Exhibit (e)
UNDERWRITING AGREEMENT
THIS AGREEMENT is made as of August 15, 2005, by and between Fairholme
Funds, Inc. (the "Fund"), a Maryland Corporation, and Citco Mutual Fund
Distributors, Inc., a Delaware corporation ("Underwriter").
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized by its Charter and By-laws to issue
separate series of shares of its common stock representing separate investment
portfolios (each series individually referred to herein as a "Portfolio" and
collectively as the "Portfolios") and to further divide such Portfolios into
separate share classes; and
WHEREAS, the Fund has authorized the issuance of shares of common stock
("Shares") in the Portfolios which are identified on Exhibit A attached hereto,
which Exhibit A may be amended from time to time by mutual agreement of the Fund
and Underwriter; and
WHEREAS, the Fund desires that the Underwriter offer, as principal
underwriter, the shares of each Portfolio and class thereof to the public and
the Underwriter is willing to provide those services on the terms and conditions
set forth in this Agreement in order to promote the growth of the Portfolios and
facilitate the distribution of shares; and
WHEREAS, the Fund has taken the necessary steps to appoint Underwriter as
the Fund's principal underwriter pursuant to Section 15 of the 1940 Act and the
Fund's organizational documents; and
WHEREAS, Underwriter is a broker-dealer registered with the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act") and a member in good standing of the National
Association of Securities Dealers, Inc., (the "NASD"); and
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. Appointment; Delivery of Documents.
(a) The Fund hereby appoints Underwriter as exclusive agent for the
distribution of Shares of the Portfolios listed in Exhibit A hereto,
and Underwriter hereby accepts such appointment under the terms of
this Agreement.
(b) In connection therewith, the Fund has delivered to Underwriter copies
of (i) the Fund's Charter and By-laws, (ii) the Fund's Registration
Statement and all amendments thereto filed with the SEC pursuant to
the Securities Act of 1933, as amended ("Securities Act"), or the 1940
Act ("Registration Statement'), (iii) the current prospectuses and
statements of additional information of each Portfolio and class
thereof (collectively, as currently in effect and as amended or
supplemented, the "Prospectus"); and (iv) relevant procedures adopted
by the Fund with respect to the Portfolios that are necessary for
Underwriter to perform the services set forth herein and shall
promptly furnish Underwriter with all amendments of or supplements to
the foregoing. The Fund shall deliver to Underwriter a certified copy
of the resolution of the Board of Directors of the Fund (the "Board")
appointing Underwriter and authorizing the execution and deliver of
this Agreement.
(c) (i) All advertising and sales literature related to the Fund that is
not in use prior to the execution of this Agreement shall be
delivered to Underwriter for review prior to use with sufficient
time to permit the Underwriter to review the material and file
with the NASD if necessary. The Fund and Underwriter shall
mutually agree upon reasonable turnaround times for such review.
(ii) All advertising and sales literature related to the Fund that is
in use prior to the execution of this Agreement shall be
delivered to Underwriter, and Underwriter shall file such
material with the NASD, if necessary, within ten days of its use
by Underwriter or its agents.
2. Offering of Shares.
(a) Underwriter shall have the right to buy from the Fund the Shares
needed to fill unconditional orders for unsold Shares of the
Portfolios as shall then be effectively registered under the
Securities Act placed with the Underwriter by investors or Selected
Dealers or Selected Agents (each as defined in Section 10 hereof)
acting as agent for their customer or on their own behalf.
Alternatively, Underwriter may act as the Fund's agent, to offer, and
to solicit offers to subscribe to, unsold Shares of the Portfolios as
shall then be effectively registered under the Securities Act.
