PARTICIPATION AGREEMENT
AMONG
STEINROE VARIABLE INVESTMENT TRUST
XXXXX XXX & XXXXXXX INCORPORATED
FIRST TRANSAMERICA LIFE INSURANCE COMPANY
and
XXXXXXX XXXXXX & CO., INC.
This Agreement, made and entered into as of this lst day of
December, 1994 by and among FIRST TRANSAMERICA LIFE INSURANCE COMPANY
(hereinafter "First Transamerica"), a New York life insurance company,
on its own behalf and on behalf of its Separate Account VA-5 NLNY(the
"Account"); STEINROE VARIABLE INVESTMENT TRUST, a business trust
organized under the laws of Massachusetts (hereinafter the "Fund");
XXXXX XXX & FARNHAM INCORPORATED hereinafter the "Adviser"), a Delaware
corporation; and XXXXXXX XXXXXX & CO., INC., a New York 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 July 1, 1988 (File
No. 812-7044), granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the "1940 Act")
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by
variable annuity and variable life insurance separate accounts of life
insurance companies that may or may not be affiliated with one another
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and shares of the Portfolio(s) 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
WHEREAS, First 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 form 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 First Transamerica on September 28, 1993, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, First 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, First Transamerica intends to purchase shares in the
Portfolio(s) listed in Schedule B hereto, as it may be amended from time
to time by mutual written agreement (the "Designated Portfolio(s)"), on
behalf of the Account to fund the aforesaid Contracts, and the Fund 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 for the Fund and
Adviser in connection with the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Account also intends to purchase shares in other open-
end investment companies or series thereof not affiliated with the Trust
(the "Unaffiliated Funds") on behalf of the Account to fund the
Contracts; and
NOW, THEREFORE, in consideration of their mutual promises, First
Transamerica, Schwab, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to First Transamerica those shares of
the Designated Portfolio(s) 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, First 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 the applicable order by 9:30 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 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 Portfolio(s)
available for purchase at the applicable net asset value per share by
First Transamerica and the Account on those days on which the Fund
calculates its Designated Portfolio(s)' 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 Trustees of the Fund
(hereinafter the "Board") may refuse to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any
Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Board, acting
in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated Portfolio(s)
to any 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 First Transamerica's
request, any full or fractional shares of the Fund held by First
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. Request for redemption identified by First
Transamerica, or its agent, as being in connection with surrenders,
annuitizations, or death benefits under the Contracts, upon prior
written notice, 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
First 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, First 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 the applicable request for redemption by 9:30 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 Fund'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
Unaffiliated Funds.
1.6. First 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 First Transamerica
or the Account. Shares ordered from the Fund will be recorded in an
appropriate title for the Account or the appropriate sub-account of the
Account.
1.9. The Fund or its designee shall furnish same day notice (by
wire or telephone, followed by written confirmation) to First
Transamerica of any income dividends or capital gain distributions
payable on the Designated Portfolio(s)' shares. First 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. First Transamerica reserves the right to
revoke this election and to receive all such income, dividends and
capital gain distributions in cash. The Fund or its designee shall
notify First Transamerica by the end of the next following Business Day
of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Designated Portfolio available to First Transamerica on a daily basis as
soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share
available by 6:00 p.m. Eastern time. The Fund or its designee shall
notify First Transamerica by 5:45 p.m. Eastern time in the event that
the Fund cannot meet such 6:00 p.m. deadline. In such event the Fund
shall use its best efforts to make such value available as soon
thereafter as is practicable. If the Fund provides incorrect share net
asset value information, First Transamerica shall be entitled to an
adjustment to the number of shares purchased or redeemed to reflect the
correct net asset value per share (and, if and to the extent necessary,
First 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 shall be reported promptly upon
discovery to First Transamerica. Any error of a an amount less than
$0.01 per share shall be corrected in the next Business Day's net asset
value per share.
ARTICLE II. Representations and Warranties
2.1. First 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. First 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 applicable law (New York 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 0000 Xxx. 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 and to impose an asset-based or other charge to
finance distribution expenses as permitted by applicable law and
regulation. In any event, the Fund and Adviser agree to comply with
applicable provisions and SEC staff interpretations of the 1940 Act to
assure that the investment advisory or management fees paid to the
Adviser by the Fund are legitimate and not excessive. To the extent
that the Fund decides to finance distribution expenses pursuant to Rule
12b-1, the Fund undertakes to have a Board, a majority of whom are not
interested persons of the Fund, formulate and approve any plan pursuant
to Rule 12b-1 under the 1940 Act to finance distribution expenses.
2.4. The Fund represents and warrants that the investment
policies, fees and expenses of the Designated Portfolio(s) are and shall
at all times remain in compliance with the insurance and other
applicable laws of the State of New York 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 New York and all
applicable state insurance and securities laws. First Transamerica will
advise the Fund of any applicable changes in New York insurance law that
affect the Designated Portfolios, and the Fund will be deemed to be in
compliance with this Section 2.4 so long as the Fund complies with such
advice of First Transamerica. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only
if and to the extent deemed advisable by the Fund with the concurrence
of First Transamerica. 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 investment objectives, policies and
restrictions and the operation of the Fund enumerated in Schedule C
hereto, except as to those items disclosed with prior notice to First
Transamerica and not objected to by the Department of Insurance of the
State of New York.
