SHAREHOLDER SERVICES AGREEMENT
BETWEEN
FOUNDERS FUNDS, INC. AND
FOUNDERS ASSET MANAGEMENT LLC
AGREEMENT made as of the 1st day of April, 1998, in Denver, Colorado, by
and between Founders Funds, Inc., a Maryland corporation (the "Fund"), and
Founders Asset Management LLC, a Delaware limited liability company (hereinafter
referred to as "Founders").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, Founders is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser and providing certain other administrative, accounting, and
recordkeeping services to the Fund; and
WHEREAS, Founders is registered as a transfer agent under the
Securities Exchange Act of 1934; and
WHEREAS, pursuant to this Shareholder Services Agreement (the
"Agreement"), Founders will render certain transfer agent and related services
to the Fund and to the Fund's shareholders (the "Services") in the manner and on
the terms and conditions hereinafter set forth; and
WHEREAS, the Fund has entered into a Transfer Agent Agreement with
Investors Fiduciary Trust Company ("IFTC") (the "TA Agreement"), pursuant to
which IFTC provides certain other transfer agent services to the Fund; and
WHEREAS, Founders has entered into a service agreement with IFTC (the
"Service Agreement"), pursuant to which a computerized data processing
recordkeeping system for securityholder accounting (the "TA2000(TM) System")
using IFTC owned or licensed software developed by DST Technologies, Inc., an
affiliate of IFTC ("DST") is available to Founders in providing transfer agent
services to the Fund; and
WHEREAS, the Fund has entered into a Software Remote Access and License
Agreement with DST (the "Remote Access Agreement"), pursuant to which image
based application software and related user documentation to be operated in
conjunction with the TA2000(TM) System (the "Auxiliary Software") is available
to Founders in providing other transfer agent services to the Fund; and
WHEREAS, Founders has entered into a Telephone and CRT Input Equipment
Recovery Services Agreement with DST (the "Back-Up Agreement"), pursuant to
which certain computer and backup capabilities will be made available to
Founders for use in providing transfer agent services to the Fund in the event
of a disaster to Founders' telephone and cathode-ray tube input equipment; and
WHEREAS, the Fund has entered into an Agreement for Handling Drafts with
IFTC and DST (the "Drafts Agreement"), pursuant to which the Fund has
established a special account with IFTC to which all drafts drawn by the Fund's
shareholders which are payable through IFTC will be charged; and
WHEREAS, the TA Agreement, the Service Agreement, the Remote Access
Agreement, the Back-Up Agreement, and the Drafts Agreement are collectively
referred to herein as the "Collective Agreements"; and
WHEREAS, the Fund, Founders, IFTC, and DST anticipate that in the next few
years Founders will, on a service-by-service basis and over time, assume the
responsibility for performance of those transfer agent services currently being
provided to the Fund by IFTC; and
WHEREAS, the Fund desires to retain Founders to perform these additional
transfer agent services and Founders desires to perform such services on the
terms and conditions hereinafter set forth; and
WHEREAS, Founders has in the past and will in the future enter into
arrangements with third parties which provide sub-transfer agency,
recordkeeping, investor services, and/or other administrative services (the
"Third Party Services") to participants in 401(k) and other tax-qualified
retirement programs and to participants in other arrangements (the
"Participants"), pursuant to which the third party establishes one or more
omnibus accounts with the Fund, into which investments of the Participants are
pooled; and
WHEREAS, in establishing such omnibus accounts and providing the Third
Party Services, the third parties effectively reduce or eliminate the need for
Services to be provided on behalf of the Participants by Founders; and
WHEREAS, a third party may charge a basis point fee method or other fee
method to Founders or the Funds to compensate it for providing the Third Party
Services to Participants (the "Third Party Fee"); and
WHEREAS, certain of the third parties may be broker-dealers who, in
accordance with applicable federal rules and regulations, may be selected by
Founders to execute portfolio securities transactions on behalf of the Fund; and
WHEREAS, commissions earned by the broker-dealer third party from
executing portfolio transactions on behalf of a specific series fund of the Fund
("Series") may be credited by the broker-dealer against the Third Party Fee
charged to that Series, on a basis which has resulted from negotiations between
Founders and the third party;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and Founders agree as follows:
1. Services. The Fund hereby retains Founders to provide the Services
outlined on Exhibit A hereto, which exhibit is incorporated herein by this
reference. Founders shall at all times use reasonable care, due diligence, and
act in good faith in performing its duties under this Agreement.
