EXHIBIT (h) (45)
OPERATING AGREEMENT
This Agreement is made as of June 17, 1999, between Xxxxxxx Xxxxxx & Co.,
Inc. ("Schwab"), a California corporation, Firstar Investment Research and
Management Co., LLC ("Fund Affiliate"), and each registered investment company
executing this Agreement ("Fund Company"), on its own behalf and on behalf of
each of its series or classes of shares listed on Schedule I ("Fund(s)"), as
amended from time to time. In the event there are no series or classes of
shares listed on Schedule 1, then the term "Fund" shall mean "Fund Company."
WHEREAS, Fund Company and Fund Affiliate wish to have shares of the
Fund(s) available to investors for purchase and redemption through Xxxxxx'x
Mutual Fund Marketplace/R ("MFMP");
WHEREAS, certain policies, procedures and information are necessary to
enable the Fund(s) to participate in the MFMP; and
WHEREAS, Schwab is willing to permit the Fund(s) to participate in its
MFMP pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
set forth below, the parties agree as follows:
1. Operating Procedures
--------------------
Schwab will open an omnibus account (the "Account") with each Fund
through which it will purchase and redeem shares, settle transactions, reconcile
transactions, obtain pricing, reinvest distributions and maintain records in
accordance with the Operating Procedures set forth in Exhibit A hereto. In
addition, the parties agree to transfer accounts, communicate with Fund
shareholders and perform other obligations in accordance with the Operating
Procedures.
2. Qualification Requirements
--------------------------
x. Xxxxxx will only place purchase orders for shares of a Fund on
behalf of an MFMP investor whose account address recorded on Xxxxxx'x books is
in a state or other jurisdiction in which Fund Company has advised Schwab that
such Fund has qualified its shares for sale under applicable law. Fund Company
shall advise Schwab immediately if any such qualification is terminated or if it
wishes Schwab not to place purchase orders for a Fund on behalf of MFMP
investors whose account addresses are in a particular state or other
jurisdiction.
x. Xxxxxx will, upon request, (i) furnish Fund Company with
monthly written statements of the number of shares of each Fund purchased on
behalf of MFMP investors whose account addresses are in one or more states or
other jurisdictions indicated by Fund Company or (ii) on a daily basis, transmit
to an electronic database provider with whom Schwab has established effective
systems interfaces information regarding the number of shares of each Fund
purchased on behalf of MFMP investors whose account addresses are in each state
for retrieval by Fund Company. Fund Company or Fund Affiliate shall be
responsible for all reasonable fees and other reasonable charges of such
database provider in connection with Xxxxxx'x transmission of such information
to and Fund Company's retrieval of such information from such database provider.
3. Compliance Responsibilities
---------------------------
a. Fund Company is responsible for (i) the compliance of each
prospectus, registration statement, annual or other periodic report, proxy
statement and item of advertising or marketing material of or relating to each
Fund with all applicable laws, rules and regulations (except for advertising or
marketing material prepared by Schwab that was not published or provided to
Schwab by or on behalf of Fund Company or any Affiliate (defined below) or
accurately derived from information published or provided by or on behalf of
Fund Company or any Affiliate), (ii) the distribution and tabulation of proxies
in accordance with all applicable laws, rules and regulations (except for such
proxy related services provided by Xxxxxx'x mailing agent), (iii) the
registration or qualification of the shares of each Fund under all applicable
laws, rules and regulations, and (iv) the compliance by Fund Company and each
Affiliate of Fund Company, as that term is defined below, with all applicable
laws, rules and regulations (including the Investment Company Act of 1940, as
amended (the "1940 Act"), and the Investment Advisers Act of 1940, as amended),
and the rules and regulations of each self-regulatory organization with
jurisdiction over Fund Company or Affiliate, except to the extent that the
failure to so comply by Fund Company or any Affiliate is caused by Xxxxxx'x
breach of this Agreement. Fund Company's responsibilities under Sections
3(a)(i) to 3(a)(iv) include, but are not limited to, compliance of information
published, distributed, or made available, and activities conducted through, the
Internet and any other electronic medium. For purposes of this Agreement, an
"Affiliate" of a person means (i) any person directly or indirectly controlling,
controlled by, or under common control with, such person, (ii) any officer,
director, partner, corporation, or employee of such person, and (iii) if such
person is an investment company, any investment advisor thereof or any member of
the advisory board thereof.
b. In the event that the Account holds five percent (5 %) or more
of the outstanding Fund shares, Fund Company will be responsible for requesting
Schwab to confirm its status as shareholder of record and to confirm whether any
MFMP investor beneficially owns five percent (5%) or more of the outstanding
Fund shares through its Schwab brokerage account. For this purpose, Fund Company
shall indicate in its inquiry the number of Fund shares that equal five percent
(5 %) of outstanding Fund shares. Schwab shall promptly reply to any such
inquiries.
x. Xxxxxx is responsible for Xxxxxx'x compliance with all
applicable laws, rules and regulations governing Xxxxxx'x performance under this
Agreement, except to the extent that Xxxxxx'x failure to comply with any law,
rule or regulation is caused by Fund Company's breach of this Agreement, or its
willful misconduct or negligence in the performance or failure to perform its
obligations under this Agreement.
d. Except as otherwise set forth in this Agreement, any
communication, instruction or notice made pursuant to this Agreement may be made
orally, provided that such oral communication is on a recorded telephone line or
is promptly confirmed in writing by facsimile transmission. Schwab is entitled
to rely on any communications, instructions or notices which it reasonably
believes were provided to it by Fund Company, any Affiliate or their agents
authorized to provide such communications, instructions or notices to Schwab.
