EXHIBIT 1.(8)(e)(i)
AMENDED PARTICIPATION AGREEMENT
BY AND AMONG
USAA LIFE INSURANCE COMPANY
AND
THE XXXXX AMERICAN FUND,
XXXX XXXXX MANAGEMENT, INC.,
XXXX XXXXX & COMPANY, INCORPORATED
TABLE OF CONTENTS
DESCRIPTION PAGE
Section 1. Available Portfolios..................................................... 2
1.1 Growth Portfolio...................................................... 2
1.2 Addition or Deletion of Portfolios.................................... 2
1.3 No Sales to the General Public........................................ 2
Section 2. Processing Transactions.................................................. 2
2.1 Timely Pricing and Orders............................................. 2
2.2 Timely Payments....................................................... 3
2.3 Applicable Price...................................................... 3
2.4 Dividends and Distributions........................................... 3
2.5 Book Entry............................................................ 4
Section 3. Costs and Expenses....................................................... 4
3.1 General............................................................... 4
3.2 Registration.......................................................... 4
3.3 Other (Non-Sales-Related)............................................. 5
3.4 Other (Sales-Related)................................................. 5
3.5 Parties to Cooperate.................................................. 5
Section 4. Legal Compliance......................................................... 5
4.1 Tax Laws.............................................................. 5
4.2 Insurance and Certain Other Laws...................................... 7
4.3 Securities Laws....................................................... 8
4.4 Notice of Certain Proceedings and Other Circumstances................. 9
4.5 USAA Life to Provide Documents; Information about the Trust........... 10
4.6 Trust to Provide Documents; Information about USAA Life............... 10
Section 5. Mixed and Shared Funding................................................. 11
5.1 General............................................................... 11
5.2 Disinterested Trustees................................................ 11
5.3 Monitoring for Material Irreconcilable Conflicts...................... 12
5.4 Conflict Remedies..................................................... 12
5.5 Notice to USAA Life................................................... 14
5.6 Information Requested by Board of Trustees............................ 14
5.7 Compliance with SEC Rules............................................. 14
5.8 Requirements for Other Insurance Companies............................ 14
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DESCRIPTION PAGE
Section 6. Termination.............................................................. 15
6.1 Events of Termination................................................. 15
6.2 Notice Requirement for Termination.................................... 16
6.3 Portfolios to Remain Available........................................ 16
6.4 Survival of Warranties and Indemnifications........................... 17
6.5 Continuance of Agreement for Certain Purposes......................... 17
Section 7. Parties to Cooperate Respecting Termination.............................. 17
Section 8. Assignment............................................................... 18
Section 9. Notices.................................................................. 18
Section 10. Voting Procedures........................................................ 19
Section 11. Foreign Tax Credits...................................................... 19
Section 12. Indemnification.......................................................... 19
12.1 Of Trust, Distributor and Adviser by USAA Life........................ 19
12.2 Of USAA Life by Distributor and Adviser............................... 21
12.3 Effect of Notice...................................................... 24
Section 13. Applicable Law........................................................... 24
Section 14. Execution in Counterparts................................................ 24
Section 15. Severability............................................................. 24
Section 16. Rights Cumulative........................................................ 25
Section 17. Restrictions on Sales of Trust Shares.................................... 25
Section 18. Scope of Liability....................................................... 25
Section 19. Headings................................................................. 26
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 16th day of December,
1994 and amended March 16, 1998 ("Agreement"), by and among USAA Life
Insurance Company, a Texas life insurance company ("USAA Life"), on behalf of
itself, the Separate Account of USAA Life Insurance Company (the "Separate
Account"), and the Life Insurance Separate Account of USAA Life Insurance
Company (the "Life Insurance Separate Account"), each an investment account
organized under the laws of Texas; The Xxxxx American Fund, a Massachusetts
business trust (the "Trust"); Xxxx Xxxxx Management, Inc., a New York
corporation ("Adviser"), the Trust's investment adviser; and Xxxx Xxxxx &
Company, Incorporated, a Delaware corporation ("Distributor"), the Trust's
principal underwriter (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, USAA Life will be the issuer of certain variable annuity
contracts of USAA Life that are the subject of USAA Life's Form N-4
registration statement filed with the Securities and Exchange commission
("SEC"), File No. 33-82268 (the "Contracts"); and
WHEREAS, USAA Life will be the issuer of certain flexible premium
variable universal life insurance policies that are the subject of USAA Life's
Form S-6 and Form N-8B-2 registration statements filed with the SEC, File No.
333-45343 and 811-08625, respectively, (the "Policy" or "Policies"); and
WHEREAS, USAA Life will fund the Contracts and Policies through the
Separate Account and Life Insurance Separate Account, respectively, each of
which currently consists of seven subaccounts ("Fund Accounts"; reference
herein to the "Separate Account" or "Life Insurance Separate Account" includes
reference to each Fund Account to the extent the context requires); and
WHEREAS, USAA Life will serve as the depositor of the Separate Account
and the Life Insurance Separate Account, each of which is a unit investment
trust registered as an investment company under the Investment Company Act of
1940 (the "1940 Act"), and the security interests deemed to be issued by the
Separate Account under the Contracts and the Life Insurance Separate Account
under the Policies will be registered as securities under the Securities Act
of 1933 (the "1933 Act"); and
WHEREAS, the Trust is registered with the SEC as an open-end management
investment company under the 1940 Act, consisting of six separate series
("Series") whose shares are registered under the 1933 Act; and
WHEREAS, the Trust and Distributor will make shares of each Series
listed on Schedule A hereto (each, a "Portfolio"; reference herein to the
"Trust" includes reference to each Portfolio to the extent the context
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requires) and made part hereof, available for purchase by the Separate Account
and the Life Insurance Separate Account; and
WHEREAS, the Trust's Xxxxx American Growth Portfolio ("Growth
Portfolio") is currently the only Portfolio that USAA Life intends to utilize
as an investment medium for the benefit of the owners of the Contracts (the
"Contract owners") or Policies ("Policy owners") who have allocated Contract
or Policy value to the Fund Account corresponding to that Portfolio;
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE PORTFOLIOS
1.1 GROWTH PORTFOLIO.
The Trust and Distributor will make shares in the Growth Portfolio
available to USAA Life for purchase and redemption at net asset value and with
no sales charges, subject to the terms and conditions of this Agreement.
