EXHIBIT 1.(8)(f)(i)
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT ("Agreement") made as of the 30th day of April, 1998, by
and among BT Insurance Funds Trust ("TRUST"), a Massachusetts business trust,
Bankers Trust Company ("ADVISER"), a New York banking corporation, and USAA
Life Insurance Company ("LIFE COMPANY"), a life insurance company organized
under the laws of the State of Texas (collectively, the "Parties").
WHEREAS, TRUST is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the "'40 Act"),
as an open-end diversified management investment company; and
WHEREAS, TRUST is comprised of several series funds (each a "Series"),
each of whose shares are registered under the Securities Act of 1933, as
amended (" '33 Act"); and
WHEREAS, TRUST was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable
Contracts") offered by life insurance companies ("Participating Insurance
Companies") through their separate accounts; and
WHEREAS, TRUST may also offer its shares to certain qualified pension
and retirement plans ("Qualified Plans"); and
WHEREAS, TRUST has received an order from the SEC granting Participating
Insurance Companies and their separate accounts exemptions from the provisions
of Sections 9(a), 13(a), 15(a) and 15(b) of the '40 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(1-5) thereunder, to the extent necessary to permit shares of
the Series of the TRUST to be sold to and held by separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and Qualified
Plans ("Exemptive Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more
separate accounts listed on Appendix A hereto (collectively, "Separate
Accounts") to offer certain Variable Contracts issued by LIFE COMPANY and
funded by the Separate Accounts listed on Appendix A hereto (collectively,
"Contracts") and is desirous of having the Series listed on Appendix B hereto
(each, a "Portfolio") serve as underlying funding vehicles for the Contracts;
and
WHEREAS, ADVISER is a "bank" as defined in the Investment Advisers Act
of 1940, as amended (the "Advisers Act") and as such is excluded from the
definition of "Investment Adviser" and is not required to register as an
investment adviser pursuant to the Advisers Act; and
1
WHEREAS, ADVISER serves as the TRUST's investment adviser; and
WHEREAS, First Data Distributors, Inc. ("DISTRIBUTOR") serves as the
Trust's principal underwriter of the Trust's shares; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of Portfolios to fund the
Contracts and TRUST is authorized to sell such shares to LIFE COMPANY at such
shares' net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
TRUST, and ADVISER agree as follows:
Article I. SALE OF TRUST SHARES
1.1 TRUST agrees to make available to the Separate Accounts shares of
each Portfolio ("Shares") for purchase and redemption at net asset value, and
with no sales charges, subject to the terms and conditions of this Agreement.
The Parties may agree, from time to time, to amend Appendicies A and/or B
hereto ("Appendix A" and "Appendix B," respectively) to reflect additions,
deletions, and other changes to the Separate Accounts, Contracts, and/or
Portfolios. Upon such amendment, references to Separate Account, Contract,
Portfolio, Trust or Shares shall be read consistently with the changes
effected by that amendment, unless otherwise specifically provided.
1.2 TRUST agrees to execute orders to purchase Shares ("Purchase
orders") that correspond to Contract owner transaction requests received by
LIFE COMPANY ("requests" or "Contract owner requests") on each Business Day
using the net asset value per Share next computed after the LIFE COMPANY
receives the requests. The Parties agree that, unless otherwise specified in
writing by TRUST, the computation of each Portfolio's net asset value per
Share will occur as of 4:00 p.m. New York time each Business Day. For purposes
of this Agreement, "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which TRUST calculates its net asset
value pursuant to the rules of the SEC.
1.3 TRUST agrees to execute orders to redeem Shares ("Redemption
orders") that correspond to Contract owner requests on each Business Day using
the net asset value per Share next computed after the LIFE COMPANY receives
the requests. Redemption orders that do not relate to requests will be
executed using the net asset value per Share next computed after receipt by
TRUST of such orders.
1.4 TRUST shall furnish, on or before each ex-dividend date, notice to
LIFE COMPANY of any income dividends or capital gain distributions payable on
the Shares of any Portfolio. LIFE COMPANY hereby elects to receive all such
income dividends and capital gain distributions as are payable on a
Portfolio's Shares in additional Shares of the Portfolio. TRUST shall notify
LIFE COMPANY or its designee of the number of Shares so issued as payment of
such dividends and distributions.
