Exhibit (m)(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
MUTUAL FUNDS
SALES AND SERVICE
AGREEMENT
This Agreement is entered into among the financial institution executing
this Agreement ("Financial Institution") and Federated Securities Corp. ("FSC"),
with respect to those investment companies listed in Exhibit A hereto (referred
to individually as the "Fund" and collectively as the "Funds") for whose shares
of beneficial interest or capital stock ("Shares") FSC serves as Distributor.
A. Financial Institution.
1. Status of Financial Institution as "Bank" or Registered Broker-Dealer.
Financial Institution represents and warrants to FSC: (a)(i) that it
is a broker or dealer as defined in Section 3(a)(4) or 3(a)(5) of the
Securities Exchange Act of 1934 ("Exchange Act"); that it is
registered with the Securities and Exchange Commission pursuant to
Section 15 of the Exchange Act; that it is a member of the National
Association of Securities Dealers, Inc.; that its customers' accounts
are insured by the Securities Investors Protection Corporation
("SIPC"); and that, during the term of this Agreement, it will abide
by all of the rules and regulations of the NASD including, without
limitation, the NASD Rules of Fair Practice. Financial Institution
agrees to notify FSC immediately in the event of (1) the termination
of its coverage by the SIPC; (2) its expulsion or suspension from the
NASD, or (3) its being found to have violated any applicable federal
or state law, rule or regulation arising out of its activities as a
broker-dealer or in connection with this Agreement, or which may
otherwise affect in any material way its ability to act in accordance
with the terms of this Agreement. Financial Institution's expulsion
from the NASD will automatically terminate this Agreement immediately
without notice. Suspension of Financial Institution from the NASD for
violation of any applicable federal or state law, rule or regulation
will terminate this Agreement effective immediately upon FSC's written
notice of termination to Financial Institution; or
(a)(ii) that it is a "bank," as that term is defined in Section 3(a)(6) of
the Exchange Act and that, during the term of this Agreement, it will
abide by the rules and regulations of those state and federal banking
authorities with appropriate jurisdiction over the Financial Institution,
especially those regulations dealing with the activities of the
Institution as described under this Agreement. Financial Institution
agrees to notify FSC immediately of any action by or communication from
state or federal banking authorities, state securities authorities, the
Securities and Exchange Commission, or any other party which may affect
its status as a bank, or which may otherwise affect in any material way
its ability to act in accordance with the terms of this Agreement. Any
action or decision of any of the foregoing regulatory authorities or any
court of appropriate jurisdiction which affects Financial Institution's
ability to act in accordance with the terms of this agreement, including
the loss of its exemption from registration as a broker or dealer, will
terminate this Agreement effective upon FSC's written notice of
termination to Financial Institution; and (b) that Financial Institution
is registered with the appropriate securities authorities in all states in
which its activities make such registration necessary.
2. Financial Institution Acts as Agent for its Customers.
The parties agree that in each transaction in the Shares of any Fund and with
regard to any services rendered pursuant to this Agreement: (a) Financial
Institution is acting as agent for the customer; (b) each transaction is
initiated solely upon the order of the customer; (c) as between Financial
Institution and its customer, the customer will have full beneficial ownership
of all Shares of the Funds; (d) each transaction shall be for the account of the
customer and not for Financial Institution's account; and (e) each transaction
shall be without recourse to Financial Institution provided that Financial
Institution acts in accordance with the terms of this Agreement. Financial
Institution shall not have any authority in any transaction to act as FSC's
agent or as agent for the Funds.
B. Sales of Fund Shares.
3. Execution of Orders for Purchase and Redemption of Shares. (a) All orders
for the purchase of any Shares shall be executed at the then-current
public offering price per share (i.e., the net asset value per share plus
the applicable initial sales load, if any) and all orders for the
redemption of any Shares shall be executed at the net asset value per
share, in each case as described in the prospectus of the Fund. Any
applicable redemption fee or deferred sales charge will be deducted by the
Fund prior to the transmission of the redemption proceeds to Financial
Institution or its customer. FSC and the Funds reserve the right to reject
any purchase request in their sole discretion . If required by law, each
transaction shall be confirmed in writing on a fully disclosed basis and,
if confirmed by FSC, a copy of each confirmation shall be sent
simultaneously to Financial Institution if Financial Institution so
requests.