1.2 ADDITION OR DELETION OF PORTFOLIOS.
The Parties hereto may agree, from time to time, to add other Trust
Portfolios to provide additional funding media for the Contracts and Policies,
or to delete, combine, or modify existing Portfolios, by amending Schedule A
hereto. Upon such amendment to Schedule A, any applicable reference to a
Portfolio, the Trust, or its shares herein shall include a reference to any
such additional Portfolio.
1.3 NO SALES TO THE GENERAL PUBLIC.
The Trust and Distributor represent and warrant that no shares of any
Portfolio have been or will be sold to the general public.
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SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
The Trust or its designated agent will provide closing net asset value,
dividend and capital gain distribution information for each Portfolio to USAA
Life at the close of trading on each day on which (a) the New York Stock
Exchange is open for regular trading, (b) the Trust calculates the Portfolio's
net asset value and (c) USAA Life is open for business ("Business Day"). The
Trust or its designated agent will use its best efforts to provide this
information by 5:15 p.m., Central time. USAA Life will use these data to
calculate unit values, which in turn will be used to process transactions that
receive that same Business Day's Separate Account or Life Insurance Separate
Account unit value. Such Separate Account or Life Insurance Account processing
will be done the same evening, and corresponding orders with respect to Trust
shares will be placed the morning of the following Business Day. USAA Life
will use its best efforts to place such orders with the Trust by 9 a.m.,
Central time.
It is understood and agreed that the Trustees of the Trust may refuse to
sell shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of
the Trustees acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Portfolio.
2.2 TIMELY PAYMENTS.
USAA Life will transmit orders for purchases and redemptions of Trust
shares to Distributor, and will wire payment for net purchases to a custodial
account designated by the Trust on the same day as the order for Trust shares
is placed, to the extent practicable. Payment for net redemptions will be
wired by the Trust to an account designated by USAA Life on the same day as
the order is placed, to the extent practicable, and in any event be made
within five calendar days after the date the order is placed in order to
enable USAA Life to pay redemption proceeds within the time specified in
Section 22(e) of the 0000 Xxx.
2.3 APPLICABLE PRICE.
The Parties agree that Portfolio share purchase and redemption orders
that result from Contract or Policy owner purchase payments, surrenders,
partial surrenders, partial withdrawals, routine withdrawals of charges,
loans, loan repayments, payment of benefit proceeds at death or Policy
maturity, or requests for other transactions under the Contracts or Policies
that USAA Life receives prior to the close of regular trading on the New York
Stock Exchange on a Business Day, will be executed at the net asset values as
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determined as of the close of regular trading on the New York Stock Exchange
on that Day, which generally will be the Business Day prior to Distributor's
receipt of the corresponding orders for purchases and redemptions of Portfolio
shares. USAA Life or its designee shall act as the Trust's agent for receipt
of such orders. All other purchases and redemptions of Portfolio shares by
USAA Life will be effected at the net asset values next computed after receipt
by Distributor of the order therefor, and such orders will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
The Trust will furnish notice promptly to USAA Life of any income
dividends or capital gain distributions payable on the shares of any
Portfolio. USAA Life hereby elects to reinvest all dividends and capital gains
distributions in additional shares of the corresponding Portfolio at the
ex-dividend date net asset values until USAA Life otherwise notifies the Trust
in writing, it being agreed by the Parties that the ex-dividend date and the
payment date with respect to any dividend or distribution will be the same
Business Day. USAA Life reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Trust shall notify USAA Life of the number of shares so issued as payment of
such dividends and distributions.
2.5 BOOK ENTRY.
Issuance and transfer of Trust shares will be by book entry only. Stock
certificates will not be issued to USAA Life. Shares ordered from the Trust on
behalf of the Separate Account will be recorded in an appropriate title for
USAA Life, on behalf of its Separate Account. Shares ordered from the Trust on
behalf of the Life Insurance Separate Account will be recorded in an
appropriate title for USAA Life, on behalf of its Life Insurance Separate
Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided herein, each Party will bear
all expenses incident to its performance under this Agreement.
3.2 REGISTRATION.
(a) The Trust will bear the cost of its registering as a management
investment company under the 1940 Act and registering its shares under the
1933 Act, and keeping such registrations current and effective; including,
without limitation, the preparation of and filing with the SEC of Forms N-SAR
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and Rule 24f-2 Notices respecting the Trust and its shares and payment of all
applicable registration or filing fees with respect to any of the foregoing.
(b) USAA Life will bear the cost of registering the Separate Account
and the Life Insurance Separate Account as a unit investment trust under the
1940 Act and registering units of interest under the Contracts and Policies
under the 1933 Act and keeping such registrations current and effective;
including, without limitation, the preparation and filing with the SEC of
Forms N-SAR and Rule 24f-2 Notices respecting the Separate Account and the
Life Insurance Separate Account and each of its units of interest and payment
of all applicable registration or filing fees with respect to any of the
foregoing.
3.3 OTHER (NON-SALES-RELATED).
(a) The Trust will bear the costs of preparing, filing with the SEC
and setting for printing the Trust's prospectus, statement of additional
information and any amendments or supplements thereto (collectively, the
"Trust Prospectus"), periodic reports to shareholders, Trust proxy material
and other shareholder communications.
(b) USAA Life will bear the costs of preparing, filing with the SEC
and setting for printing, the Separate Account's prospectus, statement of
additional information and any amendments or supplements thereto
(collectively, the "Separate Account Prospectus"), any periodic reports to
Contract owners, annuitants or participants under the Contracts (collectively,
and with Policy owners, "Participants"), voting instruction solicitation
material, and other Participant communications.
(c) USAA Life will bear the costs of preparing, filing with the SEC
and setting for printing, the Life Insurance Separate Account's prospectus and
any amendments or supplements thereto (collectively, the "Life Insurance
Separate Account Prospectus"), any periodic reports to Policy owners, voting
instruction solicitation material, and other Policy owner communications.
