-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Oq4Da2dm+qK7sMSVdMX9rXS4GbIPAmdHhPkWg8Ldz4LRtPWBHckYpEMeDblQBWSZ Rlc0KdyrKzTE4a4mxRLJ4Q== 0000099189-94-000023.txt : 19940512 0000099189-94-000023.hdr.sgml : 19940512 ACCESSION NUMBER: 0000099189-94-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSAMERICA CORP CENTRAL INDEX KEY: 0000099189 STANDARD INDUSTRIAL CLASSIFICATION: 6199 IRS NUMBER: 940932740 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02964 FILM NUMBER: 94526589 BUSINESS ADDRESS: STREET 1: 600 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4159834000 10-Q 1 Page 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________ FORM 10-Q ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended March 31, 1994 Commission File Number 1-2964 __________________ TRANSAMERICA CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-0932740 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 600 Montgomery Street San Francisco, California 94111 (Address of principal executive offices) (Zip Code) (4l5) 983-4000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares of Common Stock, $1 par value, outstanding as of close of business on April 29, 1994: 74,864,848 shares. Page 2 TRANSAMERICA CORPORATION FORM 10-Q Part I. Financial Information Item 1. Financial Statements. The following unaudited consolidated financial statements of Transamerica Corporation and Subsidiaries, for the periods ended March 31, 1994 and 1993, do not include complete financial information and should be read in conjunction with the Consolidated Financial Statements filed with the Commission in Transamerica's Annual Report on Form 10-K for the year ended December 31, 1993. The financial information presented in the financial statements included in this report reflects all adjustments, consisting only of normal recurring accruals, which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. In the first quarter of 1994 Transamerica adopted Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. This new standard requires Transamerica to report at fair value those investments which it does not have the positive intent and ability to hold to maturity. There is no effect on the income statement. To the extent the securities marked to fair value relate to interest sensitive insurance products an adjustment to deferred policy acquisition costs is also made. The effect of these adjustments, net of federal income taxes, is recorded in a separate component of shareholders' equity. All of Transamerica's investments in debt securities have been classified as available for sale at March 31, 1994. As of that date the unrealized gain included in shareholders' equity as a result of adopting this new accounting standard was $201.2 million. On March 15, 1994, Transamerica acquired substantially all the operating assets of the Container Operations of Tiphook plc ("Tiphook"), a London-based transportation equipment rental company, including certain dry cargo containers, tank containers, tank chassis, operating leases and other assets of Tiphook for $1,065 million in cash. For a discussion of this transaction see Item 2 on Page 8 of this document. On April 13, 1994, Transamerica sold its remaining 21% ownership interest in Sedgwick Group plc. Proceeds from the sale approximated $320 million and resulted in no gain or loss. Transamerica's investment in Sedgwick and its share of Sedgwick's operating results and related goodwill amortization have been separated from those of Transamerica's continuing operations and are classified as discontinued operations. Prior period financial statements have been reclassified accordingly. On May 9, 1994, Transamerica commenced a tender offer to purchase up to 4,500,000 shares of its common stock, at prices not greater than $55 nor less than $48 per share, as set forth in the Offer to Purchase dated May 9, 1994. Transamerica will determine a single price (not greater than $55 nor less than $48 per share) that it will pay for shares validly tendered, taking into account the number of shares tendered and the prices specified by tendering stockholders. Transamerica will select the Purchase Price that will enable it to purchase up to 4,500,000 shares pursuant to the Offer. The Offer will Page 3 expire on June 6, 1994, unless extended. Transamerica will use a portion of the net proceeds from the sale of its remaining 21% ownership interest in Sedgwick Group plc to purchase such shares. * * * * * The consolidated ratios of earnings to fixed charges were computed by dividing income from continuing operations before fixed charges and income taxes by the fixed charges. Fixed charges consist of interest and debt expense and one-third of rent expense, which approximates the interest factor. Results for the three months are not necessarily indicative of the results for the entire year for most of the Corporation's businesses. This is particularly true in the life insurance field, where mortality results in interim periods may vary substantially from such results over a longer period. Page 4 TRANSAMERICA CORPORATION AND SUBSIDIARIES _____________ CONSOLIDATED BALANCE SHEET Assets March 31, December 31, 1994 1993 Investments, principally of life insurance subsidiaries: Fixed maturities--held for investment $18,553.0 Fixed maturities--available for sale $20,513.3 872.4 Mortgage loans and real estate 480.5 493.0 Equity securities, at fair value 449.2 466.1 Loans to life insurance policyholders 396.5 396.5 Short-term investments 301.7 190.8 _________ _________ 22,141.2 20,971.8 Finance receivables 7,108.6 6,908.5 Less unearned fees ($236.6 in 1994 and $240.8 in 1993) and allowance for losses 428.8 426.0 _________ _________ 6,679.8 6,482.5 Cash and cash equivalents 100.8 92.7 Trade and other accounts receivable 2,339.7 2,015.4 Net assets of discontinued operations 304.8 310.2 Property and equipment, less accumulated depreciation of $849.3 in 1994 and $831.6 in 1993: Land, buildings and equipment 347.3 345.7 Equipment held for lease 2,477.8 1,306.5 Deferred policy acquisition costs 1,664.4 1,929.3 Separate accounts administered by life insurance subsidiaries 1,398.2 1,366.5 Goodwill, less accumulated amortization of $117.1 in 1994 and $113.4 in 1993 491.7 495.4 Other assets 753.8 734.5 _________ _________ $38,699.5 $36,050.5 ========= ========= (Amounts in millions) Page 5 TRANSAMERICA CORPORATION AND SUBSIDIARIES _________________ CONSOLIDATED BALANCE SHEET (Continued) Liabilities and Shareholders' Equity March 31, December 31, 1994 1993 Life insurance policy liabilities $22,452.6 $21,951.8 Notes and loans payable, principally of finance subsidiaries, of which $2,414 in 1994 and $2,023 in 1993 matures within one year 8,933.8 7,704.0 Accounts payable and other liabilities 1,965.5 1,352.4 Income taxes 433.3 312.3 Separate account liabilities 1,398.2 1,366.5 Shareholders' equity: Preferred Stock ($100 par value): Authorized--1,200,000 shares; issuable in series, cumulative Outstanding--Dutch Auction Rate Trans- ferable Securities, 2,250 shares, at liquidation preference of $100,000 per share, weighted average dividend rate of 3.02% in 1994 and 3.05% in 1993 225.0 225.0 Outstanding--Series D, 400,000 shares, at liquidation preference of $500 per share, cumulative dividend rate of 8.5% 200.0 200.0 Preference Stock (without par value)-- 5,000,000 shares authorized; none outstanding Common Stock ($1 par value): Authorized--150,000,000 shares Outstanding--75,053,015 shares in 1994 and 76,398,888 shares in 1993, after deducting 4,685,447 shares and 3,339,574 shares in treasury 75.0 76.4 Additional paid-in capital 403.9 475.2 Retained earnings 2,357.1 2,297.9 Net unrealized gain from investments marked to fair value 298.8 124.1 Foreign currency translation adjustments (43.7) (35.1) _________ _________ 3,516.1 3,363.5 _________ _________ $38,699.5 $36,050.5 ========= ========= (Amounts in millions except for share data) Page 6 TRANSAMERICA CORPORATION AND SUBSIDIARIES _______________ CONSOLIDATED STATEMENT OF INCOME Three months ended March 31, 1994 1993 REVENUES Life insurance premiums and related income $ 330.5 $ 292.2 Investment income 432.0 425.4 Finance charges and other fees 246.3 246.3 Leasing revenues 113.6 89.7 Real estate and tax service revenues 82.2 67.2 Gain on investment transactions 2.6 4.3 Other 28.2 23.9 ________ ________ 1,235.4 1,149.0 EXPENSES Life insurance benefits 546.3 511.3 Life insurance underwriting, acquisition and other expenses 131.0 122.4 Leasing operating and maintenance costs 57.8 42.9 Interest and debt expense 122.6 133.1 Provision for losses on receivables 24.2 21.1 Other, including administrative and general expenses 188.3 170.3 ________ ________ 1,070.2 1,001.1 ________ ________ 165.2 147.9 Income taxes 61.5 54.9 ________ ________ Income from continuing operations 103.7 93.0 Loss from discontinued operations (0.7) (1.2) ________ ________ Net income $ 103.0 $ 91.8 ======== ======== Earnings per share of common stock (based on weighted average number of shares outstanding of 75,811,000 in 1994 and 79,335,000 in 1993 after deduction of preferred dividends): Income from continuing operations before investment transactions $1.27 $1.07 Gain on investment transactions 0.02 0.03 _____ _____ Income from continuing operations 1.29 1.10 Loss from discontinued operations (0.01) (0.02) _____ _____ Net income $1.28 $1.08 ===== ===== Dividends per share of common stock $0.50 $0.50 ===== ===== Ratio of earnings to fixed charges 2.27 2.05 (Dollar amounts in millions except for share data) Page 7 TRANSAMERICA CORPORATION AND SUBSIDIARIES ____________ CONSOLIDATED STATEMENT OF RETAINED EARNINGS Three months ended March 31, 1994 1993 Balance at beginning of year $2,297.9 $2,100.2 Net income 103.0 91.8 Dividends on common stock (37.9) (39.8) Dividends on preferred stock (5.9) (6.0) ________ ________ Balance at end of period $2,357.1 $2,146.2 ======== ======== CONSOLIDATED STATEMENT OF CASH FLOWS Three months ended March 31, 1994 1993 OPERATING ACTIVITIES Income from continuing operations $ 103.7 $ 93.0 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Increase in life insurance policy liabilities, excluding policyholder balances on interest-sensitive policies 257.4 321.8 Amortization of policy acquisition costs 53.6 42.6 Policy acquisition costs deferred (81.8) (82.6) Other 93.3 102.4 ________ ________ Net cash provided by operating activities 426.2 477.2 INVESTING ACTIVITIES Finance receivables originated (4,135.0) (3,073.8) Finance receivables collected 3,893.2 2,880.1 Purchase of investments (2,156.3) (1,872.8) Sales or maturities of investments 1,852.3 1,132.7 Purchase of the container division assets of Tiphook plc (1,065.0) Cash transactions with discontinued operations (162.6) Other (155.5) (90.0) ________ ________ Net cash used by investing activities (1,766.3) (1,186.4) FINANCING ACTIVITIES Receipts from interest-sensitive policies credited to policyholder account balances 965.8 948.7 Return of policyholder account balances on interest-sensitive policies (722.4) (521.8) Proceeds from debt financing 2,831.6 1,677.1 Payment of notes and loans (1,610.3) (1,349.9) Dividends (43.8) (45.8) Common stock transactions (72.7) 15.2 ________ ________ Net cash provided by financing activities 1,348.2 723.5 ________ ________ Increase in cash and cash equivalents 8.1 14.3 Cash and cash equivalents at beginning of year 92.7 22.0 ________ ________ Cash and cash equivalents at end of period $ 100.8 $ 36.3 ======== ======== (Amounts in millions) Page 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Transamerica Corporation receives funds from its subsidiaries in the form of dividends, income taxes and interest on loans. The Corporation uses these funds to pay dividends to its