ACTIVE ASSETS GOVERNMENT SECURITIES TRUST
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 31st day of May, 1997 between Active Assets
Government Securities Trust, an unincorporated business trust organized under
the laws of the Commonwealth of Massachusetts (the "Trust"), and Xxxx Xxxxxx
Distributors Inc., a Delaware corporation (the "Distributor");
W I T N E S S E T H:
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a diversified open-end investment company and
it is affirmatively in the interest of the Trust to offer its shares to the
participants in the Active Assets Account program (the "AAA" program) on the
terms described in its Registration Statement filed under the Securities Act
of 1933, as amended (the "1933 Act"); and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies; and
WHEREAS, the Trust and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Trust's
transferable shares of beneficial interest, without par value ("Shares"), in
order to promote the growth of the Trust and facilitate the distribution of
its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR. (a) The Trust hereby appoints
the Distributor as the distributor of the Trust to sell Shares to
participants in the AAA program on the terms contained in the currently
effective prospectus of the Trust under the 1933 Act, as amended from time to
time (the "Prospectus"), and the Distributor hereby accepts such appointment.
The Trust, during the term of this Agreement, shall sell Shares to the
Distributor and securities dealers, including Xxxx Xxxxxx Xxxxxxxx Inc.
("DWR"), an affiliate of the Distributor, upon the terms and conditions set
forth herein.
SECTION 2. PURCHASE OF SHARES FROM THE TRUST.
(a) The Distributor shall have the right to buy from the Trust the Shares
needed, but not more than the Shares needed (except for clerical errors in
transmission), to fill unconditional orders for Shares placed through the
Distributor by eligible participants in the AAA program and securities
dealers. The price which the Distributor shall pay for the Shares so
purchased from the Trust shall be the current public offering price described
below on which such orders were based.
(b) The public offering price of the Shares, I.E., the price per Share at
which the Distributor may sell Shares to participants in the AAA program, or
to securities dealers including DWR, who have entered into selected dealer
agreements with the Distributor pursuant to Section 7 ("Selected Dealers")
shall be the net asset value, determined as set forth in the Prospectus, used
in determining the public offering price on which such orders were based.
(c) The Trust, or any agent of the Trust designated in writing by the
Trust, shall be promptly advised of all purchase orders from Shares received
by the Distributor. All issuances of Shares to participants in the AAA
program shall be deemed issued pursuant to Section 2 hereof. Any order may be
rejected by the Trust or the Distributor, provided, however, that neither
will arbitrarily or without reasonable cause refuse to accept orders for the
purchase of Shares. The Trust (or its agent) will confirm orders upon their
receipt, or in accordance with any exemptive order of the Securities and
Exchange Commission, and will make appropriate book entries pursuant to the
instructions of the Distributor. Purchase orders are effective when Federal
Funds become available to the Trust. The Distributor agrees to cause such
payment and such instructions to be delivered promptly to the Trust (or its
agent).
With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Trust's transfer agent to receive instructions
directly from the Selected Dealer on behalf of the Distributor as to
registration of Shares in the names of investors and to confirm issuance of
the Shares to such investors.
The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the
Distributor, for prompt transmittal to the Trust's custodian, of the purchase
price of the Shares. In such event the Distributor shall obtain from the
Selected Dealer and maintain a record of such registration instructions and
payments.
SECTION 3. REPURCHASE OF SHARES BY THE TRUST.
(a) Any of the outstanding Shares may be tendered for redemption at any
time, and the Trust shall redeem the shares so tendered in accordance with
its obligations and rights as set forth in the Declaration of Trust, and in
accordance with the applicable provisions set forth in the Prospectus. The
price to be paid to redeem the Shares shall be equal to the net asset value
as set forth in the Prospectus. Shares redeemed due to an unauthorized use of
a Visa card of a Shareholder shall be reinstated by the Trust at the cost of
the Distributor as set forth in Section 5(d) hereof.
With respect to Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of the Trust to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and
to instruct the Trust to transmit payments for such redemptions and
repurchases directly to the Selected Dealer on behalf of the Distributor for
the account of the shareholder. The Distributor shall obtain from the
Selected Dealer and maintain a record of such orders. The Distributor is
further authorized to obtain from the Trust, and shall maintain, a record of
payments made directly to the Selected Dealer on behalf of the Distributor.
SECTION 4. DUTIES OF THE TRUST.
(a) The Trust shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of the Shares of the
Trust, including one certified copy, upon request by the Distributor, of all
financial statements prepared by the Trust and examined by independent
accountants. The Trust shall, at the expense of the Distributor, make
available to the Distributor such number of copies of the Prospectus as the
Distributor shall reasonably request.
(b) The Trust shall take, from time to time, all necessary action to
register Shares under the 1933 Act, to the end that there will be available
for sale such number of Shares as participants in the AAA program may
reasonably be expected to purchase.