(d) USAA Life or its affiliates shall print in quantity and deliver to
existing Participants the documents provided by the Trust in camera ready form
pursuant to Section 4.6(b) hereof. The costs of printing in quantity and
delivering to existing Participants such documents will be allocated between
USAA Life or its affiliates and the Trust or its affiliates as they shall
determine by separate agreement.
3.4 OTHER (SALES-RELATED).
Expenses of distributing a Portfolio's shares and the Contracts and
Policies will be allocated between USAA Life, or its affiliates, and the
Trust, or its affiliates, as they shall determine by separate agreement. As
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used in this Agreement, the term "affiliates" shall have the same meaning as
"affiliated person" as defined in Section 2(a)(3) of the 0000 Xxx.
3.5 PARTIES TO COOPERATE.
The Trust, Adviser, Distributor and USAA Life, each agrees to cooperate
with the others, as applicable, in arranging to print, mail and/or deliver
combined or coordinated prospectuses or other materials of the Trust, Separate
Account and Life Insurance Separate Account.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) The Trust represents and warrants that each Portfolio is currently
qualified as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and represents that it
will use its best efforts to qualify and to maintain qualification of each
Portfolio as a RIC and the Trust, Adviser or Distributor will notify USAA Life
immediately upon having a reasonable basis for believing that a Portfolio has
ceased to so qualify or that it might not so qualify in the future.
(b) USAA Life represents that it believes, in good faith, that the
Contracts and Policies will be treated as annuity contracts and life insurance
policies, respectively, under applicable provisions of the Code and that it
will use its best efforts to maintain such treatment; USAA Life will notify
the Trust and Distributor immediately upon having a reasonable basis for
believing that any of the Contracts or Policies have ceased to be so treated
or that they might not be so treated in the future.
(c) The Trust represents that it will use its best efforts to comply
and to maintain each Portfolio's compliance with the diversification
requirements set forth in Section 817(h) of the Code and Section 1.817-5(b) of
the regulations under the Code, and the Trust, Adviser or Distributor will
notify USAA Life immediately upon having a reasonable basis for believing that
a Portfolio has ceased to so comply or that a Portfolio might not so comply in
the future.
(d) USAA Life represents that it believes, in good faith, that the
Separate Account and Life Insurance Separate Account are each a "segregated
asset account" and that interests in the Separate Account and Life Insurance
Separate Account are offered exclusively through the purchase of or transfer
into a "variable contract," within the meaning of such terms under Section 817
of the Code and the regulations thereunder. USAA Life will use its best
efforts to continue to meet such definitional requirements, and it will notify
the Trust and Distributor immediately upon having a reasonable basis for
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believing that such requirements have ceased to be met or that they might not
be met in the future.
(e) Adviser represents and warrants that it will manage each Portfolio
in compliance with its investment objectives, policies and restrictions as set
forth in the Trust Prospectus. Adviser further represents and warrants that it
will manage each Portfolio as a RIC in compliance with Subchapter M and
Section 817(h) of the Code and regulations thereunder.
(f) The Trust represents that it has adopted and will maintain
procedures for ensuring that the Trust is managed in compliance with
Subchapter M and Section 817(h) of the Code and regulations thereunder, and in
a manner designed to avoid the imposition of excise taxes under Section 4982
of the Code or any other similar or successor provision. On request, the Trust
will also provide USAA Life with such materials, cooperation and assistance as
may be reasonably necessary for USAA Life or any person designated by USAA
Life to review from time to time the procedures and practices of Adviser or
any other provider of services to the Trust for ensuring that the Trust is
managed in compliance with Subchapter M and Section 817(h) of the Code and
regulations thereunder. The Parties hereto agree that the Trust shall not
incur any unreasonable costs in connection with the provision of any material,
cooperation or assistance to USAA Life pursuant to this paragraph.
(g) Within 15 Business Days after the end of each calendar quarter,
the Adviser will furnish to USAA Life a letter confirming the Trust's
compliance with Subchapter M and Section 817(h) of the Code and regulations
thereunder as of the end of the applicable quarter, or, in the case of the
last quarter in each year, for the 12 months then ended.
(h) In the event of any noncompliance or potential noncompliance with
Subchapter M or Section 817(h) of the Code and regulations thereunder, the
Trust will take such action as is necessary or appropriate to cure any
noncompliance during a grace period of 30 calendar days after the end of the
calendar quarter in which such noncompliance occurred. If the Trust so cures
the noncompliance, it will furnish USAA Life with a report by the last day of
such grace period confirming the same. If the Trust does not so cure the
noncompliance regarding its status as a RIC, the Trust will pursue those
efforts necessary to enable each affected Portfolio to qualify once again for
treatment as a RIC in compliance with Subchapter M. If the Trust does not so
cure the noncompliance regarding its status under Section 817(h), the Trust
will cooperate in good faith with USAA Life's efforts to obtain a ruling and
closing agreement, as provided in Revenue Procedure 92-25 issued by the
Internal Revenue Service (or any applicable ruling or procedure subsequently
issued by the Internal Revenue Service), that the Trust satisfies Section
817(h) for the applicable period or periods.
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4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) The Trust will use its best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in
writing by USAA Life.
(b) USAA Life represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws
of the State of Texas and has full corporate power, authority and legal right
to execute, deliver and perform its duties and comply with its obligations
under this Agreement, (ii) it has legally and validly established and
maintains the Separate Account and the Life Insurance Separate Account each as
a segregated asset account under Chapter 3, Article 3.75 of the Texas
Insurance Code and the regulations thereunder, and (iii) the Contracts and
Policies comply in all material respects with all other applicable federal and
state laws and regulations.
(c) Distributor represents and warrants that it is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full corporate power, authority and
legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(d) The Trust, Adviser and Distributor represent and warrant that the
Trust is a business trust duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts and has full
power, authority, and legal right to execute, deliver, and perform its duties
and comply with its obligations under this Agreement.
