Registration No. _________
No. __________
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM N-8B-2
REGISTRATION STATEMENT OF UNIT INVESTMENT TRUST
WHICH IS CURRENTLY ISSUING SECURITIES
PURSUANT TO SECTION 8(B) OF THE INVESTMENT COMPANY ACT OF 1940
TRANSAMERICA OCCIDENTAL LIFE SEPARATE ACCOUNT VUL-2
(Name of Unit Investment Trust)
1150 South Olive Street, Los Angeles, CA 90015
(Address of Principal Office of Registrant)
Issuer of periodic payment plan certificates only for purposes of
information provided herein.
Dated September 8, 1998
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I I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Furnish name of the trust and the Internal Revenue Service Employer
Identification Number.
The trust is the Transamerica Occidental Life
Separate Account VUL-2 (the "Separate Account"). The
Separate Account is a separate investment account of
Transamerica Occidental Life Insurance Company (the
"Company") and has no employer identification number.
(b) Furnish title of each class or series of securities issued by the trust.
The securities are individual modified single payment
variable life insurance contracts (the "Contracts").
2. Furnish name and principal business address and zip code and
the Internal Revenue Service Employer Identification Number of
each depositor of the trust.
Transamerica Occidental Life Insurance Company, 1150 South Olive Street, Los
Angeles,
California 90015
FEIN: 95-1060502
3. Furnish name and principal business address and zip code and
the Internal Revenue Service Employer Identification Number of
each custodian or trustee of the trust indicating for which
class or series of securities each custodian or trustee is
acting.
The Company will hold, in its own custody, all of the
securities.
4. Furnish name and principal business address and zip code and
the Internal Revenue Service Employer Identification Number of
each principal underwriter currently distributing securities
of the trust.
Distribution of the Contracts has not yet commenced. When
distribution commences, the principal underwriter will be:
Transamerica Securities Sales Corporation, 1150 South Olive Street, Los Angeles,
California 90015 FEIN: 95-4044525
5. Furnish name of state or other sovereign power, the laws of
which govern with respect to the organization of the trust.
California.
6. (a) Furnish the dates of execution and termination of
agreement currently in effect under the terms of
which the trust was organized and issued or proposes
to issue securities.
The Separate Account was established under California
law pursuant to a resolution of the Board of
Directors of the Company on June 11, 1996.
(b) Furnish the dates of execution and termination of any
indenture or agreement currently in effect pursuant
to which the proceeds of payments on securities
issued or to be issued by the trust are held by the
custodian or trustee.
None.
7. Furnish in chronological order the following information with
respect to each change of name of the trust since January 1,
1930. If the name has never been changed, so state.
The name of the Separate Account has never been changed.
8. State the date on which the fiscal year of the trust ends.
December 31.
Material Litigation
9. Furnish a description of any pending legal proceedings,
material with respect to the security holders of the trust
by reason of the nature of the claim or the amount thereof,
to which the trust, the depositor, or the principal
underwriter is a party or of which the assets of the trust
are the subject, including the substance of the claims
involved in such proceeding and the title of the proceeding.
Furnish a similar statement with respect to any pending
administrative proceeding commenced by a governmental
authority or any such proceeding or legal proceeding known
to be contemplated by a governmental authority. Include any
proceedings which, although immaterial itself, is
representative of, or one of, a group which in the aggregate
is material.
There are no current or pending legal or administrative
proceedings to which Separate Account, the Company, or
principal underwriter, Transamerica Securities Sales
Corporation, is a party, which are material with respect to
the security holders of the Separate Account.
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
Except for terms defined in this Form N-8B-2, terms used in
this Form N-8B-2 have the same meaning as such terms are
defined in the prospectus (the "Prospectus") filed with the
Securities and Exchange Commission ("SEC") on
_______________by Transamerica Occidental Life Separate
Account as part of a Registration Statement, as amended from
time to time, on Form S-6 under the Securities Act of 1933
(the "Registration Statement"), describing the Contracts.
General Information Concerning the Securities of the Trust
and the Rights of Holders.
10. Furnish a brief statement with respect to the following
matters for each class or series of securities issued by the
trust.
(a) Whether the securities are of the registered or bearer type.
The Contracts are modified single payment variable
life insurance contracts and, as such, are
"registered" in the name of the owner of a Contract
(the "Contract Owner") and the records concerning the
Contract Owner are maintained by or on behalf of the
Company.
(b) Whether the securities are of the cumulative or
distributive type. The Contracts are of the
cumulative type, providing for no distribution of
income, dividends or capital gains except in
connection with a voluntary surrender or partial
withdrawal of Contract Value by a Contract Owner, or
in connection with the payment of death benefits.
(c) The rights of security holders with respect to partial
withdrawal or redemption.
A Contract may be surrendered at any time, subject to the
possible imposition of a surrender charge. See Item 13(a)
"Surrender Charge" and Item 17(a) "Surrender."
Partial withdrawals in a minimum amount of $1,000 may
be made from the Contract Value at any time upon
written request filed at the Company's Variable Life
Service Center.
A surrender charge may apply to the amount
withdrawn. Currently, we do not impose a transaction
fee for partial withdrawals. We reserve the right to
impose a withdrawal transaction fee of 2.0% of the
amount withdrawn, not to exceed $25. See Item 13(a)
"Charges on Partial Withdrawal" and Item 17(a)
"Partial Withdrawal."
(d) The rights of security holders with respect to
conversion, transfer, partial-redemption, and similar
matters.
TRANSFER - The Contracts permit payments to be
allocated either to the Fixed Account, which is part
of the Company's General Account, or to the
sub-accounts of the Separate Account. Each
sub-account invests exclusively in a corresponding
mutual fund investment portfolio ("portfolio").
Subject to the consent of the Company, the Contract
Owner may transfer amounts among all of the
sub-accounts and between the sub-accounts and the
Fixed Account, subject to certain restrictions, but
at no time may have allocations in more than 20
sub-accounts.
CONVERSION PRIVILEGE - During the first 24 Contract
months after the date of issue, subject to certain
restrictions, the Contract Owner may convert the
Contract to a fixed Contract by transferring all
Contract Value in the sub-accounts to the Fixed
Account and by simultaneously changing the allocation
of future payments to the Fixed Account.
FREE LOOK PRIVILEGE -
The Contract provides for a free look period under
the Right to Cancel provision. The Contract Owner has
the right to examine and cancel the Contract by
returning it to us or to one of our representatives
on or before the tenth day (or such later date as
required in by state law) after receiving the
Contract.
If the Contract provides for a full refund under its
"Right to Cancel" provision as required by state law,
the refund will be the entire payment. If the
Contract does not provide for a full refund, the
refund amount will be (1) amounts allocated to the
Fixed Account; PLUS, (2) the Contract Value in the
sub-accounts; PLUS, (3) all fees, charges and taxes
which have been imposed.
We may delay a refund of any payment made by check
until the check has cleared the Contract Owner's
bank. The refund will be determined as of the
Valuation Date that the Contract is received at our
Variable Life Service Center.
The Contract Owner may make surrenders and partial
withdrawals as described in Items 10(c), 13(a) and
17(a).
(e) If the trust is the issuer of periodic payment plan
certificates, the substance of the provisions of any
indenture or agreements with respect to lapses or
defaults by security holders in making principal
payments, and with respect to reinstatement.
CONTRACT LAPSE AND REINSTATEMENT - If the Guaranteed
Death Benefit Rider is not in effect on your
Contract, the Contract will lapse if, on a monthly
processing date, the surrender value is less than the
monthly deductions due. If the Contract lapses, you
will have a 62-day grace period in which to pay
required premium. If sufficient premium is not paid
by the end of the grace period, the Contract will
terminate without value.
If the Guaranteed Death Benefit Rider is in effect on
your Contract, the Contract will not lapse. If the
Guaranteed Death Benefit Rider is terminated,
however, your Contract may then lapse.
Additionally, whether the Guaranteed Death Benefit
Rider is or is not in effect on the Contract, if the
outstanding loan at any time exceeds the Contract
Value minus the surrender charges, the outstanding
loan will be in default. If the outstanding loan goes
into default, you will have a 62-day grace period in
which to pay back the excess outstanding loan. If you
do not pay back the excess outstanding loan by the
end of the grace period, the loan will be foreclosed
and the Contract will terminate without value.
If the Guaranteed Death Benefit Rider is in effect on
the Contract, the Guaranteed Death Benefit Rider will
terminate if the loan is foreclosed. Once terminated,
the Guaranteed Death Benefit Rider may not be
reinstated.
Within limits, the Contract may be reinstated within
three years from the date of default if it lapses or
the outstanding loan is foreclosed.
GUARANTEED DEATH BENEFIT - If the Contract Owner pays
100% of the guideline single premium for the
Contract, this rider will be added to the Contract
without additional charge. If the rider is in effect,
the Contract will not lapse through the final payment
date. After the final payment date, if the rider is
in effect and is not subsequently terminated, the
rider provides that the death benefit after the final
payment date is the GREATER of (1) the face amount as
of the final payment date or (2) 101% of the Contract
Value as of the date due proof of death is received
by the Company. The rider may terminate under certain
circumstances and, once terminated, may not be
reinstated. The rider may not be available in all
juridictions.
(f) The substance of the provisions of any indenture or
agreements with respect to voting rights, together
with the names of any persons other than security
holders given the right to exercise voting rights
pertaining to the trust's securities or the
underlying securities and the relationship of such
persons to the trust.
We are the legal owner of all portfolio shares held
in the Separate Account and each sub-account. As the
owner, we have the right to vote at a portfolio's
shareholder meetings. However, to the extent required
by federal securities laws and regulations, we will
vote portfolio shares that each sub-account holds
according to instructions received from Contract
Owners with Contract Value in the sub-account. If any
federal securities laws or regulations or their
interpretation change to permit us to vote shares in
our own right, we reserve the right to do so, whether
or not the shares relate to the Contracts.
We will provide each person having a voting interest
in a portfolio with proxy materials and voting
instructions. We will vote shares held in each
sub-account for which no timely instructions are
received in proportion to all instructions received
for the sub-account. We will also vote in the same
proportion our shares held in the Separate Account
that do not relate to the Contracts.
We will compute the number of votes that a Contract
Owner has the right to instruct on the record date
established for the portfolio. This number is the
quotient of (1) each Contract Owner's Contract Value
in the sub-account; divided by (2) the net asset
value of one share in the portfolio in which the
assets of the sub-account are invested.
We may disregard voting instructions Contract Owners
initiate in favor of any change in the investment
policies or in any investment adviser or principal
underwriter. Our disapproval of any change must be
reasonable. A change in investment policies or
investment adviser must be based on a good faith
determination that the change would be contrary to
state law or otherwise is improper under the
objectives and purposes of the portfolios. If we do
disregard voting instructions, we will include a
summary of and reasons for that action in the next
report to Contract Owners.
(g) Whether security holders must be given notice of any
changes in:
(1) the composition of the assets of the trust.
We reserve the right, subject to law, to
make additions to, deletions from, or
substitutions for the shares that are held
in the sub-accounts. We may redeem the
shares of a portfolio and substitute shares
of another registered open-end management
company, if (1) the shares of the portfolio
are no longer available for investment; or
(2) in our judgment further investment in
the portfolio would be improper based on the
purposes of the Separate Account or the
affected sub-account.
Where the 1940 Act or other law requires, we
will not substitute any shares respecting a
Contract interest in a sub-account without
notice to Contract Owners and prior approval
of the SEC and state insurance authorities.
The Separate Account may, as the law allows,
purchase other securities for other
contracts or allow a conversion between
contracts on a Contract Owner's request.
We reserve the right to establish additional
sub-accounts funded by a new portfolio or by
another investment company. Subject to law,
we may, in our sole discretion, establish
new sub-accounts or eliminate one or more
sub-accounts.
Shares of the portfolios are issued to other
separate accounts of Transamerica and its
affiliates that fund variable annuity
contracts and that fund other variable life
policies ("mixed funding"). Shares of the
portfolios are also issued to other
unaffiliated insurance companies ("shared
funding"). It is conceivable that in the
future such mixed funding or shared funding
may be disadvantageous for variable life
Contract and Policy Owners or variable
annuity Policy Owners. Transamerica does not
believe that mixed funding is currently
disadvantageous to either variable life
insurance Contract and Policy Owners or
variable annuity Policy Owners. Transamerica
will monitor events to identify any material
conflicts among Contract and Policy Owners
because of mixed funding. If Transamerica
concludes that separate portfolios should be
established for variable life and variable
annuity separate accounts, or for separate
variable life separate accounts, we will
bear the expenses.
We may change the Contract to reflect a
substitution or other change and will notify
Contract Owners of the change. Subject to
any approvals the law may require, the
Separate Account or any sub-accounts may be
(1) operated as a management company under
the 1940 Act; (2) deregistered under the
1940 Act if registration is no longer
required; or (3) combined with other
sub-accounts or our other separate accounts.
(2) the terms and conditions of the securities issued
by the trust.
No change in the terms and conditions of the
Contracts that affect the Contract Owner's
rights will be made without notice to
Contract Owners to the extent required by
law.
(3) the provisions of any indenture or agreement of
the trust.
No notice to or consent from Contract Owners
is required for any change in the Company's
resolution establishing the Separate
Account.
(4) the identity of the depositor, trustee or
custodian.
The depositor of the Separate Account cannot
be changed.
The Separate Account has no Trustees.
Notice to Contract Owners need not be given
for the custodian to be changed.
(h) Whether the consent of security holders is required
in order for action to be taken concerning any change
in:
(1) the composition of the assets of the trust.
The Contracts do not require consent of the
Contract Owners when changing the underlying
securities of the Separate Account, except
as may be required by currently applicable
law or regulation.
(2) the terms and conditions of the securities issued
by the trust.
Except as appropriate to comply with federal
or state law or regulation the terms and
conditions of a Contract cannot be changed
without the consent of the Contract Owner.
(3) the provisions of any indenture or agreement of
the trust.
No consent is required.
(4) the identity of the depositor, trustee or
custodian.
The depositor of the Separate Account cannot
be changed.
The Separate Account has no Trustees and no
custodian.
(i) Any other principal feature of the securities issued
by the trust or any other principal right, privilege
or obligation not covered by subdivisions (a) to (g)
or by any other item in this form.
(1) Payments - See Items 14 and 15.
(2) DEATH BENEFIT - If the Contract is in force on
the Insured's death, we will, with due proof of
death, pay the net death benefit to the named
beneficiary. For Second-to-Die Contracts, the net
death benefit is payable on the death of the last
surviving Insured. There is no death benefit payable
on the death of the first Insured to die. We will
normally pay the net death benefit within seven days
of receiving due proof of the Insured's death, but we
may delay payment of net death benefits. The
beneficiary may receive the net death benefit in a
lump sum or under a payment option, unless the
payment option has been restricted by the Contract
Owner. The net death benefit is the amount of the
death benefit reduced by certain amounts, as
described below. The amount of the death benefit in
some instances depends on whether the Guaranteed
Death Benefit Rider is in effect on the Contract at
the time of the Insured's death.
GUARANTEED DEATH BENEFIT RIDER (NOT AVAILABLE IN ALL
JURISDICTIONS) - If at the time of issue the Contract
Owner has made payments equal to 100% of the
guideline single premium, a Guaranteed Death Benefit
Rider will be added to the Contract at no additional
charge. The Contract will not lapse while the
Guaranteed Death Benefit Rider is in force. The
Guaranteed Death Benefit Rider will terminate (AND
MAY NOT BE REINSTATED) on the first to occur of (1)
foreclosure of the outstanding loan; (2) any Contract
change that results in a negative guideline level
premium; (3) a request for a partial withdrawal or a
loan after the final payment date; or (4) written
request by the Contract Owner to terminate the Rider.
DEATH BENEFIT AND NET DEATH BENEFIT - Through the
final payment date, the death benefit is equal to the
GREATER of the(1) face amount or (2) guideline
minimum sum insured.
Through the final payment date, the net death benefit
is (1) the death benefit MINUS (2) any outstanding
loan, rider charges and monthly deductions due and
unpaid through the Contract month in which the
Insured dies, as well as any unpaid partial
withdrawals, withdrawal transaction fees, and
applicable surrender charges.
If the Guaranteed Death Benefit Rider is in effect on
the final payment date, and is not subsequently
terminated, then the death benefit after the final
payment date is the GREATER of (1) the face amount on
the final payment date; or (2) 101% of the Contract
Value as of the date due proof of death is received
by us.
The net death benefit after the final payment date if
the Guaranteed Death Benefit Rider is in effect is
(1) the death benefit MINUS (2) any outstanding loan,
through the month in which the Insured dies.
If the Guaranteed Death Benefit Rider is NOT in
effect, then the death benefit after the final
payment date is 101% of the Contract Value as of the
date due proof of death is received by us.
The net death benefit after the final payment date if
the Guaranteed Death Benefit Rider is NOT in effect
is (1) the death benefit MINUS (2) any outstanding
loan, through the month in which the Insured dies, as
well as any unpaid partial withdrawals, withdrawal
transaction fees, and applicable surrender charges.
GUIDELINE MINIMUM SUM INSURED - The guideline minimum
sum insured is a percentage of the Contract Value as
set forth in APPENDIX A -- GUIDELINE MINIMUM SUM
INSURED TABLE. The guideline minimum sum insured is
computed based on federal tax regulations to ensure
that the Contract qualifies as a life insurance
contract and that the insurance proceeds generally
will be excluded from the gross income of the
beneficiary.
(3) Calculation of Contract Value - See Items 44(a), 44(c),
and 46(a).
----------------------------- ---
(4) Loan Provisions. See Item 21.
(5) PAYMENT OPTIONS - The net death benefit
payable may be paid in a single sum or under
one or more of the benefit payment options
then offered by the Company. Benefit payment
options are paid from the General Account
and are not based on the investment
experience of the Separate Account. These
benefit payment options also are available
at the maturity date or if the Contract is
surrendered. If no election is made, we will
pay the net death benefit in a single sum.
(6) Optional Insurance Benefits - Subject to
certain requirements, one or more of the
following additional insurance benefits may
be added by rider(1) Option for Accelerated
Death Benefits (Living Benefits Rider), (2)
1035 Exchange Rider; and (3) Guaranteed
Death Benefit Rider. There is not charge
currently for any of these riders. All
riders may not be available in all
jurisdictions
Information Concerning the Securities Underlying the Trust's Securities
11. Describe briefly the kind or type of securities comprising the
unit of specified securities in which security holders have an
interest.
The Contracts permit payments to be allocated either to the
Fixed Account, which is part of the Company's General Account,
or to the Separate Account. Twenty-four investment divisions
("sub-accounts") are currently offered under the Contracts.
Each sub-account invests exclusively in a corresponding
portfolio. The portfolios are open-end management investment
companies or portfolios of series, open-end management
companies. Each of the portfolios operates pursuant to
different investment objectives, which are summarized below:
The Capital Appreciation Portfolio of AIM Variable Insurance
Funds, Inc. seeks capital appreciation through investments in
commons stocks, with emphasis on medium-sized and smaller
emerging growth companies. The Adviser will be particularly
interested in companies that are likely to benefit from new or
innovative products, services or processes that should enhance
such companies' prospects for future growth in earnings. As a
result of this policy, the market prices of many of the
securities purchased and held by the Portfolio may fluctuate
widely. Any income received from securities held by the
Portfolio will be incidental, and an investor should not
consider a purchase of shares of the Portfolio as equivalent
to a complete investment program. The Portfolio is primarily
comprised of securities for two basic categories of companies:
(1) "core" companies, which the Adviser considers to have
experienced above-average and consistent long-term growth in
earnings and to have excellent prospects for outstanding
future growth, and (2) "earning acceleration" companies which
the Adviser believes are currently enjoying a dramatic
increase in profits.
The Growth & Income Portfolio of AIM Variable Insurance Funds,
Inc. seeks growth of capital, with current income as a
secondary objective. Although the amount of the Portfolio's
current income will vary from time to time, it is anticipated
that the current income realized by the Portfolio will
generally be greater than that realized by mutual funds whose
sole objective is growth of capital. The Portfolio seeks to
achieve its objective by generally investing at least 65% of
its net assets in stocks of companies believed by management
to have the potential for above average growth in revenues and
earnings. The Portfolio generally will also invest at least
80% if its net assets in securities which pay income to the
Portfolio.
The International Equity Portfolio of AIM Variable Insurance
Funds, Inc. seeks to provide long-term growth of capital by
investing in a diversified portfolio of international equity
securities the issuers of which are considered by the Adviser
to have strong earnings momentum. Any income realized by the
Portfolio will be incidental and will not be an important
criterion in the selection of portfolio securities. In
managing the Portfolio, the Adviser seeks to apply to a
diversified portfolio of international equity securities
judged by the Adviser to be under-valued relative to the
current or projected earnings of the companies issuing the
securities, or relative to current market value of assets
owned by the companies issuing the securities or relative to
the equities market generally. The Portfolio will utilize to
the extent practicable a fully managed investment policy
providing for the selection of securities which meet certain
quantitative standards determined by the Adviser. The Adviser
will review carefully the earnings history and prospects for
growth of each company considered for investment by the
Portfolio. It is expected that the Portfolio, when fully
invested, will generally be comprised of two basic categories
of foreign companies: (1) "core" companies, which the Adviser
considers to have experienced consistent long-term growth in
earnings and to have strong prospects for outstanding future
growth, and (2) companies that the Adviser believes are
currently experiencing a greater than anticipated increase in
earnings. if a particular foreign company meets the
quantitative standards determined by the Adviser, its
securities may be acquired by the Portfolio regardless of the
location of the company or the percentage of the Portfolio's
Investments in the company's country or region. However, the
Adviser will also consider other factors in making investment
decisions for the Portfolio, including such factors as the
prospects for relative economic growth among countries or
regions, economic and political conditions, currency exchange
fluctuations, tax considerations and the liquidity of a
particular security.
The Income and Growth Portfolio of The Alger American Fund
seeks, primarily, a high level of dividend income. Capital
appreciation is a secondary objective of the portfolio. Except
during temporary defensive periods, the portfolio attempts to
invest 100%, and it is a fundamental policy of the portfolio
to invest at least 65%, of its total assets in dividend paying
equity securities. The Adviser will favor securities it
believes also offer opportunities for capital appreciation.
The portfolio may invest up to 35% of its total assets in
money market instruments and repurchase agreements and in
excess of that amount (up to 100% of its assets) during
temporary defensive periods.
The Growth and Income Portfolio of the Alliance Variable
Products Series Fund, Inc. seeks reasonable current income and
reasonable opportunity for appreciation through investments
primarily in dividend-paying common stocks of good quality.
Whenever the economic outlook is unfavorable for investment in
common stock, investments in other types of securities, such
as bonds, convertible bonds, preferred stock and convertible
preferred stocks may be made by the portfolio. Purchases and
sales of portfolio securities are made at such times and in
such amounts as are deemed advisable in light of market,
economic and other conditions.
The Premier Growth Portfolio of Alliance Variable Products
Series Fund, Inc. seeks growth of capital by pursuing
aggressive investment policies. Since investments will be made
based upon their potential for capital appreciation, current
income will be incidental to the objective of capital growth.
The portfolio will invest predominantly in the equity
securities (common stocks, securities convertible into commons
stocks and rights and warrants to subscribe for or purchase
common stocks) of a limited number of large, carefully
selected, high-quality U.S. companies that, in the judgment of
the Adviser, are likely to achieve superior earnings growth.
The portfolio investments in the 25 such companies most highly
regarded at any point in time by the Adviser will usually
constitute approximately 70% of the portfolio's net assets.
The portfolio thus differs from more typical equity mutual
funds by investing most of its assets in a relatively small
number of intensively researched companies. The portfolio
will, under normal circumstances, invest at least 85% of the
value of its total assets in the equity securities of U.S.
companies.
The Capital Appreciation Portfolio of the Dreyfus Variable
Investment Fund is a diversified portfolio, the primary
investment objective of which is to provide long-term capital
growth consistent with the preservation of capital; current
income is a secondary investment objective. During periods
which the Sub-Adviser determines to be of market strength, the
portfolio acts aggressively to increase shareholders' capital
by investing principally in common stocks of domestic and
foreign issuers, common stocks with warrants attached and debt
securities of foreign governments. The portfolio will seek
investment opportunities generally in large capitalization
companies (those with market capitalizations exceeding $500
million) which the Sub-Adviser believes have the potential to
experience above average and predictable earnings growth.
The Small Cap Portfolio of the Dreyfus Variable Investment
Fund seeks to maximize capital appreciation. It seeks to
achieve its objective by investing principally in common
stocks. Under normal market conditions, the portfolio will
invest at least 65% of its total assets in companies with
market capitalizations of less than $1.5 billion at the time
of purchase which the Adviser believes to be characterized by
new or innovative products, services or processes which should
enhance prospects for growth in future earnings.
The Balanced Portfolio of the Janus Aspen Series seeks
long-term capital growth, consistent with preservation of
capital and balanced by current income. It is a diversified
portfolio that, under normal circumstances, pursues its
objective by investing 40-60% of its assets in securities
selected primarily for their growth potential and 40-60% of
its assets in securities selected primarily for their income
potential. This portfolio normally invests at least 25% of its
assets in fixed-income senior securities, which include debt
securities and preferred stocks.
The Worldwide Growth Portfolio of the Janus Aspen Series seeks
long-term growth of capital in a manner consistent with the
preservation of capital. It is a diversified portfolio that
pursues its objective primarily through investments in common
stocks of foreign and domestic issuers. The portfolio has the
flexibility to invest on a worldwide basis in companies and
other organizations of any size, regardless of country of
organization or place of principal business activity. The
portfolio normally invests in issuers from at least five
different countries, including the United States. The
portfolio may at times invest in fewer than five countries or
even a single country.
The Emerging Growth Series of the MFS Variable Insurance Trust
seeks to provide long-term growth of capital. Dividend and
interest income from portfolio securities, if any, is
incidental to the investment objective of long-term growth of
capital. The investment policy is to invest primarily (i.e.,
at least 80% of its assets under normal circumstances) in
common stocks of companies that the Adviser believes are early
in their life cycle but which have the potential to become
major enterprises (emerging growth companies). While the
portfolio will invest primarily in common stocks, the
portfolio may, to a limited extent, seek appreciation in other
types of securities such as fixed income securities (which may
be unrated), convertible securities and warrants when relative
values make such purchases appear attractive either as
individual issues or as types of securities in certain
economic environments. The portfolio may invest in
non-convertible fixed income securities rated lower than
"investment grade" (commonly known as "junk bonds") or in
comparable unrated securities, when, in the opinion of the
Adviser, such an investment presents a greater opportunity for
appreciation with comparable risk to an investment in
"investment grade" securities. Under normal market conditions
the portfolio will invest not more than 5% of its nets assets
in these securities. Consistent with its investment objective
and policies described above, the portfolio may also invest up
to 25% (and generally expects to invest not more than 15%) of
its net assets in foreign securities (including emerging
market securities and Brady Bonds) which are not traded on a
U.S. exchange.
The Growth with Income Series of the MFS Variable Insurance
Trust seeks reasonable current income and long-term growth of
capital and income. Under normal market conditions, the
portfolio will invest at least 65% of its assets in equity
securities of companies that are believed to have long-term
prospects for growth and income. Equity securities in which
the portfolio may invest include the following: common stocks,
preferred stocks and preference stock; securities such as
bonds, warrants or rights that are convertible into stocks;
and depository receipts for those securities. These securities
may be listed on securities exchanges, traded in various
over-the-counter markets or have no organized markets.
Consistent with its investment objective and policies
described above, the portfolio may also invest up to 75% (and
generally expects to invest no more than 15%) of its net
assets in foreign securities (including emerging market
securities and Brady Bonds) which are not traded on a U.S.
exchange.
The Research Series of the MFS Variable Insurance Trust seeks
long-term growth of capital and future income. The policy is
to invest a substantial proportion of its assets in equity
securities of companies believed to possess better than
average prospects for long-term growth. Equity securities in
which the portfolio may invest include the following: common
stocks, preferred stocks, securities such as bonds, warrants
or rights that are convertible into stocks and depository
receipts for those securities. These securities may be listed
on securities exchanges, traded in various over-the-counter
markets or have no organized markets. A smaller proportion of
the assets may be invested in bonds, short-term obligations,
preferred stocks or common stocks whose principal
characteristic is income production rather than growth. Such
securities may also offer opportunities for growth of capital
as well as income. In the case of both growth stocks and
income issues, emphasis is placed on the selection of
progressive, well-managed companies. The portfolio's
non-convertible debt investments, if any, may consist of
"investment grade" securities, and, with respect to no more
than 10% of the portfolio's net assets, securities in the
lower rated categories or securities which the Adviser
believes to be a similar quality to these lower rated
securities (commonly know as "junk bonds"). Consistent with
its investment objective and policies described above, the
portfolio may also invest up to 20% of its net assets in
foreign securities (including emerging market securities)
which are not traded on a U.S. exchange.
The Fixed Income Portfolio of the Morgan Stanley Universal
Funds, Inc. seeks above-average total return over a market
cycle of three to five years by investing primarily in a
diversified portfolio of U.S. government and agencies
securities, corporate bonds, mortgage backed securities,
foreign bonds and other fixed income securities and
derivatives. The portfolio's average weighted maturity will
ordinarily exceed five years and will usually be between five
and fifteen years.
The High Yield Portfolio of the Morgan Stanley Universal
Funds, Inc. seeks above-average total return over a market
cycle of three to five years by investing primarily in high
yield securities of U. S. and foreign issuers, including
corporate bonds and other fixed income securities and
derivatives. High yield securities are rated below investment
grade and are commonly referred to as "junk bonds." The
portfolio's average weighted maturity will ordinarily exceed
five years and will usually be between five and fifteen years.
The International Magnum Portfolio of the Morgan Stanley
Universal Funds, Inc. seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers
domiciled in EAFE countries. The countries in which the
portfolio will invest are those comprising the Morgan Stanley
Capital International EAFE Index, which includes Australia,
Japan, New Zealand, most nations located in Western Europe and
certain developed countries in Asia, such as Hong Kong and
Singapore (collectively the "EAFE countries"). The portfolio
may invest up to 5% of its total assets in securities of
issuers domiciled in non-EAFE countries. Under normal
circumstances, at least 65% of the total assets of the
portfolio will be invested in equity securities of issuers in
at least three different EAFE countries.
The Managed Portfolio of the OCC Accumulation Trust seeks
growth of capital over time through investment in a portfolio
consisting of common stocks, bonds and cash equivalents, the
percentages of which will vary based on the Adviser's
assessments of the relative outlook for such investments. Debt
securities are expected to be predominantly investment grade
intermediate to long term U.S. Government and corporate debt,
although the portfolio will also invest in high quality short
term money market and cash equivalent securities and may
invest almost all of its assets in such securities when the
Adviser deems it advisable in order to preserve capital. In
addition, the portfolio may also purchase foreign securities
provided that they are listed on a domestic or foreign
securities exchange or are represented by American depository
receipts listed on a domestic securities exchange or traded in
domestic or foreign over-the-counter markets.
The Small Cap Portfolio of the OCC Accumulation Trust seeks
capital appreciation through investments in a diversified
portfolio consisting primarily of equity securities of
companies with market capitalizations of under $1 billion.
Under normal circumstances at least 65% of the portfolio's
assets will be invested in equity securities. The majority of
securities purchased by the portfolio will be traded on the
New York Stock Exchange, the American Stock Exchange or in the
over-the-counter market, and will also include options,
warrants, bonds, notes and debentures which are convertible
into or exchangeable for, or which grant a right to purchase
or sell, such securities. In addition, the portfolio may also
purchase foreign securities provided that they are listed on a
domestic or foreign securities exchange or are represented by
American depository receipts listed on a domestic securities
exchange or traded in domestic or foreign over-the-counter
markets.
The Aggressive Growth Portfolio of the Transamerica Variable
Insurance Fund, Inc. seeks to maximize long-term growth. The
Portfolio generally invests at least 90% of its total assets
in a non-diversified portfolio of domestic equity securities
of any size, which may include securities of larger more
established companies and/or smaller emerging companies
selected by the Sub-Adviser for their growth potential
resulting from growing franchises protected by high barriers
to competition. The Portfolio may invest to a lesser degree in
common stocks of foreign issuers and in other types of
domestic and foreign securities, including preferred stocks,
warrants, convertible securities and debt securities. While
the Portfolio will generally be fully invested, should the
Sub-Adviser determine that market conditions warrant, the
Portfolio may invest without limit in cash and cash
equivalents for temporary defensive purposes. The Portfolio is
constructed one stock at a time. Although themes may emerge in
the Portfolio, securities are generally selected without
regard to any defined industry sector or other similarly
defined selection procedure. Each company passes through a
research process and stands on its own merits as a viable
investment in the Sub-Adviser's opinion.
The Balanced Portfolio of the Transamerica Variable Insurance
Fund, Inc. seeks to achieve long-term capital growth and
current income with a secondary objective of capital
preservation, by balancing investments among stocks, bonds,
and cash (or cash equivalents). The Portfolio invests in a
diversified selection of common stocks, bonds, and money
market instruments and other short-term debt securities. The
Portfolio attempts to achieve reasonable asset appreciation
during favorable market conditions and conservation of
principal in adverse times. The proportion of investments in
bonds and stocks will be adjusted according to business and
investment conditions. In general, common stocks represent 60%
to 70% of the Portfolio's total assets, with the remaining 30%
to 40% of the Portfolio's assets primarily invested in
investment grade bonds and cash and cash equivalents. The
Portfolio holds common stocks primarily to provide long-term
growth of capital. The stocks in the Portfolio are generally
growth companies that are considered to be premier companies
and under-valued in the stock market. The fixed income portion
of the Portfolio is invested in a diversified selection of
corporate and U.S. government bonds and mortgage-backed
securities. The fixed income assets are normally at least 65%
high quality, investment grade bonds with maturities between 5
and 30 years. Non-investment grade bonds held in the fixed
income portion of the Portfolio will be less than 20% of the
Portfolio's total net assets. The Portfolio may also hold
certain short-term fixed income securities. The Portfolio may
buy foreign securities and other instruments if they meet the
same criteria described above for the Portfolio's investments
in general. As much as 20% of the Portfolio's assets may be
invested in foreign securities.
The Growth Portfolio of the Transamerica Variable Insurance
Fund, Inc., seeks long-term capital growth. Common stock
(listed and unlisted) is the basic form of investment. The
Growth Portfolio invests primarily in common stocks of growth
companies that are considered by the Sub-Adviser to be premier
companies. In the Sub-Adviser'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
Sub-Adviser of the Portfolio believes in long-term investing
and places great emphasis on the sustainability of the above
competitive advantages. Unless market conditions indicate
otherwise, the Sub-Adviser also tries to keep the Portfolio
fully invested in equity-type securities and does not try to
time stock market movements. When in the judgment of the
Sub-Adviser market conditions warrant, the portfolio may, for
temporary defensive purposes, hold part or all of its assets
in cash, debt or money market instruments. The portfolio may
invest up to 10% of its assets in debt securities having a
call on common stocks that are rated below investment grade.
The Money Market Portfolio of the Transamerica Variable Insurance Fund, Inc.
seeks to maximize current income from money market securities consistent with
liquidity and the preservation of principal. The portfolio invests primarily in
high quality U. S. dollar-denominated money market instruments with remaining
maturities of 13 months or less, including: obligations issued or guaranteed by
the U. S. and foreign governments and their agencies and instrumentalities;
obligations of U. S. and foreign banks, or their foreign branches, and U. S.
savings banks; short-term corporate obligations, including commercial paper,
notes and bonds; other short-term debt obligations with remaining maturities of
397 days or less; and repurchase agreements involving any of the securities
mentioned above. The portfolio may also purchase other marketable,
non-convertible corporate debt securities of U. S. issuers. These investments
include bonds, debentures, floating rate obligations, and issues with optional
maturities.
The Small Company Portfolio of the Transamerica Variable
Insurance Fund, Inc. seeks to maximize long-term growth. It
invests primarily in a diversified portfolio of domestic
common stocks. Under normal market conditions, at least 65% of
the Portfolio will be invested in companies with smaller
market capitalizations (generally, under $1 billion) or annual
revenues of no more than $1 billion. The companies in which
the Portfolio invests are those that the Sub-Adviser believes
to have the potential for significant long-term capital
appreciation. The Portfolio primarily invests in domestic
common stocks of small companies selected by the Sub-Adviser.
The Portfolio may invest to a lesser degree in other types of
domestic and foreign securities, including preferred stocks,
warrants, convertible securities and debt securities. Although
the Portfolio is authorized to invest without limitation in
foreign equity and debt securities, the Sub-Adviser currently
does not intend to invest in foreign securities. The
Sub-Adviser tries to keep the Portfolio fully invested.
However, when the Sub-Adviser determines that market
conditions warrant, the Portfolio may invest without
limitation in cash and cash equivalents for temporary
defensive purposes.
The Value Portfolio of the Transamerica Variable Insurance
Fund, Inc. seeks to maximize capital appreciation. The
Portfolio is a diversified Portfolio that invests primarily in
securities of companies that the Sub-Adviser believes are
"under-valued" relative to the intrinsic or private market
value of the firm. The securities in the Portfolio may include
common and preferred stocks, warrants, convertible securities,
corporate and high-yield debt, and other securities that the
Sub-Adviser believes are attractively priced. The Portfolio
has no pre-set limit as to the percentage of the portfolio
which may be invested in equity securities, debt securities,
or cash equivalents. Although the Portfolio may invest in
securities from any size issuer, the Portfolio will generally
invest in securities of issuers with market capitalizations in
excess of $500 million. Debt securities in which the Portfolio
invests (such as corporate and U.S. government bonds,
debentures and notes) may or may not be rated by rating
agencies and, if rated, such rating may range from the very
highest to the very lowest. Lower rated debt securities in
which the Portfolio expects to invest are commonly referred to
as "junk bonds." The Portfolio is limited to 35% of total
assets for junk bonds and other non-investment grade debt
securities. The Portfolio seeks to invest in debt instruments
that are available at prices less than their intrinsic value.
The Sub-Adviser tries to keep the Portfolio fully invested.
However, when the Sub-Adviser determines that market
conditions warrant, the Portfolio may invest without limit in
cash and cash equivalents for temporary defensive purposes.
12. If the trust is the issuer of periodic payment plan
certificates and if any underlying securities were issued by
another investment company, furnish information for each such
company:
(a) Name of Company.
The sub-accounts of the Separate Account invest in a number of corresponding
portfolios managed by a number of investment advisers.
<TABLE>
<CAPTION>
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
(a) (b) (c) (d) (e)
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Name of Company Depositor Custodian Underwriter Period during which
securities of such
companies have been
the underlying
securities
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
<S> <C> <C> <C> <C>
Capital Appreciation Portfolio of None State Street Bank and AIM Distributors, None
AIM Variable Insurance Trust Company, 225 P.O. Box 4739,
Franklin Street, Boston, Houston, Texas 77210
MA 02110
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Growth & Income Portfolio of AIM None State Street Bank and AIM Distributors, None
Variable Insurance Trust Company, 225 P.O. Box 4739,
Franklin Street, Boston, Houston, Texas 77210
MA 02110
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
International Equity Portfolio of None State Street Bank and AIM Distributors, None
AIM Variable Insurance Trust Company, 225 P.O. Box 4739,
Franklin Street, Boston, Houston, Texas 77210
MA 02110
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Emerging Growth Series of MFS None Investors Bank and Trust MFS Fund None
Variable Insurance Trust Company, 89 South Street, Distributors, Inc.
Boston, MA 02111 500 Boylston Street
Boston, MA 02116
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Research Series of MFS Variable None Investors Bank and Trust MFS Fund None
Insurance Trust Company, 89 South Street, Distributors, Inc.
Boston, MA 02111 500 Boylston Street
Boston, MA 02116
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Growth with Income Series of MFS None Investors Bank and Trust MFS Fund None
Variable Insurance Trust Company, 89 South Street, Distributors, Inc.
Boston, MA 02111 500 Boylston Street
Boston, MA 02116
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
None Morgan Stanley & Co., None
Fixed Income Portfolio of Morgan Chase Global Funds Inc. 1221 Avenue of
Stanley Universal Funds, Inc. Services Company, 73 the Americas, New
Tremont Street, Boston, York, NY 10020
MA 02108
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
High Yield Portfolio of Morgan None Chase Global Funds Morgan Stanley & Co., None
Stanley Universal Funds, Inc. Services Company, 73 Inc. 1221 Avenue of
Tremont Street, Boston, the Americas, New
MA 02108 York, NY 10020
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
International Magnum Portfolio of None Chase Global Funds Morgan Stanley & Co., None
Morgan Stanley Universal Funds, Inc. Services Company, 73 Inc. 1221 Avenue of
Tremont Street, Boston, the Americas, New
MA 02108 York, NY 10020
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Premier Growth Portfolio of None State Street Bank and Alliance Fund None
Alliance Variable Products Series Trust Co. Distributors, Inc.
Fund, Inc. 225 Franklin Street 1345 Avenue of the
Boston, MA 02110 Americas, New York,
NY 10105
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Growth and Income Portfolio of None State Street Bank and Alliance Fund None
Alliance Variable Products Series Trust Co. Distributors, Inc.
Fund, Inc. 225 Franklin Street 1345 Avenue of the
Boston, MA 02110 Americas, New York,
NY 10105
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Income and Growth Portfolio of The None Custodial Trust Co. Fred Alger & Co., Inc. None
Alger American Fund 245 Park Avenue 30 Montgomery Street
New York, NY 10167 Jersey City, NJ 07302
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Worldwide Growth Portfolio of Janus None State Street Bank and None None
Aspen Series Trust
P. O. Box 0351
Boston, MA 02117
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Balanced Portfolio of Janus Aspen None State Street Bank and None None
Series Trust
P. O. Box 0351
Boston, MA 02117
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Small Cap Portfolio of OCC None State Street Bank and OCC Distributors None
Accumulation Trust Trust 2 World Financial
P.O. Box 8505 Center
Boston, MA 02266 New York, NY 10080
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Managed Portfolio of OCC None State Street Bank and OCC Distributors None
Accumulation Trust Trust 2 World Financial
P.O. Box 8505 Center
Boston, MA 02266 New York, NY 10080
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Small Cap Portfolio of Dreyfus None Mellon Bank, N.A. Premier Mutual Fund None
Variable Investment Fund One Mellon Bank Center Services, Inc.
Pittsburgh, PA 15258 60 State Street
Boston, MA 02109
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Capital Appreciation Portfolio of None Mellon Bank, N.A. Premier Mutual Fund None
Dreyfus Variable Investment Fund One Mellon Bank Center Services, Inc.
Pittsburgh, PA 15258 60 State Street
Boston, MA 02109
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Aggressive Growth Portfolio of None State Street Bank and None None
Transamerica Variable Insurance Trust Company
Fund, Inc. 225 Franklin Street
Boston, MA 02110
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Balanced Portfolio of Transamerica None State Street Bank and None None
Variable Insurance Fund, Inc. Trust Company
225 Franklin Street
Boston, MA 02110
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Growth Portfolio of Transamerica None State Street Bank and None None
Variable Insurance Fund, Inc. Trust Company
225 Franklin Street
Boston, MA 02110
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Money Market Portfolio of None State Street Bank and None None
Transamerica Variable Insurance Trust Company
Fund, Inc. 225 Franklin Street
Boston, MA 02110
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Small Company Portfolio of None State Street Bank and None None
Transamerica Variable Insurance Trust Company
Fund, Inc. 225 Franklin Street
Boston, MA 02110
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
Value Portfolio of Transamerica None State Street Bank and None None
Variable Insurance Fund, Inc. Trust Company
225 Franklin Street
Boston, MA 02110
- ------------------------------------- ------------ --------------------------- ----------------------- ------------------------
</TABLE>
Information Concerning Loads, Fees, Charges and Expenses
13. (a) Furnish the following information with respect to
each load, fee, expense or charge to which (1)
principal payments; (2) underlying securities; (3)
distributions; (4) cumulated or reinvested
distributions or income; and (5) redeemed or
liquidated assets of the trust's securities are
subject:
(A) the nature of such load, fee, expense or charge;
(B) the amount thereof:
(C) the name of the person to whom such amounts
are paid and his relationship to the trust:
(D) the nature of the services performed by such
person in consideration for such load, fee,
expense or charge.
(1) Under the Contracts
On the monthly processing date, the Company
will deduct an amount to cover charges and
expenses incurred in connection with the
Contract. No monthly deductions will be
taken after the final payment date or, for
the Distribution Fee and the Tax Charge,
after the end of the tenth Contract year.
This monthly deduction will be deducted by
subtracting values from the Fixed Account
accumulation and/or canceling units from
each applicable sub-account in the ratio
that the portion of the Contract Value in
the sub-account bears to the Contract Value.
The amount of the monthly deduction will
vary from month to month. If the Contract
Value is not sufficient to cover the monthly
deduction which is due, the Contract may
lapse. The monthly deduction is comprised of
the following charges:
ADMINISTRATION CHARGE: The Company imposes a monthly charge at an annual
rate of 0.30% of the Contract Value. This charge is to reimburse us for
administrative expenses incurred in the administration of the Contract. It
is not expected to be a source of profit.
MONTHLY INSURANCE PROTECTION CHARGE:
Immediately after the Contract is issued the
death benefit will be greater than the
payment. While the Contract is in force, the
death benefit generally will be greater than
the payment(s). To help enable us to pay
this excess of the death benefit over the
Contract Value, a monthly cost of insurance
charge is deducted. This charge varies
depending on the type of Contract and the
underwriting class of the insured. In no
event will the current deduction for the
cost of insurance exceed the guaranteed
maximum insurance protection rates set forth
in the Contract. These guaranteed rates are
based on the Commissioners 1980 Standard
Ordinary Mortality Tables (Age Last
Birthday), Tobacco User or Non-Tobacco User
(males rates are used for unisex Contracts
and Mortality Table D for Second-to-Die
Contracts) and the Insured's sex and Age.
There are appropriate adjustments in the
rates for non-standard ratings. The Tables
used for this purpose set forth different
mortality estimates for males and females
and for tobacco user and non-tobacco user.
Any change in the insurance protection rates
will apply to all Insureds of the same Age,
sex and underwriting class whose Contracts
have been in force for the same period.
The underwriting class of an Insured will
affect the insurance protection rate. We
currently place Insureds into standard
underwriting classes and non-standard
underwriting classes. The underwriting
classes are also divided into two
categories: tobacco user and non-tobacco
user. We will place Insureds under the age
of 18 at the date of issue in a standard or
non-standard underwriting class. We will
then classify the Insured as a non-tobacco
user when the Insured reaches age 18.
We also charge different monthly insurance
protection rates depending upon whether the
Contract was issued based on simplified
underwriting criteria or, instead, was
issued based on full underwriting. For
example, the rates charged for a standard,
non-tobacco user underwriting class will
differ between individuals in that class
covered under contracts issued on a
simplified underwriting basis compared to
individuals in that class covered under
contracts issued on fully underwritten
basis.
Simplified underwriting applies to all
applications which meet all of the following
conditions: (1) the proposed insured
(younger proposed insured for Second-to-Die
applications) is at least 35 years old but
not older than 80 on the date of issue; (2)
the premium paid is 100% of the guideline
single premium; (3) the premium is at least
$10,000 but not more than the maximum shown
below, based on the Age of the insured (or,
as applicable, younger insured):
-------------------- -------------------------------
Age Maximum Single Premium
-------------------- -------------------------------
-------------------- -------------------------------
35-44 $30,000
-------------------- -------------------------------
-------------------- -------------------------------
45-54 $50,000
-------------------- -------------------------------
-------------------- -------------------------------
55-64 $75,000
-------------------- -------------------------------
-------------------- -------------------------------
65-80 $100,000
-------------------- -------------------------------
and (4) no adverse health conditions are disclosed on the application and
no adverse health conditions are discovered based on information available
from the Medical Information Bureau, Inc. (MIB).
Any application which does not meet all of
the conditions listed above will be fully
underwritten.
DISTRIBUTION FEE: During the first ten
Contract years, we make a monthly deduction
to compensate us for a portion of the sales
expenses which are incurred by us with
respect to the Contracts. This charge is
equal to an annual rate of 0.40% of the
Contract Value.
TAX CHARGE: During the first ten Contract
years, we make a monthly deduction to
partially compensate us for state and local
premium taxes, and federal income tax
treatment of Deferred Acquisition Costs.
This charge is equal to an annual rate of
0.20% of Contract Value. Premium tax rates
vary from state to state and are a
percentage of payments made by Contract
Owners to us. Currently, rates in the fifty
states and the District of Columbia range
between 0.75% and 3.5%. Since we are subject
to retaliatory tax, the effective premium
tax for us typically ranges between 2.35%
and 3.5%. Typically, we pay premium taxes
(including retaliatory tax) in all
jurisdictions, but the tax charge will be
deducted, even if we are not subject to
premium or retaliatory tax in a state. The
Company does not intend to profit from the
premium tax portion of this charge.
DAILY DEDUCTIONS: We assess each sub-account with a charge for mortality
and expense risks we assume. Portfolio expenses are also reflected in the
Separate Account.
MORTALITY AND EXPENSE RISK CHARGE: We impose
a daily charge at an annual rate of 0.80% of
the average daily net asset value of each
sub-account. This charge compensates us for
assuming mortality and expense risks for
variable interests in the Contracts.
The mortality risk we assume is that
Insureds may live for a shorter time than
anticipated. If this happens, we will pay
more net death benefits than anticipated.
The expense risk we assume is that the
expenses incurred in issuing and
administering the Contracts will exceed
those compensated by the administration
charges in the Contracts. If the charge for
mortality and expense risks is not
sufficient to cover mortality experience and
expenses, we will absorb the losses. If the
charge turns out to be higher than mortality
and expense risk expenses, the difference
will be a profit to us. If the charge
provides us with a profit, the profit will
be available for our use to pay
distribution, sales and other expenses.
