EX-99.E3 5 dex99e3.htm DISTRIBUTION AGREEMENT
Exhibit (e)(3)
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, made this 1st day of
December, 2005 by and between Xxxxx Xxxxxx Fundamental
Value Fund Inc. ("Investment Company"), a Maryland
corporation and Xxxx Xxxxx Investor Services, LLC ("Distributor").
WHEREAS, the Investment Company is registered with the
Securities and Exchange Commission ("SEC") as an open-end
management investment company under the Investment Company
Act of 1940, as amended (the "1940 Act"), and has registered its
shares forthe series thereof listed on Appendix A ("Shares"), as
it may be amended from time to time by agreement between the
Distributor and the Investment Company (each such series thereof,
a "Fund") for sale to the public under the Securities Act of 1933,
as amended (the "1933 Act") and filed appropriate notices under
various state securities laws; and
WHEREAS, the Investment Company wishes to retain the Distributor
as the principal underwriter in connection with the offering and
sale of the Shares and to furnish certain other services to the
Investment Company as specified in this Agreement; and
WHEREAS, this Agreement has been approved by separate votes of
the Investment Company's Board of Directors ("Board") and of
those Board members who are not "interested persons" of the
Investment Company, as defined in the 1940 Act and who have no
direct or indirect financial interest in the operation of the plan
of distribution adopted pursuant to Rule 12b-1 under the
1940 Act ("Plan") of a Fund or in any agreements related to
such plan ("Independent Board Members") in conformity with
Section 15 of, and Rule 12b-1 under, the 1940 Act; and
WHEREAS, the Distributor is willing and able to furnish
such services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed as follows:
1. (a) The Investment Company hereby appoints the Distributor
as non-exclusive principal underwriter and distributor in
connection with the offering and sale of Shares of the Fund
to the public directly and through registered and qualified
securities dealers, banks and other intermediaries
(collectively, "Intermediaries"), and the Distributor hereby
accepts such appointment, on the terms and for the period
set forth in this Agreement. The Distributor, as agent for
the Investment Company, shall, in accordance with applicable
federal and state law and the organizational documents of the
Investment Company and the registration statement most recently
filed by the Investment Company with the SEC and effective
under the 1940 Act and 1933 Act, as such Registration Statement
may be amended or supplemented from time to time
("Registration Statement"): (i) promote the Fund; (ii) solicit
orders for the purchase of the Shares subject to such terms
and conditions as the Investment Company may specify; and (iii)
accept orders for the purchase of the Shares on behalf of the
Investment Company (collectively, "Distribution Services"). The
Distributor shall comply with all applicable federal and state laws
and offer the Shares of the Fund on an agency or "best efforts"
basis under which the Investment Company shall issue only such
Shares as are actually sold.
(b) The Distributor may pay for ongoing shareholder liaison
services, including responding to shareholder inquiries,
providing shareholders with information on their investments,
and any other services now or hereafter deemed to be appropriate
subjects for the payments of "service fees" under Conduct Rule
2830 of the National Association of Securities Dealers, Inc.
("NASD") (collectively, "Shareholder Services"), as appropriate.
2. The Distributor may also enter into dealer or similar
agreements with qualified Intermediaries it may select for
the performance of Distribution Services and Shareholder Services.
The Distributor may also enter into agreements with Intermediaries
and other qualified entities to perform recordkeeping, shareholder
servicing and sub-accounting services. In making such arrangements,
the Distributor shall act only as principal and not as agent for
the Investment Company. No such Intermediary is authorized to act
as agent for the Investment Company in connection with the offering
or sale of Shares to the public or otherwise, except for the
limited purpose of determining the time as of which orders for
the purchases, sales and exchanges of Shares are deemed to have
been received.
3. The public offering price of the Shares of the Fund shall
be the net asset value per share (as determined by the Investment
Company) of the outstanding Shares of the Fund (or class thereof)
next determined after receipt of an order by the Fund or its
designated agent plus any applicable sales charge, as described
in the Registration Statement of the Investment Company.
4. As compensation for providing Distribution Services
under this Agreement, the Distributor shall retain the sales
charge, if any, on purchases of Shares or retain deferred
sales charges upon redemption of Shares, as set forth in the
Registration Statement. The Distributor is authorized to
collect the gross proceeds derived from the sale of the Shares,
remit the net asset value thereof to the Investment Company upon
receipt of the proceeds and retain the sales charge, if any. The
Distributor shall receive from each Fund fees at the rates
and under the terms and conditions of the Plan adopted by the
Investment Company with respect to each Fund, as such Plan is in
effect from time to time, and subject to any further limitations
on such fees as the Board may impose. The Distributor may reallow
any or all of the sales charges that it has received under this
Agreement to such Intermediaries as it may from time to time determine,
consistent with the Registration Statement and applicable
law. The Distributor may pay any or all of the distribution
fees and service fees that it has received under this Agreement
to such Intermediaries as it may from time to time determine
consistent with the Registration Statement and applicable law.
