Exhibit h(vi)
January 06, 2006
USAA Mutual Fund, Inc.,
USAA Investment Trust,
USAA Tax Exempt Fund, Inc.,
USAA State Tax-Free Trust, and
USAA Life Investment Trust, not in their individual capacities but
on behalf of and for the benefit of the series of funds comprising
each such Borrower as set forth on SCHEDULE A hereto
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Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Ladies and Gentlemen:
This Facility Agreement Letter (this "AGREEMENT") sets forth the terms
and conditions for loans (each a "LOAN" and collectively the "LOANS") which USAA
Capital Corporation ("CAPCO"), agrees to make during the period commencing
January 06, 2006 and ending January 05, 2007 (the "FACILITY PERIOD") to USAA
Mutual Fund, Inc., USAA Investment Trust, USAA Tax Exempt Fund, Inc., USAA State
Tax-Free Trust and USAA Life Investment Trust, and each investment company which
may become a party hereto pursuant to the terms of this Agreement (each a
"BORROWER" and collectively the "BORROWERS"), each of which is executing this
Agreement not in its individual capacity, but on behalf of and for the benefit
of the series of funds comprising each such Borrower as set forth on SCHEDULE A
(as hereafter modified or amended in accordance with the terms hereof) (each a
"FUND" and collectively the "FUNDS"), under a master revolving credit facility
(the "FACILITY"). This Agreement replaces in its entirety that certain Facility
Agreement Letter dated January 7, 2005, as heretofore amended or modified,
between the Borrowers and CAPCO. CAPCO and the Borrowers hereby agree as
follows:
1. AMOUNT. The aggregate principal amount of the Loans to be
advanced under this Facility shall not exceed, at any one time outstanding, U.S.
$300,000,000 (the "COMMITMENT"). The aggregate principal amount of the Loans
which may be borrowed by a Borrower for the benefit of a particular Fund under
the Facility shall not exceed the percentage (the "BORROWING LIMIT") of the
total assets of such Fund as set forth on SCHEDULE A.
2. PURPOSE AND LIMITATIONS ON BORROWINGS. Each Borrower will use
the proceeds of each Loan made to it solely for temporary or emergency purposes
of the Fund for whose benefit it is borrowing in accordance with such Fund's
Borrowing Limit and prospectus in effect at the time of such Loan. Portfolio
securities may not be purchased by a Fund while there is a Loan outstanding
under the Facility for the benefit of such Fund, if the aggregate amount of such
Loan exceeds 5% of the total assets of such Fund. The Borrowers will not, and
will not permit any Fund to, directly or indirectly, use any proceeds of any
Loan for any purpose, that would violate any provision of any applicable
statute, regulation, order, or restriction.
3. BORROWING RATE AND MATURITY OF LOANS. CAPCO shall make Loans
to a Borrower and the principal amount of each Loan outstanding from time to
time shall bear interest from the date each such Loan is made to, but excluding
the date of payment in full thereof, at a rate per annum equal to the rate at
which CAPCO obtains funding in the capital markets. Interest on the Loans shall
be calculated on
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the basis of a year of 360 days and the actual days elapsed but shall not exceed
the highest lawful rate. Each loan will be for an established number of days
agreed upon by the applicable Borrower and CAPCO on or before the date of such
Loan. Notwithstanding the above, all Loans to a Borrower shall be made available
at a rate per annum equal to the rate at which CAPCO would make loans to
affiliates and subsidiaries. Any past due principal and/or accrued interest
shall bear interest at a rate per annum equal to the aggregate of the "FEDERAL
FUNDS RATE" plus 1.50 percent (150 basis points), but not to exceed the highest
lawful rate, from the date of any such payment was due, but excluding the date
of payment in full thereof, and shall be payable on demand.
4. ADVANCES, PAYMENTS, PREPAYMENTS AND READVANCES. Upon each
Borrower's request, and SUBJECT TO the terms and conditions contained herein,
CAPCO shall make Loans to each Borrower on behalf of and for the benefit of its
respective Fund(s) during the Facility Period, and each Borrower may borrow,
repay and reborrow Loans hereunder. The Loans shall be evidenced by a duly
executed and delivered Master Grid Promissory Note in the form of EXHIBIT A (the
"NOTE"). Each Loan shall be in an aggregate amount not less than U.S. $100,000
and increments of U.S. $1,000 in excess thereof. Payment of principal and
interest due with respect to each Loan shall be payable at the maturity of such
Loan and shall be made in funds immediately available to CAPCO prior to 2:00
p.m. San Antonio, Texas time on the day such payment is due, or as CAPCO shall
otherwise direct from time to time and, SUBJECT TO the terms and conditions
hereof, may be repaid with the proceeds of a new borrowing hereunder.
Notwithstanding any provision of this Agreement to the contrary, all Loans,
accrued but unpaid interest and other amounts payable hereunder shall be due and
payable upon termination of the Facility (whether by acceleration or otherwise).
5. FACILITY FEE. Beginning with the date of this Agreement
and until such time as all Loans have been irrevocably repaid to CAPCO in full,
and CAPCO is no longer obligated to make Loans, each Fund (to be allocated among
the Funds as the Borrowers deem appropriate) severally shall pay to CAPCO its
allocated share of a facility fee (the "FACILITY FEE"). The Facility Fee will be
the Borrowers' assessed proportionate share of CAPCO's operating expenses
related to obtaining/maintaining CAPCO's funding programs. The expense will be
allocated by CAPCO to the Borrowers and to the other CAPCO borrowers (CAPCO
affiliates and subsidiaries) based on the Borrowers' Commitment (as it may be
reduced pursuant to SECTION 6) as a percentage of the total amount of borrowing
authorized for all CAPCO borrowers. In no event will the Facility Fee exceed .07
of one percent (7 basis points) of the amount of the commitment, nor will it
exceed the fee charged any other CAPCO affiliates and subsidiaries under similar
loan arrangements.
6. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENT. The Borrowers
on behalf of the applicable Funds shall have the right upon at least three
business days prior written notice to CAPCO, to terminate or reduce the unused
portion of the Commitment. Any such reduction of the Commitment shall be in the
amount of U.S. $5,000,000 or any larger integral multiple of U.S. $1,000,000
(EXCEPT that any reduction may be in the aggregate amount of the unused
Commitment). Accrued fees with respect to the terminated Commitment shall be
payable to CAPCO on the effective date of such termination.
7. MANDATORY TERMINATION COMMITMENT. The Commitment shall
automatically terminate on the last day of the Facility Period and any Loans
then outstanding (TOGETHER WITH accrued interest thereon and any other amounts
owing hereunder) shall be due and payable on such date.
8. COMMITTED FACILITY. CAPCO acknowledges that the Facility is a
committed facility and that CAPCO shall be obligated to make any Loan requested
during the Facility Period under this Agreement, subject to the terms and
conditions hereof; PROVIDED, HOWEVER, that CAPCO shall not be obligated to make
any Loan if this Facility has been terminated by the Borrowers, or to a Borrower
on
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behalf of a proposed borrowing Fund, if at the time of a request for a Loan by a
Borrower (on behalf of such applicable borrowing Fund) there exists any Event of
Default or condition which, with the passage of time or giving of notice, or
both, would constitute or become an Event of Default with respect to such Fund.
9. LOAN REQUESTS. Each request for a Loan (each a "BORROWING
NOTICE") shall be in writing by the applicable Borrower, EXCEPT that such
Borrower may make an oral request (each an "ORAL REQUEST") PROVIDED THAT each
Oral Request shall be followed by a written Borrowing Notice within one business
day. Each Borrowing Notice shall specify the following terms ("TERMS") of the
requested Loan: (i) the date on which such Loan is to be disbursed, (ii) the
principal amount of such Loan, (iii) the Borrower which is borrowing such Loan,
(iv) the Fund(s) for whose benefit the Loan is being borrowed and the amount of
the Loan which is for the benefit of each such Fund, and (v) the requested
maturity date of the Loan. Each Borrowing Notice shall also set forth the total
assets of each Fund for whose benefit a portion of the Loan is being borrowed as
of the close of business on the day immediately preceding the date of such
Borrowing Notice. Borrowing notices shall be delivered to CAPCO by 9:00 a.m. San
Antonio, Texas time on the day the Loan is requested to be made.
Each Borrowing Notice shall constitute a representation to CAPCO by the
applicable Borrower on behalf of the proposed borrowing Fund(s) of such Borrower
that all of the representations and warranties made by such Borrower on behalf
of the applicable borrowing Fund(s) of such Borrower in SECTION 12 are true and
correct as of such date and that no Event of Default or other condition which
with the passage of time or giving of notice, or both, would result in an Event
of Default, has occurred or is occurring with respect to such borrowing Fund(s).
10. CONFIRMATIONS; CREDITING OF FUNDS; RELIANCE BY CAPCO. Upon
receipt by CAPCO of a Borrowing Notice:
(a) CAPCO shall send the applicable Borrower written
confirmation of the Terms of such Loan via facsimile or telecopy, as soon as
reasonably practicable; PROVIDED, HOWEVER, that the failure to do so shall not
affect the obligation of such Borrower;
(b) CAPCO shall make such Loan in accordance with the
Terms by transfer of the Loan amount in immediately available funds, to the
account of the applicable Borrower as specified in EXHIBIT B or as such Borrower
shall otherwise specify to CAPCO in a writing signed by an Authorized Individual
(as defined in SECTION 11) of such Borrower and sent to CAPCO via facsimile or
telecopy; and
(c) CAPCO shall make appropriate entries on the Note or
the records of CAPCO to reflect the Terms of the Loan; PROVIDED, HOWEVER, that
the failure to do so shall not affect the obligation of any borrowing Fund.
CAPCO shall be entitled to rely upon and act hereunder pursuant to any Oral
Request, which it reasonably believes to have been made by the applicable
Borrower through an Authorized Individual. If any Borrower believes that the
confirmation relating to any Loan contains any error or discrepancy from the
applicable Oral Request, such Borrower will promptly notify CAPCO thereof.
11. BORROWING RESOLUTIONS AND OFFICERS' CERTIFICATES. Prior to
the making of any Loan pursuant to this Agreement, the Borrowers shall have
delivered to CAPCO (a) the duly executed Note, (b) resolutions of each
Borrower's Board of Directors/Trustees authorizing each Borrower to execute,
deliver and perform this Agreement and the Note on behalf of the applicable
Funds, (c) an Officer's Certificate in substantially the form set forth in
EXHIBIT D, authorizing certain individuals ("AUTHORIZED
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INDIVIDUALS"), to take on behalf of each Borrower (on behalf of the applicable
Funds) actions contemplated by this Agreement and the Note, and (d) the opinion
of counsel to USAA Investment Management Company, manager and advisor to the
Borrowers, with respect to such matters as CAPCO may reasonably request.