(c) The Trust shall use its best efforts to pay the filing fees for an
appropriate number of the Shares for sale under the securities laws of such
states as the Distributor and the Trust may approve. Any such qualification
to sell its Shares in a state may be withheld, terminated or withdrawn by the
Trust at any time in its discretion. As provided in Section 6(c) hereof, such
filing fees shall be borne by the Trust. The Distributor shall furnish such
information and other material relating to its affairs and activities as may
be required by the Trust in connection with the sale of its Shares in any
state.
(d) The Trust shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of annual and
interim reports of the Trust.
SECTION 5. DUTIES OF THE DISTRIBUTOR.
(a) The Distributor shall sell Shares of the Trust through DWR and may
sell shares through other securities dealers and its own Account Executives
and shall devote reasonable time and effort to promote sales of Shares of the
Trust, but shall not be obligated to sell any specific number of Shares. The
services of the Distributor hereunder are not to be deemed exclusive and
nothing herein contained shall prevent the Distributor from entering into
distribution arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby. It is also
understood that Selected Dealers, including DWR, may also sell shares for
other registered investment companies.
(b) In selling the Shares of the Trust, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all federal
and state laws and regulations and the regulations of the National
Association of Securities Dealers, Inc. (the "NASD") relating to the sale of
such securities.
2
Neither the Distributor nor any other person is authorized by the Trust to give
any information or to make any representations, other than those contained in
the Registration Statement or related Prospectus and any sales literature
specifically approved by the Trust.
(c) The Distributor shall adopt and follow procedures, as approved by the
Trust, for the confirmation of sales to participants in the AAA program, the
collection of amounts payable by investors on such sales, and the
cancellation of unsettled transactions, as may be necessary to comply with
the requirements of the NASD, as such requirements may from time to time
exist.
(d) Through the AAA program, the Trust is linked to securities and Visa
accounts of customers of the Distributor and automatic purchases and
redemptions of Shares of the Trust will be effected by the Distributor
pursuant to the AAA program. Free credit cash balances in the securities
accounts of customers of the Distributor will automatically be invested by
the Distributor in Shares of the Trust on the terms described in the
Prospectus. Shares of the Trust will automatically be redeemed by the
Distributor to satisfy debit balances in such securities accounts or amounts
owing in the Visa card accounts on the terms described in the Prospectus. AAA
program participants may be liable for the unauthorized use of their Visa
card in an amount not to exceed $50. In the event of the unauthorized use of
the Visa card or cards held by AAA program participants after the Visa
processing agent has been notified orally or in writing of the loss, theft or
possible unauthorized use of such card or cards, and the redemption of Trust
Shares due to such unauthorized use, the Trust agrees to reinstate such
Shares in the account of the AAA program participant as if never redeemed and
the Distributor hereby agrees to indemnify the Trust against any losses
caused thereby and all costs associated therewith.
SECTION 6. PAYMENT OF EXPENSES.
(a) The Trust shall bear all costs and expenses of the Trust, including
fees and disbursements of its counsel and independent accountants, in
connection with the preparation and filing of any required Registration
Statements and Prospectuses under the 1933 Act, and the 1940 Act, and all
amendments and supplements thereto, and the expense of preparing, printing,
mailing and otherwise distributing prospectuses, annual or interim reports or
proxy materials to shareholders.
(b) After the Prospectuses and annual and interim reports have been
prepared, set in type and mailed to shareholders, the Distributor shall bear
the costs and expenses of printing and distributing any copies thereof which
are used in connection with the offering of Shares or the AAA program. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any supplementary sales literature used by the Distributor in
connection with the offering of the Shares for sale or the AAA program. Any
expense of advertising incurred in connection with such offering will also be
the obligation of the Distributor.
(c) The Trust shall pay the filing fees of the Shares for sale in such
states of the United States or other jurisdictions as shall be selected by
the Trust and the Distributor pursuant to Section 4(c) hereof and the cost
and expenses payable to each such state for continuing to offer Shares
therein until the Trust decides to discontinue selling Shares pursuant to
Section 4(c) hereof.
(d) The Distributor agrees that it will comply with the terms and
limitations of the Rules of the Association of the NASD.
SECTION 7. SELECTED DEALER AGREEMENTS. (a) The Distributor shall have the
right to enter into selected dealers agreements with Selected Dealers for the
sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Fund. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public
offering price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell shares
only to such Selected Dealers as are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by the
Fund, for the confirmation of sales of Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers
on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the NASD, as such requirements
may from time to time exist.
