PARTICIPATION AGREEMENT
AMONG
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO FUNDS GROUP, INC.
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
AND
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., INC.
THIS AGREEMENT, made and entered into as of this 22nd day of March, 1994
by and among TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY (hereinafter
"Transamerica"), a California life insurance company, on its own behalf and on
behalf of its Separate Account VA-5 (the "Account"); INVESCO VARIABLE INVESTMENT
FUNDS INC., a corporation organized under the laws of Maryland (hereinafter the
"Fund"); INVESCO FUNDS GROUP, INC. (hereinafter the "Adviser"), a Delaware
corporation; and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., INC., a California corporation
(hereinafter "Schwab").
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"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest 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 December 29, 1993 (File No. 812-8590),
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 6e3(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 Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws and 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 or will register 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
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of
Transamerica on November 10, 1993, to set aside and invest assets attributable
to the Contracts; and
WHEREAS, Transamerica has registered or will register 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 Adviser is authorized to sell such shares to unit
investment trusts such as the Account at net asset value; and
WHEREAS, Schwab will perform certain services in connection
with the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, Transamerica,
Schwab, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Adviser agrees to sell to Transamerica those shares of the
Designated Portfolios which the Account 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 any such order by 10:00 a.m. Eastern
time on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the SEC.
1.2 The Fund agrees to make shares of the Designated Portfolios available
for purchase at the applicable net asset value per share by Transamerica and the
Account on those days on which the Fund calculates its Designated Portfolios'
net asset value pursuant to rules of the SEC, 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 an 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 Adviser will not sell shares of the Designated
Portfolios to any other insurance company or separate account 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.
1.4 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. Requests for redemption
identified by Transamerica, or its agent, as being in connection with
surrenders, annuitizations, or death benefits under Contracts may be executed
within seven (7) calendar days after receipt by the Fund or its designee of the
requests for redemption. If permitted by an order of the SEC under Section 22(e)
of the 1940 Act, the Fund shall be permitted to delay sending redemption
proceeds to Transamerica beyond the foregoing deadlines, provided, however, that
the Account receives similar relief to defer paying proceeds to Contract Owners,
and further, that the Account is treated no less favorably than the other
shareholders of the Designated Portfolios. This Section 1.4 may be amended, in
writing, by the parties consistent with the requirements of the 1940 Act and
interpretations thereof. For purposes of this Section 1.4, 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 any such request of redemption by 10:00 a.m. Eastern time on
the next following Business Day.
1.5 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fun's shares may be sold to other insurance
companies (subject to Section 1.3 and Article VI hereof) and the cash value of
the Contracts may be invested in other investment companies.
1.6 Transamerica shall pay for Fund shares by 11:00 a.m. Eastern 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.
1.7 The Fund shall pay and transmit the proceeds of redemptions of Fund
shares by 11:00 a.m. Eastern time on the next Business Day after a redemption
order is received in accordance with Section 1.4 hereof. Payment shall be in
federal funds transmitted by wire and/or a credit for any shares purchased the
same day as the redemption.
1.8 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 will be recorded in an appropriate title for the Account
or the appropriate subaccount of the Account.
1.9 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 as are payable on the Portfolio shares 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 Business Day 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 Designated
Portfolio available to Transamerica on a daily basis as soon as reasonably
practical after the net asset value per share is calculate and shall use its
best efforts to make such net asset value per share available by 6:00 p.m.
Eastern time. If the Fund provides incorrect share net asset vale information
Transamerica shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct net asset value per shares (and, if
and to the extent necessary, Transamerica shall make adjustments to the number
of units credited and/or unit values for the Contracts for the periods
affected). Any error in the calculation or reporting of net asset value per
share, dividend or capital gains information greater than or equal to $.01 per
share 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 Adviser or the Fund shall
notify Schwab as soon as possible 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 has caused
Contractholders 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.
Transamerica will adjust the number of shares of the applicable sub-account of
each Contractholder and credit the appropriate amount of such payment to each
Contractholder. In no event shall Schwab or Transamerica be liable to
Contractholders for any such adjustments or underpayment amounts. If
Contractholders have received amounts in the excess of the amounts to which they
otherwise would have been entitled prior to an adjustment for an error,
Transamerica and Schwab , when requested by the Adviser or the Fund, will make a
good faith attempt to collect such excess amounts from the Contractholders. In
no event shall Schwab or Transamerica be liable to the Fund or the Adviser 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
prior to any issuance or sale thereof 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 all applicable federal
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 ▇▇▇▇ ▇▇▇.
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.
2.3 The Fund reserves the right to adopt a plan pursuant to Rule 12b-1
under the 1940 Act (a "12b-1 Plan") and to impose an asset-based or other charge
to finance distribution expenses as permitted by applicable law and regulation.
As of the date of this Agreement, the Fund has no 12b-1 Plan and does not,
directly or indirectly, impose any asset-based or other charge to finance
distribution expenses. 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 12b-1 Plan to finance distribution expenses.