2.5. The Fund represents and warrants that it is lawfully
organized and validly existing under the laws of the Commonwealth of
Massachusetts and that it does and will comply in all material aspects
with the 1940 Act.
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
Delaware 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 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, in all material
respects, with all applicable laws, rules and regulations in the
performance of its obligations under this Agreement.
2.9. The Fund will provide First Transamerica with as much advance
notice as is reasonably practicable of any material change affecting the
Designated Portfolio(s) (including, but not limited to, any material
change in its registration statement or prospectus affecting the
Designated Portfolio(s) and any proxy solicitation affecting the
Designated Portfolio(s) and consult with First 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 prospectus for the
Contracts. The Fund or Adviser agree to share equitably in expenses
incurred by First Transamerica as a result of actions taken by the Fund,
consistent with the allocation of expenses contained in Schedule F.
2.10. The Insurance Company 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 (the "Code"), as amended, and that it
will make every effort to maintain such treatment and that it will
notify the Fund immediately upon having a reasonably 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. First 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.
2.12. First Transamerica represents and warrants that it will not
transfer or otherwise convey shares of any Designated Portfolio, without
the prior written consent of the Fund, which consent shall not be
unreasonably withheld.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Fund or the Adviser shall provide
First Transamerica and Schwab with as many copies of the Fund's current
prospectus for the Designated Portfolio(s) as First Transamerica and
Schwab may reasonably request for marketing purposes (including
distribution to Contract owners with respect to new sales of a
Contract). If requested by First Transamerica in lieu thereof, the
Adviser or Fund shall provide such documentation (including a final copy
of the new prospectus for the Designated Portfolio(s)) and other
assistance as is reasonably necessary in order for First Transamerica
once each year (or more frequently if the prospectus for the Designated
Portfolio are amended) to have the prospectus for the Contracts and the
Fund's prospectus for the Designated Portfolio(s) printed together in
one document. The Fund and Adviser agree that the prospectus, and semi-
annual and annual reports for the Designated Portfolio(s) provided
pursuant to this Section 3.1 will described only the Designated
Portfolio(s) and will not name or describe any other portfolios or
series that may be in the Fund unless 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 Adviser or the Fund
shall provide First Transamerica with the Fund's SAI or documentation
thereof in such quantities and/or with expenses to be borne in
accordance with Schedule F hereof.
3.3. The Fund or the Adviser shall provide First Transamerica and
Schwab with as many copies of the Fund's SAI as each of them may
reasonably request. The Fund or the Adviser 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 First Transamerica with copies of its
prospectus, SAI, proxy material, reports to stockholders and other
communications to stockholders for the Designated Portfolio(s) in such
quantity as First Transamerica shall reasonably require for distributing
to Contract owners.
3.5. It is understood and agreed that, except with respect to
information regarding First Transamerica or Schwab provided in writing
by that party, neither First Transamerica nor Schwab are responsible for
the content of the prospectus or SAI for the Designated Portfolio(s).
It is also understood and agreed that, except with respect to
information regarding the Fund, Adviser or the Designated Portfolio(s)
provided in writing by the Fund or the 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, First Transamerica
shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Designated Portfolio shares in accordance with
instructions 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 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. First 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. First Transamerica's procedures
currently are in compliance with such requirements, as described in
Schedule G. The Fund agrees to promptly notify First 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 or trustees and with whatever rules the Commission may
promulgate with respect thereto. The Fund reserves the
right, upon 45 days prior written notice to First Transamerica and
Schwab, to take all actions, including but not limited to, the
dissolution, merger, and sale of all assets of the Fund or any
Designated Portfolio upon the sole authorization of the Board, to the
extent permitted by the laws of The Commonwealth of Massachusetts and
the 1940 Act.
ARTICLE IV. Sales Material and Information
4.1. First Transamerica and Schwab shall furnish, or shall cause
to be furnished, to the Fund or its designee, each piece of sales
literature or other promotional material that First 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. First 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 in the registration
statement or prospectus for the Fund shares, as such registration
statement and prospectus may be amended or supplemented from time to
time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its
designee 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 First Transamerica and Schwab, a copy of each piece of
sales literature or other promotional material in which First
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 First 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 First Transamerica or concerning
First 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 First Transamerica or its designee, except with the
permission of First Transamerica.
4.5. The Fund and Adviser shall not give any information or make
any representations on behalf of or concerning Schwab, or use Xxxxxx'x
name except with permission of Schwab.
4.6. The Fund will provide to First 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 Portfolio(s), contemporaneously with the
filing of such document(s) with the SEC or NASD or other regulatory
authorities.
4.7. First 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
or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone
or tape recording, videotape display, signs or billboards, motion
pictures, or other public media), sales literature (i.e., any written
communication distributed or made generally available to customers or
the public, including brochures, circulars, research reports, market
letters, form letters seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, 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 representative of the appropriate regulatory agencies, all
records, data and access to operating procedures that may be reasonably
requested in connection with compliance and regulatory requirements
related to this Agreement or any party's obligations under this
Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund and the Adviser shall pay no fee or other
compensation to First Transamerica under this Agreement, and First
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.