2. Collective Agreement Obligations. To the extent that the TA Agreement
and any other Collective Agreement (a) may impose obligations upon the Fund to
ensure that Founders provides services, conforms to a standard of conduct,
adheres to a stipulated process or procedure, or otherwise undertakes to perform
a defined duty or responsibility or (b) provides that Founders performs the
foregoing (collectively, the "Obligations"), Founders shall perform the
Obligations and shall at all times use reasonable care, due diligence, and act
in good faith in performing the Obligations.
3. Staff Maintenance. Founders shall, at its own expense, maintain such
staff and employ or retain such personnel as it shall from time to time
determine to be necessary or useful to the performance of its obligations under
this Agreement. Without limiting the generality of the foregoing, such staff and
personnel may include officers of Founders and persons employed or otherwise
retained by Founders to provide or assist in providing services to the Fund
other than those Services to be provided pursuant to this Agreement.
4. Facilities. Founders shall, at its own expense, provide such office
space, facilities, equipment, and other property or resources as shall be
necessary to provide the Services to the Fund.
5. Fund Information. The Fund will, from time to time, furnish or
otherwise make available to Founders such information relating to the business
and affairs of the Fund as Founders may reasonably require in order to discharge
its duties and obligations hereunder.
6. Fees. The Fund shall pay to Founders a prorated monthly fee equal on an
annual basis to $26.00 for each shareholder account of the Fund considered to be
an open account at any time during the month. This fee shall provide for the
payment of the following:
a. The services rendered and facilities furnished by Founders
under this Agreement; and
b. The services rendered and facilities furnished by IFTC and DST to
the Fund pursuant to the Collective Agreements.
In addition to the $26.00 per account fee, Founders, IFTC, and DST will
also be entitled to reimbursement from the Fund for all reasonable out-of-pocket
expenses incurred by Founders, IFTC, and DST in connection with the performance
of Services under the Agreement and services under the Collective Agreements.
Out-of-pocket expenses with respect to the Agreement shall include, but
are not limited to, expenditures for postage, envelopes, banking fees, courier
fees, overnight mail fees, computer hardware and software licensing fees, voice
response unit fees, checks, continuous forms, reports and statements, telephone
line charges, telegraph, stationery, supplies, costs of outside mailing firms,
record storage costs and media for storage of records (e.g., microfilm and
computer tapes). Out-of-pocket expenses incurred by Founders, IFTC, and/or DST
in connection with the performance of services under the Collective Agreements
shall include those out-of-pocket expenses to which each Collective Agreement
makes reference.
Any other expenses incurred by Founders at the request or with the consent
of the Fund will be reimbursed promptly by the Fund.
As provided herein, Founders will use a portion of the $26.00 account fee
to pay IFTC and DST for services which are performed by each entity pursuant to
the Collective Agreements. Upon assumption by Founders in the future of certain
duties currently performed by IFTC and/or DST pursuant to the terms of the
Collective Agreements, Founders will retain an amount equal to the amount
previously paid to IFTC and/or DST for performing such duties.
In the event any termination fee is appropriately charged to Founders or
to the Fund pursuant to Section 2.02 of the Service Agreement, the fee shall be
paid by the Fund unless circumstances would dictate payment of the fee by
Founders.
In the event any late charges or interest charges are incurred pursuant to
Section 2.03 of the TA Agreement, such charges are the responsibility of
Founders and the Fund will reduce the amount of its next payment to Founders
pursuant to this Agreement by such amount.
