EXHIBIT 23(E)
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT
This Distribution Agreement is made as of the ___ day of _______, 1999,
between THE LEGACY FUNDS, INC., a Delaware business trust (herein called the
"Trust"), and XXXXXXX & XXXXXX, LLC, a New York limited liability company
(herein called the "Distributor").
WHEREAS, the Trust is an open-end management investment company and is
so registered under the Investment Company Act of 1940, and will register one
or more distinct series of shares of beneficial interest for sale to the
public under the Securities Act of 1933, as amended (the "1933 Act"), and
will qualify its shares for sale to the public under various state securities
laws; and
WHEREAS, the Trust has adopted a Distribution Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"),
with respect to the Legacy Growth Fund (the "Fund"), which is a separate
series of the Trust, such Distribution Plan as in effect and amended from
time to time being referred to herein as the "Distribution Plan"; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and under the
state securities laws of each state where such registration is required for
the distribution of the shares of beneficial interest of the Fund ("Shares"),
and is also a member of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, pursuant to the Distribution Plan the Trust desires to retain
the Distributor as distributor in connection with the offering and sale of
the Shares of the Fund, and the Distributor is willing to act as principal
underwriter distributor for the Fund on the terms and conditions hereinafter
set forth;
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein the parties hereto agree as follows:
I. DELIVERY OF DOCUMENTS
The Trust has delivered to Distributor copies of each of the following
documents and will deliver to it all future amendments and supplements
thereto, if any:
(a) The Trust's Certificate of Trust and all amendments thereto
(such Certificate of Trust, as currently in effect and as it shall from time
to time be amended, herein called the Trust's "Certificate of Trust");
(b) The Trust's Agreement and Declaration of Trust and all
amendments thereto (such Agreement and Declaration of Trust, as currently in
effect and as it shall from time to time be amended, herein called the
"Agreement and Declaration of Trust");
(c) The By-Laws of the Trust (such By-Laws, as currently in
effect and as it shall from time to time be amended, herein called the
"By-Laws");
(d) Resolutions of the Board of Trustees of the Trust
authorizing the execution and delivery of this Agreement;
(e) The Trust's initial Registration Statement under the 1940
Act, on Form N-1A as filed with the Securities and Exchange Commission (the
"Commission"), said Registration Statement, as will be declared effective and
as amended or supplemented from time to time, is herein called the
"Registration Statement";
(f) Notification of Registration of the Trust under the 1940
Act on Form N-8A as filed with the Commission; and
(g) The Prospectus and Statement of Additional Information, if
any, of the Fund (such prospectus and statement of additional information, as
will be filed with the Securities and Exchange Commission and as they shall
from time to time be amended and supplemented, herein called the
"Prospectus").
II. DISTRIBUTION
1. APPOINTMENT OF DISTRIBUTOR. The Trust hereby appoints
Distributor to serve as the distributor of the Fund's Shares to sell Shares
to the public on behalf of the Fund and Distributor hereby accepts such
appointment and agrees to render the services and duties set forth in this
Section II. The Trust hereby agrees during the term of this Agreement to
sell Shares of the Fund through the Distributor on the terms and conditions
set forth below.
2. SERVICES AND DUTIES.
(a) Except as provided below, the Trust agrees to offer for
sale exclusively through Distributor as agent, from time to time during the
term of this Agreement, Shares of the Fund (whether authorized but unissued
or treasury shares, in the Trust's sole discretion) upon the terms and at the
net asset value as described in the Prospectus. Distributor will act only in
its own behalf as principal in making agreements with selected dealers or
others for the sale of Shares, and shall offer Shares only at the net asset
value thereof as set forth in the Prospectus. Distributor shall devote its
best efforts to effect sales of Shares of the Fund, but shall not be
obligated to sell any certain number of Shares. All subscriptions for Shares
solicited by the Distributor shall be directed to the Trust for acceptance in
the ordinary course of business following the procedures set forth in the
Fund's Prospectus as in effect from time to time. The Trust reserves the
right to offer Shares directly to investors, including offers in connection
with (i) the merger or consolidation of the Fund or its series or classes
with any other investment company or series or class thereof, (ii) the Fund's
acquisition by purchase or otherwise of all or substantially all of the
assets or stock of any other investment company or (iii) reinvestment in
Shares by the Fund's stockholders of dividends or other distributions or any
other offering by the Trust of securities to the stockholders of the Fund.