12. REPRESENTATIONS AND WARRANTIES. In order to induce CAPCO to
enter into this Agreement and to make the Loans provided for hereunder, each
Borrower hereby severally, makes on behalf of each of its respective series of
Funds comprising such Borrower the following representations and warranties,
which shall survive the execution and delivery hereof and of the Note:
(a) ORGANIZATION, STANDING, ETC. Such Borrower is a
corporation or trust duly organized, validly existing, and in good standing
under applicable state laws and has all requisite corporate or trust power and
authority to carry on its respective businesses as now conducted and proposed to
be conducted, to enter into this Agreement and all other documents to be
executed by it in connection with the transactions contemplated hereby, to issue
and borrow under the Note and to carry out the terms hereof and thereof;
(b) FINANCIAL INFORMATION; DISCLOSURE, ETC. Such Borrower
has furnished CAPCO with certain financial statements of such Borrower with
respect to itself and the applicable Fund(s), all of which such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis and fairly present the financial
position and results of operations of such Borrower and the applicable Funds on
the dates and for the periods indicated. Neither this Agreement nor any
financial statements, reports or other documents or certificates furnished to
CAPCO by such Borrower on behalf of the applicable Fund(s) in connection with
the transactions contemplated hereby contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
contained herein or therein in light of the circumstances when made not
misleading;
(c) AUTHORIZATION; COMPLIANCE WITH OTHER INSTRUMENTS. The
execution, delivery and performance of this Agreement and the Note, and
borrowings hereunder, have been duly authorized by all necessary corporate or
trust action of such Borrower and will not result in any violation of or be in
conflict with or constitute a default under any term of the charter, by-laws or
trust agreement, as applicable, of such Borrower or of any borrowing
restrictions or prospectus or statement of additional information of such
Borrower or the applicable Fund(s), or of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Borrower on behalf of the applicable Fund(s), or result in the creation of any
mortgage, lien, charge or encumbrance upon any of the properties or assets of
the applicable Fund(s) pursuant to any such term. Such Borrower is not in
violation of any term of its respective charter, by-laws or trust agreement, as
applicable, and such Borrower and the applicable Fund(s) are not in violation of
any material term of any agreement or instrument to which they are a party, or
to the best of such Borrower's knowledge, of any judgment, decree, order,
statute, rule or governmental regulation applicable to them;
(d) SEC COMPLIANCE. Such Borrower and the applicable
Fund(s) are in compliance in all material respects with all federal and state
securities or similar laws and regulations, including all material rules,
regulations and administrative orders of the Securities and Exchange Commission
(the "SEC") and applicable Blue Sky authorities. Such Borrower and the
applicable Fund(s) are in compliance in all material respects with all of the
provisions of the Investment Company Act of 1940, and such Borrower has filed
all reports with the SEC that are required of it or the applicable Fund(s);
(e) LITIGATION. There is no action, suit or proceeding
pending or, to the best of
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each Borrower's knowledge, threatened against such Borrower or the applicable
Fund(s) in any court or before any arbitrator or governmental body which seeks
to restrain any of the transactions contemplated by this Agreement or which
could reasonably be expected to have a material adverse effect on the assets or
business operations of such Borrower or the applicable Fund(s) or the ability of
such applicable Fund(s) to pay and perform their respective obligations
hereunder and under the Notes; and
(f) FUNDS' OBLIGATION FOR REPAYMENT. The assets of each
Fund for whose benefit Loans are borrowed by the applicable Borrower are SUBJECT
TO and liable for such Loans. CAPCO may only seek repayment from the assets of
the Fund of a Borrower that obtained a Loan, and may not seek repayment of that
Loan from the assets of any other Fund of that Borrower.
13. AFFIRMATIVE COVENANTS OF THE BORROWERS. Until such time as all
amounts of principal, interest and other sums due to CAPCO by a Borrower
pursuant to any Loan made to such Borrower for the benefit of the applicable
Fund(s) is irrevocably paid in full, and until CAPCO is no longer obligated to
make Loans to such Borrower for the benefit of the applicable Fund(s), such
Borrower (on behalf of its respective Fund(s)) severally agrees:
(a) To deliver to CAPCO as soon as possible and in any
event within seventy-five (75) days after the end of each fiscal year of such
Borrower and the applicable Fund(s), Statements of Assets and Liabilities,
Statements of Operations and Statements of Changes in Net Assets of each
applicable Fund for such fiscal year, as set forth in each applicable Fund's
Annual Report to shareholders TOGETHER WITH a calculation of the maximum amount
which each applicable Fund could borrow under its Borrowing Limit as of the end
of such fiscal year;
(b) To deliver to CAPCO as soon as available and in any
event within seventy-five (75) days after the end of each semiannual period of
such Borrower and the applicable Fund(s), Statements of Assets and Liabilities,
Statement of Operations and Statements of Changes in Net Assets of each
applicable Fund as of the end of such semiannual period, as set forth in each
applicable Fund's Semiannual Report to shareholders, TOGETHER WITH a calculation
of the maximum amount which each applicable Fund could borrow under its
Borrowing Limit at the end of such semiannual period;
(c) To deliver to CAPCO prompt notice of the occurrence
of any event or condition which constitutes, or is likely to result in, a change
in such Borrower or any applicable Fund which could reasonably be expected to
materially adversely affect the ability of any applicable Fund to promptly repay
outstanding Loans made for its benefit or the ability of such Borrower or the
applicable Fund(s) to perform their respective obligations under this Agreement
or the Note;
(d) To do, or cause to be done, all things necessary to
preserve and keep in full force and effect the corporate or trust existence of
such Borrower and all permits, rights and privileges necessary for the conduct
of its businesses and to comply in all material respects with all applicable
laws, regulations and orders, including without limitation, all rules and
regulations promulgated by the SEC;
(e) To promptly notify CAPCO of any litigation,
threatened legal proceeding or investigation by a governmental authority which
could reasonably be expected to materially affect the ability of any applicable
Fund to promptly repay the outstanding Loans made for its benefit hereunder or
the ability of such Borrower or the applicable Fund(s) to otherwise perform
their respective obligations hereunder;
(f) In the event a Loan for the benefit of a particular
Fund is not repaid in full within 10 days after the date it is borrowed, and
until such Loan is repaid in full, to deliver to CAPCO, within
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two business days after each Friday occurring after such 10th day, a statement
setting forth the total assets of such Fund as of the close of business on each
such Friday; and
(g) Upon the request of CAPCO, which may be made by CAPCO
from time to time in the event CAPCO in good faith believes that there has been
a material adverse change in the capital markets generally, to deliver to CAPCO,
within two business days after any such request, a statement setting forth the
total assets of each Fund for whose benefit a Loan is outstanding on the date of
such request.
14. NEGATIVE COVENANTS OF THE BORROWERS. Until such time as all
amounts of principal, interest and other sums due to CAPCO by a Borrower
pursuant to any Loan made to such Borrower for the benefit of the applicable
Fund(s) is irrevocably paid in full, and until CAPCO is no longer obligated to
make Loans to such Borrower for the benefit of the applicable Fund, such
Borrower (on behalf of its respective Fund(s)) severally agrees:
(a) Unless CAPCO has breached its obligations to lend
hereunder or becomes insolvent or the subject of a receivership proceeding, not
to incur any indebtedness for borrowed money (other than overdrafts incurred at
the custodian of the Funds from time to time in the ordinary course of business)
EXCEPT the Loans, without the prior written consent of CAPCO, which consent will
not be unreasonably withheld; and
(b) Not to dissolve or terminate its existence, or merge
or consolidate with any other person or entity, or sell all or substantially all
of its assets in a single transaction or series of related transactions (OTHER
THAN assets consisting of margin stock), each without the prior written consent
of CAPCO, which consent will not be unreasonably withheld; PROVIDED THAT a
Borrower or Fund may without such consent merge, consolidate with, or purchase
substantially all of the assets of, or sell substantially all of its assets to,
an affiliated investment company or series thereof, as provided for in Rule
17a-8 under the Investment Company Act of 1940.
15. EVENTS OF DEFAULT. If any of the following events (each an
"EVENT OF DEFAULT") shall occur (it being understood that an Event of Default
with respect to one Fund shall not constitute an Event of Default with respect
to any other Fund):
(a) A Fund shall default in the payment of principal or
interest on any Loan or any other fee due hereunder for a period of five days
after the same becomes due and payable, whether at maturity or, with respect to
any Facility Fee, at a date fixed for the payment thereof;
(b) A Fund shall default in the performance of or
compliance with any term contained in SECTION 13 and such default shall not have
been remedied within 30 days after written notice thereof shall have been given
to the applicable Borrower on behalf of such Fund by CAPCO;
(c) A Fund shall default in the performance of or
compliance with any term contained in SECTION 14;
(d) A Fund shall default in the performance of or
compliance with any other term contained herein and such default shall not have
been remedied within 30 days after written notice thereof shall have been given
to the applicable Borrower on behalf of such Fund by CAPCO;
(e) Any representation or warranty made by or on behalf
of a Fund herein or pursuant hereto shall prove to have been false or incorrect
in any material respect when made; or
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(f) USAA Investment Management Company or any successor
manager or investment adviser (PROVIDED THAT such successor manager or
investment advisor is a wholly-owned subsidiary of United Services Automobile
Association and/or CAPCO) shall cease to be the manager and investment advisor
of a Fund; PROVIDED THAT USAA Investment Management Company (or its successor)
shall be permitted to hire one or more of the existing subadvisers listed on
SCHEDULE B as subadvisers for any Fund and may add new subadvisers as provided
in SECTION 16(B);
then, in any event, and at any time thereafter, if any Event of Default shall be
continuing, CAPCO may by written notice to the applicable Borrower (i) terminate
its commitment to make any Loan hereunder to such Borrower with respect to such
Fund, whereupon said commitment shall forthwith terminate without any other
notice of any kind and (ii) declare the principal and interest in respect of any
outstanding Loans with respect to such Fund, and all other amounts due hereunder
with respect to such Fund, to be immediately due and payable whereupon the
principal and interest in respect thereof and all other amounts due hereunder
shall become forthwith due and payable without presentment, demand, protest or
other notice of any kind, all of which are expressly waived by the Borrowers on
behalf of the applicable Funds.
16. NEW BORROWERS; NEW FUNDS; NEW SUBADVISERS
(a) So long as no Event of Default or condition which,
with the passage of time or the giving of notice, or both, would
constitute or become an Event of Default has occurred and is
continuing, and with the prior consent of CAPCO, which consent will not
be unreasonably withheld:
(i) Any investment company that becomes part
of the same "GROUP OF INVESTMENT COMPANIES" (as that term is defined in
Rule 11a-3 under the Investment Company Act of 1940) as the original
Borrowers to this Agreement, may, by submitting an amended SCHEDULE A
and EXHIBIT B to this Agreement to CAPCO (which amended SCHEDULE A and
EXHIBIT B shall replace SCHEDULE A and EXHIBIT B which are then a part
of this Agreement) and such other documents as CAPCO may reasonably
request, become a party to this Agreement and may become a "BORROWER"
hereunder; and
(ii) A Borrower may, by submitting an amended
SCHEDULE A and EXHIBIT B to this Agreement to CAPCO (which amended
SCHEDULE A and EXHIBIT B shall replace SCHEDULE A and EXHIBIT B which
are then a part of this Agreement), add additional Funds for whose
benefit such Borrower may borrow Loans. No such amendment of SCHEDULE A
to this Agreement shall amend the Borrowing Limit applicable to any
Fund without the prior consent of CAPCO.
(b) A Borrower may, by submitting an amended SCHEDULE B
to this Agreement to CAPCO (which amended SCHEDULE B shall replace the
SCHEDULE B which is then a part of this Agreement), add new
subadvisers, which are not currently subadvising any other Fund.
17. LIMITED RECOURSE. CAPCO agrees (a) that any claim, liability,
or obligation arising hereunder or under the Note whether on account of the
principal of any Loan, interest thereon, or any other amount due hereunder or
thereunder shall be satisfied only from the assets of the specific Fund for
whose benefit a Loan is borrowed and in any event in an amount not to exceed the
outstanding principal amount of any Loan borrowed for such Fund's benefit,
TOGETHER WITH accrued and unpaid interest due and owing thereon, and such Fund's
share of any other amount due hereunder and under the Note (as determined in
accordance with the provisions hereof) and (b) that no assets of any Fund shall
be used to
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satisfy any claim, liability, or obligation arising hereunder or under the Note
with respect to the outstanding principal amount of any Loan borrowed for the
benefit of any other Fund or any accrued and unpaid interest due and owing
thereon or such other Fund's share of any other amount due hereunder and under
the Note (as determined in accordance with the provisions hereof).
18. REMEDIES ON DEFAULT. In case any one or more Events of Default
shall occur and be continuing, CAPCO may proceed to protect and enforce its
rights by an action at law, suit in equity or other appropriate proceedings,
against the applicable Borrower on behalf of the applicable defaulting Fund(s),
as the case may be. In the case of a default in the payment of any principal or
interest on any Loan or in the payment of any fee due hereunder, the relevant
Fund(s) (to be allocated among such Funds as the Borrowers deem appropriate)
severally shall pay to CAPCO such further amount as shall be sufficient to cover
the cost and expense of collection, including, without limitation, reasonable
attorney's fees and expenses from the relevant Fund.
19. NO WAIVER OF REMEDIES. No course of dealing or failure or
delay on the part of CAPCO in exercising any right or remedy hereunder or under
the Note shall constitute a waiver of any right or remedy hereunder or under the
Note, nor shall any partial exercise of any right or remedy hereunder or under
the Note preclude any further exercise thereof or the exercise of any other
right or remedy hereunder or under the Note. Such rights and remedies expressly
provided are cumulative and not exclusive of any rights or remedies which CAPCO
would otherwise have.
20. EXPENSES. Each of the Funds severally shall pay on demand all
reasonable out-of-pocket costs and expenses (including reasonable attorney's
fees and expenses) incurred by CAPCO in connection with the collection and any
other enforcement proceedings of or regarding this Agreement, any Loan or the
Note against such Fund.
