Exhibit 3
SERVICE AGREEMENT
This Agreement is entered into as of the 1st day of October, 2001, by
and between American Express Financial Advisors Inc. ("AEFA") and GMO Trust, on
behalf of each fund listed on Schedule A, severally and not jointly ("Company").
WHEREAS, the Company is an open-end investment company registered under
the Investment Company Act of 1940 (the "1940 Act") and is comprised of various
individual series, including those identified in Schedule A (collectively
referred to as the "Funds");
WHEREAS, AEFA, either directly or through one or more of its
affiliates, provides administrative and recordkeeping services for certain
qualified and nonqualified plans (the "Plans");
WHEREAS, the Plans desire to invest in one or more of the Funds on
behalf of Plan participants (the "Participants");
WHEREAS, AEFA and the Company desire to facilitate the purchase and
redemption of shares of the Funds on behalf of the Plans and the Participants
through one or more accounts (as determined by AEFA) in the Funds (individually
an "Account" and collectively the "Accounts") and the rendering of recordkeeping
and shareholder services in connection with investment by the Plans in the
Funds, subject to the terms and conditions of this Agreement;
THEREFORE, in consideration of the mutual covenants contained herein
and intending to be legally bound, the parties agree as follows:
1. Services Provided by AEFA
(a) AEFA, either directly or through one or more of its
affiliates, shall provide shareholder recordkeeping and
administrative services for the Participants having an
interest in shares of the Funds purchased by the Plans for
which AEFA or such affiliates provide recordkeeping services.
(b) The services to be provided by AEFA include: (i) answering
routine inquiries from authorized representatives of the Plans
("Plan Representatives") or Participants and providing them
with information concerning investment options in shares of
the Fund ("Shares"); (ii) assisting in the establishment and
maintenance of Accounts in the Funds; (iii) making the Funds'
investment plans and dividend payment options available; (iv)
assisting in aggregating and processing purchase and
redemption transactions; (v) forwarding prospectuses and
reports to the Plans upon request; (vi) assisting in changing
Account designations and addresses; (vii) providing such other
information and customer liaison services and the maintenance
of Accounts or other similar services as the Company or the
Funds may reasonably request and to which the parties may
agree from time to time to the extent permitted by applicable
statute, rule or regulation.
1
(c) AEFA shall act as agent for the Company for the limited
purpose of receiving and transmitting instructions for the
purchase or redemption of Shares as described herein. The
parties hereto agree that the services provided by AEFA
pursuant to this Agreement are not investment advisory or
distribution-related services. A Fund may form a part of an
investment vehicle offered under a Plan, and purchases and
redemptions of Shares of the Fund will reflect (i) Plans' and
Participants' investments in the investment vehicle holding
shares of a Fund; and (ii) any adjustments necessary to meet
established allocation percentage guidelines of the investment
vehicle.
2. Information Provided by the Company
(a) The Company agrees to provide to AEFA or its designee on each
business day that the New York Stock Exchange ("NYSE") is open
for business ("Business Day") with (i) net asset value
information as determined at or about the close of trading
(currently 3:00 p.m. Central Time) on the NYSE or at such
other time at which the Fund's net asset value is calculated
as specified in each Fund's current prospectus ("Close of
Trading"); (ii) dividend and capital gains information as it
becomes available; (iii) in the case of income Funds, the
daily accrual for interest rate factor (mil rate); and (iv)
any other information that AEFA or its designee needs to
perform its duties described in Section 1. The Company will
provide net asset value information, and income accrual,
dividend payment and capital gains information to AEFA or its
designee by 6:00 p.m. Central Time on each Business Day.
(b) The Company will provide AEFA or its designee (i) a
confirmation with respect to each instruction no later than
the start of trading of the NYSE on the Business Day following
the date on which the instruction is deemed to be received by
the Company; (ii) share positions for each Fund on each
Business Day; (iii) quarterly statements detailing activity in
each Account within fifteen Business Days after the end of
each quarter; and (iv) such other reports as may be reasonably
requested by AEFA or its designee.