PORTFOLIO EXPENSES: The value of the units of the sub-accounts will
reflect the investment advisory fee and other expenses of the
portfolios whose shares the sub-accounts purchase. See 13(a)(2).
No charges are currently made against the
sub-accounts for federal or state income
taxes. Should income taxes be imposed, we
may make deductions from the sub-accounts to
pay the taxes.
SURRENDER CHARGE: The Contract's contingent
surrender charge is a deferred sales charge
and an unrecovered tax charge. The deferred
sales charge compensates us for distribution
expenses, including commissions to our
representatives, advertising and the
printing of prospectuses and sales
literature.
<TABLE>
<CAPTION>
----------------- ---------------------- ----------------- --------------------
Contract Year Surrender Charge Contract Year Surrender Charge
----------------- ---------------------- ----------------- --------------------
----------------- ---------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
1 9% 6 4%
----------------- ---------------------- ----------------- --------------------
----------------- ---------------------- ----------------- --------------------
2 8% 7 3%
----------------- ---------------------- ----------------- --------------------
----------------- ---------------------- ----------------- --------------------
3 7% 8 2%
----------------- ---------------------- ----------------- --------------------
----------------- ---------------------- ----------------- --------------------
4 6% 9 1%
----------------- ---------------------- ----------------- --------------------
----------------- ---------------------- ----------------- --------------------
5 5% 10+ 0%
----------------- ---------------------- ----------------- --------------------
</TABLE>
The surrender charge applies for nine
Contract years. For a Contract that lapses
and is subsequently reinstated, however, the
surrender charge upon reinstatement is the
surrender charge which was in effect on the
date of default. Subsequent surrender
charges are adjusted accordingly. We impose
the surrender charge only if, during its
duration, the Contract Owner requests a full
surrender or a partial withdrawal in excess
of the free withdrawal amount.
PARTIAL WITHDRAWAL COSTS - SURRENDER CHARGES
AND WITHDRAWAL TRANSACTION FEES: A surrender
charge may be deducted from Contract Value
due to partial withdrawal. However, in any
Contract year, you may withdraw, without a
surrender charge, up to: (1) 10% of the
Contract Value; MINUS (2) the total of any
prior free withdrawals in the same Contract
year ("Free 10% Withdrawal").
The right to make the Free 10% Withdrawal is
not cumulative from Contract year to
Contract year. For example, if only 8% of
Contract Value were withdrawn in the second
Contract year, the amount you could withdraw
in future Contract years would not be
increased by the amount you did not withdraw
in the second Contract year.
We impose any applicable surrender charge on
any withdrawal greater than the Free 10%
Withdrawal.
Currently, we do not impose a withdrawal
transaction fee for partial withdrawals. We
reserve the right to impose a withdrawal
transaction fee of 2.0% of the amount
withdrawn, not to exceed $25.
TRANSFER CHARGES: The first 18 transfers in
a Contract year are free. After that, we may
deduct a transfer charge not to exceed $25
from amounts transferred in that Contract
year. This charge reimburses us for the
administrative costs of processing the
transfer.
If the Contract Owner applies for automatic
transfers, the first automatic transfer for
the elected option counts as one transfer.
Each future automatic transfer for the
elected option is without charge and does
not reduce the remaining number of transfers
that may be made without charge.
Each of the following transfers of Contract
Value is free and does not count as one of
the 18 free transfers in a Contract year:
(1) a conversion within the first 24 months
from date of issue; (2) a transfer to the
Fixed Account to secure a loan; (3) a
transfer from the Fixed Account as a result
of a loan repayment; (4) a reallocation of
value in the Money Market sub-account at the
time of issue or the end of the free look
period if the Contract provides for a full
refund of payments if the free look right is
exercised; and (5) a transfer made because
of a material change in investment policy.
(2) Underlying Securities
In addition to the charges described above,
certain management fees and other expenses
are deducted from the assets of the
underlying portfolios. The level of fees and
expenses vary among the portfolios. The
following table shows the management fees
and other expenses of the portfolios for
1997. For more information concerning these
fees and expenses, see the prospectuses of
the portfolios.
<PAGE>
<TABLE>
<CAPTION>
Portfolio Expenses
(as a percentage of assets after fee waiver
and/or expense reimbursement)(1)
Total
Portfolio
Management Other Annual
Portfolio Fees (2) Expenses Expenses
<S> <C> <C> <C>
AIM V. I. Capital Appreciation 0.63 0.05 0.68
AIM V. I. Growth & Income 0.63 0.06 0.69
AIM V. I. International Equity 0.75 0.18 0.93
Alger American Income & Growth 0.625 0.115 0.74
Alliance VPF Growth & Income 0.63 0.09 0.72
Alliance VPF Premier Growth 0.85 0.10 0.95
Dreyfus VIF Capital Appreciation 0.75 0.05 0.80
Dreyfus VIF Small Cap 0.75 0.03 0.78
Janus Aspen Balanced 0.76 0.07 0.83
Janus Aspen Worldwide Growth 0.66 0.08 0.74
MFS VIT Emerging Growth 0.75 0.12 0.87
MFS VIT Growth with Income 0.75 0.25 1.00
MFS VIT Research 0.75 0.13 0.88
Morgan Stanley UF Fixed Income 0.00 0.70 0.70
Morgan Stanley UF High Yield 0.00 0.80 0.80
Morgan Stanley UF International Magnum 0.00 1.15 1.15
OCC Accumulation Trust Managed 0.80 0.07 0.87
OCC Accumulation Trust Small Cap 0.80 0.17 0.97
Transamerica VIF Aggressive Growth
Transamerica VIF Balanced
Transamerica VIF Growth 0.62 0.23 0.85
Transamerica VIF Money Market 0.35 0.25 0.60
Transamerica VIF Small Company
Transamerica VIF Value
</TABLE>
Expense information regarding the portfolios has been provided by the
portfolios. Transamerica has no reason to doubt the accuracy of that
information, but Transamerica has not verified those figures. These figures are
for the year ended December 31, 1997, except for the Transamerica VIF Money
Market Portfolio which are estimates for the year 1998, its first year of
operation. Actual expenses in future years may be higher or lower than these
figures.
Notes to Fee Table:
(1) From time to time, the portfolios' investment advisers, each in its own
discretion, may voluntarily waive all or part of their fees and/or
voluntarily assume certain portfolio expenses. The expenses shown in
the Portfolio Expenses table are the expenses paid for 1997 (except for
the Transamerica VIF Money Market Portfolio, which are estimates). The
expenses shown in the table reflect a portfolio's adviser's waivers of
fees or reimbursement of expenses, if applicable. It is anticipated
that such waivers or reimbursements will continue for calendar year
1998, except for Alliance VPF Premier Growth for which the management
fee, other expenses and total portfolio annual expenses for 1998
without waivers or reimbursements are estimated to be 1.00%, 0.08% and
1.08%, respectively. Without such waivers or reimbursements, the annual
expenses for 1997 for certain portfolios would have been, as a
percentage of assets, as follows:
<TABLE>
<CAPTION>
Total Portfolio
Management Fee Other Annual Expenses
Portfolio Expenses
--------- --------
<S> <C> <C> <C>
Alliance VPF Growth & Income 0.63 0.09 0.72
Alliance VPF Premier Growth 1.00 0.10 1.10
Janus Aspen Balanced 0.77 0.06 0.83
Janus Aspen Worldwide Growth 0.72 0.09 0.81
MFS VIT Growth with Income 0.75 0.35 1.10
Morgan Stanley UF Fixed Income 0.40 1.31 1.71
Morgan Stanley UF High Yield 0.80 0.88 1.68
Morgan Stanley UF International Magnum 0.80 1.98 2.78
Transamerica VIF Growth 0.75 0.23 0.98
</TABLE>
Without expense reimbursements, the management fee, other expenses and
total portfolio expenses for the first year of operation for the
Transamerica VIF Money Market Portfolio are expected to be 0.35%, 0.45%
and 0.80%, respectively. There were no fee waivers or expense
reimbursements during 1997 for the AIM V. I. Capital Appreciation,
Growth and Income and International Equity; Alger American Income and
Growth Portfolio, Dreyfus VIF Capital Appreciation Portfolio, Dreyfus
VIF Small Cap Portfolio, MFS VIT Emerging Growth Portfolio, MFS VIT
Research Portfolio, OCC Accumulation Trust Managed Portfolio or OCC
Accumulation Trust Small Cap Portfolio.
(2) The management fee of certain of the portfolios includes breakpoints at
designated asset levels.
(3) Distributions
No distributions are made to Contract Owners
except voluntary surrenders or partial
withdrawals, or to beneficiaries except upon
payment of death proceeds. Surrenders and
partial withdrawals may be subject to the
surrender charges and withdrawal transaction
fees described in 13(a)(1), above. Also see
Item 21.
(4) Cumulated or Reinvested Distributions or Income
Distributions from the portfolios are
reinvested by sub-accounts of the Separate
Account in additional shares of the
respective portfolios, without charge, at
net asset value.
(5) Redeemed or Liquidated Assets of the Trust's Securities
See "Surrender Charge" and "Charges on
Partial Withdrawals" under Item 13(a)(1)
above.
(b) For each installment payment type of periodic payment
plan certificate of the trust, furnish information
with respect to sales load and other deductions from
principal payments.
There are no sales loads or other deductions
from principal payments.
(c) State (1) the amount of sales load as a percentage of
the net amount invested, and (2) the amount of total
deductions as a percentage of the net amount invested
for each type of security issued by the trust.
There are no sales loads. Types and amounts of
deductions are described above in 13(a).
(d) Explain fully the reasons for any difference in the
price at which securities are offered for any class
of transactions to any class or group of officers,
including officers, directors or employees of the
deposition trustee, custodian or principal
underwriter.
Not Applicable.
(e) Furnish a brief description of any loads, fees,
expenses or charges not covered in Item 13(a) which
may be paid by security holders in connection with
the trust or its securities.
None.
(f) State whether the depositor, principal underwriter,
custodian or trustee, or any affiliated person of the
foregoing, may receive profits or other benefits not
included in answer to Item 13(a) or 13(d) through the
sale or purchase of the trust's securities or
interests in such securities, or underlying
securities or interests in underlying securities, and
describe fully the nature and extent of such profits
or benefits.
Neither the Company, Transamerica Securities Sales
Corporation nor any affiliated person of the
foregoing may receive any profit or any other benefit
from payments under the Contract or the investments
held in the Separate Account not included in the
answer to Item 13(a) or (d) through the sale or
purchase of the Contract or shares of the portfolios,
except that (1) the Company may receive a profit to
the extent that the cost of insurance built into the
Contract exceeds the actual cost of insurance needed
to pay benefits; (2) favorable mortality or expense
experience may cause the insurance provided to be
profitable to the Company; (3) the Company will
compensate certain others, including the company's
agents, for services rendered in connection with the
distribution of the Contract, as described in Item
38, but such payments will be made from the Fixed
Account; and (4) the investment advisers of the
respective portfolios will receive an advisory fee,
as described in Item 13(a)(2).
(g) State the percentage that the aggregate annual
charges and deductions for maintenance and other
expenses of the trust bear to the dividend and
interest income from the trust property during the
period covered by the financial statements filed
herewith.
Not Applicable. The Separate Account has no assets as of the date of
this filing.
Information Concerning the Operations of the Trust
14. Describe the procedure with respect to the applications (if
any) and the issuance and authentication of the trust's
securities, and state the substance of the provisions of any
indenture or agreement pertaining thereto.
Individuals wishing to purchase a Contract must complete an
application. We offer Contracts to individuals 89 years old
and under. For applications for Second-to-Die Contracts, both
proposed Insureds must be less than 89 years old or under.
After receiving a completed application from a prospective
Contract Owner, we will begin underwriting to decide the
insurability of the proposed Insured. We may require medical
examinations and other information before deciding
insurability. We issue a Contract only after underwriting has
been completed. We may reject an application that does not
meet our underwriting guidelines.
If a prospective Contract Owner makes an initial payment of at
least $10,000 and which is at least 80% of the guideline
single premium for the amount requested, we will issue a
conditional receipt which provides fixed conditional
insurance, but not until after all its conditions are met.
Included in these conditions are the completion of both parts
of the application (to the extent required by our underwriting
guidelines), completion of all underwriting requirements, and
the proposed Insured must be insurable under Transamerica's
rules for insurance under the Contract, in the amount, and in
the underwriting class applied for in the application. After
all conditions are met, the amount of fixed conditional
insurance provided by the conditional receipt will be the
amount applied for, up to a maximum of $250,000 for persons
age 16 to 65 and insurable in a standard underwriting class,
and up to $100,000 for all other ages and underwriting
classes.
If the Contract Owner made the initial payment before the date
we approve the application, we will allocate the payment to
our Fixed Account within two business days of receipt of the
payment at our Variable Life Service Center. IF WE ARE UNABLE
TO ISSUE THE CONTRACT, THE PAYMENT WILL BE RETURNED TO THE
CONTRACT OWNER WITHOUT INTEREST.
If the application is approved and the Contract is issued, we
will allocate the Contract Value within two days of the date
we approve the application according to the Contract Owner's
allocation instructions. However, if the Contract provides for
a full refund of payments under its "Right to Cancel"
provision as required under state law, we will initially
allocate the sub-account investments to the sub-account
investing in the Money Market portfolio. We will reallocate
all amounts according to the Contract Owner's investment
choices no later than the expiration of the right to cancel
period.
If the initial payment is equal to the amount of the guideline
single premium, the contract will be issued with the
Guaranteed Death Benefit Rider at no additional cost, if the
Rider is available under state law. If the Guaranteed Death
Benefit Rider is in effect on the final payment date, a
guaranteed net death benefit will be provided thereafter
unless the Guaranteed Death Benefit Rider is subsequently
terminated.
15. Describe the procedure with respect to the receipt of payments
from purchasers of the trust's securities and the handling of
the proceeds thereof, and state the substance of the
provisions of any indenture or agreement pertaining thereto.
PAYMENTS. The Contracts are designed for a large single
payment to be paid by the Contract Owner on or before the date
of issue. The minimum initial payment is $10,000. The initial
payment is used to determine the face amount. Except as
described below, the face amount will be determined by
treating the payment as equal to 100% of the guideline single
premium.
The proposed Contract Owner may indicate the desired face
amount on the application. If the face amount specified
exceeds 100% of the guideline single premium for the payment
amount, the application will be amended and a Contract with a
higher face amount will be issued. If the face amount
specified is less than 80% of the guideline single premium for
the payment amount, the application will be amended and a
Contract with a lower face amount will be issued. The Contract
Owner must agree to any amendment to the application.
Under our underwriting rules, the face amount must be based on
100% of the guideline single premium to be eligible for
simplified underwriting.
Payments are payable to the Company. The initial payment may
be made by mail to our Variable Life Service Center or through
our authorized representative. Any additional payment, after
the initial payment, is credited to the sub-accounts or Fixed
Account on the date of receipt at the Variable Life Service
Center and is made by mail to out Variable Life Service
Center.
The Contract limits the ability to make additional payments.
Any additional payment(s) may not cause total payments to
exceed the maximum payment on the specifications pages of the
Contract. Additional payments may be accepted by us subject to
our underwriting approval if the payment would increase the
amount of the death benefit. No additional payment may be less
than $10,000 without our consent except as necessary to keep a
Contract in force.
Total payments may not exceed the current maximum payment
limits under federal tax law. Where total payments would
exceed the current maximum payment limits, we will only accept
that part of a payment that will make total payments equal the
maximum. We will return any part of a payment that is greater
than that amount. However, we will accept a payment needed to
prevent Contract lapse during a Contract year.
ALLOCATION OF PAYMENTS. In the application for the Contract,
the proposed Contract Owner decides the initial allocation of
the payment among the sub-accounts and the Fixed Account.
Payment may be allocated to one or more of the sub-accounts
and/or the Fixed Account. Payment may be allocated among up to
twenty sub-accounts, plus the Fixed Account. The minimum
amount that may be allocated to a sub-account or to the Fixed
Account without our consent is 5.0% of the payment. Allocation
percentages must be in whole numbers (for example, 33 1/3% may
not be chosen) and must total 100%.
The Contract Owner may change the allocation of any future
payment by written request or telephone request. The Contract
Owner has the privilege to make telephone requests, unless the
owner elected not to have the privilege on the application.
The policy of the Company and its representatives and
affiliates is that they will not be responsible for losses
resulting from acting on telephone requests reasonably
believed to be genuine. We will use reasonable methods to
confirm that instructions communicated by telephone are
genuine; otherwise, the Company may be liable for any losses
from unauthorized or fraudulent instructions. We require that
callers on behalf of a Contract Owner identify themselves by
name and identify the Contract Owner by name, date of birth
and Social Security number. All telephone requests are tape
recorded. An allocation change will take effect on the date of
receipt of the notice at the Variable Life Service Center.
16. Describe the procedure with respect to the acquisition of
underlying securities and the disposition thereof, and state
the substance of the provisions of any indenture or agreement
pertaining thereto.
Each sub-account of the Separate Account invests its assets in
shares of a corresponding portfolio. Purchases and redemptions
of such shares are made at net asset value, with no deduction
for sales load.
Amounts of payments allocated to a sub-account, transfers to
that sub-account, and reserve adjustment transfers, if any,
will be netted as of each valuation date against amounts
withdrawn from the sub-account in connection with Contract
surrenders, partial withdrawals, transfers (including
transfers of amounts to secure any outstanding loan), and
death benefits, as well as the asset charge and amounts paid
to the Company in lieu of taxes, if any. A net purchase or
sale of portfolio shares will be made for a sub-account at net
asset value. All income, dividends and realized gain
distributions of a portfolio will be reinvested in shares of
the respective portfolio at net asset value. Valuation dates
currently occur on each day on which the New York Stock
Exchange is open for trading, and on such other day where
there is a sufficient degree of trading in a portfolio's
securities such that the current net asset value of the
sub-accounts may be materially affected.
17. (a) Describe the procedure with respect to partial
withdrawal or redemption by security holders.
SURRENDER - The Contract Owner may surrender the
Contract and receive its surrender value. The
surrender value is: the Contract Value MINUS any
outstanding loan and surrender charges.
We will compute the surrender value on the valuation
date on which we receive the written request for
surrender. We will deduct a surrender charge if the
Contract is surrendered within nine full Contract
years of the date of issue. If the Contract is
reinstated, however, however, the surrender charges
upon reinstatement will be the charges which applied
on the date of default. The surrender value may be
paid in a lump sum or under a payment option then
offered by us. We will normally pay the surrender
value within seven days following our receipt of the
written request.
The right is reserved by the Company to defer
surrenders of amounts allocated to the Fixed Account
for a period not to exceed six months.
PARTIAL WITHDRAWAL - The Contract Owner may withdraw
part of the Contract Value of the Contract on written
request. The written request must state the dollar
amount which the owner wishes to receive. The owner
may allocate the amount withdrawn among the
sub-accounts and the Fixed Account. If no allocation
instructions, are provided, we will make a pro rata
allocation. Each partial withdrawal must be at least
$1,000. We will not allow a partial withdrawal if it
would reduce the Contract Value below $10,000. The
face amount is reduced proportionately based on the
ratio of the amount of the partial withdrawal plus
withdrawal transaction fees and applicable surrender
charges to the Contract Value on the date of
withdrawal.
On a partial withdrawal from a sub-account, we will
cancel the number of units equal in value to the
amount withdrawn. The amount withdrawn will be the
amount requested plus the withdrawal transaction
fees, if any, and any applicable surrender charges.
We will normally pay the partial withdrawal within
seven days following our receipt of the written
request.
The right is reserved by the Company to defer
surrenders of amounts allocated to the Fixed Account
for a period not to exceed six months.
(b) Furnish the names of any persons who may redeem or
repurchase, or are required to redeem or repurchase,
the trust's securities or underlying securities from
security holders, and the substance of the provisions
of any indenture or agreement pertaining thereto.
The Company is required to process all surrender and
partial withdrawal requests as described in Item
17(a). The portfolios will redeem their shares upon
the Company's request in accordance with the
Investment Company Act of 1940. Redeemed shares may
later be reissued.
(c) Indicate whether repurchased or redeemed securities will
be canceled or may be resold.
If a Contract is surrendered, the Contract will be
canceled and may not be reissued.
If a Contract terminates due to lapse or foreclosure,
the Contract may be reinstated as provided below.
TERMINATION - If the Guaranteed Death Benefit Rider
is not in effect on your Contract, the Contract will
lapse if, on a monthly processing date, the surrender
value is less than the monthly deductions dues. If
the Contract lapses, you will have a 62-day grace
period in which to pay required premium. If
sufficient premium is not paid by the end of the
grace period, the Contract will terminate without
value.
If the Guaranteed Death Benefit Rider is in effect on
your Contract, the Contract will not lapse. If the
Guaranteed Death Benefit Rider is terminated,
however, your Contract may then lapse.
Additionally, whether the Guaranteed Death Benefit
Rider is or is not in effect on the Contract, if the
outstanding loan at any time exceeds the Contract
Value minus the surrender charges, the outstanding
loan will be in default. If the outstanding loan goes
into default, you will have a 62-day grace period in
which to pay back the excess outstanding loan. If you
do not pay back the excess outstanding loan by the
end of the grace period, the loan will be foreclosed
and the Contract will terminate without value.
If the Guaranteed Death Benefit Rider is in effect on
the Contract, the Guaranteed Death Benefit Rider will
terminate if the loan is foreclosed. Once terminated,
the Guaranteed Death Benefit Rider may not be
reinstated.
REINSTATEMENT - A terminated Contract may be
reinstated within three years (or such other time
period required by state law) of the date of default
and before the final payment date (or, before the
maturity date if the default occurred because the
outstanding loan exceeded the Contract Value less
surrender charges). The reinstatement takes effect on
the monthly processing date following the date the
Contract Owner submits to us: (1) written application
for reinstatement; (2) evidence of insurability
showing that the Insured is insurable according to
our current underwriting rules; (3) a payment that is
large enough to cover the cost of all Contract
charges and deductions that were due and unpaid
during the grace period; (4) a payment that is large
enough to keep the Contract in force for three
months; and (5) a payment or reinstatement of any
loan against the Contract that existed at the end of
the grace period.
Contracts which have been surrendered may not be reinstated. The
Guaranteed Death Benefit Rider may not be reinstated.
SURRENDER CHARGE -- For the purpose of measuring the
surrender charge period, the Contract will be
reinstated as of the date of default. The surrender
charge on the date of reinstatement is the surrender
charge that would have been in effect on the date of
default. The remaining period during which surrender
charges apply, as well as the percentage charge
applicable, will be adjusted accordingly.
CONTRACT VALUE ON REINSTATEMENT -- The Contract Value
on the date of reinstatement is: the payment made to
reinstate the Contract and interest earned from the
date the payment was received at our Variable Life
Service Center; PLUS, the Contract Value less any
outstanding loan on the date of default; MINUS, the
monthly deductions due on the date of reinstatement.
The Contract Owner may reinstate any outstanding
loan.
18. (a) Describe the procedure with respect to the
receipt, custody and disposition of the income and
other distributable funds of the trust and state the
substance of the provisions of any indenture or
agreement pertaining thereto.
Distributions with respect to the shares of a
portfolio held by a sub-account are reinvested in
shares of that portfolio at net asset value. Such
shares are added to the assets of the respective
sub-account.
(b) Describe the procedure, if any, with respect to the
reinvestment of distributions to security holders and
state the substance of the provisions of any
indenture or agreement pertaining thereto.
No distributions are made to Contract Owners (or
beneficiaries) other than in connection with a death
benefit or with a Contract Owner-initiated loan,
partial withdrawal or surrender of the Contract. See
Items 13(a) and 21.
(c) If any reserves or special funds are created out of
income or principal, state with respect to each such
reserve or fund the purpose and ultimate disposition
thereof, and describe the manner of handling same.
Payments placed in the Separate Account constitute
certain reserves for benefits under the Contract.
(d) Submit a schedule showing the periodic and special distributions
which have been made to security holders during the three years
covered by the financial statements filed herewith. State for each
such distribution the aggregate amount and amount per share. If
distributions from sources other than current income have been made,
identify each such other source and indicate whether such distribution
represents the return of principal payments to security holders. If
payments other than cash were made, describe the nature thereof, the
account charged and the basis of determining the amount of such
charge.
Not Applicable. The Separate Account has not begun business
operations.
19. Describe the procedure with respect to the keeping of records
and accounts of the Trust, the making of reports and the
furnishing of information to security holders, and the
substance of the provisions of any indenture or agreement
pertaining thereto.
The Company will maintain the records and books of the
Separate Account. The Company will also maintain records for
each Contract, including the number and value of units of each
sub-account credited to each Contract and the value of
accumulations in the Fixed Account.
Issuance and transfer of portfolio shares will be by book
entry only. Stock certificates of the portfolios will not be
issued to the Company or Separate Account. Shares ordered from
the portfolios will be recorded in an appropriate title for
the Separate Account or appropriate sub-account.
Contract Owners will be sent promptly statements of
significant transactions such as payments, transfers among
sub-accounts and the Fixed Account, partial withdrawals,
increases in loan amount by the Contract Owner, loan
repayments, lapse, termination for any reason, and
reinstatement. An annual statement will also be sent to the
Contract Owner. The annual statement will summarize all of the
above transactions and deductions of charges during the
Contract year. It will also set forth the status of the death
benefit, Contract Value, surrender value, amounts in the
sub-accounts and Fixed Account, and any Contract loan(s).
In addition, the Contract Owners will be sent semi-annual
reports of the underlying portfolios and other information for
the Separate Account as required by the 1940 Act.
20. State the substance of the provisions of any indenture or
agreement concerning the trust with respect to the following:
(a) Amendments to such indenture or agreement.
Not Applicable.
(b) The extension or termination of such indenture or
agreement.
Not Applicable.
(c) The removal or resignation of the trustee or
custodian, or the failure of the trustee or custodian
to perform its duties, obligations and functions.
The Company will act as custodian of assets of the
Separate Account. The Company may appoint another
custodian. In such event, the custodial agreement
will provide that the assets owned by the Separate
Account shall be delivered directly by the Company to
a successor custodian.
(d) The appointment of a successor trustee and the
procedure if a successor trustee is not appointed.
Not Applicable.
(e) The removal or resignation of the depositor, or the
failure of the depositor to perform its duties,
obligations and functions.
There is no such provision in an indenture or
agreement. Under California law, the Company may not
abrogate its obligation under the Contracts.
(f) The appointment of a successor depositor and the
procedure if a successor depositor is not appointed.
There is no such provision in any indenture or
agreement.
21. (a) State the substance of the provisions of any
indenture or agreement with respect to loans to
security holders.
CONTRACT LOANS. The Contract Owner may borrow money
secured by the Contract Value, both during and after
the first Contract year. The total amount which the
Contract Owner may borrow is the loan value. The loan
value is 90% of the result of Contract Value less
surrender charges. Contract Value equal to the
outstanding loan will earn monthly interest in the
Fixed Account at an annual rate of at least 4.0%.
The minimum loan amount is $1,000. The maximum loan
amount is the loan value minus any outstanding loan.
We will usually pay the loan within seven days after
we receive the written request.
We will allocate the loan among the sub-accounts and
the Fixed Account according to the Contract Owner's
instructions. If the owner does not make an
allocation, we will make a pro rata allocation. We
will transfer the portion of the Contract Value in
each sub-account equal to the Contract loan to the
Fixed Account. We will not count this transfer as a
transfer subject to the transfer charge.
PREFERRED LOAN OPTION. Any portion of the outstanding
loan that represents: (1) earnings in this Contract,
(2) a loan from an exchanged life insurance policy
that was carried over to this Contract, or (3) the
gain in the exchanged life insurance policy that was
carried over to this Contract may be treated as a
preferred loan. The available percentage of the gain
carried over from an exchanged policy, less any
policy loan carried over, which will be eligible for
preferred loan treatment is as follows:
<TABLE>
<CAPTION>
-------------- ----------------- --------------- ---------------- ------------- --------------
Beginning of Unloaned Beginning of Unloaned Gain Beginning Unloaned
Contract Year Gain Available Contract Year Available of Contract Gain
Year Available
-------------- ----------------- --------------- ---------------- ------------- --------------
-------------- ----------------- --------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 0% 6 50% 11+ 100%
-------------- ----------------- --------------- ---------------- ------------- --------------
-------------- ----------------- --------------- ---------------- ------------- --------------
2 10% 7 60%
-------------- ----------------- --------------- ---------------- ------------- --------------
-------------- ----------------- --------------- ---------------- ------------- --------------
3 20% 8 70%
-------------- ----------------- --------------- ---------------- ------------- --------------
-------------- ----------------- --------------- ---------------- ------------- --------------
4 30% 9 80%
-------------- ----------------- --------------- ---------------- ------------- --------------
-------------- ----------------- --------------- ---------------- ------------- --------------
5 40% 10 90%
-------------- ----------------- --------------- ---------------- ------------- --------------
</TABLE>
The annual interest rate credited to the Contract
Value securing a preferred loan will be at least
5.5%.
LOAN INTEREST CHARGED. Interest accrues daily at the
annual rate of 6.0%. Interest is due and payable in
arrears at the end of each Contract year or for as
short a period as the loan may exist. Interest not
paid when due will be added to the outstanding loan
by transferring the portion of the Contract Value
equal to the interest due to the Fixed Account. The
interest due will bear interest at the same rate.
REPAYMENT OF OUTSTANDING LOAN. The Contract Owner may
pay any loans before Contract lapse and before the
maturity date. We will allocate that part of the
Contract Value in the Fixed Account that secured a
repaid loan to the sub-accounts and Fixed Account
according to the owner's instructions. If the owner
does not make a repayment allocation, we will
allocate Contract Value according to the most recent
payment allocation instructions. However, loan
repayments allocated to the Separate Account cannot
exceed that portion of the Contract Value previously
transferred from the Separate Account to secure the
outstanding loan.
If the outstanding loan exceeds the Contract Value
less the surrender charge, the Contract will
terminate. We will mail a notice of termination to
the last known address of the Contract Owner and any
assignee. If a sufficient payment is not made within
62 days after this notice is mailed, the Contract
will terminate with no value.
EFFECT OF CONTRACT LOANS. Contract loans will
permanently affect the Contract Value and surrender
value, and may permanently affect the death benefit.
The effect could be favorable or unfavorable,
depending on whether the investment performance of
the sub-accounts is less than or greater than the
interest credited to the Contract Value in the Fixed
Account that secures the loan. We will deduct any
outstanding loan from the proceeds payable when the
Insured dies or from a surrender. We will deduct any
outstanding loan from the proceeds payable when the
Insured dies or from a surrender.
If the outstanding loan on the Contract exceeds the
Contract Value minus surrender charges, the Contract
will be in default. There is no charge imposed solely
because the Contract goes into default. If the
required premium is not paid within the grace period,
however, the Contract will terminate without value.
If there is an outstanding loan, decreases in
Contract Value, including decreases due to negative
investment results in sub-account allocations, could
result in default of the Contract. If there is an
outstanding loan and the Contract Owner does not pay
loan interest when due, unpaid interest will be added
to the loan and will bear interest at the same rate.
If the investment gains are not sufficient, the
outstanding loan could be greater than the Contract
Value minus surrender charges, resulting in the
Contract going into default.
In the event the Contract lapses or is otherwise
terminated while a loan is outstanding, the loan is
foreclosed and this foreclosure will be treated as
cash received from the Contract for income tax
purposes.
(b) Furnish a brief description of any procedure or
arrangement by which loans are made available to
security holders by the depositor, principal
underwriter, trustee or custodian, or any affiliated
person of the foregoing.
See Items 10(i) and 21(a), above. No other loans are
made, except under the terms of life insurance
contracts which may be issued by the depositor or
affiliated insurance companies.
(c) If such loans are made, furnish the aggregate amount
of loans outstanding at the end of the last fiscal
year, the amount of interest collected during the
last fiscal year allocated to the depositor,
principal underwriter, trustee or custodian or
affiliated person of the foregoing, aggregate amount
of loans in default at the end of the last fiscal
year covered by financial statements filed herewith.
Not Applicable.
22. State the substance of the provisions of any indenture or
agreement with respect to limitations on the liabilities of
the depositor, trustee or custodian, or any other party to
such indenture or agreement.
ASSIGNMENT. The Contract Owner may assign a Contract as
collateral or make an absolute assignment. All Contract rights
will be transferred as to the assignee's interest. The consent
of the assignee may be required to make changes in payment
allocations, make transfers or to exercise other rights under
the Contract. We are not bound by an assignment or release
thereof, unless it is in writing and recorded at our Variable
Life Service Center. When recorded, the assignment will take
effect on the date the written request was signed. Any rights
the assignment creates will be subject to any payments we made
or actions we took before the assignment is recorded. We are
not responsible for determining the validity of any assignment
or release.
23. Describe any bonding arrangement for officers, directors,
partners or employees of the depositor or principal
underwriter of the trust, including the amount of coverage and
the type of bond.
The depositor is insured under a broad manuscript fidelity
bond program with coverage limits of $80,000,000. The lead
underwriter is Capital CNA.
24. State the substance of any other material provisions of any
indenture or agreement concerning the trust or its securities
and a description of any other material functions or duties of
the depositor, trustee or custodian not stated in Item 10 or
Items 14 to 23 inclusive.
PARTICIPATION AGREEMENT. The Company and the portfolios will
enter into Participation Agreements which define the terms
under which the sub-accounts of Separate Account invest in the
portfolios.
CONTRACT OWNER. The Contract Owner named on the specification
pages of the Contract is the Insured unless another Contract
Owner has been named in the application. The Contract Owner is
entitled to exercise all rights under the Contract while the
Insured is alive, with the consent of any irrevocable
beneficiary.
BENEFICIARY. The beneficiary is the person or persons to whom
the net death benefit is payable on the Insured's death.
Unless otherwise stated in the Contract, the beneficiary has
no rights in the Contract before the Insured dies. While the
Insured is alive, the Contract Owner may change the
beneficiary, unless the owner has declared the beneficiary to
be irrevocable. An irrevocable beneficiary may only be changed
with the consent of the irrevocable beneficiary. If no
beneficiary is alive when the Insured dies, the Contract Owner
(or the Contract Owner's estate) will be the beneficiary. If
more than one beneficiary is alive when the Insured dies, we
will pay each beneficiary in equal shares, unless the owner
has chosen otherwise. Where there is more than one
beneficiary, the interest of a beneficiary who dies before the
Insured will pass to surviving beneficiaries proportionally,
unless the Contract Owner has requested otherwise.
LIMIT ON RIGHT TO CHALLENGE THE CONTRACT. Except for fraud
(unless such defense is prohibited by state law) or
non-payment of premium, we cannot challenge the validity of
your Contract if the Insured was alive after the Contract has
been in force for two years from the date of issue. This
provision does not apply to any riders providing benefits
specifically for disability or death by accident. We may also
challenge the validity of your Contract for two years from the
effective date of : 91) any change in underwriting class that
you request; and (2) any reinstatement.
SUICIDE. The net death benefit will not be paid if the Insured
commits suicide, while sane or insane, within two years from
the date of issue. Instead, we will pay the beneficiary all
payments made for the Contract, without interest, less any
outstanding loan and partial withdrawals.
MISSTATEMENT OF AGE OR SEX. If the Insured's Age or sex is not
correctly stated in the Contract application, we will adjust
the death benefit and the face amount under the Contract to
reflect the correct Age and sex. The adjustment will be based
upon the ratio of the maximum payment for the Contract to the
maximum payment for the Contract issued for the correct Age or
sex. We will not reduce the death benefit to less than the
guideline minimum sum insured. For a unisex Contract, there is
no adjusted benefit solely for misstatement of sex. No
adjustment will be made if the Insured dies after the final
payment date.
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
Organization and Operations of Depositor
25. State the form of organization of the depositor of the trust,
the name of the state or other sovereign power under the laws
of which the depositor was organized and the date of
organization.
The Company is a stock life insurance company incorporated
under the laws of the state of California in 1906.
26. (a) Furnish the following information with respect to
all fees received by the depositor of the trust in
connection with the exercise of any functions or
duties concerning securities of the trust during the
period covered by the financial statements filed
herewith:
Not Applicable.
(b) Furnish the following information with respect to any
fee or any participation in fees received by the
depositor from any underlying investment company or
any affiliated person or investment adviser of such
company:
The Company has not received any such fee or any
participation in fees.
(1) The nature of such fee or participation.
Not Applicable.
(2) The name of the person making payments.
Not Applicable.
(3) The nature of the services rendered in
consideration for such fee or participation.
Not Applicable.
(4) The aggregate amount received during the
last fiscal year covered by the financial
statements filed herewith.
Not Applicable.
27. Describe the general character of the business engaged in by
the depositor including a statement as to any business other
than that of depositor of the trust. If the depositor acts or
has acted in any capacity with respect to any investment
company or companies other than the trust, state the name or
names of such company or companies, their relationship, if
any, to the trust, and the nature of the depositor's
activities therewith. If the depositor has ceased to act in
such named capacity, state the date of and circumstances
surrounding such cessation.
The Company is a California life insurance company licensed to
sell life insurance in the District of Columbia, Puerto Rico,
Virgin Islands and Guam and all states except New York.
The Company offers registered variable life and annuity
contracts through other separate accounts registered as unit
investment trusts and one, Separate Account Fund B, as a
management investment company. The Company serves as
investment adviser to Separate Account Fund B.
Officials and Affiliated Persons of Depositor
28. (a) Furnish as at latest practicable date the
following information with respect to the depositor
of the trust, with respect to each officer, director,
or partner of the depositor, and with respect to each
natural person directly or indirectly owning or
holding with power to vote 5% or more of the
outstanding voting securities of the depositor.
(i) name and principal business address;
(ii) nature of relationship or affiliation with
depositor of the trust; (iii) ownership of all
securities of the depositor; (iv) ownership of all
securities of the trust; (v) other companies of which
each person named above is presently officer,
director or partner.
See 28(b) and 29, below.
(b) Furnish a brief statement of the business
experience during the last five years of
each officer, director or partner of the
depositor.
The principal occupations and business
experience for the last five years of
Directors and Executive Officers of the
Company are as follows:
DIRECTORS AND PRINCIPAL OFFICERS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
Robert Abeles* Director, Executive
Vice President and Chief
Financial Officer of TOLIC
since 1996. Executive Vice
President and Chief
Financial Officer of First
Interstate Bank of
California from 1990 to
1996.
Nicki Bair* Senior Vice President
of TOLIC since 1996. Vice
President of TOLIC from
1991 to 1996.
Roy Chong-Kit* Senior Vice
President and Chief Actuary
of TOLIC since 1997. Vice
President and Actuary of
TOLIC from 1995 to 1997.
Actuary of TOLIC from 1988
to 1995.
<TABLE>
<CAPTION>
<S> <C> <C>
Thomas J. Cusack* Director, Chairman, President and Chief Executive
Officer of TOLIC since 1997. Director, President and Chief
Executive Officer of TOLIC since 1995. Senior Vice
President of Transamerica Corporation from 1993 to 1995.
Vice President of Corporate Development of General Electric
Company from 1989 to 1993.
James W. Dederer, CLU* Director, Executive Vice President,
General Counsel and Corporate Secretary of TOLIC since 1988.
David E. Gooding* Director and Executive Vice President of TOLIC since 1992.
Edgar H. Grubb**** Director, Executive Vice President and
Chief Financial Officer of Transamerica Corporation since
1993. Senior Vice President of Transamerica Corporation
1989-1993.
Frank C. Herringer**** Director, President and Chief Executive
Officer of Transamerica Corporation since 1991.
Daniel E. Jund, FLMI* Senior Vice President of TOLIC since 1988.
Richard N. Latzer**** Director, Senior Vice President and Chief
Investment Officer of Transamerica Corporation since 1989.
Director, President and Chief Executive Officer of
Transamerica Investment Services, Inc. since 1988.
Karen MacDonald* Director, Senior
Vice President and
Corporate Actuary of TOLIC
since 1995. Senior Vice
President and Corporate
Actuary from 1992 to 1995.
Gary U. Rolle'* Director, Executive Vice President
and Chief Investment Officer of Transamerica Investment
Services, Inc. since 1981.
William N. Scott, CLU, FLMI**
Senior Vice President of
TOLIC since 1993. Vice
President of TOLIC from
1988 to 1993.
T. Desmond Sugrue* Director
and Executive Vice
President of TOLIC since
1997. Senior Vice President
of TOLIC from 1996 to 1997.
Self-employed - Consulting
from 1994 to 1996. Employed
at Bank of America from
1988 to 1993.
Claude W. Thau, FSA** Senior Vice
President of TOLIC since
1996. Vice President of
TOLIC from 1985 to 1996.
Bruce A. Turkstra* Executive Vice President and Chief
Information Officer since 1997. Chief Information Officer
of Anderson Worldwide from 1991-1997.
Nooruddin S. Veerjee, FSA* Director, President of Group Pension Division of
TOLIC since 1993. President of Insurance Products
Division since 1997.
Senior Vice President of
TOLIC from 1992 to 1993.
Vice President of TOLIC
from 1990 to 1992.
Ron F. Wagley* Senior Vice
President and Chief Agency
Officer of TOLIC since
1993. Vice President of
TOLIC from 1989 to 1993.
Robert A. Watson**** Director and Executive Vice President of
Transamerica Corporation since 1995. President and Chief
Executive Officer Westinghouse Financial Services, 1992-1995.
William R. Wellnitz, FSA*** Senior
Vice President and Actuary
of TOLIC since 1996. Vice
President and Reinsurance
Actuary of TOLIC from 1988
to 1996.
</TABLE>
*The business address is 1150 South Olive Street, Los Angeles,
California 90015. **The business address is 1100 Walnut Street, 23rd
Floor, Kansas City, Missouri 64106. ***The business address is 401
North Tryon Street, Charlotte, North Carolina 28202. ****The business
address is 600 Montgomery Street, San Francisco, California 94111.
Companies Owning Securities of Depositor
29. Furnish as at latest practicable date the following
information with respect to each company which directly or
indirectly owns, controls or holds with power to vote 5% or
more of the outstanding voting securities of depositor.
The Company is a wholly-owned subsidiary of Transamerica
Insurance Corporation of California, 1150 South Olive Street,
Los Angeles, which in turn is a wholly-owned subsidiary of
Transamerica Corporation, 600 Montgomery Street, San
Francisco, California. Transamerica Corporation is organized
under the laws of the state of Delaware.
Controlling Persons
30. Furnish as at latest practicable date the following
information with respect to any person other than those
covered by Items 28, 29, and 42 who directly or indirectly
controls the depositor.
None.
Compensation of Officers of Depositor
31. Furnish the following information with respect to the
remuneration for services paid by the depositor during the
last fiscal year covered by financial statements filed
herewith:
(a) directly to each of the officers or partners or the depositor
directly receiving the three highest amounts of remuneration;
None. No person received compensation for services rendered to the
trust (separate
account).
(b) directly to all officers or partners of the depositor
as a group exclusive of persons whose remuneration is
included under Item 31(a), stating separately the
aggregate amount paid by the depositor itself and the
aggregate amount paid by all the subsidiaries;
None. No person received compensation for services rendered to the
trust (separate account).
(c) indirectly or through subsidiaries to each of the
officers or partners of the depositor:
None. No person received compensation for services rendered to the
trust (separate account).
Compensation of Directors
32. Furnish the following information with respect to the
remuneration for services, exclusive of remuneration reported
under Item 31, paid by the depositor during the last fiscal
year covered by financial statements filed herewith:
(a) the aggregate direct remuneration to directors;
None.
(b) indirectly or through subsidiaries to directors.
Not Applicable.
Compensation to Employees
33. (a) Furnish the following information with respect to
the aggregate amount of remuneration for services of
all employees of the depositor (exclusive of persons
whose remuneration is reported in Items 31 and 32) who
received remuneration in excess of $10,000 during the
last fiscal year covered by financial statements filed
herewith from the depositor and any of its
subsidiaries.
Not applicable.
(b) Furnish the following information with respect to the renumeration
for services paid directly during the last fiscal year covered by
financial statements filed herewith to the following classes of
persons (exclusive of those persons covered by Item 33(a)): (1) Sales
managers, branch managers, district managers and other persons
supervising the sale of registrant's securities; (2) Salesmen, sales
agents, canvassers and other persons making solicitations but not in
supervisory capacity; (3) Administrative and clerical employees; and
(4) others (specify). If a person is employed in more than one
capacity, classify according to predominant type of work.
Not Applicable.
Compensation to Other Persons
34. Furnish the following information with respect to the aggregate
amount of compensation for services paid any person (exclusive
of persons whose remuneration is reported in Items 31, 32 and
33), whose aggregate compensation in connection with services
rendered with respect to the trust in all capacities exceeded
$10,000 during the last fiscal year covered by financial
statements filed herewith from the depositor and any of its
subsidiaries.
Not Applicable.
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
Distribution of Securities
35. Furnish the names of the states in which sales of the trust's
securities (a) are currently being made, (b) are presently
proposed to be made, and (c) have been discontinued, indicating
by appropriate letter the status with respect to each state.
(a) Sale of the Contracts has not commenced in any state.
(b) Following the effectiveness of the Separate Account's
registration statement under the Securities Act of
1933, and obtaining required approvals under state law,
the Company proposes issuing the Contracts in the
District of Columbia, Guam, Virgin Islands, and Puerto
Rico and in all states except New York.
(c) Not Applicable.
36. If sales of the trust's securities have at any time since
January 1, 1936 been suspended for more than a month, describe
briefly the reasons for such suspension.
Not Applicable.
37. (a) Furnish the following information with respect to
each instance where subsequent to January 1, 1937, any
federal or state governmental officer, agency, or
regulatory body denied authority to distribute
securities of the trust, excluding a denial which was
merely a procedural step prior to any determination by
such officer, etc., and which denial was subsequently
rescinded.
(1) Name of officer, agency or body
None.
(2) Date of denial
Not Applicable.
(3) Brief statement of reasons given for denial
Not Applicable.
(b) Furnish the following information with regard to each
instance where, subsequent to January 1, 1937, the
authority to distribute securities of the trust has
been revoked by any federal or state governmental
officer, agency or regulatory body.
(1) Name of officer, agency or body
None.
(2) Date of revocation
Not Applicable.
(3) Brief statement of reasons given for revocation
Not Applicable.
38. (a) Furnish a general description of the method of distribution of
securities of the trust.
Transamerica Securities Sales Corporation, an affiliate
of the Company, will act as principal underwriter of
the Contracts pursuant to a Distribution Agreement with
the Company and the Separate Account. Transamerica
Securities Sales Corporation is a broker-dealer and a
member of the National Association of Securities
Dealers, Inc. The contracts will be sold by agents of
the Company who are registered representatives of
independent broker-dealers.
(b) State the substance of any current selling agreement
between each principal underwriter and the trust or the
depositor, including a statement as to the inception
and termination dates of the agreement, any renewal and
termination provisions, and any assignment provisions.
The Company and Separate Account will execute a
Distribution Services Agreement ("Agreement") with
Transamerica Securities Sales Corporation ("TSSC"), its
principal underwriter. Unless otherwise terminated, the
Agreement shall continue in effect from year to year.
The Agreement may be terminated by any party at any
time upon giving 60 days' written notice to the other
parties, and terminates automatically in the event of
its assignment.
(c) State the substance of any current agreements or
arrangements of each principal underwriter with
dealers, agents, salesmen, etc., with respect to
commissions and overriding commissions, territories,
franchises, qualifications, and revocations. If the
trust is the issuer of periodic payment plan
certificates, furnish schedules of commissions and the
bases thereof. In lieu of a statement concerning
schedules of commissions, such schedules of commissions
may be filed as Exhibit A(3)(c).
(Not yet available.)
Transamerica Securities Sales Corporation (TSSC) acts
as the principal underwriter and general distributor of
the Contract. TSSC is registered with the SEC as a
broker-dealer and is a member of the National
Association of Securities Dealers (NASD).
Broker-dealers sell the Contracts through their
registered representatives who are appointed by us.
We pay to broker-dealers who sell the Contract
commissions based on a commission schedule,
Broker-dealers may choose among available commission
options. Each option includes a commission equal to a
percentage of the payment made to the Contract. Certain
options also include a commission equal to a percentage
of the unloaned Contract Value ("trail commission"),
paid quarterly beginning with the second Contract year
on in force Contracts. Commission options provide for
commissions of up to 8.0% of payments made, with no
trail commissions, and lesser commissions on payments
made but with trail commissions.
Depending upon the insured's Age when the Contract is
issued or additional payments are made, not all options
may be available.
To the extent permitted by NASD rules, promotional
incentives or payments may also be provided to
broker-dealers based on sales volumes, the assumption
of wholesaling functions or other sales-related
criteria. Other payments may be made for other services
that do not directly involve the sale of the Contracts.
These services may include the recruitment and training
of personnel, production of promotional literature, and
similar services.
We intend to recoup commissions and other sales
expenses through: the distribution fee; the surrender
charges; and investment earnings on amounts allocated
under Contracts to the Fixed Account.
Commissions paid on the Contract, including other
incentives or payments, are not charged to the Contract
Owners or the Separate Account.
Information Concerning Principal Underwriter
39. (a) State the form of organization of each principal
underwriter of securities of the trust, the name of the
state or other sovereign power under the laws of which
each underwriter was organized and the date of
organization.
The principal underwriter of the contracts,
Transamerica Securities Sales Corporation, was
incorporated under the laws of Maryland, February 26,
1986.
(b) State whether any principal underwriter currently distributing
securities of the trust is a member of the National Association of
Securities Dealers, Inc. (NASD).
The Contracts will be distributed only by
broker-dealers which are members of the NASD.
40. (a) Furnish the following information with respect to
all fees received by each principal underwriter of the
trust from the sale of securities of the trust and any
other functions in connection therewith exercised by
such underwriter in such capacity or otherwise during
the period covered by the financial statement filed
herewith.