2
1.5 TRUST shall make the net asset value per Share for the Portfolios
available to LIFE COMPANY on a daily basis as soon as reasonably practicable
after the net asset value per Share is calculated but shall use its best
efforts to make such net asset value available by 6:30 p.m. New York time. If
TRUST provides LIFE COMPANY with materially incorrect Share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of Shares
purchased or redeemed to reflect the correct Share net asset value. Any
material error in the calculation of net asset value per Share, dividend or
capital gain information shall be reported promptly by TRUST upon discovery to
LIFE COMPANY.
1.6 LIFE COMPANY shall be the designee of TRUST for receipt of
Purchase orders and Redemption orders from the designated Separate Account to
purchase or redeem Shares that correspond to Contract owner transactions. At
the end of each Business Day, LIFE COMPANY shall use the information described
in Section 1.5 to calculate Separate Account unit values for that Day. Using
these unit values, LIFE COMPANY shall process each such Business Day's
Contract owner transactions based on requests received by the close of trading
on the floor of the New York Stock Exchange (currently 4:00 P.M. New York
time) to determine the net dollar amount of Shares which shall be purchased or
redeemed at that Day's closing net asset value per Share. LIFE COMPANY shall
net all Purchase and Redemption orders, and shall submit a net order ("Net
Order") to TRUST by 9:30 a.m. New York time on the Business Day next following
LIFE COMPANY's receipt of such requests in accordance with the terms of
Sections 1.2 and 1.3 hereof; provided, however, that TRUST shall provide
additional time to LIFE COMPANY in the event that TRUST is unable to meet the
6:30 p.m. time stated in Section 1.5 hereof. Such additional time shall be
equal to the additional time that TRUST takes to make the net asset values
available to LIFE COMPANY.
1.7 If LIFE COMPANY's Net Order requests the purchase of TRUST Shares,
LIFE COMPANY shall pay for such purchase by wiring federal funds to TRUST or
its designated custodial account on the day the order is transmitted by LIFE
COMPANY. If LIFE COMPANY's Net Order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, TRUST shall wire the
redemption proceeds to LIFE COMPANY by the next Business Day, unless doing so
would require TRUST to dispose of Portfolio securities or otherwise incur
additional costs. In any event, proceeds shall be wired to LIFE COMPANY within
the time period permitted by the '40 Act or the rules, orders or regulations
thereunder, and TRUST shall notify the person designated in writing by LIFE
COMPANY as the recipient for such notice of such delay by 3:00 p.m. New York
time on the same Business Day that LIFE COMPANY transmits the Net Redemption
Order to TRUST. If LIFE COMPANY's Net Order requests the application of
redemption proceeds from the redemption of Shares to the purchase of shares of
another fund advised by ADVISER, TRUST shall so apply such proceeds on the
same Business Day that LIFE COMPANY transmits such order to TRUST.
1.8 TRUST agrees that all Shares of the Portfolios will be sold only
to Participating Insurance Companies which have agreed to participate in TRUST
to fund their separate accounts and/or to Qualified Plans, all in accordance
with the requirements of Section 817(h)(4) of the Internal Revenue Code of
1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of the
TRUST's Series will not be sold directly to the general public.
3
1.9 TRUST may refuse to sell Shares of any Portfolio to any person, or
suspend or terminate the offering of the Shares of or liquidate any Portfolio
of TRUST if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board of Trustees of the
TRUST (the "Board"), acting in good faith and in light of its duties under
federal and any applicable state laws, deemed necessary, desirable or
appropriate and in the best interests of the Shareholders of such Portfolios.
1.10 Issuance and transfer of Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY or the Separate Accounts. The
TRUST will record, or cause to be recorded, Shares ordered from any Portfolio
in appropriate book entry titles for the Separate Accounts.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and warrants that it is an insurance
company duly organized and in good standing under the laws of Texas and that
it has legally and validly established each Separate Account as a segregated
asset account under such laws, and that USAA Investment Management Company,
the principal underwriter for the Contracts, is registered as a broker-dealer
under the Securities Exchange Act of 1934.
2.2 LIFE COMPANY represents and warrants that it has registered or,
prior to any issuance or sale of the Contracts, will register each Separate
Account as a unit investment trust ("UIT") in accordance with the provisions
of the '40 Act to the extent required thereby, and cause each Separate Account
to remain so registered to serve as a segregated asset account for the
Contracts, unless an exemption from registration is available.