Underwriter will promptly forward all orders and subscriptions to the
Fund. The price that Underwriter shall pay for Shares purchased from
the Fund shall be the net asset value per Share, determined as set
forth in Section 2(c) hereof, used in determining the public offering
price on which the orders are based. Shares purchased by Underwriter
are to be resold by Underwriter to investors at the public offering
price, as set forth in Section 2(b) hereof, or to Selected Dealers or
Selected Agents acting as agent for their customers that have entered
into agreements with Underwriter pursuant to Section 10 hereof or
acting on their own behalf. The Fund reserves the right to sell Shares
directly to investors through subscriptions received by the Fund, but
no such direct sales shall affect the sales charges due to Underwriter
hereunder.
(b) The public offering price of the Shares of a Portfolio, i.e., the
price per Share at which Underwriter or Selected Dealers or Selected
Agents may sell Shares to the public or to those persons eligible to
invest in Shares as described in the applicable Prospectus, shall be
the public offering price determined in accordance with the then
currently effective Prospectus of the Portfolio or class thereof under
the Securities Act relating to such Shares. The public offering price
shall not exceed the net asset value at which Underwriter, when acting
as principal, is to purchase such Shares, plus, in the case of Shares
for which an initial sales charge is assessed, an initial charge equal
to a specified percentage or percentages of the public offering price
of the Shares as set forth in the current Prospectus relating to the
Shares. In the case of Shares for which an initial sales charge may be
assessed, Shares may be sold to certain classes of persons at reduced
sales charges or without any sales charge as from time to time set
forth in the current Prospectus relating to the Shares. The Fund will
advise Underwriter of the net asset value per Share at each time as
the net asset value per Share shall have been determined by the Fund
and at such other times as Underwriter may reasonably request.
(c) The net asset value per Share of each Portfolio or class thereof shall
be determined by the Fund, or its designated agent, in accordance with
and at the times indicated in the applicable Prospectus on each
business day in accordance with the method set forth in the Prospectus
and guidelines established by the Board.
(d) The Fund reserves the right to suspend the offering of Shares of a
Portfolio or of any class thereof at any time in the absolute
discretion of the Board, and upon notice of such suspension
Underwriter shall cease to offer Shares of the Portfolios or classes
thereof specified in the notice.
(e) The Fund, or any agent of the Fund designated in writing to
Underwriter by the Fund, shall be promptly advised by Underwriter of
all purchase orders for Shares received by Underwriter and all
subscriptions for Shares obtained by Underwriter as agent shall be
directed to the Fund for acceptance and shall not be binding until
accepted by the Fund. Any order or subscription may be rejected by the
Fund. The Fund or its designated agent will confirm orders and
subscriptions upon their receipt, will make appropriate book entries
and, upon receipt by the Fund or its designated agent of payment
thereof, will issue such Shares in uncertificated form pursuant to the
instructions of Underwriter. Underwriter agrees to cause such payment
and such instructions to be delivered promptly to the Fund or its
designated agent.
3. Repurchase or Redemption of Shares by the Fund.
(a) Any of the outstanding Shares of a Portfolio or class thereof may be
tendered for redemption at any time, and the Fund agrees to redeem or
repurchase the Shares so tendered in accordance with its obligations
as set forth in the Charter and the Prospectus relating to the Shares.
The price to be paid to redeem or repurchase the Shares of a Portfolio
or class thereof shall be equal to the net asset value calculated in
accordance with the provisions of Section 2(c) hereof less, in the
case of Shares for which a deferred sales charge is assessed, a
deferred sales charge equal to a specified percentage or percentages
of the net asset value of those Shares as from time to time set forth
in the Prospectus relating to those Shares or their cost, whichever is
less. Shares of a Portfolio or class thereof for which a deferred
sales charge may be assessed and that have been outstanding for a
specified period of time may be redeemed without payment of a deferred
sales charge as from time to time set forth in the Prospectus relating
to those Shares.