Fund Company is entitled to rely on any communications, instructions or notices
it reasonably believes were provided to it by Schwab, or its agents authorized
to provide such communications, instructions or notices to Fund Company.
e. Except to the extent otherwise expressly provided in this
Agreement, neither party assumes any responsibility hereunder, or will be liable
to the other, for any damage, loss of data, delay or any other loss whatsoever
caused by events beyond its reasonable control.
f. Fund Company, as to each Fund severally and not jointly, shall
indemnify and hold harmless Schwab and each director, officer, employee and
agent of Schwab from and against any and all losses, claims, liabilities and
expenses (including reasonable attorney's fees) ("Losses") incurred by any of
them arising out of (i) any untrue statement of material fact or any omission of
a material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading in any prospectus,
registration statement, annual or other periodic report or proxy statement of
the Fund or in any advertising or promotional material published or provided to
Schwab by or on behalf of Fund Company or any Affiliate or accurately derived
from information published or provided by or on behalf of Fund Company or any
Affiliate, (ii) any violation of any law, rule or regulation relating to the
registration or qualification of shares of the Fund, (iii) any breach by Fund
Company of any representation, warranty or agreement contained in this
Agreement, or (iv) any willful misconduct or negligence by Fund Company or a
Fund in the performance of, or failure to perform, its obligations under this
Agreement, except to the extent such Losses are caused by Xxxxxx'x breach of
this Agreement or its willful misconduct or negligence in the performance, or
failure to perform, its obligations under this Agreement. This Section 3(f)
shall survive termination of this Agreement.
4. Account Establishment and Maintenance Fees
------------------------------------------
Fund Affiliate shall pay to Schwab such fees as are set forth on Schedule
II hereto to reimburse Schwab for its costs in establishing and maintaining
Account(s) for each Fund. The fee shall be paid at the time and in the manner
set forth in Schedule II.
5. Representations and Warranties
------------------------------
a. Fund Company represents and warrants that (i) each Fund is in
compliance with the conditions and qualifications set forth in Rule 2830 of the
Conduct Rules of the National Association of Securities Dealers Regulation, Inc.
("NASDR"), as amended from time to time ("Rule 2830"), which enable a member of
the National Association of Securities Dealers, Inc. ("NASD") to offer or sell
shares of the Fund; and (ii) each Fund marked with an asterisk on Schedule I is
a "no load" or "no sales charge" Fund as defined in Rule 2830. If a Fund, for
any reason, fails to satisfy the terms and conditions of Rule 2830, Fund Company
will notify Schwab immediately of such failure to satisfy the terms and
conditions and the reason therefor.
x. Xxxxxx represents and warrants that it is a member of the NASD.
6. Use of Parties' Names
---------------------
a. Without Xxxxxx'x prior written consent, Fund Company will not
cause or permit the use, description, or reference to Schwab, or to the
relationship contemplated by this Agreement in any advertisement or promotional
materials or activities, including, without limitation, any advertisement or
promotional materials published, distributed, or made available, or any activity
conducted through, the Internet or any other electronic medium.
b. Fund Company authorizes Schwab to use the names or other
identifying marks of Fund Company and Fund in connection with the operation of
the MFMP.
c. Fund Company may withdraw this authorization as to any particular
use of any such name or identifying marks at any time (i) upon Fund Company's
reasonable determination that such use would have a material adverse effect on
the reputation or marketing efforts of Fund Company or such Fund, or (ii) if any
of the Funds cease to be available through the MFMP; provided, however, that
Schwab may, in its discretion, continue to use materials prepared or printed
prior to the withdrawal of such authorization or in the process of being
prepared or printed at the time of such withdrawal.
7. Proprietary Information
-----------------------
Each party hereto acknowledges that the identities of the other
party's customers, information maintained by such other party regarding those
customers, and all computer programs and procedures developed by such other
party or such other party's Affiliates or agents in connection with such other
party's performance of its duties hereunder constitute the valuable property of
such other party. Each party agrees that should it or its Affiliate or agent
come into possession of any list or compilation of the identities of or other
information about the other party's customers, or any other property of such
party, pursuant to this Agreement or any other agreement related to services
under this Agreement, the party who acquired such information or property, or
whose Affiliate or agent acquired such information or property, shall use its
best efforts to hold, or to cause its Affiliate or agent to hold, such
information or property in confidence and refrain from using, disclosing, or
distributing any of such information or other property, except (i) with the
other party's prior written consent, or (ii) as required by law or judicial
process. Each party acknowledges that any breach of the foregoing agreements as
to another party would result in immediate and irreparable harm to such other
party for which there would be no adequate remedy at law and agrees that in the
event of such a breach such other party will be entitled to equitable relief by
way of temporary and permanent injunctions, as well as such other relief as any
court of competent jurisdiction deems appropriate.
8. Assignability
-------------
This Agreement is not assignable by either party without the other
party's prior written consent, and any attempted assignment in contravention
hereof shall be null and void and not merely voidable; provided, however, that
Schwab may, without the consent of Fund Company, assign its rights and
obligations under this Agreement to any Affiliate.
9. Exhibits and Schedules; Entire Agreement
----------------------------------------
All Exhibits and Schedules to this Agreement, as they may be amended
from time to time, are by this reference incorporated into and made a part of
this Agreement. This Agreement (including the Exhibits and Schedule hereto)
constitutes the entire agreement between the parties as to the subject matter
hereof and supersedes any and all agreements, representations and warranties,
written or oral, regarding such subject matter made prior to the date on which
this Agreement has been executed and delivered by Schwab, Fund Affiliate and
Fund Company.