2.4 The Fund represents and warrants that the investment policies, fees
and expenses of the Designated Portfolios are and shall at all times remain in
compliance with the insurance and other applicable laws for 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 of the Fund enumerated in Schedule C hereto, except as
to those items disclosed to Transamerica. Transamerica shall disclose such
items to the Department of Insurance of the State of California, and shall
promptly notify the Fund of any objections to any such items by the Department.
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 ▇▇▇▇ ▇▇▇.
2.6 The Adviser represents and warrants that it is and shall remain duly
registered under all applicable federal and state securities laws and that it
shall perform its obligations for the Fund in compliance in all material
respects with the laws of the State of Colorado and any applicable state and
federal securities laws.
2.7 The Fund and the Adviser represent and warrant that all of their
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.
2.8 Schwab represents and warrants that it has completed, obtained and
performed, in all material respects, all registrations, filings, approvals, and
authorizations, consents and examinations required by any government or
governmental authority as may be necessary to perform this Agreement. Schwab
does and will comply with all applicable laws, rules and regulations in the
performance of its obligations under this Agreement.
2.9 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 F.
2.10 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 ("the Code"), and that it will make every effort to maintain such
treatment and that it will notify the Adviser 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.
2.11 Transamerica represents and warrants that it will not purchase Fund
Shares with assets derived from tax-qualified retirement plans except
indirectly, through Contracts purchased in connection with such plans.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1 At least annually, the Adviser, shall provide Transamerica and Schwab
with as many copies of the Fund's current prospectuses for the Designated
Portfolios as Transamerica and Schwab may reasonably request for marketing
purposes. If requested by Transamerica in lieu thereof, the Adviser or Fund
shall provide such documentation (including a final copy for the new
prospectuses for the Designated Portfolios) and other assistance as is
reasonably necessary in order for Transamerica once each year (or more
frequently if the prospectuses for the Designated Portfolios are amended) to
have the prospectus for the Contracts and the Fund's prospectus for the
Designated Portfolios printed together in one document. The Fund and Adviser
agree 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 unless, in the reasonable judgment of the Fund's
legal counsel, such disclosure is required by law.
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
Contract Purchasers, 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 Schedule F.
3.3 The Fund shall provide Transamerica and Schwab with as many copies of
the SAI for the Designated Portfolios as each of them may reasonably request.
The Adviser (or the Fund) shall also provide such SAI to any owner of a contract
or prospective owner who requests such SAI (although it is anticipated that such
requests will be made to Schwab).
3.4 The Fund shall provide Transamerica with copies of its prospectus,
SAI, proxy material, reports stockholders and other communications to
stockholders for the Designated Portfolios in such quantity as Transamerica
shall reasonably require for distributing to Contract owners.
3.5 It is understood and agreed that, except with respect to information
regarding Transamerica or Schwab provided in writing by that party, neither
Transamerica nor Schwab are 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, Adviser or the Designated
Portfolios provided in writing by the Fund or Adviser, neither the Fund nor
Adviser are 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 instructions
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.
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. Transamerica shall fulfill its obligations under, and abide by
the terms and conditions of, the Shared Funding Exemptive Order, including
calculating voting privileges as described on Schedule G. The Fund agrees to
promptly notify Transamerica of any changes of interpretations or amendments 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 and Schwab shall furnish, or shall cause to be furnished,
to the Fund or its designee, a copy of each piece of sales literature or other
promotional material that Transamerica or Schwab, respectively, develops or
proposes to use 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 5 (five) Business Days after receipt of such material.
4.2 Transamerica and Schwab 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 n the registration statement or prospectus for the
Fund shares, a 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 or by the Adviser, except with the permission of the Fund or the
Adviser.
4.3 The Fund or Adviser shall furnish, or shall cause to be furnished, to
Transamerica and Schwab, a copy of each piece of sales literature or other
promotional material in which Transamerica and/or its separate account(s), or
Schwab is named at least 10 (ten) Business Days prior to its use. No such
material shall be used if Transamerica or Schwab objects to such use within 5
(five) Business Days after receipt of such material.
4.4 The Fund and the Adviser 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 material approved by Transamerica or its designee, except with the
permission of Transamerica.
4.5 The Fund and Adviser shall not give any information or make any
representations on behalf of or concerning Schwab, or use ▇▇▇▇▇▇'▇ name except
with the permission of Schwab.
4.6 The Fund will provide to Transamerica and Schwab 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 Designated Portfolios,
contemporaneously with the filing of such documents(s) with the SEC, NASD or
other regulatory authorities.
4.7 Transamerica or Schwab 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 the Account, contemporaneously with the filing of such document(s)
with the SEC, NASD, or other regulatory authority.
4.8 For purposes of this Article IV, the phrase "sales literature and 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 writer communication distributed or made generally available to
customers or the public, including brochures, circulars, research report, 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.