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 Portfolio(s)
are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale.
5.3. The parties shall bear the expenses of routine annual
distribution (mailing costs) of the Fund's prospectus and distribution
(mailing costs) of the Fund's proxy materials and reports to owners of
Contracts offered by First 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 Portfolio(s) and the Unaffiliated Funds, and to transfer
the Contract's cash value between funds and portfolios. The Fund and
Adviser agree to cooperate with First 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 communications, 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
Portfolio(s), within the meaning of the 1933 Act or the 0000 Xxx.
5.6. As compensation for the services specified in Schedule D
hereto, the Adviser 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
Portfolio(s) 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 its 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 [Section] 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 Adviser agree that shares of
the Designated Portfolio(s) 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
maintain such qualification (under Subchapter M or any successor or
similar provisions) as long as this Agreement is in effect.
6.4. The Fund or Adviser will notify First Transamerica
immediately upon having a reasonable basis for believing that the Fund
or any Portfolio has ceased to comply with the aforesaid Section 817(h)
diversification or Subchapter M qualification requirements or might not
so comply in the future.
6.5. The Fund and 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
would result in the Contracts not being treated as annuity contracts for
federal income tax purposes, which would have adverse tax consequences
for Contract owners and could also adversely affect First Transamerica's
corporate tax liability. The Fund and Adviser also acknowledge that it
is solely within their power and control to meet those requirements.
Accordingly, without in any way limiting the effect of Section 8.3
hereof and without in any way limiting or restricting any other remedies
available to First Transamerica, the Adviser will pay all costs
associated with or arising out of any failure, or any anticipated or
reasonably foreseeable failure, of the Fund or any Designated Portfolio
to comply with Sections 6.1, 6.2 or 6.3 hereof,
including all costs associated with reasonable and appropriate
corrections or responses to any such failure; such costs may include,
but are not 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, fees and expenses of legal counsel and
other advisors to First Transamerica and any federal income taxes or tax
penalties (or "toll charges" or exactments or amounts paid in
settlement) incurred by First Transamerica with respect to itself or
owners of its Contracts in connection with any such failure or
anticipated or reasonably foreseeable failure.
6.6. The Fund shall provide First Transamerica or its designee
with reports certifying compliance with the aforesaid Section 817(h)
diversification and Subchapter M qualification requirements, at the
times provided for and substantially in the form attached hereto as
Schedule E; provided, however, that providing such reports does not
relieve the Fund or Adviser of their responsibility for such compliance
or of their liability for non-compliance.
ARTICLE VII. Potential Conflicts and Compliance With Shared Funding
Exemptive Order
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretive 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 Designated Portfolio(s) 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 First
Transamerica if it determines that an irreconcilable material conflict
exists and the implications thereof.
7.2. First Transamerica will report any potential or existing
conflicts of which it is aware to the Board. First 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 First Transamerica to
inform the Board whenever contract owner voting instructions are
disregarded. Such responsibilities (other than the duty to report,
which is unqualified) shall be carried out by First 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 a material irreconcilable conflict exists, First
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 Designated Portfolio
and reinvesting such assets in a different investment medium, including
(but not limited to) another Designated Portfolio of the Fund, or
submitting the question whether such
segregation should be implemented to a vote of all affected contract
owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed
separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by First Transamerica to disregard contract owner voting
instructions and that decision represents a minority position or would
preclude a majority vote, First Transamerica may be required, at the
Fund's election, to withdraw the Account's investment in the Fund and
terminate this Agreement; provided, however; that such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
Independent Directors. Any such withdrawal and termination must take
place within six (6) months after the Fund gives written notice that
this provision is being implemented, and until the end of the effective
date of such termination the Fund shall continue to accept and implement
orders by First Transamerica for the purchase (and redemption) of shares
of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to First
Transamerica conflicts with the majority of other state regulators, then
First Transamerica will withdraw the Account's investment in the Fund
and terminate this Agreement within six months after the Board informs
First Transamerica in writing that it has determined that such decision
has created an irreconcilable material conflict; provided, however, that
such withdrawal and termination shall be limited to the extent required
by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members
of the Board. Until the end of the effective date of such termination,
the Fund shall continue to accept and implement orders by First
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 Trustees 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. First 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 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 First Transamerica will withdraw the Account's investment
in the Fund and terminate this Agreement within six (6) months after the
Board informs First Transamerica in writing of the foregoing
determination; provided, however, that such withdrawal and termination
shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the Independent
Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with
respect to mixed or shared funding (as defined in the Shared Funding
Exemptive Order) or terms and conditions materially different from those
contained in the Shared Funding Exemptive Order, then (a) the Fund
and/or 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 First Transamerica
8.1(a). First Transamerica agrees to indemnify and hold harmless
the Fund and its officers and 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 First
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,
expenses, 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 First 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 are based upon any untrue statements or
alleged untrue statements of any
material fact contained in any Registration Statement,
prospectus, or statement or additional information for any
Unaffiliated Fund, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
or necessary to make the statements therein not misleading, or
otherwise pertain to or arise in connection with the
availability of any Unaffiliated Funds as an underlying funding
vehicle in respect of the Contracts; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of the Fund not supplied by First Transamerica
or persons under its control) or wrongful conduct of
First Transamerica or persons under its control, with respect
to the sale or distribution of the Contracts or Fund
Shares; or
(iv) arise out of or are based upon 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 First Transamerica; or
(v) arise as a result of any failure by First Transamerica to
provide the services and furnish the materials under the
terms of this Agreement; or
(vi) arise out of or result from any material breach of any
representation and/or warranty made by First Transamerica in
this Agreement or arise out of or result from any other
material breach of this Agreement by First Transamerica,
as limited by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof.
