THIRD PARTY FEEDER FUND AGREEMENT
AMONG SECURITY MANAGEMENT COMPANY, LLC, SECURITY INCOME FUND,
[NAME OF SERIES FUND] AND
BANKERS TRUST COMPANY
DATED AS OF [MONTH DAY], 1999
THIRD PARTY FEEDER FUND AGREEMENT
The parties to this Agreement are Security Management Company, LLC ("Security
Management"), Security Income Fund, (the "Company"), a Kansas corporation, in
respect of [NAME OF SERIES FUND], a series thereof (the "Fund"), BT Preservation
Plus Income Portfolio, a New York business trust (the "Portfolio"), Security
Distributors, Inc., a corporation organized under the laws of the State of
Kansas ("Security Distributors"), and Bankers Trust Company, a New York banking
corporation (the "Adviser"), with respect to the proposed investment by the Fund
in the Portfolio. THIS AGREEMENT is made and entered into as of the ___ day of
_________, 1999, with respect to the proposed investment by the Fund in the
Portfolio.
PREAMBLE
WHEREAS, the Company and the Portfolio are each open-end management investment
companies and the Fund and the Portfolio have the same investment objectives and
substantively the same investment policies;
WHEREAS, the Adviser currently serves as the investment adviser of the
Portfolio;
WHEREAS, Security Distributors currently serves as the principal underwriter and
Security Management serves as investment manager of the Fund;
WHEREAS, the Company desires to invest all of the Fund's investable assets in
the Portfolio in exchange for a beneficial interest in the Portfolio (the
"Investment") on the terms and conditions set forth in this Agreement; and
WHEREAS, the Portfolio believes that accepting the Investment is in the best
interests of the Portfolio and that the interests of existing investors in the
Portfolio will not be diluted as a result of its accepting the Investment;
NOW, THEREFORE, in consideration of the foregoing, the mutual promises herein
made and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
ARTICLE ONE
THE INVESTMENT
1.1 Agreement to Effect the Investment. The Company agrees to assign, transfer
and deliver all of the Fund's investable assets (the "Assets") to the
Portfolio at each Closing (as hereinafter defined). The Portfolio agrees
in exchange therefore to issue to the Fund a beneficial interest (the
"Interest") in the Portfolio equal in value to the net asset value of the
Assets of the Fund conveyed to the Portfolio on that date of Closing.
ARTICLE TWO
CLOSING AND CLOSING DATE
2.1 Time of Closing. The conveyance of the Assets in exchange for the
Interest, as described in Article One, together with related acts
necessary to consummate such transactions, shall occur initially on the
date the Company commences its offering of shares of the Fund to the
public and at each subsequent date as the Company desires to make a
further Investment in the Portfolio (each, a "Closing"). All acts
occurring at any Closing shall be deemed to occur simultaneously as of the
last daily determination of the Portfolio's net asset value on the date of
Closing.
2.2 Related Closing Matters. On each date of Closing, the Company, on behalf
of the Fund, shall authorize the Fund's custodian to deliver all of the
Assets held by such custodian to the Portfolio's custodian. The Fund's and
the Portfolio's custodians shall each acknowledge, in a form acceptable to
the other party, their respective delivery and acceptance of the Assets.
The Portfolio shall deliver to the Company acceptable evidence of the
Fund's ownership of the Interest. In addition, each party shall deliver to
each other party such bills of sale, checks, assignments, securities
instruments, receipts or other documents as such other party or its
counsel may reasonably request. Each of the representations and warranties
set forth in Article Three shall be deemed to have been made anew on each
date of Closing.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
3.1 THE COMPANY AND SECURITY MANAGEMENT
The Company and Security Management each represents and warrants to the
Portfolio and the Adviser that:
(a) Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Kansas.
The Fund is a duly and validly designated series of the Company. The
Company and the Fund have the requisite power and authority to own
their property and conduct their business as now being conducted and
as proposed to be conducted pursuant to this Agreement.
(b) Authorization of Agreement. The execution and delivery of this
Agreement by the Company and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action
on the part of the Company. No other action or proceeding is
necessary for the execution and delivery of this Agreement by the
Company, the performance by the Company of its obligations hereunder
and the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the
Company in respect of the Fund, enforceable against them in
accordance with its terms.
(c) Authorization of Investment. The Investment has been duly authorized
by all necessary action on the part of the Board of Directors of the
Company.
(d) No Bankruptcy Proceedings. Neither the Company nor the Fund is under
the jurisdiction of a court in a proceeding under Title 11 of the
United States Code (the "Bankruptcy Code") or similar case within the
meaning of Section 368(a) (3) (A) of the Bankruptcy Code.
(e) Fund Assets. The Fund's Assets will, at the initial Closing, consist
solely of cash.
(f) Fiscal Year. The fiscal year end for the Fund is [ ].