The monthly fee described in this Section 6. and any out-of-pocket
reimbursements due to Founders pursuant to this Section shall be payable to
Founders on the first business day of the calendar month next succeeding the
month in which the services are rendered, or as soon thereafter as such
reimbursements can be determined.
In instances in which third parties establish omnibus accounts with one or
more of the Series which represent pooled accounts of Participants whose
transfer agency, recordkeeping, or similar services are being provided by the
third party or its agent and not by Founders and/or IFTC and/or DST, the Series
will reimburse Founders for an amount which shall not be in excess of the $26.00
account fee for each Participant account, which amount Founders will have
previously paid to the third party.
In instances in which commissions are earned by a broker-dealer
third-party from executing portfolio transactions on behalf of a Series,
Founders is authorized to enter into arrangements pursuant to which the
commissions may be credited by the broker-dealer against the Third Party Fee
otherwise payable by that Series to the broker-dealer, on a basis which will
have been negotiated between the broker-dealer and Founders.
Any fees paid by the Fund to Founders as reimbursement for payment by
Founders to a third party in consideration of its providing Third Party Services
shall be paid monthly at the rate of 1/12th of an annual fee not to exceed
$26.00 per Participant account. Such payments shall be made for a Participant
account in the month that it opens or closes, as well as in each month in which
the Participant account remains open, regardless of its account balance.
In the event that the aggregate of the monthly fees per Participant may on
occasion exceed the aggregate monthly Third Party Fees due to the third party,
the applicable Series will accrue the excess through the applicable calendar
year-end, which excess will be available to reimburse Founders if, during any
remaining month in the calendar year, the aggregate monthly Third Party Fees
applicable to that Series paid by Founders exceed the aggregate monthly fees per
Participant. Any accrual remaining at year-end will be credited to the
respective Series' general ledger expense account.
7. Access to Founders' Records. Founders will permit representatives of
the Fund, including the Fund's independent auditors, to have reasonable access
to the personnel and records of Founders in order to enable such representatives
to monitor the quality of services being provided and the level of fees and
reimbursements due Founders pursuant to this Agreement. In addition, Founders
shall promptly deliver to the Board of Directors of the Fund such information as
may reasonably be requested from time to time to permit the Board of Directors
to make an informed determination regarding the rendering of the Services, the
continuation of this Agreement, and the payments contemplated to be made
hereunder.
8. Liability and Indemnification. So long as Founders shall use reasonable
care, due diligence, and act in good faith in performing its duties under this
Agreement, Founders shall not be responsible for, and the Fund shall indemnify
and hold Founders harmless from and against, any and all losses, liabilities,
claims, demands, suits, costs, and expenses (including reasonable attorneys'
fees) which may be asserted against Founders or for which Founders may be held
to be liable, which arise out of, or are attributable to, Founders' discharge of
its responsibilities and obligations imposed by this Agreement.
The Fund shall not be responsible for, and Founders shall indemnify and
hold the Fund harmless from and against, any and all losses, liabilities,
claims, demands, suits, costs, and expenses (including reasonable attorneys'
fees) which may be asserted against the Fund or for which the Fund may be held
to be liable, which arise out of, or are attributable to, any negligence,
willful misconduct, or lack of due care of Founders in discharging the
responsibilities and obligations imposed upon Founders by this Agreement.
Founders and the Fund agree that each shall promptly notify the other in
writing of any situation which represents or appears to involve a claim which
may be the subject of indemnification hereunder, although the failure to provide
such notification shall not relieve the indemnifying party of its liability
pursuant to this Section 8. The indemnifying party shall have the option to
defend against any such claim. In the event the indemnifying party so elects, it
will notify the indemnified party and shall assume the defense of such claim,
and the indemnified party shall cooperate fully with the indemnifying party, at
the indemnifying party's expense, in the defense of such claim. Notwithstanding
the foregoing, the indemnified party shall be entitled to participate in the
defense of such claim at its own expense through counsel of its own choosing.