21. BENEFIT OF AGREEMENT. This Agreement and the Note shall be
binding upon and inure for the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; PROVIDED THAT no party to this
Agreement or the Note may assign any of its rights hereunder or thereunder
without the prior written consent of the other parties.
22. NOTICES AND OTHER COMMUNICATIONS; FACSIMILE COPIES
(A) GENERAL. Unless otherwise expressly provided herein, all
notices, requests and other communications provided for hereunder shall be in
writing (including by facsimile transmission). All such written notices shall be
mailed, faxed, or delivered to the applicable address or facsimile number, or
(subject to SUBSECTION (C) below) electronic mail address, and all notices and
other communications expressly permitted hereunder to be given by telephone
shall be made to the applicable telephone number, as follows:
(i) if to the Borrowers, to the address, facsimile
number, electronic mail address, or telephone number specified for such
Person on EXHIBIT B or to such other address, facsimile number,
electronic mail address, or telephone number as shall be designated by
such party in a notice to the other parties; and
(ii) if to CAPCO, to the address, facsimile number,
electronic mail address, or telephone number specified on EXHIBIT C or
to such other address, facsimile number, electronic mail address, or
telephone number as shall be designated by such party in a notice to
the other parties.
All such notices and other communications shall be deemed to be given or made
upon the EARLIER to occur of (i) actual receipt by the relevant party hereto and
(ii) (A) if delivered by hand or by courier, when
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signed for by or on behalf of the relevant party hereto; (B) if delivered by
certified mail, when signed for by or on behalf of the relevant party hereto;
(C) if delivered by facsimile, when sent and receipt has been confirmed by
telephone; and (D) if delivered by electronic mail (which form of delivery is
subject to the provisions of SUBSECTION (C) below), when delivered. In no event
shall a voicemail message be effective as a notice, communication or
confirmation hereunder.
(b) EFFECTIVENESS OF FACSIMILE DOCUMENTS AND SIGNATURES. This
Agreement and all other documents to be executed by it in connection with the
transactions contemplated hereby may be transmitted and/or signed by facsimile.
The effectiveness of any such documents and signatures shall, subject to
applicable law, have the same force and effect as manually-signed originals and
shall be binding on all Borrowers and the Bank. The Bank may also require that
any such documents and signatures be confirmed by a manually-signed original
thereof; PROVIDED HOWEVER, that the failure to request or deliver the same shall
not limit the effectiveness of any facsimile document or signature.
(c) LIMITED USE OF ELECTRONIC MAIL. Electronic mail and Internet
and intranet websites may be used only to distribute routine communications,
such as drafts of loan documents and financial statements and other information
as provided in Section 13, and to distribute this Agreement and the other
documents to be executed in connection herewith for execution by the parties
thereto, and may not be used for any other purpose.
23. MODIFICATIONS. No provision of this Agreement or the Note may
be waived, modified or discharged EXCEPT by mutual written agreement of all
parties. THIS WRITTEN LOAN AGREEMENT AND THE NOTE REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
24. GOVERNING LAW AND JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the state of Texas
without regard to the choice of law provisions thereof. Chapter 346 of the Texas
Finance Code shall not apply to this Agreement or the Loans made hereunder.
25. TRUST DISCLAIMER. Neither the shareholders, trustees,
officers, employees and other agents of any Borrower or Fund shall be personally
bound by or liable for any indebtedness, liability or obligation hereunder or
under the Note nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder.
26. PUBLICITY. Neither CAPCO nor the Borrowers will use any
name, trademark, or trade name of the other without that other party's prior
written consent.
1505406v1
If this letter correctly reflects your agreement with us, please execute both
copies hereof and return one to us, whereupon this Agreement shall be binding
upon the Borrowers (not in their individual capacity, but on behalf of their
respective Funds listed on SCHEDULE A hereto) and CAPCO.
Sincerely,
USAA CAPITAL CORPORATION
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Senior Vice President-Treasurer
Signature to the Facility Agreement Letter dated January 6, 2006, between USAA
Mutual Fund, Inc., USAA Investment Trust, USAA Tax Exempt Fund, Inc., USAA State
Tax-Free Trust, and USAA Life Investment Trust (not in their individual
capacities, but on behalf of and for the benefit of the series of funds set
forth on SCHEDULE A hereto) and CAPCO.
AGREED AND ACCEPTED
USAA MUTUAL FUND, INC.,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to this Agreement
By: /S/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA INVESTMENT TRUST,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to this Agreement
By: /S/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA TAX EXEMPT FUND, INC.,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to this Agreement
By: /S/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA STATE TAX-FREE TRUST,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to this Agreement
By: /S/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA LIFE INVESTMENT TRUST,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to this Agreement
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
1505406v1
SCHEDULE A TO FACILITY AGREEMENT LETTER
FUNDS FOR WHOSE BENEFIT LOANS CAN BE BORROWED
UNDER FACILITY AGREEMENT LETTER AND BORROWING LIMIT
BORROWER FUNDS MAXIMUM PERCENT OF THE
TOTAL ASSETS WHICH CAN BE
BORROWED UNDER FACILITY
AGREEMENT WITH CAPCO
USAA Mutual Fund, Inc. USAA Aggressive Growth 5% of Total Assets
USAA Growth & Income "
USAA Income Stock "
USAA Short-Term Bond "
USAA Money Market "
USAA Growth "
USAA Income "
USAA S&P 500 Index (Member
and Reward classes) "
USAA Science & Technology "
USAA First Start Growth "
USAA High Yield Opportunities "
USAA Intermediate-Term Bond "
USAA Small Cap Stock "
USAA Extended Market Index "
USAA Nasdaq-100 Index "
USAA Capital Growth "
USAA Value "
USAA Investment Trust USAA Cornerstone Strategy "
USAA Precious Metals and Minerals "
USAA International "
USAA World Growth "
USAA GNMA Trust "
USAA Treasury Money Market Trust "
USAA Emerging Markets "
USAA Growth and Tax Strategy "
USAA Balanced Strategy "
USAA Total Return Strategy "
USAA Tax Exempt Fund, Inc. USAA Long-Term "
USAA Intermediate-Term "
USAA Short-Term "
USAA Tax Exempt Money Market "
USAA California Bond "
USAA California Money Market "
USAA New York Bond "
USAA New York Money Market "
USAA ▇▇▇▇▇▇▇▇ ▇▇▇▇ "
USAA Virginia Money Market "
USAA State Tax-Free Trust USAA Florida Tax-Free Income "
USAA Florida Tax-Free Money Market "
USAA Life Investment Trust USAA Life Income "
USAA Life Growth and Income "
USAA Life World Growth "
USAA Life Diversified Assets "
USAA Life Aggressive Growth "
1505406v1
Schedule A
SCHEDULE B TO FACILITY AGREEMENT LETTER
PERMITTED SUBADVISERS
Barrow, Hanley, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Inc.
Batterymarch Financial Management, Inc.
The Boston Company Asset Management, LLC
Grantham, Mayo, Van Otterloo & Co. LLC
▇▇▇▇▇▇, ▇▇▇▇▇▇ & Company, ▇.▇.
▇▇▇▇▇▇▇ Capital Management, LLC
▇▇▇▇▇▇▇ ▇▇▇▇▇ Quantitative Advisers
MFS Investment Management
Northern Trust Investments, N.A.
OFI Institutional Asset Management, Inc.
Wellington Management Company, LLP
1505406v1
Schedule B
EXHIBIT A TO FACILITY AGREEMENT LETTER
MASTER GRID PROMISSORY NOTE
U.S. $300,000,000 Dated: January 06, 2006
FOR VALUE RECEIVED, each of the undersigned (each a "BORROWER" and
collectively the "BORROWERS"), severally and not jointly and not in their
individual capacities, but on behalf of and for the benefit of the series of
funds comprising each such Borrower as listed on SCHEDULE A to the Agreement as
defined below (each a "FUND" and collectively the "FUNDS") promises to pay to
the order of USAA Capital Corporation ("CAPCO") at CAPCO's office located at
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, in lawful money of the
United States of America, in immediately available funds, the principal amount
of all Loans made by CAPCO to such Borrower for the benefit of the applicable
Funds under the Facility Agreement Letter dated January 06, 2006 (as amended or
modified, the "AGREEMENT"), among the Borrowers and CAPCO, together with
interest thereon at the rate or rates set forth in the Agreement. All payments
of interest and principal outstanding shall be made in accordance with the terms
of the Agreement.
This Note evidences Loans made pursuant to, and is entitled to the
benefits of, the Agreement. Terms not defined in this Note shall be as set forth
in the Agreement.
CAPCO is authorized to endorse the particulars of each Loan evidenced
hereby on the attached Schedule and to attach additional Schedules as necessary,
provided that the failure of CAPCO to do so or to do so accurately shall not
affect the obligations of any Borrower (or the Fund for whose benefit it is
borrowing) hereunder.
Each Borrower waives all claims to presentment, demand, protest, and
notice of dishonor. Each Borrower agrees to pay all reasonable costs of
collection, including reasonable attorney's fees in connection with the
enforcement of this Note.
CAPCO hereby agrees (i) that any claim, liability, or obligation
arising hereunder or under the Agreement whether on account of the principal of
any Loan, interest thereon, or any other amount due hereunder or thereunder
shall be satisfied only from the assets of the specific Fund for whose benefit a
Loan is borrowed and in any event in an amount not to exceed the outstanding
principal amount of any Loan borrowed for such Fund's benefit, TOGETHER WITH
accrued and unpaid interest due and owing thereon, and such Fund's share of any
other amount due hereunder and under the Agreement (as determined in accordance
with the provisions of the Agreement) and (ii) that no assets of any Fund shall
be used to satisfy any claim, liability, or obligation arising hereunder or
under the Agreement with respect to the outstanding principal amount of any Loan
borrowed for the benefit of any other Fund or any accrued and unpaid interest
due and owing thereon or such other Fund's share of any other amount due
hereunder and under the Agreement (as determined in accordance with the
provisions of the Agreement).
Neither the shareholders, trustees, officers, employees and other
agents of any Borrower or Fund shall be personally bound by or liable for any
indebtedness, liability or obligation hereunder or under the Note nor shall
resort be had to their private property for the satisfaction of any obligation
or claim hereunder.
This Note shall be governed by the laws of the state of Texas.
Exhibit A
1505406v1
Signature to the Master Grid Promissory Note dated January 06, 2006, by USAA
Mutual Fund, Inc., USAA Investment Trust, USAA Tax Exempt Fund, Inc., USAA State
Tax-Free Trust and USAA Life Investment Trust (not in their individual
capacities, but on behalf of and for the benefit of the series of funds set
forth on SCHEDULE A to the Agreement) payable to CAPCO.
USAA MUTUAL FUND, INC.,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to the Agreement
By:
-------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA INVESTMENT TRUST,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to the Agreement
By:
-------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA TAX EXEMPT FUND, INC.,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to the Agreement
By:
-------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA STATE TAX-FREE TRUST,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to the Agreement
By:
-------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA LIFE INVESTMENT TRUST,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to the Agreement
By:
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Exhibit A
1505406v1
SCHEDULE TO NOTE
LOANS AND PAYMENT OF PRINCIPAL
This schedule (grid) is attached to and made a part of the Promissory Note dated
January 06, 2006, executed severally and not jointly by USAA MUTUAL FUND, INC.,
USAA INVESTMENT TRUST, USAA TAX EXEMPT FUND, INC., USAA STATE TAX-FREE TRUST and
USAA LIFE INVESTMENT TRUST (not in their individual capacity, but on behalf of
and for the benefit of the series of funds comprising each such Borrower)
payable to the order of USAA CAPITAL CORPORATION.