(b) The Fund or its designated agent shall pay (i) the total amount of the
redemption price consisting of the redemption price, less first, any
applicable contingent deferred sales charge, and second, any
applicable redemption fee as provided in the Prospectus, which
redemption fee shall be retained by the Fund, to the redeeming
shareholder or its agent and (ii) except as may be otherwise required
by the Rules of Conduct (the "Rules") of the NASD and any
interpretations thereof, any applicable deferred sales charges to
Underwriter in accordance with Underwriter's instructions on or before
the fifth business day (or such other earlier business day as is
customary in the investment company industry) subsequent to the Fund
or its agent having received the notice of redemption in proper form.
(c) Redemption of Shares or payment therefor may be suspended at times
when the New York Stock Exchange is closed for any reason other than
its customary weekend or holiday closings, when trading thereon is
restricted, when an emergency exists as a result of which disposal by
the Fund of securities owned by a Portfolio is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to
determine the value of a Portfolio's net assets, or during any other
period when the SEC so requires or permits.
4. Duties and Representations of the Underwriter.
(a) Underwriter shall distribute Shares of the Portfolios upon the terms
and conditions contained herein and in the then current Prospectus.
Underwriter shall devote reasonable time and effort to effect sales of
Shares but only against orders therefore and shall not be obligated to
sell any specific number of Shares. The services of Underwriter to the
Fund hereunder are not to be deemed exclusive, and nothing herein
contained shall prevent Underwriter from entering into like
arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby.
(b) In selling Shares of the Portfolios, Underwriter shall use its best
efforts in all material respects duly to conform with the requirements
of all federal and state laws relating to the sale of the Shares. None
of Underwriter, any Selected Dealer, any Selected Agent or any other
person is authorized by the Fund to give any information or to make
any representations other than as is contained in a Portfolio's
Prospectus or any advertising materials or sales literature
specifically approved in writing by the Fund or its agents.
(c) Underwriter shall adopt and follow procedures for the confirmation of
sales to investors and Selected Dealers or Selected Agents, the
collection of amounts payable by investors and Selected Dealers or
Selected Agents on such sales, and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of
the NASD.
(d) Underwriter shall provide to the Fund, promptly upon its request, the
taxpayer identification of all shareholders of a Portfolio that
purchased, redeemed, transferred, or exchanged shares of the Portfolio
held through an account with Underwriter, and the amount and dates of
such shareholder purchases, redemptions, transfers, and exchanges.
Underwriter shall execute any instructions from the Fund to restrict
or prohibit further purchases or exchanges of Portfolio shares by a
shareholder who has been identified by the Fund as having engaged in
transactions that violate the Fund's market timing policies.
(e) Underwriter represents and warrants to the Fund that:
(i) It is a corporation duly organized and incorporated and in good
standing under the laws of the State of Delaware and it is duly
qualified to carry on its business in the Commonwealth of
Pennsylvania;
(ii) It is empowered under applicable laws and by its Charter and
By-laws to enter into and perform this Agreement;
(iii) All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement;
(iv) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(v) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of Underwriter, enforceable
against Underwriter in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting the rights and remedies of
creditors and secured parties;
(vi) It is registered with the SEC as a broker-dealer under the
Exchange Act, it will comply with all applicable terms and
provisions of the Exchange Act and the rules and regulations
thereunder, it is a member in good standing of the NASD, it will
abide by the rules and regulations of the NASD, and it will
notify the Fund if its membership in the NASD is terminated or
suspended; and
(vii) The performance by Underwriter of its obligations hereunder does
not and will not contravene any provision of its Charter or
By-laws.
(e) Notwithstanding anything in this Agreement to the contrary,
Underwriter makes no warranty or representation as to the number of
Selected Dealers or Selected Agents with which it has entered into
agreements in accordance with Section 10 hereof, as to the
availability of any Shares to be sold through any Selected Dealer,
Selected Agent or other intermediary or as to any other matter not
specifically set forth herein.
5. Duties and Representations of the Fund.
(a) The Fund shall furnish to Underwriter copies of all financial
statements and other documents to be delivered to shareholders or
investors at least two business days prior to such delivery and shall
furnish Underwriter copies of all other financial statements,
documents and other papers or information which Underwriter may
reasonably request for use in connection with the distribution of
Shares. The Fund shall make available to Underwriter the number of
copies of a Portfolio's Prospectus as Underwriter shall reasonably
request.
