EXHIBIT (h)(2)
XXX XXXXXX FUNDS
DEALER AGREEMENT
Xxx Xxxxxx Funds Inc. ("VKFI") serves as the principal underwriter for
the Xxx Xxxxxx group of investment companies (each, a "Fund," and, collectively,
the "Funds"), including open-end investment companies (the "Open-End Funds") and
closed-end investment companies (the "Closed-End Funds"). VKFI and
________________________________________ ("Dealer") hereby agree that Dealer
will participate in the distribution of shares ("Shares") of the Funds, subject
to the terms of this Dealer Agreement, dated as of _________________________,
200_ ("Agreement").
SECTION 1. LICENSING
a. Dealer represents and warrants that: (i) it is a broker-dealer
registered with the Securities and Exchange Commission ("SEC"); (ii) it is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); (iii) it is licensed by the appropriate regulatory agency of each
state or other jurisdiction in which Dealer will offer and sell Shares of the
Funds; and (iv) each of its partners, directors, officers, employees, and agents
who will participate or otherwise be involved in the offer or sale of the Shares
or the performance by Dealer of its duties and activities under this Agreement
is either appropriately licensed or exempt from such licensing requirements by
the appropriate regulatory agency of each state or other jurisdiction in which
Dealer will offer and sell Shares of the Funds.
b. Dealer agrees that: (i) termination or suspension of its
registration with the SEC; (ii) termination or suspension of its membership with
the NASD; or (iii) termination or suspension of its license to do business by
any state or other jurisdiction shall immediately cause the termination of this
Agreement. Dealer further agrees to notify VKFI promptly in writing of any such
action or event.
c. Dealer agrees that this Agreement is in all respects subject to the
Conduct Rules of the NASD and such Conduct Rules shall control any provision to
the contrary in this Agreement. Without limiting the generality of the
foregoing, Dealer acknowledges that it is solely responsible for all suitability
determinations with respect to offers and sales of Shares of the Funds to
Dealer's customers and that VKFI has no responsibility for the manner of
Dealer's performance of, or for Dealer's acts or omissions in connection with,
the duties and activities Dealer performs under this Agreement.
d. Dealer agrees to be bound by and to comply with all applicable
federal and state laws and all rules and regulations promulgated thereunder
generally affecting the sale or distribution of mutual fund shares or classes of
such shares, including anti-money laundering laws and regulations and applicable
guidance issued by the Department of the Treasury, the SEC and the NASD.
SECTION 2. TERMS AND CONDITIONS APPLICABLE TO DISTRIBUTION OF OPEN-END FUNDS AND
CONTINUOUSLY OFFERED CLOSED-END FUNDS
The following provisions relate to the offer and sale of Shares of (i)
each Open-End Fund, and (ii) any Closed-End Fund that offers its Shares during
an offering period that continues indefinitely (a "Continuously Offered
Closed-End Fund"). Unless otherwise noted, references to "Funds" in this Section
2 shall include both Open-End Funds and Continuously Offered Closed-End Funds.
a. Orders
(i) Dealer agrees to offer and sell Shares of the Funds
(including classes thereof) only at the regular public offering price applicable
to such Shares and in effect at the time of each transaction. The procedures
relating to all orders and the handling of each order (including the manner of
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computing the net asset value of Shares and the effective time of orders
received from Dealer) are subject to: (A) the terms of the then-current
prospectus and Statement of Additional Information (including any supplements,
stickers or amendments thereto) relating to each Fund (or, as appropriate, class
thereof), as filed with the SEC (collectively, the "Prospectus"); (B) the new
account application for each Fund (or, as appropriate, class thereof), as
supplemented or amended from time to time; and (C) VKFI's written instructions
and multiple class pricing procedures and guidelines, if any, as provided to
Dealer from time to time. To the extent that the Prospectus contains provisions
that are inconsistent with this Agreement or any other document, the terms of
the Prospectus shall be controlling.
(ii) VKFI reserves the right at any time, and without notice
to Dealer, to suspend the sale of Shares or to withdraw or limit the offering of
Shares.
(iii) In all offers and sales of the Shares to the public,
Dealer is not authorized to act as broker or agent for, or employee of, VKFI,
any Fund or any other dealer, and Dealer shall not represent to any third party
that Dealer has such authority or is acting in such capacity. Rather, Dealer
agrees that it is acting as principal for Dealer's own account or as agent on
behalf of Dealer's customers in all transactions in Shares, except as provided
in Section 2.b. (viii) hereof.
(iv) All orders are subject to acceptance by VKFI in its sole
discretion and become effective only upon confirmation by VKFI. VKFI reserves
the unqualified right not to accept any specific order for the purchase or sale
of Shares.