None.
(b) Furnish the following information with respect to any
fee or any participation in fees received by each
principal underwriter from any underlying investment
company or any affiliated person or investment adviser
of such company:
None.
(1) The nature of such fee or participation.
None.
(2) The name of the person making payment.
None.
(3) The nature of the services rendered in
consideration for such fee or participation.
None.
(4) The aggregate amount received during the last
fiscal year covered by the financial statements
filed herewith.
None.
41. (a) Describe the general character of the business
engaged in by each principal underwriter, including a
statement as to any business other than the
distribution of securities of the trust. If a principal
underwriter acts or has acted in any capacity with
respect to any investment company or companies other
than the trust, state the name or names of such company
or companies, their relationship, if any, to the trust
and the nature of such activities. If a principal
underwriter has ceased to act in such named capacity,
state the date of and circumstances surrounding such
cessation.
Transamerica Securities Sales Corporation is a
registered broker-dealer and a member of the NASD.
Transamerica Securities Sales Corporation acts as
principal underwriter of variable annuity and variable
life contracts issued by separate accounts of the
Company and of variable annuities issued by
Transamerica Life Insurance and Annuity Company and of
Premier Funds, Inc. The variable contracts issued by
the Company are sold through registered representatives
of affiliated broker-dealers and of independent
broker-dealers who are also appointed as insurance
agents of the Company.
(b) Furnish as at latest practicable date the address of
each branch office of each principal underwriter
currently selling securities of the trust and furnish
the name and residence address of the person in charge
of such office.
Not Applicable. The Separate Account is not yet issuing securities.
(c) Furnish the number of individual salesmen of each
principal underwriter through whom any of the
securities of the trust were distributed for the last
fiscal year of the trust covered by the financial
statements filed herewith and furnish the aggregate
amount of compensation received by such salesmen in
such year.
Not Applicable. The Contracts have not yet been issued.
42. Furnish as at latest practicable date the following information
with respect to each principal underwriter currently
distributing securities of the trust and with respect to each of
the officers, directors or partners of such underwriter
(ownership of securities of the Trust).
Not Applicable. The Contracts have not yet been issued.
43. Furnish, for the last fiscal year covered by the financial
statements filed herewith, the amount of brokerage commissions
received by any principal underwriter who is a member of a
national securities exchange and who is currently distributing
the securities of the trust or effecting transactions for the
trust in the portfolio securities of the trust.
Not Applicable.
Offering Price or Acquisition Valuation of Securities of the Trust
44. (a) Furnish the following information with respect to
the method of valuation used by the trust for the
purposes of determining the offering price to the
public of securities issued the trust or the valuation
of shares or interests in the underlying securities
acquired by the holder of a periodic payment plan
certificate.
THE UNIT -- We allocate each payment to the
sub-accounts selected by the Contract Owner. We credit
allocations to the sub-accounts as units. Units are
credited separately for each sub-account.
The number of units of each sub-account credited to the
Contract is the QUOTIENT of: (1) that part of the
payment allocated to the sub-account; DIVIDED BY (2)
the dollar value of a unit on the valuation date the
payment is received at our Variable Life Service
Center. (Prior to the end of the free-look period for
the Contract, however, different rules may apply. See
Item 14, above.)
The number of units will remain fixed unless changed by
a split of unit value, transfer, transfer charge, loan,
partial withdrawal or surrender. Also, monthly
deductions taken from a sub-account will result in
cancellation of units equal in value to the amount
deducted.
The dollar value of a unit of a sub-account varies from
valuation date to valuation date based on the
investment experience of that sub-account. This
investment experience reflects the investment
performance, expenses and charges of the portfolio in
which the sub-account invests. The value of each unit
was set at $10.00 on the first valuation date of each
sub-account (except that the value for the Money Market
sub-account was set at $1.00).
The value of a unit on any valuation date is the
PRODUCT of: (1) the dollar value of the unit on the
preceding valuation date; TIMES (2) the net investment
factor.
NET INVESTMENT FACTOR -- The net investment factor
measures the investment performance of a sub-account
during the valuation period just ended. The net
investment factor for each sub-account is the result
of: (1) the net asset value per share of a portfolio
held in the sub-account determined at the end of the
current valuation period; PLUS (2) the per share amount
of any dividend or capital gain distributions made by
the portfolio on shares in the sub-account if the
"ex-dividend" date occurs during the current valuation
period; DIVIDED BY (3) the net asset value per share of
a portfolio share held in the sub-account determined as
of the end of the immediately preceding valuation
period; MINUS (4) the mortality and expense risk charge
for each day in the valuation period at an annual rate
of 0.80% of the daily net asset value of that
sub-account. The net investment factor may be more or
less than one.
Allocations to the Fixed Account are not converted into
Units, but are credited interest at rates periodically
set by the Company.
(b) Furnish a specimen schedule showing the components of
the offering price of the trust's securities as of the
latest practicable date.
No Contracts have been issued or offered for sale to
the public.
(c) If there is any variation in offering price of the
trust's securities to any person or classes of persons
other than underwriters, state the nature and amount of
such variation and indicate the person or classes of
persons to whom such offering is made.
At any time, the "price" of a unit of a sub-account
will be the same for all Contract Owners. However, the
cost of insurance charges (insurance protection
charges) for the Contracts will not be the same for all
Contract Owners. The insurance principles of pooling
and distribution of mortality risks is based upon the
assumption that each Contract Owner pays a cost of
insurance charge commensurate with the Insured's
mortality risk, which is actuarially determined based
upon factors such as age, sex, health and occupation.
In the context of life insurance, a uniform mortality
charge (the "cost of insurance charge") for all
Insureds would discriminate unfairly in favor of those
Insureds representing greater mortality risks to the
disadvantage of those representing lesser risks.
Accordingly, there will be a different "price" for each
actuarial category of Insureds because different cost
of insurance rates will apply. The "price" will also
vary depending upon whether the Contract is issued
based on simplified underwriting criteria or, instead,
is issued based on full underwriting. The "price" may
also vary based on net amount at risk. The Contracts
will be offered and sold pursuant to this cost of
insurance schedule, the Company's underwriting
standards, and in accordance with state insurance laws.
Such laws prohibit unfair discrimination among
Insureds, but recognize that premiums must be based
upon factors such as age, health and occupation. Tables
showing the maximum cost of insurance charges will be
delivered as part of the Contract.
45. Furnish the following information with respect to any suspension
of the redemption rights of the securities issued by the trust
during the three fiscal years covered by the financial
statements filed herewith:
(a) by whose action redemption rights were suspended;
Not Applicable.
(b) the number of days' written notice given to security
holders prior to suspension of redemption rights;
Not Applicable.
(c) reason for suspension;
Not Applicable.
(d) period during which suspension was in effect.
Not Applicable.
46. (a) Furnish the following information with respect to the method
of determining the redemption or partial withdrawal valuation of
securities issued by the trust:
(1) The source of quotations used to determine the
value of portfolio securities.
The sub-accounts invest only in shares of the
portfolios. Shares of each are sold and redeemed
at their net asset value as next computed after
receipt of the purchase or redemption order.
Each purchase or redemption is confirmed in a
written statement of the number of shares
purchased or redeemed and the aggregate number
of shares currently held by the
respective-sub-accounts. See Item 44(a).
(2) Whether opening, closing, bid, asked or any other
price is used.
See 44(a) and 46(a)(1), above.
(3) Whether price is as of the day of sale or as of any
other time.
See 44(a) and 46(a)(1), above.
(4) A brief description of the methods used by
registrant for determining other assets and
liabilities including accrual for expenses and
taxes (including taxes on unrealized
appreciation).
Contract Value and Surrender Value - The
Contract Value is the total value of the
Contract. It is the SUM of: (1) accumulation in
the Fixed Account; PLUS (2) the value of units
in the sub-accounts.
There is no guaranteed minimum Contract Value.
The Contract Value on any date depends on
variables that cannot be predetermined.
Contract Value is affected by the: (1) amount of
payment(s); (2) interest credited in the Fixed
Account; (3) investment performance of the
selected sub-accounts; (4) partial withdrawals;
(5) loans, loan repayments and loan interest
paid or credited; and (6) charges and deductions
under the Contract.
COMPUTING CONTRACT VALUE -- We compute the
Contract Value on the date of issue and on each
valuation date. On the date of issue, the
Contract Value is: (1) the payment plus any
interest earned during the period it was
allocated to the Fixed Account; MINUS (2) the
monthly deductions due.
On each valuation date after the date of issue,
the Contract Value is the SUM of: (1)
accumulations in the Fixed Account; PLUS the SUM
of the PRODUCTS of: (2) the number of units in
each sub-account: TIMES (3) the value of a unit
in each sub-account on the valuation date.
Thus, the Contract Value is determined by
multiplying the number of units in each
sub-account by the value of the applicable units
on the particular valuation date, adding the
products, and adding the amount of the
accumulations in the Fixed Account, if any. Also
see Item 44(a), above.
Because of its current tax status, the Company
does not expect to incur any federal income tax
liabilities that would be charged to the
Separate Account, and the Company does not
intend to make a charge for federal income
taxes. If there is a change in tax status or in
law resulting in tax liabilities to the Company,
the Company may assess a charge against the
Contract Value. The Company may, however, incur
state and local taxes (in addition to premium
taxes) in several states. At present, these
taxes are not significant. If there is a
material change in state or local tax laws,
charges for such taxes, if any, attributable to
the Separate Account may be made.
SURRENDER VALUE. The amount payable on a full surrender. It is the
Contract
Value less any outstanding loan and surrender charges.
(5) Other items which registrant deducts from the
net asset value in computing redemption value of
its securities.
Units of the sub-accounts will be redeemed at net asset value.
However, under the Contracts, a surrender or partial redemption may be
subject to surrender charges. See 13(a), "SURRENDER CHARGES" and
"PARTIAL WITHDRAWAL."
(6) Whether adjustments are made for fractions.
No adjustments are made for fractions.
(b) Furnish a specimen schedule showing the components of
the redemption price to the holders of the trust's
securities as of the latest practicable date.
No Contracts have been issued or offered for sale to
the public.
Purchase and sale of interests in underlying securities from and to
Security Holders
47. Furnish a statement as to the procedure with respect to the
maintenance of a position in the underlying securities or interests in
the underlying securities, the extent and nature thereof and the
person who maintains such a position. Include a description of the
procedure with respect to the purchase of underlying securities or
interests in the underlying securities from security holders who
exercise redemption or withdrawal rights and the sale of such
underlying securities and interests in the underlying securities to
other security holders. State whether the method of valuation of such
underlying securities or interests in underlying securities differs
from that set forth in Items 44 and 46. If any item of expenditure
included in the determination of the valuation is not or may not
actually be incurred or expended, explain the nature of such item and
who may benefit from the transaction.
All purchases and redemptions of shares of the portfolios are at
net asset value. The Company will redeem sufficient shares of
the portfolios to pay certain life insurance proceeds, benefits
at maturity, or surrender proceeds, or for other purposes
contemplated by the Contract.
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Furnish the following information as to each trustee or custodian
of the trust.
The Company maintains custody of all securities of the Separate
Account. The Separate Account has no trustees. See Item 3.
(a) Name and principal address:
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
(b) Form of organization:
Stock life insurance company.
(c) State or other sovereign power under the laws of which
the trustee or custodian was organized.
Incorporated under the laws of California.
(d) Name of governmental supervising or examining authority.
California Department of Insurance.. The Company is also subject to
examination by the insurance departments of each state in which it
does business.
49. State the basis for payment of fees or expenses of the trustee
or custodian for services rendered with respect to the trust and
its securities, and the amount thereof for the last fiscal year.
Indicate the person paying such fees or expenses. If any fees or
expenses are prepaid, state the unearned amounts.
The Company is not paid a separate fee for expenses or services
rendered as custodian of the Separate Account.
A daily charge equivalent to an effective annual rate of 0.80%
of the daily net asset value of each sub-account is imposed to
compensate the Company for its assumption of certain mortality
and expense risks. Such expense risks include the risks of
increased costs associated with the custodian function.
The contingent surrender charge (See 13(a)) includes a component
for administrative services, which may be deemed to include
custodial services.
As the Separate Account has not begun business operations, no
fees have been paid.
50. State whether the trustee or custodian or any other person has
or may create a lien on the assets of the trust, and, if so,
give full particulars, outlining the substance of the provisions
of any indenture or agreement with respect thereto.
None. Under California law, the assets supporting Contract
reserves in the Separate Account may not be charged with any
liabilities arising out of any other business of the Company.
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Furnish the following information with respect to insurance of
holders of securities:
Interests in the Separate Account are sold only to fund the
Contracts. Other than the Contracts themselves, no insurance is
sold to Contract owners with interests in the sub-accounts, in
connection with such interests.
(a) The name and address of the insurance company.
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
(b) The types of contracts and whether individual or group
contracts.
The Contracts are individual modified single payment
variable life insurance contracts. In certain states,
however, we may instead issue certificates under a
group contract.
(c) The types of risks insured and excluded.
The Contracts are offered to individuals age 89 and
under, subject to our underwriting standards. We assume
the risk that the deduction made for mortality and
expense risks will prove inadequate to cover actual
insurance costs and expenses.
(d) The coverage of the contracts.
The Contracts provide insurance coverage on the life of
the Insured. The minimum death benefit is stated in
each Contract. Death benefits will be reduced by any
outstanding loans, any due and unpaid monthly
deductions, as well as any unpaid withdrawal
transaction fees, partial withdrawals, and applicable
surrender charges.
(e) The beneficiaries of such contracts and the uses to
which the proceeds of contracts must be put.
The beneficiary is named by the Contract Owner to
receive the net death benefits. The interest of any
beneficiary will be subject to any assignment made by
the Contract Owner. The Contract Owner may declare a
beneficiary to be revocable (changed at any time by
written request) or irrevocable (may be changed only
with the written consent of the irrevocable
beneficiary). The interest of a beneficiary who dies
before the Insured will pass to surviving
beneficiaries. If all beneficiaries die before the
Insured, the death benefits will pass to the Contract
Owner or to the Contract Owner's estate.
(f) The terms and manner of cancellation and of
reinstatement. See Item 17(c) for the manner of
cancellation and reinstatement.
(g) The method of determining the amount of premiums to be paid
by holders of securities.
See answers to Item 13(a) for amount of charges imposed
and 44(a) and 44(c) for the manner in which the
payments are determined.
(h) The amount of aggregate premiums paid to the insurance
company during the last fiscal year.
We have not yet begun issuing the Contracts.
(i) Whether any person other than the insurance company
receives any part of such premiums, the name of each
such person and the amounts involved, and the nature of
the services rendered therefor.
No person other than the Company receives any part of
the amounts deducted for assumption of mortality and
expense risks. However, the Company may from time to
time enter into reinsurance agreements with other
insurance companies under which certain insurance
risks, premium income and related expenses are assumed
by such other insurance companies.
(j) The substance of any other material provisions of any
indenture or agreement of the trust relating to
insurance.
None.
VII. CONTRACT OF REGISTRANT
52. (a) Furnish the substance of the provisions of any indenture
or agreement with respect to the conditions upon which and the
method of selection by which particular portfolio securities must
or may be eliminated from the assets of the trust or must or may
be replaced by other portfolio securities. If an investment
adviser or other person is to be employed in connection with such
selection, elimination or substitution, state the name of such
person, the nature of any affiliation to the depositor, trustee
or custodian, and any principal underwriter, and the amount of
remuneration to be received for such services. If any particular
person is not designated in the indenture or agreement, describe
briefly the method of selection of such person.
The investment policy of each sub-account of the
Separate Account is to invest in a particular
portfolio.
We reserve the right, subject to law, to make additions
to, deletions from, or substitutions for the shares
that are held in the sub-accounts. We may redeem the
shares of a portfolio and substitute shares of another
registered open-end management company, if: (1) the
shares of the portfolio are no longer available for
investment; or (2) in our judgment further investment
in the portfolio would be improper based on the
purposes of the Separate Account or the affected
sub-account.
Where the 1940 Act or other law requires, we will not
substitute any shares respecting a Contract interest in
a sub-account without notice to Contract Owners and
prior approval of the SEC and state insurance
authorities. The Separate Account may, as the law
allows, purchase other securities for other contracts
or allow a conversion between contracts on a Contract
Owner's request.
We reserve the right to establish additional
sub-accounts funded by a new portfolio or by another
investment company. Subject to law, we may, in our sole
discretion, establish new sub-accounts or eliminate one
or more sub-accounts.
Shares of the portfolios are issued to other separate
accounts of Transamerica and its affiliates that fund
variable annuity contracts and that fund other variable
life policies ("mixed funding"). Shares of the
portfolios are also issued to other unaffiliated
insurance companies ("shared funding"). It is
conceivable that in the future such mixed funding or
shared funding may be disadvantageous for variable life
contract and policy owners or variable annuity policy
owners. Transamerica does not believe that mixed
funding is currently disadvantageous to either variable
life insurance contract and policy owners or variable
annuity policy owners. Transamerica will monitor events
to identify any material conflicts among contract and
policy owners because of mixed funding. If Transamerica
concludes that separate portfolios should be
established for variable life and variable annuity
separate accounts, or for separate variable life
separate accounts, we will bear the expenses.
We may change the Contract to reflect a substitution or
other change and will notify Contract Owners of the
change. Subject to any approvals the law may require,
the Separate Account or any sub-accounts may be: (1)
operated as a management company under the 1940 Act;
(2) deregistered under the 1940 Act if registration is
no longer required; or (3) combined with other
sub-accounts or our other separate accounts.
(b) Furnish the following information with respect to each
transaction involving the elimination of any underlying
security during the period covered by the financial
statements filed herewith.
Not Applicable.
(c) Describe the contract of the trust with respect to the
substitution and elimination of the underlying
securities of the trust with respect to:
(1) the grounds for elimination and substitution;
See 52(a), above.
(2) the type of securities which may be substituted for
any underlying security;
See 52(a), above.
(3) whether the acquisition of such substituted
security or securities would constitute the
concentration of investment in a particular
industry or group of industries or would conform
to a contract of concentration of investment in
a particular industry or group of industries;
Not Applicable.
(4) whether such substituted securities may be the
securities of any other investment company; and
See 52(a), above.
(5) the substance of the provisions of any indenture
or agreement which authorize or restrict the
contract of the registrant in this regard.
See 52(a) above.
(d) Furnish a description of any contract (exclusive of
contracts covered by paragraph (a) and (b) herein) of
the trust which is deemed a matter of fundamental
contract and which is elected to be treated as such.
None.
Regulated Investment Company
53. (a) State the taxable status of the trust.
Because of its current tax status, the Company does not
expect to incur any federal income tax liabilities that
would be charged to the Separate Account, and the
Company does not intend to make a charge for federal
income taxes. The Company may, however, incur state and
local taxes (in addition to premium taxes) in several
states. At present, these taxes are not significant. If
there is a material change in state or local tax laws,
charges for such taxes, if any, attributable to the
Separate Account may be made.
See also 46(a), above.
(b) State whether the trust qualified for the last taxable
year as a regulated investment company as defined in
Section 851 of the Internal Revenue Code of 1954, and
state its present intention with respect to such
qualification during the current taxable year.
Not Applicable.
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. If the trust is not the issuer of periodic payment plan
certificates, furnish the following information with respect to
each class or series of its securities.
Not Applicable.
55. If the trust is the issuer of periodic payment plan
certificates, a transcript of a hypothetical account shall be
filed in approximately the following form on the basis of the
certificate calling for the smallest amount of payments. The
schedule shall cover a certificate of the type currently being
sold assuming that such certificate had been sold at a date
approximately ten years prior to the date of registration or to
the approximate date of organization of the trust.
Not Applicable.
56. If the trust is the issuer of periodic payment plan
certificates, furnish by years for the period covered by the
financial statements filed herewith in respect of certificates
sold during such period, the following information for each
fully paid type and each installment payment type of periodic
payment plan certificate currently being issued by the trust.
Not Applicable.
57. If the trust is the issuer of periodic payment plan
certificates, furnish by years for the period covered by
financial statements filed herewith the following information
for each installment payment type of periodic payment plan
certificate currently being issued by the trust.
Not Applicable.
58. If the trust is the issuer of periodic plan certificates furnish
the following information for each installment periodic payment
plan certificate outstanding as of the latest practicable date.
Not Applicable.
59. Financial Statements:
Financial Statements of the Separate Account
Financial statements, if any, will be contained in a
pre-effective amendment to the registration statement for the
Contract on Form S-6 filed under the Securities Act of 1933.
They are incorporated herein by reference.
Financial Statements of the Depositor
The Financial Statements of the Company will be contained in a
pre-effective amendment to the registration statement on Form
S-6 filed by the Registrant pursuant the Securities Act of 1933.
They are incorporated herein by reference.
IX. EXHIBITS
A. Furnish the most recent form of the following:
(1) Indenture
Certified Copy of vote of Board of Directors of Transamerica
Occidental Life Insurance Company dated December 6, 1996,
establishing the Transamerica Occidental Life Separate Account.
1/
(2) Not Applicable.
(3) Distributing Contracts
(a) Distribution Agreement between the depositor
and principal underwriter. 1/
(b) Sales Agreement between principal underwriter
and broker-dealers. 1/
(c) Schedule of sales commissions. /
(4) Not Applicable.
(5) Form of Contract and Contract riders. 1/
(6) Organizational documents of the Company. 1/
(7) Not applicable.
(8) (a) Forms of Participation Agreements 1/
(9) Not applicable.
(10) Form of Application for Contract. 1/
B. (1) None.
(2) None.
C. None.
1/Filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Initial Registration
Statement to be signed by the Initial Undersigned, in the City of
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Transamerica Occidental Life Separate Account VUL-2, has duly caused
this registration statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Los Angeles, and the State of California, on this 8th day of
September, 1998.
Transamerica Occidental Life Separate Account VUL-2
(Registrant)
(SEAL)
Attest:/s/Gina Grusman By: /s/David M. Goldstein
(Title) SEC Filing Coordinator (Name) David M. Goldstein
(Title) Vice President
Transamerica Occidental Life Insurance Company
Pursuant to the requirements of the Securities Act of 1933, Transamerica
Occidental Life Insurance Company has duly caused this registration statement to
be signed on its behalf by the undersigned thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the City of Los Angeles and the
State of California, on the 8th day of September, 1998.
Transamerica Occidental Life Insurance Company
(SEAL)
Attest:/s/Gina Grusman By:/s/David M. Goldstein
Title) SEC Filing Coordinator (Name) David M. Goldstein
(Title) Vice President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated on the date(s) set forth below.
<TABLE>
<CAPTION>
Signatures Titles Date
<S> <C> <C>
______________________* Director, Executive Vice President September 8, 1998
Robert Abeles and Chief Financial Officer
______________________* Director, Chairman, President, September 8, 1998
Thomas J. Cusack Chief Executive Officer and Director
<PAGE>
_____________________* Director September 8, 1998
James W. Dederer
_____________________* Director September 8, 1998
George A. Foegele
______________________* Director September 8, 1998
David E. Gooding
______________________* Director September 8, 1998
Edgar H. Grubb
______________________* Director September 8, 1998
Frank C. Herringer
______________________* Director September 8, 1998
Richard N. Latzer
______________________* Director September 8, 1998
Karen MacDonald
______________________* Director September 8, 1998
Gary U. Rolle'
_____________________* Director September 8, 1998
Paul E. Rutledge III
______________________* Director September 8, 1998
T. Desmond Sugrue
_____________________* Director September 8, 1998
Bruce A. Turkstra
______________________* Director September 8, 1998
Nooruddin S. Veerjee
______________________* Director September 8, 1998
Robert A. Watson
</TABLE>
/s/ David M. Goldstein On September 8, 1998 as Attorney-in-Fact pursuant to
*By: David M. Goldstein powers of attorney previously filed and filed herewith,
and in his own capacity as Vice President.
<PAGE>
Exhibit List
1. (1) Certified Copy of Resolution of Board of Directors
(3) (a) Form of Distribution Agreement
(b) Form of Sales Agreement
(5) Forms of Contract and Riders
(6) Organizational documents
(8) Form of Participation Agreements
(9) Form of Administrative Agreement
(10) Form of Application
(11) Procedures Memorandum
<PAGE>
Exhibit 1.(1) Certified Resolution of Board of Directors
<PAGE>
Resolution of Board
Exhibit 1(1) Resolution of the Board of Directors of the Company
Establishing the Separate Account
<PAGE>
CERTIFICATE
I, James W. Dederer, Corporate Secretary of Transamerica Occidental Life
Insurance Company, do hereby certify that the attached is a full, true and
correct copy of a resolution - SEPARATE ACCOUNTS - duly passed and adopted at a
regular meeting of the Board of Directors of Transamerica Occidental Life
Insurance Company on the 6th day of December, 1996 at which meeting a quorum of
directors was present. I further certify that said resolution is now in full
force and effect.
WITNESS my hand and seal of Transamerica Occidental Life Insurance
Company this 11th day of August, 1998.
<PAGE>
EXCERPTS FROM THE MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY HELD DECEMBER 6, 1996.
SEPARATE ACCOUNTS
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
WHEREAS, this Corporation adopted a resolution authorizing its proper officers
to enter into, make, perform and carry out contracts pursuant to Section 10506
of the California Insurance Code; and
WHEREAS, this Corporation desires to continue entering into, making, performing
and carrying out contracts pursuant to Section 10506 et seq. of the California
Insurance Code, and specifically at this time to authorize its proper officers
to establish additional separate accounts under Section 10506 et seq. of the
California Insurance Code without further action of approval of this Board of
Directors;
THEREFORE IT IS RESOLVED, that this Corporation reaffirms that through its
proper officers, be and hereby is 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 10506 et seq. of
the California Insurance Code, which permits a life insurance company to
allocate to one more separate accounts, in accordance with the terms of a
written agreement approved by the Insurance Commissioner of California, any
amounts that are paid to the Company under a pension, retirement or
profit-sharing plan, or program for one or more persons and that are to be
applied in payment of proceeds or benefits under the Company's policies,
contracts, or agreements in fixed or variable dollar amounts, or both, 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, in each separate account shall be credited to or charged against
such separate account without regard to other gains or losses of the Company's
general account or other separate accounts; and 2) no separate account shall be
chargeable with liabilities arising out of any other business of the Company.
<PAGE>
(3) (a) Form of Distribution Agreement
<PAGE>
Exhibit (3)
Form of Underwriting Agreement
<PAGE>
DISTRIBUTION AGREEMENT BETWEEN
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
AND TRANSAMERICA SECURITIES SALES CORPORATION
This Agreement (the "Agreement") made as of this 1st day of August, 1997,
by and between TRANSAMERICA INSURANCE SECURITIES SALES CORPORATION (the
"Distributor"), a corporation organized and existing under the laws of the State
of Maryland with its principal place of business in Los Angeles, California, and
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY (the "Company"), an insurance
company organized and existing under the laws of the State of North Carolina
with its principal place of business in Charlotte, North Carolina, for itself
and on behalf of certain of its separate accounts.
W I T N E S S E T H
WHEREAS, the Company may establish and maintain a class or classes of
variable insurance contracts as set forth on Schedule 1 to this Agreement, as
may be amend from time to time in accordance with Section 18 of this Agreement,
and including any riders to such contracts and any other contract offered in
connection therewith (collectively the "Contracts") (A "class of Contracts"
shall mean those Contracts issued by the Company on the same policy form or
forms and covered by the same Registration Statement.); and
WHEREAS, the Distributor, a wholly-owned subsidiary of Transamerica
Insurance Corporation of California, is registered as a broker-dealer with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (the "1934 Act") and is a member of the National Association
of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the parties desire to have the Distributor act as the principal
underwriter for and in connection with the sale of the Contracts to the public
and assume full responsibility for the securities activities of each "associated
person" (as that term is defined in Section 3(a)(18) of the 1934 Act) of the
Distributor, including each associated person of the Distributor engaged in the
offer and sale of the Contracts (a "Representative"); and
WHEREAS, the Distributor and the Company acknowledge that the Company is
best suited to provide certain administrative functions in connection with the
Contracts, subject at all times to the control and direction of the Distributor
with respect to the broker-dealer operations;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, the Distributor and the Company agree as follows:
1. Definitions
a. Fund -- An investment company serving as the funding medium for any
Contracts, specified in Schedule 2 to this Agreement as in effect at the
time this Agreement is executed, and such other investment companies that
may be added to Schedule 2 from time to time in accordance with Section 18
of this Agreement.
b. Intermediary Distributors -- A person registered as a broker-dealer
and licensed as a life insurance agent or affiliated with a person so
licensed, and authorized to distribute the Contracts pursuant to a sales
agreement as provided for in Section 2 of this Agreement (the "Sales
Agreement").
c. Separate Account -- Each separate account of the Company specified
on Schedule 3 to this Agreement as in effect at the time this Agreement is
executed, and such other separate accounts of the Company that may be added
to Schedule 3 from time to time in accordance with Section 18 of this
Agreement, each of which will be approved by the Commissioner of Insurance
of the State of California under Section 10506 of the California Insurance
Code.
2. Distribution Duties and Responsibilities. The Distributor shall act as
principal underwriter for the Contracts in connection with their sale during the
term of this Agreement in each state or other jurisdiction where they may
legally be sold (the "Territory"). The Distributor is authorized to solicit
applications for the Contracts ("Applications") directly from customers and
prospective customers in the Territory and to select all persons who will be
authorized to engage in solicitation activities with respect to the Contracts.
Such selection activity shall include the recruitment and appointment of third
parties to act as distributors. In turn such third parties may be authorized as
Intermediary Distributors to engage in solicitation activities, including the
solicitation of Applications directly from customers and prospective customers
in the Territory and/or as Intermediary Distributors to recruit other third
parties to act as Intermediary Distributors, in each case as the Company and the
Distributor shall agree to. The Distributor shall enter into separate written
Sales Agreements with each such Intermediary Distributor. Such Sales Agreements
will be substantially in the form attached to this Agreement as Exhibit A, but
may include such additional or alternative terms and conditions that are not
otherwise inconsistent with this Agreement, subject to the Company's review and
prior written consent (which may be given by facsimile), which consent will not
be unreasonably withheld, and which will be deemed to have been given if the
Company has not responded in writing (by facsimile or otherwise) within 10
calendar days. The Distributor will provide the Company with a profile on each
Intermediary Distributor. The Distributor shall use its best efforts to market
the Contracts actively, both directly and through Intermediary Distributors.
The Distributor shall have the power and authority to select and recommend
Representatives of the Distributor, and to authorize an Intermediary Distributor
to select and recommend representatives of such Intermediary Distributor (the
"Intermediary's Representatives"), for appointment as agents of the Company, and
only such Representatives and Intermediary's Representatives shall become agents
of the Company with authority to engage in solicitation activities with respect
to the Contracts. The Distributor shall be solely responsible for background
investigations of its Representatives to determine their qualifications, good
character and moral fitness to sell the Contracts, and pursuant to the Sales
Agreement, each Intermediary Distributor shall be solely responsible for
background investigations of its Intermediary's Representatives to determine
their qualifications, good character and moral fitness to sell the Contracts.
The Company shall appoint in the appropriate states or jurisdictions such
selected and recommended agents, provided that the Company reserves the right,
which right shall not be exercised unreasonably, to refuse to appoint as agent
any Representative or Intermediary's Representative, or, once appointed, to
terminate the same at any time with or without cause. No other individuals,
persons or entities, other than affiliates of the Company, shall have authority
to engage in solicitation activities with respect to the Contracts, without the
express prior written consent of the Distributor.
The Distributor shall at all times be an independent contractor, and shall
be under no obligation to produce any particular amount of sales of the
Contracts. Anything in this Agreement to the contrary notwithstanding, the
Company retains ultimate responsibility for the direction and control of the
services provided under this Agreement, and the ultimate right to control the
sale of the Contracts, including the right to suspend sales in any jurisdiction
or jurisdictions, to appoint and discharge agents of the Company, or to refuse
to sell a Contract to any applicant for purchase of a Contract (an "Applicant")
for any reason whatsoever. The Distributor and the Distributor's Representatives
shall not have the authority, and shall not grant the authority to Intermediary
Distributors or the Intermediary's Representatives, on behalf of the Company: to
make, alter or discharge any Contract or other contract entered into pursuant to
a Contract; to waive any Contract forfeiture provision; to extend the time of
paying any premium on the Contracts; or to receive any monies or premiums
(except for the sole purpose of forwarding such monies or premiums to the
Company). The Distributor shall not possess or exercise any authority on behalf
of the Company other than that expressly conferred upon the Distributor by this
Agreement.
3. Filings, Marketing Materials and Representatives. The Distributor will
assume full responsibility for the securities activities of its Representatives,
and, similarly, each Intermediary Distributor shall assume, pursuant to the
Sales Agreement, full responsibility for the Intermediary's Representatives'
securities activities, including compliance with the NASD Rules of Fair Practice
and any applicable state securities laws and regulations. The Distributor,
either directly or indirectly through the Company as its agent, shall: (a) make
timely filings with the SEC, the NASD, and any other appropriate securities
regulatory authorities of any advertisements, sales literature, or other
materials relating to the Contracts, as required by law or regulation to be
filed; (b) make available to the Company for approval copies of all agreements
and other written plans and documents relating to the sale of the Contracts, and
shall, if necessary, submit such agreements and other plans and documents to the
appropriate securities regulatory authorities for approval prior to their use;
(c) assist its Representatives in their efforts to prepare themselves to pass
any and all applicable NASD and state insurance qualification examinations; (d)
register its Representatives with the NASD and any other appropriate securities
regulatory authorities; and (e) supervise and control their Representatives in
the performance of their selling activities. The Intermediary Distributors,
pursuant to each Sales Agreement, shall have similar responsibilities with
regard to the assistance, registration, supervision and control of the
Intermediary's Representatives. In connection with obtaining the clearances of
the appropriate regulatory authorities, the parties agree to use their best
efforts to obtain such clearances as expeditiously as possible, and shall not
use any sales material, plan, or other agreement in any jurisdiction unless the
appropriate filings have been made and approvals obtained that are necessary to
make their use proper and legal therein.
The Distributor will take reasonable steps to ensure that the
Representatives do not make any recommendations to Applicants for the purchase
of a Contract(s) in the absence of reasonable grounds to believe that the
purchase of such Contracts is suitable for the Applicants. Determinations of
suitability will be based on various types of information including, but not
limited to, information furnished to a Representative by an Applicant after
reasonable inquiry by the Representative concerning the Applicant's insurance
and investment objectives, financial situation, and needs, including the
likelihood that the Applicant will be financially able to make sufficient
premium payments to derive the benefits from the Contracts. Likewise, pursuant
to each Sales Agreement, each Intermediary Distributor shall take reasonable
steps to ensure that the Intermediary's Representatives do not make any
recommendations to any Applicant in the absence of reasonable grounds to believe
that the purchase of such Contracts is suitable for the Applicant, with
determinations of suitability based upon the factors set forth immediately
above.
The Distributor will not encourage a prospective Applicant to surrender or
exchange an insurance contract in order to purchase a Contract, nor will the
Distributor encourage any existing holder of a Contract (a "Contractholder") to
surrender or exchange a Contract in order to purchase another insurance
contract. Likewise, each Intermediary Distributor, pursuant to each Sales
Agreement with the Distributor, shall not encourage a prospective Applicant to
surrender or exchange an insurance contract in order to purchase a Contract, nor
encourage any Contractholder to surrender or exchange a Contract in order to
purchase another insurance contract. The obligations under this paragraph are
subject to applicable NASD Rules of Fair Practice and any other applicable laws,
regulations and regulatory guidelines.
The Distributor and each Intermediary Distributor, pursuant to each Sales
Agreement, each shall take reasonable steps to ensure that their respective
Representatives or Intermediary's Representatives do not use any advertisement,
sales literature, or other promotional material which has not been specifically
approved in advance by the Company; and the Company, as agent for the
Distributor, shall be responsible for filing such items, as necessary, with the
SEC, the NASD, and any other appropriate securities regulatory authorities, and,
where necessary, shall obtain the approvals of such authorities. No associated
person, either of the Distributor or of any Intermediary Distributor, shall, in
connection with the offer and sale of the Contracts, make any representation or
communicate any information regarding the Contracts or the Company, which is not
inconsistent with (i) materials approved by the Company for distribution to the
public, or (ii) a current prospectus relating to the Contracts, or (iii) the
then effective registration statements under the Securities Act of 1933 (the
"1933 Act") for the Contracts.
4. Offer, Sale and Acceptance of Applications. The Company will undertake
to appoint the Representatives and Intermediary's Representatives as life
insurance agents of the Company, and will be responsible for ensuring that only
agents properly qualified under the insurance laws of all relevant jurisdictions
will engage in the offer and sale of the Contracts. Completed Applications shall
be transmitted directly to the Company for acceptance or rejection by the
Company in its sole discretion, in accordance with its insurance underwriting
and selection rules. Initial and subsequent premium payments under the Contracts
shall be made payable to the Company, and when such payments are received by a
Representative or Intermediary's Representative they shall be held in a
fiduciary capacity and forwarded promptly, and in any event not later than two
business days, in full to the Company. All such premium payments, whether by
check, money order or wire, shall be the property of the Company.
5. Undertakings. The Distributor, in order to discharge its duties under
this Agreement, may designate certain employees of the Company to become limited
or general securities principals of the Distributor, and the Company will use
its best efforts to ensure the cooperation of such employees. These individuals
will perform various functions on behalf of the Distributor, including, but not
limited to, supervision of the securities sales activities of the
Representatives and enforcement of the compliance rules and procedures of the
Distributor. All books and records relating to the Distributor's operations
shall: (a) be maintained and preserved by the Company as agent for the
Distributor, in conformity with the requirements of SEC Rules 17a-3 and 17a-4
under the 1934 Act; (b) be and remain the property of the Distributor; and (c)
be at all times subject to inspection by the SEC and the NASD in accordance with
Section 17(a) of the 1934 Act.
The Distributor will fully cooperate with the Company in executing such
papers and performing such acts as may be reasonably requested by the Company
from time to time for the purpose of: (a) maintaining the registration of the
Contracts under the 1933 Act, and of the Separate Account(s) under the
Investment Company Act of 1940 (the "1940 Act"); and (b) maintaining the
qualification of the Contracts for sale under applicable state laws.
Upon the completion of each transaction relating to the Contracts for which
a confirmation is legally required, the Company shall, acting as agent of the
Distributor, send a written confirmation of such transaction to the customer.
6. Servicing of the Contracts. The Company shall provide all necessary
insurance operations, including such actuarial, financial, statistical, premium
billing and collection, accounting, data processing, and investment services as
may be required with respect to the Contracts. In addition to these services, or
other services provided hereunder, the Company shall provide such executive,
legal, clerical, and other personnel related services as may be required to
carry out the Company's obligations under this Agreement, including its
obligation to perform certain functions on behalf of the Distributor.
7. Recordkeeping. The Company shall provide recordkeeping and general
office administration services incidental to or necessary for the proper
performance of the services to be performed by the Company and, to the extent
the Distributor does not elect to perform said recordkeeping and administration
functions, the Distributor in accordance with this Agreement. In addition, the
Company shall maintain all book and records relating to the Contracts, which
materials will be available to the Distributor (to the extent that they relate
to the broker-dealer operations) and to the appropriate regulatory authorities
upon request.
All books, accounts, and records of the Company and the Distributor as may
pertain to the Contracts and this Agreement shall be maintained so as to clearly
and accurately disclose the nature and details of all Contract transactions and
all other transactions relating to this Agreement. The Company shall own and
control all records pertinent to its variable insurance products operations that
are maintained by the Distributor under this Agreement, and in the event this
Agreement is terminated for any reason, all such records shall promptly be
returned to the Company without charge, free from any claim or retention of
rights of the Distributor.
8. Confidentiality. The Distributor shall keep confidential any information
obtained pursuant to this Agreement, and shall disclose such information only if
the Company has authorized such disclosure, or if such disclosure is expressly
required by the appropriate federal or state regulatory authorities.
9. Expenses and Fees. The Company shall pay commissions to the Distributor
on premiums paid under all Contracts sold pursuant to this Agreement and any
Sales Agreements entered into pursuant to Section 2 of this Agreement. The
Company shall, in connection with the sale of the Contracts, pay all amounts,
including sales commissions, owed by the Distributor to the Representatives or
Intermediary Distributors. The Distributor shall be responsible for all tax
reporting information which the Distributor is required to provide under
applicable tax law to its agents, Representatives or employees with respect to
the Contracts.
The Company shall pay, or cause another person to pay, all expenses related
to: (a) registering the Distributor's associated persons with the NASD and all
other appropriate securities regulatory authorities; (b) preparing the
Distributor's associated persons to pass the applicable NASD and state
qualification examinations; (c) preparing and distributing all prospectuses
(including all amendments and supplements thereto), Contracts, notices,
confirmations, periodic reports, proxy solicitation materials, sales literature
and advertising relating to the sale of the Contracts; and (d) ensuring
compliance with all applicable insurance and securities laws and regulations
relating to the registration of the Contracts and the activities of the
Representatives in connection with the offer and sale of the Contracts. Except
as otherwise indicated herein, or by written agreement of the parties, the
Company shall pay, or cause another person to pay, all expenses resulting from
this Agreement.
10. Dual Interests. It is understood that any shareholder, director,
officer, employee, or agent of the Distributor, or of any organization
affiliated with the Distributor, or of any organization which the Distributor
may have an interest, or of any organization which may have an interest in the
Distributor may be a Contractholder; and that the existence of any such dual
interest shall not affect the validity thereof or the validity of any
transaction hereunder except as may be otherwise provided in the articles of
incorporation or by-laws of the Distributor, or by the specific provisions of
applicable law. For the purpose of this Section 10, the term "affiliated person"
shall have the same definition as set forth in the 1940 Act subject, however, to
such exemptions as may be granted pursuant to the 1940 Act.
11. Customer Claims. The Company shall provide all services relating to
claims made under the Contracts, including investigation, adjustment, and
defense of claims, and shall make all payments relating to the Contracts,
including payments representing claims, Contract loans, full and partial
surrenders, and amounts paid under Contract settlement options. The Company
shall retain ultimate authority for adjustments and claim payments, which
payments shall be final and conclusive.
12. Cooperation Regarding Investigations and Proceedings. The Distributor
and the Company agree to fully cooperate with each other in any insurance
regulatory examination, investigation, or proceeding, or in any judicial
proceeding arising in connection with the Contracts distributed under this
Agreement. The Distributor and the Company further agree to fully cooperate with
each other in any securities regulatory examination, investigation, or
proceeding, or in any judicial proceeding with respect to the Company, the
Distributor, their affiliates and agents, or representatives, to the extent that
such examination, investigation, or proceeding is in connection with Contracts
distributed under this Agreement. The Distributor shall, upon request by the
appropriate federal and state regulatory authorities, furnish such authorities
with any information or reports in connection with the Distributor's services
under this Agreement.
13. Sharing of Information. Each party hereto will promptly advise the
other of: (a) any action taken by the SEC, the NASD, or other regulatory
authorities, of which it has knowledge, affecting the registration or
qualification of the Contracts, or the right to offer the Contracts for sale;
and (b) the happening of any event which makes untrue any statement contained in
the registration statements or prospectus, or which requires the making of any
change in the registration statements or prospectus in order to make the
statements therein not misleading.
14. Indemnification.
a. The Company. The Company shall indemnify and hold harmless the
Distributor and each person who controls or is associated with the
Distributor within the meaning of such terms under the federal securities
laws, and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or
several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of any
action, suit or proceeding or any claim asserted), to which the Distributor
and/or any such person may become subject, under any statute or regulation,
any NASD rule or interpretation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged
omission to state a materials fact required to be stated therein or
necessary to make the statements therein not misleading, in light of
the circumstances in which they were made, contained in any (A)
registration statement or in any prospectus; or (B) a blue-sky
application or other document executed by the Company specifically for
the purpose of qualifying any or all of the Contracts for sale under
the securities laws of any jurisdiction; provided that the Company
shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, an untrue
statement or alleged untrue statement or omission or alleged omission:
(A) made in reliance upon information furnished in writing to the
Company by the Distributor specifically for use in the preparation of
any registration statement or any such blue-sky application or any
amendment thereof or supplement thereto; or (B) contained in any
registration statement, or any post-effective amendment thereto which
becomes effective, filed by a Fund with the SEC relating to shares of
such Fund (the "Shares"), including any financial statements included
in, or any exhibit to, such registration statement or post-effective
amendment, any prospectus of a Fund relating to the Shares either
contained in any such registration statement or post-effective
amendment or filed pursuant to Rule 497(c) or Rule 497(e) under the
1933 Act, any blue-sky application or other document executed by a
Fund specifically for the purpose of qualifying any or all of the
shares of such Fund for sale under the securities laws of any
jurisdiction or any promotional, sales or advertising material or
written information relating to the Shares authorized by a Fund; or
(ii) result because of the terms of any Contract or because of
any breach by the Company of any provision of this Agreement or of any
Contract or which proximately result from any activities of the
Company's officers, directors, employees or agents or their failure to
take any action in connection with the sale, processing or
administration of the Contracts. This indemnification agreement shall
be in addition to any liability that the Company may
otherwise have; provided, however, that no person shall be entitled to
indemnification pursuant to this provision if such loss, claim, damage or
liability is due to the willful misfeasance, bad faith, gross negligence or
reckless disregard of duty by the person seeking indemnification.
b. The Distributor. The Distributor shall indemnify and hold harmless
the Company and each person who controls or is associated with the Company
within the meaning of such terms under the federal securities laws, and any
officer, director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection
with, and any amounts paid in settlement of any action, suit or proceeding
or any claim asserted), to which the Company and/or any such person may
become subject, under any statute or regulation, any NASD rule or
interpretation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon:
(i) violations(s) by the Distributor or a Representative of
federal or state securities law(s) or regulation(s), applicable
banking law(s) or regulation(s), insurance law(s) or regulation(s) or
any rule or requirement of the NASD; or
(ii) any unauthorized use of sales or advertising material, any
oral or written misrepresentations, or any unlawful sales practices
concerning the Contracts, by the Distributor or a Representative; or
(iii) claims by the Representatives or other agents or
representatives of the Distributor
for commissions or other compensation or remuneration of any type; or
(iv) any action or inaction by a clearing broker through whom
the Distributor
purchases any transaction pursuant to this Agreement; or
(v) any failure on the part of the Distributor or a
Representative to submit premiums or Applications to the Company, or
to submit the correct amount of a premium, on a timely basis and in
accordance with Section 4 of this Agreement, subject to applicable
law; or
(vi) any failure on the part of the Distributor or a
Representative to deliver the
Contracts to purchasers thereof on a timely basis; or
(vii) a breach by the Distributor of any provisions of this
Agreement.
This indemnification agreement shall be in addition to any liability
that the Distributor may otherwise have; provided, however, that no person
shall be entitled to indemnification pursuant to this provision if such
loss, claim, damage or liability is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the person seeking
indemnification.
c. In General. After receipt by a party entitled to indemnification
(the "indemnified party") under this Section 14 of notice of the
commencement of any action, if a claim in respect thereof is to be made
against any person obligated to provide indemnification under this Section
14 (the "indemnifying party"), such indemnified party shall notify the
indemnifying party in writing of the commencement thereof as soon as
practicable thereafter, provided that the omission to so notify the
indemnifying party shall not relieve the indemnifying party from any
liability under this Section 14, except to the extent that the omission
results in a failure of actual notice to the indemnifying party and such
indemnifying party is damaged solely as a result of the failure to give
such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the indemnifying
party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party shall indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
The indemnification provisions contained in this Section 14 shall
remain operative in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company or by or on behalf of any
controlling person thereof, (ii) delivery of any Contracts and premiums
therefor, and (iii) any termination of this Agreement. A successor by law
of the Distributor or the Company, as the case may be, shall be entitled to
the benefits of the indemnification provisions contained in this Section
14.
15. Standard of Care. Neither the Company nor the Distributor shall be
liable to the other for any action taken or omitted by any of their officers,
directors, employees, or agents, in connection with the good faith performance
of their responsibilities under this Agreement, except for willful misconduct,
bad faith, negligence, or reckless disregard of the duties of the parties under
this Agreement.
16. Assignment. The Distributor may not assign or delegate its
responsibilities under this
Agreement without the prior written consent of the Company.
17. Termination. This Agreement shall become effective as of the date of
its execution, shall continue in full force and effect until terminated, and may
be terminated by either party at any time without penalty upon sixty (60) days
written notice to the other party. This Agreement may be terminated upon ten
days notice upon the other party's material breach of any provision of this
Agreement, unless such breach has been cured to the satisfaction of the
non-breaching party within ten days of receipt by the breaching party of notice
of such breach from the non-breaching party. This Agreement may also be
terminated at any time without penalty if, in the sole discretion of the
Company, the Distributor is not performing its duties in a satisfactory manner.
Upon termination of this Agreement all authorizations, rights and
obligations shall cease except for the obligation to settle accounts hereunder,
including commissions on premiums subsequently received for Contracts in effect
at the time of termination or issued pursuant to Applications received by the
Company prior to termination, and the obligations contained in Sections 7, 10,
11, 12, 13, and 14.
18. Amendment. This Agreement and the Schedules hereto may be amended at
any time by a
writing executed by both of the parties hereto.