[GRID]
Date of
Loan
Borrower
and Fund
Amount of
Loan
Type of Rate and
Interest
Rate on Date of
Borrowing
Amount of
Principal
Repaid
Date of
Repayment
Other
Expenses
Notation made
by
Exhibit A
1505406v1
EXHIBIT B
EXHIBIT B TO FACILITY AGREEMENT LETTER
BORROWER INFORMATION SHEET
BORROWERS: USAA MUTUAL FUND, INC., USAA INVESTMENT TRUST, USAA
TAX EXEMPT FUND, INC. and USAA STATE TAX-FREE TRUST
ADDRESS FOR NOTICES AND OTHER COMMUNICATIONS TO THESE BORROWERS:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (for Federal Express, 78240)
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President, Fixed Income Investments
USAA Investment Management Company
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Cellphone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
e-mail: ▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President, Equity Investments
USAA Investment Management Company
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
e-mail: ▇▇▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇.▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Assistant Vice President,
Senior Financial Officer & Treasurer
USAA Investment Management Company
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: 498-7819
e-mail: ▇▇▇▇▇.▇▇▇▇@▇▇▇▇.▇▇▇
ADDRESS FOR BORROWING AND PAYMENTS:
1505406v1
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (for Federal Express, 78240)
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Assistant Vice President,
Senior Financial Officer & Treasurer
USAA Investment Management Company
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: 498-7819
e-mail: ▇▇▇▇▇.▇▇▇▇@▇▇▇▇.▇▇▇
BORROWERS: USAA LIFE INVESTMENT TRUST
1505406v1
ADDRESS FOR NOTICES AND OTHER COMMUICATIONS TO THIS BORROWER:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (for Federal Express, 78240)
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Assistant Vice President, Senior Financial
Officer & Treasurer
USAA Investment Management Company
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: 498-7819
e-mail: ▇▇▇▇▇.▇▇▇▇@▇▇▇▇.▇▇▇
ADDRESS FOR BORROWING AND PAYMENTS:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (for Federal Express, 78240)
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Assistant Vice President, Senior Financial
Officer & Treasurer
USAA Investment Management Company
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: 498-7819
e-mail: ▇▇▇▇▇.▇▇▇▇@▇▇▇▇.▇▇▇
INSTRUCTIONS FOR PAYMENTS TO BORROWER:
WE PAY VIA: X FED FUNDS CHIPS
---------- ----------
Exhibit B
1505406v1
TO: (PLEASE PLACE BANK NAME, CORRESPONDENT NAME (IF APPLICABLE), CHIPS AND/OR
FED FUNDS ACCOUNT NUMBER BELOW)
USAA MUTUAL FUND, INC.
STATE STREET BANK AND TRUST COMPANY, BOSTON, MASSACHUSETTS
ABA #▇▇▇▇▇▇▇▇▇
USAA AGGRESSIVE GROWTH FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA GROWTH & INCOME FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA INCOME STOCK FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA SHORT-TERM BOND FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA MONEY MARKET FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA GROWTH FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA INCOME FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA SCIENCE & TECHNOLOGY FUND ACCT.#▇▇▇▇-▇▇▇-▇
USAA FIRST START GROWTH FUND ACCT.#▇▇▇▇-▇▇▇-▇
USAA HIGHYIELD OPPORTUNITIES FUND ACCT.#▇▇▇▇-▇▇▇-▇
USAA INTERMEDIATE-TERM BOND FUND ACCT.#▇▇▇▇-▇▇▇-▇
USAA SMALL CAP STOCK FUND ACCT.#▇▇▇▇-▇▇▇-▇
USAA NASDAQ-100 INDEX FUND ACCT.#▇▇▇▇-▇▇▇-▇
USAA CAPITAL GROWTH FUND ACCT.#▇▇▇▇-▇▇▇-▇
USAA VALUE FUND ACCT.#▇▇▇▇-▇▇▇-▇
NORTHERN TRUST COMPANY, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇ #▇▇▇▇▇▇▇▇▇
▇▇▇▇ S&P 500 INDEX FUND ACCT.#2616882
▇ ▇ ▇▇▇▇▇▇ CHASE BANK, NEW YORK, NY ABA #▇▇▇▇▇▇▇▇▇
USAA EXTENDED MARKET INDEX FUND ACCT.#P83544
Exhibit B
1505406v1
USAA INVESTMENT TRUST
STATE STREET BANK AND TRUST COMPANY, BOSTON, MASSACHUSETTS
ABA #▇▇▇▇▇▇▇▇▇
USAA CORNERSTONE STRATEGY FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA PRECIOUS METALS AND MINERALS FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA INTERNATIONAL FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA WORLD GROWTH FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA GNMA TRUST ACCT.# ▇▇▇▇-▇▇▇-▇
USAA TREASURY MONEY MARKET TRUST ACCT.# ▇▇▇▇-▇▇▇-▇
USAA EMERGING MARKETS FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA GROWTH AND TAX STRATEGY FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA BALANCED STRATEGY FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA TOTAL RETURN STRATEGY FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA TAX EXEMPT FUND, INC.
State Street Bank and Trust Company, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ #▇▇▇▇▇▇▇▇▇
▇▇▇▇ LONG-TERM FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA INTERMEDIATE-TERM FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA SHORT-TERM FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA TAX EXEMPT MONEY MARKET FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA CALIFORNIA BOND FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA CALIFORNIA MONEY MARKET FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA NEW YORK BOND FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA NEW YORK MONEY MARKET FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA ▇▇▇▇▇▇▇▇ ▇▇▇▇ FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA VIRGINIA MONEY MARKET FUND ACCT.# ▇▇▇▇-▇▇▇-▇
Exhibit B
1505406v1
USAA STATE TAX-FREE TRUST
STATE STREET BANK AND TRUST COMPANY, BOSTON, MASSACHUSETTS
ABA #▇▇▇▇▇▇▇▇▇
USAA FLORIDA TAX-FREE INCOME FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA FLORIDA TAX-FREE MONEY MARKET FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA LIFE INVESTMENT TRUST
STATE STREET BANK AND TRUST COMPANY, BOSTON, MASSACHUSETTS
ABA #▇▇▇▇▇▇▇▇▇
USAA LIFE INCOME FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA LIFE GROWTH & INCOME FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA LIFE WORLD GROWTH FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA LIFE DIVERSIFIED ASSETS FUND ACCT.# ▇▇▇▇-▇▇▇-▇
USAA LIFE AGGRESSIVE GROWTH FUND ACCT.# ▇▇▇▇-▇▇▇-▇
Exhibit B
1505406v1
EXHIBIT C
ADDRESS FOR USAA CAPITAL CORPORATION
USAA Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Exhibit C
1505406v1
EXHIBIT D TO FACILITY AGREEMENT LETTER
OFFICER'S CERTIFICATE
▇▇▇▇ ▇. ▇▇▇▇▇▇ hereby certifies that he is the duly elected Secretary of USAA
Mutual Fund, Inc., USAA Investment Trust, USAA Tax Exempt Fund, Inc., USAA State
Tax-Free Trust, and USAA Life Investment Trust (each a "BORROWER" and
collectively the "BORROWERS"), and that he is authorized to execute this
Certificate on behalf of the Borrowers. The undersigned hereby further certifies
to the following:
Any one of the Chairman and Chief Executive Officer of United States Automobile
Association ("USAA"), the Executive Vice President-Chief Financial
Officer/Corporate Treasurer of USAA, or the Senior Vice President-Corporate
Finance and Assistant Treasurer of USAA, together with either the Treasurer or
Assistant Treasurer of the Borrowers, are duly authorized to act on behalf of
the Funds, by transmitting telephonic, electronic mail, telex, or telecopy
instructions and other communications with regard to borrowings and payments
pursuant to the Facility Agreement dated January 6, 2006, with USAA Capital
Corporation. The signature set opposite the name of each individual below is
that individual's genuine signature.
NAME OFFICE SIGNATURE
---- ------ ---------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Chairman and Chief Executive
Officer of USAA _____________________
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. Executive Vice President-Chief
Financial Officer/Corporate
Treasurer of USAA ______________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Senior Vice President-Corporate
Finance and Assistant Treasurer
of USAA ______________________
▇▇▇▇▇ ▇. ▇▇▇▇ Treasurer of the Borrowers ______________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. Assistant Treasurer of the
Borrowers ______________________
IN WITNESS WHEREOF, I have executed the Certificate as of this 6th day of
January, 2006.
--------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Secretary
I, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, officer of the Borrowers, hereby certify that ▇▇▇▇ ▇.
▇▇▇▇▇▇ is, and has been at all times since a date prior to the date of this
Certificate, the duly elected, qualified, and acting Secretary of the Borrowers
and that his signature set forth above is his true and correct signature.
Date: January 6, 2006
------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Officer
Exhibit D
1505406v1
MASTER GRID PROMISSORY NOTE
U.S. $300,000,000 Dated: January 06, 2006
FOR VALUE RECEIVED, each of the undersigned (each a "BORROWER" and
collectively the "BORROWERS"), severally and not jointly and not in their
individual capacities, but on behalf of and for the benefit of the series of
funds comprising each such Borrower as listed on SCHEDULE A to the Agreement as
defined below (each a "FUND" and collectively the "FUNDS") promises to pay to
the order of USAA Capital Corporation ("CAPCO") at CAPCO's office located at
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, in lawful money of the
United States of America, in immediately available funds, the principal amount
of all Loans made by CAPCO to such Borrower for the benefit of the applicable
Funds under the Facility Agreement Letter dated January 06, 2006 (as amended or
modified, the "AGREEMENT"), among the Borrowers and CAPCO, together with
interest thereon at the rate or rates set forth in the Agreement. All payments
of interest and principal outstanding shall be made in accordance with the terms
of the Agreement.
This Note evidences Loans made pursuant to, and is entitled to the
benefits of, the Agreement. Terms not defined in this Note shall be as set forth
in the Agreement.
CAPCO is authorized to endorse the particulars of each Loan evidenced
hereby on the attached Schedule and to attach additional Schedules as necessary,
provided that the failure of CAPCO to do so or to do so accurately shall not
affect the obligations of any Borrower (or the Fund for whose benefit it is
borrowing) hereunder.
Each Borrower waives all claims to presentment, demand, protest, and
notice of dishonor. Each Borrower agrees to pay all reasonable costs of
collection, including reasonable attorney's fees in connection with the
enforcement of this Note.
CAPCO hereby agrees (i) that any claim, liability, or obligation
arising hereunder or under the Agreement whether on account of the principal of
any Loan, interest thereon, or any other amount due hereunder or thereunder
shall be satisfied only from the assets of the specific Fund for whose benefit a
Loan is borrowed and in any event in an amount not to exceed the outstanding
principal amount of any Loan borrowed for such Fund's benefit, together with
accrued and unpaid interest due and owing thereon, and such Fund's share of any
other amount due hereunder and under the Agreement (as determined in accordance
with the provisions of the Agreement) and (ii) that no assets of any Fund shall
be used to satisfy any claim, liability, or obligation arising hereunder or
under the Agreement with respect to the outstanding principal amount of any Loan
borrowed for the benefit of any other Fund or any accrued and unpaid interest
due and owing thereon or such other Fund's share of any other amount due
hereunder and under the Agreement (as determined in accordance with the
provisions of the Agreement).
Neither the shareholders, trustees, officers, employees and other
agents of any Borrower or Fund shall be personally bound by or liable for any
indebtedness, liability or obligation hereunder or under the Note nor shall
resort be had to their private property for the satisfaction of any obligation
or claim hereunder.
This Note shall be governed by the laws of the state of Texas.
1505406v1
Signature to the Master Grid Promissory Note dated January 06, 2006, by USAA
Mutual Fund, Inc., USAA Investment Trust, USAA Tax Exempt Fund, Inc., USAA State
Tax-Free Trust and USAA Life Investment Trust (not in their individual
capacities, but on behalf of and for the benefit of the series of funds set
forth on SCHEDULE A TO THE AGREEMENT) payable to CAPCO.
USAA MUTUAL FUND, INC.,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to the Agreement
By: /S/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA INVESTMENT TRUST,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to the Agreement
By: /S/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA TAX EXEMPT FUND, INC.,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to the Agreement
By: /S/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA STATE TAX-FREE TRUST,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to the Agreement
By: /S/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
USAA LIFE INVESTMENT TRUST,
on behalf of and for the benefit
of its series of Funds as set forth
on SCHEDULE A to the Agreement
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
LOANS AND PAYMENT OF PRINCIPAL
This schedule (grid) is attached to and made a part of the Promissory Note dated
January 06, 2006, executed severally and not jointly by USAA MUTUAL FUND, INC.,
USAA INVESTMENT TRUST, USAA TAX EXEMPT FUND, INC., USAA STATE TAX-FREE TRUST and
USAA LIFE INVESTMENT TRUST (not in their individual capacity, but on behalf of
and for the benefit of the series of funds comprising each such Borrower)
payable to the order of USAA CAPITAL CORPORATION.