(g) Auditors. The Company has appointed [ ] as the Fund's independent
public accountants to certify the Fund's financial statements in
accordance with Section 32 of the Investment Company Act of 1940, as
amended ("1940 Act").
(h) Registration Statement. The Company has reviewed the Portfolio's
registration statement on Form N-1A, as filed with the Securities and
Exchange Commission ("SEC"), and understands and agrees to the
Portfolio's policies and methods of operation as described therein.
(i) Errors and Omissions Insurance Policy. The Company has in force an
errors and omissions liability insurance policy insuring the Fund
against loss up to $[______] for negligence or wrongful acts.
(j) SEC Filings. The Company has duly filed all forms, reports, proxy
statements and other documents (collectively, the "SEC Filings")
required to be filed under the Securities Act of 1933, as amended
(the "1933 Act"), the Securities Exchange Act of 1934 (the "1934
Act") and the 1940 Act (collectively, the "Securities Laws") in
connection with the registration of its shares, any meetings of its
shareholders and its registration as an investment company. The SEC
Filings were prepared in accordance with the requirements of the
Securities Laws, as applicable, and the rules and regulations of the
SEC and do not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(k) 1940 Act Registration. The Company is duly registered as an open-end
management investment company under the 1940 Act and the Fund and its
shares are registered or qualified in any states where such
registration or qualification is necessary and such registrations or
qualifications are in full force and affect.
3.2 THE PORTFOLIO AND THE ADVISER
The Portfolio and the Adviser each represents and warrants to the Company and
Security Management that:
(a) Organization. The Portfolio is a business trust duly organized and
validly existing under the common law of the State of New York and
has the requisite power and authority to own its property and conduct
its business as now being conducted and as proposed to be conducted
pursuant to this Agreement.
(b) Authorization of Agreement. The execution and delivery of this
Agreement by the Portfolio and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action
on the part of the Portfolio by its Board of Trustees and no other
action or proceeding is necessary for the execution and delivery of
this Agreement by the Portfolio, the performance by the Portfolio of
its obligations hereunder and the consummation by the Portfolio of
the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Portfolio and constitutes a legal,
valid and binding obligation of the Portfolio, enforceable against it
in accordance with its terms.
(c) Authorization of Issuance of Interest. The issuance by the Portfolio
of the Interest in exchange for the Investment by the Fund of its
Assets has been duly authorized by all necessary action on the part
of the Board of Trustees of the Portfolio. When issued in accordance
with the terms of this Agreement, the Interest will be validly
issued, fully paid and non-assessable by the Portfolio.
(d) No Bankruptcy Proceedings. The Portfolio is not under the
jurisdiction of a court in a proceeding under Title 11 of the
Bankruptcy Code or similar case within the meaning of Section
368(a)(3)(A) of the Bankruptcy Code.
(e) Fiscal Year. The fiscal year end of the Portfolio is September 30.
(f) Auditors. The Portfolio has appointed Ernst & Young LLP as the
Portfolio's independent public accountants to certify the Portfolio's
financial statements in accordance with Section 32 of the 1940 Act.
(g) Registration Statement. The Portfolio has reviewed the Company's
registration statement on Form N-1A, as filed with the SEC, and
understands and agrees to the Fund's policies and methods of
operation as described therein.
(h) Errors and Omissions Insurance Policy. The Portfolio has in force an
errors and omissions liability insurance policy insuring the
Portfolio against loss up to $10 million for negligence or wrongful
acts.
(i) SEC Filings. The Portfolio has duly filed all SEC Filings required to
be filed with the SEC pursuant to the 1934 Act and the 1940 Act in
connection with any meetings of its investors and its registration as
an investment company. Beneficial interests in the Portfolio are not
required to be registered under the 1933 Act because such interests
are offered solely in private placement transactions that do not
involve any "public offering" within the meaning of Section 4(2) of
the 1933 Act. The SEC Filings were prepared in accordance with the
requirements of the Securities Laws, as applicable, and the rules and
regulations of the SEC thereunder, and do not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
(j) 1940 Act Registration. The Portfolio is duly registered as an
open-end management investment company under the 1940 Act and such
registration is in full force and effect.
(k) Tax Status. The Portfolio is taxable as a partnership under the
Internal Revenue Code of 1986, as amended (the "Code").
3.3 THE ADVISER
The Adviser represents and warrants to the Company and Security Management that:
(a) Organization. The Adviser is a New York banking corporation duly
organized, validly existing and in good standing under the laws of
the State of New York and has the requisite power and authority to
conduct its business as now being conducted.
(b) Authorization of Agreement. All necessary action on the part of the
Adviser and no other action have duly authorized the execution and
delivery of this Agreement by the Adviser or proceeding is necessary
for the execution and delivery of this Agreement by the Adviser. This
Agreement has been duly executed and delivered by the Adviser and
constitutes a legal, valid and binding obligation of the Adviser.