19. Governing Law. This Agreement, and the rights and liabilities of the
parties hereunder, shall
be construed in accordance with the internal laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
TRANSAMERICA INSURANCE SECURITIES
SALES CORPORATION
By: ____________________________
----------------------------
Name
----------------------------
Title
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY
By: _____________________________
-----------------------------
Name
-----------------------------
Title
<PAGE>
(3) (b) Form of Sales Agreement
<PAGE>
-1-
VAR0119
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, CA 90015
Transamerica Life Insurance and Annuity Company
401 North Tryon Street
Charlotte, NC 28202
Transamerica Life Insurance Company of New York
100 Manhattanville Road
Purchase, NY 10577
Transamerica Assurance Company
1150 South Olive Street
Los Angeles, CA 90015
VARIABLE INSURANCE PRODUCTS SALES AGREEMENT
The parties to this agreement are: (i) the Insurance Company which has executed
this agreement on the signature page (referred to as "the Insurance Company");
(ii) the Insurance Company's underwriter, Transamerica Securities Sales
Corporation (referred to as "the Underwriter"), and (iii) the Broker-Dealer
named below (referred to as "you" or "the Broker"). The Insurance Company and
the Underwriter are collectively referred to as "we", "us" or "the Company". If
more than one Insurance Company has executed this agreement, each such execution
shall be deemed to create a new and separate agreement between the Insurance
Company, the Underwriter and the Broker. In that case, the terms of this
agreement shall apply separately with regard to each such agreement and no
Insurance Company shall be liable for the obligations or actions of any other
Insurance Company.
This agreement is effective on the date set forth below.
The terms of this agreement are as follows:
1. APPOINTMENT
You are appointed by the Company for the purpose of soliciting
applications for and servicing variable insurance products
("Contracts") and otherwise transacting the business of this agreement.
You accept such appointment and agree to comply with all applicable
laws and regulations, and to diligently devote yourself to the business
of this appointment in order to sell new Contracts and prevent the
termination of existing Contracts.
1.1 TERRITORY; NON-EXCLUSIVITY
Unless otherwise specified by us, you are authorized to solicit
applications in any jurisdiction in which we are authorized to offer
such Contracts and in which you are licensed and authorized to
represent us. We reserve the right to limit your territory at any
time.
You are not obligated to represent us exclusively, and you do not have
an exclusive right to solicit Contracts for us in any area.
1.2 INDEPENDENT CONTRACTOR
You are an independent contractor. Nothing contained in this agreement
is to be construed to create the relation of employer and employee
between the Company and you. You may exercise your own judgment as to
the time and manner in which you may perform the services required to
be performed by you under this agreement. We may, from time to time,
prescribe rules and regulations concerning the conduct of the business
covered by this agreement which do not interfere with such freedom of
action.
2. SOLICITATION OF APPLICATIONS
We will inform you from time to time which products you are authorized
to sell. Solicitation of Contracts authorized under this agreement will
be performed by you or by solicitors in accordance with the terms set
forth below.
A solicitor is a properly licensed registered representative who is
employed by or associated with you and is appointed by us to solicit
Contracts in your name. You are responsible for assuring that all
solicitors are persons of good character.
You agree not to allow any solicitor to engage in the services
authorized under this agreement, except in accordance with this
Section.
At our option, we may refuse to contract with or appoint any proposed
solicitor and may terminate any agreement with or appointment of a
solicitor. You will be solely responsible for the payment of any
compensation to solicitors, and you agree to hold us harmless from all
claims for commissions or other compensation by any solicitor.
2.1 LICENSING
Neither you nor any solicitor may engage in any activities under this
agreement unless and until you and they are properly licensed and/or
registered, as required, to perform such services in the particular
state or jurisdiction involved in accordance with all applicable laws
and regulations, including, but not limited to, any certification or
continuing education requirements and any applicable rules or other
requirements of the National Association of Securities Dealers
("NASD").
You agree to undertake and pay for all actions necessary to acquire and
maintain any necessary licenses and registrations for yourself and/or
the solicitors. We will take the necessary actions, including the
payment of applicable fees, to appoint you and the solicitors to
represent us in the states in which you and they reside. We will
appoint you and the solicitors to represent us in additional states at
your expense.
2.2 SUPERVISION
You are responsible for the performance of solicitors and your
employees and associated persons. You agree to take all necessary steps
to communicate the Company's rules and regulations to such persons, and
to assure that they comply with such rules and regulations, as well as
all other applicable laws and regulations. You will supervise and train
registered representatives and other associated persons to ensure
compliance with Company policies and applicable laws.
3. RESPONSIBILITIES OF THE BROKER
You will abide by the following in the conduct of your activities under
this agreement:
3.1 COMPANY REGULATIONS
To the extent they do not conflict with the terms of this agreement,
you will conform to the rules and regulations of the Company now or
hereafter in force. Such rules and regulations will constitute a part
of this agreement. This provision shall not be construed to alter the
relationship of the parties as provided in Section 1.2 above.
3.2 LIMITATION OF AUTHORITY
You have no authority to alter, modify, waive or change any of the
terms, rates or conditions of our contracts or policies whether or not
covered by this agreement. You have no authority to obligate us in any
manner whatsoever nor to receive monies due to us, except as otherwise
provided in this agreement or as may be authorized in writing by us.
<PAGE>
3.3 COMPANY RECORDS
All documents, records, software and other data and information, in
whatever form they may be, which pertain to the Company's policyholders
or any other business of the Company, are and will remain the property
of the Company. Any such property in your possession shall be at any
time and all times open to inspection by the Company or its authorized
representative, and upon termination of this agreement you will
promptly turn all such property over to the Company or its authorized
representatives.
You acknowledge that all documents, records, software and other data,
information and supplies referred to in this Section 3.3 are
confidential and proprietary to the Company, and you agree to preserve
the confidentiality and privacy of the Company in all of the same; and
you further agree that you will not, without the Company's prior
written consent, release or disclose any of the same or their contents
to any person, or otherwise use any of the same or their contents in
any manner, except in furtherance of the business of this agreement or
as required by legal process.
Nothing contained in this Section 3.3 is intended to restrict your
right to retain possession of your records and other materials relating
solely to your producers and solicitors.
3.4 ACCOUNTS AND RECORDS
You agree that you will keep customary and accurate accounts of
receipts and disbursements and will, at our request and in accordance
with our instructions, account for all Contracts, receipts, premiums
and other monies or securities received and all property and supplies
received from the Company. We may, at any time, make copies of the
records of such accounts, records and documents, and all such records,
documents, supplies and other property relating to the business
transacted under this agreement will be the property of the Company,
open to inspection at all times by our authorized representatives, and
at the termination of this agreement will be delivered to us upon
demand. We will furnish you a current statement of your commission
account within a reasonable time after receipt of a written request
from you.
3.5 COLLECTION AND REMITTANCE OF COMPANY MONEY
Where authorized by us, you may accept premiums or purchase payments in
accordance with our rules and regulations in force at the time of
payment. We have the right at any time to revoke such authority in
whole or in part and to limit it in any way. ALL MONIES OR OTHER
CONSIDERATIONS RECEIVED BY YOU AS FULL OR PARTIAL PAYMENT OF PREMIUMS
OR FOR ANY OTHER ITEM, WITHOUT EXCEPTION, SHALL BE HELD BY YOU IN TRUST
SEPARATE FROM YOUR OWN OR OTHER FUNDS AND WILL BE IMMEDIATELY DELIVERED
AND PAID TO THE COMPANY. Such remittances must be applied to the
relevant item. You are not authorized to deposit any such monies or
checks in your own account or any trust account, nor to accept any
check made payable to you for any premium or other item.
3.6 ADVERTISING
(I) You agree that you will not place into use, or distribute to
any person, any advertising, sales material or other document
(including, without limitation, illustrations, telephone
scripts and training materials) referring directly or
indirectly to the Company or to any Company Contract, or
cause, authorize or permit any person to do so, without our
prior written consent. You agree that you will not use the
name of the Company on any business card, letterhead or
marquee or in any directory listing, or in any other manner,
or cause, authorize or permit any producer or other person to
do so, without our prior written consent.
(ii) In making offers of the contracts, you agree to deliver the
applicable currently effective prospectuses, as required by
law.
(iii) You agree that you and your solicitors will not misrepresent
the Contracts and will make no oral or written representation
which is inconsistent with the terms of the Contracts,
prospectuses or sales literature or is misleading in any way.
(iv) The Company will use reasonable efforts to provide you with
information and marketing assistance, including providing,
without charge, reasonable quantities of advertising
materials, sales literature, reports and current prospectuses.
(v) The Company will deliver to you, and you agree to use, only
sales literature and advertising material which conforms to
all applicable legal requirements and which has been
authorized by us.
3.7 ERRORS AND OMISSIONS
You are encouraged to maintain errors and omissions insurance covering
your activities under this agreement. If you carry such insurance at
any time, you agree to provide us with copies of the current binders
evidencing the issuance of the errors and omissions, and within ten
business days of each date such insurance is discontinued, suspended,
reduced or terminated for any reason.
3.8 COMPLIANCE WITH ADDITIONAL RULES
You agree to abide by all laws, rules and regulation, including,
without limitation, the rules of the NASD, insurance laws and state and
federal securities and banking laws and including, without limitation,
the maintenance of licenses and books and records required by
applicable laws and regulations.
4. COMPANY RIGHT OF ACTION
We are not obligated to accept any business produced by you or by a
solicitor. We may reject applications for insurance without specifying
the reason therefor, as well as settlements tendered or made
thereunder, or take up and cancel any Contract for any reason and
return the premium thereon or any part thereof.
We, in our sole discretion, may at any time and from time to time do
the following:
(i) modify or amend any Contract form;
(ii) fix or change maximum and minimum limits on the amount for which
any Contract form may be issued;
(iii) modify or alter the conditions or terms under which any
Contract form may be sold or regulate its sale in any way;
(iv) discontinue or withdraw any Contract form from any geographic
area or market segment, without prejudice to continuation of
such form in any other area or market segment;
(v) cease doing business in any area.
5. COMPENSATION
For each Contract sold under this agreement, we will pay you
commissions as set forth in the applicable Commission Rate Schedule.
You may also be eligible for compensation under other programs
established by us from time to time. Payment of commissions and any
other compensation will be subject to the terms and conditions of this
agreement and to our rules and regulations in effect from time to time.
Such rules and regulations may be changed by us at any time without
notice. In any states in which you may not receive commissions pursuant
to state insurance law, we will pay such commissions to the insurance
agency or agencies with which you have associated yourself, as
specified in the applicable Commission Rate Schedule.
The commissions and any other compensation payable by us to you will be
payment in full for all services performed by you. Except as we may
otherwise agree, you are not entitled to reimbursement for any expenses
incurred by you.
5.1 COMMISSIONS
General - The "applicable Commission Rate Schedule" means the
Commission Rate Schedule published by us from time to time for the type
of Contract involved. Commission Rate Schedules are subject to change
without notice. Copies may be obtained at any time.
Repayment of Commissions - If any commission or other compensation to
which you are not entitled under the terms of this agreement is paid to
or retained by you, you will pay the same to the Company upon demand.
You will pay to us upon demand all commissions received by or credited
to you, or premiums collected, or evidence of indebtedness representing
the same, taken on applications on which Contracts are not issued by
us, or on Contracts declined by the applicant, or on Contracts canceled
by us, and all commissions received or credited on premiums or any part
thereof which for any reason we may return. In case of any provision
requiring a refund of commissions or other compensation, we may, at our
election, debit your account for the amount of the refund without
demand or notice, or may demand the refund, or both, but debiting your
account in such manner will not relieve you of your obligation to make
the refund.
Changes in Compensation - We reserve the right to change the rate of
commissions and/or any other compensation payable under this agreement.
Any such change will apply only to Contracts issued or other triggering
events occurring after the effective date of the change.
When Due - Commissions will be paid in accordance with our normal
commission processing schedule. Commissions will be payable only on
premiums paid in cash to and accepted by us on Contracts which were
produced hereunder by you or by solicitors or producers while operating
under your supervision. No premium will be considered paid in cash to
the Company until it has been actually collected and transmitted to us
and recorded on our records. Commissions and other compensation will
accrue only as such premiums otherwise would become due.
Commissions Paid in Advance - If we pay you a commission or other
compensation on a premium which is or becomes due but which has not yet
actually been paid to the Company, and if such premium is not paid in
cash to the Company, you will refund any commission or other
compensation which you have received on such premium.
Conditions - Commissions and any other compensation under this
agreement will be payable to you only if and so long as you are in
existence and are continuously and properly licensed to transact
insurance business for us and we may legally pay such commissions and
other compensation.
Accounting Year - We reserve the right at any time and from time to
time, without notice to you, to change the period comprising our
accounting year or subdivisions thereof.
6. INDEBTEDNESS
6.1 LIEN AND OFFSETS
You grant us a first lien on all commissions and any other compensation
payable to you under this agreement or under any other existing or
future agreement with Transamerica Occidental Life Insurance Company,
Transamerica Life Insurance and Annuity Company, Transamerica Assurance
Company, Transamerica Life Insurance Company of New York, or any other
company which is a subsidiary or affiliate of Transamerica Occidental
Life Insurance Company, Transamerica Corporation or Transamerica
Insurance Corporation of California (referred to individually and
collectively as "Transamerica entity" or "Transamerica entities"), as
security for the payment of any existing or future debit balance or
other indebtedness of yours to us. We may at any time and from time to
time, with or without notice or judicial action, exercise our lien by
offsetting such indebtedness against any commissions and other
compensation otherwise due to you. These liens shall not be
extinguished by the termination of this agreement or any other
agreement.
All debit balances and other indebtedness of yours to us will be
debited to your account, but debiting your account will not relieve you
of your obligation to repay the indebtedness. You may not offset
against any such indebtedness any compensation accrued or to accrue
under this agreement or under any other agreement with us.
We will be under no obligation to pay any commissions or other
compensation to you, your executors, administrators or assigns, under
this agreement or under any other existing or future agreement with us
now or hereafter existing as long as your account with any Transamerica
entity has a debit balance.
Any debit balance of your account shall be payable to us upon demand
and shall bear interest, payable monthly, at the rate declared by us
from time to time. Any future change in interest rate may, at our
option, be applied to the then remaining balance of any debit balance
theretofore created as well as to debit balances thereafter created.
6.2 MULTI-COMPANY ASSIGNMENT OF COMMISSIONS
In order to effectuate the rights of offset set forth in Section 6.1,
you hereby assign to each of the Transamerica entities, their
successors and assigns, all of your right, title and interest in and to
any and all commissions or other compensation now due and payable, or
which becomes due in the future, under the terms of any and all agency
contracts between you and any Transamerica entity. Each Transamerica
entity shall receive and retain such commissions or other compensation
only to the extent necessary to secure repayment of any of your present
or future indebtedness to such Transamerica entity.
You authorize us to make payment of all sums due to you under this
agreement to any Transamerica entity which may be entitled to such
payment under this Section 6.
7. DISPUTES AND LITIGATION
Each party agrees to cooperate fully with each other in the resolution
of all matters arising out of the business of this agreement. Any
disputes between you and us will be settled through binding
arbitration.
7.1 COMPLAINTS AND CLAIMS
You agree to notify us promptly of any complaint, claim or dispute
involving an applicant, Contract or contractholder.
You will not litigate any dispute with an applicant or policyholder, on
any matter relating to the business of this agreement, without our
prior written consent.
We may settle any claim against us or you arising out of the business
of this agreement. If you disagree with our settlement, you may seek
arbitration pursuant to Section 7.2.
7.2 DISPUTE RESOLUTION
The parties agree that this agreement involves "commerce" within the
meaning of the Federal Arbitration Act, and that any dispute between
the parties arising out of or related to this agreement will be
resolved by binding arbitration in accordance with this Section and the
procedural and discovery rules of the Federal Arbitration Act. The
arbitration will take place in Los Angeles, California, unless we
mutually agree to another location. The arbitration will be determined
by one neutral arbitrator as agreed upon by the Company and you. If the
parties fail to appoint an arbitrator on a timely basis or are unable
to agree on the choice of an arbitrator on a timely basis, the
arbitrator will be appointed by the office of the Judicial Arbitration
and Mediation Service in the city where the arbitration takes place, or
by another mutually agreeable arbitration service. The arbitrator's
decision will be binding on the parties and the decision will be final
with no right of appeal. The award of the arbitrator may be entered as
a final judgment in any court which has jurisdiction thereof. The cost
of arbitration, including the fees of the arbitrator, will be borne by
the party or parties as the arbitrator decides.
EACH PARTY HERETO HEREBY WAIVES THE RIGHT TO A TRIAL BY EITHER A JURY
OR A COURT, INCLUDING BUT NOT LIMITED TO A TRIAL OF ANY ISSUE
CONCERNING THE VALIDITY OF THIS SECTION 7.2 OR ANY PORTION THEREOF, AND
THE RIGHT OF APPEAL FROM THE ARBITRATOR'S AWARD. EACH PARTY HERETO
WAIVES ANY CLAIM TO RECOVER PUNITIVE DAMAGES AND NON-COMPENSATORY
DAMAGES AGAINST THE OTHER PARTY.
8. TERMINATION
Any party may terminate this agreement with or without cause by giving
written notice to the other parties, specifying the effective date of
termination.
9. MISCELLANEOUS PROVISIONS
Certain provisions of this agreement are emphasized for the convenience
of the reader. Nevertheless, all provisions apply equally.
9.1 PREVIOUS AGREEMENTS
Any and all prior agreements between the parties hereto authorizing the
solicitation of SEC registered products, are hereby terminated and are
superseded by this agreement.
9.2 AMENDMENTS
Neither party will not be bound by any promise, agreement,
understanding or representation heretofore or hereafter made unless the
same is made by an instrument in writing, signed by one of its
officers, which expresses by its terms an intention to modify this
agreement.
9.3 FORBEARANCE
Forbearance or neglect on the part of either party to insist upon
compliance with the terms of this agreement or the rules and
regulations of the Company shall not be construed as or constitute a
waiver thereof.
9.4 AGREEMENT NON-ASSIGNABLE
You may not assign this agreement or any of the rights, authorities and
benefits provided hereunder without our prior written consent. We agree
not to withhold our consent unreasonably. Any attempted assignment as
collateral security or assignment for the benefit of creditors will be
subject to our rules and policies then in effect.
9.5 SEVERABILITY
This is a severable agreement. If any provision of this agreement would
require a party to take action prohibited by applicable federal or
state law or prohibit a party from taking action required by applicable
federal or state law, then it is the intention of the parties hereto
that such provision shall be enforced to the extent permitted under the
law, and, in any event, that all other provisions of this agreement
shall remain valid and duly enforceable as if the provision at issue
had never been a part of this agreement.
9.6 INDEPENDENT AGREEMENT
The compensation provided by this agreement is separate from any
compensation or consideration provided under any other agreement you
may have with us or with one of our affiliates. Except as set forth in
our applicable rules and regulations, your activities under this
agreement will not be taken into account for purposes of any
compensation or benefits under any such agreement.
9.7 APPLICABLE LAW
This Agreement shall be construed in accordance with the laws of the
state of domicile of the contracting Insurance Company without giving
effect to principles of conflict of laws. For Transamerica Occidental
Life Insurance Company that state is California; for Transamerica Life
Insurance and Annuity Company that state is North Carolina; for
Transamerica Life Insurance Company of New York that state is New York;
and for Transamerica Assurance Company that state is Missouri.
9.8 TRADEMARKS
The provision of Contracts and prospectuses and sales literature for
the Contracts and underlying funding vehicles to the Broker shall not
provide the Broker with any license to use any tradenames, trademarks,
service marks or logos or proprietary information of the Company or any
underlying funding vehicle or any affiliates thereof, except to the
extent necessary for Broker to distribute the Contracts in accordance
with the terms of this agreement.
9.9 CONFIDENTIALITY
Each party shall keep confidential any confidential information it may
acquire as a result of this Agreement.
9.10 SURVIVAL
The following provisions will survive the termination of this
agreement: Sections 3, 5, 6, 7, 9.4, 9.5, 9.6, 9.7.
10. CORPORATIONS; PARTNERSHIPS
The additional provisions set forth below apply to this agreement.
10.1 OFFICIAL ACTIONS
You may designate one or more individuals to deal with us on your
behalf. Such designation must be made by your board of directors if you
are a corporation or by any general partner if you are a partnership.
In the absence of a designation, we may (but are not obligated to) deal
with your president or any vice president (if you are a corporation) or
any general partner (if you are a partnership).
10.2 CHANGES
You agree to inform us of any changes in your legal structure, and of
any changes in your officers or partners. You also agree to inform us
of any transfer of your stock or partnership interests. Upon receipt of
such information, we may elect to terminate this agreement upon five
days' written notice to you.
10.3 STATUS
We may, from time to time, require you to provide us with evidence of
your continued existence and good standing.
11. REPRESENTATIONS AND WARRANTIES; COMPLIANCE
You represent, warrant and covenants that:
(i) You are, and will remain during the term of this Agreement, a
properly licensed and registered broker-dealer under
applicable state and federal securities law and a member in
good standing of the NASD.
(ii) You will solicit applications for Contracts only through
properly licensed insurance agents ("Insurance Agent"), duly
appointed by the appropriate Insurance Company. For purposes
of this Agreement, all acts and omissions of any Insurance
Agent within the scope of this Agreement shall be deemed to be
acts or omissions of Broker.
(iii) You are in compliance, and will remain in compliance, with all
applicable laws, rules and regulations, including, without
limitation, those of the NASD and state and federal
securities, banking and insurance laws.
(iv) You have taken and will continue to take the actions
appropriate to supervise your representatives and other
associated persons to ensure compliance with all applicable
laws and regulations.
(v) You will comply, and will cause each Insurance Agent to
comply, with any applicable Company policies and procedures,
including, without limitation, those regarding replacements of
Contracts, as amended from time to time.
(vi) You will not solicit or sell any Contracts in connection with
any "market timing" or "asset allocation" program or service,
and if the Company determines in its sole discretion that you
are soliciting or have solicited Contracts subject to any such
program, the Company may take such action it deems necessary
to halt such solicitations or sales, and in addition to any
indemnification provided in Section 12 of this Agreement and
any other liability that you may have, you will be liable to
the Company and each underlying funding vehicle affected by
any such program, for any damages or losses, actual or
consequential, sustained by them as a result of such program.
12. INDEMNIFICATION
12.1 Broker shall indemnify and hold harmless the Company, and each
employee, director, officer and shareholder of the Company, against any
losses, claims, damages or liabilities, including but not limited to
reasonable attorney fees and court costs, to which the Company or any
employee, officer, director or shareholder may be subject, which arise
out of or are based on any violation of the terms of this Agreement,
any Company policies or procedures or any applicable law by Broker, its
representatives, the Insurance Agent, its agents and any employee,
officer, director, shareholder, principal, partner and affiliate of the
Broker or Insurance Agent. In the event the Company suffers a loss
resulting from Broker or Insurance Agent activities, Broker hereby
assigns any proceeds received under its fidelity bond to the Company to
the extent of such losses. If there is any deficiency amount, whether
due to a deductible or otherwise, Broker-Dealer shall promptly pay the
Company such amount on demand and Broker-Dealer shall indemnify and
hold harmless the Company from any such deficiency and from the costs
of collection thereof (including reasonable attorney fees).
12.2 The Company shall indemnify and hold harmless Broker and each employee,
officer, director or shareholder of Broker, against any losses, claims,
damages or liabilities, including but not limited to reasonable
attorney fees and court costs, to which Broker or any employee,
officer, director or shareholder becomes subject which arises out of or
is based on any violation of the terms of this Agreement or any
applicable law by the Company and any employee or officer.
This Agreement is effective as of ___________________, 199___.
<TABLE>
<CAPTION>
<S> <C>
Transamerica Occidental Life Insurance Company Transamerica Life Insurance Company of New York
1150 South Olive Street 100 Manhattanville Road
Los Angeles, CA 90015 Purchase, NY 10577
Signature: Signature:
Name: John Dohmen Name: Alan T. Cunningham
Title: Vice President Title: President
Transamerica Life Insurance and Annuity Company Transamerica Securities Sales Corporation
401 North Tryon Street 1150 South Olive Street
Charlotte, NC 28202 Los Angeles, CA 90015
Signature: Signature:
Name: Matt R. Coben Name: Barbara A. Kelley
Title: Vice President Title: President
BROKER:
Address:
City, State, Zip:
Phone:
Signature:
Name:
Title:
</TABLE>
<PAGE>
(5) Forms of Contract and Riders
<PAGE>
TASPVER5.DOC Revision number: 1 version as of: Monday Aug 31
Page 1 of 1
Contract form number
TLC Logo
PLEASE READ THIS CONTRACT CAREFULLY
This modified single payment variable universal life insurance Contract is a
legal Contract between you ("the owner") and Transamerica Occidental Life
Insurance Company ("we" and "the Company"). If you pay the required payments, we
will pay your beneficiary the net death benefit when the person you are insuring
("the insured") dies prior to the Maturity Date or, if the insured is alive on
the Maturity Date, we will pay the surrender value to the owner on the Maturity
Date. If the Contract is issued with two insureds, net death benefits are
payable at the death of the last surviving insured. There is no death benefit at
the death of the first of the insureds.
THE DEATH BENEFIT AND CONTRACT VALUE, WHEN BASED ON THE INVESTMENT PERFORMANCE
OF THE VARIABLE ACCOUNT, MAY INCREASE OR DECREASE AND ARE NOT GUARANTEED AS TO A
FIXED DOLLAR AMOUNT. PLEASE REFER TO THE VARIABLE ACCOUNT AND "WHAT YOU SHOULD
KNOW ABOUT THE DEATH BENEFIT" SECTIONS FOR ADDITIONAL INFORMATION. WE AGREE TO
PAY THE BENEFITS OF THIS CONTRACT IN ACCORDANCE WITH ITS TERMS.
RIGHT TO CANCEL
We want you to be satisfied with the Contract you have purchased, and we urge
you to examine it closely. If for any reason you are not satisfied, you may
return the Contract to us or an authorized representative within 10 days after
receipt of the Contract. If you return the Contract, it will be void from the
date of issue, and you will receive a refund equal to the total of: 1. the
difference between any payments made, including fees or any other charges, and
the amounts allocated to
the Variable Account;
2. the value of the amounts in the Variable Account on the date the returned
Contract is received at our
Variable Life Service Center; and
3. any fees or other charges imposed on amounts in the Variable Account.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
Home Office: 1150 South Olive, Los Angeles, California 90015
Variable Life Service Center: 440 Lincoln Street, P.O. Box 3800, Worcester,
Massachusetts 01653
This is a legal Contract between Transamerica Occidental Life Insurance Company
and the owner. It is issued in consideration of the payment shown on the
specification pages.
MODIFIED SINGLE PAYMENT VARIABLE UNIVERSAL LIFE INSURANCE CONTRACT
NON-PARTICIPATING
Executive Vice President, General Counsel and Corporate Secretary
President and CEO
<PAGE>
(to reviewers: To be updated on final draft)
Table of Contents
Specification Pages
Definitions
General Terms
Information about you and the beneficiary What you should know about:
The payments
Your Contract Value
The Variable Account
The Fixed Account
Transfers
Borrowing from your Contract
Surrenders and partial withdrawals
The death benefit
The benefit payment options
<PAGE>
Specification
Contract Number: [specimen]
=============================================================================
[First] Insured: [John Doe] [First] Insured's Sex: [Male]
[First] Insured's Age: [55] [First] Insured's Underwriting
Class: [Non-smoker]
- ----------------------------------------------------------------------------
[Second Insured:] [Second Insured's Sex:]
[Second Insured's Age:] [Second Insured's Underwriting Class:]
---------------------------------------------------------------------------
Date of Issue: [01/01/1999] Contract Plan: Modified Single Payment Variable
Universal Life Insurance Contract
Face Amount: [$318,554] Monthly Processing Date:
[1st of each month]
Owner(s): [John Doe] Rider(s): [Guaranteed Death Benefit
Living Benefits]
Beneficiary at Issue: [Mary Doe] Rider[s] Date of Issue: [01/01/99]
---------------------------------------------------------------
Payment: [$50,000]
Maximum Payment: The greater of [$50,000] or [$4,123] times
the current Contract year.
Guaranteed Death Benefit
Payment: [$x]
Guideline Single Payment: [$x]
Guideline Level Payment: [$x]
Final Payment Date: [01/01/1999]
Maturity Date: [01/01/2059]
Initial Payment Allocation:
Variable Sub-Accounts Advisers:
[30% Transamerica VIF Growth Portfolio Transamerica Occidental Life Insurance
Company
20% Alliance VPF Premier Growth Alliance Capital Management L.P.
20% Dreyfus VIF Capital Appreciation The Dreyfus Corporation
20% OCC Accumulation Trust Managed OpCap Advisors
5% Janus Aspen Worldwide Growth Janus Capital Corporation]
Fixed Account
[5%] Initial Interest Rate: [4%]
<PAGE>
Specification
[First] Insured: [John Doe] Contract Number: [specimen]
[Second Insured:]
==========================================================
Minimum Additional Payment: [$10,000]
Minimum Fixed Account Interest Rate: [4% of value not subject to
Outstanding Loan]
[4% of value securing Outstanding
Loan - not Preferred Loan]
[5 1/2% of value securing
Outstanding Loan - Preferred Loan]
Outstanding Loan Interest Rate: [6%]
Maximum Loan Amount: [90% of the result of the
Contract Value less the surrender charge]
Minimum Loan Amount: [$1,000]
Minimum Balance After Withdrawal: [$10,000]
Free Withdrawal Amount: [10% of Contract Value]
<TABLE>
<CAPTION>
Fees and Deductions: Current Guaranteed
<S> <C> <C> <C> <C>
Administration Charge: [0.30%] Annually (1) [0.30%] Annually (1)
Distribution Fee (Contract Years 1-10): [0.40%] Annually (1) [0.40%] Annually (1)
Tax Charge (Contract Years 1-10): [0.20%] Annually (1) [0.20%] Annually (1)
Insurance Protection Charge: [0.50%] Annually (1) See Page x
Mortality & Expense Risk Charge: [0.80%] Annually (2) [0.80%] Annually (2)
Withdrawal Transaction Fee: [No fee assessed.] [2% of amount withdrawn, not to
exceed $25]
</TABLE>
(1) This charge is deducted monthly from the Contract Value on a pro rata
basis. The monthly charge is equal to one-twelfth of this factor
times the Contract Value.
(2) This charge is deducted daily from each sub-account of the Variable
Account on a pro rata basis.
----------------
Surrender Charge Table (Percent of Total Payments Withdrawn)
--------------------------- -------------------------------
Contract Year* Total Surrender Charge
--------------------------- -------------------------------
--------------------------- -------------------------------
[1 9%
--------------------------- -------------------------------
--------------------------- -------------------------------
2 8%
--------------------------- -------------------------------
--------------------------- -------------------------------
3 7%
--------------------------- -------------------------------
--------------------------- -------------------------------
4 6%
--------------------------- -------------------------------
--------------------------- -------------------------------
5 5%
--------------------------- -------------------------------
--------------------------- -------------------------------
6 4%
--------------------------- -------------------------------
--------------------------- -------------------------------
7 3%
--------------------------- -------------------------------
--------------------------- -------------------------------
8 2%
--------------------------- -------------------------------
--------------------------- -------------------------------
9 1%
--------------------------- -------------------------------
--------------------------- -------------------------------
10+ 0%]
--------------------------- -------------------------------
* If your Contract is reinstated, the surrender charge on the date of
reinstatement will be the surrender charge that was in effect on the date of
default. Subsequent surrender charges will be adjusted accordingly.
If you have questions regarding this Contract or need assistance about your
coverage, please call our Variable Life Service Center. The phone number is
[1-(800)-782-8315].
<PAGE>
<TABLE>
<CAPTION>
Specification
[First] Insured: [John Doe] Contract Number: [specimen]
[Second Insured:]
shapeType20fFlipH0fFlipV0lineWidth38100fShadow0
Guaranteed Maximum Monthly Insurance Protection Rate Table
[Age] Insurance Protection Rate [Age] Insurance Protection Rate
[Age Younger Insured] ($) Per $1,000 [Age Younger Insured] ($) Per $1,000
<S> <C> <C> <C> <C>
[55 0.68 85 14.17
56 0.75 86 15.56
57 0.83 87 17.00
58 0.91 88 18.48
59 1.01 89 20.04
60 1.11 90 21.69
61 1.23 91 23.48
62 1.36 92 25.50
63 1.51 93 27.96
64 1.69 94 31.38
65 1.87 95 36.79
66 2.07 96 46.58
67 2.29 97 67.04
68 2.53 98 83.33
69 2.79 99 83.33]
70 3.09
71 3.44
72 3.83
73 4.29
74 4.79
75 5.33
76 5.90
77 6.51
78 7.15
79 7.84
80 8.62
81 9.49
82 10.50
83 11.62
84 12.86
</TABLE>
Note: [Single life, Male, Age 55, Non-smoker] Based on 1980 CSO Age Last
Birthday (ALB)Table.
<PAGE>
Important Definitions
Age means how old the insured is on his or her last birthday measured on the
date of issue and each Contract anniversary, thereafter.
Application is the form you complete to apply for this Contract. It contains
your payment amount, payment allocation and other information that enable us to
prepare this Contract. If a medical questionnaire or other forms are required,
they become a part of the application. It is signed by you and the insured and
becomes a part of this Contract.
Assignee is a person to whom you transfer ownership of this Contract.
Attained age is the insured's age as of the insured's last birthday at the start
of the Contract year of determination. Attained age is used in the calculation
of the guideline minimum sum insured.
Beneficiary is the person or persons you name to receive the net death benefit
when the Insured dies.
Company means Transamerica Occidental Life Insurance Company, also referred to
as we, our, and us. Our telephone number is [1-800-782-8315].
Contract change means any change in the underwriting class or the addition or
deletion of a rider.
Contract owner is the person who may exercise all rights under the Contract,
with the consent of any irrevocable beneficiary. "You" and "your" refer to the
Contract Owner in this prospectus.
Contract Value is the sum of your values in the Variable Account and the Fixed
Account.
Date of issue is the date coverage under this policy becomes effective and is
stated on the specification pages. Contract months, years and anniversaries are
measured from this date.
Death benefit is the amount payable when the insured dies before the Maturity
Date, before deductions for monthly deductions, any outstanding loan, due and
unpaid partial withdrawals, withdrawal transaction fees and applicable surrender
charges.
Earnings means the amount by which the Contract Value exceeds the sum of the
payments made less any payments that were previously considered withdrawn. For
Contract loan purposes, Earnings are calculated on each monthly processing date.
Evidence of insurability is the information, including medical information, that
we use to decide whether to issue the requested coverage, to determine the
underwriting class for the person insured, or to determine whether the Contract
may be reinstated.
Face amount is the amount of insurance you elect to buy in the application or
enrollment form and which we agree to issue. The face amount is shown in the
specification pages of the Contract. The death benefit is based on the face
amount; see the "What You Should Know About The Death Benefit" section.
Final payment date is the Contract anniversary immediately before the insured's
100th birthday. If there are two insureds, the final payment date is the
Contract anniversary immediately before the younger insured's 100th birthday.
This date is shown on the specification pages. No payments are permitted by you
after this date. No monthly deduction (including insurance protection charges)
will be deducted from the Contract Value after this date. Generally, the net
death benefit after this date will equal 101% of the Contract Value minus any
outstanding loan, except as otherwise provided in a Guaranteed Death Benefit
Rider if attached to this Contract.
Fixed Account is the part of the Company's General Account to which all or a
portion of a payment or transfer may be allocated.
General Account is the assets of the Company that are not allocated to a
Separate Account.
Guideline Minimum Sum Insured is not less than the minimum death benefit
required to qualify the Contract as "life insurance" under federal tax laws. The
guideline minimum sum insured is the product of
the Contract Value TIMES
a percentage based on the insured's attained age.
Guideline single premium is used to determine the face amount under the
Contract.
Internal Revenue Code or Code is the Internal Revenue Code of 1986, as amended,
and rules and regulations.
Insurance protection amount is the death benefit minus the Contract Value.
Insured is the person or persons covered as indicated on the specification
pages. If more than one insured is named, all provisions of this Contract that
are based on the death of the insured will be based on the date of death of the
last survivor of the persons named.
Loan value is the maximum amount you may borrow under the Contract.
Maturity Date is the Contract anniversary immediately before the insured's 115th
birthday. If there are two insureds, the maturity date is the Contract
anniversary immediately before the younger insured's 115th birthday.
Monthly deductions is the amount of money that we deduct from the Contract Value
each month to pay for the Administration Charge, Monthly Insurance Protection
Charge, Distribution Fee and the Tax Charge.
Monthly insurance protection charge is the amount of money that we deduct from
the Contract Value each month to pay for the insurance and any riders.
Monthly processing date is the date the monthly charges are deducted from the
Contract Value. This date is shown on the specification pages. If the Company is
not open on this date, the monthly processing date for that month will be the
next business date.
Net death benefit: Through the final payment date the net death benefit is:
The death benefit; MINUS
Any outstanding loan on the insured's death, rider charges and monthly
deductions due and unpaid through the Contract month in which the insured
dies, as well as any partial withdrawals, withdrawal transaction fees, and
applicable surrender charges.
After the final payment date, except as provided otherwise under a Guaranteed
Death Benefit Rider if attached to this Contract, the net death benefit is:
101% of the Contract Value; MINUS
Any outstanding loan on the insured's death through the Contract month in
which the insured dies and any unpaid partial withdrawals, withdrawal
transaction fees and applicable surrender charges.
Outstanding loan means all unpaid Contract loans plus interest due or accrued on
such loans.
Portfolio is a separate investment series for investment by a sub-account of the
Variable Account.
Pro rata refers to an allocation among the sub-accounts of the Variable Account
and the Fixed Account. A pro rata allocation will be in the same proportion that
the portion of the Contract Value in each sub-account of the Variable Account
and the portion of the Contract Value in the Fixed Account have to the total
Contract Value net of any outstanding loans.
Preferred Loan is the portion of any outstanding loan secured by Earnings.
Preferred Loan Rate is the Minimum Fixed Account Interest Rate shown in the
specification pages regarding the rate that applies to the value securing
Outstanding Loan - Preferred Loan.
Rider is an optional benefit that may be added to your Contract. An additional
charge may be required for a rider.
Second-to-die is a Contract issued as a joint survivorship ("Second-to-Die")
Contract. Life insurance coverage is provided for two insureds, with death
benefits payable at the death of the last surviving insured.
Separate account is a segregated account established by the Company. The assets
are not commingled with the Company's general assets and are not subject to
claims of the Company's creditors.
Specification pages contain information specific to your Contract and are
located after the Table of Contents.
Sub-accounts are subdivisions of the Variable Account investing exclusively in
the shares of one or more portfolios.
Surrender value is the amount payable on a full surrender. It is the Contract
Value less any outstanding loan and surrender charges.
Transamerica is Transamerica Occidental Life Insurance Company. "We", "our",
"us" and "Company" refer to Transamerica in this Contract.
Underwriting class means the insurance risk classification that we assign to the
insured based on the information in the application and any other evidence of
insurability we obtain. The underwriting class affects the monthly insurance
protection charge.
Unit is a measure of your interest in a sub-account.
Variable Account is the Company's Separate Account, consisting of sub-accounts
that invest in the underlying Portfolios.
Variable Life Service Center is the Company's office at 440 Lincoln Street, P.O.
Box 3800 Worcester, Massachusetts 01653.
Written request is a signed request you make in written form that is
satisfactory to us and filed at our Variable Life Service Center.
You or your means the owner of this Contract as shown in the application or in
the latest change filed with us.
<PAGE>
General Terms
Entire Contract We have issued this Contract in
consideration of the application and your Contract
payment. A copy of the application is attached and
is part of this Contract. This Contract, with a
copy of the application, and any attached Riders,
is the entire Contract between you and us. The
entire Contract also includes:
a copy of any application to change to a
better underwriting class, any new
specification pages, and any supplemental
pages issued.
All statements made by or for the insured will be
considered representations and not warranties. We
will not use any statements made by or for the
insured to deny a claim unless the statement is in
the application and the application is attached to
this Contract when it is issued or delivered. Our
representatives are not permitted to change this
Contract or extend the time for making payments.
Only our President or a Vice President together
with our Secretary may change the provisions of
this Contract, and then only in writing.
Right To Contest The A contest is any action taken by us to cancel your
insurance or deny a claim based on Contract Is Limited untrue or incomplete
answers in your application. Except for fraud or nonpayment of payments, this
Contract will be incontestable after it has been in force during the lifetime of
the insured for two years from the date of issue. This provision does not apply
to any riders providing benefits specifically for disability or death by
accident.
If the underwriting class is changed at your
request, we cannot contest the change after it has
been in force for two years from its effective date
and the insured is alive.
Non-Participating No insurance dividends will be paid on this Contract.
Adjustment Of Interest We determine the Fixed Account interest rates used to
calculate the Contract Value, Rates subject to the guarantees on the
specification pages.
Suicide Exclusion If the insured dies by suicide, while
sane or insane, within two years from the date of
issue, we will be liable only for the total amount
of payments made to us less any outstanding loans
and amounts withdrawn.
Notice Of First To Die If more than one insured is named
on the specification pages, upon the death of the
insured who dies first, the owner agrees to mail
proof of death to the Variable Life Service Center,
within 90 days of the date of death, or as soon
thereafter as is reasonably possible.
<PAGE>
(General terms continued)
Misstatement Of Age Or Sex On the date of death of the insured,
the death benefit will be reduced or increased if
the Age or sex is misstated. The adjustment will be
based upon the ratio of the Maximum Payment for
this Contract to the Maximum Payment for the
Contract issued at the correct Age or sex.
No adjustment will be made if:
o The insured dies after the final payment date; or
o The underwriting class is unisex and there has
been a misstatement only of sex.
Protection Of Benefits To the extent allowed by law, the
benefits provided by this Contract cannot be
reached by the beneficiary's creditors. No
beneficiary may assign, transfer, anticipate, or
encumber the Contract Value or benefit unless you
give them this right.
Periodic Report We will mail a report to you at your last known
address at least once a year. This
report will provide the following information:
o Contract Values in each sub-account and in
the Fixed Account;
o the value of the Contract if surrendered;
o payments made by you and charges deducted by
us since the last report;
o the outstanding loan and any other information
required by law; and
o the death benefit.
<PAGE>
Information about you and the beneficiary
Owner The insured is the owner of this Contract unless
another person (which could include a trust,
corporation, partnership, etc.) is named as the
owner in the application. The owner may change the
ownership of this Contract without the consent of
any beneficiary except that an irrevocable
beneficiary must agree to the change in writing.
Assignment You may change the ownership of this Contract by sending us a signed
written request. An absolute assignment will transfer ownership of the Contract
from you to another person called the assignee. You may also assign this
Contract as collateral to a collateral assignee. The limitations on your
ownership rights while a collateral assignment is in effect are specified in the
assignment. An assignment will take place only when the signed written request
is recorded at our Variable Life Service Center. When recorded, it will take
effect on the date it was signed by you. Any rights created by the assignment
will be subject to any payments made or actions taken by us before the change is
recorded. We are not responsible for assuring that any assignment or any
assignee's interest is valid.
Beneficiary You name the beneficiary to receive the net death
benefit. The beneficiary's interest will be
affected by any assignment you make. If you assign
this Contract as collateral, all or a portion of
the net death benefit will first be paid to the
collateral assignee; any money left over from the
amount due the assignee will go to those otherwise
entitled.
Your choice of beneficiary may be revocable or
irrevocable. You may change a revocable beneficiary
at any time by written request, but an irrevocable
beneficiary must agree to any change in writing.
You will also need an irrevocable beneficiary's
permission to exercise other rights and options
granted by this Contract. Unless you have asked
otherwise, the beneficiary will be revocable.
Any change of the beneficiary must be made while
the insured is living. This change will take place
on the date the request is signed, even if the
insured is not living on the day we receive it at
the Variable Life Service Center. Any rights
created by the change will be subject to any
payments made, or actions taken, before we receive
the written request. If a beneficiary dies before
the insured, his or her interest in this Contract
will pass to any surviving beneficiaries in
proportion to their share in the net death benefit,
unless you have requested otherwise. If all
beneficiaries die before the insured, the net death
benefit will pass to you or your estate.
Common Disaster Option The common disaster option may be elected and changed
after Contract issue by a signed written request. If the common disaster option
is in effect on the date of the insured's death, the beneficiary must be alive
for a certain number of days following the insured's date of death in order to
be entitled to receive a benefit. Otherwise, we will pay the net death benefit
as though the beneficiary died before the insured. The number of days that the
beneficiary must live after the insured's death is selected by you when you
elect the common disaster option. Unless you elect otherwise by written request,
the common disaster option under the Contract will provide for a 10-day period.
<PAGE>
What you should know about the payments
Payments This Contract will not be in force until the Payment shown on the
specification pages is paid to us. Additional payments may be made to us at
any time through the final payment date, but before the date of death of
the insured, subject to the minimum additional payment amount and the
maximum payment amount, shown on the specification pages. A payment
required to keep the Contract in force will not be subject to the minimum
additional payment or maximum payment limitations. Payments must be sent to
our Variable Life Service Center .
If you request it in writing, we will send you a
signed receipt after payment. The payment amount
which must be paid to keep the Contract in force is
described in the Grace Period provision.
We may require evidence of insurability before accepting an additional
payment, if the additional payment would increase the net death benefit.
We may limit the amount you pay us. The sum of all payments made from the
date of issue, minus any partial withdrawals, may not be more than the
greater of: o The guideline single payment, or o The sum of the guideline
level payments on the date of payment.
The guideline payment limits are shown on the
specification pages. These payment limitations will
not apply if they prevent you from paying us enough
to keep the Contract in force.
Guideline payment limits are determined according
to rules in the federal tax law and will be
adjusted as that law changes.
If the payments made exceed the amount allowable
for this Contract to continue to qualify as a life insurance Contract under
Section 7702 of the Internal Revenue Code and the regulations thereunder,
as applicable to this Contract from time to time, we will remove excess
payments made from the Contract, with interest. Such an excess amount could
occur, for example, as a result of a partial withdrawal or other change in
the benefits or terms of the Contract, since such actions may reduce the
guideline payment limits allowable for the Contract. The
portion of the payment that cannot be accepted as
payment will be applied first against any
outstanding Contract loans. We will refund to you
any excess amount (including interest) not later
than 60 days after the end of that Contract year.
The amount refundable will not exceed the surrender
value of the Contract. If the entire surrender
value is refunded, we will treat the transaction as
a full surrender of your Contract.
<PAGE>
(What you should know About the Payments continued)
Grace Period This Contract will terminate 62 days after a monthly
processing date on which the surrender value is less than zero. The
62-day period is a grace period. At least 61 days before the end of
the grace period, we will mail the Owner and any Assignee written
notice of the amount of payment that will be required to continue this
Contract in force. The required payment will be no greater than the
amount required to pay the guaranteed monthly deductions for three
months as of the day the grace period began. The Contract will lapse
if the amount shown in the notice remains unpaid at the end of the
grace period. The Contract terminates on the date of lapse. The death
benefit during the grace period will be reduced by any overdue
charges.
Reinstatement If this Contract has lapsed or has been foreclosed for
failure to pay loan interest and has not been surrendered, it may be
restored (called "reinstated" in this Contract) within three years
after the date of default or foreclosure. We will reinstate the
Contract on the monthly processing date following the day we receive
all of the following items: o a written application for reinstatement;
o evidence of insurability satisfactory to us; o a payment sufficient
to cover the cost of all Contract charges that were due and unpaid
during the grace period; o a payment large enough to keep the Contract
in force for three months; and o payment or reinstatement of any loans
against the Contract that existed at the end of the grace period.
Your reinstatement payment will be allocated to the
Fixed Account until we approve your application. At
that time, we will transfer the reinstatement
payment, plus accrued interest, as you directed in
your last payment allocation request.
The Contract Value on the reinstatement date is: the payment to
reinstate the Contract, including the interest earned from the date we
received your payment, plus an amount equal to the Contract Value less
any outstanding loan on the default date; less the monthly deductions
due on the reinstatement date.
The surrender charge on the reinstatement date is the
charge that was in effect on the date of default.
<PAGE>
What you should know about your Contract Value
Allocation of New Payments You may allocate the payments to: any of
the sub-accounts which are available at the time the payment is made;
and/or, the Fixed Account.
The Company reserves the right to limit the number
of sub-accounts which are available at one time,
but in no event will this be less than [twenty].
All percentage allocations must be in whole
numbers, with the total allocation to all selected
accounts equaling 100%. Allocations of less than 5%
to a sub-account or to the Fixed Account may only
be made with our consent.
Allocation Of Initial If you make a payment with your application or at any time
before the Contract is Payments approved by us, we may put that payment into the
Fixed Account on the date we receive
it at our Variable Life Service Center. Not later
than two days after the date this Contract is
approved by us, the Contract Value you elected to
allocate to the Variable Account will be
transferred from the Fixed Account to either the
sub-accounts you have elected or to the Money
Market sub-account. In any event, we will transfer
any Variable Account Contract Values from the Money
Market sub-account to the sub-accounts you have
selected not later than the expiration of the
period during which you may exercise your right to
examine this Contract and request a refund of your
payments.
Monthly Deduction Beginning on the date this Contract is
issued and on every monthly processing date through
the final payment date, we will deduct the
following monthly charges pro rata from the
Contract Values:
o Administration Charge;
o Distribution Fee;
o Tax Charge; and
o Insurance Protection Charge.
The amounts of the monthly deductions and their
durations are shown on the specification pages. No
additional monthly deductions will be assessed
following the end of the duration period. Charges
allocated to the Fixed Account will be deducted on
a last-in, first-out basis. This means that we use
the most recent payments to pay the fees.
Administration Charge The Administration Charge compensates us for
the cost of providing administrative services
attributable to this Contract.
Distribution Fee The Distribution Fee compensates us for distribution expenses.
Tax Charge This charge compensates us for certain federal,
state and local taxes we must pay.
<PAGE>
Insurance Protection Charge The Insurance Protection Charge
compensates us for the cost of providing a death
benefit in excess of the Contract Value. This
charge will not exceed the guaranteed maximum
insurance protection charge. The guaranteed maximum
insurance protection charge for any Contract month
is equal to (a) times (b), where: (a) is the rate
shown in the Guaranteed Maximum Monthly Insurance
Protection Rate
Table shown on the specification pages, and
(b) is the insurance protection amount divided by
$1,000.