[GRID]
Date of
Loan
Borrower
and Fund
Amount of
Loan
Type of Rate and
Interest
Rate on Date of
Borrowing
Amount of
Principal
Repaid
Date of
Repayment
Other
Expenses
Notation made
by
1505406v1
OFFICER'S CERTIFICATE
▇▇▇▇ ▇. ▇▇▇▇▇▇ hereby certifies that he is the duly elected Secretary of USAA
Mutual Fund, Inc., USAA Investment Trust, USAA Tax Exempt Fund, Inc., USAA State
Tax-Free Trust, and USAA Life Investment Trust (each a "BORROWER" and
collectively the "BORROWERS"), and that he is authorized to execute this
Certificate on behalf of the Borrowers. The undersigned hereby further certifies
to the following:
Any one of the Chairman and Chief Executive Officer of United States Automobile
Association ("USAA"), the Executive Vice President-Chief Financial
Officer/Corporate Treasurer of USAA, or the Senior Vice President-Corporate
Finance and Assistant Treasurer of USAA, together with either the Treasurer or
Assistant Treasurer of the Borrowers, are duly authorized to act on behalf of
the Funds, by transmitting telephonic, electronic mail, telex, or telecopy
instructions and other communications with regard to borrowings and payments
pursuant to the Facility Agreement dated January 6, 2006, with USAA Capital
Corporation. The signature set opposite the name of each individual below is
that individual's genuine signature.
NAME OFFICE SIGNATURE
---- ------ ---------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Chairman and Chief Executive
Officer of USAA /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. Executive Vice President-Chief
Financial Officer/Corporate
Treasurer of USAA /S/ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Senior Vice President-Corporate
Finance and Assistant Treasurer
of USAA /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇ Treasurer of the Borrowers /S/ ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. Assistant Treasurer of the
Borrowers /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
IN WITNESS WHEREOF, I have executed the Certificate as of this 6th day of
January, 2006.
/S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Secretary
I, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, officer of the Borrowers, hereby certify that ▇▇▇▇ ▇.
▇▇▇▇▇▇ is, and has been at all times since a date prior to the date of this
Certificate, the duly elected, qualified, and acting Secretary of the Borrowers
and that his signature set forth above is his true and correct signature.
Date: January 6, 2006
/S/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Officer
SECRETARY'S CERTIFICATE
USAA MUTUAL FUND, INC.
USAA INVESTMENT TRUST
USAA TAX EXEMPT FUND, INC.
USAA STATE TAX-FREE TRUST
USAA LIFE INVESTMENT TRUST
I, ▇▇▇▇ ▇. ▇▇▇▇▇▇ being the Secretary of USAA Mutual Fund, Inc., USAA
Investment Trust, USAA Tax Exempt Fund, Inc., USAA State Tax-Free Trust and USAA
Life Investment Trust (each a "Borrower" and collectively the "Borrowers")
hereby certify to, and for the benefit of, USAA Capital Corporation that the
following are true and correct:
1. Resolution. The attached resolutions were approved by all of the
Board of Directors/Trustees of each Borrower on November 29, 2005 (USAA Mutual
Fund, Inc.; USAA Investment Trust; USAA Tax Exempt Fund, Inc.; and USAA State
Tax-Free Trust) and December 8 , 2005 (USAA Life Investment Trust) and such
resolutions are now in full force and effect.
2. Organization. Each of the Borrowers is duly organized and existing.
3. Power. The Board of Directors/Trustees of each of the Borrowers
which took the action called for by the resolutions attached hereto have the
power to take such action.
4. Incumbency. The following-named individuals are duly elected,
qualified, and acting officers of the Borrowers and hold the offices set forth
opposite their respective names as of the date hereof, and the signatures set
opposite the respective names and titles of said officers are their true and
authentic signatures:
NAME TITLE SPECIMEN SIGNATURE
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ President /S/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ President /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
USAA Life Investment Trust
▇▇▇▇ ▇. ▇▇▇▇▇▇ Secretary /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
IN WITNESS WHEREOF, I have executed this Certificate as of this 6th day of
January, 2006.
/S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary
I, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Officer of the Borrowers, hereby certify that ▇▇▇▇ ▇.
▇▇▇▇▇▇ is, and has been at all times since a date prior to the date of this
Certificate, the duly elected, qualified, and acting Secretary of the Borrowers
and that his signature set forth above is his true and correct signature.
/S/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Date: January 6, 2006 -----------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Officer
January 6, 2006
USAA Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have acted as counsel to USAA Investment Management Company, Manager and
Investment Adviser of USAA Mutual Fund, Inc., USAA Investment Trust, USAA Tax
Exempt Fund, Inc., USAA State Tax-Free Trust and USAA Life Investment Trust
(each a "Borrower" and collectively the "Borrowers"), in connection with (i) the
$300,000,000 committed Master Revolving Credit Facility Agreement dated January
6, 2006 (the "Credit Agreement") between the Borrowers, for the benefit of each
Borrower's series of funds (the "Funds"), and USAA Capital Corporation (the
"CAPCO") and (ii) the Note (as such term is defined in the Credit Agreement)
dated January 6, 2006 made by each Borrower in favor of the Bank (the "Note"). I
am a Senior Vice President of USAA Investment Management Company, an indirect
wholly-owned subsidiary of United Services Automobile Association ("USAA"). All
capitalized terms used in this opinion and not otherwise defined herein shall
have the meanings ascribed to them in the Credit Agreement.
I have examined such records, certificates and documents, and such questions of
fact and law as I have deemed necessary or appropriate for the basis of the
opinions hereinafter expressed.
Based upon and subject to the foregoing, but subject to the assumptions and
qualifications set forth herein I am of the opinion that:
1. Each Borrower is a corporation or trust duly organized,
validly existing, and in good standing under applicable state laws and
has all requisite corporate or trust power and authority to carry on
its respective businesses as now conducted and proposed to be
conducted, to enter into the Credit Agreement and all other documents
to be executed by it in connection with the transactions contemplated
hereby, to issue and borrow under the Note and to carry out the terms
thereof.
2. The execution, delivery and performance of the Credit
Agreement and the Note, and borrowings hereunder, have been duly
authorized by all necessary corporate or trust action of each Borrower
and will not result in any violation of or be in conflict with or
constitute a default under any term of the applicable Funds, or of any
Borrowing Limit or prospectus or statement of additional information of
such Borrower or its applicable Funds, or of any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Borrower, or result in the creation of any mortgage,
lien, charge or encumbrance upon any of the properties or assets of
such Borrower or its applicable Funds pursuant to any such term. No
Borrower or its applicable Funds are in violation of any term of its
respective charter, by-laws or trust agreement, and no Borrower or its
applicable Funds are in violation of any material term of any agreement
or instrument to which they are a party, or to the best of my
knowledge, of any judgment, decree, order, statute, rule or
governmental regulation applicable to them.
1505406v1
3. Each Borrower and its applicable Funds are in compliance
in all material respects with all federal and state securities or
similar laws and regulations, including all material rules, regulations
and administrative orders of the Securities and Exchange Commission
(the "SEC") and applicable Blue Sky authorities. Each Borrower and its
applicable Funds are in compliance in all material respects with all of
the provisions of the Investment Company Act of 1940, and such Borrower
has filed all reports with the SEC that are required of it or its
applicable Funds.
4. There is no action, suit or proceeding pending or, to the best
of my knowledge, threatened against any Borrower or its applicable
Funds in any court or before any arbitrator or governmental body which
seeks to restrain any of the transactions contemplated by the Credit
Agreement or which, if adversely determined, could have a material
adverse effect on the assets or business operations of any Borrower or
its applicable Funds or the ability of any Borrower and its applicable
Funds to pay and perform their obligations under the Credit Agreement
and under the Note.
5. The Credit Agreement and the Note have been duly executed and
delivered by each Borrower, for the benefit of its applicable Funds,
and constitute the valid and binding obligations of each Borrower, for
the benefit of its applicable Funds, enforceable in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, receivership, moratorium or other applicable
debtor relief laws and by general principles of equity.
6. The assets of each Fund for whose benefit Loans are borrowed
by the applicable Borrower are subject to and liable for such Loans and
are available to the applicable Borrower for the repayment of such
Loans.
In rendering the opinion expressed above, I have further assumed: (i) that the
terms of the Credit Agreement will be strictly complied with by CAPCO; (ii) that
there is not, nor shall there be, any form of compensation or charge, whether
direct or indirect, by CAPCO in connection with any of the Loans, except as
expressly set forth in the Credit Agreement; (iii) that there are not, nor will
there be, any compensating balances, frozen funds, deposits or other funds of
any Borrower or its applicable Funds which are pledged or hypothecated as
security or which are given as any other form of compensation, whether direct or
indirect, for the account or benefit of CAPCO in connection with Loans other
than as provided in the Credit Agreement; (iv) that any fees which have been
paid or may be paid to CAPCO or to any other party in connection with the Loans
are for services actually rendered and that such fees will not exceed just and
reasonable compensation for such services rendered; and (v) that the utilization
fees, and any other fees to be paid to CAPCO in connection with the Loans shall
be treated as interest by CAPCO for purposes of assuring that the interest
charged by CAPCO on the Loans does not exceed the Maximum Lawful Rate.
In giving the foregoing opinions, I express no opinion other than as to the
federal laws of the United States of America, and the laws of the state of
Texas.
I am furnishing this letter to you in my capacity as counsel to USAA Investment
Management Company, Manager and Investment Adviser of the Borrowers, and this
letter is solely for the benefit of CAPCO. This letter is not to be used,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
/S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President, Secretary and Counsel
USAA Investment Management Company
1505406v1
Exhibit h (vii)
PRIVILEGED AND CONFIDENTIAL
DRAFT 04/06/06
FORM OF AGREEMENT AND PLAN OF CONVERSION AND TERMINATION
THIS AGREEMENT AND PLAN OF CONVERSION AND TERMINATION ("AGREEMENT") is made
as of _______ __, 2006 between [USAA MUTUAL FUNDS TRUST], a Delaware statutory
trust ("TRUST"), on behalf of each of its segregated portfolios of assets
("SERIES") listed under the heading "New Funds" on Schedule A to this Agreement
("SCHEDULE A") (each, a "NEW FUND"), and USAA MUTUAL FUND, INC., a Maryland
corporation ("CORPORATION"), on behalf of each of its series listed under the
heading "Old Funds" on Schedule A (each, an "OLD FUND"). (Each New Fund and Old
Fund is sometimes referred to herein as a "FUND," and each of the Trust and the
Corporation is sometimes referred to herein as an "INVESTMENT COMPANY.") All
agreements, covenants, representations, actions, and obligations described
herein made or to be taken or undertaken by a Fund are made and shall be taken
or undertaken by the Trust on each New Fund's behalf and by the Corporation on
each Old Fund's behalf, and all rights and benefits created hereunder in favor
of a Fund shall inure to, and shall be enforceable by, the Investment Company of
which it is a series acting on its behalf.
Each Investment Company wishes to effect seventeen separate
reorganizations, each described in section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended ("CODE"), and intends this Agreement to be, and adopts
it as, a "plan of reorganization" within the meaning of the regulations under
the Code ("REGULATIONS"). Each reorganization will involve an Old Fund's
changing its identity, form, and place of organization -- by converting from a
series of the Corporation to a series of the Trust -- by (1) transferring all
its assets to the New Fund listed on Schedule A opposite its name (which is
being established solely for the purpose of acquiring such assets and continuing
that Old Fund's business) in exchange solely for voting shares of beneficial
interest in that New Fund and that New Fund's assumption of all that Old Fund's
liabilities, (2) distributing those shares PRO RATA to that Old Fund's
shareholders in exchange for their shares of common stock therein and in
complete liquidation thereof, and (3) terminating that Old Fund (all the
foregoing transactions involving each Old Fund and its corresponding New Fund
being referred to herein collectively as a "REORGANIZATION"), all on the terms
and conditions set forth herein. The consummation of one Reorganization shall
not be contingent on the consummation of any other Reorganization. (For
convenience, the balance of this Agreement, except paragraph 8, refers only to a
single Reorganization, one Old Fund, and one New Fund, but the terms and
conditions hereof shall apply separately to each Reorganization and the Funds
participating therein.)
Each Investment Company's Board of Trustees/Directors (each, a "BOARD"), in
each case including a majority of its members who are not "interested persons"
(as that term is defined in the Investment Company Act of 1940, as amended
("1940 ACT")) thereof, (1) has duly adopted and approved this Agreement and the
transactions contemplated hereby and (2) has determined that participation in
the Reorganization is in the best interests of its Fund and that the interests
of the existing shareholders of its Fund will not be diluted as a result of the
Reorganization.