2.3 LIFE COMPANY represents and warrants that units of interest issued
in connection with the Contracts have been or will be registered under the '33
Act unless an exemption from registration is available prior to any issuance
or sale of the Contracts, and that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and further that the sale of the Contracts shall comply in all material
respects with applicable state insurance law suitability requirements.
2.4 Subject to TRUST's compliance with the duties and obligations set
out in Sections 2.6 and 2.7 hereof, LIFE COMPANY represents and warrants that
the Contracts have been or will be at the time of issuance treated as life
insurance, endowment or annuity contracts under applicable provisions of the
Code, that it will maintain such treatment and that it will notify TRUST
immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the
future.
2.5 TRUST and ADVISER represent and warrant that the Shares offered
and sold pursuant to this Agreement will be registered under the '33 Act and
sold in accordance with all applicable federal laws, and TRUST shall be
registered under the '40 Act prior to and at the time of any issuance or sale
of such Shares. TRUST, subject to Section 1.9 above, shall amend its
registration statements under the '33 Act and the '40 Act from time to time as
4
required in order to effect the continuous offering of its Shares. TRUST shall
register and qualify its Shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by TRUST.
2.6 TRUST and ADVISER represent and warrant that each Portfolio has
complied and will comply with the requirements set forth in Section 817(h) of
the Code, and the rules and regulations thereunder, including without
limitation Treasury Regulation 1.817-5, and will notify LIFE COMPANY
immediately upon having a reasonable basis for believing any Portfolio has
ceased to comply and will immediately take all reasonable steps to adequately
diversify the Portfolio to achieve compliance.
2.7 TRUST and ADVISER represent and warrant that each Portfolio
invested in by the Separate Account will be treated as a "regulated investment
company" under Subchapter M of the Code, and will notify LIFE COMPANY
immediately upon having a reasonable basis for believing it has ceased to so
qualify or might not so qualify in the future.
2.8 ADVISER represents and warrants that it shall perform its
obligations hereunder in compliance in all material respects with any
applicable state and federal laws.
Article III. PROSPECTUS AND OTHER TRUST DOCUMENTS
3.1 TRUST shall prepare and be responsible for filing with the SEC and
any state regulators requiring such filing all Shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of TRUST.
TRUST shall bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this Section 3.1
and all taxes and filing fees to which an issuer is subject on the issuance
and transfer of its shares.
3.2 TRUST or its designee shall provide LIFE COMPANY, free of charge,
with as many copies of the current prospectus (or prospectuses), including
supplements, statements of additional information, annual and semi-annual
reports and proxy materials for the Shares of the Portfolios as LIFE COMPANY
may reasonably request for distribution to existing Contract owners whose
Contracts are funded by Shares. TRUST or its designee shall provide LIFE
COMPANY, at LIFE COMPANY's expense, with as many copies of the current
prospectus (or prospectuses) for the Shares ("TRUST prospectus") as LIFE
COMPANY may reasonably request for distribution to prospective purchasers of
Contracts. If requested by LIFE COMPANY, TRUST or its designee shall provide
the Trust prospectus (including a "camera ready" copy of the current
prospectus (or prospectuses) as set in type or, at the request of LIFE
COMPANY, as a diskette in the form sent to the financial printer) and other
assistance as is reasonably necessary in order for the Parties once a year (or
more frequently if the Trust prospectus is supplemented or amended) to have
the prospectus for the Contracts ("Contract prospectus") and the Trust
prospectus printed together in one document. The expenses of such printing
will be apportioned between LIFE COMPANY and TRUST in proportion to the number
of pages of the Contract and TRUST prospectuses, taking account of other
relevant factors affecting the expense of printing, such as covers, columns,
graphs and charts; TRUST shall bear the cost of printing the TRUST prospectus
portion of such document for distribution only to owners of existing Contracts
5
funded by the Shares, and LIFE COMPANY shall bear the expense of printing the
Contract prospectus portion of such document, as well as the TRUST prospectus
portion of such document for distribution to prospective purchasers of
Contracts. In the event that LIFE COMPANY requests that TRUST or its designee
provide the TRUST prospectus in a "camera ready" or diskette format, TRUST
shall be responsible for providing the TRUST prospectus in the format in which
it is accustomed to formatting prospectuses and shall bear the expense of
providing the TRUST prospectus in such format (e.g. typesetting expenses), and
LIFE COMPANY shall bear the expense of adjusting or changing the format to
conform with any of its prospectuses.
