled for any reason, you may not reelect it. An early
withdrawal charge may be levied on APO payments made under the annuity
certificate. We reserve the right to waive any applicable early withdrawal
charge.
DEATH PROVISIONS
If you die before the required beginning date, the entire death benefit must:
Be completely distributed no later than December 31 of the fifth year
following the year you died; or
Begin to be distributed in the form of settlement option payments, as
described below.
The following options are available to the beneficiary as soon as we receive
proof of your death.
If the beneficiary is your surviving spouse, he or she must elect to
begin receiving settlement option payments no later than the earliest of:
(1) December 31 of the year following the year you died; or (2) December 31
of the year following the year in which you would have reached the required
beginning date if you had not died.
<PAGE>
TCE-146-198 Page 5
<PAGE>
If the beneficiary is not your surviving spouse, he or she must elect
to begin receiving settlement option payments no later than December 31 of
the year following the year in which you died.
If you die after the required beginning date, we will continue to distribute the
remaining death benefit at least as rapidly as under the settlement option in
effect on the date of your death.
LIMITATION OF PAYMENT
If the net annuity value at the time settlement option payments begin is $5,000
or less, we may pay the net annuity value in a cash payment, regardless of the
settlement option you or any other payee chooses. Such cash payment will be in
full settlement of our liability under the annuity certificate to the payee for
the benefit.
PAYMENTS TO MINORS
If you die, any amount paid to your child will be treated as if it had been paid
to your surviving spouse if the remainder of the value of the annuity
certificate becomes payable to the surviving spouse when the child reaches the
age of majority.
Signed for the Company at Charlotte, North Carolina to be effective on the
annuity certificate effective date.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
Nooruddin S. Veerjee
PRESIDENT
James W. Dederer
GENERAL COUNSEL AND SECRETARY
TCE-146-198 Page 6
<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 ------------------------------------
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) arise 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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(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.
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<PAGE>
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with
respect to some or all Portfolios, upon one (1) year advance
written notice delivered to the other parties; provided,
however, that such notice shall not be given earlier than one
year following the date of this Agreement; or (b) at the
option of Transamerica by written notice to the other parties
with respect to any Portfolio based upon Transamerica's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or (c) at
the option of Transamerica by written notice to the other
parties with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/ or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
Transamerica; or (d) at the option of the Fund in the event
that formal administrative proceedings are instituted against
Transamerica by the National Association of Securities
Dealers, Inc. ("NASD"), the Securities and Exchange
Commission, the Insurance Commissioner or like official of any
state or any other regulatory body regarding Transamerica's
duties under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the purchase of
the Fund shares, provided, however, that the Fund determines
in its sole judgment
- 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>
Participation Agreement with PIMCO Variable Insurance Trust
<PAGE>
PARTICIPATION AGREEMENT
Among
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY,
PIMCO VARIABLE INSURANCE TRUST,
and
PIMCO FUNDS DISTRIBUTORS LLC
THIS AGREEMENT, dated as of the 1st day of July, 1999 by and among
Transamerica Life Insurance and Annuity Company (the "Company"), a North
Carolina life insurance company, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each account hereinafter referred to as the
"Account"), PIMCO Variable Insurance Trust (the "Fund"), a Delaware business
trust, and PIMCO Funds Distributors LLC (the "Underwriter"), a Delaware limited
liability company.