Old Fund, except Old S&P 500 Index Fund, offers a single class of shares of
common stock ("OLD SHARES"). Old S&P 500 Index Fund offers two classes of common
stock, designated Member Class and Reward Class shares ("MEMBER CLASS OLD FUND
SHARES" and "REWARD CLASS OLD FUND SHARES," respectively, and collectively with
Old Shares, "OLD FUND SHARES"). New Fund, except New S&P 500 Index Fund, will
offer a single class of voting shares of
beneficial interest ("NEW SHARES"). New S&P 500 Index Fund will offer two
classes of voting shares of beneficial interest, also designated Member Class
and Reward Class shares ("MEMBER CLASS NEW FUND SHARES" and "REWARD CLASS NEW
FUND SHARES," respectively, and collectively with New Shares, "NEW FUND
SHARES").
In consideration of the mutual promises contained herein, the Investment
Companies agree as follows:
1. PLAN OF CONVERSION AND TERMINATION
1.1. Subject to the requisite approval of Old Fund's shareholders and the
terms and conditions set forth herein, Old Fund shall assign, sell, convey,
transfer, and deliver all of its assets described in paragraph 1.2 ("ASSETS") to
New Fund. In exchange therefor, New Fund shall:
(a) issue and deliver to Old Fund the number of full and fractional New
Fund Shares equal to the number of full and fractional Old Fund Shares then
outstanding (all references herein to "fractional" shares meaning fractions
rounded to the third decimal place), and
(b) assume all of Old Fund's liabilities described in paragraph 1.3
("LIABILITIES").
Such transactions shall take place at the CLOSING (as defined in paragraph 2.1).
1.2 The Assets shall consist of all assets and property -- including all
cash, cash equivalents, securities, commodities, futures interests, receivables
(including interest and dividends receivable), claims and rights of action,
rights to register shares under applicable securities laws, books and records,
and deferred and prepaid expenses shown as assets on Old Fund's books -- Old
Fund owns at the EFFECTIVE TIME (as defined in paragraph 2.1).
1.3 The Liabilities shall consist of all of Old Fund's liabilities, debts,
obligations, and duties of whatever kind or nature existing at the Effective
Time, whether absolute, accrued, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable at that time, and
whether or not specifically referred to in this Agreement. Notwithstanding the
foregoing, Old Fund shall endeavor to discharge all its known liabilities,
debts, obligations, and duties before the Effective Time.
1.4 At or prior to the Closing, New Fund shall redeem the INITIAL SHARE (as
defined in paragraph 5.5) for $10.00 each. At the Effective Time (or as soon
thereafter as is reasonably practicable), Old Fund shall distribute the New Fund
Shares it receives pursuant to paragraph 1.1(a) to its shareholders of record
determined as of the Effective Time (each, a "Shareholder"), in proportion to
their Old Fund Shares then held of record and in exchange for their Old Fund
Shares, and shall completely liquidate. That distribution shall be accomplished
by the Trust's transfer agent's opening accounts on New Fund's share transfer
books in the Shareholders' names and transferring those New Fund Shares thereto.
Pursuant to such transfer, each Shareholder's account shall be credited with the
number of full and fractional New Fund Shares equal to the number of full and
fractional Old Fund Shares that Shareholder holds at the Effective Time. All
issued and outstanding Old Fund Shares, including any represented by
2
certificates, shall simultaneously be canceled on Old Fund's share transfer
books. New Fund shall not issue certificates representing the New Fund Shares
issued in connection with the Reorganization.
1.5 As soon as reasonably practicable after distribution of the New Fund
Shares pursuant to paragraph 1.4, but in all events within six months after the
Effective Time, Old Fund shall be terminated as a series of the Corporation and
any further actions shall be taken in connection therewith as required by
applicable law.
1.6 Any reporting responsibility of Old Fund to a public authority,
including the responsibility for filing regulatory reports, tax returns, and
other documents with the Securities and Exchange Commission ("COMMISSION"), any
state securities commission, any federal, state, and local tax authorities, and
any other relevant regulatory authority, is and shall remain its responsibility
up to and including the date on which it is terminated.
1.7 Any transfer taxes payable on issuance of New Fund Shares in a name
other than that of the registered holder on Old Fund's share transfer books of
the Old Fund Shares actually or constructively exchanged therefor shall be paid
by the person to whom those New Fund Shares are to be issued, as a condition of
that transfer.
2. CLOSING AND EFFECTIVE TIME
2.1 The Reorganization, together with related acts necessary to consummate
the same ("CLOSING"), shall occur at the Investment Companies' offices on August
1, 2006 or at such other place and/or on such other date as to which the
Investment Companies may agree. All acts taking place at the Closing shall be
deemed to take place simultaneously immediately after the close of business
(I.E., 4:00 p.m., Eastern time) on the date thereof ("EFFECTIVE TIME").
2.2 The Corporation shall direct the custodian for its assets ("CUSTODIAN")
to deliver at the Closing a certificate of an authorized officer stating that
(a) the Assets have been delivered in proper form to New Fund within two
business days before or at the Effective Time and (b) all necessary taxes in
connection with the delivery of the Assets, including all applicable federal and
state stock transfer stamps, if any, have been paid or provision for payment has
been made. Each of Old Fund's portfolio securities represented by a certificate
or other written instrument shall be transferred and delivered by Old Fund as of
the Effective Time for New Fund's account duly endorsed in proper form for
transfer in such condition as to constitute good delivery thereof. The Custodian
shall deliver as of the Effective Time by book entry, in accordance with the
customary practices of the Custodian and any securities depository (as defined
in Rule 17f-4 under the ▇▇▇▇ ▇▇▇) in which any Assets are deposited, the Assets
that are deposited with such depositories. The cash to be transferred by Old
Fund shall be delivered by wire transfer of federal funds at the Effective Time.
2.3 The Corporation shall direct its transfer agent to deliver at the
Closing a certificate of an authorized officer stating that Old Fund's share
transfer books contain the number of full and fractional outstanding Old Fund
Shares each Shareholder owned immediately before the Closing.
3
2.4 The Corporation shall deliver to the Trust at the Closing a certificate
of an authorized officer of the Corporation setting forth information (including
adjusted basis and holding period, by lot) concerning the Assets, including all
portfolio securities, on Old Fund's books immediately before the Effective Time.
2.5 Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance reasonably satisfactory to the recipient and dated the date of the
Closing, to the effect that the representations and warranties it made in this
Agreement are true and correct at the Effective Time except as they may be
affected by the transactions contemplated by this Agreement.
3. REPRESENTATIONS AND WARRANTIES
3.1 The Corporation, on Old Fund's behalf, represents and warrants to the
Trust, on New Fund's behalf, as follows:
(a) The Corporation is a corporation that is duly incorporated, validly
existing, and in good standing under the laws of the State of
Maryland; and its Articles of Incorporation ("ARTICLES") are on file
with that state's Department of Assessments and Taxation;
(b) The Corporation is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be
in full force and effect at the Effective Time;
(c) Old Fund is a duly established and designated series of the
Corporation;
(d) At the Effective Time, the Corporation, on Old Fund's behalf, will
have good and marketable title to the Assets and full right, power,
and authority to sell, assign, transfer, and deliver the Assets
hereunder free of any liens or other encumbrances (except securities
that are subject to "securities loans" as referred to in section
851(b)(2) of the Code or that are restricted to resale by their
terms); and on delivery and payment for the Assets, the Trust, on
New Fund's behalf, will acquire good and marketable title thereto;
(e) Old Fund is not engaged currently, and the Corporation's execution,
delivery, and performance of this Agreement will not result, in (1)
a material violation of the Articles or the Corporation's By-Laws
(collectively, "CORPORATION GOVERNING DOCUMENTS") or of any
agreement, indenture, instrument, contract, lease, or other
undertaking to which the Corporation, on Old Fund's behalf, is a
party or by which it is bound or (2) the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
indenture, instrument, contract, lease, judgment, or decree to which
the Corporation, on Old Fund's behalf, is a party or by which it is
bound;
(f) All material contracts and other commitments of Old Fund (other than
this Agreement and certain investment contracts, including options,
futures, and forward contracts) will terminate, or provision for
discharge of any liabilities of Old Fund thereunder will be made, at
or before the Effective Time, without either Fund's incurring any
liability or penalty with respect thereto and without diminishing or
releasing any rights the
4
Corporation, on Old Fund's behalf, may have had with respect to
actions taken or omitted or to be taken by any other party thereto
before the Closing;
(g) No litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or, to
its knowledge, threatened against the Corporation with respect to
Old Fund or any of its properties or assets that, if adversely
determined, would materially and adversely affect its financial
condition or the conduct of its business; and the Corporation, on
Old Fund's behalf, knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject
to the provisions of any order, decree, or judgment of any court or
governmental body that materially and adversely affects its business
or its ability to consummate the transactions herein contemplated,
except as otherwise disclosed to the Trust;
(h) Old Fund's Statement of Assets and Liabilities, Statements of
Operations and Changes in Net Assets, and Portfolio of Investments
(collectively, "Statements") at and for the year ended on July 31,
2005 or December 31, 2005 ("2005 Statements"), have been audited by
Ernst & Young LLP, an independent registered public accounting firm
("E& Y"); the 2005 Statements and Old Fund's unaudited Statements at
and for the six-month period ended on January 31, 2006 or June 30,
2006, present fairly, in all material respects, Old Fund's financial
condition as of the respective dates thereof in accordance with
generally accepted accounting principles consistently applied
("GAAP"); and to the Corporation's management's best knowledge and
belief, there are and will be no known contingent liabilities,
debts, obligations, or duties of Old Fund required to be reflected
on a balance sheet (including the notes thereto) in accordance with
GAAP as of such respective dates that are not disclosed therein;
(i) Since July 31, 2005 or December 31, 2005, there has not been any
material adverse change in Old Fund's financial condition, assets,
liabilities, or business, other than changes occurring in the
ordinary course of business, or any incurrence by Old Fund of
indebtedness maturing more than one year from the date such
indebtedness was incurred; for purposes of this subparagraph, a
decline in net asset value per Old Fund Share due to declines in
market values of securities Old Fund holds, the discharge of Old
Fund liabilities, or the redemption of Old Fund Shares by its
shareholders shall not constitute a material adverse change;
(j) At the Effective Time, all federal and other tax returns, dividend
reporting forms, and other tax-related reports of Old Fund required
by law to have been filed by such date (including any extensions)
shall have been filed and are or will be correct in all material
respects, and all federal and other taxes shown as due or required
to be shown as due on such returns and reports shall have been paid
or provision shall have been made for the payment thereof, and to
the best of the Corporation's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such
returns;
(k) Old Fund is a "fund" as defined in section 851(g)(2) of the Code;
for each taxable year of its operation, Old Fund has met (or, for
its current taxable year, will meet) the
5
requirements of Subchapter M of Chapter 1 of the Code for
qualification as a regulated investment company ("RIC") and has been
(or will be) eligible to and has computed (or will compute) its
federal income tax under section 852 of the Code; from the time the
Corporation's Board approved the transactions contemplated by this
Agreement ("APPROVAL TIME") through the Effective Time, Old Fund has
invested and will invest its assets in a manner that ensures its
compliance with the foregoing; from the time it commenced operations
through the Effective Time, Old Fund has conducted and will conduct
its "historic business" (within the meaning of section 1.368-1(d)(2)
of the Regulations) in a substantially unchanged manner; from the
Approval Time through the Effective Time, Old Fund (1) has not
disposed of and/or acquired, and will not dispose of and/or acquire,
any assets (i) for the purpose of satisfying New Fund's investment
objective or policies or (ii) for any other reason except in the
ordinary course of its business as a RIC and (2) has not otherwise
changed, and will not otherwise change, its historic investment
policies; and Old Fund has no earnings and profits accumulated in
any taxable year in which the provisions of Subchapter M did not
apply to it;
(l) All issued and outstanding Old Fund Shares are, and at the Effective
Time will be, duly and validly issued and outstanding, fully paid,
and non-assessable by the Corporation and have been offered and sold
in every state and the District of Columbia in compliance in all
material respects with applicable registration requirements of the
Securities Act of 1933, as amended ("1933 ACT"), and state
securities laws; all issued and outstanding Old Fund Shares will, at
the Effective Time, be held by the persons and in the amounts set
forth in the Old Fund's share transfer books, as provided in
paragraph 2.3; and Old Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any Old Fund
Shares, nor is there outstanding any security convertible into any
Old Fund Shares;
(m) Old Fund incurred the Liabilities, which are associated with the
Assets, in the ordinary course of its business;
(n) Old Fund is not under the jurisdiction of a court in a "title 11 or
similar case" (as defined in section 368(a)(3)(A) of the Code);
(o) During the five-year period ending at the Effective Time, (1)
neither Old Fund nor any person "related" (within the meaning of
section 1.368-1(e)(3) of the Regulations) to it will have acquired
Old Fund Shares, either directly or through any transaction,
agreement, or arrangement with any other person, with consideration
other than New Fund Shares or Old Fund Shares, except for shares
redeemed in the ordinary course of Old Fund's business as a series
of an open-end investment company as required by section 22(e) of
the 1940 Act, and (2) no distributions will have been made with
respect to Old Fund Shares, other than normal, regular dividend
distributions made pursuant to Old Fund's historic dividend-paying
practice and other distributions that qualify for the deduction for
dividends paid (within the meaning of section 561 of the Code)
referred to in sections 852(a)(1) and 4982(c)(1)(A) of the Code;
6
(p) Not more than 25% of the value of Old Fund's total assets (excluding
cash, cash items, and U.S. government securities) is invested in the
stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five
or fewer issuers;
(q) The Corporation's current prospectus and statement of additional
information including Old Fund, and each prospectus and statement of
additional information including Old Fund used at all times prior to
the date hereof, (1) conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the
rules and regulations of the Commission thereunder and (2) as of the
date on which they were issued did not contain, and as supplemented
by any supplement thereto dated before or at the Effective Time do
not contain, any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(r) Each of the PROXY STATEMENT (as defined in paragraph 4.5) (other
than written information the Trust provided for inclusion therein)
and the Corporation's REGISTRATION STATEMENT including Old Fund
under the 1933 Act and the 1940 Act did not, on its effective date,
and will not, at the Effective Time and at the time of the
SHAREHOLDERS MEETING (as defined in paragraph 4.1), contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements
were made, not misleading; and
(s) The New Fund Shares are not being acquired for the purpose of any
distribution thereof, other than in accordance with the terms
hereof.
