UNDERWRITING AGREEMENT
This Agreement, dated as of December 1, 1999, is made by and between The
Xxxxxxxx Funds, Inc. a Maryland corporation (the "Fund") operating as an open-
end management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), and Provident Distributors, Inc. ("PPDI"), a
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Fund is authorized to issue separate series of shares
representing interests in separate investment portfolios (the "Series"), which
Series are identified on Schedule "A" attached hereto, and which Schedule "A"
may be amended from time to time by mutual agreement among the Parties; and
WHEREAS, PDI is a broker-dealer registered with the U.S. Securities and
Exchange Commission (the "SEC") and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Parties are desirous of entering into an agreement providing
for the distribution by PDI of the shares of the Fund (the "Shares").
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
1. Appointment
-----------
The Fund hereby appoints PDI as its principal agent for the distribution of
the Shares, and PDI hereby accepts such appointment under the terms of this
Agreement. The Fund agrees that it will not sell any Shares to any person
except to fill orders for the Shares received through PDI, provided,
however, that the foregoing exclusive right shall not apply to: (a) Shares
issued or sold in connection with the merger or consolidation of any other
investment company with the Fund or the acquisition by purchase of
otherwise of all or substantially all of the assets of any investment
company or substantially all of the outstanding shares of any such company
by the Fund; (b) Shares which may be offered by the Fund to its
stockholders for reinvestment of cash distributed from capital gains or net
investment income of the Fund; or (c) Shares which may be issued to
shareholders of other funds who exercise any exchange privilege set forth
in the Fund's Prospectus. Notwithstanding any other provision hereof, the
Fund may terminate, suspend, or withdraw the offering of the Shares
whenever, in their sole discretion, they deem such action to be desirable.
-1-
2. Sale and Repurchase of Shares
-----------------------------
(a) PDI is hereby granted the right, as agent for the Fund, to sell Shares
to the public against orders received at the public offering price as
defined in the Fund's Prospectus and Statement of Additional
Information.
(b) PDI will also have the right to take, as agent for the Fund, all
actions which, in PDI's judgment, and subject to the Fund's reasonable
approval, are necessary to carry into effect the distribution of the
Shares.
(c) PDI will act as agent for the Fund in connection with the repurchase
of Shares by the Fund upon the terms set forth in the Fund's
Prospectus and Statement of Additional Information.
(d) The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
Information relating to the Shares, and when determined shall be
applicable to all transactions as provided in the Prospectus. The net
asset value of the Shares shall be calculated by the Fund or by
another entity on behalf of the Fund. PDI shall have no duty to
inquire into, or liability for, the accuracy of the net asset value
per Share as calculated.
(e) On every sale, PDI shall promptly pay to the Fund the applicable net
asset value of the Shares.
(f) Upon receipt of purchase instructions, PDI will transmit such
instructions to the Fund or its transfer agent for registration of the
Shares purchased.
(g) Nothing in this Agreement shall prevent PDI or any affiliated person
(as defined in the Act) of PDI from acting as underwriter for any
other person, firm or corporation (including other investment
companies), or in any way limit or restrict PDI or such affiliated
person from buying, selling or trading any securities for its or their
own account or for the account of others for whom it or they may be
acting, provided, however, that PDI expressly agrees that it will not
for its own account purchase any Shares of the Fund except for
investment purposes, and that it will not for its own account dispose
of any such Shares except by redemption of such Shares with the Fund,
and that it will not undertake in any activities which will adversely
affect the performance of its obligations to the Fund under this
Agreement.
3. Rules of Sale of Shares
-----------------------
-2-
PDI does not agree to sell any specific number of Shares and serves only in
the capacity of Statutory Underwriter. The Fund reserves the right to
terminate, suspend or withdraw the sale of its Shares for any reason deemed
adequate by it, and the Fund reserves the right to refuse at any time or
times to sell any of its Shares to any person for any reason deemed
adequate by it.