(c) Advisers Act. The Adviser is exempt from the definition of an
investment adviser under the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), and is not required to register under
that Act.
(d) [Additional statements concerning change of control of the adviser,
as necessary.]
3.4 SECURITY MANAGEMENT AND SECURITY DISTRIBUTORS
(a) Security Management represents and warrants to the Portfolio and the
Adviser that:
(i) Organization. Security Management is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Kansas and has the requisite power and
authority to conduct its business as now being conducted.
(ii) Authorization of Agreement. The execution and delivery of this
Agreement by Security Management have been duly authorized by
all necessary action on the part of Security Management and no
other action or proceeding is necessary for the execution and
delivery of this Agreement by Security Management. This
Agreement has been duly executed and delivered by Security
Management and constitutes a legal, valid and binding
obligation of Security Management.
(iii) Investment Manager. Security Management serves as the Fund's
investment manager and is duly registered as an investment
adviser under the Advisers Act.
(b) Security Distributors represents and warrants to the Portfolio and
the Adviser that:
(i) Authorization of Agreement. The execution and delivery of this
Agreement by Security Distributors has been duly authorized by
all necessary action on the part of Security Distributors and
no other action or proceeding is necessary for the execution
and delivery of this Agreement by Concord. This Agreement has
been duly executed and delivered by Security Distributors and
constitutes a legal, valid and binding obligation of Security
Distributors.
(ii) Security Distributors serves as the Trust's and the Fund's
principal underwriter and is duly registered as a
broker-dealer under the 1934 Act. Security Distributors is
duly organized, validly existing and in good standing under
the laws of the state of Kansas, and has requisite authority
to conduct its business as now being conducted.
ARTICLE FOUR
COVENANTS
4.1 THE COMPANY
The Company covenants that:
(a) Advance Review of Certain Documents. The Company will furnish the
Portfolio and the Adviser, at least 10 business days prior to filing
or first use, as the case may be, with drafts of its registration
statement on Form N-lA (including amendments) and prospectus
supplements or amendments relating to the Fund. The Company will
furnish the Portfolio and the Adviser with any proposed advertising
or sales literature relating to the Fund at least 10 business days
prior to filing or first use. The Company agrees that it will include
in all such Fund documents any disclosures that may be required by
law, particularly those relating to the Adviser's status as a bank,
and it will include in all such Fund documents any material comments
reasonably made by the Adviser or Portfolio. The Portfolio and
Adviser will, however, in no way be liable for any errors or
omissions in such documents, whether or not they make any objection
thereto, except to the extent such errors or omissions result from
information provided by the Adviser or the Portfolio. [The Exclusive
Placement Agent for the Portfolio will in no way be liable for any
errors or omissions in such documents.] The Company will not make any
other written or oral representation about the Portfolio or the
Adviser without their prior written consent.
(b) Tax Status. The Fund will qualify for treatment as a regulated
investment company under Subchapter M of the Code for all periods
during which this Agreement is in effect, except to the extent a
failure to so qualify may result from any action or omission of the
Portfolio.
(c) Investment Securities. The Fund will own no investment security other
than its Interest in the Portfolio.
(d) Proxy Voting. If requested to vote as a shareholder on matters
pertaining to the Portfolio (other than a vote by the Company to
continue the operation of the Portfolio upon the withdrawal of
another investor in the Portfolio), the Company will (i) call a
meeting of shareholders of the Fund for the purpose of seeking
instructions from shareholders regarding such matters, (ii) vote the
Fund's Interest proportionally as instructed by Fund shareholders,
and (iii) vote the Fund's Interest with respect to the shares held by
Fund shareholders who do not give voting instructions in the same
proportion as the shares of Fund shareholders who do give voting
instructions. The Company will hold each such meeting of Fund
shareholders in accordance with a timetable reasonably established by
the Portfolio.
(e) Insurance. The Company shall at all times maintain errors and
omissions liability insurance with respect to the Fund covering
losses for negligence and wrongful acts in an amount not less than
$[____].
(f) Auditors. In the event the Fund's independent public accountants
differ from those of the Portfolio, the Fund shall be responsible for
any costs and expenses associated with the need for the Portfolio's
independent public accountants to provide information to the Fund's
independent public accountants.
(g) Fund Name. The Company agrees on behalf of the Fund that the Fund may
use the name "PreservationPlus" in its name only so long as all of
the Fund's investable assets are invested in the Portfolio. If the
Company elects to withdraw or redeem the Fund's Interest in the
Portfolio, the Fund will immediately change its name.