(v) VKFI agrees that it will accept from Dealer orders placed
through a remote terminal or otherwise electronically transmitted via the
National Securities Clearing Corporation ("NSCC") Fund/SERV Networking program,
provided, however, that appropriate documentation thereof and agreements
relating thereto are executed by both parties to this Agreement, including in
particular the standard NSCC Networking Agreement and any other related
agreements between VKFI and Dealer deemed appropriate by VKFI, and that all
accounts opened or maintained pursuant to that program will be governed by
applicable NSCC rules and procedures. Both parties further agree that, if the
NSCC Fund/SERV Networking program is used to place orders, the standard NSCC
Networking Agreement will control insofar as there is any conflict between any
provision of this Dealer Agreement and the standard NSCC Networking Agreement.
b. Duties of Dealer
(i) Dealer agrees to purchase Shares only from VKFI or from
Dealer's customers.
(ii) Dealer agrees to enter orders for the purchase of Shares
only from VKFI and only for the purpose of covering purchase orders Dealer has
already received from its customers or for Dealer's own bona fide investment.
(iii) Dealer agrees to date and time stamp all orders for the
purchase or sale of Shares received by Dealer, and to promptly forward such
orders to VKFI in time for processing at the public offering price next
determined after receipt of such orders by Dealer, in each case as described in
the applicable Prospectus. Dealer represents that it has procedures in place
reasonably designed to ensure that orders received by Dealer are handled in a
manner consistent with Rule 22c-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"), and any SEC staff positions or interpretations issued
thereunder.
(iv) Dealer agrees not to withhold placing orders for Shares
with VKFI so as to profit itself as a result of such inaction.
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(v) Dealer agrees to maintain records of all purchases and
sales of Shares made through Dealer and to furnish VKFI or regulatory
authorities with copies of such records upon request. In that regard, Dealer
agrees that, unless Dealer holds Shares as nominee for its customers or
participates in the NSCC Fund/SERV Networking program, at certain matrix levels,
it will provide VKFI with all necessary information to comply properly with all
applicable federal, state and local reporting and record keeping requirements,
including, without limitation, backup and nonresident alien withholding
requirements for its customer accounts. Dealer represents and agrees that all
Taxpayer Identification Numbers ("TINs") provided are certified, and that no
account that requires a certified TIN will be established without such certified
TIN. With respect to all other accounts, including Shares held by Dealer in
omnibus accounts and Shares purchased or sold through the NSCC Fund/SERV
Networking program, at certain matrix levels, Dealer agrees to perform all
federal, state and local tax reporting with respect to such accounts, including,
without limitation, redemptions and exchanges.
(vi) Dealer agrees to distribute or cause to be delivered to
its customers Prospectuses, proxy solicitation materials and related information
and proxy cards, semi-annual and annual shareholder reports and any other
materials in compliance with applicable legal requirements, except to the extent
that VKFI expressly undertakes in writing to do so on Dealer's behalf.
(vii) Dealer agrees that payment for Shares ordered from VKFI
shall be in Fed Funds, New York clearinghouse or other immediately available
funds and that such funds shall be received by VKFI by the earlier of: (A) the
end of the third (3rd) business day following Dealer's receipt of the customer's
order to purchase such Shares; or (B) the settlement date established in
accordance with Rule 15c6-1 under the Securities Exchange Act of 1934, as
amended (the "1934 Act"). If such payment is not received by VKFI by such date,
Dealer shall forfeit its right to any compensation with respect to such order,
and VKFI reserves the right, without notice, to cancel the sale, or, at its
option (in the case of Open-End Funds), to sell the Shares ordered back to the
Fund, in which case VKFI may hold Dealer responsible for any loss, including
loss of profit, suffered by VKFI resulting from Dealer's failure to make
payment. If a purchase is made by check, the purchase is deemed made upon
conversion of the purchase instrument into Fed Funds, New York clearinghouse or
other immediately available funds.
(viii) Dealer agrees that it shall assume responsibility for
any loss to the Fund caused by a correction to any order placed by Dealer that
is made subsequent to the trade date for the order, to the extent such order
correction was not based on any negligence on VKFI's part. Dealer further agrees
that it will immediately pay such loss to the Fund upon notification.
(ix) Dealer agrees that, in connection with orders for the
purchase of Shares on behalf of any IRAs, 401(k) plans or other retirement plan
accounts, by mail, telephone, or wire, Dealer shall act as agent for the
custodian or trustee of such plans (solely with respect to the time of receipt
of the application and payments), and Dealer shall not place such an order with
VKFI until it has received from its customer payment for such purchase and, if
such purchase represents the first contribution to such a retirement plan
account, the completed documents necessary to establish the retirement plan.
(x) Dealer agrees that it will not make any conditional orders
for the purchase or redemption of Shares and acknowledges that VKFI will not
accept conditional orders for Shares.