(b) The Fund shall take, from time to time, subject to the approval of the
Board and any required approval of the shareholders of the Fund, all
action necessary to fix the number of authorized Shares (if such
number is not limited) and to register the Shares under the Securities
Act, to the end that there will be available for sale the number of
Shares as reasonably may be expected to be sold pursuant to this
Agreement.
(c) The Fund shall execute any and all documents, furnish to Underwriter
any and all information, otherwise use its best efforts to take all
actions that may be reasonably necessary and cooperate with
Underwriter in taking any action as may be necessary to register or
qualify Shares for sale under the securities laws of the various
states of the United States and other jurisdictions ("States") as
Underwriter shall designate (subject to approval by the Fund);
provided that Underwriter shall not be required to register as a
broker-dealer or file a consent to service of process in any State and
neither the Fund nor any Portfolio or class thereof shall be required
to qualify as a foreign corporation, trust or association in any
State. Any registration or qualification may be withheld, terminated
or withdrawn by the Fund at any time in its discretion. Underwriter
shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection
with such registration or qualification.
(d) The Fund represents and warrants to Underwriter that:
(i) It is a corporation duly organized and incorporated and in good
standing under the laws of the State of Maryland;
(ii) It is empowered under applicable laws and by its Charter and
By-laws to enter into and perform this Agreement;
(iii) All proceedings required by the Charter and By-laws have been
taken to authorize it to enter into and perform its duties under
this Agreement;
(iv) It is an open-end management investment company registered with
the SEC under the 1940 Act;
(v) All Shares, when issued, shall be validly issued, fully paid and
non-assessable;
(vi) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Fund, enforceable
against the Fund in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting the rights and remedies of
creditors and secured parties;
(vii) The Registration Statement is currently effective and will
remain effective with respect to all Shares of the Portfolios and
classes thereof being offered for sale;
(viii) The Registration Statement and Prospectuses have been or will
be, as the case may be, carefully prepared in conformity with the
requirements of the Securities Act and the rules and regulations
thereunder;
(ix) The Registration Statement and Prospectuses contain or will
contain all statements required to be stated therein in
accordance with the Securities Act and the rules and regulations
thereunder; all statements of fact contained or to be contained
in the Registration Statement or Prospectuses are or will be true
and correct at the time indicated or on the effective date as the
case may be; and neither the Registration Statement nor any
Prospectus, when they shall become effective or be authorized for
use, will include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a
purchaser of Shares;
(x) It will from time to time file such amendment or amendments to
the Registration Statement and Prospectuses as, in the light of
then-current and then-prospective developments, shall, in the
opinion of its counsel, be necessary in order to have the
Registration Statement and Prospectuses at all times contain all
material facts required to be stated therein or necessary to make
any statements therein not misleading to a purchaser of Shares
("Required Amendments");
(xi) It will provide Underwriter with copies of any amendment to the
Registration Statement or Prospectuses promptly;
(xii) Any amendment to the Registration Statement or Prospectuses
hereafter filed will, when it becomes effective, contain all
statements required to be stated therein in accordance with the
1940 Act and the rules and regulations thereunder; all statements
of fact contained in the Registration Statement or Prospectuses
will, be true and correct at the time indicated or on the
effective date as the case may be; and no such amendment, when it
becomes effective, will include an untrue statement of a material
fact or will omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading to a purchaser of the Shares; and
(xiii) It will provide Underwriter with a list of persons authorized
by the Board to give oral and/or written instructions and upon
whose orders Underwriter may act.