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 and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter ("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest of the Fund are divided into
several series of shares, each designated a "Portfolio" and representing the
interest in a particular managed portfolio of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC") dated February 9, 1998 (PIMCO Variable Insurance
Trust, et al., File No. 812-10822, Investment Company Act. Rel. No. 23022)
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,
(the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, if and 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 both
affiliated and unaffiliated life insurance companies, as well as qualified
pension and retirement plans outside of the separate account context (the "Mixed
and Shared Funding Exemptive Order"), and the Fund hereby provides notice to the
Company that appropriate prospectus disclosure regarding potential risks of
mixed and shared funding may be appropriate;
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 (the "1933 Act");
WHEREAS, Pacific Investment Management Company (the "Adviser"), which
serves as investment adviser to the Fund, is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940, as amended;
WHEREAS, the Company has issued or will issue certain variable life
insurance and/or variable annuity contracts supported wholly or partially by an
Account (the "Contracts"), and said Contracts are listed in Schedule A hereto,
as it may be amended from time to time by mutual written agreement;
WHEREAS, each Account is duly established and maintained as a
segregated asset account, duly established by the Company, to set aside and
invest assets attributable to the aforesaid Contracts;
WHEREAS, the Underwriter, which serves as distributor to the Fund, is
registered as a broker dealer with the SEC 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, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A 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
the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
The Fund has granted to the Underwriter exclusive authority to
distribute the Fund's shares, and has agreed to instruct, and has so instructed,
the Underwriter to make available to the Company for purchase on behalf of the
Account Fund shares of those Designated Portfolios selected by the Underwriter.
Pursuant to such authority and instructions, and subject to Article X hereof,
the Underwriter agrees to make available to the Company for purchase on behalf
of the Account, shares of those Designated Portfolios listed on Schedule A to
this Agreement, such purchases to be effected at net asset value in accordance
with Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) Fund
series (other than those listed on Schedule A) in existence now or that may be
established in the future will be made available to the Company only as the
Underwriter may so provide, and (ii) the Board of Trustees of the Fund (the
"Board") may suspend or terminate the offering of Fund shares of any Designated
Portfolio or class thereof, if such action is required by law or by regulatory
authorities having jurisdiction or if, 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, suspension or termination is necessary in the best
interests of the shareholders of such Designated Portfolio.
1.2. The Fund shall redeem, at the Company's request, any full or fractional
Designated Portfolio shares held by the Company on behalf of the Account, such
redemptions to be effected at net asset value in accordance with Section 1.3 of
this Agreement. Notwithstanding the foregoing, (i) the Company shall not redeem
Fund shares attributable to Contract owners except in the circumstances
permitted in Section 10.3 of this Agreement, and (ii) the Fund may delay
redemption of Fund shares of any Designated Portfolio to the extent permitted by
the 1940 Act, and any rules, regulations or orders thereunder.
1.3. Purchase and Redemption Procedures
(a) The Fund hereby appoints the Company as an agent of the Fund for the
limited purpose of receiving purchase and redemption requests on behalf of
the Account (but not with respect to any Fund shares that may be held in
the general account of the Company) for shares of those Designated
Portfolios made available hereunder, based on allocations of amounts to the
Account or subaccounts thereof under the Contracts and other transactions
relating to the Contracts or the Account. Receipt of any such request (or
relevant transactional information therefor) on any day the New York Stock
Exchange is open for trading (a "Business Day") by the Company as such
limited agent of the Fund prior to the time that the Fund ordinarily
calculates its net asset value as described from time to time in the Fund
Prospectus (which as of the date of execution of this Agreement is 4:00
p.m. Eastern Time) shall constitute receipt by the Fund on that same
Business Day, provided that the Fund receives notice of such request by
9:00 a.m. Eastern Time on the next following Business Day.
(b) The Company shall pay for shares of each Designated Portfolio on the same
day that it notifies the Fund of a purchase request for such shares.
Payment for Designated Portfolio shares shall be made in federal funds
transmitted to the Fund by wire to be received by the Fund by 4:00 p.m.
Eastern Time on the day the Fund is notified of the purchase request for
Designated Portfolio shares (unless the Fund determines and so advises the
Company that sufficient proceeds are available from redemption of shares of
other Designated Portfolios effected pursuant to redemption requests
tendered by the Company on behalf of the Account). If federal funds are not
received on time, such funds will be invested, and Designated Portfolio
shares purchased thereby will be issued, as soon as practicable and the
Company shall promptly, upon the Fund's request, reimburse the Fund for any
charges, costs, fees, interest or other expenses incurred by the Fund in
connection with any advances to, or borrowing or overdrafts by, the Fund,
or any similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request. Upon
receipt of federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the
Fund.