10. Amendment
---------
This Agreement may be amended only by a writing executed by each
party hereto that is to be bound by such amendment, except as provided in this
Section 10. Exhibit A and Schedule II may each be amended by Schwab on forty
(40) days' written notice to Fund Company or such earlier time as shall be
agreed to by the parties. Exhibits B and C shall be amended by Fund Company in
the event of any change to the information contained therein.
11. Governing Law
-------------
This Agreement shall be governed by and interpreted under the laws
of the State of California, applicable to contracts between California residents
entered into and to be performed entirely within the state.
12. Arbitration.
-----------
In the event of a dispute between Fund Company, Fund Affiliate and
Schwab relating to or arising out of this Agreement or the relationship of the
parties hereto, the parties will submit the matter to arbitration in accordance
with paragraphs a, b, and c below.
a. Arbitration will be held in San Francisco, California, in
accordance with the rules and regulations of the NASD, except, (i) in the event
that the NASD is unwilling to accept jurisdiction of the matter, such
arbitration will be held in San Francisco, California in accordance with the
rules and regulations of the American Arbitration Association, and (ii) in the
event that a non-party to this Agreement brings an arbitration against Schwab or
Fund Company or Fund Affiliate relating to or arising out of this Agreement,
then the parties agree to arbitrate in whichever arbitration forum such
arbitration is brought.
b. If the arbitration is brought by one of the parties hereto, the
number of arbitrators will be three (3), and they will be selected in accordance
with the rules and regulations of the NASD or American Arbitration Association,
as appropriate. The arbitrators shall be attorneys specializing in securities
law. Any award of the arbitrators will be limited to compensatory damages and
will be conclusive and binding upon the parties. The arbitration shall be
governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16 to the exclusion
of state laws inconsistent therewith, and judgment upon the award may be entered
in any court having jurisdiction.
c. Each party will bear its own expenses, including legal and
accounting fees, if any, with respect to the arbitration. The arbitrator will
designate the party to bear the expenses of the arbitration or the respective
amounts of such expense to be borne by each party. Any costs, fees or taxes
involved in enforcing the award shall be fully assessed against and paid by the
party resisting enforcement of the award.
d. Nothing in this Section 12 will prevent either party from
resorting to judicial proceedings or otherwise for injunctive relief to prevent
serious irreparable harm or injury to a party or to others.
13. Effectiveness and Termination
-----------------------------
a. The effective date of this Agreement as to any Fund shall be the
later of the date on which this Agreement is made or the date set forth opposite
the name of the Fund on Schedule I.
b. This Agreement may be terminated as to any Fund by Schwab
immediately upon written notice to Fund Company. This Agreement may be
terminated as to any Fund by Fund Company upon thirty (30) days' written notice
to Schwab.
c. Upon the termination date for any Fund, Schwab will no longer
make the Fund shares available for purchase by investors through the MFMP.
Schwab reserves the right to transfer the Fund shares of MFMP investors out of
the Account. If Schwab continues to hold the Fund shares on behalf of MFMP
investors in the Account, the parties agree to be obligated under, and act in
accordance with, the terms and conditions of this Agreement with respect to such
shares.
IN WITNESS WHEREOF, this Agreement has been executed by a duly
authorized representative of the parties hereto.
XXXXXXX XXXXXX & CO., INC. FIRSTAR FUNDS, INC., on its own behalf
and on behalf of each Fund listed on
By: /s/ Xxxx Xxxxx Schedule I hereto, as amended from
-------------------------------- time to time
Xxxx Xxxxx
Vice President/Mutual Funds
Operations Administration By: /s/ Xxxx Xxxxx Xxxxxx
------------------------------
Date: July 5, 1999 Name: Xxxx Xxxxx Xxxxxx
------------------------------- ------------------------------
Title: President
------------------------------
FIRSTAR INVESTMENT RESEARCH AND
MANAGEMENT CO., LLC Date: June 21, 1999
------------------------------
By: /s/ Xxxxx Xxxxxx
-----------------------------
Name: Xxxxx Xxxxxx
-----------------------------
Title: Vice President
-----------------------------
Date: June 21, 1999
-----------------------------
SCHEDULE I
TO THE OPERATING AGREEMENT
Fund Company/Funds Effective Date
------------------ --------------
Firstar Funds, Inc.
Firstar Bond IMMDEX/TM Fund, Retail A Shares 6/17/99
Firstar Growth Fund, Retail A Shares 6/17/99
Firstar Growth & Income Fund, Retail A Shares 6/17/99
Firstar Intermediate Bond Market Fund, Retail A Shares 6/17/99
Firstar MicroCap Fund, Retail A Shares 6/17/99
* Indicates that Fund is a "no-load" or "no sales charge" Fund as defined in
Rule 2830 of the NASDR.
SI Indicates that Fund is available only to MFMP investors through Schwab
Institutional or another advice program offered or made available by
financial institutions clearing transactions through Schwab.
SCHEDULE II
TO THE OPERATING AGREEMENT
Fees to Establish and Maintain Account(s) for a Fund
ESTABLISHMENT FEE
The Establishment Fee for the Account(s) for the initial Fund established
on Xxxxxx'x system shall be $18,000 plus an additional amount determined as
follows for any negotiation of this Operating Agreement with Xxxxxx'x in house
or external legal counsel: $2,000 for each 10 hour period of such attorney time
or any incremental portion thereof. The Establishment Fee for the Account(s)
for each additional Fund, whether added at the same time or subsequent to the
initial Fund, shall be $6,000. The Establishment Fee for each Fund shall be
paid prior to establishment of the Account(s) for such Fund.