6. Expenses to be Borne by Fund. The Fund will bear the following expenses:
(a) preparation, setting in type, and printing of sufficient copies of the
Prospectuses for distribution to shareholders, and the distribution to
shareholders of the Prospectus;
(b) preparation, printing and distribution of reports and other
communications to shareholders;
(c) registration of the Shares under the federal securities law;
(d) qualification of the Shares for sale in the jurisdictions designated
by Fund and Underwriter;
(e) maintaining facilities for the issue and transfer of the Shares;
(f) supplying information, prices and other data to be furnished by the
Fund under this Agreement; and
(g) any original issue taxes or transfer taxes applicable to the sale or
delivery of the Shares of certificates therefore.
7. Compensation. The Fund shall pay Underwriter for the services to be
provided under this Agreement in accordance with, and in the manner set
forth in, Exhibit B attached hereto, as such Exhibit B may be amended from
time to time by mutual agreement of the parties.
If this Agreement becomes effective subsequent to the first day of a month
or terminates before the last day of a month, Underwriter's compensation
for that part of the month in which this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of Underwriter's compensation for the preceding month
shall be made promptly.
8. Standard of Care.
(a) Underwriter shall use its best judgment and reasonable efforts in
rendering services to the Fund under this Agreement but shall be under
no duty to take any action except as specifically set forth herein or
as may be specifically agreed to by Underwriter in writing.
Underwriter shall not be liable to the Fund or any of the Fund's
shareholders for any error of judgment or mistake of law, for any loss
arising out of any investment, or for any action or inaction of
Underwriter in the absence of bad faith, willful misfeasance or gross
negligence in the performance of Underwriter's duties or obligations
under this Agreement or by reason of Underwriter's reckless disregard
of its duties and obligations under this Agreement.
(b) Underwriter shall not be liable for any action taken or failure to act
in good faith reliance upon:
(i) the advice of the Fund or of counsel, who may be counsel to the
Fund or counsel to Underwriter;
(ii) any oral instruction with respect to any amount less than
$10,000, which it receives from any person authorized by the
Board to give such oral instruction;
(iii) any written instruction or certified copy of any resolution of
the Board, and Underwriter may rely upon the genuineness of any
such document or copy thereof reasonably believed in good faith
by Underwriter to have been validly executed; or
(iv) any signature, instruction, request, letter of transmittal,
certificate, opinion of counsel, statement, instrument, report,
notice, consent, order, or other document reasonably believed in
good faith by Underwriter to be genuine and to have been signed
or presented by the Fund or other proper party or parties;
and Underwriter shall not be under any duty or obligation to inquire into
the validity or invalidity or authority or lack thereof of any statement,
oral or written instruction, resolution, signature, request, letter of
transmittal, certificate, opinion of counsel, instrument, report, notice,
consent, order, or any other document or instrument which reasonably
believes in good faith to be genuine.
9. Indemnification.
(a) The Fund agrees to indemnify, defend and hold the Underwriter, its
officers, Directors and agents, and any person who controls the
Underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, free and harmless from and against any
and all claims, demands or 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
Underwriter, its officers, Directors and agents or any such
controlling persons may incur, without bad faith, willful misfeasance
or negligence on the part of the person being indemnified, under the
Securities Act, the Exchange Act, or under common law or otherwise,
arising out of or based upon (i) the bad faith, willful misfeasance or
gross negligence of the Fund in connection with the subject matter of
this Agreement; (ii) any material breach by the Fund of its
representations and warranties under this Agreement; (iii) any untrue
statement of a material fact contained in the Registration Statement
or Prospectus or arising out of or based upon any alleged omission to
state a material fact required to be stated in either thereof or
necessary to make the statements in either thereof not misleading,
except insofar as such claims, demands, liabilities or expenses arise
out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Underwriter to
the Fund for use in the Registration Statement, (iv) any untrue
statement of a material fact contained in a Fund advertisement or
sales literature or arising out of or based upon any alleged omission
to state a material fact required to be stated in either thereof or
necessary to make the statements in either thereof not misleading,
except insofar as such claims, demands, liabilities or expenses arise
out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Underwriter to
the Fund for use in such advertisement or sales literature or (iv) any
action taken or omitted by the Fund prior to the date of this
Agreement.