4.2 INDEMNIFICATION BY SECURITY MANAGEMENT
(a) With respect to those matters listed in subparagraphs (i) through
(vi) below, Security Management will indemnify and hold harmless the
Portfolio, the Adviser and their respective trustees, directors,
officers and employees and each other person who controls the
Portfolio or the Adviser, as the case may be, within the meaning of
Section 15 of the 1933 Act (each, a "Covered Person" and
collectively, "Covered Persons"), against any and all losses, claims,
demands, damages, liabilities and expenses, joint or several, (each,
a "Liability" and collectively, the "Liabilities"). Unless Security
Management elects to assume the defense pursuant to paragraph (b)
Security Management will bear the reasonable cost of investigating
and defending against any claims therefor and any counsel fees
incurred in connection therewith. Any or each Liability which arises
out, is based upon or results from:
(i) any violation or alleged violation of the Securities Laws, any
other statute or common law or are incurred in connection with
or as a result of any formal or informal administrative
proceeding or investigation by a regulatory agency, insofar as
such Liabilities arise out of or are based upon the ground or
alleged ground that any direct or indirect omission or
commission by the Company or the Fund (either during the
course of its daily activities or in connection with the
accuracy of its representations or its warranties in this
Agreement) caused or continues to cause the Portfolio to
violate any federal or state securities laws or regulations or
any other applicable domestic or foreign law or regulations or
common law duties or obligations, but only to the extent that
such Liabilities do not arise out of and are not based upon an
omission or commission of the Portfolio or Adviser;
(ii) Security Management having caused the Portfolio to be an
association taxable as a corporation rather than a
partnership; or
(iii) any misstatement of a material fact or an omission of a
material fact in the Company's registration statement
(including amendments thereto) or included in Fund advertising
or sales literature, other than information provided by the
Portfolio or the Adviser or included in Fund advertising or
sales literature at the request of the Portfolio or the
Adviser;
(iv) the failure of any representation or warranty made by the
Company or Security Management to be accurate when made or the
failure of the Company or Security Management to perform any
covenant contained herein or to otherwise comply with the
terms of this Agreement;
(v) any unlawful or negligent act of the Company, Security
Management or any director, officer, employee or agent of the
Company or Security Management, whether such act was committed
against the Company, the Portfolio, Bankers Trust or any third
party;
(vi) any Liability of the Fund for which the Portfolio is also
liable; provided, however, that in no case shall Security
Management be liable with respect to any claim made against
any Covered Person unless the Covered Person shall have
notified Security Management in writing of the nature of the
claim within a reasonable time after the summons, other first
legal process or formal or informal initiation of a regulatory
investigation or proceeding shall have been served upon or
provided to a Covered Person, or any federal, state or local
tax deficiency has come to the attention of the Adviser, the
Portfolio or a Covered Person. Failure to notify Security
Management of such claim shall not relieve it from any
liability that it may have to any Covered Person otherwise
than on account of the indemnification contained in this
Section.
(b) Security Management will be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but, if Security
Management elects to assume the defense, such defense shall be
conducted by counsel chosen by Security Management. In the event
Security Management elects to assume the defense of any such suit and
retain such counsel, each Covered Person and any other defendant or
defendants may retain additional counsel, but shall bear the fees and
expenses of such counsel unless (A) Security Management shall have
specifically authorized the retaining of such counsel or (B) the
parties to such suit include any Covered Person and Security
Management, and any such Covered Person has been advised by counsel
that one or more legal defenses may be available to it that may not
be available to Security Management, in which case Security
Management shall not be entitled to assume the defense of such suit
notwithstanding its obligation to bear the fees and expenses of such
counsel. Security Management shall not be liable to indemnify any
Covered Person for any settlement of any claim affected without
Security Management's written consent, which consent shall not be
unreasonably withheld or delayed. The indemnities set forth in
paragraph (a) will be in addition to any liability that the Company
in respect of the Fund might otherwise have to a Covered Person.
4.3 INDEMNIFICATION BY SECURITY DISTRIBUTORS
(a) With respect to those matters listed in subparagraph (i) through (iv)
below, Security Distributors will indemnify and harmless the
Portfolio, the Adviser and their respective trustees, directors,
officers and employees and each other person who controls the
Portfolio or the Adviser, as the case may be, within the meaning of
Section 15 of the 1933 Act (each a "Covered Person" and collectively,
"Covered Persons"), against any and all losses, claims, demands,
damages, liabilities and expenses, joint or several, (each, a
"Liability" and collectively, the "Liabilities"). Unless Security
Distributors elects to assume the defense pursuant to paragraph (b),
Security Distributors will bear the reasonable cost of investigating
and defending against any claims therefor and any counsel fees
incurred in connection therewith. Any or each liability which arises
out, is based upon or results from:
(i) any misstatement of a material fact or an omission of a
material fact included in Fund advertising or sales
literature, other than information provided by the Portfolio
or the Adviser or included in Fund advertising or sales
literature at the request of the Portfolio or the Adviser;
(ii) the failure of any representation or warranty made by Security
Distributors to be accurate when made or the failure of
Security Distributors to perform any covenant contained herein
or to otherwise comply with the terms of this Agreement;
(iii) any unlawful or negligent act of Security Distributors or any
director, officer, employee or agent of the Company or
Security Distributors, whether such act was committed against
the Company, the Portfolio, Bankers Trust or any third party;
or
(iv) any breach of the representations, warranties and covenants
included herein, including the representations that the Fund
will permit investments only by IRAs and Plans as defined in
the prospectus for the BT PreservationPlus Income Fund and
that the redemption rights of shareholders of the Fund will be
the same as those described in the prospectus for the BT
PreservationPlus Income Fund.
