UNDERWRITING AGREEMENT
----------------------
This Agreement made as of May 9, 1998 by and between Firsthand Funds (the
"Company"), a Delaware business trust, Interactive Research Advisers, Inc. (the
"Manager"), a Delaware corporation, and CW Fund Distributors, Inc., a Delaware
corporation (the "Underwriter").
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and is employed by the Company to
provide it with investment advisory and management services; and
WHEREAS, Underwriter is a broker-dealer registered with the Securities and
Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD") and is registered with the relevant securities
regulatory agencies in all fifty states, the District of Columbia and Puerto
Rico; and
WHEREAS, the Company and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of beneficial
interest (the "Shares") of each series of shares of the Company (the "Series")
to the public in accordance with the applicable federal and state securities
laws;
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
------------
The Company hereby appoints, for the period of this Agreement,
Underwriter as its exclusive agent for the distribution of the Shares, and
Underwriter hereby accepts such appointment under the terms of this Agreement.
While this Agreement is in force, the Company shall not sell any Shares except
on the terms set forth in this Agreement. Notwithstanding any other provision
hereof, the Company may terminate, suspend or withdraw the offering of Shares
whenever, in its sole discretion, it deems such action to be desirable.
Underwriter will undertake and discharge its obligations hereunder as an
independent contractor and shall have no authority or power to obligate or bind
the Company by its actions, conduct or contracts except as described in this
Agreement.
2. Sale and Repurchase of Shares.
------------------------------
(a) Underwriter will have the right, as agent for the Company, to
enter into dealer agreements with responsible investment dealers, and to sell
Shares to such investment dealers against orders therefor at the public offering
price (as defined in subparagraph 2(d) hereof) stated in the Company's effective
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, including the then current prospectus and statement of additional
information (the "Registration Statement"). Upon receipt of an order to purchase
Shares from a dealer with whom Underwriter has a dealer agreement, Underwriter
will promptly cause such order to be filled by the Company.
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(b) Underwriter will also have the right, as agent for the Company, to
sell such Shares to the public against orders therefor at the public offering
price.
(c) Underwriter will also have the right to take, as agent for the
Company, all actions which, in Underwriter's judgment, are necessary to carry
into effect the distribution of the Shares.
(d) The public offering price for the Shares of each Series shall be
the respective net asset value of the Shares of that Series then in effect, plus
any applicable sales charge determined in the manner set forth in the
Registration Statement or as permitted by the Act and the rules and regulations
of the Securities and Exchange Commission promulgated thereunder. In no event
shall any applicable sales charge exceed the maximum sales charge permitted by
the Rules of the NASD. Any payments to dealers shall be governed by a separate
agreement between Underwriter and such dealer and the Registration Statement.
(e) The net asset value of the Shares of each Series shall be
determined in the manner provided in the Registration Statement, and when
determined shall be applicable to transactions as provided for in the
Registration Statement. The net asset value of the Shares of each Series shall
be calculated by the Company or by another entity on behalf of the Company.
Underwriter shall have no duty to inquire into or liability for the accuracy of
the net asset value per Share as calculated.
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(f) On every sale, the Company shall receive the applicable net asset
value of the Shares promptly, but in no event later than the third business day
following the date on which Underwriter shall have received an order for the
purchase of the Shares.
(g) Upon receipt of purchase instructions, Underwriter will transmit
such instructions to the Company or its transfer agent for registration of the
Shares purchased.
(h) Exchanges of shares between Funds will be effected in the manner
and subject to the restrictions and charges described in the Registration
Statement. The handling of exchanges will be further subject to such other
procedures as may be mutually agreed upon from time to time.
(i) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Underwriter or any
such affiliated person from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that Underwriter expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Company under this Agreement.
(j) Underwriter, as agent of and for the account of the Company, may
repurchase the Shares at such prices and upon such
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terms and conditions as shall be specified in the Registration Statement.
3. Sale of Shares by the Company.
------------------------------
The Company reserves the right to issue any Shares at any time
directly to the holders of Shares ("Shareholders"), to sell Shares to its
Shareholders or to other persons approved by Underwriter at not less than net
asset value and to issue Shares in exchange for substantially all the assets of
any corporation or trust or for the shares of any corporation or trust.
4. Basis of Sale of Shares.
------------------------
Underwriter does not agree to sell any specific number of Shares.