8.1(b). First 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). First 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
First 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), but failure to notify First Transamerica of any such
claim shall not relieve First 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, except to
the extent that First Transamerica has been prejudiced by such failure
to give notice. In case any such action is brought against the
Indemnified Parties, First Transamerica shall be entitled to
participate, at its own expense, in the defense of such action. First
Transamerica also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from First Transamerica to such party of First 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 First
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 First
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 and
its officers and 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, 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 or are based upon Xxxxxx'x 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 the 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 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 First
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 are based upon 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; or
(vi) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in any Registration Statements, prospectus, or statement
of additional information for any Unaffiliated Fund, or
arise out of or are based upon the omission or alleged
omission to state therein a material fact or necessary to
make the statements therein not misleading, or otherwise
pertain to or arise in connection with the availability
of any Unaffiliated Funds as an underlying funding
vehicle in respect of the Contract;
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), but failure to
notify Schwab of any such claim shall 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, 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 Xxxxxx'x 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 First
Transamerica and Schwab and each of their directors and officers and
each person, if any, who controls First 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, 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 for 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 First 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 are based upon 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 or are based upon any untrue statement or
alleged untrue statement of a material fact contained in
a registration statement, prospectus, or sales literature
covering the Contracts or any amendment thereof or
supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated
therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was
made in reliance upon information furnished in writing to
First 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. This indemnification is in addition to and apart
from the responsibilities and obligations of the Adviser specified in
Article VI 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 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 First 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), but failure to
notify the Adviser of any such claim shall not relieve the Adviser from
any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision, except to the extent that the Adviser has been prejudiced by
such failure to give notice. In case any such action is brought against
the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Adviser to such party
of the Adviser's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). First Transamerica and Schwab agree promptly to notify the
Adviser of the commencement of any litigation or proceedings against it
or any of its officers and 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 First
Transamerica and Schwab, and each of their directors and officers and
each person, if any, who controls First 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,
expenses, damages, liabilities or expenses (or actions in respect
thereof) or settlements, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification and other qualification
requirements specified in Article VI of this Agreement);
or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund; or
(iii) arise out of or result from the incorrect or untimely
calculation or reporting of the daily net asset value per
share or dividend or capital gain distribution rate;
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 by 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 First 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 served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision, except to the extent that the Fund has been prejudiced by
such failure to give notice. In case any such action is brought against
the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Fund to such party of
the Fund's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by
it, and the Fund will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.4(d). First Transamerica and Schwab each agree promptly to
notify the Fund of the commencement of any litigation or proceedings
against itself or any of its respective officers or directors in
connection with this 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 State of New York.
9.2. This Agreement shall be made 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 Designated 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 First Transamerica by written notice to the
other parties with respect to any Designated Portfolio based
upon First Transamerica's reasonable and good faith determination
that shares of such Designated Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) at the option of First Transamerica by written notice to the
other parties with respect to any Designated Portfolio in the
event any of the Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by First
Transamerica; or
(d) at the option of the Fund in the event that formal
administrative proceedings are instituted against First
Transamerica or Schwab by the NASD, the SEC, the Insurance
Commissioner of like official of any state or any other
regulatory body regarding First Transamerica's or Xxxxxx'x duties
under this Agreement or related to the sale of the Contracts,
the operation of any Account, or the purchase of the Fund
shares or the shares or sponsor of any Unaffiliated Fund,
provided, however, that the Fund determines in its sole
judgement exercised reasonably and in good faith, that any
such administrative proceedings will have a material adverse
effect upon the ability of First Transamerica or Schwab to
perform its obligations under this Agreement or would have a
material adverse impact upon the Fund; or
(e) at the option of First 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 First Transamerica determines in its sole judgement
exercised reasonably and 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 First Transamerica by written notice to the
Fund and the Adviser with respect to any Portfolio if
First Transamerica reasonably and in good faith 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 Adviser, if (i) the
Fund or Adviser, respectively, shall determine, in their sole
judgement reasonably exercised in good faith, that either
First Transamerica or Schwab has suffered a material adverse change
in their business or financial condition or is the subject of
material adverse publicity and that material adverse change
or publicity will have a material adverse impact on
First Transamerica's or Xxxxxx'x ability to perform its obligations
under this Agreement, (ii) the Fund or Adviser notifies
First Transamerica or Schwab, as appropriate, of that determination
and its intent to terminate this Agreement, and (iii) after
considering the actions taken by First 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 (60th) day following
the giving of that notice, which sixtieth day shall be the
effective date of termination; or
(h) at the option of either First Transamerica or Schwab, if (i)
First Transamerica or Schwab, respectively, shall determine, in its
sole judgment reasonably exercised in good faith, that either
the Fund or Adviser have suffered a material adverse change
in their business or financial condition or is the subject of
material adverse publicity and that material adverse change
or publicity will have a material adverse impact upon the
Fund's or Adviser's ability to perform its obligations under
this Agreement, (ii) First 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
notice, the determination of First 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) termination at the option of First 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
regulatory body regarding Xxxxxx'x 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
Fund shares, provided, however, that First 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 such termination.