4. Rules of NASD, etc.
-------------------
(a) PDI will conform to the Conduct Rules of the NASD and the securities
laws of any jurisdiction in which it directly or indirectly sells any
Shares.
(b) PDI will require each dealer with whom PDI has a selling agreement to
conform to the applicable provisions of the Prospectus, with respect
to the public offering price of the Shares, and PDI shall not withhold
the placing of purchase orders so as to make a profit thereby.
(c) The Fund agrees to furnish PDI sufficient copies of any and all:
agreements, plans, communications with the public or other materials
which the Fund intends to use in connection with any sales of Shares,
in adequate time for PDI to file and clear such materials with the
proper authorities before they are put in use. PDI and the Fund may
agree that any such material does not need to be filed subsequent to
distribution. In addition, the Fund agrees not to use any such
materials until so filed and cleared for use, if required, by
appropriate authorities as well as by PDI.
(d) PDI, at its own expense, will qualify as a dealer or broker, or
otherwise, under all applicable state or federal laws required in
order that the Shares may be sold in such states as may be mutually
agreed upon by the Parties.
(e) PDI shall remain registered with the SEC and a member of the NASD for
the term of this Agreement.
(f) PDI shall not, in connection with any sale or solicitation of a sale
of the Shares, make or authorize any representative, service
organization, broker or dealer to make any representations concerning
the Shares, except those contained in the Prospectus offering the
Shares and in communications with the public or sales materials
approved by PDI as information supplemental to such Prospectus.
Copies of the Prospectus will be supplied by the Fund to PDI in
reasonable quantities upon request.
(g) PDI shall only be authorized to make representations in respect of the
Fund consistent with the then current Prospectus, Statement of
Additional Information, and other written information provided by the
Fund or its agents to be used explicitly with respect to the sale of
Shares.
-3-
5. Records to be Supplied by the Fund
----------------------------------
The Fund shall furnish to PDI copies of all information, financial
statements and other papers which PDI may reasonably request for use in
connection with the underwriting of the Shares including, but not limited
to, one certified copy of all financial statements prepared for the Fund by
its independent public accountants.
6. Expenses
--------
(a) The Fund will bear the following expenses:
(i) preparation, setting in type, and printing of sufficient copies
of the Prospectus and Statement of Additional Information for
distribution to existing shareholders, and the cost of
distribution of same to the existing shareholders;
(ii) preparation, printing and distribution of reports and other
communications to existing shareholders;
(iii) registration of the Shares under the federal securities laws;
(iv) qualification of the Shares for sale in the jurisdictions as
directed by the Fund;
(v) maintaining facilities for the issue and transfer of the Shares;
(vi) supplying information, prices and other data to be furnished by
the Fund under this Agreement; and
(vii) any original issue taxes or transfer taxes applicable to the
sale or delivery of the Shares or certificates therefor.
(b) PDI agrees to pay all of its own expenses in performing its
obligations hereunder.
7. Term
----
(a) The term of this Agreement shall commence immediately upon the
consummation of the acquisition of First Data Investor Services Group,
Inc. by a subsidiary of PNC Bank Corp., which the parties anticipate
to occur on or about December 1, 1999, (the "Effective Date").
(b) This Agreement shall remain in effect for one (1) year from the
Effective Date. This Agreement shall continue thereafter for periods
not exceeding one (1) year, if approved at least annually (i) by a
vote of a majority of the
-4-
outstanding voting securities of each Series, or (ii) by a vote of a
majority of the Board Members of the Fund who are not parties to this
Agreement (other than as Board Members of the Fund) or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.
(c) This Agreement (i) may be terminated as to any Series at any time
without the payment of any penalty, either by a vote of the Directors
of the Fund or by a vote of a majority of the outstanding voting
securities of each Series with respect to such Series, on sixty (60)
days' written notice to PDI; and (ii) may be terminated by PDI on
sixty (60) days' written notice to the Fund with respect to any
Series.
(d) This Agreement shall automatically terminate in the event of its
assignment, as defined in the Act.