(b) Security Distributors will be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability. If Security
Distributors elects to assume the defense, such defense shall be
conducted by counsel chosen by Security Distributors. In the event
Security Distributors elects to assume the defense of any such suit
and retain such counsel, each Covered Person and any other defendant
or defendants may retain additional counsel, but shall bear the fees
and expenses of such counsel unless (A) Security Distributors shall
have specifically authorized the retaining of such counsel or (B) the
parties to such suit include any Covered Person and Security
Distributors, and any such Covered Person has been advised by counsel
that one or more legal defenses may be available to it that may not
be available to Security Distributors, in which case Security
Distributors shall not be entitled to assume the defense of such suit
notwithstanding its obligation to bear the fees and expenses of such
counsel. Security Distributors shall not be liable to indemnify any
Covered Person for any settlement of any claim affected without
Security Distributors' written consent. Such consent shall not be
unreasonably withheld or delayed. The indemnities set forth in
paragraph (a) will be in addition to any liability that the Company
in respect of the Fund might otherwise have to a Covered Person.
(c) Any breach of the representations, warranties and covenants included
herein (including the representations that the Fund will permit
investments only by IRAs and Plans (as defined in the prospectus for
the BT PreservationPlus Income Fund) and that the redemption rights
of shareholders of the Fund will be the same as those described in
the prospectus for the BT PreservationPlus Income Fund) will
constitute a request for the partial or complete redemption of
Portfolio interests by the Company.
4.4 THE PORTFOLIO
The Portfolio covenants that:
(a) Advance Review of Certain Documents. The Portfolio will furnish the
Company and Security Management, at least 10 business days prior to
filing or first use, as the case may be, with drafts of its
registration statement on Form N-1A (including amendments) and
prospectus supplements or amendments. The Portfolio will not make any
written or oral representation about the Company or Security
Management without their prior written consent.
(b) Tax Status. The Portfolio will qualify to be taxable as a partnership
under the Code for all periods during which this Agreement is in
effect, except to the extent that the failure to so qualify results
from any action or omission of the Fund.
(c) Insurance. The Portfolio shall at all times maintain errors and
omissions liability insurance covering losses for negligence and
wrongful acts in an amount not less than $10 million.
(d) Availability of Interests. Conditional upon the Company complying
with the terms of this Agreement, the Portfolio shall permit the Fund
to make additional Investments in the Portfolio on each business day
on which shares of the Fund are sold to the public; provided,
however, that the Portfolio may refuse to permit the Fund to make
additional Investments in the Portfolio on any day on which:
(i) the Portfolio has refused to permit all other investors in the
Portfolio to make additional investments in the Portfolio, or
(ii) the Trustees of the Portfolio have reasonably determined that
permitting additional investments by the Fund in the Portfolio
would constitute a breach of their fiduciary duties to the
Portfolio.