(c) Payment for Designated Portfolio shares redeemed by the Account or the
Company shall be made in federal funds transmitted by wire to the Company
or any other designated person on the next Business Day after the Fund is
properly notified of the redemption order of such shares (unless redemption
proceeds are to be applied to the purchase of shares of other Designated
Portfolio in accordance with Section 1.3(b) of this Agreement), except that
the Fund reserves the right to redeem Designated Portfolio shares in assets
other than cash and to delay payment of redemption proceeds to the extent
permitted under Section 22(e) of the 1940 Act and any Rules thereunder, and
in accordance with the procedures and policies of the Fund as described in
the then current prospectus. The Fund shall not bear any responsibility
whatsoever for the proper disbursement or crediting of redemption proceeds
by the Company, the Company alone shall be responsible for such action.
(d) Any purchase or redemption request for Designated Portfolio shares held
or to be held in the Company's general account shall be effected at the
net asset value per share next determined after the Fund's receipt of
such request, provided that, in the case of a purchase request, payment
for Fund shares so requested is received by the Fund in federal funds
prior to close of business for determination of such value, as defined
from time to time in the Fund Prospectus.
1.4. The Fund shall use its best efforts to make the net asset value per share
for each Designated Portfolio available to the Company by 6:30 p.m. Eastern Time
each Business Day, and in any event, as soon as reasonably practicable after the
net asset value per share for such Designated Portfolio is calculated, and shall
calculate such net asset value in accordance with the Fund's Prospectus. Neither
the Fund, any Designated Portfolio, the Underwriter, nor any of their affiliates
shall be liable for any information provided to the Company pursuant to this
Agreement which information is based on incorrect information supplied by the
Company or any other Participating Insurance Company to the Fund or the
Underwriter.
1.5. The Fund shall furnish notice (by wire or telephone followed by written
confirmation) to the Company as soon as reasonably practicable of any income
dividends or capital gain distributions payable on any Designated Portfolio
shares. The Company, on its behalf and on behalf of the Account, hereby elects
to receive all such dividends and distributions as are payable on any Designated
Portfolio shares in the form of additional shares of that Designated Portfolio.
The Company reserves the right, on its behalf and on behalf of the Account, to
revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company promptly of the number
of Designated Portfolio shares so issued as payment of such dividends and
distributions. The Fund shall provide an annual calendar of dividend and
distribution dates, which may be amended from time to time.
1.6. Issuance and transfer of Fund shares shall be by book entry only. Stock
certificates will not be issued to the Company or the Account. Purchase and
redemption orders for Fund shares shall be recorded in an appropriate ledger for
the Account or the appropriate subaccount of the Account.
1.7. (a) 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 (subject to Section 1.8 hereof) and the cash value of the
Contracts may be invested in other investment companies.
The Company shall not, without prior notice to the Underwriter (unless
otherwise required by applicable law), take any action to operate the Account as
a management investment company under the 1940 Act.
(c) The Company shall not, without prior notice to the Underwriter (unless
otherwise required by applicable law), induce Contract owners to change or
modify the Fund or change the Fund's distributor or investment adviser.
(d) The Company shall not, without prior notice to the Fund, induce Contract
owners to vote on any matter submitted for consideration by the
shareholders of the Fund in a manner other than as recommended by the Board
of Trustees of the Fund.
1.8. The Underwriter and the Fund shall sell Fund shares only to Participating
Insurance Companies and their separate accounts and to persons or plans
("Qualified Persons") that represent to the Underwriter and the Fund that they
qualify to purchase shares of the Fund under Section 817(h) of the Internal
Revenue Code of 1986, as amended (the "Code") and the regulations thereunder
without impairing the ability of the Account to consider the portfolio
investments of the Fund as constituting investments of the Account for the
purpose of satisfying the diversification requirements of Section 817(h). The
Underwriter and the Fund shall not sell Fund shares to any insurance company or
separate account unless an agreement substantially complying with Article VI of
this Agreement is in effect to govern such sales, to the extent required. The
Company hereby represents and warrants that it and the Account are Qualified
Persons. The Fund reserves the right to cease offering shares of any Designated
Portfolio in the discretion of the Fund.