(xi) Dealer agrees that all out-of-pocket expenses incurred by
it in connection with its activities under this Agreement will be borne by
Dealer.
c. Multiple Classes of Shares; Reduced Sales Charges
(i) VKFI may, from time to time, provide Dealer with written
guidelines or standards relating to the sale, distribution or servicing of Funds
offering multiple classes of Shares,
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including classes offering different sales charges, Rule 12b-1 Plan,
Distribution Plan or Service Plan (as described below) fees or other operating
expenses.
(ii) In accordance with the terms of each applicable
Prospectus, Dealer acknowledges that a reduced sales charge or no sales charge
(collectively, "discounts") may be available to purchasers of Shares. Dealer
represents that it has, and will maintain during the term of this Agreement,
adequate written supervisory procedures and internal controls to ensure that
Dealer's customers receive all available discounts, and Dealer agrees: (A) to
inform its customers of applicable discount opportunities and to inquire about
other qualifying holdings that might entitle customers to receive discounts; (B)
to advise VKFI, contemporaneously with each purchase order it forwards to VKFI
as agent for its customers, of the availability of any discounts; and (C) that
in the event that Dealer fails to provide VKFI with information concerning the
availability of discounts as provided in (B) above, Dealer, and not VKFI or the
Funds, shall be responsible for reimbursing its customer any applicable discount
amount.
d. Dealer Compensation
(i) In return for providing the services set forth in this
Agreement, Dealer shall be entitled to any concessions and/or sales charges
(collectively, "Concessions") set forth in the Prospectus of the applicable
Fund. In addition, VKFI may pay Dealer a fee for performing distribution-related
services and/or performing shareholder services with respect to Shares. Dealer
acknowledges and agrees that any compensation to be paid for performing
distribution-related services with respect to Shares shall be paid pursuant to a
"Rule 12b-1 Plan" adopted by the applicable Open-End Fund pursuant to Rule 12b-1
under the 1940 Act, or, in the case of a Continuously Offered Closed-End Fund,
pursuant to such Fund's plan adopted pursuant to Rule 12b-1 under the 1940 Act
as if such Continuously Offered Closed-End Fund were an open-end investment
company (a "Distribution Plan") or Service Plan, and that to the extent VKFI
waives any payments payable to VKFI under such Rule 12b-1 Plan, Distribution
Plan or Service Plan, as the case may be, the amounts payable to Dealer will be
reduced accordingly. In determining the amount payable to Dealer hereunder, VKFI
reserves the right to exclude any sales which it reasonably determines are not
made in accordance with the terms of the Prospectus and provisions of this
Agreement.
(ii) Dealer agrees that each Fund may, without prior notice,
suspend or eliminate the payment of any compensation, including Rule 12b-1 Plan
payments, Distribution Plan payments, Service Plan payments or other dealer
compensation, by amendment, sticker or supplement to the then current Prospectus
for such Fund. VKFI shall have no obligation to pay any compensation to Dealer
for the sale of Shares of a Fund until VKFI receives the related compensation
from the Fund, and VKFI's liability to Dealer for such payments is limited
solely to the related compensation that VKFI receives from such Fund.
e. Redemptions, Repurchases and Exchanges of Open-End Funds
(i) Dealer agrees that it will not make any representations to
shareholders relating to the redemption of their Shares other than the
statements contained in the applicable Prospectus and the underlying
organizational documents of the Open-End Fund to which it refers, and that
Dealer will pay as redemption proceeds to shareholders the net asset value,
minus any applicable redemption fee, determined after receipt of the order as
discussed in the Prospectus.
(ii) Dealer agrees not to repurchase any Shares from its
customers at a price below that next quoted by an Open-End Fund for redemption
or repurchase, i.e., at the net asset value of such Shares, less any applicable
redemption fee, in accordance with the Open-End Fund's Prospectus. Dealer shall,
however, be permitted to sell Shares for the account of the customer or record
owner to an Open-
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End Fund at the repurchase price then currently in effect for such Shares and
may charge the customer or record owner a fair service fee or commission for
handling the transaction, provided Dealer discloses the fee or commission to the
customer or record owner. Nevertheless, Dealer agrees that it shall not maintain
a secondary market in such repurchased Shares.
(iii) Dealer agrees that, with respect to a redemption order
it has made, if instructions in proper form, including any outstanding
certificates, are not received by VKFI within the time customary or required by
law, the redemption may be canceled without any responsibility or liability on
VKFI's part or on the part of any Open-End Fund, or VKFI, at its option, may buy
the shares redeemed on behalf of the Open-End Fund, in which latter case VKFI
may hold Dealer responsible for any loss, including loss of profit, suffered by
VKFI resulting from VKFI's failure to settle the redemption.
(iv) Dealer agrees that if any Share is repurchased by any
Open-End Fund or is tendered for redemption within seven (7) business days after
confirmation by VKFI of the original purchase order from Dealer, Dealer shall
forfeit its right to any compensation with respect to such Share and shall
forthwith refund to VKFI the full compensation, if any, paid to Dealer on the
original sale. VKFI agrees to notify Dealer of such repurchase or redemption
within a reasonable time after settlement. Termination or cancellation of this
Agreement shall not relieve Dealer from its obligation under this provision.
