SERVICE AGREEMENT
This Agreement is made as of February 1, 2000, between Xxxxxxx Xxxxxx & Co.,
Inc. ("Schwab"), a California corporation, each registered investment company
("Fund Company") executing this Agreement, on its own behalf and on behalf of
each of its series or classes of shares ("Fund(s)") listed on Schedule I, as
amended from time to time, Xxxx Xxxxxxx Funds, Inc., a Delaware corporation (the
"Distributor"), and Xxxx Xxxxxxx Signature Services, Inc., a Delaware
corporation (the "Transfer Agent"). The Distributor and the Transfer Agent are
collectively referred to herein as "Fund Affiliate," and Fund Company and Fund
Affiliate are collectively referred to herein as "Fund Parties." In the event
that there are no series or classes of shares listed on Schedule I, the term
"Fund(s)" shall mean "Fund Company".
WHEREAS, Fund Affiliate is either a transfer agent or an administrator
for the Funds or the principal underwriter for the Funds.
WHEREAS, Fund Parties wish to have certain recordkeeping, shareholder
communication, and other such administrative services performed for each Fund;
and
WHEREAS, Schwab is willing to perform or cause to be performed such
administrative services on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, the parties agree as follows:
1. Services
a. During the term of this Agreement, Schwab shall perform or cause to
be performed the administrative services set forth on Exhibit A hereto, as such
exhibit may be amended from time to time by mutual consent of the parties (the
"Services").
b. The parties agree that the Operating Agreement, dated as of February
1, 2000, between Schwab and Fund Company, as amended from time to time
("Operating Agreement"), is incorporated herein by this reference. In processing
purchase, redemption, transfer and exchange orders placed by Schwab on behalf of
investors, and in order to facilitate the performance of Services, all terms and
conditions of the Operating Agreement shall be binding as between Schwab and
Fund Parties, and the references to Fund Company therein shall be deemed to mean
Fund Parties for the purposes of this Agreement. In the event of any
inconsistency between the Operating Agreement and this Agreement, this Agreement
shall control.
2. Fees
For the Services, Schwab shall receive a fee (the "Fee") which shall be
calculated and paid in accordance with Exhibit B hereto. Schedule II identifies
the amount of components of the Fee as follows: (A) that portion of the Fee, if
any, determined by the Fund's board of directors to be payable by the Fund for
non-distribution related services, and not paid pursuant to a plan of
distribution or shareholder servicing adopted and maintained pursuant to Rule
12b-1 under the Investment Company Act of 1940 Act, as amended ("1940 Act" and
"Rule 12b-1 Plan"); (B) that portion of the Fee, if any, paid pursuant to a Rule
12b-1 Plan; (C) that portion of the Fee, if any, not payable by the Fund and not
paid pursuant to a Rule 12b-1 Plan. Fund Parties acknowledge and agree that (i)
Fund Company will pay to Schwab component A, and Fund Affiliate will be jointly
and severally responsible to Schwab with Fund Company for component A; and,
either (ii) Fund Affiliate is the Fund's principal underwriter and will pay to
Schwab any remaining Fee (component B and/or component C), or (iii) Fund
Affiliate, on behalf of the Fund's principal underwriter, will pay to Schwab any
remaining Fee (component B and/or component C).
3. Transaction Charges
The parties acknowledge and agree that Schwab may collect
transaction fees from certain customers (including "Active Traders," as Schwab
may define that term) for certain services and from other customers upon such
other customers' redemption of certain shares.