4.5 INDEMNIFICATION BY THE ADVISER
(a) With respect to those matters listed in subparagraphs (i) through
(viii) below, the Adviser will indemnify and hold harmless the
Company, Security Management, their respective directors, officers
and employees and each other person who controls the Company, the
Fund or Security Management, as the case may be, within the meaning
of Section 15 of the 1933 Act (each, a "Covered Person" and
collectively, "Covered Persons"), against any and all losses, claims,
demands, damages, liabilities and expenses, joint or several, (each,
a "Liability" and collectively, the "Liabilities"). Unless the
Adviser elects to assume the defense pursuant to paragraph (b) the
Adviser will bear the reasonable costs of investigating and defending
against any claims therefore and any counsel fees incurred in
connection therewith), whether incurred directly by the Company or
Security Management or indirectly by the Company or Security
Management through the Company's Investment in the Portfolio. Any or
each Liability which arises out, is based upon or results from:
(i) any of the Securities Laws, any other statute or common law or
are incurred in connection with or as a result of any formal
or informal administrative proceeding or investigation by a
regulatory agency, insofar as such Liabilities arise out of or
are based upon the ground or alleged ground that any direct or
indirect omission or commission by the Portfolio (either
during the course of its daily activities or in connection
with the accuracy of its representations or its warranties in
this Agreement) caused or continues to cause the Company to
violate any federal or state securities laws or regulations or
any other applicable domestic or foreign law or regulations or
common law duties or obligations, but only to the extent that
such Liabilities do not arise out of and are not based upon an
omission or commission of the Company or Security Management;
(ii) an inaccurate calculation of the Portfolio's net asset value
(whether by the Portfolio, the Adviser or any party retained
for that purpose);
(iii) (A) any misstatement of a material fact or an omission of a
material fact in the Portfolio's registration statement
(including amendments thereto) or included at the Adviser's or
Portfolio's request in advertising or sales literature used by
the Fund, or (B) any misstatement of a material fact or an
omission of a material fact in the registration statement or
advertising or sales literature of any investor in the
Portfolio, other than the Company;
(iv) the Portfolio's having caused the Fund to fail to qualify as a
regulated investment company under the Code;
(v) failure of any representation or warranty made by the
Portfolio or Adviser to be accurate when made or the failure
of the Portfolio or Adviser to perform any covenant contained
herein or to otherwise comply with the terms of this
Agreement;
(vi) any unlawful or negligent act by the Portfolio, the Adviser or
any director, trustee, officer, employee or agent of the
Portfolio or Adviser, whether such act was committed against
the Portfolio, the Company, Security Management or any third
party;
(vii) any claim that the systems, methodologies, or technology used
in connection with operating the Portfolio, including the
technologies associated with maintaining the master-feeder
structure of the Portfolio, violates any license or infringes
upon any patent or trademark;
(viii) any Liability of the Portfolio to any investor in the
Portfolio (or shareholder thereof), other than the Fund (and
its shareholders); provided, however, that in no case shall
the Adviser be liable with respect to any claim made against
any such Covered Person unless such Covered Person shall have
notified the Adviser in writing of the nature of the claim
within a reasonable time after the summons, other first legal
process or formal or informal initiation of a regulatory
investigation or proceeding shall have been served upon or
provided to a Covered Person or any federal, state or local
tax deficiency has come to the attention of the Company,
Security Management or a Covered Person. Failure to notify the
Adviser of such claim shall not relieve it from any liability
that it may have to any Covered Person otherwise than on
account of the indemnification contained in this paragraph.
(b) The Adviser will be entitled to participate at its own expense in the
defense or, if it so elects to assume the defense of any suit brought
to enforce any such liability. If the Adviser elects to assume the
defense, such defense shall be conducted by counsel chosen by the
Adviser. In the event the Adviser elects to assume the defense of any
such suit and retain such counsel, each Covered Person and any other
defendant or defendants in the suit may retain additional counsel but
shall bear the fees and expenses of such counsel unless (A) the
Adviser shall have specifically authorized the retaining of such
counsel or (B) the parties to such suit include any Covered Person
and the Adviser, and any such Covered Person has been advised by
counsel that one or more legal defenses may be available to it that
may not be available to the Adviser, in which case the Adviser shall
not be entitled to assume the defense of such suit notwithstanding
the obligation to bear the fees and expenses of such counsel. The
Adviser shall not be liable to indemnify any Covered Person for any
settlement of any such claim effected without the Adviser's written
consent. Such consent shall not be unreasonably withheld or delayed.
The indemnities set forth in paragraph (a) will be in addition to any
liability that the Portfolio might otherwise have to a Covered
Person.
4.6 SCOPE OF AGREEMENT
Nothing contained herein shall be construed to protect any person against any
liability to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, or negligence, in the performance of such person's
duties, or be reason of such person's reckless disregard of such person's
obligations under such contract or agreement.
4.7 IN-KIND REDEMPTION
In the event the Company desires to withdraw or redeem all or a portion of the
Fund's Interests in the Portfolio, unless otherwise agreed to by the parties,
the Portfolio will effect such redemption (i) in cash, (ii) "in kind" (as
described below) or (iii) in some combination of the foregoing determined solely
in the discretion of the Adviser. Further, if the Interest Rate Trigger as
described in the Prospectus for the Portfolio is active, a redemption fee
(currently 3% of the proceeds of such redemption) will be applied. In connection
with a partial or complete payment "in kind", the Portfolio will distribute to
the Company securities and Wrapper Agreements as described in the prospectus for
the BT PreservationPlus Income Fund. The Portfolio will assign to the Company
one or more Wrapper Agreements issued by the Wrapper providers covering the
securities distributed in kind. The terms and conditions of the Wrapper
Agreements distributed to the Company will be substantially similar to the terms
and conditions of the Wrapper Agreements held by the Portfolio. In order to
obtain the benefits provided thereunder, the Company's management of the
securities must be consistent with the Wrapper Agreement requirements and the
Company must complete the assignment by executing the Wrapper Agreements. No
other withdrawal or redemption of any Interest in the Portfolio will be
satisfied by means of an "in kind" redemption except in compliance with Rule
18f-1 under the 1940 Act, provided, however, that for purposes of determining
compliance with Rule 18f-1, each shareholder of the Fund redeeming shares of the
Fund on a particular day will be treated as a direct holder of an Interest in
the Portfolio being redeemed that day.