The insurance protection rates actually charged
will never be higher than the guaranteed rates. We
may change the insurance protection rates from time
to time. Any change in the rates for monthly
insurance protection charges will apply to all
Contracts in the same underwriting class, will be
prospective, and will be based on our expectations
as to future cost factors. Such cost factors may
include, but are not limited to: mortality
expenses, interest, and persistency. We will review
the actual insurance protection rates for this
Contract whenever we change these rates for new
Contracts. In any event, rates will be reviewed no
more often than once each year, but not less than
once in a five-year period.
<PAGE>
What you should know about the Variable Account
Variable Account The value of your Contract will vary if it is
funded through investments in the sub-accounts of the Variable
Account. This account is separate from our Fixed Account. We have
exclusive and absolute ownership and control of all assets,
including those in the Variable Account. However, the portion of
assets in the Variable Account equal to the reserves and
liabilities of the contracts that are supported by this account
will not be charged with liabilities that arise out of any other
business we conduct.
This Variable Account, which we established to
support variable life insurance Contracts, is
registered with the Securities and Exchange
Commission (SEC) as a unit investment trust under
the Investment Company Act of 1940. The laws of the
State of California also govern it.
This Variable Account has several sub-accounts.
Each sub-account invests its assets in a separate
series of a registered investment company (called a
"portfolio"). We reserve the right, when the law
allows, to change the name of the Variable Account
or any of its sub-accounts. You will find a list in
your application of these sub-accounts in which you
may invest.
Variable Account Contract Value Not later than two days
after the date this Contract is approved for issue by us,
the Contract Value you elected to allocate to the Variable
Account may be transferred from the Fixed Account to either
the sub-accounts you have selected or to the Money Market
sub-account. We will transfer the Variable Account Contract
Values from the Money Market sub-account to the sub-accounts
you have selected not later than the expiration of the
period during which you may exercise your right to examine
this Contract and request a refund of your payments.
Payments made thereafter which are allocated to the
sub-accounts will purchase additional units of the
sub-accounts.
The number of units purchased in each sub-account
is equal to the portion of the net payment
allocated to the sub-account, divided by the value
of the applicable unit as of the valuation date the
payment is received at our Variable Life Service
Center or on the date value is transferred to the
sub-account from another sub-account or the Fixed
Account. If we receive your payment on a date which
is not a valuation date, we will use the value of
the applicable unit on the first valuation date
following the date we receive your payment to
determine the number of units that the payment will
purchase.
The number of units will remained fixed unless:
(1) changed by a subsequent split of unit value, or
(2) reduced because of a transfer, transfer charge,
Contract loan, partial withdrawal, withdrawal
transaction fee, monthly deductions, surrender or
surrender charge allocated to the sub-account.
<PAGE>
Variable Account Contract Any transaction described in (2) will result in the
cancellation of the number of Value units which are equal in value to the amount
of the transaction. On each valuation (Continued) date we will value the assets
of each sub-account in which there has been activity.
The value in a sub-account at any time is equal to
the number of units this Contract then has in that
sub-account multiplied by the sub-account's unit
value. The value of a unit for any sub-account for
any valuation period is determined by multiplying
that sub-account's unit value for the immediately
preceding valuation period by the net investment
factor for the valuation period for which the unit
value is being calculated. The unit value will
reflect the investment advisory fee and other
expenses incurred by the registered investment
companies.
Net Investment Factor This measures the investment
performance of a sub-account during the valuation
period that has just ended. The net investment
factor is the result of (a) plus (b), divided by
(c), minus (d) where: (a) is the net asset value
per share of a portfolio share held in the
sub-account
determined at the end of the current valuation period;
(b) is the per share amount of any dividend or
capital gain distributions made by the
portfolio on shares held in the sub-account if
the "ex-dividend" date occurs during the
current valuation period;
(c) is the net asset value per share of a
portfolio share held in the sub-account
determined as of the end of the immediately
preceding valuation period; and
(d) is a charge for mortality and expense risks in
the valuation period.
The current mortality and expense risk charge is
shown on the specification pages. This charge may
be increased or decreased, but will never exceed
the maximum mortality and expense risk charge shown
on the specification pages. Expense and mortality
results may not adversely affect this maximum
charge. Since the net investment factor may be more
or less than one, the unit value may increase or
decrease. You bear the investment risk. We reserve
the right, subject to any required regulatory
approvals, to change the method we use to determine
the net investment factor.
Valuation Dates And Periods A valuation date is each day that
the New York Stock Exchange (NYSE) is open for
business and any other day that there is enough
trading in the Variable Account's underlying
portfolio securities to materially affect the value
of the Variable Account. A valuation period is the
period between valuation dates.
<PAGE>
(what you should know about the Variable Account -continued)
Addition, Deletion Or We may not change the investment policy of the Variable
Account without the approval Substitution Of Investments of the Insurance
Commissioner of California. This approval process is on file with the
Commissioner of your state. We reserve the right,
subject to applicable law, to add, delete, or
substitute the shares of a portfolio that are held
by the Variable Account or that the Variable
Account may purchase. We also reserve the right to
eliminate the shares of any portfolio if they are
no longer available for investment, or if we
believe investing more in any portfolio is no
longer appropriate for the purposes of the Variable
Account.
We will notify you before we substitute any of your
shares in the Variable Account.
Reviewer This will not, however, prevent the Variable Account from buying other
shares of Previous version state underlying securities for other series or
classes of contracts or policies, or from contracts and contracts, permitting a
conversion between series or classes of contracts or policies when changed to
contracts and requested by the Contract Owner. We reserve the right to establish
other policies sub-accounts, and to make them available to any class or series
of contracts and
policies as we think appropriate. Each new
sub-account would invest in a new investment
company or in shares of another open-end investment
company. We also reserve the right to eliminate or
combine existing sub-accounts of the Variable
Account and to transfer the assets between
sub-accounts, when allowed by law. If we make any
substitutions or changes that we believe are
necessary or appropriate, we may make changes in
this Contract by written notice to reflect the
substitution or change. If we think it is in the
best interests of our Contract Owners, we may
operate the Variable Account as a management
company under the Investment Company Act of 1940,
or we may de-register it under that Act if
registration is no longer required. We may also
combine it with other separate accounts.
Federal Taxes If we must pay taxes on the Variable Account,
we will charge you for that tax. Although the
Variable Account is currently not taxable, we
reserve the right to charge for taxes if it becomes
taxable.
Splitting Of Units We reserve the right to split the value
of a unit, to either increase or decrease the number of
units. Any splitting of units will have no material effect
on Contract benefits.
<PAGE>
What you should know about the Fixed Account
Fixed Account The Fixed Account is a part of our General
Account. The General Account consists of all assets
owned by us, other than those in the Variable
Account and other separate accounts. Except as
limited by law, we have sole control over the
investment of these General Account assets. You do
not share directly in the investment experience of
the General Account, but are allowed to allocate
and transfer funds into the Fixed Account.
Fixed Account Interest The interest rates credited to Contract Value in the
Fixed Account are set by us, but Rates will never be less than the Minimum Fixed
Account Interest Rate shown in the
specification pages. We may establish higher
interest rates, and the initial interest rates and
the renewal interest rates may be different.
Interest rates will be determined as follows:
Payments allocated to the Fixed Account will
be credited at the initial interest rate in
effect on the day we receive your payment at
our Variable Life Service Center, and the
initial interest rate is guaranteed until the
next Contract anniversary unless you borrow
from that Contract Value.
Funds transferred from a sub-account of the
Variable Account to the Fixed Account will be
credited with interest at the initial interest
rate in effect on the valuation date of the
transfer, and the initial interest rate is
guaranteed until the next Contract anniversary
unless you borrow from that Contract Value.
Contract Values in the Fixed Account on the
Contract anniversary will be credited with
interest at the renewal interest rate in
effect on the Contract anniversary for one
year so long as those values remain in the
Fixed Account and are not borrowed.
The interest rate we use for that portion of
the Contract Value that equals the outstanding
loan will be no less than the guaranteed rates
shown on the specification pages. One of the
rates shown is the Preferred Loan Rate, which
applies only to loans qualifying as a
Preferred Loan.
<PAGE>
Fixed Account Contract On each monthly processing date, the Contract Value of
the Fixed Account is equal to: Value o the Contract Value in this account on the
preceding monthly processing date
increased by one month's interest; plus
o payments received since the last monthly
processing date that are allocated to the
Fixed Account plus the interest accrued from
the date the payments are received by us; plus
o Variable Account Contract Value transferred to
the Fixed Account from any sub-accounts since
the preceding monthly processing date,
increased by interest from the date the
Contract Value is transferred; minus
o Contract Value transferred from the Fixed
Account to a sub-account since the preceding
Monthly processing date and interest accrued
on these transfers from the transfer date to
the monthly processing date; minus
o partial withdrawals from the Fixed Account,
any withdrawal transaction fees and surrender
charges assessed since the last monthly
processing date, interest accrued on these
withdrawals and charges from the withdrawal
date to the monthly processing date; minus
o the portion of the monthly deductions
allocated to the Contract Value in the Fixed
Account.
During any Contract month the Fixed Account
Contract Value will be calculated on a consistent
basis.
Basis Of Value Of The We base the minimum surrender value in the Fixed Account
on the minimum Fixed Account Fixed Account interest rates and mortality table
shown on the specification pages. Actual Contract Values are based on interest
and insurance protection rates that we set. We have filed a detailed description
of the way we determine this value with the State Insurance Department. All
values equal or exceed the minimums required by law in the state in which this
Contract is delivered.
What You Should Know About While the Contract is in force, you may transfer
amounts between the Fixed Account and Transfers the sub-accounts or among
sub-accounts on request. You may transfer, without charge,
all of the Contract Value in the Variable Account
to the Fixed Account once during the first 24
months after the Contract is issued in order to
convert to a fixed-only product. If you do so,
future payments will be allocated to the Fixed
Account unless you specify otherwise. All other
transfers are subject to the following rules and
will be permitted with our approval. We will
determine the minimum and maximum amounts that may
be transferred according to the rules that are in
effect at the time of the transfer. We also reserve
the right to limit the number of transfers that can
be made in each Contract year and set other
reasonable rules controlling transfers.
If a transfer would reduce the Contract Value in a
sub-account to less than the current minimum
balance required for such accounts, we reserve the
right to include the remaining value in the amount
transferred. You will not be charged for the first
eighteen (18) transfers in a Contract year, but a
transfer charge of up to $25 may be assessed on
each additional transfer. Any transfer charge will
be deducted from the amount that is transferred.
There is no charge for transfers that result from a
Contract loan or repayment of a loan.
<PAGE>
What you should know about borrowing from your Contract
To borrow from this Contract, the only collateral
you will need is the Contract itself.
Amount You May Borrow The maximum loan amount is 90% of
the result of Contract Value less surrender
charges. You may borrow an amount subject to the
minimum shown on the specification pages, up to the
maximum loan amount minus any outstanding loan. If
you do not specify from which accounts you want to
borrow, we will allocate the loan pro rata. In
order to secure the outstanding loan, we will
transfer the value in each sub-account equal to the
Contract loan allocated to each sub-account to the
Fixed Account.
Loan Interest You will pay interest on your loan at an annual rate indicated on
the specification pages. Interest accrues daily and is payable at the end of
each Contract year. Any interest that is not paid on time will be added to the
loan principal and bear interest at the same rate. If this makes the principal
higher than the Contract Value in the Fixed Account, we will offset this
shortfall by transferring funds from the sub-accounts to the Fixed Account. We
will allocate the transferred amount among the sub-accounts in the same
proportion that the value in each sub-account has to the total value in all of
them.
Repaying The Outstanding You may repay the outstanding loan at any time before
this Contract lapses and before Loan the maturity date. When you repay it, we
will transfer the Contract Value that is
securing the loan in the Fixed Account to the
various sub-accounts and increase the value in
them. You may tell us how to allocate repayments.
Otherwise, we may allocate them according to the
most recent payment allocation choices you have
made. Loan repayments made to the Variable Account
cannot be higher than the amounts you transferred
to secure the outstanding loan.
Foreclosure If at any time the amount of the outstanding loan
is higher than the Contract Value minus the
surrender charge, we will terminate the Contract.
We will mail a notice of this termination to the
last known address of you and any assignee. If the
excess outstanding loan is not paid within 62 days
after this notice is mailed, the Contract will
terminate with no value. You may reinstate this
Contract in accordance with the Reinstatement
provision.
<PAGE>
WHAT YOU SHOULD KNOW ABOUT SURRENDERS AND PARTIAL WITHDRAWALS
Surrender You may cancel this Contract and receive its surrender value as long
as the insured is living on the date we receive your written request at our
Variable Life Service Center. The Contract will be canceled on that day. You may
choose to receive the surrender value in a lump sum or under a benefit option.
The surrender value equals the Contract Value minus the outstanding loan and
surrender charge. You will find the surrender charges on the specification
pages.
Partial Withdrawals You may withdraw part of the surrender
value on written request. Each withdrawal must be
at least $1,000. The withdrawal transaction fee in
effect on the date of issue is shown on the
specification pages. The withdrawal transaction fee
is subject to change, but will never exceed the
guaranteed charge shown on the specification pages.
We will not permit a partial withdrawal if it
reduces the Contract Value amount to less than the
minimum amount shown on the specification pages.
The face amount will be reduced proportionately
based on the ratio of the amount of the partial
withdrawal and charges to the Contract Value on the
date of withdrawal. The Contract Value will be
reduced by the amount of the partial withdrawal,
the withdrawal transaction fee and any applicable
surrender charges.
If you do not allocate a partial withdrawal, its
fee and its charges between the Fixed Account and
each sub-account, we will automatically allocate
them pro rata.
Free Withdrawal Amount The free withdrawal amount will
not be subject to the surrender charge. as
described on the specification pages. The free
withdrawal amount equals (a) minus (b), where: (a)
is the free withdrawal amount shown on the
specification pages, and (b) is the total of the
withdrawals (or portions of them) made in the same
Contract year that were exempt from the surrender
charge.
The free withdrawal amount is first deducted from
earnings. Withdrawals in excess of the free
withdrawal amount are deducted from payments not
previously considered withdrawn on a last-in,
first-out basis. Surrender charges applicable to
the excess withdrawal are described on the
specification pages.
<PAGE>
(WHAT YOU SHOULD KNOW ABOUT SURRENDERS AND PARTIAL WITHDRAWALS - continued)
Postponement Of Payment We may postpone any transfer from the
Variable Account, or payment of any amount payable
on:
surrender,
partial withdrawal,
transfer,
Contract loan, or
death of the insured.
The postponement will continue during any period
when:
o trading on the New York Stock Exchange is
restricted as determined by the Securities and
Exchange Commission, or the New York Stock
Exchange is closed for days other than
weekends and holidays, or
o the Securities and Exchange Commission by order
has permitted such suspension, or o the Securities
and Exchange Commission has determined that such an
emergency
exists that disposal of portfolio securities or valuation of assets is not
reasonably practical.
We also may postpone any transfer from the Fixed
Account or payment of any portion of the amount
payable on a surrender, partial withdrawal or
Contract loan from the Fixed Account for not more
than six months from the day we receive your signed
written request and your Contract, if it is
required. If we postpone those payments for 30 days
or more, the amount postponed will earn interest
during that period of not less than 3% per year or
such higher rate as required by law. We will not
postpone premium payments to make payments on our
Policies Contracts.
<PAGE>
What you should know about the death benefit
Net Death Benefit If the insured dies before the maturity date and before
the Contract is terminated, we will pay the net death benefit. The net
death benefit is equal to the death benefit reduced by certain amounts, as
described below. The death benefit is determined as of the date we receive
due proof of the insured's death at our Variable Life Service Center. Due
proof of death is a valid death certificate or other evidence satisfactory
to us.
The amount of the net death benefit depends upon:
(1) whether the date the insured dies is after, or
on or before, the final payment date; and, if after
the final payment date, (2) whether the Guaranteed
Death Benefit Rider is in effect at the time of the
insured's death.
If the insured dies on or before the final payment date then the death
benefit is the greater of the face amount or the guideline minimum sum
insured. The net death benefit is determined by deducting from the death
benefit: any outstanding loan and any monthly deductions due and unpaid
through the Contract month in which the insured dies, as well as any
partial withdrawals, withdrawal transaction fees, and applicable surrender
charges.
After the final payment date, except as provided
under a Guaranteed Death Benefit Rider if attached
to this Contract, the net death benefit is:
101% of the Contract Value; minus
Any outstanding loan on the insured's death
through the Contract month in which the
insured dies and any unpaid partial
withdrawals, withdrawal transaction fees and
applicable surrender charges.
If the net death benefit is paid in a lump sum,
interest will be earned at our declared interest
rate for sums held on deposit, but not less than
2.5% per year, beginning on the date we receive
notice of death at our Variable Life Service
Center. We will pay a higher interest rate if
required by state law. We will credit interest from
an earlier date (for example, from the date of the
insured's death) if required by state law.
<PAGE>
<TABLE>
<CAPTION>
Guideline Minimum Sum Insured Table
Attained Age Percentage Attained Age Percentage
40 or less 265% 66 134%
<S> <C> <C> <C> <C>
41 258% 67 133%
42 251% 68 132%
43 244% 69 131%
44 237% 70 130%
45 230% 71 128%
46 224% 72 126%
47 218% 73 124%
48 212% 74 122%
49 206% 75-85 120%
50 200% 86 118%
51 193% 87 116%
52 186% 88 114%
53 179% 89 112%
54 172% 90 110%
55 165% 91 108%
56 161% 92 106%
57 157% 93 105%
58 153% 94 105%
59 149% 95 105%
60 145% 96 104%
61 143% 97 103%
62 141% 98 102%
63 139% 99 101%
64 137% 100-115 101%
65 135%
</TABLE>
Required Minimum Amount of This Contract is intended to qualify under Section
7702 of the Internal Revenue Code Death Benefit as a life insurance Contract for
federal tax purposes. The provisions of this
Contract (including any rider or endorsement)
shall be interpreted to ensure such tax
qualification, regardless of any language to the
contrary.
At no time will the amount of the death benefit
under the Contract ever be less than the amount
needed to ensure such tax qualification. To the
extent that the death benefit is increased,
appropriate adjustments will be made in any
monthly insurance protection charges or
supplemental benefits as of that time,
retroactively or otherwise, that are consistent
with such an increase. Such adjustments may be
made by right of setoff against any death benefits
payable.
This death benefit is calculated by multiplying
the Contract Value by the percentage shown in the
preceding table. The death benefit under this
Contract will not be less than the guideline
minimum sum insured as specified in the tax code.
The guideline minimum sum insured varies by
attained age. The amounts shown in the table are
determined to provide a death benefit at least as
great as those in the federal tax law, and will be
adjusted according to any changes in that law
applicable to this Contract.
<PAGE>
What you should know about the benefit payment options
Benefit Options When the insured dies, we will pay the death benefit
in a lump sum unless you or the beneficiary choose a benefit option.
You may choose a benefit option while the insured is living. The
beneficiary may choose a benefit option after the insured has died.
The beneficiary's right to choose will be subject to any settlement
agreement in effect at the insured's death. You may also choose one of
these options as a method of receiving the surrender or maturity
proceeds, if any are available under this Contract. When we receive a
satisfactory signed written request, we will pay the benefit according
to one of these options.
Option A: Installment for a We will pay equal installments for a
guaranteed period of from one to thirty years. Each Guaranteed Period
installment will consist of part benefit and part interest. We will
pay the installments monthly, quarterly, semi-annually or annually, as
requested. See Table A on next page.
Option B: Installments for We will pay equal monthly installments
as long as the payee is living, but we will not Life with a
Guaranteed make payments for less than the guaranteed period the
payee chooses. The guaranteed Period (Table B) period may be
either 10 years or 20 years. We will pay the installments
monthly. See Table B on next page.
Option C: Benefit Deposited We will hold the benefit on deposit. It will earn
interest at the annual interest rate we with Interest are paying as of the date
of death, surrender or maturity. We will not pay less than 2
1/2% annual interest. We will pay the earned
interest monthly, quarterly, semi-annually or
annually, as requested. The payee may withdraw
part or all of the benefit and earned interest at
any time.
Option D: Installments of a We will pay installments of a selected amount until
we have paid the entire benefit and Selected Amount accumulated interest.
Option E: Annuity We will use the benefit as a single
payment to buy an annuity. The annuity may be
payable to one or two payees. It may be payable
for life with or without a guaranteed period, as
requested. The annuity payment will not be less
than what our current annuity Contracts are then
paying.
General The payee may arrange any other method of benefit
as long as we agree to it. The payee must be an
individual receiving payment in his or her own
right. There must be at least $10,000 available
for any option and the amount of each installment
to each payee must be at least $100. If the
benefit amount is not enough to meet these
requirements, we will pay the benefit in a lump
sum.
Steve: The first installment due under any option will be for the
period beginning on the date of Is this any better? death,
maturity or surrender, whichever applies. Any unpaid balance we
hold under Options A, B or D will earn interest at the rate we
are paying at the time of settlement. We will not pay less than
3% annual interest. Any benefit we hold will be combined with our
general assets.
If the payee does not live to receive all
guaranteed payments under Options A, B, C, D or E
or any amount deposited under Option C, plus any
accumulated interest, we will pay the remaining
benefit as scheduled to the payee's estate. The
payee may name and change a successor payee for
any amount we would otherwise pay the payee's
estate.
<PAGE>
<TABLE>
<CAPTION>
Table A: Installments for Each $1,000 Payable under Option A
Multiply the Monthly Installment by 11.83895 for annual, by 5.96322 for semi-annual, or by 2.99263 for quarterly
Installments
- ------------------ ---------------- ----------------- ---------------- ----------------- -----------------
Guaranteed Monthly Guaranteed Monthly Guaranteed Monthly
Period (Years) Installment Period (Years) Installment Period (Years) Installment
- ------------------ ---------------- ----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
1 $84.47 11 $8.86 21 $5.32
2 42.86 12 8.24 22 5.15
3 28.99 13 7.71 23 4.99
4 22.06 14 7.26 24 4.84
5 17.91 15 6.87 25 4.71
6 15.14 16 6.53 26 4.59
7 13.16 17 6.23 27 4.48
8 11.68 18 5.96 28 4.37
9 10.53 19 5.73 29 4.27
10 9.61 20 5.51 30 4.18
- ------------------ ---------------- ----------------- ---------------- ----------------- -----------------
Table B: Monthly Installment for each $1,000 Payable under Option B
------------------- -------------------- ----------------------- ----------------------
Male Payee Female Payee Male Payee Female Payee
------------------- -------------------- ----------------------- ----------------------
---------------------------------------- ----------------------------------------------
Guaranteed Period (Yr.) Guaranteed Period (Yr.)
----------------------------------------------
- ----------- --------- --------- ---------- --------- ---------
Age 10 Yr. 20 Yr. 10 Yr. 20 Yr. Age 10 Yr. 20 Yr. 10 Yr. 20 Yr.
- ----------- --------- --------- ---------- --------- --------- ----------- ----------- ----------- ----------
11 $ 2.90 $ 2.89 2.83 2.83 51 $ 4.44 $ 4.26 $ 4.10 4.02
12 2.91 2.91 2.84 2.84 52 4.53 4.32 4.17 4.08
13 2.93 2.92 2.86 2.85 53 4.62 4.39 4.25 4.14
14 2.94 2.94 2.87 2.87 54 4.71 4.46 4.33 4.21
15 2.96 2.96 2.88 2.88 55 4.81 4.52 4.42 4.28
16 2.98 2.97 2.90 2.90 56 4.92 4.59 4.51 4.35
17 3.00 2.99 2.91 2.91 57 5.03 4.66 4.61 4.42
18 3.01 3.01 2.93 2.93 58 5.15 4.73 4.71 4.50
19 3.03 3.03 2.95 2.94 59 5.27 4.80 4.82 4.57
20 3.05 3.05 2.96 2.96 60 5.40 4.87 4.94 4.65
21 3.08 3.07 2.98 2.98 61 5.53 4.94 5.06 4.72
22 3.10 3.09 3.00 2.99 62 5.68 5.00 5.19 4.80
23 3.12 3.11 3.02 3.01 63 5.83 5.07 5.33 4.88
24 3.14 3.14 3.04 3.03 64 5.98 5.13 5.47 4.95
25 3.17 3.16 3.06 3.05 65 6.15 5.18 5.63 5.02
26 3.20 3.19 3.08 3.07 66 6.32 5.24 5.79 5.09
27 3.22 3.21 3.10 3.10 67 6.50 5.28 5.96 5.15
28 3.25 3.24 3.12 3.12 68 6.68 5.33 6.14 5.21
29 3.28 3.27 3.15 3.14 69 6.88 5.36 6.33 5.27
30 3.31 3.30 3.17 3.17 70 7.07 5.40 6.53 5.32
31 3.34 3.33 3.20 3.19 71 7.27 5.42 6.73 5.36
32 3.38 3.36 3.23 3.22 72 7.48 5.45 6.94 5.40
33 3.41 3.39 3.26 3.25 73 7.68 5.46 7.16 5.43
34 3.45 3.43 3.29 3.28 74 7.88 5.48 7.38 5.45
35 3.49 3.46 3.32 3.31 75 8.08 5.49 7.60 5.47
36 3.53 3.50 3.35 3.34 76 8.27 5.50 7.82 5.48
37 3.57 3.54 3.39 3.37 77 8.46 5.50 8.04 5.49
38 3.62 3.58 3.42 3.41 78 8.63 5.51 8.25 5.50
39 3.67 3.62 3.46 3.44 79 8.79 5.51 8.45 5.51
40 3.72 3.67 3.50 3.48 80 8.94 5.51 8.64 5.51
41 3.77 3.71 3.54 3.52 81 9.07 5.51 8.82 5.51
42 3.82 3.76 3.59 3.56 82 9.18 5.51 8.97 5.51
43 3.88 3.81 3.63 3.60 83 9.28 5.51 9.11 5.51
44 3.94 3.86 3.68 3.65 84 9.36 5.51 9.23 5.51
45 4.00 3.91 3.73 3.69 85+ 9.42 5.51 9.32 5.51
--------- ----------- ----------- ----------- ----------
46 4.07 3.97 3.78 3.74 Ages younger than 11 are the same shown for age 11,
and
47 4.14 4.02 3.84 3.79 ages older than 85 are the same as shown for age 85.
48 4.21 4.08 3.90 3.85
49 4.28 4.14 3.96 3.90
50 4.36 4.20 4.03 3.96
- ----------- --------- --------- ---------- ---------
</TABLE>
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
OPTION TO ACCELERATE DEATH BENEFITS (LIVING BENEFITS RIDER)
This rider is a part of the Contract to which it is attached. The insured under
this rider is the insured under the Contract. This rider does not apply to any
benefits provided by other riders.
Benefit While this rider is in force, you may elect to
receive a portion of the net death benefit called
the "Living Benefit," prior to the insured's death,
subject to the definitions, conditions and
limitations in this rider. This option may only be
exercised once.
Definitions "Option Amount" means that portion of the death
benefit which you elect to apply under this rider.
The Option Amount must be at least $25,000 and may
not exceed the lesser of:
o one-half of the death benefit on the date
the option is elected; or o the amount that
would reduce the face amount to our minimum
issue limit for
this Contract; or
o $250,000.
"Option Percentage" is the Option Amount divided by the death benefit.
"Living Benefit" is the Option Amount which has been reduced for interest and
other factors. It is the lump sum benefit under this rider, and it is the amount
used to determine the monthly benefit. The Living Benefit will not be less than
the surrender value of the Contract multiplied by the Option Percentage. The
following factors will be used to calculate the Living Benefit:
o age;
o sex, unless the Contract is issued on a unisex basis; o life expectancy;
o Contract Value; o outstanding loan;
o rate of interest currently being credited to the Fixed Account,
including those values which are subject to outstanding loan;
o Face Amount; o current monthly deductions; and o an expense charge of
$150.
An amount equal to the outstanding loan multiplied by the Option Percentage will
be deducted from the Living Benefit. The remaining outstanding loan will
continue in force.
The assumptions we use to calculate the Living Benefit may change from time to
time. The factors used to compute the Living Benefit will be set and changed
only prospectively; that is, based on changes in future expectations. We will
not change these factors to recoup any prior losses or distribute past gains
under the rider.
"Proof of claim" includes:
o a request signed by the insured to disclose all facts concerning the
insured's health; o records of the attending physician, including a
prognosis of the insured's condition; and o if we request, a medical
examination of the insured at our expense conducted by a physician we
choose.
Form xxxx-98
<PAGE>
Conditions Upon written request you may elect to receive
payment under the accelerated death benefit option
subject to the following conditions:
o the Contract is in force;
o a written consent has been given by any
collateral assignee, irrevocable beneficiary
and the insured if you are not the insured; and
o the insured qualifies for the option you elect.
Exercising the Option If you provide proof of claim
satisfactory to us that the insured's life
expectancy is 12 months or less, you may elect to
receive equal monthly payments for 12 months. For
each $1,000 of Living Benefit, each payment will be
at least $85.21. This assumes an annual interest
rate of 5%.
If the insured dies before all the payments have
been made, we will pay in one sum the present value
of the remaining payments due under this rider
calculated at the interest rate we use to determine
those payments as part of the net death benefit. If
you do not wish to receive monthly payments, you may
elect to receive the Living Benefit in a lump sum.
Effect On Contract The death benefit of the Contract will
be decreased by the option amount. Such decrease
will be effective on the monthly processing date
following the date of your written request. New
specification pages will be issued. These pages will
include the following information:
o the effective date of the decrease; and o the
amount of the decrease and the reduced face
amount.
The Contract Value will be reduced in the same
proportion as the reduction in the death benefit.
There will be no surrender charge on the reduction
in Contract Value. The allocation of the Contract
Value between earnings and payments will remain the
same.
Exclusion No benefit will be paid under this rider if a claim
results, directly or indirectly, from a suicide
attempt or a self-inflicted injury (while sane or
insane) for any period during which a suicide
exclusion is applicable.
Termination This rider will terminate on the first to occur of:
the date the Living Benefit is paid, or
o the end of the grace period of a payment in
default; or o the termination or maturity of
the Contract while the insured is alive; or o
at any time on your written request.
General The Contract specification pages will show the date of
issue of this rider. The Living Benefit will be made available to
you on a voluntary basis only. Accordingly: (a) If you would be
required by law to exercise this option to satisfy the claim of
creditors, whether in bankruptcy or otherwise, you are not
eligible for this benefit. (b) If you would be required by a
government agency to exercise this option in order to apply for,
obtain, or retain a government benefit or entitlement, you are
not eligible for this benefit.
Except as otherwise provided, all conditions and
provisions of the Contract apply to this rider.
Form xxxx-98
<PAGE>
Tax Qualification This rider is intended to provide a qualified
accelerated death benefit that is excluded from gross income for
federal income tax purposes. To that end, the provisions of this
rider and the Contract are to be interpreted to ensure or
maintain such tax qualification, notwithstanding any other
provisions to the contrary. Whether any tax liability may be
incurred when benefits are paid under this rider could depend on
whether the Contract Owner is also the insured and on how the
Internal Revenue Service interprets applicable provisions of the
Internal Revenue Code. As with any tax matter, the Contract Owner
and any other recipient of this benefit should each consult his
or her own tax advisor to evaluate any tax impact of this
benefit.
Signed for Transamerica Occidental Life Insurance Company at Los Angeles,
California and effective on the date of issue of the Contract to which this
rider is attached, unless a different date is shown here.
Executive Vice President, General Counsel President and CEO
And Corporate Secretary
Form xxxx-98
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
SECTION 1035 RIDER
This rider is a part of the Contract to which it is attached. The insured under
this rider is the insured under the Contract.
The Contract is issued in consideration of your assignment to us of a life
insurance policy (called the "Exchanged Policy") on the life of the insured. The
"Exchanged Policy" is identified in your application for this Contract. As used
in this endorsement, "gain" means the amount by which the cash value of the
Exchanged Policy (including any unpaid policy loan) exceeds your investment in
the Exchanged Policy as reported to us by the company which issued the Exchanged
Policy. We assume no responsibility for the calculation of your investment in
the Exchanged Policy.
The Fixed Account Interest Rates provisions are amended by the addition of the
following:
The Preferred Loan Rate will also be credited to the following amounts:
(1) That portion of the outstanding loan which is carried over from the
Exchanged Policy; and (2) A percentage of the gain under the Exchanged
Policy less the policy loan carried over to this Contract
as of the date of exchange.
<TABLE>
<CAPTION>
---------------------------------------- ----------------------------------------
Beginning of Contract Year Exchanged Policy's Unloaned Gain
Available For Preferred Loan Rate
---------------------------------------- ----------------------------------------
<S> <C> <C>
1 0%
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
2 10%
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
3 20%
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
4 30%
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
5 40%
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
6 50%
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
7 60%
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
8 70%
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
9 80%
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
10 90%
---------------------------------------- ----------------------------------------
---------------------------------------- ----------------------------------------
11+ 100%
---------------------------------------- ----------------------------------------
</TABLE>
Signed for Transamerica Occidental Life Insurance Company at Los Angeles,
California and effective on the date of issue of the Contract to which this
rider is attached, unless a different date is shown here.
Executive Vice President, General Counsel President and CEO
And Corporate Secretary
Form xxxxx-98
<PAGE>
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
Guaranteed Death Benefit Rider (SPVUL)
This rider is a part of the Contract to which it is attached.
Required Payment This Rider will take effect upon receipt by
the Company of the Guaranteed Death Benefit Payment
shown on the specification pages.
Guaranteed Death Benefit The Contract will not lapse while this
Rider is in force. The monthly deductions will be
made from the Contract Value, if any, through the
final payment date (but not after the end of any
duration period shown on the specification pages).
Net Death Benefit While this Rider is in force, the net
death benefit provisions of the Contract are amended
by the addition of the following:
If this Rider is in effect on the final payment
date, a death benefit will be provided thereafter
unless the Rider is terminated. The net death
benefit under the Rider will be the face amount as
of the final payment date or 101% of the Contract
Value as of the date due poof of death is received
by the Company, whichever is greater, reduced by the
outstanding loan through the Contract month in which
the insured dies. The monthly deductions will not be
deducted after the final payment date.
Termination This Rider will terminate and may not be reinstated
on the first to occur of the following:
o Foreclosure of the outstanding loan; or
o A request for a partial withdrawal or
preferred loan is made after the final
payment date; or
o Upon your written request.
It is possible that the Contract Value will not be sufficient to keep the
Contract in force on the first monthly processing date following the date the
Rider is terminated. The net amount payable to keep the Contract in force will
never exceed the surrender charge plus the amount required to pay three monthly
deductions.
Signed for Transamerica Occidental Life Insurance Company at Los Angeles,
California and effective on the date of issue of the Contract to which this
rider is attached, unless a different date is shown here.
Executive Vice President, General Counsel President and CEO
And Corporate Secretary
Form xxxxx-98
<PAGE>
(6) Organizational documents
<PAGE>
RESTATED
ARTICLES OF INCORPORATION
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
William A. Simpson and James W. Dederer hereby certify that:
1. They are the President and the Secretary, respectively, of Transamerica
Occidental Life Insurance Company, a California corporation.
2. The Articles of Incorporation of this corporation are amended and
restated to read as follows:
FIRST
The name of this corporation is TRANSAMERICA OCCIDENTAL LIFE INSURANCE
COMPANY.
SECOND
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the
trust company business or the practice of a profession permitted to be
incorporated by the California Corporations Code. The business of the
corporation is to be an insurer.
THIRD
This corporation is authorized to issue only one class of stock; and
the total number of shares this corporation is authorized to issue is
FOUR MILLION (4,000,000) shares with a par value of $12.50 per share.
FOURTH
This corporation elects to be governed by all of the provisions of the
General Corporation Law effective January 1, 1977 not otherwise
applicable to it under Chapter 23 thereof.
FIFTH
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California.
<PAGE>
SIXTH
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through
by-law provisions, agreements with the agents, vote of shareholders or
disinterested directors, or otherwise, in excess of the indemnification
otherwise permitted by Section 317 of the California Corporations Code,
subject only to the limits on excess indemnification set forth in
Section 204 of the California Corporations Code. The corporation is
further authorized to provide insurance for agents as set forth in
Section 317 of the California Corporations Code, provided that, in
cases where the corporation owns all or a portion of the shares of the
company issuing the insurance policy, the company and/or the policy
must meet one of the two sets of conditions set forth in section 317,
as amended.
3. The foregoing amendment and restatement of Articles of Incorporation
has been duly approved by the Board of Directors.
4. The foregoing amendment and restatement of Articles of Incorporation
has been duly approved by the required vote of shareholders of said
corporation in accordance with section 902 of the Corporations Code.
The total number of outstanding shares entitled to vote, with respect
to the foregoing amendment was 2,206,933 shares; and the number of
shares voting in favor of the foregoing amendment equaled or exceeded
the vote required, such required vote being more than 50% of the
outstanding shares entitled to vote.
The undersigned declare under penalty of perjury that the matters set
forth in the foregoing certificate are true of their own knowledge.
Executed at Los Angeles, California, on January 11, 1988.
TRANSAMERICA OCCIDENTAL
LIFE INSURANCE COMPANY
By: William A. Simpson
President
By: James W. Dederer
Secretary
<PAGE>
RESTATED BYLAWS OF
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
ARTICLE I
SHAREHOLDERS
The annual meeting of the shareholders of Transamerica Occidental Life
Insurance Company shall be held on the fourth Wednesday in February of each
year, if not a legal holiday, in which case the annual meeting shall be held 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 this corporation shall be at least ten (10)
and not more than nineteen (19). 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 corporation to be chief executive officer.
ARTICLE IV
GENERAL
Except as is expressly set forth herein, this corporation shall be
governed by the applicable statutes of the California General Corporation Law as
though said statutes had been fully set forth herein.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
Section 1. Right to Indemnification.
Each person who was or is a party or is threatened to be made a party to or is
involved, even as a witness, in any threatened, pending, or completed action,
suit, or proceeding, whether civil criminal, administrative, or investigative
(hereafter a "Proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director, officer, employee, or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another foreign or domestic
corporation partnership, joint venture, trust, or other enterprise, or was a
director, officer, employee, or agent of a foreign or domestic corporation that
was a predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation, including service with respect to
employee benefit plans, whether the basis of the Proceeding is alleged action in
an official capacity as a director, officer, employee, or agent or in any other
capacity while serving as a director, officer, employee, or agent (hereafter an
"Agent"), shall be indemnified and held harmless by the corporation to the
fullest extent authorized by statutory and decisional law, as the same exists or
may hereafter be interpreted or amended (but, in the case of any such amendment
or interpretation, only to the extent that such amendment or interpretation
permits the corporation to provide broader indemnification rights than were
permitted prior thereto) against all expenses, liability, and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes and penalties, amounts
paid or to be paid in settlement, any interest, assessments, or other charges
imposed thereon, and any federal, state, local, or foreign taxes imposed on any
Agent as a result of the actual or deemed receipt of any payments under this
Article) incurred or suffered by such person in connection with investigating,
defending, being a witness in, or participating in (including on appeal), or
preparing for any of the foregoing, in any Proceeding (hereafter "Expenses");
provided, however, that except as to actions to enforce indemnification rights
pursuant to Section 3 of this Article, the corporation shall indemnify any Agent
seeking indemnification in connection with a Proceeding (or part thereof)
initiated by such person only if the Proceeding (or part thereof) was authorized
by the Board of Directors of the corporation. The right to indemnification
conferred in this Article shall be a contract right. (It is the Corporation's
intent that these bylaws provide indemnification in excess of that expressly
permitted by Section 317 of the California General Corporation Law, as
authorized by the corporation's Articles of Incorporation.]
Section 2. Authority to Advance Expenses.
Expenses incurred by an officer or director (acting in his capacity as such) in
defending a Proceeding shall be paid by the corporation in advance of the final
disposition of such Proceeding, provided, however, that if required by
California General Corporation Law, as amended, such Expenses shall be advanced
only upon delivery to the corporation of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation as authorized in
this Article or otherwise. Expenses incurred by other Agents of the corporation
(or by the directors or officers not acting in their capacity as such, including
service with respect to employee benefit plans) may be advanced upon the receipt
of a similar undertaking, if required by law, and upon such other terms and
conditions as the Board of Directors deems appropriate. Any obligation to
reimburse the corporation for Expense advances shall be unsecured and no
interest shall be charged thereon.
Section 3. Right of Claimant to Bring Suit.
If a claim under Section 1 or 2 of this Article is not paid in full by the
corporation within 30 days after a written claim has been received by the
corporation the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense
(including attorneys' fees) of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending a Proceeding in advance of its final disposition where the
required undertaking has been tendered to the corporation) that the claimant has
not met the standards of conduct that make it permissible under the California
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed. The burden of proving such a defense shall be on the
corporation. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper under the circumstances because he has met the applicable
standard of conduct set forth in the California General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant had not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct.
Section 4. Provisions Nonexclusive.
The rights conferred on any person by this Article shall not be exclusive of any
other rights that such person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office. To the extent that any provision of the Articles, agreement, or vote of
the stockholders or disinterested directors is inconsistent with these bylaws,
the provision, agreement, or vote shall take precedence.
Section 5. Authority to Insure.
The corporation may purchase and maintain insurance to protect itself and any
Agent against any Expense asserted against or incurred by such person, whether
or not the corporation would have the power to indemnify the Agent against such
Expense under applicable law or the provisions of this Article [provided that,
in cases where the corporation owns all or a portion of the shares of the
company issuing the insurance policy, the company and/or the policy must meet
one of the two sets of conditions set forth in Section 317 of the California
General Corporation Law, as amended].
Section 6. Survival of Rights.
The rights provided by this Article shall continue as to a person who has case
to be an Agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
Section 7. Settlement of Claims.
The corporation shall not be liable to indemnify any Agent under this Article
(a) for any amounts paid in settlement of any action or claim effected without
the corporation's written consent, which consent shall not be unreasonably
withheld; or (b) for any judicial award, if the corporation was not given a
reasonable and timely opportunity, at its expense, to participate in the defense
of such action.
Section 8. Effect of Amendment.
Any amendment, repeal, or modification of this Article shall not adversely
affect any right or protection of any Agent existing at the time of such
amendment, repeal, or modification.
Section 9. Subrogation.
In the event of payment under this Article, the corporation shall be subrogated
to the extent of such payment to all of the rights of recovery of the Agent, who
shall execute all papers required and shall do everything that may be necessary
to secure such rights, including the execution of such documents necessary to
enable the corporation effectively to bring suit to enforce such rights.
Section 10. No Duplication of Payments
The corporation shall not be liable under this Article to make any payment in
connection with any claim made against the Agent to the extent the Agent has
otherwise actually received payment (under any insurance policy, agreement,
vote, or otherwise) of the amounts otherwise indemnifiable hereunder.
<PAGE>
(8) Form of Participation Agreements
<PAGE>
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 OCCIDENTAL LIFE INSURANCE 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 California 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
<PAGE>
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the day of _________, 1998, between
Transamerica Occidental Life Insurance Company a life insurance company
organized under the laws of the State of California ("Insurance Company"), and
DREYFUS VARIABLE INVESTMENT FUND("Fund").
----
ARTICLE I 1.
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
California.
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 2.
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 California
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 3.
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 4.
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 5.
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 7.
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 8.
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 9.
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless each Participating
Fund, Dreyfus, each respective Participating Fund's investment adviser and
sub-investment adviser (if applicable), each respective Participating Fund's
distributor, and their respective affiliates, and each of their directors,
trustees, officers, employees, agents and each person, if any, who controls or
is associated with any of the foregoing entities or persons within the meaning
of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of Section 9.1), against any and all
losses, claims, damages or liabilities joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid in settlement of, any action, suit or proceeding or any
claim asserted) for which the Indemnified Parties may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect to thereof) (i) aris
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in information furnished by Insurance
Company for use in the registration statement or Prospectus or sales literature
or advertisements of the respective Participating Fund or with respect to the
Separate Account or Contracts, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements
therein not misleading; (ii) arise out of or as a result of conduct,
statements or representations (other than statements or representations
contained in the Prospectus and sales literature or advertisements of the
respective Participating Fund) of Insurance Company or its agents, with respect
to the sale and distribution of Contracts for which the respective
Participating Fund's shares are an underlying investment; (iii) arise out of the
wrongful conduct of Insurance Company or persons under its
control with respect to the sale or distribution of the Contracts or
the respective Participating Fund's shares; (iv) arise out of Insurance
Company's incorrect calculation and/or untimely reporting of net purchase or
redemption orders; or (v) arise out of any breach by Insurance Company of a
material term of this Agreement or as a result of any failure by Insurance
Company to provide the services and furnish the materials or to make any
payments provided for in this Agreement. Insurance Company
will reimburse any Indemnified Party in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that with respect to clauses (i) and (ii) above Insurance Company will
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
omission or alleged omission made in such registration statement, prospectus,
sales literature, or advertisement in conformity
with written information furnished to Insurance Company by the
respective Participating Fund specifically for use therein. This indemnity
agreement will be in addition to any liability which Insurance Company may
otherwise have.
9.2 Each Participating Fund severally agrees to indemnify and hold harmless
Insurance Company and each of its directors, officers, employees,
agents and each person, if any, who controls Insurance Company within
the meaning of the 1933 Act against any losses, claims, damages or
liabilities to which Insurance Company or any such director, officer,
employee, agent or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (1) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement or Prospectus or
sales literature or advertisements of the respective Participating
Fund; (2) arise out of or are based upon the omission to state in the
registration statement or Prospectus or sales literature or
advertisements of the respective Participating Fund any material fact
required to be stated therein or necessary to make the statements
therein not misleading; or (3) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the registration statement or Prospectus or sales
literature or advertisements with respect to the Separate Account or
the Contracts and such statements were based on information provided to
Insurance Company by the respective Participating Fund; and the
respective Participating Fund will reimburse any legal or other
expenses reasonably incurred by Insurance Company or any such director,
officer, employee, agent or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the respective Participating Fund will
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or omission or alleged omission made in such registration statement,
Prospectus, sales literature or advertisements in conformity with
written information furnished to the respective Participating Fund by
Insurance Company specifically for use therein. This indemnity
agreement will be in addition to any liability which the respective
Participating Fund may otherwise have.
9.3 Each Participating Fund severally shall indemnify and hold Insurance
Company harmless against any and all liability, loss, damages, costs or
expenses which Insurance Company may incur, suffer or be required to
pay due to the respective Participating Fund's (1) incorrect
calculation of the daily net asset value, dividend rate or capital gain
distribution rate; (2) incorrect reporting of the daily net asset
value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital
gain distribution rate; provided that the respective Participating Fund
shall have no obligation to indemnify and hold harmless Insurance
Company if the incorrect calculation or incorrect or untimely reporting
was the result of incorrect information furnished by Insurance Company
or information furnished untimely by Insurance Company or otherwise as
a result of or relating to a breach of this Agreement by Insurance
Company.
9.4 Promptly after receipt by an indemnified party under this Article of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying
party under this Article, notify the indemnifying party of the
commencement thereof. The omission to so notify the indemnifying party
will not relieve the indemnifying party from any liability under this
Article IX, except to the extent that the omission results in a failure
of actual notice to the indemnifying party and such indemnifying party
is damaged solely as a result of the failure to give such notice. In
case any such action is brought against any indemnified party, and it
notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such indemnified party, and to the extent that the
indemnifying party has given notice to such effect to the indemnified
party and is performing its obligations under this Article, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation.
Notwithstanding the foregoing, in any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article IX. The
provisions of this Article IX shall survive termination of this Agreement.
9.5 Insurance Company shall indemnify and hold each respective Participating
Fund, Dreyfus and sub-investment adviser of the Participating Fund harmless
against any tax liability incurred by the Participating Fund under Section 851
of the Code arising from purchases or redemptions by Insurance Company's General
Accounts or the account of its affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall continue
in force until terminated in accordance with the provisions herein.
10.2 This Agreement shall terminate without penalty:
a. As to any Participating Fund, at the option of Insurance Company or
the Participating Fund at any time from the date hereof upon 180 days' notice,
unless a shorter time is agreed to by the respective Participating
Fund and Insurance Company;
b. As to any Participating Fund, at the option of Insurance Company, if
shares of that Participating Fund are not reasonably available to meet the
requirements of the Contracts as determined by Insurance Company. Prompt notice
of election to terminate shall be furnished by Insurance Company,
said termination to be effective ten days after receipt of notice unless the
Participating Fund makes available a sufficient number of shares to meet the
requirements of the Contracts within said ten-
day period;
c. As to a Participating Fund, at the option of Insurance Company, upon
the institution of formal proceedings against that Participating Fund by the
Commission, National Association of Securities Dealers or any other regulatory
body, the expected or anticipated ruling, judgment or outcome of which would, in
Insurance Company's reasonable judgment, materially impair that Participating
Fund's ability to meet and perform the Participating Fund's obligations and
duties hereunder. Prompt notice
of election to terminate shall be furnished by Insurance
Company with said termination to be effective upon receipt of notice;
d. As to a Participating Fund, at the option of each Participating
Fund, upon the institution of formal proceedings against
Insurance Company by the Commission, National Association of Securities Dealers
or any other regulatory body, the expected or anticipated ruling, judgment or
outcome of which would, in the Participating Fund's reasonable judgment,
materially impair Insurance Company's ability to meet and perform Insurance
Company's obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by such Participating
Fund with said termination to be effective upon receipt of notice;
e. As to a Participating Fund, at the option of that
Participating Fund, if the Participating Fund shall determine,
in its sole judgment reasonably exercised in good faith, that
Insurance Company has suffered a material adverse change in
its business or financial condition or is the subject of
material adverse publicity and such material adverse change or
material adverse publicity is likely to have a material
adverse impact upon the business and operation of that
Participating Fund or Dreyfus, such Participating Fund shall
notify Insurance Company in writing of such determination and
its intent to terminate this Agreement, and after considering
the actions taken by Insurance Company and any other changes
in circumstances since the giving of such notice, such
determination of the Participating Fund shall continue to
apply on the sixtieth (60th) day following the giving of such
notice, which sixtieth day shall be the effective date of
termination;
f. As to a Participating Fund, upon termination of the Investment
Advisory Agreement between that Participating Fund and Dreyfus or its successors
unless Insurance Company specifically approves the selection of a new
Participating Fund investment adviser. Such Participating Fund shall promptly
furnish notice of such termination to Insurance Company;
g. As to a Participating Fund, in the event that Participating Fund's
shares are not registered, issued or sold in accordance with applicabl
federal law, or such law precludes the use of such shares as the underlying
investment medium of Contracts issued or to be issued by Insurance Company.