(b) In all matters relating to the sale of Shares, Distributor
will act in conformity with the Trust's Certificate of Trust, Agreement and
Declaration of Trust, By-Laws, and Prospectus and with the instructions and
directions of the Board of Trustees of the Trust and will conform to and
comply with the requirements of the 1933 Act, and the 1940 Act, the
regulations of the National Association of Securities Dealers, Inc. and all
other applicable federal or state laws and regulations. In connection with
such sales, Distributor acknowledges and agrees that it is not authorized to
provide any information or make any representations other than as contained
in the Fund's Registration Statement and Prospectus and any sales literature
specifically approved by the Trust. The Distributor shall adopt and follow
procedures for the confirmation of sales 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 National Association of Securities
Dealers, Inc. (NASD). The Distributor shall have the right to enter into
selected dealer agreements with registered and qualified securities dealers
and other financial institutions of its choice for the sale of Shares,
provided that the Trust shall approve the forms of such agreements. 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. Shares sold to
selected dealers shall be for resale by such dealers only at the offering
price determined as set forth in the Prospectus.
(c) Distributor will bear the cost of (i) printing and
distributing the Prospectus (including any supplement thereto) to persons who
are not either shareholders of, or counsel, independent accountants or other
persons providing similar services to, the Trust, and (ii) preparing,
printing and distributing any literature, advertisement or material which is
primarily intended to result in the sale of the Shares; PROVIDED, HOWEVER,
that Distributor shall not be obligated to bear the expenses incurred by the
Trust in connection with the preparation and printing of any amendment to any
Registration Statement or Prospectus necessary for the continued effective
registration of the Shares under the 1933 Act or under the laws of any state
or other jurisdiction.
(d) All Shares of the Fund offered for sale by Distributor
shall be offered for sale to the public at the net asset value (determined in
the manner set forth in the Trust's Certificate of Trust and the Fund's then
current Prospectus). No broker-dealer or other person who enters into a
selling agreement with Distributor shall be authorized to act as agent for
the Trust in connection with the offering or sale of Shares to the public or
otherwise.
The Distributor in its sole discretion may repurchase Shares offered
for sale by the shareholders. Repurchase of Shares by the Distributor shall
be at the price determined in accordance with, and in the manner set forth
in, the most current Prospectus. At the end of each business day, the
Distributor shall notify, by any appropriate means, the Trust and the
transfer agent of the Fund of the orders for repurchase of Shares received by
the Distributor since the last such report, the amount to be paid for such
Shares, and the identity of the shareholders offering Shares for repurchase.
The Trust reserves the right to suspend such repurchase right upon written
notice to the Distributor. The Distributor further agrees to act as agent
for the Trust to receive and transmit promptly to the Fund's transfer agent
shareholder requests for redemption of Shares.
The Distributor shall prepare reports for the Board regarding its
activities under this Agreement and the Distribution Plan in accordance with
the Distribution Plan.
The Distributor shall at all times during the term of this Agreement
remain registered as a broker-dealer under the 1934 Act and with each state
where such registration is required for the distribution of the Fund's
Shares, and shall also remain a member in good standing of the NASD. The
Distributor shall immediately notify the Trust in writing if it receives
written notification that such registrations or membership have been
temporarily or permanently suspended, limited or terminated.
3. SALES OF SHARES.
(a) The Fund shall pay all costs and expenses in connection
with the registration of the Shares under the 1933 Act, and all expenses in
connection with maintaining facilities for the issue and transfer of the
Shares and for supplying information, prices and other data to be furnished
by the Trust hereunder, and all expenses in connection with preparing,
printing and distributing the Prospectus except as set forth in subsection
2(c) of Section II hereof and except for those costs and expenses required to
be borne by the Distributor pursuant to the Distribution Plan and subject to
the requirements of Rule 12b-1 under the 0000 Xxx.
(b) The Trust shall execute all documents, furnish all
information and otherwise take all actions which may be reasonably necessary
in the discretion of the Trust's officers in connection with the
qualification of the Shares for sale in such states as the Distributor may
designate to the Trust and the Trust may approve, and the Fund shall pay all
filing fees which may be incurred in connection with such qualification.
Distributor shall pay all expenses connected with its qualification as a
dealer under state or federal laws and, except as otherwise specifically
provided in this Agreement, all other expenses incurred by Distributor in
connection with the sale of the Shares as contemplated in this Agreement.