4.9 At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and/or representatives
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 and the Adviser shall pay no fee or other compensation to
Transamerica under this Agreement, and Transamerica shall pay no fee or other
compensation to the Fund or Adviser under this Agreement, although the parties
hereto will bear certain expenses in accordance with Schedule F, Articles III,
V, and other provisions of this Agreement. In the event that Transamerica or
Schwab agrees with any other mutual fund or investment adviser to any provision
for bearing expenses that is more favorable to such fund or investment adviser
than the provisions applicable to the Fund and the Adviser in this Agreement or
the Schedules hereto, this Agreement shall be automatically amended to give the
Fund and the Advisor the benefits of such more favorable provisions.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, as further provided in Schedule F. 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.
5.3 The parties shall bear the expenses of routine annual distribution of
the Fund's prospectus and distributing the Fund's proxy materials and reports to
owners of Contracts offered by Transamerica, as provided in Schedule F.
5.4 The Fund and Adviser acknowledge 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 Contract's
cash value between funds and portfolios. The Fund and Advisor agree to cooperate
with Transamerica and Schwab in facilitating the operation of the Account and
the Contracts as intended, including but not limited to cooperation in
facilitating transfers between Unaffiliated Funds.
5.5 Schwab agrees to provide certain administrative services, specified in
Schedule D hereto, in connection with the arrangements contemplated by this
Agreement. The parties acknowledge and agree that the services referred to in
this Section 5.5 are recordkeeping, shareholder communication, and other
transaction facilitation and processing, and related administrative services
only and are not the services of an underwriter or a principal underwriter of
the Fund and that Schwab is not an underwriter for the shares of the Designated
Portfolios, within the meaning of the 1933 Act or the ▇▇▇▇ ▇▇▇.
5.6 As compensation for the services specified in Schedule D hereto, the
Advisor agrees to pay Schwab a monthly Administrative Service Fee based on the
percentage per annum on Schedule D hereto applied to the average daily value of
the shares of the Designated Portfolios held in the Account with respect to
Contracts sold by Schwab. This monthly Administrative Service Fee is due and
payable before the 15th (fifteenth) day following the last day of the month to
which it relates.
ARTICLE VI. Diversification and Qualification
6.1 The Fund and Adviser represent and warrant that the Fund will at all
times sell its shares and invest it assets in such a manner as to ensure that
the Contracts will be treated as annuity contracts under the Code, and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund and Adviser 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 Advisor agree that shares of the Designated Portfolios will be sold
only to Participating Insurance Companies and their separate accounts.
6.2 No shares of any series or portfolio of the Fund will be sold to the
general public.
6.3 The Fund and Adviser 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 remain such qualification
(under Subchapter M or any successor or similar provisions) as long as this
Agreement is in effect.
6.4 The Fund or Adviser 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 is likely not to so comply in the future.
6.5 The Fund and Adviser 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 could result in the
Contracts not being treated as annuity contracts for federal income tax
purposes, which could have adverse tax consequences for Contract owners and
could also adversely affect Transamerica's corporate tax liability. The Fund and
Advisor also acknowledge that it is solely within their power and control to
meet those requirements. Accordingly, without in any way limiting the effect of
Sections 8.3 and 8.4 hereof and without in any way limiting or restricting any
other remedies available to Transamerica, the Adviser will pay all costs
associated with reasonable and appropriate corrections or responses to any
failure of the Fund or any Designated Portfolio to comply with Sections 6.1,
6.2, or 6.3 hereof. The parties shall use their best efforts to mitigate any
such costs, but acknowledge that the costs associated with a failure to comply
with sections 6.1, 6.2 or 6.3 could include, but may not be limited to, the
costs involved in creating, organizing, and registering a new investment company
as a funding medium for the Contracts and/or the costs of obtaining whatever
regulatory authorizations are required to substitute 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, reasonable fees and expenses of legal counsel
to Transamerica and any federal income taxes or tax penalties (or "toll charges"
or exactments or amounts paid in settlement) incurred by Transamerica with
respect to itself or owners of its Contracts in connection with any such
failure.
6.6 The Fund shall provide Transamerica or its designee with reports
demonstrating compliance with the aforesaid Section 817(h) diversification and
Subchapter M qualification requirements, at the time provided for and
substantially in the form attached hereto as Schedule E provided, however, that
providing such reports does not relieve the Fund or Adviser of their
responsibility for such compliance or of their liability for any non-compliance.
ARTICLE VII. Potential Conflicts and Compliance with Shared
Funding Exemptive Order
7.1 The Board will monitor the Fund for existence of any irreconcilable
material 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 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
to be 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, the Adviser or any
sub-adviser to any of the Portfolios (the "Independent Directors"), that an
irreconcilable material 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 and including: (1), withdrawing the assets allocable to some or
all of the separate accounts from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, including (but not limited to) another
Portfolio of the Fund, or submitting the question whether such segregation
should be implemented to a vote of all affected contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
7.4 If an irreconcilable material 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
irreconcilable material 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 Adviser and the Fund
shall continue to accept and implement orders by Transamerica for the purchase
(and redemption) of shares of the Fund.