MAINTENANCE FEE
a. The Maintenance Fee as to the Account(s) for each Fund shall be
billed in arrears on February 28 (or February 29 in a leap year) and August 31
(each an "Assessment Date") on the first Assessment Date after the establishment
of the Account(s) for the Fund on the Schwab system. The Maintenance Fee as to
the Account(s) of a Fund shall continue to be paid as long as there are any
shares held in the Account(s). The Maintenance Fee shall be paid by wire
transfer within ten (10) days after Fund Company's receipt of the invoice. Such
wire transfers shall be separate from wire transfers of redemption proceeds or
distributions under this Agreement.
b The Maintenance Fee as to the Account(s) for a Fund is $1,000 per
full month of establishment on Xxxxxx'x system since the previous Assessment
Date unless the assets held in the Account(s) for the Fund are in excess of $5
million on the Assessment Date. If the assets held in the Account(s) for a Fund
are in excess of $5 million on the Assessment Date, then the Maintenance Fee as
to the Account(s) for the Fund for such period is $0.
c For purposes of this calculation, the value of the shares of each
Fund will be the net asset value reported by such Fund to the National
Association of Securities Dealers, Inc. Automated Quotation System. No
adjustments will be made to the net asset values to correct errors in the net
asset values so reported for any Assessment Date unless such error is corrected
and the corrected net asset value per share is reported to Schwab before 5
o'clock, p.m., San Francisco time, on the next business day after the Assessment
Date to which the error relates. For purposes of this Exhibit, a "Business Day"
is any day the New York Stock Exchange is open for trading.
EXHIBIT A
OPERATING PROCEDURES
1. The Account
-----------
x. Xxxxxx will open an Account with each Fund. The Account shall
be registered:
Xxxxxxx Xxxxxx & Co., Inc.
Special Custody Account for the Exclusive Benefit of Customers
Attention: Mutual Funds
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
The Account will be set up for the reinvestment of capital gains and dividend
distributions.
b. The Fund shall designate the Account with account numbers.
Account numbers will be the means of identification when the parties are
transacting in the Account.
c. The Parties acknowledge that the Account is an omnibus account
in Xxxxxx'x name with shares held by any number of beneficial owners. Schwab
represents that the shares in the Account are customer securities and are
segregated from Xxxxxx'x own assets. Fund Company represents that the shares in
the Account are carried free of any charge, lien or payment of any kind in favor
of the Fund or any person claiming through the Fund.
d. The Account shall be kept open on the Fund's books regardless
of a lack of activity or small position size, except to the extent that Schwab
takes specific action to close the Account, or to the extent the Fund's
prospectus reserves the right to close accounts that are inactive. In the
latter case, Fund Company will give prior notice to Schwab before closing any
Account.
x. Xxxxxx has the right to open additional accounts from time to
time to accommodate other investment options and features, and to consolidate
existing accounts if and when appropriate to meet the needs of the MFMP. In the
event that it is necessary for Schwab to open an account with a Fund for the
payment of distributions in cash, the term "Account" shall mean both the account
for the reinvestment of capital gains and dividend distributions and the account
for the payment of distributions in cash.
x. Xxxxxx reserves the right to issue instructions to each Fund
to move shares between the Account and any other account Schwab may open.
2. Purchase and Redemption Orders
------------------------------
For each day on which any MFMP investor places with Schwab a
purchase or redemption order for shares of a Fund, Schwab shall aggregate all
such purchase orders and aggregate all such redemption orders and communicate to
the Fund an aggregate purchase order and an aggregate redemption order.
3. Authorization to Receive Orders on Fund's Behalf
------------------------------------------------
a. Fund Company hereby designates and authorizes Schwab to
receive purchase and redemption orders in proper form ("Orders") from MFMP
investors on the Fund's behalf for purposes of Rule 22c-1, so that any such MFMP
investor will receive the share price next computed by the Fund after the time
at which such MFMP investor places its Order with Schwab.
b. Fund Company further agrees that Schwab may designate and
authorize such intermediaries as it deems necessary, appropriate or desirable
("Sub-Designees"), to receive Orders from their customers on the Fund's behalf
for purposes of Rule 22c-1, so that any such customer will receive the share
price next computed by the Fund after the time at which such customer places its
Order with Sub-Designee. Schwab shall be liable to Fund Company and the Funds
for compliance with the terms of this Section 3b to the same extent as if Schwab
itself had acted or failed to act instead of the Sub-Designee.
x. Xxxxxx agrees that, except as set forth in Section 4b below,
(a) Orders received by Schwab or a Sub-Designee prior to the close of the New
York Stock Exchange (generally, 4:00 p.m. Eastern Time) ("Market Close") on any
Business Day ("Day 1") (such Orders are referred to herein as "Day 1 Trades")
will be transmitted by Schwab to the Fund by 8:00 p.m. Eastern Time on the same
Business Day; and (b) Orders received by Schwab or Sub-Designees at or after
Market Close on any business day (such Orders are referred to herein as "Day 2
Trades") will be transmitted by Schwab to the Fund by 8:00 p.m. Eastern Time on
the next Business Day ("Day 2"). For purposes of this Exhibit, a "business day"
is any day the New York Stock Exchange is open for trading.