8. Liability of PDI
----------------
(a) PDI, its directors, officers, employees, shareholders and agents shall
not be liable for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with the performance of this
Agreement, except a loss resulting from a breach of PDI's obligations
pursuant to Section 4 of this Agreement (including breach of the Rules
of NASD), a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of PDI in the
performance of its obligations and duties or by reason of its reckless
disregard of its obligations and duties under this Agreement. PDI
agrees to indemnify and hold harmless the Fund and each person who has
been, is, or may hereafter be a Director, officer, or employee of the
Fund against expenses, including reasonable counsel fees, reasonably
incurred by any of them in connection with any claim or in connection
with any action, suit, or proceeding to which any of them may be a
party, which arises out of or is alleged to arise out of any
misrepresentation or omission to state a material fact, on the part of
PDI or any agent of employee of PDI or any of the persons for whose
acts PDI is responsible or is alleged to be responsible unless such
misrepresentation or omission was made in reliance upon written
information furnished to PDI by the Fund. PDI also agrees to indemnify
and hold harmless the Fund and each such person in connection with
any claim or in connection with any action, suit, or proceeding which
arises out of or is alleged to arise out of PDI's failure to exercise
reasonable care and diligence with respect to its services rendered in
connection with the purchase and sale of Shares. With respect to the
foregoing, the Fund shall have the right to participate in the defense
of any action, suit or proceeding and to retain its own counsel, and
the reasonable fees and expenses of such counsel shall be
-5-
borne by PDI, which shall pay such fees, costs and expenses at least
quarterly. The foregoing rights of indemnification shall be in
addition to any other rights to which the Fund or any such person
shall be entitled to as a matter of law.
(b) The Fund agrees to indemnify and hold harmless PDI against any and all
liability, loss, damages, costs of expenses (including reasonable
counsel fees) which PDI may incur or be required to pay hereafter, in
connection with any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body, in
which PDI may be involved as a party or otherwise or with which PDI
may be threatened, by reason of the offer or sale of the Fund's Shares
by persons other than PDI or its representatives, prior to the
execution of this Agreement. If a claim is made against PDI as to
which PDI may seek indemnity under the Section, PDI shall notify the
Fund promptly after any written assertion of such claim threatening to
institute an action or proceeding with respect thereto and shall
notify the Fund promptly of any action commenced against PDI within 10
days time after PDI shall have been served with a summons or other
legal process, giving information as to the nature and basis of the
claim. Failure to notify the Fund shall not, however, relieve the
Fund from any liability which it may have on account of the indemnity
under this Section 8(b) if the Fund has not been prejudiced in any
material respect by such failure. The Fund shall have the sole right
to control the settlement of any such action, suit or proceeding
subject to PDI approval, which shall not be unreasonably withheld. PDI
shall have the right to participate in the defense of an action or
proceeding and to retain its own counsel, and the reasonable fees and
expenses of such counsel shall be borne by the Fund (which shall pay
such fees, costs and expenses at least quarterly) if:
(i) PDI has received an opinion of counsel stating that the use
of counsel chosen by the Fund to represent PDI would
present such counsel with a conflict of interest;
(ii) the defendants in, or targets of, any such action or
proceeding include both PDI and the Fund, and legal counsel
to PDI shall have reasonably concluded that there are legal
defenses available to it which are different from or
additional to those available to the Fund or which may be
adverse to or inconsistent with defenses available to the
Fund (in which case the Fund shall not have the right to
direct the defense of such action on behalf of PDI); or
(iii) the Fund shall authorize PDI to employ separate counsel at
the expense of the Fund.
-6-
(c) Any person, even though also a director, officer, employee,
shareholder or agent of PDI who may be or become an officer, director,
trustee, employee or agent of the Fund, shall be deemed, when
rendering services to the Fund or acting on any business of the Fund
(other than services or business in connection with PDI's duties
hereunder), to be rendering such services to or acting solely for the
Fund and not as a director, officer, employee, shareholder or agent,
or one under the control or direction of PDI even though receiving a
salary from PDI.