(v) Dealer agrees that it will comply with any restrictions
and limitations on exchanges described in each Open-End Fund's Prospectus,
including any restrictions or prohibitions relating to frequent purchases and
redemptions (i.e., market timing).
f. Repurchases and Tender Offers of Continuously Offered
Closed-End Funds
(i) Dealer agrees that Shares of a Continuously Offered
Closed-End Fund will not be repurchased by either the Continuously Offered
Closed-End Fund (other than through repurchase offers at specific intervals) or
VKFI, and that no secondary market for the Shares of the Continuously Offered
Closed-End Fund exists currently or is expected to develop. Dealer further
agrees that, in the event any purchase order for shares of a Continuously
Offered Closed-End Fund is canceled after confirmation by VKFI, such Shares may
not be repurchased, remarketed or otherwise disposed of by or through VKFI.
(ii) Dealer agrees that, while a Continuously Offered
Closed-End Fund will make repurchase offers at specific intervals pursuant to
Rule 23c-3 under the 1940 Act, there is no assurance that following such a
repurchase offer, Shares tendered will be repurchased by the Continuously
Offered Closed-End Fund. Dealer further agrees that, as set forth in the
applicable Continuously Offered Closed-End Fund's Prospectus, under certain
circumstances an early withdrawal charge payable to VKFI may be imposed on
Shares accepted for repurchase. Any representation as to a repurchase offer by a
Continuously Offered Closed-End Fund, other than as set forth in the
Continuously Offered Closed-End Fund's Prospectus, is expressly prohibited.
g. Fund Information
(i) Dealer agrees that neither it nor any of its partners,
directors, officers, employees, and agents is authorized to give any information
or make any representations concerning Shares of any Fund except those contained
in the Fund's Prospectus or in materials provided by VKFI.
(ii) VKFI will supply to Dealer reasonable quantities of
Prospectuses, sales literature, sales bulletins, and additional sales
information as approved by VKFI and the Funds. Dealer
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is not authorized to modify or translate any such materials without VKFI's prior
written consent. Dealer agrees to use only advertising or sales material
relating to the Funds that: (A) is supplied by VKFI, or (B) conforms to the
requirements of all applicable laws or regulations of any government or
authorized agency having jurisdiction over the offering or sale of Shares of the
Funds and is approved in writing by VKFI in advance of its use. Such approval
may be withdrawn by VKFI in whole or in part upon written notice to Dealer, and
Dealer shall, upon receipt of such notice, immediately discontinue the use of
such sales literature, sales bulletins and advertising.
SECTION 3. TERMS AND CONDITIONS APPLICABLE TO THE DISTRIBUTION OF CLOSED-END
FUNDS
The following provisions relate to the initial offer and sale of Shares
of the Closed-End Funds other than Continuously Offered Closed-End Funds.
a. Sales to Dealer During the Initial Offering
(i) VKFI will advise Dealer by telegram, telex, facsimile
transmission or other written form, electronic or otherwise (collectively, the
"Notification"), of (A) the method and terms of the offering; (B) the time of
the release of Shares for sale to the public; (C) the initial offering price,
the selling concession, and the portion of the selling concession allowable (the
"reallowance") to certain dealers (together with Dealer, the "Selected
Dealers"); (D) the time at which the subscription books will be opened; and (E)
the amount, if any, of Shares reserved for purchase by Dealer and the period of
reservation.
(ii) An offering may be made on the basis of reservations or
allotments against subscriptions. Acceptance of any reserved Shares after the
time specified therefor in the Notification and any application for additional
Shares will be subject to rejection in whole or in part. The offering may be
withdrawn by VKFI at any time without notice and the right is reserved to reject
any subscription in whole or in part.
(iii) Any Selected Dealer may buy Shares from or sell Shares
to any other Selected Dealer at the offering price, less all or any part of the
selling concession.
(iv) Dealer agrees that any Shares purchased by it in an
offering will be sold to the public (A) at the initial public offering price set
forth in the Prospectus relating to the applicable Shares, and (B) subject to
any terms and limitations contained in such Prospectus or in the Notification.
Dealer represents that it is familiar with Rule 15c2-8 under the 1934 Act,
relating to the distribution of preliminary and final prospectuses, and Dealer
agrees to comply therewith.