4.8 REASONABLE ACTIONS
Each party covenants that it will, subject to the provisions of this Agreement,
from time to time, as and when requested by another party or in its own
discretion, as the case may be, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, take or cause to be taken
such actions, and do or cause to be done all things reasonably necessary, proper
or advisable in order to consummate the transactions contemplated by this
Agreement and to carry out its intent and purpose.
ARTICLE FIVE
CONDITIONS PRECEDENT
The obligations of each party to consummate the transactions provided for herein
shall be subject to:
(a) performance by the other parties of all the obligations to be
performed by the other parties hereunder on or before each Closing,
(b) all representations and warranties of the other parties contained in
this Agreement being true and correct in all material respects as of
the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of each date of
Closing, with the same force and effect as if made on and as of the
time of such Closing, and
(c) the following further conditions that shall be fulfilled on or before
each Closing.
5.1 REGULATORY STATUS
All necessary filings shall have been made with the SEC and state securities
authorities, and no order or directive shall have been received that any other
or further action is required to permit the parties to carry out the
transactions contemplated hereby.
5.2 APPROVAL OF AUDITORS
Unless precluded by applicable fiduciary duties or the failure of the Fund's
shareholders to provide necessary ratification, the directors of the Company
that are not "interested persons" of the Company, as defined in the 1940 Act,
shall have selected as the independent certified public accountants for the Fund
the independent certified public accountants selected and ratified for the
Portfolio.
5.3 INVESTMENT OBJECTIVE/RESTRICTIONS
The Fund shall have the same investment objective and substantively the same
investment restrictions as the Portfolio.
ARTICLE SIX
ADDITIONAL AGREEMENTS
6.1 NOTIFICATION OF CERTAIN MATTERS
Each party will give prompt notice to the other parties of:
(a) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause either:
(i) any representation or warranty contained in this Agreement to
be untrue or inaccurate, or
(ii) any condition precedent set forth in Article Five hereof to be
unsatisfied in any material respect at the time of any
Closing, and
(b) any material failure of a party or any trustee, director, officer,
employee or agent thereof to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such
person hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.1 shall not limit or otherwise affect the
remedies available, hereunder or otherwise, to the party receiving
such notice.
6.2 ACCESS TO INFORMATION
The Portfolio and the Company shall afford each other reasonable access at all
reasonable times to such party's officers, employees, agents and offices and to
all its relevant books and records and shall furnish each other party with all
relevant financial and other data and information as requested; provided,
however, that nothing contained herein shall obligate the Company to provide the
Portfolio with access to the books and records of the Company relating to any
series of the Company other than the Fund, nor shall anything contained herein
obligate the Company to furnish the Portfolio with the Fund's shareholder list,
except as may be required to comply with applicable law or any provision of this
Agreement.
6.3 CONFIDENTIALITY
Each party agrees that it shall hold in strict confidence all data and
information obtained from another party (unless such information is or becomes
readily ascertainable from public or published information or trade sources) and
shall ensure that its officers, employees and authorized representatives do not
disclose such information to others without the prior written consent of the
party from whom it was obtained, except if disclosure is required by the SEC,
any other regulatory body or the Fund's or Portfolio's respective auditors, or
in the opinion of counsel such disclosure is required by law, and then only with
as much prior written notice to the other party as is practical under the
circumstances.
6.4 PUBLIC ANNOUNCEMENTS
No party shall issue any press release or otherwise make any public statements
with respect to the matters covered by this Agreement without the prior consent
of the other parties hereto, which consent shall not be unreasonably withheld;
provided, however, that consent shall not be required if, in the opinion of
counsel, such disclosure is required by law, provided further, however, that the
party making such disclosure shall provide the other parties hereto with as much
prior written notice of such disclosure as is practical under the circumstances.
Advance review of sales literature and advertising material shall be subject to
the provisions of Section 4.1 of this Agreement.
6.5 INVESTMENT ACCOUNTING SERVICES
Security Management agrees to delegate to the Adviser certain investment
accounting services with respect to the Fund pursuant to an Investment
Accounting Agreement dated as of [_________ __], 1999.
ARTICLE SEVEN
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION
(a) This Agreement may be terminated by the mutual agreement of all
parties.
(b) This Agreement may be terminated at any time by the Company by
withdrawing all of the Fund's Interest in the Portfolio.