d. In connection with this Section 3 of Exhibit A, Fund Company
represents and warrants to Schwab that all necessary legal and other actions
have been taken to authorize Schwab to receive purchase and redemption Orders
from MFMP investors on behalf of the Funds for purposes of Rule 22c-1 under the
1940 Act by each Fund's board of directors or board of trustees, and that it
will cause each Funds' board of directors or board of trustees to take such
necessary legal and other actions regarding the annual review of such
authorization.
e. In connection with this Section 3 of Exhibit A, Schwab
represents and warrants that:
(i) Xxxxxx'x internal control structure over the processing
and transmission of Orders for Fund transactions is suitably designed to prevent
or detect on a timely basis Orders received after Market Close from being
aggregated with Orders received before Market Close, and to minimize errors that
could result in late transmission of Orders to the Funds;
(ii) it will cause an independent public accountant or other
qualified independent party annually to review Xxxxxx'x internal control
structure and prepare a written report to Schwab concerning the structure's
adequacy for the obligations undertaken by Schwab under this Agreement, and that
upon receipt of its internal control structure report, it will make such report
available to Fund Company or any Fund upon written request; and
(iii) it will also require each Sub-Designee to retain an
independent public accountant or other qualified independent party annually to
review Sub-Designee's internal control structure and prepare a written report to
Schwab and the Sub-Designee concerning the structure's adequacy for the
obligations undertaken by Sub-Designee as set forth in this Agreement, and that,
upon its receipt of any internal control structure report of any Sub-Designee,
it will make such report available to Fund Company or any Fund upon written
request.
4. Fund's Pricing of Orders
------------------------
a. Fund Company agrees that, except as set forth in Section 4b
below, Day 1 Trades will be effected at the net asset value of each Fund's
shares ("Net Asset Value") calculated as of Market Close on Day 1, provided such
trades are received by the Fund by 8:00 p.m. Eastern Time on Day 1; and Day 2
Trades will be effected at the Net Asset Value calculated as of Market Close on
Day 2, provided such trades are received by the Fund by 8:00 p.m. Eastern Time
on Day 2. Fund Company agrees that, consistent with the foregoing, Day 1 Trades
will have been received by the Fund prior to Market Close on Day 1, and Day 2
Trades will have been received by the Fund prior to Market Close on Day 2, for
all purposes, including, without limitation, effecting distributions (if
distributions are paid based on the date Trades are effected).
b. Notwithstanding Sections 3c and 4a above, Fund Company agrees
that, if Schwab is prevented from transmitting Day 1 Trades to the Fund by 8:00
p.m. Eastern Time on Day 1 due to unforeseen circumstances, such as computer
system failures, natural catastrophes, or other emergencies or human error, then
Schwab may transmit such Day 1 Trades by 9:30 a.m. Eastern Time on Day 2, and
such Day 1 Trades will be effected at the Net Asset Value calculated as of
Market Close on Day 1, provided that Schwab notifies the Fund of such
contingency prior to 8:00 p.m. Eastern Time on Day 1.
5. Settlement of Transactions
--------------------------
x. Xxxxxx and Fund Company will settle Day 1 Trades on Day 2 and
will settle Day 2 Trades on Day 3 (each, respectively, a "Settlement Date").
x. Xxxxxx will transmit the aggregate purchase price of all the
purchase Orders for a given trade date to the Fund by wire transfer on the
appropriate Settlement Date.
c. Fund Company will cause the Fund(s) to send to Schwab the
aggregate proceeds of all redemption Orders for the Fund(s) placed by Schwab on
a given trade date on the appropriate Settlement Date. Such redemption proceeds
will be sent by wire transfer on the Settlement Date for the redemption Orders;
provided that Fund Company may, in its discretion, send such proceeds by check
if the aggregate amount is less than $250. Wire transfers of redemption
proceeds shall be separate from wire transfers for other purposes.
d. Each wire transfer of redemption proceeds shall indicate, on
the Fed Funds wire system, the amount thereof attributable to each Fund;
provided, however, that if the number of entries would be too great to be
transmitted through the Fed Funds wire system, Fund Company shall, on the day
the wire is sent, notify Schwab of such entries. The cost of the wire transfer
is the responsibility of the party sending the wire. The interest cost
associated with any delayed wire is the responsibility of the party sending the
wire and will be charged at the Federal Funds rate for Schwab, and as set forth
in Section 5(f) below for Fund Company.
e. Should a Fund need to extend settlement on a trade, including
without limitation Orders under any amendment to this Operating Agreement to
implement retirement plan order processing, Fund Company must contact Schwab by
7:00 p.m. Eastern time on trade date to discuss the extension. For purposes of
determining the length of settlement, Fund Company agrees to treat shareholders
that hold Fund shares through the Account the same as it treats shareholders
that hold Fund shares directly with the Fund.
f. If Fund Company does not settle redemption orders on
Settlement Date and has not contacted Schwab by 7:00 p.m. Eastern Time on trade
date to discuss such extension of settlement (even if such extension is due to a
systems problem unknown on trade date), then Schwab may, at its option, take any
or all of the following actions:
(i) Charge Fund Affiliate interest on the amount of the
redemption proceeds due to it, as follows:
(A) For the first day, (a) Schwab may charge Fund
Affiliate interest at the Federal Funds "offered" rate for such day as published
in The Wall Street Journal if the amount does not exceed $1 million, or (b)
Schwab may charge Fund Affiliate interest at the Prime Rate for such day as
published in The Wall Street Journal if the amount exceeds $1 million; and
(B) For each day following, Schwab may charge Fund
Affiliate interest at the Prime Rate for each such day as published in The Wall
Street Journal, plus 2% per annum; and
(ii) Upon notice to Fund Company, on any subsequent
Settlement Date and for so long as such redemption proceeds are due to it:
(A) Schwab may settle purchase orders and redemption
orders net of each other for such Fund; and/or
(B) Schwab may net any redemption proceeds still due
to it against any net or gross purchase amount due from it to the Fund.