(b) The Underwriter agrees to indemnify, defend, and hold the Fund, its
officers, Directors, employees, shareholders and agents, and any
person who controls the Fund within the meaning of Section 15 of the
Securities Act of Section 20 of the Exchange Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending against such claims,
demands or liabilities and any counsel fees incurred in connection
therewith) which the Fund, its Directors, officers, employees,
shareholders and agents, or any such controlling person may incur,
without bad faith, willful misfeasance or negligence on the part of
the person being indemnified, under the Securities Act, the Exchange
Act or under common law or otherwise arising out of or based upon (i)
any material breach by the Underwriter of its representations and
warranties in this Agreement; (ii) any untrue statement of a material
fact contained in information furnished in writing by the Underwriter
to the Fund for use in the Registration Statement, or arising out of
or based upon any omission or alleged omission to state a material
fact in connection with such information required to be stated in the
Registration Statement necessary to make such information not
misleading; or (iii) any act of, or omission by, Underwriter or its
representatives that does not conform to the standard of care set
forth in Section 8 of this Agreement.
(c) A party seeking indemnification hereunder (the "Indemnitee") shall
give prompt written notice to the party from whom indemnification is
sought (the "Indemnitor") of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to
indemnity under this Section; provided, however, that failure to
notify the Indemnitor of such written assertion or claim shall not
relieve the indemnitor of any liability arising from this Section. The
Indemnitor shall be entitled, if it so elects, to assume the defense
of any suit brought to enforce a claim subject to this Agreement and
such defense shall be conducted by counsel chosen by the Indemnitor
and satisfactory to the Indemnitee; provided, however, that if the
defendants include both the Indemnitee and the Indemnitor, and the
Indemnitee shall have reasonably concluded that there may be one or
more legal defenses available to it which are different from or
additional to those available to the Indemnitor ("conflict of
interest"), the Indemnitor shall have the right to select separate
counsel acceptable to the Indemnitee to defend such claim on behalf of
the Indemnitee. In the event that the Indemnitor elects to assume the
defense of any suit pursuant to the preceding sentence and retains
counsel satisfactory to the Indemnitee, the Indemnitee shall bear the
fees and expenses of additional counsel retained by it except for
reasonable investigation costs which shall be borne by the Indemnitor.
If the Indemnitor (i) does not elect to assume the defense of a claim,
(ii) elects to assume the defense of a claim but chooses counsel that
is not satisfactory to the Indemnitee or (iii) has no right to assume
the defense of a claim because of a conflict of interest, the
Indemnitor shall advance or reimburse the Indemnitee, at the election
of the Indemnitee, reasonable fees and disbursements of any counsel
retained by Indemnitee, including reasonable investigation costs.
10. Selected Dealer and Selected Agent Agreements. Underwriter shall have the
right to enter into selected dealer agreements with securities dealers of
its choice ("Selected Dealers") and selected agent agreements with
depository institutions and other financial intermediaries of its choice
("Selected Agents") for the sale of Shares and to fix therein the portion
of the sales charge, if any, that may be allocated to the Selected Dealers
or Selected Agents; provided, that the Fund shall approve the standard form
of agreement with Selected Dealers or Selected Agents and shall review the
compensation set forth therein. Underwriter shall include in the agreements
with Selected Dealers or Selected Agents provisions relating to compliance
with anti-money laundering and market timing policies. Shares of each
Portfolio or class thereof shall be resold by Selected Dealers or Selected
Agents only at the public offering price(s) set forth in the Prospectus
relating to the Shares. Within the United States, Underwriter shall offer
and sell Shares of the Portfolios only to such Selected Dealers as are
members in good standing of the NASD.