3
SECTION 8. INDEMNIFICATION. (a) The Trust shall indemnify and hold
harmless the Distributor and each person, if any, who controls the
Distributor, against any loss, liability, claim, damage or expense (including
the reasonable cost of investigating or defending any alleged loss,
liability, claim, damage or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any Shares,
which may be based upon the 1933 Act, or on any other statute or at common
law, on the ground that the Registration Statement or related Prospectus, as
from time to time amended and supplemented, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, unless
such statement or omission was made in reliance upon, and in conformity with,
information furnished to the Trust in connection therewith by or on behalf of
the Distributor; provided, however, that in no case (i) is the indemnity of
the Trust in favor of the Distributor and any such controlling persons to be
deemed to protect such Distributor or any such controlling persons thereof
against any liability to the Trust or its security holders to which the
Distributor or any such controlling persons would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust to be
liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Distributor or any such controlling persons,
unless the Distributor or any such controlling persons, as the case may be,
shall have notified the Trust in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon the Distributor or such controlling
persons, (or after the Distributor or such controlling persons shall have
received notice of such service on any designated agent), but failure to
notify the Trust of any such claim shall not relieve it from any liability
which it may have to the person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Trust 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 the Trust elects to assume the defense, such defense shall
be conducted by counsel chosen by it and satisfactory to the Distributor or
such controlling person or persons, defendant or defendants in the suit. In
the event the Trust elects to assume the defense of any such suit and retain
such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit, shall bear the fees and the expenses of
any additional counsel retained by them, but, in case the Trust does not
elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by
them. The Trust shall promptly notify the Distributor of the commencement of
any litigation or proceedings against it or any of its officers or Trustees
in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless the Trust and
each of its Trustees and officers and each person, if any, who controls the
Trust against any loss, liability, claim, damage or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in
conformity with, information furnished to the Trust in writing by or on
behalf of the Distributor for use in connection with the Registration
Statement or related Prospectus, as from time to time amended, and against
any losses and all costs in connection with the redemption of shares due to
unauthorized use of a Visa card or due to any error, fault or breakdown of
the AAA computer programs or operating procedures. In case any action shall
be brought against the Trust or any person so indemnified, in respect of
which indemnity may be sought against the Distributor, the Distributor shall
have the rights and duties given to the Trust, and the Trust and each, person
so indemnified shall have the rights and duties given to the Distributor by
the provisions of subsection (a) of this Section 8.
(ii) The Distributor shall indemnify and hold harmless the Fund and Fund's
transfer agent, individually and in its capacity as the Fund's transfer
agent, from and against any claims, damages and liabilities which arise as a
result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to subsection 4(c) hereof and pay the proceeds to, or as directed
by, the Distributor for the account of each shareholder whose Shares are so
redeemed; and (2) register Shares in the names of investors, confirm the
issuance thereof and receive payment therefor pursuant to subsection 3(e).
4
(iii) In case any action shall be brought against the Fund or any person
so indemnified by this subsection 8(b) in respect of which indemnity may be
sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall
have the rights and duties given to the Distributor by the provisions of
subsection (a) of this Section 8.
(c) If the indemnification provided for in this Section 8 is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages, liabilities or expenses
(or actions in respect thereof) referred to herein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Fund on the one hand and the
Distributor on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Fund on the one hand and the Distributor on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Fund on the one hand and the Distributor on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Fund bear to the total
compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Fund or the prevent such statement or omission.
The Fund and the Distributor agree that it would not be just and equitable if
contribution were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses (or actions in
respect thereof) referred to above shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such claim. Notwithstanding the
provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at
which the Shares distributed by it to the public were offered to the public
exceeds the amount of any damages which it has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
SECTION 9. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective as of the date first above written and shall remain in
force until April 30, 1998, and thereafter, but only so long as such
continuance is specifically approved at least annually by (i) the Trustees of
the Trust, or by the vote of a majority of the outstanding voting securities
of the Trust, cast in person or by proxy, and (ii) a majority of those
Trustees who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting upon
such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Trust, or by vote of a majority of the
outstanding voting securities of the Trust, or by the Distributor, on sixty
days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 10. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Trustees of the Trust, or by the vote of a majority of outstanding voting
securities of the Trust, and (ii) a majority of those trustees of the Trust
who are not parties to this Agreement or interested persons of any such party
cast in person at a meeting called for the purpose of voting on such approval.
5
SECTION 11. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable provisions of the
1940 Act. To the extent the applicable law of the State of New York, or any
of the provisions herein, conflict with the applicable provisions of the 1940
Act, the latter shall control.
SECTION 12. PERSONAL LIABILITY. The Declaration of Trust establishing
Active Assets Government Securities Trust, dated March 27, 1981, a copy of
which, together with all amendments thereto (the "Declaration"), is on file
in the office of the Secretary of the Commonwealth of Massachusetts, provides
that the name Active Assets Government Securities Trust, refers to the
Trustees under the Declaration collectively as Trustees, but not as
individuals or personally; and no Trustee, shareholder, officer, employee or
agent of Active Assets Government Securities Trust shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Active Assets Government Securities Trust but the Trust
Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST
By:
--------------------------------------
XXXX XXXXXX DISTRIBUTORS INC.
By:
--------------------------------------