ARTICLE II. Representations and Warranties
The Company represents and warrants that the Contracts (a)
are, or prior to issuance will be, registered under the 1933 Act, or (b) 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 and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws and that the sale of the Contracts shall 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, that it has legally and validly established
the Account prior to any issuance or sale thereof as a segregated asset account
under North Carolina insurance laws, and that it (a) has registered or, prior to
any issuance or sale of the Contracts, will register 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, or alternatively (b) has not
registered the Account in proper reliance upon an exclusion from registration
under the 1940 Act. The Company shall register and qualify the Contracts or
interests therein as securities in accordance with the laws of the various
states only if and to the extent deemed advisable by the Company.
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 applicable state and federal 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 or the Underwriter.
2.3. The Fund may make payments to finance distribution expenses pursuant to
Rule 12b-1 under the 1940 Act. Prior to financing distribution expenses pursuant
to Rule 12b-1, the Fund will have the Board, a majority of whom are not
interested persons of the Fund, formulate and approve a plan pursuant to Rule
12b-1 under the 1940 Act to finance distribution expenses.
2.4. The Fund makes no representations as to whether any aspect of its
operations, including, but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, but may do so upon request.
2.5. The Fund represents that it is lawfully organized and validly existing
under the laws of the State of Delaware and that it does and will comply in all
material respects with the 1940 Act.
2.6. The Underwriter represents and warrants that it is a member in good
standing of the 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 any applicable state and federal securities laws.
2.7. The Fund and the Underwriter represent and warrant that all of their
trustees/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
minimum 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 shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.8. The Company represents and warrants it will maintain a blanket fidelity
bond or similar coverage issued by a reputable bonding company in an amount
appropriate to the Company's obligations under this Agreement.
2.9. ARTICLE III. Prospectuses and Proxy Statements; Voting
The Underwriter shall provide the Company with as many copies
of the Fund's current prospectus (describing only the Designated Portfolios
listed on Schedule A) or, to the extent permitted, the Fund's profiles as the
Company may reasonably request. The Company shall bear the expense of printing
copies of the current prospectus and profiles for the Contracts that will be
distributed to existing Contract owners, and the Company shall bear the expense
of printing copies of the Fund's prospectus and profiles that are used in
connection with offering the Contracts issued by the Company. If requested by
the Company in lieu thereof, the Fund shall provide such documentation
(including a final copy of the new prospectus in electronic format at the Fund's
expense) and other assistance as is reasonably necessary in order for the
Company once each year (or more frequently if the prospectus for the Fund is
amended) to have the prospectus for the Contracts and the Fund's prospectus or
profile printed together in one document (the payment of such printing costs to
be governed by the provisions of Section 5.3 of this Agreement).
3.2. The Fund's prospectus shall state that the current Statement of Additional
Information ("SAI") for the Fund is available, and the Underwriter (or the
Fund), at its expense, shall provide a reasonable number of copies of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
3.3. The Fund shall provide the Company with information regarding the Fund's
expenses, which information may include a table of fees and related narrative
disclosure for use in any prospectus or other descriptive document relating to a
Contract. The Company agrees that it will use such information in the form
provided. The Company shall provide prior written notice of any proposed
modification of such information, which notice will describe in detail the
manner in which the Company proposes to modify the information, and agrees that
it may not modify such information in any way without the prior consent of the
Fund.
3.4. The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders describing only the Designated
Portfolio(s) in Schedule A, and other communications to shareholders in such
quantity as the Company shall reasonably require for distributing to Contract
owners.
3.5. 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 SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company will vote Fund shares held in any
segregated asset account in the same proportion as Fund shares of such portfolio
for which voting instructions have been received from Contract owners, to the
extent permitted by law.
3.6. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Mixed and Shared Funding
Exemptive Order and consistent with any reasonable standards that the Fund may
adopt and provide in writing.