11. Force Majeure. If either party shall be delayed in the performance of its
services or prevented entirely or in part from performing services due to
causes or events beyond its control, including and without limitation, acts
of God, interruption of power or other utility, transportation or
communication services, acts of civil or military authority, sabotages,
national emergencies, explosion, flood, accident, earthquake or other
catastrophe, fire, strike or other labor problems, legal action, present or
future law, governmental order, rule or regulation, or shortages of
suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time, subject to
restrictions and requirements of performance as may be established by
federal or state law.
12. Confidentiality.
Underwriter agrees to treat all records and other information related to
the Fund, including any information concerning a Portfolio's holdings, as
proprietary information of the Fund and, on behalf of itself and its
employees, to keep confidential all such information, except that
Underwriter may:
(i) Prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC;
(ii) Provide information typically supplied in the investment company
industry to companies that track or report price, performance or
other information regarding investment companies; and
(iii) Release such other information as approved in writing by the
Fund, which approval shall not be unreasonably withheld;
Provided, however, that Underwriter may release any information regarding
the Fund without the consent of the Fund if Underwriter reasonably believes
that it may be exposed to civil or criminal legal proceedings for failure
to comply, when requested to release any information by duly constituted
authorities or when so requested by the Fund.
13. Rule 38a-1 Policies and Procedures
Underwriter has provided the Fund with its written compliance policies and
procedures as required by Rule 38a-1 ("Rule 38a-1 Policies and Procedures")
for the approval by the Board of Directors of the Fund. With respect to the
services that Underwriter provides to the Fund hereunder, Underwriter's
Rule 38a-1 Policies and Procedures shall be reasonably designed to prevent
violations by the Underwriter of the federal securities laws as defined in
Rule 38a-1, and which include the Securities Act of 1933, the Securities
and Exchange Act of 1934, the Xxxxxxxx-Xxxxx Act of 2002, the Investment
Company Act of 1940, the Investment Advisers Act of 1940, Title V of the
Xxxxx-Xxxxx-Xxxxxx Act (relating to privacy regulation), any SEC rules
adopted under any of these statutes, the Bank Secrecy Act as it applies to
registered investment company operations (anti-money laundering), and any
rules adopted thereunder by the SEC or the Department of the Treasury
("Federal Securities Laws").
Underwriter will promptly provide the Fund's Chief Compliance Officer with
any material changes that have been made to Underwriter's Rule 38a-1
Policies and Procedures.
Underwriter agrees to cooperate with the Fund in the annual review of
Underwriter's Rule 38a-1 Policies and Procedures conducted by the Fund's
Chief Compliance Officer to determine the adequacy of Underwriter's Rule
38a-1 Policies and Procedures and the effectiveness of their implementation
(the "Annual Review"). Underwriter also agrees to cooperate with the Fund
in any interim reviews of Underwriter's Rule 38a-1 Policies and Procedures
to determine their adequacy and the effectiveness of their implementation
in response to significant compliance events, changes in business
arrangements, and/or regulatory developments ("Interim Review"). Such
cooperation includes, without limitation, furnishing such certifications,
subcertifications, and documentation within the scope of the Underwriter's
functions and responsibilities as the Fund's Chief Compliance Officer shall
reasonably request from time to time and implementing changes to
Underwriter's Rule 38a-1 Policies and Procedures satisfactory to the Fund's
Chief Compliance Officer and the Underwriter.
Underwriter will provide the Fund with ongoing, direct, and immediate
access to Underwriter's compliance personnel and shall cooperate with the
Fund's Chief Compliance Officer in order to provide assistance to the Fund
in carrying out it's obligations under Rule 38a-1.
Underwriter will promptly notify the Fund in the event that a Material
Compliance Matter, as defined under Rule 38a-1, occurs with respect to
Underwriter's Rule 38a-1 Policies and Procedures and will cooperate with
the Fund in providing the Fund with periodic and special reports in the
event any Material Compliance Matter occurs. A "Material Compliance Matter"
has the same meaning as the term defined in Rule 38a-1, and includes any
compliance matters that involve: (1) a violation of the Federal Securities
Laws by Underwriter (or its officer, directors, employees, or agents); (2)
a violation of Underwriter's Rule 38a-1 Policies and Procedures; or (3) a
weakness in the design or implementation of Underwriter's Rule 38a-1
Policies and Procedures.