3. Instructions and Settlement
(a) The parties agree that instructions to purchase and redeem
Shares by the Plan shall be effected as provided in this
section. AEFA or its designee shall transmit to the Company
instructions to purchase or redeem Shares of the Funds for
Accounts that have been or will be opened with the Fund for
the Plans.
(b) Purchases and redemptions for the Plans shall be made at the
net asset value determined as of the Close of Trading on the
Business Day that an instruction to purchase or redeem Shares
is received by AEFA or its designee, provided that (i) AEFA or
its designee receives instructions from Participants or Plan
representatives prior to the Close of Trading on that Business
Day; and (ii) AEFA or its designee uses its best efforts to
transmit to the Company by 7:30 a.m. Central Time on the next
following Business Day. If AEFA experiences systems problems
or other errors, it may use its best efforts to deliver an
additional instruction to the Company via facsimile by 7:30
a.m. on the next following Business Day, and purchases or
2
redemptions made pursuant to such additional instruction shall
also be made at the net asset value determined as of the Close
of Trading on the Business Day that an instruction is received
by AEFA. Instructions received by AEFA or its designee from
Participants or Plan representatives after the Close of
Trading on any given Business Day shall be treated as if
received on the next following Business Day.
(c) AEFA agrees that payment for net purchases of Shares
attributable to all instructions executed for the Accounts on
a given Business Day will be wired by AEFA or its designee no
later than 2:00 p.m. Central Time on the next Business Day to
a custodial account designated by the Company. The Company
agrees that payment for redemptions of Shares attributable to
all instructions executed for the Accounts on a given Business
Day will be wired by the Company on the next Business Day no
later than 2:00 p.m. Central Time to an account designated by
AEFA.
(d) On any given Business Day when the Federal Reserve Wire
Transfer System is closed, all communication and processing
rules will be suspended for settlement of trades. Trades will
be settled on the next Business Day on which the Federal
Reserve Wire Transfer System is open. The original trade date
will apply.
(e) Unless otherwise instructed by AEFA based upon instructions
provided by Plan representatives, dividends and capital gains
distributions from any Fund will be automatically reinvested
in additional shares of such Fund.
(f) The parties anticipate trading via the National Securities
Clearing Corporation's ("NSCC") Fund/SERV system and agree
that upon three days notice by AEFA to the Company after the
parties or their NSCC member affiliates have completed system
testing and execute the Trust Fund/SERV Agreement, orders
shall be transmitted via Fund/SERV in accordance with the
procedures described in such Trust Fund/SERV Agreement.
4. Process for Correcting Errors
The Company shall be responsible for making the Plan whole, including
at the Participant level, in the event of an error or delay in the
calculation of any of the information provided by the Company pursuant
to Section 2 and for all reasonable costs incurred by AEFA in
correcting the error. If a Plan or Participant receives an amount
greater than the amount it should have received as a result of any
error, the parties agree to evaluate the situation on a case-by case
basis, with the goal of pursuing an appropriate course of action. AEFA
shall not be responsible for recovering any gain received by a Plan or
a Participant as a result of any error.
3
5. Fees
The Company agrees to pay a fee for the services provided pursuant to
this Agreement as set forth in Schedule B.
6. Maintenance of Records
AEFA shall provide copies of all records it maintains relating to the
Accounts as may reasonably be requested by the Company or its
representatives to comply with any request of a governmental body or
self-regulatory organization. Upon the request of AEFA, the Company
shall provide copies of all records relating to the Accounts, as may
reasonably be requested by its representatives to enable it to comply
with any request of a governmental body or self-regulatory
organization.