The Distributormay securitize or borrow against amounts to be
received by the Distributor under a Plan, in which case payments
of the fees under the Plan by the Fund may be made directly to the
lender, security-holder or an agent thereof pursuant to written
instructions of the Distributor; provided, however, that no such
arrangement shall be deemed to give rise to any obligation on the
part of an Investment Company or its Board to continue such payments
if the Board determines that such payments are not in the best
interests of the Fund or its shareholders, or to create any obligation
of the Fund or Investment Company to the lender.
5. As used in this Agreement, the terms "Prospectus" and
"Statement of Additional Information" shall mean, respectively,
the form of prospectus and statement of additional information
with respect to the Fund filed by the Investment Company as part
of the Registration Statement, or as they may be amended or supplemented
from time to time.
6. The Distributor shall print and distribute to prospective
investors current Prospectuses, and shall print and distribute,
upon request, to prospective investors current Statements of
Additional Information, and may print and distribute such other
sales literature, reports, forms and advertisements in connection with
the sale and offers of sale of the Shares as it deems appropriate.
In connection with such sales and offers of sale, the Distributor
and any Intermediary shall give only such information and make only
such statements or representations as are contained in the Fund's
Registration Statement, or in information furnished in writing to
the Distributor by the Investment Company and intended for such use
or approved in writing by authorized representatives of the
Investment Company or the Investment Company's investment adviser,
and the Investment Company shall not be responsible in any way
for any other information, statements or representations given or
made by the Distributor or any Intermediary. Except as specifically
provided in this Agreement, the Investment Company shall bear
none of the expenses of the Distributor in connection with its
offer and sale of the Shares.
7. Subject to the right of the Investment Company to cease to offer
Shares as set forth in paragraph 11 hereof, the Investment Company
agrees at its own expense to register, qualify or determine the
exemption for registration or qualification of the Shares then
offered with the SEC, state and other regulatory bodies, and
to prepare and file from time to time such Fund's Registration
Statement, amendments thereto, reports and other documents as may
be necessary to maintain the registration or qualification. The
Distributor and Intermediaries shall provide the Investment Company
promptly with all information required for such registration or
qualification. Each Fund shall bear all expenses related to preparing
and typesetting such Prospectuses, Statements of Additional
Information, and other materials required by law and such other
expenses, including printing and mailing expenses, related to such
Fund's communications with persons who are shareholders of that Fund.
8. (a) The Distributor shall act as distributor of Shares
in compliance in all material respects with all applicable
laws, rules and regulations, including, without limitation,
all rules and regulations made or adopted pursuant to (i)
the 1940 Act, (ii) the 0000 Xxx, (xxx) the Securities Exchange
Act of 1934 ("1934 Act"), (iv) any securities association
registered under the 1934 Act, including without limitation
the NASD Conduct Rules or rules of any other applicable
self-regulatory organization. The Distributor shall offer the Shares,
and accept purchases, redemptions and exchanges for Shares,
in compliance with the Fund's Registration Statement and applicable law.
(b) The Distributor shall be responsible for reviewing and making
such filings with the NASD, as required, of advertisements and
sales literature relating to each Fund. The Distributor shall be
responsible for reviewing the Registration Statement of each Fund,
as applicable, for compliance with the requirement of the NASD
Conduct Rules that a Fund's prospectus contain disclosure of the
details of any arrangement by which special cash compensation
arrangements are made available to an NASD member distributing the
Fund's securities, which arrangements are not made available
on the same terms to all NASD members who distribute the Fund's
securities.
(c) The Distributor shall adopt and follow procedures for
the confirmation of sales to investors and Intermediaries
timeliness of orders, the collection of amounts payable by
investors and Intermediaries on such sales, the correction of
errors related to distribution of Shares, the cancellation
of unsettled transactions, and assisting with the solicitation
of proxies, and any other matters governed by Rule 38a-1 under
the 1940 Act (as may apply to a principal underwriter for a registered
investment company), each as may be necessary to comply with
the requirements of the NASD, any other self-regulatory
organization, and the federal and state securities laws. The
Distributor shall provide reports or other information to the Investment
Company at the Investment Company's reasonable request, including,
without limitation, reports related to the operation and implementation
of the Fund's policies related to customer privacy, safeguarding of
customer information, sales and marketing practices or other policies
and procedures of the Investment Company.