shareholders, reinvest in the operations of its subsidiaries and pay corporate interest, expenses and taxes. Reinvested funds are allocated among subsidiaries on the basis of profitability and capital requirements. Reinvestment may be accomplished by allowing a subsidiary to retain all or a portion of its earnings, or by making capital contributions or loans. The Corporation also borrows funds to finance acquisitions or to lend to certain of its subsidiaries to finance their working capital needs. Subsidiaries are required to maintain prudent financial ratios consistent with other companies in their respective industries and retain the capacity through committed credit lines to repay working capital loans from the Corporation. On March 15, 1994, Transamerica acquired substantially all the operating assets of the Container Operations of Tiphook plc ("Tiphook"), a London-based transportation equipment rental company, including certain dry cargo containers, tank containers, tank chassis, operating leases and other assets of Tiphook (collectively the "Container Operations"). Transamerica assumed certain specified liabilities of the Container Operations including trade accounts payable. Transamerica did not assume any borrowings, tax liabilities or contingent liabilities of Tiphook. Transamerica paid to Tiphook $1 billion, with further payments of $14.3 million to be made upon delivery of bills of sale and releases of liens, and delivered $50.7 million to escrow agents for the establishment of a general escrow account ($40.4 million) and a repairs escrow account ($10.3 million). Adjustments to the purchase price, if any, will be determined on completion of examination of the closing balance sheet of the Container Operations as of March 15, 1994 by Transamerica's auditors and Tiphook's auditors. Unresolved disputes, if any, will be referred to a third independent auditor. Tiphook, at the closing, entered into a non-compete agreement with Transamerica prohibiting Tiphook and its affiliates from competing with the Container Operations for a period of seven years. After the closing, Tiphook is providing certain transitional services to Transamerica pursuant to the terms of a transitional services agreement. Tiphook has granted Transamerica an exclusive, perpetual license to the name "Tiphook" in the business of leasing containers (on a worldwide basis) and tank chassis (in the United States). The transaction was accounted for as a purchase and the operations of the business included in the consolidated statement of income from the date of acquisition. On April 13, 1994, Transamerica sold its remaining 21% ownership interest in Sedgwick Group plc. Proceeds from the sale approximated $320 million and resulted in no gain or loss. Transamerica's investment in Sedgwick and its share of Sedgwick's operating results and related goodwill amortization have been separated from those of Transamerica's continuing operations and are classified as discontinued operations. Prior period financial statements have been reclassified accordingly. Page 9 On May 9, 1994, Transamerica commenced a tender offer to purchase up to 4,500,000 shares of its common stock, at prices not greater than $55 nor less than $48 per share, as set forth in the Offer to Purchase dated May 9, 1994. Transamerica will determine a single price (not greater than $55 nor less than $48 per share) that it will pay for shares validly tendered, taking into account the number of shares tendered and the prices specified by tendering stockholders. Transamerica will select the Purchase Price that will enable it to purchase up to 4,500,000 shares pursuant to the Offer. The Offer will expire on June 6, 1994, unless extended. Transamerica will use a portion of the net proceeds from the sale of its remaining 21% ownership interest in Sedgwick Group plc to purchase such shares. Transamerica's income from continuing operations for the first quarter of 1994 increased $10.7 million (11%) compared to the first quarter of 1993. Income from continuing operations for the first quarter of 1994 included net after tax gains from investment transactions aggregating $1.7 million compared to $2.8 million in the first quarter of 1993. Income from continuing operations before investment transactions increased $11.8 million (13%) due primarily to increases in real estate services, life insurance, commercial lending and asset management operating results and lower unallocated expenses. Partially offsetting these improvements were declines in consumer lending and leasing operating results. Gain (loss) on investment transactions, pretax, included in consolidated revenues, comprises (amounts in millions): Three months ended March 31, 1994 1993 Net gain on sale of investments $12.9 $40.2 Adjustment for impairment in value (7.5) (30.9) Accelerated amortization of deferred policy acquisition costs (2.8) (5.0) _____ _____ $ 2.6 $ 4.3 ===== ===== As required by generally accepted accounting principles, the amortization of deferred policy acquisition costs was accelerated due to gains realized on the sale of certain investments. The accelerated amortization of deferred policy acquisition costs has been included in investment transactions as an offset to the related gain. Investment transactions also reflected loss provisions primarily for impairment in the value of certain nonperforming fixed maturity investments, mortgage loans, real estate investments and real estate acquired through foreclosure. Transamerica Corporation's continuing operations, principally through its life insurance subsidiaries, maintain an investment portfolio which aggregated $22.1 billion at March 31, 1994. Of this amount $20.5 billion was invested in fixed maturities. At March 31, 1994, 96.6% of the fixed maturities was rated as "investment grade" with an additional 2.4% rated in the BB category or its equivalent. Fixed maturity investments are generally held for long-term investment and used primarily to support life insurance policy liabilities. The amortized cost of delinquent below investment grade securities, before Page 10 provision for impairment in value, was $29.4 million at March 31, 1994 compared to $31.1 million at December 31, 1993. Provision for impairment in value has been made to reduce the amortized cost of certain fixed maturity investments by $103.8 million at March 31, 1994 and $104 million at December 31, 1993. Additionally, $480.5 million (2.2% of the investment portfolio), net of allowance for losses of $65.3 million, was invested in mortgage loans and real estate including $349.3 million in commercial mortgage loans, $37.8 million in residential mortgage loans, $113.8 million in real estate investments and $44.9 million in foreclosed real estate. Foreclosed commercial real estate decreased $8.3 million (15.7%) from December 31, 1993 to March 31, 1994 due primarily to the sale of foreclosed properties. Problem loans, defined as delinquent loans and restructured loans yielding less than 8%, totaled $12.3 million at March 31, 1994. Problem loans decreased $6.2 million from December 31, 1993 to March 31, 1994. Allowances for possible losses of $65.3 million at March 31, 1994 and $70.7 million at December 31, 1993 have been established to cover possible losses from mortgage loans and real estate investments. The net unrealized gain on marketable equity securities, after related taxes, which is included in shareholders' equity decreased $26.5 million during the quarter ended March 31, 1994 and increased $13.7 million during the first quarter of 1993. In the first quarter of 1994 Transamerica adopted Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. This new standard requires Transamerica to report at fair value those investments which it does not have the positive intent and ability to hold to maturity. There is no effect on the income statement. To the extent the securities marked to fair value relate to interest sensitive insurance products an adjustment to deferred policy acquisition costs is also made. The effect of these adjustments, net of federal income taxes, is recorded in a separate component of shareholders' equity. All of Transamerica's investments in debt securities have been classified as available for sale at March 31, 1994. As of that date the unrealized gain included in shareholders' equity as a result of adopting this new accounting standard was $201.2 million. Changes in the earnings, capital requirements and liquidity of the Corporation's consolidated operations are best understood by considering the Corporation's separate business segments, which are discussed below. Page 11 REVENUES AND INCOME BY LINE OF BUSINESS Three months ended March 31, Revenues Income 1994 1993 1994 1993 (Amounts in millions) Consumer lending $ 163.3 $ 160.2 $ 21.4 $24.2 Commercial lending 89.9 94.2 11.4 7.6 Leasing 116.7 94.9 13.0 13.2 Real estate services 89.0 72.7 24.6 19.6 Amortization of goodwill (3.3) (3.2) ________ ________ ______ _____ Finance 458.9 422.0 67.1 61.4 Life insurance 767.6 722.2 58.9 58.5 Asset management 10.7 10.7 0.8 (0.2) Amortization of goodwill (0.4) (0.4) ________ ________ ______ _____ Insurance 778.3 732.9 59.3 57.9 Unallocated investment transactions, interest and expenses, less related income taxes (1.8) (5.9) (22.7) (26.3) ________ ________ ______ _____ Total revenues and income from continuing operations $1,235.4 $1,149.0 $103.7 $93.0 ======== ======== ====== ===== Consumer Lending Consumer lending income, before the amortization of goodwill, for the first quarter of 1994 decreased $2.8 million (11%) from the first quarter of 1993 due to increased operating expenses and an increased provision for losses on receivables that more than offset higher revenues and lower interest expense. Revenues increased $3.1 million (2%) in the first quarter of 1994 compared to 1993's first quarter mainly due to increased finance charges resulting from slightly higher average owned finance receivables outstanding. Operating expenses for the first quarter of 1994 increased $6 million (13%) over the first quarter of 1993 mainly due to an increase in the number of branches, from 515 at March 31, 1993 to 570 at March 31, 1994, and new loan products, which are intended to stimulate future growth. The provision for losses on receivables increased $5.4 million (46%) due to increased credit losses. Credit losses, net of recoveries, on an annualized basis as a percentage of average consumer finance receivables outstanding, net of unearned finance charges and insurance premiums, were 1.93% for the first quarter of 1994 compared to 1.25% for the first quarter of 1993. Credit losses increased mainly due to continued sluggishness in the California economy and a continued weak California real estate market. Interest expense declined $3.1 million (5%) due to a lower average interest rate. Page 12 Net consumer finance receivables at March 31, 1994 included $3.1 billion of real estate secured loans, principally first and second mortgages secured by residential properties, of which approximately 49% are located in California. Company policy generally limits the amount of cash advanced on any one loan, plus any existing mortgage, to between 70% and 80% (depending on location) of the appraised value of the mortgaged property, as determined by qualified independent appraisers at the time of loan origination. Delinquent finance receivables, which are defined as receivables contractually past due 60 days or more, were $86.8 million (2.24% of finance receivables outstanding) at March 31, 1994 compared to $78.8 million (2.01% of finance receivables outstanding) at December 31, 1993 and $69.6 million (1.80% of finance receivables outstanding) at March 31, 1993. Management has established an