7. Representations and Warranties
(a) The Company hereby represents and warrants:
(i) It has the power and the authority to enter into and
perform all of its duties and obligations under this
Agreement;
(ii) This Agreement constitutes its legal, valid and
binding obligation, enforceable against it in
accordance with its terms;
(iii) Except for those described herein, no consent or
authorization of, filing with or other act by or in
respect of any governmental authority is required in
connection with the execution, delivery, performance,
validity or enforceability of this Agreement;
(iv) The execution, performance and delivery of this
Agreement by the Company will not result in its
violating, breaching or otherwise impairing any
judgment, order or contractual obligation to which it
is subject;
(v) The Funds are a series of investment companies
registered under the 1940 Act and Shares sold by the
Funds are, and will be, registered under the
Securities Act of 1933 ("1933 Act");
(vi) Shares of the Funds are properly registered in all
fifty states, or if registration is not required, all
regulatory requirements of each state necessary to
permit Shares to be sold in accordance with the terms
of this Agreement have been satisfied. The Company
agrees to notify AEFA immediately if there is any
change in the registration or qualification for sale
of any Shares in a particular state; and
(vii) The Funds are registered so that it is lawful for the
Plans to purchase Shares on behalf of Participants in
Puerto Rico, or if registration is not required, all
regulatory requirements to permit such sales have
been met, and that a Plan whose Participants are
Puerto Rican citizens ("Puerto Rican Plan") shall be
4
deemed "qualified" for the purposes of any investment
thresholds or limitations in the prospectuses of the
Fund.
(viii) Instructions may be placed on each and every Business
Day, without regard to the market value of the
transaction.
(b) AEFA hereby represents and warrants to the Company:
(i) It has the corporate power and the authority to enter
into and perform all of its duties and obligations
under this Agreement;
(ii) This Agreement constitutes its legal, valid and
binding obligation and is enforceable against it in
accordance with its terms;
(iii) No consent or authorization of, filing with, or other
act by or in respect of any governmental authority is
required in connection with the execution, delivery,
performance, validity or enforceability of this
Agreement.
(iv) Its execution, performance and delivery of this
Agreement will not result in its violating, breaching
or otherwise impairing any judgment, order or
contractual obligation to which it is subject.
8. Compliance with Laws
At all times, the parties shall comply with all federal and state
securities laws and regulations, including, but not limited to, the
1940 Act, the 1933 Act and the 1934 Act (all as amended).
9. Compliance with Prospectus
(a) The Company acknowledges and agrees that neither AEFA nor any
of its affiliates or designees is responsible for any
information contained in any prospectus, registration
statement, annual report, proxy statement, or item of
advertising or marketing material prepared by the Company
which relates to any Fund.
(b) The Company shall be responsible for the content of each
Fund's prospectus. Where AEFA identifies an ambiguity in the
content of a prospectus relating to its ability to process
orders on behalf of Plans and Participants pursuant to this
Agreement, it may request clarification from the Company at
any time; the Company shall respond to such request within
three Business Days.
(c) All parties acknowledge that AEFA is servicing both qualified
and nonqualified plans. The Company represents and warrants
that investments by these Plans shall be eligible under the
prospectus for the treatment described in this Agreement.
5
10. Provision of Materials
The Company shall be responsible for providing AEFA or its designee
with current prospectuses, reports, and performance information
regarding the Funds and such other information regarding the Funds as
AEFA may reasonably request. A request by AEFA shall be deemed
reasonable to the extent it reflects a sufficient quantity to meet
anticipated requests for dissemination at the Participant level and
such other appropriate commercial or legal standards. The Company shall
provide AEFA with performance regarding the Funds as of the prior
month-end on or before the third business day of each month. To
facilitate AEFA's performance of proxy-related services in those
instances where it or an affiliate performs such services pursuant to a
separate agreement regarding a Plan, the Company agrees to notify AEFA
of any proxy no less than 60 days before voting is to take place and to
timely provide AEFA with materials in sufficient quantity to enable it
to perform such services.
11. Use of Names/Representatives
(a) AEFA will not make any representations concerning the Company
or any of its Funds, except those consistent with the then
current prospectus or statement of additional information of
the Fund, in current sales literature furnished by the Company
or the Fund to AEFA, and in any current literature created by
AEFA and submitted to and approved by the Company. To the
extent that the Company has approved a representation about
the Funds in literature prepared by AEFA, the Company is
responsible for the accuracy of the information contained in
such representation.