(f) Adviser represents and warrants that it is a corporation, duly
organized, validly existing and in good standing under the laws of New York
and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) USAA Life represents and warrants that (i) interests in the
Separate Account pursuant to the Contracts and in the Life Insurance Separate
Account pursuant to the Polices will be registered under the 1933 Act to the
extent required by the 1933 Act, and the Contracts and Policies will be duly
authorized for issuance and sold in compliance with Texas law, (ii) the
Separate Account and Life Insurance Separate Account each is and will remain
registered under the 1940 Act, to the extent required under the 1940 Act,
(iii) the Separate Account and Life Insurance Separate Account each does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, (iv) the Separate Account's and the Life Insurance
Separate Account's 1933 Act registration statement relating to the Contracts
and Policies, respectively, together with any amendments thereto, will at all
times comply in all material respects with the requirements of the 1933 Act
and the rules thereunder, and (v) the Separate Account Prospectus and Life
Insurance Separate Account Prospectus each will at all times comply in all
material respects with the requirements of the 1933 Act and the rules
thereunder.
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(b) The Trust and Distributor represent and warrant that (i) Trust
shares sold pursuant to this Agreement will be registered under the 1933 Act
to the extent required by the 1933 Act and duly authorized for issuance and
sold in compliance with Massachusetts law, (ii) the Trust is and will remain
registered under the 1940 Act to the extent required by the 1940 Act, (iii)
the Trust will amend the registration statement for its shares under the 1933
Act and itself under the 1940 Act from time to time as required in order to
effect the continuous offering of shares, (iv) the Trust does and will comply
in all material respects with the requirements of the 1940 Act and the rules
thereunder, (v) the Trust's 1933 Act registration statement, together with any
amendments thereto, will at all times comply in all material respects with the
requirements of the 1933 Act and rules thereunder, and (vi) the Trust
Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) The Trust will register and qualify its shares for sale in
accordance with the laws of any state or other jurisdiction if and to the
extent reasonably deemed advisable by the Trust, USAA Life or any other life
insurance company utilizing the Trust.
(d) Distributor represents and warrants that it is registered as a
broker-dealer with the SEC under the Securities Exchange Act of 1934, as
amended, and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"), and that it has and will perform its
obligations hereunder in compliance in all material respects with the federal
securities laws, any applicable state securities laws, and the regulations of
the NASD.
(e) Adviser represents and warrants that it is registered as an
investment adviser with the SEC under the Investment Advisers Act of 1940, as
amended, and under such state securities laws as may be applicable, and that
it has and will perform its obligations hereunder in compliance in all
material respects with the federal securities laws and any applicable state
securities laws.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) Distributor or the Trust will immediately notify USAA Life of (i)
the issuance by any court or regulatory body of any stop order, cease and
desist order, or other similar order with respect to the Trust's registration
statement under the 1933 Act or the Trust Prospectus, (ii) any request by the
SEC for any amendment to such registration statement or Trust Prospectus,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of the Trust's shares, or
(iv) any other action or circumstances that may prevent the lawful offer or
sale of shares of any Portfolio in any state or jurisdiction, including,
without limitation, any circumstances in which (x) such shares are not
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law or (y) such law precludes the use of such
shares as an underlying investment medium of the Contracts or the Policies
issued or to be issued by USAA Life. Distributor and the Trust will make every
reasonable effort to prevent the issuance, with respect to any Portfolio, of
9
any such stop order, cease and desist order or similar order and, if any such
order is issued, to obtain the lifting thereof at the earliest possible time.
(b) USAA Life will immediately notify the Trust of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to the Separate Account's or Life Insurance
Separate Account's registration statement under the 1933 Act relating to the
Contracts or the Separate Account Prospectus, or the Policies or the Life
Insurance Separate Account Prospectus, respectively, (ii) any request by the
SEC for any amendment to such registration statements or Prospectuses, (iii)
the initiation of any proceedings for that purpose or for any other purpose
relating to the registration or offering of the Separate Account interests
pursuant to the Contracts or the Life Insurance Separate Account interests
pursuant to the Policies, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or
jurisdiction, including, without limitation, any circumstances in which said
interests are not registered and, in all material respects, issued and sold in
accordance with applicable state and federal law. USAA Life will make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
4.5 USAA LIFE TO PROVIDE DOCUMENTS; INFORMATION ABOUT THE TRUST.
(a) USAA Life will provide to the Trust one complete copy of all SEC
registration statements, Separate Account Prospectuses, Life Insurance
Separate Account Prospectuses, reports, any preliminary and final voting
instruction solicitation material, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to the
Separate Account, the Contracts, the Life Insurance Separate Account or the
Policies, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
(b) USAA Life will provide to the Trust or its designee each piece of
sales literature or other promotional material in which the Trust,
Distributor, and/or Adviser is named, at least 15 Business Days prior to its
use or such shorter period as the Parties hereto may, from time to time, agree
upon. No such material shall be used if the Trust or its designee objects to
such use within 15 Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. The
Trust hereby designates its Adviser as the entity to receive such sales
literature, until such time as the Trust appoints another designee by giving
notice to USAA Life in the manner required by Section 9 hereof.
(c) Neither USAA Life nor any of its affiliates will give any
information or make any representations or statements on behalf of or
concerning the Trust in connection with the sale of the Contracts or the
Policies other than (i) the information or representations contained in the
registration statement, including the Trust Prospectus contained therein,
relating to shares of a Portfolio, as such registration statement and Trust
Prospectus may be amended from time to time; or (ii) in reports or proxy
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materials for the Trust; or (iii) in sales literature or other promotional
material approved by the Trust or Distributor, except with the permission of
the Trust or Distributor.
4.6 TRUST TO PROVIDE DOCUMENTS; INFORMATION ABOUT USAA LIFE.
(a) The Trust will provide to USAA Life one complete copy of all SEC
registration statements, Trust Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Trust or
the shares of a Portfolio, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
(b) The Trust will provide to USAA Life camera ready copies of all
Trust Prospectuses, proxy materials, periodic reports to shareholders and
other materials required by law to be sent to Contract or Policy owners who
have allocated any Contract or Policy value to a Portfolio. The Trust will
provide such camera ready copies to USAA Life in a timely manner so as to
enable USAA Life to print and distribute such materials within the time
required by law to be furnished to Contract and Policy owners.