10.3. Effect of Termination. Notwithstanding any termination of
this Agreement, the Fund and the Adviser, shall, at the option of First
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 Designated
Portfolio(s) (as in effect on such date), redeem investments in such
Designated Portfolios(s) and/or invest in such Designated Portfolios(s)
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 termination 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 from time to time
specify in writing to the other party.
If to the Fund:
SteinRoe Variable Investment Trust
c/o Liberty Investment Services, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Secretary
If to First Transamerica:
First Transamerica Life Insurance Company
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: President
If to the Adviser:
Xxxxx Xxx & Xxxxxxx Incorporated
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Secretary
If to Schwab:
Xxxxxxx Xxxxxx & Co., Inc.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement, shall not disclose, disseminate
or utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as such information may come into the public domain. Without
limiting the foregoing, no party hereto shall disclose any information
designated as proprietary by another party.
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 First 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 or obligations hereunder
may not be assigned by any party without the prior written consent of
all parties hereto.
12.8. All persons dealing with the Fund and any Designated
Portfolio shall look solely to the assets of such Designated Portfolio
for the enforcement of any claims against the Fund hereunder. Each
other party acknowledges and agrees that none of the Trustees, officers
or shareholders of the Fund shall have any personal liability for any
obligations entered into by or on behalf of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as
of the date specified below.
First Transamerica:
FIRST TRANSAMERICA LIFE INSURANCE COMPANY
By its authorized officer,
By: [SIGNATURE]
Title: Chairman Gen. Coun. & Sec.
Date: Jan 95
Fund:
STEINROE VARIABLE INVESTMENT TRUST
on behalf of the Designated Portfolio
By its authorized officer,
By: XXXXXXX X. XXXXXXXXXXX
Title: President
Date: 1/9/95
Adviser:
XXXXX XXX & FARNHAM INCORPORATED
By its authorized officer,
By: XXXXXXX XXXXXX XXXXX
Title: Senior Vice President
Date: 11/10/94
Schwab:
XXXXXXX XXXXXX & CO., INC.
By its authorized officer,
By: [SIGNATURE]
Title: Vice President
Date: ________
SCHWAB INVESTMENT ADVANTAGE, A VARIABLE ANNUITY
SCHEDULE A
----------
Contracts Form Numbers
--------- ------------
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
Modification of Allocation of Net Purchase Payments
Provision Form No. FTGE-007-194
Variable Annuity Application Form No. FTGA-004-193
Certificate of Participation Form No. FTCG-101-193
XXX 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
Unisex Annuity Rate Tables Endorsement Form No. FTCE-010-193
Modification of Allocation of Net Purchase Payments
Provision Form No. FTCE-011-194
SCHEDULE B
----------
Designated Portfolios
---------------------
Capital Appreciation Fund
SCHEDULE C
----------
Xxxxx Xxx Capital Appreciation Fund (the "Fund")
The Fund is one of the seven Funds that comprise the Xxxxx Xxx
Variable Investment Trust (the "Trust"), an open-end diversified
management investment company. The Trust issues shares of beneficial
interest in each Fund that represent interests in a separate portfolio
of securities and other assets.
The Trust is the funding vehicle for variable annuity contracts
("VA contracts") and variable life insurance policies("VLI policies")
offered by the separate accounts of life insurance companies
("Participating Insurance Companies"). The shares of the Fund currently
are sole only to Keyport Life Insurance Company ("Keyport") and Liberty
Life Assurance Company of Boston ("Liberty Mutual").
The Participating Insurance Companies and their separate accounts
are the shareholders or investors ("shareholders") of the Fund. Owners
of VA contracts or owners of VLI policies invest in sub-accounts of
separate accounts of the Participating Insurance Companies that, in
turn, invest in the Funds.
The investment portfolio of the Fund is managed, subject to the
direction of the Board of Trustees, and by Xxxxx Xxx & Farnham
Incorporated (the "Adviser"), Xxx Xxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx
00000, pursuant to an Advisory Agreement dated December 9, 1988 with the
Fund. The Adviser was organized in 1986 to succeed to the business of
Xxxxx Xxx & Farnham ("SRF"), a partnership that had been providing
investment advisory and administrative services since 1932. The Adviser
is a wholly owned indirect subsidiary of Liberty Mutual. As of December
21, 1992, the Adviser had assets under management of approximately $28.9
billion.
The Adviser places orders for the purchase and sale of securities
and options for each Fund. In doing so, the Adviser seeks to obtain the
best combination of price and execution, which involves a number of
judgmental factors.