(c) The Trust shall have the right to suspend the offering and
sale of Shares of the Fund at any time in the absolute discretion of the
Trust in response to conditions in the securities markets or otherwise, and
to suspend the redemption of Shares of the Fund at any time permitted by the
1940 Act or the rules of the commission ("Rules"). Upon notice of any such
suspension of the offering and sale of Shares, the Distributor shall cease to
offer Shares. The Distributor shall not make or cause to be made any offers
of Shares in any state or other jurisdiction where such Shares are not then
qualified for offer or sale or exempt from such qualification.
(d) All orders for the Fund's Shares shall be transmitted
promptly to the Fund's transfer agent, unless otherwise directed by the Trust.
(e) The Trust reserves the right to reject any order for Shares.
IIA. COMPENSATION
The Fund shall pay to the Distributor as compensation for its services
under this Agreement and in accordance with the Distribution Plan a
distribution fee of .50 of 1% per annum of the average daily net assets of
the Fund. The distribution fee will be accrued daily and paid monthly in
arrears. For purposes of determining the distribution fee, the net assets of
the Fund shall be determined as set forth from time to time in the Fund's
then current Prospectus. Amounts paid under this Agreement shall comply with
the guidelines concerning asset-based sales charges as set forth in the
Conduct Rules of the NASD, including, without limitation, Rule 2830 thereof.
Amounts paid to the Distributor by the Fund will not be used to pay the
distribution expenses incurred with respect to any other series of the Trust,
except that distribution expenses attributable to the Trust as a whole will
be allocated to each series (including the Fund) according to the ratio of
the sale of shares such series to the total sales of the shares of all series
over the Trust's fiscal year or such other allocation method approved by the
Board of Trustees. The allocation of distribution expenses between series
will be subject to the review of the Board of Trustees.
III. LIMITATION OF LIABILITY
Distributor shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or from reckless disregard by it of its obligations and duties
under this Agreement.
IV. CONFIDENTIALITY
Distributor will treat confidentially and as proprietary information of
the Trust all records and other information relative to the Trust, to the
Trust's prior or present shareholders and to those persons or entities who
respond to Distributor inquiries concerning investment in the Trust, and,
except as provided below, will not use such records and information for any
purpose other than the performance of its responsibilities and duties
hereunder or the performance of its responsibilities and duties with regard
to sales of the shares of any series which may be added to the Trust in the
future. Any other use by Distributor of the information and records referred
to above may be made only after prior notification to and approval in writing
by the Trust. Such approval shall not be unreasonably withheld and may not
be withheld where (i) Distributor may be exposed to civil or criminal
contempt proceedings for failure to divulge such information; (ii)
Distributor is requested to divulge such information by duly constituted
authorities; or (iii) Distributor is so requested by the Trust.
V. INDEMNIFICATION
1. TRUST REPRESENTATIONS. The Trust represents and warrants to
Distributor that at all times the Registration Statement and Prospectus will,
in all material respects, conform to the applicable requirements of the 1933
Act and the rules thereunder, that the Registration Statement did not contain
at the time it became effective and will not contain at the time any
subsequent amendment thereto becomes effective any untrue statement of
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements contained therein not misleading
and that the Prospectus does not contain and will not contain at any time
when it is authorized for use any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except that no representation or warranty in this
subsection shall apply to statements or omissions made in reliance upon and
in conformity with written information furnished to the Trust by or on behalf
of or otherwise approved by and with respect to Distributor or its affiliates
expressly for use in the Registration Statement or Prospectus.
2. DISTRIBUTOR REPRESENTATIONS. Distributor represents and warrants
to the Trust that it is duly incorporated as a New York limited liability
company and is registered as a broker-dealer under the Securities Exchange
Act of 1934 and the laws of each state where such registration is required
for the distribution of the Fund's Shares and is and at all times will remain
duly authorized and licensed to carry out its services as contemplated herein.
3. FUND INDEMNIFICATION. The Fund will indemnify, defend and hold
harmless Distributor, its several directors and officers, and any person who
controls Distributor within the meaning of Section 15 of the 1933 Act, from
and against any losses, claims, damages or liabilities, joint or several, to
which any of them may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, the Prospectus or in any application or other document executed by
or on behalf of the Trust in respect of the Fund, or arise out of, or are
based upon, information furnished by or on behalf of the Trust in respect of
the Fund filed in any state in order to qualify the Shares under the
securities or blue sky laws thereof ("Blue Sky Application"), or arise out
of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse Distributor, its
several directors and officers, and any person who controls Distributor
within the meaning of Section 15 of the 1933 Act, for any legal or other
expenses reasonably incurred by any of them in investigating, defending or
preparing to defend any such action, proceeding or claim; PROVIDED, HOWEVER,
that neither the Trust nor the Fund shall be liable in any case to the extent
that such loss, claim, damage or liability arises out of, or is based upon,
any untrue statement, alleged untrue statement, or omission or alleged
omission made in the Registration Statement, the Prospectus, any Blue Sky
Application or any application or other document executed by or on behalf of
the Trust in respect of the Fund in reliance upon and in conformity with
written information furnished to the Trust by or on behalf of or otherwise
approved by and with respect to Distributor or its affiliates specifically
for inclusion therein.