g. In the event that a Fund cannot verify redemption proceeds,
Fund Company will settle trades and forward redemption proceeds in accordance
with this Agreement based on the information provided by Schwab. Schwab will be
responsible for the accuracy of all trade information provided by it.
h. Fund Company represents that each Fund that has reserved the
right to redeem in kind has filed Form N-18F-1 with the Securities and Exchange
Commission. For purposes of complying with the Fund's election on Form N-18F-1,
Fund Company agrees that it will treat as a "shareholder" each shareholder that
holds Fund shares through the Account, provided that Schwab provides to Fund
Company, upon request, the name or account number, number of Fund shares and
other relevant information for each such shareholder. Fund Company acknowledges
that treatment of Schwab as the sole shareholder of Fund shares held in the
Account for purposes of applying the limits in Rule 18f-1 under the 1940 Act
would be inconsistent with the intent of Rule 18f-1 and the Fund's election on
Form N-18F-1 and could unfairly prejudice shareholders that hold Fund shares
through the Account.
6. Account Reconciliation Requirements
-----------------------------------
x. Xxxxxx shall verify, on a next day basis, Orders placed for
the Account with each Fund. All activity in the Account must be reflected.
Therefore, any "as of" activity must be shown with its corresponding "as of"
dates.
x. Xxxxxx must receive statements on or before the eighth
Business Day of each month, even if there has been no activity in the Account
during the period, unless Schwab can verify transactions by electronic
transmission.
c. The parties agree to notify each other and correct any error
in the Account with any Fund upon discovery. If an error is not corrected by
the day following discovery, each party agrees to make best efforts to avoid
this from hindering any routine daily operational activity.
7. Pricing Information
-------------------
For every Business Day on which there is a transaction in the
Account and for each month-end Business Day, Fund Company will provide to Schwab
prior to 7:00 p.m., Eastern Time, each Fund's closing Net Asset Value and public
offering price (if applicable) for that day and/or notification of no price for
that day. Fund Company shall provide such information on a best efforts basis
taking into consideration any extraordinary circumstances arising at the Fund
(e.g. natural disasters, etc.).
8. Distributions
-------------
a. Fund Company shall provide distribution information to Schwab
in a timely manner to enable Schwab to pay distributions to its MFMP investors
on or as close to payable date as practicable. As to each Fund, Fund Company or
such Fund shall provide Schwab with (i) the record date, ex-dividend date, and
payable date with respect to a Fund as soon as practicable after it is
announced, but no later than three (3) Business Days prior to record date, (ii)
the record date share balance in the Account and the distribution rate per share
on the first Business Day after record date, and (iii) the reinvest price per
share as soon as it is available. Other distribution information required by
Schwab from time to time for payment of distributions to its MFMP investors
shall be provided by Fund Company on such dates as are agreed upon between
Schwab and Fund Company, but no later than payable date.
b. For purposes of effecting cash distributions for MFMP
investors who have elected to receive their capital gains distributions and/or
dividends in cash, prior to 10:00 a.m., Eastern Time, on the next Business Day
following receipt of the reinvest price per share as provided in paragraph
8(a)(iii) above, Schwab shall notify Fund Company of the aggregate number of
Fund shares necessary to make an adjusting reconciling transaction to void the
purchase of such number of shares. Fund Company or such Fund shall wire the
proceeds from said adjusting reconciling transaction from the Fund to the
designated Schwab account on the same Business Day. Schwab shall use such
proceeds to pay the distribution in cash to MFMP investors who have elected to
receive such distributions in cash.
c. In the event that Schwab maintains an Account with a Fund for
the payment of distributions in cash, Fund Company shall wire, on payable date,
any cash distribution from the Fund to Schwab.
d. (i) With respect to a consolidated omnibus Account, and for
purposes of effecting cash distributions for investors who have elected to
receive their capital gains distributions and/or dividends in cash, if Fund
Company does not wire the cash proceeds to Schwab on the next Business Day after
the ex-dividend date for such distribution (a "Due Date"), then Schwab may, at
its option, charge Fund Affiliate interest on the amount of such cash proceeds
outstanding on or after the Due Date as set forth in Section 8 (d)(iii) below.
(ii) With respect to a cash distribution Account, if Fund
Company does not wire the cash distribution to Schwab on the payable date for
such distribution (also a "Due Date"), then Schwab may, at its option, charge
Fund Affiliate interest on the amount of such cash distribution outstanding on
or after the Due Date as set forth in Section 8 (d)(iii) below.
(iii) (A) For the Due Date, Schwab may charge Fund Affiliate
interest at the Federal Funds "offered" rate for such day as published in The
Wall Street Journal if the amount does not exceed $1 million, and Schwab may
charge Fund Affiliate interest at the Prime Rate for such day as published in
The Wall Street Journal if the amount exceeds $1 million.