Underwriter (and anyone acting under the direction of Underwriter) will
refrain from, directly or indirectly, taking any action to coerce,
manipulate, mislead, or fraudulently influence the Fund's Chief Compliance
Officer in the performance of his or her responsibilities under Rule 38a-1.
14. 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 Underwriter, (ii) either by action of the Board or at a
meeting of the Shareholders of the Fund by the affirmative vote of a
majority of the outstanding Shares, and (iii) by a majority of the
Directors of the Fund who are not interested persons of the Fund or of
Underwriter, by vote cast in person at a meeting called for the purpose of
voting on such approval. Either the Fund or Underwriter may terminate this
Agreement at any time on sixty (60) days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party.
15. Effective Period of This Agreement. Unless terminated automatically as set
forth in Section 14 of this Agreement, this Agreement shall take effect
upon its execution and shall remain in full force and effect for a period
of two years from that date, and shall remain in full force and effect from
year to year thereafter, subject to annual approval (i) by Underwriter,
(ii) by the Board or by vote of a majority of the outstanding Shares, and
in either case (iii) by a majority of the Directors of the Fund who are not
interested persons of the Fund or of Underwriter, by vote cast in person at
a meeting called for the purpose of voting on such approval.
16. Successor Investment Company. Unless this Agreement has been terminated in
accordance with Section 14, the terms and provisions of this Agreement
shall become automatically applicable to any investment company which is a
successor to the Fund as a result of a reorganization, recapitalization or
change of domicile.
17. Severability. 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 remain in full force and effect.
18. Questions of Interpretation.
(a) This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania.
(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 1940 Act shall be resolved by reference to such term
or provision of the 1940 Act and its 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 SEC
issued pursuant to said Act. In addition, where the effect of a
requirement of the 1940 Act, reflected in any provision of this
Agreement is revised by rule, regulation or order of the SEC, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
19. Notices. 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 for this purpose the
address of the Fund is 00 Xxxx X. Xxxxxxx Xxxxxxx, Xxxxx Xxxxx, Xxx Xxxxxx
00000, Attn: Xxxxx X. Xxxxxxx, and for the Underwriter is 83 General Xxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxxx, XX 00000, Attn:President.
20. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
21. Binding Effect. Each of the undersigned expressly warrants and represents
that he has the full power and authority to sign this Agreement on behalf
of the party indicated, and that his signature will operate to bind the
party indicated to the foregoing terms.
IN WITNESS WHEREOF, the Fund and Underwriter have each caused this
Agreement to be signed on its behalf, all as of the day and year first above
written.
ATTEST: FAIRHOLME FUNDS, INC.
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxx
--------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer & Secretary
ATTEST: CITCO MUTUAL FUND DISTRIBUTORS, INC.
/s/ Xxxxxx X. Xxxxxxxxxxx By: /s/ Xxxx X. Xxxxxxx
---------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer/FINOP
EXHIBIT A
The following Portfolios and share classes thereof are hereby made subject
to the Agreement dated August 15, 2005, by and between Citco Mutual Fund
Distributors, Inc. ("Underwriter") and Fairholme Funds, Inc. (the "Fund"):
PORTFOLIOS Sole Class
---------- ----------
The Xxxxxxxxx Xxxx [X]
EXHIBIT B
The following fees are hereby made subject to the Agreement dated August
15, 2005, by and between Citco Mutual Fund Distributors, Inc. ("Underwriter")
and Fairholme Funds, Inc. (the "Fund"):
The Fund will pay Underwriter a flat fee of $12,000 per year for underwriting
services provided to the Portfolios of the Fund.
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