3.3 TRUST will provide LIFE COMPANY with at least one complete copy of
all TRUST prospectuses, statements of additional information, annual and
semi-annual reports, proxy statements, exemptive applications and all
amendments or supplements to any of the above that relate to the Portfolios
promptly after the filing of each such document with the SEC or other
regulatory authority. LIFE COMPANY will provide TRUST with at least one
complete copy of all Contract prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements, exemptive
applications and all amendments or supplements to any of the above that relate
to a Separate Account promptly after the filing of each such document with the
SEC or other regulatory authority.
Article IV. SALES MATERIALS
4.1 LIFE COMPANY will furnish or will cause to be furnished, to TRUST
and ADVISER, each piece of sales literature in which TRUST or ADVISER is
named, at least fifteen (15) Business Days prior to its intended use. No such
material will be used if TRUST or ADVISER objects to its use in writing within
ten (10) Business Days after receipt of such material.
4.2 TRUST and ADVISER will furnish, or will cause to be furnished, to
LIFE COMPANY, each piece of sales literature in which LIFE COMPANY or any of
its Separate Accounts is named, at least fifteen (15) Business Days prior to
its intended use. No such material will be used if LIFE COMPANY objects to its
use in writing within ten (10) Business Days after receipt of such material.
4.3 TRUST and its affiliates and agents shall not give any information
or make any representations on behalf of LIFE COMPANY or concerning LIFE
COMPANY, the Separate Accounts, or the Contracts other than the information or
representations contained in a registration statement or Contract prospectus,
as such registration statement and prospectus may be amended or supplemented
from time to time, or in reports of the Separate Accounts or reports prepared
for distribution to owners of such Contracts, or in sales literature approved
by LIFE COMPANY or its designee, except with the written permission of LIFE
COMPANY.
4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of TRUST or concerning TRUST
other than the information or representations contained in a registration
statement or TRUST prospectus, or prospectus for any Portfolio, as such
registration statement or prospectus may be amended or supplemented from time
6
to time, or in sales literature approved by TRUST or its designee, except with
the written permission of TRUST.
4.5 For purposes of this Agreement, the phrase "sales literature"
includes, without limitation, advertisements (such as material published, or
designed for use, in a newspaper, magazine or other periodical, radio,
television, telephone or tape recording, videotape display, signs or
billboards, motion pictures or other public media), sales literature (such as
any written communication distributed or made generally available to customers
or the public, including brochures, circulars, research reports, market
letters, form letters, seminar texts, or reprints or excerpts of any other
advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, prospectuses, statements of
additional information, shareholder reports and proxy materials, and any other
material constituting sales literature or advertising under National
Association of Securities Dealers, Inc. ("NASD") rules, the '40 Act, the '33
Act, or rules thereunder.
Article V. POTENTIAL CONFLICTS
5.1 The TRUST represents that it has received The Exemption Order from
the SEC granting relief from various provisions of the '40 Act and the rules
thereunder to the extent necessary to permit TRUST Shares to be sold to and
held by separate accounts of both affiliated and unaffiliated Participating
Insurance Companies and Qualified Plans. The Exemptive Order requires TRUST
and each Participating Insurance Company to comply with conditions and
undertakings substantially as provided in this Section 5. The TRUST agrees not
to enter into a participation agreement with any other Participating Insurance
Company unless it imposes the same conditions and undertakings as are imposed
on LIFE COMPANY hereby.
5.2 The Board will monitor TRUST for the existence of any material
irreconcilable conflict between the Variable Contract owners of all separate
accounts, including the Contract owners investing in the Separate Accounts,
and of participants of Qualified Plans investing in TRUST, and determine what
action, if any, should be taken in response to such conflicts. An
irreconcilable material conflict may arise for a variety of reasons, which may
include: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of TRUST are
being managed; (e) a difference in voting instructions given by Variable
Contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of Variable Contract owners.
5.3 LIFE COMPANY will report any potential or existing conflicts of
which it becomes aware to the Board. LIFE COMPANY will be responsible for
assisting the Board in carrying out its responsibilities in this regard by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This responsibility includes, but is not limited
to, an obligation by the LIFE COMPANY to inform the Board whenever it has
7
determined to disregard Contract owners' voting instructions. These
responsibilities of LIFE COMPANY will be carried out with a view only to the
interests of the Contract owners.