(B) For each day following the Due Date, Schwab may
charge Fund Affiliate interest at the Prime Rate for each such day as published
in The Wall Street Journal, plus 2% per annum.
e. For each Fund that pays daily dividends, Fund Company shall
provide on a daily basis, the following record date information: daily rate,
account share balance, account accrual dividend amount (for that day), account
accrual dividend amount (for period to date), and account transfers and period-
to-date accrual amounts.
f. For each Fund that pays daily dividends, each Fund shall
accrue dividends, commencing on the settlement date for the purchase of Fund
shares and terminating on the trade date for the redemption of Fund shares.
g. For annual tax reporting purposes, Fund Company shall inform
Schwab by January 15 of the portion of each Fund's distributions for the
previous calendar year that include dividends, capital gains, and tax
reclassifications; and by February 15, the portion of each Fund's distributions
for the previous calendar year that include foreign source income, tax exempt
income by state of origin or return of capital, U.S. government obligation
interest, creditable and non-creditable foreign tax, dividends eligible for the
corporate dividends received deductions, and redemption and exchange proceeds
and throwback dividends.
h. In conformance with its status as a broker/dealer holding its
customers securities in street name, Schwab shall prepare and file with the
appropriate governmental agencies, such information, returns and reports as are
required to be so filed for reporting (i) dividends and other distributions
made, (ii) amounts withheld on dividends and other distributions and payments
under applicable federal and state laws, rules and regulations and (iii) gross
proceeds of sales transactions as required.
i. Upon notice from Fund Company, Schwab shall effect mergers,
splits and other reorganization activities of a Fund for its customers.
9. Price and Distribution Rate Errors
----------------------------------
a. In the event adjustments are required to correct any error in
the computation of the Net Asset Value or public offering price of a Fund's
shares or in the distribution rate for a Fund's shares, Fund Company shall
notify Schwab upon discovering the need for such adjustments. Notification may
be made orally, but must be confirmed in writing.
x. Xxxxxx and Fund Company shall agree promptly and in good faith
to a resolution of the error, and no adjustment for the error shall be taken in
the Account until such agreement is reached. Following resolution, upon request
by Schwab, Fund Company shall provide Schwab with written notification of the
resolution. The letter shall be written on Fund Company letterhead and must
state for each day on which an error occurred the incorrect price or rate, the
correct price or rate, and the reason for the price or rate change. Fund
Company agrees that Schwab may send this writing, or derivation thereof, to
Xxxxxx'x MFMP investors whose accounts are affected by the price or rate change.
c. If an MFMP investor has received cash in excess of what he is
entitled, Schwab will, when requested by Fund Company, and to the extent
practicable and permitted by law, debit the customer's brokerage account in the
amount of such excess, but only to the extent of any cash in the account, and
repay it to the Fund. In no event, however, shall Schwab be liable to Fund
Company or the Fund for any such amounts. Upon the request of Fund Company,
Schwab shall provide Fund Company with the name of Xxxxxx'x customer and other
relevant information concerning the customer's brokerage account to assist Fund
Company in the collection from Xxxxxx'x customer of any such excess amount not
repaid to the Fund.
d. If adjustment is necessary to correct an error which has
caused Xxxxxx'x customers to receive dollars or shares less than that to which
they are entitled, the Fund shall, as appropriate and as mutually agreed by the
parties pursuant to 9(b) above, make all necessary adjustments to the number of
shares owned in the Account and/or distribute to Schwab any and all amounts of
the underpayment. Schwab will credit the appropriate amount of such shares or
payment to each MFMP investor.
e. For purposes of making adjustments, including the collection
of overpayments, Fund Company agrees to treat shareholders that hold Fund shares
through the Account the same as it treats shareholders that hold Fund shares
directly with the Fund. When making adjustments for an error, a Fund shall not
net transactions for that day in the Account.
10. Record Maintenance
------------------
x. Xxxxxx maintains records for each of its customers who holds
Fund shares through the Account, which records include:
i. Number of shares;
ii. Date, price and amount of purchases and redemptions (including
dividend reinvestments) and date and amounts of dividends paid
for at least the current year to date;
iii. Name and address of each of its customers, including zip codes
and social security numbers or taxpayer identification
numbers;
iv. Records of distributions and dividend payments;
v. Any transfers of shares; and
vi. Overall control records.
x. Xxxxxx posts transactions in Fund shares to its customers'
brokerage accounts.
11. Transfer of Accounts
--------------------
a. Fund Company agrees to transfer shares between direct accounts
for MFMP investors or other street name brokers held with a Fund and the Account
on the Fund's records. For the purpose of expediting direct transfers from
accounts for MFMP investors, Fund Company will accept by facsimile transmission
a summary sheet of information ("Summary Sheet") indicating the customers'
names, account numbers, the Fund affected and the number of shares to be re-
registered or liquidated. For record keeping purposes, actual copies of
transfer forms will be forwarded to a Fund upon its request for such forms.
x. Xxxxxx represents and warrants that for each transfer and
liquidation transfer indicated in the Summary Sheet, it holds each underlying
instruction for re-registration or liquidation signed by its customer, and that
its customer's signature on such instruction is signature guaranteed by Schwab
pursuant to the New York Stock Exchange's Medallion Signature Program. Schwab
will retain these documents for the period required by any applicable law rule
or regulation.
x. Xxxxxx agrees to indemnify and hold harmless Fund Company, the
Fund and each director, officer, employee and agent of Fund Company
("indemnified person") from and against any and all Losses incurred by any of
them arising out of the impropriety of any transfer or liquidation transfer
effected by the Fund in reliance on the Summary Sheet to the same extent as
provided under the New York Stock Exchange's Medallion Signature Program, except
to the extent such Losses arise out of the failure of any indemnified person to
comply with the instructions on the Summary Sheet.