The indemnified party shall not enter into any settlement of such matter without
the written consent of the indemnifying party, which consent shall not
unreasonably be withheld. The indemnifying party shall not be obligated to
indemnify the indemnified party for any settlement entered into without the
written consent of the indemnifying party. If the consent of the indemnified
party is required to effectuate any settlement and the indemnified party refuses
to consent to any settlement negotiated by the indemnifying party, the liability
of the indemnifying party for losses arising out of or due to such matter shall
be limited to the amount of the rejected proposed settlement.
The obligations of Founders and the Fund pursuant to this Section 8 shall
survive the termination of this Agreement.
9. Effect of Agreement. Nothing herein contained shall be deemed to require the
Fund to take any action contrary to its Articles of Incorporation or its By-Laws
or any applicable law, regulation or order to which it is subject or by which it
is bound, or to relieve or deprive the directors of the Fund and the Fund of
their overall responsibility for and control of the conduct of the business and
affairs of the Fund.
10. Term and Termination. This Agreement shall remain in effect until no later
than May 31, 1998, and shall remain in effect from year to year thereafter
provided such continuance is approved at least annually by the vote of a
majority of the directors of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party, which vote must
be cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that (a) the Fund may, at any time and without the
payment of any penalty, terminate this Agreement upon 90 days' written notice to
Founders; (b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rule thereunder) unless the
Board of Directors of the Fund approves such assignment; and (c) Founders may
terminate this Agreement without payment of penalty on 180 days' written notice
to the Fund. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at the principal
office of such party.
11. Application of Law. This Agreement shall be construed in accordance
with the laws of the State of Colorado and the applicable provisions of the Act.
To the extent the applicable law of the State of Colorado or any of the
provisions herein conflict with the applicable provision of the Act and other
applicable laws, the latter shall control.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
on the day and year first above written.
FOUNDERS FUNDS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------
Xxxxx X. Xxxxxxxx, President
FOUNDERS ASSET MANAGEMENT LLC
By: /s/ Xxxxxxxx X. Xxxxxxx
------------------------------
Xxxxxxxx X. Xxxxxxx, President
EXHIBIT A
TO
SHAREHOLDER SERVICES AGREEMENT
BETWEEN
FOUNDERS FUNDS, INC. AND
FOUNDERS ASSET MANAGEMENT LLC
The following Services will be provided by Founders to the Fund:
1. TELEPHONE SERVICES
Founders' personnel will receive and process all telephone requests
received by Founders to: purchase, redeem or exchange shares; open an
account, add or delete services for an account, explain Fund or market
conditions and/or performance, perform research into account problems and
correct such problems, and other matters related to account servicing;
change an account address or distribution option; correct a registration
or account error; or send an additional account statement. Founders will
also make available to shareholders a Voice Response Unit to provide
routine account and Fund information.
2. TRANSFER AGENCY SERVICES
Founders' personnel will discharge the following duties:
Pick up all incoming mail and scan documents into the DST image system
(the DST image system is that system used by IFTC in performing transfer
agent services on behalf of the Fund).
Open new accounts, purchase shares, and establish services requested by
new shareholders. Contact shareholders in writing or via the phone if
incomplete or inaccurate information is contained in the application.
Make subsequent purchases on behalf of shareholders and 401(k) plans.
Deliver checks to bank, monitor bank account(s), wire funds to appropriate
custodial account.
Receive returned (bounced) checks, cancel purchases, and contact
shareholders regarding any potential losses.
Research all mail returned to Founders by the Post Office and forward such
mail if possible.
Retrieve information from microfilm, microfiche, paper files, and/or the
DST image system needed to respond to inquiries and/or to resolve
research.
Store previously scanned items as required by the SEC and NASD.
Other routine partial transfer agency functions needed to complete the
duties typically expected of a transfer agent performing the services
outlined in this item 2.