5.4 If a majority of the Board, or majority of its disinterested
Trustees, determines that a material irreconcilable conflict exists affecting
LIFE COMPANY, LIFE COMPANY, at its expense and to the extent reasonably
practicable (as determined by a majority of the Board's disinterested
Trustees), will take any steps necessary to remedy or eliminate the material
irreconcilable conflict, including; (a) withdrawing the assets allocable to
some or all of the Separate Accounts from TRUST or any Portfolio thereof and
reinvesting those assets in a different investment medium, which may include
another portfolio of TRUST ; (b) submitting the question as to whether such
segregation should be implemented to a vote of all affected Contract owners
and as appropriate, segregating the assets of any appropriate group of
Contract owners that votes in favor of such segregation, or offering to the
affected Contract owners the option of making such a change; and (c)
establishing a new registered management investment company (or series
thereof) or managed separate account. If a material irreconcilable conflict
arises because of LIFE COMPANY's decision to disregard Contract owner voting
instructions, and that decision represents a minority position or would
preclude a majority vote, LIFE COMPANY may be required, at the election of
TRUST, to withdraw a Separate Account's investment in TRUST, and no charge or
penalty will be imposed as a result of such withdrawal. The responsibility to
take such remedial action shall be carried out with a view only to the
interests of the Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested
Trustees shall determine whether or not any proposed action adequately
remedies any material irreconcilable conflict, but in no event will TRUST or
ADVISER (or any other investment adviser of TRUST) be required to establish a
new funding medium for any Contract. Further, LIFE COMPANY shall not be
required by this Section 5.4 to establish a new funding medium for any
Contracts if an offer to do so has been declined by a vote of a majority of
Contract owners materially and adversely affected by the material
irreconcilable conflict.
5.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.
5.6 No less than annually, LIFE COMPANY shall submit to the Board such
reports, materials or data as the Board may reasonably request so that the
Board may fully carry out its obligations. Such reports, materials, and data
shall be submitted more frequently if deemed appropriate by the Board.
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Contract owners so long as the SEC continues to interpret the '40 Act as
requiring pass-through voting privileges for Contract owners. Accordingly,
LIFE COMPANY, where applicable, will vote Shares of any Portfolio held in its
Separate Account(s) in a manner consistent with voting instructions timely
received from its Contract owners. LIFE COMPANY will be responsible for
assuring that each of its registered Separate Account(s) that owns any Shares
8
calculates voting privileges in a manner consistent with other Participating
Insurance Companies. LIFE COMPANY will vote Shares that are not attributable
to Contract owners to whom pass-through voting privileges are extended, or
that are attributable to Contract owners from whom timely voting instructions
were not received, in the same proportion as it votes those Shares for which
it has received voting instructions. Notwithstanding the foregoing, LIFE
COMPANY reserves the right to vote Shares held in any Separate Account in its
own right, to the extent permitted by law. TRUST will promptly notify LIFE
COMPANY of any amendment to, or change in interpretation of, the Exemptive
Order it has obtained.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
'40 Act or the rules thereunder with respect to mixed and shared funding on
terms and conditions materially different from any exemptions granted in the
Exemptive Order, then TRUST, and/or LIFE COMPANY, as appropriate, shall take
such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable.