7.5 If an irreconcilable material 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 irreconcilable material conflict as determined by a
majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Adviser 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.
Transamerica 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 and adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then Transamerica will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs
Transamerica in writing of the foregoing determination; provided, however, that
such withdrawal and termination shall be limited to the extent required by any
such irreconcilable material conflict as determined by a majority of the
Independent Directors.
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 mix 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 3.6, 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, its officers, each member of its Board, and the Adviser
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, expenses, 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 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 in writing to
Transamerica or Schwab by or on behalf of the Adviser 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
(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 a 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, expenses, 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 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 upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent). Notwithstanding
the foregoing, the failure of any Indemnified Party to give notice as provided
herein shall not relieve Transamerica of its obligations hereunder except to the
extent that Transamerica has been prejudiced by such failure to give notice. In
addition, any 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, as 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 Schwab
8.2(a). Schwab agrees to indemnify and hold harmless the Fund, its
officers, each member of its Board, and the Adviser (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of Schwab) 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 ▇▇▇▇▇▇'▇ dissemination of information regarding the
Fund that is both (A) materially incorrect and (B) that was not either
contained in the Fund's registration statement or sales literature or
provided in writing to Schwab, or approved in writing, by or on behalf
of the Fund or the Adviser; or
(ii) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in sales literature
for the 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, provided that this Agreement to indemnify shall not apply
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 or Schwab by or on
behalf of the Adviser 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
(iii) 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 Schwab or persons under its control) or wrongful conduct
of Schwab or persons under its control, with respect to the sale or
distribution of the Contracts; or
(iv) arise as a result of any failure by Schwab 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 Schwab in this Agreement or
arise out of or result from any other material breach of this
Agreement by Schwab,
as limited by and in accordance with the provisions of Sections
8.2(b) and 8.2(c) hereof.
8.2(b). Schwab 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 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.
8.2(c) Schwab 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 Schwab 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). Notwithstanding the
foregoing, the failure of any Indemnified Party to give notice as provided
herein shall not relieve Schwab of its obligations hereunder except to
the extent that Schwab has been prejudiced by such failure to give notice.
In addition, any failure to notify Schwab of any such claim not
relieve Schwab 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. Notwithstanding the foraging, the failure of any
Indemnified Party to give notice as provided herein shall not relieve Schwab, of
its obligations hereunder except to the extent that Schwab has been prejudiced
by such failure to give notice. In case any such action is brought against the
Indemnified Parties, Schwab shall be entitled to participate, at its own
expense, in the defense of such action. Schwab also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in the action.
After notice from Schwab to such party of ▇▇▇▇▇▇'▇ election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and Schwab will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.2(d). The Indemnified Parties will promptly notify Schwab 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.
8.3 Indemnification By the Adviser
8.3(a). The Adviser agrees to indemnify and hold harmless
Transamerica and Schwab and each of their directors and officers and each
person, if any, who controls Transamerica or Schwab within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 8.3) against any and all losses, claims, expenses, 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 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 Adviser or Fund by or on behalf of Transamerica or
Schwab 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 Adviser or persons under its control) or
wrongful conduct of the Fund or Adviser 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 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 or Schwab by or on behalf of
the Adviser or Fund; or
(iv) arise as a result of any failure by the Fund or Adviser 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
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or Adviser in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Adviser,
as limited by and in accordance with the provisions of Sections
8.3(b) and 8.3(c) hereof.
8.3(b). The Adviser 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 to Schwab or the Account, whichever is
applicable.
8.3(c). The 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). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Adviser of its obligations hereunder except to the extent that the
Adviser has been prejudiced by such failure to give notice. In addition, any
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 shall also 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.
8.3(d). Transamerica and Schwab agree 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 the Account.
8.4 Indemnification By the Fund
8.4(a). The Fund agrees to indemnify and hold harmless Transamerica
and Schwab and each of their directors and officers and each person, if any, who
controls Transamerica or Schwab within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.4)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may be
required to pay or may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expense (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
(including a failure to comply with diversification and other
qualification requirement specified in Article VI of this
Agreement); or
(ii) arise out of result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of
or result from any other material breach of this Agreement by the
Fund,
as limited by and in accordance with the provisions of Sections
8.4(b) and 8.4(c) hereof.
8.4(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement
or to Transamerica, Schwab, the Fund, the Adviser or the Account, whichever is
applicable.
8.4(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). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Fund of its obligations hereunder except to the extent that the Fund
has been prejudiced by such failure to give notice. In addition, any 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 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.
8.4(d). Transamerica and Schwab each agree promptly to notify the
Fund of the commencement of any litigation or proceeding against itself or any
of its respective officers or directors in connection with the Agreement, the
issuance or sale of the contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of California,
except the California Conflict of Laws provisions thereof.