Liberty Investment Services, Inc. the "Administrator", Federal
Reserve Plaza, 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000,
provides the Fund with management and administrative services pursuant
to an Administration Agreement with the Trust on behalf of the Fund.
These services include the provision of office space and equipment and
facilities in connection with the maintenance of the Trust's
headquarters, preparation and filing of required reports, arrangements
for meetings, maintenance of the Trust's corporate books and records,
communication with shareholders, and oversight of custodial, accounting
and other
services provided to the Fund by others. The Administrator pays all
compensation of the Trust's Trustees, officers and employees who are
employees of the Administrator.
Under a separate agreement, the Administrator also acts as the
agent of the Fund for the transfer of shares, disbursement of dividends
and maintenance of shareholder account records.
The Administrator was organized in 1983 and commenced active
operations in 1987. It became an indirect wholly owned subsidiary of
Liberty Mutual in 1985.
Liberty Mutual is an international multi-line insurance writer and,
with its affiliates, is currently the fifth largest writer of property-
casualty insurance in the United Sates. Its headquarters are in Boston,
Massachusetts, and it employs approximately 23,000 people in over 250
offices across North America. At December 31, 1992, Liberty Mutual and
its affiliates had total assets of approximately $31.4 billion.
Keyport Financial Services Corp. (the "Underwriter") serves as the
Underwriter of the Trust, and is a wholly owned indirect subsidiary of
Liberty Mutual.
The Fund intends to declare and distribute, as dividends or capital
gains distributions, at least annually, substantially all of its net
investment income and net profits realized from the sale of portfolio
securities, if any, to its shareholders (Participating Insurance
Companies' separate accounts). Income dividends will be declared and
distributed annually. All dividends and distributions are reinvested in
additional shares of the Fund at net asset value, as of the record date
for the distributions.
The Trust's custodian, State Street Bank and Trust Company,
determines net asset value per share of the Fund as of the close or
regular trading on the New York Stock Exchange (currently 4:00 p.m.,
Boston time). Net asset value per share is calculated for the Fund by
dividing the current market value (amortized cost value in the case of
the Cash Income Fund) of total portfolio assets, less all liabilities
(including accrued expenses), by the total number of shares outstanding.
Net asset value is determined on each day when the Exchange is open,
except on such days in which no order to purchase or redeem shares is
received.
Investment Objectives & Policies
The Fund seeks to provide shareholders with growth of capital. It
pursues this objective by investing primarily in common stocks,
securities convertible into common stocks and securities having common
stock characteristics, including rights and warrants, selected primarily
for prospective capital growth.
Investments in newer and smaller companies (those having a market
capitalization of less than $500,000,000), particularly those believed
to be in the earlier phases of growth, are emphasized. The Fund may
also invest in securities of larger, more established companies that the
Adviser believes possess some of the same characteristics as smaller
companies. While income is not an objective, securities appearing to
offer attractive possibilities for future growth of income may be
included in the Fund's portfolio.
The type of securities in which Capital Appreciation Fund invests
may be expected to experience wide fluctuations in price in both rising
and declining markets. The Fund may be expected to experience a greater
degree of market and financial risk than other equity portfolios. The
Fund's portfolio may include securities that are not widely traded or
new issues of securities.
The Fund may invest up to 25% of its total assets in securities of
foreign issuers that are not publicly traded in the U.S., which for this
purpose do not include securities represented by American Depository
Receipts ("ADRs") and securities guaranteed by a U.S. person. While
investment in foreign securities is intended to reduce risk by providing
further diversification, such investments involve sovereign risk in
addition to the credit and market risks normally associated with
domestic securities. Foreign investments may be affected favorably or
unfavorably by changes in currency rates and exchange control
regulations. There may be less publicly available information about a
foreign company than about a U.S. company, and foreign companies may not
be subject to accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies.
Securities of some foreign companies are less liquid or more volatile
than securities of U.S. companies, and foreign brokerage commissions and
custodian fees are generally higher than in the U.S. Investments in
foreign securities may also be subject to other risks different from
those affecting U.S. investments, including local political or economic
developments, expropriation or nationalization of assets, imposition of
withholding taxes on dividend or interest payments, currency
blockage(which would prevent cash from being brought back to the U.S.),
and sometimes less advantageous legal, operational, and financial
protection applicable to foreign subcustodial arrangements. These risks
are carefully considered by the Adviser prior to the purchase of these
securities.
When the Adviser believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, it may
cause the Fund to enter into forward contracts to sell an amount of
foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. The Adviser
may also cause the Fund to
enter into forward foreign currency contracts to protect against loss
between trade and settlement dates resulting from changes in foreign
currency exchange rates. Such contracts will also have the effect of
limiting any gains to the Fund that would have resulted from
advantageous changes in such rates.
When the Adviser deems a temporary defensive position advisable The
Fund may invest, without limitation, in high-quality fixed-income
securities, or hold assets in cash or cash equivalents.