(v) Subject to the terms hereof, upon receipt of the
Notification from VKFI, Dealer may reoffer the Shares purchased by it in
conformity with the terms of offering set forth in the Prospectus and the
Notification. Dealer shall not, without prior written approval from VKFI, offer
or sell such Shares below the offering price before the termination of the
offering, except that a concession for each Share (as set forth in the
Notification) may be allowed by Dealer to dealers who are members in good
standing of the NASD and who agree in writing to comply with Rule 2740(c) of the
NASD Conduct Rules or to foreign dealers not eligible for such membership who
agree in writing (A) to conform to the NASD Conduct Rules in making sales to
purchasers outside of the United States as though they were members of the NASD,
including, without limitation, the provisions of NASD Conduct Rules 2730, 2740
and 2750 and Rule 2420 as such rules apply to a non-member broker-dealer in a
foreign country, and (B) not to offer or sell any of the Shares in the United
States or to persons they have reason to believe are citizens or residents of
the United States.
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(vi) Dealer agrees to advise VKFI, prior to the termination of
the offering, of the amount of Shares purchased by Dealer in such offering
remaining unsold, and to sell to VKFI such amount of any unsold Shares as VKFI
may designate, at the offering price, less an amount determined by VKFI not in
excess of the selling concession.
b. Delivery and Payment
(i) Payment for and delivery of Shares purchased by Dealer
hereunder will be made through the facilities of the Depository Trust Company,
if Dealer is a member, or, if Dealer is not a member, settlement may be made
through a correspondent who is a member pursuant to instructions that Dealer
provides to VKFI.
(ii) VKFI may, at its discretion, require Dealer to pay the
full public offering price for any Shares that it purchases pursuant to this
Agreement.
(iii) VKFI will specify a period during which sales
concessions and other additional compensation, if any, as described in the
applicable Prospectus ("Compensation") is subject to forfeiture (the "Forfeiture
Period"). The Forfeiture Period will generally begin after the date that the
Shares are initially listed on a national securities exchange, and end on or
before the first dividend payment date with respect to such Shares. In the event
that any Shares purchased through an order received from Dealer are resold in
the open market or otherwise during the Forfeiture Period, VKFI reserves the
right to require Dealer to forfeit any Compensation with respect to such Shares,
and Dealer agrees to repay to VKFI, promptly upon demand, any such forfeited
Compensation previously paid to Dealer.
SECTION 4. REGISTRATION OF SHARES
a. VKFI acts solely as agent for the Funds and VKFI shall have no
obligation or responsibility with respect to Dealer's right to purchase or sell
Shares in any jurisdiction.
b. VKFI shall periodically furnish Dealer with information identifying
the states or jurisdictions in which it is believed that all necessary notice,
registration or exemptive filings for Shares have been made under applicable
securities laws such that offers and sales of Shares may be made in such states
or jurisdictions. VKFI shall have no obligation to make such notice,
registration or exemptive filings with respect to Shares in any state or
jurisdiction.
c. Dealer agrees not to transact orders for Shares in states or
jurisdictions in which it has been informed that Shares may not be sold or in
which it and its personnel are not authorized to sell Shares.
d. VKFI shall have no responsibility, under the laws regulating the
sale of securities in the United States or any foreign jurisdiction, with
respect to the qualification or status of Dealer or Dealer's personnel selling
Fund Shares.
e. Dealer agrees that it will make no offers or sales of Shares in any
foreign jurisdiction, except with the express written consent of VKFI.
SECTION 5. INDEMNIFICATION
a. Dealer agrees to indemnify, defend and hold harmless VKFI and the
Funds and their directors, trustees, officers, employees, shareholders, agents,
affiliates and each person who controls or is controlled by VKFI, within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), from
any and all losses, claims, liabilities, costs, and expenses, including attorney
fees (collectively, "Losses"), that may be assessed against or suffered or
incurred by any of them howsoever they arise, and
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as they are incurred, which relate in any way to: (i) Dealer's lack of good
faith, negligence, or willful misconduct in carrying out its duties and
responsibilities under this Agreement; (ii) the failure of Dealer to comply with
any applicable law, rule or regulation (including, without limitation, the
securities laws and regulations of the United States or any state or
jurisdiction) in connection with the offer or sale by Dealer of Shares of the
Funds pursuant to this Agreement, or the discharge of any of its other duties
and responsibilities under this Agreement; (iii) any alleged tort or breach of
contract related to the offer or sale by Dealer of Shares of the Funds pursuant
to this Agreement (except to the extent that VKFI's negligence or failure to
follow correct instructions received from Dealer is the cause of such Loss);
(iii) any redemption or exchange pursuant to instructions received from Dealer
or its directors, trustees, officers, partners, employees, agents, or
affiliates; (iv) incorrect investment instructions received by VKFI from Dealer;
or (v) the breach by Dealer of any of its representations and warranties
specified herein or the Dealer's failure to comply with the terms and conditions
of this Agreement, whether or not such action, failure, error, omission,
misconduct or breach is committed by Dealer or its directors, trustees,
officers, partners, employees, agents, affiliates or any person who controls or
is controlled by Dealer within the meaning of the Securities Act.