Article VII. INDEMNIFICATION
7.1 INDEMNIFICATION BY LIFE COMPANY. LIFE COMPANY agrees to indemnify
and hold harmless TRUST, and ADVISER and each of their respective trustees,
directors, principals, officers, employees and agents (and former trustees,
directors, principals, officers, employees, and agents) and each person, if
any, who controls TRUST or ADVISER within the meaning of Section 15 of the '33
Act (collectively, the "Indemnified Parties") against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of LIFE COMPANY, which consent shall not be unreasonably
withheld) or litigation or threatened litigation (including reasonable legal
and other expenses), to which the Indemnified Parties may become subject under
any statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of Shares or the Contracts
and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Contracts, any Separate Account's registration statement
or Contract prospectus contained therein, or in any sales
literature for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished in writing to LIFE
COMPANY by or on behalf of TRUST, ADVISER or DISTRIBUTOR for
use in the Contracts, any Separate Account's registration
statement or Contract prospectus or sales literature for the
Contracts (or any amendment or supplement supplement to any
of the foregoing) or otherwise for use in connection with
the sale of the Contracts or Shares; or
9
(b) arise out of or result from (i) statements or
representations (other than statements or representations
contained in any registration statement, prospectus or sales
literature for the TRUST, or any Portfolio not supplied by
LIFE COMPANY, or persons under its control) or (ii) willful
misfeasance, bad faith, negligence, or reckless disregard of
obligations or duties of LIFE COMPANY or persons under its
control, with respect to the sale or distribution of the
Contracts or Shares; or (c) arise out of any untrue
statement or alleged untrue statement of a material fact
contained in any registration statement, prospectus, or
sales literature for the TRUST, or any Portfolio, 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 or such alleged statement or omission was made in
reliance upon and in conformity with information furnished
in writing to TRUST by or on behalf of LIFE COMPANY for use
in such materials; or
(c) arise as a result of any failure by LIFE COMPANY to provide
substantially the services and furnish the materials under
the terms of this Agreement; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by LIFE COMPANY in this
Agreement or arise out of or result from any other material
breach of this Agreement by LIFE COMPANY.
7.2 LIFE COMPANY shall not be liable under Section 7.1 hereof with
respect to any losses, claims, damages, liabilities or litigation incurred or
assessed against an Indemnified Party to the extent that such losses, claims,
damages, liabilities or litigation are attributable to such Indemnified
Party's willful misfeasance, bad faith, negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or breach of this
Agreement.
7.3 LIFE COMPANY shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify LIFE COMPANY
of any such claim shall not relieve LIFE COMPANY from any liability which it
may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against an Indemnified Party, LIFE COMPANY shall be entitled
to participate at its own expense in the defense of such action. LIFE COMPANY
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnified Party named in the action. After notice from
LIFE COMPANY to such Indemnified Party of LIFE COMPANY's election to assume
the defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and LIFE COMPANY will not be liable to
such Indemnified Party under this Agreement for any legal or other expenses
10
subsequently incurred by such Indemnified Party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.4 INDEMNIFICATION BY TRUST AND ADVISER. TRUST and ADVISER agree to
indemnify and hold harmless LIFE COMPANY and each of its directors,
principals, officers, employees, and agents (and former directors, principals,
officers, employees, and agents) and each person, if any, who controls LIFE
COMPANY within the meaning of Section 15 of the '33 Act (collectively, the
"Indemnified Parties") against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
TRUST and ADVISER which consent shall not be unreasonably withheld) or
litigation or threatened litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any
statute, or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of Shares or the Contracts
and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
any registration statement or prospectus or sales literature
for the TRUST or any Portfolios (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to
TRUST, ADVISER, or DISTRIBUTOR by or on behalf of LIFE
COMPANY for use in any registration statement, prospectus or
sales literature for the TRUST or any Portfolio (or any
amendment or supplement to any of the foregoing) or
otherwise for use in connection with the sale of the
Contracts or Shares; or
(b) arise out of or result from (i) statements or
representations (other than statements or representations
contained in any Separate Account's registration statement
or Contract prospectus, or sales literature for the
Contracts not supplied by TRUST, ADVISER or DISTRIBUTOR or
persons under their respective control) or (ii) willful
misfeasance or bad faith, negligence, or reckless disregard
of obligations or duties of ADVISER, TRUST or DISTRIBUTOR or
persons under their respective control, with respect to the
sale or distribution of the Contracts or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in any Separate
Account's registration statement or Contract prospectus, or
sales literature for the Contracts, or any amendment or
supplement to any of the foregoing or the omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, if such statement or omission or
such alleged statement or omission was made in reliance upon
11
and in conformity with information furnished in writing to
LIFE COMPANY for inclusion therein by or on behalf of TRUST,
ADVISER or DISTRIBUTOR; or
(d) arise as a result of (i) a failure by TRUST, or ADVISER to
provide substantially the services and furnish the materials
under the terms of this Agreement; (ii) a failure by a
Portfolio(s) to comply with the diversification requirements
of Section 817(h) of the Code; or (iii) a failure by a
Portfolio(s) to qualify as a "regulated investment company"
under Subchapter M of the Code; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by TRUST, or ADVISER in
this Agreement or arise out of or result from any other
material breach of this Agreement by TRUST, or ADVISER.