allowance for losses equal to 2.83% of net consumer finance receivables outstanding at March 31, 1994, December 31, 1993 and March 31, 1993. Generally, by the time an account secured by residential real estate becomes past due 90 days, foreclosure proceedings have begun, at which time the account is moved from finance receivables to other assets and is written down to the estimated realizable value of the collateral if less than the account balance. After foreclosure, repossessed assets are carried at the lower of cost or fair value less estimated selling costs. Accounts in foreclosure and repossessed assets held for sale totaled $233.6 million at March 31, 1994 compared to $214.7 million at December 31, 1993 and $200.1 million at March 31, 1993. The increase primarily reflects a higher number of units in inventory in California, due to its continuing weak real estate market. Commercial Lending Commercial lending income, before the amortization of goodwill, for the first quarter of 1994 increased $3.8 million (49%) over the first quarter of 1993. The increase was primarily due to stronger margins brought about by the declining interest rate environment. The interest rates at which the commercial lending operation borrows funds for its businesses have moved more quickly than the rates at which it lends to its customers. As a result, margins have been enhanced by the declining interest rate environment. Lower operating expenses and a lower provision for losses also contributed to the increase. Revenues in the first quarter of 1994 decreased $4.3 million (5%) from the first quarter of 1993 mainly as a result of lower finance charges in the liquidating portfolio and slightly reduced yields attributable to the current low interest rate environment. Expenses decreased in the first quarter of 1994 by $9.6 million (12%) from the first quarter of 1993. Interest expense declined $5.3 million (18%) due to a lower average interest rate. The provision for losses on receivables declined $2.2 million (24%) principally due to lower credit losses. Credit losses, on an annualized basis as a percentage of average commercial finance receivables outstanding, net of unearned finance charges, were a negative 0.08% as recoveries on previously recorded losses exceeded credit losses for the first quarter of 1994 compared to 1.57% in 1993's first quarter. Operating expenses declined $2.1 million (5%) mainly as a result of Page 13 reduced expenses incurred relating to the management of the liquidating portfolio and restructuring of the commercial lending unit's infrastructure. Net commercial finance receivables outstanding increased $228.8 million (8%) from December 31, 1993 to March 31, 1994 due to growth in the inventory finance and business credit portfolios. Management has established an allowance for losses equal to 2.76% of net commercial finance receivables outstanding as of March 31, 1994 compared to 2.71% at December 31, 1993 and 2.92% at March 31, 1993. Delinquent receivables, which are defined as the instalment balance for inventory finance and business credit receivables and the receivable balance for all other receivables over 60 days past due, were $25.6 million (0.80% of receivables outstanding) at March 31, 1994 compared to $28.9 million (0.96% of receivables outstanding) at December 31, 1993 and $56.8 million (1.84% of receivables outstanding) at March 31, 1993. Nonearning receivables, which are defined as balances from borrowers that are over 90 days delinquent or at such earlier time as full collectibility becomes doubtful, were $34.4 million (1.07% of receivables outstanding) at March 31, 1994 compared to $33.6 million (1.12% of receivables outstanding) at December 31, 1993 and $73.7 million (2.38% of receivables outstanding) at March 31, 1993. Assets held for sale as of March 31, 1994 totaled $79.8 million, net of a $155.3 million valuation allowance, and consisted of rent-to-own finance receivables of $111.3 million, repossessed rent-to-own stores of $104.9 million and other repossessed assets of $18.9 million. Assets held for sale at December 31, 1993 totaled $90.1 million, net of a $157 million valuation allowance, and comprised rent-to-own finance receivables of $120.5 million, repossessed rent-to-own stores of $107.2 million and other repossessed assets of $19.4 million. Assets held for sale at March 31, 1993 totaled $175.4 million, net of a $119.9 million valuation allowance, and comprised rent-to-own finance receivables of $161.5 million, repossessed rent-to-own stores of $103.6 million and other repossessed assets of $30.2 million. Of the rent-to-own finance receivables, $26.8 million were classified as both delinquent and nonearning at March 31, 1994 compared to $27.5 million at December 31, 1993 and $35.6 million at March 31, 1993. Leasing As previously discussed on Page 8, on March 15, 1994, the leasing operation purchased substantially all of the assets of the container rental businesses of Tiphook plc for $1,065 million in cash. The acquired fleet of standard containers and tank containers totaled 363,000 units. The transaction has been accounted for as a purchase and the operations of the business acquired have been included in the results of the leasing operation from the date of acquisition. Results for the first quarter include the sixteen days of operations subsequent to the acquisition and reduced net income for the quarter by $300,000. Leasing income, excluding the effect of Tiphook discussed above and before the amortization of goodwill, for the first quarter of 1994 increased $100,000 (1%) from the first quarter of 1993 mainly as a result of higher utilization in the rail trailer business. Page 14 Revenues, including $8.8 million from the Tiphook operation, for the first quarter of 1994 increased $21.8 million (23%) over the first quarter of 1993. The increase was mainly due to a larger standard and refrigerated container fleet, higher utilization in the rail trailer and European trailer product lines and a larger finance lease portfolio. Expenses, including $9.3 million from the Tiphook operation, for the first quarter of 1994 increased $21.9 million (30%) over the first quarter of 1993 mainly due to higher ownership and operating costs due to a larger fleet. The combined utilization (including Tiphook) of standard containers, refrigerated containers, domestic containers, tank containers and chassis averaged 82% for the first quarter of 1994 compared to 81% during the first quarter of 1993. Rail trailer utilization was 90% for the first quarter of 1994 compared to 86% in the first quarter of 1993. European over-the-road trailer utilization was 96% during the 1994 first quarter compared to 86% during the comparable 1993 period. Real Estate Services Real estate services comprise Transamerica's real estate tax, property management and other services. Income for the first quarter of 1994 increased $5 million (25%) over the first quarter of 1993 primarily due to continued high levels of mortgage refinancings and higher levels of home sales. Revenues for the first quarter of 1994 increased $16.3 million over the first quarter of 1993 as a result of increased business at the real estate tax service operation where new life of loan tax service contracts written were 1 million in the first quarter of 1994 compared to 677,000 in the first quarter of 1993. Life Insurance Income for the first quarter of 1994 increased $400,000 (0.6%) over the first quarter of 1993. Income for the first quarter of 1994 and 1993 includes $3.3 million and $6.7 million net after tax gains from investment transactions. The life insurance, structured settlements, living benefits and group pension lines in 1994 all experienced increases in income over the first quarter of 1993, excluding net gains from investment transactions, resulting primarily from asset growth, increased charges on a larger base of interest- sensitive policies, improved or maintained interest spreads and expense control. Investment transactions in the first quarter of 1994 included after tax gains of $8 million realized on the sale of investments compared to $22.4 million in the first quarter of 1993. As required by generally accepted accounting principles, the amortization of deferred policy acquisition costs was accelerated by $1.8 million in 1994 and $3.3 million in 1993 due to the investment gains. The accelerated amortization of deferred policy acquisition costs has been included in investment transactions as an offset to the related Page 15 gains. Investment transactions in the first quarter of 1994 also reflected a downward adjustment of $2.9 million after tax, compared to $12.4 million in the first quarter of 1993, primarily for impairment in the value of certain nonperforming fixed maturity investments. Premiums and related income increased $38.4 million (13%) in the first quarter of 1994 compared to the first quarter of 1993 primarily due to higher policy charges on interest-sensitive policies and increased income from reinsurance assumed, partially offset by an increase in reinsurance premiums ceded. Net investment income for the first quarter of 1994 increased $12.2 million (3%) over the comparable 1993 period due primarily to increased investments. Net investment income for the first quarter of 1994 included a $4.6 million addition to investment income from the accretion of discounts on securities called or expected to be called. Net investment income for the first quarter of 1993 included a $15.6 million addition to investment income from such accretion of discounts. Life insurance benefits and expenses increased $43.5 million (7%) in the first quarter of 1994 over the first quarter of 1993 principally due to increased benefits attributable to the larger base of life insurance and annuities in force, higher benefit payments for reinsurance assumed and increased amortization of deferred policy acquisition costs (exclusive of accelerated amortization related to investment gains). Other expenses in the first quarter of 1993 included charges of $8.5 million primarily attributable to the establishment of an allowance for possible loss related to a receivable from the sale of a business unit in 1991 and anticipated guaranty fund assessments. Cash provided by operations for the first quarter of 1994 was $96.8 million which was $273.7 million (74%) below the 1993 amount primarily as a result of the timing in the settlement of certain receivables and payables, including reinsurance receivables and payables. The company continues to maintain a sufficiently liquid portfolio to cover its operating requirements, with the remaining funds invested in longer term securities. Asset Management Asset management results, before goodwill amortization, for the first quarter of 1994 were income of $800,000 compared to a loss of $200,000 for the comparable period of 1993. The improvement was due primarily to higher revenues from increased assets under management. Unallocated Investment Transactions, Interest and Expenses Unallocated investment transactions, interest and expenses, after related income taxes, for the first quarter of 1994 decreased $3.6 million (14%) from the first quarter of 1993. The decrease was principally due to lower interest expense on lower outstanding debt. Page 16 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders. At the Corporation's Annual Meeting of Stockholders held on April 28, 1994, its stockholders approved a number of proposals and nominations. Results of these proposals and nominations were:
Votes Votes Votes Broker-- For Against Withheld Abstentions Non--Votes Nomination for director: Forrest N. Shumway 64,711,147 -- 744,164 -- -- Peter V. Ueberroth 63,406,537 -- 2,048,774 -- -- Ratification of auditors 64,717,756 396,621 -- 340,933 -- Ratifying an amendment to the 1985 Stock Option and Award Plan 47,224,056 11,742,760 -- 1,040,113 5,448,381 Approving the adoption of the Value Added Incentive Plan 59,494,828 4,906,908 -- 1,053,575 --
A total of 65,455,311 shares were present in person or by proxy at the Annual Meeting. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. EX-10.1 1994 Corporate Bonus Plan. EX-10.2 Value Added Incentive Plan. EX-10.3 Form of Non-qualified Stock Option Agreement under the 1985 Stock Option and Award Plan. EX-10.4 Form of Non-qualified Stock Option Agreement for Nonemployee Directors under the 1985 Stock Option and Award Plan. EX-10.5 Form of Amendment No. 6 to the 1985 Stock Option and Award Plan. EX-11 Statement Re: Computation of Per Share Earnings. EX-12 Computation of Ratio of Earnings to Fixed Charges. (b) Reports on Form 8-K. None Page 17 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRANSAMERICA CORPORATION (Registrant) Burton E. Broome Vice President and Controller (Chief Accounting Officer) Date: May 9, 1994 EX-10.1 2 EXHIBIT EX-10.1 TRANSAMERICA CORPORATION 1994 CORPORATE BONUS PLAN _____________________________________________________________________________ Purpose: To provide a variable pay element that serves as an incentive to achieve planned performance; and To recognize individual contributions to annual operating results and achievement of the Corporation's strategic goals. To complement the Value Added Incentive Plan described in the 1994 proxy statement. Eligibility and Participation: Senior corporate and subsidiary executives selected by the Chief Executive Officer and Corporate Vice Presidents are eligible to participate in the Plan. Individuals will be notified of their participation, target bonuses, the percentage weighting of the components described below, and applicable payout tables in a letter as soon as possible after the Plan has been adopted. Inclusion of any individual as a participant in the Plan will not be a guarantee that any bonus will be paid to that person or that the person's employment will be continued for any period. Individual Bonuses: Individual target bonuses will be a predetermined percentage of 1994 base salary. A percentage of each executive's target bonus will be based on performance achieved in the following areas as appropriate: - The level of Value Added achieved. Value Added is described on Exhibit I. - The level of Operating Income achieved. Operating Income is described on Exhibit II. - Management's evaluation of accomplishment of Strategic Goals or other management objectives. Actual awards will be calculated after results are known and will take into account performance in the above areas. Bonuses may be further modified to reflect the individual's personal performance. Approval of Plan and Payouts: The Plan is established by, and may be modified or terminated at any time by, the Management Development and Compensation Committee of the Corporation's Board of Directors (the "Compensation Committee"). Individual awards under the Plan shall be subject to review and approval by the Compensation Committee. The Compensation Committee reserves the right to modify the formula for individual target bonuses (both as to the components and the percentage mix) for particular individuals and exclude non-recurring items as appropriate. Bonus Committee: The Plan will be administered by the Bonus Committee composed of the Corporation's President and Chief Executive Officer, Executive Vice President (Finn), Executive Vice President and Chief Financial Officer and Director of Compensation. The Bonus Committee is responsible for interpreting the Plan and recommending methods to deal with unforeseen circumstances. Payment of Bonuses: Bonuses will be paid in cash as soon as possible after Value Added and Operating Income for the Corporation and each subsidiary have been determined and bonus recommendations have been approved by the Compensation Committee. Participants must be continuously employed by the Corporation or one of its subsidiaries from January 1 through December 31, 1994 to receive a payout under the Plan. 1994 Bonus Plan - Page 2 EXHIBIT I Value Added Component _____________________________________________________________________________ Value Added is calculated in the same manner as for the 1994 profit plan and is defined as Adjusted Net Income minus a capital charge, expressed as a percentage of the Corporation's Average Adjusted Equity. The capital charge is determined by multiplying the Corporation's Average Adjusted Equity by the Cost of Equity. Each of these terms is further defined for 1994 as follows: - - - "Adjusted Net Income" means the Corporation's net income, in accordance with generally accepted accounting principles, as reported for the year, adjusted for (i) cumulative effects of changes in accounting standards, (ii) the economic amount of interest and depreciation (levelized over the life of the equipment) and any economic gains and losses on the disposition of equipment held for lease in lieu of reported interest, depreciation and gains and losses, (iii) amortized bond, equity and other portfolio gains and losses in lieu of realized gains and losses as reported, and (iv) the exclusion of goodwill amortized during the year. - - - "Adjusted Equity" means the Corporation's reported shareholders' equity, adjusted to exclude (i) preferred stock and (ii) net unrealized gains and losses on marketable equity and debt securities and foreign currency translation adjustments, and to include accumulated goodwill amortization related to assets still owned by the Company. - - - "Average Adjusted Equity" means the "five-point" quarterly average of the Adjusted Equity, the first point being the preceding year end. - - - "Cost of Equity" means the Corporation's imputed equity cost based on a formula approved by the Bonus Committee prior to the start of the year. For 1994, the cost of equity will be determined by adding (a) the Corporation's risk premium (the long-term market growth in equity securities over the risk-free rate multiplied by the Corporation's beta) and (b) the trend risk-free rate. i EXHIBIT II Operating Income Component _____________________________________________________________________________ Bonuses under the Operating Income Component will be based on actual after-tax operating income, excluding investment gains and losses, compared to the profit plan operating income for the relevant subsidiary or group of subsidiaries. If actual Operating Income equals the target Operating Income, the actual Operating Income bonus will equal the target Operating Income bonus. The leverage for above-target performance will take into account the expected degree of difficulty in achieving plan and is not necessarily the same for each organization. If actual Operating Income is greater or less than the target, the actual Operating Income bonus will be determined in accordance with an applicable payout table, which will be communicated to participants as soon as possible after the Plan has been adopted. If actual Operating Income is less than 80 percent of the respective profit plan target, the final bonus for that Operating Income component will be zero. ii EX-10.2 3 EXHIBIT EX-10.2 TRANSAMERICA CORPORATION VALUE ADDED INCENTIVE PLAN (Effective January 1, 1994) TRANSAMERICA CORPORATION VALUE ADDED INCENTIVE PLAN (Effective January 1, 1994) TABLE OF CONTENTS Page ____ Section 1. Establishment and Purpose . . . . . . . . . . . . . . . . . 1 1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Effective Date . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1 2.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 3. Awards and Committee Determinations . . . . . . . . . . . . 2 3.1 Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . 2 3.2 Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3.3 Determination . . . . . . . . . . . . . . . . . . . . . . . . 3 3.4 Adjustments Prior to Payment . . . . . . . . . . . . . . . . 3 3.5 Certification . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 4. Payment of Awards . . . . . . . . . . . . . . . . . . . . . 3 4.1 Right to Receive Payment . . . . . . . . . . . . . . . . . . 3 4.2 Payment Options . . . . . . . . . . . . . . . . . . . . . . . 4 4.3 Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 5. Administration . . . . . . . . . . . . . . . . . . . . . . 4 5.1 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5.2 Rules and Interpretation . . . . . . . . . . . . . . . . . . 4 5.3 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5.4 Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . 4 Section 6. General Provisions . . . . . . . . . . . . . . . . . . . . 4 6.1 Nonassignability . . . . . . . . . . . . . . . . . . . . . . 4 6.2 Employment Rights/Participation . . . . . . . . . . . . . . . 5 6.3 No Individual Liability . . . . . . . . . . . . . . . . . . . 5 6.4 Severability; Governing Law . . . . . . . . . . . . . . . . . 5 6.5 Affiliates of the Company . . . . . . . . . . . . . . . . . . 5 6.6 1994 Plan Year . . . . . . . . . . . . . . . . . . . . . . . 5 Section 7. Amendment and Termination . . . . . . . . . . . . . . . . . 5 7.1 Amendment and Termination . . . . . . . . . . . . . . . . . . 5 7.2 Change in Control of the Company . . . . . . . . . . . . . . 5 i TRANSAMERICA CORPORATION VALUE ADDED INCENTIVE PLAN (Effective January 1, 1994) Section 1. Establishment and Purpose 1.1 Purpose. Transamerica Corporation (the "Company") hereby establishes the Transamerica Corporation Value Added Incentive Plan (the "Plan"), effective as of January 1, 1994. The Plan is intended to attract and retain the services of executives who are in a position to influence the success of the Company by providing an award based on the financial performance of the total Company. Further, this Plan is designed to motivate key executives to increase shareholder value by improving operating results and efficiently employing the Company's capital. 1.2 Effective Date. The Plan is effective as of January 1, 1994, subject to the approval by an affirmative vote, at the 1994 Annual Meeting of Stockholders, or any adjournment thereof, of the holders of a majority of the outstanding shares of the common stock of the Company, present in person or by proxy and entitled to vote at such meeting. Section 2. Definitions 2.1 Defined Terms. When used in the Plan, the following terms shall have the meanings specified below: 2.1.1 "Adjusted Net Income" means the Company's net income, in accordance with Generally Accepted Accounting Principles, as reported for the Plan Year, adjusted for (i) cumulative effects of changes in accounting standards, (ii) the economic amount of interest and depreciation (levelized over the life of the equipment) and any economic gains and losses on the disposition of equipment held for lease in the Plan Year in lieu of reported interest, depreciation and gains and losses, (iii) amortized bond, equity and other portfolio gains and losses in lieu of realized gains and losses as reported, and (iv) the exclusion of goodwill amortized during the Plan Year. 2.1.2 "Adjusted Equity" means the Company's reported shareholders' equity for the Plan Year, adjusted to exclude (i) preferred stock and (ii) net unrealized gains and losses on marketable equity and debt securities and foreign currency translation adjustments, and to include accumulated goodwill amortization related to assets still owned by the Company. 