(c) The Trust will provide to USAA Life or its designee each piece of
sales literature or other promotional material in which USAA Life or any of
its affiliates is named, or which refers to the Contracts or Policies, at
least 15 Business Days prior to its use or such shorter period as the Parties
hereto may, from time to time, agree upon. No such material shall be used if
USAA Life or its designee objects to such use within 15 Business Days after
receipt of such material or such shorter period as the Parties hereto may,
from time to time, agree upon. USAA Life shall receive all such sales
literature until such time as it appoints a designee by giving notice to the
Trust in the manner required by Section 9 hereof.
(d) Neither the Trust nor any of its affiliates will give any
information or make any representations or statements on behalf of or
concerning USAA Life, the Separate Account, the Contracts, the Life Insurance
Separate Account or the Policies other than (i) the information or
representations contained in the registration statement, including the
Separate Account Prospectus contained therein, relating to the Contracts, as
such registration statement and Separate Account Prospectus may be amended
from time to time; or (ii) the information or representations contained in the
registration statement, including the Life Insurance Separate Account
Prospectus contained therein, relating to the Policies, as such registration
statement and Life Insurance Separate Account Prospectus may be amended from
time to time; (iii) in reports or voting instruction materials for the
Separate Account or the Life Insurance Separate Account; or (iv) in sales
literature or other promotional material approved by USAA Life or its
affiliates, except with the express written permission of USAA Life.
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SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The Trust represents and warrants that it has received an order from the
SEC exempting it from certain provisions of the 1940 Act and rules thereunder
so that the Trust may be available for investment by certain other entities,
including, without limitation, separate accounts funding variable life
insurance contracts ("Mixed Funding") and separate accounts of insurance
companies unaffiliated with USAA Life ("Shared Funding"). The Parties
recognize that the SEC has imposed terms and conditions for such orders that
are substantially identical to many of the provisions of this Section 5.
Sections 5.2 through 5.8 below shall apply, if and only if the Trust
implements Mixed or Shared Funding, pursuant to such an exemptive order or
otherwise.
5.2 DISINTERESTED TRUSTEES.
The Trust agrees that its Board of Trustees shall at all times consist
of trustees a majority of whom (the "Disinterested Trustees") are not
interested persons of the Trust within the meaning of Section 2(a)(19) of the
1940 Act.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
The Trust agrees that its Board of Trustees will monitor for the
existence of any material irreconcilable conflict between the interests of the
participants in all separate accounts of life insurance companies utilizing
the Trust, including the Separate Account. USAA Life agrees to inform the
Board of Trustees of the Trust of the existence of or any potential for any
such material irreconcilable conflict of which it is aware. The concept of a
"material irreconcilable conflict" is not defined by the 1940 Act or the rules
thereunder, but the Parties recognize that such a conflict may arise for a
variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action
by insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Portfolio are being
managed;
12
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract participants or by
participants of different life insurance companies utilizing the
Trust; or
(f) a decision by a life insurance company utilizing the Trust to
disregard the voting instructions of participants.
Consistent with the SEC's requirements in connection with exemptive
proceedings of the type referred to in Section 5.1 hereof, USAA Life will
assist the Board of Trustees in carrying out its responsibilities by providing
the Board of Trustees with all information reasonably necessary for the Board
of Trustees to consider any issue raised, including information as to a
decision by USAA Life to disregard voting instructions of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members
of the Board of Trustees or a majority of the Disinterested Trustees that a
material irreconcilable conflict exists, USAA Life and the other life
insurance companies utilizing the Trust will, at their own expense and to the
extent reasonably practicable (as determined by a majority of the
Disinterested Trustees), take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, which steps may include, but
are not limited to:
(i) withdrawing the assets allocable to some or all of the separate
accounts from the Trust or any Portfolio and reinvesting such
assets in a different investment medium, including another
Portfolio of the Trust, or submitting the question whether such
segregation should be implemented to a vote of all affected
participants and, as appropriate, segregating the assets of any
particular group (E.G., annuity contract owners or participants,
life insurance contract owners or all contract owners and
participants of one or more life insurance companies utilizing the
Trust) that votes in favor of such segregation, or offering to the
affected contract owners or participants the option of making such
a change; and
(ii) establishing a new registered investment company of the type
defined as a "Management Company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a Management
Company.
(b) If the material irreconcilable conflict arises because of USAA
Life's decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, USAA Life
may be required, at the Trust's election, to withdraw the Separate Account's
or Life Insurance Separate Account's investment in the Trust. No charge or
penalty will be imposed as a result of such withdrawal. Any such withdrawal
must take place within six months after the Trust gives notice to USAA Life
13
that this provision is being implemented, and until such withdrawal
Distributor and the Trust shall continue to accept and implement orders by
USAA Life for the purchase and redemption of shares of the Trust.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to USAA Life conflicts with
the majority of other state regulators, then USAA Life will withdraw the
Separate Account's or Life Insurance Separate Account's investment in the
Trust within six months after the Trust's Board of Trustees informs USAA Life
that it has determined that such decision has created a material
irreconcilable conflict, and until such withdrawal Distributor and Trust shall
continue to accept and implement orders by USAA Life for the purchase and
redemption of shares of the Trust.
(d) USAA Life agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and
with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Trustees will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will the Trust or Distributor
be required to establish a new funding medium for any Contracts or Policies.
USAA Life will not be required by the terms hereof to establish a new funding
medium for any Contracts or Policies if an offer to do so has been declined by
vote of a majority of Participants materially adversely affected by the
material irreconcilable conflict.
5.5 NOTICE TO USAA LIFE.
The Trust will promptly make known in writing to USAA Life the Board of
Trustees' determination of the existence of a material irreconcilable
conflict, a description of the facts that give rise to such conflict and the
implications of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF TRUSTEES.
USAA Life and the Trust will at least annually submit to the Board of
Trustees of the Trust such reports, materials or data as the Board of Trustees
may reasonably request so that the Board of Trustees may fully carry out the
obligations imposed upon it by the provisions hereof, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Trustees. All reports received by the Board of Trustees of
potential or existing conflicts, and all Board of Trustees actions with regard
to determining the existence of a conflict, notifying life insurance companies
utilizing the Trust of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of
the Board of Trustees or other appropriate records, and such minutes or other
records will be made available to the SEC upon request.