b. VKFI agrees to indemnify, defend and hold harmless Dealer and its
directors, trustees, officers, partners, employees, agents, affiliates and each
person who controls or is controlled by Dealer, within the meaning of the
Securities Act, from any and all Losses that may be assessed against or suffered
or incurred by any of them howsoever they arise, and as they are incurred, which
relate in any way to (i) VKFI's lack of good faith, gross negligence, or willful
misconduct in carrying out its duties and responsibilities under this Agreement;
(ii) the failure of VKFI to comply with any applicable law, rule or regulation
in connection with the discharge of its duties and responsibilities under this
Agreement; (iii) any untrue statement of a material fact, or any omission to
state a material fact, contained in a Prospectus or in any written sales
literature or other marketing materials provided by VKFI to the Dealer, or (iv)
the breach by VKFI of any of its representations and warranties specified herein
or VKFI's failure to comply with the terms and conditions of this Agreement,
whether or not such action, failure, error, omission, misconduct or breach is
committed by VKFI or its directors, officers, employees agents, affiliates or
any person who controls or is controlled by VKFI within the meaning of the
Securities Act.
c. Dealer agrees to notify VKFI, within a reasonable time, of any claim
or complaint or any enforcement action or other proceeding with respect to
Shares offered hereunder against Dealer or its partners, affiliates, officers,
directors, employees or agents, or any person who controls Dealer, within the
meaning of Section 15 of the Securities Act.
SECTION 6. TERMINATION; AMENDMENT
a. In addition to the automatic termination of this Agreement specified
in Section 1.b. of this Agreement, each party to this Agreement may unilaterally
cancel its participation in this Agreement by giving thirty (30) days prior
written notice to the other party. In addition, each party to this Agreement
may, in the event of a material breach of this Agreement by the other party,
terminate this Agreement immediately by giving written notice to the other
party, which notice sets forth in reasonable detail the nature of the breach.
Such notice shall be deemed to have been given and to be effective on the date
on which it was either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a telegraph office for
transmission to the other party's designated person at the addresses shown
herein.
b. This Agreement shall terminate immediately upon the appointment of a
trustee under the Securities Investor Protection Act or any other act of
insolvency by Dealer.
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c. The termination of this Agreement by any of the foregoing means
shall have no effect upon transactions entered into prior to the effective date
of termination and shall not relieve Dealer of its obligations, duties and
indemnities specified in this Agreement. A trade placed by Dealer subsequent to
its voluntary termination of this Agreement will not serve to reinstate the
Agreement. Reinstatement, except in the case of a temporary suspension of
Dealer, will only be effective upon written notification by VKFI.
d. This Agreement is not assignable or transferable and will terminate
automatically in the event of its "assignment," as defined in the 1940 Act, and
the rules, regulations and interpretations thereunder. VKFI may, however,
transfer any of its duties under this Agreement to any entity that controls or
is under common control with VKFI.
e. This Agreement may be amended by VKFI at any time by written notice
to Dealer. Dealer's placing of an order or accepting payment of any kind after
the effective date and receipt of notice of such amendment shall constitute
Dealer's acceptance of such amendment.
f. Dealer acknowledges and agrees that if Dealer terminates this
Agreement, VKFI may, without liability of any kind,
(i) refuse to establish any account with respect to any
affected customer;
(ii) delay the establishment of any account with respect to
any affected customer;
(iii) close accounts previously established with respect to
any affected customer;
(iv) refuse to engage in any transactions (except redemption
requests) with respect to any affected customer;
(v) cancel any pending transactions (except redemption
requests) with respect to any affected customer;
(vi) liquidate the account of any affected customer; and
(vii) return to the appropriate person securities or other
property held in such customer's account.
SECTION 7. REPRESENTATIONS AND WARRANTIES
a. VKFI represents and warrants that:
(i) It is a corporation duly organized and existing and in
good standing under the laws of the state of Delaware and is duly registered or
exempt from registration as a broker-dealer in all states and jurisdictions in
which it provides services as a non-exclusive distributor for the Funds.
(ii) It is a member in good standing of the NASD.
(iii) It is empowered under applicable laws and by VKFI's
organizational documents to enter into this Agreement and perform all activities
and services of VKFI provided for herein and that there are no impediments,
prior or existing, regulatory, self-regulatory, administrative, civil or
criminal matters affecting VKFI's ability to perform under this Agreement.
(iv) All requisite actions have been taken to authorize VKFI
to enter into and perform this Agreement.
9
b. In addition to the representations and warranties found
elsewhere in this Agreement, Dealer represents and warrants that:
(i) It is duly organized and existing and in good standing
under the laws of the state, commonwealth or other jurisdiction in which Dealer
is organized and that Dealer will not offer Shares of any Fund for sale in any
state or jurisdiction where such Shares may not be legally sold or where Dealer
is not qualified to act as a broker-dealer.
(ii) It is empowered under applicable laws and by Dealer's
organizational documents to enter into this Agreement and perform all activities
and services of the Dealer provided for herein and that there are no
impediments, prior or existing, regulatory, self-regulatory, administrative,
civil or criminal matters affecting Dealer's ability to perform under this
Agreement.