3. RETIREMENT SERVICES
a. Retirement Plan Transfers. Founders' personnel will ensure that
retirement plan transfers are accomplished on a timely basis. Applications
to request transfers will be reviewed to ensure that the application is in
proper order before it is sent to the shareholders' custodian. A Founders
representative will contact the shareholder with a personal note once the
transfer arrives at Founders. Founders will maintain an updated list of
the transfer requirements imposed by transfer agents. A Founders
representative will contact the appropriate custodian to ensure that the
custodian has received the transfer application and that the transfer
occurs on a timely basis.
b. Prototype Retirement Plans. Founders' personnel will provide the
following services on prototype non-TRAC2000 retirement plans (TRAC2000
retirement plans are serviced on behalf of the Fund by a third party,
pursuant to separate contract):
(1) Review previous Adoption Agreements (if applicable) and assist
investors in completing the Founders Adoption Agreement.
(2) Review the Founders Adoption Agreement to ensure compliance with
ERISA and IRS regulations.
(3) Complete the Summary Plan Description for the Founders
Adoption Agreement.
(4) Ensure that employers have all the necessary forms to administer
their plans.
(5) Review employee enrollment forms.
(6) Create documentation which consolidates the information from the
enrollment forms and forward such documentation to the employer.
(7) Create and maintain documentation reflecting contributions,
loans, terminations and other types of plan transactions.
(8) Handle all money movements including purchases, exchanges,
redemptions (due to terminations or hardship withdrawals, or loans),
and similar functions.
c. Review of Retirement Accounts. Founders' personnel will periodically
review retirement account information and advise investors before reaching
age 70-1/2 that a distribution may be required.
4. QUALITY CONTROL
Founders' personnel will periodically conduct a quality control audit on
telephone purchase, redemption and exchange requests, account changes and
applications received by Founders. Founders will provide quality control
with respect to other aspects of the transfer agent's operations, such as
the transfer agent's resolution of shareholder inquiries. Founders will
perform quality control on retirement plans.
5. TRAINING
Founders will periodically train personnel of IFTC on Founders' products
and services using its own training materials and training workshops
conducted at the offices of IFTC by Founders' customer service
representatives. Founders will continually provide training to its
investor services representatives with regard to processing exchanges and
redemptions, maintaining accounts, liquidating accounts, transferring
accounts, providing "B" notices, and servicing mutual fund accounts.
6. CORRESPONDENCE
a. Shareholder Inquiries. Founders' personnel will respond to shareholder
inquiries received by Founders and to the extent feasible will resolve
such inquiries.
b. German Shareholders. Founders' personnel will provide
specialized service to German shareholders as may be necessary and
appropriate.
c. Due Diligence. Founders will arrange for the mailing of W-8 and W-9
forms to shareholders to ensure that the Fund is complying with IRS
regulations.
d. Requests for Information. Founders will respond to requests it receives
from shareholders for additional prospectuses and account statements.
7. MONITORING CUSTOMER ACCOUNTS
a. Telephone Purchases. Founders' personnel will contact shareholders who
have purchased shares by phone but have not paid for such shares within
the allowable settlement period.
b. Cancelled Checks. Founders' personnel will contact shareholders who
have cancelled their checks.
c. Dormant Accounts. Founders' personnel will assist in locating
shareholders with dormant accounts.
d. Annual Review. Annually, Founders will review open and closed accounts
and arrange for the purging of certain of these accounts.
e. Short-Term Traders. Founders will monitor shareholder accounts
to uncover abuses of the telephone exchange privilege described in the
prospectus.
8. LARGE MONEY MANAGERS
Founders will assign a contact person to communicate with large money
managers and to ensure that their transactions are timely and properly
conducted and their accounts are set up correctly and continually updated.
9. USE OF IFTC'S SYSTEM AND FACILITIES
Founders hereby accepts responsibility for compliance with the
requirements of Section 6.06 of the TA Agreement.
10. OTHER SERVICES
Founders will provide all other customary and reasonable transfer agent
and prototype non-TRAC2000 retirement plan services which are not being
provided to the Fund pursuant to the provisions of this Agreement, the
Collective Agreements, or other agreements to which the Fund is a party.