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 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 an 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 or Schwab by the NASD, the SEC, the Insurance
Commissioner or like official of any state or any other
regulatory body regarding Transamerica's or ▇▇▇▇▇▇'▇ 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 exercised in good faith, that any such
administrative proceedings will have a material adverse
effect upon the ability of Transamerica or Schwab 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 Adviser by the NASD, the SEC, 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 Adviser to perform its obligations
under this Agreement; or
(f) at the option of Transamerica by written notice to the
Fund and the Adviser with respect to any Portfolio if
Transamerica reasonably believes that the Portfolio will
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 Adviser, if (i)
the Fund or Adviser, respectively, shall determine, in their
sole judgment reasonably exercised in good faith, that
either Transamerica or Schwab has suffered a material
adverse change in their business or financial condition or
is the subject of material adverse publicity and the
material adverse change or publicity will have a material
adverse impact on Transamerica's or ▇▇▇▇▇▇'▇ ability to
perform its obligations under this Agreement (ii) the Fund
or Adviser notifies Transamerica or Schwab, as appropriate,
of that determination and its intent to terminate this
Agreement, and (iii) after considering the actions taken by
Transamerica or Schwab and any other changes in
circumstances since the giving of such notice, the
determination of the Fund or Adviser shall continue to apply
on the sixtieth (60) day following the giving of that
notice, which sixtieth day shall be the effective date of
termination; or
(h) at the option of either Transamerica or Schwab, if (i)
Transamerica or Schwab, respectively, shall determine, in
its sole judgment reasonably exercised in good faith, that
either the Fund or the Adviser 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 the Fund's or Adviser's ability to perform its
obligations under this Agreement, (ii) Transamerica or
Schwab notifies the Fund or Adviser, as appropriate, of that
determination and its intent to terminate this Agreement,
and (iii) after considering the actions taken by the Fund or
Adviser and any other changes in circumstances since the
giving of such a notice, the determination of Transamerica
or Schwab shall continue to apply 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 Transamerica in the event that formal
administrative proceedings are instituted against Schwab by
the NASD, the Securities and Exchange Commission, or any
state securities or insurance department or any other
regulatory body regarding ▇▇▇▇▇▇'▇ duties under this
Agreement or related to the sale of the Fund's shares or the
Contracts, the operation of any Account, or the purchase of
the Fund shares, 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 Schwab to
perform its obligations related to the Contracts.
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. Furthermore,
(a) in the event that any terminating is based upon the provisions of
Article VII, or the provisions of Section 10.1(a), 10.1(g) or 10.1(h) of
this Agreement, the prior written notice shall be given in advance of the
effective date of termination as required by those provisions;
(b) in the event that any terminating is based upon the provisions of
Section 10.1(d), 10.1(e) or 10.1 i) of this Agreement, the prior written
notice shall be given at least sixty (60) days before the effective date of
termination; and
(c) in the event that any termination is based upon the provisions of
Section 10.1(b), 10.1(c) or 10.1 f), the prior written notice shall be
given in advance of the effective date of termination, which date shall be
determined by the party sending the notice.
10.3 Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Adviser shall, at the option of Transamerica,
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 reallocate 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 Contracts, all provisions of this
Agreement shall also survive and not be affected by any termination of this
Agreement.
10.5 Survival of Agreement. A termination by Schwab shall terminate this
Agreement only as to that party, and this Agreement shall remain in effect as to
the other parties; provided, however, that in the event of a terminating by
Schwab, the other parties shall have the option to terminate this Agreement upon
60 (sixty) days notice, rather than the one (1) year specified in Section 10.1
(a).
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 form time to time specify in writing
to the other party.
If to the Fund:
INVESCO Variable Investment Funds, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
If to Transamerica:
Transamerica Occidental Life Insurance Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President, Living Benefits Division
If to the Adviser:
INVESCO Funds Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
If to Schwab:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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
address 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.
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 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 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 to the date
specified below.
Transamerica:
TRANSAMERICA OCCIDENTAL LIFE INSURANCE
COMPANY
By its authorized officer,
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
Title:----------------------
Date: 3/22/94
----------------
Fund:
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Title:Treasurer
------------------
Date: 3/22/94
------------------
Adviser:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Title: Senior Vice President and Treasurer
-----------------------------------
Date: 3/22/94
--------------------
Schwab:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., INC.