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 that
the Company develops and in which the Fund (or a Designated Portfolio thereof)
or the Adviser or the Underwriter is named. No such material shall be used until
approved by the Fund or its designee, and the Fund will use its best efforts for
it or its designee to review such sales literature or promotional material
within four Business Days after receipt of such material. The Fund or its
designee reserves the right to reasonably object to the continued use of any
such sales literature or other promotional material in which the Fund (or a
Designated Portfolio thereof) or the Adviser or the Underwriter is named, and no
such material shall be used if the Fund or its designee so object.
4.2. The Company shall not give any information or make any representations or
statements on behalf of the Fund or concerning the Fund or the Adviser or the
Underwriter in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or
prospectus or SAI for the Fund shares, as such registration statement and
prospectus or SAI 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 or by the Underwriter,
except with the permission of the Fund or the Underwriter or the designee of
either.
4.3. The Fund and the Underwriter, or their designee, shall furnish, or cause to
be furnished, to the Company, each piece of sales literature or other
promotional material that it develops and in which the Company, and/or its
Account, is named. No such material shall be used until approved by the Company,
and the Company will use its best efforts to review such sales literature or
promotional material within ten Business Days after receipt of such material.
The Company reserves the right to reasonably object to the continued use of any
such sales literature or other promotional material in which the Company and/or
its Account is named, and no such material shall be used if the Company so
objects.
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, the Account,
or the Contracts other than the information or representations contained in a
registration statement, prospectus (which shall include an offering memorandum,
if any, if the Contracts issued by the Company or interests therein are not
registered under the 1933 Act), or SAI for the Contracts, as such registration
statement, prospectus, or SAI may be amended or supplemented from time to time,
or in published reports for the 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, SAIs, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, promptly after the filing of such document(s)
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 (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, 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, promptly after the filing of
such document(s) with the SEC or other regulatory authorities. The Company shall
provide to the Fund and the Underwriter any complaints received from the
Contract owners pertaining to the Fund or the Designated Portfolio.
4.7. The Fund will provide the Company with as much notice as is reasonably
practicable of any proxy solicitation for any Designated Portfolio, and of any
material change in the Fund's registration statement, particularly any change
resulting in a change to the registration statement or prospectus for any
Account. The Fund will work with the Company so as to enable the Company to
solicit proxies from Contract owners, or to make changes to its prospectus or
registration statement, in an orderly manner. The Fund will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
4.8. For purposes of this Article IV, the phrase "sales literature and other
promotional materials" 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, 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,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Fund.
ARTICLE V. Fees and Expenses
The Fund and the 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 the Fund or 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, 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. Currently, no such payments are
contemplated.
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 and distributing
the proxy materials and setting in type and printing 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. For the first 14 months following the effective date of this Agreement, the
Fund shall contribute a maximum of $5,000 in aggregate towards the expenses of
printing and distributing the Fund's prospectus to owners of Contracts issued by
the Company and of distributing the Fund's periodic reports to such Contract
owners, with any additional expenses to be borne by the Company. The Fund and
the Company may agree at a future date to adjust the amount contributed by the
Fund for expenses described under this Section 5.3.
ARTICLE VI. Diversification and Qualification
The Fund will invest its assets in such a manner as to ensure
that the Contracts will be treated as annuity or life insurance contracts,
whichever is appropriate, under the Code and the regulations issued thereunder
(or any successor provisions). Without limiting the scope of the foregoing, each
Designated Portfolio has complied and will continue to comply with Section
817(h) of the Code and Treasury Regulation ss.1.817-5, 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. 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 within the grace period afforded
by Regulation 1.817-5.
6.2. The Fund represents that it shall maintain qualification as a Regulated
Investment Company under Subchapter M of the Code (under Subchapter M or any
successor or similar provisions) and that it will notify the Company immediately
upon having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.
6.3. The Company represents that the Contracts are currently, and at the time of
issuance shall be, treated as life insurance or annuity insurance contracts,
under applicable provisions of the Code, and that it will make every effort to
maintain such treatment, and that it will notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing the Contracts have
ceased to be so treated or that they might not be so treated in the future. To
the extent applicable under federal securities law, the 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 (or any successor or similar
provision), shall identify such contract as a modified endowment contract.