Underwriter, as agent for the Company, undertakes to sell Shares on a best
efforts basis only against orders therefor.
5. Rules of NASD, etc.
-------------------
(a) Underwriter will conform to the Rules of the NASD and the
securities laws of any jurisdiction in which it sells, directly or indirectly,
any Shares.
(b) Underwriter will require each dealer with whom Underwriter has a
dealer agreement to conform to the applicable provisions hereof and the
Registration Statement with respect to the public offering price of the Shares,
and neither Underwriter nor any such dealers shall withhold the placing of
purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Company sufficient copies of
any agreements, plans or other materials it intends to use in connection with
any sales of Shares in adequate
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time for the Company to file and clear them with the proper authorities before
they are put in use, and not to use them until so filed and cleared.
(d) Underwriter, at its own expense, will qualify as dealer or broker,
or otherwise, under all applicable State or federal laws required in order that
Shares may be sold in such States as may be mutually agreed upon by the parties.
(e) Underwriter shall not make, or permit any representative, broker
or dealer to make, in connection with any sale or solicitation of a sale of the
Shares, any representations concerning the Shares except those contained in the
then current prospectus and statement of additional information covering the
Shares and in printed information approved by the Company as information
supplemental to such prospectus and statement of additional information. Copies
of the then effective prospectus and statement of additional information and any
such printed supplemental information will be supplied by the Company to
Underwriter in reasonable quantities upon request.
(f) Underwriter shall file Company advertisements, sales literature
and other marketing and sales related materials with the appropriate regulatory
agencies and shall obtain such approvals for their use as may be required by the
Securities and Exchange Commission, the NASD and/or state securities
administrators. Underwriter shall not disseminate to the public any such
materials without prior approval by Company.
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6. Records to be Supplied by Company.
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The Company shall furnish to Underwriter copies of all information,
financial statements and other papers which Underwriter may reasonably request
for use in connection with the distribution of the Shares, and this shall
include, but shall not be limited to, one certified copy, upon request by
Underwriter, of all financial statements prepared for the Company by independent
public accountants.
7. Expenses.
---------
In the performance of its obligations under this Agreement,
Underwriter will pay only the costs incurred in qualifying as a broker or dealer
under state and federal laws and in establishing and maintaining its
relationships with the dealers selling the Shares. All other costs in connection
with the offering of the Shares will be paid by the Manager in accordance with
agreements between them as permitted by applicable law, including the Act and
rules and regulations promulgated thereunder. These costs include, but are not
limited to, licensing fees, filing fees, travel and such other expenses as may
be incurred by Underwriter on behalf of the Company and the Manager.
8. Indemnification of Company and Manager.
---------------------------------------
Underwriter agrees to indemnify and hold harmless the Company, the
Manager and each person who has been, is, or may hereafter be a director,
trustee, officer, employee, shareholder or control person of the Company or the
Manager, against any loss,
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damage or expense (including the reasonable costs of investigation) 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 or is based upon any untrue statement or
alleged untrue statement of a material fact, or the omission or alleged omission
to state a material fact necessary to make the statements not misleading, on the
part of Underwriter or any agent or employee of Underwriter or any other person
for whose acts Underwriter is responsible, unless such statement or omission was
made in reliance upon written information furnished by the Company or the
Manager. Underwriter likewise agrees to indemnify and hold harmless the Company,
the Manager 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 Underwriter's failure to exercise reasonable care and diligence with
respect to its services, if any, rendered in connection with investment,
reinvestment, automatic withdrawal and other plans for Shares. The term
"expenses" for purposes of this and the next paragraph includes amounts paid in
satisfaction of judgments or in settlements which are made with Underwriter's
consent. The Underwriter will advance attorneys' fees or other expenses incurred
by any such person in defending a proceeding upon the undertaking by or on
behalf of such person to repay the advance if it is ultimately determined that
such person is not entitled to indemnification. The foregoing rights of
indemnification shall be
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in addition to any other rights to which the Company, the Manager or each such
person may be entitled as a matter of law.