(d) The Fund agrees to indemnify and hold harmless PDI, and each person
who controls PDI within the meaning of Section 15 of the Securities
Act of 1933, as amended (the "Securities Act"), or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
against any and all losses, claims, damages and liabilities, joint or
several (including any reasonable investigative, legal and other
expenses incurred in connection therewith) to which they, or any of
them, may become subject under the Act, the Securities Act, the
Exchange Act or other federal or state law or regulations, at common
law or otherwise insofar as such losses, claims, damages or
liabilities (or actions, suits or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in a Prospectus, Statement of
Additional Information, supplement thereto, sales literature (or other
written information) prepared by the Fund and furnished by the Fund to
PDI for PDI's use hereunder, disseminated by the Fund or which arise
out of or are based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading.
Such indemnity, and any indemnity provided by Section 8(b) above,
shall not, however, inure to the benefit of PDI (or any person
controlling PDI) on account of any losses, claims, damages or
liabilities (or actions, suits or proceedings in respect thereof)
arising from the sale of the Shares of the Fund to any person by PDI
(i) if such untrue statement or omission or alleged untrue statement
or omission was made in the Prospectus, Statement of Additional
Information, or supplement, sales or other literature, in reliance
upon and in conformity with information furnished in writing to the
Fund by PDI specifically for use therein or (ii) if such losses,
claims, damages or liabilities arise out of or are based upon an
untrue statement or omission or alleged untrue statement or omission
found in any Prospectus, Statement of Additional Information,
supplement, sales or other literature, subsequently corrected, but
negligently distributed by PDI and a copy of the corrected Prospectus
was not delivered to such person at or before the confirmation of the
sale to such person.
-7-
(e) PDI shall not be responsible for any damages, consequential or
otherwise, which the Fund may experience, due to the disruption of the
distribution of Shares caused by any action or inaction of any
registered representative or affiliate of PDI or of PDI itself.
(f) Notwithstanding anything in this Agreement to the contrary, in no
event shall any party to this Agreement, its affiliates or any of its
or their directors, trustees, officers, employees, agents or
subcontractors be liable for lost profits, exemplary, punitive,
special, incidental, indirect or consequential damages.
9. Amendments
----------
No provision of this Agreement may be amended or modified in any manner
whatsoever, except by a written agreement properly authorized and executed
by the Parties.
19. Section Headings
----------------
Section and paragraph headings are for convenience only and shall not be
construed as part of this Agreement.
11. Reports
-------
PDI shall prepare reports for the Board of the Fund, on a quarterly basis,
showing such information as, from time to time, shall be reasonably
requested by the Board.
12. Severability
------------
If any part, term or provision of this Agreement is held by any court to be
illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not affected, and the
rights and obligations of the Parties shall be construed and enforced as if
the Agreement did not contain the particular part, term or provision held
to be illegal or invalid provided that the basic agreement is not thereby
substantially impaired.
13. Governing Law
-------------
This Agreement shall be governed by the laws of the State of Delaware and
the exclusive venue of any action arising under this Agreement shall be the
City of Wilmington, State of Delaware.
14. Authority to Execute
--------------------
-8-
The Parties represent and warrant to each other that the execution and
delivery of this Agreement by the undersigned officer of each Party has
been duly and validly authorized; and, when duly executed, this Agreement
will constitute a valid and legally binding and enforceable obligation of
each Party.
-9-
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be signed
by their duly authorized officer, of the day and year first above written.
PROVIDENT DISTRIBUTORS, INC.
_____________________________
By:
Title:
THE XXXXXXXX FUNDS, INC.
_____________________________
By:
Title:
-10-
SCHEDULE A
IDENTIFICATION OF SERIES
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
Xxxxxxxx Small-Cap Yield Fund
This Schedule "A" may be amended from time to time by agreement of the Parties.
Dated: December __, 1999
-11-