3.2 The Trust, on New Fund's behalf, represents and warrants to the
Corporation, on Old Fund's behalf, as follows:
(a) The Trust is a statutory trust that is duly organized, validly
existing, and in good standing under the laws of the State of
Delaware; and its Certificate of Trust has been duly filed in the
office of the Secretary of State thereof;
(b) The Trust is duly registered as an open-end management investment
company under the 1940 Act;
(c) New Fund is duly established and designated series of the Trust;
(d) New Fund has not commenced operations and will not do so until after
the Closing;
(e) Before the Closing, there will be no (1) issued and outstanding New
Fund Shares, (2) options, warrants, or other rights to subscribe for
or purchase any New Fund Shares, (3) securities convertible into any
New Fund Shares, or (4) any other securities issued by New Fund,
except the Initial Shares;
(f) No consideration other than New Fund Shares (and New Fund's
assumption of the Liabilities) will be issued in exchange for the
Assets in the Reorganization;
7
(g) New Fund is not engaged currently, and the Trust's execution,
delivery, and performance of this Agreement will not result, in (1)
a material violation of the Trust's Master Trust Agreement or
By-Laws (collectively, "TRUST GOVERNING DOCUMENTS") or of any
agreement, indenture, instrument, contract, lease, or other
undertaking to which the Trust, on New Fund's behalf, is a party or
by which it is bound or (2) the acceleration of any obligation, or
the imposition of any penalty, under any agreement, indenture,
instrument, contract, lease, judgment, or decree to which the Trust,
on New Fund's behalf, is a party or by which it is bound;
(h) No litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or, to
its knowledge, threatened against the Trust with respect to New Fund
or any of its properties or assets that, if adversely determined,
would materially and adversely affect its financial condition or the
conduct of its business; and the Trust, on New Fund's behalf, knows
of no facts that might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of
any order, decree, or judgment of any court or governmental body
that materially and adversely affects its business or its ability to
consummate the transactions herein contemplated, except as otherwise
disclosed to the Corporation;
(i) New Fund will be a "fund" as defined in section 851(g)(2) of the
Code; it will meet the requirements of Subchapter M of Chapter 1 of
the Code for qualification as a RIC for its taxable year in which
the Reorganization occurs; and it intends to continue to meet all
such requirements for the next taxable year;
(j) New Fund has no plan or intention to issue additional New Fund
Shares following the Reorganization except for shares issued in the
ordinary course of its business as a series of an open-end
investment company; nor does New Fund, or any person "related"
(within the meaning of section 1.368-1(e)(3) of the Regulations) to
it, have any plan or intention to acquire -- during the five-year
period beginning at the Effective Time, either directly or through
any transaction, agreement, or arrangement with any other person --
with consideration other than New Fund Shares, any New Fund Shares
issued to the Shareholders pursuant to the Reorganization, except
for redemptions in the ordinary course of such business as required
by section 22(e) of the 1940 Act;
(k) Following the Reorganization, New Fund (1) will continue Old Fund's
"historic business" (within the meaning of section 1.368-1(d)(2) of
the Regulations) and (2) will use a significant portion of Old
Fund's "historic business assets" (within the meaning of section
1.368-1(d)(3) of the Regulations) in a business; moreover, New Fund
(3) has no plan or intention to sell or otherwise dispose of any of
the Assets, except for dispositions made in the ordinary course of
that business and dispositions necessary to maintain its status as a
RIC, and (4) expects to retain substantially all the Assets in the
same form as it receives them in the Reorganization, unless and
until subsequent investment circumstances suggest the desirability
of change or it becomes necessary to make dispositions thereof to
maintain such status;
8
(l) There is no plan or intention for New Fund to be dissolved or merged
into another statutory or business trust or a corporation or any
"fund" thereof (as defined in section 851(g)(2) of the Code)
following the Reorganization;
(m) During the five-year period ending at the Effective Time, neither
New Fund nor any person "related" (within the meaning of section
1.368-1(e)(3) of the Regulations) to it will have acquired Old Fund
Shares with consideration other than New Fund Shares;
(n) Assuming the truthfulness and correctness of the Corporation's
representation and warranty in paragraph 3.1(p), immediately after
the Reorganization, (1) not more than 25% of the value of New Fund's
total assets (excluding cash, cash items, and U.S. government
securities) will be invested in the stock and securities of any one
issuer and (2) not more than 50% of the value of such assets will be
invested in the stock and securities of five or fewer issuers;
(o) The New Fund Shares to be issued and delivered to Old Fund, for the
Shareholders' accounts, pursuant to the terms hereof, (1) will at
the Effective Time have been duly authorized and duly registered
under the federal securities laws (and appropriate notices
respecting them will have been duly filed under applicable state
securities laws) and (2) when so issued and delivered, will be duly
and validly issued and outstanding New Fund Shares and will be fully
paid and non-assessable by the Trust;
(p) The Proxy Statement (only with respect to written information the
Trust provided for inclusion therein) will, on its effective date,
at the Effective Time, and at the time of the Shareholders Meeting,
not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
such statements were made, not misleading; and
(q) The Trust's Trust Agreement permits the Trust to vary its
shareholders' investment; and the Trust will not have a fixed pool
of assets -- each series thereof (including New Fund after it
commences operations) will be a managed portfolio of securities, and
its investment adviser, USAA Investment Management Company
("ADVISER"), will have the authority to buy and sell securities for
it.
3.3 Each Investment Company, on its respective Fund's behalf,
represents and warrants to the other Investment Company, on its respective
Fund's behalf, as follows:
(a) No governmental consents, approvals, authorizations, or filings are
required under the 1933 Act, the Securities Exchange Act of 1934, as
amended ("1934 ACT"), the 1940 Act, or state securities laws for its
execution or performance of this Agreement, except for (1) the
Trust's amendment of its registration statement under the 1933 Act
and the 1940 Act and the amendment of its notification of
registration filed on Form N-8A under the 1940 Act to reflect the
Reorganization and any additional information necessary to comply
with Rule 414(d) under the 1933 Act ("REGISTRATION STATEMENT"), and
(2) such consents, approvals, authorizations, and filings as have
been made or received or as may be required subsequent to the
Effective Time;
9
(b) The fair market value of the New Fund Shares each Shareholder
receives will be approximately equal to the fair market value of its
Old Fund Shares it actually or constructively surrenders in exchange
therefor;
(c) Its management (1) is unaware of any plan or intention of the
Shareholders to redeem, sell, or otherwise dispose of (i) any
portion of their Old Fund Shares before the Reorganization to any
person "related" (within the meaning of section 1.368-1(e)(3) of the
Regulations) to either Fund or (ii) any portion of the New Fund
Shares they receive in the Reorganization to any person "related"
(within such meaning) to New Fund, (2) does not anticipate
dispositions of those New Fund Shares at the time of or soon after
the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Old Fund as a series of an open-end
investment company, (3) expects that the percentage of shareholder
interests, if any, that will be disposed of as a result of or at the
time of the Reorganization will be DE MINIMIS, and (4) does not
anticipate that there will be extraordinary redemptions of New Fund
Shares immediately following the Reorganization;
(d) The Shareholders will pay their own expenses (such as fees of
personal investment or tax advisers for advice regarding the
Reorganization), if any, incurred in connection with the
Reorganization;
(e) The fair market value of the Assets on a going concern basis will
equal or exceed the Liabilities to be assumed by New Fund and those
to which the Assets are subject;
(f) None of the compensation received by any Shareholder who is an
employee of or service provider to Old Fund will be separate
consideration for, or allocable to, any of the Old Fund Shares that
Shareholder held; none of the New Fund Shares any such Shareholder
receives will be separate consideration for, or allocable to, any
employment agreement, investment advisory agreement, or other
service agreement; and the compensation paid to any such Shareholder
will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's-length for similar
services;
(g) Neither Fund will be reimbursed for any expenses incurred by it or
on its behalf in connection with the Reorganization unless those
expenses are solely and directly related to the Reorganization
(determined in accordance with the guidelines set forth in Rev. Rul.
73-54, 1973-1 C.B. 187) ("REORGANIZATION EXPENSES");
(h) The aggregate value of the acquisitions, redemptions, and
distributions limited by paragraphs 3.1(o), 3.2(j), and 3.2(m) will
not exceed 50% of the value (without giving effect to such
acquisitions, redemptions, and distributions) of the proprietary
interest in Old Fund at the Effective Time;
(i) Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares and will own such
shares solely by reason of their ownership of the Old Fund Shares
immediately before the Reorganization; and
10
(j) Immediately following consummation of the Reorganization, New Fund
will hold the same assets -- except for assets used to pay the
Funds' expenses incurred in connection with the Reorganization --
and be subject to the same liabilities that Old Fund held or was
subject to immediately before the Reorganization, plus any
liabilities for such expenses; and such excepted assets, together
with the amount of all redemptions and distributions (other than
regular, normal dividends) Old Fund makes immediately preceding the
Reorganization, will, in the aggregate, constitute less than 1% of
its net assets.
4. COVENANTS
4.1 The Corporation covenants to call a meeting of Old Fund's shareholders
to consider and act on this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated herein ("SHAREHOLDERS
MEETING").
4.2 The Corporation covenants that the New Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
4.3 The Corporation covenants that it will assist the Trust in obtaining
information the Trust reasonably requests concerning the beneficial ownership of
Old Fund Shares.
4.4 The Corporation covenants that it will turn over its books and records
(including all books and records required to be maintained under the 1940 Act
and the rules and regulations thereunder) to the Trust at the Closing.
4.5 Each Investment Company covenants to cooperate in preparing, in
compliance with applicable federal securities laws, a proxy statement on
Schedule 14A relating to the Reorganization to be furnished in connection with
the Corporation's Board's solicitation of proxies for use at the Shareholders
Meeting ("PROXY STATEMENT").
4.6 Each Investment Company covenants that it will, from time to time, as
and when requested by the other Investment Company, execute and deliver or cause
to be executed and delivered all assignments and other instruments, and will
take or cause to be taken further action, the other Investment Company deems
necessary or desirable in order to vest in, and confirm to, (a) New Fund, title
to and possession of all the Assets, and (b) Old Fund, title to and possession
of the New Fund Shares to be delivered hereunder, and otherwise to carry out the
intent and purpose hereof.
4.7 The Trust covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and state
securities laws it deems appropriate to continue its operations after the
Effective Time.