Termination shall be effective immediately as to that Participating Fund only
upon such occurrence without notice;
h. At the option of a Participating Fund upon a determination by its
Board in good faith that it is no longer advisable and in the best
interests of shareholders of that Participating Fund to continue to operate
pursuant to this Agreement. Termination pursuant to this Subsection (h) shall be
effective upon notice by such Participating Fund to Insurance Company of such
termination;
i. At the option of a Participating Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies, as applicable, under
the Code, or if such Participating Fund reasonably believes that the Contracts
may fail to so qualify;
j. At the option of any party to this Agreement, upon another party's
breach of any material provision of this Agreement;
k. At the option of a Participating Fund, if the Contracts are not
registered, issued or sold in accordance with applicable federal and/or
state law; or
l. Upon assignment of this Agreement, unless made with the written
consent of every other non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
10.2k herein shall not affect the operation of Article V of this Agreement.
Any termination of this Agreement shall not affect the operation of Article IX
of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to Section
10.2 hereof, each Participating Fund and Dreyfus may, at the option of
the Participating Fund, continue to make available additional shares of
that Participating Fund for as long as the Participating Fund desires
pursuant to the terms and conditions of this Agreement as provided
below, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, if that Participating Fund and
Dreyfus so elect to make additional Participating Fund shares
available, the owners of the Existing Contracts or Insurance Company,
whichever shall have legal authority to do so, shall be permitted to
reallocate investments in that Participating Fund, redeem investments
in that Participating Fund and/or invest in that Participating Fund
upon the making of additional purchase payments under the Existing
Contracts. In the event of a termination of this Agreement pursuant to
Section 10.2 hereof, such Participating Fund and Dreyfus, as promptly
as is practicable under the circumstances, shall notify Insurance
Company whether Dreyfus and that Participating Fund will continue to
make that Participating Fund's shares available after such termination.
If such Participating Fund shares continue to be made available after
such termination, the provisions of this Agreement shall remain in
effect and thereafter either of that Participating Fund or Insurance
Company may terminate the Agreement as to that Participating Fund, as
so continued pursuant to this Section 10.3, upon prior written notice
to the other party, such notice to be for a period that is reasonable
under the circumstances but, if given by the Participating Fund, need
not be for more than six months.
10.4 Termination of this Agreement as to any one Participating Fund shall not be
deemed a termination as to any other Participating Fund unless Insurance
Company or such other Participating Fund, as the case may be, terminates this
Agreement as to such other Participating Fund in accordance with this Article X.
ARTICLE XI 11.
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 13.
LAW
14.1 This Agreement shall be construed in accordance with the internal laws of
the State of California, 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 Occidental Life Insurance 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
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
TRANSAMERICA OCCIDENTAL LIFE INSURANCE 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 Occidental Life Insurance Company, a California
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 OCCIDENTAL LIFE INSURANCE 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>
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 California 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 Occidental Life Insurance 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 OCCIDENTAL LIFE INSURANCE 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 OCCIDENTAL LIFE INSURANCE COMPANY
DATED AS OF
DECEMBER 15, 1997
PartTran.doc
<PAGE>
<PAGE>
10
PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
And
OCC DISTRIBUTORS
And
OpCap Advisors
THIS AGREEMENT, made and entered into this 18th day of
December, 1997, by and among Transamerica Occidental Life Insurance Company, a
California 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 Occidental Life Insurance 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 Occidental Life Insurance 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 OCCIDENTAL LIFE INSURANCE 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 California life insurance company, on its own behalf and on
behalf of its SEPARATE ACCOUNT C (the "Account"); TRANSAMERICA VARIABLE
INSURANCE FUND, INC., a corporation organized under the laws of Maryland
(hereinafter the "Fund"); and TRANSAMERICA SECURITIES SALES CORPORATION,
(hereinafter the "Underwriter"), a _________ corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and/or
variable annuity contracts (collectively, the "Variable Insurance Products") to
be offered by insurance companies which have entered into participation
agreements similar to this Agreement (hereinafter "Participating Insurance
Companies"), as well as qualified pension and retirement plans; and
<PAGE>
WHEREAS, the beneficial interests in the Fund are divided into several
series of shares, each designated a "Portfolio" and representing interests in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (hereinafter the "SEC"), dated __________ (File No.
812-_____), granting Participating Insurance Companies and variable annuity and
variable life insurance separate accounts exemptions from the provisions of
sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as
amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T) (b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
life insurance companies that may or may not be affiliated with one another
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Underwriter is duly registered as a broker-dealer under
the Securities Exchange Act of 1934, as amended (the "1934 Act") and is a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, Transamerica has registered certain variable annuity contracts
supported wholly or partially by the Account (the "Contracts") under the 1933
Act and said Contracts are listed in Schedule A hereto, as it may be amended
from time to time by mutual written agreement; and
- 2 -
<PAGE>
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of
Transamerica on ________________, to set aside and invest assets attributable to
the Contracts; and
WHEREAS, Transamerica has registered the Account as a unit investment
trust under
the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Transamerica intends to purchase shares in the Portfolios listed in
Schedule B hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios"), on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises,
Transamerica, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to Transamerica those shares of the
Designated Portfolios which Transamerica orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Fund or
its designee of the order for the shares of the Portfolios. For purposes of this
Section 1.1, Transamerica shall be the designee of the Fund for receipt of such
orders and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by ____ a.m. _________ time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund calculates
its net asset value.
- 3 -
<PAGE>
1.2. The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per share by
Transamerica on those days on which the Fund calculates its net asset values,
and the Fund shall calculate such net asset value on each day which the New York
Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of
Directors of the Fund (hereinafter the "Board") may refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering of shares of any
Portfolio if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith and
in light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Designated
Portfolios will be sold only to Participating Insurance Companies and their
separate accounts and qualified pension and retirement plans. No shares of any
Designated Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell shares of the
Designated Portfolios to any other insurance company, separate account or
qualified pension and retirement plan unless an agreement containing provisions
substantially the same as Sections 2.1, 3.6, 3.7, 3.8, and Article VII of this
Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on Transamerica's request, any
full or fractional shares of the Fund held by Transamerica, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption or
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<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
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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
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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
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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.
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<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.
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<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)
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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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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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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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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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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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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
- 23 -
<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
- 24 -
<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
- 25 -
<PAGE>
upon such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify
Transamerica of any such claim shall not relieve Transamerica from any liability
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, Transamerica shall be
entitled to participate, at its own expense, in the defense of such action.
Transamerica also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from Transamerica to
such party of Transamerica's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and Transamerica will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.1(d). The Indemnified Parties will promptly notify
Transamerica of the commencement of any litigation or proceedings against them
in connection with the issuance or sale of the Fund Shares or the Contracts or
the operation of the Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harm-less
Transamerica and each of its directors and officers and each person, if any, who
controls Transamerica within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
- 26 -
<PAGE>
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or SAI or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this Agreement to indemnify shall not apply as to any
- --------
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Underwriter or Fund by or on behalf of Transamerica for use in
the Registration Statement or prospectus for the Fund or in sales literature (or
any amendment or supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful
conduct of the Fund or Underwriter or persons under their
control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii)
arise out of any untrue statement or alleged untrue statement of a material
fact contained in a registration statement, prospectus or sales literature
covering the Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon information
furnished in writing to Transamerica by or on behalf of the Underwriter or
Fund; or
(iv) arise as a result of any failure by the Fund or
Underwriter to provide the services and furnish the
materials under the terms of this Agreement (including a
failure, whether unintentional or in good faith or
otherwise, to comply with the diversification and other
qualification requirements specified in Article VI of this
Agreement); or
- 27 -
<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
- 28 -
<PAGE>
named in the action. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). Transamerica agrees promptly to notify the Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of California.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
- 29 -
<PAGE>
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with
respect to some or all Portfolios, upon one (1) year advance
written notice delivered to the other parties; provided,
however, that such notice shall not be given earlier than one
year following the date of this Agreement; or (b) at the
option of Transamerica by written notice to the other parties
with respect to any Portfolio based upon Transamerica's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or (c) at
the option of Transamerica by written notice to the other
parties with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/ or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
Transamerica; or (d) at the option of the Fund in the event
that formal administrative proceedings are instituted against
Transamerica by the National Association of Securities
Dealers, Inc. ("NASD"), the Securities and Exchange
Commission, the Insurance Commissioner or like official of any
state or any other regulatory body regarding Transamerica's
duties under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the purchase of
the Fund shares, provided, however, that the Fund determines
in its sole judgment
- 30 -
<PAGE>
exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the
ability of Transamerica to perform its obligations under this
Agreement; or (e) at the option of Transamerica in the event
that formal administrative proceedings are instituted against
the Fund or Underwriter by the NASD, the Securities and
Exchange Commission, or any state securities or insurance
department or any other regulatory body, provided, however,
that Transamerica determines in its sole judgment exercised in
good faith, that any such administrative proceedings will have
a material adverse effect upon the ability of the Fund or
Underwriter to perform its obligations under this Agreement;
or (f) at the option of Transamerica by written notice to the
Fund and the Underwriter with respect to any Portfolio if
Transamerica reasonably believes that the Portfolio may fail
to meet the Section 817(h) diversification requirements or
Subchapter M qualifications specified in Article VI hereof; or
(g) at the option of either the Fund or the Underwriter, if
(i) the Fund or Underwriter, respectively, shall determine, in
their sole judgement reasonably exercised in good faith, that
Transamerica has suffered a material adverse change in its
business or financial condition or is the subject of material
adverse publicity and that material adverse change or
publicity will have a material adverse impact on
Transamerica's ability to perform its obligations under this
Agreement, (ii) the Fund or Underwriter notifies Transamerica
of that determination and its intent to terminate this
Agreement, and (iii) after
- 31 -
<PAGE>
considering the actions taken by Transamerica and any other
changes in circumstances since the giving of such a notice,
the determination of the Fund or Underwriter shall continue on
the sixtieth (60th) day following the giving of that notice,
which sixtieth day shall be the effective date of termination;
or (h) at the option of Transamerica, if (i) Transamerica
shall determine, in its sole judgement reasonably exercised in
good faith, that either the Fund or the Underwriter have
suffered a material adverse change in their business or
financial condition or is the subject of material adverse
publicity and that material adverse change or publicity will
have a material adverse impact on the Fund's or Underwriter's
ability to perform its obligations under this Agreement, (ii)
Transamerica notifies the Fund or Underwriter, as appropriate,
of that determination and its intent to terminate this
Agreement, and (iii) after considering the actions taken by
the Fund or Underwriter and any other changes in circumstances
since the giving of such a notice, the determination of
Transamerica shall continue on the sixtieth (60th) day
following the giving of that notice, which sixtieth day shall
be the effective date of termination; or (i) at the option of
any party to this Agreement, upon another party's material
breach of any provision of this Agreement; or (j) upon
assignment of this Agreement, unless made with the written
consent of the parties hereto; or (k) at the option of
Transamerica or the Fund by written notice to the other party
upon a determination by the Fund's Board that a material
irreconcilable
- 32 -
<PAGE>
conflict exists among the interests of (i) all contract owners
of all separate accounts investing in the Fund or (ii) the
interests of the Participating Insurance Companies; or (l) at
the option of Transamerica by written notice to the Fund or
the Underwriter upon the sale, acquisition or change of
control of the Underwriter.
10.2. Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties of its intent to terminate, which notice
shall set forth the basis for the termination.
10.3. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of Transamerica,
continue to make available additional shares of the Fund for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts") pursuant to the terms and conditions of
this Agreement. Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.3 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.4. Surviving Provisions. Notwithstanding any termination of this
Agreement, each party's obligations under Article VIII to indemnify other
parties shall survive and not be affected by any termination of this Agreement.
In addition, with respect to Existing
- 33 -
<PAGE>
Contracts, all provisions of this Agreement shall also survive and not be
affected by any termination of this Agreement.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail or by overnight mail sent through a nationally-recognized
delivery service to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Transamerica Variable Insurance Fund, Inc.
Transamerica Center
1150 South Olive Street
Los Angeles, CA 90015
Attention: General Counsel
If to Transamerica:
TRANSAMERICA OCCIDENTAL LIFE INSURANCE 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>
(9) Form of Administrative Agreement
<PAGE>
PRODUCT DEVELOPMENT
AND
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT, effective this 1st day of November, 1997, by and between First
Allmerica Financial Life Insurance Company ("Allmerica Financial"), a life
insurance company organized and existing under the laws of the Commonwealth of
Massachusetts, with a principal place of business at 440 Lincoln Street,
Worcester, Massachusetts 01653 and Transamerica Occidental Life Insurance
Company ("Transamerica"), a life insurance company organized and existing under
the laws of the State of California, with a principal place of business at 1150
South Olive Street, Los Angeles, California 90015.
WHEREAS, Allmerica Financial, directly and through its affiliate, Allmerica
Financial Life Insurance and Annuity Company ("AFLIAC"), has developed and is
marketing various variable universal life insurance policy forms; and
WHEREAS, through such development and marketing efforts Allmerica Financial has
acquired significant expertise in developing, designing and servicing flexible
premium variable universal life insurance products; and
WHEREAS, through such development and marketing efforts Allmerica Financial has
also acquired significant expertise in obtaining necessary state regulatory
approvals for the sale of variable universal life insurance policies; and
WHEREAS, Transamerica and Allmerica Financial have agreed that Allmerica
Financial shall provide assistance to Transamerica in developing and bringing to
market a flexible premium variable universal life insurance policy (the
"Policy", collectively the "Policies") and certain related forms, as described
herein; and
WHEREAS, Transamerica and Allmerica Financial have also agreed that Allmerica
Financial shall contract with Transamerica to provide, on behalf of
Transamerica, Policy underwriting, claims, and Policy and other administrative
services;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
PRODUCT DEVELOPMENT
<PAGE>
- 35 -
1.01 Development of Policy Forms. Prior to the effective date of this
Agreement, Transamerica and Allmerica Financial jointly drafted the
standard Policy, Policy applications and Policy riders, which are
referred to herein collectively as the "Policy Forms". Such Policy
Forms are based on the AFLIAC Policy Forms listed on Schedule 1.01
hereto. Transamerica agrees that it approved the final drafts of the
standard Policy Forms prior to the effective date of this Agreement.
When required, Allmerica Financial shall appropriately modify the
standard Policy Forms for each jurisdiction in which the Policy Forms
will be offered for sale. Such modifications shall represent Allmerica
Financial's best judgment as to what changes to the Policy Forms will
be necessary in order to secure insurance department approval. Because
the Policy Forms include numerous changes requested by Transamerica
which differ from the original AFLIAC Policy Forms which are listed on
Schedule 1.01 hereto, it is understood and agreed by Transamerica that
Allmerica Financial makes no representation that the Policy Forms will
be approved for sale by any particular jurisdiction.
1.02 Policy Form Filings and Submission Dates. All insurance department
filings will be made by Allmerica Financial on behalf of Transamerica.
It is the intent of the parties that the Policy Forms will be filed
with all states of the U.S. except New York and also with the District
of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands and that
Transamerica will be responsible for all insurance department filing
fees, although such fees will be advanced by Allmerica Financial.
Transamerica agrees to reimburse Allmerica Financial for the amount of
any advanced filing fees within 30 days of receipt of a written request
for reimbursement. Transamerica understands and agrees that late
payments of such reimbursements shall be assessed a late payment charge
at the rate of 12% per annum.
Transamerica acknowledges that prior to the effective date of this
Agreement Allmerica delivered and Transamerica received and approved
the following:
(i) The Policy Forms in final print, the Actuarial
Memorandum and all related documents for filing with
the California Insurance Department,
(ii) Sample annual and quarterly statements and
illustration formats, and
(iii) The basic submission letter.
The parties shall comply with the following time frames and delivery
dates:
(a) Not later than the effective date of this Agreement,
Transamerica shall provide Allmerica Financial with the
following:
(i) Final product specifications for the Policy Forms.
The final product specifications are listed on
Schedule 1.02 hereto. The final product
specifications highlight the specifications which
vary from the corresponding AFLIAC Policy Forms,
(ii) A draft policy prospectus, and
(iii) Any other information deemed necessary by Allmerica
Financial for the filing of the Policy Forms which is
not to be prepared by Allmerica Financial.
(b) If Transamerica furnishes the materials described in
paragraph (a) to Allmerica Financial not
later than November 1, 1997, Allmerica Financial agrees
(i) to submit the Policy Forms to all
jurisdictions that do not require California's prior
approval prior to December 1, 1997 and
(ii) to submit the Policy Forms to all jurisdictions
requiring California approval within 10
business days from the date Allmerica Financial
receives notification of California's
approval. To expedite the Policy Form submission
process, Transamerica agrees to grant a
limited Power of Attorney to appropriate Allmerica
Financial personnel to enable them to sign
letters and other correspondence on behalf of Transamerica.
Notwithstanding the above, if Transamerica fails to deliver
the materials described in paragraph (a) by the agreed upon
delivery date or fails to obtain any necessary approvals by
California of the separate account or accounts offered as
funding choices under the Policy, Allmerica Financial cannot
guarantee insurance department submission by the agreed upon
deadlines. However, in the event of any such delay, Allmerica
Financial does agree to make such submissions within 30 days
following receipt of all necessary approvals and other
materials.
1.03 Development and Filing of Policy Prospectus and Registration Statement;
Separate Account State Regulatory Approvals. The parties understand and
agree that the Policy Prospectus and `40 Act Registration Statement
development, printing and filing with the SEC will be the
responsibility of Transamerica, which will also be responsible for all
SEC filing fees. Further, the parties understand and agree that
Transamerica is responsible for obtaining any necessary California
Insurance Department or other state regulatory approvals of the
separate account or accounts that will be offered as funding choices
under the Policy.
1.04 State Submission Follow-Up Assistance. After filing the insurance
department Policy Form submissions contemplated by this Agreement,
Allmerica Financial shall provide all necessary follow-up to insurance
department correspondence in a prompt manner in order to secure
insurance department approvals on behalf of Transamerica. However,
Allmerica Financial makes no representation that Policy Form approvals
will be obtained from all jurisdictions. Allmerica Financial
understands and agrees that Transamerica must approve all material
changes to Policy Forms requested or required by insurance departments.
Allmerica Financial agrees to provide Transamerica weekly written
status reports of the approval status of each state filing.
1.05 Product Development Compensation. For the services described in
Sections 1.01 through 1.04 of this Agreement, Transamerica agrees to
pay Allmerica Financial $840,000 for assistance in developing and
bringing to market the Policy Forms. The $840,000 fee shall be paid to
Allmerica Financial, as follows:
(i) $100,000 shall be paid to Allmerica Financial within five (5)
business days following the date of execution of this
Agreement;
(ii) $100,000 shall be paid to Allmerica Financial within ten (10)
business days after the date of final approval by Transamerica
of the Policy Forms;
(iii) $100,000 shall be paid to Allmerica Financial within ten (10)
business days of notice to Transamerica of Policy approval in
twenty (20) states; and
(iv) the remainder, $540,000, shall be paid by Transamerica in
monthly installments. Each monthly
installment shall be equal to $1.50 multiplied by the
number of Policies in force during the
month, including any Policies surrendered during the month
Such monthly installments shall
only be paid until Allmerica Financial has been paid its
remaining product development fee.
Except as provided below, if this Agreement is terminated for
any reason, including termination
by Transamerica for cause in accordance with Section
11.03 or 11.05, prior to Allmerica
Financial having been paid its total product development
fee of $840,000, Transamerica agrees
to pay the balance in one sum within 30 days following the
date of termination.
Notwithstanding the foregoing, Transamerica reserves the right to
withhold amounts payable to Allmerica Financial pursuant to clause (iv)
above without the payment of any late payment charge if, in good faith,
Transamerica concludes that Allmerica Financial has materially breached
its product development duties and responsibilities, as set forth in
Sections 1.01 through 1.04 hereof. Additionally, Transamerica reserves
the right, to the extent permitted by law, to offset amounts payable to
Allmerica Financial pursuant to clause (iv) above against any damages
payable to Transamerica as a result of a material breach of the
Agreement by Allmerica Financial resulting in Transamerica's
terminating the Agreement for cause pursuant to Section 11.03 or 11.05
hereof.
Transamerica shall not withhold or offset any amounts otherwise payable
to Allmerica Financial under this Section 1.05 unless and until (i)
Transamerica provides Allmerica Financial with written notice
describing in detail the basis for the withholding or offset, such
notice to be provided before the payment is due; (ii) the parties use
their best efforts to resolve any dispute that formed the basis for the
withholding or offset; (iii) in the event the dispute is not resolved
within 90 days, Transamerica immediately pays all amounts due under
this Section 1.05, regardless of the dispute, into an escrow account,
where such amounts shall remain until the dispute is resolved; and (iv)
the dispute is then submitted to binding arbitration, as provided in
Section 12.18 hereof.
Transamerica understands and agrees that, except as provided above,
late payments shall be assessed a late payment charge at the rate of
12% per annum.
1.06 Ownership of Policy Forms. Allmerica Financial hereby transfers all of
its right, title and interest in the Policy Forms, including the
actuarial basis for the Policy Forms, it has developed on behalf of
Transamerica, to Transamerica.
Allmerica Financial warrants that it is the sole developer of the
Policy Forms and, except to the extent that the Policy Forms utilize
Transamerica's logo or Policy provisions or other material provided by
Transamerica, Allmerica Financial warrants that neither the Policy
Forms nor any of their elements will violate or infringe upon any
patent, copyright, trade secret or other property right of any other
person. This warranty shall survive termination of this Agreement.
1.07 New Products, Product Enhancements, etc. At any time and from time to
time while this Agreement remains in force, Transamerica may request
that Allmerica Financial enhance, modify or otherwise change the Policy
Forms ("Product Changes") or develop new variable life insurance
products ("New Products"), including New Products to be developed for
sale in New York State. After receipt of any such request Allmerica
Financial agrees to negotiate in good faith with Transamerica the terms
and conditions (including compensation and delivery time frames) under
which Allmerica Financial shall develop and, if so requested, file with
the various insurance departments the requested Product Changes or New
Products.
Allmerica Financial agrees to promptly review any Product Change or New
Product request and to respond to such request in writing within 30
days of its receipt of the request. In negotiating with Transamerica
the terms and conditions under which Allmerica Financial will comply
with any such request, Allmerica Financial agrees to assign the same
priority to such request, if it concludes that it is able to
accommodate the request, as would be assigned in the event of a similar
Product Change or New Product request related to its own variable life
insurance business.
ARTICLE 2
SERVICES
2.01 In General. During the term of this Agreement, Allmerica Financial
shall provide Transamerica the Policy underwriting, issue, servicing,
claims, computer system and other Policy administrative services
described in detail in Schedule 2.01A, Section 2.02 and in Article 3
(collectively, the "Policy Services") in support of the Policies, the
specifications for which are listed on Schedule 1.02 hereto, subject to
the terms and conditions set forth in this Agreement. The performance
of Policy Services shall occur in three (3) phases described as
follows, in accordance with the schedule of events set forth in
Schedule 2.01B hereto. Throughout each such phase, the parties agree to
discharge their respective obligations as further specified herein. The
phases shall consist of:
(a) The Implementation Phase. This phase will consist of the
recruitment and hiring by Allmerica
--------------------------
Financial of any additional personnel deemed necessary by
Allmerica Financial to perform its
Policy Services obligations hereunder, personnel training
and the installation (including any
necessary modifications) by Allmerica Financial of the
Computer System (as defined in Section
3.01(a)) necessary for Allmerica Financial to perform Policy
Services, Computer System testing,
business workflow testing, financial control and
compliance testing and Allmerica
Financial/Transamerica systems interface testing and
implementation and delivery of the
Computer System, as described in Articles 3 and 8.
Allmerica Financial covenants and agrees that it will use its
best efforts to hire sufficient personnel and devote adequate
resources to meet the planned timetables set forth in this
Agreement.
(b) The Operational Phase. This phase will consist of
Allmerica's performance of Policy Services
-----------------------
utilizing the accepted Computer System, all Policy
Services to be accomplished in accordance
with the Service Standards listed on Schedule 2.01C
hereto. Whenever the parties have not
agreed to a Service Standard for a particular Policy
Service, Allmerica Financial agrees that
the Service shall be performed utilizing the same service
standard as is then applicable to its
own variable life insurance business, but in no event
shall such standard be less than
standards consistent with prudent administrative
practices in the life insurance industry
generally and with any applicable legal and regulatory
requirements.
If at any time Allmerica Financial's performance of a Policy
Service does not meet the applicable Service Standard listed
on Schedule 2.01C or described in the preceding paragraph,
Allmerica Financial shall use its best efforts to take
necessary curative actions to bring its performance into
compliance within thirty (30) days of Transamerica giving
Allmerica Financial written notice of its non-compliance.
Provided, however, that if the non-compliance occurs as a
result of an unanticipated event, such as an unanticipated
increase in new Policy sales above the projections set forth
below or an unanticipated level of Policy Service activity,
the parties understand and agree that even with Allmerica's
best efforts, it may not be possible to cure the problem
within such thirty (30) day period.
Projected New Policy Sales Year
$12.5 million 11/1/97 - 10/31/98
$22.0 million 11/1/98 - 10/31/99
$27.5 million 11/1/99 - 10/31/00
$35.0 million 11/1/00 - 10/31/01
(c) The Conversion Phase. Upon termination of this Agreement
for any reason (including a default
- ---------------------
by either party), Allmerica Financial and Transamerica shall promptly retur
all Property (as
defined in Section 3.01(d)) held by the other party, including, but not
limited to, data,
records, files, materials and supplies and computer software. A cooperative
conversion work
plan and program will be developed by Allmerica Financial and Transamerica
to accomplish the
transfer of records and other Property. Each party will work in good
faith to effect the
conversion and minimize the cost of business interruption resulting from
the conversion. If
and to the extent requested by Transamerica, during the Conversion Phase
Allmerica Financial
agrees to continue to provide Policy Services in accordance with the Service
Standards listed
on Schedule 2.01C hereto. If Policy Services are being provided during the
Conversion Phase,
Transamerica's rights under the Agreement to receive such Services and
Allmerica Financial's
obligations under the Agreement to provide such Services shall continue and
remain in effect on
the same basis and to the same extent as such rights and obligations
existed under the
Agreement prior to its termination, including Sections 4.02, 5.02, 5.03,
5.04, 6.02, 6.05,
6.06, 6.08, 6.10, 12.08 and 12.14. If Allmerica Financial continues to
provide Policy Services
during the Conversion Phase, Transamerica understands and agrees that it
will continue to
compensate Allmerica Financial for such Services as provided in Section
2.04 hereto, even if
the Agreement is being terminated by Transamerica for cause in accordance
with Sections 11.03
or 11.05 hereof. Notwithstanding Transamerica's rights under Section
2.04 to withhold or
offset amounts payable for Policy Services, Transamerica agrees not to
withhold or offset
compensation or reimbursements payable for Policy Services provided by
Allmerica during the
Conversion Phase.
All expenses incurred in connection with the return of
Property as a result of termination of this Agreement shall be
borne by the party requesting the termination; provided,
however, that if this Agreement is terminated by a party for
cause, then, except for each party's personnel costs and
expenses, which costs shall be borne by the party incurring
such costs and expenses, any costs or expenses incurred in
connection with any such return of Property shall be borne by
the defaulting party.
Upon completion of the Conversion Phase, each party shall
certify to the other that all records and other Property has
been returned to its owner.
2.02 Policy Underwriting. All Policy underwriting services shall be
performed by Allmerica Financial on behalf of Transamerica. Policies
shall be underwritten based upon Transamerica's underwriting criteria,
requirements and standards ("Underwriting Standards"). Transamerica's
Underwriting Standards relating to the Policies must be satisfactory to
Allmerica Financial, and cannot be changed without Allmerica
Financial's written consent, which consent shall not be unreasonably
withheld. Copies of Transamerica's underwriting manuals and other
relevant materials necessary for Allmerica Financial to perform its
Policy underwriting obligations hereunder shall be furnished to
Allmerica Financial at Transamerica's expense. Transamerica
underwriting personnel (to be specified by Transamerica) shall be made
available at Transamerica's expense to answer any questions that might
arise from Allmerica Financial's underwriters relating to
Transamerica's Underwriting Standards. Vendors used for medical
underwriting services must be acceptable to both parties. The costs of
medical underwriting shall be paid initially by Allmerica Financial.
One hundred percent of such costs shall be reimbursed by Transamerica.
Medical underwriting cost reimbursements shall be paid to Allmerica
Financial as provided in Section 2.04.
In addition to the foregoing, in the case of a proposed underwriting
declination, which declination is not clearly a medical decline
described in Transamerica's underwriting manual, Allmerica Financial
shall communicate the proposed declination to appropriate Transamerica
personnel who must agree with and approve the proposed declination
before the underwriting decision is finalized. Allmerica Financial will
communicate appropriate details of any proposed declination in
accordance with notification procedures to be jointly developed by the
parties. If no response is received within five (5) days of the
transmission, Allmerica Financial shall have the right to proceed on
the basis that Transamerica is in agreement with the decision to
decline the risk.
2.03 Policy Claims. All Policy claims processing services shall be performed
by Allmerica Financial on behalf of Transamerica. All Policy claims
shall be investigated, processed and paid in accordance with
Transamerica's claims processing rules and requirements. Copies of
Transamerica's claims manuals and other relevant materials necessary
for Allmerica Financial to perform its Policy claims investigation,
processing and payment obligations hereunder shall be furnished to
Allmerica Financial at Transamerica's expense. Transamerica claims
personnel (to be specified by Transamerica) shall be made available at
Transamerica's expense to answer any questions that might arise from
Allmerica Financial's claims personnel relating to the investigation,
processing or payment of Policy claims.
In addition to the foregoing, in the case of a decision by Allmerica
Financial that a Policy claim should be denied, Allmerica Financial
shall communicate its proposed action to appropriate Transamerica
personnel who must agree with and approve the proposed claim denial
before the claims decision is finalized. Allmerica Financial will
communicate appropriate details of any proposed Policy claim denial in
accordance with notification procedures to be jointly developed by the
parties. If no response is received within five (5) days of the
transmission, Allmerica Financial shall have the right to proceed on
the basis that Transamerica is in agreement with the decision to deny
the claim.
2.04 Compensation and Reimbursement for Policy Services. For the Policy
Services described in this Agreement, while this Agreement remains in
force Transamerica agrees to pay Allmerica the following amounts:
(a) Reimbursement of 100% of Policy medical underwriting costs,
as described in Section 2.02.
(b) A single one time per Policy issued charge of $166.67.
(c) A monthly policy charge for each policy in force during a
calendar month, including any Policies surrendered during the
month. The total monthly policy charge shall be $4.50.
Provided, however, that commencing with the third calendar
month following the month the first Policy is issued, the
minimum amount payable to Allmerica Financial under this
Subsection (c) shall be $10,000 per calendar month.
Compensation and reimbursements described in this Section 2.04 shall be
payable to Allmerica Financial on such basis and at such time or times
as shall be mutually agreeable to the parties. Provided, however, that
in no event shall compensation and reimbursements payable for a
calendar month be paid later than ten business days from the date of
receipt by Transamerica of Allmerica Financial's bill for the month.
Transamerica understands and agrees that, except as provided below,
late payments shall be assessed a late payment charge at the rate of
12% per annum.
Notwithstanding the foregoing, Transamerica reserves the right to
withhold amounts payable to Allmerica Financial pursuant to this
Section 2.04 without the payment of any late payment charge if, in good
faith, Transamerica disputes Allmerica Financial's right to receive
payment. Additionally, Transamerica reserves the right, to the extent
permitted by law, to offset amounts payable to Allmerica Financial
pursuant to this Section 2.04 against any damages payable to
Transamerica as a result of a material breach of the Agreement by
Allmerica Financial resulting in Transamerica's terminating the
Agreement for cause pursuant to Section 11.03 or 11.05 hereof.
Transamerica shall not withhold or offset any amounts otherwise payable
to Allmerica Financial pursuant to this Section 2.04 unless and until
(i) Transamerica provides Allmerica Financial with written notice
describing in detail the basis for the withholding or offset, such
notice to be provided before the payment is due; (ii) the parties use
their best efforts to resolve any dispute that formed the basis for the
withholding or offset; (iii) in the event the dispute is not resolved
within 90 days, Transamerica immediately pays all amounts then due
under this Section 2.04, regardless of the dispute, into an escrow
account, where such amounts shall remain until the dispute is resolved;
and (iv) the dispute is then submitted to binding arbitration, as
provided in Section 12.18 hereof.
ARTICLE 3
COMPUTER SYSTEM AND PROPRIETARY RIGHTS
3.01 Definitions. As used in this Agreement, the following terms shall have the
following meanings:
(a) "Administrative Computer System" or "Computer System" shall
refer to all computer systems and related materials used by
Allmerica Financial to administer the Policies, including
Allmerica Financial proprietary software and third party
licensed software comprised of computer programs and
supporting documentation, including, but not limited to,
source code, object code input and output formats, program
listings, narrative descriptions and operating instructions
and shall include the tangible media upon which the computer
programs and supporting documentation are recorded as well as
the deliverable forms and documents.
Allmerica Financial's proprietary software and third party
licensed software used to administer the Policies shall be
listed in Schedule 3.01A attached hereto. Such Schedule shall
be updated from time to time to reflect the addition or
deletion of software used in the administration of the
Policies.
The Computer System shall support, administer and process
Transamerica's business and product requirements as outlined
in Schedules 2.01A and 2.01C.
(b) "Functional Outline Documents" shall mean the detailed
description of the functions and features being added to the
Computer System and those necessary changes to be made to the
Computer System, all in support of Transamerica and which are
included in this Agreement in Schedule 3.01B.
(c) "Specifications" shall mean Functional Outline Documents,
Policy Specifications, Policyholder Documents, Variable Life
Prospectus and Policy Forms, Schedules and Reports, as
described in Schedules 1.02, 2.01C and 3.01B.
(d) "Property" shall mean all property of either party including,
but not limited to, data records, materials, supplies,
computer software, customer records, premium information,
underwriting files, customer lists, sales data, policyholder
and insured data, data on agents, agencies and distribution
systems.
3.02 Computer System. The Computer System will be and remain the Property of
Allmerica Financial and Transamerica shall have no rights or interest
in the Computer System except as provided in this Agreement.
Modifications to the Computer System developed for Transamerica that
are mutually agreed to be proprietary to Transamerica shall not be
sold, licensed, transferred, assigned or otherwise distributed without
the express written consent of Transamerica.
(a) The Computer System currently uses the LIFE-COMM III
Computer System, licensed to Allmerica
Financial by CSC Continuum Inc., ("Continuum"), as successo
to Informatics, Inc., pursuant to
a License Agreement ("Licensed Software") dated October
15, 1976, as amended, and Allmerica
Financial warrants that it has the right to use the
Licensed Software to provide the Policy
Services described in this Agreement. Transamerica
understands and agrees that, at Allmerica
Financial's option, the Licensed Software or any
replacement software may be replaced at any
time and from time to time, at Allmerica Financial's
expense, with other suitable software of
Allmerica Financial's choice. Allmerica Financial
agrees that neither the Licensed Software
nor any replacement software shall be replaced without at
least six months' written notice to
Transamerica of the pending replacement.
In the event that Allmerica Financial decides to replace such
licensed software, Allmerica Financial agrees to test the
replacement software prior to its installation to be certain
that it will properly perform the Policy Services contemplated
by this Agreement. The testing standards and the testing
process for any such replacement software must be approved by
Transamerica.
(b) In order for Allmerica Financial to utilize the Licensed
Software to provide the Policy Services contemplated by this
Agreement, Transamerica agrees to execute a Non-Disclosure and
Non-Use Agreement with Continuum and First Allmerica, in the
form set forth in Schedule 3.02.
Allmerica Financial agrees to use its best efforts to convince
Continuum to enter into an agreement with Transamerica. Such
agreement shall provide, in substance, that should this
Agreement terminate for any reason prior to an agreed upon
date, then Continuum shall, at Transamerica's option, issue to
Transamerica, or to a Transamerica affiliate specified by
Transamerica, a license agreement to use the version of the
LIFE-COMM III Computer System then currently used to service
Transamerica's business. Any such agreement shall provide that
the fee for any such license shall not exceed the current
market price for the product. Allmerica Financial further
agrees that it shall not replace the LIFE-COMM III Computer
System with another computer system unless and until the
product vendor enters into a separate agreement with
Transamerica similar to the agreement with Continuum
contemplated by this provision.
In addition, (i) if Transamerica terminates this Agreement for
cause, as described in Section 11.03, or as a result of
Allmerica Financial's insolvency, as described in Section
11.05, or (ii) if Allmerica Financial chooses not to renew or
to terminate this Agreement (other than for cause), then, in
the case of any such event, Allmerica Financial further agrees
to grant Transamerica, at no cost to Transamerica, a license
with respect to all of the modifications and enhancements
Allmerica Financial has made to the LIFE-COMM III Computer
System, or any replacement thereof, which are necessary to
allow Transamerica to continue to provide the Policy Services
contemplated by this Agreement.
Notwithstanding the above, Transamerica understands and agrees
that in no event shall Allmerica Financial provide to
Transamerica during the term of this Agreement or any
extension thereto, access to Continuum proprietary software
source codes, technical design documentation, detailed
business or technical practices or techniques, Continuum
confidential correspondence or documentation.
Allmerica Financial agrees to identify and inventory all
confidential information of Continuum provided to Transamerica
under the terms of this Agreement and shall secure written
acknowledgment from an authorized Transamerica representative
of receipt of such property.
Allmerica Financial warrants that the Computer System is the
Property of Allmerica Financial and utilizes software
developed by or licensed to Allmerica Financial. Allmerica
Financial further warrants that the use of the Computer System
to provide the Policy Services contemplated by this Agreement
will not infringe upon or violate any patent, copyright, trade
secret or other proprietary right of any third party. These
warranties shall survive termination of this Agreement.
ARTICLE 4
CONFIDENTIALITY AND AUDIT RIGHTS
4.01 Confidentiality. Except as otherwise provided in this Agreement, all
information communicated by Transamerica to Allmerica Financial and by
Allmerica Financial to Transamerica shall be and is received in
confidence and shall be used only for purposes of this Agreement. No
such information shall be disclosed by Allmerica Financial, by
Transamerica or by their respective agents or employees without the
prior written consent of the non-disclosing party, except as may be
necessary by reason of legal, accounting, or regulatory requirements
beyond the reasonable control of the disclosing party. The provisions
of this Section 4.01 shall survive termination or expiration of this
Agreement for any reason.
Allmerica Financial and Transamerica each agree not to disclose to any
person, firm or corporation or to utilize or reproduce for their own
use any proprietary or confidential information concerning the business
or data of the other party which it may have acquired pursuant to or in
the course of the performance of its obligations under this Agreement.
Proprietary information shall include, but not be limited to, data,
marketing information and materials, sales data, customer lists,
financial plans, investment strategies, policyholder and insured data,
data on agents, agencies and distribution systems. The foregoing
notwithstanding, the following shall not be considered proprietary
information for purposes of this provision: (i) information publicly
available or generally known within the life insurance industry; (ii)
information obtained from other sources, to the knowledge of Allmerica
Financial or Transamerica, as the case may be, not under a duty of
confidentiality to Transamerica or Allmerica Financial with respect to
such information; and (iii) information that is developed or created
independently by either party without breach of this Agreement.
In addition to the foregoing, Allmerica Financial agrees that during
the term of this Agreement and thereafter it shall not, directly or
indirectly, or through any third party utilize confidential information
obtained pursuant to this Agreement to recruit or attempt to recruit
any Transamerica insurance agents, brokers, general agents or other
producers.
In addition to the foregoing, Transamerica agrees that during the term
of this Agreement and thereafter it shall not, directly or indirectly,
or through any third party utilize confidential information obtained
pursuant to this Agreement to recruit or attempt to recruit any
Allmerica Financial or AFLIAC insurance agents, brokers, general agents
or other producers.
4.02 Audit Rights. Allmerica Financial shall provide reasonable access
during normal business hours to any location from which Allmerica
Financial conducts its business and provides Policy Services to
Transamerica pursuant to this Agreement to auditors designated in
writing by Transamerica for the purposes of performing audits for
Transamerica. Transamerica shall give reasonable advance written notice
of an audit and include in that notice the matters which it will audit.
Allmerica Financial shall provide the auditors any assistance they may
reasonably require. Such auditors shall have the right during normal
business hours to audit any business record, activity, procedure or
operation of Allmerica Financial that is reasonably related to the
provision the Policy Services provided under this Agreement, including
the right to interview any Allmerica Financial personnel involved in
providing or supporting such Policy Services.
If Transamerica determines, following an audit, that errors have been
made in Allmerica Financial's records, procedures or operations,
Allmerica Financial will make prompt correction and forward evidence of
such corrections to Transamerica. Allmerica Financial will use its best
efforts to make all such corrections within thirty (30) business days.
ARTICLE 5
RECORDS AND DATA MAINTENANCE
5.01 Maintenance of Allmerica Financial Records. Allmerica Financial records
relating to Policies and the Policy Services provided under this
Agreement will be maintained at Allmerica Financial's principal
administrative office and at other storage facilities used for
maintenance of records relating to Allmerica Financial's variable life
insurance business. Such records shall be maintained: (i) in the case
of records relating to a particular Policy, while the Policy remains in
force and for a period of seven (7) years following termination of the
Policy and (ii) for all other such records, for the duration of this
Agreement and, for any records not transferred to Transamerica after
termination of this Agreement, for a period of seven (7) years
following such termination.
Notwithstanding the foregoing, voice recording tapes shall only be
maintained for one (1) year from the date of the call.
All such Allmerica Financial records will be maintained in accordance
with prudent standards of recordkeeping as required by state insurance
laws and regulations and the Investment Company Act of 1940, as well as
other federal and state securities laws and regulations.
5.02 Records and Data Management. Allmerica Financial shall:
(i) maintain all Policy paper-based files provided to Allmerica
Financial on behalf of Transamerica, including, but not
limited to, Policy applications, transaction documents and
authorizations, correspondence, beneficiary designations and
all other relevant Policy servicing documents;
(ii) maintain voice recording tapes for all telephone based service
requests. These tapes shall be maintained in a safe and secure
location;
(iii) maintain Policy machine sensible records, including values,
options, status and payments;
(iv) store Transamerica Computer System data under Allmerica
Financial's retention schedule, as mutually agreed upon, on
magnetic tapes and disc packs when in the possession or
custody of Allmerica Financial in accordance with the
confidentiality and security safeguards specified in this
Agreement. In the event a longer retention schedule is desired
by Transamerica, Allmerica Financial shall comply with such
requirements, and Transamerica shall reimburse Allmerica
Financial at an agreed upon rate for any additional costs
reasonably incurred by Allmerica Financial;
(v) maintain all records and files relating to Policies and Policy
Services as the Property of Transamerica and promptly return
such Property to Transamerica upon termination of this
Agreement, as provided in Subsection 2.01(c) hereof;
(vi) maintain all such records and files in an accessible and
useable form; and
(vii) not destroy any such records and files without the approval of
Transamerica and only after 30 days' written notice to
Transamerica of the proposed destruction.
5.03 Transamerica's Records. Transamerica's files, records, and documents
and the data contained therein shall be and remain Transamerica's
Property and shall be returned to Transamerica promptly upon request or
the expiration or termination of this Agreement or, with respect to any
particular data files and data, on the earlier date the data files and
data are no longer required by Allmerica Financial to provide services
to Transamerica pursuant to this Agreement. Transamerica's data is
confidential and proprietary and shall not be utilized by Allmerica
Financial for any purpose other than that of providing services to
Transamerica and shall not be disclosed, sold, assigned, leased or
otherwise disposed of or commercially exploited by or on behalf of
Allmerica Financial or its affiliates or their employees or agents
without the prior written consent of Transamerica.
At any time and from time to time, Transamerica may request Allmerica
Financial for copies of Transamerica's files, records and documents
then in the possession of Allmerica Financial. Unless prohibited by its
license agreement with Continuum or any other agreement with a software
vendor, Allmerica Financial shall promptly comply with any such request
for copies. Transamerica understands and agrees that any costs or
expenses, including personnel costs, incurred by Allmerica Financial in
complying with any such requests for copies shall be reimbursed by
Transamerica. Any such reimbursement shall be paid by Transamerica
within 30 business days of its receipt of a written request for
reimbursement.
5.04 Safeguarding Transamerica Data and Records. In order to properly
safeguard Transamerica data and records in its possession, Allmerica
Financial will establish and maintain full and complete safeguards no
less rigorous than those in effect at Allmerica Financial to protect
its own confidential data and records against destruction, loss,
alteration or unauthorized access.
ARTICLE 6
ALLMERICA FINANCIAL'S OBLIGATIONS
6.01 Implementation Duties and Responsibilities. Commencing on the Effective
Date, Allmerica Financial shall, in accordance with the time schedules
set forth in Article 1 and in Schedule 2.01B: (a) Develop the Policy
Forms and perform its additional duties and responsibilities as set
forth in
Article 1.
(b) Jointly develop with Transamerica the detail requirements and
specifications for each of the Functional Outline Documents to
be included in Schedule 3.01B. These documents will be the
detailed business specifications for all product and service
modifications. Allmerica Financial and Transamerica expect to
complete this task within six (6) weeks from the date the
Agreement is executed by both parties.
(c) Jointly develop with Transamerica the Computer System
interfaces to Transamerica's Home Office and Kansas City
Operational Center. The Allmerica Financial time frames for
completion of such interfaces will be negotiated by the
parties. Transamerica understands and agrees that, to the
extent compatible, Allmerica Financial intends to utilize file
formats currently in use in developing such interfaces.
(d) Modify and implement the Administrative Computer System as
necessary to support the Policy and Policy Services covered by
this Agreement. The time frames for Computer System
modification and implementation will be negotiated by the
parties.
(e) Develop illustration software and illustration formats to be
used with the Policy Forms, as more fully described in Section
6.04.
6.02 Computer System Operation. Upon the successful completion of acceptance
testing and the implementation of the Computer System, Allmerica
Financial shall provide Transamerica the following Computer System
services:
(a) Operate the Computer System and process Transamerica business
and data in accordance with Schedules 2.01A, 2.01B and 3.01B
to achieve the Service Standards called for in Schedule 2.01C.
In the event that the Service Standards in Schedule 2.01C are
not achieved, Allmerica Financial shall institute corrective
action, as described in Section 2.01(b), in order for such
standards to be achieved.
(b) Provide all necessary man-hours to install new releases of the
Computer System and maintain the Computer System in accordance
with the specifications and Functional Outline Documents set
forth in Schedules 2.01A, 2.01B and 3.01B by making routine
corrections and by accomplishing ordinary day-to-day changes
to the computer programs in the Computer System.
(c) Store Transamerica data, as provided in clause (iv) of Section 5.02
hereof.
(d) Use its best efforts to ensure that the Computer System is Year
2000 ready.
6.03 Computer System Maintenance, Changes and Enhancements. Allmerica
Financial agrees to maintain the Computer System in accordance with the
specifications and Functional Outline Documents set forth in this
Agreement at no additional cost to Transamerica. At any time and from
time to time while this Agreement remains in force Transamerica may
request that Allmerica Financial modify, enhance or otherwise make
changes to the Computer System ("System Changes") other than changes
required as part of Allmerica Financial's responsibility to perform
normal Computer System maintenance. After receipt of any such request,
Allmerica Financial agrees to negotiate in good faith with Transamerica
the terms and conditions (including compensation and delivery time
frames) under which Allmerica Financial shall develop and implement any
such requested Systems Change.
Allmerica Financial agrees to promptly review any Systems Change
request and to respond to such request in writing within 30 days of its
receipt of the request. In negotiating with Transamerica the terms and
conditions under which Allmerica Financial will comply with any such
request, Allmerica Financial agrees to assign the same priority to such
request, if it concludes that it is able to accommodate the request, as
would be assigned in the event of a similar Systems Change request
related to its own variable life insurance products.
6.04 Policy Illustrations. Allmerica Financial agrees to develop
illustration software to be used with the Policy Forms. Transamerica
understands and agrees that such software shall be substantially
similar to the illustration software currently used by Allmerica
Financial in its variable life insurance business. Allmerica Financial
agrees to finalize such illustration software within a mutually
agreeable time frame after the date the final specifications for the
Policy Forms are agreed to by the parties.
In addition to the foregoing, Allmerica Financial agrees to modify its
illustration software whenever modifications are necessary to comply
with any regulatory and/or statutory changes applicable to
illustrations used in connection with the sale and servicing of the
Policy Forms.
Allmerica Financial represents and warrants that illustrations produced
by such illustration software shall comply with all applicable state
and federal regulatory and statutory requirements. This warranty shall
survive termination of this Agreement.