The Fund may invest in securities purchased on a when-issued or
delayed-delivery basis. Although the payment terms of these securities
are established at the time the Fund enters into the commitment, the
securities may be delivered and paid for a month or more after the date
of purchase, when their value may have changed and the yields then
available in the market may be greater. The Fund will make such
commitments only with the intention of actually acquiring the
securities, but may sell the securities before settlement date if it is
deemed advisable for investment reasons.
The Fund may also invest in securities purchased on a standby
commitment basis, which is a delayed delivery agreement in which the
Fund binds itself to accept delivery of a security at the option of the
other party to the agreement. The Fund usually receives a commitment
fee in consideration for its standby commitment.
The Fund, may purchase and write both call options and put options
on securities and on indexes, and enter into interest rate and index
futures contracts and options on such futures contracts in order to
provide additional revenue, or to hedge against changes in security
prices or interest rates. If other types of options, future contracts,
or options on future contracts are traded in the future, the Fund may
also use those investment vehicles, provided the Board of Trustees
determines that their use is consistent with the Fund's investment
objective.
Investment Restrictions
The Fund operates under the investment restrictions listed below.
Restrictions numbered (i) through (ix) are fundamental policies which
may not be changed for the Fund without approval of a majority of the
outstanding voting shares of the Fund, defined as the lesser of the vote
of (a) 67% of the shares of the Fund at a meeting where more than 50% of
the outstanding shares are present in person or by proxy or (b) more
than 50% of the outstanding shares of the Fund. Other restrictions are
not fundamental policies and may be changed with respect to the Fund by
the Trustees without shareholder approval.
The following investment restrictions apply to the Fund. The Fund
may not:
(i) with respect to 75% of the value of its total assets,
invest more than 5% of the value of its total assets, taken at
market value at the time of a particular purchase, in the
securities of any one issuer, except (a) securities issued or
guaranteed by the U.S. government or its agencies or
instrumentalities and (b) [with respect to Cash Income Fund only]
certificates of deposit, bankers' acceptances and repurchase
agreements;
(ii) purchase securities of any one issuer if more than 10%
of the outstanding voting securities of such issuer would at the
time beheld by the Fund;
(iii) act as an underwriter of securities, except insofar as
it may be deemed an underwriter for purposes of the Securities Act
of 1933 on disposition of securities acquired subject to legal or
contractual restrictions on resale;
(iv) invest in a security if more than 25% of its total
assets (taken at market value at the time of a particular
purchase) would be invested in the securities of issuers in any
particular industry, except that this restriction does not apply
to (i) securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities;
(v) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, and
securities issued by companies which invest in real estate or
interests therein), commodities, or commodity contracts, except
that it may enter into (a) futures and options on futures and (b)
forward contracts;
(vi) purchase securities on margin (except for use of short-
term credits as are necessary for the clearance of transactions),
make short sales of securities, or participate on a joint or a
joint and several basis in any trading account in securities,
except in connection with transactions in options, futures, and
options on futures;
(vii) make loans, but this restriction shall not prevent the
Fund from (a) buying a part of an issue of
bonds, debentures, or other obligations which are publicly
distributed, or from investing up to an aggregate of 15% of its
total assets (taken at market value at the time of each purchase)
in parts of issues of bonds, debentures or other obligations of a
type privately placed with financial institutions, (b) investing
in repurchase agreements, or (c) lending portfolio securities,
provided that it may not lend securities if, as a result, the
aggregate value of all securities loaned would exceed 15% of its
total assets (taken at market value at the time of such loan);
(viii) borrow, except that it may (a) borrow up to 33-1/3% of
its total assets from banks, taken at market value at the time of
such borrowing, as a temporary measure for extraordinary or
emergency purposes, but not to increase portfolio income (the
total of reverse repurchase agreements and such borrowings will
not exceed 33-1/3% of its total assets, and the Fund will not
purchase additional securities when its borrowings, less proceeds
receivable from sales of portfolio securities, exceed 5% of its
total assets and (b) enter into transactions in options, futures,
and options on futures.
The Fund is also subject to the following restrictions and
policies, which are not fundamental and may be changed by the
Trustees without shareholder approval.
The Fund may not:
(a) invest in companies for the purpose of exercising control
or management;
(b) purchase more than 3% of the stock of another investment
company; or purchase stock of other investment companies equal to
more than 5% of the Fund's total assets (valued at time of
purchase) in the case of any one other investment company and 10%
of such assets (valued at the time of purchase) in the case of all
other investment companies in the aggregate; any such purchases
are to be made in the open market where no profit to a sponsor or
dealer results from the purchase, other than the customary
broker's commission, except for securities acquired as part of a
merger, consolidation or acquisition of assets;
(c) mortgage, pledge, hypothecate or in any manner transfer,
as security for indebtedness, any securities owned or held by it,
except as may be necessary in connection with (i) permitted
borrowings and (ii) options, futures and options on futures;
(d) issue senior securities, except to the extent permitted
by the Investment Company Act of 1940, including permitted
borrowings;
(e) purchase portfolio securities for the Fund from, or sell
portfolio securities to, any of the officers and directors or
Trustees of the Trust or of its Adviser;
(f) invest more than 5% of its net assets (valued at time of
purchase) in warrants that are not listed on the New York or
American Stock Exchange;
(g) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar
entity;
(h) buy or sell an option on a security, a futures contract,
or an option on a futures contract unless the option, the futures
contract, or the option on the futures contract is offered through
the facilities of a recognized securities association or listed on
a recognized exchange or similar entity;
(i) purchase a put or call option if the aggregate premiums
paid for all put and call potions exceed 20% of its net assets
(less the amount by which any such positions are in-the-money),
excluding put and call options purchased as closing transactions;
(j) investment more than 15% of the Fund's net assets (taken
at market value at the time of each purchase) in illiquid
securities including repurchase agreements maturing in more than
seven days.