(c) This Agreement may be terminated on not less than 120 days' prior
written notice by the Portfolio to the Company and Security
Management.
(d) This Agreement shall terminate automatically with respect to Security
Management upon the effective date of termination by the Company and
this Agreement shall terminate automatically with respect to the
Adviser upon the effective date of termination by the Portfolio.
(e) This Agreement may be terminated at any time immediately upon written
notice to the other parties in the event that formal proceedings are
instituted against another party to this Agreement by the SEC or any
other regulatory body, provided that the terminating party has a
reasonable belief that the institution of the proceeding is not
without foundation and will have a material adverse impact on the
terminating party's ability to perform the obligations hereunder.
(f) This Agreement shall terminate automatically with respect to Security
Distributors upon the effective date of the termination of its duties
as principal underwriter by the Company. At such time the Adviser
shall have the right to immediately terminate this Agreement.
Security Distributors and the Company acknowledge that at such time
in the event this Agreement is not terminated, the Agreement will
require amendment to reflect the Company's appointment of a new
distributor.
(g) The indemnification obligations of the parties set forth in Article
Four shall survive the termination of this Agreement with respect to
any Liability relating to actions or omissions prior to the
termination.
7.2 AMENDMENT
This Agreement may be amended, modified or supplemented at any time in such
manner as may be mutually agreed upon in writing by the parties.
7.3 WAIVER
At any time prior to any Closing, any party may:
(a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and
(c) waive compliance with any of the agreements or conditions contained
herein.
ARTICLE EIGHT
DAMAGES
8.1 APPROPRIATE RELIEF
The parties agree that, in the event of a breach of this Agreement, the remedy
of money damages would not be adequate and agree that injunctive relief would be
the appropriate relief.
ARTICLE NINE
GENERAL PROVISIONS
9.1 NOTICES
All notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made on the earlier of
(1) when actually received in person or by fax, or (2) three days after being
sent by certified or registered United States mail, return receipt requested,
postage prepaid, addressed as follows:
If to Security Management or the Company:
[Address]
[Address]
[Attn:]
If to the Portfolio or the Adviser:
0 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xx. Xxxxx X. Xxxxxx
Any party to this Agreement may change the identity of the person to receive
notice by providing written notice thereof to all other parties to the
Agreement.
9.2 EXPENSES
All costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses.
9.3 HEADINGS
The headings and captions contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
9.4 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
9.5 ENTIRE AGREEMENT
This Agreement and the agreements and other documents delivered pursuant hereto
set forth the entire understanding between the parties concerning the subject
matter of this Agreement and incorporate or supersede all prior negotiations and
understandings. There are no covenants, promises, agreements, conditions or
understandings, either oral or written, between them relating to the subject
matter of this Agreement other than those set forth herein. No representation or
warranty has been made by or on behalf of any party to this Agreement (or any
officer, director, trustee, employee or agent thereof) to induce any other party
to enter into this Agreement or to abide by or consummate any transactions
contemplated by any terms of this Agreement, except representations and
warranties expressly set forth herein.
9.6 SUCCESSORS AND ASSIGNMENTS
Each and all of the provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and, except as otherwise specifically
provided in this Agreement, their respective successors and assigns.
Notwithstanding the foregoing, no party shall make any assignment of this
Agreement or any rights or obligations hereunder without the written consent of
all other parties. As used herein, the term "assignment" shall have the meaning
ascribed thereto in the 1940 Act. The parties hereby consent to the acquisition
of the Adviser by Deutsche Bank, AG.
9.7 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York without giving effect to the choice of law or conflicts of
law provisions thereof.
9.8 COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which shall
constitute one and the same instrument, and any party hereto may execute this
Agreement by signing one or more counterparts.
9.9 THIRD PARTIES
Nothing herein expressed or implied is intended or shall be construed to confer
upon or give any person, other than the parties hereto and their successors or
assigns, any rights or remedies under or by reason of this Agreement.
9.10 INTERPRETATION
Any uncertainty or ambiguity existing herein shall not presumptively be
interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for arm's length agreements.
9.11 LIMITATION OF LIABILITY
The parties hereby acknowledge that the Company has entered into this Agreement
solely on behalf of the Fund and that no other series of the Company shall have
any obligation hereunder with respect to any liability of the Company arising
hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers, thereunto duly authorized, as of the date first
written above.
SECURITY MANAGEMENT COMPANY, LLC
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
SECURITY INCOME FUND on behalf of itself and the [FUND NAME], a series thereof
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
BT PRESERVATIONPLUS INCOME PORTFOLIO
By:
---------------------------
Name: Xxxxxx X. Xxxxxx
Title: Secretary
BANKERS TRUST COMPANY
By:
---------------------------
Name: Xxxxx Xxxxxx
Title: Principal