4. Indemnification
x. Xxxxxx shall indemnify and hold harmless Fund Parties and their
directors, officers, employees, and agents ("Indemnified Parties") from and
against any and all losses, claims, liabilities and expenses (including
reasonable attorney's fees) ("Losses") incurred by any of them arising out of
(i) Xxxxxx'x dissemination of information regarding Fund Parties or a Fund that
contains an untrue statement of material fact or any omission of a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading and that was not published or
provided to Schwab by or on behalf of Fund Company or its affiliated persons
("Affiliates") as defined under the Investment Company Act of 1940, as amended
(the "1940 Act"), or accurately derived from information published or provided
by or on behalf of Fund Company or any Affiliate, (ii) any breach by Schwab of
any representation, warranty or agreement contained in this Agreement, or (iii)
any willful misconduct or negligence by Schwab in the performance of, or failure
to perform, its obligations under this Agreement, except to the extent such
Losses are caused by Fund Company or Fund's breach of this Agreement or Fund
Company or Fund's willful misconduct or negligence in the performance, or
failure to perform, its obligations under this Agreement. This Section 4(a)
shall survive termination of this Agreement.
b. In any event, no party shall be liable for any special,
consequential or incidental damages.
5. Role and Relationship of Schwab
The parties acknowledge and agree that the Services under this
Agreement are recordkeeping, shareholder communication and related services only
and are not the services of an underwriter or a principal underwriter of any
Fund within the meaning of the Securities Act of 1933, as amended, or the 1940
Act, although certain of these services may be distribution related. This
Agreement does not xxxxx Xxxxxx any right to purchase shares from any Fund
(although it does not preclude Schwab from purchasing any such shares), nor does
it constitute Schwab an agent of Fund parties or any Fund for purposes of
selling shares of any Fund to any dealer or the public. To the extent Schwab is
involved in the purchase of shares of any Fund by Xxxxxx'x customers, such
involvement will be as agent of such customer only.
6. Information to be Provided
Fund Parties shall provide to Schwab prior to the effectiveness of this
Agreement or as soon thereafter as practicable, two (2) copies of the
then-current prospectus and statement of additional information of each Fund.
Fund Party shall provide Schwab with written copies of any amendments to or
changes in the Fund's prospectus or statement of additional information
immediately upon their effective date.
7. Representations and Warranties
a.Each Fund Party represents and warrants that it has obtained
certified resolutions of its board of directors authorizing such Fund Party to
enter into this Agreement.
b. Each Fund Party represents and warrants that the person signing this
Agreement on its behalf is an officer authorized to execute this Agreement on
behalf of such Fund Party.
8. Notices
All notices required by this Agreement (excluding the Operating
Agreement) shall be in writing and delivered personally or sent by first class
mail. Such notices will be deemed to have been received as of the earlier of
actual physical receipt or three (3) days after deposit, first class postage
prepaid, in the United States mail. All such notices shall be made:
if to Schwab, to: Xxxxxxx Xxxxxx & Co., Inc.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Senior Vice President/Mutual Funds
with a copy to: General Counsel, Mutual Funds & International at the
same address;
if to Fund Party, to the address given below in the signature block.
9. Nonexclusivity
Each party acknowledges that the other may enter into agreements
similar to this Agreement with other parties for the performance of services
similar to those to be provided under this Agreement, unless otherwise agreed to
in writing by the parties.
10. Assignability
This Agreement is not assignable by either party without the other
party's prior written consent, and any attempted assignment in contravention
hereof shall be null and void and not merely voidable; provided , however, that
(i) Schwab may, without the consent of Fund Parties, assign its rights and
obligations under this Agreement to any Affiliate that is capable or performing
such obligations and (ii) any Fund Party may, upon to notice to Schwab but
without the consent of Schwab, assign its rights and obligations under this
Agreement to any Affiliate that is capable of performing such obligations.
11. Exhibits and Schedules; Entire Agreement
All Exhibits and Schedules to this Agreement, as they may be amended
from time to time, are by this reference incorporated into and made a part of
this Agreement. This Agreement (including the Exhibits and Schedules hereto),
together with the Operating Agreement and the Confidentiality Agreement,
constitute the entire agreement between the parties as to the subject matter
hereof and supersede any and all agreements, representations and warranties,
written or oral, regarding such subject matter made prior to the time at which
this Agreement has been executed and delivered by Schwab and Fund Parties.
12. No Waiver
The failure of either party to insist upon exercising any right under
this Agreement shall not be construed as a waiver or relinquishment to any
extent of such party's right to assert or rely upon such provision or right in
any other instance.