By its authorized officer,
By: /s/▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------
Title:Vice President
---------------------
Date: 3/22/94
-------------------
Schwab Investment Advantage, A Variable Annuity
SCHEDULE A
Contracts Form Numbers
--------- ------------
Transamerica Occidental Life Insurance Company
Group Annuity Contract Form No. GNP-215-193
Dollar Cost Averaging Endorsement Form No. GPM-020-193
Automatic Payout Option Endorsement Form No. GPM-021-193
Systematic Withdrawal Option Endorsement Form No. GPM-022-193
Acceptance of Group Annuity Contract Form No. GNA-212-193
Variable Annuity Application Form No. GNA-213-193
Certificate of Participation Form No. GNC-37-193
▇▇▇ Endorsement Form No. GCE-020-193
Benefit Distribution Endorsement Form No. GCE-021-193
Dollar Cost Averaging Endorsement Form No. GCE-022-193
Automatic Payout Option Endorsement Form No. GCE-923-193
Systematic Withdrawal Option Endorsement Form No. GCE-024-193
First Transamerica Life Insurance Company
Group Annuity Contract Form No. FTGP-501-193
Dollar Cost Averaging Endorsement Form No. FTGE-003-193
Automatic Payout Option Endorsement Form No. FTGE-004-193
Systematic Withdrawal Option Endorsement Form No. FTGE-005-193
Acceptance of Group Annuity Contract Form No. FTGA-003-193
Variable Annuity Application Form No. FTGA-004-193
Certificate of Participation Form No. FTCG-101-193
▇▇▇ Endorsement Form No. FTCE-005-193
Benefit Distribution Endorsement Form No. FTCE-006-193
Dollar Cost Averaging endorsement Form No. FTCE-007-193
Automatic Payout Option Endorsement Form No. FTCE-008-193
Systematic Withdrawal Option Endorsement Form No. FTCE-009-193
Annuity Rate Table Endorsement Form No. FTCE-010-193
SCHEDULE B
Designated Portfolios
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
INVESCO VIF-High Yield Portfolio
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 at 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 regulations, 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 Adviser
(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
Adviser (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).
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 persons 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 ▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ 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)).
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, 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).
SCHEDULE D
Administrative Services
To be performed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc.
▇. ▇▇▇▇▇▇ will provide the properly registered and licensed personnel and
systems needed for all customer servicing and support - for both fund and
annuity information and questions including:
delivery of prospectuses - both fund and annuity;
entry of initial and subsequent orders;
transfer of cash to insurance company and/or funds;
explanations of fund objectives and characteristics;
entry of transfers between funds;
fund balance and allocation inquiries;
mail fund prospectuses;
▇. ▇▇▇▇▇▇ will calculate on a daily basis for each fund the number of shares and
the asset balance on which the fee is to be paid pursuant to this agreement.
Also provided will be a monthly summary of the reports, expressed in both shares
and dollar amounts.
▇. ▇▇▇▇▇▇ will communicate all purchase, withdrawal, and exchange orders it
receives form its customers to Transamerica who will retransmit them to each
fund.
D. For the services, Schwab shall receive a fee of 0.20% per annum applied to
the average daily value of the shares of the fund held by ▇▇▇▇▇▇'▇ customers,
payable by the Adviser directly to Schwab, such payments being due and payable
within 15 (fifteen) days after the last day of the month to which such payments
relates.
SCHEDULE E
Reports per Section 6.6
With regard to the reports relating to the quarterly testing of compliance
with the asset diversification requirements 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 the attached Forms E.1 and E.2 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 gross income requirements of Subchapter M of the Code, referred to
hereinafter as "RIC status", the Fund will provide the reports on the following
basis: the year-end report in the attached Form E.3 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 the
fiscal year ending the following December 31. The report will be provided under
cover of a letter from the Advisor 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, memorializes 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:
(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).
E.1
817(h) Test
Fund Name------------------ Date of Report------------------
First Second Third Fourth
Asset Diversification Test Quarter Quarter Quarter Quarter
--------------------------------------------------------------------------------
Total Assets
==================================================
Cash
--------------------------------------------------
Cash Items (incl.
Receivables)
--------------------------------------------------
Government Securities
--------------------------------------------------
Securities of Other RIC's
--------------------------------------------------
Subtotal
--------------------------------------------------
--------------------------------------------------
Percentage < or = to 55%
--------------------------------------------------
Fund Name------------------ Date of Report------------------
First Second Third Fourth
Asset Diversification Test Quarter Quarter Quarter Quarter
--------------------------------------------------------------------------------
Total Assets ======= ======= ====== =======
List fund's four largest
investment in descending
order of value
Name/Account
1. ======= ======= ====== =======
2. ======= ======= ====== =======
3. ======= ======= ====== =======
4. ======= ======= ====== =======
Percentages:
1/Total Net Assets ------- ------- ------ -------
1+2/Total Net Assets ------- ------- ------ -------
1+2+3/Total Net Assets ------- ------- ------ -------
1+2+3+4/Total Net Assets ------- ------- ------ -------
Test:
Is % at A< or = 55% ------- ------- ------ -------
Is % at B< or = 70% ------- ------- ------ -------
Is % at C< or = 80% ------- ------- ------ -------
Is % at D< or = 90% ------- ------- ------ -------
E.2
RIC Test
Fund Name------------------ Date of Report------------------
QUARTERLY ASSET DIVERSIFICATION TEST
1. Computations: 1st 2nd ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
a. Total net assets:
cash, receivable,
securities and total
other assets $------ $------ $------- $------
5% of TNA ======= ======== ========= ========
b. Qualifying assets,
sum of:
(1) Cash, receivables, $------ $------ $------- $------
govt. securities
and securities of
other regulated
Investment Companies
(2) Other securities
not including: (a)
securities of any one
issuer having a value
in excess of 5% of
line 1a; or (b)
securities representing
more than 10% of
the outstanding voting
securities of any one
issuer (See attached
for detail.) $------ $------ $------- $------
(3) Total qualifying
assets: sum of (1) +
(2) $------ $------ $------- $------
(4) Total nonqualifying $------ $------ $------- $------
(5) Total net assets:
(should equal a.)