(b) The procedures relating to all orders will be subject to the terms of
the prospectus of each Fund and FSC's written instructions to Financial
Institution from time to time.
(c) Payments for Shares shall be made as specified in the applicable Fund
prospectus. If payment for any purchase order is not received in
accordance with the terms of the applicable Fund prospectus, FSC reserves
the right, without notice, to cancel the sale and to hold Financial
Institution responsible for any loss sustained as a result thereof.
4. Initial Sales Loads Payable to Financial Institution.
(a) On each order accepted by FSC, in exchange for the performance of
sales and/or distribution services, Financial Institution will be entitled
to receive the applicable percentage of the initial sales load, if any, as
established by FSC from the amount paid by Financial Institution's
customer . The initial sales loads for any Fund shall be those set forth
in its prospectus. The portion of the initial sales load payable to
Financial Institution may be changed at any time at FSC's sole discretion
upon written notice to Financial Institution.
(b) Transactions may be settled by Financial Institution: (1) by payment
of the full purchase price less an amount equal to Financial Institution's
applicable percentage of the initial sales load, or (2) by payment of the
full purchase price, in which case Financial Institution shall receive,
not less frequently than monthly, the aggregate fees due it on orders
received and settled. (c) It shall be the obligation of the Financial
Institution either: (i) to provide FSC with all necessary information
regarding the application of the appropriate initial sales load to each
transaction, or (ii) to assess the appropriate initial sales load for each
transaction and to forward the public offering price, net of the amount of
the initial sales load to be reallocated to the Financial Institution, to
the appropriate Fund. Neither the Fund nor FSC shall have any
responsibility to correct the payment or assessment of an incorrect
initial sales load due to the failure of the Financial Institution to
fulfill the foregoing obligation.
C. Distribution Services.
5. Agreement to Provide Distribution Services.
(a) With regard to those Funds which pay asset-based sales charges
(pursuant to Distribution Plans adopted under Investment Company Act Rule
12b-1), as noted on Exhibit A hereto (or, if more recently published, the
Fund's current prospectus), FSC hereby appoints Financial Institution to
render or cause to be rendered distribution and sales services to the
Funds and their shareholders. (b) The services to be provided under this
Paragraph (a) may include, but are not limited to, the following:
(i) reviewing the activity in Fund accounts; (ii) providing training
and supervision of its personnel; (iii) maintaining and distributing
current copies of prospectuses and shareholder reports; (iv)
advertising the availability of its services and products; (v)
providing assistance and review in designing materials to send to
customers and potential customers and developing methods of making
such materials accessible to customers and potential customers; and
(vi) responding to customers' and potential customers' questions
about the Funds.
6. Asset-Based Sales Loads Payable to Financial Institution. During the term of
this Agreement, FSC will pay Financial Institution asset-based sales charges
(also known as "Rule 12b-1 Fees") for each Fund as set forth in Exhibit A to
this Agreement (or, if more recently published, the Fund's current prospectus).
For the payment period in which this Agreement becomes effective or terminates,
there shall be an appropriate proration of the fee on the basis of the number of
days that this Agreement is in effect during the quarter.
D. Supplemental Payments.
7. Supplemental Payments to Financial Institution.
During the term of this Agreement, FSC, or its affiliates will make Supplemental
Payments to Financial Institution as set forth in Exhibit A to this Agreement
(or, if more recently published, the Fund's current prospectus) as additional
compensation for services described in Paragraph 5, above; such payments will be
made from the assets of FSC, or its affiliates, and not from assets of the Funds
nor from fees payable under applicable Distribution (Rule 12b-1) Plan. For the
payment period in which this Agreement becomes effective or terminates, there
shall be an appropriate proration of the payments on the basis of the number of
days that this Agreement is in effect during the quarter.
E. Miscellaneous.
8. Delivery of Prospectuses to Customers.
Financial Institution will deliver or cause to be delivered to each customer, at
or prior to the time of any purchase of Shares, a copy of the current prospectus
of the Fund and, upon request by a customer or shareholder, a copy of the Fund's
current Statement of Additional Information. Financial Institution shall not
make any representations concerning any Shares other than those contained in the
prospectus or Statement of Additional Information of the Fund or in any
promotional materials or sales literature furnished to Financial Institution by
FSC or the Fund. 9. ERISA Assets.