Neither the Trust nor the Fund shall be obligated to indemnify any
person pursuant to this subsection 3 unless the court or other body before
which the proceeding was brought has rendered a final decision on the merits
that such person was not liable by reason of his willful misfeasance, bad
faith or gross negligence in the performance of his duties, or his reckless
disregard of obligations and duties, under this Agreement ("disabling
conduct") or, in the absence of such a decision, a reasonable determination
(based upon a review of the facts) that such person was not liable by reason
of disabling conduct has been made by the vote of a majority of a quorum of
trustees of the Trust who are neither "interested persons" of the Trust (as
defined in the 0000 Xxx) nor parties to the proceeding, or by an independent
legal counsel in a written opinion.
The Fund shall advance reasonable attorneys' fees and other expenses
incurred by any person in defending any claim, demand, action or suit which
is the subject of a claim for indemnification pursuant to this subsection 3,
so long as: (i) such person shall undertake to repay all such advances
unless it is ultimately determined that he is entitled to indemnification
hereunder; and (ii) such person shall provide security for such undertaking,
or the Fund shall be insured against losses arising by reason of any lawful
advances, or a majority of a quorum of the disinterested, non-party trustees
of the Trust (or an independent legal counsel in a written opinion) shall
determine based on a review of readily available facts (as opposed to a full
trial-type inquiry) that there is a reasonable likelihood that such person
ultimately will be found entitled to indemnification hereunder.
4. DISTRIBUTOR INDEMNIFICATION. Distributor will indemnify, defend
and hold harmless the Fund, the Trust, the Trust's several officers and
trustees and any person who controls the Trust within the meaning of Section
15 of the 1933 Act, from and against any losses, claims, damages or
liabilities joint or several, to which any of them may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect hereof) arise out of, or
are based upon, any breach of its representations and warranties in
subsection 2 of this Section V or its agreements in subsection 2 or 3 of
Section II hereof, or which arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, any Blue Sky Application or any
application or other document executed by or on behalf of the Trust in
respect of the Fund, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, which statement or omission was made in
reliance upon or in conformity with information furnished in writing to the
Trust or any of its several officers and trustees by or on behalf of or
otherwise approved by and with respect to Distributor specifically for
inclusion therein, and will reimburse the Fund, the Trust, the Trust's
several officers and trustees, and any person who controls the Trust or any
series within the meaning of Section 15 of the 1933 Act, for any legal or
other expenses reasonably incurred by any of them in investigating, defending
or preparing to defend any such action, proceeding or claim.
The Distributor shall advance reasonable attorneys' fees and other
expenses incurred by any person in defending any claim, demand, action or
suit which is the subject of a claim for indemnification pursuant to this
subsection 4, so long as: (i) such person shall undertake to repay all such
advances unless it is ultimately determined that he is entitled to
indemnification hereunder; and (ii) such person shall provide security for
such undertaking, or the Fund and the Trust shall be insured against losses
arising by reason of any lawful advances, or a majority of a quorum of the
disinterested, non-party trustees of the Trust (or an independent legal
counsel in a written opinion) shall determine based on a review of readily
available facts (as opposed to a full trial-type inquiry) that there is a
reasonable likelihood that such person ultimately will be found entitled to
indemnification hereunder.
5. GENERAL INDEMNITY PROVISIONS. No indemnifying party shall be
liable under its indemnity agreement contained in subsection 3 or 4 hereof
with respect to any claim made against such indemnifying party unless the
indemnified party shall have notified the indemnifying party in writing
within twenty (20) days after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
indemnified party (or after the indemnified party shall have received notice
of such service on any designated agent), but failure to notify the
indemnifying party of any such claim shall not relieve it from any liability
which it may otherwise have to the indemnified party. The indemnifying party
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, and if the indemnifying party elects to assume the defense, such
defense shall be conducted by counsel chosen by it and reasonably
satisfactory to the indemnified party. In the event the indemnifying party
elects to assume the defense of any such suit and retain such counsel, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by the indemnified party.