(b) Neither the Company nor any of the Funds shall allow their
employees or agents to use the name or logo of AEFA or any
affiliate of AEFA, or any products or services sponsored or
offered by AEFA or any of its affiliates, for advertising,
trade or other commercial or non-commercial purposes without
the prior written consent of AEFA.
12. Publicity
AEFA is authorized to discuss the terms of this Agreement with current
and potential clients and to publicize the Funds and the existence of
this Agreement in literature or communications (including electronic
communication via the internet) disseminated by AEFA.
13. Confidentiality; Security
All parties agree to keep confidential all proprietary data, software,
processes, information and documentation provided by the other parties
(including information regarding the Plans and Participants)
("Proprietary Information"), unless the party providing such
information consents in writing to the disclosure of Proprietary
Information or the disclosure of the Proprietary Information is
required by a governmental body or self-regulatory organization and, if
the information concerns a qualified plan, the plan's sponsor also
consents in writing to the disclosure. This section shall survive
termination of the Agreement.
6
14. Non exclusivity
Each party acknowledges and agrees that this Agreement and the
arrangements described herein are intended to be non exclusive and that
each of them is free to enter into similar arrangements with other
entities.
15. Indemnification
(a) The Company agrees to indemnify AEFA and each of its
respective directors, officers, employees, agents, affiliates
and delegates and hold each of them harmless from and against
any and all losses, damages, claims, demands, liabilities and
expenses (including reasonable attorneys' fees) imposed on or
incurred by any of them resulting from or relating to (i) any
untrue statement or alleged untrue statement of material fact
contained in the Registration Statement or prospectus or sales
literature of the Funds or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii)
the Company's performance or non-performance of its duties and
obligations; or (iii) the Company's material breach of any
representation or warranty to AEFA under this Agreement.
(b) AEFA agrees to indemnify the Company and each of its
respective trustees, officers, employees, agents and
affiliates and hold each of them harmless from and against any
and all direct losses, damages, claims, demands, liabilities
and expenses (including reasonable attorneys' fees) imposed on
or incurred by any of them resulting from or relating directly
to AEFA's performance or non-performance of its duties and
obligations or material breach of any representation or
warranty to the Company under this Agreement.
(c) The indemnification provided in paragraphs (a) and (b) of this
section shall not be valid to the extent such loss, damage,
claim, demand, liability or expense is due to the negligence
or willful misconduct of the party to whom the indemnification
would otherwise be provided.
(d) In order for the indemnification provisions contained in
paragraphs (a) and (b) of this section to apply, as soon as a
claim for which a party may be required to indemnify another
party is asserted, the party seeking indemnification will
promptly notify the other party of the assertion, and will
keep the other party advised with respect to all developments
concerning the claim. The party who may be required to
indemnify will have the option to participate with the party
seeking indemnification in the defense of the claim or defend
against the claim in its own name or in the name of the other
party. The party seeking indemnification will in no case
confess any claim or make any compromise in any case which the
other party may be required to indemnify except with the other
party's consent, which may not be withheld unreasonably. This
section shall survive termination of this Agreement.
7
16. Notices
Each notice required by this Agreement shall be given in writing and
delivered personally or mailed by certified mail or courier service to
the other party at the following address.
All communications to the Company should be sent to:
Grantham, Mayo, Van Otterloo & Co. LLC
00 Xxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxxxx Xxxxxxxxxx
All communications to AEFA should be sent to:
American Express Financial Advisors Inc.
200 AXP Financial Center
Xxxxxxxxxxx, XX 00000
Attn: Counsel
17. Assignment and Delegation
The Agreement may not be assigned by any party without the prior
written consent of the other parties, except that AEFA may assign the
Agreement to any entity controlling, controlled by or under common
control with AEFA without the consent of the Company; and to the extent
not otherwise specifically authorized herein, AEFA may delegate any of
its responsibilities under this Agreement to an entity controlling,
controlled by or under common control with AEFA without the consent of
the Company.
18. Termination
(a) The Agreement may be terminated by a party at any time without
penalty upon at least 30 days' prior written notice to the
other parties.