(a) Financial Institution understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from
receiving administrative service fees or other compensation from funds in
which the fiduciary's discretionary ERISA assets are invested. To date,
the Department of Labor has not issued any exemptive order or advisory
opinion that would exempt fiduciaries from this interpretation. Without
specific authorization from the Department of Labor, fiduciaries should
carefully avoid investing discretionary assets in any fund pursuant to an
arrangement where the fiduciary is to be compensated by the fund for such
investment. Receipt of such compensation could violate ERISA provisions
against fiduciary self-dealing and conflict of interest and could subject
the fiduciary to substantial penalties. (b) Financial Institution will not
perform or provide any duties which would cause it to be a fiduciary under
Section 4975 of the Internal Revenue Code, as amended. For purposes of
that Section, Financial Institution understands that any person who
exercises any discretionary authority or discretionary control with
respect to any individual retirement account or its assets, or who renders
investment advice for a fee, or has any authority or responsibility to do
so, or has any discretionary authority or discretionary responsibility in
the administration of such an account, is a fiduciary.
10. Indemnification.
(a) Financial Institution shall indemnify and hold harmless FSC, each
Fund, the transfer agents of the Funds, and their respective subsidiaries,
affiliates, officers, directors, agents and employees from all direct or
indirect liabilities, losses or costs (including attorneys fees) arising
from, related to or otherwise connected with: (1) any breach by Financial
Institution of any provision of this Agreement; or (2) any actions or
omissions of FSC, any Fund, the transfer agents of the Funds, and their
subsidiaries, affiliates, officers, directors, agents and employees in
reliance upon any oral, written or computer or electronically transmitted
instructions believed to be genuine and to have been given by or on behalf
of Financial Institution. (b) FSC shall indemnify and hold harmless
Financial Institution and its subsidiaries, affiliates, officers,
directors, agents and employees from and against any and all direct or
indirect liabilities, losses or costs (including attorneys fees) arising
from, related to or otherwise connected with: (1) any breach by FSC of any
provision of this Agreement; or (2) any alleged untrue statement of a
material fact contained in any Fund's Registration Statement or
Prospectus, or as a result of or based upon any alleged omission to state
a material fact required to be stated therein or necessary to make the
statements contained therein not misleading.
(c) The agreement of the parties in this Paragraph to indemnify each other
is conditioned upon the party entitled to indemnification (Indemnified
Party) giving notice to the party required to provide indemnification
(Indemnifying Party) promptly after the summons or other first legal
process for any claim as to which indemnity may be sought is served on the
Indemnified Party. The Indemnified Party shall permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting
from it, provided that counsel for the Indemnifying Party who shall
conduct the defense of such claim or litigation shall be approved by the
Indemnified Party (which approval shall not unreasonably be withheld), and
that the Indemnified Party may participate in such defense at its expense.
The failure of the Indemnified Party to give notice as provided in this
subparagraph (d) shall not relieve the Indemnifying Party from any
liability other than its indemnity obligation under this Paragraph. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
without the consent of the Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an
unconditional term the giving by the claimant or plaintiff to the
Indemnified Party of a release from all liability in respect to such claim
or litigation. (d) The provisions of this Paragraph 10 shall survive the
termination of this Agreement.
11. Customer Names Proprietary to Financial Institution.
(a) The names of Financial Institution's customers are and shall remain
Financial Institution's sole property and shall not be used by FSC, or its
affiliates for any purpose except the performance of their respective
duties and responsibilities under this Agreement and except for servicing
and informational mailings relating to the Funds. Notwithstanding the
foregoing, this Paragraph 14 shall not prohibit FSC, or any of its
affiliates from utilizing the names of Financial Institution's customers
for any purpose if the names are obtained in any manner other than from
Financial Institution pursuant to this Agreement.
(b) Neither party shall use the name of the other party in any manner
without the other party's written consent, except as required by any
applicable federal or state law, rule or regulation, and except pursuant
to any mutually agreed upon promotional programs.