6. INDEMNITY IN CONNECTION WITH THE ACCEPTANCE OF ORDERS TO PURCHASE
FUND SHARES PRIOR TO RECEIPT OF PAYMENT (NEXT DAY SETTLEMENT). The
Prospectus of the Fund, as amended or supplemented from time to time, may
authorize the Trust to accept orders to purchase Shares of the Fund prior to
receipt of payment therefor in Federal funds. The parties recognize that in
the event any such purchase order is canceled as a result of the failure of
the investor to make timely payment for such Shares, the Fund may suffer
dilution in the event the net asset value per share of the Fund applicable on
the date such purchase order is canceled is less than the purchase price per
share applicable to such purchase order and that the Fund may incur fees and
other losses and expenses in connection with the processing and cancellation
of such purchase order. In the event of any such cancellation of any such
purchase order, the Distributor will (i) pay to the Fund an amount equal to
the decline in the price of the Shares from price applicable at the time the
purchase order was accepted (i.e. the net asset value per share of the Fund
next determined after the acceptance of such purchase order) to the price
applicable at the time the purchase order was canceled (i.e. the net asset
value per share of the Fund next determined after the cancellation of such
purchase order), less the net amount, if any, of any Gain on Canceled Shares
(as defined below) accrued from the beginning of the fiscal year of the Trust
in which the cancellation takes place to the date of such cancellation, (ii)
reimburse the Fund and the Trust for any and all fees and other losses and
expenses incurred in connection with the processing and cancellation of such
purchase order and (iii) pay all legal fees incurred in connection with any
legal action taken against an investor for nonpayment or taken by an investor
against the Fund or the Trust as a result of the cancellation. As used
herein, "Gain on Canceled Shares" shall mean the amount, if any, by which the
aggregate purchase price applicable to all orders to purchase Shares of the
Fund that are accepted but subsequently canceled for nonpayment (measured by
the respective net asset values per share of the Fund next determined after
the acceptance of such purchase orders) exceeds the aggregate value of such
Shares at the time of cancellation (measured by the respective net asset
values per share of the Fund next determined after the cancellation of such
purchase orders).
VI. DURATION AND TERMINATION
This Agreement shall become effective as of the date first above
written, and, unless sooner terminated as provided herein, shall remain in
effect until [________________, 2000]. Thereafter, if not terminated, this
Agreement shall continue automatically for successive terms of one year
expiring on [____________] of each year, provided that such continuance is
specifically approved at least annually by the vote of a majority of the
Board of Trustees of the Trust, including a majority of the Rule 12b-1
Trustees (as defined in the Distribution Plan), cast in person at a meeting
called for the purpose of voting on such approval; PROVIDED, HOWEVER, that
this Agreement shall automatically terminate in the event of its assignment
and may be terminated by the Trust at any time, without the payment of any
penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of a
majority of the outstanding voting securities, on 60 days' written notice to
the Distributor, or by the Distributor at any time on 60 days' written notice
to the Trust. The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the 1940
Act and the rules and regulations thereunder.
VII. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged, or
terminated except by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge, or termination is
sought. This Agreement may be amended with the approval of the Board of
Trustees of the Trust, or of a majority of the outstanding voting securities
of the Fund; provided, that in either case, such amendment also shall be
approved by a majority of the Independent Trustees.
VIII. NOTICES
Notice of any kind to be given to the Distributor by the Trust shall be
in writing and shall be duly given if mailed or delivered to the Distributor
at 00 Xxxxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxxx Xxxxxx, Managing
Director, or at such other address or to such other individual as shall be
specified by the Distributor to the Trust in accordance with this Section
VIII. Notices of any kind to be given to the Trust by the Distributor shall
be in writing and shall be duly given if mailed or delivered to the Trust at
its address set forth in the then-current Prospectus, Attention: President,
or at such other address or to such other individual as shall be specified by
the Trust to the Distributor in accordance with this Section, with copies to
each of the Trust's Trustees at their respective addresses set forth in the
Fund's Registration Statement and to the legal counsel to the Trust.
IX. CONSTRUCTION; GOVERNING LAW
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Section VI hereof, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and shall be governed by New York law; PROVIDED,
however, that nothing herein shall be construed in a manner inconsistent with
the 1940 Act or any rule or regulation of the Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their officers designated below as of the day and year first
above written.
THE LEGACY FUNDS, INC.
By: ________________________________
Xxxxxx X. Xxxxxxx
President
XXXXXXX & XXXXXX, LLC
By: ________________________________
Xxxxxx Xxxxxx
Managing Director