13. Amendment
This Agreement and the Exhibits and Schedules hereto may be amended
only by a writing executed by each party hereto that is to be bound by such
amendment.
14. Governing Law
This Agreement shall be governed by and interpreted under the laws of
the State of California, applicable to contracts between California residents
entered into and to be performed entirely within the state.
15. Effectiveness of Agreement; Termination
a. The effective date of this Agreement as to any Fund shall be the
later of the date on which this Agreement is made or the date set forth opposite
the name of the Fund on Schedule I.
b. This Agreement may be terminated as to a Fund (i) by any party upon
ninety (90) days' written notice to the other parties or (ii) by any party upon
such shorter notice as is required by law, order, or instruction by a court of
competent jurisdiction or a regulatory body or self-regulatory organization with
jurisdiction over such terminating party or (iii) by Fund Parties, upon notice
to Schwab of the termination of any Rule 12b-1 Plan as to any Fund that had such
Rule 12b-1 Plan in effect as of its effective date on this Agreement, provided
that a portion of the Fee is paid pursuant to the Rule 12b-1 Plan.
c. Notwithstanding any termination, Fund Parties will remain obligated
to pay Schwab the Fee as to each share of the Fund that was considered in the
calculation of the Fee as of the date of termination, and as to each share of
the Fund which results from reinvesting the dividends or capital gains
distributed on such shares (each a "Pre-Termination Share"), for so long as such
Pre-Termination Share is held in any of the Account(s) (as defined in the
Operating Agreement) and Schwab continues to perform substantially all of the
Services as to such Pre-Termination Share. Further, for so long as Schwab
continues to perform the Services as to any Pre-Termination Shares, this
Agreement will otherwise remain in full force and effect as to such
Pre-Termination Shares. Fund Parties shall reimburse Schwab promptly for any
reasonable expenses Schwab incurs in effecting any termination of this
Agreement, including delivery to a Fund Party of any records, instruments, or
documents reasonably requested by the Fund Party.
16. Status of Funds as Massachusetts Business Trusts
Each of the Funds is a Massachusetts business trust; Schwab expressly
acknowledges the provision in the Funds' Declaration of Trust limiting the
personal liability of the trustees and shareholders of the Fund; and Schwab
agrees that it shall have recourse only to the assets of the Fund for the
payment of claims or obligations as between Schwab and the Fund arising out of
this Agreement, and Schwab shall not seek satisfaction of any such claim or
obligation from the trustees or shareholders of the Fund. In any case, each
Fund, and each series or portfolio of each Fund , shall be liable only for its
own obligations to Schwab under this Agreement and shall not be jointly or
severally liable for the obligations of any other Fund, series or portfolio
hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement by a duly
authorized representative of the parties hereto.
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XXXXXXX XXXXXX & CO., INC.
By: /s/Xxxxxx X. Xxxxx By: /s/Xxxx X. Xxxxxxx
------------------ -----------------
Xxxxxx X. Xxxxx Xxxx X. Xxxxxxx, as President of each Fund Company
Senior Vice President listed on schedule I hereto, on behalf of each such
Mutual Funds Fund Company and on behalf of each Fund
------------------------------------------------------- -----------------------------------------------------
Date: 2-1-00 Date: January 24, 2000
------------------------------------------------------- -----------------------------------------------------
XXXX XXXXXXX FUNDS, INC. 000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
By: /s/Xxxxx X. Xxxxxxx
-------------------
Xxxxx X. Xxxxxxx Attn: Xxxxx x. Xxxxxx
President
------------------------------------------------------- -----------------------------------------------------
Date: 1/24/00 XXXX XXXXXXX SIGNATURE SERVICES, INC.
------------------------------------------------------- -----------------------------------------------------
000 Xxxxxxxxxx Xxxxxx By: /s/ Xxxx X. Xxxxx
-----------------
Xxxxxx, XX 00000 Name: Xxxx X. Xxxxx
Attn: Xxxxxx X. Xxxxxxx Title: Vice President & Corp. Sec.