sum of (3) + (4) $------ $------ $------- $------
Fund Name------------------ Date of Report------------------
2. Requirements (Answer Yes/No)
a. Are total qualifying
assets equal to or
greater than 50% of
total assets? $------ $------ $------- $------
b. Is not more than 25%
of total assets
invested in the
securities (other
than U.S. government
securities or the
securities of other
RICs) of any one
issuer? $------ $------ $------- $------
c. Are total non-
qualifying assets
over 25%? $------ $------ $------- $------
d. If yes, are securities
qualifying at date of
purchase? (See
attached for detail.) $------ $------ $------- $------
Fund Name------------------ Date of Report------------------
A. Securities of an one issuer having a value in excess of 5% of
line 1a:
QTR SECURITY MARKET VALUE % OF MKT VAL > 5% OF TNA
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B. Securities representing more than 10% of the outstanding
voting securities of any one issuer.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ Quarter
-------- -------- -------- --------
Fund Name------------------ Date of Report------------------
QUARTERLY ASSET DIVERSIFICATION TEST
Nonqualifying assets: client appraisals
a. Securities of issuer w/value > 5% of total asset
PRIOR MKT VALUE
PRIOR DAY'S AT TIME
ACQUISITION PURCHASES NAV OF LAST
QUARTER SECURITY DATE VALUE COST VALUE PURCHASE
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= + / =
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= + / =
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E.3
Fund Name------------------ Date of Report------------------
TAX COMPUTATION OF INVESTMENT
COMPANY FISCAL YEAR INCOME GROSS
INCOME TESTS (ANNUAL)
UTI
---------------------------------------------
BOOK TAX ADJ TAX BASIS
---------------------------------------------
1.Interest and dividend income
---------------------------------------------
2.Gross gains on stock or
securities held three months or
More (exclude each sale at a
loss).
---------------------------------------------
3. Gross gains on options,
futures or forward contracts
held for three months or more
related to stock or securities
(exclude each transaction
generating a loss).
---------------------------------------------
4. Gains from foreign
currencies which are directly
related to the Fund's principal
business of investing in stock
or securities (or options and
futures with respect to stock
or securities).
---------------------------------------------
5. Other income (describe)
related to Fund's business of
investing in stock or
securities.
---------------------------------------------
6. Other income (describe) NOT
related to Fund's business of
investing in stock or
securities.
---------------------------------------------
7. Gains from foreign
currencies NOT directly related
to the Fund's principal
business of investing in stock
or securities (or options and
futures with respect to stock
and securities) held Three
Months or MORE.
---------------------------------------------
8. Gains from foreign
currencies NOT directly related
to the fund's principal
business of investing in stock
or securities (or options and
futures with respect to stock
and securities) held Less than
Three Months.
---------------------------------------------
9. Gross gains form stock or
securities held Less than Three
Months (exclude each sale at a
loss).
---------------------------------------------
10. Gross gains on options,
futures and forward contracts
held for Less than Three Months
related to stock or securities
(exclude each transaction
generating a loss).
---------------------------------------------
11. Gross Income (Sum of 1-10)
---------------------------------------------
12. Requirements (1=YES 0=NO)
---------------------------------------------
a. Is other income (lines
6+7+8) not related to
Fund's business less
than or equal to 10 percent
of gross income (line 10)?
---------------------------------------------
b. Are gross gains on securities
held less than three months
(line 8+9+10) less than 30
percent of gross Income
(line 11)?
---------------------------------------------
SCHEDULE F
EXPENSES
1. The Fund and Transamerica will pay the costs of printing and/or
distributing copies of the documents based upon an allocation of costs
that reflects the Fund's share of the total costs determined according to
the number of pages of the parties' and other fund's respective portions
of the documents.
2. The Adviser and Transamerica will pay the costs of printing and/or
distributing copies of the documents based upon an allocation of costs
that reflects the Adviser's share of the total costs determined according
to the number of pages of the parties' and other funds' respective
portions of the documents.