2.1.3 "Average Adjusted Equity" means the "five-point" quarterly average of the Adjusted Equity for the Plan Year, the first point being the preceding year end. 2.1.4 "Base Salary" means as to any Plan Year a Participant's actual salary rate approved by the Committee prior to the start of the Plan Year. Such Base Salary shall be before (i) deductions for taxes or benefits 1 and (ii) deferrals of compensation pursuant to established plans. 2.1.5 "Board" means the Company's Board of Directors. 2.1.6 "Committee" means the Management Development and Compensation Committee of the Board of Directors of Transamerica Corporation. 2.1.7 "Cost of Equity" means the Company's imputed equity cost based on a formula approved by the Committee prior to the start of the Plan Year. 2.1.8 "Disability" has the meaning assigned to that term in the Transamerica Disability Income Plan in effect from time to time. 2.1.9 "Maximum Award" means the maximum award pursuant to this Plan to any individual Participant for any one Plan Year, which shall be $3.0 million. 2.1.10 "Normal Retirement" or "Early Retirement" means any termination of employment (other than by death or disability) after a Participant's normal or early retirement date (as defined in the Company's Retirement Plan). 2.1.11 "Participant" means as to any Plan Year a key executive of the Company who is likely to have a significant impact on the value added performance of the Company. An employee must be approved as a Participant by the Committee before the beginning of each Plan Year. 2.1.12 "Plan Year" means the 1994 calendar year and each succeeding calendar year. 2.1.13 "Target Award" means the target incentive opportunity for an individual, expressed as a percentage of his or her Base Salary for a specific Plan Year. The schedule of individual Target Awards shall be determined by the Committee in accordance with Section 3.1. 2.1.14 "Value Added" means Adjusted Net Income minus a capital charge, expressed as a percentage of the Company's Average Adjusted Equity. The capital charge is determined by multiplying the Company's Average Adjusted Equity by the Cost of Equity. Section 3. Awards and Committee Determinations 3.1 Opportunity. The Committee shall approve participation in the Plan and establish a Target Award for each Participant, based on his or her role and responsibilities, prior to the beginning of each Plan Year. 3.2 Awards. Payment under this Plan will be based on a payout table adopted by the Committee in writing prior to the start of the Plan Year. 2 Such table will generally remain unchanged for a period of years; however, the Committee reserves the right (in its sole discretion) to modify the table, provided that such modification is done prior to the start of the applicable Plan Year. The payout table will provide 100% of a Participant's Target Award if a certain level of Value Added is achieved and greater or lesser awards for Value Added that exceeds or is less than, respectively, the level at which 100% of Target Awards are paid. No Participant's award under this Plan may exceed three times his or her Target Award, and in no event may a Participant's award under this Plan exceed his or her Maximum Award. 3.3 Determination. Prior to the start of any Plan Year, the Committee shall determine for such Plan Year whether any significant non- recurring item (e.g. an acquisition, or the gain or loss on a divestiture, of a business) will be excluded from the calculation of Value Added for the Plan Year. Such determination shall apply only to events that have occurred since the adoption of this Plan or that may occur in the Plan Year. Once included, non-recurring items may not be excluded in subsequent Plan Years. 3.4 Adjustments Prior to Payment. The Committee, in its sole discretion, may reduce the award for any Participant below the award that would otherwise be payable in accordance with the Plan. 3.5 Certification. The Committee shall certify in writing the level of Value Added achieved and the respective percent of Target Awards earned for the Plan Year prior to payment of awards. Section 4. Payment of Awards 4.1 Right to Receive Payment. Any award that may become due under this Plan shall be made solely from the general assets of the Company, normally on or before the March 20th next following the end of the Plan Year during which the award was earned. Nothing in this Plan shall be construed to create a trust or to establish or evidence any Participant's claim of any right other than as an unsecured general creditor with respect to any payment to which he or she may be entitled. 4.1.1 Employment for Plan Year. If a Participant's employment with the Company continues for the entire Plan Year, the Participant shall be entitled to receive full payment of the award amount determined under Section 3 for the Plan Year in accordance with the terms of the Plan. 4.1.2 Retirement, Disability or Death. In the event of death, Disability or Normal or Early Retirement of a Participant during a Plan Year, the Committee (in its sole discretion) will determine on a pro rata basis the amount of the partial award (if any) to be paid to such Participant (or to his or her personal representative) for such Plan Year. Payments will be made in 3 cash at the same time as other awards to Participants are made for the same Plan Year. 4.1.3 Resignation or Discharge. If during a Plan Year, a Participant's employment with the Company terminates by reason of resignation or discharge, then the Participant will not be eligible for and shall forfeit any award under this Plan for the Plan Year. 4.2 Payment Options. Generally, awards under this Plan will be made in cash. However, the Committee reserves the right to declare any award, in whole or in part, payable in restricted stock, awarded under the terms of the 1985 Stock Option and Award Plan (the "1985 Plan") in an amount equivalent to the cash amount foregone with the restricted stock valued at fair market value on the date that the cash payment otherwise would have been made. Any restricted stock so awarded shall vest ratably over a period of not more than four years, subject to acceleration for termination of employment due to death, Disability, Normal or Early Retirement and change in control. 4.3 Beneficiaries. Each Participant may designate, in writing and on such form as the Company may prescribe, one or more beneficiaries to receive any amount that is payable after the individual's death. In the event of a Participant's death, any award (whether cash or restricted stock) that is payable to such Participant shall be paid to his or her beneficiary or, in the event that no beneficiary has been designated, to his or her estate. Section 5. Administration 5.1 Committee. The Plan shall be administered by the Committee. 5.2 Rules and Interpretation. The Committee shall be vested with all discretion and authority as it deems necessary or appropriate to administer the Plan and to interpret the provisions of the Plan. Any determination, decision or action of the Committee in connection with the construction, interpretation, administration or application of the Plan shall be final, conclusive and binding upon all persons. 5.3 Records. The records of the Committee with respect to the Plan shall be conclusive on all Participants and their beneficiaries and on all other persons. 5.4 Tax Withholding. The Company shall withhold all applicable taxes required by law from any payment, including any federal, FICA, state and local taxes. Section 6. General Provisions 6.1 Nonassignability. Prior to the time of any payment under the Plan, a Participant shall have no right by way of anticipation or 4 otherwise to assign or transfer any interest under this Plan. 6.2 Employment Rights/Participation. The establishment and subsequent operation of the Plan, including eligibility as a Participant, shall not be construed as conferring any legal or other rights upon any Participant or any other individual for the continuation of his or her employment for any Plan Year or any other period. The Company expressly reserves the right, which may be exercised at any time and without regard to when during a Plan Year or other accounting period such exercise occurs, to discharge any individual and/or treat him or her without regard to the effect which such treatment might have upon him or her as a Participant in this Plan. Being a Participant in any one Plan Year does not confer any right to be named as a Participant for any succeeding Plan Year. 6.3 No Individual Liability. No member of the Committee or the Board, or any officer of the Company, shall be liable for any determination, decision or action made in good faith with respect to the Plan or any award made under the Plan. 6.4 Severability; Governing Law. If any particular provision of this Plan is found to be invalid or unenforceable, such provision shall not affect the other provisions of the Plan, but the Plan shall be construed in all respects as if such invalid provision had been omitted. The provisions of the Plan shall be governed by and construed in accordance with the laws of the State of California. 6.5 Affiliates of the Company. Requirements referring to employment with the Company or payment of awards can be performed through the Company or any affiliate of the Company. 6.6 1994 Plan Year. For Plan Year 1994 all actions that would otherwise be required to be taken prior to the beginning of a Plan Year shall be taken prior to April 1, 1994. Section 7. Amendment and Termination 7.1 Amendment and Termination. The Committee may prospectively amend or terminate the Plan at any time and for any reason; provided, however, that such amendment shall not relieve the Company of its obligations under Section 7.2. 7.2 Change in Control of the Company. In the event of a change in control of the Company (as defined in the severance agreements in effect at the time of adoption of this Plan between the Company and certain executive officers, including Plan Participants, the "Agreements"), not later than the 20th business day following the date of such event, the Company shall pay each Participant an award that is the greater of (i) an award calculated in accordance with Section 3 above, but using the period ending on the day immediately prior to the day a change in control occurred as the last day of 5 the fiscal year for purposes of determining Value Added, or (ii) a pro rata amount of each Participant's Target Award for the Plan Year, based upon the portion of the fiscal year that has elapsed as of the date of the change in control. Payments made under this Section 7.2 shall not constitute "good reason" for purposes of terminating employment under any of the Agreements; however, the failure of the Company or its successor to continue this Plan or substitute a comparable plan immediately thereafter shall constitute "good reason" for such purposes. 