9. The Distributor agrees that it has adopted and implemented
an anti-money-laundering program in compliance with the USA PATRIOT
Act of 2001, the regulations thereunder and NASD Conduct Rules,
including, without limitation, customer identification program
procedures and monitoring for suspicious activity. The Distributor
additionally agrees that it has adopted and implemented procedures
to comply with applicable law and regulation related to cash
transaction reportingrequirements, as well as monitoring and
reporting under FinCEN, OFAC and other government watch lists.
The Distributor shall provide reports or other information to
the Investment Company at the Investment Company's reasonable
request, related to the operation and implementation of any
of the Fund's anti-money-laundering policies for which the
Distributor is responsible.
10. (a) The Investment Company agrees to indemnify, defend and hold the
Distributor, its officers, directors and employees and any person
who controls the Distributor within the meaning of Section 15 of
the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the reasonable
cost of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection therewith)
which the Distributor, its officers, directors and employees or
any such controlling person may incur, under the 1933 Act or under
common law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in the Registration
Statement or arising out of or based upon any alleged omission to
state a material fact required to be stated or necessary to
make the Registration Statement not misleading, provided that
in no event shall anything contained in this Agreement be construed
so as to protect the Distributor or such other parties against any
liability to the Investment Company or its shareholders to which the
Distributor or such other parties would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in
the performance of their duties, or by reason of reckless disregard
of their obligations and duties under this Agreement, and further
provided that, notwithstanding the foregoing, the Investment
Company shall not indemnify the Distributor or such other parties
if such indemnification obligations arose, directly or indirectly,
as a result of conduct as set forth in paragraph 10(b). The
Distributor agrees that it shall look only to the assets of the Fund,
and not to any other series of the Investment Company, for
satisfaction of any obligation created by this paragraph or
otherwise arising under this Agreement.
(b) The Distributor agrees to indemnify, defend and hold the
Investment Company, its several officers and Board members,
and any person who controls the Investment Company within the
meaning of Section 15 of the 1933 Act, free and harmless from
and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending
such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which the Investment Company,
its officers or Board members, or any such controlling person may
incur, under the 1933 Act or under common law or otherwise, on
account of any act of the Distributor or its directors, officers,
employees or agents, constituting willful misfeasance,
bad faith, or gross negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and
duties under this Agreement or arising out of or based upon any
alleged untrue statement of a material fact contained in information
furnished in writing by the Distributor to the Investment Company for
use in the Registration Statement or arising out of or based upon any
alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or
necessary to make such information not misleading. As used in this
paragraph, the term "employee" shall not include a corporate entity
under contract to provide services to the Fund, or any employee of
such a corporate entity, unless such person is otherwise an
employee of the Investment Company.
(c) Each party agrees to promptly notify the other of the
commencement of any litigation or proceedings involving any
indemnified party. The indemnification provisions of this paragraph
10 shall survive the termination of this Agreement.
11. The Investment Company reserves the right at any time
to withdraw any or all offerings of the Shares of a Fund,
and at its discretion to recommence offering any time thereafter,
by written notice to the Distributor at its principal office.
12. The Distributor may at its sole discretion, directly or
through Intermediaries, repurchase Shares offered for sale
by the shareholders or Intermediaries. Repurchase of Shares
by the Distributor shall be at the net asset value (less any
applicable sales, redemption or other charges, as described in
the Fund's Registration Statement) next determined after a repurchase
order has been received. The Distributor will receive no commission
or other remuneration for repurchasing Shares, other than deferred
sales charges as described in the Fund's Registration Statement. At
the end of each business day, the Distributor shall notify, by means
of electronic transmission (as may be agreed-upon by the parties to
this Agreement) or in writing, the Investment Company and the
Investment Company's transfer agent, of the orders for repurchase of
Shares received by the Distributor since the last such report, the
amount to be paid for such Shares, and the identity of the
shareholders or Intermediaries offering Shares for repurchase. Upon
such notice, the Investment Company shall pay the Distributorsuch
amounts as are required by the Distributor to pay for the repurchase
of such Shares in cash or in the form of a credit against moneys
due the Investment Company from the Distributor as proceeds from
the sale of Shares. The Investment Company reserves the right to
suspend such repurchase right upon written notice to the Distributor.
The Distributor further agrees to act as agent for the Investment
Company to receive and transmit promptly to the Investment
Company's transfer agent shareholder and Intermediary requests for
redemption of Shares.
13. The Distributor is an independent contractor and shall
be agent for the Investment Company only in respect to the
sale, redemption and exchange of the Shares, including for the
limited purpose of determining the time as of which Share
transactions are deemedto have been received.
14. The services of the Distributor to the Investment Company
under this Agreement are not to be deemed exclusive, and the
Distributor shall be free to render similar services or other
services to others so long as its services hereunder are not
impaired thereby.