================================================================================
RESPONSIBLE
ITEM FUNCTION PARTY
================================================================================
PROSPECTUS
--------------------------------------------------------------------------------
Annual Update Printing 1
Distribution 1
--------------------------------------------------------------------------------
New Sales:
Marketing (supply and distribution 2
of prospectuses to persons who
have not yet invested in a
Designated Portfolio)
Delivery of prospectuses to
satisfy legal prospectus delivery
requirements (e.g., copies sent 1
with confirmations of sales)
--------------------------------------------------------------------------------
Existing Supply quantities described in 1
Owners: Section 3.4
Distribution 1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Interim Updates
--------------------------------------------------------------------------------
New Sales: Marketing (supply and distribution 2
of prospectuses to persons who
have not yet invested in a
Designated Portfolio)
Deliver of propsectuses to satisfy 1
legal prospectus delivery
requriements (e.g., copies sent
with confirmations of sales)
If required by Participating PIC
Insurance Company (PIC)
If required by Schwab Schwab
--------------------------------------------------------------------------------
Existing Owners: If required by Fund or Adviser: Fund
If required by PIC: PIC
IF required by Schwab Schwab
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STATEMENTS OF Same as Prospectus Same
ADDITIONAL
INFORMATION
--------------------------------------------------------------------------------
PROXY MATERIALS Printing Fund
OF THE FUND
Distribution
Fund
(a) If required by law:
(B) If required by participating PIC insurance company:
(c) If required by Schwab Schwab
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ANNUAL REPORTS & Printing Fund
OTHER
COMMUNICATIONS
WITH SHAREHOLDERS Distribution 1
OF THE FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OPERATIONS OF All operations and related Fund
FUND expenses, including 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, the
preparation of all statements
and notices required by any
federal or state law and all
taxes on the issuance of the
Fund's shares, and all costs of
management of the business
affairs of the Fund.
--------------------------------------------------------------------------------
* Schwab will advise the Adviser and the Fund of the allocation of the foregoing
expenses among the parties as soon as possible after such allocations are
determined.
SCHEDULE G
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities of the
handling of proxies relating to the fund by the Adviser, the Fund and
Transamerica. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Transamerica" shall also include
the department or third party assigned by Transamerica to perform the steps
delineated below.
1. The number of proxy proposals is given to Transamerica by the Adviser
as early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Adviser will inform Transamerica of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, Transamerica will perform a "tape run,"
or other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Contract Owners") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status of
the Contract Owners' accounts of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. Transamerica will use its best efforts to call in
the number of Contract Owners to the Adviser, as soon as possible, but no
later than one week after the Record Date.
3. The Fund's Annual Report must be sent to each Contract Owner by
Transamerica either before or together with the Contract Owner's receipt
of a proxy statement. The Adviser will provide at least one copy of the
last Annual Report to Transamerica.
4. The text and format for the Voting Instruction cards ("Cards" or
"Card") is provided to Transamerica by the Fund. Transamerica shall
produce and personalize the voting Instruction cards. The Legal Department
of the Adviser ("Adviser Legal") 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:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due
to possible uncertainties relating to the proposals.)
5. During this time, Adviser Legal will develop and produce the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Insurance Fund for insertion into envelopes
(envelopes and return envelopes are provided and paid for by
Transamerica). Contents of envelope sent to Contract Owners by
Transamerica will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid) addressed to
Transamerica or its tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is a
small single sheet of paper that requests Contract Owners
to vote as quickly as possible and that their vote is
important. One copy will be supplied by the Fund.)
e. Cover letter - optional, supplied by Transamerica and
reviewed and approved in advance by Adviser Legal.
6. The above contents should be received by Transamerica approximately 3-5
business days before mail date. Individual in charge at Transamerica
reviews and approves the contents of the mailing package to ensure
correctness and completeness.
Copy of this approval sent to Adviser Legal.
7. Package mailed by Transamerica.
* The Fund must allow at least a 15-day solicitation time
to Transamerica as the shareowner. (A 5-week period is
recommended.) Solicitation time is calculated as calendar
days from (but not including) the meeting, counting
backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure.
9. If cards are mutilated, or for any reason are illegible or are
not signed properly, they are sent back to the Contract Owner
with an explanatory letter, a new Card and return envelope.
The mutilated or illegible Card is disregarded and considered
to be not received for purposes of vote tabulation. Such
mutilated or illegible Cards are "hand verified," i.e.,
examined as to why they did not complete the system. Any
questions on those Cards are usually remedied individually.
10. There are various control procedures used to ensure proper
tabulation of votes and accuracy of the 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.
11. The actual tabulation of votes is done in units which are 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.) Adviser Legal
must review and approve tabulation format.
12. Final tabulation in shares is verbally given by Transamerica to Adviser
Legal on the morning of the meeting not later than 10:00 a.m. Denver time.
Adviser Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
13. A certificate of Mailing and Authorization to Vote Shares will
be required from Transamerica as well as an original copy of
the final vote. Adviser Legal will provide a standard form for
each Certification.
14. Transamerica will be required to box and archive the Cards received from
the Contract Owners. In the event that any vote is challenged or is
otherwise necessary for legal, regulatory, or accounting purposes, Adviser
Legal will be permitted reasonable access to such Cards.
15. All approvals and "signing-off" may be done orally, but must
always be followed up in writing.