6 EX-10.3 4 EXHIBIT EX-10.3 TRANSAMERICA CORPORATION NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT, made as of this 1st day of March, 1994, between TRANSAMERICA CORPORATION, a Delaware corporation (the "Company") and _______________________________________ (the "Employee"). W I T N E S S E T H : WHEREAS, the Company has adopted The 1985 Stock Option and Award Plan of Transamerica Corporation (the "Plan"), providing for the granting of certain stock options to key employees of the Company and its Affiliates, which options ("non-qualified stock options") are not intended to be incentive stock options within the meaning of section 422A, or successor provisions, of the Internal Revenue Code of 1986, as amended (the "Code"), to purchase shares of the common stock of the Company (the "Common Stock"); and WHEREAS, the Management Development and Compensation Committee (the "Committee"), which is responsible for administration of the Plan, has authorized the granting of an option to the Employee on the date of this Agreement, thereby allowing the Employee to acquire a proprietary interest in the Company in order that said Employee will have a further incentive for remaining with and increasing his or her efforts on behalf of the Company or one of its Affiliates; and WHEREAS, this Agreement is prepared in conjunction with and under the terms of the Plan; although all of the terms of the Plan and the definitions used in the Plan have not been set forth herein, such terms and definitions are incorporated herein and made a part hereof by reference; the provisions of the Plan shall govern any interpretation of this Agreement; and WHEREAS, the Employee has accepted the grant of stock options hereunder and agreed to the terms and conditions hereinafter stated; NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. The Company hereby grants to the Employee under the non-qualified stock option provisions of the Plan, as a separate incentive in connection with his or her employment and not in lieu of any salary or other compensation for his or her services, a non-qualified stock option to purchase, on the terms and conditions set forth in this Agreement and the Plan, all or any part of an aggregate of ____________ shares of authorized but unissued or reacquired shares of the Common Stock, at the purchase price set forth in paragraph 2 of this Agreement. The option granted hereby is not intended to be an Incentive Stock Option within the meaning of Section 422A of the Code. 2. The purchase price per share (the "Option Price") shall be $50.94, which is the fair market value per share of the Common Stock on the date of this Agreement. The Option Price shall be payable in the legal tender of the United States or, in the discretion of the Committee, in shares of the Common Stock of the Company or in a combination of such legal tender and such shares. 3. The number and class of shares specified in paragraph 1 above, and/or the Option Price, are subject to appropriate adjustment in the event of changes in the capital stock of the Company by reason of stock dividends, split-ups or combinations of shares, reclassifications, mergers, consolidations, reorganizations or liquidations. Subject to any required action of the stockholders of the Company, if the Company shall be the surviving corporation in any merger or consolidation, the option granted hereunder (to the extent that it is still outstanding) shall pertain to and apply to the securities to which a holder of the same number of shares of Common Stock that are then subject to the option would have been entitled. A dissolution or liquidation of the Company, or a merger or consolidation in which the Company is not the surviving corporation, will cause the option granted hereunder to terminate, unless the agreement of merger or consolidation shall otherwise provide, provided that the Employee shall in such event have the right immediately prior to such dissolution or liquidation, or merger or consolidation, to exercise the option in whole or part, without regard to the provisions of paragraph 4 or 5 of this Agreement. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. 4. The option may not be exercised as to any shares unless and until the Employee remains in the employ of the Company and/or an Affiliate, for a period of at least twelve (12) months after the date of this Agreement. In the event of termination of the Employee's employment for any reason whatever within this twelve (12) month period, the Employee's option shall terminate and all rights hereunder shall cease. 5. Except as otherwise provided in this Agreement, the right to exercise the option awarded by this Agreement shall accrue as to 25% of the shares subject to such option on the first anniversary date of the date of this Agreement and as to an additional 25% on each succeeding anniversary date, until the right to exercise this option shall have accrued with respect to 100% of the shares subject to such option. Immediately upon the occurrence of a Change in Control of the Company as defined from time to time in the Plan, or in the event of the liquidation or dissolution of the Company, the right to exercise the option awarded by this Agreement shall accrue to 100% of the shares subject to such options, notwithstanding the provisions of the foregoing paragraph or paragraph 4 of this Agreement. 6. In the event of the Employee's termination of Employment for any reason except Retirement, Total Disability or death, the Employee may, within three (3) months after the date of such termination or within ten (10) years from the date of this Agreement, whichever shall first occur, exercise the option to the extent the right to exercise the option had accrued as of the date of such termination. In the event of the Employees's Retirement or Termination of Employment by reason of his or her Total Disability, the Employee may, within three (3) years after the date of such Termination of Employment or within ten (10) years from the date of this Agreement, whichever shall first occur, exercise the option to the extent the Employee could have exercised the option on the date of such termination. In the event the Employee shall die within such three (3) month period or such three (3) year -2- period, whichever is applicable, or shall die while in the employ of the Company or an Affiliate, the option may be exercised by the Employee's transferee, as hereinafter provided, to the same extent the right to exercise the option had accrued immediately prior to his or her death, for a period of one (1) year after the date of the Employee's death. 7. The option shall be exercisable during the Employee's lifetime only by the Employee. The option shall be non-transferable by the Employee otherwise than by will or the applicable laws of descent and distribution. 8. To the extent exercisable after the Employee's death, the option shall be exercised only by the Employee's transferee who shall be the person or persons entitled to the option under the Employee's will, or if the Employee shall fail to make testamentary disposition of the option, his or her legal representative. Any transferee exercising the option must furnish the Company (a) written notice of his or her status as transferee, (b) evidence satisfactory to the Company to establish the validity of the transfer of the option and compliance with any laws or regulations pertaining to said transfer, and (c) written acceptance of the terms and conditions of the option as prescribed in this Agreement. 9. The option may be exercised by the person then entitled to do so as to any shares which may then be purchased (a) by giving written notice of exercise to the Company, specifying the number of full shares to be purchased and accompanied by full payment of the purchase price thereof (and the amount of any income tax the Company is required by law to withhold by reason of such exercise), and (b) by giving satisfactory assurances in writing if requested by the Company, signed by the person exercising the option, that the shares to be purchased upon such exercise are being purchased for investment and not with a view to the distribution thereof. At the absolute discretion of the Committee, the person entitled to exercise the option may elect to satisfy the income tax withholding requirement described in subparagraph (a) above by having the Company withhold shares of Common Stock or by delivering to the Company already-owned shares of Common Stock. No partial exercise of this option may be for less than ten (10) share lots or multiples thereof. 10. The Committee, in its absolute discretion, may elect (in lieu of accepting the exercise price tendered for, and delivering, all or a portion of the shares of Common Stock as to which the option has been exercised) if the fair market value of the Common Stock exceeds the exercise price of the option (the "Appreciation Value") to pay the Employee in cash or in shares of the Common Stock, or a combination of cash and Common Stock, an amount equal to the Appreciation Value. The Committee's election pursuant to this paragraph 10 shall be made by giving written notice to the Employee (or other person exercising the option). The Committee may not permit an Employee who is subject to Section 16(b) of the Securities Exchange Act of 1934 to receive a cash payment equal to all or any portion of the Appreciation Value unless the option is exercised during a ten-day "window" period defined in Rule 16b-3(e) under such Act. If the Employee is subject to such section and exercises the option awarded by this Agreement during such a "window" period, for purposes of this paragraph 10 the Fair Market Value of the Company's Common Stock on the exercise date shall be deemed to equal that value determined by the Committee in its discretion which is not less than the lowest fair market -3- value, nor more than the highest fair market value, of a share of the Company's Common Stock on any day during the ten-day "window" period including the exercise date. Shares of the Company's Common Stock paid pursuant to this paragraph will be valued at their Fair Market Value on the exercise date. 11. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of the shares covered by the option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory authority, is necessary or desirable as a condition of the purchase of shares hereunder, the option may not be exercised, in whole or in part, unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. The Company shall make reasonable efforts to meet the requirements of any such state or federal law or securities exchange and to obtain any such consent or approval of any such governmental authority. 12. Neither the Employee nor any person claiming under or through said Employee shall be or have any of the rights or privileges of a stockholder of the Company in respect of any of the shares issuable upon the exercise of the option, unless and until certificates representing such shares shall have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Employee. 13. The Employee agrees to remain in the employ of the Company and/or an Affiliate for at least one (1) year after the date of this Agreement. Subject to any written, express employment contract with the Employee, nothing in this Agreement or the Plan shall confer upon the Employee any right to continue to be employed by the Company or the Affiliate or shall interfere with or restrict in any way the rights of the Company or the Affiliate, which are hereby expressly reserved, to terminate the employment of the Employee at any time for any reason whatsoever, with or without good cause. Such reservation of rights can be modified only in an express written contract executed by a duly authorized officer of the Company or the Affiliate. A leave of absence or an interruption in service (including an interruption during military service) authorized or acknowledged by the Company, or the Affiliate employing the Employee, as the case may be, shall not be deemed a Termination of Employment for the purposes of this Agreement. 14. Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company, in care of its Secretary, at 600 Montgomery Street, San Francisco, California 94111, or at such other address as the Company may hereafter designate in writing. Any notice to be given to the Employee shall be addressed to the Employee at the address set forth beneath the Employee's signature hereto, or at such other address as the Employee may hereafter designate in writing. Any such notice shall be deemed to have been duly given if and when enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified and deposited, postage and registry fee prepaid, in a United States post office. 