(iii) All requisite actions have been taken to authorize
Dealer to enter into and perform this Agreement.
(iv) It is not, at the time of the execution of this
Agreement, subject to any enforcement or other proceeding with respect to its
activities under state or federal securities laws, rules or regulations.
(v) It has, and will maintain during the term of this
Agreement, appropriate broker's blanket bond insurance policies covering any and
all acts of Dealer's directors, trustees, officers, partners, employees, and
agents reasonably necessary in light of its obligations under this Agreement,
with coverage limits in amounts standard in the industry, and adequate to
reasonably protect and indemnify VKFI and the Funds against any Loss which any
party may suffer or incur, directly or indirectly, as a result of any action or
omission by Dealer or Dealer's directors, officers, partners, employees, and
agents. The mere purchase and existence of insurance does not reduce or release
Dealer from liability incurred and/or assumed within the scope of this
Agreement. Dealer's failure to maintain insurance shall not relieve it of
liability under this Agreement.
(vi) It is a "financial institution" as defined in 31 U.S.C.
5312(a)(2) or (c)(1) and is regulated by a "Federal functional regulator" as
defined in 31 CFR Section 103.120(a)(2).
(vii) If any of the representations set forth in Section 7 or
Section 8 at any time ceases to be true, Dealer shall promptly notify VKFI of
this fact. Such notice shall be provided in accordance with Section 16.
SECTION 8. ANTI-MONEY LAUNDERING RESPONSIBILITY
a. Dealer represents and warrants that it is in compliance and will
continue to be in compliance with all applicable anti-money laundering laws and
regulations, including the Bank Secrecy Act, as amended by the USA PATRIOT Act,
and implementing regulations of the Bank Secrecy Act ("BSA Regulations") and
applicable guidance issued by the SEC and the guidance and rules of the
applicable Exchanges, SROs and the NASD (collectively, "Guidance").
b. In connection with VKFI's reliance on Dealer to perform Customer
Identification Program ("CIP") procedures on its behalf, Dealer represents and
warrants that (1) Dealer is subject to a rule implementing 31 U.S.C. 5318(h) and
maintains an anti-money laundering program consistent with the USA PATRIOT Act
and the rules thereunder; (2) Dealer is regulated by a Federal functional
regulator as that term is defined under 31.C.F.R. Section 103.120(a)(2); (3)
Dealer has implemented a CIP compliant with Section 326 that enables Dealer to
form a reasonable belief that it knows the true identity of its customers,
including procedures to obtain information from and verify the identity of
customers,
10
maintain records of the information used to verify identity, determine whether
the customer appears on any government list of known or suspected terrorists or
terrorist organizations, and provide customers with adequate notice that the
institution is requesting information to verify their identities; and (4) Dealer
will certify annually that it has implemented its anti-money laundering program
and that it or its agent will perform all aspects of its CIP procedures with
respect to customers referred to the Fund by the Dealer.
c. Dealer represents and warrants that to the extent that any of its
customers who maintain Fund accounts is a current or former Senior Foreign
Political Figure ("SFPF"), an immediate family member of a SFPF, a person who is
widely known (or is actually known by the Dealer) to maintain a close personal
relationship with any such individual, or a corporation, business or other
entity that has been formed by or for the benefit of such individual, it has
conducted appropriate due diligence of such customer consistent with Section 312
of the USA PATRIOT Act and any applicable BSA Regulations and Guidance.
d. Dealer represents and warrants that to the extent its customers who
maintain Fund accounts are foreign banks, it has taken reasonable measures and
has obtained certifications and will obtain re-certifications that indicate that
the customers are not foreign shell banks, as defined in the BSA Regulations.
e. Dealer will take all reasonable and practicable steps to ensure that
it does not accept or maintain investments in any Fund, directly or indirectly,
from:
(i) A person or entity (A) who is or becomes subject to
sanctions administered by the U.S. Office of Foreign Assets Control ("OFAC"), is
included in any executive order or is on the list of Specially Designated
Nationals and Blocked Persons maintained by OFAC, or (B) whose name appears on
such other lists of prohibited persons and entities as may be mandated by
applicable U.S. law or regulation.
(ii) A foreign shell bank (i.e., a bank with no physical
presence in any country).
f. Dealer agrees to immediately notify in writing the Anti-Money
Laundering Compliance Officer of VKFI if it becomes aware of any suspicious
activity or pattern of activity or any activity that may require further review
to determine whether it is suspicious in connection with the Funds.
g. Dealer agrees that if the Funds or VKFI is required to supply
information, documentation or guidance to a securities regulatory organization
("SRO") or government department or agency about the CIP of the Funds or VKFI or
the measures taken to obtain information and to verify the identity of specific
clients of the Funds, Dealer shall allow such SRO or government department or
agency to examine its files.