SCHEDULE D
----------
ADMINISTRATIVE SERVICES
-----------------------
To be performed by Xxxxxxx Xxxxxx & Co., Inc.
X. Xxxxxx will provide the properly registered and licensed personnel
and systems needed for all customer servicing support - for both fund
and annuity information and questions - including:
delivery of prospectus - 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 prospectus;
X. Xxxxxx 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.
X. Xxxxxx will communicate all purchase, withdrawal, and exchange
orders it receives from its customers to First Transamerica who will
retransmit them to each fund.
D. For its 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
Xxxxxx'x 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 payment relates.
SCHEDULE E
----------
Reports per Section 6.6
-----------------------
With regard to the reports relating to the quarterly testing of
compliance with the requirement of Section 817(h) and Subchapter M under
the Internal Revenue Code (the "Code") and the regulations thereunder,
the Fund shall provide within twenty (20) Business Days of the close of
the calendar quarter a report in the attached form regarding the status
under such sections of the Code of the Designated Portfolio(s), and if
necessary, identification of any remedial action to be taken to remedy
non-compliance.
With regard to the reports relating to the year-end testing of
compliance with the requirements of Subchapter M of the Code, referred
to hereinafter as "RIC status," the Fund will provide the reports on the
following basis: the year-end report in the attached form will be
provided 45 days after the end of the calendar year, but prior thereto,
the Fund will provide the additional interim and supplemental reports,
described below.
The additional reports are as follows:
1. A report in the usual reporting format and content, as of November
30, of each future fiscal year. The report will be provided under cover
of a letter from the Adviser 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 the 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 Sections 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).
SCHEDULE F
EXPENSES
1. The Fund and First 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 total
costs determined according to the number of pages of the
parties' and other funds' respective portions of the
documents.
2. The Adviser and First Transamerica will pay the costs of printing
and/or distributing copies of the documents based upon an
allocation of the 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 of 2
prospectuses to persons who have not yet
invested in a Designated Portfolio)
Delivery of prospectuses to satisfy legal 1
prospectus delivery requirements (e.g., copies
sent with confirmations of sales)
Existing Supply quantities described in Section 3.4 1
Owners: Distribution 1
Interim Updates
New Sales: Marketing (supply and distribution of 2
prospectuses to persons who have not yet
invested in a Designated Portfolio)
Delivery of prospectuses to satisfy legal 1
prospectus delivery requirements (e.g., copies
sent with confirmations of sales
If required by Participating Insurance
Company (PIC) PIC
If required by Schwab Schwab
Existing If required by Fund or Adviser: Fund
Owners: If required by PIC: PIC
If required by Schwab: Schwab
STATEMENTS Same as Prospectus Same
OF ADDITIONAL
INFORMATION
PROXY Printing Fund
MATERIALS Distribution
OF THE FUND (a) If required by law: Fund
(b) If required by participating insurance
company: PIC
(c) If required by Schwab: Schwab
ANNUAL Printing Fund
REPORTS Distribution 1
& OTHER
COMMUNICATIONS
WITH SHAREHOLDERS
OF THE FUND
OPERATIONS All operations and related expenses, including Fund
OF FUND 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
for the handling of proxies relating to the Fund by the Adviser, the
Fund and First Transamerica. The defined terms herein shall have the
meanings assigned in the Participation Agreement except that the term
"First Transamerica" shall also include the department or third party
assigned by First Transamerica to perform the steps delineated below.
1. The number of proxy proposals is given to First 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
First Transamerica of the Record, Mailing and Meeting dates. This
will be done verbally approximately two months before the
meeting.
2. Promptly after the Record Date, First 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. First 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 First 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 First Transamerica.
4. The text and format for the Voting Instructions Card ("Cards"
or "Card") is provided to First Transamerica by the Fund.
First 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
First Transamerica for insertion into envelopes (envelopes
and return envelopes are provided and paid for by First
Transamerica). Contents of envelope sent to Contract Owners
by First Transamerica will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid) addressed to
First 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 t their vote is
important. One copy will be supplied by the Fund.)
e. Cover letter - optional, supplied by First Transamerica and
reviewed and approved in advance by Adviser Legal.
6. The above contents should be received by First Transamerica
approximately 3-5 business days before mail date. Individual
in charge at First 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 First Transamerica.
* The Fund must allow at least a 15-day solicitation time to
First 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 the 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 no 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 First 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 votes in time for the meeting.
13. A Certificate of Mailing and Authorization to Vote Shares will
be required from First Transamerica as well as an original copy of
the final vote. Adviser Legal will provide a standard form for each
Certification.
14. First 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.