Date: January 24, 2000
------------------------------------------------------- -----------------------------------------------------
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
------------------------------------------------------- -----------------------------------------------------
EXHIBIT A
SERVICES
1. Record Maintenance
Schwab shall maintain, and require any correspondent brokers
or banks to maintain with respect to their customers, the following records with
respect to a Fund for each customer who holds Fund shares in a Schwab brokerage
account:
a. Number of shares;
b. Date, price and amount of purchases and redemptions (including
dividend reinvestments) and dates and amounts of dividends paid for
at least the current year to date;
c. Name and address of the customer, including zip codes and social
security numbers or taxpayers identification numbers;
d. Records of distributions and dividend payments;
e. Any transfers of shares; and
f. Overall control records.
2. Shareholder Communications
Schwab shall:
a. Provide to a shareholder mailing agent for the purpose of mailing
certain Fund-related materials the names and addresses of all Schwab customers
who hold shares of such Fund in their Schwab brokerage accounts. The shareholder
mailing agent shall be a person or entity with whom the Fund has arranged for
the distribution of certain Fund-related material in accordance with the
Operating Agreement. The Fund-related materials shall consist of updated
prospectuses and any supplements and amendments thereto, annual and other
periodic reports, proxy or information statements and other appropriate
shareholder communications. In the alternative, in accordance with the Operating
Agreement, Schwab may distribute the Fund-related materials to its customers.
b. Mail current Fund prospectuses and statements of additional
information and annual and other periodic reports upon customer request and, as
applicable, with confirmation statements;
c. Mail statements to customers on a monthly basis (or, as to accounts
in which there has been no activity in a particular month, no less frequently
than quarterly) showing, among other things, the number of shares of each Fund
owned by such customer and the net asset value of such Fund as of a recent date;
d. Product and mail to customers confirmation statements reflecting
purchases and redemptions of shares of each Fund in Schwab brokerage accounts;
e. Respond to customer inquiries regarding, among other things, share
prices, account balances, dividend amounts and dividend payment dates; and
f. With respect to Fund shares purchased by customers after the
effective date of this Agreement, provide average cost basis reporting to
customers to assist them in preparation of income tax returns.
g. If Schwab clears transactions in Fund shares for any correspondent
brokers or banks in an omnibus relationship, it will require each such
correspondent broker or bank to provide such shareholder communications as set
forth in 2(a) through to 2(f) to its own customers.
3. Transactional Services
Schwab shall communicate, as to shares of each Fund, purchase,
redemption and exchange orders reflecting the orders it receives from its
customers or from any correspondent brokers and banks for their customers.
Schwab shall also communicate to beneficial owners holding through it, and to
any correspondent brokers or banks for beneficial owners holding through them,
as to shares of each Fund, mergers, splits and other reorganization activities,
and require any correspondent broker or bank to communicate such information to
its customers.
4. Tax Information Returns and Reports
Schwab shall prepare and file, and require to be prepared and
filed by any correspondent brokers or banks as to their customers, with the
appropriate governmental agencies, such information, returns and reports as are
required to be so filed for reporting (i) dividends and other distributions
made, (ii) amounts withheld on dividends and other distributions and payments
under applicable federal and state laws, rules and regulations, and (iii) gross
proceeds of sales transactions as required.
5. Fund Communications
Schwab shall, upon request by Fund Parties, on each business
day and for each Fund, report the number of shares on which the Fee is to be
paid pursuant to this Agreement and the number of shares on which no such Fee is
to be paid. Schwab shall also provide each Fund with a monthly invoice.
EXHIBIT B
Calculation of Fee
1. The Fee shall be calculated each month by multiplying the average
Daily Value of Qualifying Shares (defined below) for the month times 35 basis
points per annum. Notwithstanding the foregoing, the minimum Fee for each Fund
shall be $2,000 per month commencing with the first full month and terminating
with the last full month such Fund is effective under this Agreement. Any
Maintenance Fee as to the Account(s) of a Fund which would otherwise be assessed
under the Operating Agreement shall be waived for any month for which this
Agreement is in effect as to such Fund. The Fee shall be billed monthly in
arrears and paid in accordance with Section 5 below.