(c) The provisions of this Paragraph 11 shall survive the termination of
this Agreement.
12. Security Against Unauthorized Use of Funds' Recordkeeping Systems. Financial
Institution agrees to provide such security as is necessary to prevent any
unauthorized use of the Funds' recordkeeping system, accessed via any computer
hardware or software provided to Financial Institution by FSC.
13. Solicitation of Proxies.
Financial Institution agrees not to solicit or cause to be solicited directly,
or indirectly, at any time in the future, any proxies from the shareholders of
any or all of the Funds in opposition to proxies solicited by management of the
Fund or Funds, unless a court of competent jurisdiction shall have determined
that the conduct of a majority of the Board of Directors or Trustees of the Fund
or Funds constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties. This Paragraph 13 will survive the
termination of this Agreement.
14. Certification of Customers' Taxpayer Identification Numbers. Financial
Institution agrees to obtain any taxpayer identification number certification
from its customers required under Section 3406 of the Internal Revenue Code, and
any applicable Treasury regulations, and to provide FSC, or its respective
designee with timely written notice of any failure to obtain such taxpayer
identification number certification in order to enable the implementation of any
required backup withholding.
15. Notices.
Except as otherwise specifically provided in this Agreement, all notices
required or permitted to be given pursuant to this Agreement shall be given in
writing and delivered by personal delivery or by postage prepaid, registered or
certified United States first class mail, return receipt requested, overnight
courier services, or by facsimile or similar electronic means of delivery (with
a confirming copy by mail as provided herein). Unless otherwise notified in
writing, all notices to FSC shall be given or sent to FSC at its offices located
at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, and all
notices to Financial Institution shall be given or sent to it at its address
shown below.
16. Termination and Amendment.
(a) This Agreement shall become effective in this form as of the date set
forth below or as of the first date thereafter upon which Financial
Institution executes any transaction, performs any service, or receives
any payment pursuant hereto. This Agreement supersedes any prior sales,
distribution, shareholder service, or administrative service agreements
between the parties. (b) With respect to each Fund, this Agreement shall
continue in effect for one year from the date of its execution, and
thereafter for successive periods of one year if the form of this
Agreement is approved at least annually by the Directors or Trustees of
the Fund, including a majority of the members of the Board of Directors or
Trustees of the Fund who are not interested persons of the Fund and have
no direct or indirect financial interest in the operation of the Fund's
Distribution Plan or in any related documents to such Plan ("Independent
Directors or Trustees") cast in person at a meeting called for that
purpose.
(c) This Agreement, including Exhibit A hereto, may be amended by FSC from
time to time by the following procedure. FSC will mail a copy of the
amendment to Financial Institution's address, as shown below. If Financial
Institution does not object to the amendment within thirty (30) days after
its receipt, the amendment will become part of the Agreement. Financial
Institution's objection must be in writing and be received by FSC within
such thirty days. (d) Notwithstanding subparagraph 19(b) and in addition
to subparagraph 1(a), this Agreement may be terminated as follows:
(i) at any time, without the payment of any penalty, by the vote of
a majority of the Independent Directors or Trustees of the Fund or
by a vote of a majority of the outstanding voting securities of the
Fund as defined in the Investment Company Act of 1940 on not more
than sixty (60) days' written notice to the parties to this
Agreement;
(ii) automatically in the event of the Agreement's assignment as defined
in the Investment Company Act of 1940, upon the termination of the
"Distributor's Contract" between the Fund and FSC, or upon the
termination of the Distribution Plan to which this Agreement is
related; and (iii) by any party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice of
its intention to terminate.
(e) The termination of this Agreement with respect to any one Fund will
not cause the Agreement's termination with respect to any other Fund.
17. Governing Law.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania.
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By: Date:
Name:
Title:
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Financial Institution Name
(Please Print or Type)
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Address
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City State Zip Code
By:______________________________
Authorized Signature
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Title
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Print Name or Type Name
Dated:_____________________
Exhibit A to the Mutual Funds Sales and Service Agreement
Wachovia Balanced Fund II
Wachovia Equity Fund II
Wachovia Special Values Fund II