14
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which the Trust is serving as an investment
medium for variable life insurance policies, 1940 Act Rules 6e-3(T) or, if
applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive
relief with respect to mixed and shared funding, the Trust agrees that it will
comply with the terms and conditions thereof and that the terms of this
Section 5 shall be deemed modified if and only to the extent required in order
also to comply with the terms and conditions of such exemptive relief that is
afforded by any of said rules that are applicable.
5.8 REQUIREMENTS FOR OTHER INSURANCE COMPANIES.
The Trust will require that each insurance company utilizing the Trust
enter into an agreement with the Trust that contains in substance the same
provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, 10 and 18(a) of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a
Portfolio:
(a) at the option of USAA Life, Distributor or the Trust upon the
approval by (x) a majority of the Disinterested Trustees or (y) a majority
vote of the shares of the affected Portfolio that are held in the
corresponding Fund Account of the Separate Account or Life Insurance Separate
Account (pursuant to the procedures set forth in Section 10 of this Agreement
for voting Trust shares in accordance with Participant instructions);
provided, however, that the approvals described in clauses (x) and (y) above
shall not be required if (1) the aggregate account value under the Contracts
or Policies is less than $25 million, respectively, at the date the notice of
termination is delivered, and (2) the notice of termination is delivered no
earlier than the end of the 36th full calendar month following the date this
Agreement was amended; or
(b) at the option of the Trust upon institution of formal proceedings
against USAA Life or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding USAA Life's obligations under
this Agreement or related to the sale of the Contracts or Policies, the
operation of the Separate Account or the Life Insurance Separate Account, or
the purchase of the Trust shares, if, in each case, the Trust reasonably
determines that such proceedings, or the facts on which such proceedings would
15
be based, have a material likelihood of imposing material adverse consequences
on the Portfolio with respect to which the Agreement is to be terminated; or
(c) at the option of USAA Life upon institution of formal proceedings
against the Trust, Distributor, or Adviser by the NASD, the SEC, or any state
insurance regulator or any other regulatory body regarding the Trust's,
Distributor's or Adviser's obligations under this Agreement or related to the
operation or management of the Trust or the purchase of Trust shares, if, in
each case, USAA Life reasonably determines that such proceedings, or the facts
on which such proceedings would be based, have a material likelihood of
imposing material adverse consequences on USAA Life, or the Fund Accounts
corresponding to the Portfolio with respect to which the Agreement is to be
terminated; or
(d) at the option of any Party in the event that (i) the Portfolio's
shares are not registered and, in all material respects, issued and sold in
accordance with any applicable state or federal law or (ii) such law precludes
the use of such shares as an underlying investment medium of the Contracts or
Policies issued or to be issued by USAA Life; or
(e) upon termination of the corresponding Fund Accounts' investment in
the Portfolio pursuant to Section 5 hereof; or
(f) at the option of USAA Life if the Portfolio ceases to qualify as a
RIC under Subchapter M of the Code or under successor or similar provisions,
or if USAA Life reasonably believes that the Portfolio may fail to so qualify;
(g) at the option of USAA Life if the Portfolio fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if USAA
Life reasonably believes that the Portfolio may fail to so comply; or
(h) in the event of any change in the Portfolio's investment adviser
or investment practices, at the option of USAA Life if USAA Life reasonably
believes that such change will materially increase the risks incurred by USAA
Life or Participants; or
(i) at the option of any Party if the Contracts or Policies issued by
USAA Life cease to qualify as annuity contracts or life insurance policies,
respectively, under the Code (other than by reason of the Portfolio's
noncompliance with Section 817(h) or Subchapter M of the Code) or if interests
in the Separate Account under the Contracts or in the Life Insurance Separate
Account under the Policies are not registered and, in all material respects,
issued or sold in accordance with any applicable state or federal law.
16
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore,
(a) in the event that any termination is based upon the provisions of
Section 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six months days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Section 6.1(b) or Section 6.1(c) hereof, such prior written notice shall be
given at least ninety (90) days in advance of the effective date of
termination unless a shorter time is agreed to by the Parties hereto;
(c) in the event that any termination is based upon the provisions of
Section 6.1(d), Section 6.1(f), Section 6.1(g), Section 6.1(h) or Section
6.1(i) hereof, such prior written notice shall be given as soon as possible
within twenty-four (24) hours after the terminating Party learns of the event
causing termination to be required.
6.3 PORTFOLIOS TO REMAIN AVAILABLE.
Except (i) as necessary to implement Participant-initiated transactions,
(ii) as required by state insurance laws or regulations, (iii) as required
pursuant to Section 5 of this Agreement, or (iv) with respect to any Portfolio
as to which this Agreement has terminated, USAA Life shall not (x) redeem
Trust shares attributable to the Contracts or Policies (as opposed to Trust
shares attributable to USAA Life's assets held in the Separate Account or Life
Insurance Separate Account), or (y) prevent Participants from allocating
payments to or transferring amounts from a Portfolio that was otherwise
available under the Contracts or Policies, until, in either case, 90 calendar
days after USAA Life shall have notified the Trust or Distributor of its
intention to do so.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of
this Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Portfolio
pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i)
hereof, this Agreement shall nevertheless continue in effect as to any shares
of that Portfolio that are outstanding as of the date of such termination (the
"Initial Termination Date"). This continuation shall extend to the earlier of
the date as of which the Separate Account or Life Insurance Separate Account
owns no shares of the affected Portfolio or a date (the "Final Termination
Date") six months following the Initial Termination Date, except that USAA
17
Life may, by written notice to the other Parties, shorten said six month
period in the case of a termination pursuant to Sections 6.1(d), 6.1(f),
6.1(g), 6.1(h) or 6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The other Parties hereto agree to cooperate with and give reasonable
assistance to USAA Life in taking all necessary and appropriate steps for the
purpose of ensuring that the Separate Account or Life insurance Separate
Account owns no shares of a Portfolio after the Final Termination Date with
respect thereto, or, in the case of a termination pursuant to Section 6.1(a),
the termination date specified in the notice of termination. Such steps may
include combining the affected Fund Account with another Fund Account,
substituting other mutual fund shares for those of the affected Portfolio, or
otherwise terminating participation by the Contracts or the Policies in such
Portfolio.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 2 hereof
will be given by means mutually acceptable to the Parties concerned. Each
other notice or communication required or permitted by this Agreement will be
given to the following persons at the following addresses and facsimile
numbers, or such other persons, addresses or facsimile numbers as the Party
receiving such notices or communications may subsequently direct in writing:
USAA Life Insurance Company
0000 Xxxxxxxxxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxx, Esq.
FAX: 000-000-0000
00
Xxx Xxxxx American Fund
00 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
FAX: 000-000-0000
Xxxx Xxxxx Management, Inc.