ARTICLE VII. Potential Conflicts
The following provisions shall apply only upon the sale of shares of the Fund to
variable life insurance separate accounts, and then only to the extent required
under the 1940 Act.
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 and all other persons 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
annuity contract and variable life insurance contract owners; or (f) a decision
by an insurer to disregard the voting instructions of contract owners. The Board
shall promptly inform the Company if it determines that a material
irreconcilable conflict exists and the implications thereof.
7.2. The Company, with a view only to the interests of Contract owners, will
report any potential or existing conflicts of which it is aware to the Board.
The Company, with a view only to the interests of Contract owners, will assist
the Board in carrying out its responsibilities under the Mixed and 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. No less than annually, the Company
shall submit to the Board such reports, materials, or data as the Board
reasonably requests so that the Board may carry out its obligations under the
Mixed and Shared Funding Exemptive Order.
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 Board members), 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 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.
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 Account's investment in
the Fund and terminate this Agreement with respect to each 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.
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 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 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 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 members of the Board. Until the
end of the foregoing six month period, the 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 Section 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 material irreconcilable 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 Contract 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 Board determines that any
proposed action does not adequately remedy any material irreconcilable conflict,
then the Company will withdraw the Account's investment in the Fund 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 by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent the Mixed and Shared Funding Exemption Order or any
amendment thereto contains terms and conditions different from Sections 3.4,
3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement, then the Fund and/or
the Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with the Mixed and Shared Funding Exemptive Order,
and Sections 3.4, 3.5, 3.6, 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 the Mixed and Shared Funding
Exemptive Order or any amendment thereto. 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 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
3.5, 3.6, 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
Indemnification by the Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund and the
Underwriter and the trustees/directors and officers of each, and each
person, if any, who controls the Fund or Underwriter within the meaning of
Section 15 of the 1933 Act or who is under common control with the Fund or
the Underwriter (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 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 or
liabilities (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or alleged untrue
statements of any material fact contained in the registration statement,
prospectus (which shall include a written description of a Contract that is
not registered under the 1933 Act), or SAI 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, prospectus or SAI for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund 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, SAI, or sales literature of the Fund not supplied by the
Company or persons under its control) or wrongful conduct of the Company or
its agents or persons under the Company's authorization or 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, SAI, 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 to the Fund by or on behalf of the Company; or
(iv) arise as a result of any material failure by the Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise,
to comply with the qualification requirements specified in Article VI 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 to
which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of its 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 an Indemnified Party, 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 Underwriter
8.2(a). The Underwriter 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 (collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Underwriter) or litigation
(including 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 or liabilities (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 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 to the Underwriter or Fund by or on behalf of the
Company for use in the registration statement, prospectus or SAI 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, SAI 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, SAI 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 the Underwriter; or
(iv) arise as a result of any failure by the Fund or the
Underwriter to provide the services and furnish the
materials under the terms of this Agreement,
including, without limiting the foregoing, a
materially incorrect or untimely calculation or
reporting of the daily net asset value per share or
distribution rate (and including a failure of the
Fund, 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
(v) arise out of or result from any material breach
of any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) 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 gross 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 the Company 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 an Indemnified Party, 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 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). The Indemnified Parties will promptly 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.
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
(collectively, the "Indemnified Parties" 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 be required to pay or may become subject under
any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
or settlements, 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 (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
(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;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund 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 gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement or to the Company, the Fund, the
Underwriter or the Account, whichever is applicable.
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 and the Underwriter agree promptly to notify the Fund
of the commencement of any litigation or proceeding against it or any
of its respective officers or directors in connection with the
Agreement, the issuance or sale of the Contracts, the operation of the
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of North
Carolina.
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, any Mixed and Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
If, in the future, the Mixed and Shared Funding Exemptive Order should no longer
be necessary under applicable law, then Article VII shall no longer apply.