6.05 Acknowledgment and Additional Responsibilities of Allmerica Financial.
Allmerica Financial shall have no authority, nor shall it represent
itself as having such authority, other than as specifically set forth
in this Agreement. Without limiting the generality of the foregoing
sentence, Allmerica Financial specifically agrees that it will not do
any of the following without the prior written consent of Transamerica:
(a) Litigation. Institute or prosecute any legal proceedings in
connection with any matter pertaining to the Policy Services
provided pursuant to this Agreement or Transamerica's business
or accept service of process on behalf of Transamerica.
(b) Alterations. Waive, amend, modify, alter, terminate or change
any term, provision or condition stated in any Policy Form or
discharge any contract in the name of Transamerica, except as
otherwise specifically provided in this Agreement.
(c) Advice to Policyholders/Prospective Policyholders. Offer tax,
legal, or investment advice to any Policyholder or prospective
Policyholder of Transamerica under any circumstances, with
respect to a Policy or the Policy Services provided pursuant
to this Agreement.
6.06 Cooperation. Allmerica Financial agrees to cooperate at all times with
Transamerica to ensure that the Policy Services provided pursuant to
this Agreement are provided properly to any Policyholder or prospective
Policyholder of Transamerica. Allmerica Financial shall use its best
efforts to comply with any and all written directives from Transamerica
for the correction of deficiencies or problems associated with
Allmerica Financial's performance of Policy Services or its obligations
hereunder (each, a "Correction Letter"). Such deficiencies or problems
shall include, without limitation, (i) Allmerica Financial's failure to
provide Policy Services in a timely manner, or (ii) Allmerica
Financial's failure to provide Policy Services in accordance with the
Service Standards specified in Schedule 2.01C. Allmerica Financial
shall use its best efforts to comply with a Correction Letter within
thirty (30) days of its receipt of the Letter (or such longer period as
shall be specified in the Correction Letter, in situations where it is
not reasonably possible to comply within such thirty (30) day period).
6.07 Notification of Service Deficiencies. Allmerica Financial shall
promptly notify Transamerica, in writing, of (i) any material
weaknesses relating to the provision of Policy Services under the
Agreement and (ii) any comment of a material nature made pursuant to a
regulatory examination relating to the provision of such Policy
Services. Written notification shall be provided within seven (7) days
of when Allmerica becomes aware, through written notification, of the
material weakness or regulatory comment. If Allmerica has not corrected
the material weakness or material problem that caused the regulatory
comment to the satisfaction of Transamerica within a time frame set
reasonably by Transamerica in writing and agreed to by Allmerica
Financial, Transamerica may then immediately terminate this Agreement
without prejudice to any of Transamerica's rights or remedies against
Allmerica Financial pursuant to Section 11.03 of this Agreement.
6.08 Administrative Services Provided. Allmerica Financial shall perform the
administrative services specified in Schedules 2.01A, 2.01B and 3.01B
within the time frames and Service Standards specified in Schedule
2.01C.
6.09 Records and Data Maintenance. Allmerica Financial shall provide the
records and data maintenance, management and other services described
in Article 5.
6.10 Personnel. Allmerica Financial shall use its best efforts to ensure
that adequate personnel are assigned to perform the services required
under this Agreement, to include a Project/Account Manager and the
staffing levels needed in order to achieve the Service Standards
specified in Schedule 2.01C.
Except for third party vendors used to service Allmerica Financial's
variable life insurance business, Transamerica's business will be
serviced only by employees of Allmerica Financial.
Before Allmerica Financial communicates any confidential information
described in Section 4.01 and relating to Transamerica to a vendor, the
vendor must execute a confidentiality agreement acceptable to
Transamerica.
ARTICLE 7
TRANSAMERICA'S OBLIGATIONS
7.01 Transamerica's Duties and Responsibilities. Transamerica shall:
(a) Assist Allmerica Financial in the development of the Policy
Forms and perform its additional duties and responsibilities
set forth in Article 1.
(b) Jointly develop with Allmerica Financial an implementation
plan and schedule as set forth in Schedule 2.01B.
(c) Provide designated Transamerica personnel dedicated to work
with Allmerica Financial personnel in the performance of this
Agreement and all other reasonable and necessary cooperation
and support.
(d) Develop business specifications and jointly develop with
Allmerica Financial the Functional Outline Documents.
(e) Provide all the requirements for the operation of the
Administrative Computer System at Transamerica's facilities
necessary for Computer System interfaces and output.
(f) Provide necessary input data for the operation of the Computer
System.
(g) Jointly develop with Allmerica Financial the interface
specifications for the Computer System and Transamerica
systems.
(h) Assist Allmerica Financial in the development of the
illustration software and formats described in Section 6.04.
(i) Make all necessary payments due under the terms of this Agreement.
ARTICLE 8
ACCEPTANCE TESTING
8.01 Contents. Allmerica Financial and Transamerica shall conduct tests of
the Computer System. The standard to be used to determine the
successful completion for all tests shall be the Computer System's
performance of the functions and features described in the Functional
Outline Documents set forth in Schedule 3.01B and the specifications
set forth in Schedules 1.02 and 2.01A. The testing standards and the
testing process must be approved by Transamerica, whose approval shall
not be unreasonably withheld.
8.02 Usability Testing. Allmerica Financial and Transamerica shall conduct
a joint usability test as follows:
(a) The test will be performed utilizing Allmerica Financial's existing
test environment.
(b) A test sample of Policies and business transactions shall be
determined and processed by Allmerica Financial and will be
made available to Transamerica for review.
(c) Allmerica Financial and Transamerica will jointly review the
test results to determine completeness, accuracy and
performance.
(d) Transamerica will process all Allmerica Financial generated
system interface files to determine successful use by internal
Transamerica systems.
(e) Allmerica Financial and Transamerica will evaluate overall
business and system processing flow for capability to meet
operational performance standards.
(f) Allmerica Financial and Transamerica will make all necessary
revisions to business and technical systems identified in the
usability test.
(g) In order to satisfy usability testing, the Computer System
must process all sample Policies and related transactions to
such standards as would be acceptable to Allmerica Financial
in the processing of AFLIAC's variable life insurance
business. Transamerica and Allmerica Financial must mutually
agree that usability testing has been successfully
accomplished. Transamerica and Allmerica Financial must also
mutually agree that usability testing has been performed with
true representation of Transamerica sales force illustration
and investment scenarios.
(h) In the event the usability testing has not been successfully
completed within six months from the Effective Date of this
Agreement, unless the parties agree to an extension,
Transamerica and Allmerica Financial shall proceed in
accordance with the provisions of Subsection 2.01(c) of this
Agreement.
ARTICLE 9
ADDITIONAL REPRESENTATIONS AND WARRANTIES
9.01 Corporate Authority, etc. Allmerica Financial represents and warrants:
(a) That it is a corporation duly organized and existing in good
standing under the laws of the Commonwealth of Massachusetts.
(b) That Allmerica Financial has the power and authority under the
laws of the Commonwealth of Massachusetts and under its
charter and by-laws to enter into and perform the Product
Development and Policy Services contemplated in this
Agreement.
(c) That all requisite corporate and other acts or proceedings
required to be taken to authorize the execution, delivery and
performance of this Agreement have been taken.
(d) That in performing the Policy Services contemplated in this
Agreement it will be in compliance with all applicable state
and federal laws and regulations and will use its best efforts
to perform the Policy Services in compliance with
Transamerica's policies and procedures that are designed to
achieve IMSA (Insurance Marketplace Standards Association)
certification.
(e) That it has and will use its best efforts to continue to have
and maintain the necessary facilities to perform Policy
Services in accordance with the provisions of this Agreement.
9.02 Survivability. The warranties provided for in this Article 9
shall survive termination of this
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Agreement.
ARTICLE 10
INDEMNITIES AND LIABILITY
10.01 Cross Indemnity. Each party shall indemnify, defend and hold harmless
the other, and the other's subsidiaries, parent and affiliates, from
and against any and all claims, actions, damages, liabilities, costs
and expenses (including reasonable attorneys' fees and expenses),
arising out of the death or bodily injury of any agent, employee,
customer, business invitee or business visitor of the indemnitor
occurring on premises under the control of the indemnitor or its parent
or one of its subsidiaries or affiliates.
10.02 Allmerica Financial Limitation of Liability; Indemnification by
Transamerica. Allmerica Financial, its subsidiaries, parent, affiliates
and its or their officers, directors, employees and agents
(collectively "Allmerica Indemnitees") shall not be responsible for,
and Transamerica shall indemnify and hold harmless Allmerica
Indemnitees from and against any and all claims, demands, losses,
damages, charges, costs, expenses (including reasonable attorneys' fees
and expenses), judgments, awards and settlements, including any
punitive, consequential, special or indirect damages (herein "Losses")
arising out of or attributable to:
(a) All actions of Allmerica Indemnitees related to Policy
underwriting or the investigation, processing, denial or
payment of Policy claims, including death claims, provided
that:
(i) in the case of an underwriting matter, Allmerica
Financial properly utilized Transamerica's
Underwriting Standards (as described in Section 2.02)
in underwriting, rating or declining an applicant for
insurance and, in the event of the declination of a
proposed insured, which declination is not clearly a
medical decline described in Transamerica's
underwriting manual, that the matter was communicated
to authorized Transamerica personnel who agreed with
and approved the declination; and
(ii) in the case of a Policy claim, Allmerica Financial
followed Transamerica's claims investigation and
processing rules and requirements and, in the event
of the denial of a claim, that the matter was
communicated to authorized Transamerica personnel who
agreed with and approved the denial.
Allmerica Financial will communicate appropriate details of
any required communication described in (a) (i) and (ii) above
in accordance with notification procedures to be jointly
developed by the parties. If no response is received within
five (5) days from the day of the transmission, Allmerica
Financial shall have the right to proceed on the basis that
Transamerica is in agreement with the decision to decline the
risk or deny the payment of the claim and will proceed with
appropriate action.
(b) A claim against an Allmerica Indemnitee by any third party, to
the extent it arises out of or results from any act or
omission of Transamerica, its employees, agents, brokers or
representatives relating to the sale or servicing of any
Policy.
(c) A claim against an Allmerica Indemnitee by any third party, to
the extent it arises out of or results from the reasonable
reliance of an Allmerica Indemnitee on information, records or
documents furnished to it by or on behalf of Transamerica.
(d) A claim against an Allmerica Indemnitee by any third party, to
the extent it arises out of or results from the reasonable
reliance on, or the carrying out of by an Allmerica Indemnitee
of, any instructions of authorized personnel of Transamerica.
10.03 Transamerica Limitation of Liability; Indemnification by Allmerica
Financial. Transamerica, its subsidiaries, affiliates and its or their
officers, directors, employees and agents (collectively "Transamerica
Indemnitees") shall not be responsible for, and Allmerica Financial
shall indemnify and hold harmless Transamerica Indemnitees from and
against any and all Losses arising out of or attributable to:
(a) A breach or negligent failure of Allmerica Financial to
perform any of Allmerica Financial's representations,
warranties, covenants or obligations set forth in this
Agreement.
(b) A claim against a Transamerica Indemnitee by any third party,
to the extent it arises out of or results from the reasonable
reliance of a Transamerica Indemnitee on information, records
or documents furnished to it by or on behalf of Allmerica
Financial.
(c) A claim against a Transamerica Indemnitee by any third party,
to the extent it arises out of or results from the reasonable
reliance on, or the carrying out of by a Transamerica
Indemnitee of, any instructions of authorized personnel of
Allmerica Financial.
In addition to the foregoing, Allmerica Financial shall indemnify and
hold harmless Transamerica Indemnitees from and against any tax,
interest or penalties imposed by the IRS or any state or local taxing
authority on Transamerica, as well as any liability Transamerica may
incur to Policyholders caused by or related to Allmerica Financial's
failure to properly test and apply the life insurance testing rules
under IRC Sections 7702 and 7702A or its failure to perform its tax
withholding and information reporting duties and responsibilities under
this Agreement, including, but not limited to, failures to: (i) deposit
the correct amount of income tax withholding on time; (ii) issue timely
information returns; (iii) issue correct information returns; (iv)
correctly process tax-related transactions related to nonresident
aliens; and (v) correctly process tax-related transactions related to
death claims.
10.04 Notice and Opportunity to Defend. Promptly after receipt by any party
hereto of notice of the assertion of any claim for a Loss with respect
to which such party hereto expects to make a request for
indemnification hereunder, such party shall give the party which may
become obligated to provide indemnification hereunder (the
"Indemnifying Party") written notice describing such claim in
reasonable detail. The Indemnifying Party shall have the right, at its
option and at its own expense and by its own counsel, to participate in
the defense of any such claim, provided that the Indemnifying Party
shall have agreed in writing to indemnify the party seeking
indemnification hereunder (the "Indemnified Party"). Notwithstanding
the foregoing, the Indemnifying Party shall not have the right to
control or to represent the Indemnified Party in the defense of any
claim.
10.05 Processing Liability. Notwithstanding the provisions of Sections 10.02
and 10.03, in the event of any liability incurred by Allmerica
Financial or Transamerica as a result of Policy processing errors made
by Allmerica Financial, Allmerica Financial shall be liable for the
first ten thousand dollars incurred during each twelve (12) month
period from the commencement of the Operational Phase ("Liability
Period") for the term of this Agreement. For liability arising from
Allmerica Financial processing errors incurred in a Liability Period in
excess of ten thousand dollars, Allmerica Financial shall be liable for
40% of such amount and Transamerica shall be liable for 60% of such
amount. Provided, however, that Transamerica shall not be liable with
respect to any Liability Period for any such amount in excess of .35%
of Policy premiums (including first year target and excess premiums and
renewal premiums) paid during the Liability Period. Allmerica Financial
agrees that it shall be responsible for the dollar amount of processing
errors incurred during a Liability Period in excess of such .35% cap.
If such cap is not determined until after the end of a Liability
Period, both parties agree to a true-up by Allmerica Financial (or to a
reimbursement by Transamerica, if appropriate) within 30 days following
the date the cap is both calculated and agreed to by both parties. For
purposes of calculating processing errors, both parties understand and
agree that liabilities shall only mean and include amounts payable or
creditable to Policyholders and their beneficiaries and shall not
include internal costs incurred by either party to correct such errors.
For purposes of this Agreement, the term "processing errors" shall mean
and include:
(i) errors or delays relating to the processing of Policy premium
payments;
(ii) errors or delays relating to the processing of Policy fund
transfer requests;
(iii) errors or delays relating to Policy Services involving Policy
dollar cost averaging or automatic account rebalancing;
(iv) errors or delays related to the processing of Policy changes
(e.g., processing of title changes, beneficiary changes or
insurance increases or decreases);
(v) errors or delays related to the processing of Policy
surrenders, exchanges or withdrawals;
(vi) errors or delays related to the processing of Policy loans; and
(vii) other errors or delays related to the Policy Administration
functions described in Part B of Schedule 2.01C.
Notwithstanding the foregoing, processing errors shall not include
systemic Computer System errors, errors related to Policy underwriting,
Policy claims processing or errors related to Allmerica Financial's
Code Section 7702 and 7702A policy testing and tax withholding and
information reporting duties and responsibilities, as described in the
last paragraph of Section 10.03 hereof.
10.06 Acknowledgment. Allmerica Financial and Transamerica expressly
acknowledge that the limitations contained in this Article 10 represent
the express agreement of the parties with respect to allocation of
risks between the parties, including the level of risk to be associated
with the provision of the Policy Services described herein as related
to the amount of the payments to be made to Allmerica Financial for
such Services, and each party fully understands and accepts such
limitations.
10.07 Survivability. The indemnifications provided for in this Article 10
shall survive termination of this
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Agreement for any reason.
ARTICLE 11
TERM AND TERMINATION
11.01 Term.
(a) The Product Development obligations of the parties and the
Policy Services Implementation Phase
shall commence upon the Effective Date of this Agreement. The
Implementation Phase shall
expire upon successful completion of all acceptance testing of the
Computer System under
Article 8. The Operational Phase shall commence upon certification by
Allmerica Financial that
it is ready to commence production processing of Transamerica data,
and shall expire
forty-eight (48) full calendar months from the date of receipt of said
certification from
Allmerica Financial, unless terminated earlier or extended in accordance with
the provisions of
this Agreement.
(b) A failure to commence the Operational Phase on or before
the date which is six months from the
date the Functional Outline Documents have been finalized and agreed to by
the parties shall
result in a sixty (60) day cure period during which Transamerica and Allmerica
Financial shall
take all necessary steps to complete the work to commence the
Operational Phase. If the
Operational Phase is not commenced by the end of the 60-day cure period,
then, at its option,
either party shall have the right to terminate the Agreement. In such event,
neither Allmerica
Financial nor Transamerica shall have any further responsibility under this
Agreement except
for Transamerica's responsibility to pay the balance of the
Compensation due Allmerica
Financial for its Product Development services, as specified in Section 1.05.
11.02 Extension. This Agreement shall continue in force after the initial
48-month termination date specified in Subsection 11.01(a) unless
either party elects to terminate the Agreement on said initial
termination date by notifying the other party in writing of its
intention to do so. Such notice must be given at least twelve months
prior to said initial termination date unless both parties agree to
accept a later date of notification. If this Agreement is continued
beyond said initial termination date, Transamerica and Allmerica
Financial shall each have the right to cancel this Agreement on any
date thereafter upon twelve months' written notice to the other party.
11.03 Termination for Cause. Except as otherwise provided in this Agreement,
in the event either party defaults in the performance of any of that
party's material duties or obligations under this Agreement, which
default shall not be substantially cured within thirty (30) days after
written notice is given to the defaulting party specifying the default
or, with respect to those defaults which cannot reasonably be cured
within thirty (30) days, should the defaulting party fail to proceed
within sixty (60) days to commence curing the default and thereafter to
proceed with all due diligence to substantially cure the default, the
party not in default may terminate this Agreement for cause by giving
written notice to the defaulting party.
For purposes of this Agreement, material breach shall include, but not
be limited to, the following events: (i) fraud, material
misrepresentation, conversion or unlawful withholding of funds by
either party; (ii) the disqualification by either party to do business
under any applicable state or federal law where its ability to do
business is materially impaired; (iii) any breach of confidentiality by
either party or the use of confidential information by either party in
a competitive manner; and (iv) any failure by Allmerica Financial to
maintain fidelity bond coverage in an amount of at least $10,000,000.
Circumstances described in clauses (i) and (iii) shall not be subject
to the cure provisions described in the preceding paragraph.
In addition to the foregoing, (i) if Allmerica Financial breaches its
agreement with Continuum (or any replacement software vendor), such
that Allmerica Financial's license to use the then current Computer
System is revoked, and (ii) if at the time of such license revocation
the LIFE-COMM III Computer System (or the software of any replacement
vendor whose agreement with Allmerica Financial has been breached by
Allmerica Financial), is being utilized to perform the Policy Services
contemplated by this Agreement, then in such event, Transamerica may
terminate this Agreement for cause.
In the event this Agreement is terminated for cause, the party
materially breaching the Agreement shall be liable for all damages
incurred by the aggrieved party as a result of the breach. In the event
either party terminates the Agreement for cause, Transamerica agrees to
pay Allmerica Financial the balance of any compensation for Product
Development required to be paid to Allmerica Financial under Section
1.05 and to pay compensation for Policy Services rendered, required to
be paid to Allmerica Financial under Sections 2.04. In the event that
either party terminates this Agreement for cause, Allmerica Financial
and Transamerica shall jointly develop and implement a cooperative
conversion workplan under Subsection 2.01(c) of this Agreement.
Notwithstanding the foregoing, if Transamerica terminates this
Agreement for cause, subject to the requirements set forth in Sections
1.05 and 2.04, Transamerica shall have the right to offset amounts
otherwise payable to Allmerica Financial against any damages incurred
by Transamerica as a result of Allmerica Financial's breach of this
Agreement.
11.04 Termination for Nonpayment. In the event Transamerica defaults in the
payment of any amount due Allmerica Financial under this Agreement and
does not cure the default within thirty (30) days after written notice
of the default or unless such payment shall be in dispute, Allmerica
Financial may terminate this Agreement for cause by giving thirty (30)
days written notice to Transamerica.
11.05 Termination for Insolvency. In the event either party becomes or is
declared insolvent or bankrupt, is the subject of any proceedings
relating to its liquidation, insolvency or for the appointment of a
receiver or similar officer for it, makes an assignment for the benefit
of all or substantially all of its creditors, or enters into an
agreement for the continuation, extension, or readjustment of all or
substantially all of its obligations, the other party may immediately
terminate this Agreement for cause.
ARTICLE 12
MISCELLANEOUS
12.01 Binding Nature and Assignment. This Agreement shall be binding on the
parties and their respective successors and assigns. Neither party may
assign this Agreement without the prior written consent of the other,
which shall not be unreasonably withheld.
12.02 Notices. Any notice or other instrument authorized or required by this
Agreement shall be deemed given upon receipt and shall be effective
only if it is in writing and delivered personally, by facsimile
transmission with telephone confirmation, by registered or certified
return receipt mail, postage prepaid, or by nationally recognized
overnight courier service addressed as set forth below or to such other
person or address as each party may from time to time designate by
notice to the other party.
In the case of Allmerica Financial:
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, Massachusetts 01653
Attention: Mammen G. Verghis
Vice President
In the case of Transamerica:
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, California 90015
Attention: General Counsel
and with copy to:
Transamerica Occidental Life Insurance Company
1150 South Olive Street
Los Angeles, California 90015
Attention: Mark Madden
A party may from time to time change its address or designees for
notification purposes by giving the other party prior notice in the
manner specified above of the new address or the new designee and the
subsequent date upon which the change shall be effective.
12.03 Amendment. This Agreement may be amended or modified only by a written
agreement executed by both parties, as evidenced in writings signed by
a Vice President of Allmerica Financial and Transamerica.
12.04 Counterparts. This Agreement may be executed simultaneously in multiple
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
12.05 Certain Construction Rules; Governing Law. All Schedules attached
hereto and referred to herein, are hereby incorporated in and made a
part of this Agreement as if set forth herein. Any matter disclosed on
any Schedule referred to herein shall be deemed also to have been
disclosed on any other applicable Schedule referred to herein. All
Section titles or captions contained in this Agreement or in any
Schedule are for convenience only, shall not be deemed a part of this
Agreement and shall not affect the meaning or interpretation of this
Agreement. Any reference to a "Section" or "Schedule" shall be deemed
to refer to a Section of this Agreement or Schedule attached to this
Agreement. The recitals set forth on the first page of this Agreement
are incorporated into and made a part of this Agreement. Unless the
context clearly indicates, words used in the singular include the
plural, and words in the plural include the singular.
This Agreement is to be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts and without regard to the
conflicts of laws principles thereof.
12.06 Relationship of Parties. Transamerica understands and agrees that
Allmerica Financial in furnishing services to Transamerica is acting
only as an independent contractor. Unless otherwise provided in this
Agreement, Allmerica Financial has the sole right and obligation to
supervise, manage, contract, direct, procure, perform or cause to be
performed all work to be performed by Allmerica Financial pursuant to
this Agreement.
12.07 Approvals and Similar Actions. Where agreement, approval, acceptance,
consent or similar action is required by any provision of this
Agreement, such action shall not be unreasonably delayed or withheld.
12.08 Force Majeure. Each party shall be excused from performance for any
period and to the extent that the party is prevented from performing
any services, in whole or in part, as a result of delays caused by an
act of God, war, civil disturbance, court order, labor dispute, or
other cause beyond that party's reasonable control, including failures
or fluctuations in electrical power, heat, light, air conditioning or
telecommunications equipment and such nonperformance shall not be a
default or a ground for termination. Notwithstanding the above,
Allmerica Financial agrees that it will establish and maintain
reasonable recovery steps, including technical disaster recovery
facilities, uninterruptable power supplies for computer equipment and
communications and that as a result thereof Allmerica Financial will
use its best efforts to ensure that the Computer System shall be
operational within forty-eight (48) hours of a performance failure.
12.09 Severability. The provisions of this Agreement are severable and the
invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision
hereof. In addition, in the event that any provision of this Agreement
(or portion thereof) is determined by a court of competent jurisdiction
to be unenforceable as drafted by virtue of the scope, duration, extent
or character of any obligation contained therein, it is the mutual
agreement of the parties that such provision (or portion thereof)
shall, to the extent equitable, be construed in a manner designed to
effectuate the purposes of such provision to the maximum extent
enforceable under applicable law.
12.10 Construction and Representation by Counsel. The parties hereto
represent that in the negotiation and drafting of this Agreement they
have been represented by and relied upon the advice of counsel of their
choice. The parties affirm that their counsel have had a substantial
role in the drafting and negotiation of this Agreement and, therefore,
the rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any Schedule attached hereto.
12.11 Media Releases. Transamerica and Allmerica Financial shall consult with
each other as to the form, substance and timing of any press release or
other public disclosure of matters related to this Agreement or any of
the transactions contemplated hereby, and no such press release or
other public disclosure shall be made without the consent of the other
party, which shall not be unreasonably withheld or delayed; provided,
however, that either party may make such disclosures as are required by
legal, accounting or regulatory requirements after making reasonable
efforts in the circumstances to consult in advance with the other
party.
12.12 Reinsurance Agreement. The parties understand and agree that certain
policy expenses and mortality risks assumed under the Policies serviced
under this Agreement will be 40% reinsured by Allmerica Financial
pursuant to the terms of a separate Reinsurance Agreement to be
negotiated between the parties.
12.13 Agreement Relating to Additional Services. The parties understand and
agree that certain investment accounting, separate account and treasury
services to be provided by Allmerica Financial will be set forth in a
separate agreement to be negotiated by the parties.
12.14 Waiver. No delay or omission by either party to exercise any right or
power shall impair such right or power or be construed as a waiver. A
waiver by either of the parties of any of the covenants to be performed
by the other or any breach shall not be construed to be a waiver of any
succeeding breach or of any other covenant.
12.15 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. There
are no representations, understandings or agreements which are not
fully expressed in this Agreement. No change, waiver, or discharge
shall be valid unless in writing and signed by an authorized
representative of the party against whom such change, waiver or
discharge is sought to be enforced.
12.16 Hiring of Employees. During the term of this Agreement and for one (1)
year thereafter, Transamerica and Allmerica Financial and any of their
affiliates shall not, directly or indirectly, solicit for employment
any person employed or working on the services provided hereunder
within the preceding twelve (12) months by the other party or any
affiliate of the other party without the prior written consent of the
other party, which shall not be unreasonably withheld; provided,
however, that (i) in the event either party uses the services of a
professional recruiter and provides such recruiter solely with generic
job duties and job descriptions (without making any reference to the
other party or the other party's affiliates) and such recruiter
contacts a qualified candidate who happens to be an employee of the
other party and that candidate initiates contact through the recruiter
with that party, then that party may employ that employee, or (ii) in
the event an employee of the other party responds to a general
advertisement placed by a party, then that party may employ that
employee.
12.17 Taxes. Any taxes or similar assessments charged against Allmerica
Financial or charged in connection with the services provided under
this Agreement shall be the responsibility of Allmerica Financial,
whether such tax or assessment is imposed by the Federal government, a
state, a municipality or an administrative organization thereof.
12.18 Arbitration. All disputes and differences between the parties with
respect to this Agreement will be decided by arbitration, regardless of
the insolvency of either party, unless the conservator, receiver,
liquidator, or statutory successor is specifically exempted from an
arbitration proceeding by applicable state law. Either party may
initiate arbitration by providing written notification to the other
party. Such written notice shall set forth a brief statement of the
issue(s), the failure of the parties to reach agreement, and the date
of the demand for arbitration.
An arbitration panel shall be chosen consisting of three arbitrators.
The arbitrators must be impartial and must be or must have been
officers of life insurance companies other than the parties or their
affiliates. Each party shall select an arbitrator within thirty days
from the date of the demand. If either party shall refuse or fail to
appoint an arbitrator within the time allowed, the party that has
appointed an arbitrator may notify the other party that, if it has not
appointed its arbitrator within the following ten days, the arbitrator
will appoint an arbitrator on its behalf. The two arbitrators shall
select a third arbitrator within thirty days of the appointment of the
second arbitrator. If the two arbitrators fail to agree on the
selection of the third arbitrator within the time allowed, either party
may ask ARIASo US to appoint the third arbitrator. However, if ARIASo
US is unable to appoint an arbitrator who is impartial and who is or
was an officer of a life insurance company other than the parties or
their affiliates, then either party may ask a court to appoint the
third arbitrator pursuant to the Uniform Arbitration Act or any similar
statute empowering the court to appoint an arbitrator.
The arbitration panel shall interpret this Agreement as an honorable
engagement rather than merely a legal obligation, and shall consider
practical business and equitable principles as well as industry custom
and practice. The panel is released from judicial formalities and shall
not be bound by strict rules of procedure and evidence.
The arbitration panel shall determine all arbitration schedules and
procedural rules. Organizational and other meetings shall be held in
Worcester, Massachusetts, unless the panel shall select another
location. The panel shall decide all matters by majority vote.
Decisions of the arbitration panel shall be final and binding on both
parties. The panel may, at its discretion, award costs and expenses it
deems appropriate, including but not limited to attorneys' fees and
interest. Judgment may be entered upon the final decision of the panel
in any court of competent jurisdiction. The panel may not award
exemplary or punitive damages. Unless the panel decides otherwise, each
party will be separately responsible for paying all fees and expenses
charged by its respective counsel, accountants, actuaries, and other
representatives in connection with the arbitration, and the parties
shall bear equally the fees and expenses of the arbitrators and any
ancillary expenses associated with a hearing (e.g., any rental fee for
use of the hearing room, etc.).
12.19 Legal Proceedings and Complaints. If Allmerica Financial receives:
(a) notice of the commencement of any legal proceeding involving
any of Transamerica's customers; or
(b) a communication from any insurance department, other
administrative agency or any other person identifying a
complaint by any Transamerica customer or calling a hearing
involving any Transamerica practice; or
(c) written or oral complaints from customers of Transamerica; or
(d) a demand or request by any court, government agency or
regulatory body to examine any of the books and records of
Transamerica relating to Policies or Policy Services;
Allmerica Financial will use its best efforts to notify Transamerica
within one (1) business day. Allmerica Financial will send copies of
any necessary documentation to Transamerica within two (2) business
days.
Allmerica Financial and Transamerica will jointly develop a complaint
handling process.
Allmerica Financial will maintain a file containing any correspondence
relating to complaints received from Transamerica customers or service
providers for a period of seven (7) years from receipt of the complaint
letter.
12.20 Trademarks and Tradenames. Allmerica Financial will not use
Transamerica's name, trademarks, logo, or the name of any affiliate of
Transamerica in any way or manner not specifically authorized in
writing by Transamerica.
Transamerica will not use Allmerica Financial's name, trademarks, logo
or the name of any affiliate of Allmerica Financial in any way or
manner not specifically authorized in writing by Allmerica Financial.
On August 17, 1997, Transamerica provided Allmerica Financial with
electronic formats of its trademark, pyramid logo and digitized
officers' signatures for use on Policy Forms. Those properties combined
with those Transamerica marks listed on Schedule 12.20 make up the
Transamerica marks and names ("Marks and Names") licensed herein. Any
marketing name or service mark adopted by the parties to identify the
Policy contemplated in this Agreement shall be owned by Transamerica
and considered one of the Marks and Names.
As Transamerica is an owner-authorized user of those Marks and Names,
Transamerica desires to exercise control over the use of said Marks and
Names. Transamerica desires to license the Marks and Names for use by
Allmerica Financial in the underwriting, claims servicing, Policy
servicing and administrative services outlined in this Agreement.
Accordingly the parties agree as follows:
(a) License of Marks and Names. Transamerica hereby grants a
nonexclusive license unto Allmerica Financial to use the Marks
and Names solely in connection with the Services provided
under this Agreement.
(b) Manner of Use. Allmerica Financial shall not use the Marks and
Names in any manner or format which differs from the
electronic versions provided by Transamerica to Allmerica
Financial on August 17, 1997 or as shown in Schedule 12.20. If
Allmerica Financial deems a change in format for its limited
use is necessary, a request for such change must be submitted
in writing to Transamerica for its approval. Said request must
include the version as originally supplied by Transamerica and
the requested change, as well as the reason such a change is
requested. Transamerica's approval of a requested change shall
not be unreasonably withheld.
(c) Quality Control. Allmerica Financial's usage of the Marks and
Names shall be under the quality control of Transamerica as
provided herein and shall comply with Transamerica's
standards. As provided in Section 4.02, Transamerica may
conduct reasonable audits of Allmerica's usage of the Marks
and Names in relation to the Services provided under this
Agreement to ensure compliance with the terms set forth in
this Section.
(d) Indemnification. Transamerica shall protect, indemnify, defend
and hold harmless Allmerica Financial from any and all
liability, damages, costs or expenses, including reasonable
attorneys' fees incurred in connection with any claim or
action arising from Allmerica Financial's use of the Marks and
Names, limited to causes of action sounding in state or
federal trademark infringement and/or state or federal
trademark dilution. This indemnification shall survive
termination of this Agreement.
(e) Termination. The License to use the Marks and Names shall
terminate in accordance with the provisions of Article 11. Any
use of the Marks and Names that does not comply with the terms
as set forth in this Section will be considered a default in
the performance of Allmerica's material duties and or
obligations. Upon termination under Article 11, Allmerica
shall cease and desist use of the Marks and Names, except for
limited use in administering and servicing of Policies issued
prior to the date of termination.
12.21 Advertisement. Allmerica Financial shall not advertise the existence of
this Agreement or announce its existence to other insurance companies
or broker-dealers without the express written consent of Transamerica.
Notwithstanding the foregoing, Transamerica agrees that Allmerica
Financial may disclose the existence of this Agreement to insurance
companies or other organizations that are prospective purchasers of
services similar to the product development and administrative services
to be provided under this Agreement.
12.22 Continuation. Sections 1.05, 1.06, 2.01(c), 2.03, 3.02, 4.01, 5.01,
6.04, 12.15, 12.16, 12.17, 12.18, 12.19, 12.20, and Articles 9 and 10
shall survive termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to take
effect on the effective date specified above.
Transamerica Occidental Life
Insurance Company
By: ______________________________
Name: ______________________________
Title: ______________________________
Date: ______________________________
First Allmerica Financial Life
Insurance Company
1025
By: _______________________________
Name: _______________________________
Title: _______________________________ <PAGE>
Date: _______________________________
Schedule 1.01 To Product
Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company ("Allmerica Financial")
and Transamerica Occidental Life Insurance Company ("Transamerica"), effective
November 1, 1997.
AFLIAC POLICY FORMS
The Transamerica Policy, Policy Application and related Policy forms
contemplated by the Agreement will be substantially the same as the following
Allmerica Financial Life Insurance and Annuity Company ("AFLIAC") forms:
Name of AFLIAC Form AFLIAC Form Numbers
1. Flexible Premium Variable Life 1027-95
Insurance Policy*
2. Policy Application Forms AS-156, AS-158-95,
AS-159, 1AM-90
3. Children's Insurance Rider 1068-95
4. Guaranteed Insurability Rider 1087-95
5. Waiver of Payment Rider 1086-94
6. Living Benefits Rider 1089.13-95
7. Guaranteed Death Benefit Rider 1099-97
* The Preferred Loan Option in Form 1027-95 will be deleted and the Preferred
Loan Option described in END 260-96 will be substituted.
<PAGE>
Schedule 1.02 To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company ("Allmerica Financial")
and Transamerica Occidental Life Insurance Company ("Transamerica"), effective
November 1, 1997.
POLICY FORM SPECIFICATIONS
See Attachment
<PAGE>
Schedule 3.01B To Product Development and Administrative Services Agreement
between First Allmerica Financial
Life Insurance Company ("Allmerica Financial") and Transamerica
Occidental Life Insurance Company
("Transamerica"), effective November 1, 1997.
FUNCTIONAL OUTLINE DOCUMENTS
PRODUCT DIFFERENCES
- Mortality Rates
Mortality rates are extended to age 115
For Montana, male rates will be used instead of unisex rates
- Target Rates on some base cases
Target rates for this product are shown in Attachment 1
- Surrender charges
The surrender charges to be used for this product are shown in
Attachment 2
- Maturity at age 115
Maturity date is the policy anniversary nearest age 115
- Any processes or procedures that differ significantly from
Allmerica's usual and customary procedures will be documented via
memo
[Policy Underwriting, Claims Processing and Escheat procedures
differ significantly - a Memorandum of Understanding needs to be
developed with regard to each such process and procedure].
DOCUMENTS AND REPORTS
- Revisions to reflect Transamerica company name, address,
names and phone numbers in place of
Allmerica information
ELECTRONIC INTERFACES
Allmerica to Transamerica
- Alpha (daily) - Attachment 3
- Reinsurance (monthly) - Attachment 4
- Accounting (daily) - Attachment 5
- Compensation (daily) - Attachment 6
- Sales Reporting (daily) - Attachment 7
Transamerica to Allmerica
- Agency and Agent Data (initial file at conversion and then daily
- Attachment 8
<PAGE>
Schedule 3.02 To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company and Transamerica
Occidental Life Insurance Company, effective November 1, 1997.
CONTINUUM NON-DISCLOSURE AND NON-USE AGREEMENT
CSC Continuum Inc. ("Continuum"), First Allmerica Financial Life Insurance
Company ("Customer"), and Transamerica
Occidental Life Insurance Company ("Company"), agree as follows:
1. RECITALS
Customer is a licensee of all or part of the following computer
software product: LIFE-COMM III (collectively, the "Software Product").
The Software Product (including the program code, specifications,
logic, and design), all related documentation, and any information
about the Software Product (the "Confidential Information") are
confidential trade secrets of Continuum. Customer has also been granted
limited rights to process the data and files of Company using the
Software Product at Customer's site (the "Services"), which will
require that Company have restricted access to certain of the
Confidential Information in order to use the software product input and
output capabilities.
2. CONSENT
Continuum consents to the disclosure by Customer to Company of only
such Confidential Information as is reasonably necessary for Customer
to perform the Services. However, such disclosure to Customer shall in
no event include the disclosure of or access to any code or
documentation of the Software Products.
3. CONFIDENTIAL RELATIONSHIP
Customer and Company acknowledge that the Confidential Information
contains valuable trade secrets of Continuum. Any disclosures of
Confidential Information to Company shall be made in the strictest
confidence. Company shall take all appropriate action, whether by
instruction, agreement or otherwise, to ensure the protection,
confidentiality and security of any Confidential Information in its
possession.
4. NON-DISCLOSURE
Company may disclose the Confidential Information to its own employees
and to employees of Customer as reasonably necessary for Customer to
provide the Services. Company and its employees shall not otherwise
disclose or permit access to any Confidential Information to anyone
other than such employees of Company and Customer. Before disclosing
any Confidential Information to its employees, Company shall instruct
its employees to comply with the terms of this Agreement.
5. NON-USE
Company shall not use any Confidential Information for any purpose
other than for receiving the benefit of the Services.
6. COPIES
Company shall not copy or record any Confidential Information. Company
shall not remove any materials containing Confidential Information from
Customer's premises. Within ten (10) days after the completion of the
Services, Company shall destroy or deliver to Customer all copies or
records of Confidential Information in Company's possession.
7. CONTINUING OBLIGATIONS
Company's obligations under this Agreement shall survive termination of
this Agreement and shall continue as long as any Confidential
Information disclosed to Company remains confidential. Confidential
Information does not include any information which (a) is known to
Company prior to disclosure to Company by Continuum or Customer; (b)
becomes publicly known in the data processing industry through no
wrongful act of Company; or (c) is approved by release by written
authorization of Continuum. The existence of a copyright notice will
not cause, or be construed as causing, any part of the Software Product
to be a published copyrighted work or to be in the public domain.
8. INDEMNITY
Company agrees that it is fully responsible for the actions of its
employees with respect to the Confidential Information, whether or not
such employee was acting within the scope of his or her employment.
Customer and Company agree to indemnify Continuum for any damages,
costs, or expenses (including court costs and reasonable attorneys'
fees) suffered by Continuum as a result of any breach of this Agreement
by Company.
9. INJUNCTION
Customer and Company agree that, in the event of a breach or threatened
breach of this Agreement, Continuum will have no adequate remedy at law
and shall be entitled to a temporary restraining order and/or a
preliminary injunction without bond, and thereafter to a permanent
injunction.
10. TERM
Continuum's consent granted by this Agreement shall terminate
immediately upon the expiration or termination of the agreement for
processing services between Customer and Company. Company shall have no
access to Confidential Information after such date.
- 2 -
At the termination of the Product Development and Administrative
Services Agreement between First Allmerica Financial Life Insurance and
Annuity Company and Transamerica Occidental Life Insurance Company
effective November 1, 1997, but no later than the expiry of the
48-month initial term of the Agreement, CSC Continuum Inc. would be
willing to: (1) grant to Transamerica Occidental Life Insurance Company
a license for the base release of the version of the software product
LIFE-COMM III used by First Allmerica Financial Life Insurance Company
to service the Company's business at CSC Continuum's then current price
and then current terms, (2) grant to Transamerica Occidental Life
Insurance Company a license for them to use First Allmerica Financial
Life Insurance Company modifications to such base release for no
additional license fee and on the same terms as those for the base
release, but without any indemnity for infringement of intellectual
property by such modifications, and (3) consent to First Allmerica
Financial Life Insurance Company delivery of such base release and
modifications to Transamerica Occidental Life Insurance Company
following execution of foregoing licenses.
Upon execution by all of the parties, this Agreement shall be effective as of
the date of Continuum's signature below.
Transamerica Occidental Life Insurance Company
By: _____________________________________
(Signature)
Name: _____________________________________
(Printed)
Title: _____________________________________
Date: _____________________________________
CSC Continuum Inc.
By: _____________________________________
(Signature)
Name: _____________________________________
(Printed)
Title: _____________________________________
Date: _____________________________________
First Allmerica Financial Life Insurance Company
By: _____________________________________
(Signature)
Name: _____________________________________
(Printed)
Title: _____________________________________
Date: _____________________________________
- 3 -
<PAGE>
Schedule 2.01A To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company ("Allmerica Financial")
and Transamerica Occidental Life Insurance Company ("Transamerica"), effective
November 1, 1997.
<TABLE>
<CAPTION>
INVENTORY OF SERVICES AND FUNCTIONS
REGISTERED REPRESENTATIVE LICENSING/SELLING FUNCTIONS (INCLUDING
<S> <C> <C> <C> <C> <C> <C>
PRODUCT ILLUSTRATIONS).......................................................................................Transamerica
PRODUCT MARKETING ILLUSTRATION SUPPORT FUNCTIONS...............................................................Transamerica
800-LINE TECHNICAL SUPPORT FOR ILLUSTRATIONS AND ASSET
ALLOCATION SOFTWARE..................................................................................Allmerica Financial
RECEIPT OF INITIAL APPLICATION FOR BUSINESS AND INITIAL PREMIUM.........................................Allmerica Financial
BUSINESS SUITABILITY...........................................................................................Transamerica
UNDERWRITING REVIEW/APPROVAL............................................................................Allmerica Financial
PROCESS INCOMPLETES/DECLINES............................................................................Allmerica Financial
POLICY ISSUE............................................................................................Allmerica Financial
POLICY PRINTING.........................................................................................Allmerica Financial
POLICY MAILING..........................................................................................Allmerica Financial
(POLICY LEVEL) FUND ALLOCATION..........................................................................Allmerica Financial
INITIAL PREMIUM COLLECTION..............................................................................Allmerica Financial
FREE LOOK REFUNDS/NOT TAKENS............................................................................Allmerica Financial
COMMISSION PROCESSING/PAYMENT..................................................................................Transamerica
BILLING (ANNUAL, SEMI-ANNUAL, QUARTERLY)................................................................Allmerica Financial
COLLECTIONS.............................................................................................Allmerica Financial
LOCK BOX MANAGEMENT.....................................................................................Allmerica Financial
MONTHLY AUTOMATIC PREMIUM...............................................................................Allmerica Financial
FUND TRANSFER/REALLOCATIONS.............................................................................Allmerica Financial
800-LINE TELEPHONE CUSTOMER SERVICES....................................................................Allmerica Financial
INVENTORY OF SERVICES AND FUNCTIONS (Continued)
POLICY HISTORY REQUESTS.................................................................................Allmerica Financial
BENEFICIARY AND OWNER CHANGES...........................................................................Allmerica Financial
CUSTOMER CONFIRMATIONS (FINANCIAL TRANSACTIONS).........................................................Allmerica Financial
POLICY CHANGES..........................................................................................Allmerica Financial
ADDRESS CHANGES.........................................................................................Allmerica Financial
LOANS/PARTIAL WITHDRAWALS...............................................................................Allmerica Financial
1035 EXCHANGES..........................................................................................Allmerica Financial
SURRENDERS..............................................................................................Allmerica Financial
CONSERVATION...................................................................................................Transamerica
WRITTEN CORRESPONDENCE
PRE SALE (i.e., BEFORE APPLICATION SIGNED)............................................................Transamerica
POST SALE......................................................................................Allmerica Financial
DEATH AND OTHER POLICY CLAIMS
NOTIFICATION...................................................................................Allmerica Financial
SYSTEM PROCESSING..............................................................................Allmerica Financial
INVESTIGATION/REVIEW...........................................................................Allmerica Financial
SETTLEMENT OPTIONS.............................................................................................Transamerica
ANNUAL STATEMENTS.......................................................................................Allmerica Financial
INSURANCE ACCOUNTING (e.g., POLICY GAAP AND STATUTORY ACCOUNTING)..............................................Transamerica
TAX WITHHOLDING AND INFORMATION REPORTING...............................................................Allmerica Financial
</TABLE>
<PAGE>
Schedule 2.01B To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company ("Allmerica Financial")
and Transamerica Occidental Life Insurance Company ("Transamerica"), effective
November 1, 1997.
POLICY SERVICES - PROJECT SCHEDULE OF EVENTS
DEVELOPMENT OF DETAILED BUSINESS SPECIFICATIONS........September 15, 1997
LIFE-COMM, ALLMERICA FINANCIAL AND TRANSAMERICA
INTERFACE SYSTEMS PROGRAMMING AND SYSTEM TESTING.........October 3, 1997
BUSINESS ACCEPTANCE AND MODEL OFFICE TESTING.............December 5, 1997
IMPLEMENTATION OF OPERATIONAL PHASE......................December 8, 1997
<PAGE>
Schedule 2.01C To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company and Transamerica
Occidental Life Insurance Company, effective November 1, 1997.
SERVICE STANDARDS
<TABLE>
<CAPTION>
Service Standard
A. Underwriting
<S> <C>
Initial Underwriting Review........................................................................3 Business Days
Pending Underwriting Review........................................................................3 Business Days
Follow-Up..........................................................................................3 Business Days
Final Action.......................................................................................2 Business Days
B. Policy Administration
Premium Payments Applied....................................................98% Applied Within 1 Business Day
Fund Transfers/Reallocations Processed................................................98% Processed Within 1 Business Day
New Business*..............................................................98% Issued Within 2 Business Days
1035 Exchanges*.............................................................98% Mailed Within 3 Business Days
Loans/Partial Withdrawals.....................................................98% Processed Within 2 Business Days
Policy Changes (i.e. increases, decreases
reinstatements)*............................................................98% Processed Within 5 Business Days
Policy Surrenders.............................................................98% Processed Within 5 Business Days
Address Changes...............................................................95% Processed Within 5 Business Days
Beneficiary and Owner Changes.................................................95% Processed Within 5 Business Days
C. Customer Service
Average Speed to Answer.................................................................................20 Seconds
Abandonment Rate................................................................................................3%
Return Calls.........................................................................Within 3 Hours or as Promised
Correspondence............................................Letter to Inquirer within 5 Business Days or as Promised
Complaint Handling...............................................Acknowledge within 1 Business Day, Final Response
to be sent within a mutually acceptable time frame
intended to meet all state regulatory requirements
D. Death and Other Policy Claims......................................Policy claims will be processed within mutually
acceptable time frames intended to meet
all state regulatory requirements
</TABLE>
* Measured from date of Policy underwriting approval
<PAGE>
Schedule 12.20 To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company and Transamerica
Occidental Life Insurance Company, effective November 1, 1997.
Transamerica Marks and Names
Transamerica
Transamerica Occidental
Transamerica Occidental Life
The Pyramid Logo
<PAGE>
Schedule 3.01A To Product Development and Administrative Services Agreement
between First Allmerica Financial Life Insurance Company and Transamerica
Occidental Life Insurance Company ("Transamerica"), effective November 1, 1997.
1. LIFE-COMM III - Licensed by CSC Continuum, Inc.
2. Variable Product Administration System - Licensed by Douglas G. Draeseke
3. Triton Valuation System - Licensed by Price Waterhouse
4. R2 Reinsurance System - Licensed by The Actuarial Network
5. Life Underwriting System - Licensed by Lincoln National
6. Illustration - Allmerica Financial**
7. Asset Allocator - Allmerica Financial**
**Software that Allmerica Financial is developing specifically for Transamerica.
Transamerica understands and agrees that the source codes for this software
are proprietary to Allmerica Financial and will not be given to
Transamerica under any circumstances.