7.5 TRUST and ADVISER shall not be liable under Section 7.4 hereof
with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party to the extent that such
losses, claims, damages, liabilities or litigation are attributable to such
Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or breach of this Agreement.
7.6 TRUST and ADVISER shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified TRUST and ADVISER in writing within
a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify TRUST and
ADVISER of any such claim shall not relieve TRUST and ADVISER from any
liability which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification provision. In
case any such action is brought against an Indemnified Party, TRUST and
ADVISER shall be entitled to participate at its own expense in the defense of
such action. TRUST and ADVISER also shall be entitled to assume the defense
thereof, with counsel satisfactory to the Indemnified Party named in the
action. After notice from TRUST and ADVISER to such Indemnified Party of TRUST
and ADVISER's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
TRUST and ADVISER will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof other
than reasonable costs of investigation.
Article VIII. TERM: TERMINATION
8.1 This Agreement shall be effective as of the date first written
above and shall continue in force until terminated in accordance with the
provisions herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
12
(a) At the option of LIFE COMPANY or TRUST at any time from the
date hereof upon 180 days' notice, unless a shorter time is
agreed to in writing by the Parties;
(b) At the option of LIFE COMPANY, if TRUST Shares are not
reasonably available to meet the requirements of the
Contracts as determined by LIFE COMPANY. Prompt notice of
election to terminate shall be furnished by LIFE COMPANY,
said termination to be effective ten days after receipt of
notice unless TRUST makes available a sufficient number of
Shares to reasonably meet the requirements of the Contracts
within said ten-day period;
(c) At the option of LIFE COMPANY, upon the institution of
formal proceedings against TRUST or ADVISER by the SEC, the
NASD, or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in
LIFE COMPANY's reasonable judgment, materially impair the
ability of the TRUST, or ADVISER, to meet and perform their
respective obligations and duties hereunder. Prompt notice
of election to terminate shall be furnished by LIFE COMPANY
with said termination to be effective upon receipt of
notice;
(d) At the option of TRUST or ADVISER, upon the institution of
formal proceedings against LIFE COMPANY and/or its
broker-dealer affiliates by the SEC, the NASD, or any other
regulatory body, the expected or anticipated ruling,
judgment or outcome of which would, in TRUST or ADVISER's
reasonable judgment, materially impair LIFE COMPANY's
ability to meet and perform its obligations and duties
hereunder. Prompt notice of election to terminate shall be
furnished by TRUST or ADVISER with said termination to be
effective upon receipt of notice;
(e) In the event TRUST's Shares are not registered, issued or
sold in accordance with applicable state and/or federal law,
or such law precludes the use of such Shares as the
underlying investment medium of Contracts issued or to be
issued by LIFE COMPANY termination shall be effective upon
such occurrence without notice;
(f) In the event any Portfolio fails to qualify as a "regulated
investment company" under Subchapter M of the Code or
otherwise fails to meet the requirements of Section 817(h)
of the Code and the regulations thereunder. Termination
shall be effective upon such occurrence without notice;
(g) At the option of TRUST and ADVISER if the Contracts cease to
qualify as annuity contracts or life insurance contracts, as
applicable, under the Code, or if TRUST and ADVISER
reasonably believes that the Contracts may fail to so
qualify. Termination shall be effective upon receipt of
notice by LIFE COMPANY;
(h) At the option of LIFE COMPANY, upon breach by TRUST or
ADVISER of any material provision of this Agreement, which
breach has not been cured to the satisfaction of LIFE
13
COMPANY within ten days after written notice of such breach
is delivered to TRUST or ADVISER;
(i) At the option of TRUST or ADVISER, upon LIFE COMPANY's
breach of any material provision of this Agreement, which
breach has not been cured to the satisfaction of TRUST or
ADVISER within ten days after written notice of such breach
is delivered to LIFE COMPANY;
(j) At the option of TRUST, if the Contracts are not registered,
issued or sold in accordance with applicable federal and/or
state law. Termination shall be effective immediately upon
such occurrence without notice;
(k) In the event this Agreement is assigned without the prior
written consent of LIFE COMPANY, TRUST, and ADVISER,
termination shall be effective immediately upon such
occurrence without notice.