ARTICLE X. Termination
This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party, for any reason with respect
to some or all Designated Portfolios, by 45 days'
advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to the
Fund and the Underwriter based upon the Company's
determination that shares of the Fund are not
reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the
Fund and the Underwriter in the event any of the
Designated 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 Fund or Underwriter in the event that formal
administrative proceedings are instituted against the Company by the NASD, the
SEC, the Insurance Commissioner or like official 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 operation of any Account, or the purchase of
the Fund's shares; provided, however, that the Fund or Underwriter 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 Company
to perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the
Fund or Underwriter by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body; provided, however, that the Company
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) termination by the Company by written notice to the
Fund and the Underwriter with respect to any
Designated Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company
under Subchapter M or fails to comply with the
Section 817(h) diversification requirements specified
in Article VI hereof, or if the Company reasonably
believes that such Portfolio may fail to so qualify
or comply; or
(g) termination by the Fund or Underwriter by written
notice to the Company in the event that the Contracts
fail to meet the qualifications specified in Article
VI hereof; or
(h) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both
of the Fund or the Underwriter 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
(i) termination by the Company by written notice to the
Fund and the Underwriter, if the Company shall
determine, in its sole judgment exercised in good
faith, that the Fund, Adviser, or the Underwriter 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
(j) termination by the Fund or the Underwriter by written
notice to the Company, if the Company gives the Fund
and the Underwriter the written notice specified in
Section 1.7(a)(ii) 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(j) shall be effective forty-five
days after the notice specified in Section 1.7(a)(ii)
was given; or
(k) termination by the Company upon any substitution of
the shares of another investment company or series
thereof for shares of a Designated Portfolio of the
Fund in accordance with the terms of the Contracts,
provided that the Company has given at least 45 days
prior written notice to the Fund and Underwriter of
the date of substitution; or
(l) termination by any party in the event that the Fund's
Board of Trustees determines that a material
irreconcilable conflict exists as provided in Article
VII.
10.2. Notwithstanding any termination of this Agreement, the Fund and the
Underwriter 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"). The
Underwriter agrees to split the cost of seeking such an order, and the Company
agrees that it shall reasonably cooperate with the Underwriter and seek such an
order upon request. Specifically, the owners of the Existing Contracts may 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 (subject to any such election by the Underwriter). 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. The parties further agree that this Section 10.2
shall not apply to any terminations under Section 10.1(g) of this Agreement.
10.3. 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)
except (i) as necessary to implement Contract owner initiated or approved
transactions, (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"), (iii) upon 45 days prior written notice
to the Fund and Underwriter, as permitted by an order of the SEC pursuant to
Section 26(b) of the 1940 Act, or (iv) as permitted under the terms of the
Contract. Upon request, the Company will promptly furnish to the Fund and the
Underwriter reasonable assurance that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contacts, 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 or the Underwriter
45 days notice of its intention to do so.
10.4. Notwithstanding any termination of this Agreement, each party's obligation
under Article VIII to indemnify the other parties shall survive.
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: PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
If to the Company: Transamerica Life Insurance and Annuity Company
1150 South Olive Street
Los Angeles, CA 90015
Attention: Sandy Brown
If to Underwriter: PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
ARTICLE XII. Miscellaneous
All persons dealing with the Fund must look solely to the
property of the Fund, and in the case of a series company, the respective
Designated Portfolios listed on Schedule A hereto as though each such Designated
Portfolio had separately contracted with the Company and the Underwriter for the
enforcement of any claims against the Fund. The parties agree that neither the
Board, officers, agents or shareholders of the Fund assume any personal
liability or responsibility for obligations entered into by or 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 without the express written consent
of the affected party until such time as such information has come into the
public domain.
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 SEC, 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 relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the North Carolina 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 the Company are being conducted in a manner consistent with the
North Carolina insurance laws and 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.