15. The Distributor shall prepare reports for the Board
on a quarterly basis, or more frequently as reasonably
requested by the Board, showing such information concerning
expenditures related to this Agreement or related to the operation and
implementation of a Fund's Plan.
16. As used in this Agreement, the terms "assignment,"
"interested person" and "majority of the outstanding voting
securities" shall have the meanings given to them by Section 2(a)
of the 1940 Act, subject to such exemptions as may be granted
by the SEC or its staff, as appropriate, by any rule, regulation,
order, or no-action or interpretative letter.
17. This Agreement will become effective with respect
to the Fund on the date first written above and, unless
sooner terminated as provided herein, will continue in
effect for two years from the above written date. Thereafter, if
not terminated, this Agreement shall continue in effect with
respect to each Fund for successive annual periods ending on
the same date of each year, provided that such continuance is
specifically approved at least annually (i) by the Board or
(ii) by a vote of a majority of the outstanding voting securities
(as defined the in 0000 Xxx) of the Fund, provided that in either
event the continuance is also approved by a majority of the
Investment Company's Independent Board Members, by vote cast in
person at a meeting called for the purpose of voting on such approval.
18. This Agreement is terminable with respect to some or
all of the Funds without penalty by the Board, by vote of a
majority of the outstanding voting securities of the Fund (as
defined in the 1940 Act), or by the Distributor, on not less than
60 days' written notice to the other party, and such notice
period may be waived upon the mutual written consent of the Distributor
and the Investment Company. This Agreement will also automatically
and immediately terminate in the event of itsassignment (as defined
in Section 16 of this Agreement).
19. Shares of any Fund may have been divided into separate
classes, as described in the applicable Fund's Registration
Statement, and may have sales charges or discounts or waivers
available for certain categories of investor.
20. The Fund and the Distributor agree that the information
exchanged hereunder and information about the respective
customers and potential customers of each is confidential
and as such shall not be disclosed, sold or used in any way
except to carry out the terms of this Agreement. Notwithstanding
the foregoing, such confidential information may be disclosed on a
"need to know" basis as set forth in applicable privacy rules and
regulations. The obligations regarding confidentiality hereunder
shall not apply to any information which is (i) otherwise publicly
available, (ii) already possessed by the entity to whom the information
was disclosed prior to disclosure hereunder, (iii) independently
developed by the entity, or (iv) disclosed pursuant to law, rule,
regulation or court or administrative order. The Distributor shall
have the right to use any list of shareholders of the Fund or
any other list of investors which it obtains in connection with
its provision of services under this Agreement, provided that such
use is consistent with applicable law and the privacy policies of
the Distributor and the Fund. The Distributor further agrees to take
commercially reasonable steps, in accordance with applicable law, to
safeguard customer information. The provisions of this paragraph 20
will survive termination of this Agreement.
21. From time to time, each Fund may implement policies,
procedures or charges in an effort to avoid the potential
adverse effects on the Funds of short-term trading by market
timers. The Distributor agrees to cooperate in good faith with
the Investment Company in the implementation of (i) any such
policies, procedures and/or charges, and (ii) the imposition and
payment over to the Fund of redemption fees specified in the
Registration Statement. The Distributor agrees, where appropriate,
to make reasonable efforts to obtain the agreement of Intermediaries
to comply with the Funds' frequent trading and other policies set
forth in the Funds' Registration Statement or to take alternative
actions reasonably designed to achieve compliance with these policies.
22. No provision of this Agreement may be changed, waived, discharged
or terminated,except by an instrument in writing signed by the party
against which enforcement ofthe change, waiver, discharge or termination
is sought. This Agreement may be executed in multiple counterparts.
23. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Maryland.
24. Notices shall be provided to each party, as noted below:
To the Distributor:
Attn: Xxxxxx Xxxxx
Xxxx Xxxxx Investor Services, LLC
c/x Xxxx Xxxxx, Inc.,
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
To the Investment Company:
Xxxxx Xxxxxx Fundamental Value Fund Inc.
000 Xxxxx Xxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Secretary and Chief Legal Officer
25. The Articles of Incorporation of the Investment Company,
amended from time to time, which is on file with the Maryland
State Department of Assessments and Taxation, provides that to
the fullest extent permitted by Maryland law, no Board member
or officer of the Investment Company shall be personally liable to
the Investment Company or its stockholders for money damages,
except to the extent such exemption from liability or limitation
thereof is not permitted by the 1940 Act.
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be
executed by their officers thereunto duly authorized.
ATTEST:
By: By:
Assistant Secretary
ATTEST:
XXXX XXXXX INVESTOR SERVICES, LLC
By: By:
Appendix A
Fund
Xxxxx Xxxxxx Fundamental Value Fund Inc.
Date Added:
December 1, 2005