8.3 Notwithstanding any termination of this Agreement pursuant to
Section 8.2 hereof, TRUST at its option may elect to continue to make
available additional TRUST Shares, as provided below, for so long as TRUST
desires pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, if TRUST so elects to make additional Shares available, the owners
of the Existing Contracts or LIFE COMPANY, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in TRUST,
redeem investments in TRUST and/or invest in TRUST upon the payment of
additional premiums under the Existing Contracts. In the event of a
termination of this Agreement pursuant to Section 8.2 hereof, TRUST and
ADVISER, as promptly as is practicable under the circumstances, shall notify
LIFE COMPANY whether TRUST elects to continue to make Shares available after
such termination. If Shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either TRUST or LIFE COMPANY may terminate the Agreement, as so
continued pursuant to this Section 8.3, upon sixty (60) days prior written
notice to the other Party.
8.4 Except as necessary to implement Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the Shares attributable to the Contracts (as opposed
to the Shares attributable to LIFE COMPANY's assets held in the Separate
Accounts), and LIFE COMPANY shall not prevent Contract owners from allocating
payments to a Portfolio that is otherwise available under the Contracts until
thirty (30) days after the LIFE COMPANY shall have notified TRUST of its
intention to do so.
Article IX. NOTICES
Any notice hereunder shall be given by registered or certified mail
return receipt requested to the other party at the address of such Party set
forth below or at such other address as such Party may from time to time
specify in writing to the other Party.
14
If to TRUST:
BT Insurance Funds Trust
Attn.:
Phone:
Fax:
If to ADVISER:
Bankers Trust Company - Global Investment Management
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn.:
Phone:
Fax:
If to LIFE COMPANY:
USAA Life Insurance Company
0000 Xxxxxxxxxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Attn.: Xxxxx Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
10.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.3 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
10.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York. It
shall also be subject to the provisions of the federal securities laws and the
rules and regulations thereunder and to any orders of the SEC granting
exemptive relief therefrom and the conditions of such orders.
15
10.5 It is understood and expressly stipulated that neither the
shareholders of shares of any Portfolio nor the Trustees or officers of TRUST
or any Portfolio shall be personally liable hereunder. No Portfolio shall be
liable for the liabilities of any other Portfolio. All persons dealing with
TRUST or a Portfolio must look solely to the property of TRUST or that
Portfolio, respectively, for enforcement of any claims against TRUST or that
Portfolio. It is also understood that each of the Portfolios shall be deemed
to be entering into a separate Agreement with LIFE COMPANY so that it is as if
each of the Portfolios had signed a separate Agreement with LIFE COMPANY and
that a single document is being signed simply to facilitate the execution and
administration of the Agreement.
10.6 Each Party shall cooperate with each other Party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
10.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the Parties hereto are entitled to
under state and federal laws.
10.8 If the Agreement terminates the Parties agree that Article VII and
Sections 10.5, 10.6 and 10.7 shall remain in effect after termination.
10.9 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by
TRUST, ADVISER and the LIFE COMPANY.
10.10 No failure or delay by a Party in exercising any right or remedy
under this Agreement will operate as a waiver thereof and no single or partial
exercise of rights shall preclude a further or subsequent exercise. The rights
and remedies provided in this Agreement are cumulative and not exclusive of
any rights or remedies provided by law.
IN WITNESS WHEREOF the Parties have caused their duly authorized
officers to execute this Agreement as of the date and year first above
written.
16
BT INSURANCE FUNDS TRUST
By: /s/XXXXXXXXX XXXXXXX
--------------------
Name: Xxxxxxxxx Xxxxxxx
Title: Secretary
BANKERS TRUST COMPANY
By: /s/ XXXXX X. XXXXXXXXX
----------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
USAA LIFE INSURANCE COMPANY
By: /s/ XXXXXXX X. XXXXXXX
----------------------
Name: Xxxxxxx X. XxXxxxx
Title: Senior Vice President
Life, Health & Marketing
17
Appendix A
This appendix is an integral part of the Agreement to which it is
attached. Except as otherwise noted, defined terms used herein shall have the
same meaning as given them in the Agreement.
1. The Separate Account of USAA Life Insurance Company
2. The Life Insurance Separate Account of USAA Life Insurance Company
00
Xxxxxxxx X
This Appendix is an integral part of the Agreement to which it is
attached. Except as otherwise noted, defined terms used herein shall have the
same meaning as given them in the Agreement.
1. Equity 500 Index Fund
2. Small Cap Index Fund
3. EAFE(R) Equity Index Fund
19