00 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
FAX: 000-000-0000
Xxxx Xxxxx & Company, Incorporated
00 Xxxxxxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
FAX: 000-000-0000
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
USAA Life will distribute all proxy material furnished by the Trust to
Participants and will vote Trust shares in accordance with instructions
received from Participants. USAA Life will vote Trust shares that are (a) not
attributable to Participants or (b) attributable to Participants, but for
which no instructions have been received, in the same proportion as Trust
shares for which said instructions have been received from Participants. USAA
Life agrees that, with respect to the Policies, it will disregard Participant
voting instructions only to the extent it would be permitted to do so pursuant
to Rule 6e-3(T)(b)(15)(iii) under the 1940 Act. USAA Life agrees that, with
respect to the Contracts, it will disregard Participant voting instructions
only to the extent it would be permitted to do so pursuant to Rule
6e-3(T)(b)(15)(iii) under the 1940 if the Contracts were variable life
insurance policies subject to that rule. Other participating life insurance
companies utilizing the Trust will be responsible for calculating voting
privileges in a manner consistent with that of USAA Life, as prescribed by
this Section 10.
19
SECTION 11. FOREIGN TAX CREDITS
The Trust agrees to consult in advance with USAA Life concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF TRUST, DISTRIBUTOR AND ADVISER BY USAA LIFE.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, USAA Life agrees to indemnify and hold harmless the Trust, Distributor
and Adviser, each of their trustees, directors and officers, and each person,
if any, who controls the Trust, Distributor or Adviser within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 12.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
USAA Life) or actions in respect thereof (including, to the extent reasonable,
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions are related to the sale or
acquisition of the Trust's shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Separate
Account's or the Life Insurance Separate Account's 1933 Act
registration statement, the Separate Account Prospectus, the Life
Insurance Separate Account Prospectus, the Contracts, the Policies
or sales literature or advertising for the Contracts or the
Policies (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and
in conformity with information furnished to USAA Life or its
affiliates by or on behalf of the Trust, Distributor or Adviser
for use in the Separate Account's or the Life Insurance Separate
Account's 1933 Act registration statement, the Separate Account
Prospectus, the Life Insurance Separate Account Prospectus, the
Contracts, the Policies, or sales literature or advertising (or
any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Trust's 1933 Act registration statement, Trust
20
Prospectus, sales literature or advertising of the Trust, or any
amendment or supplement to any of the foregoing, not supplied for
use therein by or on behalf of USAA Life or its affiliates) or the
negligent, illegal or fraudulent conduct of USAA Life or its
affiliates or persons under their control (including, without
limitation, their employees and "Associated Persons," as that term
is defined in paragraph (m) of Article I of the NASD's By-Laws),
in connection with the sale or distribution of the Contracts; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Trust's
1933 Act registration statement, Trust Prospectus, sales
literature or advertising of the Trust, or any amendment or
supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading
if such a statement or omission was made in reliance upon and in
conformity with information furnished to the Trust, Adviser or
Distributor by or on behalf of USAA Life or its affiliates for use
in the Trust's 1933 Act registration statement, Trust Prospectus,
sales literature or advertising of the Trust, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by USAA Life to perform the
obligations, provide the services and furnish the materials
required of them under the terms of this Agreement, or any
material breach of any representation and/or warranty made by USAA
Life in this Agreement or arise out of or result from any other
material breach of this Agreement by USAA Life; or
(v) arise as a result of failure by the Contracts or Policies issued
by USAA Life to qualify as annuity contracts or life insurance
policies, respectively, under the Code, otherwise than by reason
of any Portfolio's failure to comply with Subchapter M or Section
817(h) of the Code.
(b) USAA Life shall not be liable under this Section 12.1 with respect
to any losses, claims, damages, liabilities or actions to which an Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance by that Indemnified Party of its duties
or by reason of that Indemnified Party's reckless disregard of obligations or
duties (i) under this Agreement or (ii) to Distributor or to the Trust.
(c) USAA Life shall not be liable under this Section 12.1 with respect
to any action against an Indemnified Party unless the Trust, Distributor or
Adviser shall have notified USAA Life in writing within a reasonable time
after the summons or other first legal process giving information of the
nature of the action shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify USAA Life of any such action shall