9. Indemnification of Underwriter.
-------------------------------
The Company agrees to indemnify and hold harmless Underwriter and each
person who has been, is, or may hereafter be a director, officer, employee,
shareholder or control person of Underwriter against any loss, damage or expense
(including the reasonable costs of investigation) reasonably incurred by any of
them in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or negligence on the part of
any of such persons in the performance of Underwriter's duties or from the
reckless disregard by any of such persons of Underwriter's obligations and
duties under this Agreement. The Company will advance attorneys' fees or other
expenses incurred by any such person in defending a proceeding, upon the
undertaking by or on behalf of such person to repay the advance if it is
ultimately determined that such person is not entitled to indemnification. Any
person employed by Underwriter who may also be or become an officer or employee
of the Company shall be deemed, when acting within the scope of his employment
by the Company, to be acting in such employment solely for the Company and not
as an employee or agent of Underwriter.
10. Termination and Amendment of this Agreement.
--------------------------------------------
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment. This Agreement may be amended only
if such amendment is approved (i) by
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Underwriter, (ii) either by action of the Board of Trustees of the Company or at
a meeting of the Shareholders of the Company by the affirmative vote of a
majority of the outstanding Shares, and (iii) by a majority of the Trustees of
the Company who are not interested persons of the Company or of Underwriter by
vote cast in person at a meeting called for the purpose of voting on such
approval.
Either the Company or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
11. Effective Period of this Agreement.
-----------------------------------
This Agreement shall take effect upon its execution and shall remain
in full force and effect for a period of two (2) years from the date of its
execution (unless terminated automatically as set forth in Section 10), and from
year to year thereafter, subject to annual approval (i) by Underwriter, (ii) by
the Board of Trustees of the Company or a vote of a majority of the outstanding
Shares, and (iii) by a majority of the Trustees of the Company who are not
interested persons of the Company or of Underwriter by vote cast in person at a
meeting called for the purpose of voting on such approval.
12. New Series.
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The terms and provisions of this Agreement shall become automatically
applicable to any additional series of the Company established during the
initial or renewal term of this Agreement.
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13. Successor Investment Company.
-----------------------------
Unless this Agreement has been terminated in accordance with Paragraph
10, the terms and provisions of this Agreement shall become automatically
applicable to any investment company which is a successor to the Company as a
result of reorganization, recapitalization or change of domicile.
14. Severability.
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In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
15. Questions of Interpretation.
----------------------------
(a) This Agreement shall be governed by the laws of the State of
Delaware.
(b) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the Act shall be resolved by reference to such term or provision of the Act
and to interpretation thereof, if any, by the United States courts or in the
absence of any controlling decision of any such court, by rules, regulations or
orders of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
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16. Limitation of Liability.
------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
17. Miscellaneous.
--------------
(a) Underwriter represents and warrants that it has taken reasonable
steps to make its transaction processing and recordkeeping and other systems and
equipment compatible with the change in the year 1999 to 2000 without any
related errors in reports or material disruption to services provided hereunder
and Underwriter expects full compatibility before December 31, 1999.
(b) The parties to this Agreement acknowledge and understand that any
and all technical, trade secret, or business information, including, without
limitation, financial information, business or marketing strategies or plans,
product development or customer information, which is disclosed to the other or
is otherwise obtained by the other, its affiliates, agents or representatives
during the term of this Agreement (the "Proprietary Information") is
confidential and proprietary, constitutes trade secrets of the owner, and is of
great value and
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importance to the success of the owner's business. Each party agrees to use its
best efforts (the same being not less than that employed to protect its own
proprietary information) to safeguard the Proprietary Information and to prevent
the unauthorized, negligent or inadvertent use or disclosure thereof. Neither
party shall, without the prior written approval of an officer of the other,
directly or indirectly, disclose the Proprietary Information. Each party shall
be liable under this Agreement to the other for any use or disclosure in
violation of this Agreement by its employees, attorneys, accountants, or other
advisors or agents. This section shall continue in full force and effect
notwithstanding the termination of this Agreement.
18. Notices.
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Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Company and the Manager
for this purpose shall be 000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxx,
Xxxxxxxxxx 00000, and that the address of Underwriter for this purpose shall be
000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx 00000.
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IN WITNESS WHEREOF, the Company, the Manager and Underwriter have each
caused this Agreement to be signed in duplicate on their behalf, all as of the
day and year first above written.
FIRSTHAND FUNDS
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Its: President
INTERACTIVE RESEARCH ADVISERS, INC.
By: /s/ Xxxxxxxx X. Xxx
-------------------------------
Its: President
CW FUND DISTRIBUTORS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Its: President
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