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
filed with any state or federal regulatory body or
otherwise made available to the public, as soon as
practicable and in any event within 90 days after the
end of each fiscal year;
(b) the Company's quarterly statements (statutory), as
soon as practical and in any event within 45 days
after the end of each quarterly period;
(c) as it relates to the Contracts in Schedule A, 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) as it relates to the Contracts in Schedule A, any
registration statement (without exhibits) and
financial reports of the Company filed with the
Securities and Exchange Commission or any state
insurance regulatory, as soon as practicable after
the filing thereof; and
(e) as it relates to the Contracts in Schedule A, 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 below.
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
By its authorized officer
By:
Title:
Date:
PIMCO VARIABLE INSURANCE TRUST
By its authorized officer
By:
Title:
Date:
PIMCO FUNDS DISTRIBUTORS LLC
By its authorized officer
By:
Title:
Date:
<PAGE>
A - 1
Schedule A
Contract Account Designated Portfolio(s)
1. Classic VA-6 PIMCO StocksPLUS Growth and Income
2. Catalyst VA-6 PIMCO StocksPLUS Growth and Income
3. Bounty VA-7 PIMCO StocksPLUS Growth and Income
Date: __________________
<PAGE>
Exhibit (9) Opinion and Consent of Counsel
<PAGE>
March 14, 2000
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-8 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,
/s/James W. Dederer
Executive Vice President,
General Counsel and
Corporate Secretary
<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 Frank A. Camp, James W. Dederer, David M. Goldstein, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler 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
______ day of March, 2000.
------------------------------
Patrick S. Baird
<PAGE>
Power of Attorney
The undersigned Director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Frank A. Camp, James W. Dederer, David M. Goldstein, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler 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 her hand, this
______ day of March, 2000.
------------------------------
Brenda K. Clancy
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Frank A. Camp, James W. Dederer, David M. Goldstein, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler 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
______ day of March, 2000.
------------------------------
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 Frank A. Camp, James W. Dederer, David M. Goldstein, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler 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
______ day of March, 2000.
------------------------------
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 Frank A. Camp, James W. Dederer, David M. Goldstein, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler 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
______ day of March, 2000.
------------------------------
Douglas C. Kolsrud
<PAGE>
POWER OF ATTORNEY
The undersigned Director of Transamerica Life Insurance and Annuity
Company, a North Carolina corporation (the "Company"), hereby constitutes and
appoints Frank A. Camp, James W. Dederer, David M. Goldstein, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler 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
______ day of March, 2000.
------------------------------
Richard N. Latzer
<PAGE>
POWER OF ATTORNEY
The undersigned Director and Acting Chief Financial Officer of
Transamerica Life Insurance and Annuity Company, a North Carolina corporation
(the "Company"), hereby constitutes and appoints Frank A. Camp, James W.
Dederer, David M. Goldstein, Priscilla I. Hechler, William M. Hurst, Larry N.
Norman, Thomas E. Pierpan, Stephen E. Price, Colleen Tobiason, Ronald L. Ziegler
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 her hand, this
______ day of March, 2000.
------------------------------
Karen O. 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 Frank A. Camp, James W. Dederer, David M. Goldstein, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler 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
______ day of March, 2000.
------------------------------
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 Frank A. Camp, James W. Dederer, David M. Goldstein, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler 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
______ day of March, 2000.
------------------------------
Paul E. Rutledge III
<PAGE>
POWER OF ATTORNEY
The undersigned Director and President of the Insurance Products
Division of Transamerica Life Insurance and Annuity Company, a North Carolina
corporation (the "Company"), hereby constitutes and appoints Frank A. Camp,
James W. Dederer, David M. Goldstein, Priscilla I. Hechler, William M. Hurst,
Larry N. Norman, Thomas E. Pierpan, Stephen E. Price, Colleen Tobiason, Ronald
L. Ziegler 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
______ day of March, 2000.
------------------------------
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 Frank A. Camp, James W. Dederer, David M. Goldstein, Priscilla I.
Hechler, William M. Hurst, Larry N. Norman, Thomas E. Pierpan, Stephen E. Price,
Colleen Tobiason, Ronald L. Ziegler 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
______ day of March, 2000.
------------------------------
Craig D. Vermie
<PAGE>