(b) A party may terminate the Agreement at any time without
penalty for cause upon written notice to the other parties,
effective upon the date of receipt of notice. Cause for such
termination may include a material violation of the Agreement
that is not cured within 30 days after notice; commencement of
bankruptcy, liquidation, or similar proceedings respecting the
other party; the violation of any law, rule, or regulation by
the other party or the institution of formal proceedings
against the other party by the National Association of
Securities Dealers, Inc., the Securities and Exchange
Commission, the Department of Labor, the Internal Revenue
Service, or any other governmental or regulatory body,
provided that the terminating party has a reasonable belief
that the violation of such law, rule or regulation or the
institution of formal proceedings will have a material adverse
impact on the terminating party or a material adverse impact
on the ability of the party subject to the proceeding to meet
8
its obligations under this Agreement. Failure to terminate for
any cause shall not constitute a waiver of a party's right to
terminate at a later date for any such cause.
(c) At the election of AEFA, the Company shall remain obligated to
pay the fee as to each Share that was considered in the
calculation of the fees as of the date of termination for so
long as such shares are held by the Accounts and AEFA
continues to provide services to the Accounts.
19. Modification
This Agreement shall not be modified or amended except by an instrument
in writing signed by all parties, provided, however, that Company may
amend this Agreement unilaterally to add additional funds to Schedule A
at the appropriate fee factor based on the type of fund. The new or
amended Schedule A will be effective upon receipt by AEFA but will not
be required to be signed by AEFA. It is understood and agreed that the
intent of this provision is to avoid the inadvertent omission of funds
from Schedule A, where AEFA has agreed to provide services to Plans
seeking to invest in the funds.
20. Complete Agreement
This Agreement contains the full and complete understanding of the
parties and supersedes all prior representations, promises, statements,
arrangements, agreements, warranties and understandings between the
parties with respect to the subject matter hereof, whether oral or
written, express or implied.
21. Governing Law
This Agreement and all the rights and obligations of the parties shall
be governed and construed in accordance with the laws of the state of
Minnesota, without giving effect to principles of conflicts of laws.
22. Headings
The section headings in this Agreement are for convenience of reference
only and shall not be deemed to alter or affect any provision thereof.
9
IN WITNESS WHEREOF the undersigned have executed this Agreement by
their duly authorized officers as of this 1st day of October, 2001.
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
By:____________________________________________
Print Name:____________________________________
Title:_________________________________________
GMO TRUST, ON BEHALF OF EACH FUND LISTED ON
SCHEDULE A, SEVERALLY AND NOT JOINTLY
By:____________________________________________
Print Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
GMO Trust is a Massachusetts business trust and a copy of the Agreement and
Declaration of Trust of GMO Trust is on file with the Secretary of The
Commonwealth of Massachusetts. Notice is hereby given that this Agreement is
executed on behalf of the Trustees of the Trust as Trustees and not
individually, and that the obligations of or arising out of this Agreement with
respect to each Fund are not binding upon any of the Trustees or shareholders
individually or any other series of the Trust, but are binding only upon the
assets and property of the Fund.
10
SCHEDULE A
FUNDS
FUND NAME CUSIP TICKER
--------- ----- ------
GMO VALUE FUND (CLASS M) 362008542 N/A
11
SCHEDULE B
Capitalized terms used in this Schedule have the meanings given them in the
agreement to which this Exhibit is attached (the "Agreement").
Company shall pay to AEFA, for each Fund, a fee, computed daily and paid
quarterly in arrears, equal to the percentage specified below applied to the
average daily value of the total number of Shares of such Fund held in accounts
at AEFA. Company shall pay AEFA such fee within 30 days after the end of each
quarter. For purposes of this Schedule, the average daily value of the Shares of
each Fund will be based on the net asset value reported by the Company to AEFA.
For the services discussed in the Service Agreement, AEFA shall receive a fee
based on the percentage per annum applied to the average daily value of the
Shares of the Funds held in AEFA Plan accounts of .35% of the Funds' assets.
12