2. The Daily Value of Qualifying Shares is the aggregate daily value of
all shares of a Fund held in the Account(s), subject to the following exclusions
("Qualifying Shares"). There shall be excluded (i) shares held in the Account(s)
prior to the effective date of this Agreement as to the Fund, and (ii) shares
first held in the Account(s) after the termination of this Agreement as to the
Fund (except that Pre-Termination Shares resulting from reinvested dividends or
capital gains under Section 15(c) of this Agreement shall also be Qualifying
Shares).
3. For purposes of this Exhibit, the daily value of the shares of each
Fund will be the net asset value reported by such Fund to the National
Association of Securities Dealers, Inc. Automated Quotation System. No
adjustments will be made to the net asset values to correct errors in the net
asset values so reported for any day unless such error is corrected and the
corrected net asset value per share is reported to Schwab before 5 o'clock,
p.m., San Francisco time, on the first business day after the day to which the
error relates. 4. At the request of Fund Parties, Schwab shall provide, on each
business day, a statement of the aggregate Daily Value of the Qualifying Shares
of each Fund for such day and the estimated amount of the Fee for such day. As
soon as practicable after the end of the month, Schwab shall also provide to
Fund Parties an invoice for the amount of the Fee due for each Fund. In the
calculation of such Fee, Xxxxxx'x records shall govern unless an error can be
shown in the number of shares used in such calculation.
5. The Fee is due and payable by Fund Parties upon receipt of the
invoice setting forth the Fee. Payment shall be made by wire transfer. Such wire
transfer shall be separate from wire transfers of redemption proceeds or
distributions under the Operating Agreement. The amount of the Fee shall accrue
interest from the date of the invoice, and Schwab shall be entitled to charge
Fund Parties with payment of such accrued interest with respect to any
outstanding amount in the event that Schwab has not received full payment by the
last business day of the month in which such invoice is rendered. The rate of
interest shall be the Federal Funds "offered" rate for each day as published in
The Wall Street Journal, and shall be billed by Schwab in the following month's
invoice. Schwab shall not be entitled to charge Fund Parties with payment of
such accrued interest with respect to any amount for which Schwab has received
payment by the last business day of the month in which such invoice is rendered.
SCHEDULE I
TO THE SERVICES AGREEMENT
Fund Companies/Funds Effective Date
-------------------- --------------
Xxxx Xxxxxxx Xxxx Trust
Xxxx Xxxxxxx High Yield Bond Fund, Class A 2/1/00
Xxxx Xxxxxxx Capital Series
Xxxx Xxxxxxx Core Equity Fund, Class A 2/1/00
Xxxx Xxxxxxx Institutional Series Trust
Xxxx Xxxxxxx Core Growth Fund, Class A 2/1/00
Xxxx Xxxxxxx Core Value Fund, Class A 2/1/00
Xxxx Xxxxxxx Investment Trust
Xxxx Xxxxxxx Large Cap Value Fund, Class A 2/1/00
Xxxx Xxxxxxx Investment Trust II
Xxxx Xxxxxxx Financial Industries Fund, Class A 2/1/00
Xxxx Xxxxxxx Small Cap Value Fund, Class A 2/1/00
Xxxx Xxxxxxx Series Trust
Xxxx Xxxxxxx Global Technology Fund, Class A 2/1/00
Xxxx Xxxxxxx Small Cap Growth Fund, Class A 2/1/00
Xxxx Xxxxxxx Sovereign Bond Fund
Xxxx Xxxxxxx Xxxx Fund, Class A 2/1/00
Xxxx Xxxxxxx Strategic Series
Xxxx Xxxxxxx Strategic Income Fund, Class A 2/1/00
SCHEDULE II
TO THE SERVICES AGREEMENT
Qualifying
Fee Component (Section 2) Shares Fee Rate Minimum Fee
Component A (Fund payable, non-Rule 12b-1 Plan) 10 bps $0
Component B (Rule 12b-1 Plan) 25 bps $0
Component C (non-Fund payable, non- 12b-1 Plan 0 bps $2,000
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Total Fee 35 bps $2,000