not relieve USAA Life from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
21
Section 12.1. In case any such action is brought against an Indemnified Party,
USAA Life shall be entitled to participate, at its own expense, in the defense
of such action. USAA Life also shall be entitled to assume the defense
thereof, with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from USAA Life
to such Indemnified Party of USAA Life's election to assume the defense
thereof, the Indemnified Party will cooperate fully with USAA Life and shall
bear the fees and expenses of any additional counsel retained by it, and USAA
Life will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
12.2 OF USAA LIFE BY DISTRIBUTOR AND ADVISER.
(a) Except to the extent provided in Sections 12.2(d) and 12.2(e),
below, Distributor and Adviser agree to indemnify and hold harmless USAA Life
and its affiliates, each of their directors and officers, and each person, if
any, who controls USAA Life or iTs affiliates within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 12.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of Distributor
and/or Adviser) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions are related to the sale or
acquisition of the Trust's shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Trust's
1933 Act registration statement, Trust Prospectus or sales
literature or advertising of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading; provided that this
agreement to indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Trust Distributor or Adviser by or on
behalf of USAA Life or its affiliates for use in the Trust's 1933
Act registration statement, Trust Prospectus, or in sales
literature or advertising (or any amendment or supplement to any
of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Separate Account's or Life Insurance Separate
Account's 1933 Act registration statement, Separate Account
Prospectus, Life Insurance Separate Account Prospectus, sales
literature or advertising for the Contracts or Policies, or any
amendment or supplement to any of the foregoing, not supplied for
use therein by or on behalf of the Trust, Distributor or Adviser)
or the negligent, illegal or fraudulent conduct of the Trust,
Distributor, Adviser or persons under their control (including,
22
without limitation, their employees and Associated Persons), in
connection with the sale or distribution of Trust shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Separate
Account's or Life Insurance Separate Account's 1933 Act
registration statement, Separate Account Prospectus, Life
Insurance Separate Account Prospectus, sales literature or
advertising covering the Contracts or Policies, or any amendment
or supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance
upon and in conformity with information furnished to USAA Life or
its affiliates by or on behalf of the Trust, Distributor or
Adviser for use in the Separate Account's or Life Insurance
Separate Account's 1933 Act registration statement, Separate
Account Prospectus, Life Insurance Separate Account Prospectus,
sales literature or advertising covering the Contracts or
Policies, or any amendment or supplement to any of the foregoing;
or
(iv) arise as a result of any failure by the Trust, Distributor or
Adviser to perform the obligations, provide the services and
furnish the materials required of them under the terms of this
Agreement, or any material breach of any representation and/or
warranty made by the Trust, Distributor, or Adviser in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Trust, Distributor, or Adviser.
(b) Except to the extent provided in Sections 12.2(d) and 12.2(e)
hereof, Distributor and Adviser agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement thereof with, except as set
forth in Section 12.2(c) below, the written consent of Distributor and/or
Adviser) or actions in respect thereof (including, to the extent reasonable,
legal and other expenses) to which the Indemnified Parties may become subject
directly or indirectly under any statute, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or actions directly or indirectly
result from or arise out of the failure of any Portfolio to operate as a
regulated investment company in compliance with (i) Subchapter M of the Code
and regulations thereunder or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Contract owners,
Policy owners or Participants asserting liability against USAA Life or its
affiliates pursuant to the Contracts or Policies, the costs of any ruling and
closing agreement or other settlement with the Internal Revenue Service, and
the cost of any substitution by USAA Life of shares of another investment
company or portfolio for those of any adversely affected Portfolio as a
funding medium for the Separate Account or Life Insurance Separate Account
that USAA Life reasonably deems necessary or appropriate as a result of the
noncompliance.
23
(c) The written consent of Distributor and/or Adviser referred to in
Section 12.2(b) above shall not be required with respect to amounts paid in
connection with any ruling and closing agreement or other settlement with the
Internal Revenue Service.
(d) Distributor and Adviser shall not be liable under this Section
12.2 with respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of such Indemnified Party's
reckless disregard of its obligations and duties (i) under this Agreement or
(ii) to USAA Life, the Separate Account, the Life Insurance Separate Account
or Participants.
(e) Distributor and Adviser shall not be liable under this Section
12.2 with respect to any action against an Indemnified Party unless USAA Life
or its affiliates shall have notified Distributor and/or Adviser in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify Distributor
and/or Adviser of any such action shall not relieve Distributor or Adviser
from any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this Section 12.2. In case
any such action is brought against an Indemnified Party, Distributor and/or
Adviser will be entitled to participate, at its own expense, in the defense of
such action. Distributor and/or Adviser also shall be entitled to assume the
defense thereof (which shall include, without limitation, the conduct of any
ruling request and closing agreement or other settlement proceeding with the
Internal Revenue Service), with counsel approved by the Indemnified Party
named in the action, which approval shall not be unreasonably withheld. After
notice from Distributor or Adviser to such Indemnified Party of Distributor or
Adviser's election to assume the defense thereof, the Indemnified Party will
cooperate fully with Distributor or Adviser and shall bear the fees and
expenses of any additional counsel retained by it, and Distributor or Adviser
will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Section 12.1(c) or 12.2(e) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or
responsibility, and the indemnifying Party will remain free to contest
liability with respect to the claim among the Parties or otherwise.
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SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Texas law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, that the Parties are entitled to under
federal and state laws.
SECTION 17. RESTRICTIONS ON SALES OF TRUST SHARES
USAA Life agrees that the Trust will be permitted (subject to the other
terms of this Agreement) to make its shares available to separate accounts of
other life insurance companies and such other entities as may be permitted by
Section 817(h) of the Code, the regulations hereunder, or judicial or
administrative interpretations thereof. The Trust, Distributor, and Adviser
agree to make available to USAA Life and its affiliates, to the extent
permitted by applicable law and consistent with the fiduciary duties of the
Trustees of the Trust, any arrangement for utilization of a Portfolio that
involves a Rule 12b-1 plan adopted by the Trust.
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SECTION 18. SCOPE OF LIABILITY
(a) It is understood and expressly agreed that the obligations and
liabilities of the Trust hereunder will not be binding upon any of the
trustees, shareholders, nominees, officers, agents or employees of the Trust,
as provided in its Declaration of Trust. The execution and delivery of this
Agreement have been authorized by the Board of Trustees and this Agreement has
been signed by an authorized officer of the Trust, acting as such, and neither
such authorization by the Board of Trustees nor such execution and delivery by
such officer will be deemed to have been made by any of the Trustees
individually or to impose any liability on any of them personally, but will
bind only the assets and property of the Trust, as provided in its Declaration
of Trust.
(b) The obligations assumed by Adviser and Distributor under this
Agreement shall be binding on them notwithstanding any provision in any other
agreement or instrument that limits their liability to Trust shareholders
generally.
SECTION 19. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
--------------------------
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers signing below.
USAA LIFE INSURANCE COMPANY
By /s/ XXXXX X. XXXXXX
-------------------
Title President
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THE XXXXX AMERICAN FUND
By /s/ XXXXXXX X. XXXX
-------------------
Title Treasure
XXXX XXXXX MANAGEMENT, INC.
By /s/ XXXXXXX X. XXXX
-------------------
Title Executive Vice President
XXXX XXXXX & COMPANY, INCORPORATED
By /s/ XXXXXXX X. XXXX
-------------------
Title Executive Vice President
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SCHEDULE A
LIST OF PORTFOLIOS
Xxxxx American Growth Portfolio
28