d. Fund Company shall process all transfer and liquidation
requests into the appropriate Account. Schwab as custodian is qualified to
accept in the Accounts shares from Fund XXX, Xxxxx or 401(k) accounts. At no
time shall any Fund establish separate accounts registered to Schwab for the
benefit of individual shareholders. In the event any such account is mistakenly
opened, Schwab reserves the right to instruct such Fund to move Fund shares to
the Account.
e. Fund Company must confirm to Schwab the completion of each
transfer on the day it occurs. The confirming information shall include the
number of shares, date ("as of" date if unavoidable delay), transaction date,
account number of the customer and the Account, registration, accrued dividends
and account type (i.e., XXX, Xxxxx, 401(k), etc.).
f. Transfer processing after record date but prior to payable
date will include all accrued dividends. Each Fund is responsible for
monitoring all completed full transfers for "trailing" dividends. Should a
"trailing" dividend appear in an account, a Fund shall send such dividend to
Schwab within five (5) Business Days, along with a specific written notification
thereof. Notification shall include details of the dividend and customer,
including the customer's social security number or taxpayer identification
number, and/or the account number for the Account to which the transfer was
made.
g. If MFMP investors submit share certificates for transfer into
their Schwab brokerage accounts, Schwab will send such certificates, properly
endorsed to the applicable Fund, for transfer into the Account with such Fund.
Upon Xxxxxx'x request, Fund Company agrees to provide the status of said
certificates and book share balances.
12. Shareholder Communication
-------------------------
a. Fund Company shall arrange with Schwab, or a mailing agent
designated or approved by Schwab, for the distribution of the materials listed
below to all of Xxxxxx'x customers who hold Fund shares, which distribution
shall be so arranged by Fund Company as to occur immediately upon the effective
date of the materials:
i. All proxy or information statements prepared for circulation
to shareholders of record of such Fund;
ii. Annual reports;
iii. Semi-annual reports;
iv. Quarterly reports (if applicable); and
v. All updated prospectuses, supplements and amendments thereto.
Fund Company shall be responsible for providing the materials and for Schwab or
the mailing agent's fees in connection with this service as well as for timely
distribution. Fund Company agrees to have Schwab or the mailing agent
consolidate mailings of material to shareholders of more than one Fund if the
mailing is identical for all Funds in the Fund Company family.
b. In addition to the materials listed above, Fund Company agrees
to provide directly to Schwab all prospectuses, statements of additional
information and supplements and amendments thereto, and annual and other
periodic reports for each Fund in amounts reasonably requested by Schwab for
distribution to its customers. Fund Company is obligated to supply these
materials to Schwab in a timely manner so as to allow Schwab, at its own
expense, to send current prospectuses and statements of additional information
and periodic reports, immediately upon their effective dates, to customers and
prospective customers requesting them through Schwab. Schwab will also send a
current Fund prospectus with purchase trade confirmations for the initial
purchase of a Fund. Fund Company shall notify Schwab immediately of any change
to a Fund's prospectus.
c. If Schwab acts as clearing broker in an omnibus relationship
with a correspondent bank or broker ("Correspondent"), upon the request of
Schwab, Fund Company shall also provide to Schwab, in a timely manner,
sufficient supplies of Fund materials identified in Sections 12(a) and 12(b) for
Schwab to give to Correspondent for the distribution of such materials to
Correspondent's customers who hold Fund shares.
d. Fund Company shall ensure that the prospectus of each of its
Funds discloses that a broker may charge transaction fees on the purchase and/or
sale of Fund shares. Fund Company shall also ensure that either the prospectus,
or the statement of additional information ("SAI") if the SAI is incorporated in
the prospectus, of each of its Funds discloses (i) that the Fund has authorized
one or more brokers to receive on its behalf purchase and redemption Orders;
(ii) that such brokers are authorized to designate other intermediaries to
receive purchase and redemption Orders on the Fund's behalf; (iii) that the Fund
will be deemed to have received a purchase or redemption Order when an
authorized broker or, if applicable, a broker's authorized designee, receives
the Order; (iv) that customer Orders will be priced at the Fund's Net Asset
Value next computed after they are received by an authorized broker or the
broker's authorized designee; (v) that the performance of the Fund may be
compared in publications to the performance of various indices and investments
for which reliable performance data is available; (vi) that the performance of
the Fund may be compared in publications to averages, performance rankings, or
other information prepared by recognized mutual fund statistical services; and
(vii) that the annual report contains additional performance information and
will be made available to investors upon request and without charge. If
adequate disclosure is not currently contained in the prospectus (including any
incorporated SAI), then it may be added at the next regular printing of the
prospectus.
x. Xxxxxx mails statements to its customers on a monthly basis
(or as to accounts in which there has been no activity in a particular month, no
less frequently than quarterly) showing, among other things, the number of
shares of each Fund owned by such customer and the net asset value of each such
Fund as of a recent date.
x. Xxxxxx responds to customer inquiries regarding, among other
things, share prices, account balances, dividend amounts and dividend payment
dates. With respect to Fund shares purchased by customers after the effective
date of this Agreement, Schwab provides average cost basis reporting to assist
customers in the preparation of income tax returns.
13. New Processing Systems
----------------------
Fund Company agrees to cooperate to the extent possible with Schwab as
Schwab develops and seeks to implement new processing systems for the MFMP.