15. Except as provided in paragraph 17, nothing herein contained shall -4- affect the Employee's right to participate in and receive benefits under and in accordance with the then current provisions of any pension, insurance or other employee welfare plan or program of the Company or any Affiliate. 16. Except as otherwise herein provided, the option herein granted and the rights and privileges conferred hereby shall not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of said option, or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, said option and the rights and privileges conferred hereby shall immediately become null and void. 17. Notwithstanding any other provision of this Agreement except the third sentence of paragraph 6 hereof relating to the death of the Employee (in which case this option is exercisable to the extent set forth therein), this option is not exercisable after the expiration of ten (10) years from the date of this Agreement. In no event is this option exercisable after the expiration of eleven (11) years from the date of this Agreement. Notwithstanding any other provision of this Agreement, effective as of April 1, 1989, in the event that the Employee receives a hardship withdrawal from his or her pre-tax account under the Transamerica Corporation Employees Stock Savings Plan (the "SSP"), this option may not be exercised during the twelve (12) month period following the receipt of such withdrawal, unless the Committee determines that (a) such exercise (or a particular manner of exercise) would be consistent with the requirements of Treasury Regulation section 1.401(k)-1(d)(2)(iii)(B), as amended from time to time (the "safe harbor" rule for determining an employee's financial need for a hardship withdrawal), or (b) under the circumstances then prevailing, satisfaction of the requirements of said "safe harbor" rule no longer is necessary to assure the continued tax qualification of the SSP. 18. Subject to the limitation on the transferability of the option contained herein, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto. 19. This Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan shall govern. Terms used and not defined in this Agreement shall have the meaning set forth in the Plan. 20. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon Employee, the Company and all other interested persons. No member of the Committee -5- shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement. 21. In the event that any provision in this Agreement shall be held invalid or unenforceable, such provision shall be severable from, and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Agreement. 22. This Agreement constitutes the entire understanding of the parties on the subjects covered. The Employee expressly warrants that he or she is not executing this Agreement in reliance on any promises, representations, or inducements other than those contained herein, and that he or she is executing this Agreement voluntarily, free of any duress or coercion. Modifications to this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company. IN WITNESS WHEREOF, the parties have executed this Agreement, in duplicate, the day and year first above written. TRANSAMERICA CORPORATION By _________________________________ ____________________________________ Employee Signature ____________________________________ Print Name ____________________________________ Address ____________________________________ ____________________________________ Social Security Number -6- EX-10.4 5 EXHIBIT EX-10.4 TRANSAMERICA CORPORATION NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT, made as of this [DAY] day of [MONTH], 1994, between TRANSAMERICA CORPORATION, a Delaware corporation (the "Company") and ___________________________________ (the "Director"). W I T N E S S E T H: WHEREAS, the Company has adopted the 1985 Stock Option and Award Plan of Transamerica Corporation (the "Plan"), providing for the granting of certain stock options to Nonemployee Directors of the Company and its Affiliates, which options ("non-qualified stock options") are not intended to be incentive stock options within the meaning of section 422, or successor provisions, of the Internal Revenue Code of 1986, as amended (the "Code"), to purchase shares of common stock of the Company (the "Common Stock"); and WHEREAS, the Plan authorizes the grant of an option to the Director on the date of this Agreement, thereby allowing the Director to acquire or increase his or her proprietary interest in the Company in order that said Director will have a further incentive for remaining with and increasing his or her efforts on behalf of the Company; and WHEREAS, this Agreement is prepared in conjunction with and under the terms of the Plan; although all of the terms of the Plan and the definitions used in the Plan have not been set forth herein, such terms and definitions are incorporated herein and made a part hereof by reference; and the provisions of the Plan shall govern any interpretation of this Agreement; and WHEREAS, the Director has accepted the grant of stock options hereunder and agreed to the terms and conditions hereinafter stated; NOW THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. The Company hereby grants to the Director under Section 7 of the Plan, as a separate incentive in connection with his or her service on the Board and not in lieu of any fees or other compensation for his or her services, a non-qualified stock option to purchase, on the terms and conditions set forth in this Agreement and the Plan, all or any part of an aggregate of 1,500 shares of authorized but unissued or reacquired shares of the Common Stock, at the purchase price set forth in paragraph 2 of this Agreement. The option granted hereby is not intended to be an Incentive Stock Option within the meaning of section 422 of the Code. 2. The purchase price per share (the "Option Price") shall be $________, which is the fair market value per share of the Common Stock on the date of this Agreement. The Option Price shall be payable in the legal tender of the United States, in shares of the Common Stock of the Company, or in a combination of such legal tender and such shares. 3. The number and class of shares specified in paragraph 1 above, and/or the Option Price, shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a subdivision or consolidation of shares or the payment of a stock dividend or any other increase or decrease in the number of issued and outstanding shares of Common Stock effected without receipt of consideration by the Company. If the Company shall be the surviving corporation in any merger or consolidation, the option shall pertain to and apply to the securities to which a holder of the same number of shares of Common Stock that are subject to the option would have been entitled. A dissolution or liquidation of the Company, or a merger or consolidation in which the Company is not the surviving corporation, shall cause the option to terminate, unless the agreement of merger or consolidation shall otherwise provide. 4. The right to exercise the option awarded by this Agreement shall accrue as to 100% of the shares subject to such option on the date which is six months after the date of the Company's 1994 Annual Meeting of Stockholders. 5. Subject to the provisions of this paragraph 5, the right to exercise the option awarded by this Agreement shall expire on the date which is one month after the tenth anniversary of the date of this Agreement (the "Normal Expiration Date"). In the event of the termination of the Director's service on the Board for any reason except Retirement, Total Disability or death, the right to exercise the option awarded by this Agreement shall expire three (3) months after the date of such termination or upon the Normal Expiration Date, whichever shall first occur. In the event of the Director's termination of service on the Board on account of his or her Retirement or Total Disability, the right to exercise the option awarded by this Agreement shall expire three (3) years after the date of such termination or upon the Normal Expiration Date, whichever shall first occur. In the event the Director shall die within such three (3) month or three (3) year period, whichever is applicable, or shall die while a Director, the option may be exercised by the Director's transferee, as hereinafter provided, for a period of one (1) year after the date of the Director's death. 6. The option shall be exercisable during the Director's lifetime only by the Director. The option shall be non-transferable by the Director otherwise than by will or the applicable laws of descent and distribution. 7. To the extent exercisable after the Director's death, the option shall be exercised only by the Director's transferee who shall be the person or persons entitled to the option under the Director's will, or if the Director shall fail to make testamentary disposition of the option, his or her legal representative. Any transferee exercising the option must furnish the Company (a) written notice of his or her status as transferee, (b) evidence satisfactory to the Company to establish the validity of the transfer of the option and compliance with any laws or regulations pertaining to said transfer, and (c) written acceptance of the terms and conditions of the option as prescribed in this Agreement. 2 8. The option may be exercised by the person then entitled to do so as to any shares which may then be purchased (a) by giving written notice of exercise to the Company, specifying the number of full shares to be purchased and accompanied by full payment of the purchase price thereof (and the amount of any income tax the Company is required by law to withhold by reason of such exercise), and (b) by giving satisfactory assurances in writing if requested by the Company, signed by the person exercising the option, that the shares to be purchased upon such exercise are being purchased for investment and not with a view to the distribution thereof. No partial exercise of this option may be for less than ten (10) share lots or multiples thereof. Unless otherwise specified by the Director, a partial exercise of the option shall be deemed to be an exercise of the portion of the option with the earliest Normal Expiration Date(s). 9. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of the shares covered by the option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory authority, is necessary or desirable as a condition of the purchase of shares hereunder, the option may not be exercised, in whole or in part, unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. The Company shall make reasonable efforts to meet the requirements of any such state or federal law or securities exchange and to obtain any such consent or approval of any such governmental authority. 10. Neither the Director nor any person claiming under or through said Director shall be or have any of the rights or privileges of a stockholder of the Company in respect of any of the shares issuable upon the exercise of the option, unless and until certificates representing such shares shall have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Director. 11. A leave of absence or an interruption in service (including an interruption during military service) authorized or acknowledged by the Company shall not be deemed a termination of service for the purposes of this Agreement. 12. Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company, in care of its Secretary, at 600 Montgomery Street, San Francisco, California 94111, or at such other address as the Company may hereafter designate in writing. Any notice to be given to the Director shall be addressed to the Director at the address set forth beneath the Director's signature hereto, or at such other address as the Director may hereafter designate in writing. Any such notice shall be deemed to have been duly given if and when enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified and deposited, postage and registry fee prepaid, in a United States post office. 3 13. Nothing herein contained shall affect the Director's right to participate in and receive benefits under and in accordance with the then current provisions of any pension, insurance or other employee welfare plan or program of the Company or any Affiliate. 14. Except as otherwise herein provided, the option herein granted and the rights and privileges conferred hereby shall not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of said option, or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, said option and the rights and privileges conferred hereby shall immediately become null and void. 15. Notwithstanding any other provision of this Agreement except the last sentence of paragraph 5 hereof relating to the death of the Director (in which case this option is exercisable to the extent set forth therein), this option is not exercisable after the expiration of five (5) years and one (1) month from the date of this Agreement. In no event is this option exercisable after the expiration of six (6) years and one (1) month from the date of this Agreement. 16. Subject to the limitation on the transferability of the option contained herein, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto. 17. This Agreement is subject to all the terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan shall govern. Terms used and not defined in this Agreement shall have the meaning set forth in the Plan. 18. Notwithstanding the provisions of Section 2 of the Plan, the Committee shall exercise no discretion with respect to the interpretation or administration of this option. The Board shall have the power to construe the Plan and the option, to determine all questions arising thereunder, and to adopt and amend such rules and regulations for the administration thereof as it may deem desirable. The interpretation and construction by the Board of any provision of the Plan or of the option shall be final. No member of the Board shall be liable for any action or determination made in good faith with respect to the Plan or the option. 4 19. In the event that any provision in this Agreement shall be held invalid or unenforceable, such provision shall be severable from, and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement, in duplicate, the day and year first above written. TRANSAMERICA CORPORATION By __________________________________ ____________________________________ Director Signature ____________________________________ ____________________________________ Address ____________________________________ Social Security Number 5 EX-10.5 6 EXHIBIT EX-10.5 AMENDMENT NO. 6 TO THE 1985 STOCK OPTION AND AWARD PLAN OF TRANSAMERICA CORPORATION TRANSAMERICA CORPORATION, having adopted the 1985 Stock Option and Award Plan of Transamerica Corporation (the "Plan"), hereby amends the Plan, effective as of January 1, 1994, as follows: 1. Sections 1(v), 4(a)(2)(A)(iii), and 4(b)(1) are amended by substituting the phrase "Section 422 of the Code" for the phrase "Section 422A of the Code". 2. A new Section 1(y) is added to the Plan to read as follows: (y) RULE 16b-3 "Rule 16b-3" means Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and any future regulation amending, supplementing or superseding such regulation. 3. The third sentence of Section 2(a) is amended in its entirety to read as follows: A Director shall be eligible to serve on the Committee only if he or she is a "disinterested person" under Rule 16b-3. 4. Section 3(c) is amended in its entirety to read as follows: (c) CHANGES IN COMPANY'S SHARES In the event that the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend, spin-off or combination of shares, appropriate adjustments shall be made by the Committee in the numerical limitation of Section 4(a)(2)(i) and in the aggregate number and kinds of shares and units which may be issued on exercise of Options or be issued or granted as Awards. 5. Section 4(a)(2)(i) is amended in its entirety to read as follows: (i) Select from among the eligible key Employees the Employees to whom Options should be granted and determine the number of shares of Common Stock to be subject to such Options, provided that during any fiscal year of the Company, no key Employee shall be granted Options which cover more than 500,000 shares. 6. Section 4(b)(8) is amended by substituting the phrase "Section 424 of the Code" for the phrase "Section 425 of the Code". 7. Section 4(b)(10)(B) is amended by substituting the phrase "Section 424(d) of the Code" for the phrase "Section 425(d) of the Code". 8. Section 6(e) is amended in its entirety to read as follows: (e) AMENDMENT, SUSPENSION, OR TERMINATION OF THE PLAN The Board or the Committee, each in its sole discretion, may alter, amend or terminate the Plan, or any part thereof, at any time and for any reason. However, only if and to the extent required to maintain the Plan's qualification under Rule 16b-3, any such amendment shall be subject to stockholder approval. In addition, as required by Rule 16b-3, the provisions of Section 7 regarding the formula for determining the amount, exercise price, and timing of Nonemployee Director Options shall in no event be amended more than once every six months, other than to comport with changes in the Code and/or ERISA. (ERISA is not applicable to the Plan.) Neither the amendment, suspension, nor termination of the Plan shall, without the consent of the Optionee or the Grantee, alter or impair any rights or obligations under any Option or Award theretofore granted. No Option or Award may be granted during any period of suspension nor after termination of the Plan, and in no event may any Option intended to be an Incentive Stock Option be granted under this Plan after January 26, 2004. 9. Section 7(a) is amended in its entirety to read as follows: (a) GRANTING OF OPTIONS (i) For purposes of this Section 7(a), the term "Daily Mean" shall mean the mean between the highest and lowest sale prices of the Company's Common Stock quoted in the New York Stock Exchange Composite Transactions Index for the date in question, as published in The Wall Street Journal. (ii) For purposes of this Section 7(a), the term "Window Period" shall mean the period of ten business days which begins on the third business day following the release of the Company's summary statement of sales and earnings for the immediately preceding fiscal year, and which ends on the twelfth business day following such release. (iii) For purposes of this Section 7(a), the term "Grant Date" shall mean the latest business day during a Window Period on which the Daily Mean for that date equals or most closely approximates the arithmetic mean of all of the Daily Means for all of the business days during the Window Period. (iv) Each Nonemployee Director who is a Nonemployee Director on January 27, 1994 and is such as of the next occurring Grant Date, automatically will receive, as of such Grant Date only, an Option to purchase 1,500 shares of Common Stock. 2 (v) Each Nonemployee Director who becomes a Nonemployee Director after January 27, 1994 and who is such as of the next occurring Grant Date, automatically will receive, as of such Grant Date only, an Option to purchase 1,500 shares of Common Stock. (vi) Each continuing Nonemployee Director (i.e., a Nonemployee Director who, pursuant to Section 7(a)(iv) or (v), has received an initial grant of an Option to purchase 1,500 shares of Common Stock) automatically will receive, on each subsequent Grant Date on which the Nonemployee Director is such, an Option to purchase 1,500 shares of Common Stock. 10. Sections 7(b)(1) through 7(b)(4), inclusive, are amended in their entirety to read as follows: (b) TERMS OF OPTIONS (1) OPTION AGREEMENT Each Option shall be evidenced by a written stock option agreement which shall be executed by the Optionee and the Company. (2) OPTION PRICE The price of the shares subject to each Option shall be the Fair Market Value for such shares on the date that the Option is granted. (3) EXERCISABILITY Each Option shall be exercisable in full commencing six months after the date that the Option is granted, provided that each Option granted during 1994 shall be exercisable in full commencing six months after the 1994 Annual Meeting of Stockholders. (4) EXPIRATION OF OPTIONS (A) Each Option shall terminate upon the first to occur of the events listed in subparagraph (B) of this Section 7(b)(4). (B) (i) The expiration of ten years and one month from the date the Option was granted, subject to the provisions of clause (v), below; or (ii) The expiration of three months from the date of the Optionee's termination of service as a Director, unless such termination of service results from the Optionee's death, Total Disability or Retirement, subject to the provisions of clause (v) below; (iii) The expiration of three years from the date of the Optionee's termination of service as a Director by reason of Total Disability, subject to the provisions of clause (v) below; 3 (iv) The expiration of three years from the date of the Optionee's Retirement, subject to the provisions of clause (v) below; or (v) The expiration of one year from the date of the Optionee's death, if such death occurs while the Optionee is a Director or within the three-month or three-year period referred to in (ii), (iii) or (iv), above. IN WITNESS WHEREOF, Transamerica Corporation, by its duly authorized Chairman of its Management Development and Compensation Committee, and by its duly authorized officer, has executed this Amendment No. 6 on the date(s) indicated below. TRANSAMERICA CORPORATION Dated: ________________, 1994 By _________________________ Forrest N. Shumway, Chairman, Management Development and Compensation Committee Dated: ________________, 1994 And By ______________________ Title: 4 EX-11 7 EXHIBIT EX-11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS TRANSAMERICA CORPORATION Three months ended March 31, 1994 1993 (Dollar amounts in millions, except for share data) Primary Average shares outstanding 75.8 79.3 Net effect of dilutive stock options-- based on the treasury stock method using average market price 1.4* 1.3* ____ ____ TOTAL 77.2 80.6 ==== ==== Net income $103.0 $91.8 Preferred dividends (5.8) (6.0) ______ _____ Net income to common $ 97.2 $85.8 ====== ===== Per share amount $1.28 $1.08 ===== ===== Fully Diluted Average shares outstanding 75.8 79.3 Net effect of dilutive stock options-- based on the treasury stock method using the market price at quarter end if higher than the average market price for three months 1.4* 1.7* ____ ____ TOTAL 77.2 81.0 ==== ==== Net income $103.0 $91.8 Preferred dividends (5.8) (6.0) ______ _____ Net income to common $ 97.2 $85.8 ====== ===== Per share amount $ 1.28 $1.08 ====== ===== *Not included in per share calculation because effect is less than 3%. EX-12 8 EXHIBIT 12 TRANSAMERICA CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Three Months Ended March 31, 1994 1993 (Dollar amounts in millions) Fixed charges: Interest and debt expense $122.6 $133.1 One-third of rental expense 7.5 7.2 ______ ______ Total $130.1 $140.3 ====== ====== Earnings: Consolidated income from continuing operations $103.7 $ 93.0 Provision for income taxes 61.5 54.9 Fixed charges 130.1 140.3 ______ ______ Total $295.3 $288.2 ====== ====== Ratio of earnings from continuing operations to fixed charges 2.27 2.05 ==== ==== -----END PRIVACY-ENHANCED MESSAGE-----