SECTION 9. MARKET TIMING
Dealer covenants that it shall cooperate with VKFI to identify and
discourage market timers. If any market timer buying or redeeming Shares comes
to the attention of Dealer, it will immediately notify VKFI. Dealer acknowledges
that VKFI may refuse a request to purchase Shares if VKFI believes such purchase
request includes a request by a market timer.
SECTION 10. CONFIDENTIALITY
All books, records, information and data pertaining to the business of
the other party ("Confidential Information") that are exchanged or received in
connection with this Agreement shall be
11
kept confidential and shall not be voluntarily disclosed to any other person,
except (i) if such information is already publicly available; (ii) as may be
required solely for the purpose of carrying out a party's duties and
responsibilities under this Agreement; (iii) as required by order or demand of a
court or other governmental or regulatory body or as otherwise required by law;
(iv) as may be required to be disclosed to a party's attorneys, accountants,
regulatory examiners or insurers for legitimate business purposes; or (v) with
the express prior written permission of the other party.
SECTION 11. PRIVACY
Dealer represents that it has adopted and implemented procedures to
safeguard customer information and records that are reasonably designed to: (a)
ensure the security and confidentiality of customer records and information; (b)
protect against any anticipated threats or hazards to the security or integrity
of customer records and information; (c) protect against unauthorized access to
or use of customer records or information that could result in substantial harm
or inconvenience to any customer; (d) protect against unauthorized disclosure of
non-public personal information to unaffiliated third parties; and (e) otherwise
ensure Dealer's compliance with SEC Regulation S-P, adopted pursuant to the
Xxxxx-Xxxxx-Xxxxxx Act of 1999, and any other federal and state privacy laws
which may be enacted in the future.
SECTION 12. SETOFF; GOVERNING LAW
a. Should any of Dealer's compensation accounts with VKFI have a debit
balance, or should Dealer otherwise owe any amounts to VKFI, VKFI shall be
permitted to offset and recover the amount owed from any account Dealer has with
VKFI, without notice or demand to Dealer.
b. This Agreement shall be governed and construed in accordance with
the laws of the state of New York, without reference to the choice-of-law
principles thereof.
SECTION 13. INVESTIGATIONS AND PROCEEDINGS
The parties to this Agreement agree to cooperate fully in any
securities regulatory investigation or proceeding or judicial proceeding with
respect to each party's activities under this Agreement and promptly to notify
the other party of any such investigation or proceeding.
SECTION 14. CAPTIONS
All captions used in this Agreement are for convenience only, are not a
party hereof, and are not to be used in construing or interpreting any aspect
hereof.
SECTION 15. SEVERABILITY
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law.
If, however, any provision of this Agreement is held under applicable law to be
invalid, illegal, or unenforceable in any respect, such provision shall be
ineffective only to the extent of such invalidity, and the validity, legality
and enforceability of the remaining provisions of this Agreement shall not be
affected or impaired in any way.
SECTION 16. SURVIVAL
The representations, warranties, covenants and agreements of the
undersigned contained in this Agreement, including, without limitation, the
indemnity agreement contained in Section 5 hereof, shall survive any termination
of this Agreement.
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SECTION 17. NOTICES
Every notice required by this Agreement will be in writing and deemed
given (i) the next Business Day if sent by a nationally recognized overnight
courier service that provides evidence of receipt, (ii) the same Business Day if
sent by 3:00 p.m. (receiving party's time) by facsimile transmission and
confirmed by a telephone call, or (iii) on the third Business Day if sent by
certified mail, return receipt requested. Unless otherwise notified in writing,
all notices to VKFI shall be given or sent to VKFI at its offices, located at:
Xxx Xxxxxx Funds
Attn: Legal Department
0 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Unless otherwise notified in writing, all notices to Dealer shall be
given or sent to Dealer at the Dealer's address shown on the signature page to
this Agreement.
SECTION 18. NON-EXCLUSIVITY
Each of the parties acknowledges and agrees that this Agreement and the
arrangements described herein are intended to be non-exclusive and that each of
the parties is free to enter into similar agreements and arrangements with other
entities.
SECTION 19. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the parties hereto
with respect to the subject matter contained herein and supersedes all previous
agreements and/or understandings of the parties. This Agreement shall be binding
upon the parties hereto when signed by Dealer and accepted by VKFI.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year set forth below.
XXX XXXXXX FUNDS INC.
By:
--------------------------------
Xxxxxxx X. Xxxxx, President
Date:
--------------------------------
DEALER:
--------------------------------
By:
--------------------------------
(Signature)
Name:
--------------------------------
Title:
--------------------------------
Date:
--------------------------------
Address:
------------------------------
-----------------------------------------
Telephone: ( )
----------------------
Facsimile: ( )
----------------------
NASD CRD #:
-----------------------------
TAX ID #:
-----------------------------
14