4.8 Subject to this Agreement, each Investment Company covenants to take or
cause to be taken all actions, and to do or cause to be done all things,
reasonably necessary, proper, or advisable to consummate and effectuate the
transactions contemplated hereby.
11
5. CONDITIONS PRECEDENT
Each Investment Company's obligations hereunder shall be subject to (a)
performance by the other Investment Company of all its obligations to be
performed hereunder at or before the Closing, (b) all representations and
warranties of the other Investment Company contained herein being true and
correct in all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated hereby, as of the Effective Time,
with the same force and effect as if made at and as of such time, and (c) the
following further conditions that, at or before such time:
5.1 All necessary filings shall have been made with the Commission and
state securities authorities, and no order or directive shall have been received
that any other or further action is required to permit the parties to carry out
the transactions contemplated hereby. A post-effective amendment
("POST-EFFECTIVE AMENDMENT") to the Registration Statement of New Trust with
respect to the New Fund shall have become effective under the 1933 Act, no stop
orders suspending the effectiveness thereof shall have been issued, and, to each
Investment Company's best knowledge, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened, or contemplated
under the 1933 Act or the 1940 Act, and the Commission shall not have issued an
unfavorable report with respect to the Reorganization under section 25(b) of the
1940 Act nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the Commission and state securities authorities) either
Investment Company deems necessary to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on either Fund's assets or properties;
5.2 At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby;
5.3 The Investment Companies shall have received an opinion of ▇▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP ("Counsel") substantially to the effect that:
(a) Old Fund is a duly established series of the Corporation, a
corporation that is validly existing and in good standing under the
laws of the State of Maryland, and New Fund is a duly established
series of the Trust, a trust that is validly existing as a statutory
trust under the laws of the State of Delaware;
(b) Each Investment Company has duly authorized and adopted this
Agreement on its respective Fund's behalf;
(c) The New Fund Shares to be issued and distributed to the Shareholders
under this Agreement have been duly authorized and, on their
issuance and delivery in accordance with this Agreement, will be
validly issued, fully paid, and non-assessable;
(d) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not,
materially violate any provision of the
12
Corporation Governing Documents or the Trust Governing Documents or,
to Counsel's knowledge, violate any obligation of either Investment
Company under the express terms of any court order that names the
Investment Company and is specifically directed to it or its
property, except as set forth in such opinion;
(e) To Counsel's knowledge (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by
either Investment Company, on its respective Fund's behalf, of the
transactions contemplated herein, except any that have been obtained
and are in effect and exclusive of any required under state
securities laws;
(f) Each Investment Company is registered with the Commission as an
investment company, and to Counsel's knowledge no order has been
issued or proceeding instituted to suspend either such registration;
and
(g) To Counsel's knowledge (without any independent inquiry or
investigation), as of the date of the opinion, there is no action or
proceeding pending before any court or governmental agency, or
overtly threatened in writing against either Investment Company
(with respect to its respective Fund) or any of its properties or
assets attributable or allocable to its respective Fund that seeks
to enjoin the performance or affect the enforceability of this
Agreement, except as set forth in such opinion.
In rendering such opinion, Counsel need not undertake any independent
investigation, examination, or inquiry to determine the existence or absence of
any facts, need not cause a search to be made of court records or liens in any
jurisdiction with respect to either Investment Company or Fund, and may (1)
rely, as to matters governed by the laws of the State of Maryland and/or the
State of Delaware, on an opinion of competent Maryland or Delaware counsel,
respectively, (2) make assumptions that the execution, delivery, and performance
of any agreement, instrument, or document by any person or entity other than an
Investment Company has been duly authorized, (3) make assumptions regarding the
authenticity, genuineness, and/or conformity of documents and copies thereof
without independent verification thereof and other assumptions customary for
opinions of this type, (4) limit such opinion to applicable federal and state
law, (5) define the word "knowledge" and related terms to mean the actual
knowledge of attorneys then with Counsel who have devoted substantive attention
to matters directly related to this Agreement and the Reorganization and not to
include matters as to which such attorneys could be deemed to have constructive
knowledge, and (6) rely as to matters of fact on certificates of public
officials and statements contained in officers' certificates;
5.4 The Investment Companies shall have received an opinion of Counsel as
to the federal income tax consequences mentioned below ("TAX OPINION"). In
rendering the Tax Opinion, Counsel may rely as to factual matters, exclusively
and without independent verification, on the representations and warranties made
in this Agreement, which Counsel may treat as representations and warranties
made to it, and in separate letters addressed to it. The Tax Opinion shall be
substantially to the effect that, based on the facts and assumptions stated
therein and conditioned on consummation of the Reorganization in accordance with
this Agreement, for federal income tax purposes:
13
(a) New Fund's acquisition of the Assets in exchange solely for New Fund
Shares and its assumption of the Liabilities, followed by Old Fund's
distribution of those shares PRO RATA to the Shareholders actually
or constructively in exchange for their Old Fund Shares, will
qualify as a "reorganization" (as defined in section 368(a)(1)(F) of
the Code), and each Fund will be "a party to a reorganization"
within the meaning of section 368(b) of the Code;
(b) Old Fund will recognize no gain or loss on the transfer of the
Assets to New Fund in exchange solely for New Fund Shares and New
Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in exchange for
their Old Fund Shares;
(c) New Fund will recognize no gain or loss on its receipt of the Assets
in exchange solely for New Fund Shares and its assumption of the
Liabilities;
(d) New Fund's basis in each Asset will be the same as Old Fund's basis
therein immediately before the Reorganization, and New Fund's
holding period for each Asset will include Old Fund's holding period
therefor;
(e) A Shareholder will recognize no gain or loss on the exchange of all
its Old Fund Shares solely for New Fund Shares pursuant to the
Reorganization;
(f) A Shareholder's aggregate basis in the New Fund Shares it receives
in the Reorganization will be the same as the aggregate basis in its
Old Fund Shares it actually or constructively surrenders in exchange
for those New Fund Shares, and its holding period for those New Fund
Shares will include, in each instance, its holding period for those
Old Fund Shares, provided the Shareholder holds them as capital
assets at the Effective Time; and
(g) For purposes of section 381 of the Code, New Fund will be treated as
if there had been no Reorganization. Accordingly, the Reorganization
will not result in the termination of Old Fund's taxable year, Old
Fund's tax attributes enumerated in section 381(c) of the Code will
be taken into account by New Fund as if there had been no
Reorganization, and the part of Old Fund's taxable year before the
Reorganization will be included in New Fund's taxable year after the
Reorganization.
Notwithstanding subparagraphs (b) and (d), the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any Asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a ▇▇▇▇-to-market
system of accounting;
5.5 Before the Closing, the Trust's Board shall have authorized the
issuance of, and New Fund shall have issued, one New Fund Share in each class
("INITIAL SHARE") to the Adviser or an affiliate thereof in consideration of the
payment of [$1.00] each to take whatever action it may be required to take as
New Fund's sole shareholder pursuant to paragraph 5.6;
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5.6 The Trust (on behalf of and with respect to New Fund) shall have
entered into, or adopted, as appropriate, an investment advisory contract and
other agreements and plans necessary for New Fund's operation as a series of an
open-end investment company. Each such contract and agreement shall have been
approved by the Trust's Board and, to the extent required by law (as interpreted
by Commission staff positions), by its trustees who are not "interested persons"
(as defined in the ▇▇▇▇ ▇▇▇) thereof and by the Adviser or its affiliate as New
Fund's sole shareholder; and
5.7 At any time before the Closing, either Investment Company may waive any
of the foregoing conditions (except those set forth in paragraphs 5.1, 5.4, 5.5,
and 5.6) if, in the judgment of its Board, such waiver will not have a material
adverse effect on its Fund's shareholders' interests.
6. EXPENSES
Subject to complying with the representation contained in paragraph 3.3(g),
the Reorganization Expenses shall be borne by the Funds equally or in any other
proportion or manner the Investment Companies mutually agree on. The
Reorganization Expenses include costs associated with obtaining any necessary
order of exemption from the 1940 Act, preparation of the Post-Effective
Amendment, printing and distributing New Fund's prospectus and Old Fund's proxy
materials, soliciting proxies, legal fees, accounting fees, securities
registration fees, and expenses of holding shareholders meetings.
Notwithstanding the foregoing, expenses shall be paid by the party directly
incurring them if and to the extent that the payment thereof by another person
would result in such party's disqualification as a RIC or would prevent the
Reorganization from qualifying as a tax-free reorganization.
7. ENTIRE AGREEMENT; NO SURVIVAL
Neither Investment Company has made any representation, warranty, or
covenant not set forth herein, and this Agreement constitutes the entire
agreement between the Investment Companies. The representations, warranties, and
covenants contained herein or in any document delivered pursuant hereto or in
connection herewith shall not survive the Closing.
8. TERMINATION
This Agreement may be terminated, with respect to one or more
Reorganizations, at any time at or before the Closing:
8.1 By either Investment Company (a) in the event of the other Investment
Company's material breach of any representation, warranty, or covenant contained
herein to be performed at or before the Closing, (b) if a condition to its
obligations has not been met and it reasonably appears that such condition will
not or cannot be met, (c) if a governmental body issues an order, decree, or
ruling having the effect of permanently enjoining, restraining, or otherwise
prohibiting consummation of the Reorganization, or (d) if the Closing has not
occurred on or before _______ __, 2006, or such other date as to which the
Investment Companies agree; or
8.2 By the Investment Companies' mutual agreement.
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In the event of termination under paragraphs 8.1(c) or 8.2, neither Investment
Company (nor its trustees/directors, officers, or shareholders) shall have any
liability to the other Investment Company.
9. AMENDMENTS
The Investment Companies may amend, modify, or supplement this Agreement at
any time in any manner they mutually agree on in writing, notwithstanding Old
Fund's shareholders' approval thereof; provided that, following such approval no
such amendment, modification, or supplement shall have a material adverse effect
on the Shareholders' interests.
10. SEVERABILITY
Any term or provision of this Agreement that is invalid or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms and provisions of this Agreement in any
other jurisdiction.
11. MISCELLANEOUS
11.1 This Agreement shall be construed and interpreted in accordance with
the internal laws of the State of Delaware; provided that, in the case of any
conflict between those laws and the federal securities laws, the latter shall
govern.
11.2 Nothing expressed or implied herein is intended or shall be construed
to confer on or give any person, firm, trust, or corporation other than each
Investment Company (on its respective Fund's behalf) and its respective
successors and assigns any rights or remedies under or by reason of this
Agreement.
11.3 Notice is hereby given that this instrument is executed and delivered
on behalf of the Trust's trustees solely in their capacities as trustees and not
individually. Each Investment Company's obligations under this instrument are
not binding on or enforceable against any of its trustees/directors, officers,
or shareholders or any series of the Investment Company other than its Fund but
are only binding on and enforceable against its Fund's property. Each Investment
Company, in asserting any rights or claims under this Agreement on its Fund's
behalf, shall look only to the other Fund's property in settlement of such
rights or claims and not to the property of any other series of the other
Investment Company or to such trustees/directors, officers, or shareholders.
11.4 This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each Investment Company and
delivered to the other Investment Company. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officer as of the day and year first written
above.
[USAA MUTUAL FUNDS TRUST], on behalf of
each of its series listed on Schedule A
By:
------------------------------
Name:
Title:
USAA MUTUAL FUND, INC., on behalf of
each of its series listed on Schedule A
By:
------------------------------
Name:
Title:
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SCHEDULE A
OLD FUNDS NEW FUNDS
EACH A SERIES OF THE CORPORATION) (EACH A SERIES OF THE TRUST)
------------------------------------ ----------------------------------------
Aggressive Growth Fund Aggressive Growth Fund
Capital Growth Fund Capital Growth Fund
Extended Market Index Fund Extended Market Index Fund
First Start Growth Fund First Start Growth Fund
Growth Fund Growth Fund
Growth & Income Fund Growth & Income Fund
High-Yield Opportunities Fund High-Yield Opportunities Fund
Income Stock Fund Income Stock Fund
Income Fund Income Fund
Intermediate-Term Bond Fund Intermediate-Term Bond Fund
Money Market Fund Money Market Fund
Nasdaq-100 Index Fund Nasdaq-100 Index Fund
S&P 500 Index Fund S&P 500 Index Fund
Short-Term Bond Fund Short-Term Bond Fund
Science & Technology Fund Science & Technology Fund
Small Cap Stock Fund Small Cap Stock Fund
Value Fund Value Fund
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