<PAGE>
LIST OF SCHEDULES
TO
PRODUCT DEVELOPMENT
AND ADMINISTRATIVE SERVICES AGREEMENT
Schedule 1.01 AFLIAC Policy Forms
Schedule 1.02 Policy Form Specifications
Schedule 2.01A Inventory of Services and Functions
Schedule 2.01B Policy Services - Project Schedule of Events
Schedule 2.01C Service Standards
Schedule 3.01A Computer System Software
Schedule 3.01B Functional Outline Documents
Schedule 3.02 Continuum Non-Disclosure and Non-Use Agreement
Schedule 12.20 Transamerica Marks and Names
<PAGE>
(10) Form of Application
<PAGE>
TA logo Home office: Administrative office:
Transamerica Occidental Variable Life Service Center
Life Insurance Company P.O. Box 8990
1150 South Olive Boston, MA 02266-8990
Los Angeles, CA 90015
Transamerica (product name)
Application for Modified
Single Premium Variable
Universal Life Insurance
Policy
Form number filename: NPag1V3.doc version as of: Monday Aug 31
Page number
Transamerica (Product Name) SPVUL
1 Owner Information if other than proposed insured.
Name (first, middle and last)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Street Address
- --------------------------------------------------------------------
- --------------------------------------------------------------------
City, State and Zip code
- --------------------------------------------------------------------
Social Security/ Tax ID Number Date of Birth (month/day/year)
/ /
- --------------------------------------------------------------------
Relationship to Proposed Insured
- --------------------------------------------------------------------
1a. Joint Owner Information if applicable
Name (first, middle and last)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Street Address
- --------------------------------------------------------------------
- --------------------------------------------------------------------
City, State and Zip code
- --------------------------------------------------------------------
Social Security Number Date of Birth (month/day/year)
/ /
- --------------------------------------------------------------------
Relationship to Proposed Insured
- --------------------------------------------------------------------
2 Proposed Insured Information
Name (first, middle and last)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Street Address
- --------------------------------------------------------------------
- --------------------------------------------------------------------
City, State and Zip code
- --------------------------------------------------------------------
Years at above address Date of Birth (month/day/year)
/ /
- --------------------------------------------------------------------
State of Birth Social Security Number
- --------------------------------------------------------------------
Sex (check one) Driver's License (State and
|_| Female |_| Male Number)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Daytime Telephone Number Best Time
to Call
( )
- -----.
|_| a.m. |_| p.m.
- --------------------------------------------------------------------
2b. Proposed Second Insured Information if applicable Name (first, middle and
last)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Street Address
- --------------------------------------------------------------------
- --------------------------------------------------------------------
City, State and Zip code
- --------------------------------------------------------------------
Years at above address Date of Birth (month/day/year)
/ /
- --------------------------------------------------------------------
State of Birth Social Security Number
- --------------------------------------------------------------------
Sex (check one) Driver's License (State and
|_| Female |_| Male Number)
- --------------------------------------------------------------------
Daytime Telephone Number Best Time
to Call
( )
- -----
|_| a.m. |_| p.m.
- --------------------------------------------------------------------
Relationship to Proposed Insured
- --------------------------------------------------------------------
3 Beneficiary Information
Name of Primary Beneficiary Relationship to Proposed
Insured
- --------------------------------------------------------------------
Street Address, City, State and Zip Social Security/ Tax ID
code Number
- --------------------------------------------------------------------
Name of Contingent Beneficiary Relationship to Proposed
Insured
- --------------------------------------------------------------------
Street Address, City, State and Zip Social Security/ Tax ID
code Number
- --------------------------------------------------------------------
4Investment Tool Selection (Optional)
You may elect either the Automatic Account Rebalancing (AAR) option or the
Dollar Cost Averaging (DCA) option.
4a. |_| I elect AAR
You may have value in up to 20 sub-accounts. The minimum allocation per
sub-account is 5%, and the total must equal 100%. The Fixed Account is not
included in transfers under the AAR option. Indicate allocations in Section 5b
under AAR.
Select the frequency of AAR transfers (choose one):
|_| Quarterly |_| Semi-annually |_| Annually
4b. |_| I elect DCA
For each sub-account option to which funds should be transferred, indicate the
dollar amount per transfer. You may not transfer to the "source account" or to
the Fixed Account under the DCA option.
Indicate allocations in Section 5b, under DCA. Select your DCA "source account"
(choose one):
|_| Money Market |_| Fixed Account Select the frequency of
DCA transfers (choose one):
|_| Monthly |_| Quarterly |_| Semi-annually
Amount per transfer from the "source account": $___________.
(Minimum amount $100.)
5 Allocations Whole numbers only.
5a. Payments You may allocate payments to as many as 20 sub-accounts, plus the
Fixed Account. The minimum allocation for each elected allocation is 5% and the
total must equal 100%. Indicate the allocation in Section 5b under Payment.
5bInvestment Option Percentage (%)
($)
Payment AAR DCA
AIM V.I. Capital Appreciation _______ ______ ______
AIM V.I. Growth & Income _______ ______ ______
AIM V.I. International Equity _______ ______ ______
Alger American Income & Growth _______ ______ ______
Alliance VPF Growth & Income _______ ______ ______
Alliance VPF Premier Growth _______ ______ ______
Dreyfus VIF Capital _______ ______ ______
Appreciation _______ ______ ______
Dreyfus VIF Small Cap _______ ______ ______
Janus Aspen Balanced _______ ______ ______
Janus Aspen Worldwide Growth _______ ______ ______
MFS VIT Emerging Growth _______ ______ ______
MFS VIT Growth with Income _______ ______ ______
MFS VIT Research _______ ______ ______
Morgan Stanley UF Fixed Income _______ ______ ______
Morgan Stanley UF High Yield _______ ______ ______
Morgan Stanley UF Int'l Magnum _______ ______ ______
OCC Accumulation Trust Managed _______ ______ ______
OCC Accumulation Trust Small _______ ______ ______
Cap _______ ______ ______
Transamerica VIF Aggressive _______ ______ ______
Growth _______ ______ ______
Transamerica VIF Balanced _______ ______ ______
Transamerica VIF Growth _______ ______ ______
Transamerica VIF Money Market _______ XXXXX XXXXX
----- -----
Transamerica VIF Small Company _______ _______ _______
Transamerica VIF Value _______ ______ ______
Fixed Account _______ ______ ______
_____________________________ 100% 100%
=============================
Total
<PAGE>
File name P2V2.DOC Created on: Monday Aug 31
6 Telephone Access
I (we) will automatically be able to transfer sub-account and/or Fixed Account
values and change the allocation of future investments by telephone or fax
unless I (we) check the box below. |_| I (we) do not accept the Telephone Access
privilege.
(Please review additional information in the Acknowledgements and
Signatures section).
7 Insurance
7a. Life insurance coverage requested $___________.
7b. Additional insurance benefits requested:
|_| Living Benefits Rider
|-| --------------------------------
7c. This application is for a standard class of risk unless
noted otherwise here: ________________________.
8 Payment Complete as applicable.
8a. Direct Payment
Enclosed is a check for the initial payment of $____________. I (we)
received a conditional receipt.
Please make check payable to:
Transamerica Occidental Life Insurance Company. Do not leave
payee blank or make payable to the representative.
8b. IRC 1035 Exchange
The initial payment will be transferred from another life insurance policy
pursuant to an IRC 1035 Exchange. The Transfer of Assets form(s) for IRC
Section 1035 Exchange is attached.
|_| Yes |_| No My existing policy has a loan and I want
to carry over that loan to this
contract.
If yes, my loan carry over amount is $__________. Approximate amount of
exchange is $__________.
(Transfer payment plus loan carry over, if applicable.)
---------------------------------
Name of transferring company.
-------------------------------------
Name of transferring company.
8c. Other Transfer Payment
My initial payment will be transferred from another Financial institution
(not an IRC 1035 Exchange).
----------------- ---------------
Name of transferring company. Approx. transfer
amount ($)
--------------------- -------------------
Name of transferring company. Approx. transfer
amount ($)
|_| Transfer of Assets form(s) is attached.
|_| Transfer of Assets form(s) has been sent to the
transferring company.
9 Replacement of Other Contracts
May insurance, including annuities, in any company be replaced
if the proposed policy is issued? If yes, list company name(s)
and policy number(s):
Proposed Insured
- ---------------------------------------
Proposed Second Insured
- ---------------------------------------
In sections 10-16 the Proposed Insured is the "Insured" and the Proposed Second
Insured is the "Second Insured".)
10 Insured and Second Insured Information 10a-10d 10a. Please provide your
employer's name, your occupation
and your general responsibilities:
Insured ______________________________
------------------------------------
Second Insured _________________________
------------------------------------
10b. Nicotine Usage
Have you used a nicotine product during the past 24 months?
Insured Second Insured
Cigarettes |_| Yes |_| No |_| Yes |_| No
Cigars |_| Yes |_| No |_| Yes |_| No
Pipes |_| Yes |_| No |_| Yes |_| No
Chewing tobacco |_| Yes |_| No |_| Yes |_| No
Other ____________ |_| Yes |_| No |_| Yes |_| No
Specify date last used: _________ _________
10c. Financial Information
Insured Second Insured
Annual earned income $ ________ $ _________
Annual unearned income $ ________ $ _________
Approximate net worth $ ________ $ _________
10d. Height/Weight Information
Insured Second Insured
Height _________ __________
Weight _________ __________
11 Simplified Underwriting - Health History During the past 10 years, have you
had, or been treated for:
Insured Second Insured
a. heart, liver or lung
disease or disorder |_| Yes |_| No |_| Yes |_| No
b. kidney disease
or disorder |_| Yes |_| No |_| Yes |_| No
c. high blood pressure
or stroke |_| Yes |_| No |_| Yes |_| No
d. diabetes or cancer |_| Yes |_| No |_| Yes |_| No
e. nervous or
psychological disorders |_| Yes |_| No |_| Yes |_| No
f. alcohol or drug abuse |_| Yes |_| No |_| Yes |_| No
12 Simplified Underwriting - Immune Disorders During the past 10 years, have you
had a diagnosis of or treatment by a member of the medical profession for:
Insured Second Insured
a. an immune system
disorder |_| Yes |_| No |_| Yes |_| No
b. acquired immune
deficiency syndrome
(AIDS) |_| Yes |_| No |_| Yes |_| No
c. AIDS related complex
(ARC) |_| Yes |_| No |_| Yes |_| No
d. a sexually transmitted
disease. |_| Yes |_| No |_| Yes |_| No
Complete this page if: a) either the Insured or the Second Insured has
answered "yes" to any response in Section 11 or 12; or b)
the payment made is outside the simplified underwriting limits.
13 Primary Physician Information
If under care of more than one physician, indicate the other
physician's information in Section 17.
Insured
I have been diagnosed for:_____________________
- ----------------------------------------
I am currently being treated for: _______________
- ------------------------------------
Primary physician ____________________________ Health care provider
___________________________ Street address _______________________________ City,
state and zip code ________________________ Telephone (_____)_______________
Date of last visit _________________(MM/DD/YYYY)
Second Insured
I have been diagnosed for: __________________
- ------------------------------------
I am currently being treated for: _______________
- ------------------------------------
Primary physician ____________________________ Health care provider
___________________________ Street address _______________________________ City,
state and zip code ________________________ Telephone (_____)_______________
Date of last visit _________________(MM/DD/YYYY)
14 Avocation/Sports Information
During the past two years, have you participated in or, in the future, do you
intend to participate in:
Insured Second Insured
a. Aeronautics
(including
hang-gliding,
skydiving, ballooning, |_| Yes |_| No |_| Yes |_| No
etc.)?
b. Powered racing or competitive vehicles (including motorcycles, automobiles
and motor
boats, etc.)? |_| Yes |_| No |_| Yes |_| No
c. Recreational vehicles
over open terrain, trails, sand, snow or ice (including snowmobiles and
dirt bikes, etc.)?
|_| Yes |_| No |_| Yes |_| No
d. Skin or scuba diving, mountain climbing, competitive skiing?
|_| Yes |_| No |_| Yes |_| No
If yes to any above, complete Avocation/Sports Questionnaire.
15 Aviation Information
Insured Second Insured
a. During the past two years, have you flown as a trainee, pilot or crew
member?
|_| Yes |_| No |_| Yes |_| No
b. Do you intend to fly
in one of these
capacities in the
future? |_| Yes |_| No |_| Yes |_| No
If yes to any above, complete Aviation Questionnaire.
16 Driving History
Insured Second Insured
a. During the past ten years, have you had a motor vehicle license suspended
or revoked?
|_| Yes |_| No |_| Yes |_| No
b. During the past ten years, have you been convicted of driving while
intoxicated?
|_| Yes |_| No |_| Yes |_| No
c. During the past ten years, have you had more than one moving violation?
|_| Yes |_| No |_| Yes |_| No
17 Remarks Section
Complete section 17, if under care of more than one
Insured
====================================
====================================
====================================
====================================
- ------------------------------------
Second Insured
====================================
====================================
====================================
====================================
- ------------------------------------
<PAGE>
Filename: ACKNOWLE.DOC version as of: Monday Aug 31
Acknowledgements and Signatures
I (or "We", as applicable) acknowledge receipt of current Prospectuses
describing the Transamerica Occidental Life Insurance Company ("Company")
contract I (we) am (are) applying
for, and the underlying portfolios.
I (we) understand that any death benefits in excess of the face amount and any
contract value of the modified single payment variable universal life insurance
contract applied for may increase or decrease to reflect the investment
experience of the sub-accounts of the variable account. The contract value
allocated to the Fixed Account will accumulate interest at a rate set by the
Company that will not be less than the minimum guaranteed rate of 4% annually.
The contract value may decrease to the point where the contract will lapse and
provide no further death benefit without additional contract payments.
It is agreed that:
a) the application consists of this application form, and the medical
questionnaire, if any; b) The representations are true and complete to the best
of my (our) knowledge and belief; c) Except as provided in the conditional
receipt if issued with the same number as this application, no liability exists
and the insurance applied for will not take effect until the contract is
delivered and the premium is paid during the lifetime of the proposed insured(s)
and then only if the proposed insured(s) has (have) not consulted or been
treated by any physician or practitioner of any healing art nor had any tests
listed in the application since its completion; but if the payment is paid prior
to delivery of the Contract and a conditional receipt is delivered by the
registered representative, insurance will be effective subject to the terms of
the conditional receipt; and d) No registered representative or broker is
authorized to amend, alter, or modify the terms of this agreement.
Unless I (we) did not accept the Telephone Access privilege in Section 6 above,
I understand that the Company is authorized to honor telephone requests by me
(us) or individuals authorized by me (us), to transfer account values among
sub-accounts and the Fixed Account, and to change the allocation of future
payments. I (We) also understand that withdrawal of funds from my (our) contract
cannot be transacted by telephone or fax instructions.
I (We) understand that omissions or misstatements in the application could cause
an otherwise valid claim to be denied under any contract issued from the
application.
I (We) understand that the amount of insurance issued, if approved, will be the
amount determined by applying my (our) payment as 100% of the Guideline Single
Premium, unless I (we) requested a higher amount of insurance and the requested
amount is within the Company's underwriting guidelines.
I (We) understand that if an investigative consumer report is ordered in
connection with this application, I (we) may elect to be interviewed in
connection with the preparation of the report and, upon request, I (we) will be
provided with a copy of the report.
I (We) elect to be interviewed if an investigative consumer report is prepared.
Yes No
Signatures
- ----------------------------------------
Signature of Proposed
Insured
Date
- ----------------------------------------------
Signature of Proposed Second Insured (or name of minor
child) Date
- ----------------------------------------
Signed at
City
State
- ----------------------------------------------
Signature of Proposed Owner (if
applicable) Date
- ---------------------------------------------
Signature of Proposed Second Owner (if
applicable) Date
- ----------------------------------------
Signed at
City
State
If the owner is a corporation, an authorized officer, other than
the proposed insured(s), must sign as contract owner. Please
provide corporate title and the full name of the corporation:
Corporate Title _______________________________________
Corporation Name _____________________________________
For Financial Adviser Use Only
Does the Contract applied for replace an existing annuity or
life insurance contract? |_| Yes |_| No
If yes, attach replacement forms as required.
As Registered Representative, I certify witnessing the
signature of the applicant and that the information in this
application has been accurately recorded to the best of my
knowledge and belief. Based on the information furnished by
the proposed owner(s) or proposed insured(s) in this application, I certify that
I have reasonable grounds for believing the purchase of the Contract applied for
is suitable for the owner(s). I further certify that the prospectuses were
delivered and that no written sales materials other than those furnished by the
Company were used.
- -----------------------------------------------------
Signature of Registered
Representative
Date
- -----------------------------------------------------
Print Name of Registered Representative
Reg Rep # Share %
(-----)-----------------(-----)------------------------
Telephone Fax
- -----------------------------------------------------
TR Code (Indicate A, B, C or D, as applicable)
- -----------------------------------------------------
Signature of Registered
Representative
Date
- -----------------------------------------------------
Print Name of Registered Representative Reg
Rep # Share %
- -----------------------------------------------------
Signature of Registered Representative Date
- -----------------------------------------------------
Print Name of Registered Representative Reg
Rep # Share %
- -----------------------------------------------------
Name of Broker/Dealer Branch #
- -----------------------------------------------------
Branch Office Street Address City, State and Zip
Code
<PAGE>
(11) Procedures Memorandum
<PAGE>
Description of Issuance, Transfer and Redemption Procedures for Contracts
Offered by the Transamerica Occidental Life Separate Account VUL-2 of
Transamerica Occidental Life Insurance Company.
Pursuant to Rule 6e-3(T)(b)(12)(ii) under the Investment Company Act of 1940 The
Transamerica Occidental Life Separate Account VUL-2 of Transamerica Occidental
Life Insurance Company ("Separate Account") of Transamerica Occidental Life
Insurance Company ("Company") is registered under the Investment Company Act of
1940 ('1940 Act') as a unit investment trust. Within the Separate Account are
twenty-four sub-accounts. Procedures apply equally to each sub-account and for
purposes of this description are defined in terms of the Separate Account,
except where a discussion of both the Separate Account and the individual
sub-accounts is necessary. Each sub-account invests, respectively, in shares of
a corresponding portfolio of the Separate Account. The investment experience of
a sub-account of the Separate Account depends on the market performance of its
corresponding portfolio. Although modified single payment variable life
insurance Contracts funded through the Separate Account may also provide for
fixed benefits supported by the Company's General Account, this description
assumes that payments are allocated exclusively to the Separate Account and that
all transactions involve only the sub-accounts of the Separate Account, except
as otherwise explicitly stated herein.
I. "PUBLIC OFFERING PRICE": PURCHASE AND RELATED TRANSACTIONS --
SECTION 22(d) AND RULE 22C-l
This section outlines Contract provisions and administrative procedures which
might be deemed to constitute, either directly or indirectly, a "purchase"
transaction. Because of the insurance nature of the Contracts, the procedures
involved necessarily differ in certain significant respects from the purchase
procedures for mutual funds and annuity plans. The chief differences revolve
around the structure of the cost of insurance charges and the insurance
underwriting process. Certain Contract provisions, such as reinstatement and
loan repayment, do not result in the issuance of a Contract but require certain
payments by the Contract Owner and involve a transfer of assets supporting
Contract reserve into the Separate Account.
a. INSURANCE CHARGES AND UNDERWRITING STANDARDS
The Contracts are designed as modified single payment variable life insurance
polices. The total of all payments paid can never exceed the then current
maximum payments determined by Internal Revenue Service rules. If at any time a
payment is paid which would result in total payments exceeding the current
maximum payment limitations, the Company will return the amount in excess of
such maximums to the Contract Owner. If the Guaranteed Death Benefit Rider is
not in effect on the Contract, the Contract will remain in force so long as the
Contract Value less surrender charges and less any outstanding debt is
sufficient to pay certain monthly charges imposed in connection with the
Contract. Cost of insurance charges for the Contracts will not be the same for
all Contract Owners. The insurance principle of pooling and distribution of
mortality risks is based upon the assumption that each Contract Owner pays a
cost of insurance charge commensurate with the Insured's mortality risk, which
is actuarially determined based upon factors such as age and health. In the
context of life insurance, a uniform mortality charge (the "cost of insurance
charge") for all Insureds would discriminate unfairly in favor of those Insureds
representing greater mortality risks to the disadvantage of those representing
lesser risks. Accordingly, there will be a different "price" for each actuarial
category of Contract Owners because different cost of insurance rates will
apply. Accordingly, while not all Contract Owners will be subject to the same
cost of insurance rate, there will be a single "rate" for all Insureds in a
given actuarial category. The Contracts will be offered and sold pursuant to the
Company's underwriting standards and in accordance with state insurance laws.
Such laws prohibit unfair discrimination among Insureds, but recognize that
payments must be based upon factors such as age, health and occupation. Tables
showing the maximum cost of insurance charges will be delivered as part of the
Contract.
b. APPLICATION AND INITIAL PAYMENT PROCESSING
Payments are payable only to the Company, and may be mailed to the Variable Life
Service Center or, for the initial payment at the time of application or
delivery of the Contract, paid through an authorized agent of the Company. All
payments are credited to the Separate Account or the Fixed Account (a part of
our General Account) as of date of receipt at the Variable Life Service Center.
The Contract requires a single payment of at least $10,000 on or before the date
of issue. The initial payment is used to determine the face amount of the
Contract, by treating the initial payment as equal to 100% of the guideline
single premium, except as provided below. The Contract Owner also indicates the
desired face amount of insurance coverage on the application. If we approve the
application and the face amount specified exceeds 100% of the guideline single
premium for the amount of the payment, the application will be amended and a
Contract with a higher face amount will be issued. If we approve the application
and the face amount specified is less than 80% of the guideline single premium
for the amount of the payment, the application will be amended and a Contract
with a lower face amount will be issued.
Additional payments of at least $10,000 may be made as long as the total
payments do not exceed the maximum payment specified in the Contract. The total
of all payments can never exceed the then-current maximum payment limitation
determined by Internal Revenue Service rules. Where total payments would exceed
the current maximum payment limits, the Company will only accept that part of a
payment which will make total payments equal the maximum. The Company will
return any part of a payment that is greater than that amount. However, the
Company will accept a payment needed to prevent Contract lapse during a contract
year. We may require evidence of insurability prior to accepting any additional
payments which would increase the death benefit.
Upon receipt of a completed application from a prospective Contract Owner, the
Company will follow certain insurance underwriting procedures designed to
determine whether the proposed Insured is insurable. This process may involve
such verification procedures as medical examinations and may require that
further information be provided by the proposed Contract Owner before a
determination can be made. A Contract cannot be issued until this underwriting
procedure has been completed.
If at the time of application a prospective Contract Owner makes a payment of at
least $10,000 and which is also at least 80% of the guideline single premium
required for the amount of insurance requested, the Company will provide fixed
conditional insurance in the amount of insurance applied for, up to a maximum of
$250,000, subject to all the conditions of the conditional receipt, including
that the Insured is insurable according to our underwriting rules. If the
application is approved, the Contract will be issued as of the date of the
underwriting approval. If the prospective Contract Owner does not wish to make
any payment until the Contract is issued, upon delivery of the Contract the
Company will require payment of sufficient payment to place the insurance
in-force.
Pending completion of insurance underwriting and Contract issuance procedures,
the initial payment will be held in the Fixed Account. If the application is
approved and the Contract is issued and accepted, the initial payment held in
the Fixed Account will be credited with interest not later than the date of
receipt of the payment at the Company's Variable Life Service Center. Not later
than two days after underwriting approval of the Contract, the amounts held in
the Fixed Account will be allocated to the sub-accounts according to Contract
Owner's instructions. However, if the contract is issued in a "full refund"
state, the sub-account investments will initially be allocated to the Money
Market sub-account and thereafter transferred according to the Contract Owner's
instructions at the end of four calendar days plus the free look period
(generally 10 days, but longer in some circumstances). Amounts remaining in the
Fixed Account will continue to be credited interest from date of receipt of the
payment at the Variable Life Service Center. If a Contract is not issued, the
payments will be returned to the Contract Owner without interest.
These processing procedures are designed to provide insurance, starting with the
date of the application, to the proposed Contract Owner in connection with
payment of the initial payment and will not dilute any benefit payable to any
existing Contract Owner. Although a Contract cannot be issued until the
underwriting process has been completed, the proposed Contract Owner will
receive immediate insurance coverage, subject to all the conditions of the
conditional receipt, if the proposed Contract Owner has paid an initial payment
and the Insured proves to be insurable. If the initial payment is not paid with
the application, the insurance coverage under the Contract will not begin until
the Contract is delivered to the Contract Owner while the Insured is alive and
the initial payment is paid to the Company. The Company will require that the
Contract be delivered within a specific delivery period to protect itself
against anti-selection by the prospective Contract Owner resulting from a
deterioration of the health of the proposed Insured.
c. PAYMENT ALLOCATIONS
The Contract Owner may allocate payments among the Fixed Account and among up to
twenty of the sub-accounts of the Separate Account. The amount allocated to each
sub-account and to the Fixed Account may not be less than 5% of the total
payment without our consent and may only be allocated in whole percentages. Each
sub-account of the Separate Account invests its assets in shares of a
corresponding portfolio. Purchases and redemptions of such shares are made at
net asset value, with no deduction for sales load.
Payments allocated to a sub-account, transfers to that sub-account, and reserve
adjustment transfers, if any, will be netted as of each valuation date against
amounts withdrawn from the sub-account in connection with Contract surrenders,
partial withdrawals, transfers, and death benefits, as well as the asset charge
and amounts paid to the Company in lieu of taxes, if any. A net purchase or sale
of portfolio shares will be made for a sub-account at net asset value. All
income, dividends and realized capital gain distributions of a portfolio will be
reinvested in shares of the respective portfolio at net asset value. Valuation
dates currently occur on each day on which the New York Stock Exchange is open
for trading, and on such other days where there is a sufficient degree of
trading in a portfolio's securities such that the current net asset value of the
sub-accounts may be materially affected.
The Contract Owner may change the allocation of payments without charge at any
time by providing written notice to the Variable Life Service Center. The change
will be effective as of the date of receipt of the notice at the Variable Life
Service Center. The Contract Owner may transfer amounts among all of the
sub-accounts and the Fixed Account, subject to certain restrictions. At no time,
however, may the Contract Owner have value in more than 20 sub-accounts, plus
the Fixed Account.
d. REPAYMENT OF LOAN
The Contract Owner may borrow money secured by Contract Value. The total amount
the Contract Owner may borrow is the loan value. The loan value is 90% of the
Contract Value minus any surrender charges. The minimum loan is $1,000. The
maximum loan is the loan value minus any outstanding loans. The Company will
usually pay the loan within seven days after the Company receives a written
request for the loan.
The Company will allocate the loan among the sub-accounts and the Fixed Account
according to the Contract Owner's instructions. If the Contract Owner does not
make an allocation, the Company will make a pro-rata allocation among the
sub-accounts and Fixed Account. The Company will transfer Contract Value in each
sub-account, equal to the Contract loan amount, to the Fixed Account. The
Company will not count this transfer as a transfer subject to the transfer
charge, described below. Contract Value equal to the outstanding loan amount
will earn monthly interest in the Fixed Account at an annual rate of at least
4.0%.
Contract loans will permanently affect the Contract Value and surrender value,
and may permanently affect the death benefit. The effect could be favorable or
unfavorable, depending on whether the investment performance of the sub-accounts
is less than or greater than the interest credited to the Contract Value in the
Fixed Account that secures the loan. A loan made under the Contract may be
repaid with an amount equal to the original loan plus loan interest.
When a loan is made, the Company will transfer from each sub-account of the
Separate Account to the Fixed Account an amount of that sub-account's Contract
Value equal to the loan amount allocated to the sub-account. Since the Company
will credit such assets with interest at a rate which is below the interest rate
charged on the loan, the difference will be retained by the Company to cover
certain expenses and contingencies.
Upon repayment of debt, the Company will reduce the Contract Value in the Fixed
Account attributable to the loan and transfer assets supporting corresponding
reserves to the sub-accounts according to the Contract Owner's instruction or,
if no instructions are provided, according to the payment allocation percentages
then in effect. Loan repayments allocated to the Separate Account cannot exceed
Contract value previously transferred from the Separate Account to secure the
debt.
e. PREFERRED LOAN OPTION - Any portion of the outstanding loan that represents
earnings in the Contract, a loan from an exchanged life insurance policy that
was as carried over to the Contract, or the gain in the exchanged life insurance
policy that was carried over to the Contract may be treated as a preferred loan.
The available percentage of the gain carried over from an exchanged policy less
any policy loan carried over which will be eligible for preferred loan treatment
is as follows:
- --------------------- ------------------ ------------------ -----------------
Beginning of Unloaned Gain Beginning of Unloaned Gain
Contract Year Available Contract Year Available
- --------------------- ------------------ ------------------ -----------------
- --------------------- ------------------ ------------------ -----------------
1 0% 7 60%
- --------------------- ------------------ ------------------ -----------------
- --------------------- ------------------ ------------------ -----------------
2 10% 8 70%
- --------------------- ------------------ ------------------ -----------------
- --------------------- ------------------ ------------------ -----------------
3 20% 9 80%
- --------------------- ------------------ ------------------ -----------------
- --------------------- ------------------ ------------------ -----------------
4 30% 10 90%
- --------------------- ------------------ ------------------ -----------------
- --------------------- ------------------ ------------------ -----------------
5 40% 11+ 100%
- --------------------- ------------------ ------------------ -----------------
- --------------------- ------------------ ------------------ -----------------
6 50%
- --------------------- ------------------ ------------------ -----------------
The guaranteed annual interest rate credited to the Contract Value securing a
preferred loan will be at least 5.5%.
Interest on all loans under the Contract - whether the loan is treated as a
preferred loan or not --accrues daily at the annual rate of 6.0%.Interest is due
and payable in arrears at the end of each Contract year or for as short a period
as the loan may exist. Interest not paid when due will be added to the
outstanding loan by transferring Contract Value equal to the interest due to the
Fixed Account. The interest due will bear interest at the same rate.
f. TERMINATION AND REINSTATEMENT
If on a monthly processing date (first day of a Contract month) the surrender
value is insufficient to cover the monthly deductions due, or if Contract debt
exceeds the Contract value less surrender charges, the Company will notify the
Contract Owner and any assignee of record. The Contract Owner will then have a
grace period of 62 days, measured from the date the notice is mailed, to make
sufficient payments to prevent termination. Failure to make a sufficient payment
within the grace period will result in termination of the Contract without any
Contract Value. The death benefit payable during the grace period will be
reduced by any overdue charges. If the Insured dies during the grace period, the
net death benefit will still be payable, but any monthly deductions due and
unpaid through the Contract month in which the Insured dies will be deducted
from the death benefit.
If the Contract has not been surrendered and the Insured is alive, the
terminated Contract may be reinstated within three years (or such later date as
required by state law) after the date of default and before the final payment
date (or, before the maturity date if the outstanding loan exceeded the Contract
Value less the surrender charges). The Contract may be reinstated by submitting
the following to the Company: (1) a written application for reinstatement; (2)
evidence of insurability satisfactory to the Company; and (3) a payment that is
large enough (a) to cover the cost of all contract charges that were due and
unpaid during the grace period, (b) to keep the contract in force for three
months, and (c) to reinstate any loan against the Contract that existed at the
end of the grace period. The Contract value on the date of reinstatement is: (1)
the payment paid to reinstate the Contract increased by interest from the date
the payment was received at the Company's Variable Life Service Center; plus (2)
an amount equal to the Contract value less debt on the date of default minus the
monthly deduction due on the date of reinstatement. The surrender charge on the
date of reinstatement is the surrender charge which was in effect on the date of
default.
g. CORRECTION OF MISSTATEMENT OF AGE
If the Insured's age or sex is not correctly stated in the Contract application,
the Company will adjust benefits under the Contract to reflect the correct age
and sex. The adjustment will be based upon the ratio of the maximum payment for
the Contract to the maximum payment for the Contract issued for the correct age
or sex. The Company will not reduce the Death Benefit to less than the guideline
minimum sum Insured. For a unisex Contract, there is no adjusted benefit solely
for misstatement of sex. If the Insured dies after the final payment date, there
will be no adjustment for misstatement of age or sex.
h. CONTESTABILITY
Except for fraud (unless such defense is not permitted under state law) or
non-payment of premiums, a Contract may not be contested after it has been in
force during the lifetime of the Insured for two years from the date of issue. A
contest is any action taken by us to cancel insurance or deny a claim based on
untrue or incomplete answers in the application for the Contract. If the
underwriting class is changed at the Contract Owner's request and we approve the
requested change, we cannot contest the change after it has been in force for
two years from its effective date and the Insured is alive. A reinstatement may
not be contested after two years from the effective date of the reinstatement
and the Insured is alive.
i. REDUCTION IN COST OF INSURANCE RATE CLASSIFICATION
By practice, the Company will reduce the insurance protection charge rate
classification for an outstanding Contract if new evidence of insurability
demonstrates that the Insured qualifies for a lower classification. After the
reduced rating is determined, the Contract Owner will pay a lower monthly cost
of insurance charge each month compared to the charge that would have been paid
under the prior classification.
II. "REDEMPTION PROCEDURE": SURRENDER AND RELATED TRANSACTIONS
The Contracts provide for the payment of monies to a Contract Owner or
beneficiary upon presentation of a Contract. Generally except for the payments
of death proceeds, the imposition of cost of insurance and administrative
charges, and the possible effect of a contingent surrender charge, the payee
will receive a pro rata or proportionate share of the Separate Account's assets,
within the meaning of the 1940 Act, in any transaction involving "redemption
procedures". The amount received by the payee will depend upon the particular
benefit for which the Contract is presented, including, for example, the
surrender value or net death benefit. There are also certain Contract provisions
(e.g., partial withdrawals or the loan privilege) under which the Contract will
not be presented to the Company but which will affect the Contract Owner's
benefits and may involve a transfer of the assets supporting the Contract
reserve out of the Separate Account. Any combined transactions on the same day
which counteract the effect of each other will be allowed. The Company will
assume the Contract Owner is aware of the possible conflicting nature of the
transactions and desires their combined result. If a transaction is requested
which the Company will not allow (e.g., a request for a decrease in face amount)
the Company will reject the whole transaction and not just the portion which
causes the disallowance. The Contract Owner will be informed of the rejection
and will have an opportunity to give new instructions.
a. FREE LOOK PRIVILEGE - The Contract provides for a free look period under the
Right to Cancel provision. The Contract Owner has the right to examine and
cancel the Contract by returning it to the Company or one of its representatives
on or before the tenth day (or such later date as may be required by state law)
after the Contract owner receives the Contract. If the Contract provides for a
full refund under its "Right to Cancel" provision (as may be required by state
law), the refund will be the entire payment. If the Contract does not provide
for a full refund (as provided by state law), the Contract Owner will receive
(1) amounts allocated to the Fixed Account; plus (2) the portion of Contract
Value in the sub-accounts; plus (3) all fees, charges and taxes which have been
imposed.
b. CONVERSION PRIVILEGE - During the first 24 Contract months after the date of
issue, subject to certain restrictions, the Contract Owner may convert the
Contract to a modified single payment fixed Contract by transferring all
Contract Value in the sub-accounts to the Fixed Account and by simultaneously
changing the allocation of future payments to the Fixed Account.
c. CHARGES AND DEDUCTIONS -- The following charges will apply to the Contract
under the circumstances described. Some of these charges apply throughout the
Contract's duration.
MONTHLY DEDUCTIONS - On the monthly processing date, the Company will deduct an
amount to cover charges and expenses incurred in connection with the Contract.
This monthly deduction will be deducted by subtracting values from the Fixed
Account accumulation and/or canceling units from each applicable sub-account on
a pro rata basis. As a result, the number of units cancelled in a sub-account
will be in the ratio of the portion of Contract Value in that sub-account to the
total Contract Value net of any outstanding loan. The amount of the monthly
deduction will vary from month to month. If the Contract Value is not sufficient
to cover the monthly deduction which is due, the Contract may lapse if the
Guaranteed Death Benefit Rider is not in effect on the Contract. No monthly
deductions will be taken after the final payment date or, in the case of the
Distribution Fee and the Tax Charge, after the end of ten Contract years. The
monthly deduction is comprised of the following charges:
- - Administration Charge: The Company imposes a monthly charge at an annual rate
of 0.30% of the Contract Value. This charge is to partially reimburse us for
administrative expenses incurred in the administration of the Contract. It is
not expected to be a source of profit.
- - Monthly Insurance Protection Charge: Immediately after the Contract is issued,
the death benefit will be greater than the payment. While the Contract is in
force, the death benefit will generally be greater than the Contract Value. To
help enable the Company to pay this excess of the death benefit over the
Contract Value, a monthly cost of insurance charge is deducted. This charge
varies depending on the type of Contract and the underwriting class. In no event
will the current deduction for the cost of insurance exceed the guaranteed
maximum insurance protection rates set forth in the Contract. These guaranteed
rates are based on the Commissioners 1980 Standard Ordinary Mortality Tables
(Age Last Birthday), Tobacco User or Non-Tobacco User (male rates are used for
unisex Contracts and Mortality Table D for second-to-die Contracts) and the
Insured's sex and age. The Tables used for this purpose set forth different
mortality estimates for males and females and for tobacco users and non-tobacco
users. Rates also vary depending on whether the Contract was issued based on
simplified underwriting criteria or, instead, was issued based on full
underwriting. Any change in the insurance protection rates will apply to all
Insureds of the same age, sex and underwriting class whose Contracts have been
in force for the same period. The underwriting class of an Insured will affect
the insurance protection rate. The Company currently places Insureds into
standard underwriting classes and non-standard underwriting classes. The
underwriting classes are also divided into two categories: tobacco user and
non-tobacco user. The Company will place Insureds under the age of 18 at the
date of issue in a standard or non-standard underwriting class. The Company will
then classify the Insured as a non-tobacco user when the Insured reaches the age
of 18.
- - Distribution Fee: During the first ten Contract years, the Company makes a
monthly deduction to compensate us for a portion of the sales expenses incurred
by us with respect to the Contracts. This charge is equal to 0.40% of the
Contract Value.
- - Tax Charge: During the first ten Contract years, the Company makes a monthly
deduction equal to 0.20% on an annual basis to partially compensate the Company
for state and local premium taxes, and federal income tax treatment of Deferred
Acquisition Costs. The effective state premium tax for the Company typically
ranges between 2.35% and 3.5% of payments received by us. Currently, rates from
between 0% and 3.5% in the various states and the District of Columbia. The
Company does not intend to profit from the payment tax portion of this charge.
DAILY DEDUCTIONS - The Company assesses each sub-account with a charge for
mortality and expense risks. Portfolio expenses are also reflected in the
Separate Account.
- - Mortality and Expense Risk Charge: The Company imposes a daily charge
equivalent to an annual rate of 0.80% of the average daily net asset value of
each sub-account.
- - Fund Expenses - The value of the units of the sub-accounts will reflect the
management fee and other expenses of the portfolios whose shares the
sub-accounts purchase. No charges are currently made against the sub-accounts
for federal or state income taxes. Should income taxes be imposed, the Company
may make deductions from the sub-accounts to pay the taxes.
SURRENDER CHARGE - The Contract's contingent surrender charge is a deferred
sales charge and an unrecovered payment tax charge. The deferred sales charge
partially compensates us for distribution expenses, including commissions to our
representatives, advertising and the printing of prospectuses and sales
literature. The unrecovered payment tax charge is designed to help reimburse us
for the unrecovered federal and state taxes the Company has paid.
- -------------- ------------- ----------- -------------
Contract Surrender Contract Surrender
Year* Charge Year* Charge
- -------------- ------------- ----------- -------------
- -------------- ------------- ----------- -------------
1 9.0% 6 4.0%
- -------------- ------------- ----------- -------------
- -------------- ------------- ----------- -------------
2 8.0% 7 3.0%
- -------------- ------------- ----------- -------------
- -------------- ------------- ----------- -------------
3 7.0% 8 2.0%
- -------------- ------------- ----------- -------------
- -------------- ------------- ----------- -------------
4 6.0% 9 1.0%
- -------------- ------------- ----------- -------------
- -------------- ------------- ----------- -------------
5 5.0% 10+ 0.0%
- -------------- ------------- ----------- -------------
* If a Contract is terminated and is later reinstated, the surrender charge on
the effective date of reinstatement is the surrender charge which was in effect
on the date of default. Subsequent surrender charges and contract years are
adjusted accordingly.
PARTIAL WITHDRAWAL COSTS - A contingent surrender charge may apply to any
partial withdrawal taken during the time that a surrender charge applies to the
Contract (the first nine Contract years, adjusted accordingly for any
reinstatements). However, in any Contract year, the Contract Owner may withdraw,
without a surrender charge, up to 10% of the Contract Value minus the total of
any prior free withdrawals in the same Contract year ("Free 10% Withdrawal.")
The right to make the Free 10% Withdrawal is not cumulative from Contract year
to Contract year. For example, if only 8% of Contract Value were withdrawn in
the second Contract year, the amount which could be withdrawn in future Contract
years would not be increased by the amount the Contract Owner did not withdraw
in the second Contract year.
Currently, there is no withdrawal transaction fee assessed for a partial
withdrawal taken. We reserve the right to impose a withdrawal transaction fee
equal to 2% of the amount withdrawn, not to exceed $25, on any partial
withdrawal taken. The fee is designed to offset the expense of processing the
partial withdrawal.
TRANSFER CHARGES - The first 18 transfers in a Contract year are free. After
that, the Company may deduct a transfer charge not to exceed $25 from amounts
transferred in that Contract year. If the Contract Owner applies for automatic
transfers, the first automatic transfer for the selected option counts as one
transfer. Each future automatic transfer for the selected option is without
charge and does not reduce the remaining number of transfers that may be made
without charge.
Each of the following transfers of Contract Value is free and does not count as
one of the 18 free transfers in a Contract year:
- - A transfer from the Fixed Account to the Money Market sub-account during the
"free look" period on a Contract which provides for a full refund of payment in
the event the "free look" privilege is exercised; - A transfer from the Money
Market sub-account at the end of the "free look" period on a Contract which
provides for a full refund of payment in the event the "free look" privilege is
exercised; - A conversion within the first 24 months from date of issue; - A
transfer to the Fixed Account to secure a loan; A transfer from the Fixed
Account as a result of a loan repayment; and - A transfer due to a material
change in the investment policy of a portfolio.
d. DEATH BENEFIT
The death benefit through the final payment date is the greater of the face
amount or guideline minimum sum Insured. After the final payment date, the death
benefit is 101% of the Contract Value if the Guaranteed Death Benefit Rider is
not in effect. If the Guaranteed Death Benefit Rider is in effect, however, the
death benefit after the final payment date is the greater of (1) the face amount
as of the final payment date or (2) 101% of the Contract Value. The Company will
pay a net death benefit to the beneficiary within seven days after receipt at
its Variable Life Service Center of the Contract, due proof of death of the
Insured, and all other requirements necessary to make payment. For Second-to-Die
Contracts, the net death benefit is payable on the death of the last surviving
Insured; there is no net death benefit payable on the death of the first Insured
to die.
The Company will normally pay the net death benefit within seven days of
receiving due proof of the Insured's death, but the Company may delay payment of
net death benefits. The beneficiary may receive the net death benefit in a lump
sum or under a benefit payment option, unless the benefit payment option has
been restricted by the Contract Owner. Before the final payment date, the net
death benefit is the death benefit minus any outstanding loan, rider charges and
monthly deductions due and unpaid through the Contract month in which the
Insured dies, as well as any partial withdrawals, applicable surrender charges,
and withdrawal transaction fees. After the final payment date, if the Guaranteed
Death Benefit Rider is effective on the Contract, the net death benefit is the
death benefit minus any outstanding loan through the month in which the Insured
dies. If the Guaranteed Death Benefit Rider is not in effect on the Contract,
then the net death benefit after the final payment date is the death benefit
minus any outstanding loan through the month in which the Insured dies, as well
as any partial withdrawals, applicable surrender charges, and withdrawal
transaction fees. In most states, the Company will compute the net death benefit
on the date it receives due proof of the Insured's death.
The Company will make payment of the death proceeds out of its general account,
and will transfer assets from the Separate Account to the general account in an
amount equal to the reserve in the Separate Account attributable to the
Contract. The excess, if any, of the death proceeds over the amount transferred
will be paid out of the general account reserve maintained for that purpose.
GUARANTEED DEATH BENEFIT RIDER - If at the time of issue the Contract Owner has
paid a premium payment equal to 100% of the guideline single premium, a
Guaranteed Death Benefit Rider will be added to the Contract at no additional
charge. The Guaranteed Death Benefit Rider provides that (1) through the final
payment date, the Contract will not lapse; and (2) after the final payment date,
a guaranteed death benefit will be provided thereafter unless the Rider is
subsequently terminated. The death benefit and the net death benefit provided
under the Guaranteed Death Benefit Rider are described above under "DEATH
BENEFIT."
The Guaranteed Death Benefit Rider will terminate (and may not be reinstated) on
the first to occur of the following: - Foreclosure of the outstanding loan, if
any; or - A request for a partial withdrawal or loan after the final payment
date; or - Upon your written request.
GUIDELINE MINIMUM SUM INSURED - The guideline minimum sum insured is a
percentage of the Contract Value. The guideline minimum sum insured is computed
based on federal tax regulations to ensure that the Contract qualifies as a life
insurance contract and that the insurance proceeds generally will be excluded
from the gross income of the beneficiary.
<TABLE>
<CAPTION>
GUIDELINE MINIMUM SUM INSURED
Attained Age Percentage Attained Age Percentage
<S> <C> <C> <C> <C>
40 or less 265% 64 137%
41 258% 65 135%
42 251% 66 134%
43 244% 67 133%
44 237% 68 132%
45 230% 69 131%
46 224% 70 130%
47 218% 71 128%
48 212% 72 126%
49 206% 73 124%
50 200% 74 122%
51 193% 75-85 120%
52 186% 86 118%
53 179% 87 116%
54 172% 88 114%
55 165% 89 112%
56 161% 90 110%
57 157% 91 108%
58 153% 92 106%
59 149% 93 -95 105%
60 145% 96 104%
61 143% 97 103%
62 141% 98 102%
63 139% 99-115 101%
</TABLE>
e. TRANSFERS AMONG SUB-ACCOUNTS
The Contracts permit payments to be allocated either to the Fixed Account or to
the sub-accounts of the Separate Account. Each sub-account invests exclusively
in a corresponding investment portfolio. The Fixed Account is part of the
Company's general account. At any time, the Contract Owner may have value in up
to twenty sub-accounts, plus the Fixed Account. The first 18 transfers each
Contract year are free.
Subject to the consent of the Company, the Contract Owner may transfer amounts
among the sub-accounts and between the sub-accounts and the Fixed Account,
subject to certain restrictions. The Contract Owner may apply for automatic
transfers under the Dollar Cost Averaging (DCA) option from a "source account"
- -- either the Money Market sub-account or the Fixed Account -- to one or more of
the other sub-accounts. DCA transfers may not be made to the Fixed Account. DCA
transfers may not be made to the "source account." Therefore, if the Money
Market sub-account is the "source account", no transfers may be made under the
option to the Money Market sub-account. DCA transfers may be made at intervals
of one, three, or six months. The amount transferred from the "source account"
must be at least $100 per transfer, and all transfer amounts must be in whole
dollars. If the "source account" is reduced to $0 (zero), the automatic transfer
will cease. The Contract Owner must then reapply for any future automatic
transfers.
The Contract Owner may also apply for the Automatic Account Rebalancing (AAR)
option, in order to reallocate Contract Value among the sub-accounts at
intervals of three, six, or twelve months. The Fixed Account is not included in
the AAR option. The DCA and the AAR options may not be in effect at the same
time.
The first 18 transfers in a Contract year are free. Thereafter, the Company may
deduct a transfer charge not to exceed $25 from amounts transferred in that
Contract year. The first automatic transfer for each elected option counts as
one transfer toward the 18 free transfers allowed in each Contract year. Each
subsequent automatic transfer under the elected option is free and does not
reduce the remaining number of transfers that are free in a Contract year. Any
transfers made for a conversion privilege, Contract loan or material change in
investment policy will not count toward the 18 free transfers, nor will
transfers to and from the Money Market sub-account made during and at the end of
the "free look period" if the Contract provides for a full refund if the "free
look privilege" is exercised.
The transfer privilege is subject to the Company's consent. The Company reserves
the right to impose limits on transfers including, but not limited to, the:
- - Minimum amount that may be transferred;
- - Minimum amount that may remain in a sub-account following a transfer from that
sub-account; - Minimum period between transfers involving the Fixed Account; and
- - Maximum amounts that may be transferred from the Fixed Account.
f. SURRENDER FOR CASH VALUES
The surrender value of the Contract is equal to the Contract Value less any
outstanding loan and less any surrender charges. The Company will generally pay
the surrender value from the sub-accounts within seven days after receipt, at
its Variable Life Service Center, of the Contract and a signed request for
surrender (amounts payable from Fixed Account allocations may be postponed for
no more than 6 months). Computations with respect to the investment experience
of each sub-account will be made at the close of trading of the New York Stock
Exchange on each day in which the degree of trading in the corresponding
portfolio might materially affect the net return of the sub-account and on which
the Company is open. This will enable the Company to pay a net cash value on
surrender based on the next computed value after the surrender request is
received. For valuation purposes, the surrender is effective on the date the
Company receives the request at its Variable Life Service Center (although
insurance coverage ends the day the request is mailed). The Contract Value equal
to the value of all accumulations in the sub-accounts may increase or decrease
from day to day depending on the investment experience of the Separate Account.
Calculation of the Contract Value for any given day will reflect the actual
payments, expenses charged and deductions taken.
g. DEFAULT AND OPTIONS ON LAPSE
If the Guaranteed Death Benefit Rider is in effect on a Contract, the Contract
will not lapse. If the Guaranteed Death Benefit Rider is not in effect on a
Contract, the duration of insurance coverage depends upon the Contract Value
being sufficient to cover the monthly deductions plus loan interest accrued. If
the surrender value at the beginning of a Contract month is less than the
deductions for that month, a grace period of 62 days will begin. Whether the
Guaranteed Death Benefit Rider is in effect on a Contract or is not, however, a
grace period of 62 days will also begin if the outstanding loan ever exceeds the
Contract Value minus the surrender charges. Written notice will be sent to the
Contract Owner and any assignee on the Company's records stating that such a
grace period has begun and giving the amount of payment necessary to prevent
termination. If sufficient payment is not received during the grace period, the
Contract will terminate without value. Notice of such termination will be sent
to the owner and any assignee. If the Insured should die during the grace
period, an amount sufficient to cover the overdue monthly deductions and other
charges will be deducted from the death benefit.
<PAGE>
